# Six months ended 30 June 2010 compared to six months ended 30 June 2009

Turnover. Our turnover increased by 53.0% from RMB 2,045.0 million for the six months ended 30 June 2009 to RMB 3,127.9 million for the six months ended 30 June 2010, primarily due to an increase in sales of new automobiles by 55.8% from RMB 1,723.1 million for the six months ended 30 June 2009 to RMB 2,684.6 million for the six months ended 30 June 2010.

Turnover increased by 90.2% from sales of premium and ultra premium branded automobiles from RMB 871.0 million for the six months ended 30 June 2009 to RMB 1,656.3 million for the six months ended 30 June 2010. We attribute this increase primarily to the growth of the PRC premium and ultra premium brands market in general, the continued expansion of our dealership operations, particularly our sales from two new BMW dealership stores in Baotou and Beijing that commenced operations in February and June 2010 respectively and one Porsche dealership store in Dongguan that commenced operation in May 2010, as well as the continued ramp-up of two BMW dealership stores in Nanchang and Zhuhai that commenced operations in October 2008 and March 2009 respectively. The three new dealership stores in Baotou, Beijing and Dongguan generated RMB 213.1 million in sales for the six months ended 30 June 2010. The BMW dealership stores in Nanchang and Zhuhai generated RMB 230.7 million in sales for the six months ended 30 June 2010, compared to RMB 67.6 million for the six months ended 30 June 2009. The increase in turnover from sales of premium and ultra premium branded automobiles was also attributable to the increased sales volumes as well as the average sales prices of our premium and ultra premium branded automobiles as we adjusted our sales strategies to market and sell higher-priced models of premium and ultra premium branded automobiles that were introduced by automobile manufacturers. Turnover from sales of middle market automobiles increased by 20.7% from RMB 852.1 million for the six months ended 30 June 2009 to RMB 1,028.4 million for the six months ended 30 June 2010, primarily due to the growth of the overall PRC automobile market and the continued expansion of our dealership operations, particularly our sales from one new middle market brand dealership store in Inner Mongolia that commenced operations in March 2010. The dealership store in Inner Mongolia generated RMB 29.0 million in sales for the six months ended 30 June 2010. Turnover from sales of new automobiles also increased as a result of the growth of the overall PRC automobile market. According to ACMR, sales values of automobiles increased by 49.6% from the six months ended 30 June 2009 to the six months ended 30 June 2010.

In addition, turnover from provision of after-sales services increased by 45.7% from RMB 166.7 million for the six months ended 30 June 2009 to RMB 242.9 million for the six months ended 30 June 2010, which was primarily attributable to our expanded customer base and our adjustments in sales strategies for automobile accessories to offer expanded range of selection and higher priced products. Turnover from provision of logistics services and sales of lubricant oil increased by 29.1% from RMB 155.2 million to RMB 200.4 million, which was primarily due to the increase in demand from our customers as a result of the increased sales of automobiles.

Cost of sales. Our cost of sales increased by 50.0% from RMB 1,892.3 million for the six months ended 30 June 2009 to RMB 2,838.7 million for the six months ended 30 June 2010. This increase was due primarily to the increase in cost of sales for new automobiles, which increased by 52.1% from RMB 1,667.7 million to RMB 2,536.6 million for the same period as our sales of new automobiles increased.

Cost of sales increased by 83.6% from RMB 843.7 million for the six months ended 30 June 2009 to RMB 1,549.0 million for the six months ended 30 June 2010 for premium branded automobiles and increased by 19.8% from RMB 824.1 million to RMB 987.6 million for middle market branded automobiles in the same period. The increase in cost of sales of new automobiles was generally in line with the increased turnover from sales of new automobiles. The increase in our cost of sales was also due in part to an increase in cost of sales of after-sales services, which increased by 37.7% from RMB 102.9 million to RMB 141.7 million during the same period, and was generally in line with the increased turnover from after-sales services. In addition, our cost of sales of our logistics services and lubricant oil trading business increased by 31.8% from RMB 121.7 million to RMB 160.4 million during the same period, which was generally in line with the increased turnover from our logistics services and lubricant oil trading business.

Gross profit. Our gross profit increased by 89.4% from RMB 152.7 million for the six months ended 30 June 2009 to RMB 289.2 million for the six months ended 30 June 2010.

Gross profit from our dealership business increased from RMB 119.2 million for the six months ended 30 June 2009 to RMB 249.2 million for the six months ended 30 June 2010, primarily due to an increase in gross profit from sales of new automobiles. Gross profit from sales of premium and ultra premium branded automobiles increased from RMB 27.4 million to RMB 107.2 million for the same period and gross profit from sales of middle market branded automobiles increased from RMB 28.0 million to RMB 40.8 million for the same period. In addition, gross profit from after-sales services increased from RMB 63.8 million to RMB 101.2 million in the same period.

Gross profit from our logistics services and lubricant oil trading business increased from RMB 33.5 million to RMB 40.0 million in the same period.

Our gross margin increased from 7.5% for the six months ended 30 June 2009 to 9.2% for the six months ended 30 June 2010. This increase was primarily due to the increased proportion of our sales of premium and ultra premium branded automobiles, which generally have higher gross margin than sales of middle market branded automobiles, as well as increased sales of higher priced premium branded automobile models and accessories which have higher margins as a result of our adjustments in the sales strategies.

Other revenue and other net income. Our other revenue and other net income increased by 82.7% from RMB 12.7 million for the six months ended 30 June 2009 to RMB 23.2 million for the six months ended 30 June 2010, primarily due to the increase in our commission income received from financial institutions and insurance companies as we brokered more loans and insurance policies in connection with our increased sales of new automobiles. In addition, interest income from bank deposits also increased as a result of the increased balance of our pledged bank deposits.


We communicate with Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with Audit Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Ng Ping Fai.

		Year ended 31 August

	Note	2017	2016

		RMB’000	RMB’000

Revenue	5	846,222	781,331

Cost of revenue	8	(410,464)	(375,133)

Gross profit		435,758	406,198

Selling expenses	8	(3,755)	(4,196)

Administrative expenses	8	(147,203)	(70,421)

Other income	6	22,870	6,442

Other gains/(losses) — net	7	1,060	(337)

Operating profit		308,730	337,686

Finance income	10	15,527	1,376

Finance expenses	10	(10,456)	(27,386)

Finance income/(expenses) — net		5,071	(26,010)

Profit before income tax		313,801	311,676

Income tax expense	11	—	—

Profit attributable to equity holders of the Company		313,801	311,676

Earnings per share attributable to equity holders
of the Company (RMB Yuan)

Basic	12	0.12	0.14

Diluted	12	0.12	0.14


abovementioned. Accordingly, our Directors are of the view that, it is expected that the downward fluctuations, if any, in number of SMILE surgeries conducted should stabilize gradually and will not have material adverse impact on our Group’s operation and financial performance.

Revenue generated from treatment for other eye problems had increased during the Track Record Period, from approximately HK\$36.3 million for the year ended 31 March 2019 to approximately HK\$36.8 million which for the year ended 31 March 2020 which was generally consistent with an increase in total number of patient visits, and then further increased to HK\$44.8 million for the year ended 31 March 2021 which was mainly due to the increase in revenue recorded for our standard cataract surgeries and laser procedures. Revenue generated from treatment for other eye problems had increased during the Track Record Period, from approximately HK\$12.3 million for the four months ended 31 July 2020 to approximately HK\$22.1 million for the four months ended 31 July 2021, which was mainly due to the increase in revenue recorded for each of our standard cataract surgeries, laser procedures, PPV surgeries and other treatments/surgeries. As the majority of our Medical Practitioners had been providing ophthalmic services under our brand ‘‘Clarity’’ for more than three years, we were able to build up our patient base by word-of-mouth referrals from existing patients and as a result, our Directors are of the view that it had contributed to the increase in revenue generated from treatments for other eye problems during the four months ended 31 July 2021.

Revenue generated from our consultation and examination service decreased from approximately HK\$9.2 million for the year ended 31 March 2019 to HK\$8.5 million for the year ended 31 March 2020 and had subsequently increased to HK\$9.1 million for the year ended 31 March 2021. Revenue generated from the sales of prescription remained relatively stable during the Track Record Period, which amounted to approximately HK\$6.3 million, HK\$6.2 million and HK\$6.9 million, respectively. Revenue generated from our consultation and examination service increased from approximately HK\$2.7 million for the four months ended 31 July 2020 to HK\$3.8 million for the four months ended 31 July 2021 which was mainly due to the growth of member of patient visits. Revenue generated from the sales of prescription increased by approximately HK\$0.8 million, or 39.4%, from approximately HK\$2.0 million for the four months ended 31 July 2020 to HK\$2.8 million for the four months ended 31 July 2021. The increase in revenue generated from sales of prescriptions and others was generally in line with our overall increase in consultation and examination services provided during the period.

The table below sets forth the breakdown of our revenue by refractive treatments for the Track Record Period:

The table below sets forth the breakdown of our revenue by treatments for other eye problems for the Track Record Period:

We provide medical consultation and examination services to our patients through our Medical Practitioners and optometrists, with support from our registered and enrolled nurses and/or nursing staff. Consultation and examination services mainly include assessments on eye conditions, such as visual acuity, refraction, anterior segment examination, fundal examination and intraocular pressure measurement. After the completion of consultation, examination and diagnosis based on our patients’ specific conditions, needs and concerns, Medication may be prescribed and/or treatments may be recommended to the patients by our Medical Practitioners. Follow-up consultation and examination services may be provided depending on the condition of the patients after taking the recommended Medication and/or completion of treatment.

We provide a range of ophthalmic treatments at our Surgery Centres or in the Private Hospitals, depending on the complexity of the treatment, the need of general anaesthesia and/or the choice of our patients. Treatment services may be recommended to our patients after the diagnosis through consultation and examination, taking into consideration a number of factors, in particular, the age and condition of the patient, the safety, effectiveness, risks and possible side-effects of the relevant treatment. One or more types of treatments may be recommended, depending on patients’ eye problems. Our Medical Practitioners will explain to patients the associated benefits and potential risks of each recommended treatment and any alternative treatment choices. We record the details of patients’ drug allergy information into our Medical Centre Management System and arrange relevant checks to ascertain the degree of myopia or hyperopia, or the curvature of corneas, before the provision of treatment services. All our patients are required to sign an operation consent form in the presence of the responsible Medical Practitioner and at least one nursing staff. Our treatment services are performed by our Medical Practitioners with assistance from frontline staff.


# XV. Notes to Key Items of the Company Financial Statements (Continued)

十五、公司主要財務報表項目註釋（續）

6. 投資收益╱（損失）

Item                     項目	Incurred during
the year
本年發生額	Incurred in
previous year
上年發生額

Gain on long-term equity investments under 權益法核算的長期股權
the equity method             投資收益	112,997,281.78	109,875,033.76

Investment income arising from disposal of 處置長期股權投資產生的
long-term equity investments        投資收益	(2,344,493,792.76)	74,160,285.25

Gain on long-term equity investments under 成本法核算的長期股權
the cost method              投資收益	1,097,259,790.25	1,080,565,077.90

Other                    其他	4,159,314.24	–

Total                     合計	(1,130,077,406.49)	1,264,600,396.91

十五、公司主要財務報表項目註釋（續）

7. 現金流量表補充資料

Item                     項目	Incurred during
the year
本年發生額	Incurred in
previous year
上年發生額

Net profit                  淨利潤	6,565,148,557.00	7,359,913,863.60

Add: Impairment loss of assets        加：資產減值損失	1,961,966.02	351,958,827.88

Impairment gain of credit          信用減值利得	(1,404,072.48)	(34,059,926.00)

Increase in special reserve          專項儲備的增加	22,218,884.94	20,031,981.23

Depreciation of fixed assets and       固定資產及投資性
investment properties           房地產折舊	811,862,399.51	601,008,663.22

Amortization of intangible assets       無形資產攤銷	19,100,027.48	8,315,630.37

Losses (gains) on disposal of fixed      處置或報廢固定資產、
assets, intangible assets and         無形資產和其他
other long-term assets           長期資產的損失（收益）	(20,413,802.94)	3,472,164.55

Finance expenses              財務費用	(526,532.67)	3,439,623.10

Investment loss (income)           投資損失（收益）	1,130,077,406.49	(1,264,600,396.91)

Profit or loss on change of fair value     公允價值變動損益	(64,160,277.02)	–

Increase in deferred tax assets        遞延所得稅資產的增加	(444,742,582.70)	(30,320,212.07)

Increase in deferred tax liabilities       遞延所得稅負債的增加	6,653,805.68	–

Increase in inventories            存貨的增加	(1,200,231,375.10)	(1,172,939,628.20)

(Increase) decrease in operating        經營性應收項目的
receivables                 （增加）減少	(2,859,763,693.10)	1,850,840,404.39

Increase in operating payables        經營性應付項目的增加	7,251,942,122.41	5,190,664,425.45

Net cash flow from operating activities     經營活動產生的現金流量淨額	11,217,722,833.52	12,887,725,420.61


APPROACH	2

ABOUT THIS REPORT	3

ABOUT GAMEONE	5

OUR STAKEHOLDERS	6

ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT	7

SECTION A: ENVIRONMENTAL	7

Emissions	7

Use of Resources	9

The Environmental and Natural Resources	10

SECTION B: SOCIAL	11

Employment	11

Health and Safety	12

Development and Training	13

Labour Standard	13

Supply Chain Management	13

Product Responsibility	14

Anti-corruption	16

Community investment	16

ENVIRONMENTAL DATA	17

SOCIAL DATA	19

Gameone Holdings Limited (hereafter called “Gameone” or the “Company”) and its subsidiaries (collectively, the “Group” or “we”) are committed to improving business performance to maximize stakeholders’ value without compromising the environmental and social aspect, in the hope that it can bring positive impact on both the Group and the community. Aiming to be the market leader in Hong Kong and Taiwan mobile game industry, the Group focuses on developing a wide game product portfolio, ranging from self/co-developed to licensed games as well as leveraging third-party distribution platforms to enrich customer base. The strong relationship with renowned game developers and operators contributed to the success of the business.

We always thrive for meeting the expectation of our stakeholders. Our main stakeholders, including customers, potential investors and shareholders, employees, suppliers, non-governmental organizations (“NGOs”) and local community, post significant impact on the Group’s daily operations. Building on the insight gained from the stakeholders, we roll out a sustainability strategy, management and reporting system.

We constantly hope to mitigate emerging risks and explore new business opportunities. Riding on the current mobile game trend, we are hoping to refine our products to meet the escalating customers’ needs.

To implement sustainability strategies which apply to all levels of the Group, the top-down approach is adopted for the following sustainability strategies:

1. To minimize the burden on the environment

2. To identify and priorities the environmental and social issues

4. To respond to the crisis and market changes in a timely manner

5. To safeguard human rights and social culture

6. To actively engage stakeholders in the decision-making process

Hard work lies ahead as we continue to grow and operate sustainably, yet, together as a whole, there is nothing to stop us reaching more milestones.


# 29. TRADE AND OTHER RECEIVABLES (CONT’D)

Impairment loss on trade receivables, term loans and other receivables is recognised in profit or loss after review by the management of the relevant group companies, based on the latest status of trade receivables, term loans and other receivables, and the latest announced or available information about the underlying collateral held.

The following is an aged analysis of the trade and other receivables that were past due at the end of the reporting period but not impaired:

29. 貿易及其他應收款項（續）

經相關集團公司之管理層審視應收貿易賬款、有期貸款及其他應收款項的情況後（根據應收貿易賬項、有期貸款及其他應收款項的最新情況及最新公佈或得到的有關抵押品的資料）之減值虧損於損益中確認。

以下為於報告期末之已逾期但無減值之貿易及其他應收款項之賬齡分析：

	2016
二零一六年	2015
二零一五年

HK$ Million
百萬港元	HK$ Million
百萬港元

Less than 31 days            少於31日	10.6	12.4

31 to 60 days              31至60日	5.2	4.0

61 to 90 days              61至90日	3.7	5.1

91 to 180 days             91至180日	2.2	3.8

Over 180 days              180日以上	0.1	0.9

	21.8	26.2

The carrying amounts of the trade and other receivables at amortised cost approximate their fair values.

Further details on financial risk management of trade and other receivables are disclosed in note 40.

按攤銷成本計值之貿易及其他應收款項的賬面值與其公平價值相若。

貿易及其他應收款項之金融風險管理之進一步詳情載於附註40。

# 30. AMOUNTS DUE FROM ASSOCIATES AND JOINT VENTURES

30. 聯營公司及合營公司欠款

	2016
二零一六年	2015
二零一五年

HK$ Million
百萬港元	HK$ Million
百萬港元

Advances             墊款	395.5	323.9

Less: impairment allowance     減：減值撥備	(17.1)	(17.1)

	378.4	306.8

Analysed for reporting purposes as: 為呈報目的所作之分析：

Non-current assets         非流動資產	257.4	73.5

Current assets            流動資產	121.0	233.3

	378.4	306.8

Gross amount of impaired     聯營公司有減值
advances to associates       墊款總額	17.3	17.3

Individually assessed        個別評估
impairment allowances      減值撥備

At 1st January and         於一月一日及
31st December          於十二月三十一日	(17.1)	(17.1)

Net carriynig amount of mpaired 聯營公司已減值墊款
advances to associates      賬面淨值	0.2	0.2


For the rest of this section, we fix a separable topological group H, and assume that \( \phi : { \mathrm { H o m e o } } ( M ) \to H \) is a homomorphism. For simplicity, we first treat only the case where M is closed; modifications for the case where \( \partial M \ne \emptyset \) and the relative case of \( \mathrm { H o m e o } _ { 0 } ( M \, \mathrm { r e l } \, N ) \) are discussed in Section 4.1, along with a comment for noncompact M.

The proof is somewhat involved, so we have divided it into three major steps. The first is general set-up; the second a “localized” version of continuity (for homeomorphisms with support in a small ball), and the third step improves this local result to a global version by careful use of the fragmentation property. There is a delicate balancing act between steps 2 and 3; in particular, it will be necessary to construct a particular kind of efficient cover of the manifold M to use in the fragmentation argument.

Since \( \phi \) is a group homomorphism, it suffices to show continuity at the identity. In other words, we need to prove the following.

3.1. For any neighborhood V of the identity in H, there exists a neighborhood U of the identity in \( \operatorname { H o m e o } _ { 0 } ( M ) \) such that \( U \subset \phi ^ { - 1 } ( \breve { V } ) \).

We first use the Baire category theorem to extract an “approximate” version of condition 3.1.

Lemma 3.2. Let V be a neighborhood of the identity in H. There exists a neighborhood U of the identity in \( \operatorname { H o m e o } _ { 0 } ( M ) \) such that U is contained in the closure of \( \phi ^ { - 1 } ( V ) \).

Remark 3.3. The proof given below works generally for homomorphisms from any Polish group to a separable group; see e.g. [4] for one instance of this (where it is called “Baire category continuity”) and [14] for another in the context of groups with the “Steinhaus property”.

Proof of Lemma 3.2. Take a smaller neighborhood of the identity \( V _ { 0 } \subset V \) such that \( V _ { 0 } \) is symmetric (i.e. \( v \in V _ { 0 } \Leftrightarrow v ^ { - 1 } \in V _ { 0 } ) \), and such that \( V _ { 0 } ^ { 4 } \subset V \). Let \( \{ h _ { i } \} \) be a countable dense subset of H, so that

Let \( W = \phi ^ { - 1 } ( V _ { 0 } ^ { 2 } ) . \). For each translate \( h _ { i } V _ { 0 } \) that intersects the image of \( \mathrm { H o m e o } _ { 0 } ( M ) \), choose an element \( \phi ( g _ { i } ) \in h _ { i } V _ { 0 } \). Then \( \phi ( g _ { i } ) = h _ { i } v _ { i } \) for some \( v _ { i } \in V \), and so

\[ { \mathrm { H o m e o } } ( M ) = \bigcup _ { i } g _ { i } W \]

Since \( { \mathrm { H o m e o } } _ { 0 } ( M ) \) is a Baire space, it cannot be covered by countably many nowhere dense sets. Thus, W is dense in the neighborhood of some \( g \in { \mathrm { H o m e o } } _ { 0 } ( M ) \), so

is dense in some neighborhood of the identity in \( \mathrm { H o m e o } _ { 0 } ( M ) \). This proves the lemma.

Of course, improving “dense in a neighborhood of the identity” to “contains a neighborhood of the identity” is a nontrivial matter and the main goal of this work!

# Step 2: A localized version (after Rosendal)

As in Step 1, assume that we have fixed a homomorphism \( \phi : { \mathrm { H o m e o } } ( M ) \to H \), and a neighborhood V of the identity in H, with the aim of showing that \( \phi \) satisfies condition 3.1.

The “localized version” of Condition 3.1 that we aim to prove here states, loosely speaking, that a homeomorphism \( f \in { \mathrm { H o m e o } } _ { 0 } ( M ) \) with sufficiently small support lies in \( \phi ^ { - 1 } ( V ) \). The precise statement that we will use in the next step is given in Lemma 3.8 below. Our strategy is to build up to this statement gradually, using a series of lemmata guided by Rosendal’s work in [13].

Notation 3.4. As in Lemma 3.2, we start by fixing a smaller, symmetric neighborhood of the identity \( V _ { 0 } \subset V \) such that \( V _ { 0 } ^ { 8 } \subset V \). Let \( W = \phi ^ { - 1 } ( V _ { 0 } ) \).

The first lemma is a very rough version of our end goal. It states that in any neighborhood of any point of M, we can find an open ball so that all diffeomorphisms supported on that ball are restrictions of elements in \( \phi ^ { - 1 } ( V _ { 0 } ^ { 2 } ) \subset \phi ^ { - 1 } ( V ) \).

Lemma 3.5. Let \( B \subset M \) be an embedded ball. There exists a ball \( B ^ { \prime } \subset B \) such that for every \( f \in { \mathrm { H o m e o } } _ { 0 } ( M ) \) with \( \operatorname { s u p p } ( f ) \subset B ^ { \prime } \), there is an element \( w _ { f } \in W ^ { 2 } \) with \( \operatorname { s u p p } ( w ) \subset B \) and such that the restriction of \( w _ { f } \) to \( B ^ { \prime } \) agrees with f.

Proof. Let \( B \subset M \) be an embedded ball. The argument from the proof of Lemma 3.2 implies that there exists a countable set \( \{ g _ { i } \} \subset { \mathrm { H o m e o } } _ { 0 } ( M ) \) such that

\[ { \mathrm { H o m e o } } ( M ) = \bigcup _ { i } g _ { i } W . \]

We first prove a related claim for these translates of W.

Claim 3.6. There exists a ball \( B ^ { \prime } \subset B \), and a left translate \( g _ { i } W \) such that if \( \operatorname { s u p p } ( f ) \subset B ^ { \prime } \), then there exists \( w _ { f } \in g _ { i } W \) such that

i) \( \operatorname { s u p p } ( w _ { f } ) \subset B \), and

ii) the restriction of \( w _ { f } \) to \( B ^ { \prime } \) agrees with f.

Proof of claim. Let \( B _ { i } \), \( i = 1 , 2 , \dots \). be a sequence of disjoint balls with disjoint closures and with the closure of \( \bigcup _ { i = 1 } ^ { \infty } B _ { i } \) contained in B.

We will show that for some i, every \( f \in { \mathrm { H o m e o } } _ { 0 } ( M ) \) with \( \operatorname { s u p p } ( f ) \subset B _ { i } \) agrees with the restriction of an element of \( g _ { i } W \) supported on B.

Suppose for contradiction that this is not the case. Then there is a sequence \( f _ { i } \in \)\( \mathrm { H o m e o } _ { 0 } ( M ) \) with \( \operatorname { s u p p } ( f _ { i } ) \subset B _ { i } \) and such that \( f _ { i } \) does not agree with the restriction to


(In thousands)	March 2019	March 2018	December 2017

Computer software, net of accumulated amortization of: March 2019 -
$215,491; March 2018 - $183,200; December 2017 - $171,147	$       224,601	$       239,935	$       232,237

Investments held for deferred comlpensation Npans (ote 15)	206,633	201,870	203,780

Deferred income taxes (Note 18)	109,551	105,493	103,601

Pension assets (Note 15)	117,405	76,671	82,296

Deposits	53,602	45,321	45,225

Partnership stores and shop-in-shop costs, net of accumulated
amortization of: March 2019 - $100,125; March 2018 - $123,812;
December 2017 - $118,643	31,655	33,161	34,149

Derivative financial instruments (Note 23)	9,189	4,659	2,199

Other investments	13,071	12,433	12,697

Deferred line of credit issuance costs	2,121	961	1,078

Other	79,071	82,537	66,413

Other assets	$     846,899	$     803,041	$     783,675

(In thousands)	March 2019	March 2018	December 2017

Commercial paper borrowings	$       650,000	$     1,500,000	$       705,000

International borrowing arrangements	15,055	25,106	24,384

Short-term borrowings	$     665,055	$    1,525,106	$     729,384

In December 2018, VF entered into a \$2.25 billion senior unsecured revolving line of credit (the “Global Credit Facility”) that expires December 2023. The Global Credit Facility replaced VF's \$2.25 billion revolving facility which was scheduled to expire in April 2020. VF may request an unlimited number of one year extensions so long as each extension does not cause the remaining life of the Global Credit Facility to exceed five years, subject to stated terms and conditions. The Global Credit Facility may be used to borrow funds in both U.S. dollar and certain non-U.S. dollar currencies, and has a \$50.0 million letter of credit sublimit. In addition, the Global Credit Facility supports VF’s U.S. commercial paper program for short-term, seasonal working capital requirements and general corporate purposes, including share repurchases and acquisitions. Borrowings under the Global Credit Facility are priced at a credit spread of 81.0 basis points over the appropriate LIBOR benchmark for each currency. VF is also required to pay a facility fee to the lenders, currently equal to 6.5 basis points of the committed amount of the facility. The credit spread and facility fee are subject to adjustment based on VF’s credit ratings. The prior revolving credit facility was priced at a credit spread of 80.5 basis points over the appropriate LIBOR benchmark for each currency and VF was required to pay a facility fee to the lenders equal to 7.0 basis points of the committed amount of the facility.

The Global Credit Facility contains certain restrictive covenants, which include maintenance of a consolidated indebtedness to consolidated capitalization ratio, as defined therein, equal to or below 60%. If VF fails in the performance of any covenants, the lenders may terminate their obligation to make advances and declare any outstanding obligations to be immediately due and payable. As of March 2019, VF was in compliance with all covenants.

VF’s commercial paper program allows for borrowings of up to \$2.25 billionto the extent it has borrowing capacity under the Global Credit Facility. Outstanding commercial paper borrowings totaled \$650.0 million, \$1.50 billion and \$705.0 million at March 2019, March 2018 and December 2017, respectively. The Global Credit Facility also had \$15.3 million of outstanding standby letters of credit issued on behalf of VF as of March 2019, March 2018 and December 2017, leaving \$1.58 billion, \$734.7 million and \$1.53 billion as of March 2019, March 2018 and December 2017, respectively, available for borrowing against this facility.

VF has \$179.5 million of international lines of credit with various banks, which are uncommitted and may be terminated at any time by either VF or the banks. Total outstanding balances under these arrangements were \$15.1 million, \$25.1 million and \$24.4 million at March 2019, March 2018 and December 2017, respectively. Borrowings under these arrangements had a weighted average interest rate of 24.6%, 12.0% and 9.9% at March 2019, March 2018 and December 2017, respectively, excluding accepted letters of credit which are non-interest bearing to VF. The interest-bearing borrowings include short-term borrowings in Argentina.

Interest payments are due annually on the 2023 notes and semiannually on all other notes.

All notes, along with any amounts outstanding under the Global Credit Facility (Note 11), rank equally as senior unsecured obligations of VF. All notes contain customary covenants and events of default, including limitations on liens and sale-leaseback transactions and a cross-acceleration event of default. The cross-acceleration provision of the 2033 notes is triggered if more than \$50.0 million of other debt is in default and has been accelerated by the lenders. For the other notes, the cross-acceleration trigger is \$100.0 million. If VF fails in the performance of any covenant under the indentures that govern the respective notes, the trustee or lenders may declare the principal due and payable immediately. As of March 2019, VF was in compliance with all covenants. None of the long-term debt agreements contain acceleration of maturity clauses based solely on changes in credit ratings. However, if there were a change in control of VF and, as a result of the change in control, the 2021, 2023 and 2037 notes were rated below investment grade by recognized rating agencies, then VF would be obligated to repurchase those notes at 101% of the aggregate principal amount plus any accrued interest.

VF may redeem its notes, in whole or in part, at a price equal to the greater of (i) 100% of the principal amount, plus accrued interest to the redemption date, or (ii) the sum of the present value of the remaining scheduled payments of principal and interest discounted to the redemption date at an adjusted treasury rate, as defined, plus 20 basis points for the 2021 notes, 15 basis points for the 2023 and 2033 notes, and 25 basis points for the 2037 notes, plus accrued interest to the redemption date. In addition, the 2021 and 2023 notes can be redeemed at 100% of the principal amount plus accrued interest to the redemption date within the three months prior to maturity.

The 2021 notes have a principal balance of \$500.0 million and are recorded net of unamortized original issue discount and debt issuance costs. Interest expense on these notes is recorded at an effective annual interest rate of 4.69%, including amortization of a deferred loss on an interest rate hedging contract (Note 23), original issue discount and debt issuance costs.

The 2023 notes have a principal balance of €850.0 million and are recorded net of unamortized original issue discount and debt issuance costs. Interest expense on these notes is recorded at an


Institution Practicing License issued by Yinchuan Approval Service Administration (銀川市審批服務管理局). The license stipulates that the licensed diagnostic and treatment services shall be provided via the Internet. Our PRC Legal Adviser has advised that it remains uncertain whether the foreign investment restrictions applicable to “medical institutions” would apply to Yinchuan Yimaitong.

On February 2, 2021, our PRC Legal Adviser and the PRC legal adviser of the Joint Sponsors conducted an interview with the director of Yinchuan Data Industrial Development Service Center(銀川市大數據產業發展服務中心) as the examination and verification authority responsible for the online precondition review for the application of the Medical Institution Practicing License. Yinchuan Data Industrial Development Service Center confirmed that they would not issue the Certificate of the City-level Internet Hospital Regulatory Platforms (市級互聯網醫院監管平台證明) (the “Certificate”) if there is any foreign investor investing in Yinchuan Yimaitong. Without the Certificate from Yinchuan Data Industrial Development Service Center, Yinchuan Approval Service Administration (銀川市審批服務管理局), the ultimate authority to approve applications for the operation of Internet hospital service, will not proceed with the issuance of the Medical Institution Practicing License. On February 3, 2021, our PRC Legal Adviser and the PRC legal adviser of the Joint Sponsors conducted an interview with the division deputy director of Yinchuan Approval Service Administration. Yinchuan Approval Service Administration confirmed that the establishment of sino-foreign equityj oint venture Internet hospitals is prohibited, and there is no precedent for any sino-foreignj oint venture of Internet hospitals.

Our PRC Legal Adviser confirmed that (i) each of Yinchuan Data Industrial Development Service Center and Yinchuan Approval Service Administration is a competent authority on the basis that (a) according to the Provisions on the Function Configuration and Internal Organizations of Yinchuan Approval Service Administration (《銀川市審批服務管理局職能配置和內設機構規定》) promulgated on July 13, 2020, the responsibilities of Yinchuan Approval Service Administration include approving the establishment and operation of medical institutions and Yinchuan Approval Service Administration confirmed during the interview that it is the approval department for the establishment of Internet hospitals, and (b) Yinchuan Data Industrial Development Service Center is the approval authority with respect to the issuance of the Certificate, being a prerequisite and necessary document without which Yinchuan Approval Service Administration will not proceed with the issuance of the Medical Institution Practicing License, and (ii) the interviewees are the director of Yinchuan Data Industrial Development Service Center and the division deputy director of Yinchuan Approval Service Administration and they are competent authorities to give the confirmation above-mentioned, and, based on such confirmation, our Company is currently unable to establish a sino-foreign equityj oint venture to obtain the Medical Institution Practicing License for Internet hospital.

# (iii) “Restricted” — Foreign-Related Investigation Service

Under precision marketing and corporate solutions, Yimaihutong provides digital market research solutions to overseas pharmaceutical companies under eSurvey on our Medlive platform, which is considered to be engaged in foreign-related market investigation business, and as such, Yimaihutong is required to hold a Foreign-Related Investigation License. According to the Measures for the Administration of Foreign-related Investigation (涉外調查管理辦法) issued by the National Bureau of Statistics of China (國家統計局) on October 13, 2004, (i) the National Bureau of Statistics shall be in charge of the qualification evaluation for institutions applying for Foreign-Related Investigation License and (ii) no overseas organization or individual may directly conduct any market or social investigation in China or conduct any market or social investigation through any institution without the foreign-related investigation license. In addition, the Negative List requires market investigation shall only be limited to the form of equityj oint venture; for radio and television ratings survey therein, controlling stake shall be held by the Chinese Party.

Based on consultations on March 29, 2021 and June 9, 2021, in both cases with the duty officer of Civilian and Foreign-related Investigation Management Office of the Law Enforcement Supervision Bureau under the National Bureau of Statistics of China (國家統計局執法監督局民間和涉外調查管理處) which is the relevant competent authority, (i) companies that engages in market investigation shall only be limited to the form of sino-foreign equityj oint venture and the National Bureau of Statistics of China has discretion over the specific proportion of equities held by foreign investors, (ii) foreign investments in companies that engages in social investigation are prohibited, and (iii) given the nature of the business of Yimaihutong and the types of investigations that it conducts or may conduct, we will not be granted a Foreign-Related Investigation License through any sino-foreign equityj oint venture. Based on the aforesaid, it is concluded that foreign investment in Yimaihutong is prohibited. The consultations were conducted in the form of telephone consultation, through the consultation telephone hotline posted on the official website of National Bureau of Statistics of China, regarding the foreign-related investigation license approval. As advised by our PRC Legal Adviser, the National Bureau of Statistics of China is the competent authority.

The provision of digital market research solutions to overseas pharmaceutical companies by Yimaihutong is part of our precision marketing and corporate solutions which forms an integral part of the operations of our Medlive platform. Given that Yimaihutong also engages in value-added telecommunications services and plans to engage in radio and television program production business and Internet culture business, which are subject to foreign investment restrictions or prohibitions as disclosed in this prospectus and highly integrated, corelated and inseparable from each other, we are restricted from holding direct interests in Yimaihutong, despite the fact that foreign investors may engage in market investigation through sino-foreign equityj oint ventures.


# 31. STATEMENT OF FINANCIAL POSITION OF THE COMPANY (CONTINUED)

The amounts of the Group’s reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity of the financial statements. Movements in the Company’s reserves during the current and prior years are as follows:

	Share
premium	Contributed
surplus	Capital
reserve	Accumulated
losses	Total

HK$’000	HK$’000	HK$’000	HK$’000	HK$’000

		(Note)

At 31 March 2016 and
1 April 2016
Loss for the year	23,811
–	22,968
–	7,453
–	(18,557)
(6,924)	35,675
(6,924)

As at 31 March 2017	23,811	22,968	7,453	(25,481)	28,751

Loss for the year	–	–	–	(5,730)	(5,730)

Issue of shares upon
subscription	180,600	–	–	–	180,600

Transaction costs
attributable to subscription
of shares	(725)	–	–	–	(725)

As at 31 March 2018	203,686	22,968	7,453	(31,211)	202,896

Pursuant to a written confirmation on 23 March 2015, two of the Company’s shareholders, Fortune Decade and Twilight Treasure, agreed to bear the listing expenses in connection with 120,000,000 sales shares sold through the placing of the Company’s shares took place during the year ended 31 March 2015 and reimburse their share of these expenses to the Company upon the listing of shares of the Company on the GEM of the Stock Exchange. The reimbursement of approximately HK\$7,453,000 by these shareholders in their capacity as shareholders was accounted for as capital contribution to the Company.

# 32. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY

# (i) General information of subsidiaries

Details of the Company’s principal subsidiaries at 31 March 2018 and 2017 are as follows:

Name of subsidiaries	Place of
incorporation
or registration/
operation	Issued
and fully
paid share
capital/
registered
capital	Percentage of nominal
value of issued ordinary
share capital held by
the Company	Forms of
legal entity	Principal
activities

			Directly	Indirectly

			%	%

Win Vision	BVI	US$1	100	–	Wholly- owned
foreign company	Investment holding,

Kwan on Construction
Company Limited
(“Kwan On”)	Hong Kong	HK$1	–	100	Private limited
company	Civil engineering
construction

Univic Engineering Limited
(“UEL”)	Hong Kong	HK$100	–	100	Private limited
company	Provision of contracting
work on civil
plumbing, fire
protection, insulation,
concrete repairs and
related activities

Univic Engineering &
Construction Limited	Hong Kong	HK$1	–	100	Private limited
company	Provision of civil,
plumbing and
fire protection
engineering contract
services

Univic Earthworks Limited	Hong Kong	HK$1	–	100	Private limited
company	Provision of civil and
plumbing engineering
contract services

Univic Building Contractors
Limited	Hong Kong	HK$1	–	100	Private limited
company	Provision of
construction site
workmen services

Univic Construction
Resources Limited
(“UCRL”)	Hong Kong	HK$1	–	100	Private limited
company	Provision of
construction site
workmen services

Univic Fireproofing &
Construction Limited
(“UFCL”)	Hong Kong	HK$1	–	100	Private limited
company	Trading of diesel
and provision of
construction site
workmen services


In response to our findings, and evidence from other supervisory work, in September 2010 we published proposed changes to complaints handling rules in CP10/21.22 We expect to publish a Policy Statement in this area in Q2 2011. As set out in the CP, we propose to:

• abolish the two-stage complaints handling process;

• require firms to identify a senior individual responsible for complaints handling; and

• set out how firms can meet existing requirements to undertake root cause analysis and have regard to decisions made by the ombudsman service.

We also propose increasing the ombudsman service’s award limit to \( \mathcal { E } \) 150,000 to reflect its fall in real terms since the limit was last raised.

Regulated firms currently report to us that they receive around four million complaints from customers each year. New rules now require firms to publish their own complaints data.

We published this firm-specific data for the first time in September 2010, enabling customers to compare and contrast the way firms deal with their complaints.

# 2.2 Unfair terms in mortgage contracts

A number of mortgage lenders have proposed, or taken, action in their standard mortgage contracts which is to the detriment of consumers. While firms may have prudential reasons for taking these actions, and may wish to balance the interests of savers and borrowers, they need to handle the whole process carefully to not breach FSA rules and principles (including Treating Customers Fairly) or the law.

Some firms are seeking to boost their revenues by including terms that move consumers from their discounted initial rate deal to the firms’ Standard Variable Rate (SVR) in particular situations. We have come across firms using terms to change a consumer’s mortgage to the firm’s SVR if the consumer breaches any of the conditions of the mortgage, regardless of the significance of the breach. This could result in the consumer paying a significantly higher interest rate than they had originally expected.

We have seen some lenders use contractual terms including terms that demand immediate repayment of the mortgage if, in their opinion, the consumer’s circumstances have only changed to a minor degree or the consumer has committed a minor breach of the terms and conditions of the mortgage. It would appear that such terms could give firms wide discretion to demand repayment of the mortgage, to the detriment of consumers.

To address these matters, we have published undertakings under the Unfair Terms in Consumer Contracts Regulations 1999 from firms agreeing not to apply such terms unfairly. We have also reminded firms with similar terms in their contracts of the messages contained in these undertakings.

# 2.3 Treatment of mortgage customers in arrears

As we showed in Chapter A, the combination of very low interest rates, an unemployment increase less than feared, and a fall in house prices less than some commentators had predicted has so far limited the impact of the financial crisis on homeowners. This has meant that after rising arrears and repossessions in 2008/9, numbers fell back slightly in the first half of 2010. Regulatory action to require appropriate forbearance has also had an effect.

22 CP10/21 Consumer complaints: The ombudsman award limit and changes to complaints-handling rules, September 2010, The ombudsman service and FSA.

While most mainstream lenders are treating customers in arrears fairly, we have seen a number of problems, primarily with specialist lenders. These problems include:

• Unfair charges – Information provided to customers on arrears charges is often unclear, charges are sometimes applied in circumstances that do not appear to be compatible with treating customers fairly, and there is little evidence that firms are ensuring arrears charges overall reflect the additional cost of administering these cases.

• Inadequate controls in outsourcing arrangements – Some lenders do not have adequate controls in place to ensure that, where they outsource arrears handling, the third party is treating customers fairly. Frontline staff in third party administrators (TPAs) often lacked the training and competence to deliver the fair customer outcomes required under MCOB 13, and TPAs’ own oversight of their business was inadequate to detect and deal with the detriment customers suffered as a result.

• Impaired credit lenders are much more inclined than mainstream lenders to impose a ‘one size fits all’ policy and move swiftly to take possession, without establishing borrowers’ individual circumstances. Their internal controls and training and competence arrangements are also noticeably less developed than those of mainstream lenders. There is anecdotal evidence that the terms of securitisation covenants are restricting their ability to treat customers in arrears fairly.

We have taken enforcement action against mortgage firms where we identified breaches in our rules or principles. Some of the lenders we visited more recently are taking steps to rectify earlier failings, in particular by collecting more information on customers’ income and expenditure when they fall into arrears, and tailoring their response in each case to the individual’s circumstances. But this is an area that will require continuing vigilance, particularly if there is a deterioration in the general economic environment or interest rates start to rise.

# 2.4 Payment Protection Insurance (PPI)

PPI mis-selling has been a significant issue in recent years, giving rise to consumer detriment, and has been covered in previous FROs.

Since we took over the regulation of PPI we have, amongst other things, carried out three thematic reviews and reports, issued warnings, visited over 200 firms and taken enforcement action against 24 firms. In addition, the PPI market was subject to a Competition Commission enquiry which began in 2007.

In August 2010, we published a Policy Statement, PS10/12, The assessment and redress of PPI complaints. This set out a package of measures designed to ensure that firms handle PPI complaints more fairly and consistently, and deliver fairer outcomes to customers who may have been mis-sold PPI but who have not complained.

The latest development is the judicial review of PS10/12, launched by the British Bankers’ Association (with Nemo Personal Finance subsequently joining as an interested party) on 8 October 2010. This challenge was considered by the Administrative Court in late January 2011 and a decision will follow.


The Group’s financial assets are classified into loans and receivables and financial assets at fair value through profit or loss (‘‘FVTPL’’). The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instrument other than those financial assets classified as at FVTPL, of which interest income is included in net gains or losses.

Financial assets are classified as financial assets at FVTPL when it is a derivative that is not designated and effective as a hedging instrument; or it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire combined contract to be designated as at FVTPL upon initial recognition.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in the profit or loss excludes any interest earned on the financial assets and is included in ‘‘other gains and losses’’ line item. Fair value is determined in the manner described in note 7.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, amounts due from related parties and bank balances and cash) are carried at amortised cost using the effective interest method, less any impairment (see accounting policy on impairment loss on financial assets below).

Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

Objective evidence of impairment could include:

. significant financial difficulty of the issuer or counterparty; or

. breach of contract, such as a default or delinquency in interest or principal payments; or

. it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

Impairment loss for loans and receivables are assessed on an individual basis.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

# Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by an entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

Financial liabilities (including trade and other payables and accruals) are subsequently measured at amortised cost, using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest expense is recognised on an effective interest basis.

Derivatives are initially recognised at fair value at the date when derivative contracts are entered into and are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is recognised in profit or loss immediately.

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire.

On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.


of aluminum flat-rolled products to rise due to product mix improvement. The Company holds great competitive advantages in the production of aluminum extrusion and flat-rolled products. The Company is the largest producer of aluminum alloy formwork in China, with over 40% of total market share in 2019 according to Antaike, and confronts little competition in the domestic market. The Company is able to maintain the selling price of aluminum alloy formwork and collect considerable processing fees. In 2019, the ASP of aluminum alloy formwork rose slightly while aluminum price declined by about RMB400/t. We believe that the Company is able to maintain the ASP of aluminum alloy formwork. The average processing fees of industrial aluminum extrusion products also rose slightly in 2019. The average processing fees of industrial aluminum extrusion products were mainly determined by the product mix. The extrusion production lines of the Company are expected to run at full capacity and we expect the processing fees assumptions of industrial aluminum extrusion products to be maintained. We believe that newly installed extrusion capacity will be allocated to products with higher value. We expect the profitability of extrusion lines to continue to improve due to product mix change. However, we believe average processing fees of aluminum extrusion products of the Company to decline moderately in 2020 as downstream demand will be severely hit by the global outbreak of COVID-19 and consumers may require lower ASP of their products. The processing fees of flat-rolled products in 2019 decreased as the Company only produced standard products with lower processing fees. Although total output of aluminum flat-rolled products increased rapidly, they were still low-value standard products. We expect such situation to change in 2020. As the Company has acquired more authentication of high-end products, it will produce more flat-rolled products with higher processing fees. The Company has already been conducting authentication for 3 years and we believe that more authentication of high-end products will be acquired in the coming years, which will improve the profitability of its flat-rolled production lines. We believe that more high-end products will be put into production in the future and raise average processing fees of flat-rolled products.

Revise down TP of the Company to HK\$2.05, and downgrade to "Neutral". China Zhongwang is a leading processed aluminum product developer and manufacturer in Asia. The Company has established competitive advantages in the aluminum processing industry and we expect the Company to continue to lead in the aluminum processing industry. The commencement of production of high-value aluminum flat-rolled products will be the future profit driver of the Company and has complementary and synergistic effects with current industrial aluminum extrusion products. However, we expect total sale of aluminum extrusion products and flat-rolled products of the Company to be severely impacted by the global outbreak of the COVID-19 pandemic. We expect the output of aluminum alloy formwork and aluminum extrusion products of the Company to decrease by about 10%-20% in 2020 and total output of flat-rolled products to be around 500,000 tons. We expect processing fees assumptions of aluminum extrusion products to decline moderately, but processing fees of aluminum flat-rolled products to rise due to product mix improvement. We expect deep-processed products to grow fast in the next 3 years due to strong downstream consumption demand. The decline in net profit of the Company in 2019 was mainly due to business model adjustment and lower processing fees of flat-rolled products, the extrusion business of the Company still enjoys great competitive advantages. We believe that net profit of the Company holds great growth potential due to product mix change and output growth in the future. The operation of the Company is stable and we believe that the Company is able to get through the tough period of global COVID-19 pandemic. We revise down the TP of the Company to HK\$2.05 due to lower market valuation level during the COVID-19 pandemic, which is equivalent to 6.0x FY20 PE and 0.4x FY20 PB. We downgrade the investment rating of the Company to "Neutral".

Source: Bloomberg, Guotai Junan International.


Changes in our accrued liabilities for severance expenses and leased real estate were as follows:

# Pension, Post-Retirement and Other Post-Employment Benefits

We sponsor various defined benefit pension plans (qualified and non-qualified) which, in the aggregate, cover a substantial portion of our employees including legacy CenturyLink, legacy Qwest Communications International, Inc. (“Qwest”) and legacy Embarq employees. On December 31, 2015, we merged our existing qualified pension plans, which included merging the Qwest Pension Plan and Embarq Retirement Pension Plan into the CenturyLink Retirement Plan. The CenturyLink Retirement Plan was renamed the CenturyLink Combined Pension Plan (“Combined Plan”). Pension benefits for participants of the new Combined Plan who are represented by a collective bargaining agreement are based on negotiated schedules. All other participants’ pension benefits are based on each individual participant’s years of service and compensation. We also maintain non-qualified pension plans for certain current and former highly compensated employees. We maintain post-retirement benefit plans that provide health care and life insurance benefits for certain eligible retirees. We also provide other post-employment benefits for certain eligible former employees. We use a December 31 measurement date for all our plans.

In connection with the acquisition of Level 3 Communications, Inc. on November 1, 2017, we assumed defined benefit pension plans sponsored by various Level 3 companies for their employees. Based on a valuation analysis, we recognized a \$20 million liability on November 1, 2017 for the unfunded status of the Level 3 pension plans, reflecting projected benefit obligations of 167 million, in excess of the \$147 million fair value of plan assets.

Current funding laws require a company with a pension shortfall to fund the annual cost of benefits earned in addition to a seven-year amortization of the shortfall. Our funding policy for our Combined Plan is to make contributions with the objective of accumulating sufficient assets to pay all qualified pension benefits when due under the terms of the plan. The accounting unfunded status of our qualified pension plan was \$2.004 billion and\$2.352 billion as of December 31, 2017 and 2016, respectively.

We made a voluntary cash contribution to our qualified pension plan of \$100 million in both 2017 and 2016, and paid \$5 million and \$7 million of benefits directly to participants of our non-qualified pension plans in 2017 and 2016, respectively. Based on current laws and circumstances, we are not required to make any contributions to our qualified pension plan in 2018, but we currently expect to make a voluntary contribution of \$100 million to the trust for our qualified pension plan in 2018. We estimate that in 2018 we will pay \$5 million of benefits directly to participants of our non-qualified pension plans.

As mentioned above, we assumed in the Level 3 acquisition certain contributory and non-contributory employee pension plans, both qualified and non-qualified plans (the “Level 3 Pensions”). At December 31, 2017, the fair value of the Level 3 Pensions’ plan assets was \$147 million, and the associated benefit obligation was\$167 million. We recognized the unfunded status of Level 3’s pension plans of \$20 million on our consolidated balance sheet as of December 31, 2017, and the net periodic benefit expense of less than \$1 million for the period November 1, 2017 to December 31, 2017, in our consolidated income statement for the year ended December 31, 2017. Due to the insignificant amount of these pension plans, we have predominantly excluded them from the remaining employee benefit disclosures in this Note.

In connection with our acquisition of Level 3 Communications, Inc. on November 1, 2017, we assumed post-retirement benefit plans sponsored by Level 3 Communications, L.L.C. and Continental Level 3, Inc. for certain of its current and former employees. Based on a valuation analysis, we recognized less than \$1 million in liability for the unfunded status of Level 3’s post-retirement benefit plans.

Our post-retirement benefit plans provide post-retirement benefits to qualified retirees and allow (i) eligible employees retiring before certain dates to receive benefits at no or reduced cost and (ii) eligible employees retiring after certain dates to receive benefits on a shared cost basis. The post-retirement benefits not paid by the trusts are funded by us and we expect to continue funding these post-retirement obligations as benefits are paid. The accounting unfunded status of our qualified post-retirement benefit plan was \$3.352 billion and\$3.360 billion as of December 31, 2017 and 2016, respectively.

Assets in the post-retirement trusts have been substantially depleted as of December 31, 2016; however we will continue to pay certain post-retirement benefits through the trusts. No contributions were made to the post-retirement trusts in 2017 and 2016. Benefits not paid from the trusts are expected to be paid directly by us with available cash. In 2017, we paid \$237 million of post-retirement benefits, net of participant contributions and direct subsidies. In 2018, we expect to pay \$283 million of post-retirement benefits, net of participant contributions and direct subsidies. The increase in anticipated post-retirement benefit payments is the result of increased utilization coupled with a continued rise in the cost of care.

We expect our health care cost trend rate to range from 5.0% to 6.5% in 2018, 5.0% to 7.0% in 2019, 5.0% to 6.5% in 2020 and grading to 4.50% by 2025. Our post-retirement benefit cost, for certain eligible legacy Qwest retirees and certain eligible legacy CenturyLink retirees, is capped at a set dollar amount. Therefore, those health care benefit obligations are not subject to increasing health care trends after the effective date of the caps.

As mentioned above, we assumed in the Level 3 acquisition certain post-retirement plans. Though largely unfunded, these post-retirement plans, in the aggregate, are immaterial to our consolidated financial statements. Due to the insignificant amount of these post-retirement plans, we have predominantly excluded them from the remaining employee benefit disclosures in this Note.

A change of 100 basis points in the assumed initial health care cost trend rate would have had the following effects in 2017:

	100 Basis
Points Change

Increase	(Decrease)

(Dollars in millions)

Effect on the aggregate of the service and interest cost components of net periodic
post-retirement benefit expense (consolidated statement of operations) . . . . . . . . . .	 .      $ 2	(2)

Effect on benefit obligation (consolidated balance sheet) . . . . . . . . . . . . . . . . . . . . . . .	 .       60	(57)


The chart below sets forth the total sales value and sales volume of cigarettes in China from 2010 to 2015 and the forecast from 2016 to 2020:

The total sales volume of cigarettes in China grew steadily from approximately 2,342.1 billion sticks in 2010 to approximately 2,489.5 billion sticks in 2015 at a CAGR of 1.2%. The sales volume is forecasted to further grow from approximately 2,359.6 billion sticks in 2016 to approximately 2,413.0 billion sticks in 2020, at a CAGR of 0.6%. The total sales value of cigarettes in China steadily grew from RMB847.9 billion in 2010 to RMB1,422.3 billion in 2015 at a CAGR of 10.9%. The sales value is forecasted to further grow from RMB1,468.0 billion in 2016 to RMB1,749.6 billion in 2020, at a CAGR of 4.5%.

The chart below sets forth the total sales value and sales volume of cigarettes in Hubei Province from 2010 to 2015 and the forecast from 2016 to 2020:

# Sources: STMA; Ipsos research and analysis

From 2010 to 2015, the sales volume of cigarettes in Hubei Province decreased slightly from approximately 73.8 billion sticks in 2010 to approximately 73.1 billion sticks in 2015 at a CAGR of-0.2%. The total sales value of cigarettes experienced growth from RMB26.4 billion in 2010 to RMB39.9 billion in 2015 at a CAGR of 8.6%. Both sales volume and sales value of cigarettes in Hubei Province are expected to increase over the forecast period. The sales volume is expected to increase to approximately 71.9 billion sticks in 2020 from 70.2 billion sticks in 2016 with a CAGR of 0.6%, while the sales value is expected to reach RMB47.9 billion in 2020 from RMB41.5 billion in 2016 at a CAGR of 3.7%. The increase in sales value can be attributed to the STMA’s promotion of mid to high-end cigarettes and consumers’ increasing preference for mid to high-end cigarettes driven by the increasing income level and higher purchasing power of consumers. Despite the decrease in sales volume of cigarettes in 2015 and 2016 due to the slowdown of the Chinese GDP growth and the rise in specific tax from 5% to 11% in 2015 imposed by the government, the sales volume and value of cigarettes are expected to have a stable growth from 2016 to 2020. At the provincial level, Yunnan and Hunan Provinces were the top two in terms of cigarette production volume in 2015, with approximately 390.4 billion sticks and 175.7 billion sticks, respectively. Additionally, the sales of cigarettes are subject to seasonal variations. In general, the first and third quarters are the peak seasons for cigarettes during the year, partly driven by festivals such as the Lunar New Year and the Mid-Autumn Festival.


The Group mainly operates in Hong Kong and the PRC. The Group’s revenue from external customers and information about its non-current assets by geographical location are detailed below:

本集團主要於香港及中國經營。本集團按地區劃分之來自對外客戶之收益及有關其非流動資產之資料詳列如下：

	Continuing operations
Revenue from
external customers
持續經營業務
從對外客戶而來之收益	 Discontinued operation
Revenue from
external customers
已終止經營業務
從對外客戶而來之收益	Continuing operations
N*on-current assets
持續經營業務
非流動資產*	 Discontinued operation
N*
on-current assets已終止經營業務
非流動資產*

2018
二零一八年	2017
二零一七年	2018
二零一八年	2017
二零一七年	2018
二零一八年	2017
二零一七年	2018
二零一八年	2017
二零一七年

HK$’000
千港元	HK$’000
千港元	HK$’000
千港元	HK$’000
千港元	HK$’000
千港元	HK$’000
千港元	HK$’000
千港元	HK$’000
千港元

Australia                    澳洲	21	68	—	—	—	—	—	—

Europe                     歐洲	10,437	10,218	—	—	—	—	—	—

Hong Kong                   香港	144,595	(1,493)	—	—	665,778	432,895	—	—

The Middle East                 中東	—	705	—	—	—	—	—	—

The PRC                     中國	32,777	44,412	—	—	1,465,511	2,386,289	—	—

The United States of America          美利堅合眾國	207	79	—	—	—	—	—	—

	188,037	53,989	—	—	2,131,289	2,819,184	—	—

\* Non-current assets excluded deferred tax assets, other receivables and loan receivables.

\* 非流動資產不包括遞延稅項資產、其他應收款項及應收貸款。

Revenue from customers of the corresponding years contributing over 10% of the total revenue of the Group are as follows:

於相關年度向本集團總收益貢獻10% 以上之來自客戶之收益如下：

	For the year ended
31 December
截至十二月三十一日止年度

2018
二零一八年	2017
二零一七年

HK$’000
千港元	HK$’000
千港元

Customer 11               客戶11	N/A不適用4	18,549

Customer 21               客戶21	19,901	13,303

Customer 32               客戶32	21,264	20,809

Customer 42               客戶42	N/A不適用4	9,159

Customer 53               客戶53	N/A不適用4	16,200

Customer 63               客戶63	N/A不適用4	12,191

Customer 73               客戶73	N/A不適用4	10,560

1 Revenue from sale of jewelry products.

4 The corresponding revenue did not contribute over 10% of the total revenue of the Group.

1 來自銷售珠寶產品之收益。

2 來自物業投資之收益。

4 相關收益並無向本集團總收益貢獻 10% 以上。


This 2018 ESG Report of Hua Hong Semiconductor Limited (hereinafter referred to as “this Report”) disclosures its principles in fulfilling CSR and the work carried out in 2018. It mainly addresses our Stakeholders about the sustainable development regarding the relevant economic, environmental, and social issues.

This Report adopts the “Environmental, Social and Governance Reporting Guide” issued by the Stock Exchange of Hong Kong Limited and the “Sustainability Reporting Standards (2016)” of the Global Reporting Initiative (GRI) as its reference basis.

Organizational scope:	The Company as defined. This Report by the Company, Hua Hong Semiconductor Limited,
includes all subsidiaries of the Company.

Reporting period:	From 01 January 2018 to 31 December 2018

Release cycle:	This is an annual report

Data and cases in this Report originate from the Company’s original records in day-to-day operation or financial reports. In case of discrepancies, the financial reports data shall prevail.

釋義	85

主要財務指標	88

致股東的信	89

公司資料	91

董事及高級管理層	94

企業管治報告	101

董事會報告	112

2018年環境、社會及管治報告	139

獨立核數師報告	167

綜合損益表	175

綜合全面收益表	176

綜合財務狀況表	177

綜合權益變動表	179

綜合現金流量表	181

財務報表附註	183

五年財務概覽	296


The following table sets forth our other borrowings as at the dates indicated:

Other liability of approximately HK\$11.3 million represented the fair value of the Pre-IPO Investment recognised as at 31 December 2015. As at 31 December 2016 and 30 April 2017, such other liability was transferred to our Group’s equity because the put option granted to our pre-IPO investor, namely Top Champ, to require our Company to repurchase the Shares held by Top Champ was removed under the Supplemental Deed. For details of the Supplemental Deed and the Pre-IPO Investment, please refer to the paragraphs headed “History, Reorganisation and corporate structure — Pre-IPO Investment” in this prospectus.

At the close of business on 30 April 2017, being the latest practicable date for the purpose of this indebtedness statement, we had aggregate bank facilities of HK\$8.0 million and which were unutilised. The bank facilities were guaranteed by Shui On (Shun On) and Mr. TC Yik and such guarantees provided will be fully released before Listing.

During the Track Record Period and up to the Latest Practicable Date, we did not experience any delay or default in payment of trade and non-trade payables or bank borrowing or any defaults in material financial covenants and finance costs of other liability, or any difficulties in obtaining banking facilities with terms that are commercially acceptable to us. As of the date of this prospectus, we did not have any plan for material external debt financing.

As at 30 April 2017, being the latest practicable date for the purpose of the indebtedness statement, we did not have any material contingent liabilities or guarantees.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, as at the Latest Practicable Date, our Group did not have outstanding loan, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances trade receivables or acceptable credits, authorised debentures, mortgages, charges, finance leases or hire purchase commitments, guarantees, material covenants, or other material contingent liabilities. As at the Latest Practicable Date, our Group did not have any external financing plans.

# OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENT

As at the Latest Practicable Date, we had not entered into any material off-balance sheet arrangement.

For details of related party transactions, see note 32 to the Accountants’ Report in Appendix I to this prospectus. Our Directors confirm that these transactions were conducted in the ordinary and usual course of business and on normal commercial terms. Our Directors are of the view that the related party transactions did not cause any distortion of our results of operations or make our historical results non-reflective in the Track Record Period.

The following table sets forth our key financial ratios as at each of the dates indicated:

1. Net profit margin was calculated by dividing profit for the year by revenue and multiplying the resulting value by 100%. Please refer to the paragraphs headed “Review of historical results of operations” above in this section for more details on the fluctuations of our net profit margin.

2. Return on equity equals profit for the year divided by the equity attributable to owners of the parent at the end of relevant year and multiplied the resulting value by 100%.

3. Return on total assets equals profit for the year divided by the total assets at the end of the relevant year and multiplied the resulting value by 100%.

4. Current ratio is calculated based on the total current assets at the end of the year divided by the total current liabilities at the end of the year.

5. Interest coverage equals profit before finance costs and tax divided by finance costs in the relevant year. Finance costs incurred for the year ended 31 December 2016 arose due to the imputed interest charged for the Pre-IPO Investment. Please see the paragraph headed “Financial information – Indebtedness” in this prospectus for further details of the Pre-IPO Investment as other liabilities.

6. Gearing ratio is calculated as the total debt at the end of the year divided by total equity at the end of the respective year and multiplied by 100%. Total debts includes payables incurred not in ordinary course of business (being other liabilities).

7. Net debt to equity ratio is calculated as total debts (other liabilities) net of cash and cash equivalents and restricted cash, and at the end of the year divided by total equity at the end of the respective year and multiplied by 100%.


Information on inventory balances of the Group, for only ribbed smoked sheets, concentrated latex and block rubber, are as follows:

	Consolidated
financial statements	Separate
financial statements

2018	2017	2018	2017

Inventories at net realisable value (NRV)*	10,411,061	15,979,154	5,886,610	7,773,263

Inventories at lower of cost or net

realisable value (NRV) - as measured and
included in the financial statements	10,201,733	15,394,383	5,793,784	7,467,859

Difference	209,328	584,771	92,826	305,404

\* For reporting purposes, inventories are stated at the lower of cost or net realisable value, while for inventory management purposes the Group uses net realisable value (NRV) which is the estimated selling price in the ordinary course of business less the necessary costs of completion and cost to make the sale. The use of different valuation methods for these two purposes resulted in a difference at the reporting date.

Under Thai Financial Reporting Standards, such differences are not allowed to be recognised in the profit and loss until the inventories are actually sold. The amount of such difference changes over time depending on the actual price at the time of sale.

	Consolidated financial statements

2018	2017

Assets	Liabilities	Assets	Liabilities

Cross currency swaps	-	(4,479)	23,778	(55,844)

Foreign exchange options	641	(14,483)	-	(65,293)

Rubber options	127	(157)	14,161	(58,646)

Forward foreign exchange contracts	10,642	(45,743)	113,261	(5,183)

Rubber futures	45,413	(106,524)	256,739	(45,338)

Physical forward contracts	2,778	(17)	-	(939)

Total derivative financial instruments	59,601	(171,403)	407,939	(231,243)

	Separate financial statements

2018	2017

Assets	Liabilities	Assets	Liabilities

Cross currency swaps	-	(4,479)	23,778	(55,844)

Foreign exchange options	641	(11,394)	-	(48,665)

Rubber options	127	(157)	14,161	(58,646)

Forward foreign exchange contracts	1,569	-	64,804	(971)

Rubber futures	30,742	(95,302)	153,777	(34,004)

Total derivative financial instruments	33,079	(111,332)	256,520	(198,130)

As at 31 December 2018, the subsidiaries had fixed deposits pledged as collateral amounting to Baht 2 million (2017: Baht 12 million).

Fixed deposits, which were opened with a bank on behalf of the subsidiary, were pledged as collateral for contract compliance with government agencies.

12.1 Details of investments in subsidiaries as presented in separate financial statements are as follows:


(in RMB million)	2016

Goodwill (i)	Expressway
operating
rights	Prepaid land
premiums	Core
Deposits	Trademarks	Software
and others	Total

Cost

 As at 1 January 2016	12,460	11,232	8,331	15,082	2,442	5,091	54,638

 Acquisitions of subsidiaries	–	–	914	–	7,113	2,427	10,454

 Additions	8,468	–	830	–	–	1,234	10,532

 Disposals of subsidiaries	–	–	–	–	(287)	(75)	(362)

 Disposals	(289)	–	–	–	–	(124)	(413)

 As at 31 December 2016	20,639	11,232	10,075	15,082	9,268	8,553	74,849

Accumulated amortization

 As at 1 January 2016	–	2,231	679	3,393	245	3,174	9,722

 Acquisitions of subsidiaries	–	–	–	–	28	49	77

 Charge for the year	–	486	58	754	73	752	2,123

 Disposals of subsidiaries	–	–	–	–	–	(30)	(30)

 Disposals	–	–	–	–	–	(60)	(60)

 As at 31 December 2016	–	2,717	737	4,147	346	3,885	11,832

Net book value

 As at 31 December 2016	20,639	8,515	9,338	10,935	8,922	4,668	63,017

 As at 1 January 2016	12,460	9,001	7,652	11,689	2,197	1,917	44,916

As at 31 December 2017, expressway operating rights with a carrying amount of RMB5,711 million (31 December 2016: RMB8,515 million) were pledged as collateral for long term borrowings amounting to RMB2,939 million (31 December 2016: RMB3,921 million).

As at 31 December 2017, none prepaid land premiums (31 December 2016: RMB1,178 million) were pledged as collateral for long term borrowings (31 December 2016: RMB400 million).

As at 31 December 2017, prepaid land premiums with a carrying amount of 52 million (31 December 2016: RMB84 million) were still in progress of applying for title certificates.

(in RMB million)	2017

As at
1 January 2017	Additions	Disposals	As at
31 December 2017

Ping An Bank	8,761	–	–	8,761

Shanghai Jahwa	2,502	–	–	2,502

Mabyorn Group Limited	2,106	–	(275)	1,831

Ping An Securities	328	–	–	328

Shenzhen Ping An Commercial Property
 Investment Co., Ltd.	66	–	–	66

Beijing Shuangronghui Investment Co., Ltd.	134	–	–	134

Shanghai Gezhouba Yangming Property
 Co., Ltd.	241	–	–	241

Ping An E-wallet	1,073	–	–	1,073

Autohome Inc.	5,265	–	–	5,265

Other	163	143	–	306

Total	20,639	143	(275)	20,507

Less: Impairment losses	–	–	–	–

Net book value	20,639	143	(275)	20,507

(in RMB million)	2016

As at
1 January 2016	Increase	Decrease	As at
31 December 2016

Ping An Bank	8,761	–	–	8,761

Shanghai Jahwa	2,502	–	–	2,502

Mabyorn Group Limited	–	2,106	–	2,106

Ping An Securities	328	–	–	328

Shenzhen Ping An Commercial Property
 Investment Co., Ltd.	66	–	–	66

Beijing Shuangronghui Investment Co., Ltd.	134	–	–	134

Shanghai Gezhouba Yangming Property
 Co., Ltd.	239	2	–	241

Ping An E-wallet	–	1,073	–	1,073

Autohome Inc.	–	5,265	–	5,265

Other	430	22	(289)	163

Total	12,460	8,468	(289)	20,639

Less: Impairment losses	–	–	–	–

Net book value	12,460	8,468	(289)	20,639

The primary valuation technique used is cash flow projections based on business plans approved by management covering a three to five year period and a risk adjusted discount rate. Cash flows beyond that period have been extrapolated using a steady growth rate and terminal value. Discount rates used by the Group range from 9% to 16% (2016: 9% to 15%) and growth rates, where applicable, range from 2% to 33% (2016: 2% to 34%).

The results of cash flow projections exceed the carrying amount of each related cash-generating unit or group of units. However, subsequent impairment tests may be based upon different assumptions and future cash flow projections, which may result in an impairment of these assets in the foreseeable future.


Intangible assets acquired separately are measured initially at cost. The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for on a prospective basis.

# Investments and other financial assets

Financial assets of the Group in the scope of HKAS 39 are classified as loans and receivables. The Group determines the classification of its financial assets after initial recognition. When financial assets are recognised initially, they are measured at fair value plus, directly attributable transaction costs.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate. The effective rate amortisation is included in interest income in the income statement. The loss arising from impairment is recognised in the income statement in other operating expenses.

The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For financial assets carried at amortised cost, the Group first assesses individually whether objective evidence of impairment exists for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate (that is, the effective interest rate computed at initial recognition). If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced either directly or through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group.

If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or decreased by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the income statement.

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• the rights to receive cash flows from the asset have expired;

• the Group has transferred the rights to receive cash flows from the asset, or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and

• either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

# Financial liabilities at amortised cost

Financial liabilities including trade and other payables and due to shareholders are initially stated at fair value plus directly attributable transaction costs. After initial recognition, financial liabilities are subsequently measured at amortised cost, using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate method amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the income statement.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the income statement.

Financial assets and financial liabilities are offset and the net amount is reported in the combined statements of financial position if, and only if, there is currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.


During the nine months ended 30 September 2020, the impact of the global pandemic caused a general suspension in economic activities and the strict measures adopted for social distancing in general led to the worsening of individual employment and a significant drop in business operations. Similarly, the PRC Mainland market was also affected and hence the credit risk in the money lending services was perceived to be higher accordingly. Given the stringent economic and business outlook, the Group strictly adhered to cautious credit assessment and reviewed the Group’s policies by timely assessing existing and potential clients’ credit profile with reference to the then market condition and their respective background. In view of the current uncertain economic condition that affected projection on assets valuation, business forecasts and individual’s repayment abilities, the Group continued to adopt a prudent approach in selecting qualified credit applicants for potential business opportunities. Accordingly, there was a significant decrease in revenue generated for this business segment to approximately HK\$0.01 million for the nine months ended 30 September 2020 (for the nine months ended 30 September 2019: approximately HK\$0.41 million).

In view of the current social and economic challenges encountered in the PRC Mainland and globally, the Group believed that the strategies to explore appropriate new business and regional markets in order to mitigate overall business risks is the proper approach for sustainable operation. The Group hopes the business segment in the provision of education management services in the PRC Mainland will gradually recover in the second half of 2020, while the pandemic in the PRC Mainland remains stable and controlled. The business segments of trading of precious metal and money lending require cautious assessment and robust risk control management. The Group will continue to explore further opportunities to strengthen business and market presence in its business segment of provision of education management services as well as to manage its business segments of trading of precious metal and money lending on a cautious and prudent basis. All in all, the Group will continue to strive for balance in further developing its existing business model whereas securing the return and value to the shareholders of the Company as a whole.

For the nine months ended 30 September 2020, the Group had a total revenue of approximately HK\$6.4 million (for the nine months ended 30 September 2019: approximately HK\$195.9 million), representing a decrease of approximately 96.7% as compared with the nine months ended 30 September 2019. For the nine months ended 30 September 2020, the Group recorded a loss of approximately HK\$27.4 million (for the nine months ended 30 September 2019: approximately HK\$26.4 million), representing an increase of approximately 3.8% as compared with the nine months ended 30 September 2019. The increase in loss was mainly attributable to net effect of:

(i) a significant decrease in the Group’s total revenue of approximately 96.7% as discussed in above;

(ii) for the nine months ended 30 September 2020, approximately HK\$4.1 million for the carrying value of inventories sold was recognised (for the nine months ended 30 September 2019: approximately HK\$185 million);

(iii) the fair value loss on investment in unlisted equity securities of approximately HK\$2.5 million;

(iv) a provision of loss allowance of approximately HK\$1.4 million provided on loan receivable;

(v) a decrease in trading losses on commodity forward contracts of approximately HK\$2.7 million;

(vi) a decrease in employee costs of approximately HK\$3.4 million; and

(vii) a decrease in other operating expenses of approximately HK\$3.2 million.

For the nine months ended 30 September 2020, the Group’s loss attributable to owners of the Company was approximately HK\$26.4 million, as compared to the loss attributable to owners of the Company of approximately HK\$27.2 million for the nine months ended 30 September 2019.

The Group monitors capital on the basis of the net gearing ratio. This ratio is calculated as net debt divided by total capital.

As at 30 September 2020, no gearing ratio was presented as the Group has net cash surplus (31 December 2019: net cash surplus).