(c) in the redemption and repurchase of shares (subject to the provisions of section 37 of the Companies Law);

(d) writing-off the preliminary expenses of the company;

(e) writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; and

(f) providing for the premium payable on redemption or purchase of any shares or debentures of the company.

No distribution or dividend may be paid to members out of the share premium account unless immediately following the date on which the distribution or dividend is proposed to be paid the company will be able to pay its debts as they fall due in the ordinary course of business.

The Companies Law provides that, subject to confirmation by the Grand Court of the Cayman Islands, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, by special resolution reduce its share capital in any way.

Subject to the detailed provisions of the Companies Law, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a shareholder. In addition, such a company may, if authorised to do so by its articles of association, purchase its own shares, including any redeemable shares. The manner of such a purchase must be authorised either by the articles of association or by an ordinary resolution of the company. The articles of association may provide that the manner of purchase may be determined by the directors of the company. At no time may a company redeem or purchase its shares unless they are fully paid. A company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any member of the company holding shares. A payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business.

There is no statutory restriction in the Cayman Islands on the provision of financial assistance by a company for the purchase of, or subscription for, its own or its holding company’s shares. Accordingly, a company may provide financial assistance if the directors of the company consider, in discharging their duties of care and to act in good faith, for a proper purpose and in the interests of the company, that such assistance can properly be given. Such assistance should be on an arm’s-length basis.

With the exception of section 34 of the Companies Law, there are no statutory provisions relating to the payment of dividends. Based upon English case law which is likely to be persuasive in the Cayman Islands in this area, dividends may be paid only out of profits. In addition, section 34 of the Companies Law permits, subject to a solvency test and the provisions, if any, of the company’s memorandum and articles of association, the payment of dividends and distributions out of the share premium account (see paragraph 3 above for details).

The Cayman Islands courts can be expected to follow English case law precedents. The rule in Foss v. Harbottle (and the exceptions thereto which permit a minority shareholder to commence a class action against or derivative actions in the name of the company to challenge (a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraud against the minority where the wrongdoers are themselves in control of the company, and (c) an action which requires a resolution with a qualified (or special) majority which has not been obtained) has been applied and followed by the courts in the Cayman Islands.

In the case of a company (not being a bank) having a share capital divided into shares, the Grand Court of the Cayman Islands may, on the application of members holding not less than one-fifth of the shares of the company in issue, appoint an inspector to examine into the affairs of the company and to report thereon in such manner as the Grand Court shall direct.

Any shareholder of a company may petition the Grand Court of the Cayman Islands which may make a winding up order if the court is of the opinion that it isj ust and equitable that the company should be wound up.

Claims against a company by its shareholders must, as a general rule, be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by the company’s memorandum and articles of association.

The English common law rule that the majority will not be permitted to commit a fraud on the minority has been applied and followed by the courts of the Cayman Islands.

The Companies Law contains no specific restrictions on the powers of directors to dispose of assets of a company. As a matter of general law, in the exercise of those powers, the directors must discharge their duties of care and to act in good faith, for a proper purpose and in the interests of the company.


The Group holds the following financial instruments:

22 按類別劃分之金融工具

本集團持有以下金融工具：

	2020
二零二零年	2019
二零一九年

HK$’000
港幣千元	HK$’000
港幣千元

Financial assets 金融資產

Financial assets at amortised cost: 按攤銷成本列賬之金融資產：
Trade, bills and other receivables (Note 25)
貿易應收賬款、應收票據及其他應收賬款（附註25）	1,303,528	1,362,782

Bank balances and cash (Note 28)
銀行結餘及現金（附註28）	637,753	490,241

Financial assets at fair value throuhg
other comhpreensive income (Note 23(a))
按公平值入賬及列入其他綜合收益之金融資產（附註23(a)）	13,034	31,855

Financial assets at fair value throuhfig prot or loss (Note 23(b))
按公平值入賬及列入損益之金融資產（附註23(b)）	4,362	5,895

Derivative financial instruments (Note 27)
衍生金融工具（附註27）	227	2

	1,958,904	1,890,775

	2020
二零二零年	2019
二零一九年

HK$’000
港幣千元	HK$’000
港幣千元

Financial liabilities 金融負債

Financial liabilities at amortised cost: 按攤銷成本列賬之金融負債：
Trade, bills and other payables (Note 34)

貿易應付賬款、應付票據及其他應付賬款（附註34）	936,438	923,742

Bank borrowings (Note 32) 銀行借貸（附註32）	377,008	657,612

Lease liabilities (Note 16) 租賃負債（附註16）	29,195	35,667

Derivative financial instruments (Note 27)
衍生金融工具（附註27）	12	141

	1,342,653	1,617,162

The Group’s exposure to various risks associated with the financial instruments is discussed in Note 3. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above.

本集團承受與金融工具有關之各種風險於附註3討論。於報告期末之最高信貸風險為上述各類金融資產之賬面值。

# 23 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME AND THROUGH PROFIT OR LOSS

# (a) Financial assets at fair value through other comprehensive income include the following:

23 按公平值入賬及列入其他綜合收益及列入損益之金融資產

(a) 按公平值入賬及列入其他綜合收益之金融資產包括以下各項：

	2020
二零二零年	2019
二零一九年

HK$’000
港幣千元	HK$’000
港幣千元

Financial instruments level 3: 第3層金融工具：

Equity investments in unlisted entity securities
於非上市實體證券之股本投資	13,034	31,855

The unlisted equity securities represent investments in private entities incorporated in Taiwan, the British Virgin Islands and Hong Kong and are denominated in the following currencies:

非上市股本證券指於台灣、英屬維爾京群島及香港註冊成立之私人公司之投資，乃按以下貨幣列值：

Movement of financial assets at fair value through other comprehensive income is analysed as follows:

按公平值入賬及列入其他綜合收益之金融資產之變動分析如下：

	2020
二零二零年

HK$’000
港幣千元

At beignninfg o the 年year 於初	31,855

Fair value losses on financial assets at fair
value throuhg other comprehensive income
按公平值入賬及列入其他綜合收益之金融資產之公平值虧損	(19,156)

Exchange gain 匯兌虧損	335

At end of the year 於年末	13,034


# 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued

# 2.17 Accounting for income taxes (Continued)

The determination of the average tax rates requires an estimation of (1) when the existing temporary differences will reverse and (2) the amount of future taxable profit in those years. The estimate of future taxable profit includes:

– income or loss excluding reversals of temporary differences; and

– reversals of existing temporary differences

Current tax assets and current tax liabilities are presented in net if, and only if,

(a) the Group has the legally enforceable right to set off the recognised amounts; and

(b) intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

The Group presents deferred tax assets and deferred tax liabilities in net if, and only if,

(a) the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and

(b) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

(ii) different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

The Group identifies operating segments and prepares segment information based on the regular internal financial information reported to the chief operating decision maker for their decisions about resources allocation to the Group’s business components and for their review of the performance of those components.

For the purposes of the consolidated financial statements, a party is considered to be related to the Group if:

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

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

(ii) has significant influence over the Group; or

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

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

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

(ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);

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

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

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

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

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

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

Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.


# 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:

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

• the Group has transferred its 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, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement. 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.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

The Group recognises an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort, including historical and forward-looking information.

In certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

# Impairment of financial assets (continued)

Debt investments at fair value through other comprehensive income and financial assets at amortised cost are subject to impairment under the general approach and they are classified within the following stages for measurement of ECLs except for trade receivables and contract assets which apply the simplified approach as detailed below.

Stage 1	– Financial instruments for which credit risk has not increased significantly since initial recognition and for which
the loss allowance is measured at an amount equal to 12-month ECLs

Stage 2
Stage 3	– Financial instruments for which credit risk has increased significantly since initial recognition but that are not
credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs
– Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit-
impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs

For trade receivables and contract assets that do not contain a significant financing component or when the Group applies the practical expedient of not adjusting the effect of a significant financing component, the Group applies the simplified approach in calculating ECLs. Under the simplified approach, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, or payables, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Group’s financial liabilities include other payables.

The subsequent measurement of financial liabilities depends on their classification as follows:

# Financial liabilities at amortised cost (loans and borrowings)

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the effective interest rate 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 profit or loss.

# Derecognition of financial liabilities

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 profit or loss.


Established at the end of 2014, NIO is principally engaged in the research and development, manufacturing, sales and after-sales service of high-end luxury smart electric vehicles. NIO gets hold of the core research and development technologies of the batteries, electric drives and electric control systems of electric vehicles, and has competitiveness in vehicle design and brand promotion and is capable of efficiently integrating vehicle manufacturing supply chain system to promote the entire vehicle manufacturing, which as a whole makes NIO the fastest Internet-based electric vehicle manufacturing enterprise in China in terms of research and development and mass production. ES8, its first high-end luxury 7-seater electric sport utility vehicle (SUV) put into mass production, had been officially launched in December 2017. NIO has gained the supports from various Internet giants and leading investment institutions, among which Tencent is the leading investor of this round of fund-raising of NIO. NIO is an independent third party of the Group.

New energy vehicle industry is in a middle to long term strong growth trend, which has been generally recognised by the society. Recently, the Chinese Government has launched a series of policies and measures to support the rapid development of the new energy vehicle industry in China. The Company has been identifying and exploring quality targets and investment opportunities in new energy vehicle industry. This transaction represents an important exploration of the Company in such area, which is expected to create an outstanding investment return for the Shareholders and further consolidate the overall market advantage of the Company in various modern consumption upgrade sectors, including automobile, logistics, consumption and finance.

On 30 November 2017, a wholly-owned subsidiary of the Company entered into a capital increment agreement with Yimidida (“Yimidida Capital Increment Agreement”), pursuant to which the Group, as one of the investors, agreed to subscribe for the shares newly issued by Yimidida at a consideration of RMB130.00 million in US\$ equivalent.

Jointly established by several regional leading less-than-truckload logistics enterprises, Yimidida, with the mode of direct operation in core areas and regional franchise, unified the branding, systems, clearing, services and management standards of its partners along the whole ecological chain, and rapidly established the less-than-truckload freight express network across the country. Yimidida improves its franchisees’ ability in soliciting orders and profitability, achieves a strong coalition, and gains its advantages in core network and continuous low cost as a national less-than-truckload express enterprise, by making full use of the long-term operation, high network coverage rate and low operation costs of its regional franchisees and providing national services. Yimidida is an independent third party of the Group.

Logistics industry is a fundamental and strategic industry which supports the national economic development and also a major industry supported by CDB. The Company has been identifying and exploring appropriate investment opportunities in logistics industry and established an investment layout to a certain extent in logistics infrastructure and supply chain service. This transaction represents another achievement of the Company’s continuous efforts in the development of logistics industry and identifying investment opportunities in sub-sectors, which is expected to create an outstanding investment return for the Shareholders and further consolidate the overall market advantage of the Company in various modern service industries, including automobile, logistics, consumption and finance.

On 8 April 2017, a wholly-owned subsidiary of the Company had entered into a preferred share purchase agreement (the “Wacai Investment Agreement”) with Wacai, pursuant to which the Group, as one of the investors, agreed to subscribe for the newly issued preferred shares of Wacai at a consideration of US\$25.00 million, representing approximately 3.09% of the enlarged issued share capital of Wacai, and the subscription of the preferred shares of Wacai by the Company has been completed.

As one of the earliest established Fin-tech companies in the PRC, Wacai has now become a leading online comprehensive financial planning and wealth management platform in the industry. In June 2009, Wacai launched the first personal finance bookkeeping mobile application named “Wacai Bookkeeper” in the PRC, and since then gradually evolved into a holistic personal finance platform with products including “Wacai Bao Wealth Management”, “Credit Card Manager”, “Money Manager” and “Money Town Community”. With its devotion to providing one-stop online financial management tools, information and advisory services to the mass market, Wacai has developed an ecosystem around personal financial planning, wealth management, credit management, and vertical online discussion forum. Based on the profound understanding of customer needs, user-friendly product design, cutting edge finance technology, and rigorous risk management, Wacai has been providing consistent and high-quality services to over 47.00 million registered users in the past eight years. Wacai is an independent third party of the Group.

On 29 December 2016, a wholly-owned subsidiary of the Company had entered into a convertible preferred share subscription agreement with G7 pursuant to which the Group, as one of the investors, agreed to subscribe for the newly issued preferred shares of G7 at a cash consideration of US\$25.00 million, representing approximately 5.59% of the enlarged issued share capital of G7.

G7 is a leading logistics data service company in the PRC with its business coverage spanning across the PRC and its neighboring countries in Asia. G7 is connected to over 300,000 cargo vehicles of more than 30,000 customers. By installing smart devices on vehicles in the fleet, G7 utilises the real-time sensing technology to provide data services that span the entire logistic process, to connect the data of every single vehicle, consignor, fleet owner and driver, and thus to improve the efficiency of transport service. Based on the big data of the connected vehicles, G7 cooperates with premium partners from oil distribution, toll roads and bridges, insurance, banking and financial leasing industries to establish a one-stop service platform that integrates primary consumption of fleets. The platform enables safer, more economical, more efficient and more environmentally-friendly logistic services. G7 is an independent third party of the Company.

On 24 November 2016, the Company had entered into an investment agreement with Spruce pursuant to which the Company agreed to subscribe for the newly issued convertible preferred shares of Spruce at a cash consideration of US\$25.70 million, representing approximately 1.24% of the enlarged issued capital of Spruce.


# IV NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		As at 31 December

2020	2019

2.75% USD fixed rate Green Bonds
maturing in October 2020	(i)	-	3,488

5.30% subordinated fixed rate bonds
maturing in June 2026	(ii)	50,000	50,000

4.99% subordinated fixed rate bonds
maturing in December 2027	(iii)	50,000	50,000

4.45% Tier-two capital fixed rate bonds
maturing in October 2027	(iv)	40,000	40,000

4.45% Tier-two capital fixed rate bonds
maturing in April 2028	(v)	40,000	40,000

4.28% Tier-two capital fixed rate bonds
maturing in March 2029	(vi)	50,000	50,000

4.30%Tier-two capital fixed rate bonds
maturing in April 2029	(vii)	40,000	40,000

3.10% Tier-two capital fixed rate bonds
maturing in April 2030	(viii)	40,000	-

4.53% Tier-two capital fixed rate bonds
maturing in March 2034	(ix)	10,000	10,000

4.63% Tier-two capital fixed rate bonds
maturing in April 2034	(x)	20,000	20,000

Medium term notes issued	(xi)	42,643	31,163

1.99% fixed rate financial bond
maturing in April 2023	(xii)	20,000	-

3.68% CNY fixed rate Green Bonds
maturing in June 2022	(xiii)	2,720	3,000

3.90% fixed rate financial bond
maturing in November 2023	(xiv)	1,650	-

3.30% fixed rate financial bond
maturing in September 2022	(xv)	3,870	2,890

2.68% fixed rate financial bond
maturing in March 2023	(xvi)	4,000	-

4.70% fixed rate capital replenishment
bond maturing in August 2021	(xvii)	2,410	3,000

3.40% fixed rate financial bond
maturing in September 2024	(xviii)	2,000	1,880

2.75% fixed rate financial bond
maturing in March 2025	(xix)	6,000	-

3.80% fixed rate financial bond
maturing in June 2025	(xx)	500	-

5.55% fixed rate capital replenishment
bond maturing in March 2028	(xxi)	3,500	3,500

3.60% fixed rate capital replenishment
bond maturing in March 2030	(xxii)	1,500	-

Total nominal value		430,793	348,921

Less: Unamortized issuance cost and
discounts		(90)	(235)

Total		430,703	348,686

Pursuant to the approval by relevant regulatory authorities, the bonds issued by the Group are set out as below:

(i) The USD green bonds issued in October 2015 have a tenor of 5 years matured in October 2020.

(ii) The subordinated fixed rate bonds issued in June 2011 have a tenor of 15 years, with a fixed coupon rate of 5.30%, payable annually. The Bank has an option to redeem all of the bonds at face value on 6 June 2021. If the Bank did not exercise this option, the coupon rate of the bonds would remain at 5.30% per annum from 7 June 2021 onwards.

(iii) The subordinated fixed rate bonds issued in December 2012 have a tenor of 15 years, with a fixed coupon rate of 4.99%, payable annually. The Bank has an option to redeem all of the bonds at face value on 19 December 2022. If the Bank did not exercise this option, the coupon rate of the bonds would remain at 4.99% per annum from 20 December 2022 onwards.

(iv) The Tier-two capital bonds issued in October 2017 have a tenor of 10 years, with a fixed coupon rate of 4.45% payable annually. The Bank has an option to redeem part or all of the bonds at face value on 16 October 2022 if specified redemption conditions as stipulated in the offering documents were met, subject to regulatory approval. If the Bank did not exercise this option, the coupon rate of the bonds would remain at 4.45% per annum from 17 October 2022 onwards. These Tier-two capital bonds have the write-down feature of a Tier-two capital instrument and they are qualified as Tier-two Capital Instruments in accordance with the CBIRC requirements.

(v) The Tier-two capital bonds issued in April 2018 have a tenor of 10 years, with a fixed coupon rate of 4.45% payable annually. The Bank has an option to redeem part or all of the bonds at face value on 26 April 2023 if specified redemption conditions as stipulated in the offering documents were met, subject to regulatory approval. If the Bank did not exercise this option, the coupon rate of the bonds would remain at 4.45% per annum from 27 April 2023 onwards. These Tier-two capital bonds have the write-down feature of a Tier-two capital instrument and they are qualified as Tier-two Capital Instruments in accordance with the CBIRC requirements.

(vi) The Tier-two capital bonds issued in March 2019 have a tenor of 10 years, with a fixed coupon rate of 4.28% payable annually. The Bank has an option to redeem part or all of the bonds at face value on 18 March 2024 if specified redemption conditions as stipulated in the offering documents were met, subject to regulatory approval. If the Bank did not exercise this option, the coupon rate of the bonds would remain at 4.28% per annum from 19 March 2024 onwards. These Tier-two capital bonds have the write-down feature of a Tier-two capital instrument and they are qualified as Tier-two Capital Instruments in accordance with the CBIRC requirements.

(vii) The Tier-two capital bonds issued in April 2019 have a tenor of 10 years, with a fixed coupon rate of 4.30% payable annually. The Bank has an option to redeem part or all of the bonds at face value on 10 April 2024 if specified redemption conditions as stipulated in the offering documents were met, subject to regulatory approval. If the Bank did not exercise this option, the coupon rate of the bonds would remain at 4.30% per annum from 11 April 2024 onwards. These Tier-two capital bonds have the write-down feature of a Tier-two capital instrument and they are qualified as Tier-two Capital Instruments in accordance with the CBIRC requirements.


# (b) Financial risk management objectives and policies (Continued)

Ultimate responsibility for liquidity risk management rests with the Board. In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows.

The Group is exposed to liquidity risk as the Group had net current liabilities of approximately HK\$226,539,000 (2015: HK\$461,585,000). The liquidity of the Group primarily depends on the future funding being available and the ability of the Group to meet its financial obligations as they fall due. Details of which are set out in Note 2 to the consolidated financial statements.

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The maturity dates for other non-derivative financial liabilities are based on the agreed repayment dates.

The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curve at the end of the reporting period.

In addition, the following table details the Group's liquidity analysis for its derivative financial instruments. The tables have been drawn up based on the undiscounted contractual net cash outflows on derivative instruments that settle on a net basis, and the undiscounted gross outflows on those derivatives that require gross settlement.

(b) 財務風險管理目標及政策（續）

流動資金風險管理由董事會最終負責，於管理流動資金風險時，本集團監控及維持管理層認為足夠之現金及現金等值水平，以向本集團之業務提供資金及減低現金流量波動之影響。

由於本集團錄得淨流動負債約226,539,000 港 元（ 二 零 一 五 年 ；461,585,000港元），故本集團承受流動資金風險。本集團的流動資金主要倚賴可動用未來資金及本集團於財務責任到期時履行財務責任的能力。有關詳情載於綜合財務報表附註2。

下表詳列本集團非衍生金融負債之餘下合約到期情況。下表乃基於金融負債之未折現現金流量而編製，其乃根據本集團可能需付款之最早日期分類。其他非衍生金融負債之到期日是根據協定還款日期而釐定。

下表載列利息及本金現金流量。若利息流量為浮息，則按報告期間結束時之孳息曲線而得出未折現金額。

此外，下表詳列本集團對其衍生金融工具的流動性分析。編製該表時乃基於按淨額基準結算的衍生工具的未貼現合約現金流出淨額，以及須按總額結算的衍生工具的非貼現流出總額計算。

(b) 財務風險管理目標及政策（續）

	Weihgted
average
interest rate
加權
平均利率	On demand
or less than
1 year
按要求
或一年內	 1-2 years
一年
至兩年	 2-5 years
兩年
至五年	Total
undiscounted
cash flow
未折現現金
流量總額	Carriyng
amounts
 賬面值

	%
%	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

2016                二零一六年

Non-derivative financial liabilities 非衍生金融負債

Trade and other payables      貿易及其他應付款項	–	116,605	–	–	116,605	116,605

Other borrowings          其他借貸

– interest free            －免息	–	25,700	–	–	25,700	25,700

– fixed rate              －定息	10.00	4,948	–	–	4,948	4,800

– variable rate            －浮息	3.82	41,528	–	–	41,528	40,000

Obligations under finance leases 融資租賃承擔	1.45	601	601	289	1,491	1,439

Convertible bonds          可換股債券

– debt component          －債務部分	15.21	112,997	–	–	112,997	97,781

		302,379	601	289	303,269	286,325

2015                  二零一五年

Non-derivative financial liabilities 非衍生金融負債

Trade and other payables      貿易及其他應付款項	–	96,565	–	–	96,565	96,565

Other borrowings          其他借貸

– interest free            －免息	–	25,700	–	–	25,700	25,700

– fixed rate              －定息	10.00	3,620	–	–	3,620	3,500

– variable rate            －浮息	3.20	40,839	–	–	40,839	40,000

Obligations under finance leases 融資租賃承擔	2.59	668	668	980	2,316	2,196

Convertible bonds          可換股債券

– debt component         －債務部分	–	325,307	–	–	325,307	325,307

Promissory notes payable      應付承兌票據	13.70	–	24,000	–	24,000	18,925

		492,699	24,668	980	518,347	512,193

Derivatives – net settlement     衍生工具－以淨額結算
– Derivative financial liability     －衍生金融負債	–	–	–	–	–	17,785

The amounts included above for variable interest rate instruments for non-derivative financial liabilities are subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

上文就非衍生金融負債之浮動利率工具包括之金額，會因浮動利率變動有別於報告期間結算日所釐定估計而有變。


# 29. SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED)

The remuneration of Directors and other members of key management of the Group and of the Company are as follows:

	Group	Company

2019	2018	2019	2018

RM’000	RM’000	RM’000	RM’000

Short-term employee benefits	4,944	5,906	1,485	2,242

Post-employment benefits	245	324	15	41

	5,189	6,230	1,500	2,283

Analysed into:

- Directors of the Company	1,500	2,283	1,500	2,283

- Directors of the subsidiaries	1,286	1,608	-	-

- Other key management personnel	2,403	2,339	-	-

	5,189	6,230	1,500	2,283

As at the end of the reporting period, the Group had the following capital commitments:

	Group

30.9.2019	30.9.2018

RM’000	RM’000

Contracted but not provided for:

Construction of a factory	8,536	80,818

Renovation, purchase of plant and equipment	52,811	43,663

	61,347	124,481

As at the end of the reporting period, there were operating lease commitments for rental payable in subsequent accounting periods as follows:

# 30.2 Operating lease commitments – as lessee (Continued)

As at the end of the reporting period, the Group leases office premises and other operating facilities under operating leases. Leases are negotiated and rentals are fixed for a period of 1 to 5 years (30 September 2018: 1 to 10 years) with an option to renew at the prevailing market rates. Apart from the above lease commitment, the Group is required to pay contingent rentals based on percentage of sales derived from the operations for certain rented premises.

# 30.3 Operating lease commitments – as lessor

As at the end of the reporting period, there were non-cancellable operating lease commitments for rental receivable for premises in subsequent accounting periods as follows:

The above lease agreements expire within 1 to 2 year expiring in 2020 (30 September 2018: within 1 year expiring in 2018). The current rent receivables under the leases are subject to revision after expiry with no provisions for contingent rent.

Upon expiry of the lease term, the lessee is granted an option to renew the tenancy for two years subject to compliance and observation of all the terms and conditions in the tenancy agreements.


for all \( x \in \mathcal { X } \), for some \( \lambda \in \mathbb { R } \) and some function \( v : \mathcal { X } \rightarrow \mathbb { R } \). Note that \|λ\|and \|v(·)\| are both bounded by \( C ^ { \prime } \). Finally, we notice that, for any \( x \in \mathcal { X } \),

so the convergence of this sequence to \( \lambda \) holds for all x.

We are now in a position to prove existence of solutions to our Ergodic BSDE.

Theorem 4.4. Let v and \( \lambda \) be as constructed in Lemma 4.3. The triple \( ( Y , Z , \lambda ) \), where

is the unique bounded, stationary (i.e. does not depend on t), Markovian solution, with \( v ( x _ { 0 } ) = 0 \), to the Ergodic BSDE

Any other bounded solution \( ( Y ^ { \prime } , Z ^ { \prime } , \lambda ^ { \prime } ) \) satisfies \( \lambda \ = \ \lambda ^ { \prime } \), and any other bounded, stationary, Markovian solution \( ( \dot { Y } ^ { \prime } , Z ^ { \prime } , \lambda ^ { \prime } ) \) satisfies \( Y _ { t } \, = \, Y _ { t } ^ { \prime } + c \) for some \( c \in \mathbb { R } \), and \( Z \sim _ { M } Z ^ { \prime } \) 0.

Proof. Let \( \{ \alpha _ { n } \} _ { n > 1 } \) be the sequence constructed in Lemma 4.3. We have that \( Y _ { t } ^ { \alpha _ { n } } = v ^ { \alpha _ { n } } ( X _ { t } ) \) and \( e _ { k } ^ { * } Z _ { t } ^ { \alpha _ { n } } = v ^ { \alpha _ { n } } ( e _ { k } ) \) solve the discounted BSDE

However, since \( \| \mathbf { 1 } \| _ { M _ { t + 1 } } = 0 \), and f does not distinguish between values of \( Z _ { u } \) up to equivalence \( { \sim } { M } _ { u + 1 } \) , we can equally write \( Z _ { u } ^ { \alpha _ { n } } - v ^ { \alpha _ { n } } ( x _ { 0 } ) \mathbf { 1 } \) in the place of \( Z _ { u } ^ { \alpha _ { n } } \) in the above. Note that \( e _ { k } ^ { * } Z _ { u } ^ { \alpha _ { n } } - v ^ { \alpha _ { n } } ( x _ { 0 } ) \to e _ { k } ^ { * } Z _ { u } \) as \( n \to \infty \) for each \( e _ { k } \in \mathcal { X } \), and that, by the bound established in Lemma 4.3, \|e∗kZuαn   −vαn(x0)\|is uniformly bounded. Since f is Lipschitz in z, we deduce that

\[ f ( X _ { u } , Z _ { u } ^ { \alpha _ { n } } - v ^ { \alpha _ { n } } ( x _ { 0 } ) \mathbf { 1 } ) \to f ( X _ { u } , Z _ { u } ) \quad { \mathrm { a s } } \quad n \to \infty \quad { \mathrm { a . s . } } \]

\[ \begin{array} { l } { { \displaystyle Y _ { T } = \operatorname* { l i m } _ { n \to \infty } \left( v ^ { \alpha _ { n } } ( X _ { T } ) - v ^ { \alpha _ { n } } ( x _ { 0 } ) \right) } } \\ { { \displaystyle \quad = \operatorname* { l i m } _ { n \to \infty } \left( v ^ { \alpha _ { n } } ( X _ { t } ) - v ^ { \alpha _ { n } } ( x _ { 0 } ) \right) - \operatorname* { l i m } _ { n \to \infty } \displaystyle \sum _ { t \leq u < T } \left( f ( X _ { u } , Z _ { u } ^ { \alpha _ { n } } ) - \alpha _ { n } v ^ { \alpha _ { n } } ( X _ { u } ) \right) } } \\ { { \displaystyle \qquad + \operatorname* { l i m } _ { n \to \infty } \displaystyle \sum _ { t \leq u < T } \left( Z _ { u } ^ { \alpha _ { n } } \right) ^ { * } M _ { u + 1 } } } \\ { { \displaystyle \qquad = v ( X _ { t } ) - \operatorname* { l i m } _ { n \to \infty } \displaystyle \sum _ { t \leq u < T } \left( f ( X _ { u } , Z _ { u } ^ { \alpha _ { n } } - v ^ { \alpha _ { n } } ( x _ { 0 } ) \mathbf { 1 } ) - \alpha _ { n } v ^ { \alpha _ { n } } ( X _ { u } ) \right) } } \\ { { \displaystyle \qquad + \operatorname* { l i m } _ { n \to \infty } \displaystyle \sum _ { t \leq u < T } \left( Z _ { u } ^ { \alpha _ { n } } - v ^ { \alpha _ { n } } ( x _ { 0 } ) \mathbf { 1 } \right) ^ { * } M _ { u + 1 } } } \\ { { \displaystyle \qquad = Y _ { t } - \displaystyle \sum _ { t \leq u < T } \left( f ( X _ { u } , Z _ { u } ) - \lambda \right) + \displaystyle \sum _ { t \leq u < T } Z _ { u } ^ { * } M _ { u + 1 } , } } \end{array} \]

and we see that \( ( Y , Z , \lambda ) \) is indeed a solution of the EBSDE (4.4).

Suppose that \( ( Y ^ { \prime } , Z ^ { \prime } , \lambda ^ { \prime } ) \) is another bounded solution. Let \( \tilde { Y } \, = \, Y \, - \, Y ^ { \prime } \),\( \tilde { Z } = Z - Z ^ { \prime } \) and \( \tilde { \lambda } = \lambda - \lambda ^ { \prime } \). Then

By Proposition 2.2, there exists a measure Q such that

is a martingale under Q. Taking an \( \mathbb { E } _ { \mathbb { Q } } \) expectation in (4.5), we obtain

\[ \begin{array} { r } { \tilde { \lambda } = T ^ { - 1 } \mathbb { E } _ { \mathbb { Q } } \big [ \tilde { Y } _ { T } - \tilde { Y } _ { 0 } \big ] . } \end{array} \]

Since \( \tilde { Y } \) is uniformly bounded, taking the limit \( T \to \infty \) gives \( \tilde { \lambda } \) = 0, so that \( \lambda = \lambda ^ { \prime } \). Substituting back into (4.5) and taking an \( \mathbb { E } _ { \mathbb { O } } [ \, \cdot \, | \, \mathcal { F } _ { 0 } ] \)] expectation gives

\[ \mathbb { E } _ { \mathbb { Q } } { \left[ \tilde { Y } _ { T } \mid \mathcal { F } _ { 0 } \right] } = \tilde { Y } _ { 0 } . \eqno ( 4 . 6 ) \]

Suppose further that \( Y ^ { \prime } \) and \( Z ^ { \prime } \) are Markovian and do not depend on t, so that in particular there exists a function \( v ^ { \prime } : \mathcal { X } \rightarrow \mathbb { R } \) such that \( Y _ { t } ^ { \prime } \, = \, v ^ { \prime } ( X _ { t } ) \). Then the measure Q may be taken to be the measure given by Lemma 4.1, so that X is still a uniformly ergodic Markov chain under Q. Writing \( \tilde { \pi } \) for the ergodic measure of X under Q, it follows from (4.6) that, for any \( x \in \mathcal { X } \),

\[ v ( x ) - v ^ { \prime } ( x ) = \operatorname* { l i m } _ { T \to \infty } \mathbb { E } _ { \mathbb { Q } } \big [ \tilde { Y } _ { T } \, \big | \, X _ { 0 } = x \big ] = \int _ { \mathcal { X } } \big ( v ( y ) - v ^ { \prime } ( y ) \big ) d \tilde { \pi } ( y ) . \]

Since the right hand side is independent of x, we see that \( v ( x ) = v ^ { \prime } ( x ) + c \) for all x, and hence that \( Y _ { t } = Y _ { t } ^ { \prime } + c \), for some \( c \in \mathbb { R } \). In particular, if \( v ^ { \prime } ( x _ { 0 } ) = 0 \), then \( c \) = 0, and hence \( Y = Y ^ { \prime } \) up to indistinguishability.

With \( \tilde { \lambda } \) = 0 and \( \tilde { Y } _ { t } = c = \tilde { Y } _ { t + 1 } \), we deduce from the one-step dynamics of \( \tilde { Y } \) that \( \tilde { Z } _ { t } ^ { * } M _ { t + 1 } = 0 , \) and hence that \( Z \sim _ { M } Z ^ { \prime } \).


Summer Universiade (2011年世界大學生夏季運動會) in Shenzhen, the 12th National Games of the PRC (中華人民共和國第十二屆運動會) in Liaoning province in 2013, the 2014 Youth Olympic Games in Nanjing and the 1st National Youth Games of the PRC(第一届全國青年運動會) in Fujian province in 2015. According to the Frost & Sullivan Report, our live sports broadcasting services were ranked second with a 25.0% market share in China in terms of revenue in 2015. In 2013, 2014 and 2015, the revenue we derived from live sports broadcasting service was approximately RMB20.3 million, RMB9.1 million and RMB14.0 million, respectively, representing approximately 4.0%, 2.2% and 2.3%, respectively, of our total revenue for the same periods.

• Graphics template design. We provide standard templates for TV programs, such as score-displaying graphics for sports game shows, as part of our graphics creation system product and our solutions containing this product. Some customers engage us to design or customize graphics templates for their digital video programs when these standard templates are insufficient to meet their needs.

• Digitization and cataloging of media asset. We use our media asset management products and solutions to help TV broadcasters digitize and catalog their analog media content on project-by-project basis. We have also started serving other types of customers such as publishers and archives to digitize their collections of paper-based documents.

• System maintenance. We provide long-term, on-site system maintenance services on project-by-project basis to customers who have installed our solutions. When providing these services, we are able to uncover opportunities to improve our solutions and products and help customers uncover their potential need for system expansion, upgrades and additional solutions and products.

The following illustrates our selected services described above.

Our products combine our proprietary software with third-party hardware configured to our specifications to help our customers process digital video content after its capture and ingestion. Our products focus on providing certain key functionalities of digital video post-production, and primarily include:

• Video editing systems that edit digital video of news, advertisements, channel labels, banners and captions. The video editing system is one of our principal products and a key component in many of our solutions. Our Himalaya-series video editing systems are able to address our customers’ technological needs at various levels, ranging from sophisticated, high-end editing to entry-level, basic editing. Our video editing systems support real-time editing, multi-format video editing, integrated subtitle editing, special video and audio effects management, and have a user-friendly editing interface and numerous other features.

• Graphics creation systems that generate graphics and texts and integrate them into news, sports broadcasting, weather forecasts, TV shows and other TV programs and movies. Our Mariana-series graphics creation systems offer high-performance and real-time text and graphic rendering capability, easy-to-use editing and playback features and tools to allow for independent creations of a wide variety of TV shows that are well-suited to meet the demands of professional broadcasters today. According to the Frost & Sullivan Report, Mariana-series is the first domestically developed graphics creation system in China. We have also recently developed a meteorological graphics system under the brand “Tianmu”(“天目”) that we market to local government meteorological bureaus. To meet the demand of professional meteorology broadcasting, Tianmu offers its users the ability to quickly store and integrate real-time weather data from the source and accurately generate a rich array of texts, images and 3D animations to simulate and present various kinds of climate and weather effects for our customers. According to the Frost & Sullivan Report, our graphics creation systems had an industry-leading market share of 25.2% in China in terms of 2015 revenue. In 2013, 2014 and 2015, the revenue we derived from the sale of our graphics creation systems was approximately RMB35.8 million, RMB26.1 million and RMB38.2 million, respectively, representing approximately 7.1%, 6.4% and 6.3%, respectively, of our total revenue for the same periods.

• Visual effects and video compositing systems that edit and compose video content during post- production to create special visual effects such as motion detection and tracking, color correction and 3D-space compository. In 2010, we launched our Dunhuang-series visual effects and video compositing system, which is the first domestically developed system of its kind in China according to the Frost & Sullivan Report. Compared to traditional video editing systems, the Dunhuang-series has a more comprehensive and advanced set of functions targeting more sophisticated, high-end customers.


The Group has three reportable segments. The segments are managed separately as each business offers different products or provides different services and requires different business strategies.

The following summary describes the operations in each of the Group’s reportable segments:

QR code business segment	— Provision of QR code on product packaging and solutions and advertising
display services

Packaging products segment	— Manufacture and sale of watch boxes, jewellery boxes, eyewear cases, bags
and pouches and display units

Treasury investment segment	— Investments and trading in securities and money lending

Management monitors the results of the Group’s operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment profit or loss, which is a measure of adjusted profit or loss before tax. The adjusted profit or loss before tax is measured consistently with the Group’s profit or loss before tax except that finance costs, share of results of a joint venture and an associate and head office and corporate income and expenses are excluded from such measurement.

There was no inter-segment sale or transfer during the year (2017: Nil). Central revenue and expenses are not allocated to the operating segments as they are not included in the measure of the segments’ results that is used by the chief operating decision makers for assessment of segment performance.

	QR code business	Packaging products	Treasury investment	Total

2018	2017	2018	2017	2018	2017	2018	2017

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

Gr’oups revenue	73,405	78,791	276,225	318,656	447	500	350,077	397,947

Fair value losses on financial
assets at fair value through
profit or loss held for trading,
net	–	–	–	–	(1,307)	(80,248)	(1,307)	(80,248)

Segment revenue	73,405	78,791	276,225	318,656	(860)	(79,748)	348,770	317,699

Segment results	(195,734)	(157,723)	8,423	25,947	(890)	(79,874)	(188,201)	(211,650)

Corporate and unallocated
income, gains and losses							5,696	(5,978)

Corporate and unallocated
expenses							(34,957)	(28,656)

Share of result of a joint venture							19	2,990

Share of result of an associate							7,276	–

Finance costs							(41,807)	(5,693)

Loss before tax							(251,974)	(248,987)

	QR code business	Packaging products	Treasury investment	Total

2018	2017	2018	2017	2018	2017	2018	2017

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

Other segment information:

Capital expenditure

– operating segment	44,935	51,379	39	3,662	–	–	44,974	55,041

– unallocated							13	25

							44,987	55,066

Interest income

– operating segment	849	160	28	46	–	–	877	206

– unallocated							10,610	2

							11,487	208

Depreciation

– operating segment	18,941	7,422	1,719	1,518	–	–	20,660	8,940

– unallocated							9	10

							20,669	8,950

Amortisation	7,838	435	–	–	–	–	7,838	435

Loss/(gain) on disposal of
property, plant and equipment	2,385	1,633	–	(190)	–	–	2,385	1,443

Impairment of property,
plant and equipment	40,718	–	–	–	–	–	40,718	–

Impairment loss of
trade receivables, net	2,016	17	–	49	–	–	2,016	66

Impairment loss of goodwill	37,023	104,664	–	–	–	–	37,023	104,664


31.1 Certification by Jeffrey A. Stoops, Chief Executive Officer, pursuant to Section 302 of the SarbanesOxley Act of 2002.\*

31.2 Certification by Brendan T. Cavanagh, Chief Financial Officer, pursuant to Section 302 of the SarbanesOxley Act of 2002.\*

32.1 Certification by Jeffrey A. Stoops, Chief Executive Officer, pursuant to Section 906 of the SarbanesOxley Act of 2002. \*\*

32.2 Certification by Brendan T. Cavanagh, Chief Financial Officer, pursuant to Section 906 of the SarbanesOxley Act of 2002. \*\*

101.SCH XBRL Taxonomy Extension Schema Document.\*

101.DEF XBRL Taxonomy Extension Definition Linkbase Document.\*

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.\*

101.LAB XBRL Taxonomy Extension Label Linkbase Document.\*

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.\*

† Management contract or compensatory plan or arrangement.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Steven E. Bernstein
Steven E. Bernstein	Chairman of the Board of Directors	March 1, 2018

/s/ Jeffrey A. Stoops
Jeffrey A. Stoops	Chief Executive Officer and President
(Principal Executive Officer)	March 1, 2018

/s/ Brendan T. Cavanahg
Brendan T. Cavanahg	Chief Financial Officer and Executive Vice President
(Principal Financial Officer)	March 1, 2018

/s/ Brian D. Lazarus
Brian D. Lazarus	Chief Accounting Officer and Senior Vice President
(Principal Accounting Officer)	March 1, 2018

/s/ Brian C. Carr
Brian C. Carr	Director	March 1, 2018

/s/ Mary S. Chan
Mary S. Chan	Director	March 1, 2018

/s/ Duncan H. Cocroft
Duncan H. Cocroft	Director	March 1, 2018

/s/ George R. Krouse Jr.
George R. Krouse Jr.	Director	March 1, 2018

/s/ Jack Langer
Jack Langer	Director	March 1, 2018

/s/ Kevin L. Beebe
Kevin L. Beebe	Director	March 1, 2018


# Genuine Parts Company and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

	Year Ended December 31

2017	2016	2015

(In Thousands, Except per Share Amounts)

Net sales	$    16,308,801	$    15,339,713	$    15,280,044

Cost of goods sold	11,402,403	10,740,106	10,724,192

Gross marign	4,906,398	4,599,607	4,555,852

Operating expenses:

Selling, administrative, and other expenses	3,705,136	3,370,833	3,277,390

Depreciation and amortization	167,691	147,487	141,675

Provision for doubtful accounts	13,932	11,515	12,373

Total operating expenses	3,886,759	3,529,835	3,431,438

Nonoperating expenses (income) :

Interest expense	41,486	21,084	21,662

Other	(31,115)	(25,652)	(20,929)

Total nonoperating expenses (income)	10,371	(4,568)	733

Income before income taxes	1,009,268	1,074,340	1,123,681

Income taxes	392,511	387,100	418,009

Net income	$       616,757	$       687,240	$       705,672

Basic net income per common share	$          4.19	$          4.61	$          4.65

Diluted net income per common share	$          4.18	$          4.59	$          4.63

Weihgted average common shares outstanding	147,140	149,051	151,667

Dilutive effect of stock options and nonvested restricted stock awards	561	753	829

Weihgted average common shares outstandinilg — assuming dution	147,701	149,804	152,496

Net income	$       616,757	$       687,240	$       705,672

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment	137,694	(8,957)	(207,986)

Net investment hedge, net of income taxes of 2017 — $9,711	(17,388)	—	—

Pension and postretirement benefit adjustments, net of income taxes of 2017
— ($20,539); 2016 — $50,144; 2015 — $5,335	40,123	(73,446)	(2,421)

Other comprehensive income (loss), net of tax	160,429	(82,403)	(210,407)

Comprehensive income	$       777,186	$       604,837	$      495,265

(In Thousands, Except Share and per Share Amounts)

	Common Stock	Additional
PaidIn
Caiptal	Accumulated
Other
Comprehensive
Loss	Retained
Earnings	Total
Parent
Equity	Non-
controlling
Interests in
Subsidiaries	Total
Equity

	Shares	Amount

Balance at January 1, 2015	153,113,042	$    153,113	$     26,414	$        (720,211)	$ 3,841,932	$ 3,301,248	$     11,116	$ 3,312,364

Net income	—	—	—	—	705,672	705,672	—	705,672

Other comprehensive loss,
net of tax	—	—	—	(210,407)	—	(210,407)	—	(210,407)

Cash dividends declared,
$2.46 per share	—	—	—	—	(372,840)	(372,840)	—	(372,840)

Sharebased awards
exercised, including tax
benefit of $7,024	229,958	230	(2,778)	—	—	(2,548)	—	(2,548)

Sharebased compensation	—	—	17,717	—	—	17,717	—	17,717

Purchase of stock	(3,261,526)	(3,262)	—	—	(289,013)	(292,275)	—	(292,275)

Noncontrolling interest
activities	—	—	—	—	—	—	1,559	1,559

Balance at December 31, 2015	150,081,474	150,081	41,353	(930,618)	3,885,751	3,146,567	12,675	3,159,242

Net income	—	—	—	—	687,240	687,240	—	687,240

Other comprehensive loss,
net of tax	—	—	—	(82,403)	—	(82,403)	—	(82,403)

Cash dividends declared,
$2.63 per share	—	—	—	—	(391,852)	(391,852)	—	(391,852)

Sharebased awards
exercised, including tax
benefit of $12,021	340,703	341	(4,467)	—	—	(4,126)	—	(4,126)

Sharebased compensation	—	—	19,719	—	—	19,719	—	19,719

Purchase of stock	(2,011,755)	(2,012)	—	—	(179,405)	(181,417)	—	(181,417)

Noncontrolling interest
activities	—	—	—	—	—	—	953	953

Balance at December 31, 2016	148,410,422	148,410	56,605	(1,013,021)	4,001,734	3,193,728	13,628	3,207,356

Net income	—	—	—	—	616,757	616,757	—	616,757

Other comprehensive
income, net of tax	—	—	—	160,429	—	160,429	—	160,429

Cash dividends declared,
$2.70 per share	—	—	—	—	(396,891)	(396,891)	—	(396,891)

Sharebased awards
exercised, including tax
benefit of $3,134	131,232	132	(5,371)	—	—	(5,239)	—	(5,239)

Sharebased compensation	—	—	16,892	—	—	16,892	—	16,892

Purchase of stock	(1,889,039)	(1,889)	—	—	(171,635)	(173,524)	—	(173,524)

Noncontrolling interest
activities	—	—	—	—	—	—	38,376	38,376

Balance at December 31, 2017	146,652,615	$    146,653	$     68,126	$        (852,592)	$ 4,049,965	$ 3,412,152	$     52,004	$ 3,464,156


# 18. FILM RIGHTS AND FILMS AND TV PROGRAMMES UNDER PRODUCTION (continued)

	Film and TV
programmes
rights	Films and TV
 programmes
under
production	Total

HK$’000	HK$’000	HK$’000

31 December 2015

Cost:

At 1 January 2015	7,958	—	7,958

Additions	—	41,117	41,117

Disposals	(10,276)	—	(10,276)

Transfer to films and TV programmes rights	38,634	(38,634)	—

At 31 December 2015	36,316	2,483	38,799

Accumulated amortisation:

At 1 January 2015	7,366	—	7,366

Disposals	(7,366)	—	(7,366)

At 31 December 2015	—	—	—

Carrying amount	36,316	2,483	38,799

For the purpose of impairment testing, film rights have been allocated to the cash generating unit of movies, TV programmes and internet contents operation.

In light of the circumstances of film industry, the Group regularly reviewed its library of film rights to assess the marketability of film rights and the corresponding recoverable amounts.

At 31 December 2016 and 2015, the directors of the Company believe that any reasonably possible change in the key assumptions on which the recoverable amounts would not cause the carrying amounts of the films and TV programmes rights exceed the aggregate recoverable amounts.

During the year ended 31 December 2016, there is an impairment loss of approximately HK\$6,004,000 recognised in respect of films and TV programmes under production, based on contractual cash flows less cost to sell which solely related to the Group’s TV programmes under production and distribution activities based in Mainland China.

During the year ended 31 December 2016, the Group has one (2015: Nil) film investment agreement at a total contract amount of HK\$16,750,000 (2015: Nil). The investment is governed by the relevant agreement entered into between the Group and the production house whereby the Group is entitled to a fixed rate of return at 15% per annum on the principal amount. Investment income of HK\$1,982,000 was recognised by the Group.

# 20. AMOUNTS DUE FROM RELATED COMPANIES

On 21 December 2015, Young Film Culture Media Company Limited (“Young Film”), a subsidiary of the Company, entered into a master services agreement (the “Master Services Agreement”) with青島年青時候影視文化傳媒有限公司 (Qingdao Young Times Video Cultural Media Company Limited) (“Qingdao Young Times”) which is controlled by Ms. Shang Na, a member of the key management personnel of the Group, pursuant to which Qingdao Young Times shall provide to Young Film services including the production and promotion of movies, TV dramas and programmes as requested by the Group for a term of three years from the date of the Master Services Agreement. The services under the Master Services Agreement shall be charged on a cost basis (as incurred by Qingdao Young Times). For more details of the Master Services Agreement, please refer to the announcement of the Company dated 21 December 2015.

As at 31 December 2016, included in amounts due from related companies was an amount of approximately HK\$45,440,000 (2015: HK\$24,000,000) advanced by the Group to Qingdao Young Times for the services under the Master Services Agreement.

# 21. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

As at 31 December 2016, except for fully impaired other receivables of HK\$6,374,000 (2015: Nil), none of the above assets is either past due or impaired. The financial assets included in the above balances relate to receivables for which there was no recent history of default.


(4) to consider any significant or unusual items that are, or may need to be, reflected in the reports and accounts, it should give due consideration to any matters that have been raised by the Company’s staff responsible for the accounting and financial reporting function, compliance officer or auditors;

(5) to review the Company’s financial controls, and unless expressly addressed by a separate Board risk committee, or by the Board itself, to review the Company’s risk management and internal control systems;and

(6) to discuss the risk management and internal control systems with management to ensure that management has performed its duty to have effective systems.

The written terms of reference of the Audit Committee are available on the websites of the Stock Exchange and the Company.

From the Listing Date and up to 31 December 2017, two Audit Committee meetings were held. Save as Mr. Yang Zhongkai who only attended one meeting, all the members of the Audit Committee attended all two meetings. At the meetings, the Audit Committee reviewed the annual report for 2016 with external auditors, the interim results for 2017, the activities of the Group’s internal control functions and also reviewed and approved the arrangement of the annual audit work and then proposed the recommendations to the Board.

The Remuneration Committee comprises three members, including two independent non-executive Directors namely Mr. Yang Zhongkai (chairman), Mr. Shi Weixing and one executive Director namely Mr. Peng TB.

The principal duties of the Remuneration Committee include but not limited to the following:

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

2. to review and approve management’s remuneration proposals with reference to corporate goals and objectives of the Board;

3. to determine the remuneration packages of individual executive Directors and senior management. These include benefits in kind, pension rights and compensation payments, including any compensation payable for loss or termination of their office or appointment;

4. to make recommendations to the Board on the remuneration of non-executive Directors;

5. to consider salaries paid by comparable companies, time commitment and responsibilities and employment conditions elsewhere in the Group;

6. to review and approve compensation payable to executive Directors and senior management for any loss or termination of office or appointment to ensure that it is consistent with contractual terms and is otherwise fair and not excessive;

7. to review and approve compensation arrangements relating to dismissal or removal of Directors for misconduct to ensure that they are consistent with contractual terms and are otherwise reasonable and appropriate;

8. to ensure that no Director or any of his/her associates (as defined in the Listing Rules) is involved in deciding his/her own remuneration; and

9. to report back to the Board on their decisions or recommendation, unless there are legal or regulatory restrictions on their ability to do so (such as a restriction on disclosure due to regulatory requirements).

The written terms of reference of the Remuneration Committee are available on the websites of the Stock Exchange and the Company.

From the Listing Date and up to the year ended 31 December 2017, one Remuneration Committee meeting was held. Save as Mr. Yang Zhongkai, all the members of the Remuneration Committee attended the meeting. At the meeting, the Remuneration Committee reviewed remuneration of the Directors and senior management, and thought that the remunerations of whom were reasonable and appropriate.

The Nomination Committee currently comprises three members, including two independent non-executive Directors namely Mr. Shi Weixing (chairman), Mr. Yang Zhongkai and one executive Director namely Mr. Peng YH.

The principal duties of the Nomination Committee include the following:

1. to review the structure, size and composition (including the skills, knowledge and experience) of the Board at least annually and make recommendations on any proposed changes to the Board to complement the Company’s corporate strategy;

2. to identify individuals suitably qualified to become Board members and select or make recommendations to the Board on the selection of individuals nominated for directorships;

3. to assess the independence of independent non-executive Directors;

4. to make recommendations to the Board on the appointment or reappointment of Directors and the succession planning for Directors, in particular the chairman and the chief executive officer; and

5. to review the Board diversity policy.

The Nomination Committee assesses the candidate or incumbent on criteria such as integrity, experience, skill and ability to commit time and effort to carry out the duties and responsibilities. The recommendations of the Nomination Committee will then be put to the Board for decision. The written terms of reference of the Nomination Committee are available on the websites of the Stock Exchange and the Company.


1. Applicability of Rights. The Holders (as defined below) shall be entitled to the following rights only with respect to any potential public offering of the Company’s Shares in the United States. The rights provided hereunder shall terminate with respect to any Holder, at the earlier of (a) eight years after the Company’s IPO and (b) if all Registrable Securities held by such Holder may then be sold without registration in any ninety (90) day period pursuant to Rule 144 promulgated under the Securities Act.

2. Definitions. In this Agreement, in addition to those defined in the context, the following expressions shall have the following meanings:

“ADSs” means American Depositary Shares representing the relevant number of the Company’s ordinary shares.

“Form F-3” mean such respective form under the Securities Act as is in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

“Holder” means any Person owning of record Registrable Securities that have not been sold to the public or pursuant to Rule 144 promulgated under the Securities Act or any permitted assignee of record of such Registrable Securities to whom rights under this Agreement have been duly assigned in accordance with this Agreement.

For purposes of this Section 2, “Holder”, the term “Holder” means any Person owning or having the rights to acquire Registrable Securities or any permitted assignee of record of such Registrable Securities to whom rights under this Section 2 have been duly assigned in accordance with this Agreement.

“register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement.

“Registrable Securities” means (1) any Ordinary Shares of the Company issued or to be issued pursuant to the conversion of any Preference Shares;(2) any Ordinary Shares of the Company issued or issuable upon the conversion or exercise of any warrant, right or other security which is issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, any Preference Shares described in clause (1) of this definition; and (3) any other Ordinary Shares of the Company owned or hereafter acquired by holders of Preference Shares. Notwithstanding the foregoing, “Registrable Securities” shall exclude any Registrable Securities sold by a Person in a transaction in which rights under this Agreement are not assigned in accordance with this Agreement or any Registrable Securities sold in a public offering, whether sold pursuant to Rule 144 promulgated under the Securities Act, or in a registered offering, or otherwise.

“Registrable Securities then outstanding” means the number of Ordinary Shares of the Company that are Registrable Securities and are then issued and outstanding or are issuable upon conversion of Preference Shares then issued and outstanding, or issuable upon conversion or exercise of any warrant, right or other security then outstanding.

“SEC” or “Commission” means the U.S. Securities and Exchange Commission.

(a) Request by Holders. If the Company shall at any time after the earlier of (i) the third (3rd) anniversary of the date of this Agreement and (ii) the expiry of six (6) months after a Qualified IPO receive a written request from the Holders of at least 15% of the Registrable Securities that the Company file a registration statement under the Securities Act covering the registration of Registrable Securities pursuant to this Section 3, then the Company shall, within ten (10) Business Days of the receipt of such written request, give written notice of such request (“Request Notice”) to all Holders, and use all reasonable efforts to effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities that Holders (including other Shareholders who so) request to be registered and included in such registration by written notice given by such Holders to the Company within twenty (20) Business Days after receipt of the Request Notice, subject only to the limitations of this Section 3; provided that the Registrable Securities requested by all Holders to be registered pursuant to such request must have a market value in excess of US\$50,000,000 (or, in the case of an initial public offering, US\$200,000,000); provided, further, that the Company shall not be obligated to effect any such registration if the Company has, within the six (6) month period preceding the date of such request, already effected a registration under the Securities Act pursuant to this Section 3 or Section 5, or in which the Holders had an opportunity to participate pursuant to the provisions of Section 4, other than a registration from which the Registrable Securities of Holders have been excluded (with respect to all or any portion of the Registrable Securities the Holders requested be included in such registration) pursuant to the provisions of Section 4(a).


# PRC GOVERNMENTAL AUSTERITY MEASURES IN THE PROPERTY MARKET

The PRC government has recently introduced certain new policies which are intended to control the substantial increases in property prices in the PRC. These policies can be classified into four categories: (i) restrictions on speculation activities of real estate developers; (ii) limitations on financing land grant consideration payment; (iii) restrictions on speculation activities of residential property buyers; and (iv) encouragement of the PRC government in the purchase of small-size units and construction of affordable housing. For details of the aforesaid regulations, please refer to the section headed “Regulation — Impact of the PRC Governmental Austerity Measures” in this prospectus.

Our Directors are of the view that these policies did not and would not have any material adverse impact on our business operations on the basis that (i) there was no adverse impact on the average contract prices for the pre-sale of our residential properties at Golden Wheel Star City and our commercial properties at Golden Wheel Time Square during the year ended 31 December 2011 and the six months ended 30 June 2012; (ii) we had not encountered any difficulty in obtaining bank loans during the year ended 31 December 2011 and the six months ended 30 June 2012; and (iii) the residential units within our integrated commercial projects are positioned for mass market home buyers in Jiangsu and Hunan provinces. As of 30 September 2012, approximately 29,347 sq.m., or 81%, of the total GFA available for sale of our residential properties (completed and under development) were categorized as small to medium-sized ordinary commodity houses under the relevant PRC laws and regulations, which will remain as our focus for residential property development. We believe this particular residential market segment has more stable and consistent demand, higher affordability attributable to a lower purchase price in our target markets as compared to luxury residential developments which target higher income households and property investors in these markets.

However, it is difficult to ascertain the full extent of the impact of these measures on the performance of our Group or to accurately estimate the sales volume and turnover of our Group as if such measures had not been introduced. Our Directors confirm that we had not experienced any material cancellation of sales during the Track Record Period and up to the Latest Practicable Date. As advised by our PRC legal advisors, Jun He Law Offices, there has been no material changes in the PRC laws and regulations, regardless at state level or in Nanjing, Yangzhou and Zhuzhou, in the recent months to increase regulation over pre-sale activities of property developers, or to tighten measures to limit bank financing including buying-off plan pre-financing.

We failed to fully comply with certain applicable PRC laws and regulations, which had resulted in certain non-compliance incidents during the Track Record Period, including (i) late completion of Nanjing Jade Garden and Golden Wheel Star Plaza, (ii) delivery of certain property units of Golden Wheel Time Square before passing the construction completion examination, (iii) failure to complete lease registration for certain leased properties of Golden Wheel Time Square, (iv) failure to make housing fund contributions for certain employees, and (v) granting loans to Nanjing Golden Wheel Real Estate, our then related company (which became our wholly-owned subsidiary on 18 June 2012). We had rectified all the other non-compliance incidents as of the Latest Practicable Date, except for the late completion of Nanjing Jade Garden and Golden Wheel Star Plaza. As a result, we may be subject to a maximum fine of approximately RMB22.4 million and the relevant authorities may forfeit part of the land on which the constructions has not been completed by their respective deadlines without any payment to us. For details of the reasons for these non-compliance incidents and the corresponding remedial and preventive measures, please refer to the sections headed “Risk Factors — We may not be able to meet our project development schedules and complete our projects on time, or at all” and “Business — Regulatory Compliance” in this prospectus.

We maintained a profitable operation during the Track Record Period. In 2011, our net profit was RMB513.2 million, representing an increase of 74.9% from RMB293.4 million in 2010. We also had a prudent net debt to equity ratio of 15.0% as of 30 June 2012 as a result of our strict financial disciplines over all aspects of our operations from land acquisition to construction. We intend to continue maintaining a disciplined financial strategy.

The fair value gains of investment properties accounted for a substantial portion of our net profit during the Track Record Period, which may, however, fluctuate from time to time. For details, please refer to the section headed “Risk Factors — Fair value gains on our investment properties represented a substantial portion of our net profit during the Track Record Period, and the fair value of our investment properties is likely to fluctuate from time to time and may decrease significantly in the future, which may materially and adversely impact our profitability” in this prospectus.

# Selected Consolidated Statements of Comprehensive Income and Statements of Financial Position Line Items

	Year ended 31 December	 Six months ended 30 June

2009	2010	2011	2011	2012

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

			(unaudited)

Revenue	493,800	483,524	524,495	167,230	662,351

Gross profit	206,154	140,992	241,061	70,068	321,781

Changes in fair value of investment properties	250,183	306,900	539,919	229,579	75,000

Profit and total comprehensive income attributable to:

Owners of the Company	263,403	280,744	498,488	187,892	198,767

Non-controlling interests	15,033	12,632	14,705	8,134	7,916

	278,436	293,376	513,193	196,026	206,683

Profit and total comprehensive income (excluding fair value gains
and the relevant deferred taxes) attributable to:

Owners of the Company	83,274	58,894	103,446	22,554	145,443

Non-controlling interests	7,525	4,307	4,808	1,288	4,990

	90,799	63,201	108,254	23,842	150,433

# Selected Consolidated Statements of Cash Flows Line Items

	Year ended 31 December	 Six months ended 30 June

2009	2010	2011	2011	2012

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

			(unaudited)

Net cash from (used in) operating activities	26,684	261,480	134,012	118,520	(75,434)

Net cash (used in) from investing activities	(10,793)	(158,269)	(99,997)	(94,034)	16,586

Net cash from (used in) financing activities	158,503	75,693	(225,540)	(108,518)	(45,404)

Net increase (decrease) in cash and cash equivalents	174,394	178,904	(191,525)	(84,032)	(104,252)

Cash and cash equivalents at beginning of year/period	34,868	209,262	388,166	388,166	196,641

Cash and cash equivalents at end of year/period	209,262	388,166	196,641	304,134	92,389


In 2018, the macro economy basically maintained a stable and positive development trend, while the coal production and economy were in a good state of operation, industry concentration was further improved. The supply and demand in the domestic coal market were booming and balanced as well in general. The supply-side reform drove a continual rise of coal price and better profitability of the industry. Based on its existing strategic development goals, the Company was effectively responsive to market changes for the purpose of advancing its continuous high-quality development.

As of the end of the reporting period, the Company recorded a total asset of RMB94.551 billion, a revenue of RMB38.017 billion in 2018 and a net profit attributable to owners of the parent company of RMB4.194 billion.

During the reporting period, the Company has realized production of commodity coal of 47.69 million tonnes and sales of coal of 85.99 million tonnes.

During the reporting period, the Company completed the optimization and promotion of new processes and new technologies, improved the recovery rate and maximized economic benefits. Meanwhile, the Company focused on deliberating on the coal refining plans for all coal mines and coal washing plants, assisted the reform of production system, diversified the type of commodity coal, and increased lump coal rate, thereby achieving coal refining, cost reduction and efficiency enhancement.

In 2018, the Company strengthened marketing for coal. On the basis of enhancing the key contracted users, the Company brought its sale pace under control through sub-division of coal type, combination of futures and spot, direct supply of orders, container distribution and other new trade modes, optimizing its client structure and gradually releasing new driving forces.

In 2018, as driven by the strategy of transportation-sale integration, the Company seized the new opportunities brought by the reform of railway cargo settlement, strengthened the coordination of transportation with sales and storage & shipment management to improve the turnover rate; and established the Gonggou Shipment Station and increased supply. During the reporting period, Zhundong Railway Company and Huzhun Railway Company dispatched 74.20 million tonnes and 32.15 million tonnes of coal, respectively. The traffic volume through the Company’s self-operated railways first exceeded 100 million tonnes with a profit of RMB667 million achieved.

# I. DISCUSSION AND ANALYSIS ON THE OPERATIONS (Continued)

The layout of coal-to-chemicals industry is an important strategic move for the Company to extend its industrial chain, achieve transformation and upgrading and enhance its core competitiveness. The “13th Five-Year Plan for Energy Development” clearly states that the pace of development should be rationally controlled, technological innovation and market risk assessment should be strengthened, the conditions for environmental protection accession should be strictly implemented, the deep processing of coal should be developed in order, the upgrading of coal-to-fuel, coal-to-olefin production and other demonstrations should be steadily promoted and the competitiveness and risk-resistance of the project should be enhanced according to the orientation of the National Energy Technology Reserve and Capacity Reserve Demonstration Project. A total of three projects of “Xinjiang Yili”, “Xinjiang Ganquanpu” and “Inner Mongolia Yitai” were selected as key coal liquefaction projects in the “13th Five-Year Plan” for deep processing of coal. The Company has been unswervingly speeding up the approval and construction of coal chemical projects.

# 1. Demonstration project of coal-to-oil production of 0.16 Mtpa

During the reporting period, on ensuring the safe and stable production, Coal-to-oil Company optimized its processes and procedures, and enhanced technical innovation so that a total of 0.1943 million tonnes of various types of oil and chemicals were produced during the year. In the meantime, the Company realized the target of inventory-cutting and cost reduction and efficiency improvement via reasonable allocation of inventory materials and enhancement of cost control, and recorded a revenue of RMB894 million and a net profit of RMB31.84 million.

The 0.05 Mtpa stable light hydrocarbons deep processing project of Coal-to-oil Company achieved a successful trial run, further extending the industry chain and increasing the added value of the products for the Company.

The 1.2 Mtpa of fine chemicals project of Yitai Chemical completed the transfer from CIP to PPE at the end of September 2018. The Company is actively advancing the engineering settlement and budgeting of the project. During the year, Yitai Chemical recorded a production volume of 0.26 million tonnes of chemicals, and a revenue of RMB1.292 billion and net profit of RMB57.78 million.

In 2018, as to the second phase of the 2 Mtpa indirect coal-to-liquids conversion pilot project of Coal-to-oil Company, the Company adjusted the product scheme and some process plan for the second phase of the project by focusing on the design optimization and taking into account of the implementation of the project, upper-stream facilities cooperation and construction, investment and financing, product scheme adjustment and other factors.

During the reporting period, Yili Energy actively carried out project site management, supporting resource integration and product scheme optimization, continued to promote the financing works and introduction of strategic partners.

During the reporting period, Yitai Xinjiang continued to enhance project site management for its energy project, and advanced the approval work for the project in a planned and orderly manner.


Other net realized investment gains in 2017 included \$236 million of net realized investment gains related to equity securities, \$10 million of net realized investment gains from real estate sales,\$4 million of net realized gains related to fixed maturity investments and \$20 million of net realized investment losses related to other investments.

Other net realized investment gains in 2016 included \$59 million of net realized gains related to fixed maturity investments, \$14 million of net realized investment gains related to equity securities,\$7 million of net realized investment gains from real estate sales and \$17 million of net realized investment gains related to other investments.

Other net realized investment gains in 2015 included \$81 million of net realized gains related to fixed maturity investments, \$6 million of net realized investment gains related to equity securities,\$2 million of net realized investment gains from real estate sales and \$34 million of net realized investment losses related to other investments. The net realized investment losses related to other investments included \$26 million of realized foreign exchange translation losses incurred in connection with the Company’s increased ownership of Travelers Participac¸o˜es em Seguros Brasil S.A.

Other revenues in all years presented included installment premium charges. Other revenues in 2017 also included revenues from Simply Business, which was acquired in August 2017. Other revenues in 2017 and 2016 also included gains related to the settlement of reinsurance disputes (discussed in more detail in note 16 of notes to the consolidated financial statements). Other revenues in 2016 also included proceeds from the favorable settlement of a claims-related legal matter.

Claims and claim adjustment expenses in 2017 were \$17.47 billion, \$2.40 billion or 16% higher than in 2016, primarily reflecting the impacts of (i) significantly higher catastrophe losses, (ii) higher volumes of insured exposures, (iii) loss cost trends, (iv) lower net favorable prior year reserve development, (v) higher non-catastrophe fire-related losses in Business Insurance and (vi) higher non-catastrophe weather-related losses in Personal Insurance. Catastrophe losses in 2017 primarily resulted from wildfires in California, Hurricanes Harvey, Irma and Maria, and several winter, wind and hail storms throughout the United States.

Claims and claim adjustment expenses in 2016 were \$15.07 billion, \$1.35 billion or 10% higher than in 2015, primarily reflecting the impacts of (i) higher volumes of insured exposures, (ii) loss cost trends, (iii) higher catastrophe losses, (iv) lower net favorable prior year reserve development and (v) higher loss estimates in the personal automobile product line for bodily injury liability coverages, partially offset by (vi) lower non-catastrophe fire-related losses and other loss activity in Business Insurance. Catastrophe losses in 2016 primarily resulted from Hurricane Matthew, wind and hail storms in several regions of the United States, flooding in the Southeast region of the United States, wildfires in Canada and Tennessee, and winter storms in the eastern United States. Catastrophe losses in 2015 primarily resulted from wildfires in California, and several winter, wind and hail storms throughout the United States.

Factors contributing to net favorable prior year reserve development during the years ended December 31, 2017, 2016 and 2015 are discussed in more detail in note 7 of notes to the consolidated financial statements.

The Company defines a ‘‘catastrophe’’ as an event that:

• is designated a catastrophe by internationally recognized organizations that track and report on insured losses resulting from catastrophic events, such as Property Claim Services (PCS) for events in the United States and Canada; and

• the Company’s estimates of its ultimate losses before reinsurance and taxes exceed a pre-established dollar threshold.

The Company’s threshold for disclosing catastrophes is primarily determined at the reportable segment level. If a threshold for one segment or a combination thereof is exceeded and the other segments have losses from the same event, losses from the event are identified as catastrophe losses in the segment results and for the consolidated results of the Company. Additionally, an aggregate threshold is applied for International business across all reportable segments. The threshold for 2017 ranged from approximately \$17 million to \$30 million of losses before reinsurance and taxes.

The following table presents the amount of losses recorded by the Company for significant catastrophes that occurred in 2017, 2016 and 2015, the amount of net unfavorable (favorable) prior year reserve development recognized in 2017 and 2016 for catastrophes that occurred in 2016 and 2015, and the estimate of ultimate losses for those catastrophes at December 31, 2017, 2016 and 2015. For purposes of the table, a significant catastrophe is an event for which the Company estimates its ultimate losses will be \$100 million or more after reinsurance and before taxes.

(in millions, pre-tax and net of reinsurance)	Losses Incurred /
Unfavorable (Favorable)
Prior Year Reserve
Development for the Year
Ended December 31,	 Estimated Ultimate
 Losses at December 31,

2017	2016	2015	2017	2016	2015

2015

PCS Serial Number:

68—Winter storm . . . . . . . . . . . . . . . . . . . . . . . . . .	 $   3	 $(11)	$140	 $132	 $129	 $140

2016

PCS Serial Number:

21—Severe wind and hail storms . . . . . . . . . . . . . . .	(2)	150	 n/a	148	150	 n/a

25—Severe wind and hail storms . . . . . . . . . . . . . . .	10	168	 n/a	178	168	 n/a

2017

PCS Serial Number:

22—Severe wind and hail storms . . . . . . . . . . . . . . .	111	 n/a	 n/a	111	 n/a	 n/a

32—Severe wind and hail storms . . . . . . . . . . . . . . .	210	 n/a	 n/a	210	 n/a	 n/a

43—Hurricane Harvey . . . . . . . . . . . . . . . . . . . . . . .	254	 n/a	 n/a	254	 n/a	 n/a

44—Hurricane Irma . . . . . . . . . . . . . . . . . . . . . . . .	187	 n/a	 n/a	187	 n/a	 n/a

48—California wildfire—Tubbs fire . . . . . . . . . . . . . .	507	 n/a	 n/a	507	 n/a	 n/a

# Amortization of Deferred Acquisition Costs

Amortization of deferred acquisition costs in 2017 was \$4.17 billion, \$181 million or 5% higher than in 2016. Amortization of deferred acquisition costs in 2016 was \$3.99 billion, \$100 million or 3% higher than in 2015. Amortization of deferred acquisition costs is discussed in more detail in the segment discussions that follow.


(3) Times International is wholly-owned by Honour Family. Honour Family is wholly-owned by UBS Trustees as trustee of the Honour Family Trust. Mr. Huang is the settlor of Honour Family Trust. Times Properties is wholly-owned by Mr. Huang. Mr. Wong is the brother of Mr. Huang and both Mr. Wong and Mr. Huang have agreed to act in concert with each other. Each of Times International, Honour Family, UBS Trustees, Times Properties and Mr. Huang is deemed to be interested in the Shares in which TGI is interested.

(4) Sze Kai Fei is the spouse of Mr. Wong. By virtue of the SFO, Sze Kai Fei is deemed to be interested in the Shares in which Mr. Wong is interested.

(5) Fan Huili is the spouse of Mr. Huang. By virtue of the SFO, Fan Huili is deemed to be interested in the Shares held by Mr. Huang.

If the Over-allotment Option is fully exercised, the beneficial interest of each of TGI, Redco Holdings, Redco Properties, Global Universe, Global Investment, Mr. Wong, Times International, Honour Family, UBS Trustees, Times Properties, Mr. Huang and Ms. Sze Kai Fei will be approximately 72.29%.

Save as disclosed above and in “Appendix IV — Statutory and General Information — C. Further Information about our Directors and Substantial Shareholders”, our Directors are not aware of any person who will, immediately following the completion of the Capitalization Issue and the Global Offering (without taking into account any Shares which may be issued pursuant to the exercise of the Over-allotment Option), have beneficial interests or short positions in any Shares or underlying Shares, which would be required to be disclosed to us under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly interested in 10% or more of the issued voting shares of any member of our Group. Our Directors are not aware of any arrangement which may at a subsequent date result in a change of control of our Company.

The following is a description of the authorized and issued share capital of our Company in issue and to be issued as fully paid or credited as fully paid immediately before and following the completion of the Global Offering and the Capitalization Issue (without taking into account any Shares which may be issued pursuant to the exercise of the Over-allotment Option):

	Nominal value

(HK$)

Authorized share cailpta:

1,000,000,000	 Shares of HK$0.1 each	100,000,000

Issued and to be issued, fully paid or credited as fully paid:

4	 Shares in issue as of the date of this document	0.4

149,999,996	 Shares to be issued lipursuant to the Caiiptazaton Issue	14,999,999.6

50,000,000	 Shares to be issued under the Global Offering	5,000,000

200,000,000	 Total	20,000,000

The above table assumes that the Global Offering becomes unconditional and the Shares are issued pursuant to the Global Offering and Capitalization Issue are made. It takes no account of any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option or any Shares which may be issued or repurchased by us pursuant to the general mandates granted to our Directors to issue or repurchase Shares as described below.

The Offer Shares will be ordinary shares in the share capital of our Company and will carry the same rights in all respects with all Shares in issue or to be issued as mentioned in this document and, in particular, will rank in full for all dividends or other distributions declared, made or paid on the Shares in respect of a record date which falls after the date of this document save for the entitlement under the Capitalization Issue.

# GENERAL MANDATES TO ALLOT AND ISSUE AND TO REPURCHASE SHARES

Subject to the Global Offering becoming unconditional, general mandates have been granted to our Directors to allot and issue Shares and to repurchase Shares. See “Statutory and General Information — A. Further Information about Our Company — 4. Written Resolutions of Our Shareholder passed on March 14, 2022” in Appendix IV to this document for details of such general mandates.


# IX. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

# 1. Objective and policies of risk management (Continued)

The risk that changes in interest rate lead to changes in cash flow of the financial instruments of the Company is mainly associated with floating-rate bank borrowings. The Company currently does not have a foreign currency hedging policy to hedge against its exposures. However, the management will closely monitor foreign currency risk and will consider hedging significant foreign currency risk when the risk arises.

The Company other price risk is mainly concentrated on investments held for trading quoted in the stock exchange of the PRC. The management monitors the price risk exposure and will take appropriate measures should the need arise.

On 31 December 2018, the most significant credit risk exposure that might incur financial losses on the Company was mainly attributable to a contractual counterparty’s failure to perform its obligations resulting losses on financial assets of the Company and financial guarantee undertaken by the Company, specific details are set out as follows:

The carrying amount of financial assets recognised in the consolidated balance sheet: in respect of financial instruments carried at fair value, the carrying amount reflects the risk exposure; however, such amount does not represent the maximum credit exposure which changes in line with future changes in fair value.

In order to mitigate credit risk, the Company established a committee to be responsible for determining credit limits, approving credit applications and carrying out other monitoring procedures to ensure necessary actions are taken to collect overdue debts. Besides, the Company reassesses the collectability of each amount receivable on an individual basis at each balance sheet date, in order to ensure sufficient bad debt provision is allocated for amounts that are not recoverable. As such, the management of the Company believes the credit risk assumed by the Company has been significantly reduced.

The Company places its liquid funds at banks with relatively higher credit ratings; therefore, the credit risk with respect to liquid funds is low.

Since the Company’s risk exposures are distributed among various contractual parties and various customers, the Group has no significant concentration risk. Top five account receivables in total: RMB341,388,578.27.

The liquidity risk is the Company’s impossibility to perform its financial obligations after the maturity date. In the management of the liquidity risk, the Company monitors and maintains a level of working capital deemed adequate by the management to perform the Company’s obligations, thus will not cause loss or damage to the reputation of the Company. Moreover, the Company analyses its debt structure and deadline regularly and maintain sufficient fund. The management monitors the utilization of bank borrowings and ensures compliance with loan covenants. In the meanwhile, the management conducts negotiation on financing issues with financial institutions to maintain enough credit limits and mitigate liquidity risk.

The Company’s main capital source is from bank borrowing. As at 31 December 2018, the unused credit facilities of bank borrowing of the Company was RMB3.270 billion (31 December 2017: RMB3.689 billion), including unused short-term bank borrowings facilities of the Company of RMB3.100 billion (31 December 2017: RMB3.257 billion), representing a significant change as compared to last year, mainly due to the issuance of bonds for financing in this period which results in more remaining credit of bank borrowings.