Established in August 2010, Beijing Jingneng Clean Energy Co., Limited, a subsidiary of Beijing Energy Holding Co., Ltd (“BEH”), was listed on the Main Board of the Hong Kong Stock Exchange on 22 December 2011. The Group operates its business in a number of provinces and autonomous regions, such as Beijing, Inner Mongolia, Ningxia, Sichuan, Hunan and Guangdong, and involves in gas-fired power and heat energy generation, wind power, photovoltaic power, small-to-medium-sized hydropower and other clean energy generation businesses, which help the Group claim the title of internationally well-known clean energy enterprise, industry-leading clean energy brand, the largest gas-fired heat and power supplier in Beijing and the leading wind power operator in China.

As of 31 December 2017, the total consolidated installed capacity of the Group reached 8,031 MW. Currently, the Group operates six gas-fired cogeneration plants with a consolidated installed capacity of 4,436 MW in Beijing, accounting for over 50% of gas-fired power generation in Beijing and 70% of the heat supply. As a result, it is the leading gas-fired heat and power supplier in Beijing. The consolidated installed capacity of wind power generation reached 2,348 MW with the majority located in Inner Mongolia region, Shaan-Gan-Ning region and Beijing-Tianjin-Hebei region in China where wind resources are abundant. The Group’s photovoltaic power generation installed capacity is 798 MW, which is distributed in northwest China, north China and south China regions with relatively abundant solar resource. The Group also operates other clean energy business like small-to-medium-sized hydropower which has an attributable installed capacity of 449 MW mainly distributed in southwest China with abundant water resources. Furthermore, the Group continually explores overseas projects and actively develops wind power and photovoltaic projects in Australia.

The Group adheres to the development philosophy of “innovation, coordination, green, openness and sharing”, while upholds the operating approach of “building a solid foundation, refining management and control, optimizing business plans and boosting efficiency through innovation”. In pursuit of economic benefits, it generates profits through existing operation capacity, achieves growth from increment and seeks progress while maintaining stability. It also endeavors to adapt to the new normal in economic development, thus continuously improving its competitiveness and capability for sustainable development.


Dear Shareholders,

The year 2017 marked the implementation of the “Thirteenth Five-Year” Plan. While the national economy maintained steady growth and exceeded the expectation, the energy structure underwent significant optimization. In the face of the complex and volatile external environment and the drastically changing domestic market, the Group overcame challenges through ongoing exploration and seized opportunities in adversity. In pursuit of economic benefits, it strived to produce profits from stock, achieve growth from increment and maintain good development momentum. As of the end of 2017, the Group had a total consolidated installed capacity of 8,031 MW and recorded stable growth in installed capacity of the wind power and photovoltaic segments. The utilization hours of wind power and photovoltaic power reached 2,044 hours and 1,558 hours respectively, staying ahead of the nation’s average.

Low-carbon energy development, climate and environmental change initiatives, as well as green and sustainable development, have become the common goal of the global community. The PRC is poised for the restructuring, optimization and transformation of the energy structure and has achieved initial progress. Under the “Thirteenth Five-Year” Plan, China has set the target to increase the proportion of non-fossil fuel consumption to 15% by 2020. This provides unprecedented opportunities and challenges to clean energy development.

As stated in the report to the “19th CPC National Congress”, “the PRC economy has been transitioning from a phase of rapid growth to a stage of high-quality development”. High-quality development refers to meeting the ever-growing needs of people for a better life. It represents the new development philosophy, where innovation is the primary driving force, coordination is a feature of organic growth, green development is the mainstream, opening up is the essential way and sharing is the fundamental purpose. Adhering to the development strategy of “innovation, coordination, green, opening up and sharing”, the Board aims to eliminate bottlenecks in development and resolve deep-rooted conflicts. It will expand financing channels, enhance risk management and support the advancement of state-owned enterprises reform for in-depth integration, innovation and development, thereby preparing for the new round of challenges.

The “Thirteenth Five-Year” Energy Plan will be taken to the next level in 2018. The Group will grasp the opportunity as “clean and low-carbon energy development becomes the main theme in the adjustment of energy structure” in the “Thirteenth Five-Year” Energy Plan. To this end, it will optimize the energy portfolio, coordinate the domestic and foreign markets, implement the semi-organic growth strategy, and follow the keynote of achieving progress while maintaining stability. It will also focus on the principal activities and build economies of scale to improve the profitability of assets. Moreover, it will call for joint efforts in integrated development, proceed with reform and innovation, and take the people-oriented approach to work towards the win-win for enterprise and people, so as to bring more attractive investment returns to shareholders!


# (ii) Voluntary Winding-Up:

(aa) Members’ Voluntary Winding-up – A members’ voluntary winding-up is only possible if a company is solvent. A Statutory Declaration of Solvency to the effect that a company is able to meet its debts within 12 months from the date of the commencement of its winding-up is sworn by a majority of the company’s directors and filed with the Registrar.

A general meeting of members is then convened which resolves that the company be wound-up voluntarily and that a liquidator (responsible for collecting in the assets of the company, determining its liabilities and distributing its assets amongst its creditors and the surplus to the members) be appointed.

Once the affairs of the company are fully wound-up the liquidator prepares a full account of the liquidation which he then presents to the company’s members at a special general meeting called for that purpose. This special general meeting must be advertised in an appointed newspaper in Bermuda at least one month before it is held. Within one week after this special general meeting is held, the liquidator shall notify the Registrar that the company has been dissolved.

# (bb) Creditors’ Voluntary Winding-up – A creditors’ voluntary winding-up may occur where a company is insolvent and a Declaration of Solvency cannot be sworn.

A board meeting is convened which resolves to recommend to the members of the company that the company be placed into a creditors’ voluntary winding-up. This recommendation is then considered and, if thought fit, approved at a special general meeting of the company’s members and, subsequently, at a meeting of the company’s creditors.

Notice of the creditors’ meeting must appear in an appointed newspaper on at least two occasions and the Directors must provide this meeting with a list of the company’s creditors and a full report of the position of the company’s affairs.

At their respective meetings, the creditors and members are entitled to nominate a person or persons to serve as liquidator(s) and whose responsibilities include collecting in the assets of the company, ascertaining its liabilities and distributing its assets ratably amongst its creditors in accordance with their proofs of debt. In addition to the liquidator, the creditors are entitled to appoint a Committee of Inspection which, under Bermuda law, is a representative body of creditors who assist the liquidator during the liquidation.

As soon as the affairs of the company are fully wound-up, the liquidator prepares his final account explaining the liquidation of the company and the distribution of its assets which he then presents to the company’s members in a special general meeting and to the company’s creditors in a meeting. Within one week after the last of these meetings, the liquidator sends a copy of the account to the Registrar who proceeds to register it in the appropriate public records and the company is deemed dissolved three months after the registration of this account.


# (iii) Compulsory Winding-Up:

The courts of Bermuda may wind-up a Bermuda company on a petition presented by persons specified in the Companies Act and which include the company itself and any creditor or creditors of the company (including contingent or prospective creditors) and any member or members of the company.

Any such petition must state the grounds upon which the Bermuda court has been asked to wind-up the company and may include either one of the following:

(aa) that the company has by resolution resolved that it be wound-up by the Bermuda court;

(bb) that the company is unable to pay its debts; and

(cc) that the Bermuda court is of the opinion that it isj ust and equitable that the company be wound-up.

The winding-up petition seeks a winding-up order and may include a request for the appointment of a provisional liquidator.

Prior to the Winding-up Order being granted and the appointment of the provisional liquidator, (who under Bermuda law, may or may not be the Official Receiver – a government appointed officer) an interim provisional liquidator may be appointed to administer the affairs of the company with a view to its winding-up until he is relieved of these duties by the appointment of the provisional liquidator. (Often, the interim provisional liquidator is appointed the provisional liquidator).

As soon as the Winding-up Order has been made, the provisional liquidator summons separate meetings of the company’s creditors and members in order to determine whether or not he should serve as the permanent liquidator or be replaced by some other person who will serve as the permanent liquidator and also to determine whether or not a Committee of Inspection should be appointed and, if appointed, the members of that Committee. The provisional liquidator notifies the Court of the decisions made at these meetings and the Court makes the appropriate orders.

A permanent liquidator’s powers are prescribed by the Companies Act and include the power to bring or defend actions or other legal proceedings in the name and on behalf of the company and the power to carry on the business so far as may be necessary for the beneficial winding-up of the company. His primary role and duties are the same as a liquidator in a creditors’ voluntary winding-up i.e. to distribute the company’s assets ratably amongst its creditors whose debts have been admitted.

As soon as the affairs have been completely wound-up, the liquidator applies to the courts of Bermuda for an order that the company be dissolved and the company is deemed dissolved from the date of this order being made.


# 2.9.2 Persons acting in concert

Under the Take-over Code, persons acting in concert comprise individuals or companies who, pursuant to an agreement or understanding (whether formal or informal), co-operate, through the acquisition by any of them of shares in a company to obtain or consolidate effective control of the company.

Unless the contrary is established, the following persons, amongst others, will be presumed to be acting in concert, namely:-

(a) a company with its parent company, subsidiaries, its fellow subsidiaries, any associated companies of the foregoing companies, any company whose associated companies include any of the foregoing companies, and any person who has provided fi nancial assistance (other than a bank in the ordinary course of business) to any of the foregoing companies for the purchase of voting rights;

(b) a company with any of its directors, together with their close relatives, related trusts and any companies controlled by any of the directors, their close relatives and related trusts; and

(c) an individual, his close relatives, his related trusts, any person who is accustomed to act according to his instructions, companies controlled by any of the foregoing persons and any person who has provided fi nancial assistance (other than a bank in the ordinary course of business) to any of the foregoing persons and/or entities for the purchase of voting rights.

For this purpose, ownership or control of at least twenty per cent. (20%) but not more than fi fty per cent. (50%) of the voting rights of a company will be regarded as the test of associated company status.

The circumstances under which Shareholders, including Directors and persons acting in concert with them respectively, will incur an obligation to make a take-over offer under Rule 14 of the Take-over Code after a purchase or acquisition of Shares by the Company are set out in Appendix 2 of the Take-over Code.

# 2.9.3 Effect of Rule 14 and Appendix 2 of the Take-over Code

In general terms, the effect of Rule 14 and Appendix 2 of the Take-over Code is that, unless exempted, Directors and persons acting in concert with them will incur an obligation to make a take-over offer under Rule 14 if, as a result of the Company purchasing or acquiring its own Shares, the voting rights of such Directors and their concert parties would increase to thirty per cent. (30%) or more, or in the event that such Directors and their concert parties hold between thirty per cent. (30%) and fi fty per cent. (50%) of the Company’s voting rights, the voting rights of such Directors and their concert parties would increase by more than one per cent. (1 %) in any period of six (6) months. In calculating the percentages of voting rights of such Directors and their concert parties, treasury shares shall be excluded.

Under Appendix 2 of the Take-over Code, a Shareholder who is not acting in concert with the Directors will not be required to make a take-over offer under Rule 14 if, as a result of the Company purchasing or acquiring its own Shares, the voting rights of such Shareholder would increase to thirty per cent. (30%) or more, or, if such Shareholder holds between thirty per cent. (30%) and fi fty per cent. (50%) of the Company’s voting rights, the voting rights of such Shareholder would increase by more than one per cent. (1 %) in any period of six (6) months. Such Shareholder need not abstain from voting in respect of the resolution authorising the Share Purchase Mandate.


Based on the shareholdings of the Directors in the Company as at the Latest Practicable Date, none of the Directors will become obligated to make a mandatory offer by reason only of the purchase or acquisition of ten per cent. (10%) of the Shares by the Company pursuant to the Share Purchase Mandate.

The Directors are not aware of any Shareholder or group of Shareholders acting in concert who may become obligated to make a mandatory offer in the event that the Directors exercise the power to purchase or acquire Shares pursuant to the Share Purchase Mandate.

Shareholders who are in doubt as to their obligations, if any, to make a mandatory takeover offer under the Take-over Code as a result of any Share Purchases by the Company are advised to consult their professional advisers and/or the Securities Industry Council and/or other relevant authorities at the earliest opportunity.

# 2.10 The Catalist Rules

While the Catalist Rules do not expressly prohibit the purchase of shares by a listed company during any particular time or times, the listed company would be considered an “insider” in relation to any proposed purchase or acquisition of its issued shares. In this regard, the Company will not purchase any Shares pursuant to the Share Purchase Mandate after a price-sensitive development has occurred or has been the subject of a consideration and/or a decision of the Board until such time as the price-sensitive information has been publicly announced. In particular, the Company will not purchase or acquire any Shares during the following period and at all times in compliance with Rule 1204(19) of the Catalist Rules:-

(a) one (1) month immediately preceding the announcement of the Company’s annual results; and

(b) two (2) weeks immediately preceding the announcement of the Company’s results for each of the fi rst three (3) quarters of its fi nancial year.

The Company does not have any individual shareholding limit or foreign shareholding limit. However, the Company is required under Rule 723 of the Catalist Rules to ensure that at least ten per cent. (10%) of its Shares are in the hands of the public. The “public”, as defi ned under the Catalist Rules, are persons other than the Directors, chief executive offi cer, Substantial Shareholders or Controlling Shareholders of the Company and its subsidiaries, as well as the associates of such persons.

As at the Latest Practicable Date, approximately 412,472,330 Shares, representing 65.19% of the total number of issued Shares, are in the hands of the public. Assuming that the Company purchases its Shares through Market Purchases up to the full ten per cent. (10%) limit pursuant to the Share Purchase Mandate, the number of Shares in the hands of the public would be reduced to 36 2,998,541 Shares, representing 62. 24% of the reduced total number of issued Shares of the Company. Accordingly, the Company is of the view that there is a suffi cient number of issued Shares held in the hands of the public which would permit the Company to undertake purchases or acquisitions of its issued Shares up to the full ten per cent. (10%) limit pursuant to the proposed Share Purchase Mandate without affecting the listing status of the Shares on the SGX-ST, and that the number of Shares remaining in the hands of the public will not fall to such a level as to cause market illiquidity.

In undertaking any purchases or acquisitions of Shares through Market Purchases, the Directors will use their best efforts to ensure that, notwithstanding such purchases, a suffi cient fl oat in the hands of the public will be maintained so that the purchases or acquisitions of Shares will not adversely affect the listing status of the Shares on the SGX-ST, cause market illiquidity or adversely affect the orderly trading of the Shares.


# 15 PROPERTY AND EQUIPMENT

	Leasehold
improvements	Furniture
and fixtures	Office
equipment	 Total

HK$’000	 HK$’000	 HK$’000	 HK$’000

At 1 January 2020

Cost	12,711	3,370	23,602	39,683

Accumulated depreciation	(11,457)	(2,737)	(21,186)	(35,380)

Net book amount	1,254	633	2,416	4,303

Year ended 31 December 2020

Opening net book amount	1,254	633	2,416	4,303

Additions	578	82	220	880

Depreciation charge	(1,359)	(241)	(1,013)	(2,613)

Closing net book amount	473	474	1,623	2,570

At 31 December 2020

Cost	13,289	3,452	23,822	40,563

Accumulated depreciation	(12,816)	(2,978)	(22,199)	(37,993)

Net book amount	473	474	1,623	2,570

At 1 January 2019

Cost	12,669	3,186	22,410	38,265

Accumulated depreciation	(9,530)	(2,494)	(20,082)	(32,106)

Net book amount	3,139	692	2,328	6,159

Year ended 31 December 2019

Opening net book amount	3,139	692	2,328	6,159

Additions	42	184	1,192	1,418

Depreciation charge	(1,927)	(243)	(1,104)	(3,274)

Closing net book amount	1,254	633	2,416	4,303

At 31 December 2019

Cost	12,711	3,370	23,602	39,683

Accumulated depreciation	(11,457)	(2,737)	(21,186)	(35,380)

Net book amount	1,254	633	2,416	4,303


# 16 LEASES

This note provides information for leases where the Group is a leasee.

# (i) Amounts recognised in the consolidated balance sheet

	2020	2019

HK$’000	HK$’000

Right-of-use assets

Properties leased for own use	20,168	31,462

Lease liabilities

Current	18,236	26,560

Non-current	4,456	10,105

	22,692	36,665

Additions to the right-of-use assets during the year ended 31 December 2020 were HK\$20,023,000 (2019: HK\$30,568,000).

# (ii) Amounts recognised in the consolidated statement of comprehensive income

	2020	2019

HK$’000	HK$’000

Amortisation of rihgt-of-use assets

Properties leased for own use	(31,317)	(34,737)

Interest expense	(763)	(1,364)

The total cash outflow for leases during the year ended 31 December 2020 was HK\$34,759,000 (2019: HK\$35,952,000).


As the Group is required to make payments only in the event of a default by the specified debtor in accordance with the terms of the instrument that is guaranteed, an ECL is estimated based on the expected payments to reimburse the holder for a credit loss that it incurs less any amount that the Group expects to receive from the holder of the guarantee, the specified debtor or any other party. The amount is then discounted using the current risk-free rate adjusted for risks specific to the cash flows.

# (l) Inventories

Inventories are carried at the lower of cost and net realizable value.

Cost is calculated using the first in first out basis and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When the inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

# (m) Trade and other receivables

A receivable is recognized when the Group has an unconditional right to receive consideration. A right to receive consideration is unconditional if only the passage of time is required before payment of that consideration is due. If revenue has been recognized before the Group has an unconditional right to receive consideration, the amount is presented as a contract asset.

Receivables are stated at amortized cost using the effective interest method less allowance for credit losses (see note 2(k)(i)).

# (n) Interest-bearing borrowings

Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost using the effective interest method. Interest expense is recognized in accordance with the Group’s accounting policy for borrowing costs (see note 2(v)).

# (o) Trade and other payables and contract liabilities

# (i) Trade and other payables

Trade and other payables are initially recognized at fair value and are subsequently stated at amortized cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

# (ii) Contract liabilities

A contract liability is recognized when the customer pays non-refundable consideration before the Group recognizes the related revenue (see note 2(t)). A contract liability would also be recognized if the Group has an unconditional right to receive non-refundable consideration before the Group recognizes the related revenue. In such cases, a corresponding receivable would also be recognized (see note 2(m)).


# (p) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statements. Cash and cash equivalents are assessed for ECL in accordance with the policy set out in note 2(k)(i).

# (q) Employee benefits

Salaries, annual bonuses, staff welfare costs and contributions to defined contribution retirement schemes are accrued in the year/period in which the associated services are rendered by employees of the Group. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values. The employee benefits are recognized as an expense in profit or loss as incurred, except to the extent that they are included in the cost of inventories not yet recognized as an expense.

# (r) Income tax

Income tax for the year/period comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in profit or loss except to the extent that they relate to items recognized in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year/period, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities and all deferred tax assets, to the extent that it is probable that future taxable profits will be available against which the asset can be utilized, are recognized. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.


(B) the adoption, modification or operation of a pension or provident fund or retirement, death or disability benefits scheme which relates both to Directors, their associates and employees of our Company or any of its subsidiaries and does not provide in respect of any Director or any of his associates, as such any privilege or advantage not generally accorded to the class of persons to which such scheme or fund relates; and

(v) any contract or arrangement in which our Director or any of his associates is/are interested in the same manner as other holders of shares or debentures or other securities of our Company by virtue only of his/their interest in shares or debentures or other securities of our Company.

# (g) Remuneration

Our Directors shall be entitled to receive by way of remuneration for their services such sum as shall from time to time be determined by our Directors, or our Company in general meeting, as the case may be, such sum (unless otherwise directed by the resolution by which it is determined) to be divided amongst our Directors in such proportions and in such manner as they may agree, or failing agreement, equally, except that in such event any Director holding office for less than the whole of the relevant period in respect of which the remuneration is paid shall only rank in such division in proportion to the time during such period for which he has held office. Such remuneration shall be in addition to any other remuneration to which a Director who holds any salaried employment or office in our Company may be entitled by reason of such employment or office.

Our Directors shall also be entitled to be paid all expenses, including travel expenses, reasonably incurred by them in or in connection with the performance of their duties as Directors including their expenses of travelling to and from board meetings, committee meetings or general meetings or otherwise incurred whilst engaged on the business of our Company or in the discharge of their duties as Directors.

Our Directors may grant special remuneration to any Director who shall perform any special or extra services at the request of our Company. Such special remuneration may be made payable to such Director in addition to or in substitution for his ordinary remuneration as a Director, and may be made payable by way of salary, commission or participation in profits or otherwise as may be agreed.

The remuneration of an executive Director or a Director appointed to any other office in the management of our Company shall from time to time be fixed by our Directors and may be by way of salary, commission or participation in profits or otherwise or by all or any of those modes and with such other benefits (including share option and/or pension and/or gratuity and/or other benefits on retirement) and allowances as our Directors may from time to time decide. Such remuneration shall be in addition to such remuneration as the recipient may be entitled to receive as a Director.


# (h) Retirement, appointment and removal

Our Directors shall have power at any time and from time to time to appoint any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors. Any Director so appointed shall hold office only until the next general meeting of our Company and shall then be eligible for re-election at that meeting.

Our Company may by ordinary resolution remove any Director (including a Managing Director or other executive Director) before the expiration of his period of office notwithstanding anything in the Articles of Association or in any agreement between our Company and such Director (but without prejudice to any claim for compensation or damages payable to him in respect of the termination of his appointment as Director or of any other appointment of office as a result of the termination of this appointment as Director). Our Company may by ordinary resolution appoint another person in his place. Any Director so appointed shall hold office during such time only as our Director in whose place he is appointed would have held the same if he had not been removed. Our Company may also by ordinary resolution elect any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors. Any Director so appointed shall hold office only until the next following general meeting of our Company and shall then be eligible for re-election but shall not be taken into account in determining our Directors who are to retire by rotation at such meeting. No person shall, unless recommended by our Directors, be eligible for election to the office of Director at any general meeting unless, during the period, which shall be at least seven days, commencing no earlier than the day after the despatch of the notice of the meeting appointed for such election and ending no later than seven days prior to the date of such meeting, there has been given to the Secretary of our Company notice in writing by a member of our Company (not being the person to be proposed) entitled to attend and vote at the meeting for which such notice is given of his intention to propose such person for election and also notice in writing signed by the person to be proposed of his willingness to be elected.

There is no shareholding qualification for Directors nor is there any specified age limit for Directors.

The office of a Director shall be vacated:

(i) if he resigns his office by notice in writing to our Company at its registered office or its principal office in Hong Kong;

(ii) if an order is made by any competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs and our Directors resolve that his office be vacated;

(iii) if, without leave, he is absent from meetings of our Directors (unless an alternate Director appointed by him attends) for 12 consecutive months, and our Directors resolve that his office be vacated;

(iv) if he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors generally;


14

EDICO Holdings Limited

# FINANCE COSTS

The Group did not incur any finance costs for the Year 2019 whereas finance costs on lease liabilities of approximately HK\$1.1 million were recorded for the Year due to the adoption of Hong Kong Financial Reporting Standard 16.

# INCOME TAX CREDIT / EXPENSE

There was no income tax expense for the Group for the Year as the Company and its operating subsidiaries either had no assessable profits for the Year or had available tax losses brought forward from prior years.

# PROFIT / (LOSS) FOR THE YEAR AND NET PROFIT / (LOSS) MARGIN

The Group recorded a loss after tax of approximately HK\$11.5 million for the Year 2019 and a profit after tax of approximately HK\$4.1 million for the Year. The change was primarily due to the increase of the Group’s revenue during the Year.

The net (loss)/profit margins were 19.2% for the Year 2019 and 5.6% for the Year respectively.

# INTEREST COVERAGE RATIO

Interest coverage ratio was not applicable to the Group for the Year 2019 and the Year as the Group did not have any borrowings and therefore, had not incurred any interest expenses during the respective years.

# RETURN ON TOTAL ASSETS

The return on total assets was approximately 13.8% negative for the Year 2019 and approximately 3.8% positive for the Year.

# RETURN ON EQUITY

The return on equity was approximately 16.8% negative for the Year 2019 and approximately 5.6% positive for the Year.

# DIVIDEND

The board of directors of the Company (the “Directors” and the “Board”, respectively) has resolved not to recommend the payment of a final dividend in respect of the Year (2019: Nil).


15

EDICO Holdings Limited

# KEY PERFORMANCE INDICATORS (“KPIs”) WITH THE STRATEGIES OF THE GROUP

The Group sets a number of KPIs to support the delivery of its strategies with its performance for the Year as below:

Objective	KPIs	Strategies

Maximise value for the shareholders	1Gross profi()
t margin= 48.6% (2019: 40.8%)
2R(eturn on total)
 assets= 3.8% (2019: (13.8%))
R(3eturn on equi)
ty= 5.6% (2019: (16.8%))	The Group has implemented effective
cost control measures, pricing
arrangement and capital expenditure.

Maintain the Gr’oups liquidity and
monitor capital structure	Cash and cash equivalents
= approximately HK$69.7 million
(2019: approximately HK$47.4 million)
C(4urrent rati)
o= 2.9 times
(2019: 5.3 times)
G(5)eari
ng ratio= N/A (2019: N/A)
6N
et deb()t to equity ratio= Net cash position
(2019: Net cash position)	The Group adopts a prudent financial
management policy to regularly monitor
its liquidity requirements and compliance
with facilities arrangement so as to
ensure that it maintains sufficient
reserves of cash and adequate
committed lines of funding from major
financial institutions to meet the liquidity
requirements of the Group in the short
and long term.

Notes:

1. Gross profit margin is calculated by dividing the gross profit for the year by revenue and then multiplied by 100%.

2. Return on total assets is calculated by dividing the net profit/(loss) for the year by the total assets as at the respective year end and then multiplied by 100%.

3. Return on equity is calculated by dividing the net profit/(loss) for the year by the total equity as at the respective year end and then multiplied by 100%.

4. Current ratio is calculated by dividing the total current assets by the total current liabilities as at the respective year end.

5. Gearing ratio is calculated by dividing the total borrowings by the total equity as at the respective year end and then multiplied by 100%.

6. Net debt to equity ratio is calculated by dividing the net debt (all borrowings net of cash and cash equivalents) by the total equity as at the respective year end and then multiplied by 100%.


Items	Notes	For the six months ended 30 June

2021	2020

Cash paid to aciquire fixed assets, intanblge assets and
other long-term assets		25227473.40,,	49,891,307.59

Cash paid for investments		212000000.00,,	154,000,000.00

Cash paid relating to other investment activities		3207518.74,,	361,187,463.73

Subtotal of cash outflows from investment activities		240434992.14,,	565,078,771.32

Net cash flows generated from investment activities		126237775.23,,	(413,658,888.15)

III. Cash flow generated from financing activities:

Cash received from investments		330000.00,	371,700.00

Including: Cash received by subsidiaries from investment of
non-controlling interests		330000.00,	371,700.00

Cash received from loan granted		1024102431.07,,,	1,274,205,425.00

Cash received relating to other financing activities		–	26,801,199.53

Subtotal of cash inflows from financing activities		1024432431.07,,,	1,301,378,324.53

Cash paid for repayment of borrowings		922715545.00,,	571,212,762.78

Cash paid for dividends, profits or the payment of interest		45612993.92,,	72,996,667.63

Including: dividends and profits paid to non-controlling interests
by subsidiary		5746345.00,,	4,752,225.00

Cash paid relating to financing activities		38932318.64,,	255,927,309.71

Subtotal of cash outflows from financing activities		1007260857.56,,,	900,136,740.12

Net cash flows generated from financing activities		17171573.51,,	401,241,584.41

IV.Effects of changes in exchange rate on cash and cash
equivalents		(1457731.16,,)	(1,943,967.50)

V. Net increase in cash and cash equivalents		13491062.03,,	(168,728,818.18)

Add: opening balance of cash and cash equivalents		1327289120.69,,,	1,537,567,094.59

VI.Balance of cash and cash equivalents at the end of this
period		1340780182.72,,,	1,368,838,276.41


# NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

For the six months ended 30 June 2021

# I. GENERAL INFORMATION

Chongqing Machinery & Electric Co., Ltd. (the “Company”) was established on 27 July 2007 as a joint share company with limited liability by Chongqing Machinery & Electronics Holding (Group) Co., Ltd. (“CQMEHG”), Chongqing Yufu Capital Operation Group Co., Ltd (“Yufu company”,originally called Chongqing Yufu Assets Management Co., Ltd), China Huarong Asset Management Co., Ltd. (“Huarong Company”), and Chongqing Construction Engineering Group Co. Ltd. (“CCEG”). The address of the Company’s registered office is No. 60, Middle Section of Huangshan Avenue, New North Zone, Chongqing City, the PRC. The Company’s headquarter is located in Chongqing, the PRC. The parent company and the ultimate controlling shareholder is Chongqing Machinery & Electronics Holding (Group) Co. Ltd. The Group was established with a registered capital of RMB2,679.74 million (RMB1 per share).

On 13 June 2008, the Group publicly issued 1,004.90 million H shares to foreign investors with approval of the Circular “Zhengjian Xuke [2008] No. 285” of the China Securities Regulatory Commission, and the shares were listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). After issuing the shares, the total share capital increased to RMB3,684.64 million.

As of 30 June 2021, the registered capital of the Group was RMB3,684,640,154 yuan. The Group and its Subsidiaries (hereinafter collectively referred to as “the Group”) are mainly engaged in the manufacturing, sales and services of clean energy equipment and high-end intelligent equipment.

The consolidated financial statements have been approved for issue by the Board of Directors of the Group on 26 August 2021.

# II. BASIS FOR THE PREPARATION OF FINANCIAL STATEMENTS

# (1) Basis of preparation

The financial statements are prepared in accordance with the Accounting Standard for Business Enterprises – Basic Standard, and the specific accounting standards and other relevant regulations issued by the Ministry of Finance on 15 February 2006 and in subsequent periods (hereafter collectively referred to as “the Accounting Standards for Business Enterprises” or “CAS”) and the disclosure requirements in the Preparation Convention of Information Disclosure by Companies Offering Securities to the Public No.15-General Rules on Financial Reporting issued by the China Securities Regulatory Commission, Hong Kong’s “Companies Ordinance” and based on the accounting policies and accounting estimates set out in “III. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES” in this note.


# 1. Changes in Accounting Policies and Disclosures (continued)

# Amendments to HKFRS 9, HKAS 39 and HKFRS 7 Interest Rate Benchmark Reform Amendments to HKFRS 9, HKAS 39 and HKFRS 7 address the effects of interbank offered rate reform on issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative risk-free rate ("RFR"). The amendments provide temporary reliefs which enable hedge accounting to continue during the period of uncertainty before the replacement of an existing interest rate benchmark introduction of the alternative RFR. In addition, the amendments require companies to provide additional information to investors about their hedging relationships which are directly affected by these uncertainties. The amendments did not have any impact on the financial position and performance of the Group as the Group does not have any interest rate hedge relationships.

# Amendments to HKAS 1 and HKAS 8 Definition of Material

Amendments to HKAS 1 and HKAS 8 provide a new definition of material. The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments clarify that materiality will depend on the nature or magnitude of information, or both. The amendments did not have any significant impact on the financial position and performance of the Group.

# Amendment to HKFRS 16 COVID-19-Related Rent Concessions

Amendment to HKFRS 16 provides a practical expedient for lessees to elect not to apply lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic. The practical expedient applies only to rent concessions occurring as a direct consequence of the pandemic and only if (i) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; (ii) any reduction in lease payments affects only payments originally due on or before 30th June, 2021; and (iii) there is no substantive change to other terms and conditions of the lease. The amendment is effective for annual periods beginning on or after 1st June, 2020 with earlier application permitted and shall be applied retrospectively. The amendments did not have any impact on the financial position and performance of the Group as the Group does not have any rent concessions.


# 2. Operating Segment Information

# (a) Operating segments

The following tables present revenue, profit and certain asset and liability information for the Group's operating segments.

	Insurance	Corporate	Eliminations	Consolidated

2020	2020	2020	2020

HK$'000	HK$'000	HK$'000	HK$'000

Segment revenue:

External customers	1,747,918	-	-	1,747,918

Other revenue, income and
gains, net	109,687	160,833	-	270,520

Intersegment	5,911	-	(5,911)	-

Total	1,863,516	160,833	(5,911)	2,018,438

Segment results	184,914	106,029	-	290,943

Share of profits or losses of:

Joint ventures	(6,313)	33,196	-	26,883

Associates	16,891	37,704	-	54,595

Profit before tax				372,421

Income tax expense	(6,037)	(21,437)	-	(27,474 )

Profit for the year				344,9 47

	Insurance
2019	Corporate
2019	Eliminations
2019	Consolidated
2019

HK$'000	HK$'000	HK$'000	HK$'000

Segment revenue:

External customers	1,702,009	-	-	1,702,009

Other revenue, income and
gains, net	131,360	147,016	-	278,376

Intersegment	5,339	-	(5,339)	-

Total	1,838,708	147,016	(5,339)	1,980,385

Segment results	203,613	83,601	-	287,214

Share of profits or losses of:

Joint ventures	12,105	34,696	-	46,801

Associates	(7,184)	107,428	-	100,244

Profit before tax				434,259

Income tax expense	(25,796)	(895)	-	(26,691 )

Profit for the year				407,568


# 16. INVESTMENT IN AN ASSOCIATE (Continued)

Details of the Group’s associate at the end of the reporting period are as follows:

Name of entity	Country of
reigstration	Principal
lpace of
business	Proportion of
ownership interest
held by the Group	Proportion of
voting rihgts
held by the Group	Principal activity

			2020	2019	2020	2019

Shanhiiga Duonng
BiotechnoloCgy o.,
Ltd. (“Duonin”g)	PRC	PRC	15.86%	8.13%	20%	20%	Sales of serum-free media and
disposable products, formulation
production and services

In April 2019, the Group acquired 9.32% of the equity interest in Duoning from independent third parties for a total purchase price of US\$5,000,000 (equivalent to RMB33,798,000). In December 2019, other investors further invested in Duoning and the Group’s equity interest was diluted to 8.13%. In December 2020, the Group further acquired 7.73% of the equity interest in Duoning from its shareholders for a purchase price of RMB154,526,000. The Group is able to exercise significant influence over Duoning because it has the power to appoint one out of the five directors of Duoning under the Articles of Association of Duoning.

# 17. DEFERRED TAXATION

For the purpose of presentation in the consolidated statement of financial position, certain deferred tax assets and liabilities have been offset. The following is a summary of the deferred tax balances for financial reporting purposes:

	2020	2019

RMB’000	RMB’000

Deferred tax assets	80,136	36,043

Deferred tax liabilities	(180,885)	(24,734)

	(100,749)	11,309


# 17. DEFERRED TAXATION (Continued)

The following are the major deferred tax assets and liabilities recognized and movements thereon before offsetting during the reporting periods:

	Deferred
income	Allowance
on
inventories
and credit
losses	Accrued
expenses	Accelerated
tax
depreciation	Deferred
rental
under
IFRS 16	Fair value
adjustment
arising
from
acquisition
of
subsidiaries	Unrealized
exchange
gain	Derivative
financial
instruments	Others	Total

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

At January 1, 2019	13,383	10,780	6,125	(10,487)	2,746	—	—	—	—	22,547

Acquisition of subsidiaries	—	—	—	—	—	(27,401)	—	—	—	(27,401)

Credited to profit or loss	5,795	2,512	1,465	2,390	1,307	2,667	—	—	27	16,163

At December 31, 2019	1917,8	132,92	7,590	(8,097)	4,053	(247,34)	—	—	27	11,309

Credited (charged) to profit or loss	1272,3	2022,8	6,334	2,658	221,9	7,061	(124,375)	—	(68)	(7322,0)

Charged to OCI	—	—	—	—	—	—	(391)	(38447,)	—	(38,838)

At December 31, 2020	31,901	33,520	13,924	(54,39)	6272,	(17,673)	(1247,66)	(38447,)	(41)	(10074,9)

As at December 31, 2020, the Group had unused tax losses of RMB47,182,000 (2019: RMB88,366,000) available to offset against future profits. No deferred tax asset has been recognized in respect of such losses in both 2020 and 2019 due to the unpredictability of future profit streams.

Apart from unused tax losses as mentioned above, at December 31, 2020, the Group had other deductible temporary differences of RMB504,630,000 (2019: RMB218,947,000), available to offset against future profits. As at December 31, 2020 and 2019, all the deductible temporary differences had been recognized in deferred tax assets.


# 2 Summary of significant accounting policies (Continued)

# (b) Investments (Continued)

Investments that are listed or traded on an exchange are fair valued based on last traded market prices.

Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the reporting period.

# (c) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the Statement of Net Assets where the Fund currently has a legally enforceable right to set-off the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Fund or the counterparty.

# (d) Income

Dividend income on equity securities is recorded on the ex-dividend date. Dividend income on equity securities where no ex-dividend date is quoted is accounted for when the Fund’s right to receive payment is established.

Interest income on bank deposit and from bank balances is recognized on a time-proportionate basis using the effective interest method.

Other income is accounted for in the Statement of Comprehensive Income on an accrual basis.

# (e) Expenses

Expenses are accounted for in the Statement of Comprehensive Income on an accrual basis.

# (f) Distributions payable to holders of redeemable units

Proposed distributions to holders of redeemable units are recognized in the Statement of Comprehensive Income when they are approved by the Supervisory Committee. The distribution on these redeemable units is recognized in the Statement of Comprehensive Income as finance costs.

# (g) Cash component

Cash component represents the amount included in the issue price or redemption proceeds (as the case may be) of the units issued or redeemed, representing the difference between the net asset value per Creation Unit as calculated by the Manager as of that date and the value of the Index Basket (as defined in the Prospectus of the Fund and based on the nominal closing prices as of that date), including the dividend equivalent amount per Creation Unit.

# (h) Cash and cash equivalents

Cash and cash equivalents include cash in hand, demand deposits, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.


# NOTES TO THE FINANCIAL STATEMENTS (Continued)

# 2 Summary of significant accounting policies (Continued)

# (i) Translation of foreign currencies

# Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the Fund operates (the “functional currency”). The performance of the Fund is measured and reported to the holders of redeemable units in Hong Kong dollar. The Manager considers the Hong Kong dollar as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The financial statements are presented in Hong Kong dollar, which is the Fund’s functional and presentation currency.

# Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency assets and liabilities are translated into the functional currency using the exchange rate prevailing at the year end date.

Foreign exchange gains and losses arising from translation are included in the Statement of Comprehensive Income.

Foreign exchange gains and losses relating to cash and cash equivalents are presented in the Statement of Comprehensive Income within “net foreign currency gains/losses on cash and cash equivalents”.

Foreign exchange gains and losses relating to the financial assets carried at fair value through profit or loss are presented in the Statement of Comprehensive Income within “net gain/(loss) on investments”.

# (j) Redeemable units

The Fund issues redeemable units, which are redeemable at the holder’s option and are classified as financial liabilities. Redeemable units can only be redeemed in-kind equal to a proportionate share of the Fund’s net asset value. The redeemable unit is carried at the redemption amount that is payable at the year end date if the holder exercises the right to put the unit back to the Fund. In accordance with the Trust Deed, the minimum redemption units are 1,000,000 units.

Redeemable units are issued and redeemed at the holder’s option at prices based on the Fund’s net asset value per unit at the time of issue or redemption. The Fund’s net asset value per unit is calculated by dividing the net assets attributable to the holders of redeemable units with the total number of outstanding redeemable units. In accordance with the provisions of the Trust Deed, investment positions are valued based on the last traded market price for the purpose of determining the net asset value per unit for creations and redemptions.

# (k) Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The Manager, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the chief operating decision-maker that makes strategic decisions.


# Issue of new Shares under the Share Option Scheme will have a dilution effect and may affect the Group’s profitability

The Company has conditionally adopted the Share Option Scheme. Although no options have been granted thereunder as at the Latest Practicable Date, any exercise of the options granted under the Share Option Scheme in the future and issue of the Shares thereunder would result in a reduction in the percentage ownership of the Shareholders in the Company and may result in a dilution in the earnings per Share and net assets value per Share, as a result of the increase in the number of Shares outstanding after the issue.

Under HKFRS, any options granted to the grantees through the Share Option Scheme will be recognised as share based payment and will be charged to the Group’s income statements at fair value at the date of which such options are granted. As such, any grant of options under the Share Option Scheme may increase the expenses of the Group and may thereby affect the Group’s profitability.

# You should not rely on any information contained in press articles or other media regarding the Company and the Share Offer

Prior to the publication of this prospectus, there may be certain press and media coverage regarding the Company and the Share Offer which may include certain financial information, industry comparisons, profit estimates and other information about the Company that does not appear in this prospectus. The Group has not authorised the disclosure of any such information in the press or media and does not accept any responsibility for any such press or media coverage or the accuracy or completeness of any such information. The Group makes no representation as to the appropriateness, accuracy, completeness or reliability of any such information or publication. Prospective investors should not rely on any such information and should only rely on information included in this prospectus in making any decision as to whether to subscribe for the Shares.


This prospectus contains forward-looking statements, including, but without limitation to, the words and expressions such as “aim”, “expect”, “believe”, “plan”, “intend”, “anticipate”, “may”, “seek”, “will”, “would” and “could” and the negative of these words or other similar expressions or statements, in particular, in the sections headed “Business”, “Financial Information” and “Future Plans and Use of Proceeds” in this prospectus in relation to future events, business or other performance and development, the future development of the Group’s industry and the future development of the general economy of the Group’s key markets and globally.

These statements are based on numerous assumptions regarding the Group’s present and future business strategy and the environment in which the Group will operate in the future. These forward-looking statements reflecting the Group’s current views with respect to future events are not a guarantee of future performance and are subject to certain risks, uncertainties and assumptions, including the risk factors described in this prospectus and the following:

• the Group’s business and operating strategies and the Group’s ability to implement such strategies;

• the Group’s capital expenditure and expansion plans;

• the Group’s ability to further develop and manage the Group’s expansion projects as planned;

• the Group’s operations and business prospects;

• various business opportunities that the Group may pursue;

• the Group’s financial position;

• the availability and costs of bank loans and other forms of financing;

• the Group’s dividend policy;

• the regulatory environment of the Group’s industry in general;

• the performance and future developments of the consumer electronics industry;

• the general outlook of the consumer electronics market in the world;

• changes in political, economic, legal and social conditions in the PRC, including the specific policies of the PRC government and the local authorities in the regions where the Group operates;


# 8. SEGMENT INFORMATION (continued)

# Revenue from major products

# Analysis by type of products

8. 分部資料（續）

來自主要產品的收益

按產品類別劃分的分析

	2018
2018年	2017
2017年

HK$’000
千港元	HK$’000
千港元

LED backlight                  LED背光

– Small dimension               －小尺寸	302,990	331,363

– Medium dimension              －中尺寸	414,713	295,997

– Large dimension               －大尺寸	129,853	128,715

Sub-total                   小計	847,556	756,075

LED lighting                  LED照明

– Indoor lighting                －室內照明	56,535	19,395

– Outdoor lighting               －室外照明	25,460	35,136

Sub-total                   小計	81,995	54,531

Sourcing business              採購業務	1,320,235	867,360

Total                     合計	2,249,786	1,677,966


# 8. SEGMENT INFORMATION (continued)

# Revenue from major products (continued)

# Analysis by application of products

8. 分部資料（續）

來自主要產品的收益（續）

按產品應用劃分的分析

	2018
2018年	2017
2017年

HK$’000
千港元	HK$’000
千港元

LED backlight                  LED背光

– Automobile displays             －車載顯示	489,285	357,110

– Equipment displays             －儀器顯示	229,117	270,145

– Televisions                 －電視機	129,154	128,820

Sub-total                   小計	847,556	756,075

LED lighting                  LED照明

– Public lighting                 －公用照明	25,755	34,839

– Commercial lighting              －商用照明	56,240	19,692

Sub-total                   小計	81,995	54,531

Sourcing business              採購業務	1,320,235	867,360

Total                     合計	2,249,786	1,677,966


# 5. OUR ENVIRONMENT (Continued)

# 5.1 Emissions (Continued)

Waste generated by the Offices:

Indicators	2021	2020

T1otal hazardous waste (kg)	461	371

H2azardous waste discarded per employee (kg)	1.45	0.77

T3otal non-hazardous waste (kg)	14,839	16,491

Non-hazardous waste di2scarded per employee (kg)	46.52	34.36

Notes：

1. Data is calculated based on the actual weight of hazardous waste.

2. The intensity is calculated based on the total number of employees of the Office, not the Group.

3. Data is calculated based on the actual weight of non-hazardous waste and the “Research on Solutions to Domestic Solid Waste in Cities of China” issued by the Beijing Environmental Sanitation Administration.

# 5.2 Energy and Resources

Energy and resources such as water are precious resources to everyone and are crucial for maintaining the Group’s business operation. Thereby, we set energy and water conservation as one of our major environmental commitments and implement proper and effective management on the use of energy and resources. During the Reporting Period, energy was consumed in the form of electricity usage, stationary combustion and heating in the offices, as well as fuel consumption for our vehicles. Since the Group’s principal business is property development, no packaging materials were consumed during the Reporting Period.

Similarly, the Group has set targets for increasing both energy and water consumption efficiency. The Group endeavours to conserve water and electricity to cater for the environmental protection trend of the industry. In order to achieve the targets, the Group decreases the water consumption from the production and office operation through enhancing rainwater utilisation rate. In addition, the Group continues to implement energy resources management measures in offices for achieving the long-term target of 15% reduction of the previous five-year plan. During the Year, the energy consumption of the Group in offices has been reduced by 27% of that during the previous reporting period.


# 5. OUR ENVIRONMENT (Continued)

# 5.2 Energy and Resources (Continued)

Energy and water consumption of the offices:

Indicators	2021	2020

T1otal energy consumption (MWh)	1,529	2,101

Total2 energy consumption per employee (MWh)	4.79	4.38

T33otal water consumption (m)	18,656	9,427

Total23 water consumption per employee (m)	58.48	19.64

Notes:

1. Data is calculated based on the “Land Transport Enterprises – Guidelines on Greenhouse Gas Emission Accounting and Reporting (Trial)” issued by the National Development and Reform Commission of the PRC and “Appendix 2: Reporting Guidance on Environmental KPIs” published by the Hong Kong Stock Exchange.

2. The intensity is calculated based on the total number of employees of the Office, not the Group.

3. Data is calculated based on the record of actual water consumption of the Group. Water consumption has increased and returned to the original level in response to the alleviation of COVID-19 pandemic in the Year.

# Energy Consumption by Type:


# Consolidated Statement of Changes in Equity

for the year ended 31 December 2020

(Expressed in Renminbi)

	Attributable to equity shareholders of the Company	Non-
controlling
interests	Total
equity

Share
capital	Capital
reserve	Statutory
reserve	Translation
reserve	Other
reserves	Retained
profits	Total

RMB’000
(note 23(c))	RMB’000
(note 23(d)(i))	RMB’000
(note 23(d)(ii))	RMB’000
(note 23(d)(iii))	RMB’000
(note 23(d)(iv))	RMB’000	RMB’000	RMB’000	RMB’000

Balance at 1 January 2019	510,981	28,163	126,886	(1,187)	2,308	929,210	1,596,361	(7,007)	1,589,354

Changes in equity for 2019:

Profit for the year	—	—	—	—	—	26,403	26,403	959	27,362

Other comprehensive loss	—	—	—	(10)	—	—	(10)	—	(10)

Total comprehensive income	—	—	—	(10)	—	26,403	26,393	959	27,352

Equity-settled share-based
transactions (note 21)	—	1,772	—	—	—	—	1,772	—	1,772

Purchase of own shares	—	—	—	—	—	(8,913)	(8,913)	—	(8,913)

Dividends paid to equity shareholders
of the Company	—	—	—	—	—	(34,170)	(34,170)	—	(34,170)

Balance at 31 December 2019	510,981	29,935	126,886	(1,197)	2,308	912,530	1,581,443	(6,048)	1,575,395

Balance at 1 January 2020	510,981	29,935	126,886	(1,197)	2,308	912,530	1,581,443	(6,048)	1,575,395

Changes in equity for 2020:

Profit for the year	—	—	—	—	—	87,213	87,213	95	87,308

Other comprehensive loss	—	—	—	(12,352)	—	—	(12,352)	—	(12,352)

Total comprehensive income	—	—	—	(12,352)	—	87,213	74,861	95	74,956

Equity-settled share-based
transactions (note 21)	—	872	—	—	—	—	872	—	872

Purchase of own shares	—	—	—	—	—	(18,125)	(18,125)	—	(18,125)

Dividends declared by subsidiaries to
the non-controlling equity owner	—	—	—	—	—	—	—	(615)	(615)

Dividends paid to equity shareholders
of the Company (note 23(b)(ii))	—	—	—	—	—	(10,702)	(10,702)	—	(10,702)

Balance at 31 December 2020	510,981	30,807	126,886	(13,549)	2,308	970,916	1,628,349	(6,568)	1,621,781

The notes on pages 101 to 167 form part of these financial statements.


# Consolidated Cash Flow Statement

for the year ended 31 December 2020

(Expressed in Renminbi)

	Note	2020	2019

RMB’000	RMB’000

Operating activities

Cash generated from operations	17(b)	320,615	46,918

Income tax paid	22(a)	(30,486)	(27,039)

Net cash generated from operating activities		290,129	19,879

Investing activities

Payment for purchase of property, plant and equipment	11	(393)	(1,392)

Payment for purchase of intangible assets		(607)	(251)

Payment for purchase of investment property		—	(19,214)

Payment for purchase of other financial assets		(82,000)	(79,684)

Proceeds from disposal of financial assets		43,301	—

Received from other financial asset		2,000	—

Investments to associates		—	(2,150)

Time deposits with initial term over three months		(22,587)	(21,920)

Proceeds from disposal of property, plant and equipment		153	123

Payment of restricted cash		(882)	—

Interest received	5(a)	14,268	14,881

Dividends received from investments in securities		1,536	—

Net cash used in investing activities		(45,211)	(109,607)

Financing activities

Payment for purchase of own shares		(18,125)	(8,913)

Dividends paid to equity shareholders of the Company		(10,702)	(34,170)

Capital element of lease rentals paid		(1,912)	—

Interest element of lease rentals paid		(59)	—

Other cash flows arising from financing activities		28	—

Net cash used in financing activities		(30,770)	(43,083)

Net increase/(decrease) in cash and cash equivalents		214,148	(132,811)

Cash and cash equivalents at 1 January		583,677	715,109

Effect of foreign exchange rate changes		(9,741)	1,379

Cash and cash equivalents at 31 December	17	788,084	583,677

The notes on pages 101 to 167 form part of these financial statements.


# Environment

# Reducing Waste

Waste is a by-product of our manufacturing processes. Our approach is to reduce, reuse and recycle waste where possible. Metal waste, aluminium, wood and general waste constitute the primary types of waste from our operations. Metal accounts for more than half of our total waste. We sell metal waste as scrap for recycling by other users. In FY2019, metal waste accounted for 65% of our total non-hazardous waste followed by general waste of 23%.

Our policy is to dispose waste through licensed waste management contractors for recycling or safe disposal in accordance with local regulations.

# Complying with Laws

We are committed to complying with the applicable environmental regulations. There were no incidents of non-compliance against environmental laws or regulations in the reported periods.

Non-hazardous Waste (tonnes)


As a responsible corporate citizen, our business philosophy is centered on an unwavering commitment to improve the economic, environmental and social well-being of our stakeholders.

Anti-Corruption	Our policy requires zero-tolerance towards bribery and corruption. There were
no known incidents of corruption in the reported period.

Whistle-Blowing Policy	Our Whistle-Blowing Policy aims at maintaining a hihg standard of corporate
governance; providing a channel of communication for employees to report
fraudulent practices; and guides employees on actions to address their concerns
on suspicions of fraudulent activities. The policy also provides the process for
investigation and management reporting. This policy deals with:
•	 Conflicts of interest: An emlpoyee or officer should always act in the best interest
of the Group. A “conflict of interest” occurs when an individual’s personal interests
interferes or appears to interfere with the interests of the Group.
•	 Taking advantage of corporate opportunities: Emlpoyees and directors are
prohibited from taking advantage of corporate property, information, or position,
or opportunities arising from these, for personal gains or to compete with the
Group.
•	 Confidentiality: Emlpoyees and directors must maintain the confidentiality of
information entrusted to them by the Group or its customers, except when
disclosure is authorised or legally mandated.
•	 Fair dealing: Each emloyee and director should endeavour to deal fairly with thpe
G’rous customers, sulppiers, competitors and emlhpoNpyees. one sould take unfair
advantahge of anhyone throug disonesty, misrepresentation of material facts or
any other unfair practice.
’•	 Protection and proper use of the Groups assets: All emlpodl
yees an officers shoud’protect the Groups assets and ensure their efficient use for legitimate business
purposes.
•	 Comlpiance with laws, rules and regulations (including insider trading laws): We
activelly promote compiance with laws, rules and regulations, including insider
trading laws. Insider trading is both unethical and illegal.
•	 Unethical behaviour: We actively promote ethical behaviour and encourage
emlpoyees to report any misconduct in this regard.

Regulatory Compliance	GDS is committed to conducting its business activities in a lawful manner. We
have implemented measures to stay updated about the regulations that apply to
our business to ensure compliance.
There were no known incidents of non-compliance with socio-economic laws or
regulations in the reported period.


# 4. Financial risk management (continued)

# 4.3 Liquidity risk (continued)

# (C) Analysis of undiscounted cash flows by contractual maturities (continued)

# (b) Derivative cash flows

The tables below summarise the cash flows of the Group by remaining contractual maturity as at 31 December for derivative financial liabilities that will be settled on a net basis, together with all derivative financial instruments that will be settled on a gross basis regardless of whether the contract is in an asset or liability position. The amounts disclosed in the tables are the contractual undiscounted cash flows, except for certain derivatives which are disclosed at fair value.

The Group’s derivative financial instruments that will be settled on a net basis mainly include interest rate swaps whereas derivative financial instruments that will be settled on a gross basis mainly include currency forwards and currency swaps.

	2018

Up to
1 month	1 to 3
months	3 to 12
months	1 to 5
years	Over
5 years	Total

HK$’m	HK$’m	HK$’m	HK$’m	HK$’m	HK$’m

Derivative financial liabilities
settled on a net basis	(8,983)	(884)	(2,338)	(5,061)	(1,002)	(18,268)

Derivative financial instruments
settled on a gross basis

Total inflow	792,296	383,269	643,870	133,033	4,683	1,957,151

Total outflow	(793,145)	(382,112)	(641,036)	(133,384)	(4,660)	(1,954,337)

	2017

Up to
1 month	1 to 3
months	3 to 12
months	1 to 5
years	Over
5 years	Total

HK$’m	HK$’m	HK$’m	HK$’m	HK$’m	HK$’m

Derivative financial liabilities
settled on a net basis	(7,463)	(720)	(1,127)	(3,580)	(856)	(13,746)

Derivative financial instruments
settled on a gross basis

Total inflow	635,704	462,071	492,297	125,606	5,181	1,720,859

Total outflow	(636,212)	(462,229)	(491,628)	(125,756)	(5,192)	(1,721,017)


# 4. Financial risk management (continued)

# 4.3 Liquidity risk (continued)

# (C) Analysis of undiscounted cash flows by contractual maturities (continued)

# (c) Off-balance sheet items

# Loan commitments

The contractual amounts of the Group’s off-balance sheet financial instruments as at 31 December 2018 that the Group commits to extend credit to customers and other facilities amounted to HK\$545,794 million (2017: HK\$569,658 million). Those loan commitments can be drawn within one year.

# Financial guarantee contracts

Financial guarantees and other financial facilities of the Group as at 31 December 2018 amounting to HK\$62,094 million (2017: HK\$66,800 million) are maturing no later than one year.

# 4.4 Insurance risk

The Group is in the business of insuring against the risk of mortality, morbidity, disability, critical illness, accidents and related risks. The Group manages these risks through the application of its underwriting strategy and reinsurance arrangements.

The underwriting strategy is intended to set premium pricing at an appropriate level that corresponds with the underlying exposure of the risks underwritten and the Group’s underwriting procedures include the screening processes, such as the review of health condition and family medical history to ensure alignment with the underwriting strategy.

Within the insurance process, concentrations of risk may arise where a particular event or a series of events could impact heavily on the Group’s liabilities. Such concentrations may arise from a single insurance contract or through a small number of related contracts, and relate to circumstances where significant liabilities could arise.

For the in-force insurance contracts, most of the underlying insurance liabilities are related to endowment, universal life, annuity, whole life and unit-linked insurance products. For most of the insurance policies issued, the Group has a retention limit on any single life insured. The Group cedes the excess of the insured benefit over the limit to reinsurer under an excess of loss reinsurance arrangement. For some of the insurance liabilities, the Group has entered into reinsurance arrangements that reinsure most of the insurance risk.

Uncertainty in the estimation of future benefit payments and premium receipts for long-term insurance contracts arises from the unpredictability of long-term changes in overall levels of mortality, morbidity and persistency. In this regard, the Group has conducted relevant experience studies. The results of such studies are considered in determining the assumptions of insurance liability which include an appropriate level of prudential margins.


. enhancing our operational efficiency and corporate governance through compliance with rigorous disclosure standards which we believe would enhance our internal control, operating systems and risk management; and

. enhancing employee incentive and commitment. Human resources and talents are vital to our business, being a listed company can help to attract, recruit and retain our valued management personnel, employees and skilled professionals to provide additional incentive. To this end, we have also put in place the Share Option Scheme for our employees in order to attract and retain talents. See ‘‘E. Share Option Scheme’’ in Appendix V to this prospectus for a summary of the principal terms of the Share Option Scheme.

Our executive Directors had considered and evaluated different listing venues including Hong Kong and Singapore and have concluded that Hong Kong is the suitable venue to pursue a listing after taking into account the following factors:

. our executive Directors consider that the level of trading activities on a stock exchange to be one of the key factors indicating the ease of conducting secondary funding activities after a listing. A secondary fundraising exercise such as a secondary placement of shares would generally be more attractive to investors if there is a more liquid market, where there will be more buyers, who may invest in our shares under the fundraising exercise, and sellers, who may realise their investment subsequently. According to the CIC Report, the average daily turnover of securities in Hong Kong was approximately HK\$66.9 billion (equivalent to approximately S\$11.2 billion) and approximately HK\$88.4 billion (equivalent to approximately S\$14.9 billion), respectively, in 2016 and 2017. By comparison, accordingly to the Stock Exchange of Singapore, the average daily turnover of securities in Singapore was approximately S\$1.1 billion and S\$1.2 billion, respectively, for the corresponding periods. As such, our executive Directors are of the view that it would be easier to conduct secondary fundraising in the Hong Kong stock market, if necessary, for our further expansion in the future, than in the Singapore stock market, as the Hong Kong market has higher liquidity;

. according to the CIC Report, the market capitalisation weighted average price-earnings ratio of companies listed on the Stock Exchange and those on the Stock Exchange of Singapore as at 31 January 2018 was approximately 39.1 times and 18.2 times, respectively. As such, our executive Directors are of the view that the valuation of companies listed in Hong Kong is generally higher than those listed in Singapore, and thus there is a higher probability for our Company to achieve a higher valuation if the Share Offer is conducted through the Hong Kong stock market instead of the Singapore stock market;

. the Stock Exchange is an international stock market and is mature in the global financial world. According to the global ranking of stock exchanges by market capitalisation on the SFC’s website, the Stock Exchange ranked seventh among the world’s leading stock exchanges in terms of market capitalisation as at the end of December 2017, with a total market capitalisation of US\$4,350.5 billion. It is also the third largest stock exchange in Asia, behind Japan and Shanghai, China, as at the end of December 2017; and


. given the international and mature status of the Stock Exchange, our executive Directors believe that the listing of our Shares in Hong Kong has advantages which include a sound regulatory framework, free flow of capital and an advanced clearing and settlement infrastructure and financial services.

Our Directors believe that investors would be interested in investing in our Group despite the fact that our Group is based in Singapore for the following reasons. Our major customers encompass subsidiaries of listed companies. Such customers include (i) Customer B, a subsidiary of a company listed on the New York Stock Exchange, which is a Fortune 500 company and the leading global developer of integrated resorts and casino operator; (ii) CBM Pte Ltd, a subsidiary of City Developments Limited, a company listed on the Singapore Stock Exchange, which is an international real estate operating company with a global presence, and one of Singapore’s largest companies by market capitalisation; and (iii) UEMS Solutions Pte Ltd, a subsidiary of UEM Edgenta Berhad, a company listed on the Main Board of Bursa Malaysia Securities Berhad, which is a leader in total asset solutions including consultancy, procurement and construction planning, operations and maintenance for a range of assets and building types such as residential properties, offices and roads. In addition, in 2016, we secured a three-year framework agreement for the supply of our tissue products to the largest international airport in Singapore. Our Directors believe that given the international background and reputable status of our customers, investors would be attracted by our Group’s customer profile to invest in our Group.


# 2. ADOPTION OF NEW OR REVISED IFRSs (continued)

# (b) New or revised IFRSs that have been issued but are not yet effective (continued)

# IFRS 16 — Leases (continued)

As at 31 December 2018, the Group has non-cancellable operating lease commitments of HK\$18,314,000 as disclosed in Note 32(a). A preliminary assessment indicates that these arrangements will meet the definition of a lease under IFRS 16, and hence the Group will recognise a right-of-use asset and a corresponding liability in respect of all these leases unless they qualify for low value or short-term leases upon the application of IFRS 16. In addition, the application of new requirements may result in changes in measurement, presentation and disclosure as indicated above. However, it is not practicable to provide a reasonable estimate of the financial effect until the Group performs a detailed review.

In respect of the lessor accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

# IFRIC 23 — Uncertainty over Income Tax Treatments

The interpretation supports the requirements of IAS 12 “Income Taxes” by providing guidance over how to reflect the effects of uncertainty in accounting for income taxes. Under the interpretation, the entity shall determine whether to consider each uncertain tax treatment separately or together based on which approach better predicts the resolution of the uncertainty. The entity shall also assume the tax authority will examine amounts that it has a right to examine and have full knowledge of all related information when making those examinations. If the entity determines it is probable that the tax authority will accept an uncertain tax treatment, then the entity should measure current and deferred tax in line with its tax filings. If the entity determines it is not probable, then the uncertainty in the determination of tax is reflected using either the “most likely amount” or the “expected value” approach, whichever better predicts the resolution of the uncertainty.

The Group is not yet in a position to state whether these new pronouncements will result in substantial changes to the Group’s accounting policies and financial statements.

# Amendments to IFRS 10 and IAS 28 — Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments clarify the extent of gains or losses to be recognised when an entity sells or contributes assets to its associate or joint venture. When the transaction involves a business, the gain or loss is recognised in full; conversely when the transaction involves assets that do not constitute a business, the gain or loss is recognised only to the extent of the unrelated investors’ interests in the joint venture or associate.

The Group is not yet in a position to state whether these new pronouncements will result in substantial changes to the Group’s accounting policies and financial statements.


# 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

# (a) Basis of preparation

The consolidated financial statements have been prepared under historical cost convention except for certain financial instruments classified as available-for-sale investments and at fair value through profit or loss, which are measured at fair value. The significant accounting policies that have been used in the preparation of these financial statements are summarised below. These policies have been consistently applied to all the years presented unless otherwise stated. The adoption of new or revised IFRSs and the impacts on the financial statements, are disclosed in Note 2.

It should be noted that accounting estimates and assumptions are used in preparation of the financial statements. Although these estimates are based on management’s best knowledge and judgment of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are set out in Note 4.

# (b) Business combination and basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Inter-company transactions and balances between group companies together with unrealised profits are eliminated in full in preparing the consolidated financial statements. Unrealised losses are also eliminated unless the transaction provides evidence of impairment on the asset transferred, in which case the loss is recognised in profit or loss.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss from the effective dates of acquisition or up to the effective dates of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

Acquisition of subsidiaries or businesses is accounted for using acquisition method. The cost of an acquisition is measured at the aggregate of the acquisition-date fair value of assets transferred, liabilities incurred and equity interests issued by the Group, as the acquirer. The identifiable assets acquired and liabilities assumed are principally measured at acquisition-date fair value. The Group’s previously held equity interest in the acquiree is re-measured at acquisition-date fair value and the resulting gains or losses are recognised in profit or loss. The Group may elect, on a transaction-by-transaction basis, to measure non-controlling interests that represent present ownership interests in the subsidiary either at fair value or at the proportionate share of the acquiree’s identifiable net assets. All other non-controlling interests are measured at fair value unless another measurement basis is required by IFRSs. Acquisition-related costs incurred are expensed unless they are incurred in issuing equity instruments in which case the costs are deducted from equity.


# SUSTAINABILITY GOVERNANCE

At MGM China, we integrate sustainability management into all levels of our governance, from Board-level and management-level committees to operational-level teams and business units. Established in 2012, the MGM Sustainability Committee (“Committee”), chaired by the non-executive director of the Board, drives us towards fulfilling our Sustainability Vision and goals. In recognition of the rocketing awareness on sustainability in the market, we advance the structure of our Committee to enhance diversity, uphold accountability and the multi-disciplinary nature of sustainability. Therefore, the Committee underwent a restructuring, increasing the membership from 7 to 11 core departments in 2020.

The 3 operational-level teams, namely the Community Volunteer Team, Climate Change and Carbon Management Team, and Green Team are in place to encourage employees’ participation in community events, explore environmental enhancement opportunities, and engage and inspire fellow team members to help us achieve our environmental objectives.

# Sustainability Governance Structure


# RESPONSE TO GLOBAL CALLS FOR SUSTAINABLE DEVELOPMENT

MGM China supports the SDGs and has identified and aligned the Company’s strategy and initiatives with 9 relevant SDGs addressing global challenges.

# UN SDGs Supported by MGM China


# 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

# 3.15 Financial instruments (Cont’d)

# Financial assets (Cont’d)

# Effective interest method

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

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

# Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is (i) held for trading or (ii) it is designated as at FTVPL.

A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling it in the near term;or

• on initial recognition it is a part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.


# 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

# 3.15 Financial instruments (Cont’d)

# Financial assets (Cont’d)

# Financial assets at FVTPL (Cont’d)

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and HKAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets and is included in the other revenue and other income line item. Fair value is determined in the manner described in note 4 to the consolidated financial statements.


# 4 FINANCIAL RISK MANAGEMENT (Continued)

# (a) Financial risk factors (Continued)

# (i) Credit risk (Continued)

# Trade receivables

The Group’s trade receivables have been grouped into categories for shared credit risk characteristics:

– primary properties market transactions

– other transactions

For trade receivables from primary properties market transactions, the counterparties are primarily large corporations and have strong financial position and management considers the credit risk is close to zero.

For trade receivables from other transactions, the counterparties are primarily individuals. When there is objective evidence that individual trade receivable is impaired, the loss allowances for these trade receivables is assessed and measured at an amount equal to lifetime expected credit losses.

For the remaining trade receivables from other transactions which no objective evidence is available without undue cost to measure the lifetime expected credit loss, the Group applies the HKFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for these trade receivables collectively.

To measure the expected credit losses, these trade receivables have been grouped based on the days past due and the sectors of the transacted properties (i.e. commercial properties, shops and industrial properties).

The expected loss rates are based on the latest completed historical payment profile of sales over a period of 12 month and the corresponding historical credit losses experienced within that period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables, if any.


# 4 FINANCIAL RISK MANAGEMENT (Continued)

# (a) Financial risk factors (Continued)

# (i) Credit risk (Continued)

# Trade receivables (Continued)

On these basis, the loss allowances for trade receivables as at 31 December 2020 and 31 December 2019 were determined as follows:

# As at 31 December 2020

	Expected
loss rate	Gross
carrying
amount	Loss allowance

Individually
assessed	Collectively
assessed	 Total

%	 HK$’000	 HK$’000	 HK$’000	 HK$’000

Current (not yet due)	4.5%-15.0%	81,268	(460)	(4,138)	(4,598)

Less than 30 days past due	0.8%-7.7%	10,854	(75)	(597)	(672)

31-60 days past due	3.7%-19.0%	3,006	 –	(405)	(405)

61-90 days past due	7.9%-31.0%	2,163	(1,345)	(56)	(1,401)

More than 90 days past due	13.0%-100%	29,329	(24,021)	(4,665)	(28,686)

		126,620	(25,901)	(9,861)	(35,762)

# As at 31 December 2019

	Expected
loss rate	Gross
carrying
amount	Loss allowance

Individually
assessed	Collectively
assessed	 Total

%	 HK$’000	 HK$’000	 HK$’000	 HK$’000

Current (not yet due)	3.6%-6.2%	75,912	(893)	(2,955)	(3,848)

Less than 30 days past due	0.4%-5.5%	10,303	(96)	(245)	(341)

31-60 days past due	1.3%-13.9%	3,729	(1,601)	(363)	(1,964)

61-90 days past due	2.4%-19.6%	2,369	 –	(375)	(375)

More than 90 days past due	36.0%-100%	27,449	(17,104)	(8,884)	(25,988)

		119,762	(19,694)	(12,822)	(32,516)

Note: The customers are obliged to settle the amounts due upon the completion of or pursuant to the terms and conditions of the relevant agreements. The loss allowance provided for trade receivables not yet due includes the credit risk arising from bad debts and fallen through transactions. The loss allowance provided for overdue trade receivables includes only the credit risk arising from bad debts.


# Homeowners premium measures and statistics

	2017	2016	2015

PIF (thousands)	79	58	32

New issued applications (thousands)	34	37	28

Average premium	$         917	 $         875	 $         833

Renewal ratio (%) (1)	85.5	82.6	81.9

Approved rat(2)e changes :

# of locations (3)	4	1	N/A

Total brand (%)	5.1	(0.5)	N/A

Location specific (%)	14.3	(10.0)	N/A

(1) Esurance’s renewal ratios exclude the impact of risk related cancellations during the new business underwriting period. Customers can enter into a policy without a physical inspection. During the underwriting review period, a number of policies may be canceled if upon inspection the condition is unsatisfactory.

(2) Rate changes were approved in 4 states, totaled \$2.9 million in 2017. Rate changes were only approved in Texas in 2016. No rate changes were approved in 2015. N/A reflects not applicable.

(3) Esurance brand operates in 31 states and 2 Canadian provinces.

Homeowners insurance premiums written totaled\$79 million in 2017 compared to \$56 million in 2016. Factors impacting premiums written were:

• 21 thousand increase in PIF as of December 31, 2017 compared to December 31, 2016.

• 3 thousand decrease in new issued applications in 2017 compared to 2016 due to reduced marketing activities.

• 4.8% increase in average premium in 2017 compared to 2016, primarily due to increased premium distribution in higher average premium states and rate changes. As of December 31, 2017, Esurance is writing homeowners insurance in 31 states with lower hurricane risk, contributing to lower average premium compared to the industry.

Homeowners insurance premiums written totaled\$56 million in 2016 compared to \$30 million in 2015. Factors impacting premiums written were:

• 26 thousand increase in PIF as of December 31, 2016 compared to December 31, 2015.

• 9 thousand increase in new issued applications in 2016 compared to 2015.

• As of December 31, 2016, Esurance was writing homeowners insurance in 31 states with lower hurricane risk.

# Combined ratios by line of business

	For the years ended December 31,

Loss ratio (1)	E(1)xpense ratio 	Combined ratio

2017	2016	2015	2017	2016	2015	2017	2016	2015

Auto	77.5	75.8	75.3	24.8	28.2	34.0	102.3	104.0	109.3

Homeowners	83.8	78.6	63.2	45.6	161.9	136.8	129.4	240.5	200.0

Other personal lines	50.0	62.5	57.1	37.5	37.5	42.9	87.5	100.0	100.0

Total	77.6	75.8	75.1	25.7	31.7	35.2	103.3	107.5	110.3

(1) Ratios are calculated using the premiums earned for the respective line of business.

# Loss ratios by line of business

	Loss ratio	For the years ended December 31,	Effect of catastrohpe
losses included in prior
year reserve
reestimates on
combined ratio

Effect of catastrohpe
losses on combined
ratio	Effect of prior year
reserve reestimates on
combined ratio

2017	2016	2015	2017	2016	2015	2017	2016	2015	2017	2016	2015

Auto	77.5	75.8	75.3	2.1	1.5	0.7	0.1	(1.3)	(1.1)	 —	 —	 —

Homeowners	83.8	78.6	63.2	23.5	28.6	15.8	(3.0)	 —	 —	(1.5)	 —	 —

Other personal lines	50.0	62.5	57.1	 —	 —	 —	(12.5)	—	—	—	—	—

Total	77.6	75.8	75.1	2.9	2.2	0.9	(0.1)	(1.3)	(1.1)	(0.1)	 —	0.1

Auto loss ratio increased 1.7 points in 2017 compared to 2016, primarily due to unfavorable prior year reserve reestimates in 2017 compared to favorable prior year reserve reestimates in 2016 and higher catastrophe losses. Auto loss ratio increased 0.5 points in 2016 compared to 2015, primarily due to higher claim frequency and catastrophe losses, partially offset by increases in premiums earned.

Catastrophe losses were \$50 million in 2017 compared to \$36 million in 2016 and \$14 million in 2015.