# 7. TRANSACTIONS WITH THE TRUSTEE, MANAGER AND CONNECTED PERSONS (Continued)

The Trustee is entitled to receive a trustee fee of up to 1% per annum of the net asset value of the Sub-Fund, which accrued daily and calculated as at each dealing day and payable monthly in arrears. For the year ended December 2016 and 2015, the trustee fee is calculated as a percentage per annum of the net asset value of the Sub-Fund at the rate as follows, subject to a monthly minimum of RMB40,000:

	Trustee fee percentage
per annum

For first RMB200 million	0.16%

For next RMB1,000 million	0.14%

For next RMB1,000 million	0.12%

For next RMB1,000 million	0.10%

Thereafter	0.08%

The Trustee’s fee is inclusive of fees payable to The Hongkong and Shanghai Banking Corporation Limited (the “Custodian”) and HSBC Bank (China) Company Limited (the “PRC Custodian”).

The Trustee, acting as the Registrar, is also entitled to a fee of RMB120 (2015: RMB120) per participating dealer per transaction.

The investments and bank balances of the Sub-Fund held with related parties of the Trustee are:

	2016	2015

RMB	RMB

Investments

HSBC Bank (China) Company Limited	17,177,372,883	18,232,458,944

Bank balances

The HonkShgondkig an anhigai BannCg oridporaton Limte	27,455,761	110,734,726

HSBC Bank (China) Company Limited	12,822,162	100,388,864

	40,277,923	211,123,590

Interest income amounted to RMB439,200 (2015: RMB1,266,203) was earned on these bank balances for the year ended 31 December 2016 and 2015.

According to the Trust Deed dated 25 July 2012, as amended, the license fees and expenses payable to the owner of an index for the use of such index shall be payable out of the Sub-Fund. Prior to 1 January 2015, the FTSE index license fees were paid by the Manager of the Sub-Fund. Pursuant to the letter dated 16 November 2015 between the Trustee and the Manager of the Sub-Fund, the Manager has decided that the license fee shall be paid out of the Sub-Fund commencing from 1 January 2015 and the Manager was reimbursed by the Sub-Fund for the license fee of RMB19,918,378 which was paid out by the Manager from 1 January 2015 to 16 November 2015. For the year ended 31 December 2016 and 2015, the amount of RMB19,481,156 represents the license fee (2015: the amount of RMB22,984,953 represents the license fee of the Sub-Fund of which RMB19,918,378 was the reimbursement to the Manager for their payment of the license fee for the Sub-Fund for 1 January 2015 to 16 November 2015).

The objective of the Sub-Fund is to provide investment results that, before deduction of fees and expenses, closely correspond to the performance of the FTSE China A50 Index. The Sub-Fund’s activities may expose it to a variety of risks including but not limited to: market risk (including market price risk, interest rate risk and currency risk), credit and counterparty risk and liquidity risk which are associated with the markets in which the Sub-Fund invests.

The following is a summary of the main risks and risk management policies.

Market price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual instrument or factors affecting all instruments in the market.

The Sub-Fund is designated to track the performance of the FTSE China A50 Index, therefore the exposures to market risk in the Sub-Fund will be substantially the same as the tracked index. The Manager manages the Sub-Fund’s exposures to market risk by ensuring that the key characteristics of the portfolio, such as security weight and industry weight, are closely aligned with the characteristics of the tracked index.

As at 31 December, the Sub-Fund’s investments were concentrated in the following industries:

The Sub-Fund held 50 out of 50 (2015: 50 out of 50) constituent securities comprising the FTSE China A50 Index. The Sub-Fund is therefore exposed to substantially the same market price risk as the FTSE China A50 Index.


where \( \alpha _ { n } \rightarrow 1 ^ { + } \). The conclusion follows from Theorem 4.1.

For the special choice \( w _ { n } = n ^ { r } \),\( n \geq \) 1, with \( r \ge \) 0 fixed, Corollary 4.6 yields the implication

\[ ( 4 . 5 ) \qquad \qquad \operatorname * { s u p } _ { n \geq 1 } n ^ { - r } \| M _ { n } ^ { ( p ) } ( \lambda T ) \| < \infty \Longrightarrow \| T ^ { n } \| = o ( n ^ { r + 1 } ) , \quad n \to \infty \, , \]

whenever \( p \geq \) 1 and \( \sigma ( T ) \cap \mathbb { T } \) has arclength measure zero. It turns out that such ”regular” growth restrictions for the Ces\`aro means can be reformulated in terms of resolvent estimates. This has been first proved by Strikwerda and Wade [SW] in the case when \( p \) = 2 and \( r \) = 0. The Ces\`aro means of order one are related to the partial sums of the Taylor expansion at infinity of the resolvent function of T. The uniform boundedness of these partial sums in the exterior of the unit disc is called the uniform Kreiss boundedness condition (see [MSZ] and[GH] for the boundedness only on the real line) and is equivalent to the uniform boundedness of \( \{ M _ { n } ( \lambda T ) \} \) on the unit circle. These last two conditions are more restrictive. The result below provides an extension of the theorems wej ust mentioned.

Theorem 4.7. Given \( T \in { \mathcal { B } } ( { \mathcal { X } } ) \) we have:

(i) If \( p \geq \) 2 and \( r \ge \) 0 then

\[ \operatorname* { s u p } _ { \stackrel { n \geq 1 } { \lambda \in \mathbb { T } } } n ^ { - r } \| M _ { n } ^ { ( p ) } ( \lambda T ) \| < \infty \iff \operatorname* { s u p } _ { | \lambda | > 1 } \frac { ( | \lambda | - 1 ) ^ { r + 1 } } { | \lambda | ^ { r } } \| ( T - \lambda I ) ^ { - 1 } \| < \infty \, . \]

(ii) If \( p \) = 1 and \( r \ge \) 0 then

\[ \operatorname* { s u p } _ { \frac { n \geq 1 } { \lambda \in \mathbb { T } } } n ^ { - r } \| M _ { n } ( \lambda T ) \| < \infty \iff \operatorname* { s u p } _ { \frac { n \in \mathbb { N } } { | \lambda | > 1 } } \frac { ( | \lambda | - 1 ) ^ { r + 1 } } { | \lambda | ^ { r } } \left\| \sum _ { k = 0 } ^ { n } \lambda ^ { - k - 1 } T ^ { k } \right\| < \infty . \]

Proof. (=\( \Rightarrow \)) The argument uses the ideas in [SW]. We start with the identity proved in [SW],formula (6.3), for 0 \( < \rho < \) 1 and \( \lambda \in \mathbb { T } \), namely

For \( p \geq \) 2 the resolvent estimate follows directly from

By a straightforward argument we see that the above equality holds for all \( \rho \in \mathbb { D } \) and by comparing the coefficients of \( \rho ^ { k } \) we obtain for \( p \) = 1,

In this case the desired estimate follows from the inequalities

(\( \Leftarrow \)=) We begin with (i) and assume first that \( p \) = 2. Use (2.6) to write for 0 \( < \rho < \) 1,\( \lambda \in \mathbb { T } \),

If we now choose \( \textstyle \rho = 1 - { \frac { 1 } { n } } \) we obtain the estimate for \( M _ { n } ^ { ( 2 ) } ( T ) \) in (i) for all \( r \ge \) 0. For \( p > \) 2, this follows immediately from the first equality in (2.6).

Let us turn to the case when \( p \) = 1. For \( n \geq \) 1, \( \mu \in \mathbb { T } \) and \( \lambda \in \mathbb { C } \) with \|λ\| > 1 we have by the Abel summation formula

\[ \operatorname* { s u p } _ { \stackrel { n \in \mathbb { N } } { | \lambda | > 1 } } \frac { ( | \lambda | - 1 ) ^ { r + 1 } } { | \lambda | ^ { r } } \left\| \sum _ { k = 0 } ^ { n } \lambda ^ { - k - 1 } T ^ { k } \right\| < \infty \, , \]

and if \( \textstyle \lambda = 1 + { \frac { 1 } { n } } \),

for \( n \geq \) 1 and \( \mu \in \mathbb { T } \), which concludes the proof.


Following the Listing, the following transactions between our Group and the relevant connected person(s) (as defined in the GEM Listing Rules) will continue, and will constitute continuing connected transactions under the GEM Listing Rules.

# FULLY EXEMPT CONTINUING CONNECTED TRANSACTIONS

Pursuant to Chapter 20 of the GEM Listing Rules, the continuing connected transactions of our Group as set out below are exempt from compliance with the requirements of reporting, annual review, announcement and approval by the independent Shareholders under Chapter 20 of the GEM Listing Rules.

Winning Tower (as tenant) entered into a tenancy agreement (the ‘‘Warehouse Tenancy Agreement’’) dated 30 September 2015 with Iao Ip Property Investment Company Limited (‘‘Iao Ip Property’’) (as landlord), pursuant to which Iao Ip Property agreed to lease Unit 1002, 10/F, Riley House, 88 Lei Muk Road, Kwai Chung, New Territories, Hong Kong to Winning Tower for a term of three years commencing from 1 October 2015 and ending on 30 September 2018 (both days inclusive) at the monthly rent of HK\$50,000 (inclusive of property tax but exclusive of management fee, government rent, rates and water, gas and electricity charges), which was agreed after arm’s length negotiations between the parties with regard to the market rent of similar properties in similar locations as the property leased under the Warehouse Tenancy Agreement, and the terms of the Warehouse Tenancy Agreement were no less favourable to Winning Tower than terms available from Independent Third Parties.

The rent (together with the management fee, government rent and rates) paid by us under the Warehouse Tenancy Agreement for each of the two years ended 31 December 2016 amounted to approximately HK\$0.2 million and HK\$0.6 million, respectively. It is expected that the annual rent (together with the management fee, government rent and rates) payable by us under the Warehouse Tenancy Agreement for each of the two years ending 31 December 2018 amounts to approximately HK\$0.7 million and HK\$0.7 million respectively.

By using the above expected annual rent (together with the management fee, government rent and rates) as the numerators for the calculation of percentage ratios, all the relevant percentage ratios calculated for the relevant transactions under the Warehouse Tenancy Agreement pursuant to Chapter 20 of the GEM Listing Rules will be less than 5% and the annual consideration will be less than HK\$3,000,000.

Iao Ip Property is a company incorporated in Hong Kong which is owned as to 20% by Mr. Yu, our non-executive Director and Controlling Shareholder, and as to 80% in aggregate by three associates of Mr. Yu. As such, Iao Ip Property is an associate of Mr. Yu and hence a connected person of our Company for the purposes of the GEM Listing Rules and the transactions under the Warehouse Tenancy Agreement will constitute exempt continuing connected transactions for our Group after the Listing.

Winning Star (as tenant) entered into a tenancy agreement (the ‘‘Food Factory Tenancy Agreement’’) dated 1 January 2017 with Winning Tower Group (as landlord), pursuant to which Winning Tower Group agreed to lease Unit 1105, 11/F, Riley House, 88 Lei Muk Road, Kwai Chung, New Territories, Hong Kong to Winning Star for a term of three years commencing from 1 January 2017 and ending on 31 December 2019 (both days inclusive) at the monthly rent of HK\$61,000 (inclusive of property tax, management fee, government rent and rates but exclusive of water, gas and electricity charges), which was agreed after arm’s length negotiations between the parties with regard to the market rent of similar properties in similar locations as the property leased under the Food Factory Tenancy Agreement, and the terms of the Food Factory Tenancy Agreement were no less favourable to Winning Tower Group than terms available from Independent Third Parties.

The rent paid by Winning Star for the relevant premises for each of the two years ended 31 December 2016 amounted to approximately HK\$0.3 million and HK\$0.7 million, respectively. It is expected that the annual rent payable by Winning Star under the Food Factory Tenancy Agreement for each of the three years ending 31 December 2019 amounts to approximately HK\$0.7 million, HK\$0.7 million and HK\$0.7 million respectively.

By using the above expected annual rent as the numerators for the calculation of percentage ratios, all the relevant percentage ratios calculated for the relevant transactions under the Food Factory Tenancy Agreement pursuant to Chapter 20 of the GEM Listing Rules will be less than 5% and the annual consideration will be less than HK\$3,000,000.

Winning Star is a limited company incorporated in Hong Kong and is owned and controlled as to 60% by our Company and as to 40% by Grand Gold, which is a fellow subsidiary of Top Ocean, our Controlling Shareholder. As such, Winning Star is a connected subsidiary and hence a connected person of our Company for the purposes of the GEM Listing Rules and the transactions under the Food Factory Tenancy Agreement will constitute exempt continuing connected transaction for the Group after the Listing.

Winning Tower Group (for itself and as trustee for the benefit of its subsidiaries from time to time) (as purchaser) entered into a master purchase agreement (the ‘‘Master Purchase Agreement of Yau Heng’’) dated 23 May 2017 with Yau Heng (as supplier) for a term of three years commencing from 1 January 2017 and ending on 31 December 2019 (both days inclusive), pursuant to which Yau Heng agreed to supply certain frozen raw and unprocessed meat products to Winning Tower Group and its subsidiaries on the basis of individual purchase order placed by any of them at the price to be determined after arm’s length negotiations between the parties from time to time with reference to the then prevailing market price of similar products in the market (which is ascertained by, among others, obtaining quotations from two other suppliers who are Independent Third Parties).

For each of the two years ended 31 December 2016, our total purchases attributable to the purchase of the aforesaid products from Yau Heng was approximately HK\$2.6 million and HK\$2.5 million, respectively. Our Directors confirm that Yau Heng had transactions with parties other than our Group and our total purchases attributable to the purchase of the aforesaid products from Yau Heng accounted for less than 2% of Yau Heng’s sales for each of the Track Record Period. Based on our


# 9. LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

The calculation of the basic loss per share amounts is based on the loss for the year attributable to ordinary equity holders of the parent, and the weighted average number of ordinary shares of 4,439,460,000 (2019: 4,163,227,000) in issue during the year.

The computation of diluted loss per share does not assume the exercise of the Company’s share options because the exercise prices of those options were higher than the average market price of the Company’s shares for the year ended 31 December 2020.

No adjustment has been made to the basic loss per share amounts presented for the years ended 31 December 2020 and 2019 in respect of a dilution as the impact of the share options outstanding had an anti-dilutive effect on the basic loss per share amounts presented.

The calculations of basic and diluted loss per share are based on:

	2020	2019

HK$’000	HK$’000

Loss

Loss attributable to ordinary equity holders of the parent	(242,399)	(441,039)

	Number of shares

2020	2019

’000	’000

Shares

Weihgted averadige number of ornary shares in issue during
the year used in the basic and diluted loss per share calculation	4,439,460	4,163,227

The Group enters into an arrangement to sublease a leased asset to a third party while the original lease contract is in effect, the Group is an intermediate lessor, this sublease is classified as a finance lease. The Group derecognised the right-of-use asset on the head lease and recognised trade receivables at the sublease commencement date, continued to account for the original lease liability in accordance with the lessee accounting model. At 31 December 2020, the current portion and non-current portion of the trade receives amounted to RMB8,022,000 (equivalent to approximately HK\$9,532,000) and RMB71,272,000 (equivalent to approximately HK\$84,656,000), respectively.

The Group’s trading terms with its customers are mainly on credit. The credit period is generally three months. The Group seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the Group’s trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. The Group does not hold any collateral or other credit enhancements over its trade receivable balances. Trade receivables are non-interest-bearing.

An ageing analysis of the trade and bills receivables as at the end of the reporting period, based on the invoice date and net of loss allowance, is as follows:


So far as our Directors are aware, the following persons will, immediately prior to and following the completion of the Capitalisation Issue, the Distribution and the Global Offering (without taking into account any Shares which may be issued pursuant to the exercise of the Over-allotment Option and assuming there will be no change in the shareholding structure of Sunac China from the Latest Practicable Date up to the Listing), have interests or short positions in our Shares or underlying Shares which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10% or more of the issued voting shares of any other member of our Group:

Name of Shareholder	 Nature of Interest	Shares held immediately
f
prior to the comlpetion othe Caiptalisation Issue the,
Distribution and the Global
(1)Offering	Shares held immediately
following the Caiptalisation
Issue the Ditributio and
,sn(1)the Global Offering

		Number	Approximate
Percentage	 Number	Approximate
Percentage

Sunac Services
(2)Investment 	Beneficial owner	 7,600,000(L)	80%	 1,698,000,000(L)	56.60%

(2)Sunac Shine	Trustee	 1,900,000(L)	20%	 462,000,000(L)	15.40%

(2)Sunac China 	Interest in
controlled
corporation	9,500,000(L)	100%	 2,160,000,000(L)	72.00%

(2)(3)Sunac International 	Interest in
controlled
corporation	9,500,000(L)	100%	 2,160,000,000(L)	72.00%

Beneficial owner	–	–	 65,731,909(L)	2.19%

(M \( \angle \gamma ( - ) \gamma ( + \))r. S  un	Interest in
controlled
corporation	9,500,000(L)	100%	 2,227,299,274(L)	74.24%

Beneficial owner	–	–	 366,531(L)	0.01%

(1) The letter “L” denotes a long position in our Shares.

(2) Sunac Services Investment is wholly owned by Sunac China. Sunac Shine, is wholly-owned by Sunac China and acts as the trustee of the Sunac Services Share Award Scheme Trust which is set up for the purpose of a share award scheme to be adopted at least six months after Listing. As at the Latest Practicable Date, the detailed terms of the share award scheme and the relevant grantees had not yet been determined. By virtue of the SFO, Sunac China is deemed to be interested in the Shares held by Sunac Services Investment and Sunac Shine.

(3) As at the Latest Practicable Date, Sunac China was owned as to (i) approximately 43.82% by Sunac International, (ii) approximately 1.05% by Tianjin Biaodi, which was indirectly wholly owned by Mr. Sun, and (iii) approximately 0.24% by Mr. Sun. By virtue of the SFO, Sunac International and Mr. Sun are deemed to be interested in the Shares held by Sunac Services Investment and Sunac Shine, both of which are wholly owned by Sunac China.

(4) Tianjin Biaodi is expected to hold 1,567,365 Shares, representing approximately 0.05% of our Shares in issue immediately following the completion of the Capitalisation Issue, the Distribution and the Global Offering. Tianjin Biaodi is indirectly wholly owned by Mr. Sun. By virtue of the SFO, Mr. Sun is deemed to be interested in the Shares held by Tianjin Biaodi.

# INTEREST IN EQUITY INTEREST OF MEMBERS OF OUR GROUP

Name of Shareholder	Company
concerned	Nature of
Interest	Equity interest held
immediately prior to
the comlifpeton o the
Caiiptalsation Issue,
the Distribution and
the Global Offering	Equity interest held
immediately following
the comlifpeton o the
Caiiptalsation Issue,
the Distribution and
the Global Offering

			Approximate
Percentage	Approximate
Percentage

QindLgao onhPgai roperty
Services Co., Ltd. (青島隆海物
業服務有限公司) 	QindSgao unac	 Beneficial
owner	30%	30%

Deng Hong (鄧鴻) 	Chendgu
Huanrong	Beneficial
owner	29%	29%

Hebei Shuangchuang Pingan
Investment Co., Ltd. (河北雙創
平安投資有限公司) 	Shijiazhuang
Ronhgong	Beneficial
owner	46%	46%

Shoujin Minzhi (Tianjin) Property
Development Co., Ltd. (首金敏
志(天津)置業發展有限公司)	Hubei Rongshou	 Beneficial
owner	50%	50%

Henan Rongshou	 Beneficial
owner	40%	40%


Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Save as disclosed in Note 2.1, the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current income tax and deferred tax provision in the period in which such determination is made.

# (b) Provision for impairment of receivables

Management determines the provision for impairment of trade receivables. This amount of impairment is based on the credit history of its customers and the current market condition. Management reassesses the provision at each reporting date.

Significant judgment is exercised on the assessment of the collectability of trade receivables from each customer. In making the judgment, management considers a wide range of factors such as results of follow-up procedures performed by sales personnel, customer payment trends including subsequent payments and customers’ financial positions. If the financial conditions of the customers of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

The carrying amount and impairment of trade receivables are disclosed in Note 19.

# (c) Identification of functional currencies

The functional currency for each entity in the Group is the currency of the primary economic environment in which it operates. Determination of functional currency involves significant judgment. The Group reconsiders the functional currency of its entities if there is a change in the underlying transactions, events and conditions which determine their primary economic environment.

# 4 Critical accounting estimates and judgments (Continued)

# (d) Estimated useful lives and impairment of property, plant and equipment

Management estimates useful lives of the property, plant and equipment by reference to the Group’s business model, its assets management policy, the industry practice, expected usage of the assets, expected repair and maintenance, the technical or commercial obsolescence arising from changes or improvements in the market. Residual values of the property, plant and equipment are determined based on prevailing market values for equivalent aged assets taking into account the condition of the relevant assets and other economic considerations. Depreciation would be significantly affected by the useful lives and residual values of the property, plant and equipment as estimated by management.

The Group’s major operating assets represent property, plant and equipment. Management performs review for impairment of the property, plant and equipment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable.

Management considered there was no impairment indicator of remaining property, plant and equipment and construction in progress as at December 31, 2017 as these assets were used for profitable projects, and there is a strong demand of these property, plant and equipment in the second hand market (December 31, 2016: Same).

The chief operating decision-maker has been identified as the Board. The Board reviews the Group’s internal reporting in order to assess performance and allocate resources. The Board has determined the operating segments based on these reports.

The Board considers the business from both product and geographical perspectives. The Board regularly reviews the consolidated financial statements from both product and geographical perspectives to assess performance and make resources allocation decisions. The operating segments are determined to be based on products. Management assesses the performance of the operating segments based on a measure of gross profit.

The Group derives its revenue from three product segments, namely the electronics parts, branded OPLV products, and construction and industrial products which are operating in five geographical areas, namely The PRC (excluding Hong Kong), Australia, North America, Hong Kong and others.

The description of each reportable product segment is as follows:

Reportable product segment	Type of products

Electronics parts	Aluminium parts for consumer electronics products, examples include
heat sinks and chassis for computers

Construction and industrial products	Products sold for construction and industrial use, examples include
window and door frames, curtain walls, guardrails, body parts for
transportation, mechanical and electrical equipment and consumer
durable goods

Branded OPLV products	Door and window frames systems marketed under “OPLV” brand
and sold through distributors


The Company has established the Remuneration Committee on 6 June 2014 with written terms of reference in compliance with Rule 3.25 of the Listing Rules and paragraph B.1 of the Code on Corporate Governance Practices as set out in Appendix 14 to the Listing Rules. As at the date of this annual report, the Remuneration Committee consists of two independent non-executive Directors, namely Mr. Gong Jinjun (as Chairman) and Mr. Wang Ping, and one executive Director, namely Mr. Liu Daoqi (who replaced Mr. Feng Bin with effect from 17 March 2017). The primary duties of the Remuneration Committee are, inter alia, (1) to determine the remuneration policy of all Directors, to assess the performance of the Directors, to approve the terms of service contracts of the Directors, to review and approve the management’s remuneration proposals with reference to the Board’s corporate goals and objectives, to make recommendations to the Board on the remuneration packages of individual executive Directors and senior management, to make recommendations to the Board on the remuneration of the non-executive Director(s), (2) consider salaries paid by comparable companies, time commitment and responsibilities and employment conditions elsewhere in the group to review and approve compensation arrangements relating to dismissal or removal of Directors for misconduct to ensure they are consistent with relevant contractual terms and are otherwise reasonable and appropriate, (3) to review and approve compensation payable to executive Director and senior management for any loss or termination of office or appointment to ensure that it is consistent with contracted terms and is otherwise fair and not excessive, and (4) to ensure that no Director or any of his associates is involved in deciding his own remuneration.

During the year ended 31 December 2017, one meeting was held by the Remuneration Committee. The attendance record of each member of the Remuneration Committee is set out below:

Name of Director	Attendance
/Number of Remuneration Committee meeting(s)

Mr. Gong Jinjun	1/1

Mr. Wang Ping	1/1

Mr. Liu Daoiq (aidfhpponte as a member o te Remuneration
Committee on 17 March 2017)	1/1

Mr. Feng Bin (resigned on 17 March 2017)	0/0

During the year ended 31 December 2017, the Remuneration Committee mainly performed works including reviewing and making recommendation to the Board regarding of the Directors’ remuneration for the year ending 31 December 2017 and the terms of service contracts for newly appointed directors.

There had been no disagreement between the Board and the Remuneration Committee during the year ended 31 December 2017.

The Company has established the Nomination Committee on 6 June 2014 with written terms of reference in compliance with paragraph A.5 of the Code on Corporate Governance Practices as set out in Appendix 14 to the Listing Rules. As at the date of this annual report, the Nomination Committee consists of two independent non-executive Directors, namely Mr. Zeng Shiquan and Mr. Gong Jinjun, and one executive Director, Mr. Li Tie (as Chairman) (who replace Mr. Yang Yoong An with effect from 17 March 2017). The primary functions of the nomination committee are, inter alia, to review the structure, size and composition (including the skills, knowledge and experience) of the Board at least annually and make recommendations on any proposed changes to the Board to complement the Company’s corporate strategy, to identify individuals suitably qualified to become Board members and select or make recommendations to the Board on the selection of individuals nominated for directorships, to assess the independence of independent non-executive Directors, and to make recommendations to the Board on the appointment or re-appointment of Directors in particular the chairman and the chief executive officer and succession planning for Directors.

During the year ended 31 December 2017, one meeting was held by the Nomination Committee. The attendance record of each member of the Nomination Committee is set out below:

Name of Director	Attendance/
Number of Nomination Committee meeting(s)

Mr. Li Tie (appointed as chairman of the
Nomination Committee on 17 March 2017)	1/1

Mr. Zeng Shiquan	1/1

Mr. Gong Jinjun	1/1

Mr. Yang Yoong An (resigned as chairmen of the
Nomination Committee on 17 March 2017)	0/0

There had been no disagreement between the Board and the Nomination Committee during the year ended 31 December 2017. During the year ended 31 December 2017, the Nomination Committee mainly performed works including:

— identified suitable candidates for directorships and made recommendations to the Board;

— assessed the independence of independent non-executive Directors;

— made recommendations to the Board on the appointment or re-appointment of Directors; and

— reviewed and assessed the implementation of the diversity policy of the Company.

The Company recognises and embraces the benefits of having a diverse Board to enhance the quality of its performance and hence the purpose of the Board Diversity Policy aims to build and maintain a Board with a diversity of directors, in terms of skills, experience, knowledge, expertise, culture, independence, age and gender. These differences will be taken into account in determining the optimum composition of the Board. The Nomination Committee will discuss the measurable objectives for implementing diversity on the Board from time to time and recommend them to the Board for adoption. The Nomination Committee will report annually on the composition of the Board under diversified perspectives, and monitor the implementation of this policy to ensure the effectiveness of this policy. It will also discuss any revisions that may be required, and recommend any such revisions to the Board for consideration and approval.


Name of Shareholder	 Class of Share	Number of
Shares	Approximate
Shareholding
Percentage in Our
Company after the
Allotment

Zhong Hang Investment
Management Limited
(Note 11)	Series A Preferred
Shares	2,313,800	2.0199%

BAI (Note 12)	Series B Preferred
Shares	3,055,000	2.6669%

China Merchants Venture
CailFpta und, L.P. (招商
局創新投資基金有限合夥
企業) (Note 13)	Series B Preferred
Shares	4,582,600	4.0005%

Total		114,551,513	100.00%

1. Each of Cabnetvic, Cabnetwa and Cabnetsa is a business company incorporated in the BVI and wholly-owned by Mr. Song.

2. Let It Bee Company Limited (“Let it Bee”) is a business company incorporated in the BVI and wholly-owned by Ms. Chau.

3. Xylo Yonder Company Limited (“Xylo Yonder”) is a business company incorporated in the BVI and wholly-owned by Mr. Jiang, a director of certain Consolidated Affiliated Entities of our Group.

4. Shirazvic is a business company incorporated in the BVI and a shareholding platform beneficially owned by Mr. Song, Mr. Ji and Ms. Chau, our executive Directors and Co-founders, Mr. Zhong Songran (鍾松然), our Chief Technology Officer and other 10 employees who have made contributions to the establishment and development of our Group. Except Mr. Song, Mr. Ji, Ms. Chau and Mr. Zhong, all the other ultimate beneficial owners of Shirazvic are not Directors or senior management of our Company. As of the Latest Practicable Date, Shirazvic was owned as to (i) approximately 35.29% by Ms. Chau through Let It Bee; (ii) approximately 15.19% by Mr. Zhong through Soley Raven Company Limited, a business company incorporated in the BVI which is wholly-owned by Mr. Zhong; (iii) approximately 10.40% by Mr. Song; (iv) approximately 0.91% by Mr. Ji through Joy Kalton; and (v) approximately 38.21% by 10 employees of our Group who are not Directors or senior management of our Company.

5. Equity Incentive Holdco is a business company incorporated in the BVI and a special purpose vehicle wholly-owned by Trident Trust Company (HK) Limited, which is the trustee of LLS Trust, established for the purpose of holding Class B Shares pursuant to the Equity Incentive Plan.

6. Tencent Mobility Limited (“Tencent Mobility”) is a limited liability company incorporated under the laws of Hong Kong and a wholly-owned subsidiary of Tencent.

7. CCRE Investment Holdings Ltd. (“CCRE Investment”) is an exempted company with limited liability incorporated in the Cayman Islands and a wholly-owned subsidiary of CITIC Capital.

8. Qian Linklogis Limited (“LVC Qian”) is a business company incorporated in the BVI and wholly-owned by Shanghai Rongmian Information Technology Partnership (Limited Partnership) (上海融勉信息技術合夥企業(有限合夥) (“Shanghai Rongmian”), a limited partnership established in the PRC whose general partner is Shanghai LVC.

9. Le Linklogis Limited (“LVC Le”) is a business company incorporated in the BVI and wholly-owned by Shanghai Rongmian.

10. Tan Linklogis Limited (“LVC Tan”) is a business company incorporated in the BVI and wholly-owned by Shanghai Rongmian.

11. Zhong Hang Investment Management Limited (“Zhong Hang Investment”) is a business company incorporated in the BVI and ultimately beneficially owned by Mr. Wang Jianhua (王建華), an Independent Third Party.

12. BAI is a company incorporated under the laws of Germany, whose beneficial owner is Bertelsmann SE & Co. KGaA (貝塔斯曼) (“Bertelsmann”).

13. China Merchants Venture is a limited partnership established in the Cayman Islands, which is ultimately controlled by China Merchants Group Co., Ltd. (招商局集團有限公司).

On October 9, 2018, Linklogis Supply Chain Services entered into the Contractual Arrangements with Linklogis Digital, the Relevant Shareholders and the Other Parties (as defined in the section headed “Contractual Arrangements” of this prospectus), which were subsequently restated and amended on November 9, 2020. Through the Contractual Arrangements, Linklogis Supply Chain Services is able to exercise control over the operations of, and enjoy 100% of the economic benefits of Linklogis Digital and its subsidiaries. See the sections headed “Contractual Arrangements” and “Connected Transactions” of this prospectus for details of the Contractual Arrangements.

# Reclassification, redesignation and Share Subdivision

On March 22, 2021, our shareholders resolved, among other things, that subject to the Global Offering becoming unconditional, (i) all the ordinary shares with a par value of US\$0.0001 each and the Preferred Shares (save and except for 22,764,297 ordinary shares with a par value of US\$0.0001 each held by Cabnetvic, Cabnetwa and Cabnetsa), whether issued and unissued, be re-classified and re-designated as Class B Shares with a par value of US\$0.0001 each on a one-for-one basis, (ii) 22,764,297 ordinary shares with a par value of US\$0.0001 each held by Cabnetvic, Cabnetwa and Cabnetsa be re-classified and re-designated as Class A Shares with a par value of US\$0.0001 each on a one-for-one basis, and (iii) each share in the then authorized share capital of the Company with a par value of US\$0.0001 each (whether issued or unissued) be subdivided into 12 Shares of the corresponding class with a par value of US\$0.00000833 each immediately prior to the completion of the Global Offering.

As a consequence of this, immediately prior to the completion of the Global Offering, the authorized share capital of the Company will be US\$50,000 divided into 273,171,564 Class A Shares with a par value of US\$0.00000833 each and 5,726,828,436 Class B Shares with a par value of US\$0.00000833 each, and the issued share capital of the Company will be US\$15,095.9579 divided into 273,171,564 Class A Shares with a par value of US\$0.00000833 each and 1,538,343,384 Class B Shares with a par value of US\$0.00000833 each.


Members of the liquidation committee are required to discharge their duties honestly and in compliance with relevant laws. A member of the liquidation committee is liable to indemnify the company and its creditors with respect to any loss arising from his willful or material default.

The shares of a company shall only be listed overseas after obtaining approval from the securities regulatory authority of the State Council and the listing must be arranged in accordance with procedures specified by the State Council.

According to the Special Regulations, a company’s plan to issue overseas listed foreign shares and domestic shares which has been approved by the Securities Commission may be implemented by the board of directors of a company by way of respective issues, within 15 months after approval is obtained from Securities Commission.

A shareholder may apply, in accordance with the relevant provision set out in the PRC Civil Procedure Law, to a people’s court in the event that H share certificates in registered form are either stolen or lost, for a declaration that such certificates will no longer be valid. After such a declaration has been obtained, the shareholder may apply to the company for the issue of replacement certificates.

The Mandatory Provisions provide for a separate procedure regarding loss of H share certificates (which has been incorporated in the Articles of Association, a summary of which is set out in “Appendix VII – Summary of Articles of Association”).

# (xxi) Suspension and Termination of Listing

The new and amended Company Law has deleted provisions governing suspension and termination of listing. The new Securities Law has been amended as follows:

The trading of shares of a company on a stock exchange may be suspended if so decided by the Securities Exchange under one of the following circumstances:

(1) the total amount of shares or the shareholding distribution no longer complies with the necessary requirements for a listed company;

(2) the company failed to make public its financial position in accordance with the requirements or there is false information in the company’s financial report with the possibility of misleading investors;

(3) the company has committed a major breach of the law;

(4) the company has incurred losses for latest three (3) consecutive years; or

(5) other circumstances as required by the listing rules of the relevant stock exchange(s).

Under the Securities Law, in the event that the conditions for listing are not satisfied within the period stipulated by the relevant stock exchange in the case described in (1) above, or the company has refused to rectify the situation in the case described in (2) above, or the company fails to become profitable in the next subsequent year in the case described in (4) above, the relevant stock exchange shall have the right to terminate the listing of the shares of the company.

Companies may merge through merger by absorption or through the establishment of a newly merged entity. If it merges by absorption, the company which is absorbed shall be dissolved. If it merges by forming a new corporation, both companies will be dissolved.

# Securities law and other relevant regulations

The PRC has promulgated a number of regulations that relate to the issue and trading of Shares and disclosure of information by the Company. In October 1992, the State Council established the Securities Committee and CSRC. The Securities Committee is responsible for co-coordinating the drafting of securities regulations, formulating securities-related policies, planning the development of securities markets, directing, coordinating and supervising all securities-related institutions in the PRC and administering CSRC. CSRC is the regulatory body of the Securities Committee and is responsible for the drafting of regulatory provisions of securities markets, supervising securities companies, regulating public offers of securities by PRC companies in the PRC or overseas, regulating the trading of securities, compiling securities-related statistics and undertaking research and analysis. In 1998, the State Council dissolved the Securities Committee and assigned its function to CSRC. CSRC is also responsible for the regulation and supervision of the national stocks and futures market according to laws, regulations and authorizations.

The Securities Law took effect on July 1, 1999 and was latest revised on August 31, 2014. This is the first national securities law in the PRC, and it is divided into 12 chapters and 240 articles regulating, among other things, the issue and trading of securities, takeovers by listed companies, securities exchanges, securities companies and the duties and responsibilities of the State Council’s securities regulatory authorities. The Securities Law comprehensively regulates activities in the PRC securities market. Article 238 of the Securities Law provides that a company must obtain prior approval from the State Council’s regulatory authorities to list shares outside the PRC. Article 239 of the Securities Law provides that specific measures with respect to shares of companies in the PRC that are to be subscribed and traded in foreign currencies shall be separately formulated by the State Council. Currently, the issue and trading of foreign issued shares (including H Shares) are still mainly governed by the rules and regulations promulgated by the State Council and CSRC.


As stipulated by the regulations of the PRC, the Group’s subsidiaries in the PRC participate in basic defined contribution retirement schemes organised by the respective municipal governments under which they are governed. Details of the schemes of the subsidiaries are as follows:

Administrator	Beneficiary	Contribution rate

Beijing Municipal Government	Employees of Beijing OLM	19%

Shanghai Municipal Government	Employees of Shanghai OLM	20%

Chengdu Municipal Government,
Sichuan Province	Employees of Chengdu OLM	20.5%

Hangzhou Municipal Government,
Zhejiang Province	Employees of Beijing OLM
Hangzhou Branch	14%

Guangzhou Municipal Government,
Guangdong Province	Employees of Beijing OLM
Guangzhou Branch	14%

All employees are entitled to retirement benefits equal to a fixed proportion of their salaries and benefits in kind prevailing at their normal retirement ages.

The Group also operates a Mandatory Provident Fund Scheme (the “MPF scheme”) under the Hong Kong Mandatory Provident Fund Scheme Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF scheme is a defined contribution retirement plan administered by independent trustees. Under the MPF scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of HK\$30,000. Contributions to the plan vest immediately.

The Group has no other material obligation for the payment of retirement benefits associated with this scheme beyond the contributions described above.

# (a) Save as disclosed elsewhere in the consolidated financial statements, details of transactions between the Group and its related parties are disclosed below:

	2016	2015

RMB’000	RMB’000

Non-controlling interests

— Provision for software maintenance and other services	344	767

# (b) Remuneration to key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including directors and supervisors of the Group. The compensation of key management personnel is as follows:

	2016	2015

RMB’000	RMB’000

Short-term employee benefits	6,897	8,175

Post-employment benefits	279	204

	7,176	8,379

# (c) Contribution to defined contribution retirement plans

The Group participates in defined contribution retirement plans organised by municipal government for its employees. The details of the Group’s employee benefits plan are disclosed in note 30. As at 31 December 2016, there was no material outstanding contribution to post-employment benefit plans (2015: Nil).


In 2018, the Bank adhered to the unique positioning as a “commerce and logistics bank” and constructed a “Five-Clouds” platform to strengthen product and service innovation. Specifically, the Bank built a professional value-added “Cloud Service” platform by establishing the “Cloud Logistics” and “Cloud Business” product systems and improving the “Cloud Financing” and “Cloud Trading” functions to provide full-process transaction services for enterprises and enhance customer experience, so as to accrue settlement deposits and broaden income sources of intermediary business.

The Bank’s “Cloud Trading” platform uses advanced financial technology and scientific and agile iterative development methods to develop a complete set of solutions for treasury management of enterprises. The Bank introduced products such as corporate online banking, cash management, bank-enterprise direct link, interbank treasury management cloud platform, corporate settlement card and e-government to provide enterprises with a series of innovative payment and settlement services. By embedding financial services in transaction links to satisfy the needs of enterprises in various application scenarios, the platform can help enterprises achieve a range of treasury management goals such as pooling resources, reducing costs, accelerating fund flow, controlling risks and enhancing asset allocation. As at the end of the Reporting Period, the Bank had signed 28,025 corporate online banking customers with a transaction amount of RMB656.5 billion; the cash management platform had provided treasury management solutions for 839 large and medium-sized enterprises and public institutions; the bank-enterprise direct link had successfully connected with a number of medium and large group customers; the Bank had issued 2,316 corporate settlement cards in total; and the Bank had provided cash management solutions for many institutional customers including the public resources trading centre, courts, housing provident fund centre, land and resources trading centre, etc.

The Bank established an online supply chain financing platform based on the credit of core enterprises to develop financing services for upstream and downstream customers nationwide. With system connection and information exchange among the Bank’s online supply chain financing platform, fund supervision system, core enterprises’ ERP (Enterprise Resource Planning) systems and order systems, the Bank employs electronic signature law and electronic signature technology and draws on the credit of core enterprises to provide full-process online financing services for upstream and downstream partners of the core enterprises. Currently, the online 1+N prepayment financing, online 1+N factoring pool financing, online factoring and online 1+N re-factoring, financing functions have been up and running. During the Reporting Period, the “Cloud Financing” platform achieved the direct connection among multiple B2B (Business-to-Business) e-commerce platforms, supply chain finance platforms and core enterprises, and commenced business operations in June 2018, thus expanding the Bank’s channels to secure customers in large quantities for its “Cloud Financing” business. As at the end of the Reporting Period, more than 100 customers received financing online via the “Cloud Financing“ platform, and online financing business exceeded RMB400 million.

The “Cloud Logistics” platform is an open comprehensive service platform for the logistics industry. It is a professional “Internet + Logistics + Finance” platform created by the Bank to provide consignors with online registration, online ordering, online freight payment and other related functions. The platform provides logistics companies with such functions as entry application, online receipt of orders, logistics tracking, online entrusted collection of payments and branch fund management to improve their automated financial reconciliation and sub-account management capabilities and help them achieve automated fund management. For orders on the platform paid through the Bank’s acquiring channel, the Bank will supervise the funds from entrusted collection of payments for goods and ensure that the collected payments are safely and timely distributed to the consignors. Currently, the Bank has signed business cooperation agreements with a number of logistics companies.

The “Cloud Service” platform, based on the WeChat public account named “Zhengzhou Bank Trade Finance” (鄭州銀行商貿金融), promoted the Bank’s latest products for corporate banking according to customers’ industry focus so as to accurately push industry insight reports and forward-looking industry analysis for corporate customers. The platform also linked the corporate online banking, providing customers with financial value-added services such as the online appointment to open corporate banking account, account alerts, electronic invoicing, easy payment and bank-enterprise reconciliation. In the future , the “Cloud Service” platform will integrate the application scenarios of “Cloud Financing”, “Cloud Trading”, “Cloud Logistics” and “Cloud Service”, in an effort to incorporate the functions of the “Five-Cloud” platform to form an organic ecosystem.

The “Cloud Business” platform mainly serves the “Commerce and Logistics Alliance” initiated by the Bank and is expected to be an online e-commerce asset trading platform. The platform integrates the resources of the alliance to achieve win-win results by having qualified investors such as banks and quasi-financial institutions provide financial support as to the assets and financing needs of customers in the nine major commerce and logistics industries posted on the platform.


Figarch Model	Embedding delay

Figarch d=0.05	2

Figarch d=0.15	1

Figarch d=0.25	2

Figarch d=0.35	4

Figarch d=0.45	6

Figarch d=0.55	7

Figarch d=0.65	8

Figarch d=0.75	8

Figarch d=0.80	6

Figarch d=0.90	8

Table 1: Mutual Information for each Figarch Model.

The nearest neighbor in phase space will be a vector;

If the vector \( y ^ { N N } ( i ) \) is a false neighbor of y(i) having arrived its neighborhood by projection from a higher dimension because the present dimension d doesn’t unfold the attractor, then by going to next dimension \( d + \) 1 this false neighbor may be removed out of the neighborhood of y(i).

By looking at every data point y(i) and asking at what dimension all false neighbors are removed, we will sequentially intersections of orbits of lower and lower dimension are removed until at last point intersections are removed. At thatj uncture d will have been identified where the attractor is unfolded.

Comparing the distance between the vectors y(i) and \( y ^ { N N } ( i ) \) in dimension d with the dis-tance between the same vectors in dimension \( d + \) 1, it can easily be established which are true neighbors and which false. It only needs to be compared \( x _ { ( i + d T ) } - x _ { ( i + d T ) } ^ { N N } \) with the Euclidian distance \|yi − yNNi\| between nearest neighbors in dimension d.

If the additional distance is large compared to the distance in dimension d between nearest neighbors, then we have a false neighbor.

The square of the Euclidian distance between the nearest neighbor points as seen in di-mension d is

The distance between points when seen in dimension \( d + \) 1 relative to the distance in dimension d is;

When this quantity is larger than some threshold, we have a false neighbor (Kennel M B, Brown R and Abarbanel H D 1992).

Plot of percentage of false neighbors show the unfolded geometry and where there is no unfolding any more. With the correct choice of d dimension, modelling the data in d number of dynamical degrees of freedom will be adequate to capture the properties of the source.

Figure 2: FNN embedding dimension result for FIGARCH d=0.90.

The figure 2 shows minimum embedding dimension where percentage of nearest neighbors goes to zero taken into account some threshold \( r _ { t o l } \). Disappearance of false neighbors indicates minimum embedding dimension \( r _ { t o l } \) is false neighbor Euclidian distance tolerance and \( a _ { t o l } \) is neighbor tolerance based on attractor size. The neighbors are declared false neighbors, when the ratio of the Euclidian distances between neighbor candidates in successive embedding dimensions exceeds \( r _ { t o l } \).


The Company adopted a share option scheme pursuant to a resolution in writing passed by the Shareholders on 3 January 2013 (the “Share Option Scheme”) for the purpose to grant share options to selected participants as incentives or rewards for their contribution to the Group. Eligible participants of the Share Option Scheme include directors of the Company or any of its subsidiaries, including non-executive directors and independent non-executive directors, other employees of the Group and consultants.

Pursuant to the Share Option Scheme, shares which may be issued upon exercise of all options to be granted under the Share Option Scheme or any other share option scheme adopted by the Company must not in aggregate exceed 10% of the shares of the Company in issue at the time dealings in the shares of the Company first commence on the Stock Exchange. The Company may renew this 10% limit with shareholders' approval provided that each such renewal may not exceed 10% of the shares of the Company in issue as at the date of the shareholders' meeting.

The maximum number of shares of the Company which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option schemes of the Company must not in aggregate exceed 30% of the issued share capital of the Company in issue from time to time.

Unless approved by the Shareholders of the Company, the total number of shares of the Company issued and to be issued upon the exercise of options granted to each eligible participant (including exercised and unexercised options) under the Share Option Scheme or any other share option schemes adopted by the Company in any 12-month period must not exceed 1% of the shares of the Company in issue.

On 17 March 2014, the Company granted 10,800,000 share options (the “first share option”) to certain eligible participants of the Group under the Share Option Scheme. Set out below were details of the outstanding share options granted under the Share Option Scheme:

(1) All share options granted were at an exercise price of HK\$1 per share;

(2) All holders of share options might only exercise their options in the following manner:

The share options will be vested in 3 tranches, i.e. the first 30% from the date immediately after the first anniversary of the offer date until the last day of the option period, the second 30% from the date immediately after the second anniversary of the offer date until the last day of the option period, the balance 40% from the date immediately after the third anniversary of the offer date until the last day of the option period; and

(3) All outstanding or unexercised share options granted to the grantees shall lapse on 16 March 2019 or 16 March 2024.

# 33. EQUITY SETTLED SHARE-BASED PAYMENTS (continued)

The estimated fair values of share options vested on 17 March 2014 were HK\$3,911,000. These fair values were calculated using the Binomial model. The inputs into the model are as follows:

Share price	HK$0.95

Exercise price	HK$1.00

Expected volatility	50.554%

Expected life	5 years/10 years

Risk-free interest rate	1.2010%/2.1656%

Dividend yield	4.274%

Suboptimal factor	2.2

The risk-free rate was based on market yield rate from Hong Kong Monetary Authority Exchange Fund Bills Yield Curve as at the valuation date on 17 March 2014. Expected volatility was estimated by the average of historical daily volatilities of the comparable companies with similar business operation as at valuation date. Dividend yield was estimated by the trailing 12-month dividend payout of the Company divided by Company’s closing share price as at the dividend declaration date.

On 3 July 2015, the Company granted 13,400,000 share options (the “second share option”) to certain eligible participants of the Group under the Share Option Scheme. Set out below were details of the outstanding share options granted under the Share Option Scheme.

(1) All share options granted were at a subscription price of HK\$4.07 per Share;

The share options will be vested in 3 tranches, i.e. the first 30% from the date immediately after the first anniversary of the Offer Date until the last day of the option period, the second 30% from the date immediately after the second anniversary of the Offer Date until the last day of the option period, the balance 40% from the date immediately after the third anniversary of the Offer Date until the last day of the option period; and

# (3) All outstanding or unexercised share options granted to the grantees shall lapse on 2 July 2025.

The estimated fair values of share options granted on 3 July 2015 were HK\$25,864,188. These fair values were calculated using the Binomial Model. The inputs into the model are as follows:

Share price	HK$3.70

Exercise price	HK$4.07

Expected volatility	61.8%

Expected life	10 years

Risk-free interest rate	1.87%

Expected dividend yield	2.04%


# 9.	 Interest in a Joint Venture (continued)

Bozhou Botong Information Technology Co., Ltd is the only joint venture in which the Group participates and it is not considered material to the Group. Financial information (the Group’s share) of this joint venture is as follows:

9.	 於合營企業的權益（續）

亳州市博通信息科技有限公司為本集團參與業務的唯一一間合營企業，並不被視為對本集團屬重大。本集團分佔該合營企業之財務資料如下：

	2016
二零一六年	2015
二零一五年

HK$’000
千港元	HK$’000
千港元

Loss from continuing operations           持續經營虧損	(5,927)	(13,676)

Gain on deemed disposal              視作出售的收益	–	3,657

Other comprehensive income            其他全面收入	(815)	(2,155)

Total comprehensive income            全面收入總額	(6,742)	(12,174)

10.	貿易及其他應收款項

	2016
二零一六年	2015
二零一五年

HK$’000
千港元	HK$’000
千港元

Trade receivables, net                貿易應收款項淨額	8,237,903	7,702,999

Other receivables and prepayments         其他應收款項及預付款項	1,123,639	855,104

Deferred expenses (Note 16 (d))         遞延開支（附註16(d)）	10,875	9,795

	9,372,417	8,567,898

Less: Non-current deferred expenses        減：非即期遞延開支
(Note 16 (d))                （附註16(d)）	(4,792)	(3,884)

	9,367,625	8,564,014

# 10.	Trade and Other Receivables (continued)

The Group grants credit periods to third party customers ranging from 7 to 150 days, which may be extended for selected customers depending on their trade volume and settlement history with the Group. The ageing analysis of net trade receivables by invoice date is as follows:

10.	貿易及其他應收款項（續）

本集團給予第三方客戶之信貸期介乎7至150日，而選定客戶之信貸期可予延長，視乎彼等與本集團之交易量及付款記錄而定。貿易應收款項淨額按發票日期劃分的賬齡分析如下：

As at 31 December 2016, trade receivables of HK\$1,607,675,000 (2015: HK\$1,765,791,000), which were fully performing, were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables by due date is as follows:

於二零一六年十二月三十一日，已全部履行的貿易應收款項1,607,675,000港元（二零一五年：1,765,791,000港元）已逾期但未減值。該等款項與多名獨立客戶有關，彼等並無近期違約記錄。該等貿易應收款項按到期日劃分的賬齡分析如下：


# 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 – based on quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly

Level 3 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, construction contract assets, financial assets, investment properties and non-current assets/a disposal group classified as held for sale), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the statement of profit or loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.

An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the statement of profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

A party is considered to be related to the Group if:

# (a) the party is a person or a close member of that person’s family and that person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or of a parent of the Group;or

# (b) the party is an entity where any of the following conditions applies:

(i) the entity and the Group are members of the same group;

(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);

(iii) the entity and the Group are joint ventures of the same third party;

(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;

(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group; and the sponsoring employers of the post-employment benefit plan;

(vi) the entity is controlled or jointly controlled by a person identified in (a);

(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and

(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or the parent of the Group.


The final dividend distribution shall be calculated based on the total number of Shares in issue as of the Record Date and the final cash dividend distribution shall be based on RMB3.0 per 10 shares (inclusive of applicable tax). In order to qualify for the final dividend, the holders of H Shares must lodge all share certificates accompanied by the transfer documents with the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited (address: Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong) before 4:30 p.m. on Wednesday, June 2, 2021. For the purpose of ascertaining the holders of H Shares who qualify for the final dividend, the register of members for H Shares will be closed from Thursday, June 3, 2021 to Tuesday, June 8, 2021, both days inclusive, during which period no transfer of H Shares will be effected.

The final dividend will be denominated and declared in RMB. The holders of Domestic Shares will be paid in RMB and the holders of H Shares will be paid in Hong Kong dollars. The actual amount declared in HK dollars is converted based on the average benchmark exchange rate of Renminbi against HK dollars as promulgated by the People’s Bank of China for the five business days preceding the date of the AGM.

To the best of the Company’s knowledge, no shareholder has waived or agreed to waive any dividends.

In accordance with the Enterprise Income Tax Law of the People’s Republic of China (中華人民共和國企業所得稅法) and its implementation regulations which came into effect on January 1, 2008, the Company is required to withhold and pay enterprise income tax at the rate of 10% on behalf of the non-resident enterprise Shareholders whose names appear on the register of members for H Shares when distributing the cash dividends. Any H Shares not registered under the name of an individual Shareholder, including HKSCC Nominees Limited, other nominees, agents or trustees, or other organizations or groups, shall be deemed as Shares held by non-resident enterprise Shareholders. Therefore, on this basis, enterprise income tax shall be withheld from dividends payable to such Shareholders. If holders of H Shares intend to change its Shareholder status, please enquire about the relevant procedures with your agents or trustees. The Company will strictly comply with the law or the requirements of the relevant government authority and withhold and pay enterprise income tax on behalf of the relevant Shareholders based on the register of members for H Shares as of the Record Date.

If the individual holders of H Shares are Hong Kong or Macau residents or residents of the countries which had an agreed tax rate on 10% for the cash dividends to them with the PRC under the relevant tax agreement, the Company should withhold and pay individual income tax on behalf of the relevant Shareholders at a rate of 10%. Should the individual holders of H Shares be residents of the countries which had an agreed tax rate of less than 10% with the PRC under the relevant tax agreement, the Company shall withhold and pay individual income tax on behalf of the relevant Shareholders at a rate of 10%. In that case, if the relevant individual holders of H Shares wish to reclaim the extra amount withheld due to the application of 10% tax rate, the Company can apply for the relevant agreed preferential tax treatment provided that the relevant Shareholders submit the evidence required by the notice of the tax agreement to Computershare Hong Kong Investor Services Limited. The Company will assist with the tax refund after the approval of the competent tax authority. Should the individual holders of H Shares be residents of the countries which had an agreed tax rate of over 10% but less than 20% with the PRC under the tax agreement, the Company shall withhold and pay the individual income tax at the agreed actual rate in accordance with the relevant tax agreement. In the case that the individual holders of H Shares are residents of the countries which had an agreed tax rate of 20% with the PRC, or which has not entered into any tax agreement with the PRC, or otherwise, the Company shall withhold and pay the individual income tax at a rate of 20%.

The Company is not aware of any tax relief or exemption available to the Shareholders of the Company by reason of their holding of the Company’s securities.

Details of the movements in the share capital of the Company during the year are set out in note 38 to the consolidated financial statements.

Details of movements in the reserves of the Group and the Company during the year are set out in the consolidated statement of changes in equity and note 40 and note 50 to the consolidated financial statements, respectively.

As at December 31, 2020, the Company ’s distributable reserves, calculated in accordance with PRC rules and regulations, were RMB1,630.9 million.

The Directors and Supervisors during the year and as of the date of this annual report are as follows:

Ms. LI Lihua (李麗華) (ceased on July 23, 2020)

Ms. SHEN Rong (沈蓉) (ceased on July 23, 2020)

Mr. Yu Jian (余堅) (appointed on July 23, 2020)

Mr. LIU Jun (劉駿)  (ceased on December 11, 2020)

Ms. Feng Shu (馮書)  (appointed on December 11, 2020)

Biographical details of the Directors, the Supervisors and the senior management of the Group as of the date of this annual report are set out on pages 40 to 48 in the section headed “Profiles of Directors, Supervisors and Senior Management” of this annual report.

# DIRECTORS’ AND SUPERVISORS’ INTERESTS IN TRANSACTION, ARRANGEMENT OR CONTRACTS OF SIGNIFICANCE

The Group has not entered into any transaction agreement or contract of significant in which the Group’s Directors and Supervisors have direct or indirect material interests during the Reporting Period.

# CONTROLLING SHAREHOLDERS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE

None of the Controlling Shareholders has or had a material interest, either directly or indirectly, in any contract of significance, whether for the provision of services or otherwise, to the business of the Group to which the Company or any of its subsidiaries was a party during the Reporting Period.

# DIRECTORS’ INTERESTS IN COMPETING BUSINESS

During the Reporting Period, none of the Directors or their respective associates (as defined under the Listing Rules) had engaged in or had any interest in any business which competes or may compete, either directly or indirectly, with the business of the Group.

# EMOLUMENTS OF THE DIRECTORS AND THE FIVE HIGHEST PAID INDIVIDUALS

The remuneration committee determines or makes recommendation to the Board (as case may be) on the remuneration and other benefits payable to the Directors and Supervisors by the Group. The committee regularly oversees the remuneration of all Directors and Supervisors to ensure that their remuneration and compensation are at an appropriate level. The Group maintains competitive remuneration packages with reference to the industry standard and according to the business development of the Group, and determines remuneration of the Directors and Supervisors based on their qualifications, experience and contributions, to attract and retain its Directors and Supervisors as well as to control costs.


The fair values of share options granted were calculated using the Black-Scholes option pricing model for the years ended 31 December 2016 and 2015. The inputs into the model were as follows:

49. 購股權計劃（續）

(b) 購股權計劃（續）

於截至二零一六年及二零一五年十二月三十一日止年度內，已授出購股權之公平值乃使用伯力克－舒爾茲期權定價模式計算。輸入該模式之數據如下：

	11 December
2014
二零一四年
十二月十一日	8 June 2015
二零一五年
六月八日	11 December
2015
二零一五年
十二月十一日	5 July
2016
二零一六年
七月五日	8 November
2016
二零一六年
十一月八日	12 December
2016
二零一六年
十二月十二日

Exercise price        行使價	HK$1.814港元	HK$2.13港元	HK$3.37港元	HK$3.49港元	HK$0.98港元	HK$0.786港元

Adjusted exercise price    經調整行使價	HK$0.3628港元	HK$0.426港元	HK$0.674港元	HK$0.698港元	N/A不適用	N/A不適用

Expected volatility      預期波幅	41.71%-42.35%	44.45%-49.47%	48.48%-50.96%	30.23%-50.51%	38.61%-52.79%	44.32%-53.52%

Expected life         預期年期	2-5 years年	2-5 years年	2-4 years年	2.5-10 years年	10 years年	10 years年

Expected dividend yield   預期股息收益	0.676%	0.219%	0.287%	0.264%	0.164%	0.215%

Risk-free rate        無風險利率	0.43%-1.237%	0.48%-1.31%	0.404%-0.895%	0.42%-0.93%	1.12%	1.57%

Expected volatility of the options granted under the Pre-IPO Share Option Scheme and Share Option Scheme was determined by using the historical volatility of the share price of comparable companies and the Company respectively. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.

The Group recognised the total expenses of approximately RMB109,986,000 for the year ended 31 December 2016 (2015: RMB43,999,000) in relation to share options granted by the Company.

In the opinion of directors, regarding the share option granted to Company’s consultants, the fair value of the service rendered by consultants cannot reliably measured because the nature of services rendered by them includes but not limit to build up investors relationships, enhance corporate strategy and branding etc., which may not have a quantifiable and measurable effect for assessment. Thus, the fair value of the service rendered is by reference to the fair value of share option granted to them and recognised in profit or loss for the years ended 31 December 2016 and 2015 accordingly.

根據首次公開發售前購股權計劃及購股權計劃授出之購股權之預期波幅乃分別採用可資比較公司及本公司之股價之過往波幅而釐定。該模式所採用之預期年期已根據管理層之最佳估計就不可轉讓性、行使限制及行為因素作出調整。

本集團於截至二零一六年十二月三十一日止年度就本公司授出之購股權確認開支總額約人民幣109,986,000元（二零一五年：人民幣43,999,000元）。

董事認為，就本公司顧問獲授之購股權而言，顧問提供服務之公平值無法可靠計量，原因為其提供服務之性質包括但不限於建立投資者關係，提升企業策略及品牌等，其可能並無可量化及可計量之效果以供評估。因此，所提供服務之公平值乃參考彼等獲授購股權之公平值釐定，並相應於截至二零一六年及二零一五年十二月三十一日止年度之損益表確認。

# 50. INFORMATION ABOUT THE STATEMENT OF FINANCIAL POSITION OF THE COMPANY

Statement of financial position of the Company at the end of the reporting period is as follows:

50. 有關本公司之財務狀況表之資料

於報告期末本公司之財務狀況表如下：

		As at 31 December
於十二月三十一日

		2016
二零一六年	2015
二零一五年

	Notes
附註	RMB’000
人民幣千元	RMB’000
人民幣千元

Non-current asset          非流動資產
Investments in subsidiaries       於附屬公司之投資	a	–	–

Current assets            流動資產

Prepayments and other receivables   預付賬款及
其他應收款項		1,246	521

Amounts due from subsidiaries     應收附屬公司款項	c	5,716,177	2,384,963

Amounts due from joint ventures    應收合營企業款項	c	9,981	8,629

Held-for trading securities       持作買賣證券		20,902	–

Bank balances and cash        銀行結餘及現金		171,721	83,396

		5,920,027	2,477,509

Current liabilities           流動負債

Accruals               應計費用		8,266	6,313

Amounts due to subsidiaries      應付附屬公司款項	c	230,654	105,306

Amount due to a related company   應付一間

關連公司款項	d	–	395

Corporate bonds           公司債券		–	173,719

		238,920	285,733

Net current assets          流動資產淨值		5,681,107	2,191,776

Total assets less current liabilities 總資產減流動負債		5,681,107	2,191,776

Non-current liabilities        非流動負債

Borrowings              借貸		542,576	–

Corporate bonds           公司債券		65,265	60,044

Convertible bonds           可換股債券		1,393,172	234,098

		2,001,013	294,142

Net assets              資產淨值		3,680,094	1,897,634

Capital and reserves         資本及儲備

Share Capital             股本		358,259	321,642

Reserves               儲備	b	3,321,835	1,575,992

Total equity             權益總額		3,680,094	1,897,634


Property Valuers	 Beijing Colliers International Real Estate Valuation
Co., Ltd.

Suite 501, Tower W3
Oriental Plaza
No.1 East Chan’gan Avenue
Dongcheng District
Beijing, China, 100738

Cushman & Wakefield K.K.

Sanno Park Tower 13F 2-11-1N agatacho
2-11-1N agatacho
Chiyoda-ku, Tokyo, 100-6113
Japan

CBRE Limited

3/F, 4/F & 12/F 1204-06 (Reception)
Three Exchange Square
8 Connauhgt Place
Central, Hong Kong

Industry Consultant	 Jones Lang LaSalle Limited

7/F, One Taikoo Place
979 Kin’gs Road, QuarrBy ay
Hong Kong

Receiving Bank	 Standard Chartered Bank (Hong Kong) Limited

15th Floor, Standard Chartered Tower
388 Kwun Tong Road
Kwun Tong, Kowloon
Hong Kong

Compliance Advisor	 Octal Caidptal Limite

Room 801-805N an Fung Tower
173 Des Voeux Road, Central
Hong Kong

Reigstered office	c/o Walkers Corporate Limited

Cayman Corporate Centre
27 Hosiptal Road, George Town
Grand Cayman, KY1-9008
Cayman Islands

Headquarters and principal
place of business in Hong Kong	2406-07 Man Yee Building
68 Des Voeux Road, Central
Hong Kong

Com’paniys webste	www.esr.com

(The contents on this website do not formp art of this
Prospectus)

Company Secretary	Mr. Richard Kin-sing Lee (李建成) (HonKg ongs olicitor)

2406-07, Man Yee Building
68 Des Voeux Road Central
Hong Kong

Authorized Representatives	Mr. Jinchu Shen (沈晉初)

Room B, 62/F., Block 1
Harbourfront Landmark
No. 11 Wan Hoi Street, Hung Hom
Hong Kong

Mr. Richard Kin-sing Lee (李建成)

2406-07, Man Yee Building
68 Des Voeux Road Central
Hong Kong

Audit Committee	Mr. Simon James McDonald (Chairman)

Mr. JosehGp Radymon agnon

Mr. Brett Harold Krause

Nomination Committee	The Rihgt Honorable Sir HuGgo eorge William Swire,
KCMG, MP (Chairman)

Mr. Brett Harold Krause

Ms. Liu Jingsheng (劉京生)

Remuneration Committee	Mr. Brett Harold Krause (Chairman)

Mr. Jeffrey David Perlman

Mr. Simon James McDonald

Principal share reigstrar and
transfer office	Walkers Corporate Limited

27 Hosidptal Roa, GeorTge own
Grand Cayman, KY1-9008
Cayman Islands


# Long position in the shares and underlying shares of the Company

Name of Director	Number of issued
ordinary shares/
underliyng shares
of the Company
Personal interests	Total	Percentage
of the issue
shares caiptal
of the Company

Ms. Tsui Tsz Fa Mabel

– Unlisted share options	8,000,000	8,000,000	1%

Ms. Liu Taniyng

– Unlisted share options	8,000,000	8,000,000	1%

Save as disclosed above, none of the Directors nor chief executive of the Company has registered an interest or short positions in the Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules.

# INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS IN THE SHARES AND UNDERLYING SHARES OF THE COMPANY

As at 31 January 2020, the Company had not been notified by any persons who had interests or short positions in the shares or underlying shares of the Company which were recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO or which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO.

Our Directors and their respective close associates confirm that each of them does not have any interest in a business apart from our Group’s business which competes or is likely to compete, directly or indirectly, with our Group’s business, and is required to be disclosed pursuant to Rule 11.04 of the GEM Listing Rules during the nine months ended 31 January 2020.

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

During the nine months ended 31 January 2020 and up to the date of this announcement, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s listed securities.

# CODE OF CONDUCT REGARDING SECURITIES TRANSACTIONS BY DIRECTORS

The Group has adopted a code of conduct regarding securities transactions by the Directors (the “Code of Conduct”) on terms no less exacting than the required standards of dealings set out in Rules 5.48 to 5.67 of the GEM Listing Rules. Having made specific enquiries with the Directors, all Directors have confirmed that they have complied with the required standards set out in the Code of Conduct during the nine months ended 31 January 2020 and up to the date of this announcement.

The Board does not recommend a payment of an interim dividend for the nine months ended 31 January 2020 (2019: nil).

Save as disclosed, up to the date of this announcement, there was no significant event after the Reporting Period of the Group.

The Company has conditionally adopted a share option scheme on 26 September 2016 (the “Scheme”). The terms of the Scheme are in accordance with the provisions of Chapter 23 of the GEM Listing Rules.

Details of the options outstanding for the nine months ended 31 January 2020 are as follows:

Grantees	Date of grant	No. of shares comprised in options	Exercise
price
per share

As at
1 May 2019	Granted
during
the period	Exercised
during
the period	Lapsed
during
the period	As at
31 January
 2020

Executive director

Ms. Tsui Tsz Fa Mabel	30 May 2019	–	8,000,000	–	–	8,000,000	HK$0.066

Ms. Liu Taniyng	30 May 2019	–	8,000,000	–	–	8,000,000	HK$0.066

Other Grantees	30 May 2019	–	16,000,000	–	–	16,000,000	HK$0.066

	Total	–	32,000,000	–	–	32,000,000


The forecast combined profit attributable to equity holders of the Company for the year ending 31 December 2010 is set out in the section headed ‘‘Financial Information’’ in this prospectus.

The Directors have prepared the forecast of combined profit attributable to equity holders of the Company for the year ending 31 December 2010 on the basis of the audited combined results of the Group for the six months ended 30 June 2010, the unaudited combined results of the Group for the three months ended 30 September 2010 and a forecast of the combined results of the Group for the remaining three months ending 31 December 2010. The forecast has been prepared on a basis consistent in all material respects with the accounting policies currently adopted by the Group as summarised in Appendix I to the prospectus.

The forecast has been prepared based on the following principal assumptions:

• there will be no material change in existing political, legal, fiscal, market or economic conditions in the PRC or any other country or territory in which the Group currently operates or which are otherwise material to the Group’s business;

• there will be no changes in legislation, regulations or rules in the PRC or any other country or territory in which the Group operates or with which the Group has arrangements or agreements, which materially adversely affect its business;

• there will be no material change in the bases or rates of taxation in the PRC or any other country or territory in which the Group operates;

• there will be no material changes in inflation rates, interest rates or foreign currency exchange rates from those currently prevailing;

• our operations will not be materially affected or interrupted by any force majeure events or unforeseeable factors or any unforeseeable reasons that are beyond the control of the Directors, including but not limited to the occurrence of natural disasters, epidemics or serious accidents; and

• the Group’s operations, results, and financial position will not be adversely affected by the risk factors described under the ‘‘Risk Factors’’ section of the Prospectus.

# C. LETTER FROM THE REPORTING ACCOUNTANTS

The following is the text of the letter received by the directors from our reporting accountants, KPMG, Certified Public Accountants, Hong Kong, prepared for the purpose of incorporation in this prospectus in connection with the profit forecast for the year ending 31 December 2010.

J.P. Morgan Securities (Asia Pacific) Limited

We have reviewed, in accordance with the Auditing Guideline 3.341 “Accountants’ report on profit forecasts” issued by the Hong Kong Institute of Certified Public Accountants, the accounting policies adopted and calculations made in arriving at the forecast of the combined profit attributable to equity holders of China ZhengTong Auto Services Holdings Limited (“the Company”) for the year ending 31 December 2010 (“the Profit Forecast”), for which the directors of the Company are solely responsible, as set forth in the section headed “Financial Information” in the prospectus of the Company dated 29 November 2010 (“the Prospectus”).

The Profit Forecast has been prepared by the directors of the Company based on the audited combined financial statements of the Company and its subsidiaries (collectively referred to as “the Group”) for the six months ended 30 June 2010, the unaudited combined management accounts of the Group for the three months ended 30 September 2010 and a forecast of the combined results of the Group for the remaining three months ending 31 December 2010.

In our opinion, so far as the accounting policies and calculations are concerned, the Profit Forecast has been properly compiled in accordance with the assumptions made by the directors as set out in Appendix III of the Prospectus and is presented on a basis consistent in all material respects with the accounting policies normally adopted by the Group as set out in our Accountants’ Report dated 29 November 2010, the text of which is set out in Appendix I to the Prospectus.


The Covid-19 pandemic since early 2020 has brought about additional uncertainties in the Group’s operating environment and has impacted the Group’s operation and financial position.

The Group has been closely monitoring the impact of the developments on the Group’s business and has put in place contingency measures. These contingency measures include: reassessing changes to the customers’ preferences on the types of drama series to be broadcasted, assessing the readiness of the production units and revisiting the progress of self-produced drama series, negotiating with customers on possible delay in delivery timetables, increase monitoring of the business environment of the Group’s customers, and improving the Group’s cash management by expediting debtor settlements and negotiating with suppliers on payment extensions.

The Covid-19 pandemic did have a significant impact on the Group’s operation and capital position, but did not change the fundamentals of the Group’s ability to continue as a going concern. The Group now has strengthened the recovery of receivables, increased the issuance of drama series and films, and adjusted the drama and films reserves. The Group will keep the contingency measures under review as the situation evolves.

# 31 Non-adjusting events after the reporting period

On 5 January 2021, the Company and Jinbi Market (Hong Kong) Limited (the “Subscriber”) entered into a subscription agreement (the “Subscription Agreement”), pursuant to which the Company has conditionally agreed to allot and issue, and the Subscriber has conditionally agreed to subscribe, for an aggregate of 101,137,134 new shares at the Subscription price of HKD0.156 per subscription share, which in aggregate amount to a total of approximately HKD15,777,000. All the conditions have been fulfilled and the completion took place on 19 January 2021 in accordance with the terms and conditions of the Subscription Agreement. The net proceeds of the Subscription are approximately HKD15,730,000. Further to completion of the Subscription, the adjusted conversion price of the outstanding convertible bonds was further adjusted to HKD0.156 per conversion share.

On 26 February 2021, convertible bonds with entire principal amount of HKD20,000,000 held by BeiTai were converted into 128,205,128 shares at the adjusted conversion price of HKD0.156 per conversion share.

On 26 February 2021, the Company announced to redeem the convertible bonds in the aggregate principal amount of HKD50,000,000 held by the Original Bondholder, leaving the convertible bonds in the aggregate principal amount of HKD50,000,000 remain outstanding after the partial redemption. On 24 March 2021, the Company further announced that the Company received a notice from Original Bondholder confirming potential extension and potential transfer of the outstanding convertible bonds, with terms subject to the entering into of a legally binding agreement between the relevant parties.

Certain comparative figures have been adjusted to conform with the current year’s presentation.

# 33 Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended 31 December 2020

Up to the date of issue of these financial statements, the IASB has issued a number of amendments, and a new standard, IFRS 17, Insurance contracts, which are not yet effective for the year ended 31 December 2020 and which have not been adopted in these financial statements. These developments include the following which may be relevant to the Group.

	Effective for
accounting
periods beginning
on or after

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16,
Interest Rate Benchmark Reform-Phase 2	1 January 2021

Amendments to IFRS 3, Reference to the Conceptual Framework	1 January 2022

Amendments to IAS 16, Property, Plant and Equipment: Proceeds before Intended Use	1 January 2022

Amendments to IAS 37, Onerous Contracts – Cost of Fulfilling a Contract	1 January 2022

Annual Improvements to IFRSs 2018-2020 Cycle	1 January 2022

Amendments to IAS 1, Classification of Liabilities as Current or Non-current	1 January 2023

IFRS 17, Insurance contracts	1 January 2023

Amendments to IFRS 10 and IAS 28, Sale or contribution of assets between
an investor and its associate or joint venture	To be determined

The Group is in the process of making an assessment of what the impact of these developments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the consolidated financial statements.


# V. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

Employee compensation includes short-term compensation, and after-service benefits, termination benefits and other long-term employee benefits provided in various forms of consideration other than share-based payment given by the Group in exchange for service rendered by employees or compensations for the termination of employment relationship. The benefits that the Group provides to the spouse, children and dependents of the employees, the late employees’ family and other beneficiaries also shall be deemed as employee benefits.

# (1). Accounting methods for short-term remuneration

During an accounting period when employees render services, short-term remuneration actually incurred are recognised as a liability, and charged to profit or loss or in related costs of assets for the current period.

# Post-employment benefits (defined contribution plan)

If employees of the Group participate in the basic pension insurance and unemployment insurance plans managed by local governments, the relevant expenditures are recorded in the relevant asset costs or profit or loss for the current period when incurred. In addition, the Group provides an annuity plan for its eligible employees in accordance with the Labour Law. The Group’ s withdrawals and deposits for its employees are calculated based on a certain percentage of the total salary of the employees and the length of service.

In addition to the above-mentioned benefit plans, the Group provides supplementary retirement benefits to its retired employees. These plans include monthly pension benefits, medical reimbursement benefits, annual medical insurance premiums and funeral benefits for employees after their retirement. The amount of the subsidies is determined based on the period during which the employee serves the Group and the relevant subsidy benefit policy.

These benefit plans beyond the scope of overall planning are considered to be based on a defined benefit plan. The defined benefit plan is calculated annually by an independent actuary using the projected unit credit method. The present value of the defined benefit obligations determined at the market yield of the government bonds during the defined benefit obligation period, and discounted over estimated future cash outflow. If there is an asset in the defined benefit plan, the present value of the defined benefit obligation minus the fair value of the asset of the defined benefit plan will be recognised as the net liability or net asset of the defined benefit plan. The change in the net liability or net asset of the defined benefit plan is divided into three parts: service cost, net interest on the net liability or net asset of the defined benefit plan, and changes due to re-measurement of net liability or net asset of the defined benefit plan included in other comprehensive income.

# (2). Accounting methods for post-employment benefits (Continued)

# Post-employment benefits (defined benefit plans) (Continued)

Any remeasurement caused by the defined benefit plans, including actuarial gains or losses, changes in the impact of the asset cap (net of the amounts included in the net interest on the net liability of the defined benefit plan) and return on the asset in the plan (net of the amounts included in the net interest on the net liability of the defined benefit plan) are recognised in the balance sheet immediately and recorded in shareholders’ equity through other comprehensive income in the accounting period the re-measurement occurred, and shall not be reversed to profit or loss in the subsequent accounting periods.

The previous service costs should be recognised as current expenses at the earlier of the following dates: when the Group modifies the defined benefit plans; and when the Group recognises relevant restructuring costs or termination benefits.

Net interest equals to the net liability or net asset in defined benefit plan multiply by the discount rate. The Group recognised changes in the net defined benefit plan obligation as management expenses in the statement of profit. Those changes include service costs, including current service costs, previous service costs and gains and losses on settlement, and net interest, including the interest income of the asset in the plan, interest expenses of the obligation under the plan and interest of the impact of the asset cap.


# Aluminum Extrusion Consumption in the PRC Transportation Industry

Transportation is one of the fastest growing market segments for aluminum extrusion products in China.

Driven by the rapid development of the transportation industry and the continuous technological advances in means of transportation, aluminum extrusion products are expected to enjoy increasingly wide applications in railway and metropolitan railway, automotive, shipbuilding, aviation and other transportation sectors.

Aluminum extrusion consumption in the PRC transportation industry, 2001-2010E(1)

(1) The estimated figures for 2008 to 2010 do not takei nto consideration thel arge fiscal stimulus packages announced by the PRC government.

However, aluminum extrusion consumption in the transportation industry in 2007 was still relatively low at approximately 8.6% of total China’s aluminum extrusion consumption compared to those of North America, Europe and Japan at approximately 27%, 18% and 15%, respectively.

In 2007, the transportation industry consumed approximately 510,000 tons, representing a CAGR of approximately 26.4% as compared to approximately 125,000 tons in 2001. It is estimated that demand for aluminum extrusion products in the PRC transportation industry will increase to approximately 747,000 tons in 2010, representing a CAGR of approximately 13.6% compared to approximately 510,000 tons in 2007.

According to the MOR, China’s total railway network operating length was approximately 78,000 kilometers as of the end of 2007, making it the longest in Asia and the third longest in the world. However, this network is still not sufficient to meet the demands placed on it given the size of the population, the scale and growth of the economy of the PRC and the popularity of railway transportation as a medium of transport.

To address the lagging investment in the railway industry in recent years, the PRC government announced the Eleventh Five-year Plan in 2006, which included an aggressive investment and expansion plan for railways in the PRC. The plan calls for a total investment of approximately RMB1.25 trillion to develop the PRC railway network and to purchase railway-related equipment in the period between 2006 and 2010, which is almost four times the corresponding amount budgeted under the Tenth Five-year Plan. According to a spokesman of the MOR, by October 2008, the total amount of investment in the PRC railway network approved by the State Council of the PRC has reached RMB2.0 trillion, of which over RMB1.2 trillion is related to investment in projects under construction. The MOR estimates that the total amount of investment in the PRC railway network will reach RMB5.0 trillion by 2020.

The following charts set forth certain historical data relating to the PRC railway industry and certain estimates based on the Eleventh Five-year Plan and the Mid- to Long-term Railway Network Development Plan.

Operating Length of Electrified Railways in PRC

Operating Length of Double Tracked Railways in PRC