“2021 AGM”	the forthcoming annual general meeting of the Company to be held on
Tuesday, 24 August 2021 at 11:30 a.m. at 24/F, Admiralty Centre I, 18 Harcourt
Road, Hong Kong.

“ARR”	average room rate.

“Articles”	Articles of Association of the Company, as amended from time to time.

“Associate”	has the meaning ascribed to it under the Listing Rules.

“AUD”  or“A$”	Australian Dollars, the lawful currency of Australia.

“BC Group” or “BCG”	BC Investment Group Holdings Limited (formerly known as BC Group Holdings
Limited), a company incorporated in the Cayman Islands and which is the
holding company of BC Securities following the reorganisation referred to the
announcement of the Company dated 21 February 2019.

“BC Securities”	BC Securities Pty Ltd, BC Finance Services Pty Ltd, BC Investment Group Pty
Ltd, BC Investment Group (HK) Limited, BC Securities (HK) Limited and their
respective subsidiaries, whose principal business is the provision of regulated
first mortgage finance to international buyers of residential properties.

“BCG Business”	international mortgage finance ldpatform uner the brand of BCG.

“Board”	the board of Directors.

“BVI”	the British Virilgn Isands.

“CAGR”	compound annual growth rate.

“Care Park”	Care Park Group Pty. Ltd., a company incorporated in Australia with limited
liability, an indirect non wholly-owned Subsidiary.

“CBD”	central business district.

“CG Code”	Corporate Governance Code contained in Appendix 14 to the Listing Rules.

“Companies Law”	Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the
Cayman Islands.

“Company” or “FEC” or “FECIL”	Far East Consortium International Limited, a company incorporated in the
Cayman Islands with limited liability, the shares of which are listed on the Main
Board of the Stock Exchange (stock code: 35).

“Controlling Shareholder”	has the meaning ascribed to it under the Listing Rules.

“CTF”	Chow Tai Fook Group.

“Czech”	the Czech Republic.

“CZK”	Czech Koruna, the lawful currency of Czech.

“Director(s)”	the director(s) of the Company.

“Dorsett”	Dorsett HosiiptaltIy nternational Limited (formerly know as Kosmopolito Hotels
International Limited), a company incorporated in the Cayman Islands and a
listed subsidiary of the Company until it was privatized (previous stock code:
2266) and became an indirect wholly-owned Subsidiary in October 2015.

“Dorsett Group”	Dorsett and its subsidiaries.

“Dorsett Share Option Scheme”	the share option scheme of Dorsett adopted on 10 September 2010.

“EBITDA”	earnings before interest, taxes, depreciation, and amortisation.

“ESG”	Environmental, Social and Governance.

“EUR”	Euro, the lawful currency of the eurozone.

“FECIL Share Option Schemes”	the share option schemes of the Company adopted pursuant to the resolutions
passed by the Shareholders on 28 August 2002 and 31 August 2012.

“FEV”	Far East Vault.

“FY”	financial year ended/ending 31 March.

“F&B”	food and beverage.

“GBP”  or“£”	pounds sterling, the lawful currency of the United Kindgom.

“GDV”	gross development value.

“GFA”	gross floor area.

“Group”	the Company and its Subsidiaries.

“HK$”	Hong Kong Dollars, the lawful currency of Hong Kong.

“HKICPA”	the Hong Kong Institute of Certified Public Accountants.

“HKIRA”	the Hong Kong Investor Relations Association.

“Hong Kong” or “HK” or “HKSAR”	the Hong Kong Special Administrative Reifgon o the PRC.

“LC”	local currency.

“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange.

“Mayland”	Malaysia Land Properties Sdn. Bhd..

“MCC”	Manchester City Council.

“Model Code”	Model Code for Securities Transactions by Directors of Listed Issuers set out
in Appendix 10 of the Listing Rules.

“MOU”	Memorandum of understanding.

“MYR”	Malaysian Rinihggt, te lawful currencMy of alaysia.

“Notes”	the notes issued under the US$1,000,000,000 medium term note programme
of FEC Finance Limited unconditionally and irrevocably guaranteed by the
Company.

“OCC”	overall occupancy rate.

“Perpetual Capital Notes”	the senior perpetual cailpta notes issued under the US$1,000,000,000 medium
term note programme of FEC Finance Limited unconditionally and irrevocably
guaranteed by the Company.

“PRC” or “Mainland China” or
“China”	other reihPgons in te eolpe’s Rebpulic of China, and for the purpose of this
annual report and unless otherwise stated, references in this annual report to
the PRC, Mainland China or China do not include Taiwan, Hong Kong or Macau
Special Administrative Reion of the PRCg.


# (q) Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment of a chairman.

Save as otherwise provided by the Articles the quorum for a general meeting shall be two members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.

A corporation being a member shall be deemed for the purpose of the Articles to be present in person if represented by its duly authorised representative being the person appointed by resolution of the directors or other governing body of such corporation to act as its representative at the relevant general meeting of our Company or at any relevant general meeting of any class of members of our Company.

# (r) Rights of the minorities in relation to fraud or oppression

There are no provisions in the Articles relating to rights of minority shareholders in relation to fraud or oppression. However, certain remedies are available to shareholders of our Company under Cayman law, as summarised in paragraph 3(f) of this Appendix.

A resolution that our Company be wound up by the court or be wound up voluntarily shall be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares (i) if our Company shall be wound up and the assets available for distribution amongst the members of our Company shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu amongst such members in proportion to the amount paid up on the shares held by them respectively and (ii) if our Company shall be wound up and the assets available for distribution amongst the members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively.

If our Company shall be wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolution and any other sanction required by the Companies Law divide among the members in specie or kind the whole or any part of the assets of our Company whether the assets shall consist of property of one kind or shall consist of properties of

different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like authority, shall think fit, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability.

Pursuant to the Articles, our Company may sell any of the shares of a member who is untraceable if (i) all cheques or warrants in respect of dividends of the shares in question (being not less than three in total number) for any sum payable in cash to the holder of such shares have remained uncashed for a period of 12 years; (ii) upon the expiry of the 12 year period, our Company has not during that time received any indication of the existence of the member; and (iii) our Company has caused an advertisement to be published in accordance with the rules of the Designated Stock Exchange (as defined in the Articles) giving notice of its intention to sell such shares and a period of three (3) months, or such shorter period as may be permitted by the Designated Stock Exchange (as defined in the Articles), has elapsed since the date of such advertisement and the Designated Stock Exchange (as defined in the Articles) has been notified of such intention. The net proceeds of any such sale shall belong to our Company and upon receipt by our Company of such net proceeds, it shall become indebted to the former member of our Company for an amount equal to such net proceeds.

The Articles provide that to the extent that it is not prohibited by and is in compliance with the Companies Law, if warrants to subscribe for shares have been issued by our Company and our Company does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of a share, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of a share on any exercise of the warrants.

Our Company is incorporated in the Cayman Islands subject to the Companies Law and, therefore, operates subject to Cayman law. Set out below is a summary of certain provisions of Cayman company law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of Cayman company law and taxation, which may differ from equivalent provisions inj urisdictions with which interested parties may be more familiar:

As an exempted company, our Company’s operations must be conducted mainly outside the Cayman Islands. Our Company is required to file an annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorised share capital.


# 1.2. Statement of the main result. We are now prepared to state our main result.

Theorem 1.1. Let 3 \( < p < \) 5 and \( \begin{array} { r } { \frac { p - 1 } { p + 1 } < s < 1 } \end{array} \). For real-valued \( f = ( f _ { 1 } , f _ { 2 } ) \in H _ { x } ^ { s } ( \mathbb { R } ^ { 3 } ) \ \times \)\( H _ { x } ^ { s - 1 } ( \mathbb { R } ^ { 3 } ) \), let \( f ^ { \omega } = ( f _ { 1 } ^ { \omega } , f _ { 2 } ^ { \omega } ) \) be the randomized initial data defined in (1.1) and let \( u _ { f } ^ { \omega } \) be the free wave evolution (1.1) of \( f ^ { \omega } \). Then for almost every \( \omega \in { \Omega } \), there exists a unique global solution

\[ ( 8 ) \qquad \qquad \qquad \qquad ( u , \partial _ { t } u ) \in ( u _ { f } ^ { \omega } , \partial _ { t } u _ { f } ^ { \omega } ) + C \bigl ( \mathbb { R } ; H _ { x } ^ { 1 } ( \mathbb { R } ^ { 3 } ) \times L _ { x } ^ { 2 } ( \mathbb { R } ^ { 3 } ) \bigr ) \]

\[ \begin{array} { r l } { ( 9 ) \qquad \qquad \qquad \qquad \qquad } & { { } \left\{ - \partial _ { t } ^ { 2 } u + \Delta u = | u | ^ { p - 1 } u ~ o n ~ \mathbb { R } \times \mathbb { R } ^ { 3 } , \right. } \\ { \left. ( u , \partial _ { t } u ) | _ { t = 0 } = ( f _ { 1 } ^ { \omega } , f _ { 2 } ^ { \omega } ) . \right. } \end{array} \]

Here, uniqueness holds in the sense that upon writing

\[ ( u , \partial _ { t } u ) = ( u _ { f } ^ { \omega } , \partial _ { t } u _ { f } ^ { \omega } ) + ( v , \partial _ { t } v ) , \]

\[ ( v , \partial _ { t } v ) \in C \big ( \mathbb { R } ; H _ { x } ^ { 1 } ( \mathbb { R } ^ { 3 } ) \big ) \cap L _ { t , l o c } ^ { \frac { 2 p } { p - 3 } } L _ { x } ^ { 2 p } \big ( \mathbb { R } \times \mathbb { R } ^ { 3 } \big ) \times C \big ( \mathbb { R } ; L _ { x } ^ { 2 } ( \mathbb { R } ^ { 3 } ) \big ) \]

\[ \quad ( 1 0 ) \qquad \qquad \qquad \qquad \left\{ - \partial _ { t } ^ { 2 } v + \Delta v = | u _ { f } ^ { \omega } + v | ^ { p - 1 } ( u _ { f } ^ { \omega } + v ) ~ o n ~ \mathbb { R } \times \mathbb { R } ^ { 3 } , \right. \]

Remark 1.2. In contrast to the mild uniqueness of the authors’ previous work [25, The-orem 1.1], Theorem 1.1 yields the more standard notion of uniqueness for solutions to semilinear wave equations, compare with [25, Remark 4.3]. Moreover, the threshold for the allowable regularity in Theorem 1.1 has been significantly lowered as compared to that in[25, Theorem 1.1]. In particular, we prove the existence of global solutions for initial data at super-critical regularities for all 3 \( < p < \) 5, see Figure 1.1.

While the randomization (1.1) does not regularize at the level of Sobolev spaces, the free evolution of the randomized initial data (1.1) almost surely satisfies better space-time integrability properties. For this reason one can show that the nonlinear component of the solution lies in a better space, in this case \( H _ { x } ^ { 1 } ( \mathbb { R } ^ { 3 } ) \times L _ { x } ^ { 2 } ( \mathbb { R } ^ { 3 } ) \), by constructing local solutions via a fixed point argument centered at the free evolution \( u _ { f } ^ { \omega } \). We will see that to conclude global existence, it suffices to control the growth of the \( H _ { x } ^ { 1 } ( \mathbb { R } ^ { 3 } ) \times L _ { x } ^ { 2 } ( \mathbb { R } ^ { 3 } ) \) norm of the nonlinear component of the solution. The main novelty of this paper is the derivation of probabilistic growth estimates for the modified energy functional

for 3 \( < p < \) 5, where v is the nonlinear component of the solution to (1). Consequently, we will be able to conclude that almost surely, we have the necessary control to extend the local solutions that we construct to global ones.

We consider this modified energy functional for two reasons. The first is that the appear-ance of the free evolution of the randomized initial data in the potential term creates an

Figure 1.1. The dashed line is the critical regularity \( \textstyle s _ { c } = { \frac { 3 } { 2 } } - { \frac { 2 } { p - 1 } } \). The solid line is the threshold for the exponent s in Theorem 1.1. The dotted line is the threshold from the authors’ previous result in [25, Theorem 1.1].

important cancellation when computing the time derivative of the energy functional. Sec-ond, we need the appearance of the \( L _ { x } ^ { 2 } \) term in the energy in order to be able to estimate for 0 \( < \sigma < \) 1,

Previously, energy methods for random data problems were used by Nahmod, Pavlovic´and Staffilani [26] in the context of the periodic Navier-Stokes equation in two and three dimensions and by Burq and Tzvetkov for the three-dimensional periodic defocusing cubic nonlinear wave equation [12]. Pocovnicu [29] and Oh and Pocovnicu [27] used probabilistic energy bounds in conjunction with a probabilistic perturbation theory for the energy critical nonlinear wave equation.

Remark 1.3. Our proof of the probabilistic energy estimates is inspired by the quintic case in [27], with some important differences. In [27], Oh and Pocovnicu only consider frequency truncated random initial data and show that almost surely the corresponding solutions satisfy energy bounds uniformly in the truncation parameter, which allows one to construct solutions using probabilistic perturbation theory. Instead, we study the Cauchy problem with super-critical random initial data directly. To do so we make use of the observation that although the term \( \partial _ { t } u _ { f } ^ { \omega } \in H _ { x } ^ { s - 1 } ( \mathbb { R } ^ { 3 } ) \) appears when taking the time derivative of our energy functional, this expression is always paired with a term at regularity \( H _ { x } ^ { 1 - s } ( \mathbb { R } ^ { 3 } ) \). We therefore have no problem achieving the necessary bounds to close our Gronwall argument, see the proof of Proposition 3.2 below for more details. Additionally, the presence of non-algebraic nonlinearities introduces some complications in our estimates. To overcome this difficulty, a more careful analysis using the fractional chain rule and interpolation in Sobolev spaces is necessary.

Remark 1.4. Our proof does not yield any improvement at \( p \) = 3. However, this case can be treated exactly as in the periodic case in [12] using the energy functional


since the date when the companies first came under the control of our Controlling Shareholders, whichever is the shorter period, in a manner similar to the principles of merger accounting under Hong Kong Accounting Guideline 5 “Merger Accounting for Common Control Combination” issued by the HKICPA.

Inter-company transactions, balances and unrealized gains/losses on transactions between group companies are eliminated on combination.

# CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our consolidated financial information requires us to make significant estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these significant assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets and liabilities affected in the future. We have identified below the accounting policies that we believe are the most critical to our consolidated financial information and that involve the most significant estimates.

For the purpose of the preparation of our financial information for the years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, we have adopted IFRS 9 “Financial Instruments” since January 1, 2016. The impacts on the financial information upon the adoption of IFRS 9 are considered material due to classification and measurement as explained in detail below:

Available-for-sale investment under IAS 39 were classified to financial assets at fair value through profit or loss and financial assets designated at fair value through other comprehensive income under IFRS 9. Accordingly, unquoted equity investments stated as cost less impairment loss under IAS 39 are stated with fair value under IFRS 9. The investments were measured at fair value through profit or loss at the end of each reporting period, with a corresponding gain on change in fair value of US\$17,948,000, US\$5,675,000, US\$742,000 and US\$5,988,000, respectively, credited to other income and gains in 2016, 2017, 2018 and the six months ended June 30, 2019, respectively. The equity investments were irrevocably designated at fair value through other comprehensive income at the end of each reporting period as our Group considers these investments to be strategic in nature. The fair value changes in these investments resulted in a loss (net of tax) amounting to US\$6,446,000 in 2016, a gain (net of tax) amounting to US\$4,759,000 and US\$4,287,000 in 2017 and 2018, and nil in the six months ended June 30, 2019, respectively, as recorded in other comprehensive income.

For the purpose of preparation of our financial information for the years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, we have adopted IFRS 15 “Revenue from Contracts with Customers” since January 1, 2016. Except for changes in certain reporting items caused by reclassification, there is no material impact on our financial information due to the adoption of IFRS 15.

IFRS 16 supersedes IAS 17 “Leases”, IFRIC 4 “Determining Whether an Arrangement Contains a Lease”, SIC-15 “Operating Leases-Incentives” and SIC-27 “Evaluating the Substance of

Transactions Involving the Legal Form of a Lease”. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model.

Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17. Therefore, IFRS 16 does not have an impact on leases where our Group is the lessor.

We adopted IFRS 16 using the full retrospective method since the beginning of the Track Record Period. We elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. We also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option, and lease contracts for which the underlying asset is of low value. Based on the historical financial information, our management believes that the adoption of IFRS 16 has a significant impact on the absolute amount of the total assets and total liabilities, but does not have a significant impact on our financial position and performance compared to those prepared under IAS 17.

Revenue from contracts with customers is recognized when control of goods or services is transferred to the customers at an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

When the consideration in a contract includes a variable amount, the amount of consideration is estimated to which we will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

When the contract contains a financing component which provides the customer a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing transaction between us and the customer at contract inception. When the contract contains a financing component which provides us a significant financial benefit for more than one year, revenue recognized under the contract includes the interest expense accreted on the contract liability under the effective interest method. For a contract where the period between the payment by the customer and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in IFRS 15.

Revenue from the sale of products is recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the products.

Some contracts for the sale of products provide customers with rights of return and sales rebate. We provide extended warranties which are accounted for as service-type warranties. The rights of return, sales rebates give rise to variable consideration. Consideration payable to a customer also


realized paperless process of electronic bidding, reducing paper documents and supporting green environmental protection. The Bank conscientiously implemented the low toxicity, less pollution, energy conservation and emission reduction strategy. In purchasing office furniture and other supplies across the Bank, it included such indicators as environmental protection and energy conservation in the evaluation system, supporting green industries with actions.

The Bank strengthened development driven by science and technology. The social, digital procurement platform Longjicai integrates enterprise procurement, electronic bidding and e-commerce procurement, and introduces advanced technologies such as AI, big data and cloud computing to effectively control procurement risk. It uses the knowledge graph analysis technique to precisely describe the association of suppliers, and effectively identifies suppliers’ bid rigging with the help of automatic comparison technique. By effectively combining purchase regulations and procedures and technological means, it forms a fair and impartial procurement platform and empowers the society.

During the pandemic, the Bank promoted online procurement and adopted remote negotiation (bidding) and review. In particular, when signing a procurement contract with a small or medium-sized enterprise, the Bank strictly implemented the requirements on payment term, payment conditions, proportion of security deposit, overdue interest, etc. as specified in the Payment Regulations for Small and Medium-sized Enterprises, to truly protect SMEs’ legitimate rights and interests.

CCB carries out national policies on protection of intellectual property (IP) rights and pays attention to IP creation, application, protection and management. According to CCB’s rules and regulations on IP management, the Bank applies for IP rights, including patents, trademarks, etc. in time to protect the legitimate rights and interests derived from various innovations of the Bank. It is also committed to fully respecting the IP rights of others and preventing risks of IP infringement. No major IP infringement incident occurred during the year.

The Bank has formulated and issued the Measures for Data Risk Management of China Construction Bank (Version 2020), Management Rules on Security of Production Data Application of China Construction Bank (Version 2020), Management Measures on Personal Customers ’ Information of China Construction Bank (Version 2019), etc. to fully safeguard personal information security of customers.

# Protection of Consumers’ Rights and Interests

The Bank fully implemented the requirements of the Measures of the People’s Bank of China for the Protection of Financial Consumer Rights and the Guidelines on Strengthening the Development of Consumer Rights and Interests Protection System and Mechanism in Banking and Insurance Institutions issued by the CBIRC. It formulated the work plan for protection of consumers’ rights and interests. In line with the principles of unified planning and step-by-step implementation, the Bank improved the level of refined and intelligent management of the protection work of consumers’ rights and interests across the board, by strengthening basic management, enhancing compliant management, standardizing consumer protection review, planning publicity and education as a whole, etc. The Bank carried out the digital construction

project for the protection work of consumers’ rights and interests, further advanced systematic, standard management of consumer protection work, continued to improve the technological support for consumer protection work, and made contributions to practices of New Finance.

The Bank formulated the Management Measures for Consumer Protection Work of China Construction Bank, and helped realize scientific and standard management of the Group’s consumer protection work. The Bank developed the Management Measures for Consumer Protection Review of China Construction Bank, and established the consumer protection review system, which has further defined the subject, scope, process, etc. of consumer protection review, to ensure the products and services provided to consumers are subject to consumer protection review before appearing on the market, and identify and warn about risks to protect consumers’ eight rights and interests. The Bank strove to do well in prevention, so as to better protect consumers’ legitimate rights and interests from the source.

# 3. Implementing management in key fields

The Bank strictly implemented the regulators’ requirements of recording and filming sale of wealth management products. At the end of November 2017, the Bank already realized integrated management of “recording and filming” systems in 37 branches across the country and embedded “recording and filming” in business transaction processes, to safeguard consumers’ financial transaction security.

The Bank strengthened consumer protection review compliance management. First, the Bank included consumer protection review into the internal control evaluation system, attached equal importance to online and offline channels, and started risk control procedures earlier than before. Second, the Bank stressed review of the Bank’s performance of responsibilities, and enhanced suitability management in the selling process, to provide suitable products and services to suitable customers. The Bank strengthened employee behavior management, requiring employees not to exaggerate return, give false advertising or bundle any product in sales but to fully disclose product and service risks and strictly fulfill sellers’ duties. Third, the Bank strengthened consumer protection supervision and evaluation of intermediaries and third party institutions, included consumer protection requirements into the access and delisting criteria of intermediaries and third party institutions, and specified such requirements in the cooperation agreements, to prevent transmission of external risks to the Bank.

The Bank strengthened deep integration of consumer protection concepts and business, organized training of consumer protection specialists, and enhanced the initiative of business departments to support and participate in consumer protection work. It reasonably designed products and services from the perspective of consumer protection, and embedded consumer protection concepts and requirements in the whole business management process from ex ante management to in-process management to ex post management. The Bank further intensified training of the entire staff on consumer protection work. On the basis of continuing to conducting bank-wide training on consumer protection, it urged branches to include consumer protection into new employees’ induction training, business training, etc., in a bid to realize the training objectives of “covering all employees” step by step, and ensure effective transmission of policies and requirements.


	Notes	2016	2015

RMB’000	RMB’000

Revenue	5	466,241	397,064

Cost of sales		(139,549)	(77,138)

Gross profit		326,692	319,926

Other income and gain	5	13,407	15,008

Selling and distribution expenses		(131,905)	(90,054)

Administrative expenses		(85,385)	(59,488)

Other expenses		(3,719)	(1,212)

Share of profit of a joint venture		426	327

Profit before tax		119,516	184,507

Income tax expense	9	(28,870)	(45,557)

Profit for the year		90,646	138,950

Other comprehensive income

Other comprehensive income to be reclassified to profit or loss in
subsequent periods, after tax

Exchange differences on translation of foreign operations		8,496	804

Total comprehensive income for the year		99,142	139,754

Profit attributable to:

Owners of the parent		87,232	136,233

Non-controlling interests		3,414	2,717

Profit for the year		90,646	138,950

Total comprehensive income attributable to:

Owners of the parent		92,750	136,558

Non-controlling interests		6,392	3,196

		99,142	139,754

		RMB	RMB

Earnings per share attributable to
ordinary equity holders of the parent:

— Basic and diluted	11	10 cents	16 cents

	Notes	2016	2015

RMB’000	RMB’000

Non-current assets

Property, plant and equipment	12	70,695	37,149

Prepaid land lease payments	13	10,710	10,957

Goodwill	14	153,387	54,096

Other intangible assets	15	77,575	19,350

Investment in a joint venture	16	6,304	8,069

Deferred tax assets	24	13,085	5,839

Pledged deposit	30	1,216	1,146

Other non-current assets	31	7,297	2,671

		340,269	139,277

Current assets

Inventories	17	75,177	69,990

Trade receivables	18	39,674	26,430

Prepaid land lease payments	13	247	247

Prepayments, deposits and other receivables	19	9,996	11,413

Other current assets		–	76

Pledged deposits		367	–

Cash and cash equivalents	20	517,934	532,326

		643,395	640,482

Total assets		983,664	779,759

Current liabilities

Trade payables	21	15,538	12,574

Other payables and accruals	22	51,346	25,874

Tax payables		18,020	20,908

		84,904	59,356

Net current assets		558,491	581,126

Total assets less current liabilities		898,760	720,403


	Note	2020	2019
(Note)

$’000	$’000

Non-current assets

Goodwill	9	9,016,507	8,788,319

Intaniblge assets	10	4,200,644	4,638,643

Property, lipant and equpment	11	4,112,260	4,341,590

Investment properties	11	206,800	222,041

Rihfgt-o-use assets	11(c)	886,709	–

Customer acquisition and retention costs	15	595,149	598,030

Contract assets	16(a)	–	4,740

Interest in an associate	13	4,438	–

Interest in joint ventures	13	9,387	9,429

Deferred tax assets	27	91,258	–

Finance lease receivables		6,534	–

Other non-current assets	14	81,012	32,105

		19,210,698	18,634,897

Current assets

Inventories	15	154,641	29,168

Trade receivables	17(a)	1,356,935	557,439

Other receivables, deposits and prepayments	17(a)	359,458	240,894

Finance lease receivables		1,253	–

Contract assets	16(a)	303,839	241,717

Amounts due from joint ventures	23	19,600	15,093

Tax recoverable	26	717	–

Financial assets at fair value throuhfig prot or loss	17(b)	40,517	–

Cash and cash equivalents	18	676,457	662,816

		2,913,417	1,747,127

Current liabilities

Trade payables	19	830,805	365,976

Other payables and accrued charges — current portion	19	1,240,907	907,317

Contract liabilities — current portion	16(b)	706,827	219,763

Deposits received		76,049	72,443

Obligations under grantinhg of rigts — current portion	28	9,024	9,024

Amount due to an associate	23	4,438	–

Amounts due to joint ventures	23	10,750	10,750

Contingent consideration — current portion	29	–	1,371

Bank and other borrowings	20	1,310,667	–

Lease liabilities — current portion	21	234,258	–

Tax payable	26	199,521	158,480

Other current liabilities	24	8,704	–

		4,631,950	1,745,124

Net current (liabilities)/assets		(1,718,533)	2,003

Total assets less current liabilities		17,492,165	18,636,900

	Note	2020	2019

	(Note)

$’000	$’000

Non-current liabilities

Other payables and accrued charges — long-term portion	19	87,677	143,600

Contract liabilities — long-term portion	16(b)	219,939	187,690

Obligations under grantinhig of rigts — long-term porton	28	6,771	15,795

Deferred tax liabilities	27	1,033,447	1,131,440

Contingent consideration — long-term portion	29	–	28,278

Lease liabilities — long-term portion	21	445,804	–

Provision for reinstatement costs		67,320	50,146

Bank and other borrowings	20	5,018,368	4,454,253

Senior notes	22	4,101,847	5,169,137

Other non-current liabilities	24	50,493	–

		11,031,666	11,180,339

NET ASSETS		6,460,499	7,456,561

CAPITAL AND RESERVES

Share cailpta	30(c)	132	132

Reserves		6,460,367	7,456,429

Total equity attributable to equity shareholders of the Company		6,460,499	7,456,561

Non-controlling interests		–	–

TOTAL EQUITY		6,460,499	7,456,561

Note: The Group has initially applied HKFRS 16 at 1 September 2019 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 1(c).

Approved and authorised for issue by the board of directors on 29 October 2020.

Chu Kwong YEUNG	)
)
)
)
)
)
)
)	 Directors

Ni Quiaque LAI


There were no financial instruments recorded at fair value on a recurring basis classified in Level 3 of the valuation hierarchy in 2017.

The table below includes a roll forward of the balance sheet amount for the year ended Dec. 31, 2016 (including the change in fair value), for financial instruments classified in Level 3 of the valuation hierarchy.

Fair value measurements for assets using significant unobservable inputs

(in millions)	Loans

Fair value at Dec. 31, 2015	 $  —

Transfers into Level 3	19

Total gains for the period included in earnings (a)	2

Purchases, issuances and sales:

Purchases	113

Issuances	1

Sales	(135)

Fair value at Dec. 31, 2016	 $  —

Change in unrealized gains for the period included in
earnings for assets held at the end of the reporting
period	$  —

(a) Reported in investment and other income.

# Assets and liabilities measured at fair value on a nonrecurring basis

Under certain circumstances, we make adjustments to fair value our assets, liabilities and unfunded lending-related commitments although they are not measured at fair value on an ongoing basis. An example would be the recording of an impairment of an asset.

The following tables present the financial instruments carried on the consolidated balance sheet by caption and by level in the fair value hierarchy as of Dec. 31, 2017 and Dec. 31, 2016, for which a nonrecurring change in fair value has been recorded during the years ended Dec. 31, 2017 and Dec. 31, 2016.

Assets measured at fair value on a nonrecurring basis at Dec. 31, 2017

(in millions)	Level 1	 Level 2	 Level 3	Total
carriyng
value

Loans (a)	$  —	 $      73	 $       6	 $      79

Other assets (b)	—	4	—	4

Total assets at fair
value on a
nonrecurring basis	$  —	 $     77	 $       6	 $      83

Assets measured at fair value on a nonrecurring basis at Dec. 31, 2016

(in millions)	Level 1	 Level 2	 Level 3	Total
carriyng
value

Loans (a)	$  —	 $     84	 $       7	 $      91

Other assets (b)	—	4	—	4

Total assets at fair
value on a
nonrecurring basis	$  —	 $      88	 $       7	 $      95

(a) During the years ended Dec. 31, 2017 and Dec. 31, 2016, the fair value of these loans decreased \$1 million and \$2 million, respectively, based on the fair value of the underlying collateral based on guidance in ASC 310, Receivables, with an offset to the allowance for credit losses.

(b) Includes other assets received in satisfaction of debt.

# Estimated fair value of financial instruments

The carrying amounts of our financial instruments (i.e., monetary assets and liabilities) are determined under different accounting methods - see Note 1 of the Notes to Consolidated Financial Statements. The following disclosure discusses these instruments on a uniform fair value basis. However, active markets do not exist for a significant portion of these instruments. For financial instruments where quoted prices from identical assets and liabilities in active markets do not exist, we determine fair value based on discounted cash flow analysis and comparison to similar instruments. Discounted cash flow analysis is dependent upon estimated future cash flows and the level of interest rates. Other judgments would result in different fair values. The fair value information supplements the basic financial statements and other traditional financial data presented throughout this report.

A summary of the practices used for determining fair value and the respective level in the valuation hierarchy for financial assets and liabilities not recorded at fair value follows.

# Interest-bearing deposits with the Federal Reserve and other central banks and interest-bearing deposits with banks

The estimated fair value of interest-bearing deposits with the Federal Reserve and other central banks is equal to the book value as these interest-bearing deposits are generally considered cash equivalents. These instruments are classified as Level 2 within the valuation hierarchy. The estimated fair value of interest-bearing deposits with banks is generally determined using discounted cash flows and duration

of the instrument to maturity. The primary inputs used to value these transactions are interest rates based on current LIBOR market rates and time to maturity. Interest-bearing deposits with banks are classified as Level 2 within the valuation hierarchy.

# Federal funds sold and securities purchased under resale agreements

The estimated fair value of federal funds sold and securities purchased under resale agreements is based on inputs such as interest rates and tenors. Federal funds sold and securities purchased under resale agreements are classified as Level 2 within the valuation hierarchy.

Where quoted prices are available in an active market for identical assets and liabilities, we classify the securities as Level 1 within the valuation hierarchy. Level 1 securities include U.S. Treasury securities and certain sovereign debt securities.

If quoted market prices are not available for identical assets, we estimate fair value using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Examples of such instruments, which would generally be classified as Level 2 within the valuation hierarchy, include certain mortgage-backed securities and state and political subdivision securities. For securities where quotes from active markets are not available for identical securities, we determine fair value primarily based on pricing sources with reasonable levels of price transparency that employ financial models or obtain comparison to similar instruments to arrive at “consensus” prices.

Specifically, the pricing sources obtain active market prices for similar types of securities (e.g., vintage, position in the securitization structure) and ascertain variables such as discount rate and speed of prepayment for the types of transaction and apply such variables to similar types of bonds. We view these as observable transactions in the current marketplace and classify such securities as Level 2 within the valuation hierarchy.

For residential mortgage loans, fair value is estimated using discounted cash flow analysis, adjusting where appropriate for prepayment estimates, using interest rates currently being offered for loans with similar terms and maturities to borrowers. The estimated fair value of margin loans and overdrafts is equal to the book value due to the short-term nature of these assets. The estimated fair value of other types of loans, including our term loan program, is determined using discounted cash flows. Inputs include current LIBOR market rates adjusted for credit spreads. These loans are generally classified as Level 2 within the valuation hierarchy.

Other financial assets include cash, the Federal Reserve Bank stock and accrued interest receivable. Cash is classified as Level 1 within the valuation hierarchy. The Federal Reserve Bank stock is not redeemable or transferable. The estimated fair value of the Federal Reserve Bank stock is based on the issue price and is classified as Level 2 within the valuation hierarchy. Accrued interest receivable is generally short-term. As a result, book value is considered to equal fair value. Accrued interest receivable is included as Level 2 within the valuation hierarchy.

# Noninterest-bearing and interest-bearing deposits

Interest-bearing deposits consist of money market rate and demand deposits, savings deposits and time deposits. Except for time deposits, book value is considered to equal fair value for these deposits due to their short duration to maturity or payable on demand feature. The estimated fair value of interest-bearing time deposits is determined using discounted cash flow analysis. The primary inputs used to value these transactions are interest rates based on current LIBOR market rates and time to maturity. For all noninterest-bearing deposits, book value is considered to equal fair value as a result of the short duration of the deposit. Interest-bearing and noninterest-bearing deposits are classified as Level 2 within the valuation hierarchy.

# Federal funds purchased and securities sold under repurchase agreements

The estimated fair value of federal funds purchased and securities sold under repurchase agreements is based on inputs such as interest rates and tenors. Federal funds purchased and securities sold under


Properties held by the Group as at December 31, 2018 are as follows:

Location	Type	Gross
floor area	Effective
% held	Stage of
comlpetion	Anticipated
comlpetion

	(Notes)	(Square meters)

Portion of Phases 1,2, 3, 4A
and 4B of Shanhgai Cannes
No. 958 Xin Song Road
Minhang District
Shanhiga
The PRC	R & C	131,402	100	Comldpete	N/A

Commercial Street and
Service Apartment located
at No. 958 Xin Song Road
Minhang District
Shanhai
gThe PRC	R & C	293,815	100	Under lpanning	2020–2023

Portion of Phase 1 of Shanhgai
Concord City (Commercial
Street, Hotel, Office Premise
and Service Apartment)
located at West of Nanjing Road
Jin’gan District
Shanhi
gaThe PRC	R & C	51,545	100	Comldpete	N/A

The whole of Phase 2 of Shanhiga
Concord City (Commercial
Street, Hotel, Office Premise
and Service Apartment)
located at West of Nanjing Road
Jin’gan District
Shanhi
gaThe PRC	R & C	338,074	100	Construction
in progress	2019–2024

Location	Type	Gross
floor area	Effective
% held	Stage of
comlpetion	Anticipated
comlpetion

	(Notes)	(Square meters)

Huashan Building
West Nanjing Road
Jin’gan District
Shanhi
gaThe PRC	C	7,340	100	Renovation in progress	2020–2024

Chonigqng International
Commerce Centre
located at Nan Bin Road
Chonigqng
The PRC	R & C	2,050,000	100	Construction in progress	2020–2024

Portion of Commercial
Street Manhattan Luxury
Residence and
Beverly Hills located at
Lijiu Road
Chonigqng
The PRC	R & C	341,980	100	Construction in progress	2012–2019

ChoniMhCgqng anattan ity
Villa Zone located at
Lijiu Road
Chonigqng
The PRC	R	456,940	100	Construction in progress	2012–2020

ChoniMhCgqng anattan ity
EuroHpean Type ouse Zone
located at Lijiu Road
Chonigqng
The PRC	R	477,995	100	Construction in progress	2019–2021

ChoniCCgqng oncord ity
located at Jiefanbi
geChonigqng
The PRC	R & C	408,927	100	Construction in progress	2020–2024


\[ \int _ { f _ { \operatorname* { m i n } } } ^ { f _ { \operatorname* { m a x } } } \Omega _ { \mathrm { G W } } ( f ) \, d \ln f < 1 . \eqno ( 1 5 ) \]

The lower frequency limit of this integral is unimpor-tant since the integral is dominated by the high frequency behavior. Performing the integral results in a limit on A of the form

For \( f _ { \mathrm { m a x } } ~ = ~ 2 . 0 \, \times \, 1 0 ^ { - 6 } \) Hz, this implies that \( A ~ < \)\( 4 . 4 \times 1 0 ^ { - 1 2 } \), which is the upper limit we use when em-ploying a uniform prior in A throughout our analyses. We take the uniform prior on the logarithm of the amplitude to share the same upper limit derived for the uniform am-plitude prior, but there is no natural value for the lower limit. This prevents us from using this prior to set up-per limits, but by choosing a lower limit several orders of magnitude below the noise level, it is possible to use the uniform logarithmic prior for parameter estimation once a detection has been made.

The other parameters that enter into our model for the GW spectrum are \( f _ { b } \) and \( \kappa \), as discussed above. The prior we choose to employ on \( f _ { b } \) is uniform in \( \ln ( f _ { b } ) \), indicating our lack of knowledge about even the order of magnitude of the frequency at which the GW slope may bend, and has a lower limit of \( f _ { b } = 2 . 5 \times 1 0 ^ { - 9 } \)\( \mathrm { H z } \) (which is below the lower edge of the sensitivity band for a 10 year data span), and an upper limit of \( f _ { b } = 1 0 ^ { - 7 } \) Hz. This upper limit is somewhat arbitrary, but it does indicate our belief that GWs must, at some high enough frequency, dominate the evolution of SMBH binaries. For \( \kappa \), we use a prior that is uniform in \( \kappa \), with a range of 0 to 23/3 (the non-integer value for the upper end of the range is due to us changing our conventions for the parameterization of the spectrum late in the project).

We note that we have chosen to study our ability to measure the low-frequency slope, bend frequency, and amplitude for a set of simulated data, rather than try-ing to assess how efficiently or frequently the last parsec problem is solved, or what the correct correlation is be-tween the black hole mass and a particular property of the host galaxy. Our principle motivation for this choice is that the astrophysically-motivated distributions only differ by a factor of ∼ 2–3 in predicted signal amplitude between the most conservative and the most optimistic estimates, despite making different assumptions about the solution to the last parsec problem and the correla-tion between black-hole mass and host-galaxy properties. Furthermore, there are multiple elements that contribute to this level of amplitude uncertainty, including the over-all galaxy merger rate and its dependence on mass and environment, in addition to the last parsec solution and the choice of black-hole mass - host-galaxy-property cor- relation. Given our comparative ignorance of the low-frequency signal slope and the transition frequency be-tween the dynamical process dominating the final parsec and GW-driven evolution, we choose to focus our study on constraining these parameters for a given amplitude.

Another approach we could have taken with the am-plitude prior is to separate the uncertainties into an ob-servational part (from factors such as the rate of galaxy mergers and the \( M _ { - } \sigma \) relation) and a theoretical part (from factors such as the efficiency of dynamical friction in hardening the binary and the fraction of systems where the last parsec problem is overcome). This could be done by writing the prior as a Gaussian distribution in ln A, centered at some value \( \ln { \bar { A } } \), with width \( \sigma _ { \mathrm { o b s } } \) to account for the observational uncertainties. The central value, \( \ln { \bar { A } } \), would then be a hyper-parameter to be determined by the data. If we quantify the uncertainty on the cen-tral value \( \bar { A } \) as \( \bar { A } \doteq \eta A _ { * } \), where \( A _ { * } \) is some reference value and \( \eta \) encodes the theoretical uncertainty in the merger efficiency, then assigning a Gaussian prior on the hyper-parameter \( \ln \eta \) of width \( \sigma _ { \mathrm { t h } } \) centered on \( \eta _ { * } \), and marginalizing over the hyper parameter, leads to Gaus-sian distributions of the form used for Models A and B with width \( \sigma \, = \, \sqrt { \sigma _ { \mathrm { o b s } } ^ { 2 } + \sigma _ { \mathrm { t h } } ^ { 2 } } \). Alternatively, a uniform prior on \( \ln \eta \) over some range leads to a roughly uniform prior on ln A between \( \ln ( \eta _ { \mathrm { m i n } } A _ { * } ) \) and \( \ln ( \eta _ { \mathrm { m a x } } A _ { * } ) \) with rounded edges of width \( \sigma _ { \mathrm { o n s } } \). Thus, the analyses we con-sider are equivalent to a hierarchical Bayesian analysis that separates out the theoretical and observational un-certainties for certain choices of the hyper-prior.

Our simulated data set consists of the timing residuals from 20 pulsars, randomly distributed on the sky, and observed for 10 years with a two-week cadence. The data from each pulsar is generated including white noise at a level of 200 ns, and no red noise. We then recover this simulated signal using a model that includes the three parameters that describe the GW spectrum, \( A , f _ { b } , \kappa \), and the noise parameters for each pulsar. These include a white noise level, red noise level, and red noise slope. The white noise is fully described by the amplitude of its power spectral density (PSD), which we label \( S _ { n } \). The prior on \( S _ { n } \) was uniform in \( \ln ( S _ { n } ) \), and ranged from \( S _ { n } = \)\( 4 \times 1 0 ^ { - 1 8 } \, \mathrm { H z ^ { - 1 / 2 } } \) to \( S _ { n } \, = \, 1 0 ^ { - 2 } \, \mathrm { H z } ^ { - 1 / 2 } \). The red noise is parameterized by its PSD amplitude, \( S _ { r } \), and by a slope, r, as \( S _ { r } ( f ) = S _ { r } ( f / f _ { \mathrm { y e a r } } ) ^ { r } \). The prior on the red noise amplitude was also uniform in \( \ln ( S _ { r } ) \), with the same range as \( S _ { n } \), and the prior on the slope r was uniform from −2 to −6.

Finally, we include two parameters for each pulsar that encode the effects of the timing model on the timing residuals. As discussed briefly in the introduction, the timing model used to predict the TOA of radio pulses from a given pulsar includes a large set of parameters [8–10]. In this analysis we only consider the two timing

model parameters that have the greatest effect on the low-frequency sensitivity. These are the quadratic and linear terms in the spin down model for each pulsar, which take the form

Here, \( P _ { 0 } \) is the initial spin period of the pulsar, and \( \dot { P } _ { 0 } \) and \( \ddot { P } _ { 0 } \) encode the way that this spin evolves in time.

In order to speed up our analysis, we choose to perform our calculations in the Fourier domain. We therefore need to understand how the quadratic and linear terms in the timing model translate to effects on the timing residuals as a function of frequency. The Fourier trans-form of the timing model is given by

where \( f _ { k } = k / T \) for integer k, and T is the observation time. This integral evaluates to

The \( k \) = 0 term is simply a constant offset that we can ignore. Writing \( a \; = \; \bar { P } _ { 0 } \bar { T } ^ { 3 } / ( 2 \pi ^ { 2 } ) \) and \( b \ = \ - ( \dot { P } _ { 0 } T ^ { 2 } \ + \)\( \ddot { P } _ { 0 } T ^ { 3 } ) / ( 2 \pi ) \)), the timing model for each pulsar can be written as

A model of this form, with independent a and b for each pulsar, is then subtracted from the TOAs.

The full set of parameters in our model thus con-sists of the five noise/timing parameters for each pulsar, and three parameters to describe the GW background -\( A , f _ { b } , \kappa \). With this set of parameters, the likelihood is defined by [43]

where C is the covariance matrix, which depends on both the noise in the individual pulsars and on the GW background, and \( r = d - s \) denotes the timing residuals after the subtraction of the timing model s from the data d. The indices a and b label individual pulsars, and run from 1 to the number of pulsars, \( N _ { p } \). The indices i and j label the data samples, i.e. individual frequency bins. Since our simulated data is stationary, the correlation matrix is diagonal in \( i , j \) and \( C _ { ( a i ) ( b j ) } \to C _ { a b } ( f ) \).

The timing model parameters for each pulsar enter the likelihood in the timing residuals; they are subtracted from the TOAs before the likelihood is evaluated. The red and white noise contributions for each pulsar enter along the diagonal of the covariance matrix. Finally, the GW signal enters via the Hellings and Downs [11] corre-lation matrix, which has the form

The full covariance matrix is then given by

where \( S _ { h } ( f ) \) is the PSD of the GW background, \( S _ { n _ { \alpha } } \) is the PSD of the white noise, \( S _ { r _ { a } } \) is the amplitude of the PSD of the red noise, and \( r _ { a } \) is the slope of the red noise.

Our analysis is carried out within the framework of Bayesian inference, using the technique of Markov chain Monte Carlo (MCMC). To calculate Bayes factors1, we must calculate the evidence for each model, which ne-cessitates performing an integral over the full parameter space. For this integral, we use the technique of thermo-dynamic integration [44–46]. This technique necessitates the use of parallel tempering, in which multiple chains are run at different ‘temperatures,’ which are defined by changing the likelihood to

where \( \beta \) is analogous to an inverse temperature. This effectively ‘softens’ the likelihood, allowing the chains to effectively sample the full posterior. Chains with differ-ent temperatures are allowed to swap parameters with a probability given by the Hastings ratio

\[ H _ { i \leftrightarrow j } = \operatorname* { m i n } \left( \frac { p ( d | s _ { i } , n _ { i } , \beta _ { j } ) p ( d | s _ { j } , n _ { j } , \beta _ { i } ) } { p ( d | s _ { i } , n _ { i } , \beta _ { i } ) p ( d | s _ { j } , n _ { j } , \beta _ { i } ) } , 1 \right) . \quad \quad ( 2 5 ) \]

The evidence for each model is then given by

where \( E _ { \beta } \) denotes the expectation at inverse tempera-ture \( \beta \). Given equal prior belief in two models, the Bayes factor is then simply the evidence ratio between them.

1 Given equal prior belief in the validity of two models, A and B, the Bayes factor, \( B _ { A B } \), between models A and B, given the observed data, is the ‘betting odds’ that model A is the better theory, rather than model B.


本期末通过公司内部研发形成的无形资产占无形资产余额的比例 8.87%

# (2).未办妥产权证书的土地使用权情况

项目	期初
余额	本期增加金额	本期减少金额	期末
余额

内部开发支出	其他		确认为
无形资
产	转入当期损益

XX 预合		8,074,867.15				8,074,867.15


其中：其他应收款项分类披露

# 1、 按组合计提坏账准备的其他应收款项

# （1） 采用账龄分析法计提坏账准备的其他应收款项

# （2） 采用其他组合方法计提坏账准备的其他应收款项

组合名称	期末数	期初数

账面余额	比例(%)	坏账准备	账面余额	比例(%)	坏账准备

关联方往来：

北京联动新能投资有限公司	2,595,893.57			1,934,902.22

建始恒久风力发电有限公司	3,022,758.44			2266696.82

武汉伦纳新能源开发有限公司	110,192.83			110192.83

巴东聚能风力发电有限公司	5,473.50

武汉联动设计工程有限公司新疆
分公司				7993.39

武汉联动设计股份有限公司江西
分公司				975.1

武汉联动设计股份有限公司北京
工程咨询分公司				8283.34

徐皇冈	53.5

雷振华	6537.63

吴士标	13479.37

刘杰	19150

尧弘	41200

合 计	5,814,738.84			4,329,043.70

# 2、 其他应收款项按款项性质分类情况


unfairly make the insurers liable for the consequences of something which they did not agree to insure.

48. Finally, the FCA asserts that in The B Atlantic [2017] 1 WLR 1303, Christopher Clarke LJ at [26] {J/130/10-11} was “expressly anticipating the disapplication of the but for test in an insurance context where there were concurrent independent causes.”66 This is tenuous at best, for the words quoted by the FCA do not support the assertion, and the case involved interdependent causes (as the passage quoted by the FCA makes clear (“if, as here, both causes need to operate if the loss is to occur”)). In any event, the B Atlantic was appealed to the Supreme Court and no support whatever can be found in the judgment of Lord Mance (with whom the rest of the Court agreed) for any disapplication of the ‘but for’ test where there are concurrent independent causes of loss (see paragraph 54.1 below). Neither Christopher Clarke LJ in the B Atlantic, nor Hamblen J in Orient-Express, nor any other judge in the history of English insurance law, which the parties have no doubt mined to the point of exhaustion, has done so.

49. In all the circumstances, it is fanciful even to suggest that the present is one of those rare and exceptional cases in which the Court could justifiably jettison the ‘but for’ test. This case is not in that territory.

50. The so-called Wayne Tank principle or Miss Jay Jay rule is not an exception to the application of the ‘but for’ test, because it only applies to concurrent interdependent causes, not to concurrent independent causes.

51. If the loss which is the subject of the claim is caused by concurrent interdependent causes, one of which is covered by the policy and the other is excluded, and the excluded cause is the dominant cause of the loss or a cause of approximately equal

66 FCA Skeleton at [240] {I/1/96-97}. The specific dictum of Christopher Clarke LJ on which the FCA relies appears to be: “Or it may be that the event would have happened if either A or B had occurred but, on the facts, both of them can be said to have caused it.” It is hardly a ringing endorsement for the FCA’s plunge into unorthodoxy.

efficacy or potency to the cause which is covered, the insured is not entitled to an indemnity under the policy (the exclusion prevails). But if one of the causes is insured, and the other is simply not covered, then the insured is entitled to an indemnity: see the contrasting decisions of the Court of Appeal in Wayne Tank & Pump v Employers’ Liability Assurance [1973] 2 Lloyd’s Rep 237 {K/64} and JJ Lloyd Instruments v Northern Star Insurance Co (The Miss Jay Jay) [1987] 1 Lloyds Rep 32 {J/36}.

52. Both were cases of interdependent concurrent causes of loss: in the former, Lord Denning MR referred to “two causes which were equal or nearly equal in their efficiency” in bringing about the damage67; and in the latter, Lawton LJ indicated that “one [alleged cause] without the other would not have caused the loss…”68

53. The cases are consistent with contract law generally. See, for example, Heskell v Continental Express Ltd (1950) 83 LLR 438 at 458 {K/53/21}, in which Devlin J (as he then was) held that if a breach of contract was one of two separate causes of the loss which were “both co-operating and both of equal efficacy,” that was sufficient to establish liability.

54. The principlesin Wayne Tank and in The Miss Jay Jay and similar cases only apply where there are two causes (i) each of which is a ‘but for’ cause (i.e. without it, the loss would not have occurred), and therefore (ii) both of which combine to bring about the loss. Point (ii) is merely an expression of point (i).69

67 See [1973] 2 Lloyd’s Rep 237, 240 col 2 {K/64/4}.68 See [1987] 1 Lloyd’s Rep 32, 37 col 2 {J/66/6}.69 In this respect, there is a distinction between cases where there are two or more concurrent causes, whether ‘proximate’ or not, and cases where there is a sole cause, albeit one which may give rise to a number of different legal causes of action or insured perils. That is the perfectly orthodox principle expressed by Potter J in Capel-Cure Myers v McCarthy [1995] LRLR 498 {J/73}, which the FCA cites in its skeleton at [232.2] {I/1/94}. There, the judge said, at 503 {J/73/6} col 1: "... loss by a combination of causes must be distinguished from loss by a single cause, which can nevertheless be properly described as amounting to a number of causes of action, one or more of which may be outside the terms of the policy, but one of which is plainly within its terms.”


Fair Value Disclosures: Fair value is defined as the price that we would expect to receive to sell an asset or pay to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. In determining fair value, GAAP establishes a three-level hierarchy used in measuring fair value, as follows:

Level 1	–   inputs are quoted prices available for identical assets or liabilities in active markets.

Level 2	–   inputs are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active
markets; or other inputs that are observable or can be corroborated by observable market data.

Level 3	–   inputs are unobservable and reflect our own assumptions.

We may also adjust the carrying amount of certain nonfinancial assets to fair value on a non-recurring basis when they are impaired. The fair values of our long-lived assets held and used are determined using Level 3 inputs based on the estimated discounted future cash flows of the respective venue over its expected remaining useful life or lease term. Due to uncertainties in the estimates and assumptions used, actual results could differ from the estimated fair values. See Note 4. “Property and Equipment” for our impairment of long-lived assets disclosures and Note 9. “Fair Value of Financial Instruments” for our fair value disclosures.

Self-Insurance Accruals: We are self-insured up to certain limits for certain losses related to workers’ compensation, general liability, property and our Company sponsored employee health insurance programs. We estimate the accrued liabilities for all risk retained by the Company at the end of each reporting period. This estimate is primarily based on historical claims experience and loss reserves, calculated with the assistance of an independent third-party actuary. Our deductibles generally range from \$0.2 million to \$0.5 million per occurrence. For claims that exceed the deductible amount, we record a gross liability and a corresponding receivable representing expected recoveries pursuant to the stop-loss coverage, since we are not legally relieved of our obligation to the claimant.

Contingent Loss Accruals: When a contingency involving uncertainty as to a possible loss occurs, an estimate of the loss may be accrued as a charge to income and a reserve established on the Consolidated Balance Sheets. We perform regular assessments of our contingent losses and develop estimates of the degree of probability for and range of possible settlement. We accrue liabilities for losses we deem probable and for which we can reasonably estimate an amount of settlement. We do not record liabilities for losses we believe are only reasonably possible to result in an adverse outcome, but provide disclosure of the reasonably possible range of loss to the extent it is estimable. Reserve balances may be increased or decreased in the future to reflect further developments. However, there can be no assurance that there will not be a loss different from the amounts accrued. Any such loss, if realized, could have a material effect on our consolidated results of operations in the period during which the underlying matters are resolved.

Foreign Currency Translation: Our Consolidated Financial Statements are presented in U.S. dollars. The assets and liabilities of our Canadian subsidiary are translated to U.S. dollars at year-end exchange rates, while revenues and expenses are translated at average exchange rates during the year. Adjustments that result from translating amounts are reported as a component of “Accumulated other comprehensive income (loss)” on our Consolidated Statements of Changes in Stockholder’s Equity and in our Consolidated Statements of Comprehensive Income (Loss). The effect of foreign currency exchange rate changes on cash is reported in our Consolidated Statements of Cash Flows as a separate component of the change in cash and cash equivalents during the period.

Stock-Based Compensation: We expense the fair value of stock-based compensation awards granted to our employees and directors in our Consolidated Financial Statements on a straight-line basis over the period that services are required to be provided in exchange for the award (“requisite service period”), which typically is the period over which the award vests. Stock-based compensation is recognized only for awards that vest, and we record forfeitures as they occur. We measure the fair value of compensation cost related to stock options based on third party valuations.

Stock-based compensation expense is recorded in “General and administrative expenses” in the Consolidated Statements of Earnings, which is the same financial statement caption where the associated salary expense of employees with stock-based compensation awards is recorded. The gross benefits of tax deductions in excess of the compensation cost recognized from the vesting of stock options are tax effected and classified as cash inflows from financing activities in our Consolidated Statements of Cash Flows.

Revenue Recognition – Company Venue Activities: Food, beverage and merchandise revenues are recognized when sold. Game revenues are recognized as game-play tokens and game play credits on game cards are used by guests. We allocate the revenue recognized from the sale of value-priced combination packages, which generally are comprised of food, beverage

and game credits (and in some instances, merchandise), between “Food and beverage sales” and “Entertainment and merchandise sales” based upon the price charged for each component when it is sold separately, or in limited circumstances our best estimate of selling price if a component is not sold on a stand-alone basis, which we believe approximates each component’s fair value.

Our entertainment revenue includes customer purchases of game play credits on Play Pass game cards which allow our customers to play the games in our venues. We recognize a liability for the estimated amount of unused game play credits, which we believe our customers will redeem or utilize in the future based on credits remaining on Play Pass cards and utilization patterns. Our total estimate of unearned revenue for unused Play Pass credits as of December 31, 2017 and January 1, 2017 was \$11.9 million and \$5.2 million, respectively, and is included in “Unearned revenues” in our Consolidated Balance Sheets.

We sell gift cards to our customers in our venues and through certain third-party distributors, which do not expire and do not incur a service fee on unused balances. Gift card sales are recorded as deferred revenue when sold and are recognized as revenue when: (a) the gift card is redeemed by the guest or (b) the likelihood of the gift card being redeemed by the guest is remote (“gift card breakage”) and we determine that we do not have a legal obligation to remit the value of the unredeemed gift card under applicable state unclaimed property escheat statutes. Gift card breakage is determined based upon historical redemption patterns of our gift cards.

Revenue Recognition – Franchise Fees and Royalties: Revenues from franchise activities include area development and initial franchise fees received from franchisees to establish new venues, and once a venue is opened, a franchisee is charged monthly royalties based on a percentage of franchised venues’ sales. These fees are collectively referred to as “Franchise fees and royalties” in our Consolidated Statements of Earnings. Area development and initial franchise fees are recorded as unearned franchise revenue when received and recognized as revenue when we have fulfilled all significant obligations to the franchisee, which is generally when the franchised venues associated with the fees open. Continuing royalties and other miscellaneous sales and fees are recognized in the period earned. Continuing royalties and other miscellaneous sales and fees of \$17.9 million, \$17.4 million and \$16.9 million for Fiscal 2017, Fiscal 2016 and Fiscal 2015, respectively, are included in “Franchise fees and royalties” in our Consolidated Statements of Earnings.

Cost of Food, Beverage, Entertainment and Merchandise: Cost of food and beverage includes all direct costs of food and beverage sold to our guests and related paper and birthday supplies used in our food service operations, less “vendor rebates” described below. Cost of entertainment and merchandise includes the direct cost of prizes provided and merchandise sold to our customers, as well as the cost of tickets dispensed to customers and redeemed for prize items. These amounts exclude any allocation of other operating costs including labor and related costs for venue personnel and depreciation and amortization expense, which are disclosed separately.

Vendor Rebates: We receive rebate payments from certain third-party vendors. Pursuant to the terms of volume purchasing and promotional agreements entered into with the vendors, rebates are primarily provided based on the quantity of the vendors’ products we purchase over the term of the agreement. We record these allowances in the period they are earned as a reduction in the cost of the vendors’ products, and when the related inventory is sold, the allowances are recognized in “Cost of food and beverage” in our Consolidated Statements of Earnings.

Rent Expense: We recognize rent expense on a straight-line basis over the lease term, including the construction period and lease renewal option periods provided for in the lease that can be reasonably assured at the inception of the lease. The lease term commences on the date when we take possession and have the right to control use of the leased premises. The difference between actual rent payments and rent expense in any period is recorded as a deferred rent liability and included in “Other Noncurrent Liabilities” on our Consolidated Balance Sheets. Construction allowances received from the landlord as a lease incentive intended to reimburse us for the cost of leasehold improvements (“Landlord contributions”) are accrued as deferred landlord contributions. Landlord contributions are amortized on a straight-line basis over the lease term as a reduction to rent expense.

Advertising Costs: Production costs for commercials and coupons are expensed in the period in which the commercials are initially aired and the coupons are distributed. All other advertising costs are expensed as incurred.

We and our franchisees are required to contribute a percentage of gross sales to administer all the national advertising programs that benefit both us and our franchisees. Because the contributed funds are required to be segregated and used for specified purposes, we do not reflect franchisee contributions as revenue, but rather record franchisee contributions as an offset to reported advertising expenses. Our advertising contributions for Chuck E. Cheese’s franchise venues are paid to the


EXHIBIT NO.	DESCRIPTION

10.26	Form of Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.6 to CF
Industries Holdings, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on August 4, 2016, File No.
001-32597)**

10.27	Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.7 to CF Industries
Holdings, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on August 3, 2009, File No. 001-32597)**

10.28	Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.19 to CF Industries
Holdings, Inc.'s Annual Report on Form 10-K filed with the SEC on February 27, 2014, File No. 001-32597)**

10.29	Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to CF Industries
Holdings, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on November 6, 2014, File No.
001-32597)**

10.30	Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.3 to CF Industries
Holdings, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on May 7, 2015, File No. 001-32597)**

10.31	Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.28 to CF Industries
Holdings, Inc.'s Annual Report on Form 10-K filed with the SEC on February 25, 2016, File No. 001-32597)**

10.32	Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.7 to CF Industries
Holdings, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on August 4, 2016, File No. 001-32597)**

10.33	Form of Performance Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.20 to
CF Industries Holdings, Inc.'s Annual Report on Form 10-K filed with the SEC on February 27, 2014, File No.
001-32597)**

10.34	Form of Performance Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.3 to CF
Industries Holdings, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on November 6, 2014, File No.
001-32597)**

10.35	Form of Performance Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.4 to CF
Industries Holdings, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on May 7, 2015, File No.
001-32597)**

10.36	Form of Performance Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to CF
Industries Holdings, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on August 6, 2015, File No.
001-32597)**

10.37	Form of Performance Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.33 to
CF Industries Holdings, Inc.'s Annual Report on Form 10-K filed with the SEC on February 25, 2016, File No.
001-32597)**

10.38	Form of Performance Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.8 to CF
Industries Holdings, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on August 4, 2016, File No.
001-32597)**

10.39
10.40	Form of Non-EmlRpoidSyee Drector estricte tock Award Agreement (incorporated by reference to Exhibit 10.3
to CF Industries Holdings, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on August 7, 2014, File
No. 001-32597)**
Form of Equity Award Amendment Letter Agreement, dated as of July 21, 2016 (incorporated by reference to
Exhibit 10.5 to CF Industries Holdings, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on August 4,
2016, File No. 001-32597)**

10.41	Letter Agreement between Philipp P. Koch and CF Industries Holdings, Inc. (incorporated by reference to
Exhibit 10.2 to CF Industries Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on December
24, 2015, File No. 001-32597)**

10.42	Commitment Letter, dated August 6, 2015, by and among Morgan Stanley Senior Funding, Inc., Goldman
Sachs Bank USA and CF Industries Holdings, Inc. (incorporated by reference to Exhibit 10.1 to CF Industries
Holdings, Inc.’s Current Report on Form 8-K filed with the SEC on August 12, 2015, File No. 001-32597)

EXHIBIT NO.	DESCRIPTION

10.43	Third Amended and Restated Revolving Credit Agreement, dated as of September 18, 2015, among CF
Industries Holdings, Inc., the borrowers from time to time party thereto, the lenders from time to time party
thereto, Morgan Stanley Senior Funding, Inc., as administrative agent, and Morgan Stanley Bank, N.A.,
Goldman Sachs Bank USA, Bank of Montreal, Royal Bank of Canada, The Bank of Tokyo-Mitsubishi UFJ,
Ltd. and Wells Fargo Bank, National Association, as issuing banks (incorporated by reference to Exhibit 10.2
to CF Industries Holdings, Inc.’s Current Report on Form 8-K filed with the SEC on September 23, 2015, File
No. 001-32597)

10.44	Amendment No. 1, dated as of December 20, 2015, to the Third Amended and Restated Revolving Credit
Agreement among CF Industries Holdings, Inc., CF Industries, Inc., the lenders party thereto, the issuing banks
party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent (incorporated by reference to
Exhibit 10.2 to CF Industries Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on December
21, 2015, File No. 001-32597)

10.45	Amendment No. 2, dated as of July 29, 2016, to the Third Amended and Restated Revolving Credit Agreement
among CF Industries Holdings, Inc., CF Industries, Inc., the lenders party thereto, the issuing banks party
thereto and Morgan Stanley Senior Funding, Inc., as Administrative Agent (incorporated by reference to
Exhibit 10.1 to CF Industries Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on August 4,
2016, File No. 001-32597)

10.46	Amendment No. 3, dated as of October 31, 2016, to the Third Amended and Restated Revolving Credit
Agreement among CF Industries Holdings, Inc., CF Industries, Inc., Morgan Stanley Senior Funding, Inc., as
administrative agent under the Existing Revolving Credit Agreement (as defined therein), the issuing banks
under the Existing Revolving Credit Agreement signatory thereto, and the lenders under the Existing
Revolving Credit Agreement signatory thereto (incorporated by reference to Exhibit 10.1 to CF Industries
Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on November 3, 2016, File No. 001-32597)

10.47	Pledge and Security Agreement, dated as of November 21, 2016, among CF Industries Holdings, Inc., CF
Industries, Inc., the Subsidiary Guarantors (as defined therein) party thereto and Morgan Stanley Senior
Funding, Inc., as administrative agent (incorporated by reference to Exhibit 10.1 to CF Industries Holdings,
Inc.’s Current Report on Form 8-K filed with the SEC on November 22, 2016, File No. 001-32597)

10.48	364-Day Bridge Credit Agreement, dated as of September 18, 2015, among CF Industries Holdings, Inc., the
borrowers from time to time party thereto, the lenders from time to time party thereto, and Morgan Stanley
Senior Funding, Inc., as administrative agent (incorporated by reference to Exhibit 10.1 to CF Industries
Holdings, Inc.’s Current Report on Form 8-K filed with the SEC on September 23, 2015, File No. 001-32597)

10.49	Amendment No. 1, dated as of December 20, 2015, to the 364-Day Bridge Credit Agreement among CF
Industries Holdings, Inc., CF Industries, Inc., the lenders party thereto and Morgan Stanley Senior Funding,
Inc., as administrative agent (incorporated by reference to Exhibit 10.1 to CF Industries Holdings, Inc.'s
Current Report on Form 8-K filed with the SEC on December 21, 2015, File No. 001-32597)

10.50	Amended and Restated Nitrogen Fertilizer Purchase Agreement, dated December 18, 2015, by and between CF
Industries Nitrogen, LLC and CHS Inc. (incorporated by reference to Exhibit 10.1 to CF Industries
Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on December 18, 2015, File No. 001-32597)*

12	Ratio of earnings to fixed charges

21	Subsidiaries of the reigstrant

23	Consent of KPMG LLP, independent reistered public accounting figrm

31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

101	The following financial information from CF Industries Holdings, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (1)
Consolidated Statements of Operations, (2) Consolidated Statements of Comprehensive (Loss) Income, (3)
Consolidated Balance Sheets, (4) Consolidated Statements of Equity, (5) Consolidated Statements of Cash
Flows and (6) the Notes to Consolidated Financial Statements


Furthermore, our turnover growth can vary according to the level of maturity of our POS, which is a factor affecting our results of operations. The amount of turnover that a POS generates depends on its stage of operation. Generally, turnover is lower at the initial stage of operation, but a new POS generally generates an operating profit within the first year of operation. The turnover of a new POS tends to continue to increase thereafter as the POS gains customer loyalty and market recognition. Turnover growth of the POS will continue to depend on various factors such as the level of customer traffic, quality of management and the growth rate of the local economy.

Our profitability is affected in part by our ability to successfully grow sales at the existing POS that we operate. We measure this growth through evaluating Same Store Sales and Same Store Sales Growth (please see “— Explanation of Same Store Sales Growth” for further details on how these measures are calculated). The following table sets out a breakdown, by geographical segment, of our Same Store Sales Growth for FY2010, FY2011 and 1HFY2012:

(1) Includes self-operated POSi n Hong Kong, Macau and Taiwan only, as POSi n Singapore and Malaysia are all franchised POS.

Although much of our turnover growth in recent years was attributable to the expansion of our POS network, the strong performance of our existing POS on a Same Store Sales basis has also been an important driver for our turnover growth. Our overall Same Store Sales Growth was 33.8% in FY2011 and despite the global economic downturn in 2008 and 2009, our overall Same Store Sales Growth was 15.6% in FY2010. Our Same Store Sales Growth for 1HFY2012 further increased to 61.9%. Our Same Store Sales Growth over FY2010, FY2011 and 1HFY2012 can be partly attributable to our strong promotional activities, which enhance our brand awareness and image in the locations where we operate, and our continuous development and promotion of new and wider range of merchandise, including higher value products to suit market demand. We believe the strength of our customer loyalty programme is a significant factor contributing to our Same Store Sales Growth. Total sales to our customer loyalty programme members in the PRC in our self-operated POS as a percentage of total retail turnover in the PRC has risen from 27.0% for FY2009 to 33.0% for 1HFY2012. For FY2011 and 1HFY2012, over 80% of the top 500 customers (by transaction value) in the PRC were our customer loyalty programme members. Many other factors also influence Same Store Sales including economic conditions, competition, pricing and customer service.

# Maintaining a strong brand image that caters to changing consumer preferences

We derive substantially all of our turnover from sales ofj ewellery products, which depend on the strength of our brand. The strength of our brand is based in part on our long history combined with our reputation for providing trusted high qualityj ewellery with distinctive product designs to a wide range of consumers. We continually develop and promote a wide range ofj ewellery to suit consumer preferences. For example, we produce both traditional and contemporary designs that cater to the needs of customers at all life stages. Although our predominant focus is on the mass luxury segment which we believe has the greatest growth potential in the Greater China region, we also produce high-end luxury products that enable us to meet the demands of wealthy individuals in the region. Our high-end luxury products have also helped us establish our brand as a high-endj ewellery brand which is consistent with our overall marketing and advertising strategy. We have also developed a younger line of products with lower entry prices targeting the younger generation to expand our

customer base and cultivate a retailer-consumer relationship with a younger generation of consumers. Accordingly, a significant part of our success has been and will continue to depend on our ability to maintain our strong brand image and at the same time continue to design and produce a wide range of qualityj ewellery that meets continually changing consumer preferences.

# Ability to secure steady supplies and manage changes to raw material prices

Our ability to source a steady supply of raw materials is another key factor to our success. The cost of inventories recognised as expenses during the Track Record Period constituted at least 90% of our total cost of goods sold during the respective years. We maintain strong relationships with our existing suppliers due in part to our leadership position in the PRC, scale of operations, solid financial performance, reliable payment history and ability to fulfil our suppliers’ selection or membership criteria. For example, we have been selected as a DTC Sightholder and Select Diamantaire of Rio Tinto. We have been able to renew our raw material supply agreements after they expire. In addition toj ewellery, we sell more than a hundred different watch brands, and have well-established business relationships with reputable watch suppliers, including affiliates of LVMH Group, Richemont Group, Rolex group and Swatch Group. We have been able to source mid- to high-end luxury watches from a number of suppliers on an order-by-order basis since the 1960s.

Changes to raw material prices may also affect our results of operations. Ourj ewellery products are made of precious raw materials such as diamonds, coloured stones, jadeite, pearls, gold and other precious metals that are subject to changes in market prices. However, demand forj ewellery products are consumer driven, and as such, we have generally been able to pass-on raw material price changes to our customers. In addition, for our products made of gold, we use gold loans and bullion forward contracts to hedge against the financial impact of gold price fluctuations. For FY2010 as compared to FY2009, the average gold price increased by 17.0% and our turnover from our sales of gold products increased by 22.5% during the same period. For FY2011 as compared to FY2010, the average gold price increased by 26.8% and our turnover from our sales of gold products increased by 68.3% during FY2011. For 1HFY2012 as compared to 1HFY2011, the average gold price increased by 31.8% and our turnover from our sales of gold products increased by 94.7%.

The selling prices of our jewellery products, and particularly gold products, usually reflect the market price of the raw materials in the products and a relatively stable gross margin percentage for those products. While fluctuations in the price of raw materials could impact the selling prices of our products and our gross profit, we have successfully managed such price fluctuations through various selling strategies in order to maximise our nominal sales and hence our gross profit. In addition, we were able to maintain a relatively stable overall gross margin from approximately 28% to 30% during the Track Record Period due to our ability to adjust our product offerings based on a wide selection of jewellery products, including gem-set jewellery, platinum/karat gold products, gold products and watches.

Compensation costs represent a significant component of our total costs. As at 30 September 2011, we had more than 25,000 employees and our staff related costs constitute a significant portion of our overall expenses. In FY2009, FY2010, FY2011, 1HFY2011 and 1HFY2012, staff related costs relating to our selling and distribution activities were HK\$762.6 million, HK\$975.3 million, HK\$1,354.2 million, HK\$543.3 million and HK\$978.6 million, respectively, representing 31.3%, 30.5%, 30.8%, 30.9% and 34.2% of our total selling and distribution costs, respectively. The compensation programme for our sales personnel is designed to incentivise our employees to perform well at their respective functions by linking a portion of their compensation to our performance. The exact portion that is linked to our performance would depend on each employee’sj ob function and seniority. On the other hand, staff related costs (including director emoluments) relating to our administrative activities in FY2009, FY2010, FY2011, 1HFY2011 and 1HFY2012, were HK\$313.3 million, HK\$344.5 million, HK\$466.8 million, HK\$208.8 million and HK\$390.9 million, representing 61.6%, 53.6%, 51.2%, 48.3% and 55.1% of our total administrative expenses, respectively.


bogus though commonplace. But in any case even if we believe that our language is just one game among many, how can this be anything more than a matter of belief? Whether the anthropologist is ‘native’ or ‘western’, is not his/her work of culture precisely an attempt to explain ‘it’ to (and I would also say fabricate it for) us? And are not these ‘profound’ differences in reality effects of genres—literary, film, scholarly—our genres? Even if then there are profound differences, the only ones we can understand are the ones we understand (or think we do). And reflexively or self-critically we now know that the anthro-pologist can be more inventive than the native, or the native can be inventive for the benefit of the anthropologist.59

There is also the question of future generations. It is improbable that humans have the capacity to think seriously beyond the present and the future which is present in that present. One or two generations—children and grandchildren—have traditionally provided some kind of horizon for measuring this present future and this is embedded in the most fundamental device for the purposive coordination of society which is the rules of inheritance. Cryogenics and cloning may come to offer a sci-fi dissolution of this limited time-frame and elongate the present future. Beyond that, we can allow future generations in as virtual pre-sent discussants to speak for their interests, however we try to institutionalise that.60 (In a partly pre-institutional sense, that is what Greenpeace and Friends of the Earth and other groups are trying to do.) But what often gets muddled up here is the distinction between the worlded nature of postmetaphysical thinking and the viability of transposing our traditional language of trusteeship and responsibility from this world to the world of the future and of its inhabitants. This is necessarily an abstract problem (the cultural allegiances of Greenpeace etc often obscure this) and I suspect it can only be formulated technocratically, ie through calculations, statistics, measurements, computer simulations, and, in the end, probabilistically. And at this level the problem is that it’s difficult to do these calculations for ourselves and it’s difficult to choose between alternative calculations and so it’s difficult to have open-ended discussions about what we should do faced with an agenda assembled in this way.61

In response to all this, Luhmann’s position is blunt:

[Habermas’s] theory sides with the human to join the latter in battle against enemy forces. But isn’t this human merely an invention of this theory, merely a veiling of this theory’s self-reference? If he or she were meant as an empirical object (with the name of subject), the theory would have to declare who, then, is meant, for obviously it cannot send five billion humans, who at the same time are living and acting, on a discursive search for good grounds. Not only the length of this process of searching, and the conditions of ‘bounded rationality’, but already the sheer simultaneity of

59 Cf, the Writing Cultures debate literature. 60 J Habermas, The Future of Human Nature (Oxford, Polity, 2003). 61 Cf, the debate around B Lomborg, The Skeptical Environmentalist: Measuring the Real State of the World (Cambridge, Cambridge University Press, 2001).

behaviour would doom such a project. One cannot idealise sociality without taking account of time.62

In other words, the opacity of the problem cannot be redeemed through com-municative rationality, because that solution has no possible foundation in actual communicative situations. It is not just that there is no escape from the distinction between social and psychic systems; it is also the presumption at least that proposals which ignore or bury this problem are doomed to fail. There can, of course, be no proof of this. But why prefer hope to skepticism or circumspection in a world with many possibilities, many of which are ‘sub-optimal’?

One could perhaps describe the race equality agenda as a therapeutic or palliative one at the (national) societal level (and equally this can be regarded as a sub-dimension of a larger pan-European project). The aim is at once to cure or ‘ease’ pathologies and to build a ‘strong’ and healthy societal organism. The assumption is that diversity is to be cherished and that diversity is itself produc-tive. A diverse society is better than a non-diverse, culturally homogenous one. Parekh has some intelligent arguments to support this position (in reality, a more sophisticated position).63 However, who believes this?

I believe it. But I have personal reasons for believing it. That is, in any self-description which I would put into communication, I would offer a selective biography which would explain, if that was demanded, why I ‘personally’ pre-fer to work in a university with students from all over the world (multiethnic, multinational) compared with one where most of the students are from Hertfordshire or Surrey, and most of my colleagues would agree—that is—they would nod assent in an interaction system, although what they really think I do not know. I don’t know if they know. One doesn’t critically test through ‘intro-spection’ whether one believes all the things one assents to in communication. In addition, work is work. Where I live is another matter. What I want or need from where I live is for the most part a quiet environment because I work from home a lot. Certain cultural practices in my immediate environment (neighbours) might not be consistent with that. I may need to make neighbour-related predictions in deciding where to live (along with affordability, space requirements etc). Prejudice is pervasive. Without it ‘personal’ decisions cannot be made.64

62 N Luhmann, Theories of Distinction: Redescribing the Descriptions of Modernity (Stanford, Stanford University Press, 2002) 193. 63 B Parekh, Rethinking Multiculturalism: Cultural Diversity and Political Theory (Basingstoke, Palgrave, 2000). 64 TC Schelling, Micromotives and Macrobehaviour (New York, WW Norton, 1978) chapter 4.