# 2. Significant accounting policies and other explanatory information (Continued)

A liability or provision is recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. A provision is made using best estimates of the amount required in settlement and where the effect of the time value of money is material, the amount recognised is the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. Changes in estimates are reflected in profit or loss in the reporting year they occur.

The critical judgements made in the process of applying the accounting policies that have the most significant effect on the amounts recognised in the financial statements and the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting year, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities currently or within the next reporting year are discussed below. These estimates and assumptions are periodically monitored to ensure they incorporate all relevant information available at the date when financial statements are prepared. However, this does not prevent actual figures differing from estimates.

A review is made on inventory for excess inventory and declines in net realisable value below cost and an allowance is recorded against the inventory balance for any such declines. The review requires management to consider the price protection and other return policies with suppliers and future demand for the products. In any case the realisable value represents the best estimate of the recoverable amount and is based on the acceptable evidence available at the end of the reporting year and inherently involves estimates regarding the future expected realisable value. The usual considerations for determining the amount of allowance or write-down include ageing analysis, technical assessment and subsequent events. In general, such an evaluation process requires significant judgement and materially affects the carrying amount of inventories at the end of the reporting year. Possible changes in these estimates could result in revisions to the stated value of the inventories. The carrying amount of inventories at the end of the reporting year is disclosed in Note 18 on inventories.

# 2C. Critical judgements, assumptions and estimation uncertainties (Continued)

The Group operates the (a) ValueClub, Challenger membership scheme and (b) Hachi membership scheme.

The Group allocates the consideration received from the sale of goods to the goods sold and the points issued under its ValueClub Reward Points Customer Loyalty Programme (the “Programme”). The consideration allocated to the points issued is measured at their fair values. Fair values are determined by considering, among others, the following factors: the range of products available to the customers, the prices at which the Group sells the products which can be redeemed and the changing patterns in the redemption rates.

The Group awards Hachi rebates based on a percentage of the product purchased by the customer under its Hachi Dollar Rebate Programme (the “Programme”). The fair value of the rebates is based on the actual amount the customer will be able to utilise to offset against their next purchase. The estimated redemption rate used to determine the carrying value of the rebates based on historical customer’s redemption.

The carrying amount of the Group’s deferred revenue in relation to the Programme at the end of the reporting year is disclosed in Note 25C on other liabilities.

Useful lives of property, plant and equipment:

The estimates for the useful lives and related depreciation charges for property, plant and equipment are based on commercial and other factors which could change significantly as a result of innovations and in response to market conditions. The depreciation charge is increased where useful lives are less than previously estimated lives, or the carrying amounts written off or written down for technically obsolete items or assets that have been abandoned. It is impracticable to disclose the extent of the possible effects. It is reasonably possible, based on existing knowledge, that outcomes within the next reporting year that are different from assumptions could require a material adjustment to the carrying amount of the balances affected. The carrying amount of the specific asset or class of assets at the end of the reporting year affected by the assumption is disclosed in Note 14 on property, plant and equipment.


The Group recorded inventory turnover and average payable period of 44 days and 35 days respectively for the period under review (2019: 19 days and 22 days respectively) based on the amount of inventory and trade and bills payables as at 30 June 2020, divided by cost of sales for the same period and multiplied by 182 days (2019: 181 days).

During the six months period ended 30 June 2020, the Group recorded net operating cash outflow of HK\$890,888,000 compared with net operating cash inflow of HK\$544,454,000 in same period last year.

The Group has foreign currency sales and purchases, bank deposits and borrowings primary in United States dollars and Renminbi which expose the Group to foreign currency risk.

The Group entered into short-term foreign currency forward contracts to hedge the currency risk related to its payable denominated in foreign currencies.

As at 30 June 2020, certain of the Group’s assets (including land and building, bank deposits, factored trade receivables and investments held-for-trading) with the carrying value of totaling approximately HK\$331 million were pledged to banks to secure general banking facilities granted to the Group.

At 30 June 2020, the Group employed approximately 500 employees in the Greater China region. The Group ensures that their employees are offered competitive remuneration packages. Other staff benefits include share option scheme, provident fund schemes and medical insurance. Also, discretionary bonus was granted to eligible employees based on the Group’s financial results and individual performance.

# PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the period under review, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

The Group has complied with the applicable code provisions in the Corporate Governance Code as contained in Appendix 14 to the Listing Rules (the “Code”) throughout the six months ended 30 June 2020, except for the following deviations:

Under the code provision A.1.8 of the Code, provides that an issuer should arrange appropriate insurance cover in respect of legal action against its directors. With regular and timely communications among the Directors and the management of the Group, the management of the Group believes that all potential claims and legal actions against the Directors can be handled effectively, and the possibility of actual litigation against the Directors is very low. The Company will consider to make such an arrangement as and when it thinks necessary.

Under the code provision A.2.1 of the Code, the roles of chairman and chief executive officer should be separate and should not performed by the same individual. Having considered the current business operation and the size of the Group, the Board is of the view that Dr. Yim Yuk Lun, Stanley BBS JP acting as both the Chairman and the Managing Director of the Group is acceptable and in the best interest of the Group.

Under the code provision A.4.1 of the Code, non-executive directors should be appointed for a specific term and subject to re-election. The non-executive directors have not been appointed for a specific term. However, according to the Bye-laws of the Company, one-third of the directors for the time being shall retire from office by rotation at each annual general meeting. As such, the Company considers that sufficient measures have been taken to ensure that the Company’s corporate governance practices are similar to those in the Code.

The Audit Committee of the Company has reviewed with management the accounting principles and policies adopted by the Group, internal control, risk management and the unaudited interim financial statements for the six months ended 30 June 2020.

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Companies contained in Appendix 10 of the Listing Rules (the “Model Code”) as the code of conduct regarding directors’ securities transactions.

Having made specific enquiry of all Directors, the Company confirmed that all Directors have complied with the required standard set out in the Model Code throughout the six months ended 30 June 2020.


# Invest in broadband networks and services

Bell’s broadband networks are the foundation of our growth and innovation strategy. Fast fibre and mobile LTE connections power our leading wireless, TV, Internet, media and business services, and their outstanding quality and reliability continue to drive increased customer usage and satisfaction.

Bell networks connect Canadians to each other and the world, delivering billions of wireless calls, text messages and emails each day, providing fast, reliable access to streaming video and music, social media, online gaming, business applications and much more.

Canada’s largest companies rely on Bell’s networks and industry-leading roster of 28 data centres across the country for the fast and secure communications they need to support their operations and serve customers in Canada and around the globe.

As demand for bandwidth continues to accelerate, Bell is staying ahead with capital expenditures of \$4.03 billion supporting extensive wireless and fibre network expansion in 2017 to power our broadband growth strategy.

It’s On: Delivering the fastest broadband in more places

Our major fibre projects in urban centres made significant progress in 2017, expanding Bell’s direct fibre footprint to more than 3.7 million homes and businesses in Atlantic Canada, Québec, Ontario and Manitoba, up from approximately 3 million the year before. That now includes most of Toronto, and we recently announced that we will extend our all-fibre footprint across the fast-growing GTA/905 region surrounding Canada’s most populous city.

As we continue to expand our deployments, including in centres large and small throughout Manitoba with Bell MTS, we’re on track to bring direct fibre connections to a total of 4.5 million locations by the end of 2018 – approximately 50% of our long-term direct fibre build –providing even more Canadians with access to Gigabit Fibe Internet, the best TV experience with Fibe TV, and a range of new business services.

With our Toronto fibre build nearing completion, we are expanding our direct fibre links throughout Montréal and the GTA/905 region surrounding Toronto.

# \$4.03B CAPITAL EXPENDITURESBell’s leading broadband network investments are driving innovation and customer growth

In wireless, we achieved a major milestone in 2017 as our LTE network, offering theoretical download speeds of up to 150 Megabits per second (Mbps), grew to reach 99% of the Canadian population, throughout urban centres, small towns and rural locations alike. We expect to grow LTE Advanced coverage, with speeds of up to 260 Mbps, to approximately 92% of Canadians by the end of 2018.

We’re achieving industry-leading wireless speeds with active spectrum deployment and aggregation as well as our industry-leading fibre backhaul infrastructure. We continued to enhance Canada’s Best National Network in 2017, with Tri-band LTE service now providing speeds up to 335 Mbps to 34% of Canadians and Quad-band LTE service offering up to 750 Mbps in more than 90 cities.

# Bell networks support ongoing service innovations

With our industry-leading investments in Canadian R&D, Bell is leveraging the best talent and advanced technologies to build efficient networks that adapt quickly as broadband services evolve.

Our advanced and ubiquitous wireless and fibre networks position us for success in the fast-growing Internet of Things (IoT) sector, which encompasses personal wearable devices, connected vehicles, the Connected Home, Smart City platforms and a broad range of business solutions.

In 2017, Bell announced the development of an LTE-M network to improve the efficiency of IoT devices by enabling lower power consumption and better coverage in underground and hard-to-reach areas.

Bell has announced several partnerships that highlight the huge potential of IoT technology and our innovation initiatives in the sector, including the first Smart City project in Kingston to improve the efficiency of municipal operations and services, and a unique vineyard monitoring system with the Henry of Pelham Estate Winery in Ontario’s Niagara Region.

We are also working with Hyundai, Kia and other auto manufacturers to provide connected vehicle services such as emergency roadside assistance, remote start and on-demand diagnostics over Bell’s national network. Bell’s Connected Car Bell Whole Home Wi-Fi ensures you get the fastest access speeds throughout your household.

product also offers vehicle tracking and notifications, maintenance alerts and an in-vehicle Wi-Fi hotspot.

In residential services, we launched Bell Whole Home Wi-Fi service, the first in Canada to use access points called pods and smart technology to ensure all devices throughout the home receive the strongest signal and fastest speeds available. Backed by the Fibe network, the new service works seamlessly with the advanced Home Hub 3000 modem and Wi-Fi router.

We expanded our partnership with Ericsson to take Fibe TV innovation to the next level with the new MediaFirst platform. Enabling next-generation services across multiple screens and other enhancements for Fibe TV and Alt TV, MediaFirst will help keep Bell a step ahead as our cable competitors try to catch up in the IPTV marketplace.


# 55. Balance sheet and statement of changes in equity (continued)

	Reserves

Share capital	Reserve for
fair value
changes/
Reserve for fair
value changes of
available-for-sale
securities	Retained
earnings	Total equity

HK$’m	HK$’m	HK$’m	HK$’m

At 1 January 2017	52,864	1,276	7,201	61,341

Profit for the year	–	–	15,515	15,515

Other comprehensive income:

Available-for-sale securities	–	354	–	354

Total comprehensive income	–	354	15,515	15,869

Dividends	–	–	(13,375)	(13,375)

At 31 December 2017	52,864	1,630	9,341	63,835

At 1 January 2018,
as previously reported	52,864	1,630	9,341	63,835

Effect of adoption of HKFRS 9	–	(2,730)	2,730	–

At 1 January 2018, after adoption
of HKFRS 9	52,864	(1,100)	12,071	63,835

Profit for the year	–	–	16,035	16,035

Other comprehensive income:

Equity instruments at fair value
   through other comprehensive
   income	–	(763)	–	(763)

Total comprehensive income	–	(763)	16,035	15,272

Dividends	–	–	(13,776)	(13,776)

At 31 December 2018	52,864	(1,863)	14,330	65,331

The particulars of all direct and indirect subsidiaries of the Company are set out in “Appendix – Subsidiaries of the Company”. The following is a list of principal subsidiaries as at 31 December 2018:

Name	Place of
incorporation
and operation	Issued share capital	Interest held	Principal activities

Bank of China (Hong Kong) Limited	Hong Kong	HK$43,042,840,858	*100%	Banking business

BOC Group Life Assurance Company Limited	Hong Kong	HK$3,538,000,000	*51%	Life insurance
business

BOC Credit Card (International) Limited	Hong Kong	HK$480,000,000	100%	Credit card services

Bank of China (Malaysia) Berhad	Malaysia	RM760,518,480	100%	Banking business

Bank of China (Thai) Public Company Limited	Thailand	Baht10,000,000,000	100%	Banking business

Po Sang Securities and Futures Limited	Hong Kong	HK$335,000,000	100%	Securities and futures
brokerage

The particulars of a subsidiary with significant non-controlling interests are as follows:

# BOC Group Life Assurance Company Limited

	2018	2017

Proportion of ownership interests and voting rights held by
non-controlling interests	49%	49%

	2018	2017

HK$’m	HK$’m

Profit attributable to non-controlling interests	420	586

Accumulated non-controlling interests	4,083	4,334

Summarised financial information:

– total assets	132,417	130,597

– total liabilities	124,085	121,752

– profit for the year	857	1,196

– total comprehensive income for the year	(182)	1,492


	For the three months ended
30 September	For the six months ended
30 September

2021	2020	2021	2020

HK$’000	HK$’000	HK$’000	HK$’000

(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)

The Gr’oups (loss)/profit
from operations is arrived
at after charging/(crediting):

Cost of sales	6,205	2,516	8,651	208,107

Depreciation charge

– property, plant and
equipment	57	66	111	171

– right-of-use assets	–	1,359	–	2,704

Net foreign exchange
(loss)/gain	1	18	1	19

Staff costs (including
director’s remuneration)	5,940	6,415	12,398	11,395

	For the three months ended
30 September	For the six months ended
30 September

2021	2020	2021	2020

HK$’000	HK$’000	HK$’000	HK$’000

(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)

Interest on other borrowing	10,280	14,625	26,496	28,748

Interest on lease liabilities	–	319	–	319

Total	10,280	14,944	26,496	29,067

	For the three months ended
30 September	For the six months ended
30 September

2021	2020	2021	2020

HK$’000	HK$’000	HK$’000	HK$’000

(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)

Current tax charged:

PRC Enterprise Income Tax	13	67	1,532	5,659

Total tax charged	13	67	1,532	5,659

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards.

No provision for Hong Kong Profits Tax has been made as the Group has no assessable profits in Hong Kong or the estimated assessable profit was wholly absorbed by tax losses brought forward for the six months ended 30 September 2021 (2020: Nil).

The Group had no significant unprovided deferred tax assets and liabilities at 30 September 2021 (2020: Nil).

The calculation of the basic loss per share is based on the loss attributable to owners of the Company for the three months ended 30 September 2021 of approximately HK\$11,253,000 (2020: loss attributable to owners of the Company of approximately HK\$27,994,000) and loss attributable to owners of the Company for the six months ended 30 September 2021 of approximately HK\$26,499,000 (2020: loss attributable to owners of the Company of approximately HK\$27,524,000) and the weighted average of 3,640,627,457 shares in issue during the three months ended 30 September 2021 (2020: 3,564,945,946 shares) and the weighted average of 3,640,627,457 shares in issue during the six months ended 30 September 2021 (2020: 3,564,945,946 shares).

No diluted loss per share were presented as there were no potential ordinary shares in issue for the three months and six months ended 30 September 2021.


– We require significant capital investments and a high level of working capital to sustain our operations and overall growth

– We manufacture our products in a single location, and any material disruption of our operations could adversely affect our business

– Our expansion plans may not be successful

– Our production capacity might not be able to meet with growing market demand or changing market conditions

– We manufacture and sell only “high-end” steel flow control products

– We may not be able to develop new products or expand into new markets

– We may be subject to product liability claims

– We may be subject to liability in connection with industrial accidents at our production facilities

– Lack of business insurance coverage may incur substantial costs for our Group

– We are subject to foreign exchange exposure

– The interests of our Controlling Shareholders may differ from those of our other Shareholders

– Our business depends very much on the continuous casting method in the steel manufacturing industry. Industry-wide adoption of other existing or new technologies that do not require steel flow control products in the future might seriously affect our business

– We cannot assure that we will be able to renew all necessary licences, certificates, approvals and permits for our production. Changes in licensing requirements applicable to our industry may adversely affect us

– The PRC Government may adopt measures to slow down growth in the steel manufacturing industry and other steel consuming industries, thereby adversely affecting the demand for our products

– Our industry is subject to global economic and market conditions

– We operate in a highly competitive industry

# Risks relating to conducting business in the PRC

– Political and economic policies of the PRC government and social conditions and legal developments of the PRC could affect our business

– The government control of currency conversion could affect our business operations

– Uncertainties regarding interpretation and enforcement of the PRC laws and regulations may impose adverse impact on our business, operations and profitability

– The implementation of the new labour contract law and increase in labour costs in the PRC may adversely affect our business and financial conditions

– Under the Enterprise Income Tax Law (中華人民共和國企業所得稅法) and the related implementation regulations, which became effective on 1 January 2008, dividends from our subsidiary in the PRC may be subject to withholding tax or we may be subject to PRC tax on our worldwide income

– Dividends payable by us to our foreign investors and gain on the sale of our Shares may be subject to the PRC tax

– We cannot assure that we will continue to enjoy preferential tax treatments or financial incentives in the future

– PRC regulations on loans to and direct investment by offshore holding companies in PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiary

– We are a holding company and rely on dividend payments from our operating subsidiary

– Uncertainties on the PRC withholding tax rate on dividends payable by our subsidiary in the PRC

– PRC regulations relating to acquisitions of the PRC companies by foreign entities may limit our ability to acquire the PRC companies and adversely affect the implementation of our strategy as well as our business and prospects

– PRC regulations relating to the establishment of offshore special purpose companies by the PRC residents may subject our PRC resident shareholders or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to increase their registered capital or distribute profit to us, or may otherwise adversely affect us

– A shortage of electricity and water supply in the PRC would affect our production and affect our business and financial performance

– Shareholders’ interests in the share capital of our Company may be diluted in the future

– Lack of liquidity of our Shares and volatility of the market price may be resulted

– Fluctuation of RMB may affect value of our dividends (if any) and our financial condition

– Investors may experience difficulties in effecting service of legal process and enforcing judgments against our Company and our management

– We cannot guarantee the accuracy of facts and other statistics with respect to the global steel industry, the PRC economy, the PRC steel industry and the PRC steel flow control products industry in the continuous casting process contained in this prospectus

– Forward-looking statements contained in this prospectus are subject to risks and uncertainties

– We strongly caution you not to place any reliance on any information contained in press articles or media regarding us or the Global Offering


which can be taken as smoking-gun signals of DM scattering, can further increase an exper-iment’s constraining power. For DM–nucleon interactions, although the elastic scattering is the best channel, however, for light DM particles which can not deposit observable energies in detectors, one has to rely on the high energy part of ionization processes.

The energy and momentum transfers involved in sub-GeV DM scattering overlap typ-ical atomic scales, so studies of issues such as binding effects and electron/nuclear recoil mechanism, which play important roles in interpreting experimental data, require detailed many-body calculations. This case study of hydrogen, where both binding and recoil can be taken into account most simply, therefore provides useful qualitative understanding of what to be anticipated in sub-GeV DM scattering off practical detector materials such as germanium and xenon.

We acknowledge the support from the Ministry of Science and Technology of Republic of China under Grants No. 102-2112-M-002-013-MY3 (J.-W. C., C.-L. W., and C.-P. W.) and No. 103-2112-M-259-003 (H.-C. C. and C.-P. L.); the Center for Theoretical Sciences and Center of Advanced Study in Theoretical Sciences of National Taiwan University (J.-W. C., C.-L. W., and C.-P. W.); and the National Center for Theoretical Sciences. J.-W. C. was also supported in part by the Deutsche Forschungsgemeinschaft and National Natural Science Foundation of China (CRC 110).

[1] K. Olive et al. (Particle Data Group), Chin. Phys. C 38, 090001 (2014).

[2] R. Essig, J. A. Jaros, W. Wester, P. H. Adrian, S. Andreas, et al., (2013), arXiv:1311.0029[h .ep-ph]

[5] .C. Boehm and P. Fayet, Nucl. Phys. B683, 219 (2004), arXiv:hep-ph/0305261 [hep-ph]

[6] C. Boehm, P. Fayet, and J. Silk, Phys. Rev. D 69, 101302 (2004), arXiv:hep-ph/0311143.[hep-ph]

[7] N. Borodatchenkova, D. Choudhury, and M. Drees, Phys. Rev. Lett. 96, 141802 (2006), .arXiv:hep-ph/0510147 [hep-ph]

[8] M. Pospelov, A. Ritz, and M. B. Voloshin, Phys. Lett. B 662, 53 (2008), arXiv:0711.4866[h .ep-ph]

[11] M. Pospelov, A. Ritz, and M. B. Voloshin, Phys. Rev. D 78, 115012 (2008), arXiv:0807.3279[h .ep-ph]

[12] K. Rajagopal, M. S. Turner, and F. Wilczek, Nucl. Phys. B 358, 447 (1991).

[13] L. Covi, J. E. Kim, and L. Roszkowski, Phys. Rev. Lett. 82, 4180 (1999), arXiv:hep-ph./9905212 [hep-ph]

[14] K.-Y. Choi, L. Covi, J. E. Kim, and L. Roszkowski, JHEP 04, 106 (2012), arXiv:1108.2282[h .ep-ph]

[15] .S. Dodelson and L. M. Widrow, Phys. Rev. Lett. 72, 17 (1994), arXiv:hep-ph/9303287 [hep-ph]

[16] X.-D. Shi and G. M. Fuller, Phys. Rev. Lett. 82, 2832 (1999), arXiv:astro-ph/9810076 [astro-.ph]

[17] A. D. Dolgov and S. H. Hansen, Astropart. Phys. 16, 339 (2002), arXiv:hep-ph/0009083 [hep-ph.]

[18] A. Boyarsky, J. Lesgourgues, O. Ruchayskiy, and M. Viel, Phys. Rev. Lett. 102, 201304 (2 .009), arXiv:0812.3256 [hep-ph]

[20] .J. Knodlseder et al., Astron. Astrophys. 441, 513 (2005), arXiv:astro-ph/0506026 [astro-ph]

[21] G. Wei .denspointner et al., Nature 451, 159 (2008)

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Notwithstanding the rapid recovery in coal price in Guizhou province in late 2016, the fundamentals of coal demand have not changed significantly. As the coal demand shortage and overcapacity are still prominent, the Group believes that the government will continue adhering to the supply-side reform policy to resolve excess coal production capacity. The Group will continue adopting the existing business strategy through the expansion of existing shipping port, transport belts and coal beneficiation plant, and strengthening the effective coal quality management through coal washing and coal blending in order to meet different requirements of various customers and penetrate the surrounding coal market.

The status of coal as the primary energy in China is expected to remain unchanged for a considerable length of time in the future. Therefore the Company is cautiously positive about the coal industry in the longer term. The Company will also consider other potential business projects that can provide the Shareholders with promising returns and benefit the Group as a whole as and when suitable opportunities arise.

On behalf of the Board, I would like to take this opportunity to express my appreciation to the staff and management team of the Group for their hard work and dedication during the year. I would also like to express my sincere gratitude to the Shareholders for their continuous support.

In early 2016, the Group re-formulated its business strategy to enhance the Group’s overall competitiveness in the downturn of the coal industry by adopting the following measures.

First of all, in addition to the existing coal beneficiation plant, the Group managed to complete the construction of another simple coal washing facility within three months as well as putting two high sieving systems into operation. Coal washing and efficient coal blending could be performed with the Group’s own coal beneficiation plant, coal washing facility and high sieving systems. To meet the demands of power plants and other customers with lower coal specification, the Group blended raw coal, lignite (the by-product of coal washing), middling coal and coal residue stone. The sales of blended coal not only met customers’ specific requirements but also generated additional revenue for the Group and reduced the treatment cost of lignite and coal residue stone. Therefore the Group was in a better position to segment the coal market by providing customised coal products of different specifications and stable quality to various customers.

Secondly, the Group improved the logistics and transportation so that its coal products could be transported to the downstream chemical plants, cement plants and other customers waterway at a lower cost and a shorter time through the Group’s own shipping port.

Thirdly, the Group adhered to establish a strategic customer-oriented management system, which not only provided customers with a variety of customised specifications of coal products but also enhanced the quality of customer service. As a result, longer term customer relationship has been built up.

Fourthly, the Group adopted optimised mining plan, took advantage of water transport, stringent cost control and other means to reduce production and logistics costs. The Group also closely adhered to the stringent cash flow management by securing alternative financing for mine tunnel construction. Furthermore, the Group managed to negotiate “payment before delivery” term for non-power plant customers to minimise potential credit risk and reduce working capital cycle.

As a result of the effective implementation of the above strategies and the surge of coal price in the fourth quarter of 2016, the Group’s loss attributable to owners of the parent from continuing operations substantially declined from approximately CNY488.4 million in 2015 to approximately CNY205.7 million in 2016.


The Group’s investment in an associated company (Note 29) is not material to the Group. There are no contingent liabilities relating to the Group’s interest in the associated company.

In 2015, the Group’s equity accounting/gains on associated companies recognised in the income statement included a gain of \$47,570,000 arising from the partial disposal and reclassification of an associated company to available-for-sale financial assets.

# 14. FINANCIAL ASSETS (FVOCI) / AVAILABLE-FOR-SALE FINANCIAL ASSETS

As disclosed in Note 2(a), the Group has early adopted FRS 109 effective 1 January 2016 and elected, at initial adoption, to present in other comprehensive income changes in the fair value of all its equity investments previously classified as available-for-sale financial assets. In accordance with the transitional provisions in FRS 109, comparative figures have not been restated.

# (a) For 2016, equity investments at fair value through other comprehensive income (FVOCI) mainly comprise the following:

	Group

2016

	$’000

Shares of a financial institution	1,467,127

Shares of two real estate companies	460,203

These investments comprise mainly quoted investments and were previously classified as available-for-sale financial assets in 2015.

# (b) During the financial year, the Group elected to receive \$33,246,000 (2015: \$22,398,000) of dividend income as non-cash financial assets (FVOCI) / available-for-sale financial assets in lieu of cash dividends.

(c) Certain financial assets (FVOCI) / available-for-sale financial assets valued at \$169,307,000 (2015: \$175,441,000) are pledged as security for bank credit facilities (Note 20).

(d) There are no material investments held by the Company in 2016 and 2015.

	The Group	 The Company

2016	2015	2016	2015

$’000	$’000	 $’000	 $’000

Goodwill on consolidation	11,116	11,116	–	–

Trademarks and deferred expenditure	–	–	–	–

	11,116	11,116	–	–

	The Group

2016	2015

$’000	 $’000

Cost

Balance at beginning and end of financial year	11,116	11,116

The goodwill is allocated to the healthcare division of the Group, which is regarded as a cash-generating unit (“CGU”).

During the financial year, the Group has determined that there was no impairment of its CGU containing the goodwill. The recoverable amount (i.e. higher of value-in-use and fair value less costs to sell) of the CGU is determined on the basis of value-in-use calculations. These calculations incorporate cash flow projections by management covering a five-year period.

Key assumptions used for value-in-use calculations:

These assumptions have been used for the analysis of the CGU. The discount rate used is pre-tax and reflects specific risks relating to the healthcare division. Based on the sensitivity analysis performed, any reasonable change in the key assumptions would not result in any impairment adjustments.


to the case of several functions and several constraints. In all cases, the \( \mu \) s are to be regarded as independent functions just like the xs.

There are two parameterizations that we are going to discuss in this appendix: parame-terization of the path by arc length and by time. In the first case, the integral to minimize is

\[ T = { \frac { 1 } { c } } \int n ( \mathbf { x } ( \ell ) ) d \ell , \eqno { ( \mathrm { A 3 } ) } \]

\[ T = \int d t . \eqno ( \mathrm { A 4 } ) \]

As we will see, there are constraints to be appended to these integrals. But before doing that, there is another subtlety that we should discuss first. It is related to the fact that in these integrals the domain of integration is not a priori known and fixed. (For example, if we knew the domain of integration in parameterization with time, then we already knew T.) This is very important, since the standard results we quoted above are usually derived under the assumption that there is a fixed domain of integration and the variations vanish at its boundary.16 So in the rest of this appendix we first address the issue of variable domain in Subsection A 1, and then turn to the length and time parameterizations in Subsections A 2 and A 3, respectively.

In Section II our parametererization was over a fixed domain, namely: 0 \( < s < \) 1. This meant fixed lower and upper limits (0 and 1) in the integral (3) and hence we were eligible to use the Euler-Lagrange equations. However, we may equally well describe the path connecting \( \mathbf { x } _ { 1 } \) and \( \mathbf { x } _ { 2 } \) by a function x(s) on an arbitrary domain \( \sigma _ { 1 } < s < \sigma _ { 2 } \). The travel time is still given by the same integral except for the lower and upper limits of integration:

\[ T = \frac { 1 } { c } \int _ { \sigma _ { 1 } } ^ { \sigma _ { 2 } } n ( { \bf x } ( s ) ) \sqrt { \dot { \bf x } ( s ) \cdot \dot { \bf x } ( s ) } d s . \eqno ( \mathrm { A 5 } ) \]

We wish to find such general parameterizations of the path that minimize T. This appears to be a harder problem in calculus of variations, since: (i) we have to search among a larger class of functions; and (ii) the domain of integration is not fixed as before, but variable.

\[ \mathbf { x } : [ \sigma _ { 1 } , \sigma _ { 2 } ] \to \mathbb { R } ^ { 3 } , \qquad { \mathrm { ~ s u c h ~ t h a t ~ } } \mathbf { x } ( \sigma _ { 1 } ) = \mathbf { x } _ { 1 } { \mathrm { ~ a n d ~ } } \mathbf { x } ( \sigma _ { 2 } ) = \mathbf { x } _ { 2 } . \eqno ( \mathrm { A } 6 ) \]

This is to be contrasted with our previous search scope, \( \mathbf { x } : [ 0 , 1 ] \to \mathbb { R } ^ { 3 } \). Under a variation \( \delta \mathbf { x } \) in the function and \( \delta \sigma _ { 1 , 2 } \) in the domain, the boundary conditions imply

\[ \left( \mathbf { x } + \delta \mathbf { x } \right) \big | _ { \sigma _ { 1 } + \delta \sigma _ { 1 } } = \mathbf { x } _ { 1 } , \qquad \left( \mathbf { x } + \delta \mathbf { x } \right) \big | _ { \sigma _ { 2 } + \delta \sigma _ { 2 } } = \mathbf { x } _ { 2 } , \qquad \qquad \qquad \qquad ( \mathrm { A T } ) \big ( \mathrm { A T } ) \big ( \mathrm { B T } ) \circ \mathrm { A T } . \]

\[ ~ \delta { \bf x } ( \sigma _ { 1 } ) = - \dot { \bf x } ( \sigma _ { 1 } ) \delta \sigma _ { 1 } , \qquad \delta { \bf x } ( \sigma _ { 2 } ) = - \dot { \bf x } ( \sigma _ { 2 } ) \delta \sigma _ { 2 } . \eqno ( \mathrm { A 8 } ) \]

Now the variation of \( \begin{array} { r } { T = \int _ { \sigma _ { 1 } } ^ { \sigma _ { 2 } } L d s } \end{array} \) becomes

\[ \delta T = \int _ { \sigma _ { 1 } } ^ { \sigma _ { 2 } } \left[ { \frac { \partial L } { \partial x _ { i } } } - { \frac { d } { d s } } { \frac { \partial L } { \partial { \dot { x } } _ { i } } } \right] \delta x _ { i } d s + \left[ L - { \dot { x } } _ { i } { \frac { \partial L } { \partial { \dot { x } } _ { i } } } \right] _ { \sigma _ { 2 } } \delta \sigma _ { 2 } - \left[ L - { \dot { x } } _ { i } { \frac { \partial L } { \partial { \dot { x } } _ { i } } } \right] _ { \sigma _ { 1 } } \delta \sigma _ { 1 } , \qquad { \mathrm { ( A 9 ) } } \]

where summation over i is implied. By inspecting (A5) it is clear that L is a homogeneous function of \( \dot { \mathbf { x } } \) and hence the last two terms in \( \delta T \) vanish. Thus we are again left with the standard Euler-Lagrange equation and the result Eq. (5). Again we observe the non-uniqueness in the solutions: If \( \mathbf { x } ( s ) : [ \sigma _ { 1 } , \sigma _ { 2 } ] \to \mathbb { R } ^ { 3 } \) satisfies Eq. (5), then

\[ \mathbf { x } ( \bar { s } ( s ) ) : [ \bar { \sigma } _ { 1 } , \bar { \sigma } _ { 2 } ] \to \mathbb { R } ^ { 3 } \qquad \qquad \qquad \qquad \qquad ( \mathrm { A 1 0 } ) \]

is also a solution, for any monotonic function \( \bar { s } ( s ) \) satisfying \( \bar { s } ( \sigma _ { 1 } ) = \bar { \sigma } _ { 1 } \) and \( \bar { s } ( \sigma _ { 2 } ) = \bar { \sigma } _ { 2 } \).

We could have guessed that the Euler-Lagrange equations remain untouched: A function that minimizes the integral among all functions with variable domains, also does so among the smaller class of functions which share its own domain. So in general, the Euler-Lagrange equations provide a necessary condition for variable-domain problems. The boundary terms that appear in Eq. (A9) may provide additional conditions, although in our case they don’t.

We are now in a position to perform the variational analysis with length parameterization. So we choose to set the arc length \( \ell \) run from zero to \( \lambda \), the total length of the path, and work with \( { \bf x } ( \ell ) \). This choice corresponds to the constraint \|dx/d\`\| = 1, to handle which we need to employ a Lagrange multiplier function \( \mu ( \ell ) \). Therefore, the quantity to minimize is

\[ \frac { 1 } { c } \int _ { 0 } ^ { \lambda } n ( { \bf x } ( \ell ) ) d \ell + \int _ { 0 } ^ { \lambda } \mu ( \ell ) \left[ \dot { \bf x } ( \ell ) \cdot \dot { \bf x } ( \ell ) - 1 \right] d \ell , \eqno { ( \mathrm { A 1 1 } ) } \]

where dot now means \( d / d \ell \). Again we have a variable domain of integration, since we don’t know the length \( \lambda \) of the desired trajectory before solving for it. Requiring \( \mathbf { x } ( \lambda ) = \mathbf { x } _ { 2 } \) implies

\[ \delta { \bf x } ( \lambda ) = - \dot { \bf x } ( \lambda ) \delta \lambda , \eqno ( \mathrm { A 1 2 } ) \]


	2020	2019

RMB’000	RMB’000

The charge comprises:

Current tax

– PRC Enterprise Income Tax (“EIT”)	38,040	35,995

– Withholding tax levied on interest income of Hong Kong subsidiaries	4,572	4,820

– Withholding tax levied on dividend declared of a PRC subsidiary	–	1,625

	42,612	42,440

Deferred tax (note 19)	7,080	24,927

	49,692	67,367

No provision for Hong Kong Profits Tax has been made in the consolidated financial statements as the Group’s operation in Hong Kong had no assessable profit during both years.

Under the Law of the PRC on EIT (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% for both years. Certain PRC subsidiaries enjoy preferential tax rate according to approval from local tax bureau, including (i) a PRC subsidiary which enjoys preferential tax rate of 15% since year 2016 and applies a further preferential tax rate of 12.5% for the year 2020; (ii) a PRC subsidiary, located in Khorgos city in the PRC, was exempted from EIT in the first 5 years since set up in year 2018, according to “關於新疆喀什霍爾果斯兩個特殊經濟開發區企業所得稅優惠政策的通知” (Caishui [2011] 112) issued by the State Administration of Taxation and the Ministry of Finance of the PRC.

The tax charge for the year can be reconciled to the profit before taxation per the consolidated statement of profit or loss and other comprehensive income as follows:

	2020	2019

RMB’000	RMB’000

Profit before taxation	387,088	362,492

Tax at the domestic EIT rate of 25%	96,772	90,623

Tax effect of share of profit of a joint venture and associates	(3,676)	(1,444)

Tax effect of expenses not deductible for tax purposes	10,731	19,288

Effect of different tax rates of the subsidiaries	(23,527)	(8,950)

Effect of tax exemption granted to a PRC subsidiary	(50,229)	(50,475)

Tax effect of tax losses not recognised	4,618	3,869

Utilisation of tax losses previously not recognised	–	(1,740)

Tax benefit on research and development expenses	(2,660)	(1,976)

Withholding tax on distributable earnings of the PRC subsidiaries	17,663	18,172

Tax charge for the year	49,692	67,367

# 12. PROFIT FOR THE YEAR/OTHER COMPREHENSIVE (EXPENSE) INCOME

Profit for the year has been arrived at after charging (crediting):

	2020	2019

RMB’000	RMB’000

Directors’ emoluments (note 13)	6,503	5,536

Other staffs costs (excluding directors’ emoluments)

– Salaries, allowances and other staff benefits, including share
option expenses	116,194	82,630

– Staffs’ retirement benefit scheme contributions	656	4,201

Total staff costs	123,353	92,367

Less: amount capitalised in development costs	(5,581)	(9,188)

Less: st aff costs recognised as research and development costs in
other expenses	(22,577)	(13,596)

Staff costs recognised in administrative expenses	95,195	69,583

Total depreciation of property and equipment	2,310	1,694

Less: amount capitalised in development costs	(56)	(131)

Depreciation of property and equipment recognised in
administrative expenses	2,254	1,563

Depreciation of right-of-use assets recognised in
administrative expenses	9,970	7,202

Amortisation of intangible assets recognised in
administrative expenses	5,494	3,641

Auditor’s remuneration recognised in administrative expenses	2,900	2,520

Covid-19-related rent concessions (note 18)	(224)	–

Other expenses

– Research and development costs	23,466	14,269

– Donation	1,060	1,964

Total other expenses	24,526	16,233


Our prepayment and other receivables included value-added tax recoverable, interest receivables, amounts due from shareholders, amounts due from related parties, IPO cost capitalization, prepayments and other receivables. Value-added tax recoverable represented value-added taxes incurred in procurement. Interest receivables mainly represented interests from time deposits. The table below sets forth a breakdown of our prepayments and other receivables as of the dates indicated:

	As of December 31,	As of
June 30,

2018	2019	2020

(RMB in thousands)

Value-added tax recoverable	1,587	3,809	4,012

Interest receivables	37	3,006	7,268

Amounts due from shareholders during
Reorganization	8,738	–	–

Amounts due from shareholders	700	755	269

Amounts due from related parties	44	35	53

IPO cost caiiptalzation	–	–	545

Prepayments	458	458	1,141

Other receivables	309	745	2,341

Total	11,873	8,808	15,629

Our prepayments and other receivables decreased from RMB11.9 million as of December 31, 2018 to RMB8.8 million as of December 31, 2019. The decrease was primarily attributable to a decrease in amounts due from shareholders as a result of the completion of the Reorganization, partially offset by (i) an increase in value-added tax recoverable, as a result of our increased purchase of pre-clinical and clinical research and development related services and (ii) an increase in interest receivables primarily attributable to the increased amount of time deposits in 2019 as we received the funding from our series B financing. Our prepayments and other receivables increased from RMB8.8 million as of December 31, 2019 to RMB15.6 million as of June 30, 2020, mainly due to an increase in interest receivables as a result of the accrual of the interest generated by our time deposits.

Our cash and bank balances primarily consisted of cash at bank and short-term time deposits. Our cash and bank balances increased from RMB65.3 million as of December 31, 2018 to RMB746.8 million as of December 31, 2019. The increase was mainly attributable to the funds from our series B financing and the government subsidies we received. Our cash and bank balances decreased to RMB616.7 million as of June 30, 2020, mainly because of the RMB82.9 million payment we made in relation to the amendment of the Karyopharm Agreement, and payment of employment expenses and fees to CROs, CDMOs and SMOs. As of September 30, 2020, our cash and cash equivalents and time deposits was RMB957.7 million. For further information regarding our cash and bank balances, please see Note 16 to the Accountants’ Report set out in Appendix I.

The table below sets forth a breakdown of our cash and bank balances as of the dates indicated:

	As at December 31,	As at
June 30,

2018	2019	2020

(RMB in thousands)

(1)Pledged deposits	15,935	2,625	2,625

Bank deposits with oriilgna maturity of
more than three months when
(2)acquired	–	453,383	389,302

Cash and cash equivalents	49,322	290,787	224,731

Total	65,257	746,795	616,658

(1) This represents pledged deposits in commercial banks for bank loans and bank overdraft. None of these deposits are either past due or impaired.

(2) This represents time deposits with initial terms of over three months when acquired in commercial banks with annual return rates ranging from 2.70% to 3.25%. None of these deposits are either past due or impaired. None of these deposits are pledged.


On August 18, 2017, Elite Bond transferred its entire remaining holding of 190,063,207 Class A Shares to WP OCIM, together with its entitlement under the Pre-IPO Tier 1 ESOP, for a total consideration of US\$186,671,734 (determined with reference to the Company’s fair market value at the time of transfer and duly paid in cash upon completion) pursuant to a share purchase agreement dated July 20, 2017.

On January 19, 2018, Goldman Sachs exercised all its warrants granted pursuant to warrant instruments dated January 9, 2014 (as amended and restated on August 27, 2015) and August 27, 2015, respectively, which were granted in Goldman Sachs’ favor in consideration of the performance of its obligations under a facility agreement dated December 4, 2013 (as amended and restated on August 19, 2015) resulting in an issuance of 54,684,608 Class B2 Shares. The loan facility under such facility agreement was fully repaid.

In September 2018, Redwood Consulting exercised a portion of its options under the Pre-IPO Tier 1 ESOP, pursuant to exercise option letters dated September 7, 2018 and September 14, 2018, respectively, and nominated that 13,838,797 Class B4 Shares and 18,633,334 Class B4 Shares be allotted to WP OCIM and SK, respectively, pursuant to sale and purchase agreements dated September 7, 2018 and September 14, 2018, respectively. The consideration paid to our Company was US\$18,959,152 and US\$25,527,668 by WP OCIM and SK, respectively, and was determined with reference to the exercise price of US\$0.46 per Share as set out in the Pre-IPO Tier 1 ESOP and duly settled in cash on September 10, 2018 and September 20, 2018 by WP OCIM and SK, respectively.

On September 21, 2018, APG-Stichting transferred 41,257,634 and 55,975,003 Class B3 Shares to WP OCIM and SK, respectively, in return for US\$56,522,959 and US\$76,685,754 from WP OCIM and SK, respectively, determined with reference to the Company’s fair market value at the time of transfer, and duly settled in cash on the date of the transfers.

Since our Company’s incorporation and subsequent to each of the Pre-IPO financing rounds, we effected further changes to our authorized share capital, further information on which is set out in the section headed “Statutory and General Information—A. Further information about our Group—2. Changes in the share capital of our Company” in Appendix VIII to this Prospectus.

Pursuant to the terms of the Pre-IPO Shareholders’ Agreement, subject to the Global Offering becoming unconditional, all the issued Class C Preference Shares may either be converted to Class C Shares or redeemed upon the Global Offering becoming unconditional (“Share Conversion”). After this change is effected, the Company will have no Class C Preference Shares in issue. The holders of the Class C Preference Shares have each exercised their redemption right, except Emerald Ewood (Cayman) Limited, which has elected to redeem 50% of its shareholding and convert the remaining 50% of its shareholding to Class C Shares (in accordance with the Pre-IPO Shareholders’ Agreement).

Pursuant to the terms of the IPO Implementation Deed, subject to the Global Offering becoming unconditional, all the issued, unissued and authorized Class A Shares, Class B Shares and Class C Shares will be reclassified and re-designated as ordinary Shares (“Share Redesignation”) immediately following the Share Conversion. Immediately after these changes are effected, the authorized share capital of the Company shall be US\$4,400,000 divided into 4,400,000,000 Shares of US\$0.001 par value each, and the issued share capital shall be 2,717,894,514 Shares of US\$0.001 par value each. For further details of the IPO Implementation Deed, please refer to the paragraph headed“—IPO Implementation Arrangements” in this section of the Prospectus.

The Pre-IPO KM ESOP was adopted by our Board on November 24, 2017. As of the Latest Practicable Date, the current number of options granted to 163 grantees of the Pre-IPO KM ESOP, allow for the aggregate subscription of 63,558,343 Shares, representing approximately 2.09% of the share capital of our Company immediately following the completion of the Global Offering. No additional options will be granted under the Pre-IPO KM ESOP. For further information, a summary of the principal terms of the Pre-IPO KM ESOP is set out in the section headed “Statutory and General Information—D. Pre-IPO KM ESOP, Pre-IPO Tier 1 ESOP and Post-IPO Share Option Scheme—1. Pre-IPO KM ESOP” in Appendix VIII to this Prospectus.

ESOP Shareholders have entered into arrangements with our Company under which the ESOP Shareholders agreed to transfer an aggregate of up to 15,246,949 Class A and/or Class B1 Shares to our Company, or make cash payments, upon exercise of certain options over shares in our Company (the “Relevant Options”) by the relevant participants under the Pre-IPO KM ESOP. Pursuant to the IPO Implementation Deed, these arrangements will be terminated on the date of Listing in consideration of an adjustment to the number of Shares that Laurels is issued upon exercise of certain vested and unexercised options under the Pre-IPO Tier 1 ESOP, certain cash payments from our Company to Laurels and WP OCIM and cancellation of certain vested and unexercised options under the Pre-IPO Tier 1 ESOP held by WP OCIM (the “ESOP Unwind”). Our Company will, after Listing, make cash payments to the ESOP Shareholders based on the then market value of the Shares if any Relevant Options expire or lapse on or after the Listing Date. For further details of the IPO Implementation Deed, please see the paragraph headed “—IPO Implementation Arrangements” in this section below.

The Pre-IPO Tier 1 ESOP was adopted by our Board pursuant to a shareholders’ agreement dated November 3, 2015. As of the Latest Practicable Date, each of WP OCIM and Laurels hold unexercised options to subscribe for a total of 15,800,325 Shares each and Redwood Consulting holds unexercised options to subscribe for a total of 35,995,945 Shares, representing in aggregate approximately 2.2% of the share capital of our Company immediately following the completion of the Global Offering. Under the terms of the IPO Implementation Deed, the Company and the holders of the Pre-IPO Tier 1 ESOP have agreed: (i) not to exercise any vested options under the Pre-IPO Tier 1 ESOP until the Listing Date; and (ii) to exercise or cancel all the vested and unexercised options under the Pre-IPO Tier 1 ESOP on the Listing Date on a cashless basis based on the Offer Price, such that the option holders will not be required to make payment of the strike price of the options being exercised save for the nominal value of such Shares (the “Strike Amount”) and instead, the number of Shares to be issued on such exercise will be reduced by an amount whose value would equal the Strike Amount (the “Tier 1 Exercise”). For further information, a summary of the principal terms of the Pre-IPO Tier 1 ESOP is set out in the section headed “Statutory and General Information—D. Pre-IPO KM ESOP, Pre-IPO Tier 1 ESOP and Post-IPO Share Option Scheme—2. Pre-IPO Tier 1 ESOP” in Appendix VIII to this Prospectus.

As a result of the Tier 1 Exercise and taking into account agreements related to the ESOP Unwind and the Incentivization Unwind, Laurels and Redwood Consulting will be issued 1,606,449 Shares and 11,010,870 Shares, respectively, on the Listing Date, assuming the Offer Price is determined to be HK\$16.80, the mid-point of the Offer Price range and the Listing Date is determined to be Thursday, June 20, 2019.


The amortisation of intangible assets is included in cost of services and general and administrative expenses in the consolidated statement of profit or loss and other comprehensive income.

The useful lives of patents and trademarks of 10 years are determined based on terms of expiry of related legal rights.

The useful lives of software are around 5-10 years which are determined based on technological obsolescence.

Non-competition agreement is amortised over the shorter of the unexpired term of the agreement and its estimated useful lives, which is 3 years.

The useful life of the customer relationship recognised in acquisition of Biomere is 10 years, which is determined based on the factor of the attrition rate.

	RMB’000

Cost

At 1 January 2017, 31 December 2017 and 31 December 2018 	–

Acquisition of Biomere (Note 34) 	135,187

Exchange adjustments 	(1,225)

At 31 December 2019 	133,962

Exchange adjustments 	(3,190)

At 30 September 2020 	130,772

# Impairment tests for cash-generating units containing goodwill

The goodwill arose from the acquisition of Biomere in 2019 (Note 34).

The recoverable amounts of the cash-generating unit was determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a 5-year period. Cash flows beyond the 5-year period are extrapolated using estimated nil growth rate at 31 December 2019 and 30 September 2020.

	As at
31 December
2019	As at
30 September
2020

Annual growth rate of revenue during the 5-year forecast
period	3.0%-10.0%	0.2%-9.8%

Pre-tax discount rate 	12.6%	13.9%

The headroom calculated based on the recoverable amounts deducting the carrying amount of the cash-generating unit as at 31 December 2019 and 30 September 2020 is RMB10,038,000 and RMB5,901,000 respectively.

Management have undertaken sensitivity analysis on the impairment test of goodwill. The following table sets out the hypothetical changes to annual growth rate and pre-tax discount rate that would, in isolation, have removed the remaining headroom respectively as at 31 December 2019 and 30 September 2020:

	As at
31 December
2019	As at
30 September
2020

Decrease in annual growth rate 	0.2%	0.1%

Increase in pre-tax discount rate 	3.5%	2.2%

As a result of the above impairment tests, the directors of the Company are of the view that there was no impairment of goodwill as at 31 December 2019 and 30 September 2020.


The Board currently comprises eight members, including two executive Directors, three non-executive Directors and three independent non-executive Directors.

The list of all Directors is set out under “Corporate Information” on page 81 and the independent non-executive Directors are expressly identified in all corporate communications pursuant to the Hong Kong Listing Rules.

As at 31 December 2017, the board of directors of the Company comprises the following Directors:

Li Faben, General Manager (also the chief executive within the meaning of the Corporate Governance Code)

The list of Directors (by category) is also disclosed in all corporate communications issued by the Company from time to time pursuant to the Hong Kong Listing Rules. There is no relationship among members of the Board (including financial, business, family or other material or relevant relationship).

For the year ended 31 December 2017, the Board, at all times, met the requirements of the Hong Kong Listing Rules relating to the appointment of at least three independent non-executive Directors, and at least one-third of the Board with at least one independent non-executive Director possessing appropriate professional qualifications, or accounting or related financial management expertise.

The Company has received an annual confirmation from each independent non-executive Director of his independence pursuant to the requirements of the Hong Kong Listing Rules. The Company considers all independent non-executive Directors to be independent in accordance with the independence guidelines set out in Rule 3.13 of the Hong Kong Listing Rules.

Non-executive Directors (including independent non-executive Directors) bring a wide range of business and financial expertise, experience and independent judgment to the Board. Through active participation in Board meetings or meetings of Board committees, supervising management issues involving potential conflict of interests and serving on Board committees, all non-executive Directors (including independent non-executive Directors) make various contributions towards the direction of the Company.

The roles and duties of the Chairman and the General Manager are carried out by different individuals and their respective responsibilities have been clearly specified in writing.

The Chairman, Mr. Li Chaochun, provides leadership for the Board and is also responsible for chairing the meetings, leading the operations of the Board and ensuring that all major and appropriate issues are discussed by the Board in a timely and constructive manner.

The General Manager, Mr. Li Faben, is responsible for running the Company’s business operations and implementing the Group’s strategic plans and business goals.

# APPOINTMENT AND RE-ELECTION OF DIRECTORS

In accordance with the Company’s articles of association (the “Articles of Association”), all Directors of the Company are subject to retirement by rotation at least once every three years and any new Director appointed by the Board to fill a casual vacancy or as an addition to the Board shall submit himself/herself for election by shareholders at the first general meeting after appointment.

Each Director of the Company is appointed for a term commencing from the date on which the resolution regarding his appointment/re-election is passed until the conclusion of the annual general meeting of the Company to be held in 2018, and will retire and be re-elected at such annual general meeting. According to the Detailed Working Rules for Independent Directors adopted on 9 October 2012, the term of office for independent non-executive Directors shall be the same as that of other Directors of the Company, and they may stand for re-election upon expiry of their term, but the re-appointment shall not exceed six years. Mr. Bai Yanchun, Mr. Xu Shan and Mr. Cheng Gordon, who were appointed as the independent non-executive Directors on 17 August 2012, will not offer themselves for re-election at the annual general meeting to be held in 2018. The Board proposed a special resolution at the 2015 annual general meeting regarding the amendment to the Articles of Association, fixing the number of the Board members at 7 to 11 so that the number and composition of the Board of Directors of the Company are in compliance with the requirements under the Company Law and the Hong Kong Listing Rules.

The Nomination Committee and the Board selected candidates of Directors with reference to major shareholders’ recommendations and certain criteria and procedures. The relevant criteria mainly include the candidate’s professional background, especially his or her experience in the industry where the Group operates, his or her financial and past track record with other similar companies and the recommendations from management and other knowledgeable individuals. The procedures and process of appointment, re-election and removal of Directors are laid down in the Articles of Association. The Nomination Committee of the Company is responsible for reviewing the Board composition, monitoring the appointment, nomination and succession plan of Directors and assessing the independence of independent non-executive Directors.

# INDUCTION AND CONTINUING PROFESSIONAL DEVELOPMENT FOR DIRECTORS

Each newly appointed Director receives a comprehensive, formal and tailored induction on the first occasion of his/her appointment so as to ensure that he/she has an appropriate understanding of the business and operations of the Company and that he/she is fully aware of his/her responsibilities and obligations under the Hong Kong Listing Rules and relevant regulatory requirements.

The Directors are regularly updated with legal and regulatory developments as well as business and market changes to facilitate the discharge of their responsibilities. Briefings and continual professional development schemes for Directors will be arranged whenever necessary.

The Company encourages all Directors to participate in continuous professional development to develop and refresh their knowledge and skills in order to ensure that their contribution to the Board remains fully informed and relevant. For the year ended 31 December 2017, all Directors attended the training courses organized by the Company on corporate governance and regulatory development, and obtained and read relevant materials presented to them by the Office of the Board of the Company, including updates of laws and regulations.


# XVII. NOTES TO MAJOR ITEMS IN FINANCIAL STATEMENTS OF THE PARENT (Continued)

# (9). Provision for bad debts (Continued)

Provision for bad debt	Stage 1	Stage 2	Stage 3	Total

12-months
ECL	Lifetime ECL
(non-credit
 impaired)	Lifetime ECL
(credit
impaired)

Amount as at 1 January 2019	420,451.00	69,160.92	–	489,611.92

Amounts due for the period as
 at 1 January 2019

– Transferred to stage 2	–	–	–	–

– Transferred to stage 3	–	–	–	–

– Reversed to stage 2	–	–	–	–

– Reversed to stage 1	–	–	–	–

Provision for the period	–	93,632.41	–	93,632.41

Reversal for the period	-16,400.00	–	–	-16,400.00

Write-off for the period	–	–	–	–

Cancellation for the period	–	–	–	–

Other changes	–	–	–	–

Amount as at 31 December 2019	404,051.00	162,793.33	–	566,844.33

The significant changes in the gross carrying amount of other receivables that affected the changes in loss provisions in the current period are as follows:

Book Value	Stage 1	Stage 2	Stage 3	Total

12-months ECL	Lifetime ECL
(non-credit
impaired)	Lifetime ECL
(credit
impaired)

Amount as at 1 January 2020	6,188,654,816.55	269,937.32	–	6,188,924,753.87

Amounts due for the period as
 at 1 January 2020

– Transferred to stage 2	–	–	–	–

– Transferred to stage 3	–	–	–	–

– Reversed to stage 2	–	–	–	–

– Reversed to stage 1	–	–	–	–

Provision for the period	4,471,396,255.93	–	–	4,471,396,255.93

Reversal for the period	-3,638,533,099.32	–	–	-3,638,533,099.32

Write-off for the period	–	–	–	–

Cancellation for the period	–	–	–	–

Other changes	–	–	–	–

Amount as at 30 June 2020	7,021,517,973.16	269,937.32	–	7,021,787,910.48


The reconciliation between the opening and closing balances of each component of the Group’s consolidated equity is set out in the consolidated statement of changes in equity. Details of the changes in the Company’s individual components of equity between the beginning and the end of the year are set out below:

	Share cailpta	Cailpta
reserve	PRC statutory
reserve	Retained
 profits	Total

RMB’000	RMB’000	RMB’000	RMB’000	RMB’000

Balance at 1 January
2019	1,074,358	3161,02	57,606	212,868	1,660,934

Changes in equity for
2019

Total comprehensive
income for the year	–	–	–	38141,	38141,

Transfer to statutory
reserve	–	–	3,814	(3,814)	–

Dividends approved
in respect of the
previous year	–	–	–	(91,320)	(91,320)

Balance at 31
December 2019 and
1 January 2020	1,074,358	3161,02	6142,0	155,875	1,607,755

Changes in equity for
2020

Total comprehensive
income for the year	–	–	–	167,084	167,084

Transfer to statutory
reserve	–	–	16,708	(16,708)	–

Dividends approved
in respect of the
previous year	–	–	–	(1074,36)	(1074,36)

Balance at 31
December 2020	1,074,358	3161,02	7812,8	198,815	1,6674,03

# (i) Dividends payable to equity shareholder of the Company attributable to the year:

	2020	2019

RMB’000	RMB’000

Final dividend proposed after the end of
the year of RMB0.12 per ordinary share
(2019: RMB0.1 per ordinary share)	128,923	107,436

On 24 March 2021, a dividend for the year ended 31 December 2020 of approximately RMB128,923 thousand, representing RMB0.12 per share was proposed by the Board of Directors of the Company. Such dividend is to be approved by the shareholders at the Annual General Meeting of the Company. The final dividend proposed after the end of the reporting period has not been recognised as a liability at the end of the reporting period.

# (ii) Dividends payable to equity shareholder of the Company attributable to the previous financial year, approved and paid during the year:

	2020	2019

RMB’000	RMB’000

Final dividend in respect of the previous
financial year, approved and paid during
the year	107,436	91,320

On 17 June 2020, a dividend for the year ended 31 December 2019 of approximately RMB107,436 thousand, representing RMB0.1 per share was approved by the shareholders at the Annual General Meeting of the Company.


# D. APPOINTMENT AND SUCCESSION PLANNING OF DIRECTORS

The procedures and process of appointment, re-election and removal of Directors are laid down in the code provisions A.4 set out in the Code contained in Appendix 15 of the GEM Listing Rules throughout the year ended 31 March 2018.

Code A.4.1 stipulates that Non-executive Directors should be appointed for a specific term, subject to re-election and Code A.4.2 stipulates that all Directors appointed to fill a casual vacancy should be subject to election by shareholders at the first general meeting after their appointment.

All Independent Non-executive Directors appointed has entered into a letter of appointment with the Company for a term of one year and renewable automatically for successive terms of another year unless terminated by three-month notice in writing served by either party. Pursuant to the Code A.4.2, the Directors, regardless of his/her term of appointment, if any, are subject to retirement by rotation at least once every three years and any new director appointed to fill a casual vacancy is subject to re-election by shareholders at the first general meeting after his/her appointment. The Company in practice will observe Code A.4.2 and will ensure that any new director appointed to fill a casual vacancy shall submit himself/herself for re-election by shareholders at the first general meeting after his/her appointment.

Code A.2.1 stipulates that the roles of Chairman and Chief Executive should be separate and should not be performed by the same individual.

Mr. Shiu Yeuk Yuen is the Chairman and Chief Executive Officer of the Company. In view of the scale of operations of the Company and the fact that daily operations of the Group’s business is delegated to the senior executives and department heads, the Board considers that vesting the roles of both Chairman and Chief Executive Officer in the same person will not impair the balance of power and authority between the Board and the management of the Company. The Board also believes that the current structure provides the Company with strong and consistent leadership and allows for effective and efficient planning and implementation of business decisions and strategies. It is in the best interest of the Group to maintain the current practice for continuous efficient operations and development of the Group.

A remuneration committee (the “Remuneration Committee”), consisting of three Independent Non-executive Directors and two Executive Directors, was set up by the Company in accordance with the Code. The Remuneration Committee has adopted written terms of reference in compliance with Code Provision B.1.3. The primary duties of the Remuneration Committee include the following:

– evaluating the performance and making recommendations to the Board on the remuneration packages of the individual executive directors and senior management;

– making recommendations to the Board on the Company’s policy and structure for all Directors’ and senior management remuneration and on the establishment of a formal and transparent procedure for developing remuneration policy;

– reviewing and approving the management’s remuneration proposals with reference to the board’s corporate goals and objectives.

During the year ended 31 March 2018, the Remuneration Committee held three meetings with presence of all eligible members and reviewed and made recommendations on the remunerations packages of the Directors of the Group.

None of the Directors participated in the determination of his/her own remuneration. Attendance of the members of the Remuneration Committee is set out below:

Name of Directors	Number of meeting
attended/Number of
meeting held

Mr. Kam Tik Lun, CPA, FCCA, LL.M (ICFL)	3/3

Mr. Shiu Yeuk Yuen	3/3

Mr. Leung Ge On, Andy	3/3

Dr. Siu Yim Kwan, Sidney, S.B.St.J.	3/3

Mr. Ho Siu King, Stanley, BEng (Civ E-Law) (HKU), LLB (HKU) and LLM (LSE)	3/3

The Company established an Audit Committee with written terms of reference in compliance with the GEM Listing Rules. The primary duties of the Audit Committee are to review the Company’s annual report and financial statements, half-yearly report and quarterly reports and to provide advice and comment thereon to the Board. The Audit Committee is also responsible for reviewing and supervising the financial reporting process and internal control procedures of the Group. Currently, it consists of three Independent Non-executive Directors, Mr. Kam Tik Lun, chairman of the Audit Committee, Dr. Siu Yim Kwan, Sidney and Mr. Ho Siu King, Stanley. Four meetings were held during the financial year ended 31 March 2018. Attendance of the members of the Audit Committee is set out below:

Name of Directors	Number of meeting
attended/Number of
meeting held

Mr. Kam Tik Lun, CPA, FCCA, LL.M (ICFL)	4/4

Dr. Siu Yim Kwan, Sidney, S.B.St.J.	4/4

Mr. Ho Siu King, Stanley, BEng (Civ E-Law) (HKU), LLB (HKU) and LLM (LSE)	4/4

The Company’s annual results for the year ended 31 March 2018, have been reviewed by the Audit Committee.

A nomination committee (the “Nomination Committee”) consisting of three Independent Non-executive Directors and two Executive Directors was set up by the Company in accordance with the Code. The Nomination Committee has adopted written terms of reference, which have been amended by the Board in compliance with Code Provision A.5.3. The primary duties of the Nomination Committee include:

– reviewing the structure, size and composition (including the skills, knowledge and experience) of the Board at least annually and making recommendations on any proposed changes to the Board to complement the issuer’s corporate strategy;

– identify individuals suitably qualified to become board members and select or make recommendations to the board on the selection of, individuals nominated for directorships;

– reviewing the nomination of Directors and making recommendations to the Board on terms of such appointment;

– assessing the independence of Independent Non-executive Directors.

The Company has adopted a board diversity policy (the “Board Diversity Policy”), which sets out its approach to achieve and maintain diversity on the Board in order to enhance the effectiveness of the Board.


	2020	2019

RMB’000	RMB’000

Consideration payable for acquisition of a portfolio of assets
and liabilities (note (a))	32,881	42,351

Payable for mining rights (note (c))	566,896	433,677

Provision for legal claims (note (b))	8,506	8,777

Others	3,565	5,601

	611,848	490,406

Less: current portion	(72,383)	(65,911)

	539,465	424,495

(a) On 26 September 2017, SDG Xinhui, Qingdao Pingdu Jinxing Gold Mining Co. Ltd. (“Jinxing”), an independent third party of the Group, and Dazhuangzi Villagers’ Committee of Pingdu Xinhe Town (平度市新河鎮大莊子村民委員會), the former shareholder of Jinxing, entered into an asset reorganisation agreement (the “Agreement”). Pursuant to the Agreement, SDG Xinhui acquired a portfolio of assets and liabilities of Jinxing, including part of the receivables and payables, property, plant and equipment and exploration rights at a total consideration of approximately RMB174,180,000.

During the year ended 31 December 2018, the Group has settled part of consideration of approximately RMB114,180,000 and the remaining non-interest bearing consideration of approximately RMB60,000,000 (the “Remaining Consideration”) will be paid by 8 instalments until 31 January 2026.

As at 31 December 2020, the carrying amount of the Remaining Consideration included as “other non-current liabilities” amounted to approximately RMB32,881,000 (2019: RMB42,351,000) and the current portion of which to be settled within the next twelve months amounted to approximately RMB7,500,000 (2019: RMB7,792,000).

(b) As at 31 December 2020, the provision for legal claim of approximately US\$1,304,000, equivalent to approximately RMB8,506,000 (2019: US\$1,258,000, equivalent to approximately RMB8,777,000) is recognised in connection with certain outstanding labour claims of MAS.

(c) During the year ended 31 December 2020, the Group acquired of a mining right from Shandong Gold Group at a cash consideration of approximately RMB232,863,000 (note 43(a)). Approximately RMB160,656,000 (note 43(a)) has been paid during the year ended 31 December 2020.

During the year ended 31 December 2020, the Group acquired of certain mining rights from independent third parties at a total cash consideration of approximately RMB162,650,000 (2019: RMB533,677,000).

The analysis of deferred income tax assets and deferred income tax liabilities is as follows:

	2020	2019

RMB’000	RMB’000

Deferred income tax assets	170,877	130,000

Deferred income tax liabilities	(3,928,100)	(4,262,779)

Deferred income tax liabilities, net	(3,757,223)	(4,132,779)

The gross movement on the deferred income tax is as follows:

	2020	2019

RMB’000	RMB’000

At the beginning of the year	(4,132,779)	(4,141,760)

Credited to profit or loss (note 10)	226,273	46,406

Currency translation differences	149,283	(37,425)

At the end of the year	(3,757,223)	(4,132,779)

The following are the major deferred tax assets (liabilities) and movements thereon during the current and prior years:


Long-term debt was comprised of the following at December 31, 2016 and 2015:

On May 12, 2015, Chemours enteredi nto a credit agreement that provides for a seven-year senior secured terml oan (the Term Loan Facility) in a principal amount of \$1,500 repayablei n equal quarterlyi nstallments at a rate of one percent of the original principal amount per year, with the balance payable on the final maturity date. The Term Loan Facility wasi ssued with a \$7 original issue discount and bearsi nterest at a rate of LIBOR plus 3.00%, with a 0.75% LIBOR floor. The proceeds from the Term Loan Facility were used to fund a portion of the distribution to DuPont, along with related fees and expenses.

The credit agreement also provided for a five-year senior secured revolving credit facility (the Revolving Credit Facility), which has been reduced to \$750 as part of the amendment completed on February 19, 2016 (discussed below). The proceeds of anyl oans made under the Revolving Credit Facility can be used for capital expenditures, acquisitions, working capital needs and other general corporate purposes. No borrowings were outstanding under our Revolving Credit Facility but had \$132 and \$129i nl etters of credit issued and outstanding under this facility at December 31, 2016 and 2015, respectively. The Revolving Credit Facility bears variablei nterest of a range based on our total net leverage ratio between (a) 0.50% and 1.25% for base ratel oans and (b) 1.50% and 2.25% for LIBOR loans. The applicable margins were 1.00% for base ratel oans and 2.00% for LIBORl oans as of December 31, 2016 and 1.25% for base ratel oans and 2.25% for LIBORl oans as of December 31, 2015. In addition, we are required to pay a commitment fee on the average daily unused amount of the Revolving Credit Facility at a rate based on our total netl everage ratio, between 0.20% and 0.35%. As of December 31, 2016 and 2015, commitment fees were assessed at a rate of 0.30% and 0.35%, respectively.

In September 2015, in connection with the Company’s transformation plan announcedi n August 2015, Chemours andi ts Revolving Credit Facilityl enders enteredi nto an amendment to the Revolving Credit Facility that modified the consolidated EBITDA definitioni n the covenant calculation toi nclude pro forma benefits from future cost savingsi nitiativesi n the calculation of financial covenants that rely on consolidated EBITDA beginning from the quarter ended September 30, 2015. Since the revolver availabilityi n any quarteri s determined by the cushion remainingi n the financial maintenance covenants at the end of the previous quarter, this amendment increased the Company’s access to the revolving credit facility.

In February 2016, Chemours andi ts Revolving Credit Facilityl enders enteredi nto a second amendment to the Revolving Credit Facility that (a) replaced the total netl everage ratio financial covenant with senior secured netl everage ratio; (b) reduced the minimum required levels of interest expense coverage ratio covenant; (c)i ncreased thel imits and extended the time horizon fori nclusion of pro forma benefits of announced cost reductioni nitiatives into consolidated EBITDA definition for the purposes of calculating financial maintenance covenants; and (d) reduced the revolver availability from \$1,000 to \$750. As a result of this amendment, the Company recorded a charge of approximately \$4 to write off a proportionate amount of unamortized debt issuance costs attributable to the reductioni n revolver commitment, which wasi ncludedi n “Interest expense, net”.

In December 2016, Chemours enteredi nto a third amendment to the credit agreement to change certain covenants and allow the Company to enter into a sale andl easeback transaction for the sale of its corporate headquarters buildingl ocatedi n Wilmington, Delaware. The amendment requires the Company to use the proceeds from sale to repay portion of the terml oans. These transactions are expected to be completedi n the first quarter of 2017, and the Company expects to receive approximately \$32 proceeds, subject to customary closing adjustments.

Fees and expensesi ncurredi n connection with the amendments were approximately \$3 and \$1 for the years ended December 31, 2016 and 2015, respectively, which were primarily capitalizedi n “Other assets” of the Consolidated Balance Sheets and will be amortized to interest expense on a straight-line basis over the remaining term of the Revolving Credit Facility.

The credit agreement, as amended, contains financial covenants which, solely with respect to the Revolving Credit Facility, require Chemours not to exceed a maximum senior secured netl everage ratio of 3.50 to 1.00 each quarter through December 31, 2016, 3.00 to 1.00 through June 30, 2017 and further decreasing by 0.25 to 1.00 every subsequent six months to 2.00 to 1.00 by January 1, 2019 and thereafter. Chemoursi s also required to maintain a minimumi nterest coverage ratio of 1.75 to 1.00 each quarter through June 30, 2017 and furtheri ncreasing by 0.25 to 1.00 every subsequent six months to 3.00 to 1.00 by January 1, 2019 and thereafter. In addition, the credit agreement contains customary affirmative and negative covenants that, among other things,l imit or restrict Chemours andi ts subsidiaries’ ability, subject to certain exceptions, toi ncurl iens, merge, consolidate or sell, transfer orl ease assets, makei nvestments, pay dividends, transact with subsidiaries andi ncuri ndebtedness. The credit agreement also contains customary representations and warranties and events of default. Chemours wasi n compliance withi ts debt covenants as of December 31, 2016.

Chemours’ obligations under the senior secured credit facilities are guaranteed on a senior secured basis by all of its material domestic subsidiaries, subject to certain agreed upon exceptions. The obligations under the senior secured credit facilities are also, subject to certain agreed upon exceptions, secured by a first priorityl ien on substantially all of Chemours andi ts material wholly-owned domestic subsidiaries’ assets,i ncluding 100% of the stock of domestic subsidiaries and 65% of the stock of certain foreign subsidiaries.

On May 12, 2015, Chemoursi ssued senior unsecured notes (the “Notes”) with an aggregate principal of approximately \$2,503i n a private placement, which comprise of \$1,350 aggregate principal amount issued at ani nterest rate of 6.625% per annum and will mature on May 15, 2023 (the “2023 Notes”), \$750 aggregate principal amounti ssued at ani nterest rate of 7.000% per annum and will mature on May 15, 2025 (the “2025 Notes”) and €360 aggregate principal amounti ssued at ani nterest rate of 6.125% and will mature on May 15, 2023 (the “Euro Notes”). The Notes require payment of principal at maturity andi nterest semi-annuallyi n cash andi n arrears on May 15 and November 15 of each year.

The proceeds from the Notes were used to fund the cash andi n-kind distributions to DuPont and to pay related fees and expenses. The in-kind distribution to DuPont of \$507 aggregate principal amount of Chemours 2025 Notes were exchanged by DuPont with third parties for certain DuPont notes.

In connection with thei ssuance of the Notes, Chemours enteredi nto a registration rights agreement,i n which Chemours agreed to file with the SEC, a registration statement for the exchange of the Notes for new registered notes withi dentical terms. On March 18, 2016, Chemours filed a registration statement on Form S-4 with respect to the exchange offer. The registration statement was declared effective on April 12, 2016, and the exchange offer was completed on May 19, 2016. In addition, on May 5, 2016, the Euro Notes were listed for trading on the Global Exchange Market of the Irish Stock Exchange.

Each series of Notesi s or will be fully and unconditionally guaranteed, jointly and severally, by Chemours’ existing and future domestic subsidiaries that guarantee (the Guarantors) the Senior Secured Credit Facilities or that guarantee other indebtedness of Chemours or any guarantor in an aggregate principal amount in excess of \$75 (the Guarantees). The Notes are unsecured and unsubordinated obligations of Chemours. The Guarantees are unsecured and unsubordinated obligations of the Guarantors. The Notes rank equallyi n right of payment to all of Chemours’ existing and future unsecured unsubordinated debt and seniori n right of payment to all of Chemours’ existing and future debt thati s byi ts terms expressly subordinatedi n right of payment to the Notes. The Notes are subordinated toi ndebtedness under the Senior Secured Credit Facilities as well as any future secured debt to the extent of the value of the assets securing such debt. Chemours’ is obligated to offer to purchase the Notes at a price of (a) 101 percent of their principal amount, together with accrued and unpaidi nterest, if any, to the date of purchase, upon the occurrence of certain change of control events and (b) 100 percent of their principal amount, together with accrued and unpaidi nterest,i f any, to the date of purchase, with the proceeds from certain asset dispositions. These restrictions and prohibitions are subject to certain qualifications and exceptions set


See Note 21 to the consolidated financial statements for additional information regarding our business segments.

The Americas segment serves customers in the U.S., Canada, the Caribbean Islands and Latin America with a portfolio of integrated architecture, furniture and technology products marketed to corporate, government, healthcare, education and retail customers through the Steelcase, Coalesse, Turnstone, Smith System, AMQ and Orangebox brands.

Organic Revenue Growth (Decline)—Americas	Year Ended

February 22,
2019	February 23,
2018

Prior year revenue	$ 2,193.8	$ 2,231.9

Acquisitions	84.4	4.5

Divestiture	(13.6)	(8.3)

Currency translati*on effects	(2.3)	2.0

 Prior year revenue, adjusted	2,262.3	2,230.1

Current year revenue	2,470.2	2,193.8

Organic growth (decline) $	$   207.9	$   (36.3)

Organic growth (decline) %	9%	(2)%

\* Currency translation effects represent the net effect of translating prior year foreign currency revenues using the average exchange rate on a monthly basis during the current year.

Operating income in the Americas increased by \$28.5 in 2019 compared to the prior year. The comparison was negatively impacted by \$8.4 related to the pension charge and favorably impacted by a \$5.0 gain on the sale of property, net of the related variable compensation effects. The increase in 2019 operating income was driven by higher revenue and lower operating expenses as a percentage of revenue, partially offset by higher cost of sales as a percentage of revenue.

The Americas revenue represented 71.7% of consolidated revenue in 2019. Revenue for 2019 of \$2,470.2 represented an increase of \$276.4 or 13% compared to 2018. The growth in 2019 was driven primarily by overall industry growth and increased project opportunities, improvements in our competitive win rates, recent acquisitions and benefits from recent list price adjustments. After adjusting for an \$84.4 year-over-year impact of acquisitions, a\$13.6 unfavorable impact of a divestiture and \$2.3 of unfavorable currency translation effects, the organic revenue growth in 2019 was \$207.9 or 9% compared to the prior year.

Cost of sales in 2019 was 67.7% of revenue which compared to 66.1% of revenue in 2018. Cost of sales as a percentage of revenue increased by 160 basis compared to the prior year, with 40 basis points attributable to the pension charge. The year-over-year comparison reflected the following:

• approximately \$43 of higher commodity, freight and labor (other than annual merit increases) costs, partially offset by approximately \$32 of benefits from pricing actions,

• approximately \$9 of benefits associated with cost reduction efforts, net of additional overhead investments and annual merit labor cost increases, and

Operating expenses in 2019 increased by \$25.2, but decreased 180 basis points as a percentage of revenue, compared to the prior year. The increase was due to \$27.2 from acquisitions (including \$9.4 of amortization expense), net of a divestiture and \$8.9 of higher variable compensation expense, partially offset by a \$7.5 gain on the sale of property, \$3.7 of lower severance costs and \$2.6 of lower product development expenses.

Operating income in the Americas decreased by \$57.5 in 2018 compared to the prior year. The decline was driven by lower sales volume, higher cost of sales as a percentage of revenue and higher operating expenses.

The Americas revenue represented 71.8% of consolidated revenue in 2018. Revenue for 2018 of \$2,193.8 represented a decrease of \$38.1 or 2% compared to 2017, reflecting ongoing shifts in demand patterns. The decrease in revenue was driven by subdued demand from large customers. Growth from our new products and solutions was partially offset by a decline in demand for legacy furniture applications. After adjusting for an \$8.3 unfavorable impact of a divestiture, a \$4.5 impact of an acquisition and \$2.0 of favorable currency translation effects, the organic revenue decline in 2018 was \$36.3 or 2% compared to the prior year.

Cost of sales in 2018 was 66.1% of revenue which compared to 65.3% of revenue in 2017. The year-over-year comparison reflected the following:

• approximately \$10 of higher commodity costs,

• higher investments in support of product development and manufacturing agility,

• approximately \$17 of benefits associated with ongoing cost reduction efforts,

• favorability related to improvements in negotiated customer pricing, and

• approximately \$5 of lower warranty costs compared to the prior year.

Operating expenses in 2018 increased by \$27.4, or 170 basis points as a percentage of revenue, compared to the prior year. The increase was driven by approximately \$34 of higher investments in product development, sales, marketing and information technology that support our growth strategies, \$3.8 of severance costs in 2018 and a \$1.5 impairment related to an asset held for sale, partially offset by approximately \$9 of lower variable compensation expense.


# 44. PARTLY-OWNED SUBSIDIARY WITH MATERIAL NON-CONTROLLING INTERESTS (CONTINUED)

Details of the Group’s subsidiaries that have material non-controlling interests are set out below: (Continued)

	2021	2020

Percentage of equity interest held by non-controlling
 interest of Parkway:	30%	30%

The following table illustrates the summarised financial information of Parkway. The amounts disclosed are before any inter-company eliminations:

	2021	2020

HK$’000	HK$’000

Total expenses for the year	(301)	(5,059)

Loss for the year	(301)	(3,732)

Total comprehensive loss for the year	(301)	(3,732)

Loss for the year allocated to non-controlling
 interest of Parkway	(90)	(1,120)

Current assets	287	391

Non-current assets	–	171

Current liabilities	(2,266)	(2,356)

Non-current liabilities	(2,231)	(2,115)

Net liabilities	(4,210)	(3,909)

Accumulated loss of non-controlling interest of
 Parkway at the reporting date	(1,920)	(1,830)

Net cash flows generated from operating activities	83	41

Net increase in cash and cash equivalents	83	41

Particulars of the subsidiaries as at 30 June 2021 and 2020 are as follows:

Name of subsidiary	Place of
incorporation/
registration/
operations	Issued and
fully paid
share capital	Percentage of
ownership interest	Principal activities

			2021	2020

New Smart International Creation
 Limited	Hong Kong	HK$1	100%	100%	Production and
 distribution of film

Champion Peak Corporation Limited	Hong Kong	HK$1	100%	100%	Production of film

China 3D Digital Products Limited	Hong Kong	HK$1	100%	100%	Production of film

Eastern Master Corporation Limited	Hong Kong	HK$1	100%	100%	Production of film

Fantastic Union Limited	Hong Kong	HK$1	100%	100%	Production of film

Good Lead Corporation Limited	Hong Kong	HK$1	100%	100%	Production of film

Good Time Investment Limited	Hong Kong	HK$1	100%	100%	Production of film

Joyful Excellence Limited	Hong Kong	HK$1	100%	100%	Production of film

Go Up Zone Limited	Hong Kong	HK$1	100%	100%	Production of film

New Modern Corporation Limited	Hong Kong	HK$1	100%	100%	Production of film

New Noble Corporation Limited	Hong Kong	HK$1	100%	100%	Production of film

New Pioneer Corporation Limited	Hong Kong	HK$1	100%	100%	Production of film

Cream Digital Limited	Hong Kong	HK$1	100%	100%	Production of film

Source Hunter Corporation Limited	Hong Kong	HK$1	100%	100%	Production of film

China 3D Digital Distribution Limited	Hong Kong	HK$1	100%	100%	Distribution of films

Red Rich Investment Limited	Hong Kong	HK$1	100%	100%	Distribution of films

Smooth Success Development
 Limited	Hong Kong	HK$1	100%	100%	Distribution of films


Total distributable income is the (loss) profit for the period, before distribution to unitholders as adjusted to eliminate the effects of Adjustments (as defined and set out in the Trust Deed) which have been recorded in the condensed consolidated income statement for the relevant period. The Adjustments to arrive at total distributable income for the period are set out below:

	2020	2019

HK$'000
(unaudited)	HK$'000
(unaudited)

(Loss) profit for the period, before distribution to unitholders	(8,491,803)	3,186,527

Adjustments:

M'anagers fees payable in units	71,660	75,757

Decrease (increase) in fair value of investment properties	9,172,565	(2,455,700)

Fair value changes on financial assets at fair value
through profit or loss	1,939	-

Non-cash finance costs	12,434	20,955

Deferred tax	37,277	41,384

Total distributable income	804,072	868,923

	2020	2019

HK$'000
(unaudited)	HK$'000
(unaudited)

Total distributable income (note 11)	804,072	868,923

Percentage of distributable income for distribution (note (i))	90%	90%

Total distribution amount to be paid	723,665	782,031

Distribution per unit to unitholders (note (ii))	HK$0.1229	HK$0.1332

(i) It is the policy of the Manager to distribute 90% (six months ended 30 June 2019: 90%) of available distributable income as the distributions for the six months ended 30 June 2020 (the "Interim Distribution Period").

(ii) The interim distribution per unit of HK\$0.1229 for the six months ended 30 June 2020 is calculated based on the interim distribution to be paid of HK\$723,665,000 for the period and 5,888,833,523 units in issue as at 30 June 2020. Such interim distribution will be subject to further adjustments upon the issuance of units on or before 25 September 2020, which is the record date set for such period. The interim distribution will be paid to unitholders on 9 October 2020.

The interim distribution per unit of HK\$0.1332 for the six months ended 30 June 2019 was calculated based on the interim distribution paid of HK\$782,031,000 for the period and 5,872,789,311 units as of 20 September 2019, which was the record date for the period. The interim distribution was paid to unitholders on 4 October 2019.

The basic (loss) earnings per unit during the six months ended 30 June 2020 is calculated by dividing the loss for the period before distribution to unitholders of HK\$8,491,803,000 (2019: profit for the period before distribution to unitholders of HK\$3,186,527,000) by the weighted average number of units of 5,892,170,575 (2019: 5,860,193,423) in issue during the period, taking into account the units issuable as manager's fee for its service for each of the six months ended 30 June 2020 and 2019.

There were no diluted potential units in issue during the six months ended 30 June 2020 and 2019, therefore the diluted earnings per unit has not been presented.

	At
30 June
2020	At
31 December
2019

HK$'000
(unaudited)	HK$'000
(audited)

Trade receivables	37,322	10,467

Deferred lease receivables	183,545	166,052

Deposits, prepayments and other receivables	81,466	82,845

	302,333	259,364

Aging analysis of the Group's trade receivables presented based on the invoice date at the end of the reporting period is as follows: