ZGGROUP-W：2024ANNUALREPORT.pdf

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1、ANNUAL REPORT2024(A company controlled through weighted voting rights,incorporated in the Cayman Islands with limited liability and carrying on business in Hong Kong as ZGW)Stock Code:6676Warrant Code:2572Company Information2Chairmans Letter to Shareholders4Financial Highlights6Business Review and O

2、utlook9Management Discussion and Analysis13Directors Report35Directors and Senior Management59Corporate Governance Report65Other Information84Independent Auditors Report95Consolidated Statement of Profit or Loss and Other Comprehensive Income100Consolidated Statement of Financial Position102Consolid

3、ated Statement of Changes in Equity104Consolidated Statement of Cash Flows105Notes to the Consolidated Financial Statements108Four Year Financial Summary224Definitions2252 2024 ANNUAL REPORTCompany InformationBOARD OF DIRECTORSExecutive DirectorsMr.Wang Dong(王東)(Chairman and chief executive officer)

4、Mr.Wang Changhui(王常輝)Ms.Gong Yingxin(宮穎欣)Ms.Zhou Min(周敏)Non-Executive DirectorsMr.Ye Qian(葉芊)Mr.Jiang Rongfeng(蔣榕烽)Independent non-executive DirectorsMr.Wang Xiang(王翔)Mr.Wang Weisong(王蔚松)Mr.Chen Yin(陳垠)AUDIT COMMITTEEMr.Wang Weisong(Chairman)Mr.Chen YinMr.Jiang RongfengREMUNERATION COMMITTEEMr.Wang

5、Xiang(Chairman)Mr.Chen YinMr.Ye QianNOMINATION COMMITTEEMr.Wang Xiang(Chairman)Mr.Wang WeisongMs.Gong YingxinCORPORATE GOVERNANCE COMMITTEEMr.Chen Yin(Chairman)Mr.Wang WeisongMr.Wang XiangJOINT COMPANY SECRETARIESMr.Meng LongMs.Lai Siu Kuen(FCG,HKFCG)AUTHORIZED REPRESENTATIVESMr.Wang DongMs.Lai Siu

6、KuenREGISTERED OFFICEMaples Corporate Services LimitedMaples Corporate Services LimitedPO Box 309,Ugland HouseGrand Cayman KY1-1104Cayman IslandsHEADQUARTERS AND PRINCIPAL PLACE OF BUSINESS IN THE PRCNo.123,Xinpei RoadJiading District,ShanghaiPRCPRINCIPAL PLACE OF BUSINESS IN HONG KONGRoom 1918,19/F

7、,Lee Garden One33 Hysan AvenueCauseway BayHong KongHONG KONG SHARE REGISTRARTricor Investor Services Limited17/F,Far East Finance Centre16 Harcourt RoadHong KongZG Group 3Company InformationPRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICEMaples Fund Services(Cayman)LimitedPO Box 1093,Boundary HallCrick

8、et SquareGrand Cayman,KY1-1102Cayman IslandsCOMPLIANCE ADVISORAltus Capital Limited21 Wing Wo StreetCentral,Hong KongPRINCIPAL BANKBank of Communications Co.,Ltd.China Merchants Bank Co.,Ltd.Ping An Bank Co.,Ltd.STOCK CODE6676WARRANT CODE2572LEGAL ADVISORS AS TO HONG KONG LAWKing&Wood Mallesons13/F

9、Gloucester TowerThe Landmark15 Queens RoadCentralHong KongLEGAL ADVISORS AS TO CAYMAN ISLANDS LAWMaples and Calder(Hong Kong)LLP26/F,Central Plaza18 Harbour RoadWanchaiHong KongAUDITOR AND REPORTING ACCOUNTANTSDeloitte Touche TohmatsuCertified Public Accountants Registered Public Interest Entity Aud

10、itor35/F One Pacific Place88 QueenswayHong KongCOMPANY WEBSITE4 2024 ANNUAL REPORTChairmans Letter to ShareholdersSteel is the lifeblood of manufacturing and infrastructure industries,profoundly influencing cost management,operational efficiency,supply chain reliability,and overall business stabilit

11、y.As the worlds leading producer and consumer of steel,China hosts the most expansive steel trading market,fostering the growth of its manufacturing and construction sectors,which,in turn,impact the global economy.Despite its vast scale worth trillions the Chinese steel trading market has historical

12、ly been fragmented,with numerous traders and disjointed supply chain elements,such as logistics.This fragmentation has scattered operational data,making data verification challenging and hindering financial institutions ability to directly support steel-consuming enterprises,resulting in elevated fi

13、nancial costs for the industry.Since its inception,ZG Group has pursued a bold dream:to build a comprehensive platform serving the steel trading industry,offering end-to-end B2B services,including online steel transactions,logistics,warehousing and processing,financial solutions,SaaS products,and bi

14、g data analytics.Unlike consumer-focused internet platforms,ours is an industrial internet platform tailored to enterprise users.Central to this dream is the establishment of an industry-grade service center that supports pre-sale,in-sale,and after-sale stages,anchored in seamless transaction order

15、management.Unlike the straightforward pricing of B2C transactions,B2B steel trading involves complex pre-sale inquiry and quotation processes often described as“haggling.”To provide rapid quotations,our platform relies on extensive supplier collaboration,with suppliers actively and promptly sharing

16、daily tradable inventory and product prices.Through advanced technology,we process this data to deliver swift quotes,boosting conversion rates from inquiry to successful transactions.Over the past 13 years,we have invested significant resources in this domain,evolving from free matchmaking in our ea

17、rly days to closed-loop transactions and now leveraging AI to automatically process vast supplier inventory data and enable intelligent matching.No other company or organization globally surpasses our expertise in this field.In the in-sale phase,we efficiently handle diverse payment methods,includin

18、g online banking,acceptance bills,and Chinas unique central enterprise commercial bills.This phase holds immense potential,particularly in its synergy with digital technology.In the after-sale phase,our users can entrust our logistics platform,FatCat Logistics Chinas largest third-party terminal ste

19、el logistics service provider in 2023 for transportation or arrange their own.Our platform also facilitates reconciliation,settlement,and the issuance of special VAT invoices.In 2024,we issued nearly RMB200 billion in VAT invoices,distinguishing our GMV from that of consumer internet platforms,as ou

20、rs is fully backed by corresponding invoices.As our users expand globally,particularly in construction and manufacturing,we,as their trusted domestic supply chain partner,are rapidly internationalizing to deliver the same high-standard services abroad.Beyond steel,our users procure non-steel industr

21、ial raw materials,including electronic components,electrical and electric,hardware and electromechanical products,and non-ferrous metals.Building on the trust established in steel trading,we are expanding into these non-steel industries to offer a broader range of products,strengthening user loyalty

22、.ZG Group 5Chairmans Letter to ShareholdersAmid intensifying competition in domestic manufacturing and trade,coupled with the rise of artificial intelligence,enterprises increasingly prioritize digitalization.This trend presents significant opportunities for our FatCat Cloud ERP,which empowers busin

23、esses with advanced digital solutions.Over the past 13 years,our strategic focus on pre-sale,in-sale,and after-sale excellence has enabled us to outpace competitors,establishing ZG Group as the worlds leading industrial raw materials trading platform.Our successful listing on the Stock Exchange in M

24、arch this year has further bolstered our teams confidence.As a new entrant in the capital markets,we recognize that it will take time for the market to fully understand and appreciate our unique value proposition.Nevertheless,we are confident that the future belongs to us.Wang DongChairman6 2024 ANN

25、UAL REPORTFinancial HighlightsCondensed Profit Loss StatementFor the Year Ended December 31,20242023ChangeRMBRMB%(in thousands,except percentages)Revenue1,551,0431,168,45132.7%Gross Profit426,189380,17312.1%Loss before tax from continuing operations(67,014)(468,861)-85.7%Loss for the year from conti

26、nuing operations(68,667)(469,649)-85.4%Net cash generated from operating activities419,945211,70998.4%Non-IFRS Financial Measures:Adjusted net loss(Non-IFRS measure)(53,717)(80,151)-33.0%Adjusted EBITDA(Non-IFRS measure)7,1294,56756.1%Condensed Balance SheetAs of December 31,20242023ChangeRMBRMB%(in

27、 thousands,except percentages)Total current assets9,577,65111,257,399-14.9%Total non-current assets470,901507,347-7.2%Total assets10,048,55211,764,746-14.6%Total liabilities16,554,95718,202,824-9.1%Total shareholders equity(6,506,405)(6,438,078)1.1%Total liabilities and shareholders equity10,048,552

28、11,764,746-14.6%ZG Group 7Financial HighlightsNon-IFRS Financial MeasuresTo supplement our consolidated financial statements which are presented in accordance with IFRS,we also use non-IFRS measures,namely adjusted net loss(non-IFRS measure)and adjusted EBITDA(non-IFRS measure)as additional financia

29、l measures,which are not required by or presented in accordance with IFRS.We believe that such non-IFRS measures facilitate comparisons of operating performance from year to year and company to company by eliminating potential impacts of certain items,and provide useful information to investors and

30、others in understanding and evaluating our consolidated results of operations in the same manner as it helps our management.However,our presentation of such non-IFRS measures may not be comparable to similarly titled measures presented by other companies.The use of such non-IFRS measures has limitat

31、ions as an analytical tool,and you should not consider it in isolation from,or as substitute for analysis of,our results of operations or financial condition as reported under IFRS.We define adjusted net loss(non-IFRS measure)as loss for the year from continuing operations adjusted by adding back fa

32、ir value change of convertible preferred shares and warrants,share-based payment expenses and professional fees and expenses related to De-SPAC Transaction.The convertible preferred shares and warrants automatically convert into ordinary shares upon the completion of the De-SPAC Transaction,and no f

33、urther loss or gain on fair value changes is expected to be recognized afterwards.In addition,share-based payment expenses are non-cash in nature and do not result in cash outflow,and the adjustments have been consistently made during the Reporting Period.We also exclude professional fees and expens

34、es related to De-SPAC Transaction.We define adjusted EBITDA(non-IFRS measure)as adjusted net loss(non-IFRS measure)for the year adjusted by adding back income tax expense,finance costs,interest on bank deposit related to borrowings and depreciation and amortization.For the Year Ended December 31,202

35、42023RMBRMB(in thousands)Loss for the year from continuing operations(68,667)(469,649)Fair value change of convertible preferred shares and warrants(5,253)(6,883)Share-based payments(343,058)Professional fees and expenses related to De-SPAC Transaction(9,697)(39,557)Adjusted net loss(non-IFRS measur

36、e)(53,717)(80,151)Income tax expense(1,653)(788)Finance costs(39,994)(64,873)Interest on bank deposit related to borrowings9761,974Depreciation and amortization(20,175)(21,031)Adjusted EBITDA(non-IFRS measure)7,1294,5678 2024 ANNUAL REPORTFinancial HighlightsIncluded in the adjusted net loss(non-IFR

37、S measure)and Adjusted EBITDA(non-IFRS measure)of RMB53.7 million and RMB7.1 million in 2024(2023:RMB80.2 million and RMB4.6 million),respectively,an amount of RMB59.0 million,represents the expected credit loss(“ECL”)recognized during the year in relation to other receivables(2023:reversal of ECL o

38、f RMB0.1 million),which is not representative of the Groups normal core business activities,and an amount of loss of RMB7.3 million(2023:loss of RMB2.5 million)from other gains and losses including loss on disposal of interests in associate,impairment loss on investments in associates and loss on di

39、sposal of subsidiaries,and loss of RMB0.9 million(2023:gain of RMB4.6 million)from fair value changes of financial assets measured at fair value through profit or loss(“FVTPL”),which are not directly related to the Groups daily operation.Management believes that excluding these items,which are not i

40、ncurred during the Groups normal core business activities,provides a clearer reflection of the Groups underlying operating performance and better illustrates the results of its normal core business operations.For illustrative purposes only,after excluding these amounts,the Adjusted Net Income(non-IF

41、RS measure)and Adjusted EBITDA(non-IFRS measure)would have been RMB13.5 million and RMB74.3 million in 2024,respectively,compared to adjusted net loss(non-IFRS measure)of RMB82.4 million,and Adjusted EBITDA(non-IFRS measure)of RMB2.4 million in 2023,respectively.ZG Group 9Business Review and Outlook

42、OVERVIEWAquila Acquisition Corporation(“Aquila”),a special purpose acquisition company focused on technology-enabled businesses in Asia,completed a transformative De-SPAC Transaction with ZG Group(formerly Z Inc.),upon completion of the De-SPAC Transaction on March 10,2025,now known as the Company.T

43、his business combination was effected through a series of agreements,including the Business Combination Agreement,under which Aquila merged with a wholly-owned subsidiary of ZG Group,resulting in Aquila becoming a wholly-owned subsidiary of the Company.The transaction also included PIPE Investments

44、totalling a final amount of HK$532.6 million from eight investors,a bonus share issue to incentivize Aquila shareholders,and a promoter earn-out right granting additional shares to Aquilas promoters upon meeting certain conditions.Valued at HK$10.0 billion,the De-SPAC Transaction enabled the Company

45、s listing on the Stock Exchange,marking the culmination of Aquilas mission to partner with a leading player in the new economy sector ZG Group,Chinas largest digital platform for third-party steel transactions by volume in 2023.Upon completion of the De-SPAC Transaction,Aquila shareholders and PIPE

46、investors became shareholders of the Company,which now operates as a listed entity on the Stock Exchange,advancing its mission to revolutionize the steel transaction industry through technology and innovation.This annual report marks the Companys first year as a publicly listed entity,reflecting the

47、 successful completion of the De-SPAC Transaction and the start of a new chapter in its growth journey.Accordingly,2024 was a pivotal year of strategic consolidation and bold expansion.REVIEW AND OUTLOOKIn 2024,the“Resolution of the Central Committee of the Communist Party of China on Further Deepen

48、ing Reform Comprehensively to Advance Chinese Modernization”from the Third Plenary Session of the 20th Central Committee highlighted the priority of“developing industrial internet platforms”.As a leading representative of the industrial internet,our Company has consistently been featured on the fron

49、t pages of Peoples Daily and P.Backed by strong policy support,the Group achieved sustained business growth,significantly enhanced profitability,and made substantial progress in its international and non-steel operations.As of December 31,2024,our steel transaction platform boasted over 15,000 regis

50、tered suppliers and more than 183,000 registered buyers,covering over 630,000 SKU.Our non-steel transaction platform collaborated with 371 suppliers and 1,728 buyers,spanning more than 68,000 SKUs.In 2024,the steel transaction business recorded a GMV of RMB187.6 billion while the non-steel transacti

51、on business achieved a GMV of RMB408.4 million,with a total transaction volume of 51.4 million tons.Our Groups operating revenue reached RMB1.6 billion,reflecting a year-on-year increase of 32.7%.Gross profit stood at RMB426.2 million,up 12.1%,while adjusted EBITDA(non-IFRS measure)profit rose to RM

52、B7.1 million,a 56.1%increase.Operating cash flow surged to RMB419.9 million,marking a 98.4%year-on-year growth.10 2024 ANNUAL REPORTBusiness Review and Outlook1.Transaction Platform:Significant Profitability GainsAs Chinas largest third-party steel transaction platform in 2023,our Groups core busine

53、ss profitability continued to strengthen amid sustained growth and an improving competitive landscape.The successful execution of our“heavy-to-light”strategy has reduced reliance on resources and capital,paving the way for long-term,sustainable growth.As our scale expands,profitability strengthens,s

54、ynergies deepen,and cash flow improves.Transaction services drove sustained growth,with an 11.4%increase in revenue,as SME transaction solutions saw volume rise from 44.0 million tons to 50.1 million tons a 13.9%year-on-year increase.Average per-ton commission grew from RMB5.1 in the prior year to R

55、MB5.6 in 2024,lifting gross profit from SME transaction solutions by 28.8%.Concurrently,growing recognition of our logistics networks value enabled partnerships with over 1,700 carriers and 182 thousand trucks,boosting logistics gross profit from RMB26.2 million to RMB34.8 million,a 32.8%increase.Th

56、is expansion also enhanced financial resilience,with operating cash flow reaching RMB419.9 million in 2024,up 98.4%year-on-year.2.International Business:Robust Growth Fueled by Demand from the Middle East and Southeast AsiaFueled by strong infrastructure demand in the Middle East and the increasing

57、presence of Chinese firms in Belt and Road countries,our Group significantly expanded its international business in 2024.Revenue from this segment grew from RMB221.1 million in 2023 to RMB593.3 million in 2024,a 168.4%increase.Transaction volume surpassed 111,000 tons,up 174.5%year-on-year,while per

58、-ton gross profit rose from RMB297.8 to RMB372.8,a 25.2%increase.Notably,our Dubai operations saw remarkable growth,positioning our Group among the top five traders of galvanized steel coils and pre-painted galvanized steel coils in the UAE.We actively participated in prominent projects such as Egyp

59、ts Alamein New City and the UAEs Elano.Our revenue from the Middle East surged from RMB53.6 million in 2023 to RMB415.2 million in 2024,a 674.0%increase.In 2024,we also established a Saudi subsidiary to initiate operations in Saudi Arabia.Concurrently,our Southeast Asia business achieved a major mil

60、estone by generating its first revenue streams.Our Thailand and Indonesia operations now have the capacity to handle large-scale business,while our Malaysia operations completed a comprehensive product line upgrade,adding high-margin offerings such as cold-formed steel,steel plates,steel pipes,and w

61、aterproof steel plates.Looking ahead,the Group will continue optimizing supply chain management,enhancing market competitiveness and profitability,capitalizing on the growing demand for green building materials,accelerating high-value product deployment,and pursuing global expansion.Simultaneously,w

62、e will leverage technology to empower transactions and advance digital management through manufacturing execution systems and enterprise resource planning systems,improving supply chain transparency,operational efficiency,and quality control.ZG Group 11Business Review and Outlook3.Non-Steel Segment:

63、Leveraging B2B Infrastructure for Cross-Category SuccessThe Group has built an industry-leading pre-sales,in-sales,and after-sales service platform,driving growth through technology and precision operations.We successfully extended this digital infrastructure and operational framework beyond steel t

64、o other industries.Terminal steel buyers primarily factories and construction firms also procure other industrial goods and raw materials.These industries and categories share characteristics with steel,such as diverse specifications,price volatility,and relative standardization.Our inquiry-and-quot

65、ation-based transaction platform effectively addresses industry needs,enabling diversified offerings to meet broader procurement demands,boost revenue growth,and enhance profitability.In 2018,we partnered with Tencent to establish a joint venture and launched our TCRM platform,the first B2B transact

66、ion-focused customer relationship management platform.Integrating inquiry-and-quotation systems into WeChat Work and QQ Work,and powered by AI and our proprietary SaleMatch engine,TCRM serves users in electronic components,electrical and electric products,and logistics forwarding.As of December 31,2

67、024,TCRM supported 6,389 paying merchants and reached 534,330 users,covering over 11 million SKUs.It processed 6,730,653 daily opportunities,facilitating over 100 million daily transaction matches.In 2024,we established the“FatCat Industrial”division,extending our steel-honed infrastructure to non-s

68、teel transaction services.Leveraging pre-sales,in-sales,and after-sales digital modules from our steel business augmented by AI large language models for automated inquiry-and-quotation matching our non-steel transaction business collaborated with 371 suppliers and 1,728 buyers as of December 31,202

69、4,covering over 68,000 SKUs and fulfilling 19,811 orders.This generated a GMV of RMB408.4 million,a 192.7%increase from 2023.Currently focused on electrical engineering,our non-steel e-commerce operations are exploring expansion into electronic components,hardware,electromechanical,and non-ferrous m

70、etals.12 2024 ANNUAL REPORTBusiness Review and Outlook4.AI:Driving Internal Efficiency and Customer ServiceOur Groups sustained growth is underpinned by the pioneering large-scale industrial application of AI large language models,unlocking significant value.With an annual transaction scale exceedin

71、g RMB180 billion,our rich e-commerce data across the value chain serves as fertile ground for AI to take root and deliver tangible results.In 2024,we developed 12 AI Agents,fully integrated with Deepseek by year-end.Through multi-Agent configuration engines and workflows,we launched four AI products

72、 AI transaction assistant,AI procurement assistant,FatCat Cloud AI manager,and FatCat Assistant enabling full automation across pre-sales,in-sales,after-sales,and internal operations,significantly enhancing collaboration and employee efficiency.AI is now fully embedded in our operations.For example,

73、in transactions,the AI transaction assistant on the Zhaogang APP redefines the steel-buying experience by analyzing needs,retrieving inventory,and,when logistics are required,querying carrier prices and consolidating quotes.For processed goods,it prompts users to use processing services and allows o

74、ne-click order submission,followed by reminders like warehouse hours.In procurement,AI streamlines sourcing,smart pricing,and compliance,with our SaleMatch engine processing over 10 million daily messages with 95%+accuracy and facilitating billions in smart matches.The AI procurement assistant track

75、s market trends and inventory prices,supporting 12,000 supplier staff and updating 20 million product entries.In in-sales and after-sales,FatCat Clouds AI manager automates over 140,000 business documents,accelerates payments(handling 4.4 million transactions),ensures compliance(reviewing 19,841 veh

76、icle credentials and monitoring 405,441 logistics tracks),and manages warehousing(operating in 104 warehouses and confirming 10,189 receipts).Internally,FatCat Assistant leverages our knowledge base to upskill new hires to veteran-level expertise.Beyond internal use,we have empowered merchants by li

77、sting our four AI products on the FatCat Cloud marketplace.As of December 31,2024,6,389 paying clients also use TCRM AI transaction assistant.With AIs support,business and sales efficiency soared while costs remained stable.Sales expenses,management expenses,and research and development expenses exc

78、luding share payments and listing expenses total RMB419 million,a year-on-year change of 6.1%.Recent Developments after the Reporting PeriodSave as disclosed in this annual report,there were no other significant events that might affect us since the end of the Reporting Period and up to the Latest P

79、racticable Date.ZG Group 13Management Discussion and AnalysisThe following table sets forth the key operating data of the Group as of the dates indicated.For the Year Ended December 31,20242023Total GMV(RMB in billions)188.0195.5GMV for steel products(RMB in billions)187.6195.4GMV for non-steel prod

80、ucts transaction business(RMB in millions)408.4139.4Total Transaction Volume(ton in millions)51.449.0Transaction ServicesOnline third-party transaction volume(ton in millions)50.347.3GMV for online third-party transaction(RMB in billions)183.7188.8Average commission fee per ton charged on sellers(RM

81、B)5.65.1Average commission fee per ton charged on key accounts(RMB)180.9132.2Transaction Support ServicesTransaction volume supported by logistics services(ton in millions)6.97.0Overseas Transaction BusinessTransaction volume(in tons)111,907.940,774.2The following table sets forth the key financial

82、data of the Group for the years indicated.For the Year Ended December 31,20242023Gross profit margin(1)27.5%32.5%Loss before tax from continuing operations(2)-4.3%-40.1%Adjusted EBITDA Margin(non-IFRS measure)(3)0.5%0.4%Notes:(1)Gross profit margin equals gross profit for the year divided by revenue

83、 for the specified period,multiplied by 100%.(2)Net profit margin equals loss for the year divided by revenue for the specified period,multiplied by 100%.(3)Adjusted EBITDA margin equals adjusted EBITDA for the year(a non-IFRS measure)divided by revenue for the same period,multiplied by 100%.The fol

84、lowing table sets forth the consolidated statements of profit or loss and other comprehensive income of the Group for the years indicated.14 2024 ANNUAL REPORTManagement Discussion and AnalysisFor the Year Ended December 31,20242023ChangeRMBRMB%(in thousands,except percentages)Continuing operationsR

85、evenue1,551,0431,168,45132.7%Cost of revenue(1,124,854)(788,278)42.7%Gross profit426,189380,17312.1%Other income50,42033,05752.5%Other gains and losses,net(7,807)(3,773)106.9%Selling and distribution expenses(293,383)(259,869)12.9%Administrative expenses(77,127)(418,490)-81.6%Professional fees and e

86、xpenses related to De-SPAC Transaction(9,697)(39,557)-75.5%Research and development expenses(48,121)(59,338)-18.9%Finance costs(39,994)(64,873)-38.4%Impairment losses under ECL model,net of reversal(57,874)(30,188)91.7%Fair value changes of financial assets at FVTPL(881)4,578-119.2%Fair value change

87、s of financial liabilities at FVTPL(8,004)(8,041)-0.5%Share of results of associates and joint venture(735)(2,540)-71.1%Loss before tax from continuing operations(67,014)(468,861)-85.7%Income tax expense(1,653)(788)109.8%Loss for the year from continuing operations(68,667)(469,649)-85.4%Discontinued

88、 operationsProfit for the year from discontinued operations644-100.0%Loss for the year(68,667)(469,005)-85.4%(Loss)Profit for the year attributable to:Owners of the Company Continuing operations(69,002)(468,916)-85.3%Discontinued operations644-100.0%Non-controlling interests Continuing operations335

89、(733)-145.7%Discontinued operationsZG Group 15Management Discussion and AnalysisNET REVENUEThe majority of our Companys revenue and gross profit is derived from charging internet service fees.During the Reporting Period,our total revenue increased by 32.7%from approximately RMB1,168.5 million in 202

90、3 to approximately RMB1,551.0 million in 2024,primarily due to an increase in revenue from the overseas transaction business.The following table sets forth a financial breakdown of our major business lines:For the Year Ended December 31,20242023RMB%RMB%(in thousands,except percentages)Transaction Se

91、rvices313,16020.2281,10524.1Transaction Support Services432,10327.9508,99443.6Technology Subscription Services28,2961.834,0442.9Overseas Transaction Business593,30838.3221,05618.9Others184,17611.8123,25210.5Total1,551,043100.01,168,451100.0Transaction servicesRevenue generated from our transaction s

92、ervices primarily consist of income from steel transactions on our digital platform,where we sell steel products and charge a commission.We do not take ownership of the steel products sold through our platform.Under IFRS 15,we are considered an agent since the sellers retain control over the goods u

93、ntil they are transferred to the buyers.Accordingly,commission-related revenue is reported on a net basis and recognized when the transaction is completed(i.e.,when the right to receive the commission becomes unconditional).Our revenue from transaction services increased by 11.4%from RMB281.1 millio

94、n in 2023 to RMB313.2 million in 2024,primarily due to an increase in steel transaction volume,with the average commission fee we charged SME sellers on a per-ton basis rising from RMB5.1 in 2023 to RMB5.6 in 2024.16 2024 ANNUAL REPORTManagement Discussion and AnalysisTransaction support servicesThe

95、 following table sets forth a breakdown of our transaction support services revenue by nature for the years indicated.For the Year Ended December 31,20242023RMB%RMB%(RMB in thousands,except for percentages)Logistics,warehousing and processing services412,91695.6453,34989.1 Platform users400,72992.74

96、29,29484.4 Non-platform users12,1872.824,0554.7Transaction settlement services19,1874.455,64510.9Total432,103100.0508,994100.0For logistics,warehousing and processing services,we coordinate logistics,warehousing and processing for buyers who choose to use our services by retaining and matching suita

97、ble carriers for the delivery of steel products,and relevant warehousing and processing service providers for warehouse and steel product processing,through which we earn the fee difference between the fees we charge our buyers on a per ton basis and payment to our partnered third-party service prov

98、iders.Service income is recognized over the service period when the services are performed.During the Reporting Period,we offered three types of transaction settlement services,namely,FatCat Bai Tiao,FatCat Easy Procurement and Bills Settlement,and earned service fees from our transaction settlement

99、 services.We have ceased to provide FatCat Bai Tiao and FatCat Easy Procurement and the underlying systems by August 2024.Upon termination,we no longer generate revenue from providing transaction settlement services,but will continue to provide bills settlement as a payment or settlement method for

100、the transactions on our digital platform.Revenues generated from our transaction support services decreased by 15.1%from RMB509.0 million in 2023 to RMB432.1 million in 2024,primarily because(i)we ceased to provide FatCat Bai Tiao and FatCat Easy Procurement and the underlying systems by August 2024

101、,leading to a significant drop in transaction support settlement services from RMB55.6 million in 2023 to RMB19.2 million in 2024,and(ii)the revenue from our logistics,warehousing,and processing services decreased by RMB40.4 million,from RMB453.3 million in 2023 to RMB412.9 million in 2024.Although

102、the transaction volume supported by logistics services remained stable at 7.0 million tons in 2023 and 6.9 million tons in 2024,the revenue from our logistics services was affected by the fees we charged buyers,which corresponded to lower third-party logistics rates as a result of(i)changes in the d

103、ynamics of the logistics industry and(ii)a decrease in fuel prices during the same period.Such changes in revenue may happen from time to time,and despite the changes in our revenue,our profitability under the logistics services remained stable.ZG Group 17Management Discussion and AnalysisTechnology

104、 subscription servicesWe provide a range of digital solutions through our digital platform to facilitate user transaction services,including our SaaS products,data analytics,and other value-added services such as advertising.Revenue generated from our technology subscription services are recognized

105、over the service period during which the services are provided.We have assessed that the stage of completion is determined based on the proportion of the total service period that has elapsed as of the end of the Reporting Period.This is an appropriate method for measuring progress toward fully sati

106、sfying these performance obligations under IFRS 15,as buyers simultaneously receive and consume the benefits of the services we provide throughout the service period.Revenue generated from our technology subscription services decreased by 16.9%from RMB34.0 million in 2023 to RMB28.3 million in 2024,

107、primarily because we held fewer events and meetings with business partners during the same period.Overseas transaction businessThe following table sets forth a breakdown of our overseas transaction business revenue by nature for the years indicated.For the Year Ended December 31,20242023RMB%RMB%(RMB

108、 in thousands,except for percentages)Middle East415,18370.053,63824.3East Asia139,50623.5143,55964.9Southeast Asia38,6196.5Africa23,85910.8Total593,308100.0221,056100.0During the Reporting Period,we primarily operated under a direct sales model in overseas markets.In accordance with IFRS 15,we prima

109、rily act as a principal under the direct sales model because we have obtained control over the specified goods before they are transferred to the buyers.Revenue derived from overseas transaction business is primarily reported on a gross basis and is recognized when goods delivery notes are issued to

110、 and the goods are accepted by the buyers at the premises specified in the contract,representing the point in time at which a buyer obtains control of the goods and we satisfy a performance obligation.Revenues generated from our overseas transaction business increased significantly by 168.4%from RMB

111、221.1 million in 2023 to RMB593.3 million in 2024,primarily because we devoted more resources to developing our overseas transaction business in 2024.Leveraging the opportunities of the Belt and Road Initiative,we supported central enterprises in their overseas expansion by providing efficient and c

112、onvenient supply chain services,resulting in an increase in transaction volume in regions such as the UAE and Malaysia.18 2024 ANNUAL REPORTManagement Discussion and AnalysisOthersOthers primarily represent our non-steel products transaction business.During the Reporting Period,we actively developed

113、 diversified business lines across industries,mainly including wires and cables,as well as electronic components.Revenues generated from other business increased significantly by 49.4%from RMB123.3 million in 2023 to RMB184.2 million in 2024,primarily attributable to our continued expansion of the n

114、on-steel products transaction business.COST OF REVENUEOur cost of revenue primarily consists of(i)logistics,warehousing,and processing costs;(ii)product procurement costs,representing steel product procurement costs for overseas transaction sales and other procurement costs of non-steel products;(ii

115、i)stamp duty and extra charges;and(iv)service fees.The table below sets forth a breakdown of our cost of revenue by nature and as a percentage of revenue for the years indicated.For the Year Ended December 31,20242023RMB%RMB%(RMB in thousands,except for percentages)Cost of revenueLogistics,warehousi

116、ng and processing costs377,52533.6426,35354.1Product procurement costs725,43764.5328,88341.7Stamp duty and extra charges19,6211.722,6332.9Service fees2,2710.210,4091.3Total1,124,854100.0788,278100.0Our cost of revenue increased by 42.7%from RMB788.3 million in 2023 to RMB1,124.9 million in 2024,in l

117、ine with our increased revenue.Our product procurement costs increased from RMB328.9 million in 2023 to RMB725.4 million in 2024,primarily due to the expansion of our business and transaction volume,especially our overseas transaction business.Such increase was partially offset by a decrease in logi

118、stics,warehousing,and processing costs from RMB426.4 million in 2023 to RMB377.5 million in 2024,primarily due to the enhancement of management efficiency for our logistics,warehousing,and processing services.ZG Group 19Management Discussion and AnalysisGROSS PROFIT AND GROSS PROFIT MARGINOur gross

119、profit represents our revenue from continuing operations less our cost of revenue.Our gross profit margin represents our gross profit as a percentage of our revenue.The table below sets forth a breakdown of our gross profit and gross profit margin by business lines for the years indicated:For the Ye

120、ar Ended December 31,20242023RMB%RMB%(RMB in thousands,except for percentages)Gross profit and gross profit marginTransaction services294,24694.0259,74592.4Transaction support services53,96312.573,37314.4Technology subscription services26,00891.931,69293.1Overseas transaction business41,7167.012,141

121、5.5Others10,2565.63,2222.6Total426,18927.5380,17332.5As a result of the above,our gross profit increased by 12.1%from RMB380.2 million in 2023 to RMB426.2 million in 2024.Our overall gross profit margin decreased from 32.5%in 2023 to 27.5%in 2024,primarily due to an increase in the proportion of rev

122、enue from our overseas transaction business and non-steel products transaction business,which had relatively low gross profit margins,offset in part by an increase in the gross profit margin of our transaction services.20 2024 ANNUAL REPORTManagement Discussion and AnalysisTransaction servicesOur gr

123、oss profit from transaction services rose by 13.3%,from RMB259.7 million in 2023 to RMB294.2 million in 2024.This increase was primarily driven by higher transaction volumes,the growing scale of our platform,a shift in transaction mix toward higher-margin industrial and construction steel,the introd

124、uction of pipes and niche steel products,and an increase in per-ton commission to RMB5.6/ton in 2024.Additionally,the gross profit margin increased from 92.4%in 2023 to 94.0%in 2024,primarily due to a decrease in stamp duty and extra charges.Transaction support servicesOur gross profit from transact

125、ion support services decreased from RMB73.4 million in 2023 to RMB54.0 million in 2024,a decline of 26.5%,primarily because we ceased to provide FatCat Bai Tiao and FatCat Easy Procurement and the underlying systems by August 2024,offset in part by an increase in gross profit from our logistics,ware

126、housing,and processing services.We continued to optimize and adjust our logistics business structure,focusing on short-haul transportation services with lower unit prices but higher gross margins.Additionally,we enhanced our bargaining power with logistics carriers,resulting in a counter-trend incre

127、ase in gross profit from RMB26.0 million in 2023 to RMB35.0 million in 2024,despite a decline in revenue.The gross profit per ton also improved from RMB3.8/ton in 2023 to RMB5.0/ton in 2024.The gross profit margin decreased from 14.4%in 2023 to 12.5%in 2024,reflecting the termination of high-margin

128、services.Technology subscription servicesOur gross profit from technology subscription services decreased from RMB31.7 million in 2023 to RMB26.0 million in 2024,a reduction of 17.9%,primarily because we held fewer events and meetings with business partners during the same period.The gross profit ma

129、rgin of technology subscription services remained relatively stable at 91.9%in 2024 as compared to 93.1%in 2023.Overseas transaction businessOur gross profit from overseas transaction business increased significantly by 243.6%from RMB12.1 million in 2023 to RMB41.7 million in 2024,in line with our i

130、ncreased revenue from the overseas transaction business.The gross profit margin of overseas services improved from 5.5%in 2023 to 7.0%in 2024,driven by higher margins in newly expanded Middle East business segments.ZG Group 21Management Discussion and AnalysisOthersOur gross profit from the non-stee

131、l products transaction business increased from RMB3.2 million in 2023 to RMB10.3 million in 2024,a rise of 218.3%,in line with our increased revenue from the non-steel products transaction business.The gross profit margin of the non-steel products transaction business increased from 2.6%in 2023 to 5

132、.6%in 2024.OTHER INCOMEOther income primarily consists of(i)interest on bank deposits;and(ii)government grants,which represent incentives provided by local government authorities in the PRC,including various forms of government financial incentives and preferential tax treatments,to reward our suppo

133、rt for and contribution to the development of local economies.The table below sets forth a breakdown of our other incomes for the years indicated:For the Year Ended December 31,20242023(RMB in thousands)Interest on bank deposits9,88326,376Government grants40,5376,681Total50,42033,057Our other income

134、 increased from RMB33.1 million in 2023 to RMB50.4 million in 2024,a rise of 52.5%,primarily because we recorded one-off government grants of RMB40.5 million in 2024,and partially offset by decrease in interest on bank deposits.22 2024 ANNUAL REPORTManagement Discussion and AnalysisOTHER GAINS AND L

135、OSSES,NETOther gains and losses primarily consist of(i)loss on disposal of interests in associate;(ii)fair value changes of derivative financial instruments in connection with derivative futures contracts and foreign exchange forwards we hold,which are marked to market with the resulting gain or los

136、s taken to profit or loss;(iii)impairment loss on investments in associates;and(iv)net foreign exchange loss.The following table sets forth a breakdown of our other gains and losses during the years indicated:For the Year Ended December 31,20242023(RMB in thousands)Loss on disposal of interests in a

137、ssociate(7,324)Gain(loss)on fair value changes of derivative financial instruments(1,139)415Impairment loss on investments in associates(2,112)Gain on disposal of property and equipment475596Loss on early termination of right-of-use assets(398)Net foreign exchange loss(1,890)(2,651)Loss on disposal

138、of subsidiaries(425)Others2,071802Total(7,807)(3,773)Our net other losses increased from RMB3.8 million in 2023 to RMB7.8 million in 2024,a rise of 106.9%,primarily due to an increase of RMB7.3 million in the loss on disposal of interests in associate.SELLING AND DISTRIBUTION EXPENSESOur selling and

139、 distribution expenses increased by 12.9%from RMB259.9 million in 2023 to RMB293.4 million in 2024,primarily attributable to an increase in employee benefit expenses associated with sales personnels performance,and an increase in business development and travel expenses as a result of our expanded b

140、usiness.ADMINISTRATIVE EXPENSESOur administrative expenses decreased significantly from RMB418.5 million in 2023 to RMB77.1 million in 2024,a reduction of 81.6%,primarily attributable to a decrease in share-based payment expenses(2023:RMB343.1 million)as we did not record such expenses in 2024.Exclu

141、ding these share-based payments,administrative expenses would have been RMB75.4 million in 2023,remaining largely consistent with the 2024 level.ZG Group 23Management Discussion and AnalysisRESEARCH AND DEVELOPMENT EXPENSESOur research and development expenses decreased by 18.9%from RMB59.3 million

142、in 2023 to RMB48.1 million in 2024,primarily because we enhanced the effectiveness of our research and development activities and had completed the major research and development products in the past years.FINANCE COSTSOur finance costs decreased by 38.4%from RMB64.9 million in 2023 to RMB40.0 milli

143、on in 2024,primarily due to a decrease of RMB25.0 million in interest on borrowings and bank handling fees.IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS MODEL,NET OF REVERSALOur impairment losses under the expected credit loss model,net of reversal,increased from RMB30.2 million in 2023 to RMB57.9 mi

144、llion in 2024,a rise of 91.7%,primarily because we recognized more impairment losses for other receivables in 2024.This resulted from the expected non-recoverability,assessed on a more prudent basis,of amounts from certain sellers who failed to complete the delivery of steel products to buyers,from

145、whom we requested refunds of prepayments paid to them.These certain sellers constituted only a small portion of the Groups seller base for the full year of 2024.We have added these sellers to our blacklist and plan not to conduct transactions with them going forward.INCOME TAX EXPENSEOur income tax

146、expense increased from RMB0.8 million in 2023 to RMB1.7 million in 2024,an increase of 109.8%,primarily due to the expansion of our international business segment in 2024,which led to higher foreign income tax expenses for international entities.LOSS FOR THE YEARAs a result of the above,our loss for

147、 the year decreased from RMB469.0 million in 2023 to RMB68.7 million in 2024,a reduction of 85.4%.24 2024 ANNUAL REPORTManagement Discussion and AnalysisCONSOLIDATED STATEMENTS OF FINANCIAL POSITIONThe following table sets forth the consolidated statements of financial position of the Group as of th

148、e dates indicated.As of December 31,20242023ChangeRMBRMB%(in thousands,except percentages)Non-current AssetsProperty and equipment209,525207,0571.2%Right-of-use assets34,04321,68557.0%Goodwill31,95431,9540.0%Intangible assets110,226114,194-3.5%Interests in associates and joint venture34,89747,156-26

149、.0%Financial assets at fair value through profit and loss42,80644,008-2.7%Deferred tax assets294-100.0%Prepayments and other receivables7,45010,999-32.3%Restricted cash30,000-100.0%470,901507,347-7.2%Current AssetsInventories20,07710,033100.1%Trade receivables,prepayments and other receivables8,696,

150、36710,154,735-14.4%Financial assets at fair value through other comprehensive income(“FVTOCI”)114,34969,41364.7%Derivative financial instruments28-100.0%Restricted cash506,695712,286-28.9%Cash and cash equivalents240,163310,904-22.8%9,577,65111,257,399-14.9%ZG Group 25Management Discussion and Analy

151、sisAs of December 31,20242023ChangeRMBRMB%(in thousands,except percentages)Current LiabilitiesTrade,bills and other payables9,181,81410,676,418-14.0%Bank and other borrowings406,358582,326-30.2%Lease liabilities7,9902,999166.4%Contract liabilities67,04528,090138.7%Financial liabilities at FVTPL6,821

152、,9406,816,6870.1%16,485,14718,106,520-9.0%Net Current Liabilities(6,907,496)(6,849,121)0.9%Total Assets Less Current Liabilities(6,436,595)(6,341,774)1.5%Capital and ReservesShare capital71710.0%Reserves(6,549,463)(6,480,801)1.1%Equity attributable to owners of the Company(6,549,392)(6,480,730)1.1%N

153、on-controlling interests42,98742,6520.8%Total Deficit(6,506,405)(6,438,078)1.1%Non-Current LiabilitiesFinancial liabilities at FVTPL27,75925,00811.0%Bank and other borrowings28,600-100.0%Contract liabilities10,95616,898-35.2%Lease liabilities7,1121,265462.2%Deferred tax liabilities23,98324,533-2.2%6

154、9,81096,304-27.5%Net Liabilities(6,506,405)(6,438,078)1.1%26 2024 ANNUAL REPORTManagement Discussion and AnalysisTrade Receivables,Prepayments and Other ReceivablesThe following table sets forth the trade receivables,prepayments and other receivables of the Group as of the dates indicated.As of Dece

155、mber 31,20242023RMBRMB(in thousands)Trade receivables298,683373,452 Transaction services76,973266,598 Transaction support services6,67512,655 Technology subscription services1,2003,326 Overseas transaction business213,22935,394 Others60655,479 Less:allowance for credit losses(25,198)(26,292)Sub-tota

156、l273,485347,160Prepayment to sellers in relation to transaction services and transaction support services8,251,9359,720,907Prepayment to sellers in relation to overseas transaction business54,26127,147Interest receivable3,5296,643Value-added tax recoverable3,245Prepaid expenses27,73613,926Advances t

157、o staff300Amounts due from related parties23,34024,906Refundable deposits to sellers8,8019,735Deferred issue cost3,0192,188Receivable from disposal of subsidiaries150Others73,6519,524Sub-total8,446,2729,818,671Less:allowance for credit losses(15,940)(97)Sub-total8,430,3329,818,574Total8,703,81710,16

158、5,734ZG Group 27Management Discussion and AnalysisIn terms of transaction services,we charge sellers a commission and buyers a service fee.As we typically collect advances from buyers and disburse prepayments to sellers on a back-to-back basis,we recognize the advances from buyers and the prepayment

159、s to sellers.Our trade receivables,prepayments and other receivables decreased by 14.4%from RMB10,165.7 million as of December 31,2023,to RMB8,703.8 million as of December 31,2024.This reduction was primarily due to a decline in the outstanding loan balance of transaction volume and a drop in averag

160、e steel prices as of December 31,2024,which led to a decrease in prepayments to sellers related to our transaction services.This includes amounts prepaid to sellers for providing credit sales services to buyers,with such prepayments amounting to RMB209.4 million and RMB89.7 million as of December 31

161、,2023,and December 31,2024,respectively.The decrease in transaction volume was largely attributable to our decision to phase out legacy settlement services,“FatCat Bai Tiao”(胖貓白條)and“FatCat Easy Procurement”(胖貓易採),by August 2024.Restricted CashThe following table sets forth the restricted cash of th

162、e Group as of the dates indicated.As of December 31,20242023RMBRMB(in thousands)Margin deposits to secure open derivatives2,29730,206Deposits for bank borrowing and bills payable470,280696,465Others34,11815,615 Total506,695742,286 Our restricted cash primarily includes margin deposits to secure open

163、 derivatives,deposits for bank borrowing and bills payable,and others.Others mainly refers to deposits associated with derivative futures contracts that we periodically enter into,as well as deposits restricted by banks due to certain business disputes.28 2024 ANNUAL REPORTManagement Discussion and

164、AnalysisTrade,Bills and Other PayablesThe following table sets forth the trade,bills and other payables of the Group as of the dates indicated.As of December 31,20242023RMBRMB(in thousands)Trade payables145,17471,058 Transaction services78,60134,674 Transaction support services27,55735,471 Overseas

165、transaction business38,710896 Technology subscription services1117 Others295 145,17471,058 Bills payable438,800650,000Advances received from buyers in relation to transaction services and transaction support services8,516,6479,866,100Interest payable361350Salary and bonus payables38,38137,281Stamp d

166、uty payable17,55333,476Other taxes payable3,9372,311Accrued expenses2,2354,452Accrued professional fees and expenses related to De-SPAC Transaction8,4829,772Accrued issue costs352428Construction cost payables157355Others9,735835Total9,181,81410,676,418Our trade,bills and other payables decreased fro

167、m RMB10,676.4 million as of December 31,2023,to RMB9,181.8 million as of December 31,2024,primarily due to a reduction in transaction volume and a decline in average steel prices as of December 31,2024,which led to a decrease in advances received from buyers related to transaction services and trans

168、action support services.ZG Group 29Management Discussion and AnalysisBank and Other BorrowingsThe following table sets forth our bank and other borrowings as of the dates indicated:As of December 31,20242023RMBRMB(in thousands)Bank borrowings399,978424,258Bank borrowings under supplier finance arran

169、gements9,705Other borrowings6,380176,963 Total406,358610,926 The carrying amounts of the above borrowings are repayableWithin one year406,358582,326Within a period of more than one year but not exceeding two years28,600 Total406,358610,926As of December 31,2023,and December 31,2024,our bank and othe

170、r borrowings amounted to RMB610.9 million and RMB406.4 million,respectively,all of which were fixed-rate borrowings.Bank borrowings include bills discounted to banks but not derecognized,amounting to RMB65.6 million and RMB53.4 million as of December 31,2023 and December 31,2024,respectively.The rem

171、aining balance of other borrowings arose from factoring trade receivables to non-bank financial institutions with full recourse.The Group has complied with the covenants throughout the Reporting Period.Net DeficitAs of December 31,2023,and December 31,2024,the Companys owners equity amounted to a de

172、ficit of RMB6,438.1 million and a deficit of RMB6,506.4 million,respectively.The deficit was primarily due to the impact of convertible preferred shares,which were recorded at RMB6,816.7 million and RMB6,821.9 million as of December 31,2023,and December 31,2024,respectively.Following the Listing,the

173、 aforementioned convertible preferred shares were automatically converted into ordinary shares of the Company and recognized within the Companys share capital.30 2024 ANNUAL REPORTManagement Discussion and AnalysisFinancial Liabilities at FVTPLThe following table sets forth the financial liabilities

174、 at FVTPL of the Group as of the dates indicated.As of December 31,20242023RMBRMB(in thousands)Convertible preferred shares6,821,9406,816,687Redeemable preferred shares27,75925,008 Total6,849,6996,841,695Our financial liabilities at FVTPL are the convertible preferred shares and redeemable preferred

175、 shares issued to investors.The fair values of the convertible preferred shares and redeemable preferred shares are affected by changes in our equity value and various parameters and inputs.Following the listing of the Companys shares on March 10,2025,the convertible preferred shares of the Company

176、have been automatically converted into ordinary shares of the Company.Contractual CommitmentsOur contracted capital expenditure refers to capital expenditure related to the acquisition of prepaid lease payments and property and equipment that have been contracted for but not yet provided for in the

177、historical financial information.As of December 31,2024,we did not record any capital commitments.LIQUIDITY AND CAPITAL RESOURCESWe primarily funded our cash requirements through proceeds from business operations,bank borrowings,other debt financing,and shareholder equity contributions.Our cash posi

178、tion decreased from RMB1,053.2 million as of December 31,2023,to RMB746.9 million as of December 31,2024.The cash position includes cash and cash equivalents,financial investments,and restricted cash.ZG Group 31Management Discussion and AnalysisCash FlowsThe following table sets forth the components

179、 of our consolidated statement of cash flows for the years indicated.For the Year Ended December 31,20242023RMBRMB(in thousands)Net cash generated from operating activities419,945211,709Net cash used in investing activities(600,366)(546,511)Net cash generated from financing activities102,979209,407N

180、et decrease in cash and cash equivalents(77,442)(125,395)Cash and cash equivalents at beginning of the year310,904436,213Effect of foreign exchange rate changes6,70186Cash and cash equivalents at end of the year240,163310,904Operating activitiesFor the year 2024,our net cash generated from operating

181、 activities was RMB419.9 million.This net cash inflow was primarily attributable to an increase in working capital,which primarily resulted from(i)a decrease of RMB1,391.9 million in trade receivables,prepayments and other receivables,and(ii)an increase of RMB33.0 million in contract liabilities,par

182、tially offset by(i)an increase of RMB412.9 million in receivables at fair value through other comprehensive income(FVTOCI),and(ii)a decrease of RMB640.7 million in trade,bills and other payables.This net cash inflow was partially offset by our loss for the year of RMB68.7 million,adjusted by non-cas

183、h items,principally comprising(i)impairment losses under the ECL model,net of reversal,of RMB57.9 million,and(ii)finance costs of RMB40.0 million.Investing activitiesFor the year 2024,our net cash used in investing activities was RMB600.4 million,which was primarily attributable to(i)placement of pl

184、edged bank deposits for bills payable related to transaction services of RMB762.2 million,and(ii)placement of pledged bank deposits for bank borrowing of RMB44.5 million,partially offset by withdrawal of pledged bank deposits for bank borrowing of RMB70.3 million.Financing activitiesFor the year 202

185、4,our net cash generated from financing activities was RMB103.0 million,which was primarily attributable to(i)proceeds from bills discounted to banks that are not derecognized in their entirety of RMB355.8 million,and(ii)proceeds from bank and other borrowings of RMB501.6 million,partially offset by

186、 repayments of bank and other borrowings of RMB684.2 million.32 2024 ANNUAL REPORTManagement Discussion and AnalysisCAPITAL EXPENDITURESDuring the Reporting Period,our capital expenditures primarily consists of purchases of property and equipment,as well as intangible assets.For the Year Ended Decem

187、ber 31,20242023RMBRMB(in thousands)Purchases of property and equipment(12,398)(11,237)Purchases of intangible assets(27)Total(12,398)(11,264)SIGNIFICANT INVESTMENTS HELD,SIGNIFICANT ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES,ASSOCIATED COMPANIES AND JOINT VENTURES,AND FUTURE PLANS FOR SIGNIFICANT IN

188、VESTMENTS OR CAPITAL ASSETSFor the year ended December 31,2024,except for the“Future Plans and Use of Proceeds”as disclosed in the Circular,the Group did not hold any significant investments and did not make any significant acquisitions or disposals of subsidiaries,associates or joint ventures.PLEDG

189、E OF ASSETSAs of December 31,2024,we had pledged property and equipment and land use rights with net book values of RMB198.5 million and RMB16.5 million,respectively,as security for the Groups long-term borrowings of RMB280.0 million.The Group is not allowed to use such assets as security for other

190、borrowings.GEARING RATIOAs of December 31,2024,the Groups gearing ratio(calculated as total liabilities divided by total assets,expressed as a percentage)was 164.7%,compared with 154.7%as of December 31,2023.The increase was primarily due to the impact of convertible preferred shares.Following the l

191、isting of the Companys shares on March 10,2025,the convertible preferred shares of the Company have been automatically converted into Class A ordinary shares of the Company.ZG Group 33Management Discussion and AnalysisFOREIGN EXCHANGE EXPOSUREWe primarily conduct our operations in China,with the maj

192、ority of our transactions settled in RMB.Our exposure to foreign exchange risks arises predominantly from international business activities,involving currencies such as the USD,Hong Kong dollar HKD,Malaysian Ringgit,Indonesian Rupiah,and Thai Baht.These risks stem from assets and liabilities recogni

193、zed when we receive or anticipate receiving foreign currency from overseas business partners,or when we pay or expect to pay foreign currency to them.Consequently,fluctuations in exchange rates can affect our financial performance,particularly in the context of cross-border transactions.For example,

194、when the RMB appreciates,converting USD into RMB for operational needs results in receiving less RMB,which can strain liquidity.On the other hand,converting RMB into USD for obligations like dividends during USD appreciation reduces the USD amount available,potentially affecting returns for stakehol

195、ders.While our main revenue and cost streams are in RMB,a significant shift in exchange rates such as a hypothetical 10%fluctuation in RMB-USD rates,which we use as an internal benchmark could substantially impact our financial results.As of December 31,2024,we have not employed long-term contracts,

196、currency borrowings,or other mechanisms to hedge these foreign exchange risks,leaving us reliant on the natural alignment of our operations to manage exposure.Regulatory and Conversion ConstraintsPRC foreign exchange controls further complicate risk management.While current account transactions(e.g.

197、,profit repatriation,trade payments)may proceed without SAFE pre-approval,capital account activities,such as debt repayments or offshore investments,require stringent registrations with SAFE,NDRC,or market regulators.These constraints,coupled with limited access to hedging instruments in China,heigh

198、ten exposure.Although we have not yet utilized financial hedges,future efforts may be restricted in scope or effectiveness.Furthermore,exchange control policies could amplify losses by impeding timely currency conversion,particularly if RMB depreciates sharply.Failure to comply with regulatory requi

199、rements may disrupt cash utilization,constrain cross-border funding,and erode the value of your investment.CONTINGENT LIABILITIESAs at December 31,2024,we did not have any significant contingent liabilities.34 2024 ANNUAL REPORTManagement Discussion and AnalysisEMPLOYEES AND REMUNERATIONAs of Decemb

200、er 31,2024,we employed 1,120 full-time staff.Our success hinges on our ability to attract,retain,and motivate qualified personnel.As part of our human resources strategy,we offer competitive salaries,performance-linked cash bonuses,and other incentives to our employees.Additionally,we have implement

201、ed robust training programs for new hires and provide tailored online and offline regular and professional training based on the needs of employees across different departments.These training courses are customized according to the roles and skill levels of new hires,current employees,and management

202、.As required by regulations in China,we participate in various government statutory employee benefit plans.These include social insurance plans covering pension,medical,unemployment,work-related injury,and maternity benefits as well as housing provident funds.Under PRC law,we must contribute to thes

203、e employee benefit plans at specified percentages of our employees salaries,bonuses,and certain allowances,up to a maximum amount determined periodically by local governments.We believe that we maintain good working relationships with our employees and during the Reporting Period,we have not experie

204、nced any strikes nor labour disputes that had any material adverse effect to our operations in 2024.PURCHASE,SALE OR REDEMPTION OF THE COMPANYS LISTED SECURITIESSave as disclosed in this annual report,neither the Company nor any of its subsidiaries and consolidated affiliated entities had purchased,

205、sold or redeemed any of the Companys listed securities since March 10,2025(the“Listing Date”)up to the Latest Practicable Date.MATERIAL LITIGATIONDuring the Reporting Period and up to the Latest Practicable Date,unless otherwise disclosed in the Circular under the section headed“Business of the Targ

206、et Group”,our Company has not been involved in any material litigation or arbitration.Furthermore,our Directors are not aware of any material litigation or claims,whether pending or threatened,against our Company.ZG Group 35Directors ReportThe Board is pleased to present this Directors Report togeth

207、er with the consolidated financial statements of the Group for the year ended December 31,2024.DIRECTORSThe Directors who held office during the period from the Listing Date and up to the Latest Practicable Date are:Executive DirectorsMr.Wang Dong(王東)(Chairman and chief executive officer)Mr.Wang Cha

208、nghui(王常輝)Ms.Gong Yingxin(宮穎欣)Ms.Zhou Min(周敏)Non-Executive DirectorsMr.Ye Qian(葉芊)Mr.Jiang Rongfeng(蔣榕烽)Independent non-executive DirectorsMr.Wang Xiang(王翔)Mr.Wang Weisong(王蔚松)Mr.Chen Yin(陳垠)Biographical details of the Directors are set out in the section headed“Directors and Senior Management”on pa

209、ges 59 to 64 of this annual report.GENERAL INFORMATIONThe Company was the first in China to offer a one-stop integrated suite of B2B services covering the entire value chain of steel transactions,including online steel transactions,logistics,warehousing and processing,SaaS products,and big data anal

210、ytics,by connecting key participant in the steel transactions industry onto its digital platform.The Company was incorporated in the Cayman Islands on February 27,2012 as an exempted company with limited liability.Prior to the completion of the Reorganization,the Groups business was carried out by Z

211、haogang Netcom and its subsidiaries.The Groups history can be traced back to March 2012,when the Co-founders,Mr.Wang Dong,Mr.Wang Changhui and Mr.Rao Huigang,established Shanghai Gangfu(the predecessor of Zhaogang Netcom)to develop online steel trading services in the PRC.For further details of the

212、background of Mr.Wang Dong and Mr.Wang Changhui,see the section headed“Directors”in“Directors and Senior Management”.Since 2019,the Group has gone through a series of changes through which it has decreased the scale of its direct sales business and has transformed itself into a digital platform.36 2

213、024 ANNUAL REPORTDirectors ReportPRINCIPAL ACTIVITIESThe Group is a leading digital platform in China,primarily engaged in facilitating third-party steel transactions,offering a comprehensive suite of B2B services along the steel industry value chain,including online steel transactions,logistics,war

214、ehousing,processing,SaaS products,and big data analytics.The Company connects key participants in the steel transactions industry to its digital platform.Analysis of the principal activities of the Group during the Reporting Period is set out in Note 1 to the consolidated financial statements.BUSINE

215、SS REVIEWA business review of the Group,as required by Schedule 5 to the Companies Ordinance,including a fair review of the Companys business,an analysis of the Groups financial performance and the Groups key relationships with its stakeholders who have a significant impact on the Group and on which

216、 the Groups success depends,is set out in the sections headed“Business Review and Outlook”and“Management Discussion and Analysis”on pages 9 to 34 of this annual report.These discussions form part of this Directors Report.Events affecting the Company that have occurred since the end of the financial

217、year are set out in the section headed“Recent Developments after the Reporting Period”in“Business Review and Outlook”.PRINCIPAL RISKS AND UNCERTAINTIESOur business is subject to a number of risks,including risks that may prevent us from achieving our business objectives or may adversely affect our b

218、usiness,financial condition,results of operations,cash flows,and prospects.Below is a summary of certain principal risks and uncertainties facing the Group,some of which are beyond its control.Risks Relating to the Groups Business and Industry We are exposed to fluctuations in the supply of and dema

219、nd for,steel products within and outside of China,along with the underlying conditions of such fluctuations,which could adversely affect our business,results of operations and financial performance.If we cannot manage to grow our business or execute our strategies effectively,our business and prospe

220、cts may be materially and adversely affected.Our success depends on our ability to create strong synergies among all participants on our digital platform.If we fail to retain our existing participants,or to acquire new ones,or to keep or increase their engagement effectively,our business,results of

221、operations and financial performance may be materially and adversely affected.We incurred net losses during the Reporting Period,and we may continue to do so in the future.We recorded net liabilities and net current liabilities during the Reporting Period.ZG Group 37Directors Report We have had net

222、operating cash outflow in the past,which may expose us to certain liquidity risks,constrain our operational flexibility as well as adversely affect our financial conditions and ability to expand our businesses.Our business is subject to intense competition,and we may fail to compete successfully aga

223、inst existing or new competitors.We rely on third-party steel product sellers and service providers to provide quality products and services.If we fail to maintain good relationships with them,or find alternatives on reasonable terms,our business and financial performance may be materially and adver

224、sely affected.We rely on third-party sellers to offer quality products to buyers on our digital platform.Any quality issues in the products offered by such third-party sellers through our platform may subject us to liability,and may adversely affect our business and results of operations.We are subj

225、ect to risks relating to the logistics,warehousing and processing of steel products.If any of these risks materialize,our business,results of operations and financial performance could be materially and adversely affected.If PRC laws and regulations concerning the Internet finance become stricter an

226、d any of our transaction settlement services are deemed to be non-compliant with applicable laws and regulations,or are deemed to not obtain approvals from relevant governmental authorities,our business,financial condition and results of operations would be adversely affected.Our financial condition

227、s and results of operations may be subject to adverse effect from customer concentration.We rely on a mixture of public price indexes and quotations from sellers to provide prices of steel products on our digital platform.Inaccuracy in pricing information provided by sellers may adversely affect our

228、 brand name,business and financial performance.Fluctuations in foreign currency exchange rates may lead to volatility in foreign currency exchange losses and thus affect our results of operations and financial performance.The sophisticated and innovative technologies we use for our business operatio

229、ns are everchanging and may require more time to prove their reliability and effectiveness.We cannot assure you that the performance of these technologies will be stable enough to support our business.Failure to obtain,renew,or retain licenses,permits or approvals may affect our abilities to conduct

230、 or expand our business,and may incur financial penalties and other regulatory actions.Our expansion into global markets may expose us to new challenges and more risks,and we may fail to expand effectively.If we fail to overcome the challenges presented by our global operations,our business,financia

231、l condition and results of operations may suffer a material and adverse impact.38 2024 ANNUAL REPORTDirectors ReportRisks Relating to Government Regulations We may be subject to the approval of,or filing with,CSRC or other regulatory authorities in connection with capital raising activities.Regulato

232、ry requirements on currency conversion may limit our abilities to utilize our revenues effectively and affect the value of your investment.Regulatory,legislative or self-regulatory developments for online businesses in general,including privacy and data protection regimes,are expansive and if new re

233、gulations are enacted in the future and we are unable to respond to these developments promptly,we may be subject to enforcement actions for compliance failures,or restrictions on how we are able to operate our business.We may also need to incur significant compliance costs or make adjustments to ou

234、r digital platform or business model.If our PRC resident shareholders or beneficial owners fail to comply with relevant PRC foreign exchange regulations,we may be subject to penalties,including restrictions on our abilities to make capital contributions to our PRC subsidiaries and our PRC subsidiari

235、es abilities to distribute profits to us.Dividends payable by us to our foreign investors and gain on the sale of our Shares may become subject to withholding taxes under PRC tax laws.Dividends paid to our Hong Kong subsidiaries might not qualify for the reduced withholding tax rate of China mainlan

236、d under the special arrangement between Hong Kong and China mainland.PRC regulations establish certain procedures for some acquisitions of or investment into PRC companies by foreign investors,which through acquisitions in China.If we are classified as a PRC resident enterprise for PRC income tax pu

237、rposes,such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and have a material effect on our results of operations.ZG Group 39Directors ReportRisks Relating to the WVR Structure The concentration of Share ownership in Class B Shareholders limits the sh

238、areholders ability to influence corporate matters.Holders of our Class B Shares may exert substantial influence over us and may not act in the best interests of our independent shareholders.ENVIRONMENTAL POLICIES AND PERFORMANCEWe are committed to fulfilling social responsibility,promoting employee

239、benefits and development,protecting the environment,giving back to the community and achieving sustainable growth.Details of such are set out in the Environmental,Social and Governance Report.COMPLIANCE WITH RELEVANT LAWS AND REGULATIONSSave as disclosed in the Circular and the Environmental,Social

240、and Governance Report,the Company has complied with the relevant laws and regulations that have a significant impact on the operations of the Group during the Reporting Period.40 2024 ANNUAL REPORTDirectors ReportCONTINUING CONNECTED TRANSACTIONSContractual ArrangementsBackground of the Contractual

241、ArrangementsWe primarily engage in the provision of internet information services.As advised by our PRC Legal Advisor,internet information services are subject to foreign investment restrictions under current PRC laws and regulations.It was not viable for us to hold the Consolidated Affiliated Entit

242、ies directly through equity ownership.Hence,in line with common practice,we,through WFOE 1,our indirect wholly-owned subsidiary,entered into the Contractual Arrangements with the Consolidated Affiliated Entities and the Registered Shareholders of Zhaogang Netcom to gain effective control over,and re

243、ceive all the economic benefits generated by,the businesses currently operated by the Consolidated Affiliated Entities.To comply with PRC laws and regulations,while availing ourselves of international capital markets and maintaining effective control over all of our operations,we commenced a series

244、of reorganization activities.Pursuant to the Reorganization,the Contractual Arrangements currently in effect were entered into on May 18,2018,whereby WFOE 1 acquired effective control over the Consolidated Affiliated Entities and has become entitled to all the economic benefits derived from their op

245、erations.The Contractual Arrangements enable the results of operations,assets,and liabilities of the Consolidated Affiliated Entities to be consolidated into our results of operations,assets,and liabilities under IFRS as if they are our subsidiaries.Under the Contractual Arrangements,we do not direc

246、tly own any equity interest in the Consolidated Affiliated Entities.The Consolidated Affiliated Entities are Zhaogang Netcom and its subsidiaries.As of the Latest Practicable Date,the principal activities of each of the Consolidated Affiliated Entities are as follows:Consolidated Affiliated Entities

247、Principal Activities(1)Zhaogang Netcom.Online steel commerce and warehousing(2)Tushu Information Services(2)No material activities(3)Pan King Global(1)(2)No material activities(4)Qimao Equity Investment(3)Equity investment(5)Xinmao Equity Investment(3)Equity investment(6)Pangmao ZhinengTechnology(7)

248、Steel Searcher(3)Equity investment(8)Shenzhen Tushu(2)No material activities(9)Zhaogang(Shanghai)Metal MaterialsOnline steel commerce(10)Qingdao Zhaogang Netcom E-commerceOnline steel commerce(11)Shanghai Tengcai TechnologyTechnology(12)Shenzhen XinwuyouTechnology(13)Pangmao Yuanzheng(2)No material

249、activities(14)Pangmao LogisticsLogistics(15)Pangmao Logistics Technology(4)No material activitiesZG Group 41Directors ReportConsolidated Affiliated EntitiesPrincipal Activities(16)Pangmao Metal MaterialsMetal processing(17)Puhuida Digital Technology(2)No material activities(18)Pangmao LianxiangTechn

250、ology(19)Chongqing Zhaogang Netcom TechnologyOnline steel commerce(20)Jiangsu Zhaogang Netcom E-commerceOnline steel commerce(21)Zhejiang Zhaogang Netcom E-commerceOnline steel commerce(22)Henan Zhaogang Netcom TechnologyOnline steel commerce(23)Pangmao Logistics GansuLogistics(24)Guangdong Zhaogang

251、 NetcomOnline steel commerce(25)Shanghai Pangmao Zhiyuan(2)No material activitiesNotes:(1)Pan King Global terminated its steel export services in June 2022.(2)These entities may conduct activities subject to foreign investment restrictions in accordance with our business plans.To the extent that any

252、 of these entities conduct any material activities,they will only conduct activities subject to foreign investment restrictions,failing which we shall restructure them so that we will directly own them to the extent permitted by relevant laws.(3)These entities are investment holding entities of cert

253、ain minority interests and do not have any business operations of their own.(4)We plan to dissolve this entity in accordance with our business plans.A summary of our business that is subject to foreign investment restrictions in accordance with the Negative List(2024),effective from November 1,2024,

254、is set out below:CategoriesOur BusinessRestrictedValue-added telecommunication services businessThe principal business of Zhaogang Netcom,Pangmao Logistics,and Pangmao Logistics Gansu involves the provision of internet information services through mobile apps and websites,which falls within the scop

255、e of“value-added telecommunications services”under the Telecommunications Regulations of the PRC(中華人民共和國電信條例).Each of Zhaogang Netcom,Pangmao Logistics,and Pangmao Logistics Gansu holds an ICP License for the provision of internet information services.According to the Negative List(2024),foreign inv

256、estors are not allowed to hold more than 50%equity interests in any enterprise conducting such business(except for the specified exceptions).42 2024 ANNUAL REPORTDirectors ReportWe operate a third-party digital platform,Zhaogang Mall,in the steel transaction sector that can be accessed via our offic

257、ial websites and mobile apps.Our core business model is centered around our digital platform,through which we offer the following services:(1)transaction services;and(2)transaction support services,including logistics services,warehousing and processing services,and technology subscription services(

258、collectively,the“Supporting Services”,and together with(1),the“Relevant Businesses”).The transaction services,being our core business,require an ICP license and are subject to foreign investment restrictions in the PRC.Zhaogang Netcom possesses an ICP License to carry out our transaction services th

259、rough the digital platform.Therefore,as confirmed by our PRC Legal Advisor,the Consolidated Affiliated Entities(other than those with no material business activities as mentioned above)conduct value-added telecommunication services via our digital platform,which are considered“restricted”where forei

260、gn investors are restricted from holding more than 50%equity interests in companies providing such services and shall meet certain qualification requirements(the“Restricted Business”).Although the Supporting Services do not require an ICP License or fall into any foreign prohibited or foreign-restri

261、cted business category,the Supporting Services are fully integrated with the transaction services and cannot be separated from the digital platform.We are of the view that the Contractual Arrangements are narrowly tailored for the reasons below:(1)Our core business model is centered around our digit

262、al platform,Zhaogang Mall.Since our inception,our digital platform has provided the foundation for substantially all of our businesses.The transaction services offered through the digital platform generate the online traffic and users for almost all of our other business services.As we accumulated a

263、 substantial steel buyer and seller base,we expanded our business by providing transaction services under the ICP License;(2)The Supporting Services are fully integrated with the digital platform and rely on steel buyer and data accumulated from the digital platform.The Supporting Services are consi

264、dered supplementary to the steel transactions on the digital platform,and splitting services across different companies and platforms,rather than offering them seamlessly through a single checkout process,would impair the convenience and efficiency of the digital platform for steel buyers and underm

265、ine the“one-stop”shop experience that lies at the core feature of the digital platform;(3)From a technological support perspective,there is only one unified technical support service.The integration of technical support extends to the entire steel transaction ecosystem,including but not limited to t

266、he transaction services and the Supporting Services.Our proprietary technology and cloud-based infrastructure supports each segment of our business.Therefore,it is technologically impossible to separate the transaction services and the Supporting Services into two different entities without fundamen

267、tally changing our digital platform;(4)From a documentation perspective,the agreements and“fa piao”documenting the provision of services from the transaction services and/or certain services provided to the steel buyers and sellers are premised on the one unified platform;andZG Group 43Directors Rep

268、ort(5)Separating the Supporting Services would fundamentally undermine our transaction services.We benefit from our digital infrastructure that redefined the transaction process and service standards.Our logistics fulfillment network and technological management tools have enabled our digital transa

269、ction platform to cover pre-sales,in-sales,and post-sales transaction processes to achieve standardized management of buyers,sellers,and all aspects of transactions,which significantly improve transaction efficiency and effectively reduce the manpower involved.The Supporting Services,comprising logi

270、stics services,warehousing and processing services,and technology subscription services,are integral parts of our digital infrastructure and are practically inseparable from the digital platform.Furthermore,in order to create more potential cooperation opportunities and obtain potential investment g

271、ain in the future,the Consolidated Affiliated Entities make minority investments in companies which we consider to have increasing market value and expanding prospects of business diversity.These investments are primarily made through(i)Zhaogang Netcom,and(ii)Qimao Equity Investment,Xinmao Equity In

272、vestment,and Steel Searcher,all of which are subsidiaries of Zhaogang Netcom.The investments are passive,non-controlling interests that are classified as(i)financial assets at fair value through profit or loss or(ii)interests in associates and joint ventures,and are neither consolidated in our finan

273、cial statements nor form part of our group.Our Directors consider that the minority investments are not material to us.Given their immateriality and the fact that we do not consolidate or control these investee companies,our Directors consider that the Contractual Arrangements are narrowly tailored

274、notwithstanding the minority investments.By way of illustration that none of the investments held under the Contractual Arrangements are material to us,the long-term investments measured as financial assets at FVTPL and interests in associates and joint ventures held under the Contractual Arrangemen

275、ts accounted for approximately 0.8%,and 0.8%of our total assets as of December 31,2023,and December 31,2024,respectively.The long-term investments measured as financial assets at FVTPL and interests in associates and joint ventures attributed by the top 5 investments held under the Contractual Arran

276、gements in aggregate account for approximately 0.4%,and 0.4%of our total assets as of December 31,2023,and December 31,2024,respectively.The fair value gains on investments measured at fair value through profit or loss under the Contractual Arrangements and share of losses of results of associates a

277、nd joint ventures under the Contractual Arrangements account for approximately 0.4%and 2.4%of our net losses for the year ended December 31,2023 and December 31,2024,respectively.Based on the above and as set out in the section headed“Contractual Arrangements of Our Group”in the Circular,we believe

278、that the Contractual Arrangements are narrowly tailored to minimize potential conflicts with relevant PRC laws and regulations.Risks Relating to the Groups Contractual Arrangements If the PRC government finds that the structure we have adopted for our business operations does not comply with PRC law

279、s and regulations,or if any new interpretation on these regulations emerges,we could be subject to severe penalties,including the nullification of the Contractual Arrangements,or be forced to relinquish our interests in those operations.We rely on Contractual Arrangements with our Consolidated Affil

280、iated Entities and their shareholders for our business operations,which may not be as effective as direct ownership in providing operational control.44 2024 ANNUAL REPORTDirectors Report Any failure by our Consolidated Affiliated Entities or their shareholders to perform their obligations under our

281、Contractual Arrangements with them would have a material adverse effect on our business.The shareholders,directors,and executive officers of our Consolidated Affiliated Entities may have potential conflicts of interest with us,which may materially and adversely affect our business,results of operati

282、ons and financial performance.Contractual Arrangements in relation to our Consolidated Affiliated Entities may be subject to scrutiny by the PRC tax authorities and they may determine that we or our Consolidated Affiliated Entities owe additional taxes,which could negatively affect our financial per

283、formance.We conduct business operations in the PRC through our Consolidated Affiliated Entities by way of the Contractual Arrangements,but certain of the terms of the Contractual Arrangements may not be enforceable under applicable laws.Our exercise of the options to acquire equity ownership and ass

284、ets of our Consolidated Affiliated Entities may subject us to certain limitations and substantial costs.We may lose the ability to use licenses,approvals,and assets held by our Consolidated Affiliated Entities that are material to the operation of certain portions of our business if the Consolidated

285、 Affiliated Entities go bankrupt or become subject to a dissolution or liquidation proceeding.The interpretation and implementation of the PRC Foreign Investment Law may impact the viability of our current corporate structure,corporate governance and business operations.The structuring and implement

286、ation of the Contractual Arrangements,including the detailed terms discussed in this annual report and in the Circular under the section headed“Contractual Arrangements of the Target Group”,are designed to mitigate these risks.Summary of the Material Terms of the Contractual ArrangementsA summary de

287、scription of each of the specific agreements that comprise the Contractual Arrangements is set out below.Exclusive Business Cooperation AgreementsUnder the exclusive business cooperation agreement dated May 18,2018,between Zhaogang Netcom and WFOE 1(the“Exclusive Business Cooperation Agreement”),Zha

288、ogang Netcom engaged WFOE 1,our indirect wholly-owned subsidiary,as its exclusive provider of technical support,consultation,and other services,including the following:(1)the use of any relevant software legally owned by WFOE 1;(2)development,maintenance,and update of software in respect of Zhaogang

289、 Netcoms business;(3)design,installation,daily management,maintenance,and update of network systems,hardware,and database design;ZG Group 45Directors Report(4)providing technical support and staff training services for relevant employees of Zhaogang Netcom;(5)providing assistance in consultation,col

290、lection,and research of technology and market information(excluding market research business that wholly foreign-owned enterprises are prohibited from conducting under PRC laws);(6)providing business management consultation;(7)providing strategic development consultation;(8)providing finance consult

291、ation and management services;(9)providing business operation-related information consultation;(10)providing marketing and promotional services;(11)providing customer order management and customer services;(12)transfer,leasing,and disposal of equipment or properties;and(13)other relevant services re

292、quested by Zhaogang Netcom from time to time to the extent permitted under PRC laws.Pursuant to the Exclusive Business Cooperation Agreement,the service fees shall be 100%of the total consolidated profit of Zhaogang Netcom before tax,after the deduction of any accumulated deficit of the Consolidated

293、 Affiliated Entities in respect of the preceding financial years,operating costs,expenses,taxes,and other statutory contributions.Notwithstanding the foregoing,WFOE 1 may adjust the scope and amount of service fees according to PRC tax law and tax practices,and Zhaogang Netcom will accept such adjus

294、tments.WFOE 1 shall calculate the service fee on a monthly basis and issue a corresponding invoice to Zhaogang Netcom.Notwithstanding the payment arrangements in the Exclusive Business Cooperation Agreement,WFOE 1 may adjust the payment time and payment method,and Zhaogang Netcom will accept any suc

295、h adjustment.In addition,absent our prior written consent through WFOE 1,during the term of the Exclusive Business Cooperation Agreement,with respect to the services and other matters subject to the Exclusive Business Cooperation Agreement,Zhaogang Netcom shall not directly or indirectly enter into

296、any same or similar exclusive business cooperation agreement with any third party,accept the same or any similar services provided by any third party,and shall not establish cooperation relationships similar to that formed by the Exclusive Business Cooperation Agreement with any third party.WFOE 1 m

297、ay appoint other parties,who may enter into certain agreements with Zhaogang Netcom,to provide Zhaogang Netcom with the services under the Exclusive Business Cooperation Agreement.The Exclusive Business Cooperation Agreement also provides that WFOE 1 has the exclusive proprietary rights to and inter

298、ests in any and all intellectual property rights developed or created by Zhaogang Netcom during the performance of the Exclusive Business Cooperation Agreement.46 2024 ANNUAL REPORTDirectors ReportThe Exclusive Business Cooperation Agreement became effective upon its execution and shall remain effec

299、tive unless terminated(a)upon mutual agreement between WFOE 1 and Zhaogang Netcom;or(b)in writing by WFOE 1.Exclusive Option AgreementsZhaogang Netcom,WFOE 1 and the Registered Shareholders of Zhaogang Netcom,at that time entered into an option agreement on May 18,2018,which was subsequently amended

300、 and restated on August 31,2021 and on September 29,2022(the“Exclusive Option Agreement”).Pursuant to the Exclusive Option Agreement,the Registered Shareholders granted WFOE 1 an irrevocable and exclusive right to require the Registered Shareholders to transfer any or all their equity interests in Z

301、haogang Netcom to WFOE 1 and/or a third party designated by it,in whole or in part at any time and from time to time,at the lowest purchase price that permitted by the PRC laws or at the price that the registered capital of Zhaogang Netcom multiplied by the proportion of equity interests to be purch

302、ased in the total equity interests of Zhaogang Netcom,provided that such transfer shall comply with the applicable PRC laws and regulations.Zhaogang Netcom and the Registered Shareholders,among other things,have covenanted that:(1)without the prior written consent of WFOE 1,Zhaogang Netcom shall not

303、 assist or permit Registered Shareholders to sell,transfer,pledge or in any other manner dispose or impose encumbrance on the equity interest held in Zhaogang Netcom,except for any encumbrance as set under the Exclusive Option Agreement,the Equity Pledge Agreement and the Powers of Attorney;(2)witho

304、ut the prior written consent of WFOE 1,they shall not in any manner supplement,change or amend the constitutional documents of Zhaogang Netcom,increase or decrease their registered capital,or change the structure of their registered capital in other manner;(3)they shall maintain Zhaogang Netcoms cor

305、porate existence in accordance with good financial and business standards and practices,obtain and maintain all necessary government licenses and permits and prudently and effectively operate their business and handle their affairs;(4)without the prior written consent of WFOE 1,they shall not,and sh

306、all procure the subsidiaries of Zhaogang Netcom not,at any time following the signing of the Exclusive Option Agreement sell,transfer,pledge or dispose of in any manner any material assets of Zhaogang Netcom or legal or beneficial interest in the business or revenues of Zhaogang Netcom of more than

307、RMB1,000,000,or allow the encumbrance thereon of any security interest;(5)without the prior written consent of WFOE 1,Zhaogang Netcom shall not incur,inherit,guarantee or allow the existence of any debt,except for debts incurred in the ordinary course of business other than payables incurred by a lo

308、an;(6)Zhaogang Netcom shall always operate all of their businesses during the ordinary course of business to maintain their asset value and refrain from any action/omission that may adversely affect Zhaogang Netcoms operating status and asset value;(7)without the prior written consent of WFOE 1,they

309、 shall not cause Zhaogang Netcom to execute any material contract with a value above RMB1,000,000 or any contract that contravenes with existing material contracts,except the contracts executed in the ordinary course of business;ZG Group 47Directors Report(8)without the prior written consent of WFOE

310、 1,they shall not cause Zhaogang Netcom to provide any person with any loan or credit or provide any guarantee to any third party;(9)they shall provide WFOE 1 with information on Zhaogang Netcoms business operations and financial condition at the request of WFOE 1;(10)if requested by WFOE 1,they sha

311、ll procure and maintain insurance in respect of Zhaogang Netcoms assets and business from an insurance carrier acceptable to WFOE 1,at an amount and type of coverage typical of companies that operate similar businesses;(11)without the prior written consent of WFOE 1,they shall not cause or permit Zh

312、aogang Netcom to split,merge,consolidate with,acquire or invest in any person;(12)they shall immediately notify WFOE 1 of the occurrence or possible occurrence of any litigation,arbitration or administrative proceedings relating to Zhaogang Netcoms assets,business or revenue;(13)to maintain the owne

313、rship by Zhaogang Netcom of all of its assets,they shall execute all necessary or appropriate documents,take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;(14)without the prior written consent of W

314、FOE 1,Zhaogang Netcom shall not in any manner distribute dividends to its shareholders,provided that upon the written request of WFOE 1,Zhaogang Netcom shall immediately distribute all distributable profits to its shareholders;(15)at the request of WFOE 1,they shall appoint any persons designated by

315、 WFOE 1 as the directors and/or senior management of Zhaogang Netcom or remove any existing directors and/or senior management of Zhaogang Netcom;(16)without the written consent of WFOE 1,the Registered Shareholders shall not engage in any business in competition with WFOE 1 or its affiliates;(17)un

316、less otherwise mandatorily required by PRC laws,Zhaogang Netcom shall not be dissolved or liquidated without prior written consent by WFOE 1;(18)once foreign investors are allowed by the PRC laws to invest in the principal business of Zhaogang Netcom and relevant competent authority accepts applicat

317、ion for transfer of such business,the Registered Shareholders shall immediately transfer the shares of Zhaogang Netcom to WFOE 1 or its appointee(s)when WFOE 1 exercises its option rights,and Zhaogang Netcom shall cooperate to deal with the procedures of share transfer;(19)in the event that WFOE 1 i

318、s impeded to exercise purchase rights due to the failure of the Registered Shareholders and/or Zhaogang Netcom to fulfill their tax obligations under applicable laws,WFOE 1 shall be entitled to demand them to fulfill such tax obligations;and48 2024 ANNUAL REPORTDirectors Report(20)the Registered Sha

319、reholders and Zhaogang Netcom shall procure subsidiaries of Zhaogang Netcom to comply with all undertakings applicable to the Registered Shareholders under this clause in the same circumstances,as if such subsidiaries will be treated as Zhaogang Netcom under the corresponding clause.In addition,the

320、Registered Shareholders,among other things,have covenanted that:(1)without the written consent of WFOE 1,they shall not sell,transfer,pledge or dispose of in any other manner the legal or beneficial interest in Zhaogang Netcom,or allow the encumbrance thereon of any security interest,except for the

321、Exclusive Option Agreement,the Equity Pledge Agreement and the interests prescribed in the Powers of Attorney,and procure the shareholders meeting and the board of directors(or executive directors)of Zhaogang Netcom not to approve such matters;(2)without the written consent of WFOE 1,for any divisio

322、n,merger or consolidation to be conducted with anyone,or acquisition or investment of anyone by Zhaogang Netcom,to cause the shareholders meeting and/or the board of directors(or executive directors)of Zhaogang Netcom to vote on the approval of the transfer of equity interests and any other action r

323、equested by WFOE 1;(3)any Registered Shareholders who have not transferred its Shares shall waive any pre-emptive right that he/she is entitled to(if any),and give consent to the execution,by other shareholders of Zhaogang Netcom with WFOE 1 and Zhaogang Netcom,of any exclusive option agreements,equ

324、ity interest pledge agreements and powers of attorney similar to the Exclusive Option Agreement,the Equity Pledge Agreement and the Powers of Attorney,and undertake not to take any actions that would be in conflict with such documents executed by the other shareholders of Zhaogang Netcom(if any);and

325、(4)each of the Registered Shareholders will transfer to WFOE 1 or its appointee(s)by way of gift any profit,dividend,bonus and liquidation income in accordance with the PRC laws.The Registered Shareholders shall,subject to the relevant laws and regulations,return to WFOE 1 or any person designated b

326、y WFOE 1,any consideration they receive in the event that WFOE 1 exercise the options under the Exclusive Option Agreement to acquire the equity interests in Zhaogang Netcom.The Exclusive Option Agreement became effective upon its execution and shall remain effective unless terminated in the event t

327、hat the entire equity interests held by the Registered Shareholders in Zhaogang Netcom have been transferred to WFOE 1 or its appointee(s).WFOE 1 may terminate the Exclusive Option Agreement upon written notice according to its own discretion.Equity Pledge AgreementsZhaogang Netcom,WFOE 1 and the Re

328、gistered Shareholders at that time entered into an equity pledge agreement on May 18,2018,which was subsequently amended and restated on August 31,2021 and on September 29,2022(the“Equity Pledge Agreement”).Pursuant to the Equity Pledge Agreement,the Registered Shareholders pledged all their respect

329、ive equity interests in Zhaogang Netcom,including any interest or dividend paid for the shares,to WFOE 1 as a security interest to guarantee the performance of contractual obligations and the payment of outstanding debts.ZG Group 49Directors ReportThe pledge in respect of Zhaogang Netcom takes effec

330、t upon the completion of registration with the relevant administration for industry and commerce and shall remain valid until after(i)all the contractual obligations of the Registered Shareholders and Zhaogang Netcom under the relevant Contractual Arrangements have been fully performed and all the o

331、utstanding debts of the Registered Shareholders and Zhaogang Netcom under the relevant Contractual Arrangements have been fully paid,or(ii)WFOE 1 and/or its appointee(s)decide to purchase all equity interests of Zhaogang Netcom to the extent acceptable by the PRC laws pursuant to the Exclusive Optio

332、n Agreement,the equity interests of Zhaogang Netcom has been transferred to WFOE 1 and/or its appointee(s)pursuant to laws,and WFOE 1 and/or its appointee(s)could lawfully engage in the business of Zhaogang Netcom.The Equity Pledge Agreement became effective upon its execution and shall remain valid

333、 until all the contractual obligations therein have been fully performed and all the outstanding debts thereunder have been fully paid.Upon the occurrence and during the continuance of an event of default,WFOE 1 shall have the right to dispose the pledge after sending the notice of default to the Registered Shareholders.WFOE 1 shall also have the right to exercise all such rights as a secured part