Rail Transit International Development Company Limited 軌道國際發展有限公司 (incorporated with limited liability in the British Virgin Islands) €400,000,000 1.625 per cent. Guaranteed Bonds due 2022 Unconditionally and irrevocably guaranteed by Tianjin Rail Transit Group (Hong Kong) Co., Limited (incorporated with limited liability in Hong Kong) and with the benefit of a Keepwell and Liquidity Support Deed and a Deed of Equity Interest Purchase Undertaking provided by Tianjin Rail Transit Group Co., Ltd. (incorporated with limited liability in the People’s Republic of China)
Issue Price for the Bonds: 99.443 per cent. The 1.625 per cent. Guaranteed Bonds due 2022 in the aggregate principal amount of €400,000,000 (the “Bonds”) will be issued by Rail Transit International Development Company Limited (軌道國際發展有限公司) (the “Issuer”) and will be unconditionally and irrevocably guaranteed (the “Guarantee”) by Tianjin Rail Transit Group (Hong Kong) Co., Limited (the “Guarantor”). The Issuer and the Guarantor are indirect and direct wholly-owned subsidiaries of Tianjin Rail Transit Group Co., Ltd. (the “Company”), respectively. The Bonds bear interest on their outstanding principal amount from and including 22 March 2018 at the rate of 1.625 per cent. per annum. Interest on the Bonds will be payable annually in arrear on 22 June in each year. The Bonds constitute direct, unsubordinated, unconditional and (subject to Condition 4(a) of the Terms and Conditions of the Bonds) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a) of the Terms and Conditions of the Bonds, at all times rank at least equally with all the Issuer’s other present and future unsecured and unsubordinated obligations. The obligations of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a) of the Terms and Conditions of the Bonds, at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations. Payments on the Bonds will be made without deduction for taxes of the British Virgin Islands, Hong Kong or the PRC (as defined herein) to the extent described in “Terms and Conditions of the Bonds — Taxation”. The Issuer, the Guarantor and the Company will enter into a keepwell and liquidity support deed dated on or about 22 March 2018 with The Hongkong and Shanghai Banking Corporation Limited (the “Trustee”) as trustee of the Bonds (the “Keepwell and Liquidity Support Deed”) as further described in “Description of the Keepwell and Liquidity Support Deed”. The Keepwell and Liquidity Support Deed does not constitute a guarantee by the Company of the obligations of the Issuer under the Bonds or the Guarantor under the Guarantee. The Issuer, the Guarantor, the Company and the Trustee will enter into a deed of equity interest purchase undertaking dated on or about 22 March 2018 (the“Deed of Equity Interest Purchase Undertaking”) as further described in “Description of the Deed of Equity Interest Purchase Undertaking”. The Deed of Equity Interest Purchase Undertaking does not constitute a guarantee by the Company of the obligations of the Issuer under the Bonds or the Guarantor under the Guarantee. An application for the filing and registration of the offering of the Bonds was made by the Company to the National Development and Reform Commission (the “NDRC”) pursuant to the Notice on Promoting the Reform of the Filing and Registration System for Issuance of Foreign Debt by Corporates (國家發展改革委關於推進企業發行 外債備案登記 制管理改革的通知) (Fa Gai Wai Zi [2015] No 2044) (the “NDRC Notice”). An enterprise foreign debt pre-issuance registration certificate (the “NDRC Pre-Issuance Registration Certificate”) was received by the Company on 3 November 2017 from Tianjin Development and Reform Commission which was issued by the NDRC on 23 October 2017. Pursuant to the NDRC Notice, the Company shall report or cause to be reported relevant information in connection with the Bonds to the NDRC not later than the PRC Business Day (as defined in the “Terms and Conditions of the Bonds”) falling 10 PRC Business Days after the Issue Date (the “Post-Issuance Reporting Filing”). The Company intends to complete the Post-Issuance Reporting Filing as soon as practicable and in any event within 10 PRC Business Days after the Issue Date (as defined below). The Bonds will mature on 22 June 2022 at their principal amount. The Bonds are subject to redemption, in whole but not in part, at their principal amount, together with accrued interest, at the option of the Issuer at any time in the event of certain changes affecting taxes of the British Virgin Islands, Hong Kong or the PRC. See “Terms and Conditions of the Bonds — Redemption and Purchase — Redemption for Tax Reasons”. The Bonds also contain a provision for redemption at the option of the holders of the Bonds (the “Bondholders”) at 101 per cent. of the principal amount of each Bond, together with interest accrued to the date for redemption, upon the occurrence of a Change of Control (as defined in the “Terms and Conditions of the Bonds”) with respect to the Bonds. See “Terms and Conditions of the Bonds — Redemption and Purchase — Redemption for Change of Control”. The Bonds are expected to be assigned a rating of “Baa1” by Moody’s Investors Service, Inc. (“Moody’s”) and “A” by Fitch Ratings Ltd. (“Fitch”). The rating does not constitute a recommendation to buy, sell or hold the Bonds and may be subject to suspension, reduction or withdrawal at any time by Moody’s and Fitch. In addition, the Company is rated “A3” with stable outlook by Moody’s, “A-” with stable outlook by Standard & Poor’s Ratings Services, a division of the McGraw Hill Financial, Inc. (“S&P”) and “A” with stable outlook by Fitch. Such ratings do not constitute a recommendation to buy, sell or hold the Bonds and may be subject to revision or withdrawal at any time by Moody’s, S&P and Fitch. Investing in the Bonds involves certain risks. See “Risk Factors” beginning on page 15. The Bonds and the Guarantee have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and, subject to certain exceptions, may not be offered or sold within the United States. Accordingly, the Bonds are being offered and sold only outside the United States in offshore transactions in compliance with Regulation S under the Securities Act (“Regulation S”). For a description of these and certain further restrictions on offers and sales of the Bonds and the distribution of this Offering Circular, see the section entitled “Subscription and Sale”on page 128. The denomination of the Bonds shall be €100,000 and integral multiples of €1,000 in excess thereof. Application has been made to the Luxembourg Stock Exchange (the “LuxSE”) for the Bonds to be listed on the Official List of the LuxSE (the “Official List”) and to be admitted to trading on the Euro MTF Market of the LuxSE (the “Euro MTF Market”). The Euro MTF Market is not a regulated market pursuant to the provisions of the Markets in Financial Instruments Directive (Directive 2004/39/EC). This Offering Circular shall constitute a prospectus for the purpose of the Luxembourg Law dated 10 July 2015 (as amended) on Prospectuses for Securities (the “Luxembourg Prospectus Law”). The Issuer has prepared this Offering Circular solely for use in connection with the listing of the Bonds on the Euro MTF Market. The Offering Circular can only be used for the purposes for which it has been published. The LuxSE assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained in this Offering Circular. Each of the Issuer and the Guarantor accepts full responsibility for the information contained in this Offering Circular and each confirms, having made all reasonable inquiries, that to the best of its knowledge and belief, there are no other facts the omission of which would make any statement herein misleading. The Bonds will be represented initially by interests in a global certificate (the “Global Certificate”) in registered form which will be registered in the name of a nominee of, and shall be deposited on or about 22 march 2018 (the “Issue Date”) with, a common depositary for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream”). Beneficial interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream. Except as described herein, definitive certificates for the Bonds will not be issued in exchange for interests in the Global Certificate (see “Summary of Provisions Relating to the Bonds in Global Form”). Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers HSBC ICBC International Standard Chartered Bank ABC International
Joint Bookrunners and Joint Lead Managers CCB International Bank of China Wing Lung Bank Limited The date of this Offering Circular is 23 March 2018. IMPORTANT NOTICE
THIS OFFERING CIRCULAR (THE “OFFERING CIRCULAR”) DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER, THE GUARANTOR, THE COMPANY OR ANY OF THEIR RESPECTIVE SUBSIDIARIES SINCE THE DATE HEREOF OR THE DATE UPON WHICH THIS OFFERING CIRCULAR HAS BEEN MOST RECENTLY AMENDED OR SUPPLEMENTED OR THAT THE INFORMATION SET FORTH IN THIS OFFERING CIRCULAR IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
IN CONNECTION WITH THE ISSUE OF THE BONDS, ANY JOINT LEAD MANAGER AS STABILISATION MANAGER (SUCH PARTY, A “STABILISATION MANAGER”) (OR PERSONS ACTING ON BEHALF OF THE STABILISATION MANAGER) MAY, IN ACCORDANCE WITH APPLICABLE LAW, OVER-ALLOT OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE BONDS AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT THE STABILISATION MANAGER(S) (OR PERSON(S) ACTING ON THEIR BEHALF) WILL UNDERTAKE ANY STABILISATION ACTION. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE OFFER OF THE BONDS IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE BONDS AND 60 DAYS AFTER THE ALLOTMENT OF THE BONDS.
This Offering Circular contains particulars given in compliance with the rules and regulations of the LuxSE and the Luxembourg Prospectus Law for the purpose of giving information with regard to the Issuer, the Guarantor, the Company, the Bonds and the Guarantee. Each of the Issuer, the Guarantor and the Company accepts full responsibility for the accuracy of the information contained in this Offering Circular and confirms, having made all reasonable enquiries, that to the best of its knowledge and belief, there are no other facts the omission of which would make any statement herein misleading. The LuxSE takes no responsibility for the contents of this Offering Circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Offering Circular.
Each of the Issuer, the Guarantor and the Company, having made all reasonable inquiries, confirms that: (i) this Offering Circular contains all information with respect to the Issuer, the Guarantor and the Company and their respective subsidiaries and affiliates (collectively the “Group”), the Bonds, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and the Guarantee that is material in the context of the issue and offering of the Bonds; (ii) the statements contained in this Offering Circular relating to the Issuer, the Guarantor, the Company, the Group, the Bonds, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and the Guarantee are in every material respect true and accurate and not misleading; (iii) the opinions and intentions expressed in this Offering Circular with regard to the Issuer, the Guarantor, the Company and/or Group are honestly held, have been reached after considering all relevant circumstances and are based on reasonable assumptions; (iv) there are no other facts in relation to the Issuer, the Guarantor, the Company, the Group, the Bonds, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and/or the Guarantee, the omission of which would, in the context of the issue and offering of the Bonds, make this Offering Circular misleading in any material respect; and (v) the Issuer, the Guarantor and the Company have made all reasonable enquiries to ascertain such facts and to verify the accuracy of all such information and statements.
i Prospective investors in the Bonds should rely only on the information contained in this Offering Circular. None of the Issuer, the Guarantor, the Company, The Hongkong and Shanghai Banking Corporation Limited, ICBC International Securities Limited, Standard Chartered Bank and ABCI Capital Limited (together, the “Joint Global Coordinators”) and CCB International Capital Limited, Bank of China Limited and Wing Lung Bank Limited (together with the Joint Global Coordinators, the “Joint Lead Managers”), the Trustee or the Agents (each as defined in the Terms and Conditions of the Bonds) or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates has authorised the provision of information different from that contained in this Offering Circular, to give any information or to make any representation not contained in or not consistent with this Offering Circular or any other information supplied in connection with the offering of the Bonds and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, the Guarantor, the Company, any of the Joint Lead Managers, the Trustee or the Agents or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates. The information contained in this Offering Circular is accurate in all material respects only as of the date of this Offering Circular, regardless of the time of delivery of this Offering Circular or of any sale of the Bonds. Neither the delivery of this Offering Circular nor any sale made hereunder shall under any circumstances imply that there has not been a change in affairs of the Issuer, the Guarantor, the Company, the Group or any of them or that the information set forth herein is correct in all material respects as of any date subsequent to the date hereof. None of the Joint Lead Managers, the Trustee or the Agents or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates undertake to review the financial condition and affairs of the Issuer, the Guarantor, the Company or the Group nor to advise any investor or potential investor in the Bonds of any information coming to the attention of the Joint Lead Managers, the Trustee or the Agents or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates.
The distribution of this Offering Circular is limited to “professional investors” only, as defined in the Securities and Futures Ordinance (Cap. 571 of Hong Kong) (the “SFO”); or, for a person outside Hong Kong, a person to whom securities may be sold in accordance with a relevant exemption from public offer regulations in that jurisdiction.
This Offering Circular has been prepared by the Issuer, the Guarantor and the Company solely for use in connection with the proposed offering of the Bonds described in this Offering Circular.
This Offering Circular is intended solely for use in connection with the proposed offering of the Bonds, and does not purport to summarise all of the terms, conditions, covenants and other provisions contained in the Trust Deed, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and other transaction documents described herein. The information provided is not all-inclusive.
Market data and certain industry forecast and statistics in this Offering Circular have been obtained from both public and private sources, including market research, publicly available information and industry publications. Although this information is believed to be reliable, it has not been independently verified by the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee, the Agents or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates, and none of the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee, the Agents or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates makes any representation as to the accuracy or completeness of that information, and none of the Joint Lead Managers, the Trustee or the Agents accept any responsibility for any acts or omissions of the Issuer, the Guarantor, the Company
ii or any other person (other than the relevant Joint Lead Manager) in connection with the issue and offering of the Bonds. Such information may not be consistent with other information compiled within or outside the PRC. In addition, third-party information providers may have obtained information from market participants and such information may not have been independently verified. See “Risk Factors — Risks Relating to the Bonds and the Guarantee - Certain facts and statistics are derived from publications not independently verified by the Group or the Joint Lead Managers, the Trustee or the Agents”.
None of the Issuer, the Guarantor, the Company and the Joint Lead Managers is making an offer to sell the Bonds in any jurisdiction except where an offer or sale is permitted. The distribution of this Offering Circular and the offering of the Bonds may in certain jurisdictions be restricted by law. None of the Issuer, the Guarantor, the Company and the Joint Lead Managers represents that this Offering Circular may be lawfully distributed, or that the Bonds may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer, the Guarantor, the Company or the Joint Lead Managers which is intended to permit a public offering of the Bonds or the distribution of this Offering Circular in any jurisdiction where action for that purpose is required. Accordingly, no Bonds may be offered or sold, directly or indirectly, and neither this Offering Circular nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Offering Circular comes are required by the Issuer, the Guarantor, the Company and the Joint Lead Managers to inform themselves about and to observe any such restrictions.
Each prospective purchaser of the Bonds must comply with all applicable laws and regulations in force in any jurisdiction in which it purchases, offers or sells the Bonds or possesses or distributes this Offering Circular and must obtain any consent, approval or permission required under any regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers or sales, and none of the Issuer, the Guarantor, the Company and the Joint Lead Managers shall have any responsibility therefor.
The Bonds have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this Offering Circular. Any representation to the contrary is a criminal offence. These securities are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws or exemption therefrom. Investors should be aware that they may be required to bear financial risks of this investment for an indefinite period of time.
No representation or warranty, express or implied, is made by the Joint Lead Managers, the Trustee or the Agents or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates as to the accuracy or completeness of the information set forth herein and investors should not rely on anything contained in this Offering Circular as a promise or representation by any of the Joint Lead Managers, the Trustee or the Agents or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates. None of the Joint Lead Managers, the Trustee, the Agents and their respective affiliates, advisers, directors, employees, officers, agents and representatives or any person who controls any of them or their respective affiliates have independently verified the information contained herein (financial, legal or otherwise) and, to the fullest extent permitted by law, assume no responsibility for the contents, accuracy or completeness of any such information or for any other statement, made or purported to be made by the Joint Lead Managers, the Trustee or the Agents or on their behalf in connection with the Issuer or the issue and offering of the Bonds. Each of the Joint Lead Managers, the Trustee, the
iii Agents and their respective affiliates, advisers, directors, employees, officers, agents and representatives and any person who controls any of them or their respective affiliates accordingly disclaims all and any liability, whether arising in tort or contract or otherwise, which they might otherwise have in respect of this Offering Circular or any such statement.
Each person receiving this Offering Circular acknowledges that: (a) such person has not relied on any of the Joint Lead Managers, the Trustee or the Agents or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates in connection with any investigation of the accuracy or completeness of the information set forth herein or any other information supplied in connection with the offering of the Bonds or any investment decision; and (b) no person has been authorised to give any information or to make any representation concerning the Issuer, the Guarantor, the Company and their respective affiliates, the Group, the Bonds, the Guarantee, the Keepwell and Liquidity Support Deed or the Deed of Equity Interest Purchase Undertaking (other than as contained herein) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Issuer, the Guarantor, the Company, any of the Joint Lead Managers, the Trustee or the Agents.
Neither this Offering Circular nor any other information supplied in connection with the offering of the Bonds (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the Issuer, the Guarantor, the Company, any of the Joint Lead Managers, the Trustee or the Agents or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates that any recipient of this Offering Circular, or any other information supplied in connection with the offering of the Bonds, should purchase the Bonds. Admission to trading on the Euro MTF Market and listing on the Official List is not to be taken as an indication of the merits of the Issuer, the Guarantor, the Company, the Group, the Bonds or the Guarantee. In making an investment decision, investors must rely on their own independent examination of the Issuer, the Guarantor, the Company, the Group, the Bonds, the Guarantee, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and the terms of the offering, including the merits and risks involved.
None of the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee, the Agents or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates are making any representation to investors regarding the legality of an investment in the Bonds by them under any legal, investment or similar laws or regulations. Prospective investors should not construe anything in this Offering Circular as legal, business or tax advice. Each prospective investor should determine for itself the relevance of the information contained in this Offering Circular and consult its own legal, business and tax advisors as needed to make its investment decision and determine whether it is legally able to purchase the Bonds under applicable laws or regulations. In making an investment decision, investors must rely on their own examination of the Issuer, the Guarantor, the Company, the Group and the terms of the offering, including the merits and risks involved. See “Risk Factors” for a discussion of certain factors to be considered in connection with an investment in the Bonds.
This Offering Circular has been prepared by the Issuer, the Guarantor and the Company solely for use in connection with the proposed offering of the Bonds. The Issuer, the Guarantor and the Company reserve the right to withdraw the offering of the Bonds at any time. The Issuer, the Guarantor, the Company and the Joint Lead Managers also reserve the right to reject any offer to purchase, in whole or in part, for any reason, or to sell less than all of the Bonds offered hereby. You should read this Offering Circular before making a decision whether to purchase the Bonds.
The contents of this Offering Circular have not been reviewed by any regulatory authority in any jurisdiction. You are advised to exercise caution in relation to the offering of the Bonds. If you are in any doubt about any of the contents of this Offering Circular, you should obtain independent professional advice.
iv MiFID II product governance / Professional investors and ECPs only target market — Solely for the purposes of the manufacturer’s product approval process, the target market assessment in respect of the Bonds has led to the conclusion that: (i) the target market for the Bonds is eligible counterparties and professional clients only, each as defined in Directive 2014/65/EU (as amended, “MiFID II”); and (ii) all channels for distribution of the Bonds to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Bonds (a “distributor”) should take into consideration the manufacturer’s target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Bonds (by either adopting or refining the manufacturer’s target market assessment) and determining appropriate distribution channels.
PRIIPs REGULATION / PROHIBITION OF SALES TO EEA RETAIL INVESTORS — The Bonds are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; (ii) a customer within the meaning of Directive 2002/92/EC (“IMD”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Directive 2003/71/EC (as amended, the “Prospectus Directive”). Consequently no key information document required by Regulation (EU) No 1286/2014 (the “PRIIPs Regulation”) for offering or selling the Bonds or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Bonds or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation.
v CERTAIN DEFINITIONS, CONVENTIONS AND CURRENCY PRESENTATION
This Offering Circular has been prepared using a number of conventions, which investors should consider when reading the information contained herein.
This Offering Circular summarises certain documents and other information, and investors should refer to them for a more complete understanding of what is discussed in those documents. In making an investment decision, each investor must rely on its own examination of the Issuer, the Guarantor, the Company, the Group and the terms of the offering and the Bonds, including the merits and risks involved.
In this Offering Circular, all references to “U.S.$”, “USD”, “U.S. cents” or “U.S.¢” and “U.S. dollars” are to United States dollars, the lawful currency of the United States; all references to “Euros” and “€” are to Euros, the lawful currency of each member state of the European Union that adopts or has adopted the Euro as its lawful currency; all references to “HK$”, “Hong Kong dollars” and “HK dollars” are to Hong Kong dollars, the lawful currency of Hong Kong (as defined below); and all references to “RMB”, “Renminbi” or “CNY” are to Renminbi, the lawful currency of the People’s Republic of China.
This Offering Circular contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless indicated otherwise, all translations from Renminbi into U.S. dollars in this Offering Circular were made at the rate of RMB6.6533 to U.S.$1.00, based on the noon buying rate as set forth in the H.10 statistical release of the U.S. Federal Reserve Board (the “Noon Buying Rate”) on 29 September 2017. No representation is made that the U.S. dollars, Euros, HK dollars or Renminbi amounts referred to in this Offering Circular could have been or could be converted into Renminbi, U.S. dollars, Euros or HK dollars, as the case may be, at any particular rate or at all. For further information relating to exchange rates, see “Exchange Rate Information”.
References to “PRC” and “China” are to the People’s Republic of China and, for the purposes of this Offering Circular, except where the context otherwise requires, do not include Hong Kong Special Administrative Region of the PRC (“Hong Kong”), the Macau Special Administrative Region of the PRC (“Macau”) and Taiwan. “PRC government”orthe“State” means the central government of the PRC, including all political subdivisions (including provincial, municipal and other regional or local governmental entities) and instrumentalities thereof, or, where the context requires, any of them. References to the “United States” and “U.S.” are to the United States of America.
In this Offering Circular, where information has been presented in thousands or millions of units, amounts may have been rounded up or down. Accordingly, totals of columns or rows of numbers in tables may not be equal to the apparent total of the individual items and actual numbers may differ from those contained herein due to rounding.
The English names of the PRC nationals, entities, departments, facilities, laws, regulations, certificates, titles and the like are translations of their Chinese names and are included for identification purpose only. In the event of any inconsistency, the Chinese name prevails.
vi PRESENTATION OF FINANCIAL INFORMATION
The summary consolidated financial information of the Company as at and for the years ended 31 December 2014, 2015 and 2016, is derived from the audited consolidated financial statements of the Company as at and for the three years ended 31 December 2016 (the “Company’s Audited Financial Statements”), which are included elsewhere in this Offering Circular. The Company’s Audited Financial Statements have been audited by CAC CPA Limited Liability Partnership (“CAC”) and were prepared in accordance with the generally accepted accounting principles in the People’s Republic of China (“PRC GAAP”).
The summary consolidated financial information of the Company as at and for the nine months ended 30 September 2016 and 2017, is derived from the unaudited but reviewed consolidated interim financial statements of the Company as at and for the nine months ended 30 September 2017 (the “Company’s Reviewed Financial Statements”, together with the Company’s Audited Financial Statements, the “Company’s Financial Statements”), which are included elsewhere in this Offering Circular. The Company’s Reviewed Financial Statements have been reviewed but not audited by Peking Certified Public Accountants (“Peking CPA”) and were prepared in accordance with PRC GAAP.
The summary financial information of the Guarantor as at 31 December 2015 and for the period from 11 September 2015 (date of its incorporation) to 31 December 2015 and as at and for the year ended 31 December 2016 is derived from the audited financial statements of the Guarantor as at and for the year ended 31 December 2016 (the “Guarantor’s Audited Financial Statements”), which have been audited by Richful CPA Limited (“Richful”) and are included elsewhere in this Offering Circular. The summary financial information of the Guarantor as at and for the nine months ended 30 September 2016 and 2017 is derived from the unaudited but reviewed financial statements of the Guarantor as at and for the nine months ended 30 September 2017 (the “Guarantor’s Reviewed Financial Statements”, together with the Guarantor’s Audited Financial Statements, the “Guarantor’s Financial Statements”), which have been reviewed but not audited by Richful and are included elsewhere in this Offering Circular. The Guarantor’s Financial Statements were prepared in accordance with Hong Kong Financial Reporting Standard (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).
vii FORWARD-LOOKING STATEMENTS
The Issuer, the Guarantor and the Company have made certain forward-looking statements in this Offering Circular regarding, among other things, the Group’s financial conditions, future expansion plans and business strategy. These forward-looking statements are based on the Group’s current expectations about future events. Although the Issuer, the Guarantor and the Company believe that these expectations and projections are reasonable, such forward-looking statements are inherently subject to risks, uncertainties and assumptions, including, among other things:
• the Group’s strategies, plans, objectives and goals and its ability to implement such strategies and achieve its plans, objectives and goals;
• future developments, trends and conditions in the industry and markets in which the Group operates;
• the Group’s business prospects and capital expenditure plans;
• the actions and developments of the Group’s competitors;
• the Group’s financial condition and performance;
• the availability and costs of various forms of financing;
• various business opportunities that the Group may pursue;
• any changes in the laws, rules and regulations of the central and local governments in the PRC and other relevant jurisdictions and the rules, regulations and policies of the relevant governmental authorities relating to all aspects of the Group’s business;
• general political and economic conditions, including those related to the PRC;
• changes or volatility in interest rates, foreign exchange rates, equity prices or other rates or prices, including those pertaining to the PRC and the industry and markets in which the Group operates;
• macroeconomic measures taken by the PRC government (and in other relevant jurisdictions) to manage economic growth; and
• the Group’s ability to identify factors other than those discussed under “Risk Factors” and elsewhere in this Offering Circular.
The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan” and similar expressions are intended to identify a number of these forward-looking statements. The Issuer, the Guarantor and the Company have no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Offering Circular might not occur and the Issuer’s, the Guarantor’s, the Company’s or the Group’s actual results could differ materially from those anticipated in these forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on these forward-looking statements.
All forward-looking statements contained in this Offering Circular are qualified by reference to the cautionary statements set forth in this section.
These forward-looking statements speak only as at the date of this Offering Circular. The Issuer, the Guarantor and the Company expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in their expectations with regard thereto or any change of events, conditions or circumstances, on which any such statement was based.
viii TABLE OF CONTENTS
Page
IMPORTANT NOTICE ...... i
CERTAIN DEFINITIONS, CONVENTIONS AND CURRENCY PRESENTATION ...... vi
PRESENTATION OF FINANCIAL INFORMATION ...... vii
FORWARD-LOOKING STATEMENTS ...... viii
SUMMARY ...... 1
THE OFFERING ...... 5
SUMMARY FINANCIAL INFORMATION OF THE COMPANY ...... 9
SUMMARY FINANCIAL INFORMATION OF THE GUARANTOR...... 13
RISK FACTORS ...... 15
TERMS AND CONDITIONS OF THE BONDS ...... 44
DESCRIPTION OF THE KEEPWELL AND LIQUIDITY SUPPORT DEED ...... 65
DESCRIPTION OF THE DEED OF EQUITY INTEREST PURCHASE UNDERTAKING .... 71
SUMMARY OF PROVISIONS RELATING TO THE BONDS IN GLOBAL FORM ...... 75
USE OF PROCEEDS...... 78
GREEN BOND FRAMEWORK ...... 79
CAPITALISATION AND INDEBTEDNESS ...... 84
DESCRIPTION OF THE ISSUER ...... 86
DESCRIPTION OF THE GUARANTOR ...... 88
DESCRIPTION OF THE GROUP ...... 89
DIRECTORS AND SENIOR MANAGEMENT ...... 115
EXCHANGE RATE INFORMATION ...... 118
PRC REGULATIONS ...... 120
TAXATION ...... 125
SUBSCRIPTION AND SALE ...... 128
DESCRIPTION OF CERTAIN MATERIAL DIFFERENCES BETWEEN PRC GAAP AND IFRS ...... 133
GENERAL INFORMATION...... 135
INDEX TO THE FINANCIAL STATEMENTS ...... F-1
ix SUMMARY
The summary below is only intended to provide a limited overview of information described in more detail elsewhere in this Offering Circular. As it is a summary, it does not contain all of the information that may be important to investors in deciding to invest in the Bonds and terms defined elsewhere in this Offering Circular shall have the same meanings when used in this summary. Prospective investors should therefore read this Offering Circular in its entirety.
OVERVIEW
The Group is the sole investment and financing platform for the rail transit system in Tianjin (including metro, light rail and railway projects). The Group is also responsible for the investment, construction, operation, management and maintenance of metro and light rail in Tianjin’s central district, the integrated development of the land and property along the rail transit lines, as well as investment in railway projects on behalf of the Tianjin Municipal Government. As at 30 September 2017, the Group operated the five interconnected lines in operation of Tianjin metro and light rail system, namely Line 1, Line 2, Line 3, Line 6 (Phase 1, North Phase) and Jin-Bin Light Rail Line 9, with an aggregate mileage of 167.4 kilometres and 113 stations. As at the same date, the Group had five metro and light rail lines in Tianjin under construction, namely Line 1 (East Extension), Line 4 (South Phase), Line 5, Line 6 (Phase 1, South Phase) and Line 10 (Phase 1), with an aggregate mileage of 105.6 kilometres, and another five metro and light rail lines in the Tianjin area in the planning stage, with an aggregate mileage of 110.1 kilometres. As at 30 September 2017, the Group had invested in seven railway lines currently in operation with an aggregate mileage of 1,913.1 kilometres and three railway lines currently under construction with an aggregate mileage of 371.5 kilometres. The Group also operates the Tianjin Railway Station and Tianjin West Railway Station, which connect the Beijing-Tianjin Intercity Railway, the Beijing-Shanghai High-Speed Railway, the Underground Line Between Tianjin West Railway Station and Tianjin Railway Station and the Tianjin-Qinhuangdao High-Speed Railway. Since its establishment, the Group benefited from the rapid growth of Tianjin’s rail transit infrastructure development and has maintained a strong growth momentum. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2017, the total mileage in operation of the Tianjin rail transit system was approximately 66.2 million vehicles kilometres, 62.0 million vehicles kilometres, 66.8 million vehicles kilometres and 62.7 million vehicles kilometres, respectively; and the annual footfall of the metro and light rail lines of the Tianjin rail transit system amounted to 299.2 million, 284.7 million, 307.8 million and 258.3 million, respectively. As of the date of this Offering Circular, the Group has a registered capital of RMB40.3 billion.
For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2017, the Group’s total operating revenue was approximately RMB2,419.0 million, RMB2,379.3 million, RMB2,248.9 million, RMB1,062.6 million, respectively and the Group’s net profit was approximately RMB405.9 million, RMB335.1 million, RMB441.0 million and RMB176.1 million, respectively. As of 30 September 2017, the Group had net assets of approximately RMB125.8 billion and total assets of approximately RMB265.4 billion.
1 The table below sets forth the Group’s operating revenue (or investment income) by business segments for the periods indicated:
For the Nine Months ended 30 For the Year ended 31 December September 2014 2015 2016 2016 2017 %of %of %of %of %of total total total total total operating operating operating operating operating Amount revenue Amount revenue Amount revenue Amount revenue Amount revenue (RMB in millions, except percentages) Business segment Infrastructure construction and investment(1) ..... 51.1 — 76.4 — 27.2 — 20.8 — 170.5 —
Operation management .... 669.0 27.7 620.0 26.1 636.4 28.3 451.8 26.9 511.2 48.1 Resources development . . . 331.2 13.7 332.2 14.0 284.7 12.7 299.9 17.9 164.8 15.5 Engineering construction . . 1,337.6 55.3 1,354.9 56.9 1,206.0 53.6 892.5 53.2 330.0 31.1 Other businesses ...... 81.2 3.4 72.3 3.0 121.8 5.4 33.2 2.0 56.6 5.3
Total operating revenue(2) . 2,419.0 100.0 2,379.3 100.0 2,248.9 100.0 1,677.4 100.0 1,062.6 100.0
Notes:
(1) The Group does not generate any operating revenue from its infrastructure construction and investment segment; the accompanying figures set forth the Group’s investment income derived from its infrastructure construction and investment operations.
(2) Total operating revenue includes operating revenue derived from operation management, resources development, engineering construction and other businesses.
• Infrastructure construction and investment: Infrastructure construction and investment is the Group’s core business. The Group is the sole investment and financing platform for the rail transit system in Tianjin and owns equity interests in the infrastructure constructions the Group invests in after completion of constructions. The Group invested in the construction of five metro and light rail lines in operation and five metro and light rail lines under construction in Tianjin. The Group also made infrastructure investment plans for the other five metro and light rail lines in the planning stage. In addition, the Group invested in ten railway construction projects, including the Beijing-Tianjin Intercity Railway, the Beijing-Shanghai High-Speed Railway, the Tianjin-Qinhuangdao High-Speed Railway, the Tianjin West Station-Tianjin Station Underground Railway, the Beijing-Tianjin Intercity Railway (Extension Line), the Tianjin-Baoding Railway, the Beijing-Shanghai High-Speed Railway — Tianjin West Station — Interconnection Line, the Southwestern Ring Line, the Beijing-Tianjin Binhai Intercity Railway and the Beijing-Tangshan Intercity Railway. Moreover, the Group engages in the infrastructure investment of other infrastructure projects, such as reconstruction of rail transit stations and roads. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group’s capital investment in the infrastructure construction and investment business amounted to RMB13.8 billion, RMB29.0 billion, RMB18.8 billion, RMB10.8 billion and RMB21.4 billion, respectively; and the Group’s investment income derived from the infrastructure construction and investment business was RMB51.1 million, RMB76.4 million, RMB27.2 million, RMB20.8 million and RMB170.5 million, respectively, for the same periods. For the years ended 31 December 2014 and 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group received from the government as capital investment for its infrastructure construction and investment business amounted to RMB8.8 billion, RMB10.3 billion, RMB15.0 billion, RMB9.7 billion and RMB7.0 billion, respectively.
2 • Operation management: The Group operates and manages the metro and light rail lines currently in operation. In addition, the Group established a centralised operation centre to monitor train operations on a real-time basis, dispatch trains, respond to emergencies and sell tickets for all of the metro and light rail lines in operation. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, operating revenue from the Group’s operation management business was RMB669.0 million, RMB620.0 million, RMB636.4 million, RMB451.8 million and RMB511.2 million, respectively, accounting for 27.7 per cent., 26.1 per cent., 28.3 per cent., 26.9 per cent. and 48.1 per cent., respectively, of the Group’s total operating revenue. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the government subsidies allocated to the Group for operation of the metro and light rail lines amounted to RMB478.7 million, RMB688.9 million, RMB732.5 million, RMB506.8 million and RMB474.5 million, respectively.
• Resources development: The Group engages in the integrated development of land and properties along the rail transit lines. Leveraging the experience in property development that the Group has accumulated, the Group focuses on the integrated development of rail transit lines to create synergies among various assets of the Group’s and maximise the return on investment. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, operating revenue from the resources development business amounted to RMB331.2 million, RMB332.2 million, RMB284.7 million, RMB299.9 million and RMB164.8 million, respectively, accounting for 13.7 per cent., 14.0 per cent., 12.7 per cent., 17.9 per cent. and 15.5 per cent., respectively, of the Group’s total operating revenue for the same periods.
• Engineering construction: The Group engages in construction of major national and municipal projects, such as rail transit construction, civil engineering projects and architecture engineering projects. Key projects that the Group undertook include removal project of Dagang Railway, Southwest Ring Line expansion and reconstruction project, overpass project and long term logistic project of the third contract section of the Central Avenue in the Binhai New Area, phase II of the second division of the Tanghan Road expansion and reconstruction project, Tianjin Central Fishing Port project, Suizhong Power Station project, Hebei University of Technology project and the Binhai New Area West Outer Ring Expressway project. See “— Business — Resources Development and Management — Engineering Construction” of this section. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, operating revenue from the engineering construction business amounted to RMB1,337.6 million, RMB1,354.9 million, RMB1,206.0 million, RMB892.5 million and RMB330.0 million, respectively, accounting for 55.3 per cent., 56.9 per cent., 53.6 per cent., 53.2 per cent. and 31.1 per cent., respectively, of the Group’s total operating revenue for the same periods.
COMPETITIVE STRENGTHS
The Group believes its historical success and future prospects are primarily attributable to its following competitive strengths:
• Strong economic growth potentials of Tianjin
• Strong support from the Tianjin Government
• Well positioned to capitalise on the development of Tianjin’s urban mass transit industry
• Near monopoly in the Tianjin rail transit industry
• Diversified businesses create synergies and reduce operational risks
• Exceptional research and development capabilities and market recognition
3 • Strong financial profile and multiple sources of financing
• Experienced management team
BUSINESS STRATEGIES
The Group seeks to achieve its goals through the following strategies:
• Expand and improve connectivity of the rail transit network
• Further develop the Group’s infrastructure construction and investment, operation management and engineering development segments
• Further expand the Group’s resources development business along the rail transit lines
• Deepen technical expertise and enhance technology support platform
• Further explore innovative financing channels and expand the financing sources of the Group
• Attract and retain talented personnel through systematic training programmes and competitive remuneration packages
4 THE OFFERING
The following summary contains some basic information about the Bonds and is qualified in its entirety by the remainder of this Offering Circular. Some of the terms described below are subject to important limitations and exceptions. Words and expressions defined in “Terms and Conditions of the Bonds” and “Summary of Provisions Relating to the Bonds in Global Form” shall have the same meanings in this summary. For a more complete description of the terms of the Bonds, see “Terms and Conditions of the Bonds” in this Offering Circular.
Issuer ...... Rail Transit International Development Company Limited (軌 道國際發展有限公司).
Guarantor...... Tianjin Rail Transit Group (Hong Kong) Co., Limited (天津軌道交通集團(香港)有限公司).
Company...... Tianjin Rail Transit Group Co., Ltd. (天津軌道交通集團有限 公司).
Status of the Guarantee ...... The Guarantor has unconditionally and irrevocably guaranteed the due payment of all sums expressed to be payable by the Issuer under the Bonds and the Trust Deed. The Guarantor’s obligations in respect of the Bonds and the Trust Deed are contained in the Trust Deed (and any supplement thereto). The obligations of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 3(a) of the Terms and Conditions of the Bonds, at all times rank at least equally with all the Issuer’s other present and future unsecured and unsubordinated obligations.
Issue ...... €400,000,000 aggregate principal amount of 1.625 per cent. Guaranteed Bonds due 2022.
Issue Date ...... 22March 2018.
Issue Price ...... 99.443 per cent.
Form and Denomination ...... The Bonds will be issued in registered form in the denomination of €100,000 and integral multiples of €1,000 in excess thereof.
U.S. Selling Restriction ...... Regulation S Category 1.
Interest and Interest Payment Dates ...... The Bonds will bear interest from and including 22 March 2018 at the rate of 1.625 per cent. per annum, payable annually in arrear on 22 June in each year, except that the first interest payment date shall be on 22 June 2019 and shall be in respect of the period from and including 22 March 2018 to but excluding 22 June 2019.
Maturity Date...... 22June 2022.
5 Status of the Bonds ...... The Bonds constitute direct, unsubordinated, unconditional and (subject to Condition 3(a) of the Terms and Conditions of the Bonds) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 3(a) of the Terms and Conditions of the Bonds, at all times rank at least equally with all the Issuer’s other present and future unsecured and unsubordinated obligations.
Negative Pledge and Other Covenants ...... TheTerms and Conditions of the Bonds contain a negative pledge provision and certain other covenants to be performed by, as the case may be, the Issuer, the Guarantor, the Company and their respective Subsidiaries (as applicable). The negative pledge provision together with the other covenants are set out in Condition 4 of the Terms and Conditions of the Bonds.
Events of Default ...... The Bonds contain certain events of default provisions as further described in Condition 9 of the Terms and Conditions of the Bonds.
Taxation ...... Allpayments of principal, premium (if any) and interest by or on behalf of the Issuer or the Guarantor in respect of the Bonds or under the Guarantee shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within the British Virgin Islands, Hong Kong or the PRC or, in any such case, any political subdivision or authority therein or thereof having power to tax, unless such withholding or deduction is required by law, as further described in Condition 8 of the Terms and Conditions of the Bonds. In such event, the Issuer or, as the case may be, the Guarantor shall, subject to the limited exceptions specified in the Terms and Conditions of the Bonds, pay such additional amounts as will result in receipt by the holders of the Bonds of such amounts as would have been received by them had no such withholding or deduction been required.
Final Redemption ...... Unless previously redeemed or purchased and cancelled, the Bonds will be redeemed at their principal amount on the Maturity Date.
Redemption for Tax Reasons . . . The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at their principal amount, together with interest accrued to but excluding the date fixed for redemption, at any time in the event of certain changes affecting taxes of the British Virgin Islands, Hong Kong or the PRC, as further described in Condition 6(b) of the Terms and Conditions of the Bonds.
6 Redemption for Change of Control ...... Atanytime following the occurrence of a Change of Control, the holder of any Bond will have the right, at such holder’s option, to require the Issuer to redeem all, but not some only, of that holder’s Bonds at 101 per cent. of their principal amount, together with accrued interest up to, but excluding, the Change of Control Put Date, as further described in Condition 6(c) of the Terms and Conditions of the Bonds.
Further Issues ...... TheIssuer may from time to time without the consent of the Bondholders create and issue further securities having the same terms and conditions as the Bonds in all respects (or in all respects except for the issue date, the first payment of interest on them) and the timing for complying with the requirements set out in these Conditions in relation to the Post-Issuance Reporting Filing) and so that such further issue shall be consolidated and form a single series with the Bonds, as further described in Condition 15 of the Terms and Conditions of the Bonds.
Clearing Systems ...... TheBonds will be represented initially by beneficial interests in a Global Certificate, which will be registered in the name of a nominee of, and deposited on the Issue Date with, a common depositary for Euroclear and Clearstream. Beneficial interests in the Global Certificate will be shown on and transfers thereof will be effected only through records maintained by Euroclear and Clearstream. Except as described herein, definitive certificates for the Bonds will not be issued in exchange for beneficial interests in such Global Certificate (see “Summary of Provisions Relating to the Bonds in Global Form”).
Governing Law...... English law.
Trustee ...... TheHongkong and Shanghai Banking Corporation Limited.
Principal Paying Agent, Registrar and Transfer Agent . The Hongkong and Shanghai Banking Corporation Limited.
Ratings ...... TheBonds are expected to be rated “Baa1” by Moody’s and “A” by Fitch. Such rating of the Bonds does not constitute a recommendation to buy, sell or hold the Bonds and may be subject to revision or withdrawal at any time by Moody’s and/or Fitch.
Listing...... Application has been made to the LuxSE for the listing of the Bonds on the Official List and the admission to trading of the Bonds on the Euro MTF Market.
Use of Proceeds ...... Seethesection entitled “Use of Proceeds” and “Green Bond Framework”.
7 Keepwell and Liquidity Support Deed ...... TheIssuer, the Guarantor, the Company and the Trustee will enter into a keepwell and liquidity support deed as further described in “Description of the Keepwell and Liquidity Support Deed”.
Deed of Equity Interest Purchase Undertaking...... TheIssuer, the Guarantor, the Company and the Trustee will enter into a deed of equity interest purchase undertaking as further described in “Description of the Deed of Equity Interest Purchase Undertaking”.
ISIN of the Bonds...... XS1679505070.
Common Code of the Bonds.... 167950507.
Legal Entity Identifier (the “LEI”) of the Issuer ...... 529900E4SV3AFQVQFD57.
8 SUMMARY FINANCIAL INFORMATION OF THE COMPANY
The following tables set forth in the summary consolidated financial information of the Company as at and for the periods indicated.
The summary consolidated financial information of the Company as at and for the years ended 31 December 2014, 2015 and 2016, as set forth below is derived from the Company’s Audited Financial Statements, which have been audited by CAC and which are included elsewhere in this Offering Circular. The summary consolidated financial information of the Company as at and for the nine months ended 30 September 2016 and 2017, as set forth below is derived from the Company’s Reviewed Financial Statements, which have been reviewed but not audited by Peking CPA and which are included elsewhere in this Offering Circular. The summary consolidated financial information as set forth below should be read in conjunction with, and is qualified in its entirety by reference to, such audited consolidated financial statements of the Company and, including the notes thereto which are included elsewhere in this Offering Circular.
The Company’s Reviewed Financial Statements as at and for the nine months ended 30 September 2017 have not been audited. Information contained in or derived from these financial statements may change if an audit had been conducted. Such information may not provide the same quality as audited information, and caution must be exercised when using such information to evaluate the Company’s financial condition and results of operations. Interim financial results do not indicate results expected for the year ending 31 December 2017.
The Company’s Financial Statements have been prepared and presented in accordance with PRC GAAP. PRC GAAP differs in certain material respects from IFRS. For a summary of the material differences, see “Summary of Certain Material Differences Between PRC GAAP and IFRS”. Potential investors should read the following data together with the more detailed information contained in the Company’s Financial Statements, including the notes thereto. The following data is qualified in its entirety by reference to all of that information.
9 SUMMARY CONSOLIDATED INCOME STATEMENT OF THE COMPANY
For the Nine Months ended For the Year ended 31 December 30 September 2014 2015 2016 2016 2017 (Audited) (Audited) (Audited) (Unaudited) (Unaudited) (RMB in millions) Total operating revenue...... 2,419.0 2,379.3 2,248.9 1,677.4 1,062.6 Including: Operating revenue ...... 2,419.0 2,379.3 2,248.9 1,677.4 1,062.6 Total operating cost ...... 2,986.2 3,442.3 3,579.5 2,633.4 2,000.0 Including: Operating cost ...... 2,391.9 2,626.4 2,731.2 2,078.0 1,484.7 Business tax and surcharge ...... 83.2 117.3 74.5 62.5 33.0 Sales expenses...... 19.7 27.3 26.2 20.0 20.7 Administrative expenses ...... 475.8 546.4 467.3 319.0 305.4 Financial expenses ...... 9.8 119.9 258.9 153.9 152.5 Asset impairment losses ...... 5.8 4.9 21.4 (0.0) 3.6 Add: Gains from change in fair value . 149.5 94.7 87.5 — — Investment income ...... 58.1 83.7 42.9 30.9 202.1 Including: Investment income from joint ventures and associates ..... 54.9 52.1 6.3 — — Other revenues(1) ...... — — — — 894.5 Operational profit ...... (359.6) (884.6) (1,200.1) (925.2) 159.2 Add: Non-operating revenue ...... 870.9 1,334.6 1,679.4 664.9 18.3 Including: Gains from disposal of non-current assets ...... 0.4 0.2 0.0 — — Government grants and subsidies . . 861.8 1,124.4 1,678.5 — — Less: Non-operating expenses...... 26.7 5.8 10.5 7.8 1.3 Including: Losses from disposal of non-current assets ...... 20.3 0.2 0.2 — — Profit before tax ...... 484.6 444.2 468.7 (268.0) 176.2 Less: Income tax expenses ...... 78.6 109.1 27.7 3.3 0.1 Net profit...... 405.9 335.1 441.0 (271.4) 176.1 Net profit attributable to the owners of the parent company ...... 408.7 346.6 453.2 (260.0) 184.8 Net losses attributable to minority shareholders ...... (2.8) (11.5) (12.2) (11.4) (8.7) Other comprehensive income after tax . 1.2 0.3 0.0 — — Other comprehensive income that could not be reclassified into gains/losses. . . 1.2 0.3 0.0 — — Including: Other comprehensive income that could be reclassified into gains/losses under the equity method ...... 1.0 — — — — Fair value changes of available for sale financial assets ...... 0.2 0.3 0.0 — — Others...... — — — — — Total comprehensive income ...... 407.1 335.4 441.1 (271.4) 176.1 Total comprehensive income attributable to the owners of the parent company . . 409.5 346.9 453.3 (260.0) 184.8 Total comprehensive income attributable to minority shareholders ...... (2.4) (11.5) (12.2) (11.4) (8.7)
Note:
(1) Other revenues comprise of operating subsidies and funds provided by Tianjin Finance Bureau, Bureau of Public Utilities of Tianjin Economic-Technological Development Area and Finance Bureau of Binhai New Area. For details, please refer to F-308 of the notes to the financial statements attached hereto.
10 SUMMARY CONSOLIDATED BALANCE SHEET OF THE COMPANY
As at As at 31 December 30 September 2014 2015 2016 2017 (Audited) (Audited) (Audited) (Unaudited) (RMB in millions) Current assets Cash and cash equivalents ...... 5,869.9 10,927.3 10,031.0 15,448.0 Bills receivables ...... 13.7 1.0 1.6 — Accounts receivables ...... 3,247.1 3,243.3 3,314.1 3,225.9 Prepayments...... 1,097.0 16,385.1 17,324.1 16,953.9 Interest receivable ...... 16.5 — — — Dividend receivable ...... — — 0.1 — Other account receivable ...... 13,552.1 11,802.3 11,864.5 11,946.6 Inventories...... 3,903.5 4,370.3 4,719.8 4,870.7 Non-current assets due within one year ...... — — — 77.0 Other current assets ...... — — 98.5 141.1 Total current assets ...... 27,699.8 46,729.3 47,353.9 52,663.3
Non-current assets Financial assets available for sale...... 10,779.1 19,201.0 19,997.2 19,997.5 Held-to-maturity investment ...... 170.0 160.0 154.0 — Long term receivable ...... 60.0 60.0 60.0 60.0 Long term equity investment...... 3,214.1 3,232.0 2,824.9 2,801.8 Investment property...... 3,959.0 4,053.8 4,141.4 4,165.1 Fixed assets ...... 11,340.9 11,299.3 11,237.0 11,235.0 Construction in progress ...... 132,492.2 145,867.4 163,092.7 173,740.6 Fixed asset disposal ...... 7.8 7.8 0.8 0.8 Intangible assets ...... 151.9 150.7 148.7 149.6 Goodwill ...... — — 0.0 0.0 Long term expenses to be amortized...... 373.2 485.3 387.6 342.5 Deferred income tax asset...... 26.0 25.4 35.3 42.4 Other non-current asset ...... — — 172.9 172.9 Total non-current assets ...... 162,574.0 184,542.6 202,252.6 212,708.3
Total assets...... 190,273.8 231,271.9 249,606.5 265,371.5
Current liabilities Short term borrowings...... 619.0 829.0 1,296.0 2,596.0 Bills payable ...... — — 5.0 — Accounts payable...... 3,066.8 2,819.7 4,300.1 3,916.2 Advance from customers ...... 2,764.2 3,973.3 4,179.4 4,392.1 Payroll payable ...... 48.9 54.1 59.5 38.4 Tax payable ...... 477.7 459.4 (31.5) (43.6) Interest payable...... 15.5 — 0.2 0.2 Other payable ...... 2,086.2 1,680.6 1,792.9 2,052.5 Non-current liabilities due within 1 year...... 7,817.9 8,333.9 14,569.0 16,197.3 Other current liabilities ...... 2,050.1 3,636.5 1,616.8 1,501.2 Total current liabilities ...... 18,946.4 21,786.4 27,787.4 30,650.3
Non-current liabilities Long term borrowings ...... 48,191.6 62,441.4 58,219.4 65,547.4 Bonds payable ...... 5,086.2 13,038.5 18,737.2 18,624.6 Long term payable ...... 16,331.7 17,993.9 12,476.2 11,244.9 Specific payable ...... 2,426.7 7,274.5 12,119.0 12,619.5 Estimated liabilities ...... 1.4 1.4 1.4 0.4 Deferred income ...... — — — 205.6 Deferred income tax liability...... 580.2 611.7 633.9 633.9 Total non-current liabilities ...... 72,617.9 101,361.4 102,187.0 108,876.3
Total liabilities ...... 91,564.2 123,147.9 129,974.4 139,526.6
11 As at As at 31 December 30 September 2014 2015 2016 2017 (Audited) (Audited) (Audited) (Unaudited) (RMB in millions) Owners’ equity Paid in capital ...... 40,000.0 40,000.0 40,000.0 40,264.6 Other equity instruments ...... — 3,497.8 5,113.8 5,113.8 Including: preference share...... — 3,497.8 5,113.8 5,113.8 Capital surplus ...... 55,543.8 61,288.7 70,844.3 76,774.3 Other comprehensive income...... 456.2 456.4 456.5 456.5 Special reserve ...... — — 5.8 11.2 Surplus reserve ...... 380.2 418.8 480.5 480.5 Undistributed profit ...... 1,210.1 1,370.2 1,651.2 1,672.9 Total owner’s equity attributable to the parent company ...... 97,590.2 107,032.0 118,552.2 124,773.8 Minority shareholders’ equity ...... 1,119.3 1,092.0 1,079.8 1,071.1 Total owners’ equity ...... 98,709.6 108,124.0 119,632.0 125,844.9
Total liabilities and owners’ equity...... 190,273.8 231,271.9 249,606.5 265,371.5
12 SUMMARY FINANCIAL INFORMATION OF THE GUARANTOR
The following tables set forth the summary financial information of the Guarantor as at and for the periods indicated.
The summary financial information of the Guarantor as at 31 December 2015 and for the period from 11 September 2015 (date of its incorporation) to 31 December 2015 and as at and for the year ended 31 December 2016, as set forth below is derived from the Guarantor’s Audited Financial Statements, which have been audited by Richful. The summary financial information of the Guarantor as at and for the nine months ended 30 September 2016 and 2017, as set forth below is derived from the Guarantor’s Reviewed Financial Statements, which have been reviewed but not audited by Richful. The summary financial information set forth below should be read in conjunction with, and is qualified in its entirety by reference to, such audited or reviewed financial statements of the Guarantor and, including the notes thereto which are included elsewhere in this Offering Circular.
The Guarantor’s Reviewed Financial Statements as at and for the nine months ended 30 September 2017 have not been audited. Information contained in or derived from these financial statements may change if an audit had been conducted. Such information may not provide the same quality as audited information, and caution must be exercised when using such information to evaluate the Guarantor’s financial condition and results of operations. Interim financial results do not indicate results expected for the year ending 31 December 2017.
The Guarantor’s Financial Statements have been prepared in accordance with HKFRS issued by HKICPA. For the Guarantor’s Financial Statements, there is no material difference between HKFRS and the International Financial Reporting Standards.
SUMMARY CONSOLIDATED INCOME STATEMENT OF THE GUARANTOR
For the Year ended For the Nine Months ended 31 December 30 September 2015 2016 2016 2017 (Audited) (Audited) (Unaudited) (Unaudited) (U.S.$ in thousands) Revenue ...... ———— Cost ...... ———— Gross profit ...... ———— Other income ...... 2.1 8,548.0 4,521.8 12,095.2 Administrative and operating expenses ...... (11.9) (37.8) (32.3) (67.3) Other expenses ...... — (7.1) — — Finance costs ...... — (9,577.7) (5,744.6) (11,519.1) Profit/(loss) before tax ...... (9.8) (1,074.7) (1,255.1) 508.7 Income tax expense ...... ————
Net profit/(loss) for the year/period ...... (9.8) (1,074.7) (1,255.1) 508.7
13 SUMMARY CONSOLIDATED BALANCE SHEET OF THE GUARANTOR
As at As at 31 December 30 September 2015 2016 2017 (Audited) (Audited) (Unaudited) (U.S.$ in thousands) Current assets Cash and cash equivalent ...... 5,832.7 10,020.4 11,219.8 Interest receivables ...... — 2,058.5 6,055.3 Deposit and prepayment...... 159.2 — — 5,991.9 12,078.9 17,275.1 Non-current assets Goodwill ...... — 13.3 8.9 Investment in associate ...... — 45,574.0 45,574.0 Loan to related parties ...... — 492,410.0 492,410.0 — 537,997.3 537,992.9 Total assets...... 5,991.9 550,076.2 555,268.0
Current liabilities Interest payables ...... — 1,703.1 5,109.4 Accruals ...... 1.7 19.2 — 1.7 1,722.3 5,109.4 Non-current liabilities Bond payables ...... — 493,438.3 494,738.7
Total liabilities ...... 1.7 495,160.7 499,848.1
Equity Share capital ...... 6,000.0 56,000.0 56,000.0 Accumulated losses ...... (9.8) (1,084.5) (580.1) 5,990.2 54,915.5 55,419.9
Total liabilities and equity ...... 5,991.9 550,076.2 555,268.0
14 RISK FACTORS
Prior to making an investment decision, prospective investors should carefully consider the following risk factors, along with the other matters set out in this Offering Circular. PRC and Hong Kong laws and regulations may differ from the laws and regulations in other countries. Additional risks not described below or not currently known to each of the Issuer, the Guarantor or the Company or that it currently deems immaterial may also adversely affect the Group’s business, financial condition or results of operations or the value of the Bonds. The Issuer, the Guarantor and the Company believe that the risk factors described below represent the principal risks inherent in investing in the Bonds, but the inability of the Issuer, the Guarantor and the Company to pay interest, principal or other amounts on or in connection with any Bonds may occur for reasons which may not be considered as significant risks by any of the Issuer, the Guarantor and the Company based on information currently available to it or which it may not currently be able to anticipate. All of these factors are contingencies which may or may not occur and none of the Issuer, the Guarantor or the Company is in a position to express a view on the likelihood of any such contingencies occurring.
Each of Issuer, the Guarantor or the Company does not represent that the statements below regarding the risk factors of holding any Bonds are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Offering Circular and reach their own views prior to making any investment decision.
This Offering Circular also contains forward-looking statements that involve risks and uncertainties. The Group’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the considerations described below and elsewhere in this Offering Circular.
Capitalised terms used but which are not defined in this section shall have the meanings given to them in the Terms and Conditions of the Bonds.
RISKS RELATING TO THE GROUP’S BUSINESS
The Group’s business, financial condition and results of operations are heavily dependent on the urban rail transit industry and urban development of Tianjin, and are subject to the level of economic activity in Tianjin
The Group’s investment, development, construction and maintenance of rail transit business is primarily focused on the urban rail transit industry in Tianjin, which involves different types of rail transportation, including metro, light rail and intercity railway. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, almost all of the Group’s total operating revenue was attributed to the Group’s operation management, resources development and engineering construction businesses in connection with urban rail transit and development projects.
The future growth of the urban rail transit industry in China depends on the continued planning and construction of major urban rail transit projects. As a key infrastructure component in urban development, urban rail transit projects in China receive funding largely from municipal government budgets. Thus, the Group’s business relies heavily on policies promulgated by the PRC Government and continuous urban rail transit investment by such local governments, in particular the Tianjin Government. The Group conducts its rail transit investment business on behalf of the Tianjin Government. Infrastructure investment by the PRC Government is subject to, among others, periodic variations due to national and regional economic policies and changes in the development of the PRC economy. In addition, governmental policies relating to regional development planning, economic development and social benefits, land resources, industry restructuring and environmental protection may affect investment and development policies in the PRC urban rail transit industry. Furthermore, urban rail transit projects often require large capital investment and implementation of such plans may
15 be limited by the capital available for investment by local governments. If there is any adverse change in the government budgets, public expenses and public policies in relation to the PRC urban rail transit industry, the Group’s business, financial position, results of operations and prospects may be materially and adversely affected.
The Group’s business and assets are highly concentrated in Tianjin. Accordingly, the Group’s business, financial condition and results of operations have been and will continue to be heavily dependent on the level of economic activity in and around Tianjin. Tianjin has undergone a prolonged period of rapid economic development and, in particular, Tianjin has been one of the fastest growing cities in the PRC in recent years. These developments have greatly benefited the Group and allowed it to grow at a rapid pace during this time. However, there can be no assurance that the level of economic activity in Tianjin will continue to grow at the pace that it has achieved in the past, or at all, and in the event of any unfavourable developments, the Group’s business, financial condition and results of operations may be adversely affected.
The growth of the Group’s infrastructure investment, construction and operation business depends, in part, on the government approval of the Group’s new rail transit projects, the implementation of those projects and other factors that the Group may not be able to control
The growth of the Group’s infrastructure investment, construction and operation business depends, in part, on whether the Group is able to obtain approval of its new rail transit projects from various relevant PRC governmental authorities and whether it can implement such new rail transit projects in a timely and cost-effective manner in order to expand capacity and thereby accommodate more passengers and further facilitate the growth of the Group’s other businesses, such as resource development along rail transit lines. The Group’s plans for new rail transit projects are subject to a number of uncertainties, including:
• whether, and on what terms, including the location, length, funding plan and construction time, new rail transit projects of the Group will be approved by the relevant PRC governmental authorities and, in particular, whether such terms will enable the Group to earn a commercial rate of return on its investment in new rail transit projects;
• whether there will be sufficient population in the catchment area for a new rail transit project and whether that catchment area is encouraged to use the mass transit rail system as a result of government planning of highways and bus routes; and
• whether the Group will be able to obtain adequate financing on acceptable terms or governmental funding to fund the required capital expenditure.
Although the Group is currently the sole investment and financing platform for the rail transit system in Tianjin, there can be no assurance that new rail transit projects will be awarded to the Group on commercially viable terms or at all. In addition, although the Group has significant experience in the investment and construction of rail transit projects and a track record in financing and completing projects, there can be no assurance that new rail transit projects undertaken by the Group will be completed on time and/or within budget. Further, due to the fact that most transportation infrastructure projects, including the Group’s rail transit projects, are funded by government agencies, these projects are sometimes subject to changes or postponement arising from factors such as changes in government budget or spending plan as well as changes in policy considerations.
Increases in the passenger flow will also be affected by macro-economic factors, such as population and employment growth and distribution and changes in demographics and economic conditions. In addition, increases in the passenger flow will be affected by the amount of road congestion and any expansion of the bus network. Furthermore, because of certain inherent capacity limitations and structural inflexibilities of mass transit railways, the Group may not be able to respond quickly to increases in demand. For example, the Group may not be able to change its routes to cater for new
16 passenger demand in areas in which it does not operate. New routes are limited by the planning of relevant PRC governmental authorities and such routes may not be built quickly enough or cater to demand in newly developed areas. All these risks may have a material adverse effect on the Group’s results of operations and financial position.
The Tianjin Government can exert significant influence on the Group, and could cause the Group to make decisions or modify the scope of its activities, or impose new obligations on the Group, that may not be in the Group’s best interest
The Company is a state-owned enterprise directly supervised by the Tianjin SASAC, a department of the Tianjin Government. Therefore, the Tianjin Government is in a position to significantly influence the Group’s major business decisions and strategies, including the scope of its activities, development and investment decisions and dividend policy. The Tianjin Government may use its ability to influence the Group’s business in a manner that may not be in the Group’s best interest.
The Tianjin Government may also change its policies, intentions, preferences, views, expectations, projections, forecasts and opinions, as a result of changes in the economic, political and social environments, and its projections of population and employment growths. Any amendment, modification or repeal could modify the existing regulatory regime and materially and adversely affect the Group’s financial condition and results of operations.
Revenues from the Group’s investment, construction and operation of rail transit business may be affected by factors beyond the Group’s control
The Group generates a substantial portion of revenues from its investment, construction and operation of its rail transit business. The investment, construction and operation of urban rail transits may be materially and adversely affected by many factors commonly associated with the construction and operation of infrastructure projects that are beyond the Group’s control, including shortages of equipment, materials or labour, work stoppages, labour disputes, weather interference, and unforeseen mechanical, technical, engineering, design, environmental or geological problems, any of which could give rise to delays or cost overruns.
Furthermore, the construction of most of the Group’s metro lines, light rail and intercity railway transits are or will be undertaken by third-party contractors. There can be no assurance that such contractors will be able to complete construction in a timely or cost-effective manner or that the Group will be able to adequately control or monitor the contractors to ensure the quality of such construction. Construction delays can result in the loss or delayed receipt of revenues, disputes with contractors and payment of damages and penalties by the Group under the relevant construction contracts, an increase in financing costs, or the failure to meet profit and earnings projections. In addition, the failure to complete the construction of the relevant projects according to specifications could result in reduced efficiency, higher operating costs and reduced or delayed earnings which, in turn, may have a material adverse effect on the Group’s results of operations and financial position.
The Group may incur losses due to business interruptions resulting from natural or man-made disasters, and the Group’s insurance may not be adequate to cover losses resulting from accidents or injuries that may occur
The Group’s business is subject to a number of risks and hazards generally, including adverse environmental conditions, industrial accidents, explosion, fires, unusual or unexpected geological conditions, ground or slope failures and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result in damage to project constructions and facilities, personal injury or death, environmental damage to the Group’s properties or properties of others, delays in development, monetary losses and possible legal liability. For example, part of Jin-Bin Light Rail Line 9, which is one of the Group’s urban rail transits in Tianjin, temporarily suspended operation due to the damages caused by an explosion which occurred at a warehouse owned by a logistics company in Binhai New District of Tianjin on 12 August 2015.
17 The Group maintains insurance policies that cover its fixed assets (including buildings and machinery) and its current assets against damage caused by, among other things, fire, explosions, thunderstorms, typhoons and landslides. There can be no assurance, however, that the Group’s insurance policies will provide adequate compensation for all potential losses. Accidents or natural disasters may also result in significant property damage, disruption to the Group’s operations and personal injuries, and its insurance coverage may be inadequate to cover such losses. In the case of an uninsured loss or a loss in excess of insured limits, the Group could suffer reputational damage or lose all or a portion of its operation capacity as well as future revenue contribution from the relevant facilities.
The Group receives payments in relation to construction projects in stages, and any delay or default in payments from its customers may affect the Group’s working capital and cash flow
A significant portion of the Group’s business, including its investment and construction operations and integrated development, is capital intensive. The Group requires significant capital to fund its construction and maintenance activities, to build, maintain and operate its operation facilities and to purchase necessary equipment. Most of the Group’s construction projects usually take years to complete and therefore, contracts with respect to the construction operations of the Group generally require its customers, including the Tianjin Government, to make payments in stages upon the Group achieving project milestones as agreed between the parties. However, the Group incurs costs associated with a project, primarily materials, equipment and labour costs, on an on-going basis, at the beginning of the project or before achieving the relevant project milestones. In the event that the customers do not make payments to the Group pursuant to the payment terms in the relevant contracts, the Group may bear the risk of not being able to recover the relevant costs and expenditures incurred by it. Further, there may be mismatch between the aging profile of the Group’s accounts payable and the aging profile of the Group’s accounts receivable. Should the Group fail to properly manage such mismatch or if such mismatch increases significantly, the availability of the Group’s working capital may be adversely affected.
The Tianjin Government and its affiliated entities are the Group’s core client base. The Group’s ability to receive payments may be materially and adversely affected by changes or delays in the project due to changes in municipal planning, financial policies or cash or other constraints of the Tianjin Government. As at 31 December 2014, 2015 and 2016 and 30 September 2017, the Group’s total accounts receivables were RMB3,247.1 million, RMB3,243.3 million, RMB3,314.1 million and RMB3,225.9 million, respectively. The accounts receivables from the five largest debtors as at 30 September 2017 represented 84.9 per cent. of total trade receivables, while 69.1 per cent. of the total receivables were due from the largest debtor, Tianjin Urban & Rural Construction Commission (天津 市城鄉建設委員會).
If a client delays payment, or fails to release the Group’s retention monies or guarantee deposits as scheduled, the Group’s cash flow and working capital may be materially and adversely affected. Even where the Group is able to recover any losses incurred pursuant to the terms of the contract, the process of such recovery is usually time-consuming and requires financial and other resources to settle the disputes. Furthermore, there can be no assurance that any outcome will be in the Group’s favour or that any dispute will be resolved in a timely manner, in particular with respect to government funded projects. Failure to secure adequate payments in time could have a material and adverse effect on the Group’s business, financial position, results of operations and prospects.
The withdrawal or insufficiency of government grants and subsidies may affect the Group’s business and ability to fulfil its existing and future debt obligations adversely
For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group received government grants and subsidies in the amount of approximately RMB861.8 million, RMB1,124.4 million, RMB1,678.5 million, RMB663.5 million and RMB894.5 million, respectively. Government grants and subsidies mainly include grants which are to be applied towards the Group’s construction and investment and subsidies towards its operational costs,
18 respectively. As decided by the Tianjin Government, such loss shall be covered by government grants provided by the Government of Tianjin Economic-Technological Development Area. In addition, the Group receives capital investment from the government for its infrastructure construction and investment business. For the years ended 31 December 2014 and 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group received from the government as capital investment for its infrastructure construction and investment business amounted to RMB8.8 billion, RMB10.3 billion, RMB15.0 billion, RMB9.7 billion and RMB7.0 billion, respectively.
The form and amount of such grants or subsidies vary according to current government policies with respect to the urban rail transit industry in China. The amounts of and conditions attached to such grants or subsidies are determined at the sole discretion of relevant government authorities. There can be no assurance that the amount of any such grants or subsidies will not be reduced in the future, and even if it continues to be eligible, there can be no assurance that any conditions attached to such grants or subsidies will be as favourable to the Group as they have historically been. If such grants and subsidies are withheld or insufficient and the Group is not able to arrange for alternative funding on similar terms, its financial condition and results of operations may be adversely affected.
The Group’s ability to raise fares to cover the Group’s operating costs could be limited
The Group relies on the Tianjin Government to determine rail transit fares, by making a proposal to adjust rail transit fares, subject to the Tianjin Government’s approval. The Tianjin metro system has adopted a station-based fare system, starting at RMB2.0 per person per ride for trips up to five stations with RMB1.0 added for each additional five to six stations and capped at RMB5.0 per person per ride. The Jin-Bin Light Rail has adopted a distance-based fare system, starting at RMB2.0 per person per ride and capped at RMB9.0 per person per ride. Despite the heavy passenger flow on the Group’s rail transit systems every day, revenue from ticket sales is historically unable to recover the operating costs of rail transits due to the low ticket price. The Group’s ability to raise fares is subject to the Tianjin Government’s approval, which takes into consideration factors such as changes in market conditions, trends in usage of public transportation and other factors to compensate for increases in operating, financing and other costs which are limited by the Tianjin Government’s policies on rail transit fares, competitive dynamics in the mass transit industry and commuter preferences.
A decline in passenger volume may adversely affect the revenue and earnings of the Group’s transportation infrastructure construction and operation business
The inner-city and intercity rail transits are dependent on, among other things, the number of passengers, competition from alternative transportations, natural disasters and the continued fitness of the rail transits for bearing passenger volumes. Passenger volume is, directly and indirectly, affected by a number of factors, including the availability, quality, proximity and ticket rate differentials of alternative means of transportation.
The stability in transport capacity of roads and tunnels has been impacting the overall rail transit transportation industry. Widening and expansion works of nearby expressways and local roads, as well as openings of new roads, will also hinder traffic growth of metros and railways. To the extent that capacity shortages or increasing metro or railway ticket prices reduce the volume of passengers, the Group’s business, results of operations and financial condition may be materially and/or adversely affected.
Alternative modes of transportation may also affect the Group’s rail transit operations. There is no assurance that new competing transportations will not be operational to divert traffic and other existing competing modes of transportation will not significantly improve their services and consequently will not materially adversely affect the revenue, results of operations and financial condition of the infrastructure construction and operation business of the Group.
19 Competition in Tianjin from other forms of public and private transportation may adversely affect the Group
As a developer and operator of the mass transit rail network in Tianjin, the Group competes with other forms of public and private transportation available in the city, principally buses, taxis and private vehicles. The speed, reliability and comfort offered by rail transit system in Tianjin may be eroded by:
• the general improvement in bus services, including wider use of air-conditioning on buses;
• the expanding bus network;
• the opening of new highways and expressways thus resulting in an overall improvement in road traffic conditions; and
• the increased ownership and usage of private vehicles.
Private vehicles and other forms of public transportation may cover more routes throughout Tianjin and its vicinities and provide commuters with alternative access or more comfortable and convenient transportation services. There is no assurance that the Group will be able to compete with existing and new forms of transportation in respect of each of these factors, or at all. As a result, the Group expects increased competition from such public and private transportation providers, which may adversely affect the Group.
If the Group is unable to accurately estimate or control its costs or the scope of work the Group is required to perform, the Group’s profitability could be adversely affected
Substantially all of the Group’s contracts relating to its rail transit construction, operation and maintenance business require the Group to complete a project for a pre-agreed fixed price or price per unit. The Group is typically responsible for all of its own costs, and its ability to make a profit on any project or product is largely dependent on the Group’s ability to effectively control these costs. Cost overruns may result in a lower profit or even a loss on a project. The amount of total costs the Group incurs on a project is influenced by a variety of factors, including climatic conditions, variations in labour and equipment productivity and costs over the term of a contract, changes in project scope or conditions and fluctuations in the price of raw materials and components, many of which are beyond the Group’s control. Increases in costs on any particular project, especially to the extent such increases were unforeseen and not factored into the original price, may lead to lower than expected profits, or even losses, which could materially and adversely affect the Group’s business, financial condition and results of operations.
The Group may be unable to continue to procure an adequate supply of raw materials and energy supplies at acceptable prices and quality in a timely manner for its engineering construction business
Successful operations of the Group depend on its ability to obtain from its suppliers sufficient quantities of raw materials, energy supplies and other commodities at acceptable prices and quality in a timely manner. The Group is exposed to the market risk of fluctuations in certain commodity prices for raw materials such as steel, cement, explosives, admixture, track materials, waterproofing materials, and other construction materials utilised in its infrastructure construction operations. The price and availability of such raw materials may vary significantly from year to year due to factors such as China’s import restrictions, consumer demand, producer capacity, market conditions and costs of materials. In particular, steel and cement, which are critical to the Group’s operations, are subject to substantial pricing cyclicality and periodic shortages in China. The Group may also be affected by increases in energy prices, including electricity and fuel prices, for the operation of its machinery and equipment.
20 There is no assurance that the Group will be able to continue to secure sufficient raw materials from its existing suppliers or from alternative sources at prevailing or acceptable prices, in a timely manner, or at all. There is no assurance that the Group will not encounter difficulties in obtaining quality materials or shortages of raw materials, or that the Group will be able to absorb any increase in raw material prices or pass them on to its customers.
The Group requires a significant amount of cash to service its debt, the availability of which depends on many factors beyond the Group’s control
As at 31 December 2014, 2015 and 2016 and 30 September 2017, the Group had total debt of approximately RMB79.0 billion, RMB103.8 billion, RMB105.2 billion and RMB115.3 billion, respectively. Total debt represents the sum of short term borrowings, non-current liabilities due within one year, other current liabilities, long term borrowings, bonds payable and long term financing leases. The Group has the ability under its existing credit facilities to incur substantial additional indebtedness and it plans to incur significant additional indebtedness from time to time in the future, which may affect the Group’s ability to service its debts. The Group’s ability to make payments on its debt, fund its other liquidity needs and make planned capital expenditures will depend on its ability to generate cash in the future. The Group’s historical results have been subject to fluctuations. For example, the Group’s net profit and operating cash inflow had experienced decreasing trends in 2014, 2015 and 2016 and with a gradual increase in 2016. There is no assurance that such results of the Group will experience positive trends in the future, and it is expected that the Group’s future results will continue to be subject to fluctuations. The Group’s ability to generate cash, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the Group’s control. There can be no assurance that the Group’s business will generate sufficient cash flows from operations or that future borrowings will be available to it in an amount sufficient to enable it to make payments on its debt, fund its other liquidity needs and make planned capital expenditures. Furthermore, the Group receives a substantial amount of government grants and subsidies, see “Risk Factors — Risks Relating to the Group’s Business — The withdrawal or insufficiency of government grants and subsidies may affect the Group’s business and ability to fulfil its existing and future debt obligations adversely”. There is no assurance that the Group will continue to receive government grants or subsidies or that such grants and subsidies will be sufficient. In the event that the Group ceases to receive any government grants or subsidies, or if such grants and subsidies are insufficient, the Group’s ability to fulfil its debt obligations, fund its liquidity needs and meet its planned capital expenditures may also be adversely affected.
Substantially all of the Group’s operations are conducted through its subsidiaries. As a result, the Group’s ability to generate sufficient cash flow for its needs is dependent, to a large extent, on the earnings of its subsidiaries and the payment of those earnings to it in the form of dividends, loans or advances and through repayment of loans or advances from them. The Group’s subsidiaries are separate and distinct legal entities. They have no obligation to pay any amounts due on the Group’s debt or to provide it with funds to meet its cash flow needs, whether in the form of dividends, distributions, loans or advances. In addition, any payment of dividends, loans or advances by the Group’s subsidiaries could be subject to statutory or contractual restrictions. Payments to the Group by its subsidiaries are also contingent upon such subsidiaries’ earnings and business considerations. The Group’s rights to receive any assets of any of its subsidiaries upon liquidation or reorganisation will be effectively subordinated to the claims of the subsidiaries’ creditors. In addition, even if the Group is a creditor of any of its subsidiaries, the Group’s rights as a creditor would be subordinate to any security interest in the assets of its subsidiaries and any indebtedness of its subsidiaries senior to that held by the Group. In addition, the Company is also subject to certain contingent liabilities that are not reflected in its balance sheet. Should the Company be called upon to meet the obligations underlying such contingent liabilities, it may not have sufficient cash flow to do so. The Company’s obligations under the Keepwell and Liquidity Support Deed and the Deed of Equity Interest Purchase Undertaking will also constitute contingent liabilities of the Company.
21 The inherent hazardous nature of the Group’s business exposes the Group to potential liabilities, which could harm its reputation and cause it to incur substantial costs
Due to the nature of the Group’s business, it engages or may engage in certain inherently hazardous activities, including operations in harsh geological conditions, tunnel construction, underground excavations, use of heavy machinery and working with flammable and explosive materials. Despite compliance with the requisite safety requirements and standards, the Group is subject to risks surrounding these activities, such as geological catastrophes, toxic gas, the risk of equipment failure, industrial and railway accidents, fire, explosion and failure of employees to follow proper safety procedures. These hazards can cause personal injury and loss of life, damage to or destruction of property and equipment, and environmental damage and pollution, any of which could result in damage to the Group’s business reputation and corporate image, suspension of the Group’s operations and the imposition of civil or criminal penalties. The Group may also be subject to claims, resulting from the subsequent use of facilities it has constructed, from customers or other third parties.
If the Group fails to adequately protect itself or third parties against these potential liabilities, the Group could be forced to incur certain costs which could have a material and adverse effect on its financial condition and results of operations. Furthermore, any harm caused by its operations could damage its reputation and relationship with regulators and other customers, which may materially hinder the Group’s chance to win tenders for new projects.
The development and utilisation of new technology may not always produce positive results
The Group is often engaged to undertake large and complicated projects that require it to design and develop new technologies and construction methods because of its strong research, design and development capabilities. There can be no guarantee that the Group would always successfully develop these new technologies and construction methods after substantial resources have been invested by the Group. The use of new technologies and construction methods could also result in experimental failures, increased costs or unstable conditions, affecting the profitability of some of the Group’s projects, which could materially and adversely affect the business and results of operations of the Group.
The Group may not be able to obtain a sufficient number of land sites or retain land sites suitable for property development
With respect to its resources development business which involves property development along the metro and light rail lines, the Group derives revenue from the sale of properties that it develops. This revenue stream is dependent on the Group’s ability to complete and sell its property developments. To maintain or grow the resources development business in the future, the Group will be required to replenish its land reserve with suitable land sites for development. The Group’s ability to identify and acquire a sufficient number of suitable sites is subject to a number of factors that are beyond its control.
The PRC Government controls substantially all of the country’s land supplies and regulates the means by which real estate developers, including the Group, obtain land sites for property development. As a result, the PRC Government’s land supply policies affect the Group’s ability to acquire land use rights for sites it identifies and affects the costs of any acquisition. The viability or growth of the resources development business may not be sustainable if the Group is unable to obtain additional land sites for development at prices that allow it to achieve reasonable returns.
Under applicable PRC laws, if a developer fails to develop land in accordance with the terms of a land grant contract (including those relating to the payment of fees, the designated use of the land and the time for commencement and completion of the development), the relevant government authorities may issue a warning to or impose a penalty on the developer or confiscate the land. There is no assurance that circumstances leading to confiscation of land or delays in the completion of a property
22 development will not arise in the future. If the Group’s land is confiscated, it will be unable to continue its property development on the confiscated land or recover the costs incurred in the initial acquisition of the confiscated land or recover development costs and other costs incurred up to the date of confiscation.
In addition, in the event that the government exercises its authority to confiscate any land use rights that have been legally granted to the Group, the Group may not be compensated for the full market value of the land.
Failure to complete property development projects on time or to applicable standards could adversely affect the Group’s business
Property development is a long and complicated process, generally requiring large amounts of capital and involving numerous parties, including designers, construction material suppliers, contractors, developers and individual consumers. In addition, to develop and complete a property development, a property developer must obtain a number of permits, licences, certificates and other approvals from the relevant administrative authorities at various stages of property development. The progress and costs of a property development project can be adversely affected by many factors, including delays in obtaining necessary licences, permits, certificates or approvals from government agencies or authorities, shortages of materials, equipment, contractors and skilled labours, labour disputes, construction accidents, natural catastrophes, adverse weather conditions, and changes in government policies.
Failure to complete construction of a property development project on time, to specifications and within budget as a result of any or all of the above factors, may affect the Group’s financial condition and results of operations and may also cause reputational damage. There is no assurance that the Group will not experience any significant delays in completion or delivery of any of its property development projects or that the Group will not be subject to any liabilities for any such delays. Moreover, if the design or construction of a property development fails to meet applicable requirements, the Group’s sales and brand name could be adversely affected. To the extent such failure is found to interfere with normal use of the property, the purchaser would be entitled to terminate the commercial property sale and purchase contract. The occurrence of any of the above mentioned incidents could bring the Group into legal disputes, which, in turn, could have an adverse effect on the Group’s business and results of operations.
The Group generates revenue from the sale and leasing of properties, which depends on a number of factors including the schedule of property development and the timing of property sales and leasing
The Group derives its revenue from the sale and leasing of properties it develops. The Group’s results of operations may fluctuate due to factors such as the schedule of the Group’s property development and the timing of property sales and leasing.
The Group generally recognises revenue from the sale of a property upon the completion of construction and delivery of the property to the buyer, at which point the significant risks and rewards of ownership are transferred to the buyer. Due to capital requirements for land acquisition and construction, a limited land supply and the time required for completing a project, the Group can undertake only a limited number of property development projects at a time. In addition, since the timing of the delivery of our properties varies according to our construction timetable, our revenue and results of operations may vary significantly from period to period depending on the number of properties delivered during a specific period. The quantity of properties delivered is largely a result of the Group’s property delivery schedule and may not be indicative of the actual demand for the Group’s properties or sales achieved during that period. The Group’s revenue and profit during any given period generally reflect property investment decisions made by purchasers at a time significantly before property delivery, typically at least in the prior fiscal period.
23 Fluctuations in the Group’s operating results may also be caused by other factors, including fluctuations in expenses such as land grant premium, development costs, administrative expenses, and selling and marketing expenses and changes in market demand for the Group’s properties. As a result, the Group’s period-to-period comparisons of results of operations and cash flow positions may not be indicative of the Group’s future results of operations and may not be taken as meaningful measures of our financial performance for any specific period. In addition, the cyclical property market of the PRC affects the optimal timing for the acquisition of land, the planning of development and the sales of properties. This cyclicality, combined with the lead time required for the completion of projects and the sales of properties, means that the Group’s results of operations relating to property development activities may be susceptible to significant fluctuations from period to period. Furthermore, the Group’s property development projects may be delayed or adversely affected by a combination of factors beyond the Group’s control, which may in turn adversely affect the Group’s revenue recognition and consequently cash flow and results of operations.
The Group is subject to risks incidental to the ownership and operation of commercial properties, including volatility in market rental rates and occupancy levels, competition for tenants, costs resulting from on-going maintenance and repair and inability to collect rent from tenants or renew leases with tenants due to bankruptcy, insolvency, financial difficulties or other reasons. In addition, the Group may not be able to renew leases with its tenants on terms acceptable to it, or increase rental rates to a level of the then prevailing market rate, or at all, upon the expiry of the existing terms. In addition, the Group may not be able to enter into new leases at rental rates as expected. All these factors could negatively affect the demand for the Group’s properties and rental income, which may have a material and adverse effect on the Group’s business, financial condition and results of operations.
The Group faces competition from other real estate developers
In recent years, a large number of property developers in the PRC, and a number of leading Hong Kong property developers and other overseas developers, have begun undertaking property development and investment projects primarily in the first and second tier cities of the PRC. Some of these developers may have better track records and greater financial, land and other resources, better name recognition and greater economies of scale than the Group. In the past, the PRC Government has introduced various policies and measures in order to limit the growth and to prevent the overheating of the property development sector, which has led to decreased land supply and further increased competition for land among property developers.
Competition among property developers may result in an increase in land acquisition costs, an increase in construction costs, an oversupply of properties, a decrease in property prices in certain parts of the PRC or an inability to sell such properties, a slowdown in the rate at which new property developments are approved or reviewed by the relevant PRC Government authorities and an increase in administrative costs for hiring or retaining qualified personnel, any of which may adversely affect the Group’s business, financial position and results of operations. If the Group cannot respond to changes in market conditions in the markets in which it operates more effectively than its competitors, the Group’s reputation, business, financial position and results of operations may be adversely affected.
Although the Group’s resources development business focuses on metro complex development and station integration development, which differentiates the Group from other property developers, there can be no guarantee that the Group will not face intense competition from other real estate developers.
The Group may be subject to claims of infringement of third-party intellectual property rights
In the process of implementing new technologies and processes, the Group may not be aware of third-party intellectual property rights and, accordingly, may be unable to assess the scope and validity of such rights in relation to its products and operations. In addition, research and development of new construction processes is inherently uncertain in a rapidly evolving technology environment
24 as there may be numerous patent applications pending, many of which are confidential when filed and relate to similar technologies. Accordingly, the Group may become subject to lawsuits for infringement on third-party intellectual property rights. Intellectual property litigation could adversely affect the development or sale of the challenged product or technology and require the Group to pay substantial damages or royalties to licence proprietary rights from third parties. Such licences may not be available to the Group on acceptable terms, if at all. Given the rapid technological change that characterises the Group’s industries, there can be no assurance that its current measures are adequate and that it will not be subject to claims of infringement by third parties. Any intellectual property litigation could cause the Group reputational damage and to incur significant expenses or divert its personnel’s attention and efforts, any of which could have a material adverse effect on its business, financial condition or results of operations.
The Group’s business may be adversely affected if it is unable to secure and retain qualified personnel for its operations
The Group’s operations depend upon its ability to attract and retain experienced and qualified personnel, including executive officers and key technical personnel, who have the necessary and required experience, knowledge and expertise. Competition for qualified personnel is intense in the PRC. The Group may lose these persons to those competitors who are able to offer more competitive packages. The Group may have to significantly increase its related staff costs to remain competitive.
It is expected that, in order to comply with applicable construction regulations and to complete the construction projects on time and within budget, the Group will have to continue to train its employees and require additional qualified professionals. Demand for employees who have industry-related experience and expertise will increase as customers of the Group increase their capital expenditure and their use of the Group’s services. The Group’s future operating results will be dependent on its management’s ability to maintain effective control over a large and diversified enterprise. To the extent the Group is unable to recruit personnel with the necessary skills locally, the attention of its management could be diverted. If the Group cannot recruit, train and retain the qualified personnel necessary to execute its contracts or to perform necessary corporate activities, its business operations may be adversely affected. In addition, failure to attract and retain personnel with technical or marketing expertise may result in the Group’s non-compliance with applicable construction regulations and the inability to prevent misappropriation of its technology or maintain its client contacts.
The uncertainties in the global economy, the global financial market and, in particular, in China could materially and adversely affect the financial condition and results of operations of the Group
Emerging from the peak of the global financial crisis, some countries started to withdraw the stimulus packages previously executed and implement more moderate monetary policies. China withdrew its economic stimulus plan implemented during the financial crisis and returned to its general policy directions. In addition, the PRC government has implemented stricter controlling measures on the real estate market, regulated the local government financing vehicles, cancelled the export tax refund policies for certain commodities and resumed the reform of Renminbi exchange rate.
Currently, the employment, credit and property market conditions of developed economies are still unstable. Coupled with ongoing concerns on the sovereign debt crisis in Europe and the U.S., the status of the global economy is uncertain and such uncertainties in the global and China’s economies may adversely affect the Group’s financial condition and results of operations in many ways, including, among other things:
• it is difficult for business enterprises to source long term financings from the financial and capital markets during a credit crunch. The shortage of financings will affect the Group
25 particularly strongly since its investments in infrastructure are capital-intensive. Without adequate capital, the Group may fail to initiate the construction of new metro lines or continue to fund the construction of metro lines under development or the upgrading of metro lines in operation;
• withdrawal of the economic stimulus plan and other supportive economic policies may cause interest rates to increase. This would in turn increase the Group’s costs of financing and impede some of its investment plans; and
• during an economic slowdown, the demand for transportation might fall. With a drop in ridership, the Group’s income from operating its metro network might fall accordingly.
There can be no assurance that China’s economy or the global economy will maintain sustainable growth. If further economic downturn occurs or continues, the business, results of operations and financial condition of the Group could be materially and adversely affected.
Any adverse change in the economic development or social conditions of Tianjin could materially and adversely affect the Group’s business, financial condition, results of operations and prospects
Most of the Group’s total income and gross revenue are contributed by the Group’s operations in Tianjin. While the Group will continue to grow its operations outside Tianjin, the Group expects most of its businesses to be continuously operated in Tianjin for the foreseeable future. As a result, any adverse change in the economic development or social conditions of Tianjin or the occurrence of any significant natural disaster or catastrophic event in Tianjin could materially and adversely affect the Group’s business, financial condition, results of operations and prospects.
The Group faces litigation risks in the course of its business
In the ordinary course of the Group’s business, claims involving project owners, customers, labour subcontractors, joint venture partners and other parties may be brought against the Group or by the Group in connection with its contracts from time to time. Claims may be brought against the Group for alleged defective or incomplete work, related personal injuries and death, damage to or destruction of property, breaches of warranty and late completion of the project. The claims can involve actual damages and liquidated damages. If the Group was found to be liable for any of the claims against it, the Group would have to incur a charge against earnings to the extent a reserve had not been established for the matter in its accounts, or to the extent the claims were not sufficiently covered by its insurance. Claims brought by the Group against project owners may include claims for additional costs incurred in excess of current contract provisions arising out of project delays and changes in the initial scope of work. Claims between the Group and its labour sub-contractors and vendors may include claims similar to those described above.
Both claims brought against the Group and by the Group, if not resolved through negotiation, are often subject to lengthy and expensive litigation or arbitration proceedings such that the amounts ultimately realised from project claims by the Group could differ from the balances included in the Group’s financial statements. Such claims could therefore have a material adverse impact on the Group’s financial condition, results of operations and cash flow.
The Group may not be able to detect and prevent fraud or other misconduct committed by its employees
The Group may be exposed to fraud or other misconduct committed by its employees that could subject it to litigation, financial losses and sanctions imposed by governmental authorities, as well as affect its reputation and business.
26 The Group believes it has established corporate governance and internal control systems, including anticorruption and ethical integrity management but such internal control procedures may be unable to identify all incidents of non-compliance or suspicious transactions in a timely manner if at all. Although the Group has been making increasing efforts to detect and prevent employee misconduct, such efforts may not be effective in all respects. The Group has in the past been, and will from time to time be, subject to inspections, audits, investigations and supervision by various governmental, supervisory and other authorities. They have in the past provided, and will continue to provide, findings, guidance and recommendations. The Group pays great attention to such guidance and recommendation and seeks to continue to strengthen its internal control and risk management mechanisms. The Group could suffer from negative publicity, reputational damage, monetary losses or litigation losses as a result of the misconduct of its employees.
RISKS RELATING TO THE INDUSTRY
The Group’s business is largely dependent on the level of the PRC Government’s spending on transportation and other infrastructure
The Group’s business largely depends on continued spending by the relevant PRC Government agencies to build rail transits and other public transportation infrastructure, including roads, bridges and tunnels as well as other public projects. Any significant reduction in the PRC Government’s investments in infrastructure development, particularly the transportation infrastructure sector, could have a material and adverse effect on the Group’s business. The PRC Government’s spending on infrastructure has historically been, and will continue to be, cyclical in nature. Various factors affect the nature, scale, location and timing of the PRC Government’s public investment plans in the transportation infrastructure sector of the PRC. These factors include the PRC Government’s policies and priorities regarding different regional economies across China, the PRC Government’s fiscal and monetary policies which affect the availability of credit and funding for projects, deregulation to encourage private sector participation in the transportation infrastructure sector and the general condition and prospects of the overall PRC economy.
In response to the global financial crisis and the slowing pace of growth of the PRC economy, in 2008, the PRC Government introduced a stimulus package to increase spending on public infrastructure development to stimulate the domestic economy. However, since 2011, the PRC Government has implemented a number of policies aimed at tightening the credit market. Therefore, the unforeseeable fluctuation of the PRC Government’s policies regarding spending on transportation and other infrastructure may cause a decrease in investment in rail transit construction and rail transit projects opened for bidding, lack of funding for projects in progress and delay in or suspension of projects launched by the Group.
The Group’s business is affected by the level of growth in the national and regional economies in the PRC, and the general level of activities and growth in the industry in which the Group operates
The development, construction, operation and maintenance of the rail transit business of the Group are affected by the general level of activities and growth in the construction industry in the PRC. Factors which may influence the performance and growth of the construction industry include general national economic conditions, mortgage and interest rate levels, inflation, unemployment, demographic trends, gross domestic product growth and consumer confidence. A downturn in economic activities in the PRC could lead to a recession in the construction industry. The Group’s financial condition and results of operations could be materially and adversely affected by a downturn in the construction industry in the PRC or in any of the regional markets where the Group operates.
The Group’s infrastructure construction and investment and operation management business may be materially adversely affected if the Group fails to maintain risk management and internal control systems or these systems prove to be ineffective or inadequate
The Group operates a rail transit operation centre (the “Operation Centre”), which serves as the centralised command and management centre for the operation of metro and light rail transport
27 network. The Operation Centre allows the Group to manage risk and implement internal control systems and procedures. Certain areas within the Group’s risk management and internal control systems may require constant monitoring, maintenance and continual improvements by the Group’s senior management and staff. The Group’s business and prospects may be materially adversely affected if the Group’s efforts to maintain these systems prove to be ineffective or inadequate. Deficiencies in the Group’s risk management and internal control systems and procedures may adversely affect the Group’s ability to record, process, summarise and report financial and other data in an accurate and timely manner, as well as adversely impact the Group’s ability to identify any reporting errors and non-compliance with rules and regulations.
The Group’s internal control system may contain inherent limitations caused by employee errors or fault. As a result, there is no assurance that the Group’s risk management and internal control systems are adequate or effective, notwithstanding the Group’s efforts, and any failure to address any internal control matters and other deficiencies could result in investigations and disciplinary actions or even prosecution being initiated against the Group or its employees, disruption to the Group’s risk management system, and a material adverse effect on the Group’s financial condition and results of operations.
The Group is required to comply with various environmental, safety and health laws and regulations which are extensive and the compliance of which may be onerous or expensive
The Group is required to comply with various and extensive environmental as well as health and safety laws and regulations promulgated by the PRC Government and the governments of other overseas jurisdictions in which it operates. If the Group fails to comply with these laws and regulations, it could be exposed to penalties, fines, suspension or revocation of its licences or permits to conduct business, administrative proceedings and litigation. Given the magnitude and complexity of these laws and regulations, compliance with them or the establishment of effective monitoring systems may be onerous or require a significant amount of financial and other resources. As these laws and regulations continue to evolve, there can be no assurance that the PRC Government or the governments of other overseas jurisdictions in which the Group has operations will not impose additional or more onerous laws or regulations, compliance with which may cause the Group to incur significantly increased costs, which the Group may not be able to pass on to its customers.
The Group requires permits or licences to undertake its business operations and any loss, termination or non-renewal of these permits or licences could have a significant and adverse impact on its business
The Group requires various permits and licences issued by the relevant government agencies to conduct its business and it must comply with the restrictions and conditions imposed by various levels of government to maintain its permits and licences. If the Group fails to comply with any of the regulations required for the maintenance of its permits and licences, its permits and licences could be temporarily suspended or even revoked, or the renewal of its licences, upon expiry of their original terms, may be delayed, which would directly impact on the Group’s business operations.
The Group is exposed to risks in connection with contracting with public bodies
As PRC government agencies (which term shall include entities administered and financed by such agencies) at national, provincial and local levels are the largest group of investors in the transportation infrastructure industry, they also form rail transit industry public companies’ core customer base. In the Group’s case, it is the Tianjin Government and its affiliate entities. The Group is therefore exposed to risks in connection with contracting with public bodies. Due to the fact that most of the transportation infrastructure projects are funded by government agencies, these projects are sometimes subject to changes or postponements arising from factors such as changes in
28 government budget and changes in policy considerations. In addition, disputes with public bodies may last for considerably longer periods of time than those that occur with private sector counterparties, and payments from public bodies may be delayed as a result. All these risks may have an adverse effect on the Group’s results of operations and financial position.
The Group’s real estate development business is subject to fluctuations in the PRC property market
The Group’s real estate development business has, in recent years, been an important source of revenue and net profit to the Group. Most of the Group’s completed properties and properties under development are located in Tianjin in the form of metro complex development and station integration development. Economic developments in Tianjin, the PRC and internationally, such as a reoccurrence of the previous global credit and liquidity crisis, efforts by the PRC Government to control inflation in the PRC, interest rate movements in the United States and the sovereign debt crisis in Europe, could also adversely affect the property market in the PRC.
RISKS RELATING TO DOING BUSINESS IN THE PRC
PRC economic, political and social conditions, as well as government policies, could affect the Group’s business and prospects
Substantially all of the Group’s assets are located in the PRC and substantially all of the Group’s revenue is sourced from the PRC. Accordingly, the Group’s results of operations, financial position and prospects are subject, to a significant degree, to economic, political and legal developments in the PRC.
The PRC economy differs from the economies of most developed countries in many respects, including the extent of government involvement, the level of development, growth rate, uniformity in the implementation and enforcement of laws in relation to control of foreign exchange and control over capital investment and allocation of resources.
The PRC economy is in the process of transitioning from a centrally planned economy to a more market-oriented economy. For more than three decades, the PRC Government has implemented economic reform measures to utilise market forces in the development of the PRC economy. In addition, the PRC Government continues to play a significant role in regulating industries and the economy through policy measures. The Group cannot predict whether changes in PRC economic, political or social conditions and in PRC laws, regulations and policies will adversely affect its business, financial condition or results of operations.
In addition, many of the economic reforms carried out by the PRC Government are unprecedented or experimental and are expected to be refined and improved over time. Other political, economic and social factors may also lead to further adjustments of the reform measures. This refining and adjustment process may not necessarily have a positive effect on the Group’s operations and business development. The Group’s business, financial condition and results of operations may be adversely affected by:
• changes in PRC political, economic and social conditions;
• changes in policies of the PRC Government, including changes in policies in relation to the Group’s business segments;
• changes in laws and regulations or the interpretation of laws and regulations;
• measures that may be introduced to control inflation or deflation;
• changes in the rate or method of taxation;
29 • the imposition of additional restrictions on currency conversion and remittances abroad; and
• a reduction in tariff protection and other import restrictions.
Furthermore, the growth of demand in China for infrastructure industry depends heavily on economic growth. The Group cannot assure that such growth will be sustained in the future. From time to time, the PRC Government has implemented certain measures in order to prevent the PRC economy from experiencing excessive inflation. Such governmental measures may cause a decrease in the level of economic activity and have an adverse impact on economic growth in China. If China’s economic growth slows down or if the Chinese economy experiences a recession, the growth of demand for urban rail transit construction may also decrease. Such events could have a material adverse effect on the Group’s business, results of operations and financial condition.
PRC regulation of loans to and direct investments in PRC companies by offshore holding companies may delay or prevent the Group from providing loans or capital contributions to its PRC subsidiaries, which could materially and adversely affect their liquidity and its ability to fund and expand its business
Under PRC law, any capital contributions and loans made by the Issuer (as a foreign subsidiary) to the Group’s PRC-incorporated subsidiaries are subject to the relevant PRC regulatory regime. In terms of a foreign debt, the loan made by the Issuer to its PRC parent and/or sister companies must be registered with the State Administration of Foreign Exchange of the PRC (“SAFE”) or any government bureau or agency to which it has delegated this authority. Otherwise, the loans cannot be remitted into China and (if required) converted into Renminbi. In respect of capital contributions by the Issuer, the Issuer must submit applications to and obtain approvals from the competent foreign investment authority (e.g. the Ministry of Commerce of the PRC (“MOFCOM”) or its relevant local branch) if it involves the implementation of special access administrative measures prescribed by PRC law. Due to the discretionary and arbitrary nature of the aforementioned PRC regulatory authorities (e.g. SAFE and MOFCOM), there can be no assurance that the Group will be able to register the loans or obtain the approvals in a timely fashion, or at all. Failure to complete such registration or obtain such approvals would adversely affect the Group’s ability to finance the operations of its PRC parent and/or sister companies and expansion projects, which in turn could harm the Group’s business, financial condition and results of operations. The Further Instructions on the Outbound Investment Orientation (關於進一步引導和規範境外投資方向的指導意見) was promulgated by the NDRC, MOFCOM, PBOC and the Ministry of Foreign Affairs of PRC (“MFA”) (jointly the “Authorities”) and became effective on 4 August 2017, according to which, the Authorities implement guidance on different types of outbound investment. For the encouraged outbound investment, the Authorities will improve the service on tax, foreign exchange, insurance, customs, information and other aspects to create a more favourable and convenient conditions for the encouraged outbound investment. For the restricted outbound investment, the enterprises incorporated in PRC are required to participate in the restricted outbound investment prudently and would be guided by the Authorities in accordance with the practical situation. For the prohibited outbound investment, the Authorities will take effective measures to strictly control the prohibited outbound investment.
Uncertainties with respect to the PRC legal system could limit the protections available to the Group
The PRC legal system is a civil law system based on written statutes. Unlike in common law systems, prior court decisions may be cited for reference but have limited precedential value. Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, since many laws, rules and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available to the Group. For example, the Group may have to resort to administrative and court proceedings to enforce the legal protections that it enjoys either by law or contract. Since PRC administrative and court authorities have significant discretion
30 in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate and predict the outcome of PRC administrative and court proceedings and the level of legal protection the Group enjoys in China as compared to more developed legal systems. These uncertainties may impede the Group’s ability to enforce its contracts with future partners, service providers and suppliers. The effect of future developments in the PRC legal system cannot be predicted, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws. These uncertainties could limit the legal protections available to the Group and other foreign investors. In addition, any litigation in China may be protracted and result in substantial costs and diversion of the Group’s resources and management attention.
Interpretation of PRC laws and regulations involves uncertainty and the current legal environment in China could limit the legal protections available to you
The Group’s core business is conducted in China and governed by PRC laws and regulations. Its operating subsidiaries are located in China and are subject to PRC laws and regulations. The PRC legal system is a civil law system based on written statutes, and prior court decisions have limited precedential value and can only be used as a reference. In addition, PRC written laws are often principle-oriented and require detailed interpretations by the enforcement bodies to further apply and enforce such laws. Since 1979, the PRC legislature has promulgated laws and regulations in relation to economic matters such as foreign investment, corporate organisation and governance, commercial transactions, taxation and trade, with a view to developing a comprehensive system of commercial law. Because these laws and regulations have not been fully developed and because of the limited volume of published cases and the non-binding nature of prior court decisions, interpretation of PRC laws and regulations involves a degree of uncertainty and the legal protection available to you may be limited. In addition, any litigation in China may be protracted and could result in substantial costs and diversion of resources and management attention. These uncertainties may impede the Group’s ability to enforce the contracts it has entered into. Furthermore, such uncertainties, including the potential inability to enforce the Group’s contracts, together with any development or interpretation of PRC laws that is adverse to it, may materially and adversely affect its business, financial condition and results of operations.
It may be difficult to enforce any judgments obtained from non-PRC courts against the Group or its directors and senior management who reside in the PRC
Substantially all of the Group’s assets are located within the PRC. In addition, all of the Group’s directors and senior management reside within China, and assets of the directors and senior management may also be located within China. As a result, it may not be possible to effect service of process outside China upon most of the Group’s directors and senior management, including for matters arising under applicable securities law. A judgment of a court of another jurisdiction may be reciprocally recognised or enforced if the jurisdiction has a treaty with China or if judgments of the PRC courts have been recognised before in that jurisdiction, subject to the satisfaction of other requirements. However, China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with many countries, including Japan, the United States and the United Kingdom. Therefore, it may be difficult for investors to enforce any judgments obtained from non-PRC courts against the Group, the Company, any of their respective directors or senior management in the PRC.
The Group’s labour costs may increase for reasons such as the implementation of more stringent requirements regarding fixed-term employment, the minimum wage and paid annual leave
There have been instances of shortages in the labour supply in industries, including construction and real estate, in the PRC. In the event of future labour shortages, the Group may have difficulties recruiting or retaining labour for its production facilities or may face increasing labour costs. In such
31 event, the Group’s business and results of operations may be adversely affected. If there is a shortage of labour, or for any reason labour costs in the PRC increases significantly, the Group’s expenses are likely to increase, which could materially and adversely affect the Group’s business, financial condition and results of operations.
In addition, labour costs in the PRC are generally expected to increase in the coming years. As a result of the PRC Labour Contract Law《中華人民共和國勞動合同法》 ( ) which became effective on 1 January 2008, the requirements on employers in relation to entry into fixed and non-fixed term employment contracts, and dismissal of employees and the minimum wage requirement have become more stringent. In addition, the National Leisure and Tourism Outline 2013-2020 ( 《國民旅遊休閒綱要 2013-2020》) (the “Tourism Outline”), which became effective on 2 February 2013, sets a more detailed timetable regarding the mandatory annual leave requirement introduced by the Regulations on Paid Annual Leave for Employees《職工帶薪年休假條例》 ( ), which became effective on 1 January 2008, and according to the Tourism Outline, all workers in the PRC must be provided with paid annual leave by 2020. These can be no assurance that the Group can mitigate any increases in labour cost or in the future due to changes in PRC law and regulations.
Government control of currency conversion and future movements in exchange rates may adversely affect the Group’s business, results of operations and financial condition
A portion of the Group’s Renminbi revenue may need to be converted into other currencies to meet the Group’s substantial requirements for foreign currencies, including debt service on foreign currency-denominated debt, overseas acquisitions of mining properties, purchases of imported equipment and payment of dividends declared in respect of shares held by international investors.
Foreign exchange transactions under the capital account, including principal payments with respect to foreign currency-denominated obligations, are subject to the approval requirements of SAFE. In addition, the value of the Renminbi against the Euro, U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. Fluctuations in the exchange rate of the Renminbi against the Euro, U.S. dollar and certain other foreign currencies may adversely affect the Group’s business, results of operations and financial condition.
Fluctuations in the value of Renminbi may adversely affect our business and the value of distributions by its PRC subsidiaries
The Bonds are denominated in Euros, while substantially all of the Group’s revenue is generated by the Group’s PRC operating subsidiaries and is denominated in Renminbi. Pursuant to reforms of the exchange rate system, Renminbi-to-Euro exchange rates are allowed to fluctuate within a band of 3.0 per cent. above or below the central parity rate against a basket of foreign currencies, effective 1 July 2014. The PRC government may adopt further reforms of its exchange rate system, including making the Renminbi freely convertible in the future. If such reforms were implemented and resulted in devaluation of the Renminbi against the Euro or other currencies, the Group’s financial condition and results of operations could be adversely affected because of the Group’s Euro or other currencies denominated indebtedness and other obligations. Such a devaluation could also adversely affect the value, translated or converted into Euro or other currencies or otherwise, of the Group’s earnings and ability to satisfy its obligations under the Bonds.
The outbreak, or threatened outbreak, of any severe communicable disease in the PRC could materially and adversely affect the Group’s business, financial condition and results of operations
The outbreak, or threatened outbreak, of any severe communicable disease (such as severe acute respiratory syndrome or avian influenza) in the PRC could materially and adversely affect the overall business sentiment and environment in the PRC, particularly if such outbreak is inadequately controlled. This could materially and adversely affect domestic consumption, labour supply and
32 possibly the GDP growth of the PRC. In addition, if any of the Group’s employees are affected by any severe communicable disease, it could adversely affect or disrupt production levels and operations at the relevant plants and materially and adversely affect the Group’s business, financial condition and results of operations, which may also involve a closure of its facilities to prevent the spread of the disease. The spread of any severe communicable disease in the PRC may also affect the operations of the Group’s customers and suppliers, which could materially and adversely affect its business, financial condition and results of operations.
The Group cannot guarantee the accuracy of facts, forecasts and other statistics with respect to China, the PRC economy, and the selected PRC regional data contained in this Offering Circular
Facts, forecasts and other statistics in this Offering Circular relating to China, the PRC economy, and the selected PRC regional data have been derived from various official or other publications available in China and may not be consistent with other information compiled within or outside of China. The Group cannot, however, guarantee the quality or reliability of such source materials. The materials have not been prepared or independently verified by the Group, the Joint Book runners and Joint Lead Managers or any of them or their affiliates or advisors (including legal advisors), or other participants in this offering and, therefore, the Group makes no representation as to the accuracy of such facts, forecasts and statistics. Due to possibly flawed or ineffective collection methods or discrepancies between published information and market practice, the facts, forecasts and statistics in this Offering Circular may be inaccurate or may not be comparable to facts, forecasts and statistics produced with respect to other economies. Furthermore, the Group cannot assure that they are stated or compiled on the same basis or with the same degree of accuracy as in other jurisdictions. Therefore, you should not unduly rely upon the facts, forecasts and statistics with respect to China, the PRC economy, and the selected PRC regional data contained in this Offering Circular.
RISKS RELATING TO THE BONDS AND THE GUARANTEE
The Bonds and the Guarantee are unsecured obligations
The Bonds and the Guarantee are unsecured obligations of the Issuer and the Guarantor, respectively. The repayment of the Bonds and payment under the Guarantee may be adversely affected if:
• the Issuer or the Guarantor enters into bankruptcy, liquidation, reorganisation or other winding-up proceedings;
• there is a default in payment under the Issuer’s or the Guarantor’s future secured indebtedness or other unsecured indebtedness; or
• there is an acceleration of any of the Issuer’s or the Guarantor’s indebtedness.
If any of these events were to occur, the Issuer’s or the Guarantor’ assets may not be sufficient to pay amounts due on the Bonds or under the Guarantee.
The Issuer is a company with no material assets and will rely on remittances from the Company and its subsidiaries to make payments under the Bonds. In addition, the Guarantor is a company with limited material assets and its ability to make payment under the Bonds might be limited
The Issuer will not conduct business or any other activities other than the offering, sale or issuance of indebtedness and the lending of the proceeds thereof to any company controlled, directly or indirectly, by the Company and any other activities in connection therewith or related thereto. The Issuer does not and will not have any material assets other than amounts due to it from the Company or its subsidiaries, and its ability to make payments under the Bonds will depend on its receipt of timely remittances from the Company or its subsidiaries.
33 In addition, the Guarantor also has limited material assets and does not have any proven track record of generating profit since its incorporation in September 2015. The total assets of the Guarantor as at 31 December 2016 amounted to U.S.$550.1 million (consisting of primarily cash and cash equivalent, interest receivables, investment in associate and loan to related parties), and the Guarantor incurred a loss of approximately U.S.$1.1 million for the year ended 31 December 2016 (compared to a loss of approximately U.S.$10,000 for the period from 11 September 2015, its date of incorporation, to 31 December 2015). Although the Company made a capital contribution to increase the share capital of the Guarantor from U.S.$6.0 million to U.S.$56.0 million in January 2016, there is no guarantee that the Guarantor will continue to maintain its authorised share capital at this amount, acquire any material assets or start to generate profit in the foreseeable future. Accordingly, the Guarantor’s ability to make payments under the Bonds is and may continue to be limited.
The insolvency laws of the British Virgin Islands, Hong Kong and the PRC and other local insolvency laws may differ from those of another jurisdiction with which the holders of the Bonds are familiar
As the Issuer is incorporated under the laws of the British Virgin Islands, the Guarantor is incorporated under the laws of Hong Kong, and the Company is a state-owned enterprise incorporated under the laws of the PRC, any insolvency proceedings relating to the Issuer, the Guarantor or the Company would likely involve insolvency laws of the British Virgin Islands, Hong Kong or the PRC, as applicable, the procedural and substantive provisions of which may differ from comparable provisions of the local insolvency laws of jurisdictions with which the holders of the Bonds are familiar.
The rating assigned to the Bonds may be changed at any time and may adversely affect the market price of the Bonds
It is a condition to the issuance of the Bonds that the Bonds be rated “Baa1” by Moody’s and “A” by Fitch upon issuance. The ratings represent the opinions of the rating agencies and their assessment of the ability of the Issuer and the Guarantor to perform their respective obligations under the Bonds and the Guarantee and credit risks in determining the likelihood that payments will be made when due under the Bonds. A rating is not a recommendation to buy, sell or hold the Bonds and may be subject to suspension, reduction or withdrawal at any time. The Group cannot assure investors that a rating will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by the relevant rating agency if in such rating agency’s judgment circumstances in the future so warrant. A suspension, reduction or withdrawal of the ratings may adversely affect the market price of the Bonds and the Issuer’s, the Guarantor’s or the Company’s ability to access the debt capital markets.
A trading market for the Bonds may not develop
The Bonds are a new issue of securities for which there is currently no trading market. Although an application has been made to list the Bonds on the Official List, there can be no assurance as to the liquidity of the Bonds or that an active trading market will develop. If such a market were to develop, the Bonds could trade at prices that may be higher or lower than the initial issue price depending on many factors, including prevailing interest rates, the Group’s operations and the market for similar securities. Although application will be made for the listing of the Bonds on the Hong Kong Stock Exchange, no assurance can be given as to the liquidity of, or trading marked for, the Bonds. None of the Joint Lead Managers is obligated to make a market in the Bonds, and if the Joint Lead Managers do so they may discontinue such market-making activity at any time without notice. Further, the Bonds may be allocated to a limited number of investors, in which case liquidity may be limited. In addition, the Bonds and the Guarantee are being offered and sold outside of the United States in reliance on Regulation S and, as a result, the Bonds may not be offered or sold within the United
34 States. It is the investors’ obligation to ensure that offers and sales of the Bonds within the United States and other countries comply with applicable securities laws. Please see “Subscription and Sale”. None of the Joint Lead Managers, Issuer, the Guarantor, the Company, the Trustee or the Agents can predict whether an active trading market for the Bonds will develop or be sustained.
Investors in the Bonds may be subject to foreign exchange risks
The Bonds are denominated and payable in Euros. An investor who measures investment returns by reference to a currency other than Euros would be subject to foreign exchange risks by virtue of an investment in the Bonds, due to, among other things, economic, political and other factors over which none of the Joint Lead Managers, Issuer, the Guarantor, the Company, the Trustee or the Agents has any control. Depreciation of the Euro against such currency could cause a decrease in the effective yield of the Bonds below their stated coupon rates and could result in a loss when the return on the Bonds is translated into such currency. In addition, there may be tax consequences for investors as a result of any foreign currency gains resulting from any investment in the Bonds.
International financial markets and world economic conditions may adversely affect the market price of the Bonds
The market price of the Bonds may be adversely affected by declines in the international financial markets and world economic conditions. The market for Chinese securities is, to varying degrees, influenced by economic and market conditions in other markets, especially those in Asia. Although economic conditions are different in each country, investors’ reactions to developments in one country can affect the securities markets and the securities of issuers in other countries, including China. Since the sub-prime mortgage crisis in 2008, the international financial markets have experienced significant volatility. If similar developments occur in the international financial markets in the future, the market price of the Bonds could be adversely affected.
Public information on the Company, the Guarantor and the Issuer may be limited and PRC corporate disclosure and accounting standards differ from International Financial Reporting Standards (“IFRS”)
The Company is a private company incorporated in the PRC and not listed on any stock exchange. There may be less publicly available information about the Company, the Guarantor and the Issuer than is regularly made available by public companies in the PRC, Hong Kong, the British Virgin Islands and certain other countries and territories. In addition, the consolidated financial statements of the Group and standalone financial statements of the Company are prepared and presented in accordance with PRC GAAP. PRC GAAP may differ in certain respect from IFRS. Investors must determine on their own how such differences might affect the financial information contained in this Offering Circular and the perceived risk associated with an investment in the Bonds.
Changes in market interest rates may adversely affect the value of the Bonds
The Bonds will carry a fixed interest rate. Consequently, the trading price of the Bonds may vary with the fluctuations in the Euro interest rates. If a holder of the Bond tries to sell such Bonds before their maturity, he may receive an offer that is less than his investment.
Decisions that may be made on behalf of all holders of the Bonds may be adverse to the interests of individual holders of the Bonds
The Terms and Conditions of the Bonds contain provisions for calling meetings of the holders of the Bonds to consider matters affecting their interests generally. These provisions permit defined majorities to bind all holders of the Bonds including holders who did not attend and vote at the relevant meeting and holders who voted in a manner contrary to the majority. Furthermore, there is a risk that the decision of the majority of holders of the Bonds may be adverse to the interests of individuals holders.
35 The Issuer may not be able to redeem the Bonds upon the due date for redemption thereof
The Issuer may be required to redeem all of the Bonds on the Maturity Date, following a Change of Control or an Event of Default or following service of a Tax Redemption Notice. If such an event were to occur, the Issuer may not have sufficient cash in hand and may not be able to arrange financing to redeem the Bonds in time, or on acceptable terms, or at all. The ability to redeem the Bonds in such event may also be limited by the terms of other debt instruments. The Issuer’s failure to repay, repurchase or redeem tendered Bonds would constitute an event of default under the Bonds, which may also constitute a default under the terms of the Company’s or its subsidiaries’ other indebtedness.
The liquidity and price of the Bonds following the offering may be volatile
The price and trading volume of the Bonds may be highly volatile. Factors such as variations in each of the Group’s revenue, earnings and cash flows and proposals of new investments, strategic alliances and/or acquisitions, interest rates and fluctuations in prices for comparable companies or any adverse change in the credit rating, revenues, earnings or results of operations could cause the price of the Bonds to change. Any such developments may result in large and sudden changes in the volume and price at which the Bonds will trade. There can be no assurance that these developments will not occur in the future.
The Issuer may issue additional securities in the future
As set out in Condition 15 of the Terms and Conditions of the Bonds, the Issuer may from time to time and without the consent of the Bondholders create and issue further securities as it may consider necessary. There can be no assurance that such future issuance will not adversely affect the market price of the Bonds.
If any of the Company or its subsidiaries, including the Issuer and the Guarantor, is unable to comply with the restrictions and covenants in its respective debt agreements, or the Bonds, there could be a default under the terms of these agreements, or the Bonds, which could cause repayment of the relevant debt to be accelerated
If the Issuer, the Guarantor or the Company is unable to comply with the restrictions and covenants in the Terms and Conditions of the Bonds, or if any of the Company or its subsidiaries, including the Issuer and the Guarantor, is unable to comply with its current or future debt obligations and other agreements, there could be a default under the terms of these agreements or the Bonds. In the event of a default under these agreements, the holders of the debt could terminate their commitments to lend to the Company or its relevant subsidiary, accelerate repayment of the debt, declare all amounts borrowed due and payable or terminate the agreements, as the case may be. Furthermore, some of the Group’s debt agreements, and the Bonds, contain (or may in the future contain) cross-acceleration or cross-default provisions. As a result, the default by the Company or any subsidiary under one debt agreement may cause the acceleration of repayment of debt, including the Bonds, or result in a default under its other debt agreements, including the Bonds. If any of these events occur, there can be no assurance that the assets and cash flows of the Company and its subsidiaries would be sufficient to repay in full all of their indebtedness, or that they would be able to find alternative financing. Even if alternative financing could be obtained, there can be no assurance that it would be on terms that are favourable or acceptable to the Company or its subsidiaries.
Modifications and waivers may be made in respect of the Terms and Conditions of the Bonds and the Trust Deed by the Trustee or less than all of the holders of the Bonds
The Terms and Conditions of the Bonds provide that the Trustee may, without the consent of the holders of the Bonds, agree to any modification (except as mentioned in the Trust Deed) of the Trust Deed, the Terms and Conditions of the Bonds, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and/or the Agency Agreement which in the opinion of the Trustee will not be materially prejudicial to the interests of the holders of the Bonds and to any
36 modification of the Trust Deed, the Terms and Conditions of the Bonds, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and/or the Agency Agreement which in the opinion of the Trustee is of a formal, minor or technical nature or is to correct a manifest error or to comply with any mandatory provision of law.
In addition, the Trustee may, without the consent of the holders of the Bonds, authorise or waive any proposed breach or breach of the Trust Deed, the Terms and Conditions of the Bonds, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking or the Agency Agreement (other than a proposed breach, or a breach relating to the subject of certain reserved matters) if, in the opinion of the Trustee, the interests of the holders of the Bonds will not be materially prejudiced thereby.
The Trustee may request the holders of the Bonds to provide an indemnity and/or security and/or prefunding to its satisfaction
In certain circumstances (including without limitation giving of notice to the Issuer, the Guarantor and the Company pursuant to Condition 9 of the Terms and Conditions of the Bonds and the taking of any actions, steps and/or proceedings pursuant to Condition 13 of the Terms and Conditions of the Bonds), the Trustee may (at its sole discretion) request the holders of the Bonds to provide an indemnity and/or security and/or prefunding to its satisfaction before it takes any actions, steps and/or proceedings on behalf of the holders of the Bonds. The Trustee shall not be obliged to take any such actions if not first indemnified and/or secured and/or prefunded to its satisfaction. Negotiating and agreeing to an indemnity and/or security and/or prefunding can be a lengthy process and may impact on when such actions can be taken. The Trustee may not be able to take actions, notwithstanding the provision of an indemnity or security or prefunding to it, in breach of the terms of the Trust Deed constituting the Bonds, the Terms and Conditions of the Bonds, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking or the Agency Agreement (as applicable) and in such circumstances, or where there is uncertainty or dispute as to the applicable laws or regulations, to the extent permitted by the agreements and the applicable laws and regulations, it will be for the holders of the Bonds to take such actions directly.
The Issuer may be treated as a PRC resident enterprise for PRC tax purposes and certain withholding taxes may be applicable
Under the new EIT Law and the implementation rules which both took effect on 1 January 2008, enterprises established outside the PRC whose “de facto management bodies” are located in China are considered “resident enterprises” for PRC tax purposes.
The implementation rules define the term “de facto management body” as a management body that exercises full and substantial control and management over the business, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation specified certain criteria for the determination of the “de facto management bodies” for foreign enterprises that are controlled by PRC enterprises.
However, there is no assurance that the Issuer will be treated as a PRC resident enterprise under the new EIT Law and the implementation rules in the future. If the Issuer is deemed to be a PRC resident enterprise for EIT purposes, the Issuer would be subject to the PRC enterprise income tax at the rate of 25 per cent. on its worldwide taxable income. Furthermore, the Issuer may be obligated to withhold PRC income tax of up to 7 per cent. on payments of interest and certain other amounts on the Bonds to investors that are Hong Kong resident enterprises or 10 per cent. on payments of interest and other amounts on the Bonds to the non-resident enterprise investors that are not Hong Kong or PRC resident enterprises or 20 per cent. on payments of interest and other amounts on the Bonds to non-resident individual investors that are not Hong Kong or PRC residents, provided that there are no tax treaties between China and those countries or regions which exempt or reduce such withholding tax, because the interest and other amounts may be regarded as being derived from sources within the PRC. In addition, if the Issuer fails to do so, it may be subject to fines and other penalties.
37 Furthermore, if the Issuer is treated as a PRC “resident enterprise”, the interest the Issuer pays in respect of the Bonds may be treated as income derived from sources within the PRC and may be subject to PRC tax (including withholding tax in the case of interest). If the Issuer is required under the EIT Law to withhold PRC income tax from interest payments made to the Issuer’s foreign bondholders who are “non-resident enterprises”, the Issuer will be required to pay such additional amounts as will result in receipt by a holder of the Bonds of such amounts as would have been received by the holder had no such withholding been required. The requirement to pay additional amounts will increase the cost of servicing interest payments on the Bonds, and could have a material adverse effect on its ability to pay interest on, and repay the principal amount of, the Bonds, as well as its profitability and cash flow. It is unclear whether, if the Issuer is considered a PRC “resident enterprise”, holders of the Bonds might be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas.
Gains on the transfer of the Bonds may be subject to income tax under PRC tax laws
Under the new EIT law and its implementation rules, any gains realised on the transfer of the Bonds by holders who are deemed under the new EIT law as non-resident enterprises may be subject to PRC EIT if such gains are regarded as income derived from sources within the PRC (although non-PRC Bondholders who are Hong Kong tax residents may be exempt from paying income tax on gains derived from a sale or exchange of the Bonds in Hong Kong pursuant to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “Arrangement”) and the interpretation and implementation rules for the Arrangement). Under the new EIT law, a “non-resident enterprise” means an enterprise established under the laws of a jurisdiction other than the PRC and whose actual administrative organisation is not in the PRC, which has established offices or premises in the PRC, or which has not established any offices or premises in the PRC but has obtained income derived from sources within the PRC. There remains uncertainty as to whether the gains realised from the transfer of the Bonds would be treated as income derived from sources within the PRC and be subject to PRC tax. This will depend on how the PRC tax authorities interpret, apply or enforce the EIT Law and its implementation rules. In addition, there is uncertainty as to whether gains realised on the transfer of the Bonds by individual holders who are not PRC citizens or residents will be subject to PRC individual income tax. If such gains are subject to PRC income tax, the 10 per cent. EIT rate and 20 per cent. individual income tax rate will apply respectively unless there is an applicable tax treaty or arrangement that reduces or exempts such income tax. If holders of the Bonds are required to pay PRC income tax on the transfer of the Bonds, the value of their investment in the Bonds may be materially and adversely affected. The taxable income will be the balance of the total income obtained from the transfer of the Bonds minus all costs and expenses that are permitted under PRC tax laws to be deducted from the income.
The Bonds may not be a suitable investment for all investors
Each potential investor in any Bonds must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
• have sufficient knowledge and experience to make a meaningful evaluation of the relevant Bonds, the merits and risks of investing in the relevant Bonds and the information contained or incorporated by reference in this Offering Circular;
• have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the relevant Bonds and the impact such investment will have on its overall investment portfolio;
• have sufficient financial resources and liquidity to bear all of the risks of an investment in the relevant Bonds;
38 • understand thoroughly the terms of the relevant Bonds and be familiar with the behaviour of any relevant indices and financial markets; and
• be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
A potential investor should not invest in Bonds which are complex financial instruments unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Bonds will perform under changing conditions, the resulting effects on the value of such Bonds and the impact this investment will have on the potential investor’s overall investment portfolio.
Additionally, the investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (a) Bonds are legal investments for it, (b) Bonds can be used as collateral for various types of borrowing and (c) other restrictions apply to its purchase of any Bonds. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Bonds under any applicable risk-based capital or similar rules.
Certain facts and statistics are derived from publications not independently verified by the Group or the Joint Lead Managers, the Trustee or the Agents
Facts and statistics in this Offering Circular relating to the global economy and the relevant industry are derived from publicly available sources. While each of the Issuer, the Guarantor and the Company has taken reasonable care to ensure that the facts and statistics presented are accurately reproduced from such sources, they have not been independently verified by any of the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee, the Agents or any of their respective affiliates, advisers, directors, employees, officers, agents or representatives or any person who controls any of them or their respective affiliates and, therefore, none of the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee, the Agents or any of the aforementioned parties make any representation as to the accuracy of such facts and statistics. Due to possibly flawed or ineffective calculation and collection methods and other problems, the facts and statistics herein may be inaccurate or may not be comparable to facts and statistics produced for other economies and should not be unduly relied upon. Further, the Issuer cannot assure investors that such facts and statistics are stated or compiled on the same basis or with the same degree of accuracy as may be the case elsewhere.
A change in English law which governs the Bonds may adversely affect holders of the Bonds
The Terms and Conditions of the Bonds are governed by English law. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of issue of the Bonds.
Additional procedures may be required to be taken to bring English law governed matters or disputes to the Hong Kong courts and the holders of the Bonds would need to be subject to the exclusive jurisdiction of the Hong Kong courts. There is also no assurance that the PRC courts will recognise and enforce judgments of the Hong Kong courts in respect of English law governed matters or disputes
The Terms and Conditions of the Bonds and the transaction documents are governed by English law, whereas parties to these documents have submitted to the exclusive jurisdiction of the Hong Kong courts. In order to hear English law governed matters or disputes, Hong Kong courts may require certain additional procedures to be taken. Under the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties
39 Concerned (關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安 排), judgments of Hong Kong courts are likely to be recognised and enforced by the PRC courts where the contracting parties to the transactions pertaining to such judgments have agreed to submit to the exclusive jurisdiction of Hong Kong courts. However, recognition and enforcement of a Hong Kong court judgment could be refused if the PRC courts consider that the enforcement of such judgment is contrary to the social and public interest of the PRC or meets other circumstances specified by the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned. While it is expected that the PRC courts will recognise and enforce a judgment given by Hong Kong courts governed by English law, there can be no assurance that the PRC courts will do so for all such judgments as there is no established practice in this area. Compared to other similar debt securities issuances in the international capital markets, where the relevant holders of the debt securities would not typically be required to submit to an exclusive jurisdiction, the holders of the Bonds will be deemed to have submitted to the exclusive jurisdiction of the Hong Kong courts, and thus the holder’s ability to initiate a claim outside of Hong Kong will be limited.
The Bonds will initially be represented by the Global Certificate and holders of a beneficial interest in the Global Certificate must rely on the procedures of the relevant Clearing System
Bonds will initially be represented by the Global Certificate. Such Global Certificate will be deposited with a common depositary for Euroclear and Clearstream (each of Euroclear and Clearstream, a “Clearing System”). Except in the circumstances described in the Global Certificate, investors will not be entitled to receive definitive Bonds. See “Summary of Provisions Relating to the Bonds in Global Form”. The relevant Clearing System will maintain records of their account holders credited with holding beneficial interests in the Global Certificate. While the Bonds are represented by the Global Certificate, investors will be able to trade their beneficial interests only through the Clearing Systems.
While the Bonds are represented by the Global Certificate the Issuer will discharge its payment obligations under the Bonds by making payments to the common depositary for Euroclear and Clearstream for distribution to their account holders. A holder of a beneficial interest in the Global Certificate must rely on the procedures of the relevant Clearing System to receive payments under the Bonds. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Certificate.
Holders of beneficial interests in the Global Certificate will not have a direct right to vote in respect of the Bonds. Instead, such holders will be permitted to act only to the extent that they are enabled by the relevant Clearing System to appoint appropriate proxies.
The Bonds being issued as Green Bonds (as defined under “Green Bond Framework — Framework Overview — Use of Proceeds”) may not be a suitable investment for all investors seeking exposure to green assets
In connection with the issue of the Bonds as Green Bonds, the Company has engaged Sustainalytics US Inc. (“Sustainalytics”) to issue a second-party opinion confirming that the Eligible Green Projects (see “Green Bond Framework — Framework Overview — Use of Proceeds”) have been defined in accordance with the broad categorisation of eligibility for green projects set out by the International Capital Market Association Green Bond Principles 2017 (the “Green Bond Principles”) and/or the suitability of the Bonds as an investment in connection with certain environmental and sustainability projects (the “Second-party Opinion”). The Second-party Opinion may not reflect the potential impact of all risks related to the structure, market, additional risk factors discussed above and other factors that may affect the value of the Bonds or the projects financed toward an amount corresponding to the net proceeds of the issue of the Bonds in the form of “Green Bonds”. The Second-party Opinion would not constitute a recommendation to buy, sell or hold securities and would only be current as of the date it is released. In addition, although the Issuer, the Guarantor or the
40 Company may agree at the time of issue of the Bonds or the form of “Green Bonds” to certain obligations relating to reporting and use of proceeds (as described under “Green Bond Framework”), it will not be an event of default under the Bonds if the Issuer, the Guarantor or the Company were to fail to comply with such obligations. A withdrawal of the Second-party Opinion may affect the value of the Bonds and/or may have consequences for certain investors with portfolio mandates to invest in green assets.
RISKS RELATING TO THE DEED OF EQUITY INTEREST PURCHASE UNDERTAKING AND THE KEEPWELL AND LIQUIDITY SUPPORT DEED
The Keepwell and Liquidity Support Deed is not a guarantee of the payment obligations under the Bonds and the Guarantee
The Company will enter into the Keepwell and Liquidity Support Deed in relation to the Bonds. See “Description of the Keepwell and Liquidity Support Deed”. Pursuant to the terms of the Keepwell and Liquidity Support Deed, the Trustee may take action against the Company to enforce the provisions of the Keepwell and Liquidity Support Deed. However, neither the Keepwell and Liquidity Support Deed nor any actions taken by the Company thereunder can be deemed to be a guarantee by the Company for the payment obligation of the Issuer under the Bonds or the Guarantor under the Guarantee. Accordingly, the Company will only be obliged to cause the Issuer or the Guarantor to obtain, before the due date of the relevant payment obligations, funds sufficient by means as permitted by applicable laws and regulations so as to enable the Issuer or the Guarantor to pay such payment obligations in full as they fall due, rather than assume the payment obligation as in the case of a guarantee. Furthermore, even if the Company intends to perform its obligations under the Keepwell and Liquidity Support Deed, depending on the manner in which the Company performs its obligations under the Keepwell and Liquidity Support Deed in causing the Issuer or the Guarantor to obtain, before the due date of the relevant payment obligations, funds sufficient to meet its obligations under the Bonds or the Guarantee, such performance may be subject to obtaining prior consent, approvals, registration and/or filings from relevant PRC governmental authorities, including without limitation, the NDRC, MOFCOM and SAFE.
In addition, under the Keepwell and Liquidity Support Deed, the Company will undertake to cause the Issuer and Guarantor to have sufficient liquidity to ensure timely payment of any amounts payable in respect of the Bonds and/or the Guarantee. However, any claim by the Issuer, the Guarantor and/or the Trustee against the Company in relation to the Keepwell and Liquidity Support Deed will be effectively subordinated to all existing and future obligations of the Company’s subsidiaries (which have not provided the Guarantee), particularly the onshore operating subsidiaries of the Company, and all claims by creditors of such subsidiaries (which have not provided the Guarantee) will have priority to the assets of such entities over the claims of the Issuer, the Guarantor and the Trustee under the Keepwell and Liquidity Support Deed.
Performance by the Company of its undertaking under the Deed of Equity Interest Purchase Undertaking is subject to approvals of the PRC governmental authorities
The Company intends to assist the Issuer and the Guarantor to meet their obligations by entering into the Deed of Equity Interest Purchase Undertaking on the Issue Date. Under the Deed of Equity Interest Purchase Undertaking, the Company agrees to purchase or procure a PRC incorporated Subsidiary (as defined in the Deed of Equity Interest Purchase Undertaking) of the Company to purchase the equity interest held by the Guarantor and/or any other Subsidiaries (as defined in the Deed of Equity Interest Purchase Undertaking) of the Company incorporated outside the PRC (each, a “Relevant Transferor”) at a purchase price, subject to the terms in the Deed of Equity Interest Purchase Undertaking and the applicable PRC laws and regulations, which shall not be less than the Shortfall Amount (as defined in the Deed of Equity Interest Purchase Undertaking).
41 Performance by the Company of the Deed of Equity Interest Purchase Undertaking may be subject to the approvals of or registrations with:
• NDRC or its local office in respect of the transfer of the equity interest in the offshore subsidiaries from the Relevant Transferor to the Company;
• the MOFCOM or its local office in respect of the transfer of the equity interest in the onshore subsidiaries (involving the implementation of special access administrative measures prescribed by PRC law) or offshore subsidiaries from the Relevant Transferor to the Company;
• the PRC State Administration for Industry and Commerce or its local office in respect of the transfer of the equity interest in the onshore subsidiaries from the Relevant Transferor to the Company;
• the relevant PRC tax authorities in respect of withholding tax for the Relevant Transferor;
• SAFE or its local office in respect of (i) changing the SAFE registration of, or in connection with, the onshore or offshore companies being sold, and (ii) the remittance of the purchase price, denominated in Euros, from the Company in the PRC to the offshore vendor(s) in Hong Kong (where applicable); and
• other approvals, registrations and/or filings required under the applicable PRC laws, regulations or policies.
As the approval process is beyond the control of the Company, there can be no assurance that the Company will successfully obtain either the requisite approvals or registrations in time, or at all, or that the PRC government’s relevant policies or regulations will not change in the future. In the event that the Company fails to obtain the requisite approvals or registrations, the Issuer and the Guarantor may have insufficient funds to discharge their outstanding payment obligations to the holders of the Bonds.
Further, in the event of an insolvency of a Relevant Transferor, any sale proceeds received by that Relevant Transferor may be subject to the insolvency claims of third parties. The Trustee’s claim against the sale proceeds will be an unsecured claim and may rank lower in priority to any claims by secured third-party creditors of such Relevant Transferor where it is the Guarantor or the Issuer. Where a Relevant Transferor is not the Guarantor or the Issuer, the Trustee will not have a direct claim against the sale proceeds received by such Relevant Transferor.
Performance by the Company of its undertaking under the Deed of Equity Interest Purchase Undertaking may be subject to consent from third-party creditors and shareholders, and may also be restricted if any of the equity interests are secured in favour of third-party creditors
Under the terms of the Deed of Equity Interest Purchase Undertaking, the Company agrees to purchase or procure a PRC incorporated Subsidiary (as defined in the Deed of Equity Interest Purchase Undertaking) of the Company to purchase from one or more Relevant Transferors the equity interest held by it upon the occurrence of an Event of Default under the Bonds. The ability of the Company to perform this undertaking may be affected by any present or future financing agreements of the Company and its subsidiaries:
• in the event that such financial agreements contain non-disposal or other restrictive covenants that would prevent the sale of an equity interest by a Relevant Transferor, the Company and its subsidiaries would need to obtain the consent from the third-party creditor before the Relevant Transferor is able to proceed with the sale of such equity interest; and
42 • in the event that certain equity interests have been secured in favour of third-party creditors, the Company and its subsidiaries would need to arrange for these security interests to be released before the Relevant Transferor is able to proceed with the sale of such equity interests.
Under the Terms and Conditions of the Bonds and the Keepwell and Liquidity Support Deed, subject to Condition 4 of the Terms and Conditions of the Bonds, there are no restrictions on the Company or its subsidiaries entering into financing agreements with such non-disposal or other restrictive covenants or securing the equity interests of any member of the Group in favour of its creditors. In the event the obligation to purchase under the Deed of Equity Interest Purchase Undertaking becomes effective, there is no assurance that the Company or the relevant subsidiary will be able to obtain any required consents from its creditors or that it will be able to arrange for any existing security arrangement to be released in order for the sale of the equity interest to proceed. If such consents or releases cannot be obtained, the Company or the relevant subsidiary may need to repay the indebtedness owed to its third-party creditors in order to be able to sell the relevant equity interests to the Company or the relevant PRC incorporated Subsidiary (as the case may be), failing which, the Issuer and the Guarantor may have insufficient funds to discharge their payment obligations to the holders of the Bonds.
In the event the obligation to purchase under the Deed of Equity Interest Purchase Undertaking becomes effective, there is no assurance that any required approvals or waivers can be obtained from third-party shareholders, as required, in a timely manner or at all.
In addition, third-party shareholders’ consent may also be required if the Company or the relevant subsidiary chooses to acquire the equity interests of certain non-wholly-owned companies of a Relevant Transferor. In such an event, the prospective acquisition may be subject to pre-emptive rights or other restrictions in such company’s articles of association, shareholders’ agreement or otherwise that would require the selling shareholder to obtain consent or waiver from other third-party shareholders before any equity interest can be sold to the Company or the relevant PRC incorporated Subsidiary (as the case may be).
See “The Issuer and the Guarantor have limited assets which can be sold to the Company pursuant to the Deed of Equity Interest Purchase Undertaking”.
The Issuer and the Guarantor have limited assets which can be sold to the Company pursuant to the Deed of Equity Interest Purchase Undertaking
Under the terms of the Deed of Equity Interest Purchase Undertaking, the Company agrees to purchase or procure a PRC incorporated Subsidiary (as defined in the Deed of Equity Interest Purchase Undertaking) of the Company to purchase from a Relevant Transferor the equity interest held by it following the occurrence of an Event of Default under the Bonds.
As of the date of this Offering Circular, the Issuer and the Guarantor (who may act as Relevant Transferors) have very limited assets that can be sold to the Company in the event that the obligation to purchase under the Deed of Equity Interest Purchase Undertaking becomes effective. The total assets of the Guarantor as at 30 September 2017 amounted to U.S.$555.3 million (consisting of primarily cash and cash equivalent, interest receivables, investment in associate and loan to related parties).
In addition, the acquisition of such assets will be subject to regulatory and other approvals of or registrations with MOFCOM, NDRC and SAFE. There is no assurance that such approvals can be obtained in a timely manner, or at all. In the event that such approvals cannot be obtained and there are no other equity interests that the Company can purchase, the Deed of Equity Interest Purchase Undertaking may not be effective in enabling the Company to assist the Issuer and the Guarantor with their respective obligations under the Bonds, the Guarantee and the Trust Deed.
43 TERMS AND CONDITIONS OF THE BONDS
The following, subject to modification and other than the words in italics is the text of the terms and conditions of the Bonds which will appear on the reverse of each of the definitive certificates evidencing the Bonds:
The issue of €400,000,000 1.625 per cent. guaranteed bonds due 2022 (the “Bonds”, which term shall include, unless the context requires otherwise, any additional Bonds issued in accordance with Condition 15 and consolidated and forming a single series therewith) was authorised by a resolution of the sole director of Rail Transit International Development Company Limited (軌道國際發展有限 公司) (the “Issuer”) passed on 21 August 2017. The Bonds are guaranteed by Tianjin Rail Transit Group (Hong Kong) Co., Limited (the “Guarantor”). The giving of the Guarantee (as defined in Condition 3(b)) was authorised by a resolution of the sole director of the Guarantor on 21 August 2017. Each of the Issuer and the Guarantor are, directly or indirectly, a subsidiary of Tianjin Railway Transit Group Co., Ltd. (the “Company”). The Bonds are constituted by a Trust Deed (as amended or supplemented from time to time, the “Trust Deed”) dated on or about 22 March 2018 (the “Issue Date”) between the Issuer, the Guarantor, the Company and The Hongkong and Shanghai Banking Corporation Limited (the “Trustee” which expression shall, where the context so permits, include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Bonds. These terms and conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Bonds. Copies of the Trust Deed and of the Agency Agreement (as amended or supplemented from time to time, the “Agency Agreement”) dated on or about 22 March 2018 relating to the Bonds between the Issuer, the Guarantor, the Company, the Trustee, The Hongkong and Shanghai Banking Corporation Limited as registrar (the “Registrar”), as transfer agent (the “Transfer Agent”) and as initial principal paying agent (the “Principal Paying Agent”) and any other agents named in it, are available for inspection at all reasonable times during usual office hours with a prior appointment at the specified office of the Principal Paying Agent (as at the Issue Date at Level 30, HSBC Main Building, 1 Queen’s Road Central, Hong Kong). The “Agents” means the Principal Paying Agent, the Registrar, the Transfer Agent and any other agent or agents appointed from time to time with respect to the Bonds. The Bonds also have the benefit of (i) a keepwell and liquidity support deed dated on or about 22 March 2018 (as amended or supplemented from time to time, the “Keepwell and Liquidity Support Deed”) entered into by the Issuer, the Guarantor, the Company and the Trustee and (ii) a deed of equity interest purchase undertaking dated on or about 22 March 2018 (as amended or supplemented from time to time, the “Deed of Equity Interest Purchase Undertaking”) entered into by the Issuer, the Guarantor, the Company and the Trustee, both such deeds being executed in favour of the Trustee. The entering into the Keepwell and Liquidity Support Deed and the Deed of Equity Interest Purchase Undertaking was authorised by a resolution of the sole director of each of the Issuer and the Guarantor and of the board of directors of the Company on 21 August 2017, 21 August 2017 and 18 January 2018, respectively. The Bondholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed, the Keepwell and Liquidity Support Deed and the Deed of Equity Interest Purchase Undertaking and those provisions applicable to them of the Agency Agreement.
All capitalised terms that are not defined in these terms and conditions (“these Conditions”) will have the meanings given to them in the Trust Deed.
1 FORM, SPECIFIED DENOMINATION AND TITLE
The Bonds are issued in the specified denomination of €100,000 and integral multiples of €1,000 in excess thereof.
The Bonds are represented by registered certificates (“Certificates”) and, save as provided in Condition 2(a), each Certificate shall represent the entire holding of Bonds by the same holder.
Title to the Bonds shall pass by registration in the register that the Issuer shall procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement (the “Register”).
44 Except as ordered by a court of competent jurisdiction or as otherwise required by law, the holder (as defined below) of any Bond shall be deemed to be and shall be treated as its absolute owner for all purposes whether or not it is overdue and regardless of any notice of ownership, trust or an interest in it, any writing on the Certificate representing it or the theft or loss of such Certificate and no person shall be liable for so treating the holder.
In these Conditions, “Bondholder” and (in relation to a Bond) “holder” means the person in whose name a Bond is registered.
Upon issue, the Bonds will be represented by a global certificate (the “Global Certificate”) registered in the name of a nominee of, and deposited with, a common depositary for Euroclear Bank SA/NV and Clearstream Banking S.A. These conditions are modified by certain provisions contained in the Global Certificate. See “Summary of Provisions relating to the Bonds in Global Form”.
2 TRANSFERS OF BONDS
(a) Transfer: A holding of Bonds may, subject to Condition 2(d), be transferred in whole or in part upon the surrender (at the specified office of the Registrar or any Transfer Agent) of the Certificate(s) representing such Bonds to be transferred, together with the form of transfer endorsed on such Certificate(s) (or another form of transfer substantially in the same form and containing the same representations and certifications (if any), unless otherwise agreed by the Issuer), duly completed and executed and any other evidence as the Registrar or such Transfer Agent may require. In the case of a transfer of part only of a holding of Bonds represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. In the case of a transfer of Bonds to a person who is already a holder of Bonds, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding. All transfers of Bonds and entries on the Register will be made in accordance with the detailed regulations concerning transfers of Bonds scheduled to the Agency Agreement. The regulations may be changed by the Issuer, with the prior written approval of the Registrar and the Trustee, or by the Registrar, with the prior written approval of the Trustee. A copy of the current regulations will be made available by the Registrar to any Bondholder upon written request.
(b) Delivery of New Certificates: Each new Certificate to be issued pursuant to Condition 2(a) shall be available for delivery within seven business days of receipt of a duly completed form of transfer and surrender of the existing Certificate(s). Delivery of the new Certificate(s) shall be made at the specified office of any Transfer Agent or of the Registrar (as the case may be) to whom delivery or surrender of such form of transfer and Certificate shall have been made or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant form of transfer or otherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate to such address as may be so specified, unless such holder requests otherwise and pays in advance to the relevant Transfer Agent or the Registrar (as the case may be) the costs of such other method of delivery and/or such insurance as it may specify. In this Condition 2(b), “business day” means a day, other than a Saturday, Sunday or public holiday, on which banks are open for business in the place of the specified office of the relevant Transfer Agent or the Registrar (as the case may be).
(c) Transfer or Exercise Free of Charge: Certificates, on transfer, exercise of an option or redemption, shall be issued and registered without charge to the relevant Bondholder by or
45 on behalf of the Issuer, the Registrar or any Transfer Agent, but upon payment by the relevant Bondholder of any tax or other governmental charges that may be imposed in relation to it (or the giving of such indemnity and/or security and/or prefunding as the Registrar or the relevant Transfer Agent may require in respect thereof).
(d) Closed Periods: No Bondholder may require the transfer of a Bond to be registered (i) during the period of 15 days ending on (and including) the due date for redemption of that Bond, (ii) during the period of 15 days prior to (and including any date on which Bonds may be called for redemption by the Issuer pursuant to Condition 6(b), (iii) after any such Bond has been put for redemption pursuant to Condition 6(c), or (iv) during the period of seven days ending on (and including) any Record Date (as defined in Condition 7(a)(ii)).
3 STATUS AND GUARANTEE
(a) Status: The Bonds constitute direct, unsubordinated, unconditional and (subject to Condition 4(a)) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a), at all times rank at least equally with all the Issuer’s other present and future unsecured and unsubordinated obligations.
(b) Guarantee: The Guarantor has unconditionally and irrevocably guaranteed the due payment of all sums expressed to be payable by the Issuer under the Bonds and the Trust Deed. The Guarantor’s obligations in respect of the Bonds and the Trust Deed (the “Guarantee”) are contained in the Trust Deed. The obligations of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a), at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations.
4 COVENANTS
(a) Negative Pledge: So long as any Bond remains outstanding (as defined in the Trust Deed), (A) neither the Issuer nor the Guarantor shall, and each of the Issuer and the Guarantor shall procure that none of their respective Subsidiaries will, create or permit to subsist any mortgage, charge, lien, pledge or other security interest upon the whole or any part of its present or future undertaking, assets or revenues to secure (aa) any Relevant Indebtedness or (bb) any guarantee or indemnity in respect of any Relevant Indebtedness without (i) at the same time or prior thereto securing the Bonds or guaranteeing or indemnifying the Bondholders equally and rateably therewith or (ii) providing such other security for the Bonds as may be approved by an Extraordinary Resolution (as defined in the Trust Deed) of Bondholders; and (B) the Issuer and the Guarantor undertake to procure that the Company and its Subsidiaries will not create or permit to subsist any mortgage, charge, lien, pledge or other security interest, upon the whole or any part of its present or future undertaking, assets or revenues (including any uncalled capital) to secure any Relevant Indebtedness outside the PRC or to secure any guarantee or indemnity in respect of any Relevant Indebtedness outside the PRC without at the same time or prior thereto securing the Bonds or guaranteeing or indemnifying the Bondholders equally and rateably therewith.
(b) Financial Information: For so long as any Bond remains outstanding:
(i) the Company will furnish the Trustee with (A) a Compliance Certificate of the Company in English (on which the Trustee may rely conclusively as to such compliance) and a copy of the relevant Company Audited Financial Reports within 150 days of the end of each Relevant Period prepared in accordance with the Accounting Standards for Business Enterprises in the PRC (“PRC GAAP”) (audited by a nationally recognised firm of independent accountants) and if such statements
46 shall be in the Chinese language, together with an English translation of the same translated by (aa) a nationally recognised firm of accountants or (bb) a professional translation service provider, and checked by a nationally recognised firm of independent accountants; and (B) a copy of the Company Semi-Annual Unaudited Financial Reports within 90 days of the end of each Relevant Period prepared on a basis consistent with its audited consolidated financial statements and if such statements shall be in the Chinese language, together with an English translation of the same and translated by (aa) a nationally recognised firm of accountants or (bb) a professional translation service provider, and checked by a nationally recognised firm of independent accountants; provided that, if at any time the capital stock of the Company is listed for trading on a recognised stock exchange, the Company may furnish to the Trustee, as soon as they are available but in any event not more than 30 calendar days after any financial or other reports of the Company are filed with the exchange on which the Company’s capital stock is at such time listed for trading, copies of any financial or other report filed with such exchange in lieu of the reports identified in Condition 4(b)(i)(A) and Condition 4(b)(i)(B) above and if such report shall be in the Chinese language, together with an English translation of the same and translated by (aa) a nationally recognised firm of accountants or (bb) a professional translation service provider, and checked by a nationally recognised firm of independent accountants, in each case, certified as true and correct copies of the original by an Authorised Signatory (as defined in the Trust Deed) of the Company;
(ii) the Issuer and the Guarantor will furnish the Trustee with a Compliance Certificate of each of the Issuer and the Guarantor in English pursuant to the Trust Deed (on which the Trustee may rely as to such compliance) within 150 days of the end of each financial year;
(iii) the Guarantor will furnish the Trustee with: (A) a copy in English of the relevant Guarantor Audited Financial Reports within 150 days of the end of each Relevant Period prepared in accordance with the Hong Kong Financial Reporting Standards (“HKFRS”); and (B) a copy in English of the Guarantor Unaudited Financial Reports within 90 days of the end of each Relevant Period; and
(iv) each of the Issuer, the Guarantor and the Company will furnish the Trustee with a Compliance Certificate of the Issuer, the Guarantor or the Company, as the case may be, (on which the Trustee may rely conclusively as to such compliance) within 14 days of any request therefor from the Trustee.
The Trustee may rely conclusively on any such translation as referred to in this Condition 4(b) and shall be entitled to assume that it is a complete and accurate translation of the original, and the Trustee shall not be responsible or liable to the Issuer, the Guarantor, the Company, any Bondholder, the Agents or any other person for doing so.
(c) Issuer Activities: The Issuer shall not, and the Guarantor and the Company will procure that the Issuer will not, conduct any business or activities other than to (i) finance the business operations, (ii) engage in hedging activities, or (iii) any other activities incidental to (i) and (ii), for the Guarantor, the Company or any of its subsidiaries through the offering, sale or issuance of bonds and borrowings of indebtedness in or lending the proceeds thereof to the Guarantor, the Company or any of its subsidiaries, and any other activities in connection therewith.
47 (d) Maintenance of Consolidated Net Worth and Liquidity: The Company has undertaken in the Keepwell and Liquidity Support Deed that, from the Issue Date and for so long as any Bonds are outstanding, it shall cause:
(i) the Issuer to have a Consolidated Net Worth of at least US$1.00 (or its equivalent in any other currency) at all times;
(ii) the Guarantor to have a Consolidated Net Worth of at least US$10,000 (or its equivalent in any other currency) at all times;
(iii) each of the Issuer and the Guarantor to have sufficient liquidity to ensure timely payment by each of the Issuer and the Guarantor of any amounts payable under or in respect of any of its indebtedness (including under the Bonds and the Guarantee in accordance with the Terms and Conditions and/or the Trust Deed and otherwise under the Trust Deed and the Agency Agreement); and
(iv) each of the Issuer and the Guarantor to remain solvent and a going concern at all times under the laws of their respective jurisdictions of incorporation and applicable accounting standards.
The Consolidated Net Worth of the Issuer and the Guarantor, respectively, shall be tested by reference to the annual accounts of the Issuer and the Guarantor Audited Financial Reports or, as the case may be, the Guarantor Unaudited Financial Reports, whichever is the latest available document, respectively.
(e) Liquidity Support Undertaking: In the event that the Trustee has given the Issuer, the Guarantor and the Company a Trigger Notice:
(i) Irrevocable Cross-Border RMB Standby Facility: the Company shall in accordance with the Keepwell and Liquidity Support Deed, among other things, (i) as soon as practicable establish and grant to the Issuer or the Guarantor, as the case may be, a standby facility in an amount in RMB sufficient to satisfy the payment obligations as provided in the Keepwell and Liquidity Support Deed, (ii) as soon as practicable open with a PRC commercial bank a special RMB account for the transfer and remittance of such amount to the Issuer or the Guarantor, as the case may be, (iii) remit such amount to a specified account of the Issuer or the Guarantor, as the case may be, in Hong Kong through the special RMB account and (iv) cause the Issuer or the Guarantor, as the case may be, to use such amount received to (A) discharge its obligations under the Bonds, the Trust Deed, the Agency Agreement, the Deed of Equity Interest Purchase Undertaking and the Keepwell and Liquidity Support Deed on the due date therefor, or (B) remedy the Financial Ratio Failure if the Triggering Event is a Financial Ratio Failure (each as defined in the Keepwell and Liquidity Support Deed); and
(ii) Obligation to invest: the Company shall invest (either by itself or through a Subsidiary of the Company as designated by it) in the Issuer or the Guarantor, as the case may be (by equity investment or shareholders’ loan or a combination thereof) in the manner set out in the Keepwell and Liquidity Support Deed. The Issuer or the Guarantor, as the case may be, shall use its best efforts to do all such things and take such actions as may be necessary or desirable to obtaining the relevant investment approvals as provided in the Keepwell and Liquidity Support Deed.
(f) Deed of Equity Interest Purchase Undertaking: Upon the Trustee being notified in writing of the occurrence of any Event of Default (as defined under Condition 9), the Trustee shall give to the Company (with a copy to the Issuer) a notice in writing in accordance with the Trust Deed notifying the Company of its obligations to purchase
48 certain equity interests under the Deed of Equity Interest Purchase Undertaking. Upon the completion of any equity purchase made in accordance with the Deed of Equity Interest Purchase Undertaking, the Company undertakes to (x) in the event that a Relevant Transferor (as defined in the Deed of Equity Interest Purchase Undertaking) is neither the Issuer nor the Guarantor, procure such Relevant Transferor to promptly on-lend or distribute in full the relevant portion of the purchase price of such equity purchase received by such Relevant Transferor to the Issuer prior to any other use, disposal or transfer of the proceeds received and (y) promptly do all such things (including entering into and executing any agreements or arrangements required) and take all actions necessary for the proceeds received by the Issuer or the Guarantor from the Company or pursuant to any on-loan or distribution referred to in Condition 4(f)(x) above to be applied solely towards the payment in accordance with the Trust Deed of any outstanding amounts under the Trust Deed, the Guarantee and the Bonds (including any interest accrued but unpaid on such Bonds) prior to any other use, disposal or transfer of the proceeds received.
(g) Rating maintenance: So long as any Bonds remains outstanding, save with the approval of an Extraordinary Resolution of Bondholders, the Issuer, the Guarantor and the Company shall maintain a rating on the Bonds by a Rating Agency.
(h) Reporting to NDRC: The Company undertakes to (i) report or cause to be reported the relevant information in connection with the Bonds to the NDRC, not later than the PRC Business Day falling 10 PRC Business Days after the Issue Date (the “Post-Issuance Reporting Filing Deadline”) and in accordance with the Notice on Promoting the Reform of the Filing and Registration System for Issuance of Foreign Debt by Corporates (國家發 展改革委關於推進企業發行外債備案登記制管理改革的通知) promulgated by the NDRC and effective from 14 September 2015 (the “Post-Issuance Reporting Filing”) and (ii) comply with all applicable PRC laws and regulations in relation to the Post-Issuance Reporting Filing. The Company shall:
(i) within five PRC Business Days after the submission of the Post-Issuance Reporting Filing procure the Issuer to provide the Trustee with a certificate substantially in the form set out in the Trust Deed signed by an Authorised Signatory of the Issuer confirming the submission of the Post-Issuance Reporting Filing to the NDRC; and
(ii) procure the Issuer to give notice to the Bondholders confirming the submission of the Post-Issuance Reporting Filing to the NDRC within five PRC Business Days after the certificate referred to in sub-paragraph (i) above of this Condition 4(h) is delivered to the Trustee.
The Trustee shall have no obligation or duty to ensure the Post-Issuance Reporting Filing is submitted to the NDRC on or before the Post-Issuance Reporting Filing Deadline or to assist the Company with or to monitor the Post-Issuance Reporting Filing or to verify whether or not the Post-Issuance Reporting Filing is completed or to verify the accuracy, validity and/or genuineness of any documents comprising or prepared or submitted in relation to or in connection with the Post-Issuance Reporting Filing, and the Trustee shall not be liable to the Bondholders, the Issuer, the Guarantor, the Company or any other person for not doing so. The Trustee shall have no obligation or duty to give notice to the Bondholders confirming the submission of the Post-Issuance Reporting Filing.
49 (i) Interpretation:
In these Conditions:
“Company Audited Financial Reports” means the annual audited consolidated financial statements of the Company, which comprise the consolidated balance sheet, the consolidated income statement, the consolidated cashflow statement and the consolidated statement of changes in owners’ equity of the Company together with the auditors’ audit report and notes to the financial statements;
“Company Semi-Annual Unaudited Financial Reports” means the semi-annual unaudited consolidated financial statements of the Company, which comprise the consolidated balance sheet, the consolidated income statement and the consolidated cashflow statement of the Company;
“Compliance Certificate” means a certificate in English (substantially in the form included in Schedule 6 to the Trust Deed) of each of the Company, the Issuer and the Guarantor (as the case may be) signed by an Authorised Signatory of the Company, the Issuer or the Guarantor (as the case may be) that, having made all reasonable enquiries, to the best of the knowledge, information and belief of the Company, the Issuer or the Guarantor (as the case may be), as at a date (the “Certification Date”) not more than five days before the date of the certificate:
(i) no Event of Default (as defined in Condition 9) or Potential Event of Default had occurred since the Certification Date of the last such certificate or (if none) the date of the Trust Deed or, if such an event had occurred, giving details of it; and
(ii) the Company, the Issuer and the Guarantor (as the case may be) has complied with all of its obligations under the Trust Deed, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and the Bonds (as applicable);
“Consolidated Net Worth” means, in respect of the Issuer or the Guarantor, the excess of the total assets of the Issuer and its consolidated Subsidiaries or the Guarantor and its consolidated Subsidiaries, as the case may be, over the total liabilities of the Issuer and its consolidated Subsidiaries, or the Guarantor and its consolidated Subsidiaries, as the case may be, “total assets” and “total liabilities” each to be determined in accordance with the HKFRS consistently applied;
“Guarantor Audited Financial Reports” means the annual audited consolidated statement of comprehensive income, statement of financial position and statement of cashflow of the Guarantor together with any statements, reports (including any Directors’ and auditors’ reports) and notes attached to or intended to be read with any of them, which shall all be in the English language;
“Guarantor Unaudited Financial Reports” means the semi-annual (or any other interim reporting period required by applicable law or regulations) unaudited consolidated statement of comprehensive income, statement of financial position and statement of cashflow of the Guarantor together with any statements, reports (including any Directors’ and auditors’ review reports, if any) and any notes attached to or intended to be read with any of them, which shall all be in the English language;
“Hong Kong” means the Hong Kong Special Administrative Region of the People’s Republic of China;
“Potential Event of Default” means an event or circumstance which could with the giving of notice, lapse of time, issue of a certificate and/or fulfilment of any other requirement provided for in Condition 9 become an Event of Default;
50 “PRC” means the People’s Republic of China which, for the purposes of these Conditions, shall not include Hong Kong, Macau and Taiwan;
“PRC Business Day” means a working day, other than a Saturday, Sunday or public holiday in the PRC, on which commercial banks are generally open for business in Beijing and Tianjin;
“Rating Agency” means: (i) any of Moody’s Investors Service, Inc. and its successors (“Moody’s), Fitch Ratings Ltd. and its successors (“Fitch”); or (ii) if Moody’s or Fitch shall not make a rating of the Bonds publicly available, the Issuer shall select and substitute Moody’s or Fitch with Standard & Poor’s Rating Services, a division of The McGraw Hill Companies, Inc. and its successors or any other reputable credit rating agency of international standing;
“Relevant Indebtedness” means any present or future indebtedness which is in the form of or represented by any bond, note, debenture, debenture stock, loan stock, or other securities which is, or is capable of being, listed, quoted or traded on any stock exchange or in any securities market (including, without limitation, any over-the-counter market) (which for the avoidance of doubt does not include bi-lateral loans, syndicated loans or club deal loans);
“Relevant Period” means, in relation to each of the Company Audited Financial Reports and the Guarantor Audited Financial Reports, each period of twelve months ending on the last day of their respective financial years (being December 31 of that financial year) and, in relation to each of the Company Semi-Annual Unaudited Financial Reports and the Guarantor Unaudited Financial Reports, each period of six months ending on the last day of their respective first half financial years (being June 30 of that financial year);
a“Subsidiary” of any person means (i) any company or other business entity of which that person owns or controls (either directly or through one or more other Subsidiaries) more than 50 per cent. of the issued share capital or other ownership interest having ordinary voting power to elect directors, managers or trustees of such company or other business entity, or (ii) any company or other business entity which at any time has its accounts consolidated with those of that person or which, under the law, regulations or generally accepted accounting principles of the jurisdiction of incorporation of such person from time to time, should have its accounts consolidated with those of that person; and
“Trigger Notice” means a notice to be given by the Trustee to the Issuer, the Guarantor and the Company substantially in the form set out in Schedule 1 to the Keepwell and Liquidity Support Deed.
5 INTEREST
The Bonds bear interest on their outstanding principal amount from and including 22 March 2018 at the rate of 1.625 per cent. per annum, payable annually in arrear on 22 June in each year (each an “Interest Payment Date”), except that the first interest payment date shall be on 22 June 2019 and shall be in respect of the period from and including 22 March 2018 to but excluding 22 June 2019.
Each Bond will cease to bear interest from the due date for redemption unless, upon surrender of the Certificate representing such Bond, payment of principal or premium (if any) is improperly withheld or refused. In such event it shall continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant holder, and
51 (b) the day seven days after the Trustee or the Principal Paying Agent has notified Bondholders of receipt of all sums due in respect of all the Bonds up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant holders under these Conditions).
Where interest is to be calculated in respect of a period which is equal to or shorter than an Interest Period (as defined below), the day-count fraction used will be the number of days in the relevant period, from and including the date from which interest begins to accrue to but excluding the date on which it falls due, divided by the number of days in the Interest Period in which the relevant period falls (including the first such day but excluding the last).
In these Conditions, the period beginning on and including the Issue Date and ending on but excluding the first Interest Payment Date and each successive period beginning on and including an Interest Payment Date and ending on but excluding the next succeeding Interest Payment Date is called an “Interest Period”.
Interest in respect of any Bond shall be calculated per €1,000 in principal amount of the Bonds (the “Calculation Amount”). The amount of interest payable per Calculation Amount for any period shall be equal to the product of the rate of interest specified above, the Calculation Amount and the day-count fraction for the relevant period, rounding the resulting figure to the nearest cent (half a cent being rounded upwards).
6 REDEMPTION AND PURCHASE
(a) Final Redemption: Unless previously redeemed or purchased and cancelled, the Bonds will be redeemed at their principal amount on 22 June 2022 (the “Maturity Date”). The Bonds may not be redeemed at the option of the Issuer other than in accordance with this Condition 6.
(b) Redemption for Tax Reasons: The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ notice (a “Tax Redemption Notice”) to the Bondholders in accordance with Condition 16 (which notice shall be irrevocable) and in writing to the Trustee and the Principal Paying Agent, at their principal amount, (together with interest accrued up to but excluding the date fixed for redemption), if the Issuer (or, if the Guarantee was called, the Guarantor) satisfies the Trustee immediately prior to the giving of such notice that: (i) it has or will become obliged to pay Additional Tax Amounts as provided or referred to in Condition 8 as a result of any change in, or amendment to, the laws or regulations of the British Virgin Islands, Hong Kong or the PRC or, in each case, any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including but not limited to any decision by a court of competent jurisdiction), which change or amendment becomes effective on or after 13 March 2018; and (ii) such obligation cannot be avoided by the Issuer (or the Guarantor, as the case may be) taking reasonable measures available to it, provided that no Tax Redemption Notice shall be given earlier than 90 days prior to the earliest date on which the Issuer (or the Guarantor, as the case may be) would be obliged to pay such Additional Tax Amounts were a payment in respect of the Bonds then due.
Prior to the giving of any Tax Redemption Notice pursuant to this Condition 6(b), the Issuer (or the Guarantor, as the case may be) shall deliver to the Trustee (a) a certificate in English signed by any Authorised Signatory of the Issuer (or by any Authorised Signatory of the Guarantor, as the case may be) stating that the obligation referred to in Condition 6(b)(i) above cannot be avoided by the Issuer (or the Guarantor, as the case may be) taking reasonable measures available to it and (b) an opinion, addressed to and in form and substance satisfactory to the Trustee, of independent tax or legal advisers of recognised standing to the effect that the Issuer (or the Guarantor, as the case may be) has or will become obliged to pay such Additional Tax Amounts as a result of such change or
52 amendments and opinion. The Trustee shall be entitled (but shall not be obliged) to accept and rely upon such certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent set out in Condition 6(b)(ii) above without further enquiry and without liability to any Bondholder or any other person for so relying, in which event such certificate and opinion shall be conclusive and binding on the Bondholders.
(c) Redemption for Change of Control: At any time following the occurrence of a Change of Control, the holder of any Bond will have the right, at such holder’s option, to require the Issuer to redeem all, but not some only, of that holder’s Bonds on the Change of Control Put Date at a price equal to 101 per cent. of their principal amount, together with accrued interest to but excluding the Change of Control Put Date. To exercise such right, the holder of the relevant Bond must deposit at the specified office of any Paying Agent a duly completed and signed notice of redemption, in the form, for the time being current, obtainable from the specified office of any Paying Agent (a “Change of Control Put Exercise Notice”), together with the Certificate evidencing the Bonds to be redeemed, by not later than 30 days following the occurrence of a Change of Control, or, if later, 30 days following the date upon which notice thereof is given to Bondholders by the Issuer in accordance with Condition 16. The “Change of Control Put Date” shall be the fourteenth day after the expiry of such period of 30 days as referred to above in this Condition 6(c).
A Change of Control Put Exercise Notice, once delivered, shall be irrevocable and the Issuer shall redeem the Bonds which are the subject of the Change of Control Put Exercise Notices delivered as aforesaid on the Change of Control Put Date.
The Issuer shall give notice to Bondholders (in accordance with Condition 16) and to the Trustee and the Principal Paying Agent in writing by not later than 14 business days following the first day on which it becomes aware of the occurrence of a Change of Control, which notice shall specify the procedure for exercise by Bondholders of their rights to require redemption of the Bonds pursuant to this Condition 6(c).
Neither the Trustee nor the Agents shall be required to monitor whether a Change of Control or any event which could lead to the occurrence of a Change of Control has occurred and shall not be liable to Bondholders or any other person for not doing so.
For the purposes of these Conditions:
a“Change of Control” occurs when:
(i) (x) the SASAC, and (y) any other person directly controlled by the central government of the PRC, together cease to directly or indirectly hold or own 66.67 per cent. of the issued share capital of the Company;
(ii) the Company ceases to directly or indirectly hold or own 100 per cent. of the issued share capital of the Issuer; or
(iii) the Company ceases to directly or indirectly hold or own 100 per cent. of the issued share capital of the Guarantor; and
“SASAC” means the State-owned Assets Supervision and Administration Commission of the Tianjin City of the PRC or its successor.
53 (d) Purchase: The Company, the Guarantor, the Issuer and their respective Subsidiaries may at any time purchase Bonds in the open market or otherwise at any price. The Bonds so purchased, while held by or on behalf of the Company, the Guarantor, the Issuer or any such Subsidiary, shall not entitle the holder to vote at any meetings of the Bondholders and shall not be deemed to be outstanding for the purposes of, among other things, calculating quorums at meetings of the Bondholders or for the purposes of Conditions 9, 12(a) and 13.
(e) Cancellation: All Certificates representing Bonds which are (i) redeemed or (ii) purchased by or on behalf of the Company, the Guarantor, the Issuer or their respective Subsidiaries shall be surrendered for cancellation to the Transfer Agent and, upon surrender thereof, all such Bonds shall be cancelled forthwith. Any Certificates so surrendered for cancellation may not be reissued or resold and the obligations of the Issuer and the Guarantor in respect of any such Bonds shall be discharged.
7 PAYMENTS
(a) Method of Payment:
(i) Payments of principal and premium (if any) shall be made (subject to surrender of the relevant Certificates at the specified office of any Transfer Agent or of the Registrar if no further payment falls to be made in respect of the Bonds represented by such Certificates) in the manner provided in Condition 7(a)(ii) below.
(ii) Interest on each Bond shall be paid to the person shown on the Register at the close of business on the fifth Payment Business Day before the due date for payment thereof (the “Record Date”). Payments of interest on each Bond shall be made in Euros by cheque drawn on a bank and mailed to the holder (or to the first named of joint holders) of such Bond at its address appearing in the Register. Upon application by the holder to the specified office of the Registrar or any Transfer Agent before the Record Date, such payment of interest may be made by transfer to an account in Euros maintained by the payee with a bank. If the amount of principal being paid upon surrender of the relevant Certificate is less than the outstanding principal amount of such Certificate, the Registrar will annotate the Register with the amount of principal so paid and will (if so requested in writing by the Issuer or a Bondholder) issue a new Certificate with a principal amount equal to the remaining unpaid outstanding principal amount. If the amount of premium (if any) or interest being paid is less than the amount then due, the Registrar will annotate the Register with the amount of premium (if any) or interest so paid.
Notwithstanding the foregoing, so long as the Global Certificate is held on behalf of Euroclear Bank SA/NV, Clearstream Banking S.A. or any other clearing system, each payment in respect of the Global Certificate will be made to, or to the order of, the person shown as the holder in the Register at the close of business of the relevant clearing system on the Clearing System Business Day before the due date for such payments, where “Clearing System Business Day” means a weekday (Monday to Friday, inclusive) except December 25 and January 1.
(b) Payments subject to Fiscal Laws: All payments are subject in all cases to: (i) any fiscal or other laws, regulations and directives applicable thereto in the place of payment, but without prejudice to the provisions of Condition 8 and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the “Code”) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or (without prejudice to the provisions of Condition 8) any law implementing an intergovernmental approach thereto. No commission or expenses shall be charged to the Bondholders in respect of such payments.
54 (c) Payment Initiation: Where payment is to be made by transfer to an account in Euros, payment instructions (for value on the due date or, if that is not a Payment Business Day, for value the first following day which is a Payment Business Day) will be initiated, and where payment is to be made by cheque, the cheque will be mailed, on the due date for payment (or, if that date is not a Payment Business Day, on the first following day which is a Payment Business Day), or, in the case of payments of principal and premium (if any) where the relevant Certificate has not been surrendered at the specified office of any Transfer Agent or of the Registrar, on a day on which the Principal Paying Agent is open for business and on which the relevant Certificate is surrendered.
(d) Appointment of Agents: The Principal Paying Agent, the Registrar and the Transfer Agent initially appointed by the Issuer and the Guarantor and their respective specified offices are listed below. The Principal Paying Agent, the Registrar and the Transfer Agent act solely as agents of the Issuer and the Guarantor and do not assume any fiduciary or other obligation to or relationship of agency or trust for or with any Bondholder. The Issuer and the Guarantor reserve the right at any time, with the prior written approval of the Trustee, to vary or terminate the appointment of the Principal Paying Agent, the Registrar, any Transfer Agent or any of the other Agents and to appoint additional or other Agents, provided that the Issuer and the Guarantor shall at all times maintain (i) a Principal Paying Agent, (ii) a Registrar, (iii) a Transfer Agent and (iv) such other agents as may be required by any other stock exchange on which the Bonds may be listed.
Notice of any such termination or appointment or any change of any specified office of an Agent shall promptly be given by the Issuer to the Bondholders.
(e) Delay in payment: Bondholders will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due on a Bond if the due date is not a Payment Business Day or if the Bondholder is late in surrendering or cannot surrender its Certificate (if required to do so).
(f) Non-Payment Business Days: If any date for payment in respect of any Bond is not a Payment Business Day, the holder shall not be entitled to payment until the next following Payment Business Day nor to any interest or other sum in respect of such postponed payment or if a cheque mailed in accordance with Condition 7(a)(ii) arrives after the due date for payment. In this Condition 7:
“Payment Business Day” means a day (other than a Saturday, a Sunday or a public holiday) on which banks and foreign exchange markets are open for business in Hong Kong and the place in which the specified office of the Principal Paying Agent is located and which is also a TARGET Business Day;
“TARGET Business Day” means a day on which the TARGET System is open for the settlement of payments in euro; and
“TARGET System” means the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) system or any successor thereto.
55 8 TAXATION
All payments of principal, premium (if any) and interest by or on behalf of the Issuer or the Guarantor in respect of the Bonds or under the Guarantee shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within the British Virgin Islands, Hong Kong or the PRC or, in each case, any political subdivision or authority therein or thereof having power to tax, unless such withholding or deduction is required by law.
Where such withholding or deduction is made by the Issuer or, as the case may be, the Guarantor by or within the PRC at the aggregate rate applicable on 13 March 2018 (the “Applicable Rate”), the Issuer or, as the case may be, the Guarantor will increase the amounts paid by it to the extent required, so that the net amount received by Bondholders equals the amounts which would otherwise have been received by them had no such withholding or deduction been required.
If the Issuer or, as the case may be, the Guarantor is required to make a deduction or withholding (i) by or within the PRC in excess of the Applicable Rate or (ii) by or within Hong Kong or the British Virgin Islands, in such event the Issuer or, as the case may be, the Guarantor shall pay such additional amounts (“Additional Tax Amounts”) as will result in receipt by the Bondholders of such amounts as would have been received by them had no such withholding or deduction been required, except that no Additional Tax Amounts shall be payable in respect of any Bond:
(a) Other connection: to a holder (or to a third party on behalf of a holder) who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond by reason of his having some connection with the British Virgin Islands, Hong Kong or the PRC other than the mere holding of the Bond; or
(b) Surrender more than 30 days after the Relevant Date: in respect of which the Certificate representing such Bond is presented (where presentation is required) for payment more than 30 days after the Relevant Date except to the extent that the holder of it would have been entitled to such Additional Tax Amounts on surrendering the Certificate representing such Bond for payment on the last day of such period of 30 days.
In these Conditions, “Relevant Date” in respect of any Bond means the date on which payment in respect of it first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which payment in full of the amount outstanding is made or (if earlier) the date seven days after that on which notice is duly given to the Bondholders that, upon further surrender of the Certificate representing such Bond being made in accordance with these Conditions, such payment will be made, provided that payment is in fact made upon such surrender.
Neither the Trustee nor any Agent shall be responsible for paying any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or other payment referred to in this Condition 8 or for determining whether such amounts are payable or the amount thereof, and none of them shall be responsible or liable for any failure by the Issuer, the Guarantor, the Company, any Bondholder or any third party to pay such tax, duty, charges, withholding or other payment in any jurisdiction or to provide any notice or information to the Trustee or any Agent (as the case may be) that would permit, enable or facilitate the payment of any principal, premium (if any), interest or other amount under or in respect of the Bonds without deduction or withholding for or on account of any tax, duty, charge, withholding or other payment imposed by or in any jurisdiction.
56 9 EVENTS OF DEFAULT
If an Event of Default (as defined below) occurs, the Trustee at its discretion may, and if so requested in writing by holders of at least 25 per cent. of the aggregate principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution shall, (provided that in any such case the Trustee shall have been indemnified and/or secured and/or prefunded to its satisfaction), give written notice to the Issuer and the Guarantor declaring that the Bonds are, and they shall immediately become, due and payable at their principal amount together (if applicable) with accrued interest. An “Event of Default” occurs if:
(a) Non-Payment: there has been a failure to pay (i) the principal of or any premium on any of the Bonds when due; or (ii) any interest on the Bonds within seven days after the due date for such payment; or
(b) Breach of Other Obligations: the Company, the Issuer or the Guarantor defaults in the performance or observance of any of its other obligations under or in respect of the Bonds, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking, the Trust Deed, (other than those referred to in Condition 9(a) and where it gives rise to a redemption pursuant to Condition 6(c)) which default (i) is, in the opinion of the Trustee, incapable of remedy, or (ii) being a default which is, in the opinion of the Trustee, capable of remedy, remains unremedied for 30 days after notice of such default shall have been given to the Issuer, the Guarantor and Company by the Trustee; or
(c) Cross-Default: (i) any other present or future indebtedness of the Company, the Issuer, the Guarantor or any of their respective Subsidiaries for or in respect of moneys borrowed or raised becomes (or becomes capable of being declared) due and payable prior to its stated maturity by reason of any actual or potential default, event of default or the like (howsoever described), or (ii) any such indebtedness is not paid when due or, as the case may be, within any originally applicable grace period, or (iii) the Company, the Issuer, the Guarantor or any of their respective Subsidiaries fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of, any moneys borrowed or raised, provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this Condition 9(c) have occurred equals or exceeds US$20,000,000 or its equivalent; or
(d) Enforcement Proceedings: a distress, attachment, execution or other legal process is levied, enforced or sued out on or against a material part of the property, assets or revenues of the Company, the Issuer, the Guarantor or any of the Principal Subsidiaries and is not discharged or stayed within 30 days; or
(e) Security Enforced: any mortgage, charge, pledge, lien or other encumbrance, present or future, created or assumed by the Company, the Issuer, the Guarantor or any of the Principal Subsidiaries in respect of all or a material part of its assets becomes enforceable and any step is taken to enforce it (including the taking of possession or the appointment of a receiver, manager or other similar person) and is not discharged within 30 days; or
(f) Insolvency: the Company, the Issuer, the Guarantor or any of the Principal Subsidiaries is (or is, or could be, deemed by law or a court to be) insolvent or bankrupt or unable to pay its debts as and when such debts fall due, stops, suspends or threatens to stop or suspend payment of all or a material part of its debts, proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or a material part of the debts of the Company, the Issuer, the Guarantor, or any of the Principal Subsidiaries, as the case may be; or
57 (g) Winding-up: an order of any court of competent jurisdiction is made or an effective resolution passed for the winding-up or dissolution of the Issuer, the Guarantor or the Company or any of the Principal Subsidiaries (except for a members’ voluntary solvent winding-up of the Principal Subsidiaries) or the Issuer, the Guarantor or the Company or any of the Principal Subsidiaries ceases or threatens to cease to carry on all or substantially all of its business or operations, except for the purpose of and followed by a solvent winding-up, dissolution, reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms approved by an Extraordinary Resolution of the Bondholders, or (ii) in the case of any Principal Subsidiary of the Issuer, the Guarantor or the Company, whereby the undertaking and assets of such Principal Subsidiary are transferred to or otherwise vested in the Issuer, the Guarantor or the Company (as the case may be) or another of the Subsidiaries; or
(h) Nationalisation: any step is taken by any person with a view to the seizure, compulsory acquisition or expropriation of all or any part of the assets of the Issuer, the Guarantor, the Company or any of the Principal Subsidiaries; or
(i) Authorisation and Consents: any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorisation, exemption, filing, licence, order, recording or registration) at any time required to be taken, fulfilled or done in order (i) to enable the Issuer, the Company and the Guarantor lawfully to enter into, exercise their respective rights and perform and comply with their respective obligations under the Bonds, the Trust Deed, the Keepwell and Liquidity Support Deed (other than with regard to the performance and compliance with the obligations thereunder) and the Deed of Equity Interest Purchase Undertaking (other than with regard to the performance and compliance with the obligations thereunder), (ii) to ensure that those obligations are legally binding and enforceable and (iii) to make the Bonds, the Trust Deed, the Keepwell and Liquidity Support Deed and the Deed of Equity Interest Purchase Undertaking admissible in evidence in the courts of Hong Kong is not taken, fulfilled or done; or
(j) Illegality: it is or will become unlawful for any of the Company, the Issuer and the Guarantor to perform or comply with any one or more of their respective obligations under any of the Bonds or the Trust Deed, the Keepwell and Liquidity Support Deed or the Deed of Equity Interest Purchase Undertaking; or
(k) Unenforceability of Guarantee: except as permitted under the Trust Deed, any part of the Guarantee is unenforceable or invalid or shall for any reason cease to be in full force and effect or is claimed to be unenforceable, invalid or not in full force and effect by the Issuer or the Guarantor; or
(l) Keepwell and Liquidity Support Deed and Deed of Equity Interest Purchase Undertaking: the Keepwell and Liquidity Support Deed or the Deed of Equity Interest Purchase Undertaking is not or is claimed by the Company not to be enforceable, valid or in full force and effect, or the Keepwell and Liquidity Support Deed or the Deed of Equity Interest Purchase Undertaking is modified, amended or terminated other than strictly in accordance with its terms or these Conditions; or
(m) Analogous Events: any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in this Condition 9.
Neither the Trustee nor any Agent shall be required to take any steps to ascertain whether any Event of Default or Potential Event of Default has occurred and none of them shall be responsible or liable to the Bondholders, the Issuer, the Guarantor, the Company or any other person for any loss arising from any failure to do so.
58 In these Conditions, “Principal Subsidiaries” mean, at any time, each Subsidiary of the Company:
(i) whose gross revenue attributable to the Company (consolidated in the case of a Subsidiary which itself has Subsidiaries), as shown by its latest audited income statement are at least 5 per cent. of the consolidated gross revenues as shown by the latest published audited income statement of the Company and its Subsidiaries include, for the avoidance of doubt, the Company and its Consolidated Subsidiaries’ share of profits of Subsidiaries not consolidated and of associated entities and after adjustments for minority interests;
(ii) whose profits before taxation and exceptional items attributable to the Company (“pre-tax profit”) (consolidated in the case of a Subsidiary which itself has Subsidiaries), as shown by its latest audited income statement, are at least 5 per cent. of the consolidated pre-tax profit as shown by the latest published audited income statement of the Company and its Subsidiaries, including, for the avoidance of doubt, the Company and its consolidated Subsidiaries’ share of profits of Subsidiaries not consolidated and of associated entities and after adjustments for minority interests; or
(iii) whose gross assets or (in the case of a Subsidiary of the Guarantor which has subsidiaries and which customarily prepares consolidated accounts) gross consolidated assets attributable to the Guarantor as shown by its latest balance sheet are at least 5 per cent. or the sum of (x) the gross consolidated assets of the Company and its Subsidiaries as shown by the latest published audited consolidated balance sheet of the Company and its Subsidiaries, and (y) the Company and its consolidated Subsidiaries’ share of the gross assets (consolidated in the case of a Subsidiary of the Company which itself has Subsidiaries and which customarily prepares consolidated accounts) (as shown by its latest balance sheet (consolidated, if available)) of each Subsidiary of the Company whose accounts are not consolidated with the accounts of the Company and after adjustment for minority interests,
provided that, in relation to paragraphs (i), (ii) and (iii) above of this definition:
(a) in the case of a corporation or other business entity becoming a Subsidiary of the Company after the end of the financial period to which the latest consolidated audited accounts of the Company relate, the reference to the then latest consolidated audited accounts of the Company for the purposes of the calculation above shall, until consolidated audited accounts of the Company for the financial period in which the relevant corporation or other business entity becomes a Subsidiary of the Company are published, be deemed to be a reference to the then latest consolidated audited accounts of the Company adjusted to consolidate the latest accounts (consolidated in the case of a Subsidiary of the Company which itself has Subsidiaries and which customarily prepares consolidated accounts) of such Subsidiary in such accounts;
(b) if the accounts of any Subsidiary of the Company (not being a Subsidiary of the Company referred to in proviso (i) above of this definition) are not consolidated with those of the Company, then the determination of whether or not such subsidiary is a Principal Subsidiary shall be based on a pro forma consolidation of its accounts (consolidated, if available) with the consolidated accounts (determined on the basis of the foregoing) of the Company; and
(c) in relation to any Subsidiary of the Company, each reference in (i) or (ii) above to all or any of the accounts (consolidated or otherwise) of such Subsidiary shall be deemed to be a reference to the relevant audited accounts of such Subsidiary if it customarily
59 prepares accounts which are audited and, if not, to the relevant unaudited accounts of such Subsidiary which shall be certified by any two directors of such Subsidiary as having been properly prepared in accordance with generally accepted accounting principles applicable to such Subsidiary; or
(iv) to which is transferred the whole or substantially the whole of the assets of a Subsidiary which immediately prior to such transfer was a Principal Subsidiary, provided that (xx) the Principal Subsidiary which so transfers its assets shall forthwith upon such transfer cease to be a Principal Subsidiary and the Subsidiary to which the assets are so transferred shall forthwith become a Principal Subsidiary and (yy) on or after the date on which the first published audited accounts (consolidated, if appropriate) of the Company prepared as of a date later than such transfer are issued, whether such transferor Subsidiary or such transferee Subsidiary is or is not a Principal Subsidiary shall be determined on the basis of such accounts by virtue of the provisions of paragraphs (i), (ii) or (iii) above of this definition.
In addition, any Subsidiary which is not itself a Principal Subsidiary shall nevertheless be treated as a Principal Subsidiary if its gross revenue, pre-tax profit or gross assets (or consolidated gross revenue, consolidated pre-tax profit or gross consolidated assets in the case of a Subsidiary which itself has subsidiaries) when aggregated with the gross revenue, pre-tax profit or gross assets of each other Subsidiary which is not itself a Principal Subsidiary (or consolidated gross revenue, consolidated pre-tax profit or gross consolidated assets in the case of a Subsidiary which itself has subsidiaries), during the preceding 12 months, exceeds five per cent. of the consolidated gross revenue, consolidated pre-tax profit or gross consolidated assets of the Company and its Subsidiaries.
10 PRESCRIPTION
Claims against the Issuer and/or the Guarantor for payment in respect of the Bonds shall be prescribed and become void unless made within 10 years (in the case of principal or premium) or five years (in the case of interest) from the appropriate Relevant Date in respect of them.
11 REPLACEMENT OF CERTIFICATES
If any Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject to applicable laws, regulations or other relevant regulatory authority regulations, at the specified office of the Registrar or any Transfer Agent, in each case on payment by the claimant of the fees and costs incurred in connection therewith and on such terms as to evidence, security, indemnity and otherwise as (a) the Issuer may require (provided that the requirement is reasonable in light of prevailing market practice) and (b) the Registrar or the relevant Transfer Agent may require. Mutilated or defaced Certificates must be surrendered before replacements will be issued.
12 MEETINGS OF BONDHOLDERS, MODIFICATION AND WAIVER
(a) Meetings of Bondholders: The Trust Deed contains provisions for convening meetings of Bondholders to consider matters affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of any of these Conditions or any provisions of the Trust Deed, the Keepwell and Liquidity Support Deed or the Deed of Equity Interest Purchase Undertaking. Such a meeting may be convened by the Issuer, the Guarantor or the Trustee and shall be convened by the Trustee if requested in writing to do so by Bondholders holding not less than 10 per cent. in aggregate principal amount of the Bonds for the time being outstanding and subject to it being indemnified and/or secured and/or pre-funded to its satisfaction against all costs and expenses. The quorum for any meeting convened to consider an Extraordinary Resolution will be two or more persons holding or representing more than 50 per cent. in aggregate principal amount of the Bonds for the time being outstanding, or, at any adjourned meeting, two or more persons being or representing
60 Bondholders whatever the principal amount of the Bonds held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to modify the maturity of the Bonds or the dates on which interest is payable in respect of the Bonds, (ii) to reduce or cancel the principal amount of, any premium payable in respect of, or interest on, the Bonds, (iii) to change the currency of payment of the Bonds, (iv) to modify the provisions concerning the quorum required at any meeting of Bondholders or the majority required to pass an Extraordinary Resolution, or (v) to cancel or amend the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking or the Guarantee other than in accordance with Condition 12(b) (each a “Reserved Matter”), in which case the necessary quorum will be two or more persons holding or representing not less than 75 per cent., or at any adjourned meeting not less than 25 per cent., in aggregate principal amount of the Bonds for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on Bondholders (whether or not they were present at the meeting at which such resolution was passed).
The Trust Deed provides that a resolution in writing signed by or on behalf of the holders of not less than 90 per cent. in aggregate principal amount of the Bonds for the time being outstanding shall for all purposes be as valid and effective as an Extraordinary Resolution passed at a meeting of Bondholders duly convened and held. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Bondholders.
(b) Modification of Agreements and Deeds: The Trustee may (but shall not be obliged to) agree, without the consent of the Bondholders, to (i) any modification of any of these Conditions or any of the provisions of the Trust Deed, the Agency Agreement, the Keepwell and Liquidity Support Deed or the Deed of Equity Interest Purchase Undertaking that is in its opinion of a formal, minor or technical nature or is made to correct a manifest error or is to comply with any mandatory provision of applicable law, and (ii) any other modification (except as mentioned in the Trust Deed), and any waiver or authorisation of any breach or proposed breach, of any of these Conditions or any of the provisions of the Trust Deed, the Agency Agreement, the Keepwell and Liquidity Support Deed or the Deed of Equity Interest Purchase Undertaking, or determine that an Event of Default or Potential Event of Default will not be treated as such, if, in the opinion of the Trustee, the interests of the Bondholders will not be materially prejudiced thereby (provided that the Trustee will not do so in contravention of an express direction given by an Extraordinary Resolution or a request made pursuant to Condition 9 or in respect of a Reserved Matter). Any such modification, authorisation or waiver shall be binding on the Bondholders and, unless the Trustee otherwise agrees, such modification, authorisation or waiver shall be notified by the Issuer, failing whom the Guarantor and/or the Company, to the Bondholders as soon as practicable thereafter in accordance with Condition 16.
The Issuer shall notify as soon as possible the Rating Agency of any modification of any of these Conditions or any of the provisions of the Trust Deed, the Agency Agreement, the Keepwell and Liquidity Support Deed or the Deed of Equity Interest Purchase Undertaking.
(c) Entitlement of the Trustee: In connection with the exercise of its functions, rights, powers and discretions (including but not limited to those referred to in this Condition 12) the Trustee shall have regard to the interests of the Bondholders as a class and shall not have regard to the consequences of such exercise for individual Bondholders, and the Trustee shall not be entitled to require on behalf of any Bondholders, nor shall any Bondholder be entitled to claim, from the Issuer, the Guarantor or (in the case of the Bondholder) the Trustee any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders except to the extent provided for in Condition 8 and/or any undertakings given in addition thereto or in substitution therefor pursuant to the Trust Deed.
61 13 ENFORCEMENT
At any time after the Bonds become due and payable, the Trustee may, at its discretion and without further notice, take such actions and/or steps and/or institute such proceedings against the Company, the Issuer and/or the Guarantor as it may think fit to enforce the terms of the Trust Deed, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and/or the Bonds, but it need not take any such actions, steps and/or proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Bondholders holding at least 25 per cent. in principal amount of the Bonds then outstanding, and (b) it shall first have been indemnified and/or secured and/or pre-funded to its satisfaction. No Bondholder may proceed directly against the Company, the Issuer and/or the Guarantor unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.
14 INDEMNIFICATION OF THE TRUSTEE
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including, but not limited to, provisions relieving it from taking proceedings to enforce payment unless first indemnified and/or secured and/or pre-funded to its satisfaction. The Trustee is entitled to enter into business transactions with the Company, the Issuer, the Guarantor and/or any entity related (directly or indirectly) to the Company, the Issuer or the Guarantor without accounting for any profit.
None of the Trustee or any of the Agents shall be responsible for the performance by the Issuer, the Company, the Guarantor and any other person appointed by the Issuer in relation to the Bonds of the duties and obligations on their part expressed in respect of the same and, unless it has express written notice from the Issuer, the Company or the Guarantor to the contrary, the Trustee and each Agent shall assume that the same are being duly performed. None of the Trustee or any Agent shall be liable to any Bondholder or any other person for any action taken by the Trustee or such Agent in accordance with the instructions of the Bondholders. The Trustee shall be entitled to rely on any direction, request or resolution of the Bondholders given by holders of the requisite principal amount of Bonds outstanding or passed at a meeting of the Bondholders convened and held in accordance with the Trust Deed. Whenever the Trustee is required or entitled by the terms of the Trust Deed, the Agency Agreement, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking or these Conditions to exercise any discretion or power, take any action, make any decision or give any direction, the Trustee is entitled, prior to its exercising any such discretion or power, taking any such action, making any such decision, or giving any such direction, to seek directions from the Bondholders by way of an Extraordinary Resolution, and the Trustee is not responsible for any loss or liability incurred by any person as a result of any delay in it exercising such discretion or power, taking such action, making such decision, or giving such direction where the Trustee is seeking such directions or in the event that no such directions are received. The Trustee shall be entitled to rely on any direction, request or resolution of the Bondholders given by holders of the requisite principal amount of Bonds outstanding or passed at a meeting of the Bondholders convened and held in accordance with the Trust Deed. Neither the Trustee nor any of the Agents shall be under any obligation to ascertain whether any Event of Default or Potential Event of Default has occurred or to monitor compliance with the provisions of the Trust Deed, the Agency Agreement, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking or these Conditions.
The Trustee may rely without liability to Bondholders on any report, confirmation, certificate or any advice or opinion of any legal advisers, accountants, financial advisers, financial institution or any other expert, whether or not addressed to it and whether their liability in relation thereto is limited (by its terms or by any engagement letter relating thereto entered into by the Trustee
62 or any other person or in any other manner) by reference to a monetary cap, methodology or otherwise. The Trustee may accept and shall be entitled to rely on any such report, confirmation, certificate, advice or opinion and, in such event, such report, confirmation, certificate, advice or opinion shall be binding on the Issuer, the Company, the Guarantor and the Bondholders.
15 FURTHER ISSUES
The Issuer may from time to time without the consent of the Bondholders create and issue further securities having the same terms and conditions as the Bonds in all respects (or in all respects except for the issue date, the first payment of interest on them (as the case may be) and the timing for complying with the requirements set out in these Conditions in relation to the Post-Issuance Reporting Filing) and so that such further issue shall be consolidated and form a single series with the Bonds. References in these Conditions to the Bonds include (unless the context requires otherwise) any such other securities issued pursuant to this Condition 15 and forming a single series with the Bonds. Any further securities forming a single series with the Bonds) shall be constituted by a deed supplemental to the Trust Deed.
16 NOTICES
Notices to the holders of Bonds shall be mailed to them at their respective addresses in the Register and shall be deemed to have been given on the fourth weekday (being a day other than a Saturday or a Sunday) after the date of mailing. Notices to the holders of the Bonds shall also be published at the expense of the Issuer, failing whom the Guarantor, in a daily newspaper of general circulation in Asia (which is expected to be the Asian Wall Street Journal). The Issuer shall also ensure that notices are duly published in a manner that complies with the rules and regulations of any stock exchange or other relevant authority on which the Bonds are for the time being listed. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, on the first date on which such publication is made.
So long as the Global Certificate is held on behalf of Euroclear Bank SA/NV and Clearstream Banking S.A., any notice to the holders of the Bonds shall be validly given by the delivery of the relevant notice to Euroclear Bank SA/NV and Clearstream Banking S.A. for communication by the relevant clearing system to entitled accountholders in substitution for notification as required by the Conditions and shall be deemed to have been given on the date of delivery to such clearing system.
So long as the Bonds are listed on the Official List of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF Market of the Luxembourg Stock Exchange and the rules and regulations of the Luxembourg Stock Exchange so require, the Issuer will publish notices (including financial notices) in a leading newspaper having a general circulation in Luxembourg (which is currently expected to be the Luxembourg Wort) or on the official website of the Luxembourg Stock Exchange (www.bourse.lu).
17 CONTRACTS (RIGHT OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of the Bonds under the Contracts (Rights of Third Parties) Act 1999.
63 18 GOVERNING LAW AND JURISDICTION
(a) Governing Law: The Trust Deed, the Guarantee, the Agency Agreement, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and the Bonds and any non-contractual obligations arising out of or in connection with them are governed by, and shall be construed in accordance with English law.
(b) Jurisdiction: The courts of Hong Kong are to have exclusive jurisdiction to settle any disputes that may arise out of or in connection with the Bonds, the Guarantee, the Agency Agreement, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and the Trust Deed (including any proceedings relating to any non-contractual obligations arising out of or in connection therewith) and accordingly any legal action or proceedings arising out of or in connection with any Bonds, the Guarantee, the Agency Agreement, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking or the Trust Deed (“Proceedings”) may be brought in the courts of Hong Kong. Pursuant to the Trust Deed, each of the Issuer, the Guarantor and the Company has irrevocably submitted to the jurisdiction of the courts of Hong Kong and waives any objection to Proceedings in such courts whether on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum.
(c) Agent for Service of Process: Each of the Issuer and the Company has irrevocably appointed the Guarantor at its registered office, currently at Rm. 19C, Lockhart Ctr., 301-307 Lockhart Rd., Wan Chai in Hong Kong, as its authorised agent for service of process in Hong Kong. Such service shall be deemed completed on delivery to such agent (whether or not it is forwarded to and received by the Issuer or, as the case may be, the Company). If for any reason the Guarantor shall cease to be such agent for service of process, the Issuer and the Company shall each forthwith appoint a new agent for service of process in Hong Kong and deliver to the Trustee a copy of the new agent’s acceptance of that appointment within 30 days of the Guarantor ceasing to be its agent for service of process. Nothing in these Conditions shall affect the right to serve process in any other manner permitted by law.
(d) Waiver of Immunity
(i) Each of the Issuer, the Guarantor and the Company confirms that it is a separate legal and independent entity organised under the law of the British Virgin Islands, the law of Hong Kong and the Company Law of the PRC, respectively; the Company is an enterprise undertaking commercial activities independent from the PRC government with ownership of its assets and the capacity to assume civil liabilities independently and each of the Issuer, the Guarantor and the Company and their respective subsidiaries and each of their respective assets and properties does not enjoy any sovereign, crown or other immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment or attachment in and of execution or otherwise) under the laws of its jurisdiction of incorporation.
(ii) Each of the Issuer, the Guarantor and the Company hereby waives any right to claim sovereign or other immunity from jurisdiction or execution and any similar defence, and irrevocably consents to the giving of any relief or the issue of any process, including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgement made or given in connection with any Proceedings.
64 DESCRIPTION OF THE KEEPWELL AND LIQUIDITY SUPPORT DEED
The following contains summaries of certain key provisions of the Keepwell and Liquidity Support Deed. Such statements do not purport to be complete and are qualified in their entirety by reference to the Keepwell and Liquidity Support Deed. Defined terms used in this section shall have the meanings given to them in the Keepwell and Liquidity Support Deed.
Ownership of the Issuer and the Guarantor
Pursuant to the Keepwell and Liquidity Support Deed, the Company will undertake with the Issuer, the Guarantor and the Trustee that it shall:
• directly or indirectly own and hold all of the outstanding shares of each of the Issuer and the Guarantor and shall not directly or indirectly pledge, grant a security interest, or in any way encumber or otherwise dispose of any such shares unless required to dispose of any or all such shares pursuant to a court decree or order of any government authority which, in the opinion of a legal adviser to the Company, may not be successfully challenged;
• procure the Guarantor to directly or indirectly own and hold all the outstanding shares of the Issuer; and
• maintain the Guarantor as the primary overseas subsidiary and sole fund raising platform of the Company outside the PRC.
Maintenance of Consolidated Net Worth and Liquidity
Pursuant to the Keepwell and Liquidity Support Deed, the Company will undertake that it shall cause:
• the Issuer to have a Consolidated Net Worth of at least U.S.$1.00 (or its equivalent in any other currency) at all times;
• the Guarantor to have a Consolidated Net Worth of at least U.S.$10,000 (or its equivalent in any other currency) at all times;
• each of the Issuer and the Guarantor to have sufficient liquidity to ensure timely payment by each of the Issuer and the Guarantor of any amounts payable under or in respect of any of its indebtedness (including under the Bonds and the Guarantee in accordance with the Terms and Conditions of the Bonds and/or the Trust Deed and otherwise under the Trust Deed and the Agency Agreement); and
• each of the Issuer and the Guarantor to remain solvent and a going concern at all times under the laws of their respective jurisdictions of incorporation and applicable accounting standards.
If the Issuer or the Guarantor at any time determines that it will have insufficient liquidity to meet its payment obligations as they fall due, then the Issuer and/or the Guarantor shall promptly notify the Company of the shortfall and the Company will make available to the Issuer or the Guarantor (as the case may be), before the due date of the relevant payment obligations, funds sufficient to enable the Issuer or the Guarantor (as the case may be) to meet such payment obligations in full as they fall due. The Issuer or the Guarantor shall use any funds made available to it by the Company in accordance with the Keepwell and Liquidity Support Deed solely for the payment when due of such payment obligations under the Bonds, the Guarantee, the Trust Deed or the Agency Agreement (as the case may be).
In addition, each of the Issuer and the Guarantor will undertake that it shall have a Consolidated Net Worth of at least U.S.$1.00 (or its equivalent in any other currency) (in the case of the Issuer) and U.S.$10,000 (or its equivalent in any other currency) (in the case of the Guarantor) at all times.
65 Relevant Indebtedness
Pursuant to the Keepwell and Liquidity Support Deed, the Company will undertake to the Trustee that neither the Company nor any of its Subsidiaries will create or permit to subsist any mortgage, charge, lien, pledge or other security interest, upon the whole or any part of its present or future undertaking, assets or revenues (including any uncalled capital) to secure any Relevant Indebtedness (as defined in the Terms and Conditions of the Bonds) outside the PRC or to secure any guarantee or indemnity in respect of any Relevant Indebtedness outside the PRC without at the same time or prior thereto securing the Bonds equally and rateably therewith.
Irrevocable Cross-border RMB Standby Facility
Pursuant to the Keepwell and Liquidity Support Deed and notwithstanding and without prejudice to the other provisions in the Keepwell and Liquidity Support Deed, in the event that the Trustee provides a Trigger Notice to the Issuer, the Guarantor and the Company or, as the case may be, any of the Issuer, the Guarantor and/or the Company has provided a Triggering Event Notice to the Trustee, the Company will agree to:
• as soon as practicable, establish and grant to the Issuer or the Guarantor, as the case may be, a standby facility (the “Standby Facility”) pursuant to which the Company will remit an amount in RMB that can be converted by the Issuer or the Guarantor, as the case may be, into the Relevant Amount (the “RMB Amount”);
• as soon as practicable open with a PRC commercial bank (the “Settlement Bank”) a special RMB account for the transfer and remittance of the RMB Amount to the Issuer or the Guarantor, as the case may be, according to the relevant PRC laws and regulations;
• remit the RMB Amount to a specified account of the Issuer or the Guarantor, as the case may be, in Hong Kong through the special RMB account (i) where the Triggering Event notified to the Trustee in the relevant Triggering Event Notice is a Financial Ratio Failure at least two Facility Business Days prior to the next Interest Payment Date or (ii) where the Triggering Event notified to the Trustee in the relevant Triggering Event Notice is an Event of Default or whether the Trustee has given a Trigger Notice pursuant to paragraphs (i) or (ii) of the definition thereof, as soon as practicable; and
• cause the Issuer or the Guarantor, as the case may be, to use the RMB Amount to (A) discharge its obligations under the Bonds, the Guarantee, the Trust Deed, the Agency Agreement, the Deed of Equity Interest Purchase Undertaking and the Keepwell and Liquidity Support Deed on the due date therefor; or (B) remedy the Financial Ratio Failure if the Triggering Event is a Financial Ratio Failure, provided that the Company’s obligations described above shall be subject to prevailing laws, regulations and government policies at such time and if required, the approvals from or registration or filing with competent PRC government authorities.
In addition, references to the following terms have the meanings defined below:
“Relevant Amount” means:
(i) if the Triggering Event specified in the relevant Triggering Event Notice is a Financial Ratio Failure, an amount in U.S. dollars no less than the amount sufficient to enable the Issuer or the Guarantor to remedy the Financial Ratio Failure calculated on a pro forma basis; or
(ii) if the Triggering Event specified in the relevant Triggering Event Notice is an Event of Default or a Trigger Notice is given pursuant to paragraphs (i) or (ii) of the definition thereof, as the case may be, an amount in Euros that is no less than the amount sufficient to enable each of the Issuer
66 and the Guarantor to discharge in full its obligations under the Bonds, the Guarantee and the Trust Deed and any other transaction documents, as the case may be (including without limitation the payment of the principal amount of the Bonds then outstanding as at the date of the Trigger Notice or Triggering Event Notice, as the case may be, and any interest due and unpaid and/or accrued but unpaid on the Bonds up to but excluding the date of such Trigger Notice or Triggering Event Notice, as the case may be), in any such case together with all fees, costs, expenses (including, without limitation, legal expenses) and other amounts payable to the Trustee and/or the Agents under or in connection with the Bonds, the Guarantee, the Trust Deed, the Agency Agreement, the Deed of Equity Interest Purchase Undertaking and/or the Keepwell and Liquidity Support Deed as at the date of such Trigger Notice or Triggering Event Notice, as the case may be, plus provisions for all fees, costs, expenses (including, without limitation, legal expenses) and all other amounts which may be incurred after the date of the Trigger Notice or Triggering Event Notice, as the case may be, in each case as notified by the Trustee in the Trigger Notice or pursuant to the terms of the Keepwell and Liquidity Support Deed where any of the Issuer, the Guarantor and/or the Company has provided a Triggering Event Notice to the Trustee, as the case may be; and
“Trigger Notice” means a notice to be given by the Trustee to the Issuer, the Guarantor and the Company substantially in the form set out in the Keepwell and Liquidity Support Deed and to be provided to the Issuer, the Guarantor and the Company after:
(i) a Bondholder has notified it in writing that (A) an Event of Default has occurred or (B) such Bondholder believes that an Event of Default has or may have occurred; or
(ii) the Trustee has given notice to the Issuer and the Guarantor pursuant to Condition 9 of the relevant series of Bonds that the Bonds are, and they shall immediately become, due and payable.
Each of the Company, the Guarantor and the Issuer will agree and acknowledge that the terms of the Standby Facility shall be at arm’s length (or more favourable to the Issuer or the Guarantor, as the case may be) and shall not require any security from the Issuer or the Guarantor. The Standby Facility is not, and nothing contained in the Keepwell and Liquidity Support Deed and nothing done pursuant thereto by the Company shall be deemed to constitute, a guarantee by the Company of the payment of any obligation, indebtedness or liability, of any kind or character whatsoever, of the Issuer or the Guarantor under the laws of any jurisdiction.
Obligation to Invest
Pursuant to the Keepwell and Liquidity Support Deed and notwithstanding and in addition to the other provisions in the Keepwell and Liquidity Support Deed, in the event that the Trustee has provided a Trigger Notice to the Issuer, the Guarantor and the Company or, as the case may be, any of the Issuer, the Guarantor and/or the Company has provided a Triggering Event Notice to the Trustee, the Company shall, subject to obtaining all necessary approvals, consents, licences, orders, permits, registrations, filings, clearances and any other authorisations from or with the relevant Approval Authorities, including without limitation, NDRC, MOFCOM and SAFE (where applicable) (the “Relevant Investment Approvals”), invest (either by itself or through a Subsidiary of the Company as designated by it (the “Designated Investor”)) (the “Investment”) in the Issuer or the Guarantor, as the case may be (by equity investment or shareholders’ loan or a combination thereof) at the Relevant Amount on the Investment Closing Date (as defined below) on the terms set out in the Keepwell and Liquidity Support Deed and in the Investment Agreement (as defined below), and the Company will agree that:
• within 20 Business Days after the date of a Trigger Notice or, as the case may be, a Triggering Event Notice, the Issuer or the Guarantor, as the case may be, and the Company (or, as the case may be, the Designated Investor) shall execute an investment agreement (an “Investment
67 Agreement”) and all other application documents (including an Investment Agreement in the Chinese language and in such form as required by applicable laws and regulations) required by applicable laws and regulations of the PRC and shall file such agreements and/or documents as required by applicable laws and regulations with the relevant Approval Authorities (where applicable) in such sequence and timing as required by applicable laws, regulations and the relevant Approval Authorities, for approval of the Investment;
• within 10 Business Days after the receipt of approvals from the relevant Approval Authorities (where applicable), the Company shall submit all application documents required by applicable laws and regulations of the PRC to SAFE for the Investment of the Relevant Amount and the outbound remittance of the Relevant Amount (if applicable);
• closing of such Investment shall take place on or prior to the fifth Business Day after the date of receipt of the approvals from SAFE (the “Investment Closing Date”), and on the Investment Closing Date the Company or the Designated Investor (as the case may be) shall pay to or to the order of the Issuer or the Guarantor (as the case may be) the Relevant Amount payable in immediately available funds in Euros or U.S. dollars (as the case may be) to such account of the Issuer or the Guarantor (as the case may be) in Hong Kong as may be designated by the Issuer or the Guarantor (as the case may be) whereupon the Issuer or the Guarantor (as the case may be) shall take all actions necessary for the proceeds received in such Investment to be applied in and towards (A) the payment in accordance with the Keepwell and Liquidity Support Deed of any outstanding amounts as they fall due under the Keepwell and Liquidity Support Deed, the Trust Deed, the Agency Agreement and the Bonds (including any interest accrued but unpaid on the Bonds) if the Triggering Event is an Event of Default or where the Trustee has given a Trigger Notice pursuant to paragraphs (i) or (ii) of the definition thereof or (B) the remedy of the Financial Ratio Failure if the Triggering Event is a Financial Ratio Failure, prior to any other use, disposal or transfer of the proceeds received, provided that for the purpose of the Company’s obligation to invest, the Company may discharge its obligations either by itself or through the Designated Investor.
The Company shall promptly notify the Trustee in writing (and include sufficient details) (i) of the receipt of any Relevant Investment Approvals in connection with the Investment, and (ii) of any response, formal or informal, from any Approval Authority. The Trustee shall not be obliged to monitor the occurrence of any such event or to calculate the Relevant Amount, and shall not be liable to the Bondholders or any other person for not doing so.
The Company shall, and shall procure the Issuer or the Guarantor (as the case may be) to, use its best efforts to do all such things and take all such actions as may be necessary or desirable to obtaining the Relevant Investment Approvals as soon as reasonably practicable, to (i) procure the completion of the Investment no later than the date falling 90 days from the date of the Trigger Notice or Triggering Event Notice, as the case may be, and (ii) procure the remittance of the sum of the Relevant Amount to or to the order of the Issuer or the Guarantor (as the case may be) in accordance with the Keepwell and Liquidity Support Deed.
68 Suspension Notice
Pursuant to the Keepwell and Liquidity Support Deed, the Company’s obligations in respect of the Standby Facility and the Investment shall be suspended if each of the Issuer, the Guarantor and the Company receives a notice in writing substantially in the form set out in the Keepwell and Liquidity Support Deed from the Trustee (a “Suspension Notice”) stating that any of the following events has occurred (each a “Suspension Event”):
• the Trustee (a) has received a notice in writing from the Principal Paying Agent that all of the payment obligations of the Issuer or the Guarantor in respect of any principal, premium, interest and default interest under the Bonds have been satisfied in full and (b) is satisfied that all amounts due and payable to the Trustee and any other indemnified party (as defined in the Trust Deed) under clauses 4.1, 9 and 16.3 of the Trust Deed have been satisfied in full;
• in the event of service of a Triggering Event Notice following notice to the Trustee by the Issuer, the Guarantor or the Company of the occurrence of an Event of Default or where the Trustee has given a Trigger Notice pursuant to paragraphs (i) or (ii) of the definition thereof, such Event of Default has been waived by the Trustee in writing acting on the instructions of the Bondholders by Extraordinary Resolution; or
• in the event of service of a Triggering Event Notice following notice in writing to the Trustee by the Issuer, the Guarantor or the Company of a Financial Ratio Failure, the Trustee has received a certificate from the Company signed by any one of its Authorised Signatories (as previously notified to the Trustee in writing in accordance with the Agency Agreement) certifying that such Financial Ratio Failure has been remedied in full.
The Suspension Notice shall be provided by the Trustee to the Issuer, the Guarantor and the Company within three Facility Business Days after the Facility Business Day on which a Suspension Event occurs or if the day on which a Suspension Event occurs is not a Facility Business Day, the immediately succeeding Facility Business Day.
“Facility Business Day” means a day (other than a Saturday, Sunday or public holiday) on which banks and foreign exchange markets are generally open for business in Beijing, Tianjin, London, the British Virgin Islands and Hong Kong;
Financial Statements
Pursuant to the Keepwell and Liquidity Support Deed and so long as any Bond remains outstanding (as defined in the Trust Deed), the Company undertakes to the Trustee that it will furnish the Trustee with:
• a Compliance Certificate of the Company in English (on which the Trustee may rely conclusively as to such compliance) and a copy of the relevant Company Audited Financial Reports within 150 days of the end of each Relevant Period prepared in accordance with PRC GAAP (audited by a nationally recognised firm of independent accountants) and if such statements shall be in the Chinese language, together with an English translation of the same translated by (aa) a nationally recognised firm of accountants or (bb) a professional translation service provider, and checked by a nationally recognised firm of independent accountants; and
• a copy of the Company Semi-Annual Unaudited Financial Reports within 90 days of the end of each Relevant Period prepared on a basis consistent with its audited consolidated financial statements and if such statements shall be in the Chinese language, together with an English translation of the same and translated by (aa) a nationally recognised firm of accountants or (bb) a professional translation service provider, and checked by a nationally recognised firm of independent accountants,
69 provided that, if at any time the capital stock of the Company is listed for trading on a recognised stock exchange, the Company may furnish to the Trustee, as soon as they are available but in any event not more than 14 calendar days after any financial or other reports of the Company are filed with the exchange on which the Company’s capital stock is at such time listed for trading, copies of any financial or other report filed with such exchange in lieu of the reports identified above certified as true and correct copies by an Authorised Signatory of the Company.
Undertakings
Pursuant to the Keepwell and Liquidity Support Deed and for so long as the Bonds are outstanding, the Company will further undertake:
• to procure that the articles of association of each of the Issuer and the Guarantor shall not be amended in a manner that is, directly or indirectly, adverse to holders of the Bonds;
• not to amend its articles of association in a manner that is, directly or indirectly, materially adverse to the holders of the Bonds;
• to cause each of the Issuer and the Guarantor to remain in full compliance with the Terms and Conditions of the Bonds, the Guarantee, the Trust Deed and all applicable rules and regulations in the British Virgin Islands, Hong Kong and England;
• to promptly take any and all action necessary to comply with its obligations under the Keepwell and Liquidity Support Deed;
• to cause each of the Issuer and the Guarantor to take all action necessary in a timely manner to comply with its obligations under the Keepwell and Liquidity Support Deed; and
• to procure that the Issuer will not carry on any business activity whatsoever other than in connection with the Bonds (which activities in connection with the Bonds shall, for the avoidance of doubt, include the on-lending of the proceeds of the issue of the Bonds (the “Proceeds of the Bonds”) to any of the Guarantor, the Company or their respective subsidiaries and any other activities reasonably incidental thereto).
Other Provisions
The Keepwell and Liquidity Support Deed is not, and nothing therein contained and nothing done pursuant thereto by the Company shall be deemed to constitute, or shall be construed as, or shall be deemed to be evidence of, a guarantee by or any legal binding obligation of the Company of the payment of any obligation, responsibility, indebtedness or liability, of any kind or character whatsoever, of the Issuer or the Guarantor under the laws of any jurisdiction, including the PRC.
The Keepwell and Liquidity Support Deed may be modified, amended or terminated by the written agreement of the parties thereto subject to the provisions of the Terms and Conditions of the Bonds and the Trust Deed.
The Keepwell and Liquidity Support Deed and any non-contractual obligations arising out of or in connection with it will be governed by and construed in accordance with English law.
70 DESCRIPTION OF THE DEED OF EQUITY INTEREST PURCHASE UNDERTAKING
The following contains summaries of certain key provisions of the Deed of Equity Interest Purchase Undertaking. Such statements do not purport to be complete and are qualified in their entirety by reference to the Deed of Equity Interest Purchase Undertaking. Defined terms used in this section shall have the meanings given to them in the Deed of Equity Interest Purchase Undertaking or the Terms and Conditions of the Bonds.
The Company intends to assist the Issuer and the Guarantor in meeting their respective obligations under the Bonds, the Guarantee and the Trust Deed.
Obligation to Acquire Equity Interest
Pursuant to the terms of the Deed of Equity Interest Purchase Undertaking to be entered into between the Trustee, the Issuer, the Guarantor and the Company, upon the receipt of a written purchase notice (the “Purchase Notice”) provided by the Trustee in accordance with the Trust Deed following receipt by the Trustee of notice of the occurrence of an Event of Default under the Bonds, the Company will agree that it shall, subject to obtaining all necessary approvals, consents, licences, orders, permits, registrations, filings, clearances and any other authorisations from or with the relevant Approval Authorities (the “Relevant Approvals”), purchase (either by itself or through a PRC incorporated Subsidiary of the Company as designated by it (a “Designated Purchaser”)) (the “Purchase”):
(i) the Equity Interest held by the Guarantor and/or any other Subsidiaries of the Company incorporated outside the PRC, as designated by the Company and notified in writing to the Trustee within two Business Days after the date of the Purchase Notice; or
(ii) in the absence of a designation and notification within two Business Days after the date of the Purchase Notice as provided in (i) above, the Equity Interest held by all the Subsidiaries of the Company incorporated outside the PRC,
(each such designated entity in the case referred to in (i) or, as the case may be, each such Subsidiary in the case referred to in (ii), a “Relevant Transferor”), in either such case at the Purchase Price on the relevant Purchase Closing Date on the terms set out in the Deed of Equity Interest Purchase Undertaking and the relevant Equity Interest Transfer Agreement.
“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all classes of partnership interests in a partnership, any and all membership interests in a limited liability company, any and all other equivalent ownership interests and any and all warrants, rights or options to purchase any of the foregoing.
“Equity Interest” means the Capital Stock held by a Relevant Transferor and which is subject to the Purchase pursuant to an Equity Interest Transfer Agreement.
“Equity Interest Transfer Agreement” means the equity interest transfer agreement substantially in the form set out in the Deed of Equity Interest Purchase Undertaking to be entered into between the Company (or a Designated Purchaser, as the case may be) and each Relevant Transferor in respect of each Purchase (subject to necessary modification required by the applicable laws at the time).
A Purchase obligation shall be suspended if, prior to the relevant closing date for such Purchase, each of the Company, the Guarantor and the Issuer receives a notice in writing from the Trustee stating that it has been notified by the Principal Paying Agent or the Registrar, as the case may be, that all of the respective payment obligations of the Issuer and the Guarantor under the Bonds (including any principal, premium, interest and default interest), the Guarantee and the Trust Deed have been satisfied in full as at the date of that notice and the Trustee is satisfied that all amounts due and payable to the Trustee and any other indemnified party (as defined in the Trust Deed) under clauses
71 4.1, 9 and 16.3 of the Trust Deed have been satisfied in full, or that the Event of Default leading to the service of the Purchase Notice has been waived by the Trustee in writing acting on the instructions of the Bondholders by Extraordinary Resolution in accordance with the terms of the Trust Deed (the “Suspension Notice”). The Suspension Notice shall be provided by the Trustee to the Company, the Issuer and the Guarantor within three Business Days after: (i) the date the Trustee is notified in writing that the respective payment obligations of the Issuer and the Guarantor under the Bonds, the Guarantee and the Trust Deed have been satisfied in full; or (ii) the Event of Default leading to the service of the Purchase Notice has been waived by the Trustee in writing acting on the instructions of the Bondholders by Extraordinary Resolution in accordance with the terms of the Trust Deed (or if that day is not a Business Day, the immediately succeeding Business Day).
Determination of the Purchase Price
Within 14 Business Days after the date of the Purchase Notice, the Company shall determine: (i) the purchase price of the Equity Interest(s) subject to the Purchase (the “Purchase Price”) in accordance with any applicable PRC laws and regulations effective at the time of determination; and (ii) the other applicable terms relating to the Purchase. Provided that the Purchase Price shall not be less than the aggregate of the following amounts (the “Shortfall Amount”):
(i) the amount in Euros sufficient to enable each of the Issuer and the Guarantor to discharge in full its obligations under the Bonds, the Guarantee and the Trust Deed, as the case may be, (including, without limitation, the principal amount of the Bonds then outstanding as at the date of such Purchase Notice and any interest due and unpaid and/or accrued but unpaid on the Bonds up to, but excluding the date of such Purchase Notice; plus
(ii) an amount equal to €6,500,000, equivalent to the interest amount in respect of one Interest Period on the Bonds; plus
(iii) an amount in Euros equal to all fees, costs, expenses (including, without limitation, legal expenses) and other amounts payable to the Trustee and/or the Agents under or in connection with the Bonds, the Guarantee, the Trust Deed, the Agency Agreement, the Keepwell and Liquidity Support Deed and/or the Deed of Equity Interest Purchase Undertaking as at the date of such Purchase Notice plus provisions for fees, costs, expenses (including, without limitation, legal expenses) and all other amounts which may be incurred after the date of the Purchase Notice, as notified by the Trustee in the Purchase Notice.
The Company’s determination of the Purchase Price in accordance with the Deed of Equity Interest Purchase Undertaking shall be final and binding on the parties thereto save in the case of manifest error. Should the Company fail to make a determination of the Purchase Price within 14 Business Days after the date of the Purchase Notice, the Purchase Price shall be the Shortfall Amount unless the applicable PRC laws and regulations effective at the time of determination require that the Equity Interest(s) be purchased at a specified amount.
A Purchase may be effected pursuant to the Deed of Equity Interest Purchase Undertaking on more than one occasion.
The Trustee has no responsibility for making or verifying any calculation of the Purchase Price or for determining the Shortfall Amount and shall not be liable to the Bondholders, the Issuer, the Company, the Guarantor or any other person for not doing so.
72 Closing
In relation to the Purchase of any Equity Interest relating to a company incorporated in the PRC held by any Relevant Transferor, the Company will agree that:
(i) within 15 Business Days after the date of the Purchase Notice, the Company shall (where purchasing the relevant Equity Interest itself), and shall procure each Relevant Transferor and any Designated Purchaser (as applicable) to, execute, and the Company shall procure the board of directors of each of the Target Subsidiaries to execute (where applicable), an Equity Interest Transfer Agreement and all other application documents (including any equity interest transfer agreement in the Chinese language and in such form as required by applicable laws and regulations) required by applicable laws and regulations of the PRC and, if the implementation of special access administrative measures prescribed by PRC law applies to the Target Subsidiaries, the Company shall file such agreements and/or documents as required by applicable laws and regulations with MOFCOM, for approval of the transfer of the Equity Interests as being the subject of the Purchase;
(ii) within five Business Days after the execution of the Equity Interest Transfer Agreement and all other application documents required by applicable laws and regulations of the PRC, the Company shall submit the Equity Interest Transfer Agreement and all such application documents required by applicable laws and regulations of the PRC to the competent AIC for AIC registration of the transfer of the Equity Interest held by each Relevant Transferor;
(iii) as soon as reasonably practicable after receipt of AIC registration from the competent AIC, the Company shall complete the procedures in respect of withholding tax for the Relevant Transferor required by applicable laws and regulations of the PRC with the competent tax authority to obtain the tax clearance certificate from such tax authority;
(iv) within five Business Days after completion of the AIC registration and the receipt of the tax clearance certificate referred to in (ii) and (iii) above, the Company shall submit all application documents required by applicable laws and regulations of the PRC to SAFE (a) to change the SAFE registration of the Target Subsidiaries and (b) for the purchase of the Euro amount of the Purchase Price and the outbound remittance of the Purchase Price;
(v) closing of such purchase shall take place on the fifth Business Day after the date of receipt of the approvals from SAFE whereupon the Company shall pay to or to the order of each Relevant Transferor the Purchase Price payable in immediately available funds in Euros to such account in Hong Kong as may be designated by such Relevant Transferor; and
(vi) if the implementation of special access administrative measures as prescribed by PRC law does not apply to the Target Subsidiaries, the Company shall file such agreements and/or documents as required by applicable laws and regulations with MOFCOM for the filing of the transfer of the Equity Interests as being the subject of the Purchase.
In relation to the Purchase of any Equity Interest relating to a company incorporated outside the PRC held by any Relevant Transferor, the Company will agree that:
(i) within 15 Business Days after the date of the Purchase Notice, the Company shall (a) submit a project information report and other required documents to the NDRC (where applicable), and (b) submit the preliminary report and other required documents for overseas mergers and acquisitions, to MOFCOM and SAFE;
(ii) within 15 Business Days after obtaining the confirmation of NDRC, MOFCOM and SAFE for the report referred to in (i) above, the Company shall, and shall procure each Relevant Transferor to, execute, and the Company shall procure the board of directors of each of the Target Subsidiaries to execute (where applicable), an Equity Interest Transfer Agreement and all other
73 application documents (including any equity interest transfer agreement in the Chinese language and in such form as required by applicable laws and regulations) required by applicable laws and regulations, and shall file such agreements and/or documents as required by applicable laws and regulations with NDRC, MOFCOM, SAFE and any other relevant authorities of other jurisdictions (where applicable), for approval or registration of the transfer of the Equity Interests as being the subject of the Purchase; and
(iii) closing of such purchase shall take place on the fifth Business Day after the date of receipt of the approvals or registrations from NDRC, MOFCOM, SAFE and any other relevant authorities of other jurisdictions (where applicable) as referred to in (ii) above whereupon the Company shall pay to or to the order of each Relevant Transferor the Purchase Price payable in immediately available funds in Euros to such account in Hong Kong as may be designated by such Relevant Transferor.
Upon the completion of such Purchase above, the Company undertakes to (a) in the event that a Relevant Transferor is neither the Issuer nor the Guarantor, procure such Relevant Transferor to promptly on-lend or distribute in full the relevant portion of the Purchase Price received by such Relevant Transferor to the Issuer prior to any other use, disposal or transfer of the proceeds received and (b) promptly do all such things (including entering into and executing any agreements or arrangements required) and take all actions necessary for the proceeds received by the Issuer or the Guarantor from the Company or pursuant to any on-loan or distribution referred to in (a) above to be applied solely towards the payment in accordance with the Trust Deed of any outstanding amounts under the Trust Deed, the Guarantee and the Bonds (including any interest accrued but unpaid on such Bonds) prior to any other use, disposal or transfer of the proceeds received.
Best Efforts
The Company shall, and shall procure each Relevant Transferor and any Designated Purchaser (as applicable) to, use their respective best efforts to do all such things and take all such actions as may be necessary or desirable to (i) procure the completion of the Purchase on the relevant Purchase Closing Date within three months from the date of the Purchase Notice; and (ii) procure the remittance of the sum of the Purchase Price to or to the order of the Relevant Transferor(s) in accordance with the Deed of Equity Interest Purchase Undertaking.
Other Provisions
The Deed of Equity Interest Purchase Undertaking is not, and nothing therein contained and nothing done pursuant thereto by the Company shall be deemed to constitute, or shall be construed as, or shall be deemed an evidence of, a guarantee by or any legal binding obligation of the Company of the payment of any obligation, responsibilities, indebtedness or liability, of any kind or character whatsoever, of the Issuer or the Guarantor under the laws of any jurisdiction, including the PRC.
The parties to the Deed of Equity Interest Purchase Undertaking will acknowledge that in order for the Company to comply with its obligations under the Deed of Equity Interest Purchase Undertaking, it may require Relevant Approvals and filings pursuant to applicable laws.
The Deed of Equity Interest Purchase Undertaking may be modified, amended or terminated by the written agreement of the parties thereto, subject to the provisions of the Terms and Conditions of the Bonds and the Trust Deed.
The Deed of Equity Interest Purchase Undertaking and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.
74 SUMMARY OF PROVISIONS RELATING TO THE BONDS IN GLOBAL FORM
The Global Certificate contains provisions which apply to the Bonds in respect of which the Global Certificate is issued, some of which modify the effect of the Terms and Conditions of the Bonds set out in this Offering Circular. Terms defined in the Terms and Conditions of the Bonds have the same meaning in the paragraphs below. The following is a summary of those provisions:
The Bonds will be represented by a Global Certificate which will be registered in the name of a nominee of, and deposited with, a common depositary for Euroclear and Clearstream.
In the Global Certificate, the Issuer, for value received, promises to pay such principal and interest on the Bonds to the holder of the Bonds on such date or dates as the same may become payable in accordance with the Terms and Conditions of the Bonds.
Owners of interests in the Bonds in respect of which the Global Certificate is issued will be entitled to have title to such Bonds registered in their names in the Register and to receive individual definitive Certificates if either Euroclear or Clearstream or any other clearing system (an “Alternative Clearing System”) is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so. In such circumstances, the Issuer will, at its own expense, cause sufficient individual definitive Certificates to be executed and delivered to the Registrar for completion, authentication and despatch to the relevant holders of the Bonds. A person with an interest in such Bonds in respect of which the Global Certificate is issued must provide the Registrar not less than 30 days’ notice at its specified office of such holder’s intention to effect such exchange and a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such individual definitive Certificates.
Payment
So long as the Bonds are represented by the Global Certificate, each payment in respect of the Global Certificate will be made to, or to the order of, the person shown as the holder of the Bonds in the Register at the close of business (of the relevant clearing system) on the Clearing System Business Day immediately prior to the due date for such payments, where “Clearing System Business Day” means Monday to Friday, inclusive except 25 December and 1 January.
Calculation of Interest
So long as the Bonds are represented by a Global Certificate and such Global Certificate is held on behalf of a clearing system, the Issuer has promised, inter alia, to pay interest in respect of such Bonds from the Issue Date in arrear at the rates, on the dates for payment, and in accordance with the method of calculation provided for in the Conditions, save that the calculation is made in respect of the total aggregate amount of the Bonds represented by such Global Certificate.
Trustee’s Powers
In considering the interests of the Bondholders whilst the Global Certificate is registered in the name of a nominee for a clearing system, the Trustee may, to the extent it considers it appropriate to do so in the circumstances, but without being obliged to do so, (a) have regard to any information as may have been made available to it by or on behalf of the relevant clearing system or its operator as to the identity of its accountholders (either individually or by way of category) with entitlements in respect of the Bonds and (b) may consider such interests on the basis that such accountholders are the holders of the Bonds in respect of which the Global Certificate is issued.
75 Notices
So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on behalf of Euroclear or Clearstream or any Alternative Clearing System, notices to Bondholders may be given by delivery of the relevant notice to Euroclear or Clearstream or such Alternative Clearing System, for communication by the relevant clearing system to entitled accountholders in substitution for notification as required by the Terms and Conditions of the Bonds.
So long as the Bonds are listed on the Official List and admitted to trading on the Euro MTF Market and the rules and regulations of the LuxSE so require, the Issuer will publish notices (including financial notices and in addition to any communication by the relevant clearing system, as applicable) in a leading newspaper having general circulation in Luxembourg (which is currently expected to be the Luxembourg Wort) or on the official website of the LuxSE (www.bourse.lu).
Bondholder’s Redemption
The Bondholder’s redemption option in Condition 6(c) of the Terms and Conditions of the Bonds may be exercised by the holder of the Global Certificate giving notice to any Paying Agent of the principal amount of Bonds in respect of which the option is exercised (being the principal amount of Bonds held by the relevant Bondholder) within the time limits specified in the Terms and Conditions of the Bonds.
Issuer’s Redemption
The option of the Issuer provided for in Condition 6(b) of the Terms and Conditions of the Bonds shall be exercised by the Issuer giving notice to the Bondholders within the time limits set out in and containing the information required by the Terms and Conditions of the Bonds.
Transfers
Transfers of beneficial interests in the Bonds represented by the Global Certificate will be effected through the records of Euroclear and Clearstream (or any Alternative Clearing System) and their respective participants in accordance with the rules and procedures of Euroclear and Clearstream (or any Alternative Clearing System) and their respective direct and indirect participants.
Cancellation
Cancellation of any Bond (i) following redemption or (ii) following its redemption or purchase by the Issuer, the Company, the Guarantor and their respective subsidiaries will be effected by a reduction in the principal amount of the Bonds in the Register of the Bondholders.
Meetings
The holder of the Global Certificate shall (unless the Global Certificate represents only one Bond) be treated as two persons for the purposes of any quorum requirements of a meeting of Bondholders and as being entitled to one vote in respect of each €1,000 in principal amount of the Bonds for which the Global Certificate is issued.
76 Electronic Consent
While any Global Certificate is held on behalf of, and registered in the name of any nominee for one or more of Euroclear, Clearstream or an Alternative Clearing System (the “relevant clearing system(s)”), then approval of a resolution proposed by the Issuer, the Guarantor, the Company or the Trustee (as the case may be) given by way of electronic consents communicated through the electronic communications systems of the relevant clearing system(s) in accordance with their operating rules and procedures by or on behalf of the holders of not less than 90 per cent. of the aggregate principal amount of the Bonds outstanding (an “Electronic Consent”) and shall be binding on all Bondholders whether or not they participated in such Electronic Consent and shall for all purposes be as valid and effective as an Extraordinary Resolution (as defined in the Trust Deed) passed at a meeting of Bondholders duly convened and held.
77 USE OF PROCEEDS
The net proceeds from the issue of the Bonds will be allocated towards the financing of green projects or assets as described under the Eligible Green Projects in the Green Bond Framework (see “Green Bond Framework — Framework Overview — Use of Proceeds”). The Green Bond Framework, structured in accordance with the Green Bond Principles, is evaluated to be credible and robust by Sustainalytics, the Second-party Opinion provider.
78 GREEN BOND FRAMEWORK
Purpose
This Green Bond Framework has been developed to demonstrate how the Company will issue green bonds (the “Green Bond”) to fund new and existing projects and businesses with environmental benefits in alignment with:
• the Green Bond Principles; and
• the Green Bond Guidance issued by National Development and Reform Commission.
Assertions from management
For each Green Bond issued, the Company asserts that it will adopt (i) use of proceeds, (ii) project evaluation and selection, (iii) management of proceeds and (iv) reporting, as set out in this Green Bond Framework.
Background
The Company is the only entity in Tianjin that integrates investment, construction, operation management, repair and maintenance and comprehensive development. Taking up the responsibility of city-wide railway construction, investment and operation management, it has built a complete transit network containing intercity railways, subways and high-speed railways.
In light of the current guidance from the State Council and《國家環境保護 ( “十三五”規劃基本思路》) for environmental protection and development of low carbon economy, the Company, as one of the biggest railway and construction companies in the Jing-Jin-Ji (京津冀) area, is committed in ensuring its economic performance is beneficial to the environment and society.
The Company conforms to various industrial quality control standards such as ISO9001 Quality Management, OHSAS18001 Health and Safety Management.
Rational of Tianjin Rail Transit Green Bond
Low-carbon transport has a key role to play in facilitating a modal transportation shift, enabling the transition to a low carbon economy and to support future climate change mitigation efforts.
The Green Bond Framework, dedicated to low-carbon transport, will be an opportunity to emphasize the Group’s strategy in terms of sustainability and climate change, and to diversify the Company’s investor base, thanks to a reinforced dialogue with socially responsible investors.
The Green Bond will also help ensure the progress of the State Council and the PRC’s goal of environmental protection under the 13th Five Year Plan (十三五計劃), and beyond, is fulfilled.
79 Framework Overview
The Company has developed this Green Bond Framework under which it plans to finance and refinance, in whole or in part, Eligible Green Projects (as defined below):
1. Use of Proceeds
The proceeds of the Green Bond will be used exclusively for projects which are under the following Eligible Green Projects Categories.
The table below sets forth the Eligible Green Projects Categories and examples of Eligible Green Projects:
Eligible Green Projects Categories Examples of Eligible Green Projects Low Carbon Transportation ...... • Rolling stock / carriages / locomotives: — Purchase and maintenance of electric rolling stock / carriages / locomotives
• Rail infrastructure: — Construction and maintenance of tracks — Modernisation, maintenance, upgrades to electric line networks — Reinstatement of old, unused, lines into working lines
• Associated rail infrastructure: — Construction and modernisation of communication system (to improve efficiency and safety) — Modernisation of signalling system (to improve capacity and reliability) — Modernisation and maintenance of ventilation and drainage system — Modernisation of lighting systems such as upgrades to LED — Research costs associated with site suitability
• Transit station and its related real estate properties — Construction of station buildings, including internal modernisation, investment into ventilation, lighting, fire, water and waste management — Establishment and refurbishment of existing ticketing equipment to allow for automation — Upgrade of escalators and safety doors to save energy and ensure safety
80 Eligible Green Projects Categories Examples of Eligible Green Projects Pollution prevention ...... • Technologies related to: — Enhancing air quality such as to increase air circulation and air filtration — Noise reduction technologies such as noise barriers, modification of turnouts, rail dampers and insulation booths
Energy Efficiency ...... Design, manufacture and installation of systems, products and technology associated with low-carbon transportation systems that: — Reduce energy consumption or improve efficiency — Mitigate greenhouse gas emissions in railway construction and operations
Renewable Energy ...... Design, manufacture and installation of renewable energy systems, products and technology, such as solar panels
2. Project Evaluation and Selection
Process to Mitigate Environmental and Social Risks Stemming from Eligible Projects
The Company has a robust internal control and policy framework to ensure environmental and social risks are mitigated in its operation. In addition, it complies with “Energy Saving Regulation of the People’s Republic of China”《中華人民共和國節約能源法》 ( ), “Energy Saving Regulation for Real Estate in Tianjin City”《天津市建築節約能源條例》 ( ), “Best Practice of Construction in Tianjin City” (《天津市建設工程文明施工管理規定》), “Energy Efficiency Standards for Public Buildings”《公共 ( 建築節能設計標準》), “Regulation for Green Construction”《建築工程綠色施工規範》 ( ) and other related policies and regulations enforcing sustainability considerations.
Additionally, during the design stage, there is mitigation practice for all environmental risk factors. During the construction stage, controls of water, noise, air pollution and protection of the eco system are strictly implemented and monitored.
According to requirements in the Green Bond Principles and the internal process of the Company. Eligible Green Projects will be proposed by the Planning Department according to feasibility studies and environmental assessment according to the Company’s Eligible Green Projects Categories and examples of Eligible Green Projects.
They will then be reviewed by a dedicated Green Bond Working Group (the “GBWG”), which includes:
• Finance Centre and its related Financing Department and Treasury Department
• Investment Management Department
• Operations Department
81 The GBWG will approve, annually, the projects complying with the eligibility criteria and falling under one or more of the use of proceeds projects categories outlined above. It will then reviewed and approved by the General Manager and the senior management team of the Company.
The GBWG will review the allocation of the proceeds annually to ensure maximum allocation of the green bond proceeds and facilitate ongoing green bond reporting.
3. Management of Proceeds
The proceeds of each Green Bond will be deposited in the general funding accounts and “earmarked” pending allocation. The Company will maintain a green bond register (the “Green Bond Register”) to track the use of proceeds for the green bond issuance. Green Bond Allocation Register will be established to record the allocation of green bond proceeds.
The Green Bond Register will contain, for each Green Bond issued, information including:
1. Green Bond details: ISIN, pricing date, maturity date, etc.
2. Eligible Green Projects allocation list:
• confirmation of investment made are to Eligible Green Projects;
• description of investment;
• investment amount; and
• other necessary information so that the aggregate of issuance proceeds allocated to eligible projects is recorded at all times.
It is Company’s intention to deploy proceeds of each Green Bond to Eligible Green Projects within a short timeframe. A small amount of issuance proceeds not allocated to Eligible Green Projects will be held in accordance with the Company’s normal liquidity management policy, such as notice deposits.
4. Reporting
Allocation reporting
The Company commits to publish an annual green bond report (the “Green Bond Report”), which will provide information on amounts equal to the net proceeds of the Green Bond issued and provide:
(i) aggregate amount allocated to the various Eligible Green Project Categories;
(ii) remaining balance of funds which have not yet been allocated; and
(iii) examples of green projects from each of the Eligible Green Projects (subject to confidentiality disclosures).
Furthermore, the Company will confirm that the use of proceeds of the Green Bond issuance conforms to this Green Bond Framework.
82 Impact reporting
In each annual Green Bond Report, the Company will include information on the environmental and social impacts of the Eligible Green Projects. Subject to the nature of Eligible Green Projects and availability of information, the Company aims to include, but not limited to, the following impact indicators:
Eligible Green Projects Categories Impact Indicators Low Carbon Transportation ...... • Km of tracks built • Number of passenger
Pollution prevention ...... • Number of noise barriers installed
Energy Efficiency and Renewable Energy . . . • Amount of energy saved • Installed renewable energy production capacity
The Green Bond Report will be made public.
External Review
The Company has engaged Sustainalytics to act as a second-party reviewer for this Green Bond Framework.
The Green Bond Framework, together with Sustainalytics’ Second-party Opinion, will be made public via Sustainalytics’ website.
83 CAPITALISATION AND INDEBTEDNESS
CAPITALISATION AND INDEBTEDNESS OF THE COMPANY
The following table sets forth the consolidated capitalisation and indebtedness of the Company as at 30 September 2017 and adjusted to give effect to the issue of the Bonds before deducting the fees and commissions and other estimated expenses payable in connection with this offering:
As at 30 September 2017 Actual As adjusted (RMB in millions) Short term borrowings — Short term borrowingss ...... 2,596.0 2,596.0 — Non-current liabilities due within one year ...... 16,197.3 16,197.3 — Other payables ...... 2,052.5 2,052.5 — Other current liabilities ...... 1,501.2 1,501.2 Long term borrowings — Long term borrowings ...... 65,547.4 65,547.4 — Bonds payable...... 18,624.6 18,624.6 — Long term payable...... 11,244.9 11,244.9 — Bonds to be issued(1) ...... — 3,143.8 Total long term borrowings ...... 95,416.9 98,560.7 Total owners’ equity ...... 125,844.9 125,844.9 Total capitalisation(2) ...... 221,261.8 224,405.6
Notes:
(1) The translation of Euro into U.S. dollar amounts has been made at the rate of U.S.$1.1813 to €1.00, the Noon Buying Rate as set forth in the weekly H.10 statistical release of the U.S. Federal Reserve Board on 29 September 2017. The translation of U.S. dollar amounts into Renminbi has been made at the rate of U.S.$1.00 to RMB6.6533, the Noon Buying Rate as set forth in the weekly H.10 statistical release of the U.S. Federal Reserve Board on 29 September 2017.
(2) Total capitalisation represents the sum of total long term borrowings and total owners’ equity.
Except as otherwise disclosed above, there has been no material change in the consolidated capitalisation and indebtedness of the Company since 30 September 2017.
84 CAPITALISATION AND INDEBTEDNESS OF THE GUARANTOR
The following table sets forth the consolidated capitalisation and indebtedness of the Guarantor as at 30 September 2017 and adjusted to give effect to the issue of the Bonds before deducting the fees and commissions and other estimated expenses payable in connection with this offering:
As at 30 September 2017 Actual As adjusted (U.S.$ in millions) Long term borrowings — Bond payables...... 494.7 494.7 — Bonds to be issued(1) ...... — 472.5 Total long term borrowings ...... 494.7 967.2 Total equity ...... 55.4 55.4 Total capitalisation(2) ...... 550.1 1,022.6
Notes:
(1) The translation of Euro into U.S. dollar amounts has been made at the rate of U.S.$1.1813 to €1.00, the Noon Buying Rate as set forth in the weekly H.10 statistical release of the U.S. Federal Reserve Board on 29 September 2017.
(2) Total capitalisation represents total long term borrowings and total equity.
Except as otherwise disclosed above, there has been no material change in the consolidated capitalisation and indebtedness of the Guarantor since 30 September 2017.
85 DESCRIPTION OF THE ISSUER
FORMATION
The Issuer was incorporated in the British Virgin Islands as a BVI business company (BVI Company Number: 1943433) on 25 April 2017 under the BVI Business Companies Act, 2004. Its registered office is located at Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands. The Issuer is directly and wholly owned by the Guarantor, which is, in turn, a wholly-owned subsidiary of the Company. The following chart sets forth the shareholding structure for the Company, the Guarantor and the Issuer as at the date of this Offering Circular:
The Company
100% Onshore
Offshore
Guarantor
100%
Issuer
BUSINESS ACTIVITY
Under the Issuer’s memorandum of association, the Issuer has full power and authority to carry out any object not prohibited by any law of the British Virgin Islands. The Issuer’s primary purpose is to act as a financing subsidiary to issue the Bonds. The Issuer has no material business or assets and does not have any employees. In the future, the Issuer may issue further bonds and engage in other business activities related to us and may incur substantial liabilities and indebtedness.
DIRECTORS AND OFFICERS
The sole director of the Issuer is Mr. Zhang Liguo. The sole director of the Issuer does not hold any shares or options to acquire shares of the Issuer.
SHARE CAPITAL
The Issuer is authorised to issue a maximum of 50,000 shares of one class with a par value of U.S.$1.00 each. No part of the equity securities of the Issuer is listed or dealt in on any stock exchange and no listing or permission to deal in such securities is being or is proposed to be sought.
SUMMARY FINANCIAL INFORMATION OF THE ISSUER
The Issuer has not engaged, since its incorporation, in any activities other than those incidental to its incorporation, the authorisation, execution and issue of the Bonds, and the documents and matters referred to or contemplated in this Offering Circular to which the Issuer is or will be a party and matters which are incidental or ancillary to the foregoing.
Save as disclosed elsewhere in this Offering Circular, at the date of this Offering Circular, the Issuer has no borrowings or indebtedness in the nature of borrowings (including loan capital issued or created but unused), term loans, liabilities under acceptances or acceptance credits, mortgages, charges or guarantees or other contingent liabilities.
86 Save as disclosed elsewhere in this Offering Circular, at the date of this Offering Circular, there are no other outstanding loans or subscriptions, allotments or options in respect of the Issuer.
Under British Virgin Islands law, the Issuer is not required to publish interim or annual financial statements. As at the date of this Offering Circular, the Issuer has not published, and does not propose to publish, any audited stand-alone financial statements. The Issuer is, however, required to keep records and underlying documentation which are sufficient to show and explain its transactions and will, at any time, enable its financial position to be determined with reasonable accuracy.
87 DESCRIPTION OF THE GUARANTOR
OVERVIEW
The Guarantor was incorporated with limited liability on 11 September 2015 in Hong Kong under the Hong Kong Companies Ordinance (Cap. 622). As of the date of this Offering Circular, the authorised share capital of the Guarantor is U.S.$56,000,000. The registered office of the Guarantor is at Rm. 19C, Lockhart Ctr., 301-307 Lockhart Rd., Wan Chai, Hong Kong. The Company directly holds 100 per cent. equity interest in the Guarantor.
BUSINESS ACTIVITIES
The Guarantor is intended to be the primary offshore financing vehicle of the Company. The Company has provided and will continue to provide substantial financial and other support to the Guarantor, mainly by way of increases in equity investment and the provision of guarantees for indebtedness incurred by the Guarantor. The Company intends to maintain its 100 per cent. equity interest in the Guarantor.
The Guarantor is primarily engaged in holding investments, including 100 per cent. of the equity interest in the Issuer.
DIRECTOR AND MANAGEMENT
Mr. Wu Tao is the sole director and the manager of the Guarantor.
FINANCIAL INFORMATION
The financial year of the Guarantor runs from 1 January to 31 December. The financial information of the Guarantor is consolidated in the financial statements of the Company. Please see “Summary Financial Information of the Guarantor”.
88 DESCRIPTION OF THE GROUP
OVERVIEW
The Group is the sole investment and financing platform for the rail transit system in Tianjin (including metro, light rail and railway projects). The Group is also responsible for the investment, construction, operation, management and maintenance of metro and light rail in Tianjin’s central district, the integrated development of the land and property along the rail transit lines, as well as investment in railway projects on behalf of the Tianjin Municipal Government. As at 30 September 2017, the Group operated the five interconnected lines in operation of Tianjin metro and light rail system, namely Line 1, Line 2, Line 3, Line 6 (Phase 1, North Phase) and Jin-Bin Light Rail Line 9, with an aggregate mileage of 167.4 kilometres and 113 stations. As at the same date, the Group had five metro and light rail lines in Tianjin under construction, namely Line 1 (East Extension), Line 4 (South Phase), Line 5, Line 6 (Phase 1, South Phase) and Line 10 (Phase 1), with an aggregate mileage of 105.6 kilometres, and another five metro and light rail lines in the Tianjin area in the planning stage, with an aggregate mileage of 110.1 kilometres. As at 30 September 2017, the Group had invested in seven railway lines currently in operation with an aggregate mileage of 1,913.1 kilometres and three railway lines currently under construction with an aggregate mileage of 371.5 kilometres. The Group also operates the Tianjin Railway Station and Tianjin West Railway Station, which connect the Beijing-Tianjin Intercity Railway, the Beijing-Shanghai High-Speed Railway, the Underground Line Between Tianjin West Railway Station and Tianjin Railway Station and the Tianjin-Qinhuangdao High-Speed Railway. Since its establishment, the Group benefited from the rapid growth of Tianjin’s rail transit infrastructure development and has maintained a strong growth momentum. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2017, the total mileage in operation of the Tianjin rail transit system was approximately 66.2 million vehicles kilometres, 62.0 million vehicles kilometres, 66.8 million vehicles kilometres and 62.7 million vehicles kilometres, respectively; and the annual footfall of the metro and light rail lines of the Tianjin rail transit system amounted to 299.2 million, 284.7 million, 307.8 million and 258.3 million, respectively. As of the date of this Offering Circular, the Group has a registered capital of RMB40.3 billion.
For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2017, the Group’s total operating revenue was approximately RMB2,419.0 million, RMB2,379.3 million, RMB2,248.9 million, RMB1,062.6 million, respectively and the Group’s net profit was approximately RMB405.9 million, RMB335.1 million, RMB441.0 million and RMB176.1 million, respectively. As of 30 September 2017, the Group had net assets of approximately RMB125.8 billion and total assets of approximately RMB265.4 billion.
89 The map below shows the Group’s metro and light rail lines in operation, those under construction and those in the planning stage as at 30 September 2017:
The map below shows the Group’s railway lines in operation, those under construction and those in the planning stage as at 30 September 2017:
90 The Group primarily engages in four businesses, which are infrastructure construction and investment, operation management, resources development and engineering construction. The diagram below illustrates the businesses the Group engages in:
Operation management
Infrastructure construction and Operation Resources Engineering investment management development construction
• Investment in • Operation and • Integrated • Contract to build construction management of development of national and of metro and the Tianjin metro the land and municipal major light rail lines and light rail properties along projects lines the Tianjin rail transit lines, • Investment in Railway Station such as operation construction and the Tianjin and lease of of railways West Railway commercial and railway Station properties, stations operation of advertisement • Investment in and management other infrastructure of parking lots construction
The table below sets forth the Group’s operating revenue (or investment income) by business segments for the periods indicated:
For the Nine Months ended For the Year ended 31 December 30 September 2014 2015 2016 2016 2017 %of %of %of %of %of total total total total total operating operating operating operating operating Amount revenue Amount revenue Amount revenue Amount revenue Amount revenue (RMB in millions, except percentages) Business segment Infrastructure construction and investment(1) ..... 51.1 — 76.4 — 27.2 — 20.8 — 170.5 —
Operation management .... 669.0 27.7 620.0 26.1 636.4 28.3 451.8 26.9 511.2 48.1 Resources development . . . 331.2 13.7 332.2 14.0 284.7 12.7 299.9 17.9 164.8 15.5 Engineering construction . . 1,337.6 55.3 1,354.9 56.9 1,206.0 53.6 892.5 53.2 330.0 31.1 Other businesses ...... 81.2 3.4 72.3 3.0 121.8 5.4 33.2 2.0 56.6 5.3
Total operating revenue(2) . 2,419.0 100.0 2,379.3 100.0 2,248.9 100.0 1,677.4 100.0 1,062.6 100.0
Notes:
(1) The Group does not generate any operating revenue from its infrastructure construction and investment segment; the accompanying figures set forth the Group’s investment income derived from its infrastructure construction and investment operations.
(2) Total operating revenue includes operating revenue derived from operation management, resources development, engineering construction and other businesses.
91 • Infrastructure construction and investment: Infrastructure construction and investment is the Group’s core business. The Group is the sole investment and financing platform for the rail transit system in Tianjin and owns equity interests in the infrastructure constructions the Group invests in after completion of constructions. The Group invested in the construction of five metro and light rail lines in operation and five metro and light rail lines under construction in Tianjin. The Group also made infrastructure investment plans for the other five metro and light rail lines in the planning stage. In addition, the Group invested in ten railway construction projects, including the Beijing-Tianjin Intercity Railway, the Beijing-Shanghai High-Speed Railway, the Tianjin-Qinhuangdao High-Speed Railway, the Tianjin West Station-Tianjin Station Underground Railway, the Beijing-Tianjin Intercity Railway (Extension Line), the Tianjin-Baoding Railway, the Beijing-Shanghai High-Speed Railway — Tianjin West Station — Interconnection Line, the Southwestern Ring Line, the Beijing-Tianjin Binhai Intercity Railway and the Beijing-Tangshan Intercity Railway. Moreover, the Group engages in the infrastructure investment of other infrastructure projects, such as reconstruction of rail transit stations and roads. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group’s capital investment in the infrastructure construction and investment business amounted to RMB13.8 billion, RMB29.0 billion, RMB18.8 billion, RMB10.8 billion and RMB21.4 billion, respectively; and the Group’s investment income derived from the infrastructure construction and investment business was RMB51.1 million, RMB76.4 million, RMB27.2 million, RMB20.8 million and RMB170.5 million, respectively, for the same periods. For the years ended 31 December 2014 and 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group received from the government as capital investment for its infrastructure construction and investment business amounted to RMB8.8 billion, RMB10.3 billion, RMB15.0 billion, RMB9.7 billion and RMB7.0 billion, respectively.
• Operation management: The Group operates and manages the metro and light rail lines currently in operation. In addition, the Group established a centralised operation centre to monitor train operations on a real-time basis, dispatch trains, respond to emergencies and sell tickets for all of the metro and light rail lines in operation. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, operating revenue from the Group’s operation management business was RMB669.0 million, RMB620.0 million, RMB636.4 million, RMB451.8 million and RMB511.2 million, respectively, accounting for 27.7 per cent., 26.1 per cent., 28.3 per cent., 26.9 per cent. and 48.1 per cent., respectively, of the Group’s total operating revenue. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the government subsidies allocated to the Group for operation of the metro and light rail lines amounted to RMB478.7 million, RMB688.9 million, RMB732.5 million, RMB506.8 million and RMB474.5 million, respectively.
• Resources development: The Group engages in the integrated development of land and properties along the rail transit lines. Leveraging the experience in property development that the Group has accumulated, the Group focuses on the integrated development of rail transit lines to create synergies among various assets of the Group’s and maximise the return on investment. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, operating revenue from the resources development business amounted to RMB331.2 million, RMB332.2 million, RMB284.7 million, RMB299.9 million and RMB164.8 million, respectively, accounting for 13.7 per cent., 14.0 per cent., 12.7 per cent., 17.9 per cent. and 15.5 per cent., respectively, of the Group’s total operating revenue for the same periods.
• Engineering construction: The Group engages in construction of major national and municipal projects, such as rail transit construction, civil engineering projects and architecture engineering projects. Key projects that the Group undertook include removal project of Dagang Railway, Southwest Ring Line expansion and reconstruction project, overpass project and long term logistic project of the third contract section of the Central Avenue in the Binhai New Area, phase II of the second division of the Tanghan Road expansion and reconstruction project, Tianjin Central Fishing Port project, Suizhong Power Station project, Hebei University of Technology
92 project and the Binhai New Area West Outer Ring Expressway project. See “— Business — Resources Development and Management — Engineering Construction” of this section. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, operating revenue from the engineering construction business amounted to RMB1,337.6 million, RMB1,354.9 million, RMB1,206.0 million, RMB892.5 million and RMB330.0 million, respectively, accounting for 55.3 per cent., 56.9 per cent., 53.6 per cent., 53.2 per cent. and 31.1 per cent., respectively, of the Group’s total operating revenue for the same periods.
KEY AWARDS
Key awards and recognitions the Group obtained include the following:
Year Awards 2013 ...... • Tianjin Golden Award for Municipal Road Projects by the Tianjin Municipal Highway Association
2014 ...... • National Excellence Project Award by China Association of Construction Enterprise Management
• “Gold Haihe Cup” Award for Tianjin Construction Project by Tianjin Construction Industry Association
• “Haihe Cup” Award for Tianjin Construction Project by Tianjin Construction Industry Federation
• Annual Municipal Upstanding Construction Site Award in Tianjin by Tianjin Construction Industry Association
2015 ...... • Urban Rail Transit Innovation Project by the China Civil Engineering Society
• Tianjin Scientific and Technical Progress Award by the Tianjin Municipal People’s Government
• “Structure Haihe Cup” Award for Tianjin Construction Project by Tianjin Construction Industry Association
2016 ...... • Best local financing vehicle bond (“LGFV”) for Tianjin Rail Transit Group Co., Ltd.’s U.S.$500.0 million offshore bonds at The Asset Triple A Regional Awards 2016
• “Gold Haihe Cup” Award for Tianjin Construction Project by Tianjin Construction Industry Federation
• “Structure Haihe Cup” Award for Tianjin Construction Project by Tianjin Construction Industry Association
• “Construction Enterprise Credit Rating AAA” by China Construction Industry Association
93 Year Awards 2017 ...... • 2017 National Excellent Quality Management Team (Subway Line 1 Liuyuan Parking Project) by China Quality Association, China Federation of Trade Unions, China Women’s Federation and China Science and Technology Association
• 2017 National Excellent Quality Management Team (Beihai Road Underground Inbound Railway Tunnel Project) by China Quality Association, China Federation of Trade Unions, China Women’s Federation and China Science and Technology Association
• Third Prize of 2017 Construction Project QC Achievement (Dalian 1676MM Project) by Tianjin Construction Industry Association
• Third Prize of 2017 Construction Engineering QC Achievements (Shugang Connection Line, Jingu Interchange Project) by Tianjin Construction Industry Association
• Utility Model Patent Certificate for a Telescopic Concrete Pavement Paving Mechanism by the State Intellectual Property Office
• Utility Model Patent Certificate for a Steel Bending Device with a Removable Protective Plate by the State Intellectual Property Office
• Utility Model Patent Certificate for a Dust-proof Electric Cleaning Device by the State Intellectual Property Office
• Utility Model Patent Certificate for a Ground Pile Double Rope Pulling Mechanism by the State Intellectual Property Office
• Utility Model Patent Certificate for a Mobile Road Drilling Device by the State Intellectual Property Office
HISTORY AND DEVELOPMENT OF THE GROUP
The Company is an indirect wholly state-owned subsidiary of the Tianjin SASAC. The table below sets forth the milestones in the Group’s development:
Year Events 1983 ...... • The Group’s predecessor, the Tianjin Local Railway Administration (天津市地方 鐵路管理局), was founded.
2000 ...... • In September 2000, Tianjin Metro Corporation (天津市地下鐵道總公司) was founded.
2001 ...... • In January 2001, Tianjin Binhai Mass Transit Development Co., Ltd.（天津濱海快 速交通發展有限公司) was founded.
2003 ...... • In May 2003, Tianjin Local Railway Administration was restructured into the Tianjin Railway Group Co., Ltd. (天津鐵路集團有限公司).
2004 ...... • In March 2004, the Jin-Bin Light Rail (津濱輕軌) commenced operation.
2006 ...... • In June 2006, Tianjin Metro Line 1 commenced operation.
94 Year Events 2008 ...... • In April 2008, the Tianjin Railway Investment Holdings Co. Ltd (天津鐵路投資 控股有限公司) was established.
• In July 2008, the Tianjin Metro Corporation was restructured into the Tianjin Metro Group Co. Ltd. (天津地鐵集團有限公司).
• In December 2008, the Tianjin Railway Investment Holdings Co. Ltd. was renamed as Tianjin Railway Construction & Investment Holding (Group) Co., Ltd. (天津鐵路建設投資控股（集團）有限公司).
2012 ...... • In July and October 2012, Tianjin Metro Line 2 and Line 3 commenced operation, respectively.
• In December 2012, Tianjin Metro Group Co. Ltd. (天津地鐵集團有限公司) issued debut RMB3.0 billion domestic medium term notes.
2014 ...... • In May 2014, the Tianjin Municipal CPC Committee and the Tianjin Municipal Government resolved to establish Tianjin Railway Group Limited through reorganisation of the Tianjin Railway Group Co., Ltd., the Tianjin Railway Construction & Investment Holding (Group) Co., Ltd., the Tianjin Metro Group Co. Ltd. and the Tianjin Binhai Mass Transit Development Co. Ltd.
• In July 2014, the reorganisation was completed and the Tianjin Railway Group Limited was renamed as Tianjin Rail Transit Group Co. Ltd. (天津軌道交通集團 有限公司) with a registered capital of RMB40 billion.
2015 ...... • In April 2015, Tianjin Railway Construction & Investment Holding (Group) Co., Ltd. (天津鐵路建設投資控股（集團）有限公司) issued RMB2.4 billion domestic corporate bonds.
• In October 2015, the Group received an AAA credit rating from China Lianhe Credit Rating Co., Ltd. (“Lianhe Credit Rating”), a PRC domestic rating agency.
2016 ...... • In April 2016, the Company was assigned international ratings for the first time and rated “A2” by Moody’s, “A-” by S&P and “A” by Fitch.
• In May 2016, the Group issued debut offshore U.S. dollar-denominated bonds through Rail Transit International Investment Company Limited (軌道國際投資有 限公司), a subsidiary of the Company, with a principal amount of U.S.$500.0 million guaranteed by Tianjin Rail Transit Group (Hong Kong) Co., Limited.
• In August 2016, Tianjin Metro Line 6 (Phase 1, North Phase) commenced operation.
• In August 2016, the Group issued debut RMB3.0 billion medium term notes.
2017 ...... • In June 2017, the Group’s registered capital was increased to RMB40.3 billion.
95 GROUP STRUCTURE
The chart below sets forth the Group’s structure, its major subsidiaries and the beneficial interests therein directly or indirectly held by the Groupasatthe date of this Offering Circular:
State-owned Assets Supervision and Administration Commission of Tianjin Municipal People’s Government （天津市人民政府國有資 產監督管理委員會）
100% 100%
Tianjin Infrastructure Construction & Investment (Group) Company Tianjin Teda Investment Holding Company Limited Limited （天津泰達投資控股有限公司） （天津城市基礎設施建設投資集團有限公司）
86.34% 13.66% 96
Tianjin Rail Transit Group Co., Ltd. Direct Supervision （天津軌道交通集團有限公司
100% 100% 100% 100%
Tianjin Binhai Mass Transit Tianjin Railway Construction Tianjin Rail Transit Group Tianjin Metro Group Co., Ltd. Development Co., Ltd. Investment Holding (Group) Co., Ltd. Engineering Construction Co., Ltd. （天津市地下鐵道集團有限公司） （天津濱海快速交通發展 （天津鐵路建設投資控股 （天津軌道交通集團工程 Other subsidiaries 有限公司） （集團）有限公司 ） 建設有限公司）
100% 100% 100%
Tianjin Metro Operation & Tianjin Rail Transit Group Hub Operation & Tianjin Metro Resources Management Co., Ltd. Management Co., Ltd. Investment Co., Ltd. （天津市地下鐵道運營有限公司） （天津軌道交通集團樞紐運營管理有限公司） （天津地鐵資源投資有限公司） COMPETITIVE STRENGTHS
The Group believes its historical success and future prospects are primarily attributable to its following competitive strengths:
Strong economic growth potentials of Tianjin
The Group is based in Tianjin, which is one of the four municipalities and among China’s most developed cities. Tianjin’s economy has grown rapidly in the past decade due to its strategic location and a series of preferential policies designed to propel growths such as the establishment of Tianjin Pilot Free Trade Zone. Multiple economic indicators of Tianjin outperformed most of the other provinces and municipalities in the PRC in the recent years. Tianjin is also positioned as a receiving platform in the strategic eastward decentralisation of certain industries away from Beijing. From 2012 to 2016, the nominal GDP of Tianjin increased from RMB1,289.4 billion to RMB1,788.5 billion, representing a CAGR of 6.8 per cent.; the population in Tianjin increased from 14.1 million to 15.6 million, representing a CAGR of 2.5 per cent.; and the fiscal revenue of Tianjin according to regional public budget revenue increased from RMB176.0 billion to RMB272.3 billion, representing a CAGR of 11.5 per cent. Capitalising on Tianjin’s rapid economic growth, the Group also experienced rapid development and expansion.
As the sole investment and financing platform for the rail transit system in Tianjin managed by the Tianjin SASAC, the Group benefits from economic stimulus packages and preferential policies, including the Plan on Collaborative Development of Beijing, Tianjin and Hebei (京津冀協同發展規劃), the establishment of Tianjin Pilot Free Trade Zone and National Independent Innovation Demonstrative Zone, the accelerated development and further opening-up of the Binhai New Area and the “Belt and Road Initiative”.
According to the Plan on Collaborative Development of Beijing, Tianjin and Hebei, Tianjin is positioned by the PRC government as a national advanced manufacturing, research and development base, China’s core northern centre of international shipping, a demonstrative area of innovative financial operations and the first area for reform and opening. To realise the collaborative development among Beijing, Tianjin and Hebei, the Beijing, Tianjin and Hebei governments signed a framework agreement on coordination of development (關於建立京津冀兩市一省城鄉規劃協調機制 框架協議), which plans to integrate the rail transport systems and highways across the three regions; according to the framework agreement, the integrated rail transport system will comprise four sections, including the artery railways, the intercity railways, the regional express lines and the metro lines; by 2020, the three regions will form a 9,000 km highway network connecting the major cities within three hours, a 9,500 km railway network connecting the major cities within one hour, and the networks are expected to increase the passenger throughput of the capital airport to 100 million. The Group is expected to play a key role in the establishment of the integrated rail transport system.
The Tianjin Pilot Free Trade Zone is the first free trade pilot zone in Northern China, which aims at becoming a world-class free economic zone within a period of three to five years. Such economic stimulus packages and preferential policies are anticipated to bring Tianjin plenty of growth opportunities.
In addition, according to the Vision and Actions on Jointly Building Belt and Road issued by the National Development and Reform Commission, Ministry of Foreign Affairs and Ministry of Commerce of the People’s Republic of China, Tianjin is recognized as one of the strategic component of the “Belt and Road Initiative”. The “Belt and Road Initiative” will bring about tremendous market opportunities for the logistics and transportation businesses in Tianjin. The Group believes that it is well-positioned to capture the opportunities arising from the growth potentials of Tianjin.
97 Strong support from the Tianjin Government
The Group enjoys strong support from the Tianjin Government. The Tianjin Government has entrusted the Group to be the sole investment and financing platform of the rail transit system in Tianjin, and the Group’s operation is directly supervised and supported by the Tianjin Government. The Group’s establishment, reorganisation and restructuring was completed and approved under the guidance of the Tianjin Municipal Party Committee and Tianjin Municipal Government. Since its establishment, the Group, under the mandate of the Tianjin Municipal Party Committee and Tianjin Municipal Government, has played an important role in implementing the policies and guidelines of the Tianjin Government for the development of public transport in Tianjin. The Group sets out its business strategies and development plans closely in accordance with the relevant municipal policies of Tianjin. In April 2015, Tianjin SASAC issued a notice recognising the Group as a functional enterprise, with a goal to provide services to major governmental projects, to achieve strategic tasks and to promote the Tianjin economy. This unique strategic position of the Group has been bolstered by the financial and business support of the Tianjin Government.
The Tianjin Government provides strong financial support to the Group, including capital support for the construction of the rail transit lines and operational subsidies to compensate for the low ticket fare. The Tianjin Government focuses on developing the transportation infrastructure in Tianjin to bolster the city’s economic growth and attractiveness. The Group receives subsidies for its construction, operation and maintenance of the rail transit system in Tianjin. According to the Tianjin Government’s Tianjin Urban Rail Transit Phase II Construction Plan (2015-2020), the Tianjin Government plans to expand Tianjin’s metro lines by approximately 228.1 kilometres and among which the Group is appointed to construct and operate Tianjin rail transit system’s expansions for approximately 100.2 kilometres in rail length. The total mileage of Tianjin rail transit network is planned to reach 513 kilometres by 2020. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group received government grants and subsidies in the amount of approximately RMB861.8 million, RMB1,124.4 million, RMB1,678.5 million, RMB663.5 million and RMB894.5 million, respectively. In addition, the Group receives capital investment from the government for its infrastructure construction and investment business. For the years ended 31 December 2014 and 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group received from the government as capital investment for its infrastructure construction and investment business amounted to RMB8.8 billion, RMB10.3 billion, RMB15.0 billion, RMB9.7 billion and RMB7.0 billion, respectively. The Tianjin Government will provide the Group with fiscal funds of not less than RMB10.0 billion for rail transit construction each year.
In addition, most of the Group’s directors and supervisors are officers appointed directly by the Tianjin SASAC. The Group has exchange programmes that send cadres to work in relevant government departments and accept cadres from SASAC and other relevant government departments to work in the Group.
Well positioned to capitalise on the development of Tianjin’s urban mass transit industry
The Group is well positioned to capitalise on the development of urban mass transit industry in the Tianjin area. As at 30 September 2017, the Group operated five metro and light rail lines in Tianjin, with an aggregate mileage of 167.4 kilometres and 113 stations. According to the Tianjin Government’s Tianjin Urban Rail Transit Phase II Construction Plan (2015-2020), the Tianjin Government plans to expand Tianjin’s metro lines by approximately 228.1 kilometres and among which the Group is appointed to construct and operate Tianjin rail transit system’s expansions for approximately 100.2 kilometres in rail length. The total mileage of Tianjin rail transit network is planned to reach 513 kilometres by 2020.
The five metro and light rail lines in operation had an annual footfall of approximately 350.6 million in 2017. As Tianjin has a comparatively shorter operation mileage and lower density of rail transit compared with other major cities in the PRC, such as Beijing, Shanghai and Guangzhou, there is larger room for Tianjin’s rail transit industry to realise growth potentials.
98 As the sole investment and financing platform for the rail transit system in Tianjin, the Group benefited from the rapid growth of Tianjin’s rail transit infrastructure development and expects to further benefit from the favourable industry prospects and maintain a strong growth momentum. As at 30 September 2017, the Group had five metro and light rail lines under construction and five metro and light rail lines in the planning stage.
Near monopoly in the Tianjin rail transit industry
Compared to other public transport infrastructure projects, rail transit infrastructure projects generally require significant upfront capital investment. Furthermore, the rail transit infrastructure projects may have longer investment payoff period due to the mismatch between the significant upfront investment and the relatively low fares charged to customers owing to the subsidised nature of the public transport system. As a result, local governments typically provide a portion of the upfront investment and finance the rest through its administered enterprise, such as the Group, and local governments are inclined to co-operate with the enterprises under their administration. The aforementioned factors have given rise to formidable barriers for new market players to enter into the rail transit industry.
Consequently, the regional rail transit industry in China is typically monopolistic in nature. The rail transit operators in different cities typically focus on their respective geographic markets. Consequently, the market players in different cities and regions enjoy near exclusive local governmental support in terms of preferential policies and financial support, and inherent advantage of rail transit over other means of public transport.
Due to the nature of the industry and the government support, the Group enjoys de facto near monopoly in the Tianjin rail transit industry. The Group receives strong support from the Tianjin Government and faces minimum competition.
Diversified businesses create synergies and reduce operational risks
The Group primarily engages in four businesses, which are infrastructure construction and investment, operation management, resources development and engineering construction. As the sole investment and financing platform for the rail transit system in Tianjin, the Group focuses on the investment of rail transit lines. At the same time, the Group has diversified its operations into other businesses, such as the operation and management of rail transit lines and development and management of properties along the rail transit lines. The Group also engages in engineering construction and conducts the construction of housing projects, highways and other projects.
The Group’s diversified businesses create synergies through the following aspects:
• sharing market information and cross-selling across the Group’s different operations;
• co-ordinating sales and sourcing of raw materials among different operations, in order to increase the Group’s bargaining power;
• leveraging established platforms in the investment construction business to expand into other businesses that may generate higher margins; and
• optimising and consolidating management functions across different business segments.
In addition, the Group’s diversified businesses reduce operational risks through the following aspects:
• sharing market information and early warning signs across the Group’s different operations;
• diversification of risks among different operations to avoid concentration of risks; and
99 • centralising resources to establish an advanced and integrated risk management system across different business segments.
The Group benefits from the synergies among its various businesses and is well positioned in capturing different growth trends and opportunities in the industries. In addition, the Group is able to reduce operational risks due to the diversification of risks among different operations and an advanced and integrated risk management system across different business segments.
Exceptional research and development capabilities and market recognition
The Group has leading research and development capabilities in the PRC rail transit industry and is committed to technology innovation. The Group has established seven technological innovation platforms, i.e., Tianjin’s Accredited Enterprise Technology Centre, Post-Doctoral Scientific Research Workstation, Tianjin Rail Transit Technical Innovation Base, the Urban Rail Transit Branch of Tianjin Civil Engineering Society, Beijing-Tianjin-Hebei Joint Technology Centre, Rail Transportation Group Technology Alliance and “131” Innovative Talent Team. Moreover, the Group has established Tianjin Transit Rail Technology Centre, staffed with a professional team of industry experts dedicated to improving the Group’s management efficiency and technical expertise. As at 30 September 2017, the professional team in the Centre comprised a total of 95 members, including 19 professors of engineering and 57 senior engineers.
The Group possesses leading expertise in the industry with professional capabilities in the research and development of designing, constructing, operating and managing metros. As at 30 September 2017, the Group had completed approximately 40 research and development projects, covering fields such as rail transit engineering, environment control, power supply, construction technology and operation and management.
The Group’s strong research and development capabilities enable it to win bids relating to large-scale and complex projects and complete them in an innovative and cost-effective manner. As at 30 September 2017, the Group had received numerous awards for its technical innovation, including Urban Rail Transit Innovation Project, Huaxia Construction Science and Technology Award, Tianjin Scientific and Technical Progress Award and Tianjin Construction Technology Progress Award in the 10th Five Year Plan.
Strong financial profile and multiple sources of financing
Leveraging its strategic position and strong government support, the Group witnesses stable business growth and maintains strong financial profile. In October 2015, the Group received an AAA credit rating from Lianhe Credit Rating, which allowed the Group to harness competitive pricings for onshore financing. In addition, the Group targets to maintain total debt to total assets ratio at around 55.0 per cent.
The Group maintains close and strategic co-operation relationships with reputable PRC and global banks, including China Development Bank, Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China, China Construction Bank, Postal Savings Bank of China, China Merchants Bank, China Everbright Bank, Shanghai Pudong Development Bank, China Bohai Bank, The Hongkong and Shanghai Banking Corporation, Standard Chartered Bank (Hong Kong) Limited, Deutsche Bank AG and DBS Bank Ltd. These relationships enabled the Group to establish a reputation of strong creditworthiness and maintain adequate working capital for its operations. As at 30 September 2017, the Group had an aggregate credit line of approximately RMB170.4 billion, of which approximately RMB96.6 billion remained unutilised.
The Group believes its strong financial profile and multiple sources of financing well position itself in implementing its development strategies.
100 Experienced management team
The Group’s management has a track record of professional experience in the metro industry and other public service sectors and possess extensive management skills, specialised knowledge and industry expertise. The Group’s core management has an average of over 20 years of experience in serving the government authorities or state-owned enterprises. The Group believes the experience and knowledge of its management are essential to its success and enable it to capitalise on market opportunities, formulate effective business strategies, evaluate and control risks, implement management plans and enhance its profitability. The Group believes its strong management is, and will continue to be, a solid foundation of its success.
BUSINESS STRATEGIES
The Group seeks to achieve its goals through the following strategies:
Expand and improve connectivity of the rail transit network
The Group aims to establish itself as leading rail transit service provider. The Group will form a comprehensive rail transit network connecting Tianjin downtown and the city’s surrounding major areas. The Group aims to expand its network to include 13 metro and light rail lines, covering 424.0 kilometres of Tianjin’s central district and serving 81.0 per cent. of its population.
As at 30 September 2017, the Tianjin metro and light rail network had a total mileage of approximately 167.4 kilometres in operation and approximately 105.6 kilometres under construction. The Group aims to further increase the total mileage of the metro and light rail network in operation and under construction in future.
Further develop the Group’s infrastructure construction and investment, operation management and engineering development segments
The Group intends to improve its infrastructure construction and investment business by constantly improving the safety and quality of its projects. The Group will also continue to upgrade its management and control capability through various measures, such as business performance assessment, key decision-making review, unified capital operations and control over operating risks. Besides, the Group will continue to optimise its management system, establish a sound management system based on strategic management and optimise its management function.
The Group intends to improve its operation management business by strengthening its resource integration, optimise development planning, develop a customer-based operating model, streamline decision-making procedures, improve internal control and risk management and promote professionalism.
The Group intends to improve its engineering development business by leveraging the core technological advantages of its existing businesses, to adapt advanced overseas technologies customised for the China market and enhance its product innovation capabilities. The Group also intends to focus on the improving the quality of operation and organisation efficiency to lay a solid foundation for long term development.
Further expand the Group’s resources development business along the rail transit lines
The Group plans to strengthen its effort and focus on the resources development projects along its rail transit lines. The Group believes that this strategy should help strengthening the Group’s resources development portfolio, enhance its resilience against market fluctuation and secure a long term and stable stream of revenue. The Group expects resources development along its rail transit lines to constitute an increasing proportion of its projects portfolio.
101 The Group will continue to establish its brand name in developing metro complexes and seek opportunities in developing commercial and cultural properties. The Group aims to consolidate the resources and optimise its resources development profiles. Revenue from resources development will form a multi-layer, multi-dimensional and sustainable source of income of the Group.
Deepen technical expertise and enhance technology support platform
The Group will continue to concentrate on its research and development activities and deploy significant financial and other resources to develop advanced technologies. The Group believes that utilization of advanced technologies is vital to maintain and further develop its competitiveness. As such, the Group will continue to work to strengthen and improve the utilisation of technology in its business segments in order to enhance the value of such technology to its products and services. The Group also plan to push ahead with rapid transformation and commercialization of new technological achievements. In addition, the Group will closely monitor industry trends so that it can refine and adjust its investments in technologies and equipment upgrades to achieve sustainable long term growth. Moreover, the Group intends to expand its research and development efforts and capabilities by hiring more research and development personnel and purchasing the equipment and materials necessary for its research and development efforts.
Further explore innovative financing channels and expand the financing sources of the Group
In order to satisfy the demand for its construction funding, the Group intends to take proactive measures in conducting its financing activities. Specifically, the Group plans to raise funds through multi-channel financing and to further develop innovative financing channels to build a strong financing structure. The Group plans to rely on a wide range of financing channels, including debt issuance and project finance. Furthermore, the Group intends to focus on lowering its financing cost to increase profitability.
In addition, the Group intends to explore and employ new financing channels, such as establishing specialist funds and closer cooperation with financial institutions, to secure funding on more favourable terms and better support the financing needs of the Group’s development projects. Further, the Group will continue to centralise the Group’s financing activities to facilitate resource sharing among Group companies, reduce overall financing costs and improve profitability.
Attract and retain talented personnel through systematic training programmes and competitive remuneration packages
The Group is committed to building a professional and highly-skilled team with strong execution capabilities. The Group’s success and future growth strategy depends on its ability to attract and retain talented professionals. To attract and retain talented professionals, the Group offers systemic and comprehensive training programmes to its employees, such as the programmes targeted at employees of different seniorities at different stages of their career. The Group plans to continue to offer competitive remuneration packages to attract and retain talented professionals. The Group also offers performance based bonuses to better align its employees’ interests with interests of the Group and to foster a higher level of recognition and realisation of its corporate value and culture.
BUSINESS
The Group primarily engages in four businesses, which are infrastructure construction and investment, operation management, resources development and engineering construction.
102 Infrastructure Construction and Investment
The Group undertakes the financing, investment and construction of certain urban infrastructure projects in Tianjin, particularly the Tianjin rail transit system, on behalf of the Tianjin Government. The Group focuses on feasibility research, construction program and financing and investment plan of the urban rail systems and railways in Tianjin.
For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group’s capital investment in the infrastructure construction and investment business amounted to RMB13.8 billion, RMB29.0 billion, RMB18.8 billion, RMB10.8 billion and RMB21.4 billion, respectively; and the Group’s investment income derived from the infrastructure construction and investment business was RMB51.1 million, RMB76.4 million, RMB27.2 million, RMB20.8 million and RMB170.5 million, respectively, for the same periods. For the years ended 31 December 2014 and 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group received from the government as capital investment for its infrastructure construction and investment business amounted to RMB8.8 billion, RMB10.3 billion, RMB15.0 billion, RMB9.7 billion and RMB7.0 billion, respectively.
Investment in Metro and Light Rail Construction
The Group is the sole investment and financing platform for the rail transit system in Tianjin. As at 30 September 2017, the Group had invested in five metro and light rail lines of Tianjin rail transit system currently in operation, namely Line 1, Line 2, Line 3, Line 6 (Phase 1, North Phase) and Jin-Bin Light Rail Line 9. In addition, the Group also invested in another five metro and light rail lines of Tianjin rail transit system currently under construction and plans to invest in another five metro and light rail lines. As of 30 September 2017, the Group had invested an aggregate of RMB170.7 billion in metro and light rail constructions.
Planning
The Company participates in the urban infrastructure planning of the Tianjin area, and is primarily involved in the planning of the Tianjin rail transit system. Under the instruction of the Tianjin Government, the Group carries out the preliminary design and planning of the Tianjin rail transit system, including the rail transit lines, stations and surrounding land, and submits a comprehensive development report and plan to the Tianjin Government for approval.
The Company also initiates and conducts preliminary preparations for each urban rail transit project initiated by itself, including carrying out feasibility studies and applying for applicable approvals.
Construction Management
The Company outsources most of the construction work to third-party contractors. The Group is generally responsible for the financing of the construction of the metros and monitors the construction progress of the metros by third-party contractors. Such contractors may engage subcontractors for specific processes and manages the construction progress and the subcontractors to ensure the completion of the construction project in a timely and efficient manner as well as according to pre-agreed price and scope of work as set out in the outsourcing contracts with the Group.
103 Metro Lines under Construction
As at 30 September 2017, the Group had five metro lines under construction. The table below sets forth details of the projects under construction:
Length Number of Line Starting and Terminal Stations (kilometres) Stations
Line 1 (East Extension) ...... Shuanglin — Shuangqiaohe 16.0 11 Line 4 (South Phase) ...... Dongnanjiao — Xinxing Village 19.4 14 Line 5 ...... Shuangjie — Liyuantou 34.8 28 Line 6 (Phase 1, South Phase) . . Shuishang East Road — Meilin Road 14.2 13 Line 10 (Phase 1) ...... Liyuantou — Yudongcheng 21.2 21
Total ...... 105.6 87
• Line 1 (East Extension): Line 1 (East Extension), with a total mileage of 16.0 kilometres, connects the city centre with the midstream of Haihe River. Line 1 (East Extension) has 11 stations and starts from Shuanglin Station and stops at Shuangqiaohe Station.
• Line 4 (South Phase): Line 4 (South Phase), with a total mileage of 19.4 kilometres, has 14 stations and starts from Dongnanjiao Station and stops at Xinxing Village Station.
• Line 5: Line 5, with a total mileage of 34.8 kilometres and 28 stations, starts from Shuangjie Station and stops at Liyuantou Station.
• Line 6 (Phase 1, South Phase): Line 6 (Phase 1, South Phase), with a total mileage of 14.2 kilometres and 13 stations, starts from Shuishang East Road Station and stops at Meilin Road Station.
• Line 10 (Phase 1): Line 10 (Phase 1), with a total mileage of 21.2 kilometres, has 21 stations and starts from Liyuantou Station and stops at Yudongcheng Station.
Planned Metro Lines
As at 30 September 2017, the Group had five metro lines in the planning stage. The chart below sets forth details of these metro lines planned to be constructed:
Length Number of Line Starting and Terminal Stations (kilometres) Stations
Line 4 (Phase 2) ...... Nankai District Dongnanjiao — Beichen District Xiao Jie 24.0 19 Line 6 (Phase 2) ...... Meilin Road — Shuangjiang Parking Lot 4.0 4 Line 7 (Phase 1) ...... Saidabazhi Road — Yuguan Road 26.5 21 Line 8 (Phase 1) ...... Ziyang Road — Xianshuigu 33.0 25 Line 11 (Phase 1) ...... Shuishang Park — Liujing Road 22.6 21
Total ...... 110.1 90
• Line 4 (Phase 2): Line 4 (Phase 2), with a total mileage of 24.0 kilometres, has 19 stations and starts from Nankai District Dongnanjiao Station and stops at Beichen District Xiao Jie Station.
• Line 6 (Phase 2): Line 6 (Phase 2), with a total mileage of 4.0 kilometres, has 4 stations and starts from Meilin Road Station and stops at Shuangjiang Parking Lot Station.
• Line 7 (Phase 1): Line 7 (Phase 1), with a total mileage of 26.5 kilometres, has 21 stations and starts from Saidabazhi Road Station and stops at Yuguan Road Station.
104 • Line 8 (Phase 1): Line 8 (Phase 1), with a total mileage of 33.0 kilometres, has 25 stations and starts from Ziyang Road Station and stops at Xianshuigu Station.
• Line 11 (Phase 1): Line 11 (Phase 1), with a total mileage of 22.6 kilometres, has 21 stations and starts from Shuishang Park Station and stops at Liujing Road Station.
Investment in Railway Construction
The Group invests in railway construction projects through ministry-municipality co-operation. As at 30 September 2017, the Group had invested in an aggregate of ten railway construction projects, including the Beijing-Tianjin Intercity Railway, the Beijing-Shanghai High-Speed Railway, the Tianjin-Qinhuangdao High-Speed Railway, the Tianjin West Station-Tianjin Station Underground Railway, the Beijing-Tianjin Intercity Railway (Extension Line), the Tianjin-Baoding Railway, the Beijing-Shanghai High-Speed Railway — Tianjin West Station — Interconnection Line, the Southwestern Ring Line, the Beijing-Tianjin Binhai Intercity Railway and the Beijing-Tangshan Intercity Railway. As of 30 September 2017, the Group had invested an aggregate of over RMB20.0 billion in railway constructions.
As at 30 September 2017, the Group had invested in seven railway projects currently in operation. The table below sets forth details of the seven projects:
Length Commencement Line Starting and Terminal Stations (kilometres) of Operations
Beijing-Tianjin Intercity Railway . Beijing-Tianjin 120.0 2008 Beijing-Shanghai High-Speed Railway ...... Beijing-Shanghai 1,318.0 2010 Tianjin-Qinhuangdao High-Speed Railway ...... Tianjin-Qinhuangdao 261.0 2013 Tianjin West Station-Tianjin Station Underground Railway . Tianjin West Station-Tianjin Station 5.2 2013 Beijing-Tianjin Intercity Railway (Extension Line) ...... Beijing-Tianjin 45.1 2015 Tianjin-Baoding Railway ...... Tianjin-Baoding 158.0 2015 Beijing-Shanghai High-Speed Railway — Tianjin West Station — Interconnection Line...... Beijing-Tianjin 5.8 2015
Total ...... 1,913.1
• Beijing-Tianjin Intercity Railway: The Beijing-Tianjin Intercity Railway (including the extension line), with a total mileage of 165.1 kilometres, connects Beijing with Tianjin through express railway and provides passengers travelling between Beijing and Binhai New Area with a convenient and express means of transport.
• Beijing-Shanghai High-Speed Railway: The Beijing-Shanghai High-Speed Railway, with a total mileage of 1,318.0 kilometres and designed speed of 350 km/h, shortens the travel time from Tianjin to Shanghai to four hours and strengthens Tianjin’s role in serving Eastern China.
• Tianjin-Qinhuangdao High-Speed Railway: The Tianjin-Qinhuangdao High-Speed Railway, with a total mileage of 261.0 kilometres, links Northeastern China and Northern China to Eastern China through connection of several existing railways.
• Tianjin West Station-Tianjin Station Underground Railway: The Tianjin West Station-Tianjin Station Underground Railway, with a total mileage of 5.2 kilometres, is a national artery that effectively connects the Tianjin-Qinhuangdao High-Speed Railway with the Beijing-Shanghai High-Speed Railway.
105 • Tianjin-Baoding Railway: The Tianjin-Baoding Railway, with a total mileage of 158.0 kilometres and designed speed of 250 km/h, opens the gateway from Tianjin through the west. The Tianjin-Baoding Railway will better position Tianjin as the railway junction, optimise Tianjin’s railway network and expand the service range of Tianjin and Binhai New Area.
• Beijing-Shanghai High-Speed Railway — Tianjin West Station — Interconnection Line: The Interconnection Line, with a total mileage of 5.8 kilometres, is a path from Beijing South Station to the northeast via Tianjin West Station and Tianjin East Station.
As at 30 September 2017, the Group had invested in three railway projects currently under construction. The table below sets forth details of the three projects:
Length Commencement Line Starting and Terminal Stations (kilometres) of Operations
Southwestern Ring Line ...... Zhoulizhuang Station - Wanjia Terminal Station 125.0 2018 Beijing-Tianjin Binhai Intercity Railway ...... Baodi South Station - Binhai Station 97.8 2021 Beijing-Tangshan Intercity Railway ...... Beijing City Deputy Centre - Tangshan Station 148.7 2021
Total ...... 371.5
• Southwestern Ring Line: Southwestern Ring Line, with a total mileage of approximately 125.0 kilometres, is located in the southwest part of Tianjin, starting at Zhoulizhuang Station and ending at Wanjia Terminal Station. This line is expected to commence operation in 2018.
• Beijing-Tianjin Binhai Intercity Railway: The Beijing-Tianjin Binhai Intercity Railway, with a total mileage of approximately 97.8 kilometres, starts at Baodi South Station and ends at Binhai Station. This line is expected to commence operation in 2021.
• Beijing-Tangshan Intercity Railway: The Beijing-Tangshan Intercity Railway, with a total mileage of approximately 148.7 kilometres, starts at the Beijing City Deputy Centre and ends at Tangshan Station. This line is expected to commence operation in 2021.
Investment in Other Infrastructure Projects
The Group also invests in other types of urban infrastructure projects in Tianjin, such as reconstruction projects, tunnel construction projects and overpass construction projects.
Investment and Financing
The Company raises funding for the construction and development of its urban rail transit projects in Tianjin.
A portion of the Group’s financing for construction of metro and light rail lines is extended by the Tianjin Government. The Tianjin Government will provide the Group with fiscal funds of not less than RMB10.0 billion for rail transit construction each year. The Tianjin Government allocates fiscal funds to the Group on an annual basis based on project progress and the fiscal budget of the year. The fiscal funds are used for capital investment for new metro and light rail line construction, principal and
106 interest repayment and other project funds, which normally cover a substantial portion of the financing requirement of the Group for its urban rail transit projects. The table below sets forth details of fiscal funds Tianjin Government allocates to the Group for its metro construction projects:
% of Capital Capital Investment Gross Investment by Tianjin Investment by Tianjin Government Amount Government to Gross (RMB in (RMB in Investment Line millions) millions) Amount Sources for Repayment of Debt Metro and Light Rail Lines in Operation Line 1 ...... 9,205 4,603 50% Tickets income, multi-operational Line 2 ...... 12,647 6,324 50% income and government grants Line 2 (Airport Extension) ...... 2,260 1,130 50% Line 3 ...... 14,686 7,343 50% Line 3 (South Extension) ...... 1,780 890 50%
Metro and Light Rail Lines under Construction Line 1 (East Extension) ...... 12,666 6,333 50% Tickets income, multi-operational Line 4 (South Phase) ...... 18,911 9,456 50% income and government grants Line 5 ...... 25,383 12,692 50% Line 6 ...... 40,605 20,303 50% Line 10 (Phase 1) ...... 22,069 8,828 40%
As of 30 September 2017, the Group had an aggregate amount of RMB28.6 billion of government related debts. The Group submits reports to the Tianjin Government and other relevant authorities on the progress of its projects under construction.
Bank loans:
The Group maintains close and strategic co-operation relationships with reputable PRC and global banks, including China Development Bank, Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China, China Construction Bank, Postal Savings Bank of China, China Merchants Bank, China Everbright Bank, Shanghai Pudong Development Bank, China Bohai Bank, The Hongkong and Shanghai Banking Corporation, Standard Chartered Bank (Hong Kong) Limited, Deutsche Bank AG and DBS Bank Ltd. These relationships enabled the Group to establish a reputation of strong creditworthiness and maintain adequate working capital for its operations. As at 30 September 2017, the Group had an aggregate credit line of approximately RMB170.4 billion, of which approximately RMB96.6 billion remained unutilised. In particular, as of 30 September 2017, the credit facilities granted by China Development Bank for the Group’s rail transit constructions are as below:
Credit Facilities Rail Transit Constructions (RMB in millions) Line 1 ...... 2,530.0 Line 2 ...... 3,144.8 Line 2 (Airport Extension) ...... 78.5 Line 3 ...... 3,471.8 Line 4 ...... 97.4 Line 5 ...... 2,130.6 Line 6 ...... 918.6 Jin-Bin Light Rail Line 9 ...... 787.5 Tianjin West Station ...... 1,804.9 Tianjin Station...... 5,228.1
107 Debt financing:
As of 30 September 2017, the Group maintained an AAA credit rating from Lianhe Credit Rating. As at 30 September 2017, the Group had issued domestic bonds of RMB28.1 billion and a total principal amount of RMB20.9 billion remained outstanding, among which includes corporate bonds with a total outstanding principal amount of RMB4.9 billion, short term financing bonds with a total outstanding principal amount of RMB1.5 billion, medium term notes with a total outstanding principal amount of RMB10.0 billion and private placement notes with a total outstanding principal amount of RMB4.5 billion.
Operation Management
Operating Asset Management
Operation of the Tianjin Metro and Light Rail System
The Group operates the Tianjin metro and light rail system and offers easily accessible and affordable rail transit services through two wholly-owned subsidiaries, Tianjin Metro Operation & Management Co., Ltd. and Tianjin Binhai Mass Transit Development Co., Ltd. The Group commits to provide safe, reliable, comprehensive and satisfactory metro service to fulfil the growing demand and the higher requirement for public transport in Tianjin. The Group has a set of developed and detailed operating procedures covering all of its major functions, including maintenance, operation and management. As at 30 September 2017, the Group operated all of the five rail transit lines of Tianjin rail transit system with 113 stations (including seven interchange stations).
The table below sets forth the information of the five metro and light rail lines operated by the Group:
Length Number of Commencement Line Starting and Terminal Stations (kilometres) Stations of Operation
Line 1 ...... Liuyuan — Shuanglin 26.2 22 2006 Line 2 ...... Caozhuang — Binhai International Airport 27.1 20 2012 Line 3 ...... Tianjin South Station — Xiaodian 33.6 26 2012 Line 6 (Phase 1, North Phase) . . Nansunzhuang — Nancuiping 28.3 24 2016 Jin-Bin Light Rail Line 9 ..... Tianjin Station — Donghailu 52.2 21 2004
Total ...... 167.4 113
Income from sales of metro and light rail tickets is one of the primary sources of Group’s income. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2017, operating revenue from sales of metro and light rail ticket amounted to RMB669.0 million, RMB620.0 million, RMB636.4 million and RMB511.2 million, respectively.
Stations
As at 30 September 2017, the Tianjin metro and light rail system had a total of 113 stations (including seven interchange stations) in operation and a total of 87 stations under construction. A metro or light rail station of Tianjin rail transit system is usually equipped with automatic ticket machines, escalators, elevators, restrooms and facilities for the disabled. In addition, for security purpose, all of the metro and light rail stations of Tianjin rail transit system are equipped with security inspection devices. To avoid emergencies, every metro or light rail station of Tianjin rail transit system has an independent warning system, protection system, extinguishing system and back-up power supply system. Sprinkler systems or carbon dioxide gas extinguishing systems are also installed in key areas such as machine rooms. Every metro or light rail station of the Tianjin rail transit system is staffed with one station manager, responsible for the overall operation of the station, a certain number of security check inspectors and dispatchers.
108 Fares
To encourage the use of public transport and ease the traffic pressure, the Tianjin rail transit system adopts a multi-tier pricing system. The ticket fares range from RMB2.0 to RMB9.0 per person per ride. The specific ticket fares are determined by the Tianjin Government.
Due to the public services nature of the Tianjin rail transit system, the Tianjin Government strictly controls the ticket fares. Income from ticket fares cover part of Tianjin rail transit system’s operating costs and the Tianjin Government subsidises the Group for the metro’s operations. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the government subsidies allocated to the Group for operation of the metro and light rail lines amounted to RMB478.7 million, RMB688.9 million, RMB732.5 million, RMB506.8 million and RMB474.5 million, respectively.
Footfall
For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2017, the annual footfall of the metro and light rail lines of the Tianjin rail transit system amounted to 299.2 million, 284.7 million, 307.8 million and 258.3 million, respectively.
Replacement and upgrade
The Tianjin Finance and Local Taxation Bureau subsidises the replacement and upgrade of the equipment of the Tianjin metro and light rail system subject to the Group’s request.
Operation of Other Assets
Aside from operation of the Tianjin metro and light rail system, the Group also manages the daily operations, maintenance, security and passenger services of the Tianjin Railway Station and the Tianjin West Railway Station (excluding the areas of national railway sections).
The table below sets forth the information of the major metro and light rail and railway stations operated by the Group:
Gross Floor Area (square Commencement Station Connecting Metro Line and Railway meters) of Operation Tianjin Railway Station ...... Metro line 2, 3, 9 and Beijing-Tianjin Intercity Railway 384,000 2013 Tianjin South Railway Station. . . Metro line 3 and Beijing-Shanghai High-Speed Railway 4,000 2011 Tianjin West Railway Station . . . Metro line 1, 4, 6 and Beijing-Shanghai High-Speed Railway 376,000 2011 Tianjin Cultural Centre ...... Metro line 5, 6, 11 and Z1 170,000 2012 Binhai International Airport .... Metro line 2, Z2 and Beijing-Tianjin Intercity Railway (Extension Line) 110,000 2014
Metro Command and Dispatch
The Group operates the Operation Centre, which serves as the centralised command and management centre for the operation of metro and light rail transport network. The operation centre is equipped with advanced devices to monitor the operation of the metro and light rail lines on a real-time basis.
The main responsibilities of the operation centre are set forth below:
• Command and dispatch of metro and light rail trains: The operation centre commands and dispatches metro and light rail trains in accordance with the timetable and the routes. The
109 operation centre monitors the operation of the metro and light rail lines and locates all of the metro and light rail trains in operation on a real-time basis. In case any temporary adjustment is needed, the operation centre can liaise with the driver of the metro and light rail trains and the station managers through the radio communication system. The operation centre formulates policies and sets up standards for the safe operation of the Tianjin metro and light rail system, and also acts as the operation centre in case of any emergencies.
• Analysis of footfall: The operation centre collects and analyses certain data of the Tianjin rail transit system, such as the daily footfall, in order to improve the Group’s operation and planning.
Resources Development and Management
The Group engages in the integrated development of land and properties along the rail transit lines. Leveraging its rich experience, the Group adopts a “metro-land-property” model to create synergies among various assets and maximise the return on investment. The Group conducts property development, property management and other commercial businesses through its wholly-owned subsidiary, Tianjin Metro Resources Investment Co., Ltd. (“Metro Resources”). For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, operating revenue from the resources development business amounted to RMB331.2 million, RMB332.2 million, RMB284.7 million, RMB299.9 million and RMB164.8 million, respectively, accounting for 13.7 per cent., 14.0 per cent., 12.7 per cent., 17.9 per cent. and 15.5 per cent., respectively, of the Group’s total operating revenue for the same periods.
Property Development
In conjunction with the investment in rail transit construction, the Group engages in the development of residential and commercial properties above or adjacent to the metro station or metro complex. Property development is an important business of the Group and a significant source of income. In addition, property development contributes to the future rail transit patronage from the immediate catchment areas. In 2009, the Company established Metro Resources to conduct property development.
PRC laws provide that all land to be developed for commercial purposes, including that for business or residential property development purposes, must be granted through public tender, auction and listing-for-sale. The Group primarily bids for secondary land development projects through Metro Resources. The Group conducts property develop independently or through joint venture with other prominent developers. Following the completion of the construction, the Group can sell or lease such properties.
Metro Resources focuses on comprehensive property development along the rail transit lines. The table below sets forth several of the Group’s latest representative property development projects:
Project Name Location Properties Type Hutchison Whampoa Project...... Tianjin Commercial, Residential and Office Buildings Zixitai Project...... Tianjin Residential and Office Buildings Beiyunhe Project...... Tianjin Commercial, Residential and Office Buildings Kangyingli Project...... Tianjin Hotels
Property Management
The Group also engages in the management of properties above or adjacent to the metro or metro complex. The Group gains long term and steady income and minimise exposure to risks from the property management business due to inherent nature of this business. The Group is generally responsible for the development planning, operation planning, investment attraction, property leasing,
110 property operation and property service for the properties developed by itself and others. As at 30 September 2017, the Group managed approximately 30 properties, including office buildings, hotels, commercial properties and parking lots, with an aggregate floor area of approximately 0.66 million square metres. The table below sets forth several representative projects managed by the Group.
Project Name Location Properties Type Jintong Gediao Tower...... Tianjin Office Buildings Qinian Project...... Tianjin Commercial and Hotels Cultural Centre...... Tianjin Commercial and Parking Lots Global Landmark Plaza...... Tianjin Commercial and Office Buildings
Commercial Business
The Group also engages in other commercial businesses in reliance on its assets. For example, capitalising on the walls of the tunnels and the space in the metro stations (including Metro Line 1, Line 2, Line 3, Line 9, Tianjin Railway Station and Tianjin West Railway Station), the Group introduces advertisement and media and some convenience services such as ATMs. In addition, the Group also launches certain cultural creative products, such as mascots of metros, souvenirs and commemorative tickets. The operation of advertisement business of the Group is in its initial stage, comprising mediums such as traditional media, video media, print media and broadcast media.
Engineering Construction
The Group holds a comprehensive set of qualifications, including the Grade I Engineering Procurement Construction qualifications for the railway integrated construction, municipal engineering construction and housing engineering construction. As at 30 September 2017, the Group had contracted over 100 major national and municipal projects.
For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, operating revenue from the engineering construction business amounted to RMB1,337.6 million, RMB1,354.9 million, RMB1,206.0 million, RMB892.5 million and RMB330.0 million, respectively, accounting for 55.3 per cent., 56.9 per cent., 53.6 per cent., 53.2 per cent. and 31.1 per cent., respectively, of the Group’s total operating revenue for the same periods.
The table below sets forth several representative projects the Group contracted as the engineering procurement construction:
Project Type Project Name Railway construction ...... Dagang Railway Relocation and Reconstruction Project
Dalian Locomotive Lvshun Base Ring Test Line Project
Southwest Ring Line Expansion and Reconstruction Project
Tianjin Lingang Economic Zone North District Railway Special Line Project
Municipal Engineering construction ...... Central Avenue Third Contract Section Overpass Project
Central Avenue Third Contract Section Long-term Logistic Project
Tanghan Road Expansion and Reconstruction Project Phase II Second Division
111 Project Type Project Name Under the Beihai Road into the Harbour Railway Second Line Tunnel Project
Tianjin Central Fishing Port Project
Suizhong Power Station Project
Housing engineering construction...... Hebei University of Technology Project
Highway engineering construction ...... Expansion Project of the voyage bulk cargo terminal storage yard at Tianjin Harbour (Viaduct)
Binhai New Area West Outer Ring Expressway Project 22nd Division
COMPETITION
The Group sees minimal commercial competition in its infrastructure construction and investment and operation management businesses, primarily attributable to the nature of these businesses as offering public services.
The Group believes that it has minimal competition in the resources development business mainly because it primarily engages in integrated development of land and properties along the rail transit lines in Tianjin. As the sole investment and financing platform for the rail transit system in Tianjin, the Group enjoys a bidding edge in programming and developing the land and properties along the rail transit lines. In terms of a small portion of other property development projects, the Group mainly competes with certain listed property development companies in the PRC, which may have more resources and better track records. The Group encounters competition mainly on the price, cost, quality of projects, quality of services and construction period. The Group believes it is better positioned compared to peers due to the wealth of its experience in the urban infrastructure investment.
The Group primarily competes with other domestic and international market players in its engineering construction business. The competition comes mainly from tendering, price, cost, quality of projects and project period.
FUNDING SOURCES
The Group’s primary businesses follow a business model whereby high upfront capital requirements are gradually offset by earnings in the middle and latter period of the project. Therefore, a certain amount of working capital must come from external sources. At the present, the Group has already established diversified, market-oriented and commercialised funding channels that serve the Group’s business expansion and satisfy the Group’s working capital demands.
Among the Group’s primary business’ financial sources, government grants and subsidies are a significant source of funds. The Group’s government grants and subsidies received provides a continuous source of funds and ensures the sustainability of the Group’s business. For the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group received government grants and subsidies in the amount of approximately RMB861.8 million, RMB1,124.4 million, RMB1,678.5 million, RMB663.5 million and RMB894.5 million, respectively. In addition, the Group receives capital investment from the government for its infrastructure
112 construction and investment business. For the years ended 31 December 2014 and 2015 and 2016 and the nine months ended 30 September 2016 and 2017, the Group received from the government as capital investment for its infrastructure construction and investment business amounted to RMB8.8 billion, RMB10.3 billion, RMB15.0 billion, RMB9.7 billion and RMB7.0 billion, respectively.
Over the past few years the Group has established a diverse range of external funding channels:
• Financial institution loans: loans from financial institutions constitute the main source of funding for the Group’s businesses. As at 30 September 2017, the Group had an aggregate credit lines from financial institutions of approximately RMB170.4 billion, of which approximately RMB96.6 billion remained unutilised.
• Domestic bonds: As at 30 September 2017, the Group had issued domestic bonds of RMB28.1 billion and a total principal amount of RMB20.9 billion remained outstanding, among which includes corporate bonds with a total outstanding principal amount of RMB4.9 billion, short term financing bonds with a total outstanding principal amount of RMB1.5 billion, medium term notes with a total outstanding principal amount of RMB10.0 billion and private placement notes with a total outstanding principal amount of RMB4.5 billion.
RESEARCH AND DEVELOPMENT
The Group is committed to developing its research and development capabilities and the Group employs a research and development team consisting of employees dedicated to product design and technology development. In addition, the Group has established Tianjin’s Accredited Enterprise Technology Centre, a post-doctoral work station, Tianjin Rail Transit Technical Innovation Base, the Urban Rail Transit Branch of Tianjin Civil Engineering Institute, Beijing-Tianjin-Hebei Joint Technology Centre and Rail Transit Group Technology Alliance. The Group’s research and development team has, both independently and in co-operation with scientific research institutes and universities nationwide, developed a number of advanced products and technologies. As at 30 September 2017, the Group’s research team in Tianjin’s Accredited Enterprise Technology Centre comprised a total of 95 members, including 19 professors of engineering and 57 senior engineers.
The Group’s research and development expenses for the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017 were approximately RMB9.2 million, RMB8.3 million, RMB6.0 million, RMB4.2 million and RMB6.9 million, respectively.
HEALTH AND SAFETY
The Group regards occupational health and safety as one of its important corporate and social responsibilities. The Group’s business operations involve risks and hazards that could result in damage or destruction of property, death and personal injury, business interruption and possible legal liabilities.
Pursuant to the Work Safety Law of the PRC (中華人民共和國安全生產法), the Regulations on Work Safety Accident Reporting and Investigation (生產安全事故報告和調查處理條例) and the Measures of Work Safety Permits revised in 29th July 2014 (安全生產許可證條例) and Administrative Measures for the Accrual and Utilisation of Work Safety Funds of Enterprises (企業安全生產費用提取和使用 管理辦法), the Group has implemented the Measures on Work Safety Management, Emergency Handling Plan for Industrial Accidents, Guidelines on Construction Safety and Quality Standardisation, Fire Accidents Management Plan and Emergency Procedures for Fire Fighting, among other policies, to establish the management goals and operating procedures for work safety, accident handling, accident rescue and safety training. The Group has also established a work safety committee and an emergency accident response group. The Group’s safety, health and environmental protection department exercises supervision responsibilities over its work safety in accordance with their prescribed duties.
113 The Group has obtained and maintained all work safety permits issued by the relevant PRC local authorities. The Group’s ability to comply with local laws is an important consideration before it decides to commence its projects. The Group’s safety, health and environmental protection department oversees its relevant operating companies’ compliance with local occupational health, safety and environmental protection requirements. Regular reviews by its safety, health and environmental protection department are instrumental in monitoring its operating companies’ compliance with relevant safety and environmental protection regulations.
EMPLOYEES
As at 30 September 2017, the Group had a total of over 9,218 employees, among which over 4,694 had a bachelor’s degree or above, representing approximately 50.9 per cent. of the total employees. The Group contributes to the pension plan, medical insurance, unemployment insurance, maternity insurance and work-related injury insurance for its employees, in accordance with applicable law and regulations. The Group believes it maintains an amicable relationship with its staff. As at the date of this Offering Circular, the Group has not experienced any strike or any other form of labour disturbance that could materially and adversely affect its business, financial condition and results of operations.
ENVIRONMENTAL PROTECTION
The Group is subject to environmental protection laws and regulations on air pollution, noise emissions, hazardous substances, water and waste discharge and other environmental issues in the jurisdictions where it operates. The Group believes it is in strict compliance, in all material respects, with the applicable environmental protection laws and regulations. As at the date of this Offering Circular, the Group is not aware of any pending or foreseeable environmental proceedings or investigations to which it is a party.
INSURANCE
The Group maintains insurance for all of its construction projects. The Group maintains insurance for the operation of the metro and light rail lines in accordance with the customary practice adopted by peer companies in the PRC. The aforementioned insurance is not mandatory according to the PRC laws and regulations.
LEGAL PROCEEDINGS AND COMPLIANCE
As at the date of this Offering Circular, the Group has obtained and maintained all permits, licences and certificates material to its operations.
As at the date of this Offering Circular, there is no pending litigation or arbitration proceedings and, to the best of the Group’s knowledge, after due and careful enquiry, there is no foreseeable litigation or arbitration proceedings against the Group or any of its senior management that could materially and adversely affect its business, financial condition and results of operations.
114 DIRECTORS AND SENIOR MANAGEMENT
DIRECTORS
The following table sets forth certain information with respect to the Company’s directors as at the date of this Offering Circular:
Name Age Position Mr. Miao Yugang...... 57 Chairman Mr.LiuYuqi ...... 56 Director and General Manager Mr. Huang Qi ...... 47 Director and Chairman of Trade Union Mr. Ding Linsheng ...... 58 Director and Deputy General Manager Mr. Zhang Xingyan ...... 55 Director and Deputy General Manager Mr. Wang Lianen...... 52 Director
Mr. Miao Yugang, born in 1961, is a member of the Chinese Communist Party and a senior economist. Mr. Miao is currently a member of the party committee and Chairman of the Company. Before joining the Company, he has served as a teacher of Liangzhuang Primary School in Xiawuqi Town, Wuqing County, Tianjin; a cadre of the Finance Bureau of Wuqing County, Tianjin; a clerk and senior staff member of the office, the deputy head of the office and the head of the legislative affairs office of Wuqing County People’s Government in Tianjin; the deputy head of the office and the head of the legislative affairs office of Wuqing District People’s Government in Tianjin; a secretary to the party committee and the chairman of the people’s congress of Wangqingtuo Town, Wuqing District, Tianjin; the deputy district head of Wuqing District, Tianjin and a standing committee member of the district committee; a deputy general manager of Tianjin Infrastructure Construction & Investment (Group) Co., Ltd. (天津城市基礎設施建設投資集團有限公司); a secretary to the party committee of Tianjin Metro Group Co., Ltd. (天津市地下鐵道集團有限公司); and a deputy secretary to the party committee and the general manager of Tianjin Railway Group Co., Ltd. (天津市鐵路集團有限公司). Mr. Miao holds a master’s degree.
Mr. Liu Yuqi, born in 1962, is a member of the Chinese Communist Party and a professorate senior engineer. Mr. Liu is currently a member of the party committee and General Manager of the Company. He has previously served as a team leader of the production team of No. 1 Work Zone and the deputy director of Tianjin Municipal No. 2 Company (天津市政二公司); an assistant to the manager and deputy chief engineer, and the head of the engineering and technology department of Tianjin Municipal Properties and Housing Comprehensive Development Company (天津市政地產房屋綜合開 發公司); a deputy general manager of Tianjin Municipal Properties and Housing Comprehensive Development Company (天津市政地產房屋綜合開發公司); a deputy general manager of Tianjin Metro Corporation (天津市地下鐵道總公司), and concurrently served as manager of Metro Construction Company (地鐵建設公司), secretary to the general party branch, general manager and chairman of Tianjin Urban Investment and Construction Co., Ltd. (天津城投建設有限公司), deputy general manager of Tianjin Infrastructure Construction & Investment (Group) Co., Ltd. (天津城市基 礎設施建設投資集團有限公司), vice chairman of Tianjin Transportation Management Committee(天 津市交通管理委員會), vice chairman of Tianjin Urban & Rural Construction Commission (天津市城 鄉建設委員會) and member of the Urban Planning, Construction and Transportation Working Committee of the Municipal Committee (市委城市規劃建設交通工作委員會). Mr. Liu holds a master’s degree.
Mr. Huang Qi, born in 1971, is a member of the Chinese Communist Party and a senior engineer. Mr. Huang is currently a member of the party committee and chairman of the trade union of the Company. He has previously served as the head of the construction technology team of No. 4 Branch, deputy general manager of No. 4 Branch, deputy general manager of No. 3 Branch and the director of the party committee office of Tianjin Local Railway Engineering Company (天津市地方鐵路工程公司); the head of the production division of Tianjin Local Railway Engineering Corporation (天津市地方
115 鐵路工程總公司); the deputy director of the party committee propaganda department of Tianjin Railway Management Bureau (天津市地方鐵路管理局); as well as the deputy director of the planning department, director of the party committee office and deputy secretary to the party committee of Tianjin Railway Group Co., Ltd. (天津市鐵路集團有限公司). Mr. Huang holds a master’s degree.
Mr. Ding Linsheng, born in 1960, is a member of the Chinese Communist Party and a senior engineer. Mr. Ding is currently a member of the party committee and Deputy General Manager of the Company. He has previously served as a secretary to the party branch and the station chief of Wanyong Pier Station of the Transportation Company of Tianjin Railway Management Bureau (天津市地方鐵路局 運輸公司); the head of the transportation division and deputy general manager of the Transportation Company of Tianjin Railway Management Bureau (天津市地方鐵路局運輸公司); a deputy secretary to the party committee and the director of the transportation department and the general manager of Tianjian Railway Management Bureau (天津市地方鐵路局); as well as the chief scheduler and deputy general manager of Tianjin Railway Group Co., Ltd. (天津市鐵路集團有限公司). Mr. Ding holds a master’s degree.
Mr. Zhang Xingyan, born in 1963, is a member of the Chinese Communist Party and a senior engineer. Mr. Zhang is currently a member of the party committee and Deputy General Manager of the Company. He has previously served as the deputy chief engineer of China Railway 18 Bureau Group Co., Ltd. (中鐵十八局集團有限公司) and a deputy secretary to the party committee and president of the Technology Research and Design Institute of the Bureau; the chief of the engineering headquarter department of Tianjin Binhai Mass Transit Development Co., Ltd. (天津濱海快速交通發 展有限公司); the head of the intercity railway department and the head of the technology management department of Tianjin Infrastructure Construction & Investment (Group) Co., Ltd. (天津城市基礎設 施建設投資集團有限公司); a deputy secretary to the party committee, the chairman and general manager of Tianjin Metro Group Co., Ltd (天津市地下鐵道集團有限公司); as well as a deputy general manager of Tianjin Infrastructure Construction & Investment (Group) Co., Ltd. (天津城市基礎設施建 設投資集團有限公司). Mr. Zhang holds a doctorate degree.
Mr. Wang Lianen, born in 1966, is a member of the Chinese Communist Party and a lawyer. Mr. Wang is currently a Director of the Company. Before joining the Company, Mr. Wang previously served as an executive member of the Tianjin International Trust and Investment Co., Ltd. as well as a director of Grandall Law Firm (Tianjin) office. Mr. Wang holds a doctorate degree.
SENIOR MANAGEMENT
The table below sets forth certain information regarding our senior management members:
Name Age Position Mr. Qiu Daqing ...... 59 Deputy General Manager Mr. Chen Guiqun...... 55 Secretary to the Committee for Discipline Inspection Mr. Jin Zhengqiao ...... 52 Deputy General Manager Mr.ZouYu...... 55 Deputy General Manager Mr.HuHao...... 41 Deputy General Manager Mr. Zhu Ganping...... 51 Chief Engineer
Mr. Qiu Daqing, born in 1959, is a member of the Chinese Communist Party and a senior engineer. Mr. Qiu is currently a member of the party committee and Deputy General Manager of the Company. He has previously served as a cadre and secretary to the league branch of Tianjin Government Affairs Management Bureau (天津市機關事務管理局); the head of the academic affairs division of Technology School under Tianjin Public Utilities Bureau (天津市公用局); the director of the office of Tianjin Xianda Kangle Concourse (天津市先達康樂總匯); a deputy general manager of Tianjin Xianda Industrial Company (天津市先達實業公司); the director of the administrative office and a deputy general manager of Tianjin Railway Management Bureau (天津市地方鐵路管理局). Mr. Qiu holds a master’s degree.
116 Mr. Chen Guiqun, born in 1963, is a member of the Chinese Communist Party and a senior political engineer. Mr. Chen is currently a member of the party committee, a standing committee member and the Secretary to the Committee for Discipline Inspection of the Company. He has previously served as a cadre of the office, division head and deputy director of Tianjin Pipe Company (天津鋼管公司); as well as the director of the office, deputy chief economist, head of the management department and a secretary to the committee for discipline inspection of Tianjin Pipe (Group) Corporation (天津鋼管 集團股份有限公司). Mr. Chen holds a master’s degree.
Mr. Jin Zhengqiao, born in 1966, is a senior engineer and a registered tier one constructor. Mr. Jin is currently a Deputy General Manager of the Company. Before joining the Company, Mr. Jin previously served as a deputy general manager of Tianjin Real Estate Development and Management Group Co., Ltd. (天津市房地產開發經營集團有限公司); the Chairman of Tianjin Tianzheng Infrastructure Construction Co., Ltd. (天津市天政基礎設施建設有限公司); the Chairman of Tianjin Tuanbo Lake Investment Development Co., Ltd. (天津市團泊湖投資發展有限公司); the Chairman of Tianjin Tianfang Beihai Investment Company (天津天房北海投資公司) and a deputy general manager of Tianjin Real Estate Group Co., Ltd. (天津房地產集團有限公司). Mr. Jin holds a master’s degree.
Mr. Zou Yu, born in 1963, is a member of the Chinese Communist Party and a senior engineer. Mr. Zou is currently a Deputy General Manager of the Company. He has previously served as a cadre of the design institute of Tianjin Railway Management Bureau (天津市地方鐵路管理局); a cadre and vice president of Tianjin Urban-Rural Construction Institute (天津市城鄉建設研究所); a cadre of the office, deputy director and the deputy head of the comprehensive planning department of Tianjin Construction Management Committee (天津市建設管理委員會); the director of the office of Tianjin Infrastructure Construction & Investment (Group) Co., Ltd. (天津城市基礎設施建設投資集團有限公 司); a deputy general manager of Beijing-Tianjin Intercity Railway Co., Ltd. (京津城際鐵路有限責任 公司); as well as the general manager, secretary to the party committee and chairman of Tianjin Railway Construction Investment Holding (Group) Co., Ltd. (天津鐵路建設投資控股集團有限公司). Mr. Zou holds a master’s degree.
Mr. Hu Hao, born in 1977, is a member of the Chinese Communist Party and a senior engineer. Mr. Hu is currently a member of the party committee, a Deputy General Manager and a Deputy Chief Engineer of the Company; a deputy party secretary and the general manager of Tianjin Metro Group Co., Ltd. (天津市地下鐵道集團有限公司), and a deputy secretary of the party branch and the general manager of Metro Construction Company (地鐵建設公司). Mr. Hu holds a master’s degree.
Mr. Zhu Ganping, born in 1967, is a senior engineer with a master’s degree. Mr. Zhu is currently a member of the party committee and the Chief Engineer of the Company. He has previously served as the head of the project department, vice president and chief engineer of Chengjiao Branch of No. 3 Survey and Design Institute of the Ministry of Railway (鐵道部第三勘測設計院); as well as the chief engineer, deputy general manager and a member of the party committee of Tianjin Metro Group Co., Ltd. (天津市地下鐵道集團有限公司).
117 EXCHANGE RATE INFORMATION
RENMINBI
The People’s Bank of China (“PBOC”) sets and publishes daily a base exchange rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the markets during the prior day. The PBOC also takes into account other factors such as the general conditions existing in the international foreign exchange market. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong dollars and U.S. dollars, has been based on rates set by the PBOC, which are set daily based on the previous day’s inter-bank foreign exchange market rates and current exchange rates in the world financial markets. From 1994 to 20 July 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable. On 21 July 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to that of the U.S. dollar, to allow the value of the Renminbi to fluctuate within a narrow and managed band based on market supply and demand and by reference to a basket of currencies. This change in policy has resulted in a significant appreciation of the Renminbi against the U.S. dollar.
The PRC government has made further adjustments to the exchange rate system. The PBOC authorised the China Foreign Exchange Trading Centre, effective since 4 January 2006, to announce the central parity exchange rate of certain foreign currencies against the Renminbi at 9:15 a.m. each business day. This rate is set as the central parity for the trading against the Renminbi in the inter-bank foreign exchange spot market and the over the counter exchange rate for that business day. On 18 May 2007, the PBOC enlarged, effective on 21 May 2007, the floating band for the trading prices in the inter-bank spot exchange market of Renminbi against the U.S. dollar from 0.3 per cent. to 0.5 per cent. around the central parity rate. This allows the Renminbi to fluctuate against the U.S. dollar by up to 0.5 per cent. above or below the central parity rate published by the PBOC. On 12 April 2012, the PBOC announced that effective on 16 April 2012, the floating band for the trading prices in the inter- bank spot exchange market of Renminbi against the U.S. dollar is enlarged from 0.5 per cent. to 1.0 per cent. around the central parity rate, which allows the Renminbi to fluctuate against the U.S. dollar by up to 1.0 per cent. above or below the central parity rate published by the PBOC. The PBOC announced on 15 March 2014 that, since 17 March 2014, the floating band of inter-bank spot foreign exchange market trading price of RMB against U.S. dollar was further widened from 1.0 per cent. to 2.0 per cent.. On 11 August 2015, the PBOC adjusted the mechanism for market makers to form the central parity rate by requiring them to consider the closing exchange rate of the last trading date, the supply and demand of foreign exchange and the rate change at primary international currencies. On 11 December 2015, the China Foreign Exchange Trade System, a sub-institutional organisation of the PBOC, published the CFETS Renminbi exchange rate index for the first time which weighs the Renminbi based on 13 currencies, to guide the market in order to measure the Renminbi exchange rate from a new perspective. On 30 September, 2016, the International Monetary Fund announced that the Renminbi joins its Special Drawing Rights currency basket. The PRC government may in the future make further adjustments to the exchange rate system.
Although the PRC governmental policies have been introduced in 1996 to reduce restrictions on the convertibility of the Renminbi into foreign currency for current account items, conversion of the Renminbi into foreign currency for capital items, such as foreign direct investment, loans or security, requires the approval of the SAFE and other relevant authorities.
118 The following tables sets forth certain information concerning the exchange rates between Renminbi and the U.S. dollar. The exchange rate refers to the Noon Buying Rate as set forth in the weekly H.10 statistical release of the US Federal Reserve Board for the periods indicated:
Noon Buying Rate Period Period End Average(1) High Low (RMB per U.S.$1.00) 2012 ...... 6.2301 6.2990 6.3879 6.2221 2013 ...... 6.0537 6.1478 6.2438 6.0537 2014 ...... 6.2046 6.1704 6.2591 6.0402 2015 ...... 6.4778 6.2869 6.4896 6.1870 2016 ...... 6.9430 6.6549 6.9580 6.4480 2017 August ...... 6.5888 6.6670 6.7272 6.5888 September ...... 6.6533 6.5690 6.6591 6.4773 October ...... 6.6328 6.6254 6.6533 6.5712 November ...... 6.6090 6.6200 6.6385 6.5967 December ...... 6.5063 6.5932 6.6210 6.5063 2018 January...... 6.2841 6.4233 6.5263 6.2841 February (through 16 February) ...... 6.3438 6.3118 6.3438 6.2649
Note:
(1) Annual averages are calculated by averaging the rates on the last business day of each month during the relevant year. Monthly averages are calculated by averaging the daily rates during the relevant monthly period.
EURO
The following tables sets forth certain information concerning the exchange rates between the Euro and the U.S. dollar. The exchange rate refers to the Noon Buying Rate as set forth in the weekly H.10 statistical release of the US Federal Reserve Board for the periods indicated:
Noon Buying Rate Period Period End Average(1) High Low (U.S.$ per €1.00) 2012 ...... 1.3186 1.2909 1.3463 1.2062 2013 ...... 1.3779 1.3303 1.3816 1.2774 2014 ...... 1.2101 1.3210 1.3927 1.2101 2015 ...... 1.0859 1.1096 1.2015 1.0524 2016 ...... 1.0552 1.1072 1.1516 1.0375 2017 August ...... 1.1894 1.1813 1.1973 1.1703 September ...... 1.1813 1.1913 1.2041 1.1747 October ...... 1.1648 1.1755 1.1847 1.1580 November ...... 1.1898 1.1743 1.1936 1.1577 December ...... 1.2022 1.1836 1.2022 1.1725 2018 January...... 1.2428 1.2197 1.2488 1.1922 February (through 16 February) ...... 1.2442 1.2369 1.2482 1.2226
Note:
(1) Annual averages are calculated by averaging the rates on the last business day of each month during the relevant year. Monthly averages are calculated by averaging the daily rates during the relevant monthly period.
119 PRC REGULATIONS
This section summarises the principal PRC laws and regulations which are relevant to the Group’s business and operations. As this is a summary, it does not contain a detailed analysis of the PRC laws and regulations which are relevant to the Group’s business and operations.
NDRC REGISTRATION
On 14 September 2015, the NDRC issued the NDRC Notice, which became effective on the same day. In order to encourage the use of low-cost capital in the international capital markets in promoting investment and steady growth and to facilitate cross-border financing, the NDRC Notice abolishes the case-by-case quota review and approval system for the issuance of foreign debts by PRC enterprises and sets forth the following measures to promote the administrative reform of the issuance of foreign debts by PRC enterprises or overseas enterprises and branches controlled by PRC enterprises:
• steadily promote the administrative reform of the filing and registration system for the issuance of foreign debts by enterprises;
• increase the size of foreign debts issued by enterprises, and support the transformation and upgrading of key sectors and industries;
• simplify the filing and registration of the issuance of foreign debts by enterprises; and
• strengthen the supervision during and after the process to prevent risks.
For the purposes of the NDRC Notice, “foreign debts” means RMB-denominated or foreign currency-denominated debt instruments with a maturity of more than one year which are issued offshore by PRC enterprises and their controlled offshore enterprises or branches and for which the principal and interest are repaid as agreed, including offshore bonds and long term and medium term international commercial loans, etc. According to this definition, offshore bonds issued by both PRC enterprises and their controlled offshore enterprises or branches shall be regulated by the NDRC Notice.
Pursuant to the NDRC Notice, an enterprise shall: (i) apply to the NDRC for the filing and registration procedures prior to the issuance of the bonds; and (ii) shall report the information on the issuance of the bonds to NDRC within 10 working days after the completion of each issuance. The materials to be submitted by an enterprise shall include an application report and an issuance plan, setting out details such as the currency, size, interest rate, term, use of proceeds and remittance details. The NDRC shall decide whether to accept an application within 5 working days of receipt and shall issue an enterprise foreign debt pre-issuance registration certificate within 7 working days of accepting the application.
To issue foreign debts, an enterprise shall meet these basic conditions:
• have a good credit history with no default in its issued bonds or other debts;
• have sound corporate governance and risk prevention and control mechanisms for foreign debts; and
• have a good credit standing and relatively strong capability to repay its debts.
Pursuant to the NDRC Notice, the NDRC shall control the overall size of foreign debts that can be raised by PRC enterprises and their controlled overseas branches or enterprises. Based on trends in the international capital markets, the needs of the PRC economic and social development and the capacity to absorb foreign debts, the NDRC shall reasonably determine the overall size of foreign debts and guide the funds towards key industries, key sectors, and key projects encouraged by the
120 State, and effectively support the development of the real economy. When the limit of the overall size of foreign debts has been exceeded, the NDRC shall make a public announcement and shall no longer accept applications for filing and registration. According to the NDRC Notice, the proceeds raised may be used onshore or offshore according to the actual needs of the enterprises, but priority shall be given to supporting the investment in major construction projects and key sectors, such as projects for the “Belt and Road Initiative”, the coordinated development of Beijing-Tianjin-Hebei, the Yangtze River Economic Belt, international cooperation on production capacity, and the manufacturing of equipment. As the NDRC Notice is newly published, certain detailed aspects of its interpretation and application remain subject to further clarification.
THE PRC LEGAL SYSTEM
The PRC legal system is based on the PRC Constitution and is made up of written laws, regulations, directives and local laws, laws of Special Administrative Regions and laws resulting from international treaties entered into by the PRC government. In general, PRC court judgments do not constitute binding precedents. However, they are used for the purposes of judicial reference and guidance.
The National People’s Congress of the PRC (the “NPC”) and the Standing Committee of the NPC are empowered by the PRC Constitution to exercise the legislative power of the State. The NPC has the power to amend the PRC Constitution and enact and amend basic laws governing State agencies and civil, criminal and other matters. The Standing Committee of the NPC is empowered to enact and amend all laws except for the laws that are required to be enacted and amended by the NPC.
The State Council is the highest organ of the State administration and has the power to enact administrative rules and regulations. The ministries and commissions under the State Council are also vested with the power to issue orders, directives and regulations within the jurisdiction of their respective departments. All administrative rules, regulations, directives and orders promulgated by the State Council and its ministries and commissions must be consistent with the PRC Constitution and the national laws enacted by the NPC. In the event that a conflict arises, the Standing Committee of the NPC has the power to annul such administrative rules, regulations, directives and orders.
At the regional level, the provincial and municipal congresses and their respective standing committees may enact local rules and regulations and the people’s governments may promulgate administrative rules and directives applicable to their own administrative areas. These local rules and regulations must be consistent with the PRC Constitution, the national laws and the administrative rules and regulations promulgated by the State Council.
The State Council, provincial and municipal governments may also enact or issue rules, regulations or directives in new areas of the law for experimental purposes or in order to enforce the law. After gaining sufficient experience with experimental measures, the State Council may submit legislative proposals to be considered by the NPC or the Standing Committee of the NPC for enactment at the national level.
The PRC Constitution vests the power to interpret laws in the Standing Committee of the NPC. The Supreme People’s Court, in addition to its power to give general interpretation on the application of laws in judicial proceedings, also has the power to interpret specific cases. The State Council and its ministries and commissions are also vested with the power to interpret rules and regulations that they have promulgated. At the regional level, the power to interpret regional rules and regulations is vested in the regional legislative and administrative bodies which promulgated such laws.
THE PRC JUDICIAL SYSTEM
Under the PRC Constitution and the Law of Organization of the People’s Courts, the judicial system is made up of the Supreme People’s Court, the local courts, military courts and other special courts.
121 The local courts are comprised of the basic courts, the intermediate courts and the higher courts. The basic courts are organised into civil, criminal, economic, administrative and other divisions. The intermediate courts are organised into divisions similar to those of the basic courts, and are further organised into other special divisions, such as the intellectual property division. The higher level courts supervise the basic and intermediate courts. The people’s procuratorates also have the right to exercise legal supervision over the civil proceedings of courts of the same level and lower levels. The Supreme People’s Court is the highest judicial body in the PRC. It supervises the administration of justice by all other courts.
The courts employ a two-tier appellate system. A party may appeal against a judgment or order of a local court to the court at the next higher level. Second judgments or orders given at the next higher level and the first judgments or orders given by the Supreme People’s Court are final. If, however, the Supreme People’s Court or a court at a higher level finds an error in a judgment which has been given by any court at a lower level, or the president of a court finds an error in a judgment which has been given in the court over which he presides, the case may then be retried in accordance with the judicial supervision procedures.
The Civil Procedure Law of the PRC, which was adopted on 9 April 1991 and amended on 28 October 2007, 31 August 2012 and 27 June 2017, respectively, sets forth the criteria for instituting a civil action, the jurisdiction of the courts, the procedures to be followed for conducting a civil action and the procedures for enforcement of a civil judgment or order. All parties to a civil action conducted within the PRC must comply with the Civil Procedure Law. Generally, a civil case is initially heard by a local court of the municipality or province in which the defendant resides. The parties to a contract may, by express agreement, select a jurisdiction where civil actions may be brought, provided that the jurisdiction is either the plaintiff’s or the defendant’s place of residence, the place of execution or implementation of the contract or the place of the object of the contract. However, such selection cannot violate the stipulations of grade jurisdiction and exclusive jurisdiction in any case.
A foreign individual or enterprise generally has the same litigation rights and obligations as a citizen or legal person of the PRC. If a foreign country’s judicial system limits the litigation rights of PRC citizens and enterprises, the PRC courts may apply the same limitations to the citizens and enterprises of that foreign country within the PRC. If any party to a civil action refuses to comply with a judgment or order made by a court or an award granted by an arbitration panel in the PRC, the aggrieved party may apply to the court to request for enforcement of the judgment, order or award. The time limit imposed on the right to apply for such enforcement is two years. If a person fails to satisfy a judgment made by the court within the stipulated time, the court will, upon application by any party to the action, mandatorily enforce the judgment.
A party seeking to enforce a judgment or order of a court against a party who is not located within the PRC and does not own any property in the PRC may apply to a foreign court with proper jurisdiction for recognition and enforcement of the judgment or order. A foreign judgment or ruling may also be recognised and enforced by a PRC court in accordance with the PRC enforcement procedures if the PRC has entered into, or acceded to, an international treaty with the relevant foreign country, which provides for such recognition and enforcement, or if the judgment or ruling satisfies the court’s examination in accordance with the principle of reciprocity, unless the court finds that the recognition or enforcement of such judgment or ruling will result in a violation of the basic legal principles of the PRC, its sovereignty or security, or for reasons of social and public interests.
FOREIGN EXCHANGE CONTROLS
The lawful currency of the PRC is the Renminbi, which is subject to foreign exchange controls and is not freely convertible into foreign exchange at this time. SAFE, under the authority of PBOC, is empowered with the functions of administering all matters relating to foreign exchange, including the enforcement of foreign exchange control regulations.
122 Prior to 31 December 1993, a quota system was used for the management of foreign currency. Any enterprise requiring foreign currency was required to obtain a quota from the local SAFE office before it could convert Renminbi into foreign currency through PBOC or other designated banks. Such conversion had to be effected at the official rate prescribed by SAFE on a daily basis. Renminbi could also be converted into foreign currency at swap centres. The exchange rates used by swap centres were largely determined by the demand for, and supply of, the foreign currency and the Renminbi requirements of enterprises in the PRC. Any enterprise that wished to buy or sell foreign currency at a swap centre had to obtain the prior approval of SAFE.
On 28 December 1993, PBOC, under the authority of the State Council, promulgated the “Notice of PBOC Concerning Further Reform of the Foreign Currency Control System”, effective from 1 January 1994. The Notice announced the abolition of the foreign exchange quota system, the implementation of conditional convertibility of Renminbi in current account items, the establishment of the system of settlement and payment of foreign exchange by banks, and the unification of the official Renminbi exchange rate and the market rate for Renminbi established at swap centres. On 26 March 1994, PBOC promulgated the “Provisional Regulations for the Administration of Settlement, Sale and Payment of Foreign Exchange” (the “Provisional Regulations”), which set out detailed provisions regulating the trading of foreign exchange by enterprises, economic organisations and social organisations in the PRC.
On 1 January 1994, the former dual exchange rate system for Renminbi was abolished and replaced by a controlled floating exchange rate system, which was determined by demand and supply of Renminbi. Pursuant to such system, PBOC set and published the daily Renminbi-U.S. dollars exchange rate. Such exchange rate was determined with reference to the transaction price for Renminbi-U.S. dollars in the inter-bank foreign exchange market on the previous day. Also, PBOC, with reference to exchange rates in the international foreign exchange market, announced the exchange rates of Renminbi against other major foreign currencies. In foreign exchange transactions, designated foreign exchange banks may, within a specified range, freely determine the applicable exchange rate in accordance with the rate announced by PBOC.
On 29 January 1996, the State Council promulgated the “Regulations for the Control of Foreign Exchange of the PRC” (“Control of Foreign Exchange Regulations”) which became effective from 1 April 1996. The Control of Foreign Exchange Regulations classifies all international payments and transfers into current account items and capital account items. Most current account items are subject to the approval by relevant banks that are duly authorised by SAFE to do so, while capital account items are still subject to SAFE approval directly. The Control of Foreign Exchange Regulations was subsequently amended on 14 January 1997. Such amendment affirms that the State shall not restrict international current account payments and transfers. On 1 August 2008, the Control of Foreign Exchange Regulations were further amended pursuant to a resolution of the State Council of China and came into effect on 5 August 2008 (the “New Forex Regulation”). Under the New Forex Regulation, foreign currency received under current account by onshore entities will not be asked to be settled into Renminbi automatically, while foreign currency under capital account may also be maintained upon approval. The Renminbi will be convertible for current account items (including the distribution of dividends, interest and royalties payments, and trade and service-related foreign exchange transactions) upon presentation of valid receipts and proof certifying the purposes of the conversion of Renminbi into foreign currency to the designated foreign exchange banks. Conversion of Renminbi into foreign exchange and remittance of foreign exchange funds outside of PRC for capital account items, like direct investment, loan, loan guarantee, securities investment, capital contribution and repatriation of investment, is still subject to restriction, and prior approval from SAFE or its competent branch.
On 20 June 1996, PBOC promulgated the “Regulations for Administration of Settlement, Sale and Payment of Foreign Exchange” (the “Settlement Regulations”) which became effective on 1 July 1996. The Settlement Regulations superseded the Provisional Regulations and abolished the remaining restrictions on convertibility of foreign exchange in respect of current account items while
123 retaining the existing restrictions on foreign exchange transactions in respect of capital account items. Domestic entities seeking to enter into foreign exchange transactions are required to open up foreign exchange accounts for current account or capital account transactions, as the case may be, at banks involved in foreign exchange business. Interest payments for foreign debt may be made from a foreign exchange account of a domestic entity or using foreign exchange purchased at designated foreign exchange banks after the verification of the bona fide nature of the transaction by SAFE. Domestic entities may apply to SAFE for approval to purchase foreign exchange by presenting valid documents required by the Settlement Regulations for repayment of foreign debt principal and such payment can be made upon the approval of SAFE.
On 25 October 1998, PBOC and SAFE promulgated the “Notice Concerning the Discontinuance of Foreign Exchange Swap Business” pursuant to which and with effect from 1 December 1998, all foreign exchange swap business in the PRC for foreign-invested enterprises was discontinued, while the trading of foreign exchange by foreign-invested enterprises was to be regulated under the system for the settlement and sale of foreign exchange applicable to banks.
On 21 July 2005, PBOC announced that, beginning from 21 July 2005, the PRC will implement a regulated and managed floating exchange rate system based on market supply and demand and by reference to a basket of currencies. The Renminbi exchange rate is no longer pegged to the U.S. dollars only. PBOC will announce the closing price of a foreign currency such as the U.S. dollars traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each business day, setting the central parity for trading of the Renminbi on the following business day.
ENVIRONMENTAL PROTECTION LAWS
The State Environmental Protection Administration is responsible for the overall supervision and management of environmental protection in the PRC. All manufacturers in the PRC must comply with environmental laws and regulations including the Environmental Protection Law of the PRC, Prevention and Control of Water Pollution Law of the PRC, Prevention and Control of Air Pollution Law of the PRC and Prevention and Control of Environmental Pollution by Solid Waste Law of the PRC, and relevant environmental regulations such as provisions regarding the treatment and disposal of pollutants and sewage, discharge of polluted fumes and the prevention of industrial pollution. Depending on the circumstances and the seriousness of the violation of the environmental regulations, the local authorities are authorised to impose various types of penalties on the persons or entities in violation of the environmental regulations. The penalties which could be imposed include the issue of warning, suspension of operation or installation and use of preventive facilities which are incomplete and fail to meet the prescribed standard, reinstallation of preventive facilities which have been dismantled or left idle, administrative sanction against office-in-charge, suspension of business operations or shut-down of the enterprise or institution. Fines could also be levied together with these penalties. The relevant local authorities may apply to the court for compulsory enforcement of environmental compliance. The persons or entities in violation of the applicable laws and regulations may also be liable to pay damages to the victims and/or result in criminal liability.
Other environmental protection laws applicable to the Group mainly include the “Regulations of Environmental Management on Project”, the “Regulations of Environmental Protection Acceptance Inspection on Projects Completion” and the Environmental Impact Evaluation Law of the PRC.
124 TAXATION
The following summary of certain tax consequences of the purchase, ownership and disposition of the Bonds is based upon applicable laws, regulations, rulings and decisions in effect as at the date of this Offering Circular, all of which are subject to change (possibly with retroactive effect). This discussion does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Bonds and does not purport to deal with consequences applicable to all categories of investors, some of which may be subject to special rules. Neither these statements nor any other statements in this Offering Circular are to be regarded as advice on the tax position of any holder of the Bonds or any persons acquiring, selling or otherwise dealing in the Bonds or on any tax implications arising from the acquisition, sale or other dealings in respect of the Bonds. Persons considering the purchase of the Bonds should consult their own tax advisors concerning the possible tax consequences of buying, holding or selling any Bonds under the laws of their country of citizenship, residence or domicile.
Hong Kong
Withholding Tax
No withholding tax is payable in Hong Kong in respect of payments of principal or interest on the Bonds or in respect of any capital gains arising from the sale of the Bonds.
Profits Tax
Hong Kong profits tax is chargeable on every person carrying on a trade, profession or business in Hong Kong in respect of profits arising in or derived from Hong Kong from such trade, profession or business (excluding profits arising from the sale of capital assets).
Under the Inland Revenue Ordinance (Cap. 112) of Hong Kong (the “Inland Revenue Ordinance”) as it is currently applied by the Inland Revenue Department, interest on the Bonds may be deemed to be profits arising in or derived from Hong Kong from a trade, professional or business carried on in Hong Kong in the following circumstances:
(a) interest on the Bonds is received by or accrues to a financial institution (as defined in the Inland Revenue Ordinance) and arises through or from the carrying on by the financial institution of its business in Hong Kong; or
(b) interest on the Bonds is derived from Hong Kong and is received by or accrues to a company carrying on a trade, profession or business in Hong Kong; or
(c) interest on the Bonds is derived from Hong Kong and is received by or accrues to a person, other than a company (such as a partnership), carrying on a trade, profession or business in Hong Kong and is in respect of the funds of that trade, profession or business.
Sums derived from the sale, disposal or redemption of the Bonds will be subject to Hong Kong profits tax where received by or accrued to a person, other than a financial institution, who carries on a trade, profession or business in Hong Kong and the sum has a Hong Kong source unless otherwise exempted. The source of such sums will generally be determined by having regard to the manner in which the Bonds are acquired and disposed of.
Sums received by or accrued to a financial institution by way of gains or profits arising through or from the carrying on by the financial institution of its business in Hong Kong from the sale, disposal and redemption of the Bonds will be subject to profits tax.
125 Stamp Duty
No stamp duty is payable upon the issue or transfer of a Bond.
PRC
The following summary accurately describes the principal PRC tax consequences of ownership of the Bonds by beneficial owners who, or which, are not residents of mainland China for PRC tax purposes.
These beneficial owners are referred to as non-resident Bondholders in this “Taxation — PRC” section. In considering whether to invest in the Bonds, investors should consult their individual tax advisors with regard to the application of PRC tax laws to their particular situations as well as any tax consequences arising under the laws of any other tax jurisdiction. Reference is made to PRC taxes from the taxable year beginning on or after 1 January 2008.
Pursuant to the new EIT law which took effect from 1 January 2008 and the Individual Income Tax Law of the PRC, as amended on 30 June 2011 and effective from 1 September 2011, and their respective implementing regulations, an income tax is imposed on payment of interest by way of withholding in respect of debt securities, issued by PRC enterprises to non-resident bondholders, including non-resident enterprises and non-resident individuals. The current rates of such income tax are 20 per cent. for non-resident individuals and 10 per cent. for non-resident enterprises. However, the tax so charged on interest paid on bonds to non-resident bondholders who, or which are residents of Hong Kong (including enterprise holders and individual holders), as defined under the arrangement between mainland China and Hong Kong for purpose of the avoidance of double taxation, will be 7 per cent. of the gross amount of the interest pursuant to the arrangement between mainland China and Hong Kong and relevant interpretation of the arrangement formulated by the State Administration of Taxation of China. The Company has agreed to pay additional amounts to holders of the Bonds so that holders of the Bonds would receive the full amount of the scheduled payment, as further set out in Condition 8 of the Terms and Conditions of the Bonds.
Under the new EIT law and its implementation rules, any gains realised on the transfer of the Bonds by holders who are deemed under the new EIT law as non-resident enterprises may be subject to PRC EIT if such gains are regarded as incomes derived from sources within the PRC. Under the new EIT law, a “non-resident enterprise” means an enterprise established under the laws of a jurisdiction other than the PRC and whose actual administrative organisation is not in the PRC, which has established offices or premises in the PRC, or which has not established any offices or premises in the PRC but has obtained income derived from sources within the PRC. There remains uncertainty as to whether any gains realised from the transfer of the Bonds would be treated as income derived from sources within the PRC and be subject to PRC tax. This will depend on how the PRC tax authorities interpret, apply or enforce the EIT Law and its implementation rules. In addition, there is uncertainty as to whether gains realised on the transfer of the Bonds by individual holders who are not PRC citizens or residents will be subject to PRC individual income tax. If such gains are subject to PRC income tax, the 10 per cent. EIT rate and 20 per cent. individual income tax rate will apply respectively on such gains unless there is an applicable tax treaty or arrangement that reduces or exempts the holders of the Bonds from such income tax. The taxable income will be the balance of the total income obtained from the transfer of the Bonds minus all costs and expenses that are permitted under PRC tax laws to be deducted from the income. According to an arrangement between mainland China and Hong Kong for avoidance of double taxation, Bondholders who are Hong Kong residents, including both enterprise holders and individual holders, will be exempted from PRC income tax on capital gains derived from a sale or exchange of the Bonds.
No PRC stamp duty will be imposed on non-resident holders either upon issuance of the Bonds or upon a subsequent transfer of Bonds.
126 The Proposed Financial Transactions Tax (the “FTT”)
On 14 February 2013, the European Commission published a proposal (the “Commission’s Proposal”) for a Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the “participating Member States”). However, Estonia has since stated that it will not participate.
The Commission’s Proposal has very broad scope and could, if introduced, apply to certain dealings in the Bonds (including secondary market transactions) in certain circumstances.
Under the Commission’s Proposal the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in the Bonds where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, “established” in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.
However, the FTT proposal remains subject to negotiation between participating Member States. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional member states of the European Union may decide to participate.
Prospective holders of the Bonds are advised to seek their own professional advice in relation to the FTT.
British Virgin Islands
Income Tax
The Issuer is exempt from all provisions of the Income Tax Ordinance of the British Virgin Islands. Payments of principal, premium (if any) or interest in respect of the Bonds to persons who are not resident in the British Virgin Islands are not subject to British Virgin Islands tax or withholding tax.
Capital gains realised with respect to the Bonds by persons who are not persons resident in the British Virgin Islands are also exempt from all provisions of the Income Tax Ordinance of the British Virgin Islands. No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not persons resident in the British Virgin Islands with respect to the Bonds. All instruments relating to transactions in respect of the Bonds are exempt from payment of stamp duty in the British Virgin Islands. This assumes that the Issuer does not hold an interest in real estate in the British Virgin Islands.
There are currently no withholding taxes or exchange control regulations in the British Virgin Islands.
FATCA
Pursuant to certain provisions of the U.S. Internal Revenue Code (commonly known as “FATCA”), a a “foreign financial institution” may be required to withhold on certain payments it makes (“foreign passthru payments”) to persons that fail to meet certain certification, reporting, or related requirements. The Issuer may be a foreign financial institution for these purposes. A number of jurisdictions (including the British Virgin Islands) have entered into, or have agreed in substance to, intergovernmental agreements with the United States to implement FATCA (“IGAs”), which modify the way in which FATCA applies in their jurisdictions. Certain aspects of the application of the FATCA provisions and IGAs to instruments such as the Bonds, including whether withholding would ever be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Bonds, are uncertain and may be subject to change. Even if withholding would be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Bonds, such withholding would not apply prior to 1 January 2019. Bondholders should consult their own tax advisers regarding how these rules may apply to their investment in the Bonds.
127 SUBSCRIPTION AND SALE
The Issuer, the Guarantor and the Company have entered into a subscription agreement with the Joint Lead Managers dated 13 March 2018 (the “Subscription Agreement”), pursuant to which and subject to certain conditions contained therein, the Issuer, the Guarantor and the Company have agreed to sell to the Joint Lead Managers, and the Joint Lead Managers have severally but not jointly agreed to subscribe and pay for, or to procure subscribers to subscribe and pay for, the aggregate principal amount of the Bonds indicated in the following table.
Principal amount of the Bonds to be subscribed (€) The Hongkong and Shanghai Banking Corporation Limited ...... 91,000,000 ICBC International Securities Limited ...... 91,000,000 Standard Chartered Bank ...... 91,000,000 ABCI Capital Limited ...... 91,000,000 CCB International Capital Limited ...... 12,000,000 Bank of China Limited ...... 12,000,000 Wing Lung Bank Limited ...... 12,000,000 Total ...... 400,000,000
The Subscription Agreement provides that the Issuer, the Guarantor and the Company will jointly and severally indemnify the Joint Lead Managers against certain liabilities in connection with the offer and sale of the Bonds. The Subscription Agreement provides that the obligations of the Joint Lead Managers are subject to certain conditions precedent and entitles the Joint Lead Managers to terminate it in certain circumstances prior to payment being made to the Issuer.
The Joint Lead Managers and/or their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities (“Banking Services or Transactions”). The Joint Lead Managers and their respective affiliates have, from time to time, performed, and may in the future perform, various Banking Services or Transactions with the Issuer, the Guarantor and the Company, for which they have received or will receive customary fees and expenses.
The Joint Lead Managers and their respective affiliates may purchase the Bonds and allocate the Bonds for asset management and/or proprietary purposes but not with a view to distribution. Such entities may hold or sell such Bonds or purchase further Bonds for their own account in the secondary market or deal in any other securities of the Issuer, the Guarantor or the Company, and therefore, they may offer or sell the Bonds or other securities otherwise than in connection with the offering of the Bonds. Accordingly, references herein to the Bonds being ‘offered’ should be read as including any offering of the Bonds to the Joint Lead Managers and/or their respective affiliates, for their own account. Such entities are not expected to disclose such transactions or the extent of any such investment, otherwise than in accordance with any legal or regulatory obligation to do so. Furthermore, it is possible that only a limited number of investors may subscribe for a significant proportion of the Bonds. If this is the case, liquidity of trading in the Bonds may be constrained. See “Risk Factors — Risks relating to the Bonds and the Guarantee — An active trading market for the Bonds may not develop”. Each of the Issuer, the Guarantor, the Company and each Joint Lead Manager is under no obligation to disclose the extent of the distribution of the Bonds amongst individual investors.
In the ordinary course of their various business activities, the Joint Lead Managers and their respective affiliates make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their
128 own account and for the accounts of their customers, and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the Issuer, the Guarantor and/or the Company, including the Bonds. Certain of the Joint Lead Managers or their affiliates that have a lending relationship with the Issuer, the Guarantor and/or the Company routinely hedge their credit exposure to the Issuer, the Guarantor and/or the Company consistent with their customary risk management policies. Typically, such Joint Lead Managers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in the Issuer’s, the Guarantor’s and/or the Company’s securities, including potentially the Bonds offered hereby. Any such short positions could adversely affect future trading prices of the Bonds offered hereby. The Joint Lead Managers and their affiliates may make investment recommendations and/or publish or express independent research views (positive or negative) in respect of the Bonds or other financial instruments of the Issuer, the Guarantor and/or the Company, and may recommend to their clients that they acquire long and/or short positions in the Bonds or other financial instruments.
In connection with the issue of the Bonds, any Joint Lead Manager as a Stabilisation Manager or any person acting on behalf of the Stabilisation Manager may, to the extent permitted by applicable laws, over-allot the Bonds or effect transactions with a view to supporting the market price of the Bonds at a level higher than that which might otherwise prevail, but in so doing, the Stabilisation Manager or any person acting on behalf of the Stabilisation Manager shall act as principal and not as agent of the Issuer, the Guarantor or the Company. However, there is no assurance that the Stabilisation Manager or any person acting on behalf of the Stabilisation Manager will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the Bonds is made and, if begun, may be ended at any time, but in no case later than the earlier of 30 days after the issue date of the Bonds and 60 days after the date of the allotment of the Bonds. Any loss or profit sustained as a consequence of any such over-allotment or stabilisation shall be for the account of the Joint Lead Managers.
General
The distribution of this Offering Circular or any offering material and the offering, sale or delivery of the Bonds are subject to restrictions and may not be made except pursuant to registration with or authorisation by the relevant securities regulatory authorities or an exemption therefrom. Therefore, persons who may come into possession of this Offering Circular or any offering material are advised to consult with their own legal advisors as to what restrictions may be applicable to them and to observe such restrictions. This Offering Circular may not be used for the purpose of an offer or invitation in any circumstances in which such offer or invitation is not authorised.
No action has been or will be taken in any jurisdiction by the Issuer, the Guarantor, the Company, or Joint Lead Managers that would or is intended to permit a public offering, or any other offering under circumstances not permitted by applicable law, of the Bonds, or possession or distribution of this Offering Circular, any amendment or supplement thereto issued in connection with the proposed resale of the Bonds or any other offering or publicity material relating to the Bonds, in any country or jurisdiction where action for that purpose is required. Persons into whose hands this Offering Circular comes are required by the Issuer, the Guarantor, the Company and the Joint Lead Managers to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Bonds or have in their possession, distribute or publish this Offering Circular or any other offering or publicity material relating to the Bonds, in all cases at their own expense.
If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Joint Lead Managers or any affiliate of them is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the Joint Lead Managers or such affiliate on behalf of the Issuer in such jurisdiction.
129 United States
The Bonds and the Guarantee have not been and will not be registered under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States. The Bonds and the Guarantee are being offered and sold outside of the United States in reliance on Regulation S.
In addition, until 40 days after the commencement of the offering of the Bonds and the Guarantee, an offer or sale of the Bonds or Guarantee within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act.
United Kingdom
Each Joint Lead Manager has represented and agreed that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of the Bonds in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or the Guarantor; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom.
European Union
Each Joint Lead Manager has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Bonds which are the subject of the offering contemplated by this Offering Circular in relation thereto to any retail investor in the European Economic Area. For the purposes of this provision:
(a) the expression “retail investor” means a person who is one (or more) of the following:
(i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or
(ii) a customer within the meaning of Directive 2002/92/EC, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or
(iii) not a qualified investor as defined in the Prospectus Directive; and
(b) the expression “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the Bonds to be offered so as to enable an investor to decide to purchase or subscribe the Bonds.
Hong Kong
Each Joint Lead Manager has represented and agreed that:
(a) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Bonds other than (i) to “professional investors” as defined in the SFO and any rules made under that Ordinance; or (ii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance; and
(b) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement,
130 invitation or document relating to the Bonds, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the Bonds which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made under that Ordinance.
The People’s Republic of China
Each Joint Lead Manager has represented and agreed that the Bonds are not being offered or sold and may not be offered or sold, directly or indirectly, in the People’s Republic of China (for such purposes, not including the Hong Kong and Macau Special Administrative Regions or Taiwan), except as permitted by the securities laws of the People’s Republic of China.
Singapore
Each Joint Lead Manager has acknowledged that this Offering Circular has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each Joint Lead Manager has represented and agreed that it has not offered or sold any Bonds or caused such Bonds to be made the subject of an invitation for subscription or purchase and will not offer or sell such Bonds or cause such Bonds to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this Offering Circular or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of such Bonds, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
This Offering Circular has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Offering Circular and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of any Bonds may not be circulated or distributed, nor may any Bonds be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the Bonds are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Bonds pursuant to an offer made under Section 275 of the SFA, except:
(i) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
131 (ii) where no consideration is or will be given for the transfer;
(iii) where the transfer is by operation of law;
(iv) as specified in Section 276(7) of the SFA; or
(v) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.
Japan
The Bonds have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the “Financial Instruments and Exchange Act”). Accordingly, each Joint Lead Manager has represented and agreed that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Bonds in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and other relevant laws and regulations of Japan.
British Virgin Islands
Each Joint Lead Manager has represented, warranted and agreed that no invitation has been made or will be made, directly or indirectly, to any person in the British Virgin Islands or to the public in the British Virgin Islands to purchase the Bonds and the Bonds are not being offered or sold and may not be offered or sold, directly or indirectly, in the British Virgin Islands, except as otherwise permitted by the British Virgin Islands laws.
This Offering Circular does not constitute, and there will not be, an offering of the Bonds to any person in the British Virgin Islands.
132 DESCRIPTION OF CERTAIN MATERIAL DIFFERENCES BETWEEN PRC GAAP AND IFRS
The Company’s Financial Statements as included in this Offering Circular have been prepared and presented in accordance with PRC GAAP, except for certain disclosure requirements under PRC GAAP. PRC GAAP is substantially in line with IFRS, except for certain modifications which reflect the PRC’s unique circumstances and environment. The following is a general summary of certain differences between PRC GAAP and IFRS on recognition and presentation as applicable to the Guarantor. The Guarantor is responsible for preparing the summary below. Since the summary is not meant to be exhaustive, there is no assurance regarding the completeness of the financial information and related footnote disclosure between PRC GAAP and IFRS and no attempt has been made to quantify such differences. Had any such quantification or reconciliation been undertaken by the Company, other potentially significant accounting and disclosure differences may have been required that are not identified below. Additionally, no attempt has been made to identify possible future differences between PRC GAAP and IFRS as a result of prescribed changes in accounting standards. Regulatory bodies that promulgate PRC GAAP and IFRS have significant ongoing projects that could affect future comparisons or events that may occur in the future.
Accordingly, no assurance is provided that the following summary of differences between PRC GAAP and IFRS is complete. In making an investment decision, each investor must rely upon its own examination of the Group, the terms of the offering and other disclosure contained herein. Each investor should consult its own professional advisers for an understanding of the differences between PRC GAAP and IFRS and/or between PRC GAAP and other generally accepted accounting principles, and how those differences might affect the financial information contained herein.
GOVERNMENT GRANT
PRC GAAP requires an assets-related government grant to be recognised as deferred income, and evenly amortised to profit or loss over the useful life of the related asset. However, under IFRS, such assets-related government grants are allowed to be presented in the statement of financial position either by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset.
Under PRC GAAP, the relocation compensation for public interests shall be recognised as special payables. The income from compensation attributable to losses of fixed assets and intangible assets, related expenses, losses from production suspension incurred during the relocation and reconstruction period and purchases of assets after the relocation shall be transferred from special payables to deferred income and accounted for in accordance with the government grants standard. The surplus reached after deducting the amount transferred to deferred income shall be recognised in capital reserve.
Under IFRS, if an entity relocates for reasons of public interests, the compensation received shall be recognised in profit and loss.
REVERSAL OF AN IMPAIRMENT LOSS
Under PRC GAAP, once an impairment loss is recognised for a long term asset (including fixed assets, intangible assets and goodwill, etc.), it shall not be reversed in any subsequent period. Under IFRS, an impairment loss recognised in prior periods for an asset other than goodwill could be reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.
133 RELATED PARTY DISCLOSURES
Under PRC GAAP, government-related entitles are not treated as related parties. Under IFRS, government-related entities are still treated as related parties.
FIXED ASSETS AND INTANGIBLE ASSETS
Under PRC GAAP, only the cost model is allowed. Under IFRS, an entity can choose either the cost model or the revaluation model as its accounting policy.
134 GENERAL INFORMATION
1. Clearing Systems: The Bonds have been accepted for clearance through Euroclear and Clearstream under Common Code number 167950507 and the International Securities Identification Number (“ISIN”) for the Bonds is XS1679505070. The LEI of the Issuer is 529900E4SV3AFQVQFD57.
2. Authorisations: Each of the Issuer and the Guarantor has obtained all necessary consents, approvals and authorisations in connection with the issue and performance of the Bonds and the giving of the Guarantee. The issue of the Bonds was authorised by resolutions of the sole director of the Issuer on 21 August 2017. The giving of the Guarantee was authorised by resolutions of sole director of the Guarantor on 21 August 2017. The Company has obtained all necessary consents, approvals and authorisations in connection with entry into the Keepwell and Liquidity Support Deed and the Deed of Equity Interest Purchase Undertaking. The execution of the Keepwell and Liquidity Support Deed and the Deed of Equity Interest Purchase Undertaking was authorised by resolutions of the directors of the Company on 18 January 2018.
3. No Material Adverse Change: Except as otherwise disclosed in this Offering Circular, there has been no material adverse change in the financial or trading position, condition (financial or otherwise), results of operations, profitability, shareholders’ equity, business, properties, general affairs, management or prospects of the Guarantor, the Company or the Group since 30 September 2017. There has been no material adverse change in the financial or trading position of the Issuer since the date on which it has become an indirect wholly-owned subsidiary of the Company and/or since the date it was incorporated.
4. Litigation: None of the Issuer, the Guarantor, the Company or any member of the Group is involved in any litigation or arbitration proceedings that the Issuer, the Guarantor or the Company believe are material in the context of the Bonds nor is the Issuer, the Guarantor or the Company aware that any such proceedings are pending or threatened.
5. Available Documents: Copies of the Company’s Financial Statements, the Guarantor’s Financial Statements, the Trust Deed, the Agency Agreement, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking, the Deed of Guarantee and the Articles of Association of each of the Issuer, the Guarantor and the Company will be available from the Issue Date at the specified office of the Principal Paying Agent (being at the date of this Offering Circular at Level 30, HSBC Main Building, 1 Queen’s Road Central, Hong Kong) (subject, in the case of documents other than the Agency Agreement, to the Principal Paying Agent having been provided with the same by the Issuer, the Guarantor or the Company) during normal business hours (being between 9.00 a.m. and 5.00 p.m.) upon prior written request and satisfactory proof of holding, so long as any of the Bonds is outstanding. In addition, this Offering Circular (together with any supplement, if any) will be available in electronic form on the website of the Luxembourg Stock Exchange (www.bourse.lu).
6. Notices to Bondholders: All notices regarding the Bonds (including financial notices) will be published (so long as the Bonds are listed on the Euro MTF Market and the rules and regulations of the LuxSE so require) in a leading newspaper having general circulation in Luxembourg (which is currently expected to be the Luxembourg Wort) or on the official website of the LuxSE (www.bourse.lu). The Issuer will be entitled (in addition to publication as described above, where applicable) to deliver all notices concerning the Bonds to Euroclear Bank SA/NV and Clearstream Banking S.A. for communication by the relevant clearing system to the Bondholders.
135 7. Audited Financial Statements: The Company’s Audited Financial Statements, which are included elsewhere in this Offering Circular, have been audited by CAC as stated in its reports dated 25 April 2017 and were prepared in accordance with the PRC GAAP. The Company’s Reviewed Financial Statements, which are included elsewhere in this Offering Circular, have been reviewed by not audited by Peking CPA as stated in its reports dated 8 January 2018 and were prepared in accordance with the PRC GAAP. The Guarantor’s Financial Statements, which are included elsewhere in this Offering Circular, have been audited or reviewed by Richful as stated in its reports dated 27 March 2017 and 16 January 2018, respectively, and were prepared in accordance with the HKFRS. For the Guarantor’s Financial Statements, there is no material difference between HKFRS and the International Financial Reporting Standards.
8. Listing of Bonds: Application has been made to the LuxSE for the listing of the Bonds on the Official List and the admission to trading of the Bonds on the Euro MTF Market. The Euro MTF Market is not a regulated market for the purposes of the Markets in Financial Instruments Directive (Directive 2004/39/EC).
136 INDEX TO THE FINANCIAL STATEMENTS
Pages
The Company’s Audited Financial Statements as at and for the Three Years Ended 31 December 2016
Auditor’s Report ...... F-3
Consolidated Statement of Financial Position ...... F-5
Consolidated Income Statement ...... F-7
Consolidated Cash Flow Statement ...... F-8
Consolidated Statement of Changes in Owners’ Equity ...... F-9
Statement of Financial Position ...... F-12
Income Statement ...... F-14
Cash Flow Statement ...... F-15
Statement of Changes in Owners’ Equity ...... F-16
Notes to the Financial Statements ...... F-19
The Company’s Reviewed Financial Statements as at and for the Nine Months Ended 30 September 2017
Review Report...... F-173
Consolidated Balance Sheet...... F-174
Balance Sheet of Parent Company ...... F-176
Consolidated Income Statement ...... F-178
Income Statement of Parent Company ...... F-179
Consolidated Cash Flow Statement ...... F-180
Cash Flow Statement of Parent Company ...... F-181
Consolidated Statement of Changes in Owners’ Equity ...... F-182
Statement of Changes in Owners’ Equity of Parent Company ...... F-184
Notes to the Financial Statements F-186
The Guarantor’s Audited Consolidated Financial Statements as at and for the Year Ended 31 December 2016
Director’s Report...... F-334
Independent Auditor’s Report ...... F-337
Consolidated Income Statement ...... F-339
Consolidated Statement of Financial Position ...... F-340
Consolidated Statement of Changes in Equity ...... F-341
Consolidated Statement of Cash Flows ...... F-342
Accounting Policies and Explanatory Notes to the Consolidated Financial Statements F-343
F-1 Pages
The Guarantor’s Reviewed Consolidated Financial Statements as at and for the Nine Months Ended 30 September 2017
Review Opinion...... F-361
Report of Factual Findings ...... F-363
Consolidated Statement of Financial Position Consolidated Income Statement ...... F-372
Consolidated Statement of Changes in Equity ...... F-373
Consolidated Income Statement ...... F-374
Consolidated Statement of Cash Flows ...... F-375
F-2 F-3 F-4 F-5 F-6 F-7 F-8 F-9 F-10 F-11 F-12 F-13 F-14 F-15 F-16 F-17 F-18 Tianjin Rail Transit Group Co., Ltd.
Notes to the Financial Statements
˄All amounts in RMB Yuan unless otherwise stated˅
Note ˖Basic Situation of Company
/Company profile
Company Name: Tianjin Rail Transit Group Co., Ltd.
Address of Registration: 36th Cai Zhi Ave, Xi Qing District, Tianjin City, People’s Republic of China.
Permitted Operation Period: From 06/06/1992 to 14/05/2053
Total Owners Equity: RMB 40,000,000,000.00
Legal person: Miao Yu Gang
II.Main Business Area, Category of Trading and Product or Service provided
Main Business Areas of the Company: Organizing and Managing City Railway Transportation; Investing,
Constructing, Operating, Maintaining, Repairing and Developing Railway Projects; Urban Infrastructure
Investing, Marketable Security and Equity Investing; Railway related storage (Not Include Hazardous
Materials), Cargo loading and unloading Service; Agent Project Contracting, Management and Consulting;
Commercial Property Retailing; Property and Site Lease; Building Material Manufacturing and Retailing;
Conference and Exhibition Service; Advertising Producing, Designing and Publishing.(License and Operation
Permit needed if required by Law and Regulation)
III.History
Tianjin Railway Group Co., Ltd. is a wholly state-owned subsidiary of the Tianjin SASAC.The company got business license (No. 120000000007484) from Administration of industry and Commerce of Tianjin
Municipality on June 6, 1992.The registered capital is RMB 1,008,382,055.00.The paid-in capital is RMB
1,008,382,0547.00.
According to the Notice of forming the Tianjin Rail Transit Group Co., Ltd. issued by State-owned Assets
Supervision and Administration Commission of Tianjin Municipal People's Government (Tianjin former chine-guizhou aviation [2014] No. 188), and “Notice of approval for changing business name”
((2014)No.003056 ) issued by Administration of industry and Commerce of Tianjin Municipality on 28th May
2014, the company applyed to increase the registered capital of RMB 38,991,617,945.30 by way of turning the capital reserves. The registered capital is RMB 40 billion after capital increased.After the change, the
17
F-19 shareholders of the company changed to Tianjin city infrastructure investment group and Tianjin TEDA
Investment Holding Co., Ltd. The shareholding ratio is 86.34% and 13.66% respectively. IV.This Financial Statement is approved and published date
This Financial Statement is approved and Published by the Board of Directors at the 25th of April, 2017.
Note 2: Basis of preparation of financial statements
With the going-concern assumption as the basis and based on transactions and other events that actually occurred, the Group prepared financial statements in accordance with Business Enterprises—Basic Standard> and the 41 specific accounting standards issued by the Ministry of Finance, the Application Guidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises and other regulations issued and revised. Note 3: A statement of compliance with corporate accounting standards The financial statements prepared by the Company are in compliance with the Accounting Standards for Business Enterprises, which factually and completely present the Company’s, and the Company’s financial positions, business results, cash flows and other relevant information. Note 4: Significant accounting policy and accounting estimate 1. Accounting year The accounting year of the Group is from 1 January to 31 December of each calendar year. 2. Functional currency Renminbi ("RMB") is the currency of the primary economic environment in which the Company and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries choose RMB as their functional currency. 3. Accounting recognition, measurement and reporting foundation and measurement attributes The Group has adopted the accrual basis of accounting and the financial statements have been prepared on a going concern basis. The Group adopts the historical cost, replacement cost, net realizable value, present value and fair value as the principle of measurement in the financial statements. 4. Accounting Treatment Method of Business Merger under Common Control and not under Common Control ˄1˅Business Merger under Common Control The assets and liabilities acquired in the business merger shall be recorded into the consolidated financial statements at their book value on the date of business merger. For the difference of the book value of net 18 F-20 assets acquired by the Company and that of consolidation consideration (or total present value of the issued shares) paid, the stock premium in capital reserve should be adjusted. If the stock premium in capital reserve is insufficient to offset, the retained earnings shall be adjusted. If the accounting policies adopted by the acquired parties are inconsistent with the Company, the acquired parties shall adjust according to the accounting policies of the Company at the merger date and recognize the book value adjusted on these policies. All expenses directly relevant to the business merger including audit expense, assessment expense and legal service expense paid for the business merger are recorded into the current profits and losses when occurrence. Handling charges and commissions for issuing equity securities during the business merger offset the premium income of equity securities. If the premium income is insufficient to offset, the retained earnings shall be written down. ˄2˅The Business Merger not under Common Control The merger cost is the assets paid, the liabilities occurred or assumed and the fair value of equity securities issued by the Company for the control power of the acquired party at the purchase date, plus all directly relevant expenses. Thus, the assets paid, the liabilities occurred or assumed by the Company at the purchase date shall be recognized as per the fair value. The balance between the fair value and the book value are recognized into the current profits and losses. The balance that the merger costs minus the fair value of identifiable net assets of the acquired party in the business merger is recognized as the goodwill by the Company. If the merger costs are less than the fair value of identifiable net assets of the acquired party, the Company shall review the fair values of all identifiable assets, liabilities and contingent liabilities of the acquired party and the measurement of the merger costs. If the merger costs are still less than the fair values of identifiable net assets of the acquired party in the business merger after the review, the balance is recognized into the current profits and losses. The potential economic benefits of other assets (not limited to the identified assets of the acquired party) except for intangible assets of the acquired party in the business merger may flow into the Company and their fair value can be reliably measured and independently recognized. Intangible assets whose fair value can be reliably measured are separately identified as intangible assets and measured as per the fair value.The potential economic benefits of other liabilities except for the contingent liabilities of the acquired party may flow out from the Company and their fair value can be reliably measured and independently recognized. The contingent liabilities of the acquired party whose fair value can be reliably measured are separately identified as the contingent liabilities and measured as per the fair value. The acquired companies become subsidiaries of the Company after the merger. All identifiable assets, liabilities and contingent liabilities of the acquired parties in the business merger are recognized as per their fair values at the purchase date into the consolidated balance sheet of the Company. 19 F-21 5. Preparation Method of Consolidated Financial Statements The consolidation scope of the consolidated financial statements is determined on the basis of control. The parent company shall cover all controlled entities (including enterprises, divisible parts of invested companies, and structured entities controlled by enterprises) into the consolidation scope of the consolidated financial statements. Although an enterprise has at most 50% voting right of the invested party, whether its voting right is enough for it to have the ability of directing activities of the invested party and whether this enterprise is viewed with the possession of the control right, the following facts should be considered: (1)The voting right of the enterprise relative to other voting shares of other investment parties, and the dispersion of voting shares of other investment parties; (2)The potential voting rights of the enterprise and other investment parties in the invested party such as convertible bonds and executable warrants; (3)Other rights in other contracts. The enterprise shall consider the history implementation of voting rights and other facts of the invested party. When the voting right has no material impact on the returns of the invested party, for example it’s only related to regular administration of the invested party, and when activities of the invested party are determined in contracts, the enterprise has to assess these contracts and whether its right is powerful enough to control the invested party. When the enterprise is unable to find out whether its right is powerful enough to control the invested party,it should consider the evidences that prove its actual ability to direct activities of the invested party and then judge whether it has the control right of the invested party. The considerations include but are not limited to: a. Whether the enterprise has the right to assign or approve the executives of the invested party; b. Whether the enterprise votes for or against major transactions of the invested party out of its own benefits; c. Whether the enterprise has the control of appointment of authorities like Board of Directors in the invested party, or gets the attorneyship from other voting shareholders; d. Whether the enterprise is affiliated with majorities of executives or authorities like Board of Directors in the invested party. Special relations between the enterprise and the invested party, if exiting, should be considered when it’s to assess whether the enterprise has the control right of the invested party. Special relations include key executives of the invested party is or was the employee of the enterprise; the operation of the invested party relies on the enterprise; major activities of the invested party have the enterprise involved in or are taken under the name of the enterprise; the enterprise’s risks or earnings with variable returns from the invested party exceed its voting shares or similar right proportion. When determining whether it has the control of the invested party, the enterprise shall find out firstly that it executes the decision right under the name of principal entity or agency. If other parties have the decision rights, it should find out that whether they execute the decision rights under the name of agency. The enterprise should find out whether it has the overall control of the invested party. In rare cases when evidences show the following conditions are met and relevant laws and regulations are complies with, the 20 F-22 LQYHVWPHQWSDUW\VKDOOYLHZDSDUW ʊWKHSDUWý) of invested party as an separate part (individual entity) of invested party and then find out whether it has the control right of this part (individual entity). (a). The assets of the part are the sole source to pay off liabilities or other equities of the part, and are not used to pay off other liabilities of other parts of the invested party; (b). Except for parties related to the part, other parties are entitled to neither the rights related to assets of the part, nor the rights related to remaining cash flows of the part. The accounting policies and accounting periods adopted by subsidiaries consolidated to the scope of the consolidated financial statements shall be consistent with that of the Company. If the accounting policies and accounting periods adopted by subsidiaries are inconsistent with that of the Company, necessary adjustment shall be made in consolidated statements according to the accounting policies and periods of the Company. The consolidated financial statements are based on the statements of parent company and subsidiaries and complied by the parent company after all internal transactions between the parent and the subsidiaries, and among subsidiaries are written off according to relevant materials. Unrealized profits and losses arising from the parent company selling assets to its subsidiaries offset “net profit attributable to the parent” and ”minority interest income” according to their proportion allocated by the parent company. Unrealized profits and losses arising from the subsidiaries selling assets among them offset “net profit attributable to the parent” and “minority interest income” according to the selling party’s proportion allocated by the parent company. Long-term equity investment of the parent company held by the subsidiaries are viewed as the treasury stocks of the enterprise group and the deduction item of ownership equity. It’s stated in “less: treasury stock” under ownership equity of the consolidated balance sheet. Long-term equity investment of the subsidiaries held by other subsidiaries offsets the shares of ownership equity of invested subsidiaries. Deferred income tax assets or liabilities are recognized in the consolidated balance sheet, income tax expenses are adjusted in the consolidated statement of income when temporary differences between the book values of assets and liabilities in the consolidated balance sheet and their taxation base exist due to offset unrealized profits and losses arising from internal sales, but deferred income tax recorded directly into transactions or events of ownership equity and related with business merger are excepted. Minority interest is stated in “minority interest” under ownership equity in the consolidated balance sheet.Minority interest income is stated in “minority interest income” under net profit in the consolidated statement of income. The balance that current profits and losses assumed by monitories of subsidiaries exceeding their shares of ownership equity at the beginning period is used to offset the minority interest. During the reporting period, the subsidiary increased due to the business merger under common control, the Company shall adjust the beginning amount in the consolidated balance sheet and record the revenue, expense and profit of the subsidiary from the beginning to the end of reporting period in the merger period, into the consolidated statement of income, and the cash flow from the beginning to the end of reporting period in the merger period shall be included into the consolidated statement of cash flow. Same items in statement comparison shall be adjusted. The reporting entities after the merger exist since the final controlling party starts to control. 21 F-23 During the reporting period, the subsidiary increased due to the business merger under non-common control or other means, the Company shall not adjust the beginning amount in the consolidated balance sheet and then record the revenue, expense and profit of the subsidiary from the beginning to the end of reporting period in the merger period, into the consolidated statement of income, and the cash flow from the beginning to the end of reporting period in the merger period shall be included into the consolidated statement of cash flow. When business merger under non-common control is realized through multiple transactions, the Company re-measures the equity of the acquired party held before the acquisition date at the fair value of the acquisition date. The balance between the fair values and the book values are recorded into the current investment income. The equity of the acquired party held before the acquisition date and involved with other ownership income or other ownership equity changes, and other comprehensive income and other owernship equity are transferred into current investment income at the acquisition date,but other comprehensive incomes arising from net debts or assets re-measured by the investment party are excepted. The Company shall not adjust the beginning amounts in the consolidated balance sheet when depositing subsidiaries and their services within the reporting period; revenue, expense and profit of the subsidiary from the beginning of reporting period to the deposition date are included into the consolidated statement of income; cash flow of the subsidiary from the beginning of reporting period to the deposition date is included into the consolidated statement of cash flow. The Company may lose the control right of the subsidiary due to the deposition of parts of equity investment or other causes, and remeasure the remaining equity investment at the fair value at the date of losing control right. Consideration acquired from equity deposition, plus the fair value of remaining equity, less net assets computed according to original shareholding ratio since the purchase date or the merger date, is recorded into the current investment income after losing the control right and offsets the goodwill. Other comprehensive income and other ownership equity related to the equity investment on original subsidiary are transferred into the current investment income when losing the control right. The Company disposes its equity investment on subsidiaries through multiple transactions until it losses the control right. If these transactions are a package deal, they shall be treated as one transaction to dispose its equity investment until losing the control right; but before losing the control right, the balance between each deposition price and the net assets of subsidiaries arising from the disposed investment is recognized as other comprehensive income in the consolidated financial statement and transferred into the current profits and losses when losing the control right. The balance between the new long-term equity investments acquired by the Company from purchasing minority interest and the net identifiable assets of subsidiaries acquired from new holding shares, and the balance between the disposed prices acquired from the disposed of parts of equity investment of subsidiaries when not losing the control right and net assets of subsidiaries acquired from disposed long-term equity investment, are adjusted into stock premium of capital reserve in the consolidated balance sheet. The stock premium of capital reserve, if not offset, is adjusted into retained earnings. 6. Determination Standard of Cash and Cash Equivalents The cash determined by the Company in the preparation of the cash flow statement, refers to the cash on hand and the deposits that can be used to pay at any time in the Company. The cash equivalents refer to the 22 F-24 Company’s investments with short term(Generally due within three months from the date of purchase), strong liquidity, easy to covert to known amounts cash and low risk of value change. 7. Foreign Currency Transaction and Foreign Currency Translation in Financial Statements˖ As for the ending balance in various foreign currency accounts, the foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date, and any exchange balance which belongs to the period of preparing the construction shall be recognized into long-term prepaid expenses, and which belongs to borrowings on purchasing fixed assets shall be capitalized and other expenses shall be recognized into the current profits and losses. The foreign currency non-monetary items with the fair value measurement shall be translated at the spot exchange rate at the date of the fair value determined, and any exchange balance shall be recognized into the variable profit and loss of fair value. The foreign currency non-monetary items with the historical cost measurement shall be translated at the spot exchange rate at the transaction date. The assets and the liabilities items in the balance sheet shall be translated at the spot exchange rate on the balance sheet date; other items in equity items should be translated at the spot exchange rate on the occurrence date, except for the “Undistributed Profit”.Other items in the balance sheet shall be translated at the spot exchange rate on the balance sheet date; All translation balances in foreign currency statements are separately reflected under the ownership interest in the balance sheet. When the overseas operation is disposed of, the difference on the foreign currency financial statements related to the overseas operation shall be transferred to the current profits and losses of the current period. 8. Financial Assets and Liabilities Classification of financial assets and liabilitie: On initial recognition, the Group's financial assets are classified into one of the four categories, including financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables, and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Financial assets of the Group are loans and receivables and other financial assets. The Financial Instruments Recognition and Measurement: Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. For other financial assets and financial liabilities, transaction costs are included in their initial recognised amounts. Financial assets are measured by their fair values in subsequent periods.Transactions expenses shall not be deducted when the financial assets are disposed in the future.Except for: (1)Held-to-maturity investments, loans and receivables are measured as per the amortized cost in subsequent periods by the method of the effective interest. (2)Equity instruments not in active market and cannot be reliably measured with financial derivative assets measured at cost. (3)Financial liabilities at fair value through profit or loss measured at fair value. 23 F-25 (4)Equity instruments not in active market and cannot be reliably measured with financial derivative liabilities measured at cost. Method for determining the fair value of financial instruments The fair values of financial assets or liabilities in active market are determined based on their quoted prices in active market; the fair values of financial instruments not in active market are reasonably estimated by the Company by references of the prices used by voluntary parties in recent market transactions under familiar situations, the current fair values of identical financial instruments, the discount cash flow method and the option pricing model. The Group derecognises a financial assets The Group derecognises a financial asset if one of the following conditions is satisfied: (1) the contractual rights to the cash flows from the financial asset expire; or (2) the financial asset has been transferred and substantially all the risks and rewards of ownership of the financial asset is transferred to the transferee; or (3) although the financial asset has been transferred, the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset but has not retained control of the financial asset. For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the difference between (1) the carrying amount of the financial asset transferred; and (2) the sum of the consideration received from the transfer and any cumulative gain or loss that has been recognised in other comprehensive income, is recognised in profit or loss. Impairment of financial assets The Group assesses at each balance sheet date the carrying amounts of financial assets other than those at fair value through profit or loss. If there is objective evidence that a financial asset is impaired, the Group determines the amount of any impairment loss. Objective evidence that a financial asset is impaired includes the following observable events: (1) Significant financial difficulty of the issuer or obligor; (2) A breach of contract by the borrower, such as a default or delinquency in interest or principal payments; (3) The Group, for economic or legal reasons relating to the borrower's financial difficulty, granting a concession to the borrower; (4) It becoming probable that the borrower will enter bankruptcy or other financial reorganisations; (5) The disappearance of an active market for that financial asset because of financial difficulties of the issuer; (6) Upon an overall assessment of a group of financial assets, observable data indicates that there is a measurable decrease in the estimated future cash flows from the group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group. Such observable data includes: - Adverse changes in the payment status of borrower in the group of assets; - Economic conditions in the country or region of the borrower which may lead to a failure to pay the group of assets; (7) Significant adverse changes in the technological, market, economic or legal environment in which the issuer operates, indicating that the cost of the investment in the equity instrument may not be recovered by 24 F-26 the investor; (8) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost; (9) Other objective evidence indicating there is an impairment of a financial asset. Measurement of impairment losses on held-to-maturity investments, loans and receivables If held-to-maturity investments, loans and receivables measured at amortized cost occurred impairment,it will measure the impairment loss at the differences between the present value of future cash flows and the book value,and transfer to the the current profits and losses. For a financial asset that is individually significant, the Group assesses the asset individually for impairment. For a financial asset that is not individually significant, the Group assesses the asset individually for impairment or includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Measurement of impairment loss of receivables explained in bad debt provision policy Measurement of impairment losses on Financial assets available for sale If there is any objective evidence that the impairment occurred for the financial asset, the accumulative losses formed due to the decline of the fair value for the originally recorded capital reserves, shall be switched out and included into the current profits and losses. If an impairment loss has been incurred on an investment in unquoted equity instrument (without a quoted price in an active market) whose fair value cannot be reliably measured, or on a financial derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the carrying amount of the financial asset is reduced to the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. The amount of reduction is recognised as an impairment loss in profit or loss. The impairment loss on such financial asset is not reversed once it is recognised. 9. Provision of bad debts Provision of bad debts mainly include account receivables and other account receivables. For the bad debt loss using the allowance method.Withholding bad-debt balance recognized into current profit or loss.If there are evidences indicated the acoounts receivable cannot be recovered, then regarded as bad debt loss to offset the provision of the bad debts after the prescribed procedures. Determination of bad debt: (1)Uncollectible account receivables occurs if debtor has been declared bankrupt, cancellation, revocation of industrial and commercial registration or closed down by the government. (2)If debtor disappeared or died, the uncollectible receivable amount assuranced by agency. (3) The debtor suffered from war, international political events and natural disasters and other force majeure factors. The uncollectible receivable amount assuranced by agency. (4)According to court verdict, ruling, the account receivable cannot be collected. (5) In overdue receivables can not be recovered, the single amount is small, not enough to offset the cost of clearance received assurance by agency. (6)The account receivable’s age over 3 years. The debtor is insolvent and suffered 3 consecutive years’ losses or cease operating continuously for more than 3 years. (7) The account receivable’s age over 3 years cannot be recovered. The debtor in the overseas and Hong 25 F-27 Kong, Macao and Taiwan regions. (8) The account receivable’s age over 3 years approvaled by the enterprise step by step. The company can give some discount to the debtor, and the remining amount of the receivables regarded as loss. Withholding method of privision of bad debt: Receivables associated with finance and other government departments or related internal company doesn’t need provision for bad debt.Amount of receivables associated with other companies divided into significant which over RMB 5million and non-significant which below RMB 5million.The non-significant amount use the method that combined individual identification and aging analysis.The significant amount use the individual identification method.If there are evidences indicate that the account receivables can not be recovered,the differences between the book value and the estimated present value of cash flows recognized as provision of bad debts. Account receivable with insignificant single amount but single provision for bad debt using age analysis: Aging Proportion Within 1 year 0% 1-2 years 5% 2-3 years 10% 3-4 years 20% 4-5 years 50% Over 5 years 80% 10. Inventory accounting method Classification of inventory The Group's inventories mainly include raw materials, indirect materials, work in progress, finished goods and assets merged by construction contract, etc. Pricing method of inventory Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs of conversion and other expenditures incurred in bringing the inventories to their present location and condition. The actual cost of inventories upon delivery is calculated using the weighted average method. The Withholding Method for Allowance of Inventory Falling Price: At the balance sheet date, inventories are measured at the lower of cost and net realisable value. If the net realisable value is below the cost of inventories, a provision for decline in value of inventories is made. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes. Net realisable value is determined on the basis of clear evidence obtained, and takes into consideration the purposes of holding inventories and effect of post balance sheet events. The net realizable value equals to the estimated sale price of the inventory, net of the cost occurred till the 26 F-28 completion. 11. Long-term Equity Investment accounting method (1)Initial Measurement of Investment Cost a. Long-term Equity Investment in Business Merger: (a) In case of business merger under common control, the Company pays cash, transfers non-cash assets or assumes liabilities to make consolidation consideration. The portion of the ownership equity acquired from the acquired party at the merger date in the book value of consolidated financial statement of the controlling party is recorded as the initial investment cost of long-term equity investment. The balance between the initial investment cost of long-term equity investment and the paid consideration is adjusted into capital reserve; if capital reserve is not enough for the offset, it’s adjusted into retained earnings. The acquiring party issues equity securities as consolidation consideration. The portion of the ownership equity acquired from the acquired party at the merger date in the book value of consolidated financial statement of the controlling party is recorded as the initial investment cost of long-term equity investment.The total book value of issued shares is the capital stock; the balance between the initial investment cost of long-term equity investment and the total book value of issued shares is adjusted into capital reserve; if capital reserve is not enough for the offset, it’s adjusted into retained earnings. All expenses directly arising from the merger, including audit expense, assessment expense and legal service charges paid for the ongoing merger, are recorded into the current profits and losses at the occurrence. (b) As for long-term equity investment arising from the merger of enterprises under non-common control, the business merger cost is the initial investment cost. The business merger cost includes assets paid by the acquiring party to get the control right of the acquired party, liabilities occurred or assumed, and fair values of issued equity securities. Audit expense, assessment expense, legal service charge and other relevant administrative expense paid by the acquiring party for the business merger are recorded into the current profits and losses; transaction expenses of equity or liability securities issued by the acquiring party for the consolidation consideration are recorded as initial recognized amount of equity or liability securities. b. Long-term equity investment acquired by other means: As for the long-term equity investment acquired by cash, the purchase price actually paid is recorded as the initial investment cost, which includes expenses directly related to the acquisition of this long-term equity investment, taxes and other necessary expenditures. As for the long-term equity investment acquired by issuing equity securities, the fair value of issued equity securities is recorded as the initial investment cost. Handling charges and commissions paid to security underwriting institutions for equity security insurance, and other expenses directly related to the issuance are not recorded into the cost of this long-term equity investment, but are deducted from its premium issuance income. If its premium issuance income is not enough to offset, these expenses shall offset surplus reserve and then undistributed profits. As for the long-term equity investment acquired by exchanging non-monetary assets, if non-monetary asset 27 F-29 exchange has commercial natures or the fair value of the surrendered assets is reliably measured, the fair value of the surrendered assets and the relevant taxes and expenses paid are recorded as the initial investment cost of the received long-term equity investment; otherwise, the book value of the surrendered assets and the relevant taxes and expenses paid are recorded as the initial investment cost of the received long-term equity investment. As for the long-term equity investment acquired by debt restructuring, the fair value of entitled shares is recorded as the investment cost; the balance between the book balance of debt restructuring and the fair value of shares is recorded into the current profits and losses. The balance shall offset the impairment reserve, if it’s created; the remaining part shall be recorded into the current profits and losses. (2)Subsequent Measurement and Recognition of Profits and Losses a. Subsequent Measurement: The Company uses cost accounting method for its investments on its subsidiaries and measures at initial investment cost. The cost of long-term equity investment shall be adjusted after adding or recovering investments. The long-term equity investment that has joint control or significant impact on the invested entity, shall be calculated by the equity method, unless the investment is held-for-sale assets. If the initial investment cost of long-term equity investment is more than the fair value of entitled identifiable net assets of the invested party, the initial investment cost of long-term equity investment shall not be adjusted; if the initial investment cost of long-term equity investment is less than the fair value of entitled identifiable net assets of the invested party, its balance shall be recorded into the current profits and losses and meanwhile the cost of long-term equity investment shall be adjusted. If the Company has significant impacts or implements its common control but has no ultimate control on the LQYHVWHGSDUW\GXHWRDGGLWLRQDOLQYHVWPHQWDFFRUGLQJWRʊ$FFRXQWLQJ6WDQGDUGIRU%XVLQHVV(QWHUSULVHV No.22 ---- Recognition and Measurement of Financial Instrumentý, the fair value of its original equity investment and the cost of additional investment together are recorded as the initial investment cost by equity method. The original equity investment is reclassified into held-for-sale finance assets; the balance of its fair value and its book value, and accumulated fair value changes which were recorded into other comprehensive income, are recorded and transferred into the current profits and losses by equity method. If the Company implements the control on the invested party under non-common control due to additional investment, the book value of original equity investment and the cost of additional investment together are recorded as the initial investment cost into some financial statements by equity method. The equity investment held before the acquisition date is recognized as other comprehensive income by equity method, but it shall be accounted when it is disposed on the same base as similar assets or liabilities of the invested party. The equity investment held before the acquisition date is accounted according to “Accounting Standard for Business Enterprises No.22 ---- Recognition and Measurement of Financial Instrument”, the accumulated fair value changes which were recorded into other comprehensive income, are transferred into the current profits and losses by cost method. The Company losses the common control or significant impact on the invested party due to disposition of part equity investment. The remaining equity after the disposition shall be accounted according to 28 F-30 “Accounting Standard for Business Enterprises No.22 ---- Recognition and Measurement of Financial Instrument”; the balance between its fair value measured at the date of losing common control or significant impact and its book value is recorded into the current profits and losses. The original equity investment was recognized as other comprehensive income by equity method; it shall be accounted on the same base as similar assets or liabilities of the invested party at the date when the equity method is stopped.The Company losses the control on the invested party due to disposition of part equity investment. Theremaining equity after the disposition, which has the common control or significant impact on the invested party, shall be accounted by equity method, and adjusted since its acquisition; the remaining equity after the disposition, which has no common control or significant impact on the invested party, shall be accounted according to “Accounting Standard for Business Enterprises No.22 ---- Recognition and Measurement of Financial Instrument”; the balance between its fair value measured at the date of losing control and its book value is recorded into the current profits and losses. As for the ownership equity changes of the invested party accounted by equity method, except for net income and other comprehensive income: if the shareholding ratio stays the same, the Company shall compute its entitled or assumed parts according to its shareholding ratio and adjust the book value of long-term equity investment and then increase or decrease capital reserve (other capital reserve). b. Adjustment of Profits and Losses: Under the cost method, except for the purchase price paid for investment, or declared but unrealized cash dividends or profits included into consideration, the Company recognizes the investment income according to declared but unrealized cash dividends or profits of the invested party, no matter the distributed profits are net profits of the invested party before or after the investment. Under the equity method, after acquiring the long-term equity investment the Company shall recognize investment income and other comprehensive income according to its shares in realized net profits or losses and other comprehensive income of invested party and then adjust the book value of its long-term equity investment. The investing party calculates its deserved parts according to the declared profits or cash dividends of the invested party and then decreases the book value of its long-term equity investment correspondingly. The investing party recognizes realized net losses of the invested party until its book value of the long-term equity investment and other long-term equity materially invested in the invested party are decreased to zero, but the investing party’s obligation for extra losses is excluded from such case. As for future realized profits of the invested party, the investing party firstly makes up for unrecognized losses from its entitled profits and then recognizes its entitled profits. When the investing party recognizes its shares in net profits and losses of the invested party, besides the net book profits of the invested party, it shall consider the following factors: if the accounting policies or period of both parties are inconsistent, the accounting policies or period of the investing party shall be used to adjust the financial statements of the invested party; based on the fair value of all identifiable assets of the invested party at the acquisition, the net profits of the invested party shall be adjusted and then recognized;unrealized profits and losses arising from internal transactions between the Company and affiliated ventures and among joint ventures shall offset the parts attributable to the Company according to its shares.The unrealized internal transaction losses between the Company and the invested party shall be recognized in full if they are 29 F-31 asset impairments. During the investment-holding period, if consolidated financial statements of the invested party are available, the net profits and other equity changes within the consolidated financial statements shall be the accounting base. When a long-term equity investment is disposed, the balance between its book value and its actual price is recorded into the current profits and losses. As for a long-term equity investment accounted by equity method, it shall use the same base as similar assets or liabilities of the invested party when it’s disposed, and the part that was recorded into other comprehensive income is accounted according to relevant ratio (3)The Recognition of Common Control and Significant Impact on the Invested Party The common control is the control on some arrangements according to relevant agreements and the arrangements can only be decided after the parties participating in the control right reach a consensus. Joint arrangement is under the common control of two or more participating parties. Joint arrangement includes joint operation and joint venture. The significant impact means that there is the participation right on decision-making of the financial and business policies for an enterprise, but can’t control or jointly control the setup of these policies together with other parties. When deciding whether significant impact shall be imposed on the invested party, the current convertible corporate bonds, current executable warrants and other potential voting rights of the invested party held by investors and other parties shall be considered. If the investors is able to impose significant impact on the invested party, the invested party is its affiliated enterprise. (4)Impairment Test of Long-term Equity Investment and Impairment Reserve Withholding a. Both internal and external information is used to find out the signs of impairment on long-termequity investment on subsidiaries, joint ventures or affiliated ventures at the balance sheet date. If signs exist, an impairment test shall be made to estimate the recoverable amount of this long-term equity investment. If the estimation of recoverable amount shows that the recoverable amount of the long-term equity investment is less than its book value, its book value will be deducted to its recoverable amount. The deduction amount is recognized as the asset impairment and recorded into the current profits and losses.Meanwhile impairment reserve is withdrawn. The recoverable amount refers the greater of fair value of assets (or asset group, asset portfolio) less disposition expense, or the current value of estimated future cash flow of assets. The net amount of fair value of assets less disposition expense is determined according to the amount of sales agreement price in fair trade less attributable to asset disposition expense. The current value of estimated future cash flow of assets is determined according to the estimated future cash flow arising from sustained use and final disposition of the asset, and proper discount rate before tax. b. The impairment of long-term equity investments cannot be transferred in future accounting periods after the recognition. 12. Fixed Assets accounting methods The fixed assets of the Company refer to the tangible assets held for goods production, services offering, renting or operating management, and the service life of more than a fiscal year. Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is 30 F-32 probable that economic benefits associated with the asset will flow to the Group and the subsequent expenditures can be measured reliably. Meanwhile the carrying amount of the replaced part is derecognised. Other subsequent expenditures are recognised in profit or loss in the period in which they are incurred. A fixed asset is depreciated over its useful life using the straight-line method since the month subsequent to the one in which it is ready for intended use. Estimated net residual value assumes the situation where a fixed asset expire for its estimated useful life and is in its expected final status. Estimated net residual value is the amount that the Group can obtain from the disposal less expected disposal fees. If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use or disposal, the fixed asset is derecognised. When a fixed asset is sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes is recognised in profit or loss for the period. The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least once at each financial year-end, and account for any change as a change in an accounting estimate. The "finance lease" shall refer to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. Its ownership may or may not eventually be transferred. The fixed assets by finance lease shall adopt the same depreciation policy for self-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life. The amount of held-for-sale fixed assets is the lower of its carrying amount and recoverable amount. The differences between them recognized into assets impairment loss. Derecognized the fixed assets when the fixed assets being disposaled or cannot bring economic benefits to the company. The disposal revenue of fixed assets after deducting its carrying amount and related taxes transfer into current profit or loss. 13. Investment Property The investment property is defined as the real estate held for earning rent, gaining capital or both. The investment property of the Company includes the land use rights that rented out, the land use rights that held and ready to transfer after the capital appreciation, and the buildings that rented out. The investment property of the Company are initially measured at its cost and then by fair value model in subsequent periods. The costs of a purchased investment property comprise its purchase price and any directly related taxes and other expenses attributable to the asset; the costs of self-construction property comprise all costs before it reaches the conditions that can be used; the costs of investment property obtained in other ways, confirmed by the relevant accounting policy. Transfer the investment property to other assets or transfer the other assets to investment property if there are evidences that indicated the purposes of real state has been changed,and met the following conditions:1.Investment property changed to self-use;2.Property as inventory transfer to rental assets;3. Own 31 F-33 land use right to earn rentals or for capital appreciation;4. Own land use right for rental. Determination of transfer date (1)The transfer date of investment property transfer to own-occupied property is the date that the property reaches the self-use condition, and used in the production of goods, providing labor services or business management. (2)The transfer date of investment property as inventory or own land use right transfer to rental assets is the date that the lease begins. (3)Undefined date determined by the departments of production and operation. 14. Construction in progress Construction in progress is measured at its actual costs. The actual costs include various construction expenditures during the construction period, borrowing costs capitalised before it is ready for intended use and other relevant costs. Construction in progress is not depreciated. Construction in progress is transferred to a fixed asset when it is ready for intended use. 15. Intangible assets An intangible asset is measured initially at cost. When an intangible asset with a finite useful life is available for use, its original cost less net residual value and any accumulated impairment losses is amortised over its estimated useful life using the straight-line method. An intangible asset with an indefinite useful life is not amortised. For an intangible asset with a finite useful life, the Group reviews the useful life and amortisation method at the end of the period, and makes adjustments when necessary. The term "intangible asset" refers to the identifiable non-monetary assets possessed or controlled by enterprises which have no physical shape. The intangible assets shall be initially measured according to its cost. The costs related with the intangible assets, if the economic benefits related to intangible assets are likely to flow into the enterprise and the cost of intangible assets can be measured reliably, shall be recorded into the costs of intangible assets; otherwise, it shall be recorded into current profits and losses upon the occurrence. The use right of land gained is usually measured as intangible assets. For the self-developed and constructed factories and other constructions, the related expenditures on use right of land and construction costs shall be respectively measured as intangible assets and fixed assets. For the purchased houses and buildings, the related payment shall be distributed into the payment for use right of land and the payment for buildings, if it is difficult to be distributed, the whole payment shall be treated as fixed assets. For intangible assets with a finite service life, from the time when it is available for use, the cost after deducting the sum of the expected salvage value and the accumulated impairment provision shall be amortized by straight line method during the service life. While the intangible assets without certain service life shall not be amortized. At the end of period, the Company shall check the service life and amortization method of intangible assets with finite service life, if there is any change, it shall be regarded as a change of the accounting estimates. If there is any evidence showing that the period of intangible assets to bring the economic benefits to the 32 F-34 enterprise can be prospected, it shall be estimated the service life and amortized in accordance with the amortization policies for intangible assets with finite service life. 16.Goodwill Goodwill is generated when the stock investment cost exceed the fair value of the invested entity at the acquisition date, or the investment cost is more than the fair value of the net assets of invested entity at the acquisition date when the business combinations is not under the same control. Goodwill generated from business combination should be listed separately in the consolidated financial statement, the stock investment cost for purchasing joint venture and cooperative enterprise is more than the fair value of the invested entity at the acquisition date belong to long-term equity investment. When the related asset group or combination of asset group which including goodwill are subject to impairment test and they have an indiction of impairment, the related asset group or combination of asset group without goodwill should be tested for impairment, calculate the recoverable amount and compare with book value to comfirm related impairment loss. 17. Long-term prepaid expenses Long-term unamortized expenses are those already paid and their amortization period is longer than one year (one year excluded). Except for the fixed assets acquired and constructed, the Company carries forward for once all expenses occurred during the preparation periods into the profit and loss of the month when production and operation start; if one long-term unamortized expense on the book is not beneficial to future accounting periods, the remaining unamortized amount shall be recorded into the current profit and loss. Long-term prepaid expenses accounted for actual costs. 18. Determination method of asset impairment and its basis The Group and the Company review the impairment status of long-term equity investments, fixed assets, construction in progress, bearer biological asset and intangible assets with finite useful life at the end of each year. If the assets exist impairment, the Group estimates the recoverable amount of the assets. An intangible asset with an indefinite useful life and intangible assets not yet available for use are tested for impairment annually, irrespective of whether there is any indication that the assets may be impaired. Recoverable amount is estimated on individual basis. If it is not practical to estimate the recoverable amount of an individual asset, the recoverable amount of the asset group to which the asset belongs will be estimated. The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset. If recoverable amount of assets is less than book value, the difference is recognised as impairment provision and expensed in current period. Goodwill is tested for impairment at least at the end of each year. For the purpose of impairment testing, goodwill is considered together with the related assets group (s), i.e., goodwill is reasonably allocated to the related assets group (s) or each of assets group (s) expected to benefit from the synergies of the combination. An impairment loss is recognised if the recoverable amount of the assets group or sets of assets groups (including goodwill) is less than its carrying amount. The impairment loss is firstly allocated to reduce the carrying amount of any goodwill allocated to such assets group or sets of assets groups, and then 33 F-35 to the other assets of the group pro-rata on the basis of the carrying amount of each asset (other than goodwill) in the group. The impairment is recognised in profit or loss for the period in which it is incurred and will not be reversed in any subsequent period. 19. Determination of Assets group Determination of Assets group Determination to assets group based on the main cash flows whether independent to other assets, combined with the company's management style and disposal method or continued use of the assets. Impairment of assets group (1)The determination of the book value of the asset group is consistent with the recoverable amount. (2)The book value of assets group includes the amount directly attributable to the assets group and that can be reasonably and consistently allocated to asset groups, uauslly except for the book value of recognized liabilities. (3)Determination to the recoverable amount of assets group based on the higher amount of fair value less costs of disposal and estimated present value of future cash flows. (4)Impairment test on assets group at balance sheet date.The amount of book value less recoverable amount recognized into assets impairment loss. Impairment provision for the assets group first deducted the book value of goodwill, and then deducted the other assets’ book value pro-rata based on their proportion in the assets group.This amount treated as individual assets’ current impairment loss.After deduction, every assets’ book value cannot be lower than the higher amount as follows:ķFair value less cost of disposalĸ Estimated present value of future cash flowsĹ0. Unallocated amount allocated to other assets in assets group pro-rata. 20. Borrowing Costs The borrowing costs refer to interests of borrowings and other relevant costs including loan interest, discount or premium amortization, subsidiary expenses and exchange balance due to foreign currency loans. The borrowing costs shall be capitalized if they are arisen from construction or production of the assets meeting capitalization conditions. The assets meeting capitalization conditions refer to fixed assets, investment properties and inventories (Over one year) that reach estimated serviceable or merchantable condition after long-time construction or production. The borrowing costs shall be capitalized if the following requirements are simultaneously met: (1)The assets expenses have occurred; (2)The borrowing costs have occurred; (3)The necessary construction or production activities have been ready for the estimated serviceable or merchantable assets. When the capitalization-qualified assets suspend construction or production for more than three months, the borrowing costs suspend to be capitalized and that occurred during the suspension are recorded into the current profits and losses until the projects restart. When the constructed or production capitalization-qualified assets reach the estimated serviceable or merchantable conditions, the borrowing costs stop to be capitalized and that occurred afterwards are recorded into the current profits and losses. 34 F-36 The capitalization period refers to the beginning point to the ending point, except for suspension period. Special borrowings are recognized as the actual interests in current period, net of provisional deposit interest earnings or investment incomes; occupied general borrowings are computed as weighted average amount that the accumulative asset expenditure exceeds special borrowings, multiplied by the capitalization ratio of occupied general borrowings. The capitalization ratio is determined based on weighted average interest of general borrowings. During the capitalization period, the exchange differences between special foreign borrowings’ principal and interests should be capitalized, and then recognized into costs which eligible for capitalization. The exchange differences between other foreign borrowings’ principal and interests should be accounted as financial expenses which belongs to the current profit or loss. 21. Employee benefits In an accounting period in which an employee has rendered service to the Group, the Group recognises the actual employee benefits for that service as a liability. The employee benefits of the Group are either included in cost of related assets or charged to profit or loss in the period when they are incurred. Non-monetary employee benefits are measured at fair value. Social insurances such as medical insurance, injury insurance and pregnancy insurance, housing funds, labor union and employee education fees paid by the Group for employees, are recognised as relevant liability in the period in which the employees provide service, in accordance with the regulated recognition basis and percentage. The related expenditures are either included in cost of related assets or charged to profit or loss in the period when they are incurred. In the period in which the employees provide service, the Group recognise liability in accordance with the amounts to be paid calculated according to the predetermined provision plan, and the related expenditures are either included in cost of related assets or charged to profit or loss in the period when they are incurred. When providing termination benefits to employees, the Group recognise employee benefits payroll resulting from termination benefits at the earlier of: the Group cannot unilaterally withdraw from the termination plan or the redundancy offer; the Group recognise relevant costs and expenses related to the payment of termination benefits in reconstructuring. 22. Accrued Liabilities If the company involved in litigation, debt guarantees and other matters, and it is likely to delivered assets of or provide services in the future, the amount can be reliably measured, recognized as expected liability. (1)The Recognition Standard for Accrued Liabilities Accrued liabilities are recognized when the obligations relevant to contingencies meet the following conditions: a. The obligation is the current obligation undertaken by the Company. b. The implementation of the obligation is likely to result in the outflow of economic benefit from the Company. c. The amount of the obligation can be reliably measured. (2) Measurement of Accrued Liabilities Accrued liabilities are measured at the best estimates on debt payment. 35 F-37 23. Income Recognition (1) Sale of Goods: The company transfer the main risks and rewards on goods to purchaser. And the company no longer retain management and effective control. The revenue can be received. The costs related the goods can be measured reliably. (2)Sale of Real estate: Developing goods have been finished and qualified. Sales contract has been signed and fulfilled. Transfer the main risks and rewards of ownership of the product to the buyer. The company no longer retain management and effective control. Relevant revenue or evidence has been received. The related cost can be measured reliably. (3)Lease development products: In accordance with the contract and the agreement, the lessee pay the rent on the payment date recognized as operating income. (4)Provide service: Service has been provided .The related cost can be measured reliably. The economic benefit can flow to the company. (5) Property Management: Service has been provided. The related cost can be measured reliably. The economic benefit can flow to the company. (6) Land consolidation: The company which responsible for land expropriation and housing levy withholding 8‰ management fees. These compensation expenses extracted as operating income in current period. 24. Construction contract Construction contract is a contract which is made one or more assets which are closely related to the design, technology, function, and final use.The outcome can be measured reliably at balance sheet date recognized as revenue and expenses according to the percentage of completion method. The percentage of completion method is the method that confirmed the income and expense according to the progress of the contract. (1)The outcome of fixed price contract can be measured reliably, at the same time meet the following conditions: a. The total revenue can be measured reliably. b. Economic benefits related to the contract are likely to flow to the enterprise. c. The actual contract costs can be clearly distinguished and measured reliably. d. Stage of completion of the contract and the costs to complete the contract can be measured reliably. (2)The outcome of cost-plus contracts can be measured reliably, at the same time meet the following conditions: a. Economic benefits related to the contract are likely to flow to the enterprise. b. The actual contract costs can be clearly distinguished and measured reliably. (3)Determination to the stage of completion of the contract may choose the following methods: a. The proportion of accumulative actual contract costs incurred against the expected total contract costs. b. The proportion of the total amount of work completed against the total amount of the contract. c. The actual stage of completion. (4)If the company use the proportion of accumulative actual contract costs incurred against the expected total contract costs, the actual accumulated contract costs not include the following: a. Uninstalled or unused material costs related to the future contract activities. 36 F-38 b. Prepaid to subcontractors before the construction finished. (5)The amount at balance sheet date recognized as contract revenue should use the total contract revenue multiplied by the stage of completion, then deducted the accumulated recognized income. Meanwhile the amount at balance sheet date recognized as contract costs should use the total contract costs multiplied by the stage of completion, then deducted the accumulated recognized costs. (6)If the construction contract finished in current period, the amount recognized as current contract revenue should use the total contract revenue deducted the accumulated recognized income. Meanwhile the amount recognized as current contract expenses should use the actual accumulated contract expenses deducted the accumulated recognized expenses. (7)The outcome of construction contract cannot be measured reliably should deal with the following conditions: a. If the contract cost can be recovered, the contract revenue should be recognized according to the actual recoverable contract costs. The contract costs should be recognized in current period. b. Unrecoverable contract costs recognized as contract costs immediately if it occurs. (8)If there are no uncertainties, it should recognized the revenue and the costs according to the percentage of completion. (9) If the estimated total contract costs exceed the total contract revenue, the expected loss shall be recognized as expenses in current period. 25. Lease Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. (1)Operating leases Operating lease payments are recognised on a straight-line basis over the term of the relevant lease, and are either included in the cost of related asset or charged to profit or loss for the period. (2)Financial lease On the beginning date of the lease term, the Company shall recognize the sum of the minimum lease receipts on the lease beginning date and the initial direct costs as the entering value in an account of the financing lease values receivable, and record the unguaranteed residual value at the same time. The balance between the sum of the minimum lease receipts, the initial direct costs and the unguaranteed residual value and the sum of their present values shall be recognized as unrealized financing income. The balance through deducting unrealized financing incomes from the finance lease accounts receivable shall be respectively stated in long-term claims and long-term claims due within 1 year. Unrecognized financing incomes shall be adopted by the effective interest rate method in the lease term, so as to calculate and recognize current financing revenues. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. 26. Government Grant Government grants are transfer of monetary assets and non-monetary assets from the government to the Group at no consideration. The income is accounted for as either a government grant related to an asset or a government grant related to income based on its nature. 37 F-39 A government grant related to an asset is recognised as deferred income, and evenly amortised to profit or loss over the useful life of the related asset. For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent periods, the grant is recognised as deferred income, and recognised in profit or loss over the periods in which the related costs are recognised. If the grant is a compensation for related expenses or losses already incurred, the grant is recognised immediately in profit or loss for the period. 27. Income Tax The income tax expenses include current income tax and deferred income tax. The rest current income tax and the deferred income tax expenses or revenue should be included into current gains and losses except for the current income tax and the deferred income tax related to the transaction and events that be confirmed as other comprehensive income or be directly included in the shareholders’ equity which should be included in other comprehensive income or shareholders’ equity as well as the book value for adjusting the goodwill of the deferred income tax occurs from the business combination. The difference between the book value of certain assets and liabilities and their tax assessment basis, as well as the temporary difference occurs from the difference between the book value of the items which not be recognized as assets and liabilities but could confirm their tax assessment basis according to the regulations of the tax law, the deferred income tax assets and the deferred income tax liabilities should be recognized by adopting liabilities law of the balance sheet. No deferred tax liability is recognized for a temporary difference arising from the initial recognition of goodwill, the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). Besides, no deferred tax assets is recognized for the taxable temporary differences related to the investments of subsidiary companies, associated enterprises and joint enterprises, and the investing enterprise can control the time of the reverse of temporary differences as well as the temporary differences are unlikely to be reversed in the excepted future. Otherwise, the Group should recognize the deferred income tax liabilities arising form other taxable temporary difference. No deferred taxable assets should be recognized for the deductible temporary difference of initial recognition of assets and liabilities arising from the transaction which is not business combination, the accounting profits will not be affected, nor will the taxable amount or deductible loss be affected at the time of transaction. Besides, no deferred taxable assets should be recognized for the deductible temporary difference related to the investments of the subsidiary companies, associated enterprises and joint enterprises, which are not likely to be reversed in the expected future or is not likely to acquire any amount of taxable income tax that may be used for making up such deductible temporary differences. Otherwise, the Company shall recognize the deferred income tax assets arising from a deductible temporary difference basing on the extent of the amount of the taxable income that is likely to be acquired to make up such deductible temporary differences For any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax asset shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be likely obtained. 38 F-40 On the balance sheet date, the deferred income tax assets and the deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled. The book value of deferred income tax assets shall be reviewed at each balance sheet date. If it is unlikely to obtain sufficient taxable income to offset against the benefit of the deferred income tax asset, the book value of the deferred income tax assets shall be written down. Any such write-down should be subsequently reversed where it becomes probable that sufficient taxable income will be available. Impairment of deffered tax income The book value of deferred income tax assets shall be reviewed at the balance sheet date .Except for the income tax arising from the transactions or events confirmed in business merger and directly in ownership equity, the Company shall record the current income tax and deferred income tax as income tax expense or income into the current profits and losses. 28. Discontinuing Operation and Held-for-sale (1) Discontinuing Operation Discontinuing operation refers to the components that satisfies the one of the following conditions, is deposed by the Company or allocated to held-for-sale, and is separated in operations and compiling financial statements: a. The component represents one individual major business or one major operation area; b. The component is to depose one individual major business or one major operation area; c. The component is the acquired subsidiary for re-selling. (2) Held-for-sale Components or Non-current Asset Recognition: The company’s components or non-current assets meeting the following conditions shall be allocated to the held-for-sale components or held-for-sale non-current assets. a. The component or non-current asset can be immediately sold under present condition according to usual terms on such component sales; b. The Company has made the final decision on the deposition of non-current assets; c. The Company has signed an unchangeable transfer agreement with the transferee; d. This transfer shall be completed within one year. Held-for-sale fixed assets include single asset and deposition group, which refers to a group of assets sold or deposed as a whole. (3) Accounting arrangement method for held-for-sale assets: The Company adjusts the estimated net residual values of held-for-sale assets into the amount reflecting their fair values, net of deposition costs, but not exceeding their original book values under the held-for-sale condition. If the original book values are higher than the adjusted net residual values, the differences shall be recorded as asset impairment into the current profits and losses. The same accounting method is applied to held-for-sale intangible assets and other non-current assets, except for deferred income tax assets, financing assets specified in “Accounting Standard for Business Enterprises No.22 ---- Recognition and Measurement of Finance Instruments”, investment properties and biological assets measured at their fair values, and contract rights in insurance contracts. 39 F-41 A held-for-sale asset or deposition group, when it no longer satisfies the recognition condition of held-for-sale fixed assets, is no longer allocated into the held-for-sale assets by the Company, and measured at the lower amount of the two followed: a. The amount adjusted from the book value of the asset or deposition group when it’s not held-for-sale after depreciation, amortization or impairment; b. The recovered amount at the date when re-selling stops. 29. Profit Distribution After-tax profits distributed as the following orders after making up for the loss of the previous year: Items Proportion Earned Surplus 10% Decided by the general meeting of Discretionary surplus reserve shareholders Dividend of ordinary shares Decided by the general meeting of shareholders 30. Change in accounting Policy / Estimate and Correction of Significant Errors (1) Change in accounting policy: According toljMinistry of Finance’s Notice about printing Kuai[2016]No.22) stipulate: since May 2016 business tax change to value-added tax on a trial basis fully, Business tax and surcharges has adjusted to tax and surcharges, this subject includes consumption tax, Construction tax, Resource tax, educational surtax, building tax, land use tax, vehicle and vessel tax and stamp tax, etc. (2) Changes in accounting estimate: None. (3) Correction of significant errors: AǃAccording to Notice of payment of tax within a time limit assigned by Tianjin Local Taxation Bureau directly subordinate, Tianjin Rail Transit Group Co., Ltd need to make a supplementary payment for corporate income tax result from Tianjin South Central Railway Co.,Ltd. which is invested by Railway Group has added value in 2009, therefore previous reports should be restatement, the influence to the financial statements of 2015 is: reduce undistributed profits at the beginning of the year of RMB 404,480,096.04, increase tax payable - Enterprise income tax of RMB 403,672,147.23, increase tax payable - stamp tax of RMB 807,948.81, reduce surplus reserves of RMB 40,448,009.61 incuding surplus reserves of RMB 40,448,009.61at the beginning of the year. the influence to the financial statements of 2014 is: reduce 40 F-42 undistributed profits at the beginning of the year of RMB 404,480,096.04, increase tax payable - Enterprise income tax of RMB 403,672,147.23, increase tax payable - stamp tax of RMB 807,948.81, reduce surplus reserves of RMB 40,448,009.61 incuding surplus reserves of RMB 40,448,009.61at the beginning of the year. BǃSubsidiary of Tianjin Railway Construction Investment Holding (Group) Co., Ltd. adjusted the investment in The Beijing-Shanghai High-speed Railway Co., Ltd. from compensation fees for land expropriation to equity investment in terms of the amount confirmed in 2015 the third time the extraordinary shareholders' general meeting resolution of The Beijing-Shanghai High-speed Railway Co., Ltd. and ljthe audit reports for Beijing-Shanghai High-speed Railway Project about clear the compensation fees for land expropriation in Tianjin areaNJ, therefore previous reports should be restatement. The influence to the financial statements of Tianjin Railway Construction Investment Holding (Group) Co., Ltd. in 2015 is: financial assets available for sale increased by RMB 5,887,953,600.00, Projects under construction reduced by RMB 5,887,953,600.00. CǃSubsidiary of Tianjin Metro Group Co., Ltd adjusted income tax expense of last period, the influence to the financial statements of Tianjin Metro Group Co., Ltd in 2015 is : tax payable increased by RMB 42,022,294.69, surplus reserves reduced by RMB 4,202,229.47, reduce undistributed profits at the beginning of the year of RMB 37,820,065.22. Note 5: Tax 1. Catagories and tax rate Items Basis Tax rate The tax rate for operating revenue like Business tax revenue acquired by lease fixed 5% assetsis 5% before 1th May, 2016 operating revenue( according to treasury SAT of China Cai Shui[2016]No.36, business tax 3%ǃ5%ǃ6%ǃ11%ǃ13%ǃ VAT transferred to VAT which calculated by 17% appropriatetax rates since 1th May, 2016. Urban maintenance and Circulating tax actually paid construction tax 7% 41 F-43 Educational Tax Circulating tax actually paid 3% Local Educational Tax Circulating tax actually paid 2% Unti-flood maintenance tax Circulating tax actually paid 1% Property Residual Value or Rent Property Tax 1.2% or 12% Income Taxable income of selling land and VAT on Land Ultra progressive tax rate building Enterprise income tax Taxable income 25% 2. Explanation of tax policy According to the “Notice of special fiscal capital treatment on enterprise income tax” (Cai Shui [2011] No. 70), the financial funds which belong to Tianjin railway construction investment holding (group) Co., Ltd. obtained from the Tianjin Finance Bureau should be deducted from the total revenue before calculating the taxable income from 2014 to 2016. 42 F-44 Note 6: Business Merger and Consolidated financial statements I. Level 1 subsidiaries subject to consolidation in current year Share Voting holdi Actual capital Acquisiti Subsidiaries Register Register right Name Grade Type Nature of Business ng at closing on Area capital ratio ratio balance Method ˄%˅ ˄%˅ The cigarette retailers; Corporate management; Property Domestic Tianjin Xianda management; Houses tenancy; Housing information Investme F-45 First non-financial Hotel Tianjin consulting; Food(Operating after obtaining the operating 48,450,000.00 100.00 100.00 48,450,000.00 subsidiary nt license) Tianjin local railway Domestic Railway comprehensive project; Civil Building Engineering Investme construction First non-financial Tianjin (subject to comply with government regulation and 12,560,000.00 100.00 100.00 9,813,541.21 company subsidiary operating certificate if required) nt The General contracting of railway engineering Tianjin Railway Domestic construction ;The General construction of municipal Investme Group Engineering First non-financial Tianjin engineering; The contracting of Housing construction; 201,010,610.80 100.00 100.00 201,010,610.80 Co., Ltd. subsidiary nt House rent; Auto cargo freight; Building construction engineering; The General Tianjin Xianda Domestic contracting of railway engineering construction; The Investme Binhai construction First non-financial Tianjin wholesale and resale of the knitwear, textile, hardware, 15,658,640.25 100.00 100.00 15,658,640.25 company subsidiary nt steel, construction materials ,chemical product; Plastic 43 Share Voting holdi Actual capital Acquisiti Subsidiaries Register Register right Name Grade Type Nature of Business ng at closing on Area capital ratio ratio balance Method ˄%˅ ˄%˅ product making; Convention service; (subject to comply with government regulation and operating certificate if required) The special investment in Railway freight; Urban Business Tianjin Railway Domestic infrastructure investment and construction; Land combinati Construction F-46 First non-financial Consolidation; Real estate development; (subject to on under Investment Holding Tianjin 5,250,000,000.00 100.00 100.00 13,456,400,582.71 subsidiary comply with government regulation and operating Common (Group) Co., Ltd. certificate if required) control Construction and management of the urban rail transit project; engineering contractor; tender and bidding consulting (not including intermediary), engineering supervision; operation of rail transit development and comprehensive Business Tianjin Binhai Domestic management; procurement of domestic and foreign vehicle combinati Rapid Transit First non-financial and mechanical and electrical equipment, commissioning, on under Development Co., Tianjin 2,812,725,000.00 100.00 100.00 12,815,329,590.25 subsidiary operation, leasing, maintenance and rail transportation Common Ltd. related business; real estate development and commercial control housing sales; housing rental; property management; accommodation; Chinese food processing business (dinner); advertising; daily necessities, textiles, jewelry, footwear, 44 Share Voting holdi Actual capital Acquisiti Subsidiaries Register Register right Name Grade Type Nature of Business ng at closing on Area capital ratio ratio balance Method ˄%˅ ˄%˅ cosmetics, watches, glasses, leather products, construction materials wholesale and retail; exhibition service provided, housing intermediary and agency services, technology consulting, business services, cleaning services. Limited to the following operating subsidiaries; hotel management; F-47 conference services; crafts for sale; Hotel: staple food, hot dishes, cold dishes, cake manufacturers operate; canteen: staple food, hot dishes and processing operations; Guest accommodation; swimming pool; tobacco retail; gift sales ; own equipment rental, venue rental, faxing services; office supplies leasing; car park management services. (subject to comply with government regulation and operating certificate if required) Organization and management of urban rail transit project Business investment; Technology consulting and technology Tianjin Domestic combinati service; The real estate development; The municipal Metro(Gruop) First non-financial on under Tianjin engineering; Building materials production and sales; 7,186,434,027.87 100.00 100.00 75,144,647,717.79 Co,Ltd. subsidiary Common Sales of commercial housing; (subject to comply with control government regulation and operating certificate if 45 Share Voting holdi Actual capital Acquisiti Subsidiaries Register Register right Name Grade Type Nature of Business ng at closing on Area capital ratio ratio balance Method ˄%˅ ˄%˅ required) Tianjin city rail Domestic Senior: Watchman, Coach driver, Track driver, Investme vocational training First non-financial Tianjin Hostler ,Electrician, Signalman 500,000.00 100.00 100.00 500,000.00 center subsidiary nt Tianjin Railway Overseas F-48 HongKon 368,335,800.00 368,335,800.00 Investme Transit Group(HK) First non-financial None 100.00 100.00 Co., Ltd. subsidiary g (5,600dollars) (5,600 dollars) nt Financial leasing business; Leasing business; Buy rental Tianjin Rail Transit Overseas property from home and abroad; The salvage value Investme Group Financing First non-financial Tianjin processing and maintenance of the property.( the project 1,000,000,000.00 100.00 100.00 1,000,000,000.00 Lease Co., Ltd subsidiary which need approved according to law must approved by nt revelant departments to operate). II.Subsidiaries not included in Consolidation scope Register The Shareholding Explanatio Company name Type Nature of Business capital company’s ratio n 46 investment Indire amount Total cted share Tianjin Jinkatong Investment and Limited Public transit smart card production, distribution, Liquidation, 1,000.00 600.00 60.00 Development Co., Ltd. company settlement, management and maintenance Not control Metro project finance advisory and intermediary services, international procurement of Metro equipment and Limited Liquidation Tianjin Metro (HongKong) Co., Ltd. technology, Property development, management services, HK $10 million 162.62 51.00 company Not control information and management consulting, cultural and academic exchanges F-49 47 III.Major Non-wholly owned subsidiary: 1. Minority shareholders Profit and loss Dividends paid Shareholding attributable to Cumulative to minority ratio of minority minority Company Name shareholders minority shareholders in interests at in the current shareholders the current closing balance period period Tianjin Haishun Real Estate 40% -7,224,910.32 -19,145,880.69 Development Co., Ltd. Tianjin Metro Property 49% -184,769.23 -370,836.34 Development Co., Ltd. Tianjin Chengtie MTR 49% -4,759,914.61 1,099,298,176.94 Construction Co. Ltd. Total -12,169,594.16 1,079,781,459.91 2.Financial information Current year Last year Tianjin Tianjin Tianjin Tianjin Tianjin Tianjin Items Haishun Real Metro Haishun Metro Chengtie MTR Chengtie MTR Estate Property Real Estate Property Construction Construction Development Developmen Developmen Developmen Co. Ltd. Co. Ltd. Co., Ltd. t Co., Ltd. t Co., Ltd. t Co., Ltd. Current 93,639,423.43 4,653,275.69 2,374,286,744.12 88,759,373.44 4,830,355.72 2,343,896,926.05 assets Non-current 376,233,343.67 2,550,260.79 1,275,324.21 364,254,916.65 2,750,260.83 1,333,545.11 assets Total assets 469,872,767.10 7,203,536.48 2,375,562,068.33 453,014,290.09 7,580,616.55 2,345,230,471.16 Current 417,106,274.40 7,960,345.36 847,625.47 386,272,401.62 7,960,345.36 92,050,692.48 liabilities Non-current 38,380,011.76 0.00 131,248,775.63 34,293,131.72 0.00 0.00 liabilities 48 F-50 Total 455,486,286.16 7,960,345.36 132,096,401.10 420,565,533.34 7,960,345.36 92,050,692.48 liabilities Operating 28,219,687.73 0.00 0.00 33,703,678.99 0.00 0.00 revenue Net profit -18,062,275.81 -377,080.07 -9,714,111.45 -19,236,814.05 -365,399.11 -7,448,812.87 Total Comprehensi -18,062,275.81 -377,080.07 -9,714,111.45 -19,236,814.05 -365,399.11 -7,448,812.87 ve income Cash flows from 2,914,802.24 -177,080.03 -73,009,426.73 1,245,507.03 23,652.53 -105,292,176.13 operating activities IV. New Entities included into the Consolidation Scope&Entities not included into the Consolidation Scope anymore Current year Last year Voting Voting Company Name Whether Whether Reason right right consolidation consolidation ratio ratio Tianjin Rail Transit Group Financing Lease 100.00 Yes 0.00 No Investment Co., Ltd Note 7: Notes to Consolidated Financial Statements 1. Cash and cash equivalents (1) The account details of cash and cash equivalents 2016-12-31 2015-12-31 Items Curre Original RMB Original Currency RMB ncy Currency 49 F-51 Cash and cash RMB 170,670.12 170,670.12 96,065.31 96,065.31 equivalents USD 0.00 0.00 0.00 0.00 EUR 0.00 0.00 0.00 0.00 Sub-total 170,670.12 170,670.12 96,065.31 96,065.31 Bank RMB 9,963,553,622.90 9,963,553,622.90 10,877,588,959.58 10,877,588,959.58 deposit USD 7,986,553.69 55,402,722.94 5,820,007.62 37,792,801.48 HKD 22,884.15 20,470.10 0.00 0.00 EUR 1,456.70 10,643.80 199.88 1,418.19 Sub-total 10,018,987,459.74 10,915,383,179.25 Other monetary RMB 11,843,795.17 11,843,795.17 11,808,427.91 11,808,427.91 capitals Total 10,031,001,925.03 10,927,287,672.47 Including: Deposit 68,901,884.36 37,871,942.35 overseas USD 13,487,575.94 13,487,575.94 79,140.87 79,140.87 RMB 7,985,272.93 55,393,838.32 5,820,007.62 37,792,801.48 HKD 22,884.15 20,470.10 0.00 0.00 (2) The details of limited funds Items 2016-12-31 2015-12-31 Guarantee deposit 15,788,000.00 11,515,000.00 Others 160,947,014.47 11,808,427.91 Total 176,735,014.47 23,323,427.91 (3) The balance of monetary capitals includes capital account jointly controlled by subsidiary of Tianjin Metro Group Co., Ltd. and subsidiary of Tianjin Haishun Real Estate Development Co., Ltd.is RMB 11,843,795.17 as of 12.31.2016, includes capital account jointly controlled by Tianjin Railway Construction Investment Holding (Group) Co. and Tianjin Binli Small Town Construction Development Co., Ltd. of RMB 50 F-52 149,103,219.30, includes guarantee deposit in Tianjin Metro Group Co., Ltd of RMB 15,788,000.00. (4)Except the amounts mentioned above, there are no risks of mortgage or frozen to the amounts which are restricted or deposit overseas. 2.Bills receivable Items 2016-12-31 2015-12-31 Bank acceptance 1,500,000.00 1,000,000.00 Trade acceptance 100,000.00 0.00 Total 1,600,000.00 1,000,000.00 The balance of notes receivable does not include the amounts which belong to shareholders who holds more than 5% (including 5%) shares of this company. 3. Accounts receivable (1)Accounts receivable classified by category 2016-12-31 Category Book value Bad-debt provision Amount Proportion Amount Proportion Accounts receivable with significant single amount and single provision for 0.00 0.00 0.00 0.00 bad-debt Accounts receivable with insignificant single amount but single provision for 4,051,607.68 0.12 4,051,607.68 19.21 bad-debt Other accounts receivable with 3,331,183,812.20 99.88 17,035,168.20 80.79 provision for bad-debt Total 3,335,235,419.88 100.00 21,086,775.88 100.00 2015-12-31 Category Book value Bad-debt provision Amount Proportion Amount Proportion 51 F-53 Accounts receivable with significant single amount and single provision for 0.00 0.00 0.00 0.00 bad-debt Accounts receivable with insignificant single amount but single provision for 2,951,607.68 0.09 2,951,607.68 19.54 bad-debt Other accounts receivable with 3,255,438,886.44 99.91 12,156,745.47 80.46 provision for bad-debt Total 3,258,390,494.12 100.00 15,108,353.15 100.00 (2) Accounts receivable stated by aging 2016-12-31 2015-12-31 Aging Amount Proportion(%) Bad-debt Amount Proportion Bad-debt provision provision Within 533,340,877.46 83.11 0.00 759,145,809.12 90.67 0.00 1 year 1-2 56,185,421.28 8.75 2,809,271.06 60,520,065.47 7.23 3,026,003.27 years 2-3 37,104,344.47 5.78 3,710,434.45 2,907,179.50 0.35 290,717.95 years 3-4 418,850.50 0.07 83,770.10 4,452,919.13 0.53 890,583.83 years 4-5 4,452,919.13 0.69 2,226,459.57 852,642.00 0.10 426,321.00 years Over 5 10,256,541.27 1.60 8,205,233.02 9,403,899.27 1.12 7,523,119.42 years Total 641,758,954.11 100.00 17,035,168.20 837,282,514.49 100.00 12,156,745.47 (3) Details of Bad-debt 2015-12-31 Increase in Decrease in current period 2016-12-31 52 F-54 current period Recoverable of Charge-off Total assets value 15,108,353.15 5,978,422.73 0.00 0.00 0.00 21,086,775.88 (4)Top 5 debtors as of December 31, 2016 Accounts for the proportion Bad-debt Company Name Amount of the Aging Contents provision total account receivable Within 117,661,508.34 3.53 0.00 1 year 1-2 343,772,793.52 10.30 0.00 years 2-3 338,121,289.35 10.13 0.00 years Tianjin Urban & Rural Construction 3-4 Construction Commission 696,938,379.63 20.90 0.00 contract years 4-5 499,832,958.13 14.99 0.00 years over 5 250,062,974.79 7.50 0.00 years Sub-total 2,246,389,903.76 67.35 0.00 Within Operation Tianjin city One-Card Co.,Ltd 343,159,737.07 10.29 0.00 1 year fare Within Property Tianjin Yishang friendship 25,918,541.45 0.78 0.00 1 year management famous Store Co. Ltd. 1-2 fee 50,376,883.38 1.51 2,518,844.17 years Sub-total 76,295,424.83 2.29 2,518,844.17 53 F-55 Accounts for the proportion Bad-debt Company Name Amount of the Aging Contents provision total account receivable Within Third survey and Design 55,880,424.40 1.68 0.00 1 year Engineering Institute of the Ministry of 2-3 Unsettled Railways Group Co., Ltd. 3,412,813.00 0.10 0.00 year Sub-total 59,293,237.40 1.78 0.00 Within Engineering Tianjin Nanhuan Railway Co.,Ltd 38,431,711.31 1.15 0.00 1 year Unsettled Total 2,763,570,014.37 82.86 2,518,844.17 The collected amount of the top 5 closing balance of accounts receivable is RMB 2,763,570,014.37 in 31st of December 2016, which is 82.86% of total closing balance of accounts receivable. (5) Accounts receivable with insignificant single amount but single provision for bad-debt as of 31th December, 2016. Bad-debt Debtor Amount Aging Proportion Reason provision Ji Sheng Storage and Over 5 years Uncollectable Transportation Company 1,960,000.00 1,960,000.00 Dagang District Over 5 years Uncollectable Construction Committee 1,000,000.00 1,000,000.00 Tianjin Tanggu District Haisen Industry and Trade 500,000.00 Over 5 years Uncollectable Co., Ltd 500,000.00 Zhong Tie Shi Ba Ju Group in the Sixth Engineering Co., 411,508.00 411,508.00 Over 5 years Uncollectable Ltd Lianyi Gas Engineering Co., Over 5 years Uncollectable Ltd 100,000.00 100,000.00 Tianjin Lifting Equipment Over 5 years Uncollectable Five Factory 35,313.14 35,313.14 54 F-56 Tangshan Fengrun Railway 34,786.54 34,786.54 Over 5 years Uncollectable Fittings Factory Dagang Hongda Meat 10,000.00 10,000.00 Over 5 years Uncollectable Aquatic Products Co., Ltd ਸ 䇑 4,051,607.68 4,051,607.68 The balance of account receivable include the amounts of RMB 8,676,200.00 which belong to shareholders that hold more than 5% (including 5%) shares. The balance of account receivable of other related parties amounted to RMB 91,135,197.85, see note nine. 4. Prepayments (1)Aging Analysis & Percentage 2016-12-31 2015-12-31 Aging Amount Proportion Amount Proportion ˄%˅ ˄%˅ Within 1 year 2,139,986,701.04 12.35 15,739,024,018.97 96.06 1-2 years 14,840,729,813.35 85.67 340,677,473.82 2.08 2-3 years 112,153,859.23 0.65 51,583,341.86 0.31 Over 3 years 231,265,279.44 1.33 253,776,066.52 1.55 Total 17,324,135,653.06 100.00 16,385,060,901.17 100.00 (2)Top 5 debtors as of December 31, 2016 Company name Amount Aging Proportion Contents Within 1 Tianjin Jinyuan Investment Development 490,860,000.00 year 2.83 Engineering Co., Ltd. Unsettled 14,466,953,400.00 1-2 years 83.51 Sub-total 14,957,813,400.00 86.34 Tianjin binhai municipal construction Within 1 Engineering 1,000,000,000.00 5.77 development co., LTD year Unsettled Within 1 126,986,254.50 year 0.73 Large CNR Tangshan Railway Vehicle Co., Ltd Equipment 132,647,969.55 1-2 years 0.77 Unsettled 88,431,979.70 2-3 years 0.51 55 F-57 Sub-total 348,066,203.75 2.01 Tianjin Haihe River Construction over 3 Engineering Development&Investment Co.,Ltd. 133,212,133.00 years 0.77 Unsettled Large CSR Qingdao Sifang Locomotive Co., Ltd. 75,342,678.24 1-2 years 0.44 Equipment Unsettled Total 16,514,434,414.99 95.33 The collected amount of the top 5 closing balance of prepayments is RMB16,514,434,414.99 in 31st of December 2016, which is 95.33% of total closing balance of prepayments. The balance of prepayments does not include the amounts which belong to the shareholders who hold more than 5% (including 5%) shares of this company. The balance of prepayments of other related parties amounted to RMB 15,096,631,533.00, see note nine. 5. Dividend receivable Items 2016-12-31 2015-12-31 Contents Dividends receivable aging within one year 137,481.41 0.00 Including:Tianjin port bulk cargo logistics Co., Ltd. 137,481.41 0.00 dividends Total 137,481.41 0.00 6. Other account receivable (1)Other account receivables classified by category 2016-12-31 Category Book value Bad-debt provision Amount Proportion Amount Proportion Other account receivable with significant single amount and single provision for 7,232,357.79 0.06 7,232,357.79 39.27 bad-debt Other account receivable with insignificant signal amount but singlel 2,738,359.00 0.02 2,738,359.00 14.87 provision for bad-debt Other account receivable with provision 11,872,961,403.71 99.92 8,444,841.05 45.86 for bad-debt Total 11,882,932,120.50 100.00 18,415,557.84 100.00 Category 2015-12-31 56 F-58 Book value Bad-debt provision Amount Proportion Amount Proportion Other account receivable with significant single amount and single provision for 7,232,357.79 0.06 7,232,357.79 41.73 bad-debt Other account receivable with insignificant signal amount but single 2,393,501.37 0.02 2,393,501.37 13.81 provision for bad-debt Other account receivable with provision 11,810,022,437.94 99.92 7,707,114.12 44.46 for bad-debt Total 11,819,648,297.10 100.00 17,332,973.28 100.00 (2)Other account receivable stated by aging 2016-12-31 2015-12-31 Aging Proporti Bad-debt Bad-debt Amount Amount Proportion on provision provision Within 1,087,206,344.02 98.66 0.00 7,610,344,218.44 99.78 0.00 1 year 1-2 595,343.96 0.05 29,767.20 4,339,198.37 0.06 216,959.92 years 2-3 3,104,095.45 0.28 310,409.55 1,233,979.53 0.02 123,397.96 years 3-4 1,166,504.47 0.11 233,300.89 759,114.85 0.01 151,822.97 years 4-5 73,604.28 0.01 36,802.14 2,081,000.00 0.03 1,040,500.00 years Over 5 9,793,201.60 0.89 7,834,561.27 7,718,041.60 0.10 6,174,433.27 years Total 1,101,939,093.78 100.00 8,444,841.05 7,626,475,552.79 100.00 7,707,114.12 (3)Bad-debt Provision 57 F-59 Decrease in current period Increase in 2015-12-31 Recoverable of Charge-off Total 2016-12-31 current period assets value 17,332,973.28 1,082,584.56 0.00 0.00 0.00 18,415,557.84 (4)Top 5 debtors as of December 31, 2016 Company Bad-debt Amount Proportion Aging Contents Name Provision 403,129,169.65 0.00 3.39 Within 1 year 1,932,907,089.62 0.00 16.27 1-2 years Tianjin Finance 249,892,353.71 0.00 2.10 2-3 years Current account, interests Bureau 612,004,946.66 0.00 5.15 3-4 years 884,268,527.44 0.00 7.44 4-5 years Sub-total 4,082,202,087.08 0.00 34.35 247,669,474.58 0.00 2.08 Within 1 year Tianjin Land 310,689,696.60 0.00 2.61 1-2 years Consolidation Demolition funds 172,413,394.10 1.45 Center 0.00 2-3 years 1,813,005,102.44 0.00 15.26 3-4 years Sub-total 2,543,777,667.72 0.00 21.40 Tianjin 25,502,000.00 0.00 0.21 Within 1 year development 1,555,810,995.87 0.00 13.09 Allowance fees, interests area finance 3-4 years bureau 506,485,131.06 0.00 4.26 4-5 years Sub-total 2,087,798,126.93 0.00 17.56 230,000,000.00 0.00 1.94 1-2 years Tianjin South Central 270,500,000.00 0.00 2.28 2-3 years Land acquisition and Railway resettlement funds 300,000,000.00 0.00 2.52 3-4 years Co.,Ltd 470,000,000.00 0.00 3.96 4-5 years Sub-total 1,270,500,000.00 0.00 10.70 Tianjin 4,169,236.11 0.00 0.04 2-3 years Infrastucture 62,980,347.21 0.00 0.53 Construction 3-4 years Current account, interests &Investment( Group)Co,Ltd 815,427,529.32 0.00 6.86 over 5 years . 58 F-60 Sub-total 882,577,112.64 0.00 7.43 Total 10,866,854,994.37 0.00 91.44 The collected amount of the top 5 closing balance of other account receivable is RMB10,866,854,994.37 in 31st of December 2016, which is 91.44% of total closing balance of other account receivable. (5) Other account receivable with significant single amount and single provision for bad-debt as of 31th December, 2016. Bad-debt Debtor Amount Aging Proportion Reason Provision Tianhe silk factory 7,232,357.79 7,232,357.79 over 5 years Uncollectable ਸ 䇑 7,232,357.79 7,232,357.79 (6)Other account receivable with insignificant signal amount but singlel provision for bad-debt Bad-debt Debtor Amount Aging Proportion Reason Provision Tianjin Binhai Xingguo 289,183.63 289,183.63 2-5years Uncollectable Technology Co., Ltd The Original Repair over 5 Place Three Branch 733,832.09 733,832.09 Uncollectable years (RuanShiMing) Tianjin Port and over 5 Xingtufang Construction 496,725.60 496,725.60 Uncollectable years Team ShaJingZi Township over 5 158,676.60 158,676.60 Uncollectable Government years Tianjin Binhai Local over 5 Railway Construction 240,841.70 240,841.70 years Uncollectable Company Tianhe Clothing Factory over 5 117,000.00 117,000.00 Uncollectable in Tianjin years Ke Shang Jin Yi He over 5 76,975.00 76,975.00 Uncollectable Trading Company years New Beiyang over 5 Construction 50,000.00 50,000.00 years Uncollectable Engineering Company Tianxiang real estate over 5 50,000.00 50,000.00 Uncollectable development company years over 5 Others 525,124.38 525,124.38 Uncollectable years ਸ 䇑 2,738,359.00 2,738,359.00 59 F-61 The balance of other account receivable include the amounts which belong to the shareholders who hold more than 5% (including 5%) shares of this company amounts to RMB 882,577,112.64. The balance of other account receivables of other related parties amounted to RMB 1,806,290,804.63, see note nine. (7)Approvaled by Bureau of finance of Tianjin Eco-Tech development area: Tianjin Teda Investment Holding Co. Ltd. pay capital to Light rail project of Tianjin binhai rapid transit development Co., LTD, and the interests of this project will be paid by Bureau of finance of Tianjin Eco-Tech development area. Interest expenditures have already occurred RMB 1,430,499,940.93 by the end of August 31, 2013, and then credited to other account receivable of Bureau of finance of Tianjin Eco-Tech development area. (8)Tianjin Binhai Traffic Development Co. Ltd. does not grasp the rights to formulate the price of jinbin light rail, and the operating income is even unable to compensate for the cost of labor and energy costs. In fact Tianjin Binhai Traffic Development Co. Ltd has paid operating funds accumulated to RMB 631,796,186.00 to the government of Tianjin Eco-Tech development area. According to the fact that the operation capital of Jinbin light rail paid by Tianjin Binhai Traffic Development Co. Ltd and the reports about solving the problems of funds to city leaders, Tianjin Eco-Tech development area solved the accumulated loss amounted to RMB 630 million by the end of 2013.At Feb 17,2015,the summary of the thirtieth meeting of the mayor's office indicated that the arrangement of the funds.The accumulated loss of Jinbin light rail should be solved by Tianjin Eco-Tech development area. Loss generated from 2015 will be solved by Binhai New Area and Tianjin Eco-Tech development area jointly. Approved by the board of directors of Tianjin Binhai Traffic Development Co, they confirmed the other account receivable on the basis of the amount that offset the operating costs which valued at RMB 506,485,131.06 in 2012 and RMB 125,311,054.94 in 2013. 60 F-62 7. Inventory&Inventory falling price reserve (1)Details of Inventory&Inventory falling price reserve 2016-12-31 2015-12-31 Category Amount Falling price Amount Falling price reserve reserve Raw materials 131,941,694.29 0.00 132,440,904.54 0.00 Low-value consumable 10,110,800.71 0.00 6,036,208.75 0.00 products Inventory 29,235,659.50 0.00 29,305,917.27 0.00 Engineering construction 9,560,876.69 9,050,876.69 9,560,876.69 9,050,876.69 Development cost 4,489,560,154.53 0.00 4,143,576,537.97 0.00 Including:Honghuli Project 21,332,950.20 0.00 18,162,906.60 0.00 The north canal Project 2,328,448,520.99 0.00 2,271,568,016.32 0.00 The Subway Central square 1,927,172,739.17 0.00 1,654,524,251.35 0.00 The Kangyingli Project 192,087,574.43 0.00 178,802,993.96 0.00 Liuwei Road,Hedong District 20,518,369.74 0.00 20,518,369.74 0.00 ‘Mianyi’ Project Development product 58,456,765.33 0.00 58,456,765.33 0.00 Total 4,728,865,951.05 9,050,876.69 4,379,377,210.55 9,050,876.69 The closing balance of inventory including the capitalized amount of borrowing costs: RMB 269,402,537.27. (2) Analysis of Inventory impairment Decrease in current period Increase Recoverable Items 2015-12-31 in current 2016-12-31 of assets Charge-off Total period value Engineering 9,050,876.69 0.00 0.00 0.00 0.00 9,050,876.69 construction Total 9,050,876.69 0.00 0.00 0.00 0.00 9,050,876.69 61 F-63 (3)Mortgage Borrowing Company Pawn Appraised value amount Tianjin Metro Resources The land use right of Central 419,230,000.00 189,999,976.50 Investment Co., Ltd. Square The land use right of Jinpu Tianjin Chengtie MTR northern road( A housing 1,268,450,000.00 131,248,775.63 Construction Co. Ltd. block)( Bhousingblock),Xiaowang village, Hebei district,Tianjin Total 1,687,680,000.00 321,248,752.13 Sub-subsidiary of Tianjin Metro Resources Investment Co. Ltd. has used the land use rights to get mortgage from Shanghai Pudong Development Bank Tianjin Branch, This loan’amount is RMB 189,999,976.50. The term of the loan is from September 11, 2015 to October 29, 2017. Sub-subsidiary of Tianjin Chengtie MTR Construction Co. Ltd. has used the land use rights to get mortgage from Industrial and Commercial bank of China co., Ltd. Tianjin Branch, This loan’amount is RMB 131,248,775.63. The term of the loan is from June 27, 2016 to June 7, 2024. 8. Other current assets Items 2016-12-31 2015-12-31 Offset Against Value-Added Tax Payable 95,533,953.63 0.00 Prepayment of Income Tax 1,609,900.80 0.00 Prepayment of Other Tax 1,359,508.08 0.00 Total 98,503,362.51 0.00 9. Financial assets available for sale (1)Situation of Financial assets available for sale Fair-value at 2016-12-31 Fair-value at 2015-12-31 Items Impairment Impairment Book value Book value Book value Book value provision provision Available-for-sale 0.00 0.00 0.00 0.00 0.00 0.00 Debt Available-for-sale 19,997,229,135.41 0.00 19,997,229,135.41 19,200,957,901.75 0.00 19,200,957,901.75 Equity 62 F-64 Masured by fair 1,108,173.74 0.00 1,108,173.74 1,021,334.40 0.00 1,021,334.40 value Masured by cost 19,996,120,961.67 0.00 19,996,120,961.67 19,199,936,567.35 0.00 19,199,936,567.35 0.00 0.00 0.00 0.00 0.00 0.00 Others 19,997,229,135.41 0.00 19,997,229,135.41 19,200,957,901.75 0.00 19,200,957,901.75 Total 63 F-65 (2)The Financial assets available for sale masured by fair value 2016-12-31 2015-12-31 The initial The initial Category Accumulated fair Accumulated fair investment investment value changes value changes cost cost The stock of JinQuanYe 75,000.00 716,673.74 75,000.00 678,334.40 The stock of Tianfang 80,000.00 236,500.00 80,000.00 188,000.00 Development Total 155,000.00 953,173.74 155,000.00 866,334.40 (3)Financial assets available for sale measured by cost Shareholding Category 2016-12-31 2015-12-31 ratio Jinqin Railway Passenger Dedicate Line 4,581,505,000.00 4,581,505,000.00 27.97 Co.,Ltd. Jinbao Railway Co.,Ltd. 3,310,000,000.00 3,113,815,605.68 20.28 Jingjinji Intercity Railway Investment Co.,Ltd. 900,000,000.00 300,000,000.00 30.00 Jinghu high-speed railway Co., Ltd. 2,865,000,000.00 2,865,000,000.00 50.00 Jingjin Intercity Railway Investment Co.,Ltd. 5,887,953,600.00 5,887,953,600.00 4.51 Tianjin City Commercial Bank Co.,Ltd. 2,203,060,001.59 2,203,060,001.59 25.25 Tianjin Jigang Railway Co,Ltd 38,500,000.00 38,500,000.00 About 1% Tianjin Binhai Insurance Broker Co., Ltd. 16,873,433.66 16,873,433.66 0.81 Tianjin Binhai Insurance Broker Co., Ltd. 500,000.00 500,000.00 8.33 Polytec CITIC Real Estate (Tianjin) Co., Ltd. 34,573,314.10 34,573,314.10 10.00 Tianjin Tianyuan Zhenghe Real estate 5,100,000.00 5,100,000.00 51.00 development Co.,Ltd. Tianjin Jinju Real estate development 9,000,000.00 9,000,000.00 30.00 Co.,Ltd. Tianjin Jinsheng Real estate development 9,000,000.00 9,000,000.00 30.00 Co.,Ltd. 64 F-66 Tianjin Jinnuo Real estate development 3,000,000.00 3,000,000.00 30.00 Co.,Ltd. Tianjin Metro Jietong Real estate 1,800,000.00 1,800,000.00 18.00 development Co.,Ltd. Tianjin Lianfeng Real estate development 3,000,000.00 3,000,000.00 30.00 Co.,Ltd. Tianjin Chengtie Real estate development 6,000,000.00 6,000,000.00 30.00 Co.,Ltd. Hutchison whampoa properties (tianjin) Co., 76,804,650.00 76,804,650.00 20.00 Ltd. Tianjin Metro Jun Yi Investment Co., Ltd. 5,100,000.00 5,100,000.00 51.00 Tianjin Hongya Engineering Consulting 827,210.31 827,210.31 10.00 Co.,Ltd. Tianjin City Card Co., Ltd. 11,399,534.02 11,399,534.02 7.00 Hualian Stocks 288,000.00 288,000.00 -- Tianjin port bulk cargo logistics Co., Ltd. 26,836,217.99 26,836,217.99 5.00 Total 19,996,120,961.67 19,199,936,567.35 10. Held-to-maturity investments 2016-12-31 2015-12-31 Items Amount Bad-debt Amount Bad-debt provision provision Trust products 154,000,000.00 0.00 160,000,000.00 0.00 Total 154,000,000.00 0.00 160,000,000.00 0.00 Subsidiary of Tianjin Rail Transit Group Co., Ltd. has held-to-maturity investments valued at RMB154,000,000 for engineering construction of Metro Line 5(Tender No: 12002014024006). The tender bid uses the model of construction attached to financing. The winning bidder will buy a single trust plan issued by Tianjin Trust Co., Ltd. which is divided into two phases, and the each interval is six months.Subsidiary Tianjin Rail Transit Group Co., Ltd. as the client as well as the beneficiary invested in the single trust plan of Tianjin Trust Co.,Ltd based on the agreement. 11. Long-term account receivable 65 F-67 2016-12-31 2015-12-31 Items Amount Bad-debt Amount Bad-debt provision provision Long-term debt 60,000,000.00 0.00 60,000,000.00 0.00 Total 60,000,000.00 0.00 60,000,000.00 0.00 Analysis by aging 2016-12-31 2015-12-31 Aging Bad-debt Bad-debt Amount Proportion Amount Proportion provision provision Within 1 year 0.00 0.00 0.00 0.00 0.00 0.00 1-2 years 0.00 0.00 0.00 0.00 0.00 0.00 2-3 years 0.00 0.00 0.00 0.00 0.00 0.00 Over 3 years 60,000,000.00 100.00% 0.00 60,000,000.00 100.00% 0.00 Total 60,000,000.00 100.00% 0.00 60,000,000.00 100.00% 0.00 12. Long-term equity investment (1)Categories of long-term equity investment Increase in Decrease in Items 2015-12-31 2016-12-31 current year current year Investment on 6,314,245.49 0.00 0.00 6,314,245.49 subsidiaries Investment on joint 0.00 0.00 0.00 0.00 ventures Investment on associate 3,231,986,476.12 0.00 407,092,195.69 2,824,894,280.43 Total 3,238,300,721.61 0.00 407,092,195.69 2,831,208,525.92 Less:Impairment 6,314,245.49 0.00 0.00 6,314,245.49 provision The net value of long-term equity 3,231,986,476.12 0.00 0.00 2,824,894,280.43 investment 66 F-68 Movement in equity The other Mov Impairme Accou Impairmen The comp eme Accumulat Share nt Cash nting Investment t reserve Movement in movement rehen nt in ed holdi reserve Invested company 2015-12-31 bonus 2016-12-31 metho cost at opening current year under sive othe movement ng at or d balance equity inco r in equity propo closing profit method me equit rtion balance move y mrnt F-69 1.Subsidiaries 6,314,245.49 6,314,245.49 6,314,245.49 0.00 0.00 0.00 0.00 0.00 0.00 6,314,245.49 6,314,245.49 Tianjin Jinkatong Investment Cost 5,977,168.04 5,977,168.04 5,977,168.04 0.00 0.00 0.00 0.00 0.00 0.00 5,977,168.04 60.00 5,977,168.04 and Development method Tianjin Metro (HongKong) Cost 87,077.45 87,077.45 87,077.45 0.00 0.00 0.00 0.00 0.00 0.00 87,077.45 51.00 87,077.45 Co.,Ltd. method Local railway Technology Cost 250,000.00 250,000.00 250,000.00 0.00 0.00 0.00 0.00 0.00 0.00 250,000.00 100.00 250,000.00 Development Company method 2.The joint ventures 3.The associate 2,702,106,200.00 3,231,986,476.12 0.00 -400,000,000.00 -7,043,195.69 0.00 -49,000.00 0.00 122,788,080.43 2,824,894,280.43 0.00 Tianjin South Central Railway Equity 2,693,861,200.00 2,809,095,359.11 0.00 0.00 4,628,413.08 0.00 0.00 0.00 119,862,572.19 2,813,723,772.19 49.00 0.00 Co.,Ltd. method Tianjin Chengtou Zhidi Investment and Development Equity 0.00 413,318,179.13 0.00 -400,000,000.00 -13,318,179.13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Co., Ltd. method 67 Tianjin Metro Zhidi Trading Co. Equity 8,000,000.00 8,593,428.17 0.00 0.00 1,453,221.22 0.00 0.00 0.00 2,046,649.39 10,046,649.39 40.00 0.00 Ltd. method Tianjin City Fudaojia Property Equity 245,000.00 979,509.71 0.00 0.00 193,349.14 0.00 -49,000.00 0.00 878,858.85 1,123,858.85 49.00 0.00 Management Co., Ltd. method Total 2,708,420,445.49 3,238,300,721.61 6,314,245.49 -400,000,000.00 -7,043,195.69 0.00 -49,000.00 0.00 122,788,080.43 2,831,208,525.92 6,314,245.49 Explanation: aSub-subsidiary Tianjin Jinkatong Investment and Development Co., Ltd. has closed, the shares can not be recovered.Tianjin Metro Group Co., Ltd. has full provision for impairment of the long-term equity investment. bSub-subsidiary Tianjin Metro (HongKong) Co. Ltd. has closed, the shares can not be recovered.Tianjin Metro Group Co., Ltd. has full provision for impairment of long-term equity investment. F-70 cAccording to “Approval about the cancellation of business of Local railway technology development company”(Tianjin Railway Group [2006]No.12)issued by Tianjin Railway Group at November 22, 2006,it agreed to implement the cancellation of business.According to the liquidation audit report from Tianjin Jin Daxin CPAs Co., Ltd. ((2007) No. 233), the remaining assets’ value is RMB 210,598.61 after liquidation.This amount has all distributed to the investors.From this company opened in 2009, this asset has been revalued and then invested into Nan Huan Company.There are no distributive physical assets.According to the meeting of directors at December 26, 2014, the company has full provision for impairment.This asset will be regard as loss after SASAC approved. 68 (3)The main financial information of the significant associate 2016-12-31 2015-12-31 Tianjin Chengtou Tianjin South Tianjin Metro Tianjin South Tianjin Metro Items Zhidi Investment Central Railway Zhidi Trading Central Railway Zhidi Trading and Development Co.,Ltd. Co. Ltd. Co.,Ltd. Co. Ltd. Co., Ltd. Current assets 1,283,399,845.01 8,060,114.17 1,035,661,311.44 5,870,266,349.46 5,300,281.92 Non-current 11,413,313,039.27 235,350,253.55 10,109,499,293.33 314,930,326.91 240,055,424.29 assets Total assets 12,696,712,884.28 243,410,367.72 11,145,160,604.77 6,185,196,676.37 245,355,706.21 Current liabilities 5,135,703,768.31 8,543,244.06 4,633,367,816.85 4,418,714,583.80 7,872,135.79 Non-current 1,813,667,923.91 80,000,000.00 774,094,123.10 733,186,644.75 216,000,000.00 liabilities Total liabilities 6,949,371,692.22 88,543,244.06 5,407,461,939.95 5,151,901,228.55 223,872,135.79 Net assets 5,747,341,192.06 154,867,123.66 5,737,698,664.82 1,033,295,447.82 21,483,570.42 Net Assets calculated by 2,816,197,184.10 61,946,849.46 2,811,472,345.76 413,318,179.13 8,593,428.17 Shareholding percentage Adjusting events -2,473,411.91 0.00 -2,376,986.65 0.00 0.00 Book value of equity investment 2,813,723,772.19 61,946,849.46 2,809,095,359.11 413,318,179.13 8,593,428.17 in associate Fair value of equity investment 0.00 0.00 0.00 0.00 0.00 with quoted market price Operating Income 596,071,850.03 20,599,881.06 649,359,610.66 1,791,424,465.30 21,406,002.01 Financial cost -2,024,055.09 4,400,471.17 -5,971,663.93 90,353,814.95 5,882,056.27 Net profit 9,642,527.24 3,633,053.04 105,822,932.86 28,888,597.53 4,259,871.10 Other comprehensive 0.00 0.00 0.00 0.00 0.00 income Total comprehensive 9,642,527.24 3,633,053.04 105,822,932.86 28,888,597.53 4,259,871.10 income Dividend received from associate this 0.00 0.00 0.00 0.00 0.00 year (4)Summary information of unimportant Joint ventures & associate Items 2016-12-31 2015-12-31 The joint ventures: 0.00 0.00 Total book value of investment 0.00 0.00 Total amount calculated by shareholding percentage 0.00 0.00 Net profit 0.00 0.00 Other comprehensive income 0.00 0.00 Total comprehensive income 0.00 0.00 69 F-71 The associate: 0.00 0.00 Total book value of investment 1,123,858.85 979,509.71 Total amount calculated by shareholding percentage 0.00 0.00 Net profit 403,852.59 179,789.87 Other comprehensive income 0.00 0.00 Total comprehensive income 403,852.59 179,789.87 The unsignificant associate is the Tianjin City Fudaojia Property Management Co., Ltd. 13. Investment property—by fair value method Increase in current period Decrease in current period Own-occu Movement in Transfer pied fair value to Fair value at Fair-value at Items property own-occ 2015-12-31 Purchase Disposal 2016-12-31 or upied inventory property transfered 1.Total cost 2,998,187,292.21 204,162,531.86 0.00 0.00 179,203,577.32 0.00 3,023,146,246.75 House&Buildings 2,998,187,292.21 204,162,531.86 0.00 0.00 179,203,577.32 0.00 3,023,146,246.75 Land use right 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.Total movement in fair value 1,055,614,571.44 0.00 0.00 87,527,858.38 24,919,278.54 0.00 1,118,223,151.28 House&Buildings 1,055,614,571.44 0.00 0.00 87,527,858.38 24,919,278.54 0.00 1,118,223,151.28 Land use right 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.Total book value of investment property 4,053,801,863.65 204,162,531.86 0.00 87,527,858.38 204,122,855.86 0.00 4,141,369,398.03 House&Buildings 4,053,801,863.65 204,162,531.86 0.00 87,527,858.38 204,122,855.86 0.00 4,141,369,398.03 Land use right 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Explanation: (1)Tianjin Railway Construction Investment Holding (Group) Co., Ltd. located in No.258, Jiefang Bei Road, Hexi District. The fair value of this property has verified by valuation report (2017 No.014) issued from Tianjin Kirin Real Estate Land Valuation Consulting Co., Ltd. on March 13, 2017; The fair value of Civic Square located in No.86, the 1st Steeet, Development Diatrict,and Zhongshan Gate’s Huancheng Building located in No.138, Jintang Road, Hedong District etc, which belong to Tianjin Binhai Rapid Transit Development Co., Ltd. have been verified by valuation report (2017 No.012) issued from Tianjin Kirin Real Estate Land 70 F-72 Valuation Consulting Co., Ltd. on February 28, 2017;Tianjin Xianda Hotel located in No.65, Huanhu Zhong Road,Hexi District.The fair value of the property has verified by valuation report (2017 No.013) issued from Tianjin Kirin Real Estate Land Valuation Consulting Co., Ltd. on February 8, 2017;The fair value of Xiangyu Park located in No.18,San Ma Road,Nankai District,and Global Landmark Building located in No.309, Nanjing Road,Nankai District which belongs to Tianjin Metro(Gruop)Co,Ltd. etc. has verified by valuation report (2017 No.006) issued from Tianjin Kirin Real Estate Land Valuation Consulting Co., Ltd. on January 9, 2017; Tianjin Haishun Real Estate Development Co., Ltd. located in No.309, Nanjing Road,Nankai District.The fair value of this property has verified by valuation report (2017 No.003) issued from Tianjin Kirin Real Estate Land Valuation Consulting Co., Ltd. on January 8, 2017. (2)Subsidiary of Tianjin Binhai Traffic Development Co. Ltd. located in NO.138, Zhongshan Gate, Jintang Road, Hedong district.The fair value is RMB 387,828,348.00 as at December 31, 2016. There are no proof document for this property. (3)There is no mortgage. 14. Fixed assets Increase in Decrease in Original value of fixed assets 2015-12-31 2016-12-31 current year current year House&Buildings 1,573,749,033.02 16,437,496.56 18,506,712.00 1,571,679,817.58 Transportation equipment 58,315,318.92 224,696.53 1,970,558.25 56,569,457.20 Office equipment 21,176,028.67 2,667,711.33 4,832,354.57 19,011,385.43 Electronic equipment 14,025,004.22 1,002,692.40 313,608.32 14,714,088.30 Xiangyu park 73,301,775.43 1,080,360.00 471,110.00 73,911,025.43 Machinery equipment 262,247,577.30 10,969,975.32 369,488.66 272,848,063.96 Metro line 1 9,549,118,849.42 6,660,172.01 0.00 9,555,779,021.43 Special equipment 3,906,147.97 5,826,384.70 21,867.00 9,710,665.67 Instrument and apparatus 3,661,545.66 735,508.55 62,460.00 4,334,594.21 Others 98,191,251.90 2,725,434.03 11,229,971.02 89,686,714.91 Total 11,657,692,532.51 48,330,431.43 37,778,129.82 11,668,244,834.12 Including; The fixed assets under 3,964,548,078.63 0.00 0.00 3,964,548,078.63 financial leasing Increase in Decrease in Accumulated depreciation 2015-12-31 2016-12-31 current year current year House&buildings 137,213,304.79 51,347,622.13 2,605,168.84 185,955,758.08 71 F-73 Transportation equipment 41,286,006.86 3,198,989.93 1,918,824.56 42,566,172.23 Office equipment 12,433,851.72 2,821,756.85 4,127,252.88 11,128,355.69 Electronic equipment 10,350,459.12 925,193.92 255,771.21 11,019,881.83 Xiangyu park 22,050,052.03 2,056,079.63 412,067.39 23,694,064.27 Machinery equipment 56,732,567.77 26,016,389.81 547,876.65 82,201,080.93 Metro line 1 0.00 0.00 0.00 0.00 Special equipment 1,753,542.16 332,825.54 20,851.65 2,065,516.05 Instrument and apparatus 2,482,587.43 467,633.79 59,044.34 2,891,176.88 Others 54,078,421.00 5,603,220.24 4,830,482.19 54,851,159.05 Total 338,380,792.88 92,769,711.84 14,777,339.71 416,373,165.01 Including; The fixed assets under 0.00 0.00 0.00 0.00 financial leasing Net value of fixed assets 11,319,311,739.63 11,251,871,669.11 Increase in Decrease in Impairment Provision 2015-12-31 2016-12-31 current year current year House&Buildings 0.00 0.00 0.00 0.00 Transportation equipment 0.00 0.00 0.00 0.00 Office equipment 0.00 0.00 0.00 0.00 Electronic equipment 0.00 0.00 0.00 0.00 Xiangyu park 0.00 0.00 0.00 0.00 Machinery equipment 0.00 0.00 0.00 0.00 Metro line 1 0.00 0.00 0.00 0.00 Special equipment 0.00 0.00 0.00 0.00 Instrument and apparatus 0.00 0.00 0.00 0.00 Others 20,016,107.32 0.00 5,119,995.68 14,896,111.64 Total 20,016,107.32 0.00 5,119,995.68 14,896,111.64 Including: The fixed assets under 0.00 0.00 0.00 0.00 financial leasing Net value of fixed assets 11,299,295,632.31 11,236,975,557.47 (1)The increased amount includes the amount of projects under construction transferring to fixed assets is RMB 0.00. (2)No.1 Subway Line’s non-profit infrastructure is not to be depreciated. 72 F-74 (3)Tianjin Haishun Real Estate Development Co., Ltd. uses 13,213.88 square meters’ houses and buildings as mortgage to get the Metro Group entrusted loans RMB 200,000,000.00 from Agricultural Bank of China Tianjin Hedong branch. (4)ICBC Financial Leasing Co., Ltd. agreed to pay the amount of RMB 4,732,342,680.92 to lease the assets arised from the contract signed between Tianjin Metro Group Co., Ltd. and ICBC Financial Leasing Co., Ltd, and lease back to Metro Group with the principal of RMB 4,732,342,680.92 and interests.The lease term is 10 years. Metro Group has already got RMB 2,850,995,278.63 as at December 31, 2016. The company's controlling shareholder of Tianjin city infrastructure investment group signed the guarantee contract with the lessor on the same day, it provides guarantee for the above obligations. Details of leased assets Increa Decreas sed in The opening e in The closing Assets name Lease term curren balance current balance t period period 1˅The equipment of Metro line 1 2007/3/30-2018/11/30 320,000,000.00 320,000,000.00 2˅The equipment of Metro line 1 2007/12/17-2019/12/7 650,000,000.00 650,000,000.00 3˅The equipment of Metro line 1 2011/3/28-2021/3/15 1,100,000,000.00 1,100,000,000.00 4˅The equipment of Metro line 1 2011/4/8-2021/4/16 467,513,304.52 467,513,304.52 5˅The equipment of Metro line 1 2011/6/28-2021/6/15 798,919,574.17 798,919,574.17 6˅The equipment of Metro line 1 2011/8/30-2021/8/16 118,943,223.94 118,943,223.94 7˅The equipment of Metro line 1 2012/3/29-2022/3/16 365,619,176.00 365,619,176.00 8˅The total assets of Metro 1,2,3 is RMB 1,337,754,362.00 2012/3/26-2022/3/16 143,552,800.00 143,552,800.00 including the Metro line 1 assets RMB 143,552,800.00. Total 3,964,548,078.63 3,964,548,078.63 (5)Details of part of buildings does not have property certificates as at December 31, 2016: AǃThe original book value of the Lixin department which owned by Tianjin Binhai Rapid Transit Development Co., Ltd is RMB 47,500,054.00, the accumulated depreciation is RMB 5,660,285.04 and the net value is RMB 41,839,768.96.There haven’t have documents of property rights. BǃThe original book value of the Jingcai Building which owned by Tianjin Metro Group Co., Ltd is RMB 109,204,000.00, the accumulated depreciation is RMB 17,043,593.83, and the net value is RMB 92,160,406.17. The original book value of No.5 headquarters is RMB13,994,599.42, the accumulated depreciation is RMB 1,244,232.46, and the net value is RMB12,750,366.96, The original book value of No.6 headquarters is 59,567,866.76, the accumulated depreciation is RMB 5,033,606.01, the net value is 54,534,260.75, There haven’t have documents of property rights. (6)The original book value of the Wanglanzhuang Building which owned by Tianjin local railway administration is RMB 811,790.00, the accumulated depreciation is RMB 471,901.26 and the net value is RMB 339,888.74.The property rights belongs to Tianjin Local Railways Administration. 15. Projects under construction (1)The details of Projects under construction: 73 F-75 Turn out amounts in Increase in current year Projects 2015/12/31 2016/12/31 Turn in current year Other decrease Fixed amount assets Metro line 6 26,464,322,116.18 5,100,350,565.02 0.00 0.00 31,564,672,681.20 Metro line 5 18,258,828,373.75 4,024,563,317.19 0.00 0.00 22,283,391,690.94 Metro line 3 15,018,603,309.27 692,043,543.52 0.00 0.00 15,710,646,852.79 East part of Light Rail 13,924,260,667.88 11,119,439.91 0.00 178,410,428.62 13,756,969,679.17 Metro line 2 11,623,374,560.97 172,737,547.66 0.00 0.00 11,796,112,108.63 Development area of Metro 9,978,852,176.62 590,520,334.41 0.00 0.00 10,569,372,511.03 line 2 Tianjin Railway Station 8,860,666,952.50 327,689,215.76 0.00 0.00 9,188,356,168.26 transportation hub project Western part of Light Rail 7,595,424,696.88 725,807,264.49 0.00 0.00 8,321,231,961.37 East of Metro line 1 3,206,788,917.30 1,212,421,571.97 0.00 0.00 4,419,210,489.27 Jinghu project 3,469,721,166.69 324,575,514.10 0.00 0.00 3,794,296,680.79 Metro line 4 2,647,903,363.97 843,241,464.24 0.00 0.00 3,491,144,828.21 Tianjin West Railway Station transportation hub 3,305,736,580.55 25,596,703.89 0.00 0.00 3,331,333,284.44 project Cultural Center 2,839,952,771.02 238,459,492.73 0.00 0.00 3,078,412,263.75 Development area of Metro 2,903,458,114.75 77,552,484.93 0.00 30,940,871.73 2,950,069,727.95 line 1 Development area of Metro 1,967,980,340.00 736,981,842.00 0.00 0.00 2,704,962,182.00 line 6 Development area of Metro 2,542,841,260.81 106,429,792.86 0.00 0.00 2,649,271,053.67 line 5 Metro line 10 1,886,971,452.00 616,314,901.52 0.00 0.00 2,503,286,353.52 Binhai International Airport 2,093,180,682.13 237,377,725.69 0.00 0.00 2,330,558,407.82 hub Supporting Traffic 395,907,877.30 373,569,639.04 0.00 0.00 769,477,516.34 Engineering of West station Supporting Traffic Engineering of South 935,113,897.28 68,255,409.16 0.00 0.00 1,003,369,306.44 Station Airport extension line 742,831,228.11 245,850,936.71 0.00 0.00 988,682,164.82 Metro line 7 720,573,623.79 139,713,258.29 0.00 0.00 860,286,882.08 Development area of Metro 1,308,400,612.80 -585,919,224.28 0.00 0.00 722,481,388.52 line 3 Northwest line project 506,402,902.38 14,712,818.45 0.00 0.00 521,115,720.83 Interest adjustment 501,307,857.61 5,012,724.08 0.00 0.00 506,320,581.69 Tongyi Zhuang,Hongqiao 404,990,037.27 72,107,292.27 0.00 0.00 477,097,329.54 District Jiefang Road Project 367,841,586.86 0.00 0.00 0.00 367,841,586.86 The new Badali project 143,344,800.25 115,799,959.88 0.00 0.00 259,144,760.13 West Railway Station Metro 218,626,970.75 0.00 0.00 0.00 218,626,970.75 Line 6 project The signal system project of 40,800.00 210,763,537.13 0.00 0.00 210,804,337.13 Metro line 1 74 F-76 Turn out amounts in Increase in current year Projects 2015/12/31 2016/12/31 Turn in current year Other decrease Fixed amount assets Metro line 3 emergency fee 189,559,401.69 0.00 0.00 0.00 189,559,401.69 West Point Project Triangle 175,554,600.00 0.00 0.00 0.00 175,554,600.00 area profit or loss on exchange 0.00 143,543,911.00 0.00 0.00 143,543,911.00 Diboya Yuan project 132,695,206.89 0.00 0.00 0.00 132,695,206.89 Donghailu Station 0.00 126,909,573.39 0.00 15,229.82 126,894,343.57 Binhai University Station 0.00 121,805,676.80 0.00 1,571,748.53 120,233,928.27 Zhangguizhuang Station 32,435,042.48 87,140,663.95 0.00 1,711,908.08 117,863,798.35 Jiefang Road-Wushui Street 27,332,020.10 60,215,394.84 0.00 0.00 87,547,414.94 hub Other projects 56,601,387.60 21,596,757.02 0.00 0.00 78,198,144.62 Metro line 11 -96,277.51 74,466,595.07 0.00 0.00 74,370,317.56 Xiaobailou project 62,905,508.07 0.00 0.00 0.00 62,905,508.07 Cultural Center-lighthouse 52,026,398.91 809,098.79 0.00 0.00 52,835,497.70 Bus station and parking 51,887,710.93 650,193.34 0.00 0.00 52,537,904.27 Dormitory of Caozhuang 36,957,705.78 10,893,150.43 0.00 0.00 47,850,856.21 Jintangnan Li project 39,200,000.00 0.00 0.00 0.00 39,200,000.00 Jinghu high-speed rail 38,703,119.60 384,983.00 0.00 0.00 39,088,102.60 Reconstruction Project Metro line 5 8,202,489.58 30,157,777.79 0.00 0.00 38,360,267.37 Security item of metro line 1 34,476,200.00 1,064,400.00 0.00 0.00 35,540,600.00 Qinhai apartment 31,993,106.18 0.00 0.00 0.00 31,993,106.18 Yangzhuangzi Pump 22,765,387.30 5,067,660.00 0.00 0.00 27,833,047.30 Station Sitiao road project 21,333,388.25 0.00 0.00 0.00 21,333,388.25 Gejia House 9,986,557.50 10,419,755.00 0.00 0.00 20,406,312.50 Honghudong road 20,182,118.00 0.00 0.00 0.00 20,182,118.00 production Mail processing center underpass project of west 19,501,068.04 892.01 0.00 0.00 19,501,960.05 station Jinghu IntertieTunnel 0.00 18,075,562.71 0.00 0.00 18,075,562.71 project Secruity project 1,700,925.60 15,335,204.18 0.00 0.00 17,036,129.78 Yide Yuan project 10,200,000.00 1,935.10 0.00 0.00 10,201,935.10 Pre-project costs 4,888,000.00 0.00 0.00 0.00 4,888,000.00 Dongli District No.8 Road 0.00 1,081,400.00 0.00 0.00 1,081,400.00 project Olympic project of No.1 rail 15,322,204.18 -15,322,204.18 0.00 0.00 0.00 line Metro line 13 -209,655.29 -31,982.86 0.00 0.00 -241,638.15 Total 145,930,353,311.55 17,437,915,470.00 0.00 212,650,186.78 163,155,618,594.77 Provision of impairment 62,905,508.07 0.00 0.00 0.00 62,905,508.07 Net value 145,867,447,803.48 163,092,713,086.70 (2)The impairment reserve of Product under Construction 75 F-77 Increase Decrease in current year Projects 2015-12-31 in current Return Charge-off Total 2016-12-31 year Xiaobailou projects 62,905,508.07 0.00 0.00 0.00 0.00 62,905,508.07 Total 62,905,508.07 0.00 0.00 0.00 0.00 62,905,508.07 (3) Other deceased amount is RMB 212,650,186.78, including RMB181,709,315.05 in Tianjin Binhai Rapid Transit Development Co., Ltd, the reason is that "812" explosion accident lead to part of the assets impaired; the reduced amount of RMB 30,940,871.73 in Tianjin Metro Group Co., Ltd. is transferred to operating cost. (4)China Construction Bank Tianjin Kaifa Branch provide security for RMB 600,000,000.00 corporate bonds to our directors Tianjin Teda Investment Holding Co. Tianjin Binhai Traffic Development Co. Ltd uses its equipments to provide counter-gurantee for China Construction Bank Tianjin Kaifa Branch. (5)The year balance includes the leased assets of Tianjin Metro (Gruop) Co.,Ltd. amount to RMB 15,059,587,467.97,details as follows: Increase in Decrease in Assets name Lease term 2015-12-31 2016-12-31 current year current year 1˅The shield and segments of Metro line 2,3 2009.1.20-2016.1.15 282,000,000.00 0.00 282,000,000.00 0.00 2˅The shield and segments of Metro line 2,3 2012.2.1-2016.1.31 600,000,000.00 0.00 600,000,000.00 0.00 3˅Partial substation equipment of Metro 2 2012.12.25-2016.12.25 300,000,000.00 0.00 300,000,000.00 0.00 4 ˅ Total assets of Metro line 1,2,3 is 1,337,754,362.00YUAN Including the Metro line 2012.3.26-2022.3.16 1,194,201,562.00 0.00 0.00 1,194,201,562.00 2,3, assets 1,194,201,562.00YUAN. 5˅The infrastruction of Metro line 3 2012.12.6-2016.12.5 500,000,000.00 0.00 500,000,000.00 0.00 6˅The infrastruction of Metro line 3 2013.7.29-2018.7.28 1,000,000,000.00 0.00 0.00 1,000,000,000.00 7˅The civil engineering of Metro line 2 2013.9.15-2023.9.14 600,000,000.00 0.00 0.00 600,000,000.00 8˅The civil engineering of Metro line 2 2013.9.15-2023.9.14 1,000,000,000.00 0.00 0.00 1,000,000,000.00 9˅The management and control center of Tianjin railway station, Transfer Center ,Haihe 2014.3.31-2029.3.30 1,021,283,481.00 0.00 0.00 1,021,283,481.00 East Road tunnel western section 10˅Wujing Road underpass auxiliary equipment with a total of 194 in Tianjin railway station 2014.9.18-2017.9.17 1,674,414,742.00 0.00 0.00 1,674,414,742.00 11˅Weak current system equipment installation engineering with a total of 10 of Metro line 2 2014.12.18-2020.12.17 224,226,558.54 0.00 0.00 224,226,558.54 12˅The power supply equipment and site awning, full fire controlǃ Drainage facilities and 2014.7.28-2016.1.18 1,250,000,000.00 0.00 1,250,000,000.00 0.00 other related equipment of Metro line 2 13˅The civil engineering assets of Tianjin Urban Construction Group and The Huayuan car 2014.12.11-2019.12.10 deport construction by China Railway No.13 350,740,074.00 0.00 0.00 350,740,074.00 Engineering Group Co.,Ltd. 76 F-78 Increase in Decrease in Assets name Lease term 2015-12-31 2016-12-31 current year current year 14˅The Complex building in Huayuan Car Deport and The Huayuan car deport construction by China Railway No.13 2015.2.9-2020.2.8 622,156,014.00 0.00 622,156,014.00 0.00 Engineering Group Co.,Ltd. 15˅The relocation project of Ligonglou Pump Station , The main material and additional engineering construction of Metro Line 3 at 2015.2.12-2020.2.11 709,857,881.00 0.00 0.00 709,857,881.00 Tianjin Railway Station 16 ˅ The facilities of Tianjin culture center transportation hub construction 2015.3.26-2021.3.25 1,200,000,000.00 0.00 0.00 1,200,000,000.00 17 ˅ The facilities of Tianjin culture center transportation hub construction’s underground traffic engineering, The underground space 2015.3.30-2021.2.28 1,007,109,440.00 0.00 0.00 1,007,109,440.00 project ,The bus station’s electrical equipments 18˅The supporting facilities of Jingjiang Station Metro Line 2 and The stations of Metro Line 2. 2015.5.13-2017.5.14 522,472,368.43 0.00 0.00 522,472,368.43 19 ˅ The facilities from YanAn Station(Including)to Jieyuan Station(Without) 2015.12.8-2018.11.25 143,827,629.00 0.00 0.00 143,827,629.00 19˅The facilities of Metro line 2 from Jieyuan Station(Including) to Hongqinan 2015.12.8-2018.11.25 178,935,119.00 0.00 0.00 178,935,119.00 Station(Without) 19˅Tianjin Railway Station tracks and The facilities of Limingzhuang 2015.12.8-2018.11.25 53,670,380.00 0.00 0.00 53,670,380.00 20˅Power Supply System EquipmentǃWater Chilling Unit of Metro Line 6 2016.6.24-2024.6.24 0.00 451,531,598.00 0.00 451,531,598.00 21˅Signal systemǃEscalator equipmentǃ Electric bus electric traction systemǃPower supply systemǃ Electromechanical systemǃ 2016.6.24-2021.5.3 0.00 1,350,536,635.00 0.00 1,350,536,635.00 Electric motor coach of Metro Line 6 22˅Electric motor coach of Metro Line 6 2016.6.24-2021.5.3 0.00 1,326,780,000.00 0.00 1,326,780,000.00 23˅Equipments along the Metro Line 2, Equipments of Jieyuan Road station and 2016.12.5-2019.12.5 0.00 150,000,000.00 0.00 150,000,000.00 Xianyang Road station 24˅Equipments along theMetro Line 2 2016.12.5-2019.12.5 0.00 200,000,000.00 0.00 200,000,000.00 25˅Equipments along theMetro Line 2 2016.10.26-2019.10.25 0.00 150,000,000.00 0.00 150,000,000.00 26˅Equipments in the Metro Line 3 stations 2016.8.9-2019.8.9 0.00 200,000,000.00 0.00 200,000,000.00 27˅Equipments along theMetro Line 2 2016.6.24-2019.6.24 0.00 350,000,000.00 0.00 350,000,000.00 Total 14,434,895,248.97 4,178,848,233.00 3,554,156,014.00 15,059,587,467.97 1˅ BOCOM Financial Leasing Co., Ltd. (lessor) agreed to purchase tunnel segments of No.2, No.3 rail line arised from the financial leasing contract signed between Metro Group and BOCOM Financial Leasing Co., Ltd. on January 19, 2009, and lease back to Metro Group with the principal of RMB 282,000,000.00.The lease term is 7 years. The company's controlling shareholder of Tianjin city infrastructure investment group signed guarantee contract (No.20090004) with the lessor on the same day, it provides guarantee for the above obligations. 2˅ Industrial Bank Financial Leasing Co., Ltd. agreed to purchase tunnel segments of No.2, No3 rail line arised from the financial leasing contract signed between Metro Group and Industrial Bank Financial Leasing Co., Ltd. on February 14, 2012, and lease back to Metro Group with the principal of RMB 600,000,000.00.The lease term is 5 years. The company's controlling shareholder of Tianjin city infrastructure investment group signed guarantee contract (No. CIBFL-2012-004-HZ-BZ) with the lessor on the same day, it provides guarantee for the above obligations. 3˅ Tianjin T&B Holding CO., Ltd . (lessor) agreed to purchase partial substation equipments of No.2 rail line arised from the financial leasing contract signed between Metro Group and Industrial Bank Financial Leasing Co., Ltd. on Demcember 25, 2012, and lease back to Metro Group with the principal of RMB 300,000,000.00.The lease term is 5 years. The company's controlling shareholder of Tianjin city infrastructure investment group signed guarantee contract (No. 77 F-79 TBZL2012-BZ02) with the lessor on the same day, it provides guarantee for the above obligations. 4˅ ICBC Financial Leasing Co., Ltd. (lessor) agreed to purchase assets of No.1,2,3 rail line arised from the contract signed between Metro Group and ICBC Financial Leasing Co., Ltd. on March 22,2012, and lease back to Metro Group with the principal of RMB 1,337,754,362.00 (Include:total assets of No.2 and No.3 rail line are RMB1,194,201,562.00).The lease term is 10 years. The company's controlling shareholder of Tianjin city infrastructure investment group signed guarantee contract (No. 005) with the lessor on the same day, it provides guarantee for the above obligations. 5˅ Tianjin T&B Holding Co., Ltd. (lessor) agreed to purchase part of infrastructure of No.3 rail line arised from the contract (Leaseback) signed between Metro Group and Tianjin T&B Holding Co., Ltd. on December 5, 2012, and lease back to Metro Group with the principal of RMB 500,000,000.00.The lease term is 4 years. The company's controlling shareholder of Tianjin city infrastructure investment group signed guarantee contract (No. TBZL2012-BZ01) with the lessor on the same day, it provides guarantee for the above obligations. 6˅ Tianjin Jia Yong Leasing Co., Ltd. (lessor) agreed to purchase part of infrastructure of No.3 rail line arised from the financial leasing contract signed between Metro Group and Tianjin Jia Yong Leasing Co., Ltd. on July 29, 2013, and lease back to Metro Group with the principal of RMB 1,000,000,000.00.The lease term is 5 years. The company's controlling shareholder of Tianjin city infrastructure investment group signed guarantee contract (No. 2013JYC0006) with the lessor on the same day, it provides guarantee for the above obligations. 7˅ Dasheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase civil asset of No.2 rail line arised from the contract about transferring assets (No. DSZR20130006) between Metro Group and Dasheng International Financial Leasing Co., Ltd. on September 15, 2013, and lease back to Metro Group with the principal of RMB 600,000,000.00. Total period of pre-lease and lease is 10 years. Metro Group pledged the toll rights of tickets of Tianjin Metro Line 2, 3 and signed a "pledge contract" with Dasheng International Financial Leasing Co., Ltd. (the pledgee). The company's controlling shareholder of Tianjin city infrastructure investment group signed guarantee contract (No. DSBZ20130009) with the lessor on the same day, it provides guarantee for the above obligations. 8˅ Dasheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase civil asset of No.2 rail line arised from the contract about transferring assets (No. DSZR20130005) between Metro Group and Dasheng International Financial Leasing Co., Ltd. on September 15, 2013, and lease back to Metro Group with the principal of RMB 1,000,000,000.00. Total period of pre-lease and lease is 10 years. Metro Group pledged the toll rights of tickets of Tianjin Metro Line 2, 3 and signed a "pledge contract" with Dasheng International Financial Leasing Co., Ltd. (the pledgee). The company's controlling shareholder of Tianjin city infrastructure investment group signed guarantee contract (No. DSBZ20130008) with the lessor on the same day, it provides guarantee for the above obligations. 9˅ CAF Financial Leasing Co., Ltd. (lessor) agreed to purchase management control centers, transfer center, the western part of the Haihe East Road of Tianjin Railway Station transportation hub project arised from the financial leasing contract signed between Metro Group and CAF Financial Leasing Co., Ltd. on March 31, 2014, and lease back to Metro Group with the principal of RMB 1,000,000,000.00.The lease term is 15 years. The company's controlling shareholder of Tianjin city infrastructure investment group signed guarantee contract (No. 201400008) with the lessor on the same day, it provides guarantee for the above obligations. 10˅Guangdong Yi-Financial Leasing Co., Ltd. (lessor) agreed to purchase 194 assets include underpass auxiliary equipment of Five Road arised from the contract signed between Metro Group and Guangdong Yi-Financial Leasing Co., Ltd. on August 25, 2014, and lease back to Metro Group with the principal of RMB 1,528,365,000.00($ 250 million).The lease term is 3 years.Rail Group provides guarantee for the above obligations approved by board of directors at December 26, 2014. 11˅CMB Financial Leasing Co., Ltd. (lessor) agreed to purchase 10 assets include weak systems engineering construction arised from the contract signed between Metro Group and CMB Financial Leasing Co., Ltd. on December 18, 2014, and lease back to Metro Group with the principal of RMB 200,000,000.00.The lease term is 6 years.Rail Group provides guarantee for the above obligations approved by board of directors at December 26, 2014. Our company signed guarantee contract(No.ZLDBTJGD1412096003)with the lessor and we will provide irrevocable joint and several responsibility to ensure security for all debt contracts. 12˅Fergus International Financial Leasing (Tianjin) Co., Ltd. (lessor) agreed to purchase part of the power equipment, facilities and sites canopy; all fire fighting, water supply and drainage equipment and facilities; other related equipment and facilities within the station arised from the contract between Metro Group and Fergus International Financial Leasing (Tianjin) Co., Ltd. on July 28, 2014, and lease back to Metro Group with the principal of RMB1,250,000,000.00.The lease term is 539 days.Rail Group provides guarantee for the above obligations approved by board of directors at December 26, 2014. 13˅Tianjin Jia Yong Leasing Co., Ltd. (lessor) agreed to purchase the civil engineering assets of Tianjin Urban Construction Group and The Huayuan car deport construction by China Railway No.13 Engineering Group Co.,Ltd. on December 11, 2014, and lease back to Metro Group with the principal of RMB 350,000,000.00.The lease term is 5 years. 78 F-80 The company's controlling shareholder of Tianjin city infrastructure investment group signed guarantee contract (2014JYA12080015) with the lessor on the same day, it provides guarantee for the above obligations. 14˅Tianjin Jia Yong Leasing Co., Ltd. (lessor) agreed to the Complex building in Huayuan Car Deport and The Huayuan car deport construction by China Railway No.13 Engineering Group Co.,Ltd on February 9,2015,and lease back to Metro Group with the principal of RMB 620,000,000.00.The lease term is 5 years. The company's controlling shareholder of Tianjin city infrastructure investment group signed guarantee contract (2015JYA12070017) with the lessor on the same day, it provides guarantee for the above obligations. 15˅Huaxia Financial Leasing Co, Ltd.(lessor) agreed to The relocation project of Ligonglou Pump Station , The main material and additional engineering construction of Metro Line 3 at Tianjin Railway Station on February 12, 2015, and lease back to Metro Group with the principal of RMB 700,000,000.00.The lease term is 5 years. The company's controlling shareholder of Tianjin Rail Transit group signed guarantee contract (HXZL-XZ-2015108-001) with the lessor on the same day, it provides guarantee for the above obligations. 16˅Everbright Financial Leasing Co., Ltd.˄lessor˅agreed to the facilities of Tianjin culture center transportation hub construction on March 27, 2015, and lease back to Metro Group with the principal of RMB 1,200,000,000.00.The lease term is 6 years. The company's controlling shareholder of Tianjin Rail Transit group signed guarantee contract [˄1503˅ 02-00006)] with the lessor on the same day, it provides guarantee for the above obligations. 17˅Jianxin Financial Leasing Co, Ltd. (lessor) agreed to transfer the facilities of Tianjin culture center transportation hub construction’s underground traffic engineering, The underground space project ,The bus station’s electrical equipments on March 30 , 2015, arised from the transfer contract (001-0000354-001) with the principal of RMB 1,000,000,000.00and lease back to Metro Group .The lease term is 6 years. The company's controlling shareholder of Tianjin Rail Transit group signed guarantee contract with the lessor on the same day, it provides guarantee for the above obligations. 18˅Dasheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase the supporting facilities of Jingjiang Station Metro Line 2 and The stations of Metro Line 2. on May 13, 2015 under the financial leasing back contract and agreed to lease back to Metro Group and also signed asset transfer contract (DSTJHZ2015001), the principal is RMB 520,000,000.00, the lease term is 732 days. The company's controlling shareholder of Tianjin Rail Transit group signed factoring agreement (77092014280188-1)with Shanghai Pudong Development Bank Tianjin Branch on the May 14, 2015, the agreement appoint to transfer the creditor's rights with the rental of RMB 520,000,000.00 to Shanghai Pudong Development Bank Tianjin Branch. 19˅Longtai Yinxin Financial Leasing Co,Ltd, (lessor) agreed to transfer the Tianjin Railway Station tracks and The facilities of Limingzhuang on December 8, 2015,and lease back to Metro Group with the principal of RMB 350,000,000.00.The lease term is 1083 days. The company's controlling shareholder of Tianjin Rail Transit group signed guarantee contract (LTYX-2015003-HZ ) with the lessor on the same day, it provides guarantee for the above obligations. 20˅Tianjin rail transit group financing lease Co., LTD (the lessor) agreed to purchase Power Supply System Equipmentǃ Water Chilling Unit of Metro Line 6 arised from the financial leasing contract signed between Metro Group and Tianjin rail transit group financing lease Co., LTD on 23th June,2016 and lease back to Metro Group, and also signed asset transfer contract (GDZL-ZR-2016-06-04) with the lessor. The lease term is 7 years, the principal of RMB 450,000,000.00. 21˅Tianjin Rail Transit Group Financing Lease Co., Ltd (the lessor) agreed to purchase Signal systemǃEscalator equipment ǃ Electric bus electric traction system ǃ Power supply system ǃ Electromechanical system ǃ Electric motor coach of Metro Line 6 arised from the financial leasing back contract signed between Metro Group and Tianjin rail transit group financing lease Co., Ltd on 23th June, 2016 and lease back to Metro Group, and also signed asset transfer contract (GDZL-ZR-2016-06-06) with the lessor. The leasing term is 1774 days, the principal is RMB1,300,000,000.00, Tianjin rail transit group Co., Ltd provides guarantee and signed guarantee contract on the same day, it provides guarantee for the above obligations. 22˅Tianjin Rail Transit Group Financing Lease Co., Ltd (the lessor) agreed to purchase electric motor coach of Metro Line 6 arised from the financial leasing back contract signed between Metro Group and Tianjin Rail Transit Group Financing Lease Co., Ltd on 23th June, 2016 and lease back to Metro Group, and also signed asset transfer contract (GDZL-ZR-2016-06-05) with the lessor, The leasing term is 1774 days, the principal is RMB 1,320,000,000.00. 23˅Dasheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase equipments along the Metro Line 2, Equipments of Jieyuan Road station and Xianyang Road station arised from the financial leasing back contract signed between Metro Group and Dasheng International Financial Leasing Co., Ltd. on 5th December, 2016 and lease back to Metro Group, and also signed asset transfer contract (DSTJHZ2016006) with the lessor, The leasing term is 1095 days, the principal is RMB 150,000,000.00. Tianjin rail transit group Co., Ltd provides guarantee and signed guarantee contract on the same day, it provides guarantee for the above obligations. 79 F-81 24˅Dasheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase equipments along the Metro Line 2 arised from the financial leasing back contract signed between Metro Group and Dasheng International Financial Leasing Co., Ltd. on 5th December, 2016 and lease back to Metro Group, and also signed asset transfer contract (DSTJHZ2016007) with the lessor, The leasing term is 1096 days, the principal is RMB 200,000,000.00. Tianjin rail transit group Co., Ltd provides guarantee and signed guarantee contract on the same day, it provides guarantee for the above obligations. 25˅Dasheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase equipments along the Metro Line 2 arised from the financial leasing back contract signed between Metro Group and Dasheng International Financial Leasing Co., Ltd. on 26th October, 2016 and lease back to Metro Group, and also signed asset transfer contract (DSTJHZ2016005) with the lessor, The leasing term is 1095 days, the principal is RMB 150,000,000.00. Tianjin rail transit group Co., Ltd provides guarantee and signed guarantee contract on the same day, it provides guarantee for the above obligations. 26˅Dasheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase equipments along the Metro Line 3 arised from the financial leasing back contract signed between Metro Group and Dasheng International Financial Leasing Co., Ltd. on 9th August, 2016 and lease back to Metro Group, and also signed asset transfer contract (DSTJHZ2016004) with the lessor, The leasing term is 1096 days, the principal is RMB 200,000,000.00. Tianjin rail transit group Co., Ltd provides guarantee and signed guarantee contract on the same day, it provides guarantee for the above obligations. 27˅Dasheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase equipments along the Metro Line 2 arised from the financial leasing back contract signed between Metro Group and Dasheng International Financial Leasing Co., Ltd. on 24th June, 2016 and lease back to Metro Group, and also signed asset transfer contract (DSTJHZ2016003) with the lessor, The leasing term is 1096 days, the principal is RMB 350,000,000.00. Tianjin rail transit group Co., Ltd provides guarantee and signed guarantee contract on the same day, it provides guarantee for the above obligations. (6) The following is the Financial Leasing assets in Tianjin binhai rapid transit development Co., LTD about tianjin light rail line 9 with the closing balance of 6,142,532,877.00: Increase in current Decrease in Assets name Lease term Openning balance Closing balance year current year 1˅The equipment in east and 2010/5/28-2020/5/28 2,814,986,709.00 0.00 0.00 2,814,986,709.00 west part of Metro line 9 2˅The house&buildings of 2015/9/7-2025/9/20 640,016,930.00 0.00 0.00 640,016,930.00 Metro line 9 3˅The equipment installtion 2015/4/30-2021/4/21 1,505,620,199.00 0.00 0.00 1,505,620,199.00 of Metro line 9 4˅The house and equipment 2015/4/1-2021/4/1 1,181,909,039.00 0.00 0.00 1,181,909,039.00 of Metro line 9 Total 6,142,532,877.00 0.00 0.00 6,142,532,877.00 1˅ Bank Financial Leasing Co., Ltd. and ICBC Financial Leasing Co., Ltd. agreed to purchase equipments of Tianjin Binhai Traffic Development Co. Ltd. arised from the contract (Bank Leasing Zi No. 20,100,033; 2010 ICBC Leasing equipment Zi No. 026) signed between Metro Group and Bank Financial Leasing Co., Ltd. and ICBC Financial Leasing Co., Ltd. on May 28, 2010, and lease back to Metro Group with the principal of RMB 2,600,000,000.00.The lease term is 10 years. The company's controlling shareholder of Tianjin TEDA Investment Holding Co., Ltd signed guarantee contract(Bank security word No. 20100033, 2010, ICBC Leasing equipment Bao Zi No. 026) with the lessor on the 80 F-82 same day, it provides guarantee for the above obligations. 2˅ Dasheng International Financial Leasing Co., Ltd. (lessor) agreed to puechase the house and buildings of Tianjin Binhai Rapid Transit Development Co., Ltd. arised from the financial leasing contract signed between Tianjin Binhai Rapid Transit Development Co., Ltd. and Dasheng International Financial Leasing Co., Ltd. on September 17, 2015, and lease back to Tianjin Binhai Rapid Transit Development Co., Ltd. with the principle of RMB 500,000,000.00. The lease term is 10 years. The company's controlling shareholder of Tianjin Rail Transit Group Co., Ltd.signed guarantee contract (DSHZ20150013-BZ) with the lessor on the same day, it provides guarantee for the above obligations. On 25th September, 2015, Subsidiary Tianjin Binhai Rapid Transit Development Co., Ltd. signed rights and interests transfer agreement with Dasheng International Financial Leasing Co., Ltd.(assignor) and ABC bank financial leasing Co, Ltd(assignee), the agreement appoint that assignor transfers the rental earnings rights to assignee, assignee purchases above assets. 3˅ Jianxin Financial Leasing Co.,Ltd. (lessor) agreed to puechase equipments of Tianjin Binhai Traffic Development Co. Ltd. arised from the financial leasing contract signed between Tianjin Binhai Traffic Development Co. Ltd. and Jianxin Financial Leasing Co.,Ltd. on April 30, 2015, and lease back to Tianjin Binhai Traffic Development Co. Ltd. with the principle of RMB 1,500,000,000.00. The lease term is 6 years. The company's controlling shareholder of Tianjin Rail Transit Group Co., Ltd. signed guarantee contract (001-0000366-001) with the lessor on the same day, it provides guarantee for the above obligations. 4˅ Everbright Financial Leasing Co., Ltd.˄lessor˅agreed to puechase equipments of Tianjin Binhai Traffic Development Co. Ltd. arised from the contract signed between Tianjin Binhai Traffic Development Co. Ltd. and Jianxin Financial Leasing Co.,Ltd. on March 26, 2015, and lease back to Tianjin Binhai Traffic Development Co. Ltd. with the principle of RMB 800,000,000.00. The lease term is 6 years. The company's controlling shareholder of Tianjin Metro (Group) Co,Ltd signed guarantee contract (Everbright Financial Leasing(1504)No. 02-00003) with the lessor on the same day, it provides guarantee for the above obligations. 16. Intangible assets Increase in Decrease in Items 2015-12-31 2016-12-31 current year current year ĉ.Original book value 159,872,440.85 963,748.72 2,330,332.25 158,505,857.32 Land use right 150,943,000.79 0.00 0.00 150,943,000.79 Software 4,139,440.06 963,748.72 2,330,332.25 2,772,856.53 Others 4,790,000.00 0.00 0.00 4,790,000.00 Ċ.Accumulated amotization 9,213,593.82 1,642,090.74 1,035,656.85 9,820,027.71 81 F-83 Land use right 5,845,807.03 754,297.68 0.00 6,600,104.71 Software 1,571,536.79 887,793.06 1,035,656.85 1,423,673.00 Others 1,796,250.00 0.00 0.00 1,796,250.00 ċ.Net book value of intangible assets 150,658,847.03 148,685,829.61 Land use right 145,097,193.76 144,342,896.08 Software 2,567,903.27 1,349,183.53 Others 2,993,750.00 2,993,750.00 Č.Impairment provision 0.00 0.00 Land use right 0.00 0.00 Software 0.00 0.00 Others 0.00 0.00 V.Book value of intangible assets 150,658,847.03 148,685,829.61 Land use right 145,097,193.76 144,342,896.08 Software 2,567,903.27 1,349,183.53 Others 2,993,750.00 2,993,750.00 17. Goodwil (1) The book value of goodwill Increase in Decrease in Items 2015-12-31 2016-12-31 current year current year 0.00 87,435.85 0.00 87,435.85 Total 0.00 87,435.85 0.00 87,435.85 1˅ The company acquired Guangyun Equipment Co,Ltd. with the stock rights of 100% at January 2016 which formed the business combinations not under common control. The amount in consolidated statements is RMB 87,435.85. 2˅ Guangyun Equipment Co,Ltd. has performed goodwill impairment test and didn’t discover an indication of impairment as of 31th December, 2016. 18. Long-term expenses to be amortized The original Accumulated Increase in Amortized in Items 2015-12-31 2016-12-31 amount amortization current year current year Renovation 1,873,283.01 714,680.00 949,061.01 670,000.00 460,458.00 1,158,603.01 costs Operation preparation 19,374,140.74 0.00 19,374,140.74 0.00 0.00 19,374,140.74 expense Financial 160,882,820.52 64,805,572.61 117,899,717.79 0.00 21,822,469.88 96,077,247.91 lease expense 82 F-84 Guarantee fees of ICBC financial leasing and 18,200,000.00 12,133,333.47 7,886,666.61 0.00 1,820,000.08 6,066,666.53 BOCOM financial leasing Guarantee 186,479,600.00 82,192,400.00 128,492,700.00 0.00 24,205,500.00 104,287,200.00 fees of West Employee education 5,022,157.74 0.00 5,022,157.74 0.00 0.00 5,022,157.74 expense Early period Rental 453,434,487.40 303,643,300.97 201,650,507.67 0.00 51,859,321.24 149,791,186.43 expense Others 8,143,085.74 2,312,680.03 4,036,202.79 2,054,215.80 260,012.88 5,830,405.71 Total 853,409,575.15 465,801,967.08 485,311,154.35 2,724,215.80 100,427,762.08 387,607,608.07 19. Deferred Income Tax Assets and Deferred Income Tax Assets Liabilities (1)The confirmed deferred income tax and liabilities 2016-12-31 2015-12-31 Amount of Amount of Items Temporary Deferred income Temporary Deferred income difference tax assets or difference tax assets or debt debt ĉ.Deferred income tax assets Financial assets 0.00 0.00 0.00 0.00 Impairment provision of assets 46,544,120.96 11,636,030.27 25,116,267.97 6,279,067.03 Tax rate difference of long-term equity 0.00 0.00 0.00 0.00 investment by equity method The depreciation period of fixed assets 0.00 0.00 0.00 0.00 The investment property calculated by fair 64,019,136.83 16,004,784.21 68,398,966.51 17,099,741.63 value method The intangible assets with undefined useful 0.00 0.00 0.00 0.00 life Unrealised Internal profits 24,622,616.08 6,155,654.02 0.00 0.00 Set-up costs 900,156.47 225,039.12 1,591,828.03 397,957.01 Estimate liabilities 1,449,487.15 362,371.79 1,449,487.15 362,371.79 83 F-85 Anticipated profit of real estate enterprise 0.00 0.00 0.00 0.00 Prepayments 1,500,000.00 375,000.00 1,500,000.00 375,000.00 Accured expenses 10,904.70 2,726.18 1,639,639.27 409,909.82 Low-value consumption goods 356,353.36 89,088.33 356,353.36 89,088.33 Employee eduction fund 1,993,545.72 498,386.43 1,457,043.20 364,260.80 Others 0.00 0.00 0.00 0.00 Total 141,396,321.27 35,349,080.35 101,509,585.49 25,377,396.41 Ċ.Deferred income tax liabilities Financial assets 0.00 0.00 0.00 0.00 The investment property calculated by fair 1,957,106,407.32 489,276,601.86 1,846,544,836.53 461,636,209.15 value method The depreciation of fixed assets 577,402,723.64 144,350,680.92 599,367,944.08 149,841,986.03 Movement in fair value of 953,173.74 238,293.45 866,334.40 216,583.61 Available-for-sale Total 2,535,462,304.70 633,865,576.23 2,446,779,115.01 611,694,778.79 (2)Temporary differences of deffered tax assets include the amounts of bad debt provision, inventory devaluation, fix assets impairment and construction in progress impairment and other non-current assets impairment provision corresponding to RMB 13,654,492.32, RMB 9,050,876.69, RMB 14,896,111.64, RMB 62,905,508.07 and RMB 14,382,034.07 respectively as at December 31, 2016. Temporary differences of deffered tax assets include the amounts of bad debt provision, inventory devaluation, fix assets impairment and construction in progress impairment corresponding to RMB 13,639,303.95, RMB 9,050,876.69, RMB 20,016,107.32 and RMB 62,905,508.07respectively as at December 31, 2015. (3)Provision for Impairment of assets Provision Return Charge-off Items 2015-12-31 amount in 2016-12-31 this year this year current year 1.Bad debts provision 32,441,326.43 7,061,007.29 39,502,333.72 2.Inventory falling price reserve 9,050,876.69 9,050,876.69 3.Provision for available-for-sale financial 0.00 0.00 assets 4.Provision for held to 0.00 0.00 maturity investments 84 F-86 5.Provision for long-term equity investments 6,314,245.49 6,314,245.49 6.Provision for investment property 0.00 0.00 7.Provision for fixed assets 20,016,107.32 5,119,995.68 14,896,111.64 8.Provision for engineer material 0.00 0.00 9.Provision for projects under construction 62,905,508.07 62,905,508.07 10.Provision for biological assets 0.00 0.00 Including: Mature biological assets 0.00 0.00 11.Provision for oil and gas assets 0.00 0.00 12.Provision for intangible assets 0.00 0.00 13.Provision for goodwill 0.00 0.00 14.Others 0.00 14,382,034.07 14,382,034.07 Total 130,728,064.00 21,443,041.36 5,119,995.68 147,051,109.68 20. Other non-current liabilities Items 2016-12-31 2015-12-31 Unsettled Assets Profit and Loss 187,287,386.07 0.00 Less˖Impairment loss for unsettled Assets 14,382,034.07 0.00 Profit and Loss Net Value 172,905,352.00 0.00 The reason for the formation of unsettled Assets Profit and Loss has been inllustrated in ĀNote 16 Other significant mattersā. 21. Assets with Limited Ownership Details at December 31,2016 Increase in current Decrease in current Categories 2015-12-31 2016-12-31 year year ĉ. Assets for mortgage 995,100,000.00 1,268,450,000.00 575,870,000.00 1,687,680,000.00 Inventory-start-up costs-land use right 995,100,000.00 1,268,450,000.00 575,870,000.00 1,687,680,000.00 Ċ.Assets for guarantee 1,497,514,037.00 0.00 0.00 1,497,514,037.00 Projects under construction 1,497,514,037.00 0.00 0.00 1,497,514,037.00 ċ.Other reasons 23,323,427.91 153,411,686.56 100.00 176,735,014.47 85 F-87 Monetary fund 23,323,427.91 153,411,686.56 100.00 176,735,014.47 Total 2,515,937,464.91 1,421,861,686.56 575,870,100.00 3,361,929,051.47 (1) The closing balance of Inventory-start-up costs on 31 December, 2016 includes land use right of RMB 419,230,000.00 , this is that Tianjin Metro Resources Investment Co., Ltd. uses Central Square’s land use rights as pledge to get long-term borrowings amounted to RMB 189,999,976.50 from Shanghai Pudong Development Bank Tianjin Branch.The borrowing period is from September 11, 2015 to October 29, 2017. The closing balance of Inventory-start-up costs on 31 December, 2016 includes land use right of RMB 1,268,450,000.00 , this is that Tianjin Chengtie MTR Construction Co. Ltd. uses Jinpu northern road(A housing block) (B housing block),Xiaowang village, Hebei district,Tianjin’s land use rights as pledge to get long-term borrowings amounted to RMB 131,248,775.63 from Industrial and Commercial bank of China co., Ltd. Tianjin Branch.The borrowing period is from June 27, 2016 to June 7, 2024. (2) China Construction Bank Tianjin Kaifa Branch provide security to our shareholder Tianjin Teda Investment Holding Co for RMB 600,000,000.00 corporate bonds. Tianjin Binhai Traffic Development Co. Ltd use its equipmens to provide counter-gurantee to China Construction Bank Tianjin Kaifa Branch. (3) The balance of monetary capitals includes capital account jointly controlled by subsidiary of Tianjin Metro Group Co., Ltd. and subsidiary of Tianjin Haishun Real Estate Development Co., Ltd.is RMB 11,843,795.17 as at 12.31.2016, includes capital account jointly controlled by Tianjin Railway Construction Investment Holding (Group) Co. and Tianjin Binli Small Town Construction Development Co., Ltd. of RMB 149,103,219.30, includes guarantee deposit in Tianjin Metro Group Co., Ltd of RMB 15,788,000.00. 22. Short-term Borrowings (1).Short-term borrowings classification Classification 2016-12-31 2015-12-31 Mortgage borrowings 0.00 0.00 Guarantee borrowings 696,000,000.00 199,000,000.00 Pledge borrowings 0.00 0.00 Credit borrowings 600,000,000.00 630,000,000.00 Total 1,296,000,000.00 829,000,000.00 aǃ Guarantee borrowings Company Name Amount Term Guarantor China Merchants Bank Co,Ltd hebei Road Tianjin Branch 500,000,000.00 2016/3/8-2017/3/7 Tianjin Rail Transit Group Co., Ltd. China Construction Bank Co,Ltd Tianjin Hexi Branch 77,000,000.00 2016/8/19-2017/8/19 Tianjin Rail Transit Group Co., Ltd. 86 F-88 China Construction Bank Co,Ltd Tianjin Hexi Branch 100,000,000.00 2016/9/2-2017/9/2 Tianjin Rail Transit Group Co., Ltd. Industrial Bank Co,Ltd Tianjin Branch 12,000,000.00 2016/6/17-2017/6/16 Tianjin Rail Transit Group Co., Ltd. Bank of Beijing Co,Ltd.Tianjin Hongqio Branch 5,000,000.00 2016/6/20-2017/6/19 Tianjin Rail Transit Group Co., Ltd. Bank of Beijing Co,Ltd.Tianjin Hongqio Branch 2,000,000.00 2016/5/6-2017/5/5 Tianjin Rail Transit Group Co., Ltd. Total 696,000,000.00 bǃCredit borrowings Company Amount China Zhengshang Bank Co., Ltd.Tianjn Branch 600,000,000.00 Total 600,000,000.00 (2).Details of bank Company name 2016-12-31 2015-12-31 China Construction Bank Co,Ltd Tianjin Hexi 177,000,000.00 33,430,000.00 Branch Shanghai Pudong Development Bank Tianjin 0.00 1,090,000.00 Branch Bank of Tianjin Jin Choi Branch 0.00 60,960,000.00 China Merchants Bank Co,Ltd Xikang Road 0.00 23,520,000.00 Tianjin Branch Tianjin Rural Commercial Bank Co,Ltd 0.00 80,000,000.00 China CITIC Bank Hedong Branch 0.00 250,000,000.00 Bank of China Hexi Branch 0.00 300,000,000.00 China Bohai Bank Machang Road Tianjin 0.00 80,000,000.00 Branch China Merchants Bank Co,Ltd 500,000,000.00 0.00 hebei Road Tianjin Branch Industrial Bank Co,Ltd Tianjin 12,000,000.00 0.00 Branch Bank of Beijing Co,Ltd.Tianjin Hongqio Branch 7,000,000.00 0.00 China Zhengshang Bank Co., Ltd.Tianjn 600,000,000.00 0.00 Branch Total 1,296,000,000.00 829,000,000.00 23. Accounts Payable Items 2016-12-31 2015-12-31 Within 1 year(one year) 3,404,297,846.87 1,773,892,665.26 1-2 years 269,139,494.10 331,233,171.24 87 F-89 2-3 years 137,072,232.61 193,520,951.54 Over 3 years 489,563,893.52 521,034,534.17 Total 4,300,073,467.10 2,819,681,322.21 The balance of accounts payable with related party is RMB 4,562,016.41as of December 31, 2016, accounting for 0.11% of the total accounts payable, see note nine. Top 5 accounts payable as of December 31, 2016 Company name Amount Aging Proportion Contents 231,145,235.26 Within 1 year 5.38 Engineering China Railway No.3 Engineering Co.,Ltd. 1,269,812.40 1-2 years 0.03 Unsettled Sub-total 232,415,047.66 5.41 188,263,459.84 Within 1 year 4.38 Engineering Tianjin Urban Construction Group 19,025,272.92 2-3 years 0.44 Unsettled Sub-total 207,288,732.76 4.82 125,294,763.04 Within 1 year 2.91 Engineering China Railway Tunnel Group Co.,Ltd. 6,742,228.25 1-2 years 0.16 Unsettled Sub-total 132,036,991.29 3.07 Equipment China Railway No.16 Engineering Group fundǃ 111,406,174.22 2.59 Co.,Ltd. Within 1 year Engineering Unsettled China Railway No.2 Construction Engineering Engineering Co.,Ltd. 108,142,899.83 Within 1 year 2.51 Unsettled Total 791,289,845.76 18.40 The collected amount of the top 5 closing balance of accounts payable is RMB 791,289,845.76 on 31st of December 2016, which is 18.40% of total closing balance of accounts payable. 24. Advance from customes Items 2016-12-31 2015-12-31 Within 1 year(one year) 460,650,829.35 1,365,439,502.26 1-2 years 1,119,495,036.23 102,646,532.04 2-3 years 98,758,115.80 4,900,000.00 Over 3 years 2,500,499,131.29 2,500,301,450.55 Total 4,179,403,112.67 3,973,287,484.85 The balance of advance from customes with related party is RMB 3,132,076,241.38 at December 31, 2016, accounting for 74.94% of the total advance from customes, see note nine. 88 F-90 Top 5 advance from customes as of December 31, 2016 Company name Amount Aging Proportion Contents Tianjin Jinyuan Investment Development 772,690,000.00 1-2 years 18.49 Engineering Unsettled Co. Ltd. 2,314,550,000.00 4-5 years 55.38 Sub-total 3,087,240,000.00 73.87 Tianjin Transportation Engineering 21,520,621.00 Within 1 year 0.51 Engineering Unsettled Construction Service Center Tianjin Haihe River Construction 4,900,000.00 3-4 years 0.12 Development&Investment Co,Ltd. 188,600.00 4-5 years 0.00 Engineering Unsettled (The project of Sitiao Road) 15,826,309.00 Over 5 years 0.38 Sub-total 20,914,909.00 0.50 Tianjin City Road Network Construction 20,182,118.00 Over 5 years 0.48 Engineering Unsettled Investment Co., LTD 3,200,000.00 1-2 years 0.08 Tianjin Dagang District Municipal 5,000,000.00 2-3 years 0.12 Engineering Unsettled Engineering Service Site Sub-total 8,200,000.00 0.20 Total 3,158,057,648.00 75.56 The collected amount of the top 5 closing balance of payment received in advance is RMB 3,158,057,648.00 in 31st of December 2016, which is 75.56% of total closing balance of payment received in advance. 25. Payroll payable (1)The details of payroll payable Increase in current Decrease in current Items 2015-12-31 2016-12-31 year year ĉ.Short-term remuneration 54,016,733.97 1,016,063,171.28 1,010,676,023.46 59,403,881.79 Ċ .Post-employment benefit-defined 67,709.42 141,124,666.81 141,145,422.71 46,953.52 contribution plans ċ.Compensation for termination of employment 0.00 0.00 0.00 0.00 Č.Other benefits with 1 year 0.00 0.00 0.00 0.00 č.Others 0.00 0.00 0.00 0.00 Total 54,084,443.39 1,157,187,838.09 1,151,821,446.17 59,450,835.31 (2)Short-term remuneration 89 F-91 Increase in current Decrease in current Items 2015-12-31 2016-12-31 year year Salary, bonus, subsidies & allowance 21,411,581.84 782,167,493.14 775,450,972.89 28,128,102.09 Welfare benefits payable 533,660.32 48,376,611.89 48,432,498.08 477,774.13 Including :Non-monetary benefits 0.00 12,225,144.07 12,225,144.07 0.00 Social insurance 42,928.21 84,838,788.66 84,848,705.26 33,011.61 Including˖1. Medical insurance 39,636.31 77,103,309.83 77,111,908.77 31,037.37 2. Job injury insurance 1,595.93 3,710,849.72 3,711,295.16 1,150.49 3. Maternity Insurance 1,695.97 3,239,218.26 3,240,090.48 823.75 4. Others 0.00 785,410.85 785,410.85 0.00 Housing fund 33,763.00 80,887,360.95 80,885,241.95 35,882.00 Labor union expenditure and employee 31,994,800.60 19,722,341.53 20,988,030.17 30,729,111.96 education Short-term compensated absences 0.00 0.00 0.00 0.00 Short-term Profit sharing plan 0.00 0.00 0.00 0.00 Other short-term compensation 0.00 70,575.11 70,575.11 0.00 Total 54,016,733.97 1,016,063,171.28 1,010,676,023.46 59,403,881.79 (3).Defined contribution plans Increase in current Decrease in Items 2015-12-31 2016-12-31 year current year 1.Basic endownment insurance 62,720.53 123,543,149.09 123,561,387.39 44,482.23 2.Unemployment insurance 4,988.89 6,320,509.72 6,323,027.32 2,471.29 3.Pension Payment 0.00 11,261,008.00 11,261,008.00 0.00 Total 67,709.42 141,124,666.81 141,145,422.71 46,953.52 26. Tax payable Payable in current Items 2015-12-31 Paid in current year 2016-12-31 year VAT -13,004,622.46 73,362,937.22 50,592,435.74 9,765,879.02 90 F-92 Business tax 36,712,806.47 22,436,272.49 46,872,703.03 12,276,375.93 Construction tax 2,798,893.02 4,425,079.09 6,424,407.63 799,564.48 Educational surtax 1,193,112.36 1,889,315.95 2,744,470.76 337,957.55 Local Educational surtax 572,798.18 1,265,895.92 1,842,016.57 -3,322.47 Flood fee 639,699.24 538,319.48 669,369.83 508,648.89 Enterprise income tax 448,807,812.83 18,021,167.53 486,920,002.00 -20,091,021.64 Individual income tax 197,918.48 43,106,993.96 42,534,662.51 770,249.93 Property tax 3,739,530.31 46,853,367.21 50,028,863.84 564,033.68 Stamp tax -382,383.40 24,923,093.45 24,506,277.98 34,432.07 Land VAT -21,581,642.30 402,834.52 15,007,762.06 -36,186,569.84 Land use tax -305,035.37 6,012,074.61 5,694,018.41 13,020.83 Others 56,849.50 1,202,602.21 1,562,415.87 -302,964.16 Total 459,445,736.86 244,439,953.64 735,399,406.23 -31,513,715.73 27. Interest payable Items 2016-12-31 2015-12-31 ĉ.Interest of long-term borrowings whose principle is paid at 190,985.77 0.00 maturity date and whose interest are paid in installment Ċ .Enterprise bond interests whose interests are paid in 0.00 0.00 installments ċ.Short-term borrowings whose 0.00 0.00 principal and interests are paid at maturity date Č.Interest of the short-term financing bonds 0.00 0.00 č.The preferred stock which divided into financial assets 0.00 0.00 Ď.Other interest 0.00 0.00 Total 190,985.77 0.00 28. Other payables Items 2016-12-31 2015-12-31 Current account, 1,003,955,737.16 956,820,671.37 Temporary deposit and Guarantee deposit 181,954,812.85 250,638,723.36 Collection and pay for another 169,005,558.20 104,556,139.06 91 F-93 Engineering Unsettled 71,951,875.56 73,343,274.06 Borrowing 55,325,333.33 50,172,533.33 Insurance claims payment 173,964,074.47 11,099,006.95 Management expense 2,941,887.77 9,547,447.71 Safety production cost 2,500,086.23 2,500,086.23 Personal account 1,381,463.48 163,173.22 Others 129,944,105.01 221,743,031.95 Total 1,792,924,934.06 1,680,584,087.24 The balance of other payables with related party is RMB 25,527,881.36 at December 31, 2016, accounting for 1.42% of the total payables, see note nine. Top 5 other payables as at December 31, 2016 Company name Amount Aging Proportion Contents 162,905,352.00 Within 1 year 9.08 Tianjin branch of Bohai 10,125,700.00 Insurance Indemnity Property Insurance Co., Ltd. 1-2 years 0.56 897,784.63 2-3 years 0.05 Sub-total 173,928,836.63 9.69 Tianjin city One-Card Co.,Ltd 102,112,690.00 Within 1 year 5.70 Cash Pledge Tianjin Binli small town construction development 98,727,400.00 Current account Co., LTD Within 1 year 5.51 Tianjin Chengtie MTR 30,000,000.00 2-3 years 1.67 Current account Construction Co. Ltd. 55,000,000.00 4-5 years 3.07 Sub-total 85,000,000.00 4.74 Tianjin Finance Bureau 41,145,333.33 Within 1 year 2.29 Interests Total 500,914,259.96 27.93 Important other payables aging more than 1 year Company name The closing balance Reason Tianjin Xiqing District Construction Management Committee 40,900,000.00 Unpaid Tianjin Nade Construction Engineering Co., Ltd 8,757,531.91 Unpaid Tianjin Teda Investment Holding Co., Ltd 7,351,817.34 Unpaid Total 57,009,349.25 29. Non-current liabilities due within 1 year Items 2016-12-31 2015-12-31 Long-term borrowings due within one year 7,690,064,115.50 5,629,897,276.60 Long-term payable due within one year 3,860,502,274.34 2,704,007,653.39 Bonds payable due within one year 3,018,466,666.66 0.00 92 F-94 Total 14,569,033,056.50 8,333,904,929.99 (1)The detail of long-term borrowings due within one year Creditor 2016-12-31 2015-12-31 Industrial Commercial Bank of China Ltd Tianjin branch is the lead bank in the 0.00 1,000,000,000.00 syndicated loan China Construction Bank Dongli Branch 100,000,000.00 0.00 Northern International Trust Co., Ltd 0.00 500,000.00 Industrial and Commercial Bank of China Co,Ltd 100,000,000.00 100,000,000.00 China Construction Bank Co,Ltd 73,264,139.00 200,000,000.00 China Development Bank Co,Ltd 236,400,000.00 375,000,000.00 Postal Savings Bank of China Co.Ltd 357,000,000.00 324,000,000.00 China Guangfa Bank Co,Ltd Tianjin Financial Street Branch 20,000,000.00 0.00 Tianjin Rural Commercial Bank Co,Ltd 40,000,000.00 0.00 Tianjin Rural Commercial Bank Co,Ltd 94,000,000.00 40,000,000.00 Bank of Tainjin Co,Ltd 10,000,000.00 5,000,000.00 Bank of Shanghai Co,Ltd Tianjin Branch 0.00 1,000,000,000.00 China Construction Bank Co,Ltd Heping Branch 0.00 52,500,000.00 China Guangfa Bank Co,Ltd Tianjin Branch 0.00 500,000,000.00 Shanxi International Trust Co.Ltd 0.00 490,876,000.00 China Minsheng Banking Co,Ltd Tianjin Branch 500,000,000.00 0.00 Tianjin Binhai Rural Commercial Bank Co,Ltd 0.00 190,000,000.00 Bank of China Co,Ltd Tianjin Branch 0.00 70,021,276.60 China Bohai Bank Co,Ltd Guangkai Branch 348,000,000.00 0.00 Bank of Communications Tongyi Branch 299,300,000.00 0.00 Industrial and Commercial Bank of China Co,Ltd Tianjin Branc 0.00 399,000,000.00 China Development Bank Co,Ltd 40,000,000.00 40,000,000.00 Tianjin Jinnan Village Bank 0.00 30,000,000.00 Shanghai Pudong Development Bank Co,Ltd Tianjin Branch 189,999,976.50 0.00 Taikang Assets Management Co,Ltd 2,700,000,000.00 0.00 Shanghai Pudong Development Bank Co,Ltd Tianjin Branch 198,000,000.00 1,000,000.00 Tianjin Binhai Rural Commercial Bank Co,Ltd 98,600,000.00 1,000,000.00 Tianjin Rural Commercial Bank Co,Ltd 15,000,000.00 2,000,000.00 Tianjin Rural Commercial Bank Co,Ltd 15,000,000.00 2,000,000.00 China Merchants Bank Co,Ltd Tianjin Branch 2,000,000.00 2,000,000.00 China Bohai Bank Co,Ltd Machangdao Branch 550,500,000.00 5,000,000.00 Industrial and Commercial Bank of China Co,Ltd Tianjin Branch 100,000,000.00 100,000,000.00 Northern International Trust Co., Ltd 1,099,000,000.00 0.00 Tianjin Trust Co,Ltd 0.00 700,000,000.00 China Everbright Bank Co.Ltd Tianjin Branch 500,000,000.00 0.00 Bank of China Co,Ltd Tianjin Hexi Branch 4,000,000.00 0.00 Total 7,690,064,115.50 5,629,897,276.60 (2)The consist of long-term borrowings due within one year Category 2016-12-31 2015-12-31 Mortgage borrowings 189,999,976.50 0.00 Guarantee borrowings 4,222,964,139.00 2,956,000,000.00 Pledge borrowings 225,000,000.00 375,000,000.00 93 F-95 Credit borrowings 3,052,100,000.00 2,298,897,276.60 Total 7,690,064,115.50 5,629,897,276.60 aǃMortgage borrowings Loan company Amount Borrowing term Borrowing company Mortgages Shanghai Pudong Tianjin Metro Development Bank Tianjin 189,999976.50 2015/9/11-2017/10/29 Resources Investment Land use rights Branch Co., Ltd bǃGuarantee borrowings Loan company Amount Borrowing term The guarantor Industrial and Commercial Bank of Tianjin TEDA Investment Holding Co., 25,000,000.00 2003/1/23-2017/3/20 China Co,Ltd Ltd. Industrial and Commercial Bank of Tianjin TEDA Investment Holding Co., 25,000,000.00 2003/1/23-2017/6/20 China Co,Ltd Ltd. Industrial and Commercial Bank of Tianjin TEDA Investment Holding Co., 25,000,000.00 2003/1/23-2017/9/20 China Co,Ltd Ltd. Industrial and Commercial Bank of Tianjin TEDA Investment Holding Co., 25,000,000.00 2003/1/23-2017/12/20 China Co,Ltd Ltd. Tianjin TEDA Investment Holding Co., China Construction Bank Co,Ltd 73,264,139.00 2009/1/21-2017/1/20 Ltd. Tianjin TEDA Investment Holding Co. Postal Savings Bank of China Co.Ltd 178,500,000.00 2010/6/30-2017/5/10 Tianjin TEDA Investment Holding Co. Postal Savings Bank of China Co.Ltd 178,500,000.00 2010/6/30-2017/11/10 Tianjin Rural Commercial Bank 20,000,000.00 2015/9/22-2017/3/22 Tianjin Rail Transit Group Co., Ltd. Co,Ltd Tianjin Rural Commercial Bank 20,000,000.00 2015/9/22-2017/9/22 Tianjin Rail Transit Group Co., Ltd. Co,Ltd Tianjin Rural Commercial Bank 3,000,000.00 2015/12/14-2017/3/14 Tianjin Rail Transit Group Co., Ltd. Co,Ltd Tianjin Rural Commercial Bank 91,000,000.00 2015/12/14-2017/12/14 Tianjin Rail Transit Group Co., Ltd. Co,Ltd Bank of Tainjin Co,Ltd Tianjin Rail Transit Group Co., Ltd. 5,000,000.00 2016/11/3-2017/6/3 Bank of Tainjin Co,Ltd Tianjin Rail Transit Group Co., Ltd. 5,000,000.00 2016/11/3-2017/12/3 China Guangfa Bank Co,Ltd. Tianjin Tianjin Rail Transit Group Co. Financial Street Branch 1,850,000.00 2016/2/4-2017/2/4 China Guangfa Bank Co,Ltd. Tianjin Tianjin Rail Transit Group Co. Financial Street Branch 8,150,000.00 2016/5/23-2017/5/23 China Guangfa Bank Co,Ltd. Tianjin Tianjin Rail Transit Group Co. Financial Street Branch 1,850,000.00 2016/2/4-2017/8/4 China Guangfa Bank Co,Ltd. Tianjin Tianjin Rail Transit Group Co. Financial Street Branch 8,150,000.00 2016/5/23-2017/11/23 China Development Bank Co,Ltd Tianjin Finance Bureau 4,500,000.00 2014/3/25-2017/3/25 94 F-96 Tianjin Finance Bureau China Development Bank Co,Ltd 1,200,000.00 2014/3/25-2017/5/25 Tianjin Finance Bureau China Development Bank Co,Ltd 4,500,000.00 2014/3/25-2017/9/25 Tianjin Finance Bureau China Development Bank Co,Ltd 1,200,000.00 2014/3/25-2017/11/25 China Bohai Bank Co,Ltd Guangkai 348,000,000.00 Tianjin Rail Transit Group Co., Ltd. Branch 2015/1/30-2017/1/29 Tianjin Infrastucture Taikang Assets Management Co,Ltd 2,700,000,000.00 2012/12/26-2017/12/25 Construction&Investment(Group)Co,Ltd. Bank of Communications Tongyi Tianjin Infrastucture 299,300,000.00 Branch 2015/3/27-2017/12/30 Construction&Investment(Group)Co,Ltd. China Development Bank Co Tianjin Tianjin Infrastucture Branch 20,000,000.00 2014/6/27-2017/6/25 Construction&Investment(Group)Co,Ltd. China Development Bank Co Tianjin Tianjin Infrastucture Branch 20,000,000.00 2014/6/27-2017/12/25 Construction&Investment(Group)Co,Ltd. China Construction Bank Dongli Tianjin Metro Group Co., Ltd Branch 50,000,000.00 2014/6/30-2017/5/20 China Construction Bank Dongli Tianjin Metro Group Co., Ltd Branch 50,000,000.00 2014/6/30-2017/11/20 Tianjin Rural Commercial Bank Tianjin Metro(Gruop)Co,Ltd. Co,Ltd 7,500,000.00 2015/9/29-2017/4/28 Tianjin Rural Commercial Bank Tianjin Metro(Gruop)Co,Ltd. Co,Ltd 7,500,000.00 2015/9/29-2017/10/28 Tianjin Rural Commercial Bank Tianjin Metro(Gruop)Co,Ltd. Co,Ltd 7,500,000.00 2015/9/29-2017/4/28 Tianjin Rural Commercial Bank Tianjin Metro(Gruop)Co,Ltd. Co,Ltd 7,500,000.00 2015/9/29-2017/10/28 Total 4,222,964,139.00 cǃPledge borrowings Loan company Amount Loan term The pledged property China Development Land-transferring fees and The ticket right of JinBin Bank Co,Ltd 112,500,000.00 2003/3/17-2017/5/15 Rail Rapid Transit China Development Land-transferring fees and The ticket right of JinBin 112,500,000.00 2003/3/17-2017/11/15 Bank Co,Ltd Rail Rapid Transit Total 225,000,000.00 dǃCredit borrowings Loan company Amount China Minsheng Banking Co,Ltd Tianjin Branch 500,000,000.00 Shanghai Pudong Development Bank Co,Ltd Tianjin Branch 198,000,000.00 Tianjin Binhai Rural Commercial Bank Co,Ltd 98,600,000.00 China Merchants Bank Co,Ltd Tianjin Branch 2,000,000.00 China Bohai Bank Co,Ltd Machangdao Branch 550,500,000.00 Industrial and Commercial Bank of China Co,Ltd Tianjin Branch 100,000,000.00 95 F-97 Loan company Amount Northern International Trust Co., Ltd 1,099,000,000.00 China Everbright Bank Co.Ltd Tianjin Branch 500,000,000.00 Bank of China Co,Ltd Tianjin Hexi Branch 4,000,000.00 Total 3,052,100,000.00 30. Other Current Liabilities (1).Details of Other Current Liabilities Items Reason 2016-12-31 2015-12-31 Unrealized profit or losses on the sale Unamortized and leaseback transation -6,053,461.33 -10,050,994.12 Short-term finance bonds 1,622,888,767.12 3,646,502,732.24 Total 1,616,835,305.79 3,636,451,738.12 96 F-98 (2).Gain/Loss of unrealized sale and leaseback Increase in Amortization in Accumulated Items Original costs 2014-12-31 2015-12-31 current current year Amortization year Financing lease fees of Shanghai Gezhouba Dam - -8,093,530.71 -1,979,712.51 0.00 1,979,712.51 8,093,530.71 0.00 F-99 nissho Iwai Equipment Leasing Co. Cdb Leasing Co,Ltd -24,213,842.70 -8,071,281.61 0.00 2,017,820.28 18,160,381.37 -6,053,461.33 Total -32,307,373.41 -10,050,994.12 0.00 3,997,532.79 26,253,912.08 -6,053,461.33 (3).Short term financing bonds 97 Beginning Accrued Accrued Ending Book Issue Payment Bond Name Issue Amount Maturity interest interest in interest in interest Total value Date amount payable current year current year payable 15 Jin Metro One RMB100 2015/9/6 2,000,000,000.00 21,868,852.46 47,731,147.54 69,600,000.00 2,000,000,000.00 0.00 0.00 CP001 year 15 Jin TieTou One RMB100 2015/7/22 1,600,000,000.00 24,633,879.78 31,366,120.22 56,000,000.00 1,600,000,000.00 0.00 0.00 CP001 year 15 Jin Railway One RMB100 2016/7/7 1,600,000,000.00 0.00 22,888,767.12 0.00 0.00 22,888,767.12 1,622,888,767.12 CP001 year Total 5,200,000,000.00 46,502,732.24 101,986,034.88 125,600,000.00 3,600,000,000.00 22,888,767.12 1,622,888,767.12 Explanation: F-100 (1). In 6th of September 2015, our subsidiary Tianjin Metro (Gruop) Co., Ltd. issued short term financing bonds for the first quarter of 2015, the total value is RMB 2,000,000,000.00, the bonds are called NO.15 Jin Metro CP001, the code for the bond is 041564073, the payback period is 12 months, the face value is 100 RMB for one bond, the interest rats is 3.48% (calculated as 0.0657% plus the Shanghai Interbank Offered Rate at the issuing date), interest is paid once a year. The total interest payable for these bonds at 31st December 2016 is RMB 0.00. (2) In 22th of July 2015, our subsidiary Tianjin Railway Construction Investment Holding (Group) Co., Ltd. issued short term financing bonds for the first quarter of 2015, the total value is RMB 1,600,000,000.00, the bonds are called NO.15 Jin TieTou CP001, the code for the bond is 041558065, the payback period is 12 months, the face value is RMB 100 for one bond, the interest rats is 3.5%, interest is paid at maturity date. The total interest payable for these bonds at 31st December 2016 is RMB 0.00. (3) In 7th of July 2016, our subsidiary Tianjin Railway Construction Investment Holding (Group) Co., Ltd. issued short term financing bonds for the second quarter of 2016, the total value is RMB 1,600,000,000.00, the bonds are called NO.16 Jin Railway CP001, the code for the bond is 041658038, the payback period is 12 months, the face value is RMB 100 for one bond, the interest rats is 2.95%, interest is paid at maturity date. The total interest payable for these bonds at 31st December 2016 is RMB 22,888,767.12. (4) The fixed assets under financial leasing˖ a. In 29th of March 2007, our subsidiary Tianjin Metro (Gruop) Co., Ltd. (the lessee) signed a sales and lease back contract with Shanghai Gezhouba - Nissho Iwai Equipment Leasing Co., Ltd. (the lessor). The agreement states that the lessor agree to purchase a group of mechanic and electronic equipment of Tianjin subway Line 1 from the lessee for a price of RMB 320,000,000.00 and lease back to the lessee. The leasing period is from 30th of March 2007 to 30th of November 2018. A guarantee contract was signed by our shareholder Tianjin Infrastucture Construction&Investment (Group) Co., Ltd. at the same day to provide guarantee for the lease. The total book value of the lease back assets before the sales and lease back is RMB 328,093,530.71 and the total lease principal for the lease back assets is RMB 320,000,000.00, the difference of RMB 8,093,530.71 was recognized as other current liability-unrealized lost on sales and lease back. b. A leasing contract was signed between our subsidiary Tianjin Metro (Gruop) Co., Ltd.˄lessee˅and China Development Bank Leasing (lessor) at 7th December 2007. The contract agrees that the lessor purchase a group of subway train and related equipment from Metro Group and lease back to Metro Group, the lease period is 12 years, the 98 principal for the lease back is RMB 650,000,000.00. In the same day, Metro Group signed the agreement of fund supervision and account pledge with the lessor, Shenzhen Branch of Bank of China and Tianjin Branch of Bank of China, agree to pledge its bank account for the lease back. A guarantee contract was signed by our shareholder Tianjin Infrastucture Construction&Investment (Group) Co., Ltd at the same day to provide guarantee for the lease back. The total book value of the lease back assets before the sales and lease back is RMB 674,213,842.701 and the total bought back value is RMB 650,000,000.00, the difference of RMB 24,213,842.70 was recognized as other current liability-unrealized lost on sales and lease back. F-101 99 31. Long-term borrowings (1).Long-term borrowings’ Classification Categories 2016-12-31 2015-12-31 Interest rate range Bank borrowings Including: Mortgage 131,248,775.63 96,664,093.20 4.900 % Guarantee 20,704,385,650.85 21,861,822,029.71 0.800%-7.2100% Pledge 675,000,000.00 750,000,000.00 5.900% Credit 36,370,524,044.50 36,842,097,867.90 4.2750%-6.550% Sub-total 57,881,158,470.98 59,550,583,990.81 Non-bank borrowings Including: Mortgage 0.00 0.00 Guarantee 338,203,800.76 2,890,769,487.64 Pledge 0.00 0.00 Credit 0.00 0.00 Sub-total 338,203,800.76 2,890,769,487.64 Total 58,219,362,271.74 62,441,353,478.45 a.Mortgage borrowings The Loan company Amount Borrowing limit time Borrowing company mortgaged property The Industrial and Commercial Bank of Tianjin Chengtie MTR 131,248,775.63 2016/6/27-2024/6/7 Land use right China Co., Ltd Construction Co. Ltd. Tianjin Branch Total 131,248,775.63 b.Guarantee borrowings Loan company Amount Borrowing limit time The guarantor Shanghai Pudong Development Bank Tianjin Infrastucture 398,778,237.23 2014/8/29-2018/7/27 Tianjin Pulong Construction&Investment(Group)Co,Ltd. Branch 100 F-102 China Tianjin Infrastucture Development Bank 138,203,800.76 2005/6/21-2029/12/31 Construction&Investment(Group)Co,Ltd. Co China Tianjin Infrastucture Development Bank 21,500,000.00 2014/6/27-2038/10/27 Construction&Investment(Group)Co,Ltd. Co Tianjin Branch Bank of Tianjin Infrastucture Communications 4,800,000.00 2014/11/20-2018/11/20 Construction&Investment(Group)Co,Ltd. Hebei Branch Bank of Tianjin Infrastucture Communications 300,000,000.00 2015/1/22-2018/11/20 Construction&Investment(Group)Co,Ltd. Hebei Branch Bank of Tianjin Infrastucture Communications 100,000,000.00 2015/2/13-2018/11/20 Construction&Investment(Group)Co,Ltd. Hebei Branch Bank of Tianjin Infrastucture Communications 3,570,000.00 2015/3/20-2018/11/20 Construction&Investment(Group)Co,Ltd. Hebei Branch Bank of Tianjin Infrastucture Communications 6,260,000.00 2015/6/19-2018/11/20 Construction&Investment(Group)Co,Ltd. Hebei Branch Bank of Tianjin Infrastucture Communications 6,283,240.35 2015/9/21-2018/11/20 Construction&Investment(Group)Co,Ltd. Hebei Branch Bank of Tianjin Infrastucture Communications 6,280,000.00 2015/12/18-2018/11/20 Construction&Investment(Group)Co,Ltd. Hebei Branch Bank of Tianjin Infrastucture Communications 48,077,500.00 2015/3/6-2025/3/1 Construction&Investment(Group)Co,Ltd. Tianjin Branch Bank of Tianjin Infrastucture Communications 2,788,450,000.00 2015/3/27-2025/3/1 Construction&Investment(Group)Co,Ltd. Tianjin Branch Bank of Tianjin Infrastucture Communications 721,162,500.00 2015/4/28-2025/3/1 Construction&Investment(Group)Co,Ltd. Tianjin Branch Bank of Tianjin Infrastucture Communications 6,509,586,510.00 2015/6/26-2025/3/1 Construction&Investment(Group)Co,Ltd. Tianjin Branch Bank of Tianjin Infrastucture Communications 192,310,000.00 2015/6/30-2025/3/1 Construction&Investment(Group)Co,Ltd. Tianjin Branch Bank of Tianjin Infrastucture Communications 462,633,930.00 2015/7/31-2025/3/1 Construction&Investment(Group)Co,Ltd. Tianjin Branch Bank of Tianjin Infrastucture Communications 344,249,490.00 2015/11/13-2025/3/1 Construction&Investment(Group)Co,Ltd. Tianjin Branch Bank of Tianjin Infrastucture Communications 961,550,000.00 2016/8/11-2025/3/1 Construction&Investment(Group)Co,Ltd. Tianjin Branch Bank of Tianjin Infrastucture Communications 471,980,070.00 2016/8/29-2025/3/1 Construction&Investment(Group)Co,Ltd. Tianjin Branch Shanghai Pudong Development Bank 50,000,000.00 2016/12/21-2019/6/19 Tianjin Rail Transit Group Co., Ltd Tianjin Branch 101 F-103 Bank of Tianjin Infrastucture Communications 5,610,000.00 2016/3/18-2018/11/20 Construction&Investment(Group)Co,Ltd. Hebei Branch Bank of Tianjin Infrastucture Communications 5,210,000.00 2016/6/20-2018/11/20 Construction&Investment(Group)Co,Ltd. Hebei Branch Bank of Tianjin Infrastucture Communications 5,260,000.00 2016/9/20-2018/11/20 Construction&Investment(Group)Co,Ltd. Hebei Branch Bank of Tianjin Infrastucture Communications 5,260,000.00 2016/12/20-2018/11/20 Construction&Investment(Group)Co,Ltd. Hebei Branch Shanghai Pudong Tianjin Infrastucture Development Bank 20,000,000.00 2016/3/28-2018/7/27 Construction&Investment(Group)Co,Ltd. Pulong Branch Shanghai Pudong Tianjin Infrastucture Development Bank 10,000,000.00 2016/10/11-2018/7/27 Construction&Investment(Group)Co,Ltd. Pulong Branch Shanghai Pudong Tianjin Infrastucture Development Bank 5,205,066.05 2016/9/20-2018/7/27 Construction&Investment(Group)Co,Ltd. Pulong Branch Shanghai Pudong Tianjin Infrastucture Development Bank 5,142,640.11 2016/6/20-2018/7/27 Construction&Investment(Group)Co,Ltd. Pulong Branch Shanghai Pudong Tianjin Infrastucture Development Bank 4,871,750.34 2016/3/28-2018/7/27 Construction&Investment(Group)Co,Ltd. Pulong Branch Shanghai Pudong Tianjin Infrastucture Development Bank 5,304,666.75 2016/12/20-2018/7/27 Construction&Investment(Group)Co,Ltd. Pulong Branch The Industrial and Tianjin TEDA Investment Holding Co., Commercial Bank 1,335,000,000.00 2003/1/23-2027/1/20 Ltd. of China Co., Ltd China Postal Tianjin TEDA Investment Holding Co., 678,069,864.00 2010/6/30-2020/6/29 Savings Bank Ltd. Tianjin Rural Commercial Bank 1,613,500,000.00 2015/9/22-2018/9/22 Tianjin Rail Transit Group Co., Ltd. Co,Ltd Bank of Tianjin 277,682,853.99 2016/11/3-2018/11/2 Tianjin Rail Transit Group Co., Ltd. China Guangfa Bank Tianjin 151,056,712.00 2016/5/23-2018/5/23 Tianjin Rail Transit Group Co., Ltd. Financial Street Branch China Guangfa Bank Tianjin 18,771,913.48 2016/2/4-2018/2/4 Tianjin Rail Transit Group Co., Ltd. Financial Street Branch China Development Bank 86,158,764.41 2004/3/25-2028/3/25 Tianjin Finance Bureau Co,Ltd (Euro) China Development Bank 9,290,886.15 2003/8/27-2027/8/27 Tianjin Finance Bureau Co,Ltd (Dollar) Bank of Tianjin TEDA Investment Holding Co., 1,899,519,055.99 2009/9/25-2029/10/22 Communications Ltd. 102 F-104 Co., Ltd Bohai International 200,000,000.00 2016/6/27-2019/6/27 Tianjin Rail Transit Group Co., Ltd. Trust Co., Ltd. China Construction Bank Dongli 600,000,000.00 2014/6/30-2019/6/29 Tianjin Metro Group Co. Ltd. Branch Tianjin Rural Commercial Bank 283,000,000.00 2015/10/28-2018/9/28 Tianjin Metro Group Co. Ltd. Co,Ltd Tianjin Rural Commercial Bank 283,000,000.00 2015/10/28-2018/9/28 Tianjin Metro Group Co. Ltd. Co,Ltd Total 21,042,589,451.61 c. Pledge borrowings Loan company Amount Loan term The pledged property China Development Bank Land Premium and the Rights to 675,000,000.00 2003/3/17-2021/3/16 Co,Ltd receive tickets income Total 675,000,000.00 d.Credit borrowings Loan company Amount Industrial Commercial Bank of China Ltd Tianjin branch 14,079,753,000.00 Bank of China Co,Ltd Tianjin Branch 10,355,031,044.50 Agricultural Bank of China Co,Ltd Hedong Branch 1,750,240,000.00 Industrial Commercial Bank of China Ltd Tianjin branch is the lead bank in the syndicated loan 6,000,000,000.00 Tibet Trust Co., Ltd 500,000,000.00 China Bohai Bank Co,Ltd Tianjin Branch 1,024,500,000.00 Bank of China Co,Ltd Hexi Branch 606,000,000.00 Northern International Trust Co., Ltd 810,000,000.00 China Merchants Bank Co,Ltd Tianjin Branch 495,000,000.00 Industrial Commercial Bank of China Ltd Tianjin branch 500,000,000.00 Bank of Beijing Co., Ltd Tiianjin Hongqiao Branch 250,000,000.00 Total 36,370,524,044.50 (2).Details of debit bank: Company name 2016-12-31 2015-12-31 Northern International Trust Co., Ltd 810,000,000.00 1,948,500,000.00 China Bohai Bank Co,Ltd 1,024,500,000.00 1,045,000,000.00 China Development Bank Co,Ltd 930,153,451.32 1,066,646,252.31 Bank of Communications Co,Ltd 14,848,052,296.34 14,434,472,296.34 Shanghai Pudong Development Bank Co,Ltd 499,302,360.48 3,393,442,330.43 Tianjin Binhai Rural Commercial Bank Co,Ltd 0.00 198,600,000.00 Tianjin Binhai Rural Commercial Bank CoˈLtd 1,613,500,000.00 1,159,000,000.00 Tianjin Binhai Rural Commercial Bank CoˈLtd 566,000,000.00 596,000,000.00 Tianjin City Commercial Bank Co,Ltd 277,682,853.99 204,860,728.47 China Merchants Bank Co,Ltd Tianjin Branch 495,000,000.00 497,000,000.00 Industrial and Commercial Bank of China Co,Ltd 16,046,001,775.63 15,286,200,000.00 103 F-105 Industrial Commercial Bank of China Ltd Tianjin branch is the 6,000,000,000.00 7,000,000,000.00 lead bank in the syndicated loan China Everbright Bank Co.Ltd Tianjin Branch 0.00 500,000,000.00 China Construction Bank Co,Ltd 600,000,000.00 973,264,139.00 China Minsheng Banking Co,Ltd 0.00 500,000,000.00 Agricultural Bank of China Co,Ltd 1,750,240,000.00 1,444,940,000.00 Bank of China Co,Ltd Tianjin Branch 10,961,031,044.50 11,158,357,867.90 Postal Savings Bank of China Co.Ltd 678,069,864.00 1,035,069,864.00 Bohai Internationl Trust Co,Ltd 200,000,000.00 0.00 China Guangfa Bank Tianjin Financial Street Branch 169,828,625.48 0.00 Bank of Beijing Co., Ltd Tiianjin Hongqiao Branch 250,000,000.00 0.00 Tibet Trust Co., Ltd 500,000,000.00 0.00 Total 58,219,362,271.74 62,441,353,478.45 32. Bonds Payable (1).Bonds Payable Items 2016-12-31 2015-12-31 No.16 Tianijn Guijiao MTN001 3,036,570,833.33 0.00 15 Jin Tietou Bond 2,478,147,093.04 2,474,763,850.15 The first phase Medium-term note in 2012 0.00 3,018,466,666.66 The first phase Medium-term note in 2013 2,067,697,777.78 2,067,697,777.78 The first phase Private securities in 2015 1,548,378,082.19 1,548,378,082.19 The second phase Private securities in 2015 1,006,027,671.23 1,006,027,671.23 The Tianjin Metro(Gruop)Co,Ltd.’s Bond in 2014 2,521,350,000.00 2,521,057,534.25 The first phase Private securities in 2016 1,029,383,561.64 0.00 The second phase Private securities in 2016 1,028,645,734.36 0.00 2019 bond 1,380,388,683.92 0.00 2021bond 2,054,407,543.57 0.00 Preference stock 586,164,199.39 402,151,726.48 Total 18,737,161,180.45 13,038,543,308.74 104 F-106 (2).The movement of Bonds Payable (Without the preferred stock, Perpetual capital securities) Bond Book Issue date Maturity Issue Amount The opening Increase in Measured the Amortization Repayment in The closing name valve balance current year interest by of premium current period balance Book value and Discount No.16 Tianijn 2016/08/23 100 2016/8/23 - 3,000,000,000.00 0.00 3,000,000,000.00 36,570,833.33 0.00 0.000 3,036,570,833.33 Guijiao 2021/08/23 MTN001 15 Jin 2015/04/15 Tietou 100 2015/4/15 -2025/04/1 2,400,000,000.00 2,474,763,850.15 0.00 134,286,904.11 3,016,338.78 133,920,000.00 2,478,147,093.04 Bond 3 F-107 2016/05/13 1,373,188,138.00 2,864,920.92 1,387,400,000.00 21,678,125.00 17,342,500.00 1,380,388,683.92 $100 2016/5/4 -2019/05/1 0.00 ˄$197,951,295.66 ˄$412,991.34 ˄$200,000,000.00˅ ˄$3,125,000.00˅ ˄$2,500,000.00˅ ˄$198,989,287.00˅ 2019 bond 3 ˅ ˅ 2,042,425,833.06 4,502,757.38 2016/05/13 2,081,100,000.00 37,394,765.63 29,915,812.50 2,054,407,543.57 $100 2016/5/4 -2021/05/1 0.00 ˄$294,424,943.50 ˄$649,092.89 ˄$300,000,000.00˅ ˄$5,390,625.00˅ ˄$4,312,500˅ ˄$296,152,161.39˅ 2021bond 3 ˅ ˅ The first phase Medium-ter 100 2012/11/20 5 years 3,000,000,000.00 3,018,466,666.66 0.00 166,200,000.00 0.00 166,200,000.00 0.00 m note in 2012 The first phase Medium-ter 100 2013/5/6 5 years 2,000,000,000.00 2,067,697,777.78 0.00 102,400,000.00 0.00 102,400,000.00 2,067,697,777.78 m note in 2013 105 The first phase Private 100 2015/5/28 5 years 1,500,000,000.00 1,548,378,082.19 0.00 81,000,000.00 0.00 81,000,000.00 1,548,378,082.19 securities in 2015 The second phase 100 2015/11/12 5 years 1,000,000,000.00 1,006,027,671.23 0.00 44,900,000.00 0.00 44,900,000.00 1,006,027,671.23 Private securities in 2015 The Tianjin Metro(Gruo 100 2015/10/21 10 years 2,500,000,000.00 2,521,057,534.25 0.00 115,584,323.21 0.00 115,291,857.46 2,521,350,000.00 p)Co,Ltd.’s F-108 Bond in 2014 The first phase Private 100 2016/3/18 5 years 1,000,000,000.00 0.00 1,000,000,000.00 29,383,561.64 0.00 0.00 1,029,383,561.64 securities in 2016 106 The second phase 100 2016/4/20 5 years 1,000,000,000.00 0.00 1,000,000,000.00 28,645,734.36 0.00 0.00 1,028,645,734.36 Private securities in 2016 Total 20,868,500,000.00 12,636,391,582.26 8,415,613,971.06 798,044,247.28 10,384,017.08 690,970,169.96 18,150,996,981.06 On 19th of August 2016, Tianjin Rail Transit Group Co., Ltd issued the first phase of the Medium-term note with the amount of RMB 3,000,000,000.00, the bonds are called No.16 Tianjin Guijiao MTN001and issued at par, the payback period is 5 years, the code for the bond is 101651042, the face value is RMB 100, According to the fixed interest rate and the F-109 coupon rate is 3.35%, interest is paid once a year. The total interest payable for these notes at 31st December 2016 is RMB 36,570,833.33. On 4th of May 2016, our subsidiary Rail Transit Investments International Co., Ltd.issued bond with the amount of $200,000,000.00˄2019 bond˅in Hong Kong. In 13th of May 2016 the bond went public in HKSE, less the transaction cost, yield on the bond is $ 197,951,295.66, According to the fixed interest rate and the coupon rate is 2.50%, interest is paid half a year. The total interest payable for these notes at 31st December 2016 is RMB 21,678,125.00. On 4th of May 2016, our subsidiary Rail Transit Investments International Co., Ltd.issued bond with the amount of $300,000,000.00˄2021bond˅in Hong Kong. In 13th of May 2016 the bond went public in HKSE, less the transaction cost, yield on the bond is $ 294,424,943.50, the interest will be paid at a fixed rate and the coupon rate is2.875%, interest is paid half a year. The total interest payable for these notes at 31st December 2016 is RMB 37,394,765.63. In 17th of April 2014, our subsidiary Tianjin Railway Construction Investment Holding (Group) Co., Ltd. issued bonds for the first quarter of 2015, the total value is RMB 2,400,000,000.00, the bonds are called NO.15 Jin TieTou Bonds, the code for the bond is 1580112, the payback period is 10 years, the face value is RMB 100 for one bond, According to the fixed interest rate, the interest rats is 5.58%, interest is paid once a year. The total interest payable for these bonds at 31st December 2016 is RMB 134,286,904.11. The subsidiary of Tianjin Metro Group Co., Ltd. issued the first 2012 RMB 3,000,000,000.00 medium-term notes on November 20, 2012. This bond is abbreviated as 12 Tianjin Metro MTN1 and issued at par, for a period of 5 years.Bond code is 1282485.The issue price is RMB 100 of face value. According to the fixed interest rate, the coupon rate is 5.54%. 107 Interests of this current medium-term notes paid annually. the principal and interest of the bond with the amount of 3,018,466,666.66 has been transferred to non-current liabilities due within 1 year as of December 31, 2016. The subsidiary of Tianjin Metro Group Co., Ltd. issued the first 2013 RMB 2,000,000,000.00 medium-term notes on May 6, 2013. This bonds is abbreviated as 13 Tianjin Metro MTN1 and issued at par, for a period of 5 years.Bond code is 1382213.Issue price is RMB 100 of face value.According to the fixed interest rate, the coupon rate is 5.12%. Interests of this current medium-term notes paid annually. As of December 31, 2016, the debt interests occrued totaling at RMB 67,697,777.78. The subsidiary of Tianjin Metro Group Co., Ltd. issued the first 2015 RMB 1,500,000,000.00non-public directional debt financing tools on May 28, 2015. This bonds is abbreviated as 15 Tianjin Metro PPN001 and issued at par, for a period of 5 years.Bond code is 031553023.The issue price is RMB100 of face value.According to the fixed interest rate, the coupon rate is 5.4%. Interests of this non-public directional debt financing tools paid annually. As of December 31, 2016, the debt interests occrued totaling at RMB 48,378,082.19. The subsidiary of Tianjin Metro Group Co., Ltd. issued the second 2015 RMB 1,000,000,000.00 non-public directional debt financing tools on November 12, 2015. This bonds is abbreviated as 15 Tianjin Metro PPN002 and issued at par, for a period of 5 years.Bond code is 031560094.The issue price is RMB 100 of face value.According to the fixed interest rate, the coupon rate is 4.49%. Interests of this non-public directional debt financing tools paid annually. As of December 31, 2016, the debt interests occrued totaling at RMB F-110 6,027,671.23. In 21th of October 2015, our subsidiary Tianjin Metro Group Co., Ltd. issued bonds for the first quarter of 2014, the total value is RMB 2,500,000,000.00, the bonds are called NO.14 Jin TieTou Bonds, the payback period is10 years, the face value is RMB 100 for one bond, According to the fixed interest rate, the interest rats is 5.58%, interest is paid once a year. The total interest payable for these bonds at 31st December 2016 is RMB 21,350,000.00. The subsidiary of Tianjin Metro Group Co., Ltd. issued the first 2016 RMB 1,000,000,000.00non-public directional debt financing tools on March 18, 2016. This bonds is abbreviated as 16 Tianjin Metro PPN001 and issued at par, for a period of 5 years.The issue price is RMB100 of face value.According to the fixed interest rate, the coupon rate is 3.75%. Interests of this non-public directional debt financing tools paid annually. As of December 31, 2016, the debt interests occrued totaling at RMB 29,383,561.64. The subsidiary of Tianjin Metro Group Co., Ltd. issued the second 2016 RMB 1,000,000,000.00non-public directional debt financing tools on April 20, 2016. This bonds is abbreviated as 16 Tianjin Metro PPN002 and issued at par, for a period of 5 years. The issue price is RMB 100 of face value.According to the fixed interest rate, the coupon rate is 4.09%. Interests of this non-public directional debt financing tools paid annually. As of December 31, 2016, the debt interests occrued totaling at RMB 28,645,734.36. (3).The preference shares explaination see other equity instrument. 108 33. Long-term Account Payable Items 2016-12-31 2015-12-31 Infrastructure Projects 45,362,683.74 45,362,683.74 Transfer amount of Usufruct 1,014,560,509.72 1,757,744,016.67 Financial Lease expenses 10,737,682,781.57 15,538,829,234.46 Transfer amount of Usufruct 678,555,416.67 652,000,000.00 Total 12,476,161,391.70 17,993,935,934.87 Details of finance leases: Items Term 2016-12-31 2015-12-31 China Financial Leasing Co., Ltd. and Agricultural Bank of China co., LTD. Tianjin Nankai Branch 2013/11/26-2018/11/25 323,550,116.51 551,148,771.90 ICBC Financial Leasing Co., Ltd 2010/5/28-2020/5/28 469,445,679.00 601,140,462.00 Bank of Communications Financial Leasing Co., Ltd. 2010/5/28-2020/5/28 472,798,715.00 605,434,137.00 Everbright Financial Leasing Co., Ltd. 2015/4/1-2021/4/1 496,549,472.44 589,785,725.27 Jianxin Financial Leasing Co., Ltd. 2015/4/30-2021/4/21 741,234,855.00 1,057,753,059.90 ABC Financial Leasing Co,Ltd 2015/9/7-2025/9/20 407,487,127.02 427,396,741.43 Shanghai Gezhouba - Nissho Iwai Equipment Leasing Co., Ltd. 2007/03/30-2018/11/29 0.00 113,474,258.84 CDB Leasing Co., Ltd. 2007/12/07-2019/12/06 195,000,000.00 260,000,000.00 ICBC Financial Leasing Co., Ltd. 2011/12/31-2021/12/30 467,500,000.47 577,500,000.39 ICBC Financial Leasing Co., Ltd. 2011/12/31-2021/12/30 359,513,808.91 439,405,766.23 BOCOM Financial Leasing Co., Ltd. 2011/12/31-2021/12/30 56,859,461.80 68,811,256.91 BOCOM Financial Leasing Co., Ltd. 2011/12/31-2021/12/30 191,950,067.40 228,511,985.00 BOCOM Financial Leasing Co., Ltd. 2011/12/31-2021/12/30 212,643,167.11 260,249,332.63 Industrial Bank Financial Leasing Co., Ltd. 2012/02/14-2017/02/13 0.00 206,420,901.84 CBC Financial Leasing Co., Ltd. 2012/03/22-2022/03/21 0.00 838,099,392.11 Tianjin T&B Leasing Co., Ltd. 2012/12/25-2017/12/24 0.00 5,000,000.00 Tianjin JiaYong Financial Leasing Co,Ltd. 2013/07/29-2018/07/28 389,273,352.90 597,248,410.73 DaoSheng International Financial Leasing Co,Ltd 2013/09/15-2023/09/14 112,500,000.06 129,166,666.70 DaoSheng International Financial Leasing Co,Ltd 2013/09/15-2023/09/14 150,000,000.05 172,222,222.25 DaoSheng International Financial Leasing Co,Ltd 2013/09/15-2023/09/14 262,500,000.11 301,388,888.95 DaoSheng International Financial Leasing Co,Ltd 2013/09/15-2023/09/14 225,000,000.03 258,333,333.35 DaoSheng International Financial Leasing Co,Ltd 2013/09/15-2023/09/14 450,000,000.24 516,666,666.80 ABC Financial Leasing Co,Ltd 2014/03/31-2029/03/30 850,135,957.34 901,269,045.20 GuangDong YiTong Financial Leasing Co,Ltd. 2014/09/18-2017/09/17 0.00 1,385,591,991.39 109 F-111 CMB Financial Leasing Co,Ltd. 2014/12/18-2020/12/17 139,640,683.82 170,819,909.60 Tianjin JiaYong Financial Leasing Co,Ltd. 2014/12/12-2019/12/11 210,000,000.00 280,000,000.00 Tianjin JiaYong Financial Leasing Co,Ltd. 2015/02/11-2020/02/09 0.00 501,904,761.92 Huaxia Financial Leasing Co,Ltd 2015/02/13-2021/02/12 519,001,405.94 627,369,706.82 Jianxin Financial Leasing Co., Ltd. 2015/03/27-2021/03/26 708,333,333.31 874,999,999.99 Everbright Financial Leasing Co., Ltd. 2015/03/27-2021/03/26 941,667,848.36 1,127,560,479.84 DaoSheng International Financial Leasing Co,Ltd 2015/05/13-2017/05/12 0.00 369,515,000.00 DaoSheng International Financial Leasing Co 2015/05/13-2017/05/12 0.00 160,000,000.00 DaoSheng International Financial Leasing Co 2016/12/05-2019/12/05 200,000,000.00 0.00 DaoSheng International Financial Leasing Co 2016/10/26-2019/10/25 150,000,000.00 0.00 DaoSheng International Financial Leasing Co 2016/06/24-2019/06/24 350,000,000.00 0.00 DaoSheng International Financial Leasing Co 2016/08/09-2019/08/09 200,000,000.00 0.00 DaoSheng International Financial Leasing Co 2016/12/05-2019/12/05 150,000,000.00 0.00 Longtai Financial Leasing Co,Ltd 2015/12/10-2018/11/26 335,097,728.75 334,640,359.47 Total 10,737,682,781.57 15,538,829,234.46 34. Special Payable Increase in Decrease in Items 2015-12-31 2016-12-31 current period current period Infrastructure 757,232,400.00 0.00 0.00 757,232,400.00 projects Interest of Infrastructure 2,204,229,569.33 250,991,801.80 0.00 2,455,221,371.13 projects Investment in 17,595,297.68 0.00 0.00 17,595,297.68 subway Pre-project fees 227,775,900.00 0.00 0.00 227,775,900.00 Research expenses 285,000.00 95,000.00 0.00 380,000.00 Technology innovation prize project of the small 100,000.00 0.00 100,000.00 0.00 and medium-sized enterprise Special security 2,200,000.00 0.00 0.00 2,200,000.00 funds Finance special 25,000,000.00 0.00 0.00 25,000,000.00 account payable Others 53,950.00 0.00 0.00 53,950.00 Replacement of local government 4,040,000,000.00 4,585,000,000.00 0.00 8,625,000,000.00 debt funds Special payment for 0.00 8,587,770.99 0.00 8,587,770.99 fiscal interest Total 7,274,472,117.01 4,844,674,572.79 100,000.00 12,119,046,689.80 110 F-112 35. Estimated liabilities Items 2016-12-31 2015-12-31 The advance compensation for HongHuYaYuan 5,727.00 5,727.00 Delayed compensation of Taiping Life Insurance Co, Ltd 1,443,760.15 1,443,760.15 Total 1,449,487.15 1,449,487.15 36. Paid-in capital 2015-12-31 The 2016-12-31 movement Investor Proportion Amount in current Proportion Amount period Tianjin city infrastructure 86.34% 34,536,000,000.00 0.00 86.34% 34,536,000,000.00 investment group Tianjin TEDA investment holding co., 13.66% 5,464,000,000.00 0.00 13.66% 5,464,000,000.00 LTD Total 100.00% 40,000,000,000.00 0.00 100.00% 40,000,000,000.00 The company’s capital is RMB 40,000,000,000.00 which is verified by Tianjin industrial limited liability accounting firm’s capital verification report(Tianjin industrial test word (2014) no. 068) on October 29, 2014. According to the Notice of forming the Tianjin Rail Transit Group Co., Ltd. issued by State-owned Assets Supervision and Administration Commission of Tianjin Municipal People's Government (Tianjin former chine-guizhou aviation [2014] No. 188), the company applyed to increase the registered capital of RMB 38,991,617,945.30 by way of turning the capital reserves. The registered capital is RMB 40,000,000,000.00 after capital increased.After the change, the shareholders of the company changed to Tianjin city infrastructure investment group and Tianjin TEDA Investment Holding Co., Ltd. 37. Other equity instrument Increased in Decrease in Items 2015-12-31 2016-12-31 current year current year Preference stock 3,497,848,273.52 1,615,987,527.09 0.00 5,113,835,800.61 Perpetual bond 0.00 0.00 0.00 0.00 111 F-113 Total 3,497,848,273.52 1,615,987,527.09 0.00 5,113,835,800.61 Explanation: (1).Subsidiary of Tianjin Metro (Group) Co. Ltd’ s capital was increased by the CDB Development Fund Co,Ltd. in 2015 and received the investments amount to RMB 3,000,000,000.00.According to the investment contract signed between Tianjin Rail Transit Co.,Ltd and the subsidiary of Tianjin Metro (Group) Co. Ltd, the contract stipulates that the funds inject into the company by increasing the capital and the CDB Development Fund Co.Ltd has the right to allow the Tianjin Rail Transit Co.Ltd to buy- back it’s shares. During the investment period, the expected annual rate of return has been determined. According to”The guide of doing the preference stock research area” [National Development (2013)No.46] issued from the State Council, the investment of Tianjin Metro (Group) Co.Ltd was recognised in the preference stock. Meanwhile according to “The distinguish of financial liabilities and equity instrument” [Cai Hui (2014) No.13] issued from the State Finance Bureau, part of Tianjin Metro (Group) Co.Ltd investment which has the obligation to pay the cash on the interests was recognized in the financial liabilities.The financial liabilities measured at the average loan rate in the market were RMB 297,983,409.05 after discounting. These financial liabilities accounted into Bonds payable- Preference stock. And the remaining equity instrument amount to RMB 2,702,016,590.95, was accounted into other equity instrument-Preference stock. (2). Subsidiary of Tianjin Metro (Group) Co. Ltd’ s capital was increased by the ADBC Construction Fund Co.Ltd, in 2015 and received the investments amounted to RMB 900,000,000.00.Tianjin Rail Transit Co.,Ltd and the subsidiary of Tianjin Metro (Group) Co. Ltd. signed the investment contract with the ADBC Construction Fund Co.Ltd, and the contract stipulate that the funds inject into the company by increasing the capital and the ADBC Construction Fund Co.Ltd, has the right to allow the Tianjin Rail Transit Co.Ltd to buy- back it’s shares. During the investment period, the expected annual rate of return has been determined. According to “The guide of doing the preference stock research area” [National Development (2013) No.46] issued from the State Council, the investment of Tianjin Metro (Group) Co.Ltd was recognised in the preference stock. Meanwhile according to “The distinguish of financial liabilities and equity instrument” [Cai Hui(2014)No.13] issued from the State Finance Bureau, part of Tianjin Metro (Group) Co.Ltd investment which has the obligation to pay the cash on the interests was recognized in the financial liabilities.The financial liabilities measured at the average loan rate in the market were RMB 104,168,317.43 after discounting. These financial liabilities accounted into Bonds payable- Preference stock. And the remaining equity instrument amount to RMB 795,831,682.57, was accounted into other equity instrument-Preference stock. (3). Subsidiary of Tianjin Metro (Group) Co. Ltd’ s capital was increased by the CDB Development Fund Co,Ltd. in 2016 and received the investments amounted to RMB1,000,000,000.00.Tianjin Rail Transit Co.,Ltd and the subsidiary of Tianjin Metro (Group) Co. Ltd. signed the investment contract with the CDB Development Fund Co,Ltd., and the contract stipulate that the funds inject into the company by increasing the capital and the CDB Development Fund Co,Ltd., has the right to allow the Tianjin Rail Transit Co.Ltd to buy- back it’s shares. During the investment period, the expected annual rate of return has been determined. According to”The guide of doing the preference stock research area” [National Development (2013)No.46] 112 F-114 issued from the State Council, the investment of Tianjin Metro (Group) Co.Ltd was recognised in the preference stock. Meanwhile according to “The distinguish of financial liabilities and equity instrument” [Cai Hui (2014) No.13] issued from the State Finance Bureau, part of Tianjin Metro (Group) Co.Ltd investment which has the obligation to pay the cash on the interests was recognized in the financial liabilities.The financial liabilities measured at the average loan rate in the market were RMB 91,268,219.85 after discounting. These financial liabilities accounted into Bonds payable- Preference stock. And the remaining equity instrument amount to RMB908,731,780.15, was accounted into other equity instrument-Preference stock. (4). Subsidiary of Tianjin Metro (Group) Co. Ltd’ s capital was increased by the CDB Development Fund Co,Ltd. in 2016 and received the investments amounted to RMB800,000,000.00.Tianjin Rail Transit Co.,Ltd and the subsidiary of Tianjin Metro (Group) Co. Ltd. signed the investment contract with the CDB Development Fund Co,Ltd., and the contract stipulate that the funds inject into the company by increasing the capital and the CDB Development Fund Co,Ltd., has the right to allow the Tianjin Rail Transit Co.Ltd to buy- back it’s shares. During the investment period, the expected annual rate of return has been determined. According to”The guide of doing the preference stock research area” [National Development (2013)No.46] issued from the State Council, the investment of Tianjin Metro (Group) Co.Ltd was recognised in the preference stock. Meanwhile according to “The distinguish of financial liabilities and equity instrument” [Cai Hui (2014) No.13] issued from the State Finance Bureau, part of Tianjin Metro (Group) Co.Ltd investment which has the obligation to pay the cash on the interests was recognized in the financial liabilities.The financial liabilities measured at the average loan rate in the market were RMB 92,744,253.06after discounting. These financial liabilities accounted into Bonds payable- Preference stock. And the remaining equity instrument amount to RMB707,255,746.94, was accounted into other equity instrument-Preference stock. 38. Capital Reserve (1).Movement in 2016 Increase in Decrease in Items 2016-1-1 2016-12-31 current year current year Capital premium 59,575,110,481.91 9,547,673,898.74 0.00 69,122,784,380.65 Including: capital 0.00 0.00 0.00 0.00 investment by investors Others 1,713,599,304.92 7,937,611.62 0.00 1,721,536,916.54 Total 61,288,709,786.83 9,555,611,510.36 0.00 70,844,321,297.19 Including: The state-owned exclusive 154,100,000.00 110,480,000.00 0.00 264,580,000.00 capital reserves 113 F-115 Explanation of movement in current year: Items Amount Approval Tianjin Finance Bureau’s Notice of Capital of Metro line 5ǃ6 provided by disbursement of capital to Railway Group 438,000,000.00 Tianjin Finance Bureau Limited Subway Line 5ǃ6 project (Jin Cai Ji [2016] No.9ǃ11ǃ12) Tianjin Finance Bureau’s Notice of The capital of West station hud disbursement of capital to Tianjin Railway Municipal Public Engineering provided 172,690,329.77 Group Limited Company Land-transferring by Tianjin Finance Bureau fees (Jin Cai Zong [2016] No.32) Tianjin Finance Bureau’s Notice of The capital of Tietou’s railway disbursement of railway construction capital construction project provided by Tianjin 292,500,000.00 to Tianjin Railway Group Limited Company Finance Bureau (Jin Cai Zong Zhi[2016] No.15) Tianjin Finance Bureau’s Notice of The capital of Metro Group’s West disbursement of capital to Tianjin Railway station hud project provided by Tianjin 149,164,208.97 Group Limited Company Land-transferring Finance Bureau fees (Jin Cai Zong [2016] No.78) The capital of Tietou’s railway Tianjin Finance Bureau’s Notice of construction project provided by Tianjin disbursement of railway construction capital 2,000,000,000.00 Finance Bureau(10-year government to Tianjin Railway Group Limited Company bonds) (Jin Cai Zong Zhi[2016] No.140) Tianjin Finance Bureau’s Notice of Project capital provided by Tianjin disbursement of special capital to Tianjin 5,600,000,000.00 Finance Bureau Railway Group Limited Company (Jin Cai Ji Zhi[2016] No.72) Tianjin Finance Bureau’s Notice of The special capital for Tietou provided disbursement of railway construction capital 130,000,000.00 by Tianjin Finance Bureau to Tianjin Railway Group Limited Company (Jin Cai Zong Zhi[2016] No.52) Tianjin Finance Bureau’s Notice of The capital of Tietou’s railway disbursement of railway construction capital construction project provided by Tianjin 154,839,360.00 to Tianjin Railway Group Limited Company Finance Bureau (Jin Cai Zong Zhi[2016] No.73) State-owned assets supervision and administration commission of Tianjin Increased capital 110,480,000.00 municipal people's government‘s Notice of increasing capitals to partial city management enterprise(Jin Guo Zi Yu Suan[2016] No.49) Tianjin Finance Bureau’s Notice of The capital of West station hud disbursement of capital to Tianjin Railway Municipal Public Engineering provided 250,000,000.00 Group Limited Company Land-transferring by Tianjin Finance Bureau fees (Jin Cai Zong [2016] No.125) Tianjin Finance Bureau’s Notice of The capital of West station hud disbursement of capital to Tianjin Railway Municipal Public Engineering provided 250,000,000.00 Group Limited Company Land-transferring by Tianjin Finance Bureau fees (Jin Cai Zong [2016] No.145) The movement of company’s equity 7,937,611.62 Total 9,555,611,510.36 (2).Movement in 2015 114 F-116 Increase in Decrease in Items 2015-1-1 2015-12-31 current year current year Capital premium 53,832,636,544.84 5,742,473,937.07 0.00 59,575,110,481.91 Including: capital investment by 0.00 0.00 0.00 0.00 investors Others 1,711,189,145.06 2,410,159.86 0.00 1,713,599,304.92 Total 55,543,825,689.90 5,744,884,096.93 0.00 61,288,709,786.83 Including: The state-owned exclusive 10,000,000.00 144,100,000.00 0.00 154,100,000.00 capital reserves Movement in current period: Items Amount Approval Tianjin Finance Bureau’s Notice of Capital of Metro line 5 by Tianjin disbursement of capital to Railway Group 100,000,000.00 Finance Bureau Limited Subway Line 5project (Jin Choi preassigned [2015] No.46) Tianjin Finance Bureau’s Notice of Capital of Metro Line 5,6 by Tianjin disbursement of capital to Railway Group 1,000,000,000.00 Finance Bureau Limited Subway Line 5, 6 project.(Jin Choi preassigned [2015] No.7) Tianjin Finance Bureau’s Notice of The capital of West station hud project disbursement of capital to Railway Group 273,938,935.22 by Tianjin Finance Bureau Limited Land-transferring fees and Metro line 5. (Jin Choi preassigned [2015] No.43) Tianjin Finance Bureau’s Notice of The capital of West station hud project disbursement of capital to Railway Group 174,435,001.85 by Tianjin Finance Bureau Limited Land-transferring fees and Metro line 5. (Jin Choi preassigned [2015] No.87) 115 F-117 Items Amount Approval Tianjin Finance Bureau’s Notice of Capital of Metro Line 5 by Tianjin disbursement of capital to Railway Group 100,000,000.00 Finance Bureau Limited Land-transferring fees and Metro line 5. (Jin Choi preassigned [2015] No.87) Tianjin Finance Bureau’s Notice of The capital of railway construction disbursement of capital to Railway Group 650,000,000.00 project by Tianjin Finance Bureau Limited the railway construction project. (Jin Choi preassigned [2015] No.1) Tianjin Finance Bureau’s Notice of The capital of railway construction 3,200,000,000.00 disbursement of capital to Railway Group project by Tianjin Finance Bureau Limited. (Jin Choi preassigned [2015] No.6) Tianjin Finance Bureau’s Notice of The capital of Airport line project by disbursement of capital to 2015 Chengji 100,000,000.00 Tianjin Finance Bureau Railway Project the central special fund. (Jin Choi preassigned [2015] No.24) State-owned assets supervision and administration commission of Tianjin municipal people's government‘s approve the Increased capital to Tianjin Infrastucture notice of Tianjin Infrastucture Construction 51,820,000.00 Construction&Investment(Group)Co,Ltd. &Investment (Group) Co,Ltd. Adjust the capital reserve to invest the Tianjin Rail Transit Group Co., Ltd. (Tianjin state-owned assets budget [2015]NO.548) State-owned assets supervision and administration commission of Tianjin Increased capital 50,000,000.00 municipal people's government‘s Notice of increasing capitals to the Tianjin Rail Transit Group Co., Ltd. (Tianjin state-owned assets budget [2015]NO.54) 116 F-118 Items Amount Approval State-owned assets supervision and administration commission of Tianjin municipal people's government‘s Notice of Increased capital 42,280,000.00 increasing capitals to the Tianjin Rail Transit Group Co., Ltd. (Tianjin state-owned assets budget [2015]NO.55) The movement of company’s equity 2,410,159.86 Total 5,744,884,096.93 39. Surplus reserves (1).Movement in 2016 Increase in current Decrease in Items 2016-1-1 2016-12-31 year current year Legal surplus reserve 418,792,658.69 61,735,782.30 0.00 480,528,440.99 Discretionary surplus reserve 0.00 0.00 0.00 0.00 Total 418,792,658.69 61,735,782.30 0.00 480,528,440.99 (2). Movement in 2015 Increase in current Decrease in Items 2015-1-1 2015-12-31 year current year Earned surplus 380,172,024.45 44,174,131.74 5,553,497.50 418,792,658.69 Discretionary surplus 0.00 0.00 0.00 0.00 reserve Total 380,172,024.45 44,174,131.74 5,553,497.50 418,792,658.69 Explanation: The Tianjin Metro (Gruop) Co,Ltd. purchase the 60% equity of the Tianjin Metro Advertising Media Development Co., Ltd in 2015. The difference between purchasing price and the net assets value of the Tianjin Metro Advertising Medio Bevelopment Co.,Ltd. ,offset the surplus reserve RMB 5,553,497.50 and offset the undistributed profits RMB 49,981,477.49. 117 F-119 40. Undistributed Profits Items 2016-12-31 2015-12-31 2014-12-31 Undistributed profits at the end of prior 1,794,461,218.42 1,576,777,636.41 1,265,031,827.34 period Add: Total beginning undistributed -424,221,645.92 -366,696,286.60 -365,280,046.66 profits Including: The change of accounting 0.00 0.00 0.00 policy Significant accounting errors -424,221,645.92 -366,696,286.60 -365,280,046.66 Other adjustments 0.00 0.00 0.00 Balance at beginning year 1,370,239,572.50 1,210,081,349.81 899,751,780.68 Increase in current year 453,205,548.61 346,593,831.92 408,701,244.03 Including: Net profits this year 453,205,548.61 346,593,831.92 408,701,244.03 Other increase 0.00 0.00 0.00 Decrease in current year 172,215,782.30 186,435,609.23 98,371,674.90 Including:Surplus reserves 61,735,782.30 44,174,131.74 44,431,674.90 Dividends in cash this year 0.00 0.00 0.00 Other decrease 110,480,000.00 92,280,000.00 53,940,000.00 Balance at closing year 0.00 0.00 0.00 Including: Dividends in cash approved 0.00 49,981,477.49 0.00 by board of directors Explaination: The Tianjin Metro (Gruop) Co,Ltd. purchased the 60% equity of the Tianjin Metro Advertising Media Development Co., Ltd. The difference between purchasing price and the net assets value of the Tianjin Metro Advertising Medio Bevelopment Co.,Ltd. ,offset the surplus reserve RMB 5,553,497.50 and offset the undistributed profits RMB 49,981,477.49. 41. Operating Revenue and Cost (1).The details of Operating Revenue and Cost Items 2016 2015 2014 Operating Revenue 2,248,948,187.44 2,379,332,709.09 2,418,978,990.44 118 F-120 Including: Main operating 2,127,127,598.36 2,307,056,902.21 2,337,772,593.02 revenue Other operating revenue 121,820,589.08 72,275,806.88 81,206,397.42 Operating costs 2,731,240,875.55 2,626,444,457.34 2,391,860,111.54 Including: Main operating 2,651,609,135.80 2,620,165,647.82 2,386,214,202.32 costs Other operating costs 79,631,739.75 6,278,809.52 5,645,909.22 Operating gross profits -482,292,688.11 -247,111,748.25 27,118,878.90 (2).The details of main operating revenue Items 2016 2015 2014 Sales revenue 1,466,598.09 659,666.42 9,433.96 Metro operating revenue 636,401,654.98 619,959,521.42 669,027,259.23 Lease incomes 88,825,084.14 119,378,917.34 93,271,828.52 Gains from settlement of 1,205,995,206.81 1,354,868,765.03 1,337,584,011.20 projects Land replacement 33,333,333.33 50,000,000.00 63,504,276.16 incomes Labor incomes and other 152,938,302.16 153,109,780.44 169,219,319.87 services Land consolidation income 8,160,497.90 7,899,636.93 2,414,966.66 Other incomes 6,920.95 1,180,614.63 2,741,497.42 Total 2,127,127,598.36 2,307,056,902.21 2,337,772,593.02 (3).The details of main operating cost Items 2016 2015 2014 Sales costs 2,281,455.86 657,797.68 0.00 Operating costs of subway 1,410,130,061.04 1,336,726,222.05 1,188,588,337.45 Lease costs 48,439,151.67 24,018,354.26 18,804,575.86 Costs from settlement of 1,100,281,877.34 1,148,873,023.41 1,110,995,253.63 projects Land replacement costs 30,940,871.73 56,032,359.23 2,454,547.29 Labor costs and other 59,535,718.16 53,857,891.19 58,496,654.68 services Other costs 0.00 0.00 6,874,833.41 Total 2,651,609,135.80 2,620,165,647.82 2,386,214,202.32 (4).Revenue of construction contracts as follows 119 F-121 Accumulated confirmed Accumulated Settlement Category Projects Amount gross profit accured costs amount (loss expressed with "-") The interchange project of 2,698,000,000.00 1,497,123,994.45 966,314,205.20 932,212,278.40 Fixed Jinshan price Railway contract The interchange 1,102,000,000.00 665,285,251.03 430,641,493.09 380,762,761.60 project of Jinghu Railway Total 3,800,000,000.00 2,162,409,245.48 1,396,955,698.29 1,312,975,040.00 (5).The details of other operating revenue Items 2016 2015 2014 Service revenue 18,326,057.58 15,239,547.76 18,502,849.41 Leasing revenue 10,737,178.32 30,231,974.42 34,384,082.51 Utilities revenue 5,319,307.53 5,796,483.25 7,310,781.73 Compensation revenue 0.00 5,489,000.00 5,183,882.00 for occupation of land 66,772,160.35 0.00 0.00 Interest income Other revenue 20,665,885.30 15,518,801.45 15,824,801.77 Total 121,820,589.08 72,275,806.88 81,206,397.42 (6).The details of other operating costs Items 2016 2015 2014 Leasing costs 0.00 118,638.94 0.00 One –card consumption fee 0.00 0.00 919,108.83 The individual income tax 89,880.98 0.00 0.00 fees refunded Interest costs 76,069,845.45 0.00 0.00 Utilities expenses 2,750,959.44 3,228,225.47 3,768,840.46 Dining, guest room costs 245,281.05 678,968.66 0.00 service charge 0.00 1,444,536.64 0.00 Other costs 475,772.83 808,439.81 957,959.93 120 F-122 Total 79,631,739.75 6,278,809.52 5,645,909.22 42. Tax and surcharges Items 2016 2015 2014 Business tax 25,962,624.00 91,120,218.33 62,228,802.77 Construction tax 3,605,927.27 7,742,014.86 5,727,029.99 Educational surtax 1,525,460.63 4,480,185.83 3,379,500.69 Local educational surtax 997,827.34 1,856,984.69 677,186.13 The culture construction 1,192,148.78 29,974.46 1,074,248.01 fee Flood fee 175,562.18 0.00 7,056.47 Land VAT 0.00 1,525,011.82 0.00 Building tax 37,169,492.76 9,073,137.70 8,937,505.67 Land use tax 2,768,476.55 1,439,359.76 1,093,082.38 Stamp tax 1,103,432.89 0.00 0.00 Vehicle and Vessel Tax 30,554.82 0.00 0.00 Others 11,675.38 58,151.57 70,838.88 Total 74,543,182.60 117,325,039.02 83,195,250.99 Explaination: According toljMinistry of Finance’s Notice about printing Kuai[2016]No.22) stipulate: since May 2016 business tax change to value-added tax on a trial basis fully, Business tax and surcharges has adjusted to tax and surcharges, this subject includes consumption tax, Construction tax, Resource tax, educational surtax, building tax, land use tax, vehicle and vessel tax and Stamp tax, etc. 39. Sales Expenses Category 2016 2015 2014 Marketing 1,276,208.31 1,046,912.88 1,053,883.30 Packing 0.00 0.00 499,330.01 Advertising and 0.00 441,599.98 407,977.51 Exhibition fees Product maintenance 350.50 0.00 7,853.80 121 F-123 Transportation 0.00 0.00 189,952.96 Depreciation 0.00 0.00 35,415.86 Repair and 1,315,374.21 935,879.47 171,752.03 consumption fees Salary 15,769,744.73 18,638,915.12 15,185,082.72 Travel expenses 96,240.51 431,755.57 204,565.96 Operating expense 36,205.00 147,985.46 0.00 Agency fees 879,926.06 1,237,169.94 1,367,691.94 Office expenses 3,836,873.90 1,787,519.27 151,873.58 Assets fees 289,496.98 0.00 60,000.00 Intermediary fees 1,483,818.04 1,373,827.06 0.00 Others 1,195,862.68 1,278,720.30 396,856.97 Total 26,180,100.92 27,320,285.05 19,732,236.64 40. Administration expenses Category 2016 2015 2014 Salary 196,594,779.81 177,585,032.47 180,311,214.65 Repair and consumption 2,505,121.75 5,308,167.15 4,899,400.24 Amortization of low priced 871,506.09 497,662.43 4,093,161.00 and easily worn articles Office expenses 16,808,079.91 19,726,003.33 10,437,606.03 Travel expenses 5,323,862.17 5,870,656.31 4,891,675.36 Water and electricity fees 22,107.00 11,190.50 8,118,219.98 Business Hospitality 320,250.08 1,290,782.31 10,137,327.02 Depreciation 74,472,162.65 68,952,839.43 78,551,262.25 Insurance 1,568,643.38 4,434,941.00 1,841,355.84 Finance lease 49,699,100.98 84,897,931.49 22,292,680.71 Agency fees 10,506,854.52 10,714,946.84 12,750,142.09 Amortization of intangible 1,642,090.74 1,532,391.99 1,275,379.36 assets 122 F-124 Category 2016 2015 2014 Amortization of long term 48,568,440.84 57,364,549.05 55,978,852.50 prepaid expenses Lease cost 1,516,219.31 3,470,092.87 6,640,103.89 Land use taxǃBuilding taxǃ 31,666,170.70 73,689,380.72 37,400,592.66 Stamp tax, etc property management fee 4,776,631.46 5,590,222.45 5,945,203.42 Service cost 4,786,805.10 612,353.66 1,054,355.00 Others 15,614,017.10 24,841,522.22 29,170,125.27 Total 467,262,843.59 546,390,666.22 475,788,657.27 45. Financial Expenses Items 2016 2015 2014 Interest expense 304,435,189.68 149,928,636.51 41,747,987.49 Less: Interest revenue 10,864,546.94 52,516,922.82 38,810,556.59 Exchange loss 6,554,179.84 67.71 2,983,747.31 Less: Exchange income 42,461,286.07 6,278,557.83 16,566,899.55 Others 1,190,752.15 28,775,483.86 20,459,141.44 Total 258,854,288.66 119,908,707.43 9,813,420.10 46. Assets Impairment losses Items 2016 2015 2014 Bad debts losses 7,061,007.29 4,926,236.73 5,580,064.37 Inventory impairment losses 0.00 0.00 0.00 Available-for-sale finance assets 0.00 impairment losses 0.00 0.00 Held-for-maturity investment 0.00 impairment losses 0.00 0.00 Long-term equity investment 0.00 0.00 250,000.00 impairment losses Investment property impairment losses 0.00 0.00 0.00 Fixed assets impairment losses 0.00 0.00 0.00 Engineering materials impairment 0.00 0.00 0.00 123 F-125 Items 2016 2015 2014 losses Impairment losses of projects under 0.00 construction 0.00 0.00 Productive biological assets 0.00 impairment losses 0.00 0.00 Oil&gas assets impairment losses 0.00 0.00 0.00 Intangible assets impairment losses 0.00 0.00 0.00 Goodwill impairment losses 0.00 0.00 0.00 Others 14,382,034.07 0.00 0.00 Total 21,443,041.36 4,926,236.73 5,830,064.37 47. Movement in fair value Sources 2016 2015 2014 I.Financial assets held for trading Bonds held for trading 0.00 0.00 0.00 Equity instruments held for trading 0.00 0.00 0.00 Financial assets measured at fair 0.00 0.00 0.00 value through profit or loss Financial derivative assets 0.00 0.00 0.00 II.Financial liabilities held for 0.00 0.00 0.00 trading III.Investment property 87,527,858.38 94,747,703.27 149,501,547.31 Buildings 87,527,858.38 94,747,703.27 149,501,547.31 Land use right 0.00 0.00 0.00 Total 87,527,858.38 94,747,703.27 149,501,547.31 48. Investment income Category 2016 2015 2014 Income of long-term equity investment accounted by cost method 0.00 0.00 0.00 124 F-126 Category 2016 2015 2014 Income of long-term equity investment accounted by equity method 6,274,983.44 52,142,044.24 54,895,351.87 Investment income arising from disposing long-term equity investment 0.00 3,958.91 -13,047,698.77 Investment income of available-for-sale finance investment during its holding period 20,941,118.45 24,258,105.43 9,279,472.27 Investment income of held-to-maturity investment during its holding period 8,825,619.90 0.00 0.00 Investment income arising from disposing available-for-sale finance investment 0.00 0.00 0.00 Investment income arising from disposing held-to-maturity investment 0.00 0.00 0.00 Others 6,856,834.80 7,253,217.84 6,989,362.90 Total 42,898,556.59 83,657,326.42 58,116,488.27 49. Non-operting revenue The incidental Items 2016 2015 2014 losses in current year 1. Total gains from disposing 16,064.60 239,619.94 374,186.21 16,064.60 non-current assets Including: Gains from 16,064.60 239,619.94 374,186.21 16,064.60 disposing fixed assets Gains from disposing 0.00 0.00 0.00 0.00 intangible assets 2. Gains from non-monetary 0.00 0.00 0.00 0.00 asset exchange 3.Gains from debt restructuring 0.00 0.00 0.00 0.00 4. Government grants and 1,678,525,764.57 1,124,424,674.00 861,764,096.35 1,678,525,764.57 subsidies 125 F-127 The incidental Items 2016 2015 2014 losses in current year 5.Gains from inventory surplus 0.00 0.00 0.00 0.00 6.Gains from donation 0.00 0.00 0.00 0.00 7.Fine income 0.00 106,621.45 152,691.50 0.00 8. Compensation income 188,117.90 207,182,079.89 481,538.19 188,117.90 9. Others 649,799.52 2,653,025.30 8,141,658.86 649,799.52 Total 1,679,379,746.59 1,334,606,020.58 870,914,171.11 1,679,379,746.59 The details of government grants and subsidies Related to Current period Last period Items assets/ Related Amount Amount to income The return of Tianjin financial bureau turn 0.00 173,443,274.00 Related to income into the income Operating Subsidies of Metro and Jinbin Light Rail provided by Tianjin bureau of 414,671,900.00 360,000,000.00 Related to income finance Related to income The special fund in system improvement. 0.00 215,000,000.00 Security staff expense by Tianjin Finance 93,660,000.00 93,660,000.00 Related to income Bureau The special funds of Rail Transit security 6,006,100.00 0.00 Related to income check project Operating Subsidies of Tianjin station 30,000,000.00 55,000,000.00 Related to income transportation hub Subsides for entity 650,000,000.00 0.00 Related to income Operating Subsidies of Jinbin Light Rail 85,000,000.00 85,000,000.00 Related to income Operating Subsidies of Jinbin Light Rail by 59,890,000.00 59,890,000.00 Related to income Tianjin Economic and Technology 126 F-128 development Bureau Operating Subsidies of new transportation by Tianjin Economic and Technology 43,212,000.00 35,331,400.00 Related to income development Bureau Building Subsidies of Binhai university 278,380,000.00 0.00 Related to income station and Donghai Road East square Related to income Refund of stamp tax 17,500,112.44 0.00 Subsidies for LED upgrades 116,400.00 0.00 Related to income Subsidies for safety standardization 25,000.00 0.00 Related to income Subsidies for eliminating “Yellow Label Car” Related to income in advance 11,000.00 0.00 Financial support from Xi Qing District 0.00 47,000,000.00 Related to income Subsidies of Enterprise liquidation fees 0.00 100,000.00 Related to income Vehicle scrapping subsidies 51,000.00 0.00 Related to income The deduction of VAT 2,252.13 0.00 Related to income Total 1,678,525,764.57 1,124,424,674.00 Items Amount Contents Approval Tianjin Finance Bureau(Jin Cai Yu Operating Subsidies Zhi[2016]No.104) Notice from Tianjin Operating Subsidies of of Metro and Jinbin Finance Bureau about approval 2016 Metro provided by Light Rail provided 414,671,900.00 fiscal spending budgetǃJin Cai Jian by Tianjin bureau of Tianjin bureau of finance Yi Zhi[2016] No.119 Notice about finance Tianjin Finance Bureau provided operating subsides for Guidao Tianjin Finance Bureau(Jin Cai Yu Security staff Security staff expense Zhi[2016]No.104) the Notice about expense by Tianjin 93,660,000.00 by Tianjin Finance approval 2016 Fiscal spending Finance Bureau Bureau budget The cash balance The special funds of payment of Metro line Jin Cai Jian Yi Zhi[2016]No.33 Notice 1’s security inspection about Tianjin Finance Bureau Rail Transit security 6,006,100.00 check project equipment provided by allocated funds for Metro line 1 Tianjin bureau of security inspection equipment finance Tianjin Finance Bureau(Jin Cai Yu Operating Subsidies Operating Subsidies of Zhi[2016]No.104) the Notice about of Tianjin station 30,000,000.00 Tianjin station approval 2016 Fiscal spending transportation hub transportation hub budget Memorandum of Tianjin Finance 650,000,000.00 Subsides for entity Subsides for entity Bureau Operating Subsidies Operating Subsidies of The 30th Meeting minutes of Mayor 85,000,000.00 Jinbin Light Rai Office meeting on 17 February, 2015 of Jinbin Light Rail 127 F-129 Items Amount Contents Approval Operating Subsidies Operating Subsidies of of Jinbin Light Rail by Jinbin Light Rail by The confirmation sheet of Development-Area New 59,890,000.00 Tianjin Economic and Tianjin Economic and transportation and JinBin light-rail operating expence in 2016 Technology Technology development Bureau development Bureau Operating Subsidies Operating Subsidies of of new transportation new transportation by The confirmation sheet of Development-Area New 43,212,000.00 by Tianjin Economic Tianjin Economic and transportation and JinBin light-rail operating expence in 2016 and Technology Technology development Bureau development Bureau Building Subsidies of Building Subsidies of Binhai university Binhai university Construction subsidies agreement for 278,380,000.00 Binhai university station and East station and Donghai station and Donghai square of Donghai Road station Road East square Road East square Refund of stamp tax 17,500,112.44 Refund of stamp tax None Subsidies for LED Subsidies for LED None upgrades 116,400.00 upgrades Subsidies for safety Subsidies for safety None standardization 25,000.00 standardization Subsidies for Subsidies for eliminating “Yellow eliminating “Yellow None Label Car” in Label Car” in advance advance 11,000.00 Vehicle scrapping Vehicle scrapping None subsidies 51,000.00 subsidies The deduction of VAT 2,252.13 The deduction of VAT None Total 1,678,525,764.57 50. Non-operating expenses The incidental Items 2016 2015 2014 losses in current year 1.Total losses from disposing 168,930.09 228,978.91 20,349,619.15 168,930.09 non-current assets 128 F-130 Including: Losses from 168,930.09 228,978.91 20,349,619.15 168,930.09 disposing fixed assets Losses from disposing 0.00 0.00 0.00 0.00 intangible assets 2. Losses from non-monetary 0.00 0.00 0.00 0.00 asset exchange 3. Losses from debt 0.00 0.00 0.00 0.00 restructuring 4. Givings 0.00 0.00 3,986,900.00 0.00 5. Unnormal losses 0.00 0.00 0.00 0.00 6.Losses from inventory 839.21 0.00 0.00 839.21 shortages 7.Compensation expenses 5,295,390.71 201,995.40 0.00 5,295,390.71 8. Fine expenses 19,713.13 4,772,745.17 160,521.55 19,713.13 9. Others 5,049,807.73 630,668.94 2,236,165.98 5,049,807.73 Total 10,534,680.87 5,834,388.42 26,733,206.68 10,534,680.87 51. Income Tax Expenses (1).Income Tax Items 2016 2015 2014 Current income tax 9,942,570.72 70,665,481.36 19,281,468.94 Deferred income tax 17,716,810.28 38,458,355.36 59,331,120.88 Others 0.00 0.00 0.00 Total 27,659,381.00 109,123,836.72 78,612,589.82 (2).The adjustment of profit and income tax Items Amount Profit before tax 468,695,335.45 The income tax measured by applicative tax rate 117,173,833.87 The influence of subsidiaries’ different tax rate 1,240,492.67 The influence of adjusting the income tax from the previously period -11.71 129 F-131 The influence of non taxable income -196,535,025.90 The influence of the cost,the expenses and the loss which cannot be deducted 6,839,955.71 The influence of using the deductible losses of preliminary unconfirmed deferred income tax assets 0.00 The influence of unconfirmed deferred income tax assets deductible losses at the end of the current period 25,603,285.70 Others 73,336,850.66 Income Tax Expenses 27,659,381.00 130 F-132 52. Other comprehensive income (1).The items of other comprehensive income and the influence of income tax 2016 2015 2014 Items Pre-tax Income tax After-tax Pre-tax Income tax After-tax Pre-tax Income tax After-tax amount amount amount amount amount amount ĉ.Other comprehensive income cannot 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 reclassified into future profits and losses a. Changes of net liabilities or assets of beneficial 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 plans after re-measurement b. Shares of other comprehensive income of invested party not 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 reclassified into profits and Losses under the equity method F-133 Ċ.Other comprehensive income reclassified into 86,839.34 21,709.84 65,129.50 376,708.82 94,177.21 282,531.61 1,581,499.58 395,374.89 1,186,124.69 future profits and losses a.Shares of other comprehensive income of invested party reclassified into profits and Losses 0.00 0.00 0.00 0.00 0.00 0.00 1,347,874.01 336,968.50 1,010,905.51 under the equity method Less: OCI transfer into P/L this year 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Sub-total 0.00 0.00 0.00 0.00 0.00 0.00 1,347,874.01 336,968.50 1,010,905.51 b.Profits and losses of fair value changes of 86,839.34 21,709.84 65,129.50 376,708.82 94,177.21 282,531.61 233,625.57 58,406.39 175,219.18 available-for-sale financial assets Less: OCI transfer into P/L this year 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Sub-total 86,839.34 21,709.84 65,129.50 376,708.82 94,177.21 282,531.61 233,625.57 58,406.39 175,219.18 c.Profits and losses of held-to-maturity investment reclassified as available-for-sale 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 financial assets Less: OCI transfer into P/L this year 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Sub-total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 131 d.Significant part of profits and losses of cash 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 flow hedge Adjustment of initial amount recognized 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Sub-total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 e.Currency translation differences in financial 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 statements Less: OCI transfer into P/L this year 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Sub-total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 f. Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Less: OCI transfer into P/L this year 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Sub-total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ċ.Total other comprehensive income 86,839.34 21,709.84 65,129.50 376,708.82 94,177.21 282,531.61 1,581,499.58 395,374.89 1,186,124.69 F-134 (2).Details of adjustments Shares of other Shares of comprehensive other Significant income of Profits and Changes of net comprehensive invested party Profits and losses of part of Currency liabilities or income of not losses of fair held-to-maturity profits translation assets of invested party Items reclassified value changes of investment and differences Others Sub-total beneficial plans reclassified into profits and into profits and available-for-sale reclassified as losses of in financial after Losses under Losses under financial assets available-for-sale cash flow statements re-measurement the equity the equity financial assets hedge method method ĉ. Openning balance in 0.00 606,543.31 0.00 367,219.18 0.00 0.00 0.00 455,180,836.69 456,154,599.18 prior period Ċ.Movements 0.00 0.00 0.00 282,531.61 0.00 0.00 0.00 0.00 282,531.61 in prior 132 period(“-“ filled for the decrease) ċ. Openning balance in 0.00 606,543.31 0.00 649,750.79 0.00 0.00 0.00 455,180,836.69 456,437,130.79 current period Č. Adjustment due to changes in 0.00 0.00 0.00 65,129.50 0.00 0.00 0.00 0.00 65,129.50 scope of consolidation č. Closing balance in 0.00 606,543.31 0.00 714,880.29 0.00 0.00 0.00 455,180,836.69 456,502,260.29 current period F-135 133 53. Foreign currency monetary Foreign currency Translate into Items monetary at year Exchange rate RMB end Monetary fund 55,433,836.84 Including : USD 7,986,553.69 6.9370 55,402,722.94 EUR 1,456.70 7.3068 10,643.80 HKD 22,884.15 0.8945 20,470.10 Long-term borrowings 245,053,451.32 Including : USD 1,339,323.36 6.9370 9,290,886.15 EUR 32,266,185.63 7.3068 235,762,565.17 Bonds Payable 3,434,796,227.49 Including : USD 495,141,448.39 6.9370 3,434,796,227.49 Note 8: Consolidated statement of cash flow (1).Supplement to Statement of Cash Flow Items 2016 2015 2014 1. Adjust net profits to cash flow of operations Net profits 441,035,954.45 335,070,142.43 405,945,659.72 Plus: impairment reserves 21,443,041.36 4,926,236.73 5,830,064.37 Depreciation of fixed assets 92,769,711.84 89,089,592.75 97,477,695.93 Intangible assets amortization 1,642,090.74 1,565,911.99 1,205,149.08 Long-term unamortized expense 100,427,762.08 142,262,480.54 78,279,309.50 Losses from disposing fixed assets, intangible 4,566.03 -10,641.03 19,975,432.94 assets and other long-term assets (income -) Losses on retirement of fixed assets (income 149,138.67 0.00 0.00 -) Losses on fair value changes (income -) -87,527,858.38 -94,747,703.27 -149,501,547.31 Financial expenses (income -) 315,566,396.76 143,650,146.39 41,747,987.49 Investment loss (income -) -42,897,343.51 -83,657,326.42 -58,116,488.27 134 F-136 Items 2016 2015 2014 Decreases of deferred income tax assets -9,971,683.94 653,851.15 3,395,976.77 (increase -) Increases of deferred income tax liabilities 27,710,204.06 37,804,504.21 55,935,144.11 (decrease -) Inventory decreases (increase -) -349,488,740.50 -466,834,133.19 -313,644,148.38 Decreases of operational receivables -17,464,631,107.37 -19,516,279,791.28 1,959,330,121.91 (increase -) Increases of operational payables (decrease 17,495,061,689.47 19,293,227,509.10 -2,430,005,382.14 -) Others 0.00 0.00 0.00 Net cash flow of operations 541,293,821.76 -113,279,219.90 -282,145,024.28 2. Major investments and fundraising not involving cash Capital transferred from debt 0.00 0.00 0.00 Convertible enterprise bonds due within one 0.00 0.00 0.00 year Fixed assets transferred from finance lease 0.00 0.00 0.00 income 3. Net changes of cash and cash equivalents Ending cash balance 9,854,266,910.56 10,903,964,244.56 5,458,096,154.82 Less: beginning cash balance 10,903,964,244.56 5,458,096,154.82 7,566,190,367.75 Add: ending cash equivalent balance 0.00 0.00 0.00 Less: beginning cash equivalent balance 0.00 0.00 0.00 Net increase of cash and cash equivalents -1,049,697,334.00 5,445,868,089.74 -2,108,094,212.93 (2).Components of Cash and Cash Equivalents Items 2016 2015 2014 ĉ.Cash 9,854,266,910.56 10,903,964,244.56 5,458,096,154.82 Including: Treasury cash 170,670.12 96,065.31 84,592.12 135 F-137 Bank deposit on hand 9,854,096,240.44 10,903,868,179.25 5,458,011,562.70 Other currency cash on hand 0.00 0.00 0.00 Deposit in central bank on hand 0.00 0.00 0.00 Deposits in other banks 0.00 0.00 0.00 Loans from other banks 0.00 0.00 0.00 Ċ.Cash equivalents 0.00 0.00 0.00 Including :Bond investment due within three 0.00 0.00 0.00 months Ending cash and cash equivalent balance 9,854,266,910.56 10,903,964,244.56 5,458,096,154.82 Including ˖Cash and cash equivalents with 0.00 0.00 0.00 limited use for parent or subsidiaries Note 9: Related Parties and Transactions 1. Uncontrolled related party Related party Relationships Tianjin TEDA Investment Holding Co., Ltd. The company’s shareholder Tianjin port bulk cargo logistics Co., Ltd. Subsidiary’s shareholder Tianjin Jin Yuan Investment Development Co., Ltd. Controlled by the same ultimate party Tianjin Infrastructure Investment Consulting Co., Ltd. Controlled by the same ultimate party Tianjin marina intercity railway Co., Ltd. Subsidiary’s shareholder Tianjin South Central Railway Co., Ltd. The company’s shareholder Tianjin Metro Land Trading Co. Ltd. Subsidiary’s shareholder Tianjin Metro Jun Yi Investment Co., Ltd. Subsidiary’s project company Hutchison whampoa properties (tianjin) Co., Ltd Subsidiary’s project company Tianjin Urban Road Pipe Network Auxiliary Construction&Investment Co,Ltd. Controlled by the same ultimate party Tianjin Haihe River Construction Investment Development Co. Ltd. Controlled by the same ultimate party Tianjin urban resources management Co. Ltd. Controlled by the same ultimate party Tianjin Jinju real estate development Co., Ltd. Uncontrolled by tha same party Tianjin metro (Hong Kong) Co., Ltd. Subsidiary not included in the consolidation range 136 F-138 Related party Relationships Tianjin TEDA Investment Holding Co., Ltd. The company’s shareholder Tianjin Fudaojia Property Management Co., Ltd. Subsidiary’s shareholder Jingjinji Intercity Railway Investment Co,Ltd. Subsidiary’s shareholder Tianjin Jigang Railway Co.Ltd The company’s shareholder 137 F-139 2. Controlled related party Registered Registered Shareholding Voting rights Company Name Main business Relationship Capital Address ratio˄%˅ ratio˄%˅ (RMB’0000) Development and transformation to Haihe using own capital. Investment, construction and operation management of subway, the urban road and bridge, highway, wastewater treatment, water supply, heat supply, garbage disposal, parking lot (floor), underground pipe network, park green space, urban environmental infrastructure and its supporting projects. The F-140 government authorized land consolidation, regional development; Historic buildings Tianjin Infrastucture protection construction, development and Controlling Construction&Investment(Group)Co,Lt Tianjin management; Housing construction and 6,882,110.00 86.34 86.34 d. municipal utilities engineering project shareholder management; Investment planning; Enterprise management consulting; Market construction and development services; Own house lease; Infrastructure rental and utilities project development and management; Infrastructure franchise authorized by the government; Construction investment consulting(subject to comply with government regulation and operating certificate if required) The Service,Wholesale,Resale,Procurement service;Corporate management;Property First grade Tianjin Xianda Hotel Tianjin Management;Housing information consulting 4,845.00 100 100 (subject to comply with government regulation subsidiary and operating certificate if required) 138 Registered Registered Shareholding Voting rights Company Name Main business Relationship Capital Address ratio˄%˅ ratio˄%˅ (RMB’0000) Railway comprehensive project; Civil Building Tianjin local railway construction First grade Engineering (subject to comply with government Tianjin subsidiary 1,256.00 100 100 company regulation and operating certificate if required) Overall railway construction contractor, Overall civil engineer project contractor, building Tianjin Rail Transit Group Constraction First grade construction contractor, railway and railway Tianjin subsidiary 20,101.06108 100 100 Co., Ltd. communication equipment maintenance and repair, property renting The special investment in Railway freight; Urban infrastructure investment and construction; Land F-141 Tianjin Railway Construction First grade Consolidation; Real estate development; Tianjin subsidiary 525,000.00 100 100 Investment Holding (Group) Co., Ltd. (subject to comply with government regulation and operating certificate if required) Building construction engineering;The General contracting of railway engineering construction;The wholesale and resale of the Tianjin Xianda Binhai construction knitwear,textile,hardware, steel,construction First grade Tianjin materials,chemical product; Plastic product subsidiary 1,565.864025 100 100 company making; Convention service; (subject to comply with government regulation and operating certificate if required) 139 Registered Registered Shareholding Voting rights Company Name Main business Relationship Capital Address ratio˄%˅ ratio˄%˅ (RMB’0000) Construction and management of the urban rail transit project; engineering contractor; tender and bidding consulting (not including intermediary), engineering supervision; operation of rail transit development and comprehensive management; procurement of domestic and foreign vehicle and mechanical and electrical equipment, commissioning, operation, leasing, maintenance and rail transportation related business; real estate development and commercial housing sales; housing rental; property management; F-142 accommodation; Chinese food processing business (dinner); advertising; daily necessities, textiles, jewelry, footwear, cosmetics, watches, Tianjin Binhai Rapid Transit glasses, leather products, construction materials First grade Tianjin wholesale and retail; exhibition service provided, subsidiary 281,272.50 100 100 Development Co., Ltd. housing intermediary and agency services, technology consulting, business services, cleaning services. Limited to the following operating subsidiaries; hotel management; conference services; crafts for sale; Hotel: staple food, hot dishes, cold dishes, cake manufacturers operate; canteen: staple food, hot dishes and processing operations; Guest accommodation; swimming pool; tobacco retail; gift sales ; own equipment rental, venue rental, faxing services; office supplies leasing; car park management services. (subject to comply with government regulation and operating certificate if required) 140 Registered Registered Shareholding Voting rights Company Name Main business Relationship Capital Address ratio˄%˅ ratio˄%˅ (RMB’0000) Organization and management of urban rail transit project investment; Technology consulting and technology service; The real estate development; The municipal engineering; First grade Tianjin Metro(Gruop)Co,Ltd. Tianjin Building materials production and sales; Sales subsidiary 718,643.402787 100 100 of commercial housing; (subject to comply with government regulation and operating certificate if required) Tianjin Rail Transit Group (HK) Co., First grade 36,833.58 Tianjin None 100 100 F-143 subsidiary Ltd. ˄USD 5600˅ Tianjin city rail vocational training Senior: Watchman, Coach driver,Track First grade Tianjin driver,Hostler,Electrician,Signalman subsidiary 50.00 100 100 center Financial leasing business; Leasing business; Buy rental property from home and abroad; The Tianjin Rail Transit Group Financing salvage value processing and maintenance of First grade Tianjin the property.( the project which need approved subsidiary 100,000.00 100 100 Lease Co., Ltd according to law must approved by revelant departments to operate). Invest in real estate developmemt using own Tianjin century coastal Investment Co., funds; House rental; Property service; Civil First grade Tianjin engineering; (subject to comply with government subsidiary 1,000.00 100 100 Ltd. regulation and operating certificate if required) 141 Registered Registered Shareholding Voting rights Company Name Main business Relationship Capital Address ratio˄%˅ ratio˄%˅ (RMB’0000) The subway infrastructure construction; Civil Tianjin Metro Construction Second grade Tianjin engineering construction; Invest in 10,000.00 100 100 Development Co., Ltd. subsidiary infrastructural projects; Municipal engineering; Metro operation; Operation service management; Operation equipment maintenance; Thchnology consulting; House rental; Mobile communication equipment Second grade Tianjin Metro Operation Co.,Ltd. Tianjin maintenance; Metro equipment rental; The 10,000.00 100 100 subsidiary storage; The product and maintain of electrical F-144 control equipment; (subject to comply with government regulation and operating certificate if required) Operating management service; Real estate Tianjin Hub Operating Management of development; Advertising business; Technology Second grade Infrastructure Construction&Investment Tianjin consulting; House rental; Hotel management; 3,000.00 100 100 subsidiary Co,Ltd. Property service; Convention service;Building engineering construction; Invest in real estate industry;Real estate development; Equipment rental; House rental;Commodity house sales agent; Tianjin Metro Resources Investment Corporation management consulting ;Business Second grade Tianjin 70,000.00 100 100 Co., Ltd. information consulting; The convention service; subsidiary Advertising business; Property management; Project management; The resale of building materials. 142 Registered Registered Shareholding Voting rights Company Name Main business Relationship Capital Address ratio˄%˅ ratio˄%˅ (RMB’0000) The organization and management of the Tianjin Infrastucture Second grade Tianjin municipal infrastructure construction;The service 300.00 100 100 Construction&Investment Co,Ltd. subsidiary and consulting of Urban construction projects The service consulting and development of Tianjin Metro Technology Development Second grade Tianjin electronic information and the technology of 1,000.00 100 100 Co., Ltd. subsidiary subway engineering; Tianjin Kaidong Real Estate Real estate sales;Interior&outdoor decoration; Second grade Tianjin 1,500.00 100 100 Development Co., Ltd. Market management and service; subsidiary Tianjin Metro harmony Property Property management ;Property management Second grade F-145 Tianjin 300.00 100 100 Management Co., Ltd. consulting; Project of greening construction; subsidiary Tianjin Haishun Real Estate The construction land development inpowered Second grade Tianjin 2,000.00 60 60 Development Co., Ltd. by Tianjin Metro(Gruop)Co,Ltd. subsidiary Real estate development; Property Tianjin Metro Property Development Second grade Tianjin management; Civil engineering; Decoration and 1,200.00 51 51 Co., Ltd. subsidiary refurbishing; Real estate development and construction; Tianjin Chengtie MTR Construction Co. Property management; Parking service; (subject Second grade Tianjin 227,300.00 51 51 Ltd. to comply with government regulation and subsidiary operating certificate if required) Developing advertising; Large scale activities Tianjin Metro Advertising Media Second grade Tianjin planning; Corporation management consultant; 1,000.00 100 100 Development Co., Ltd. subsidiary Billboard designing; 143 Registered Registered Shareholding Voting rights Company Name Main business Relationship Capital Address ratio˄%˅ ratio˄%˅ (RMB’0000) Assets management( without financial assets);Property management; The convention Tianjin iron Investment Asset Second grade Tianjin service; Technology information consulting; 300.00 100 100 Management Co., Ltd. subsidiary (subject to comply with government regulation and operating certificate if required) Sales of commercial housing; (subject to comply Tianjin Xianda Real Estate Second grade Tianjin with government regulation and operating 1,050.00 100 100 Development Company subsidiary certificate if required) Heating technology development,service and Tianjin Xianda geothermal Second grade Tianjin consulting;The supply of steam and hot water; 484.00 100 100 development company subsidiary F-146 Pipeline maintenance; The wall maintenance. Silk manufacturing; Clothing manufacturing; Tianjin Jia Yong Industrial and Trading Second grade Tianjin Shoe makers; Resale the Building materials, 531.00 100 100 Center subsidiary ecorative materials, teel, Pigging, Woods. Rail Transit Investments International The British Second grade None 50,000 dollars 100 100 Co., Ltd. Virgin Islands subsidiary Second grade HKD10,000ˈ Guangyun Equipment Co., Ltd Hong Kong None 100 100 subsidiary USD 49,990,000 3. Paid-in capital and its movements of controlled related party 144 Related Party 2015-12-31 Increase in current Decrease in current 2016-12-31 year year Tianjin Infrastucture Construction&Investment(Group)Co,Ltd. 67,700,000,000.00 1,121,100,000.00 0.00 68,821,100,000.00 Tianjin Xianda Hotel 48,450,000.00 0.00 0.00 48,450,000.00 Tianjin local railway construction company 9,813,541.21 0.00 0.00 9,813,541.21 Tianjin Rail Transit Group Constraction Co., Ltd. 201,010,610.80 0.00 0.00 201,010,610.80 Tianjin Xianda Binhai construction company 15,658,640.25 0.00 0.00 15,658,640.25 Tianjin Railway Construction Investment Holding (Group) Co., Ltd. 5,250,000,000.00 0.00 0.00 5,250,000,000.00 Tianjin Binhai Rapid Transit Development Co., Ltd. F-147 2,812,725,000.00 0.00 0.00 2,812,725,000.00 Tianjin Metro(Gruop)Co,Ltd. 7,186,434,027.87 0.00 0.00 7,186,434,027.87 330,060,000.00 Tianjin Rail Transit Group (HK) Co., Ltd. 38,275,800.00 ˄50,000,000 0.00 368,335,800.00 ˄6,000,000 dollars˅ dollars˅ ˄56,000,000 dollars˅ Tianjin city rail vocational training center 500,000.00 0.00 0.00 500,000.00 Tianjin Rail Transit Group Financing Lease Co., Ltd 0.00 1,000,000,000.00 0.00 1,000,000,000.00 Tianjin century coastal Investment Co., Ltd. 10,000,000.00 0.00 10,000,000.00 0.00 Tianjin Metro Construction Development Co., Ltd. 100,000,000.00 0.00 0.00 100,000,000.00 Tianjin Metro Operation Co.,Ltd. 100,000,000.00 0.00 0.00 100,000,000.00 145 Related Party 2015-12-31 Increase in current Decrease in current 2016-12-31 year year Tianjin Hub Operating Management of Infrastructure Construction&Investment Co,Ltd. 30,000,000.00 0.00 0.00 30,000,000.00 Tianjin Metro Resources Investment Co., Ltd. 700,000,000.00 0.00 0.00 700,000,000.00 Tianjin Infrastucture Construction&Investment Co,Ltd. 3,000,000.00 0.00 0.00 3,000,000.00 Tianjin Metro Technology Development Co., Ltd. 10,000,000.00 0.00 0.00 10,000,000.00 Tianjin Kaidong Real Estate Development Co., Ltd. 15,000,000.00 0.00 0.00 15,000,000.00 Tianjin Metro harmony Property Management Co., Ltd. 3,000,000.00 0.00 0.00 3,000,000.00 F-148 Tianjin Haishun Real Estate Development Co., Ltd. 20,000,000.00 0.00 0.00 20,000,000.00 Tianjin Metro Property Development Co., Ltd. 12,000,000.00 0.00 0.00 12,000,000.00 Tianjin Chengtie MTR Construction Co. Ltd. 2,273,000,000.00 0.00 0.00 2,273,000,000.00 Tianjin Metro Advertising Media Development Co., Ltd. 10,000,000.00 0.00 0.00 10,000,000.00 Tianjin iron Investment Asset Management Co., Ltd. 3,000,000.00 0.00 0.00 3,000,000.00 Tianjin Xianda Real Estate Development Company 10,500,000.00 0.00 0.00 10,500,000.00 Tianjin Xianda geothermal development company 4,839,977.92 0.00 0.00 4,839,977.92 Tianjin Jia Yong Industrial and Trading Center 5,300,000.00 0.00 0.00 5,300,000.00 Rail Transit Investments International Co., Ltd. 50,000 dollars 0.00 0.00 50,000 dollars 146 Related Party 2015-12-31 Increase in current Decrease in current 2016-12-31 year year 10,000 Hong Kong 10,000 Hong Kong dollars Guangyun Equipment Co., Ltd 0.00 dollars 0.00 49,990,000 dollars 49,990,000 dollars 4. Movement in equity of controlled related party 2015-12-31 Increase in current year Decrease in current year 2016-12-31 Company name Share Proportio Share Proportion Share Proportion Share Proportion F-149 n Tianjin Haihe River Construction Development&Investment 34,536,000,000.00 86.34 34,536,000,000.00 86.34 Co,Ltd. Tianjin Xianda Hotel 48,450,000.00 100 48,450,000.00 100 Tianjin Local Railway Construction Company 9,813,541.21 100 9,813,541.21 100 Tianjin Railway Group Engineering Co., Ltd. 201,010,610.80 100 201,010,610.80 100 Tianjin Xianda Binhai Construction Company 15,658,640.25 100 15,658,640.25 100 Tianjin Railway Construction Investment Holding (Group) Co., 13,456,400,582.71 100 2,577,339,360.00 16,033,739,942.71 100 Ltd. 147 2015-12-31 Increase in current year Decrease in current year 2016-12-31 Company name Share Proportio Share Proportion Share Proportion Share Proportion n Tianjin Binhai Rapid Transit Development Co., Ltd. 12,815,329,590.25 100 12,815,329,590.25 100 Tianjin Metro(Gruop)Co,Ltd. 75,144,647,717.79 100 8,167,854,538.74 83,312,502,256.53 100 Tianjin rail transit group financing lease co., LTD 0.00 0.00 1,000,000,000.00 100 1,000,000,000.00 100 Tianjin century coastal Investment Co., Ltd. 10,000,000.00 100 10,000,000.00 100 0.00 0 Tianjin Metro Construction F-150 100,000,000.00 100,000,000.00 Development Co., Ltd. 100 100 Tianjin Metro Operation Co.,Ltd 100,000,000.00 100 100,000,000.00 100 Tianjin Hub Operating Management of Infrastructure 1,187,293,664.71 1,187,293,664.71 Construction&Investment 100 100 Co,Ltd. Tianjin Metro Resources Investment Co., Ltd. 700,000,000.00 100 700,000,000.00 100 Tianjin Infrastucture Construction&Investment 0.00 100 0.00 100 Co,Ltd. Tianjin Metro Technology 10,000,000.00 10,000,000.00 Development Co., Ltd. 100 100 Tianjin Kaidong Real Estate 11,014,509.53 11,014,509.53 Development Co., Ltd. 100 100 148 2015-12-31 Increase in current year Decrease in current year 2016-12-31 Company name Share Proportio Share Proportion Share Proportion Share Proportion n Tianjin Metro Harmony Property 3,000,000.00 3,000,000.00 Management Co., Ltd. 100 100 Tianjin Haishun Real Estate 12,003,154.85 12,003,154.85 Development Co., Ltd. 60 60 Tianjin Metro Property 6,120,000.00 6,120,000.00 Development Co., Ltd. 51 51 Tianjin Chengtie MTR Construction Co. Ltd. 159,230,000.00 51 159,230,000.00 51 Tianjin Metro Advertising Media F-151 75,400,000.00 75,400,000.00 Development Co., Ltd. 100 100 Tianjin iron Investment Asset 3,000,000.00 3,000,000.00 Management Co., Ltd. 100 100 Tianjin Xianda Real Estate Development Company 10,500,000.00 100 10,500,000.00 100 Tianjin Xianda Geothermal Development Company 4,839,977.92 100 4,839,977.92 100 Tianjin Jia Yong Industrial and Trading Center 5,300,000.00 100 5,300,000.00 100 Tianjin city rail vocational training center 500,000.00 100 500,000.00 100 Tianjin Rail Transit Group (HK) 38,275,800.00 330,060,000.00 368,335,800.00 Co., Ltd. 100 100 ˄6,000,000 dollars˅ ˄50,000,000 dollars˅ ˄56,000,000 dollars˅ Rail Transit Investments International Co., Ltd. 50,000 dollars 100 50,000 dollars 100 149 2015-12-31 Increase in current year Decrease in current year 2016-12-31 Company name Share Proportio Share Proportion Share Proportion Share Proportion n 10,000 Hong Kong 10,000 Hong Kong Guangyun Equipment Co., Ltd 0.00 0.00 dollarsˈ 100 dollarsˈ 100 49,990,000 dollars 49,990,000 dollars According to our company’s paperljNotice of “a batch of four” reform planNJ, Sub-subsidiary Tianjin century coastal Investment Co., Ltd. has cancel the qualification as a legal entity in terms of related legal and appropriate procedures. F-152 Sub-subsidiary Tianjin Subway Technology Development Co., Ltd is going to liquidation and doesn’t completed yet. 150 5ǃRelated transactions 2016-12-31 2015-12-31 Accounting Proportion Proportion Company Name Items subject Amount of the Amount of the project project Reconstruction project of Tianjin South Central Operating Tianjin railway 5,572,267.23 0.25 1,687,471.69 0.07 Railway Co.,Ltd. revenue hub Southwest loop Reconstruction Tianjin South Central Operating project of Railway Co.,Ltd. revenue Southwest loop 225,720,856.00 10.04 183,001,340.00 7.69 Dagang Tianjin South Central Operating Relocation Railway Co.,Ltd. revenue Project 1,117,621.50 0.05 0.00 0.00 dormitory Tianjin South Central Operating building project 1,767,624.32 0.08 0.00 0.00 Railway Co.,Ltd. revenue of Qingninghou station The Jacket Tianjin Urban Road Pipe Culvert of Network Auxiliary Operating Guoyuan 11,635,637.86 0.52 0.00 0.00 Construction&Investment revenue South Roadǃ Co,Ltd. Guoyuan north road Tianjin Jinju Real Estate Operating service fee 1,084,905.66 0.05 2,000,000.00 0.08 Development Co,Ltd revenue Maintenance Tianjin Port Bulk Cargo Operating project for 1,126,456.37 0.05 0.00 0.00 Logistics Co., Ltd revenue unspecialized line Logistics, South-west loop,Jinjing ǃ Tianjin Port Bulk Cargo Operating Xihuan Railway 2,805,300.24 0.12 0.00 0.00 Logistics Co., Ltd revenue Crossingǃ guard contract revenue Tianjin City Fudaojia Operating Property Management Property costs 13,073,184.19 0.58 9,607,849.18 0.40 revenue Co., Ltd. Tianjin Port Bulk Cargo Investment dividend 137,481.41 0.32 0.00 0.00 Logistics Co., Ltd income Tianjin Jinju Real Estate Investment interest 6,424,622.62 14.98 0.00 0.00 Development Co,Ltd income Tianjin Haihe River project Construction under interest 0.00 0.00 2,987,875.00 0.00 Development&Investment construction Co,Ltd. 151 F-153 Tianjin Urban Road Pipe project Network Auxiliary under Rental fees 360,000.00 0.00 0.00 0.00 Construction&Investment construction Co,Ltd. 6ǃCurrent account with related party Subjects Related Company Name Contents 2016-12-31 2015-12-31 Account Tianjin Port Bulk Cargo Logistics Co., Engineering 37,767,783.79 36,955,340.04 receivables Ltd Unsettled Account Tianjin Haihe River Construction Engineering 4,824,265.00 4,824,265.00 receivables Development&Investment Co,Ltd. Unsettled Account Tianjin Urban Road Pipe Network Engineering 6,961,437.75 109,940.00 receivables Auxiliary Construction&Investment Unsettled Co,Ltd. Account Engineering Tianjin South Central Railway Co.,Ltd. 38,431,711.31 6,711,116.00 receivables Unsettled Account Tianjin Jinju Real Estate Development service fee 3,150,000.00 2,000,000.00 receivables Co,Ltd Account Tianjin TEDA Investment Holding Co., Engineering 8,676,200.00 0.00 receivables Ltd Unsettled Advanced Tianjin Infrastructure Investment Engineering 5,606,000.00 5,606,000.00 payments Consulting Co.,Ltd Unsettled Engineering Advanced Tianjin Haihe River Construction Unsettledǃ 133,212,133.00 133,275,933.00 payments Development&Investment Co,Ltd. parking feeǃ Meal Fee Advanced Tianjin Jinyuan Investment Engineering 14,957,813,400.00 14,466,953,400.00 payments Development Co., Ltd. Unsettled Dividend Tianjin Port Bulk Cargo Logistics Co., Dividend 137,481.41 0.00 receivable Ltd distribution Other account Current Tianjin South Central Railway Co.,Ltd. 905,000.00 1,000,000.00 receivables account Other account Security Tianjin South Central Railway Co.,Ltd. 0.00 50,000.00 receivables deposit Land Other account Tianjin South Central Railway Co.,Ltd. demolition 1,270,500,000.00 1,270,500,000.00 receivables expense Other account Jingjinji Intercity Railway limited liability reimbursed 140,174.35 86,468.63 receivables company expenses Land Other account Tianjin Jinyuan Investment demolition 45,240,270.00 45,240,270.00 receivables Development Co., Ltd. expense Current Tianjin Urban Road Pipe Network account, Other account Auxiliary Construction&Investment Engineering 353,046,788.64 341,588,955.31 receivables Co,Ltd. Unsettled,Inter ests Other account Tianjin Haihe River Construction 0.00 301,575.49 receivables Development&Investment Co,Ltd. Leasing deposit Other account Tianjin Chengtou City Resources naming rights 3,620,000.00 3,620,000.00 receivables Operating Co. Ltd. income 152 F-154 Interest Other account Tianjin Jinju Real estate development revenue of 132,821,666.64 111,751,666.66 receivables Co,Ltd Entrusted loan Current Tianjin Infrastucture account,Financ Other account Construction&Investment(Group)Co,Ltd ial consulting 882,577,112.64 882,577,112.64 receivables . expense,Intere sts Other account Management Tianjin metro (Hong Kong) Co., Ltd 16,905.00 0.00 receivables fee Long-term account Tianjin Metro Zhidi Trading Co. Ltd. Long-term Debt 60,000,000.00 60,000,000.00 receivables Account Engineering Tianjin Jigang Railway Co,Ltd 4,271,344.88 4,271,344.88 payables Unsettled Account Engineering Tianjin South Central Railway Co.,Ltd. 0.00 41,250.00 payables Unsettled Account Tianjin City Fudaojia Property 290,671.53 2,487,923.04 payables Service fees Land Advanced Tianjin South Central Railway Co.,Ltd. demolition 0.00 5,572,267.23 payment expenses Advanced Engineering Tianjin South Central Railway Co.,Ltd. 3,700,014.38 0.00 payment Unsettled Advanced Hutchison Whampoa Properties Cooporation 0.00 37,000,000.00 payment (Tianjin) Co., LTD project account Tianjin Urban Road Pipe Network Advanced Engineering Auxiliary Construction&Investment 20,221,318.00 20,221,318.00 payment Unsettled Co,Ltd.—Honghu Dong project Advanced Engineering Tianjin Haihe River Construction 20,914,909.00 20,914,909.00 payment Unsettled Development&Investment Co,Ltd. Advanced Tianjin Jinyuan Investment Engineering 3,087,240,000.00 3,087,240,000.00 payment Development Co., Ltd. Unsettled Other account Jinbin Intercity Railway limited liability Engineering 14,935,400.00 14,935,400.00 payables company Unsettled Other account Engineering Tianjin Metro Junyi Investment Co,Ltd 7,551,940.00 7,551,940.00 payables Unsettled Other account Tianjin Haihe River Construction property 0.00 247,872.00 payables Development&Investment Co,Ltd. charges Interests,Mana Tianjin Infrastucture gement Other account Construction&Investment(Group)Co,Ltd expense, 3,040,541.36 2,925,565.82 payables . Current account Interestsǃthe project cost at the early stage ǃ Special Tianjin Infrastucture Information account Construction&Investment(Group)Co,Ltd 3,097,951,221.13 2,854,059,419.33 payables . enquiry fee at the early stageǃ Engineering Unsettled 153 F-155 7ǃGuarantee for subsidiaries (1).Details of guarantee for subsidiaries Company name Category Amount Guarantee term Tianjin Binhai Rapid Transit Development Guarantee borrowings 1,653,500,000.00 2015/9/22-2020/9/22 Co., Ltd. Tianjin Binhai Rapid Transit Development Guarantee borrowings 94,000,000.00 2015/12/142019/12/13 Co., Ltd. Tianjin Binhai Rapid Transit Development Finance 953,016,242.00 2015/4/30-2023/4/21 lease Co., Ltd. Tianjin Binhai Rapid Transit Development Finance 450,203,004.26 2015/9/7-2027/9/20 lease Co., Ltd. Tianjin Binhai Rapid Transit Development Guarantee 287,682,853.99 2016/11/3-2018/11/2 borrowings Co., Ltd. Tianjin Binhai Rapid Transit Development Guarantee 200,000,000.00 2016/6/27-2021/6/27 borrowings Co., Ltd. Tianjin Binhai Rapid Transit Development Guarantee 167,356,712.00 2016/5/23-2020/5/23 borrowings Co., Ltd. Tianjin Binhai Rapid Transit Development Guarantee 22,471,913.48 2016/2/4-2020/2/4 borrowings Co., Ltd. Tianjin Rail Transit Group Engineering Guarantee 100,000,000.00 2016/09/02-2017/09/02 borrowings Construction Co., Ltd. Tianjin Rail Transit Group Engineering Guarantee 77,000,000.00 2016/08/19-2017/08/19 Construction Co. borrowings Tianjin Rail Transit Group Engineering Guarantee 12,000,000.00 2016/06/17-2017/06/16 Construction Co. borrowings Tianjin Rail Transit Group Engineering Guarantee 5,000,000.00 2016/06/20-2017/06/19 Construction Co. borrowings Tianjin Rail Transit Group Engineering Guarantee 2,000,000.00 2016/05/06-2017/05/05 Construction Co. borrowings Guarantee Tianjin Metro(Gruop)Co,Ltd. borrowings 348,000,000.00 2015/01/30-2017/01/29 Guarantee Tianjin Metro(Gruop)Co,Ltd. borrowings 50,000,000.00 2016/12/19-2021/12/19 Guarantee Tianjin Metro(Gruop)Co,Ltd. borrowings 500,000,000.00 2016/03/08-2017/03/07 Finance Tianjin Metro(Gruop)Co,Ltd. lease 1,231,637,325.68 2014/09/18-2017/09/17 154 F-156 Company name Category Amount Guarantee term Finance 139,640,683.82 2014/12/18-2020/12/17 Tianjin Metro(Gruop)Co,Ltd. lease Finance 210,000,000.00 2014/12/11-2019/12/10 Tianjin Metro(Gruop)Co,Ltd. lease Finance 519,001,405.94 2015/02/13-2022/02/12 Tianjin Metro(Gruop)Co,Ltd. lease Finance 708,333,333.31 2015/03/27-2021/03/26 Tianjin Metro(Gruop)Co,Ltd. lease Finance 941,667,848.36 2015/03/27-2021/03/26 Tianjin Metro(Gruop)Co,Ltd. lease Finance 350,000,000.00 2016/06/24-2019/06/24 Tianjin Metro(Gruop)Co,Ltd. lease Finance 200,000,000.00 2016/08/09-2019/08/09 Tianjin Metro(Gruop)Co,Ltd. lease Finance 150,000,000.00 2016/10/26-2019/10/25 Tianjin Metro(Gruop)Co,Ltd. lease Finance 150,000,000.00 2016/12/05-2019/12/05 Tianjin Metro(Gruop)Co,Ltd. lease Finance 200,000,000.00 2016/12/05-2019/12/05 Tianjin Metro(Gruop)Co,Ltd. lease Total 9,722,511,322.84 (2).Guarantee provided by Internal related parties Guarantor Company Name Category Amount Term Tianjin Rail Transit Guarantee 2015/10/28- Tianjin Metro(Gruop)Co,Ltd. Group Co., Ltd. 596,000,000.00 borrowings 2018/9/28 Tianjin Binhai Rapid Finance 2015/4/1 Tianjin Metro(Gruop)Co,Ltd. Transit Development 625,576,723.72 Co., Ltd. lease 2023/4/1 Tianjin Binhai Rapid Transit Tianjin Rail Transit Finance 2015/4/30 953,016,242.00 Development Co., Ltd. Group Co., Ltd. lease 2023/4/21 Tianjin Binhai Rapid Tianjin Teda Investment Finance 2010/5/28- Transit Development 942,244,394.00 Holding Co., Ltd 2020/5/28 Co., Ltd. lease Tianjin Binhai Rapid Tianjin Teda Investment Guarantee 2003/1/23- Transit Development 1,435,000,000.00 Holding Co., Ltd Co. 2029/1/20 borrowings Tianjin Binhai Rapid Tianjin Teda Investment Guarantee 2009/1/21- Transit Development 73,264,139.00 Holding Co., Ltd Co. 2019/1/20 borrowings Tianjin Binhai Rapid Tianjin Teda Investment Guarantee 2009/9/25- Transit Development 1,899,519,055.99 Holding Co., Ltd Co. 2031/10/22 borrowings 155 F-157 Guarantor Company Name Category Amount Term Tianjin Binhai Rapid Tianjin Teda Investment Guarantee 2003/3/17- Transit Development 900,000,000.00 Holding Co., Ltd Co. 2023/3/16 borrowings Tianjin Binhai Rapid Tianjin Teda Investment Guarantee 2010/6/30- Transit Development 1,035,069,864.00 Holding Co., Ltd Co. 2022/6/29 borrowings Tianjin Infrastucture Tianjin Guarantee 2014/11/20- Construction&Investment 448,533,240.35 Metro(Gruop)Co,Ltd. 2018/11/20 (Group)Co borrowings Tianjin Infrastucture Tianjin Guarantee 2005/06/21- Construction&Investment 138,203,800.76 Metro(Gruop)Co,Ltd. 2029/12/31 (Group)Co borrowings Tianjin Infrastucture Tianjin Guarantee 2014/08/29- Construction&Investment 449,302,360.48 Metro(Gruop)Co,Ltd. 2018/07/27 (Group)Co borrowings Tianjin Infrastucture Tianjin Guarantee 2012/12/26- Construction&Investment 2,700,000,000.00 Metro(Gruop)Co,Ltd. 2017/12/25 (Group)Co borrowings Tianjin Infrastucture Tianjin Guarantee 2014/06/27- Construction&Investment 61,500,000.00 Metro(Gruop)Co,Ltd. 2038/10/27 (Group)Co borrowings Tianjin Infrastucture Tianjin Guarantee 2015/03/27- Construction&Investment 299,300,000.00 Metro(Gruop)Co,Ltd. 2017/12/30 (Group)Co borrowings Tianjin Infrastucture Tianjin Guarantee 2015/03/06- Construction&Investment 12,500,000,000.00 Metro(Gruop)Co,Ltd. 2025/03/01 (Group)Co borrowings Tianjin Infrastucture Tianjin Finance 2007/12/07- Construction&Investment 195,000,000.00 Metro(Gruop)Co,Ltd. 2019/12/06 (Group)Co lease Tianjin Infrastucture Tianjin Finance 2011/12/31- Construction&Investment 467,500,000.47 Metro(Gruop)Co,Ltd. 2021/12/30 (Group)Co lease Tianjin Infrastucture Tianjin Finance 2011/12/31- Construction&Investment 359,513,808.91 Metro(Gruop)Co,Ltd. 2021/12/30 (Group)Co lease Tianjin Infrastucture Tianjin Finance 2011/12/31- Construction&Investment 56,859,461.80 Metro(Gruop)Co,Ltd. 2021/12/30 (Group)Co lease Tianjin Infrastucture Tianjin Finance 2011/12/31- Construction&Investment 191,950,067.40 Metro(Gruop)Co,Ltd. 2021/12/30 (Group)Co lease Tianjin Infrastucture Tianjin Finance 2011/12/31- Construction&Investment 212,643,167.11 Metro(Gruop)Co,Ltd. 2021/12/30 (Group)Co lease 156 F-158 Guarantor Company Name Category Amount Term Tianjin Infrastucture Tianjin Finance 2013/07/29- Construction&Investment 389,273,352.90 Metro(Gruop)Co,Ltd. 2018/07/28 (Group)Co lease Tianjin Infrastucture Tianjin Finance 2013/09/15- Construction&Investment 112,500,000.06 Metro(Gruop)Co,Ltd. 2023/09/14 (Group)Co lease Tianjin Infrastucture Tianjin Finance 2013/09/15- Construction&Investment 150,000,000.05 Metro(Gruop)Co,Ltd. 2023/09/14 (Group)Co lease Tianjin Infrastucture Tianjin Finance 2013/09/15- Construction&Investment 262,500,000.11 Metro(Gruop)Co,Ltd. 2023/09/14 (Group)Co lease Tianjin Infrastucture Tianjin Finance 2013/09/15- Construction&Investment 225,000,000.03 Metro(Gruop)Co,Ltd. 2023/09/14 (Group)Co lease Tianjin Infrastucture Tianjin Finance 2013/09/15- Construction&Investment 450,000,000.24 Metro(Gruop)Co,Ltd. 2023/09/14 (Group)Co lease Tianjin Infrastucture Tianjin Finance 2014/03/31- Construction&Investment 850,135,957.34 Metro(Gruop)Co,Ltd. 2029/03/30 (Group)Co lease Tianjin Railway Construction Guarantee 2014/6/30-2 Tianjin Metro(Gruop)Co,Ltd. Investment Holding 700,000,000.00 019/6/29 (Group) Co., Ltd borrowings Tianjin Railway Tianjin Infrastucture Construction Finance 2013/11/26- Construction&Investment Investment Holding 597,346,456.53 2018/11/25 (Group)Co (Group) Co., Ltd lease Total 30,276,752,093.25 Note 10: Contingencies 1. Guarantee for external Company name Category Guarantee Amount Guarantee Term Guarantee: Tianjin TEDA Investment Holding Co., Mortgage and 2007.10-2019.10 600,000,000.00 Ltd. Guarantee Mortgage 2007.10-2017.10 Total 600,000,000.00 Note 11: Commitments None 157 F-159 Note 12: Events occurring after the date of the balance sheet None Note 13: Non-monetary exchange assets and Restructuring Debt None Note 14: Explanation on the transfer of important assets and their disposal None Note 15: Enterprise merger, separation and other major restructuring matters None Note 16: Other significant matters Subsidiary of Tianjin Binhai Rapid Transit Development Co., Ltd.’s part of assets were damaged by the Tianjin port 8.12 special major fire explosion accident .the book value of impaired assets is RMB 187,287,386.07, insurance indemnities received from Bohai insurance company is RMB 172,905,352.00, Subsidiary of Tianjin Binhai Rapid Transit Development Co., Ltd. accounted the book value of impaired assets in other non-current assets, and the difference between the book value and insurance indemnities formed provision of impairment with the amount of RMB 14,382,034.07. In addition, subsidiary Tianjin Binhai Rapid Transit Development Co., Ltd. tentative estimated insurance indemnities of RMB 30,000,000.00 in terms of insurance contract and accounted for non-operting revenue in the last year. Bohai Insurance Company confirmed the amount of insurance indemnities of RMB 21,757,232.00, the difference has been adjusted to non- operating revenue and other account receivable in 2015. Note 17: The Notes to the Main Financial Statements of the Parent Company 1. Accounts receivable ˄1˅Accounts receivable classified by category 2016-12-31 Classification Book value Bad-debt provision Amount Proportion(%) Amount Proportion(%) Accounts receivable with significant single amount and single provision for bad debt 0.00 0.00 0.00 0.00 Accounts receivable with insignificant single amount but single provision for bad debt 0.00 0.00 0.00 0.00 Accounts receivable with provision for bad debt created by credit risk portfolio 24,833,603.04 100.00 0.00 0.00 Total 24,833,603.04 100.00 0.00 0.00 158 F-160 2015-12-31 Classification Book-value Bad-debt provision Amount Proportion(%) Amount Proportion(%) Accounts receivable with significant single amount and 0.00 0.00 0.00 0.00 single provision for bad debt Accounts receivable with insignificant single amount 0.00 0.00 0.00 0.00 but single provision for bad debt Accounts receivable with provision for bad debt 27,405,328.04 100.00 0.00 0.00 created by credit risk portfolio Total 27,405,328.04 100.00 0.00 0.00 ˄2˅Accounts receivables stated by aging 2016-12-31 2015-12-31 Aging Amount Proportion Bad-debt Amou Proportion Bad-debt provision nt provision Within 1 1,028,275.00 100.00% 0.00 8,019,123.00 100.00% 0.00 year 1-2 years 0.00 0.00% 0.00 0.00 0.00% 0.00 2-3 years 0.00 0.00% 0.00 0.00 0.00% 0.00 3-4 years 0.00 0.00% 0.00 0.00 0.00% 0.00 4-5 years 0.00 0.00% 0.00 0.00 0.00% 0.00 Over 5 0.00 0.00% 0.00 0.00 0.00% 0.00 years Total 1,028,275.00 100.00% 0.00 8,019,123.00 100.00% 0.00 ˄3˅Top 5 debtors with their ending balances of accounts receivable 159 F-161 Provision Company name Amount Proportion for bad- Aging Contents debt Tianjin Port Bulk Cargo Engineering 19,386,205.04 78.06 0.00 Over 5 years Logistics Co., Ltd. Unsettled Tianjin Bohua Yongli 891,400.00 3.59 0.00 Within 1 year Engineering Chemical Industry 4,419,123.00 17.80 0.00 1-2 years Unsettled Co.Ltd Sub- total 5,310,523.00 21.39 0.00 Tianjin Jinbin railway design consulting Co., 136,875.00 0.55 0.00 Within 1 year Rental fee Ltd Total 24,833,603.04 100.00 In current period the total of top 5 debtors with their ending balances of accounts receivable reaches RMB 24,833,603.04, 100% of their total account receivables. The balance of accounts receivable does not include the amounts which belong to the shareholders who hold more than 5% (including 5%) shares of this company. The balance of accounts receivable of other related parties amounted to RMB 19,386,205.04. 2. Other account receivable (1).Other account receivable by risk 2016-12-31 Category Book value Bad-debt Provision Amount Proportion(%) Amount Proportion(%) Other account receivable with significant single amount and single 0.00 0.00 0.00 0.00 provision for bad debt Other account receivable with insignificant single amount but single 0.00 0.00 0.00 0.00 provision for bad debt Other account receivable with provision for bad debt created by 9,222,061,134.60 100.00 1,663,668.00 100.00 credit risk portfolio Total 9,222,061,134.60 100.00 1,663,668.00 100.00 160 F-162 2015-12-31 Book value Bad-debt Provision Category Proportio Amount Proporti Amount n(%) on(%) Other account receivable with significant single amount and single provision for bad debt 0.00 0.00 0.00 0.00 Other account receivable with insignificant single amount but single provision for bad debt 0.00 0.00 0.00 0.00 Other account receivable with provision for bad debt created by credit risk portfolio 4,881,662,723.99 100.00 1,183,668.00 100.00 Total 4,881,662,723.99 100.00 1,183,668.00 100.00 (2).Other account receivable stated by aging 2016-12-31 2015-12-31 Aging Bad-debt Bad-debt Amount Proportion Amount Proportion provision provision Within 1 6,082,002,183.60 99.97 0.00 4,687,820,610.33 99.96 0.00 year 1-2 0.00 0.00 0.00 0.00 0.00 0.00 years 2-3 0.00 0.00 0.00 0.00 0.00 0.00 years 3-4 0.00 0.00 0.00 0.00 0.00 0.00 years 4-5 0.00 0.00 0.00 1,600,000.00 0.03 800,000.00 years Over 5 2,079,585.00 0.03 1,663,668.00 479,585.00 0.01 383,668.00 years Total 6,084,081,768.60 100.00 1,663,668.00 4,689,900,195.33 100.00 1,183,668.00 161 F-163 (3).Top 5 debtors with their ending balances of other account receivable Provision Company name Amount for Proportion Aging Contents bad-debt Within 1 3,309,789,154.50 0.00 35.89 year Current accountǃ Tianjin management feeǃ Metro(Gruop)Co,Ltd. 1-2 years 485,630.69 0.00 0.01 Interest Sub-total 3,310,274,785.19 0.00 35.90 Within 1 Tianjin Binhai Rapid 1,671,514,766.67 0.00 18.13 year Current accountǃ Transit Development Co., 1-2 years Interest Ltd. 1,525,477,150.00 0.00 16.54 Sub-total 3,196,991,916.67 0.00 34.67 Tianjin Finance Bureau 1,400,000,000.00 0.00 15.18 1-2 years Borrowings Tianjin Railway Current accountǃ Within 1 0.00 11.57 Construction Investment 1,067,071,725.69 year management feeǃ Holding (Group) Co., Ltd Interest Within 1 1,100,000.00 0.00 0.01 year Tianjin Xianda Hotel Over 5 Current account 137,668,227.83 0.00 1.49 years Sub-total 138,768,227.83 0.00 1.50 Total 9,113,106,655.38 0.00 98.82 In current period the total of top 5 debtors with their ending balances of other account receivable reaches RMB 9,113,106,655.38, 98.82% of their total other account receivable. The balance of other account receivable does not include the amounts which belong to shareholders who hold more than 5% (including 5%) shares of the company. 3. Long-term Equity Investment (1).Details of long-term equity investment Increase in Decrease in Items 2015-12-31 2016-12-31 current year current year Investment on 101,730,336,483.01 11,625,253,898.74 0.00 113,355,590,381.75 subsidiaries 162 F-164 Investment on joint 0.00 0.00 0.00 0.00 ventures Investment on associate 2,754,095,359.11 4,628,413.08 0.00 2,758,723,772.19 Total 104,484,431,842.12 11,629,882,311.82 0.00 116,114,314,153.94 Less:Provision of 250,000.00 0.00 0.00 250,000.00 impairment The net value of long-term equity 104,484,181,842.12 116,114,064,153.94 investment 163 F-165 (2).The details of long-term equity investment Movement in equity Sha Impairme The Cash bonus Accumulate reh Impairmen Accoun nt reserve Investment Movement in other or profit Move d oldi t reserve in 2015-12-31 in 2016-12-31 Invested company ting The movement compre ment closing cost opening current year movement ng method under equity hensive in balance balance method income other in equity rati movem equity o rnt ĉ.Subsidiaries 113,355,590,381.75 101,730,336,483.01 250,000.00 11,625,253,898.74 0.00 0.00 0.00 0.00 0.00 113,355,590,381.75 250,000.00 Tianjin Cost 83,162,502,256.53 75,144,647,717.79 0.00 8,017,854,538.74 0.00 0.00 0.00 0.00 0.00 83,162,502,256.53 100 0.00 Metro(Gruop)Co,Ltd. method Tianjin local railway Cost 9,813,541.21 9,813,541.21 0.00 0.00 0.00 0.00 0.00 0.00 0.00 9,813,541.21 100 0.00 construction company method F-166 Tianjin Xianda Hotel Cost 48,450,000.00 48,450,000.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 48,450,000.00 100 0.00 method Tianjin Binhai Rapid Cost Transit Development 12,815,329,590.25 12,815,329,590.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 12,815,329,590.25 100 0.00 method Co., Ltd. Tianjin Railway Construction Cost 16,033,739,942.71 13,456,400,582.71 0.00 2,577,339,360.00 0.00 0.00 0.00 0.00 0.00 16,033,739,942.71 100 0.00 Investment Holding method (Group) Co., Ltd. Tianjin Rail Transit Cost Group Engineering 201,010,610.80 201,010,610.80 0.00 0.00 0.00 0.00 0.00 0.00 0.00 201,010,610.80 100 0.00 method Construction Co., Ltd Tianjin Xianda Binhai Cost 15,658,640.25 15,658,640.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 15,658,640.25 100 0.00 construction company method Local railway Technology Cost 250,000.00 250,000.00 250,000.00 0.00 0.00 0.00 0.00 0.00 0.00 250,000.00 100 250,000.00 Development Company method Tianjin City Rail Cost Vocational Training 500,000.00 500,000.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 500,000.00 100 0.00 method Center 164 368,335,800.00 Tianjin Rail Transit Cost 38,275,800.00 330,060,000.00 368,335,800.00 ˄56,000,000dolla ˄6,000,000.00 0.00 ˄50,00 0.00 0.00 0.00 0.00 0.00 ˄56,000,000 100 0.00 Group(HK) Co., Ltd. method rs˅ dollars ˅ dollars˅ dollars ˅ Tianjin rail transit Cost group financing lease 700,000,000.00 0.00 0.00 700,000,000.00 0.00 0.00 0.00 0.00 0.00 700,000,000.00 70 0.00 method co., LTD Ċ.Joint ventures 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ċ.Associates 2,638,861,200.00 2,754,095,359.11 0.00 0.00 4,628,413.08 0.00 0.00 0.00 119,862,572.19 2,758,723,772.19 0.00 Tianjin South Central Equity 2,638,861,200.00 2,754,095,359.11 0.00 0.00 4,628,413.08 0.00 0.00 0.00 119,862,572.19 2,758,723,772.19 48 0.00 Railway Co.Ltd method Total 115,994,451,581.75 104,484,431,842.12 250,000.00 11,625,253,898.74 4,628,413.08 0.00 0.00 0.00 119,862,572.19 116,114,314,153.94 250,000.00 F-167 165 (3).Financial information of significant joint ventures 2016-12-31 2015-12-31 Items Tianjin South Central Railway Tianjin South Central Co.Ltd Railway Co.Ltd Current assets 1,283,399,845.01 1,035,661,311.44 Non-current assets 11,413,313,039.27 10,109,499,293.33 Total assets 12,696,712,884.28 11,145,160,604.77 Current liabilities 5,135,703,768.31 4,633,367,816.85 Non-current liabilities 1,813,667,923.91 774,094,123.10 Total liabilities 6,949,371,692.22 5,407,461,939.95 Net assets 5,747,341,192.06 5,737,698,664.82 Net Assets calculated by Share holding 2,758,723,772.19 2,754,095,359.11 percentage Adjustment 0.00 0.00 Book Value of investment in associate 2,758,723,772.19 2,754,095,359.11 Fair value of equity investment with quoted 0.00 0.00 market price Operating revenue 596,071,850.03 649,359,610.66 Financial expenses -2,024,055.09 -5,971,663.93 Net profits 9,642,527.24 105,822,932.86 OCI 0.00 0.00 Total comprehensive income 9,642,527.24 105,822,932.86 Dividend received from joint ventures in the 0.00 0.00 year 4. Operating revenue and Operating costs (1).Details of operating revenue and costs Items 2016 2015 2014 Operating revenue 4,086,277.42 10,347,623.00 700,000.00 Including:Main operating revenue 3,331,105.00 10,019,123.00 700,000.00 Other operating revenue 755,172.42 328,500.00 0.00 Operating costs 20,326,521.59 10,039,402.04 700,000.00 Including:Main operating costs 20,188,521.59 10,019,123.00 700,000.00 Other operating costs 138,000.00 20,279.04 0.00 Operating gross profits -16,240,244.17 308,220.96 0.00 (2).Details of Main operating revenue 166 F-168 Items 2016 2015 2014 rental income 130,357.14 0.00 0.00 Project settlement income 891,400.00 10,019,123.00 700,000.00 Service revenue 2,309,347.86 0.00 0.00 Total 3,331,105.00 10,019,123.00 700,000.00 (3).Details of Main operating costs Items 2016 2015 2014 Operating cost of Metro 17,801,443.70 0.00 0.00 rental expense 8,449.59 0.00 0.00 Project settlement income 0.00 10,019,123.00 700,000.00 Service charge 2,378,628.30 0.00 0.00 Total 20,188,521.59 10,019,123.00 700,000.00 (4).Details of Other operating revenue Items 2016 2015 2014 rental income 0.00 328,500.00 0.00 Other income 755,172.42 0.00 0.00 Total 755,172.42 328,500.00 0.00 (5).Details of Other operating revenue Items 2016 2015 2014 rental cost 0.00 20,279.04 0.00 Other cost 138,000.00 0.00 0.00 Total 138,000.00 20,279.04 0.00 Note 5. Investment income Category 2016 2015 2014 Income of long-term equity investment accounted 0.00 0.00 0.00 by cost method Income of long-term equity investment accounted 4,628,413.08 36,404,660.75 53,558,170.59 by equity method Investment income arising from disposing 0.00 0.00 0.00 167 F-169 Category 2016 2015 2014 long-term equity investment Investment income of available-for-sale finance 8,943,374.34 7,174,090.00 8,010,525.00 investment during its holding period Investment income of held-to-maturity investment 0.00 0.00 0.00 during its holding period Investment income arising from disposing 0.00 0.00 0.00 available-for-sale finance investment Investment income arising from disposing 0.00 0.00 0.00 held-to-maturity investment Others 3,849,156.08 5,803,924.51 3,764,182.16 Total 17,420,943.50 49,382,675.26 65,332,877.75 6. Parent’s Cash Flow Statement (1).The Additional Information of Cash Flow Statement Items 2016 2015 2014 1. Adjust net profits to cash flow of operations Net Profit After Tax -56,528,226.36 83,223,930.60 66,007,288.27 Plus:Provision of assets 480,000.00 480,000.00 552,075.50 Depreciation 421,635.06 408,080.66 561,657.41 Intangible Assets Amortization 0.00 0.00 0.00 Long term prepaid Expense Amortization 0.00 0.00 0.00 Gain and Loss on Disposal of Non Current 0.00 15,271.45 0.00 Assets (“-“ filled for the earnings) Gain and Loss on Written-off of Non Current 0.00 0.00 0.00 Assets (“-“ filled for the earnings) Gain and Loss on fair value movement 0.00 0.00 0.00 (“-“ filled for the earnings) Financial Expenses (“-“ filled for the earnings) 51,378,940.95 3,757,888.89 0.00 Loss on Investment (“-“ filled for the earnings) -17,419,730.42 -49,382,675.26 -65,332,877.75 168 F-170 Items 2016 2015 2014 Decrease in Deferred Tax Assets (“-“ filled for -120,000.00 -120,000.00 -138,018.88 the increase) Increase in Deferred Tax Liabilities (“-“ filled 21,709.84 0.00 0.00 for the decrease) Decrease in Inventory(“-“ filled for the 0.00 0.00 0.00 increase) Decrease in Operational Account -7,900,521,577.36 -8,463,943,842.20 372,746.00 Receivables(“-“ filled for the increase) Increase in Operational Payable(“-“ filled for 1,495,762,550.15 1,343,335,613.22 77,983,541.43 the decrease) Others 0.00 0.00 0.00 The net cash flow from business activities -6,426,524,698.14 -7,082,225,732.64 80,006,411.98 2. Major investments and fundraising not involving cash The conversion of debt into capital 0.00 0.00 0.00 The convertible bonds matured within 1 year 0.00 0.00 0.00 The fixed assets under financial leasing 0.00 0.00 0.00 3. Net changes of cash and cash equivalents The closing balance of cash 37,639,207.13 372,207,292.19 61,187,044.55 Less: the opening balance of cash 372,207,292.19 61,187,044.55 136,914,545.90 Add: the closing balance of cash equivalents 0.00 0.00 0.00 Less : the opening balance of cash 0.00 0.00 0.00 equivalents The net increase amount of cash and cash -334,568,085.06 311,020,247.64 -75,727,501.35 equivalents (2).Components of Cash and Cash Equivalents Items 2016 2015 2014 ĉ.Cash 37,639,207.13 372,207,292.19 61,187,044.55 Including ˖Cash on hand 0.00 0.00 0.00 169 F-171 Bank deposit on hand 37,639,207.13 372,207,292.19 61,187,044.55 Other currency cash on hand Deposit in central bank on hand Deposits in other banks Loans from other banks Ċ.Cash equivalents Including :Bond investment due within three months ċ.Ending cash and cash equivalent balance 37,639,207.13 372,207,292.19 61,187,044.55 Including ˖Cash and cash equivalents with limited use for parent or subsidiaries Note 18. Additional information None. Note 19. Approval of the financial statements’ report This Financial Statement is approved and Published by the Board of Directors at the 25th of April, 2017. Tianjin Rail Transit Group Co.,Ltd. Legal person: Miao Yu Gang Date: April 25, 2017 170 F-172 F-173 F-174 F-175 F-176 F-177 F-178 F-179 F-180 F-181 F-182 F-183 F-184 F-185 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements January to September 2017 (All amounts in RMB Yuan unless otherwise stated) IˊBasic Situation of Company (I) Company Profile Company Name: Tianjin Rail Transit Group Co., Ltd. (hereinafter referred as “the Company”) Address of Registration: No. 36, Caizhi Road, Xiqing District, Tianjin, People's Republic of China Permitted Operation Period: From 06/06/1992 to 14/05/2053 Total Owners Equity: RMB 40,264,580,000.00 Yuan Legal Representative: Miao Yugang (II) Business Nature, Business Scope and Major Products or Services Provided by the Company Main Business Scope: organizing and managing city railway transportation; investing, constructing, operating, maintaining, repairing and developing railway projects; urban infrastructure investing; marketable security and equity investing; cargo loading and unloading service, railway-related storage (not including hazardous materials); agent project contracting, engineering construction and management and technical consultancy and services; commercial property retailing; property and site lease; building material manufacturing and retailing; conference and exhibition service; advertising producing, designing and publishing. (License and operation permits are needed if required by laws and regulations.) (III) Company History Tianjin Railway Group Co., Ltd. is a wholly state-owned subsidiary of the Tianjin SASAC. The company acquired Business License (No. 120000000007484) from the Administration of Industry and Commerce of Tianjin Municipality on June 6, 1992. The registered capital is RMB 1,008,382,055.00 Yuan. The paid-in capital is RMB 1,008,382,054.70Yuan. According to the Notice of Forming the Tianjin Rail Transit Group Co., Ltd. issued by the State-Owned Assets Supervision and Administration Commission of Tianjin Municipal People's Government (TJ Guoziqigai 14 F-186 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements No. [2014] No.188) on June 25, 2014 and the Notice of Approval for Changing Business Name ((2014) No. 003056) issued by the Administration of Industry and Commerce of Tianjin Municipality on May 28, 2014, Tianjin Railway Group Co., Ltd. is changed to Tianjin Rail Transit Group Co., Ltd., and applied to increase the registered capital of RMB 38,991,617,945.30 Yuan by way of turning the capital reserves. The registered capital is RMB 40 billion Yuan after the capital increase. The Company changed the business license on July 16, 2014. After the change, the shareholders of the Company changed to Tianjin city Infrastructure Investment Group Co., Ltd. and Tianjin TEDA Investment Holding Co., Ltd. with the shareholding ratio of 86.34% and 13.66% respectively. On May 18, 2017, approved by Tianjin SASAC according to the document Approval of Tianjin State-owned Assets Supervision and Administration Commission on Revising the Articles of Association of Tianjin Rail Transit Group Co., Ltd. (Jinguozifagui [2017] No. 49): The Company was agreed to change the “Article 6: The Company’s registered capital is RMB 40 billion Yuan.” to “Article 7: The Company’s registered capital RMB 40,264,580,000.00 Yuan” of Article of Association of Tianjin Rail Transit Group Co., Ltd, and change the “Article 8 Capital Contribution of Shareholders” as well according to the documents of Jinguoziyusuan [2014] No. 68 and No.73, Jinguoziyusuan [2015] No. 48, No.54 and No.55, and Jinguoziyusuan [2016] No.49 issued by Tianjin SASAC. After the capital increase, the shareholding ratios of Tianjin city Infrastructure Investment Group Co., Ltd. and Tianjin TEDA Investment Holding Co., Ltd. remained at 86.34% and 13.66% respectively. (ɝ) Scope of Consolidated Financial Statements As of the end of the reporting period, a total of 11 subsidiaries were included in the scope of the consolidated financial statements. For details, please refer to Note VIII Equities in Other Entities. For details about changes in the scope of the consolidated financial statements in this reporting period, please refer to Note VII Changes in Scope of Consolidation. IIˊBasis of Preparation of Financial Statements (I) Basis of Preparation With the going-concern assumption as the basis on transactions and other events that actually occurred, the Company prepared financial statements in accordance with the relevant provisions of the Accounting Standards for Business Enterprises and based on this Note III Significant Accounting Policy and Accounting Estimation. (II) Going Concern The Company did not have any matter or circumstance that caused significant doubts about the Company's ability to continue as a going concern within the 12 months from the end of the reporting period. IIIˊSignificant Accounting Policy and Accounting Estimation 1. A Statement of Compliance with Corporate Accounting Standards 15 F-187 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements The financial statements prepared by the Company are in compliance with the Corporate Accounting Standards, which factually and completely present the Company's financial positions, business results, cash flows and other relevant information. 2. Accounting Year The accounting year of the Company is from January 1 to December 31 of each calendar year. 3. Functional Currency Renminbi ("RMB") is the functional currency of the Company. 4. Accounting Recognition, Measurement and Reporting Foundation and Measurement Attributes The Company has adopted the accrual basis of accounting and the accounting recognition, measurement and close accounts for each separate accounting period and financial statements have been prepared on a going concern basis. The Company adopts the historical cost, replacement cost, net realizable value, present value and fair value as the principle of measurement in the financial statements. The historical cost is generally adopted. Where the replacement cost, net realizable value, present value and fair value are adopted, it should be ensured that the amount of the accounting elements determined can be obtained and reliably measured. 5. Accounting Treatment Method of Business Merger under Common Control and not under Common Control (1) Business Merger under Common Control The assets and liabilities acquired in the business merger shall be recorded into the consolidated financial statements at their book value on the date of business merger. For the difference of the book value of net assets acquired by the Company and that of consolidation consideration (or total present value of the issued shares) paid, the stock premium in capital reserve should be adjusted. If the stock premium in capital reserve is insufficient to offset, the retained earnings shall be adjusted. If the accounting policies adopted by the acquired parties are inconsistent with the Company, the acquired parties shall adjust according to the accounting policies of the Company at the merger date and recognize the book value adjusted based on these policies. All expenses directly relevant to the business merger are recorded into the current profits and losses upon 16 F-188 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements occurrence, including audit expense, assessment expense and legal service expense paid for the business merger. Handling charges and commissions for issuing equity securities during the business merger offset the premium income of equity securities. If the premium income is insufficient to offset, the retained earnings shall be written down. (2) The Business Merger not under Common Control The merger cost is the assets paid, the liabilities occurred or assumed and the fair value of equity securities issued by the Company for the control power of the acquired party at the purchase date, plus all directly relevant expenses. Thus, the assets paid, the liabilities occurred or assumed by the Company at the purchase date shall be recognized as per the fair value. The balance between the fair value and the book value is recognized into the current profits and losses. The balance that the merger costs minus the fair value of identifiable net assets of the acquired party in the business merger is recognized as the goodwill by the Company. If the merger costs are less than the fair value of identifiable net assets of the acquired party, the Company shall review the fair values of all identifiable assets, liabilities and contingent liabilities of the acquired party and the measurement of the merger costs. If the merger costs are still less than the fair values of identifiable net assets of the acquired party in the business merger after the review, the balance is recognized into the current profits and losses. The potential economic benefits of other assets (not limited to the identified assets of the acquired party) except for intangible assets of the acquired party in the business merger may flow into the Company and their fair value can be reliably measured and independently recognized. Intangible assets whose fair value can be reliably measured are separately identified as intangible assets and measured as per the fair value. The potential economic benefits of other liabilities except for the contingent liabilities of the acquired party may flow out from the Company and their fair value can be reliably measured and independently recognized. The contingent liabilities of the acquired party whose fair value can be reliably measured are separately identified as the contingent liabilities and measured as per the fair value. Where the acquired companies become subsidiaries of the Company after the merger, all identifiable assets, liabilities and contingent liabilities of the acquired parties in the business merger are recognized as per their fair values at the purchase date into the consolidated balance sheet of the Company. 6. Preparation Method of Consolidated Financial Statements The consolidation scope of the consolidated financial statements is determined on the basis of control. The 17 F-189 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements parent company shall cover all controlled entities (including enterprises, divisible parties of invested companies, and structured entities controlled by enterprises) into the consolidation scope of the consolidated financial statements. Although an enterprise has at most 50% voting right of the invested party, whether its voting right is enough for it to have the ability of directing activities of the invested party and whether this enterprise is viewed with the possession of the control right, the following facts should be considered: (1) The voting right of the enterprise relative to other voting shares of other investment parties, and the dispersion of voting shares of other investment parties; (2) The potential voting rights of the enterprise and other investment parties in the invested party such as convertible bonds and executable warrants; (3) Other rights in other contracts The enterprise shall consider the history implementation of voting rights and other facts of the invested party. When the voting right has no material impact on the returns of the invested party, for example it's only related to regular administration of the invested party, and when activities of the invested party are determined in contracts, the enterprise has to assess these contracts and judge whether it has enough power to control the invested party. When the enterprise is unable to find out whether its right is powerful enough to control the invested party, it should consider the evidences that prove its actual ability to direct activities of the invested party and then judge whether it has the control right of the invested party. The considerations include but are not limited to: a. Whether the enterprise has the right to assign or approve the executives of the invested party. b. Whether the enterprise votes for or against major transactions of the invested party out of its own benefits. c. Whether the enterprise has the control of appointment of authorities like Board of Directors in the invested party, or gets the attorneyship from other voting shareholders. d. Whether the enterprise is affiliated with majorities of executives or authorities like Board of Directors in the invested party. Special relations between the enterprise and the invested party, if exiting, should be considered when it's to assess whether the enterprise has the control right of the invested party. Special relations include key executives of the invested party is or was the employee of the enterprise; the operation of the invested party relies on the 18 F-190 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements enterprise; major activities of the invested party have the enterprise involved in or are taken under the name of the enterprise; the enterprise's risks or earnings with variable returns from the invested party exceed its voting shares or similar right proportion. When determining whether it has the control of the invested party, the enterprise shall find out firstly that it executes the decision right under the name of principal entity or agency. If other parties have the decision rights, it should find out that whether they execute the decision rights under the name of agency. The enterprise should find out whether it has the overall control of the invested party. In rare cases when evidences show the following conditions are met and relevant laws and regulations are complies with, the investment party shall view a party (hereinafter referred as “the part”) of invested party as an separate part (individual entity) of invested party and then find out whether it has the control right of this part (individual entity). (a) The assets of the part are the sole source to pay off liabilities or other equities of the part, and are not used to pay off other liabilities of other parts of the invested party; (b) Except for parties related to the part, other parties are entitled to neither the rights related to assets of the part, nor the rights related to remaining cash flows of the part. The accounting policies and accounting periods adopted by subsidiaries consolidated to the scope of the consolidated financial statements shall be consistent with that of the Company. If the accounting policies and accounting periods adopted by subsidiaries are inconsistent with that of the Company, necessary adjustment shall be made in consolidated statements according to the accounting policies and periods of the Company. The consolidated financial statements are based on the statements of parent company and subsidiaries and complied by the parent company after all internal transactions between the parent and the subsidiaries, and among subsidiaries are written off according to relevant materials. Unrealized profits and losses arising from the parent company selling assets to its subsidiaries offset "net profit attributable to the parent". Unrealized profits and losses arising from the subsidiaries selling assets to parent company offset "net profit attributable to the parent" and "minority interest income" according to their proportion allocated by the parent company. Unrealized profits and losses arising from the subsidiaries selling assets among them offset "net profit 19 F-191 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements attributable to the parent" and "minority interest income" according to the selling party’s proportion allocated by the parent company. Long-term equity investment of the parent company held by the subsidiaries is viewed as the treasury stocks of the enterprise group and the deduction item of ownership equity. It's stated in “less: treasury stock” under ownership equity of the consolidated balance sheet. Long-term equity investment of the subsidiaries held by other subsidiaries offsets the shares of ownership equity of invested subsidiaries. Deferred income tax assets or liabilities are recognized in the consolidated balance sheet, income tax expenses are adjusted in the consolidated statement of income when temporary differences between the book values of assets and liabilities in the consolidated balance sheet and their taxation base exist due to offsetting unrealized profits and losses arising from internal sales, but deferred income tax recorded directly into transactions or events of ownership equity and related with business merger are excepted. Minority interest is stated in "minority interest" under ownership equity in the consolidated balance sheet. Minority interest income is stated in "minority interest income" under net profit in the consolidated statement of income. The balance that current profits and losses assumed by minorities of subsidiaries exceeding their shares of ownership equity at the beginning period are used to offset the minority interest. During the reporting period, for the subsidiaries and businesses increased due to the business merger under common control, the Company shall adjust the beginning amount in the consolidated balance sheet and record the revenue, expense and profit of the subsidiaries and businesses from the beginning to the end of reporting period in the merger period into the consolidated statement of income, and include the cash flow from the beginning to the end of reporting period in the merger period into the consolidated statement of cash flow. Same items in statement comparison shall be adjusted. The reporting entities after the merger exists start to control since the final controlling party. During the reporting period, for the subsidiaries and businesses increased due to the business merger under non-common control or other means, the Company shall not adjust the beginning amount in the consolidated balance sheet and then record the revenue, expense and profit of the subsidiaries and businesses from the beginning to the end of reporting period in the merger period into the consolidated statement of income, and include the cash flow from the beginning to the end of reporting period in the merger period shall be included into the consolidated statement of cash flow. When business merger under non-common control is realized through multiple transactions, the Company re-measures the equity of the acquired party held before the acquisition date at the fair value of the acquisition date. The balance between the fair values and the book values is recorded into the 20 F-192 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements current investment income. For the equity of the acquired party held before the acquisition date and involved with other ownership income or other ownership equity changes, other comprehensive income and other ownership equity are transferred into current investment income at the acquisition date, but other comprehensive incomes arising from net debts or assets re-measured by the investment party are excepted. The Company shall not adjust the beginning amounts in the consolidated balance sheet when depositing subsidiaries and their services within the reporting period; revenue, expense and profit of the subsidiary from the beginning of reporting period to the deposition date are included into the consolidated statement of income; cash flow of the subsidiary from the beginning of reporting period to the deposition date is included into the consolidated statement of cash flow. The Company may lose the control right of the subsidiary due to the deposition of parts of equity investment or other causes, and remeasure the remaining equity investment at the fair value at the date of losing control right. Consideration acquired from equity deposition, plus the fair value of remaining equity, less net assets computed according to original shareholding ratio since the purchase date or the merger date, is recorded into the current investment income after losing the control right and offsets the goodwill. Other comprehensive income and other ownership equity related to the equity investment on original subsidiary are transferred into the current investment income when losing the control right. The Company disposes its equity investment on subsidiaries through multiple transactions until it losses the control right. If these transactions are a package deal, they shall be treated as one transaction to dispose its equity investment until losing the control right; but before losing the control right, the balance between each deposition price and the net assets of subsidiaries arising from the disposed investment is recognized as other comprehensive income in the consolidated financial statement and transferred into the current profits and losses when losing the control right. The balance between the new long-term equity investments acquired by the Company from purchasing minority interest and the net identifiable assets of subsidiaries acquired from new holding shares, and the balance between the disposed prices acquired from the disposed parts of equity investment of subsidiaries when not losing the control right and net assets of subsidiaries acquired from disposed long-term equity investment are adjusted into stock premium of capital reserve in the consolidated balance sheet. The stock premium of capital reserve, if not offset, is adjusted into retained earnings. 7. Determination Standard of Cash and Cash Equivalents The cash refers to the cash on hand and the deposits that can be used to pay at any time in the Company. 21 F-193 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements The cash equivalents refer to the Company's investments with short term (generally due within three months from the date of purchase) and strong liquidity, and are easy to convert known amounts cash and low risk of value change. 8. Foreign Currency Transaction and Foreign Currency Translation in Financial Statements The Company shall convert the foreign currency transactions incurred into the functional currency at the spot exchange rate at the transaction date. The approximate exchange rate is the exchange rate at the beginning of the month of the transaction. As for the ending balance in various foreign currency accounts, the foreign currency monetary items shall be translated at the spot exchange rate on the date of balance sheet, and any exchange balance which belongs to the period of preparing the construction shall be recognized into long-term prepaid expenses, and which belongs to borrowings on purchasing fixed assets shall be capitalized and other expenses shall be recognized into the current profits and losses. The foreign currency non-monetary items with the fair value measurement shall be translated at the spot exchange rate at the date of the fair value determined, and any exchange balance shall be recognized into the variable profit and loss of fair value. The foreign currency non-monetary items with the historical cost measurement shall be translated at the spot exchange rate at the transaction date, and no exchange different is generated. The assets and the liabilities items in the balance sheet shall be translated at the spot exchange rate on the date of balance sheet; other items in equity items should be translated at the spot exchange rate on the occurrence date, except for the "undistributed profit”. Other items in the balance sheet shall be translated at the spot exchange rate on the date of balance sheet. All translation balances in foreign currency statements are separately reflected under the ownership interest in the balance sheet. When the overseas operation is disposed, the difference on the foreign currency financial statements related to the overseas operation shall be transferred to the current profits and losses of the current period. 9. Financial Assets and Liabilities Classification of Financial Assets and Liabilities: On initial recognition, the Company 's financial assets are classified into one of the four categories, including financial assets at fair value through profit or loss (trading financial assets and financial assets measured at fair value and its variations being calculated into the current profits and losses), held-to-maturity investments, loans and receivables, and available-for-sale financial assets. 22 F-194 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements On initial recognition, the Company 's financial liabilities are classified into one of the two categories, including financial liabilities at fair value through profit or loss (trading financial liabilities and financial liabilities measured at fair value and its variations being calculated into the current profits and losses) and other financial liabilities. Recognition and Measurement of Financial Instruments Financial assets and financial liabilities are measured at fair value upon initial recognition. For financial assets or liabilities measured at fair value and its variations being calculated into the current profits and losses, relevant transaction costs are directly included into the current profits and losses; for other types of financial assets or liabilities, relevant transaction costs are included into the initially recognized amounts. Financial assets are measured by their fair values in subsequent periods. Transactions expenses shall not be deducted when the financial assets are disposed in the future. Except for: (1) Held-to-maturity investments, loans and receivables are measured as per the amortized cost in subsequent periods by the method of the effective interest; (2) Investment in equity instruments that are not quoted in an active market and whose fair value cannot be reliably measured, and derivative financial assets that are linked to and must be settled by delivery of the equity instrument are measured at cost. Financial liabilities are measured at amortized cost by using the effective interest method. Except for: (3) Financial liabilities measured at value and its variations being calculated into the current profits and losses are measured at fair value; (4) Financial liabilities that are not quoted in an active market and whose fair value cannot be reliably measured, and derivative financial liabilities that are linked to and must be settled by delivery of the equity instrument are measured at cost. Method for Determining the Fair Value of Financial Instruments The fair values of financial assets or liabilities in active market are determined based on their quoted prices in active market; the fair values of financial instruments not in active market are reasonably estimated by the Company by references of the prices used by voluntary parties in recent market transactions under familiar situations, the current fair values of identical financial instruments, the discount cash flow method and the option pricing model. 23 F-195 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Recognition and Measurement of Transfer of Financial Assets The transfer of financial asset refers to the transfer or delivery of the financial asset by the Company to a party other than the issuer of the financial asset (the transferee). If the Company has transferred substantially all the risks and rewards of ownership of the financial asset to the transferee, the financial asset will be derecognized. If the Company retains substantially all the risks and rewards of ownership of the financial asset, the Company will not derecognize the financial asset. Where the Company satisfies the criteria of derecognition for transfer of financial assets, the balance between the sum of the consideration received due to the transfer and the accumulative amount of variations in the fair value that were directly included in the owner's equity (if the transferred financial asset belongs to available-for-sale financial asset) and the carrying amount of transferred financial assets is calculated into current profits and losses. If the Company does not satisfy the conditions of derecognition for transfer of financial assets, the Company shall continue to recognize the transferred financial assets and recognize the consideration received as a financial liability. Impairment of Financial Assets On each date of balance sheet, the Company assesses the carrying amounts of financial assets other than those at fair value through profit or loss. If there is objective evidence that a financial asset is impaired, the Company determines the amount of any impairment loss. The objective evidence that a financial asset is impaired includes the following observable events: a. Significant financial difficulty of the borrower; b. A breach of contract by the borrower, such as a default or delinquency in interest or principal payments; c. The Company, for economic or legal reasons relating to the borrower's financial difficulty, granting a concession to the borrower; d. It becoming probable that the borrower will enter bankruptcy or other financial reorganizations; e. The disappearance of an active market for that financial asset because of financial difficulties of the Issuer; f. Failure to identify whether cash flow of an asset in a group of financial assets has been decreased, but based on overall assessment of publicly available data, it is found that the estimated future cash flows of the group of financial assets have decreased since initial recognition, such as the deteriorating of the debtor's ability to pay 24 F-196 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements the group of financial assets, the increase of unemployment rate in the country or region in which the debtor is located, significant decrease of price in the region of the collateral and the industry in downturn; g. Significant adverse changes in the technological, market, economic or legal environment in which the obligor operates, indicating that the cost of the investment in the equity instrument may not be recovered by the investor; h. A significant or prolonged decline in the fair value of an investment in an equity instrument; i. Other objective evidence indicating there is an impairment of accounts receivable. (1) Measurement of Impairment Losses on Held-to-Maturity Investments, Loans and Receivables If impairment occurs in held-to-maturity investments, loans and receivables measured at amortized cost, it will measure the impairment loss at the differences between the present value of future cash flows and the book value, and transfer to the current profits and losses. For a financial asset that is individually significant, the Company assesses the asset individually for impairment. If there is objective evidence that it has been impaired, the impairment loss should be recognized and calculated into current profits or losses. For a financial asset that is not individually significant, the Company assesses the asset individually for impairment or includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. After the impairment loss for financial assets measured at amortized cost is recognized, if there is objective evidence that the value of the financial asset has been recovered and is objectively related to what happened after the loss is recognized, the previously recognized impairment loss shall be reversed, and calculated into in the current profits and losses. (2) The measurement of impairment loss of accounts receivable is explained in the policy of bad debt provision. (3) Measurement of Impairment Losses on Financial assets Available for Sale If the available-for-sale financial assets are impaired, the Company will transfer the accumulated losses directly attributable to the owners' equity resulting from the decrease of fair value even if the financial assets have not been derecognized and shall include them into the current profits and losses. If an impairment loss has been incurred on an investment in unquoted equity instrument (without a quoted 25 F-197 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements price in an active market) whose fair value cannot be reliably measured, or on a financial derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the difference between the present value of estimated future cash flows and the carrying amount of the financial asset is recognized as the impairment loss and calculated into current profits and losses. The impairment loss on such financial asset is not reversed once it is recognized. For available-for-sale debt instruments with impairment loss being recognized, where the fair value of the available-for-sale debt instruments has been raised in the subsequent accounting periods and objectively related to the events occurred after the recognition of the previously impairment losses, the previously recognized impairment losses shall be reversed and calculated into current profits or losses. 10. Accounting Method of Provision of Bad Debts Provision of bad debts mainly includes account receivables and other account receivables. The allowance method is adopted for the possible bad debt losses, and the impairment test is carried out separately or in combination at the end of the period. The provision for bad debts is accrued to the current profit and loss. If there are evidences indicating that the receivables cannot be recovered, they shall be written off as bad debt losses after the Company's approval according to the prescribed procedures. Determination Standards of Bed Debt: (1) Uncollectible account receivables occurs if debtor has been declared bankruptcy, cancellation, revocation of industrial and commercial registration or close down ordered by the government; (2) Account receivables are recognized as losses in case of disappearance and death of the debtor after obtaining the evidence of the disappearance and death of the debtor issued by the public security organ, which proves that the debts are insufficiently repayable or it is unable to find the debtor to recover the debts, and after the social intermediary agency issues the economic appraisal certificate through professional reasoning and objective assessment. (3) Account receivables are recognized as losses in case of the influence of force majeure such as war, international political events and natural disasters on the debtor after the Company makes special explanations on the accounts receivable that cannot be recovered by the enterprise and the social intermediary agency issues the economic appraisal certificate through professional reasoning and objective assessment. (4) Account receivables are recognized as losses in overdue cases if the court verdict and ruling of losing are 26 F-198 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements issued or it is unable to perform or debtor is in insolvency despite with winning the lawsuit and legal instruments about the judgment, ruling or termination (suspension) are available; (5) In case of overdue account receivables that cannot be recovered, if the single amount is small and is not enough to make up for the cost of recovery, it is recognized as losses after the Company makes special explanations and the social intermediary agency issues the economic appraisal certificate through professional reasoning and objective assessment; (6) Account receivables overdue for more than 3 years are recognized as losses if the Company determines that the debtor is insolvent, have been losing money for three consecutive years or have stopped operating for more than 3 years according to the legal negotiation records for money return and confirms that there will be no business in the recent three years and the social intermediary agency issues the economic appraisal certificate through professional reasoning and objective assessment; (7) Account receivables overdue for more than 3 years are recognized as losses if the debtor is located overseas or in Hong Kong, Macao or Taiwan, and the Company determines that they cannot be recovered and obtains relevant certificates issued by overseas intermediary or Chinese embassy in overseas or commercial organizations; (8) For account receivables overdue for more than 3 years, if the Company negotiates with the debtor for reducing the loss of bad debts, applies for approval step by step and signs a valid agreement with both parties of credit to determine recover a certain percentage of account receivables, such receivables are recognized as losses. Withholding Method of Provision of Bad Debt: For account receivables formed between the Company and the government departments such as the finance department and the related parties within the Company, no provision for bad debts is made. For amounts other than those receivables between the relevant government departments and the internal enterprises of the Company, they are divided into significant items with a single amount of more than RMB 5 million Yuan and insignificant items with a single amount of less than RMB 5 million Yuan. Bad debts provision is made by a combination of individual recognition and aging analysis. Account receivables with significant single amount are individually recognized as bad debt provision. When there is objective evidence that the Company will not be able to recover the money according to the original terms of the account receivables, the provision for bad debt will be withdrawn according to the difference between the present value of the estimated cash flow of the account receivables and the book value. For account receivables with insignificant single amount, the bad debt provision is accrued using the 27 F-199 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements aging analysis method. The withdrawing proportion is as follows for the provision of bad debts: Aging Proportion of Accrual With 1 year 0% 1-2 years 5% 2-3 years 10% 3-4 years 20% 4-5 years 50% Over 5 years 80% 11. Inventory Accounting Method Classification of Inventory Inventory refers to the finished goods or commodities held by the Company for sale in the daily activities, the products in the production process, materials and products consumed in the production process or labor services, including raw materials, auxiliary materials, commissioned processing materials, products, finished products, spare parts for repairing, packaging materials and low value consumables and assets for construction contracts, etc. Pricing of Inventory The perpetual inventory method is adopted. The major inventory materials are accounted at the actual cost by using the weighted average method. Low-value consumable goods and packaging materials are written off for use; the turnover materials are accounted by using the amortization method. Withdrawing Method for Allowance of Inventory Falling Price At the middle and end each year, the Company measures all or part of the inventories that have suffered a losses or are obsolete or have the selling prices lower the cost based on the comprehensive inventory. The lower value of inventory cost and net realizable value shall prevail. The reserves of inventory falling price shall be withdrawn according to the difference of net reliable value lower than the inventory cost of single inventory item among inventories of the same type, and shall be calculated into the current profits and losses. In determining net realizable value, in addition to the purpose of holding and the fluctuation in the price and cost of the inventories on 28 F-200 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements the date of balance sheet, the impact of future events needs to be considered. Net realizable value of inventories is based on the value of the estimated selling price, less the estimated costs of completion and the estimated costs necessary to make the sale in the ordinary course of business of the Company. 12. Accounting Method of Long-Term Equity Investment (1) Initial Measurement of Investment Cost a. Long-Term Equity Investment in Business Merger (a) In case of business merger under common control, the Company pays cash, transfers non-cash assets or assumes liabilities to make consolidation consideration. The portion of the ownership equity acquired from the acquired party at the merger date in the book value of consolidated financial statement of the controlling party is recorded as the initial investment cost of long-term equity investment. The balance between the initial investment cost of long-term equity investment and the paid consideration is adjusted into capital reserve; if capital reserve is not enough for the offset; it's adjusted into retained earnings. The acquiring party issues equity securities as consolidation consideration. The portion of the ownership equity acquired from the acquired party at the merger date in the book value of consolidated financial statement of the controlling party is recorded as the initial investment cost of long-term equity investment. The total book value of issued shares is the capital stock; the balance between the initial investment cost of long-term equity investment and the total book value of issued shares is adjusted into capital reserve; if capital reserve is not enough for the offset, it's adjusted into retained earnings. All expenses directly arising from the merger, including audit expense, assessment expense and legal service charges paid for the ongoing merger, are recorded into the current profits and losses at the occurrence. (b) As for long-term equity investment arising from the merger of enterprises under non-common control, the business merger cost is the initial investment cost. The business merger cost includes assets paid by the acquiring party to get the control right of the acquired party, liabilities occurred or assumed, and fair values of issued equity securities. Audit expense, assessment expense, legal service charge and other relevant administrative expense paid by the acquiring party for the business merger are recorded into the current profits and losses; transaction expenses of equity or liability securities issued by the acquiring party for the consolidation consideration are recorded as initial 29 F-201 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements recognized amount of equity or liability securities. The business merger not under the common control which is realized through multiple transactions should be accounted as the sum of the book value of the equity investment held by the acquired party before the acquisition date and the newly increased investment cost on the acquisition date as the initial investment cost of the investment. b. Long-term equity investment acquired by other means: As for the long-term equity investment acquired by cash, the purchase price actually paid is recorded as the initial investment cost, which includes expenses directly related to the acquisition of this long-term equity investment, taxes and other necessary expenditures. As for the long-term equity investment acquired by issuing equity securities, the fair value of issued equity securities is recorded as the initial investment cost. Handling charges and commissions paid to security underwriting institutions for equity security insurance, and other expenses directly related to the issuance are not recorded into the cost of this long-term equity investment, but are deducted from its premium issuance income. If its premium issuance income is not enough to offset, these expenses shall offset surplus reserve and then undistributed profits. As for the long-term equity investment acquired by exchanging non-monetary assets, if non-monetary asset exchange has commercial natures or the fair value of the surrendered assets is reliably measured, the fair value of the surrendered assets and the relevant taxes and expenses paid are recorded as the initial investment cost of the received long-term equity investment; otherwise, the book value of the surrendered assets and the relevant taxes and expenses paid are recorded as the initial investment cost of the received long-term equity investment. As for the long-term equity investment acquired by debt restructuring, the fair value of entitled shares is recorded as the investment cost; the balance between the book balance of debt restructuring and the fair value of shares is recorded into the current profits and losses. The balance shall offset the impairment reserve, if it's created; the remaining part shall be recorded into the current profits and losses. (2) Subsequent Measurement and Recognition of Profits and Losses a. Subsequent Measurement The Company uses cost accounting method for its investments on its subsidiaries and measures at initial investment cost. The cost of long-term equity investment shall be adjusted after adding or recovering investments. 30 F-202 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements The long-term equity investment, which has joint control or significant impact on the invested entity, shall be calculated by the equity method, unless the investment is held available-for-sale assets. If the initial investment cost of long-term equity investment is more than the fair value of entitled identifiable net assets of the invested party, the initial investment cost of long-term equity investment shall not be adjusted; if the initial investment cost of long-term equity investment is less than the fair value of entitled identifiable net assets of the invested party, its balance shall be recorded into the current profits and losses and meanwhile the cost of long-term equity investment shall be adjusted. If the Company has significant impacts or implements its common control but has no ultimate control on the invested party due to additional investment according to Accounting Standard for Business Enterprises No.22 - Recognition and Measurement of Financial Instrument, the fair value of its original equity investment and the cost of additional investment together are recorded as the initial investment cost by equity method. The original equity investment is reclassified into held-for-sale finance assets; the balance of its fair value and its book value, and accumulated fair value changes which were recorded into other comprehensive income, are recorded and transferred into the current profits and losses by equity method. If the Company implements the control on the invested party under non-common control due to additional investment, the book value of original equity investment and the cost of additional investment together are recorded as the initial investment cost into some financial statements by the cost method. The equity investment held before the acquisition date is recognized as other comprehensive income by equity method, but it shall be accounted when it is disposed on the same base as similar assets or liabilities of the invested party. The equity investment held before the acquisition date is accounted according to Accounting Standard for Business Enterprises No.22 - Recognition and Measurement of Financial Instrument, the accumulated fair value changes which were recorded into other comprehensive income, are transferred into the current profits and losses by cost method. The Company losses the common control or significant impact on the invested party due to disposition of partial equity investment. The remaining equity after the disposition shall be accounted according to Accounting Standard for Business Enterprises No.22- Recognition and Measurement of Financial Instrument; the balance between its fair value measured at the date of losing common control or significant impact and its book value is recorded into the current profits and losses. The original equity investment was recognized as other comprehensive income by equity method; it shall be accounted on the same base as similar assets or liabilities of the invested party at the date when the equity method is stopped. 31 F-203 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements The Company losses the control on the invested party due to disposition of partial equity investment. The remaining equity after the disposition, which has the common control or significant impact on the invested party, shall be accounted by equity method, and adjusted since its acquisition; the remaining equity after the disposition, which has no common control or significant impact on the invested party shall be accounted according to Accounting Standard for Business Enterprises No.22- Recognition and Measurement of Financial Instrument; the balance between its fair value measured at the date of losing control and its book value is recorded into the current profits and losses. Where the Company indirectly holds a portion of the equity investment in the associate through a venture capital institution, a mutual fund, a trust company or a similar entity including a joint venture insurance fund, regardless of any significant impacts of the above entities on the investment, the Company record the indirectly holding investment at fair value and calculate its variations into profits and losses according to the related regulations of Accounting Standard for Business Enterprises No.22- Recognition and Measurement of Financial Instrument, and account the remaining part by using the equity method. As for the ownership equity changes of the invested party accounted by equity method, except for net income and other comprehensive income: if the shareholding ratio stays the same, the Company shall compute its entitled or assumed parts according to its shareholding ratio and adjust the book value of long-term equity investment and then increase or decrease capital reserve (other capital reserve). b. Adjustment of Profits and Losses: Under the cost method, except for the purchase price paid for investment, or declared but unrealized cash dividends or profits included into consideration, the Company recognizes the investment income according to declared but unrealized cash dividends or profits of the invested party, no matter the distributed profits are net profits of the invested party before or after the investment. Under the equity method, after acquiring the long-term equity investment the Company shall recognize investment income and other comprehensive income according to its shares in realized net profits or losses and other comprehensive income of invested party and then adjust the book value of its long-term equity investment. The investing party calculates its deserved part according to the declared profits or cash dividends of the invested party and then decreases the book value of its long-term equity investment correspondingly. The investing party recognizes realized net losses of the invested party until its book value of the long-term equity investment and other long-term equity materially invested in the invested party are decreased to zero, but the investing party's obligation for extra losses is excluded from such case. As for future realized profits of the invested party, the 32 F-204 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements investing party firstly makes up for unrecognized losses from its entitled profits and then recognizes its entitled profits. When the investing party recognizes its shares in net profits and losses of the invested party, besides the net book profits of the invested party, it shall consider the following factors: if the accounting policies or period of both parties are inconsistent, the accounting policies or period of the investing party shall be used to adjust the financial statements of the invested party; based on the fair value of all identifiable assets of the invested party at the acquisition, the net profits of the invested party shall be adjusted and then recognized; unrealized profits and losses arising from internal transactions between the Company and affiliated ventures and among joint ventures shall offset the parts attributable to the Company according to its shares. The unrealized internal transaction losses between the Company and the invested party shall be recognized in full if they are asset impairments. During the investment-holding period, if consolidated financial statements of the invested party are available, the net profits and other equity changes within the consolidated financial statements shall be the accounting base. When a long-term equity investment is disposed, the balance between its book value and its actual price is recorded into the current profits and losses. As for a long-term equity investment accounted by equity method, it shall use the same base as similar assets or liabilities of the invested party when it's disposed, and the part that was recorded into other comprehensive income is accounted according to relevant ratio. (3) The Recognition of Common Control and Significant Impact on the Invested Party The common control is the control on some arrangements according to relevant agreements and the arrangements can only be decided after the parties participating in the control right reach a consensus. Joint arrangement is under the common control of two or more participating parties. Joint arrangement includes joint operation and joint venture. The significant impact means that there is the participation right on decision-making of the financial and business policies for an enterprise, but can't control or jointly control the setup of these policies together with other parties. When deciding whether significant impact shall be imposed on the invested party, the current convertible corporate bonds, current executable warrants and other potential voting rights of the invested party held by investors and other parties shall be considered. If the investors are able to impose significant impact on the invested party, the invested party is its affiliated enterprise. (4) Impairment Test of Long-term Equity Investment and Impairment Reserve Withholding Method 33 F-205 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements a. Both internal and external information is used to find out the signs of impairment on long-term equity investment on subsidiaries, joint ventures or affiliated ventures on the date of balance sheet. If signs exist, an impairment test shall be made to estimate the recoverable amount of this long-term equity investment. If the estimation of recoverable amount shows that the recoverable amount of the long-term equity investment is less than its book value, its book value will be deducted to its recoverable amount. The deduction amount is recognized as the asset impairment and recorded into the current profits and losses. Meanwhile impairment reserve is withdrawn. The recoverable amount refers the greater of fair value of assets (or asset group, asset portfolio) less disposition expense, or the current value of estimated future cash flow of assets. The net amount of fair value of assets less disposition expense is determined according to the amount of sales agreement price in fair trade less attributable to asset disposition expense. The current value of estimated future cash flow of assets is determined according to the estimated future cash flow arising from sustained use and final disposition of the asset and proper discount rate before tax. b. The impairment of long-term equity investments cannot be transferred in future accounting periods after the recognition. 13. Accounting Methods of Fixed Assets The fixed assets of the Company refer to the tangible assets held for goods production, services offering, renting or operating management with the service life of more than a fiscal year. Fixed assets are initially measured at cost. The cost of acquiring fixed assets includes the purchase price, relevant taxes and fees and other expenses attributable to the asset before the fixed assets are ready for their intended use, such as transportation costs, handling fees, installation costs and professional services fees. When determining the cost of fixed assets, the cost of disposal should be considered. Subsequent expenditures related to fixed assets that meet the conditions for the confirmation of fixed assets shall be recorded into the cost of fixed assets. If the conditions for confirmation of fixed assets are not met, they shall be included in the current profits and losses. Depreciation of fixed assets is calculated using the straight-line method, and the depreciation rate is determined based on the original value, estimated service life and estimated net salvage value of fixed assets. For fixed assets where the impairment reserve has been withdrawn, the depreciation rate is determined according to 34 F-206 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements the remaining service life and estimated salvage value of fixed assets. For fixed assets where the impairment reserve has been withdrawn in full, the depreciation is not required. Depreciation shall not be accrued if the municipal government or other relevant departments approve the use of special funds for financial investments to build assets such as infrastructures that have not yet established a revenue model. Fixed assets that cannot generate any income for the Company or are temporarily unused (except seasonal ones) are used as idle fixed assets. The estimated service life and depreciation rate of idle fixed assets need to be re-estimated, and their depreciation will be directly included in the current profits and losses. If all the risks and rewards related to a certain leased fixed asset have been substantially transferred, the Company recognizes it as a finance lease. The fixed assets financed by leasing shall be recorded at the lower of the fair value of the leased asset at the start date of leasing and the present value of the minimum lease payment plus the initial direct costs directly attributable to the leased item as the recorded value of the leased asset. The minimum lease payment is taken as the book value of the long-term payables, and the difference is taken as the unrecognized financing expenses. Unrecognized financing costs are amortized using the effective interest method over the lease term. If it can reasonably determine the ownership of the fixed assets financed by financing, the assets under leasing can be depreciated before the expiration of the lease term. If it cannot reasonably determine whether to obtain ownership of the fixed assets financed by financing before the expiration of the lease term, the assets can be depreciated at the shorter period of lease term and remaining use life of lease assets. Fixed assets held for sale are listed at the lower of book value and fair value less disposal expenses. Where the fair value less the amount of the disposal cost is lower than the amount of original book value, it can be recognized as the asset impairment loss. When fixed assets are disposed of or are not expected to generate any economic benefits through its use or disposal, the fixed assets are derecognized. The amount of disposal income of disposal, transfer, scrapping or damage of fixed assets after deducting the book value and related taxes and fees shall be included in the current profits and losses. 14. Investment Property The investment property is defined as the real estate held for earning rent, gaining capital or both. The investment property of the Company includes the buildings that rented out, land use rights that rented out, the land use rights that held and ready to transfer after the capital appreciation. 35 F-207 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements The investment property of the Company is initially measured at its cost. The costs of a purchased investment property comprise its purchase price and any directly related taxes and other expenses attributable to the asset; the costs of self-construction property comprise all costs before it reaches the conditions that can be used; the costs of investment property obtained in other ways are confirmed by the relevant accounting policy. The investment property of the Company is subsequently measured by the fair value model. Transfer the investment property to other assets or transfer the other assets to investment property if there are evidences indicating the purposes of real state has been changed, and the following conditions are met: investment property is changed to self-use; property as inventory is transferred to rental assets; own land use right is used to earn rentals or for capital appreciation; own buildings are used for rent. Determination of transfer date: (1) The transfer date of investment property transferred to own-occupied property is the date that the property reaches the self-use condition, and is used in the production of goods, providing labor services or business management. (2) The transfer date of investment property as inventory or own land use right transferred to rental assets is the date that the lease begins. (3) If the transfer date is undefined, please follow the date determined by the competent department of production and operation. 15. Accounting Method of Construction in Progress. Construction in progress refers to the plant and equipment under construction and other fixed assets, which are recorded at the actual cost, including the direct construction and installation costs incurred in the construction, interest expenses actually incurred due to borrowings, exchange gains and losses and so on. In the current period, the interest that should be borne by the relevant projects should be capitalized. The capitalization of interest is calculated on the condition that asset expenditure and borrowing costs have taken place and the construction and purchase activities necessary for the asset to reach the expected usable status have started. The weighted average of accumulated expenses for the purchase and construction of fixed assets till the end of the period multiplying the capitalization rate shall not exceed the interest actually occurred. 16. Accounting Method of Intangible Assets An intangible asset is measured initially at cost. When the intangible assets are acquired and analyzed, the 36 F-208 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Company determines the service life of the intangible assets. If the service life of the intangible assets is limited, the service life of the intangible assets or the quantity of similar units that make up the service life shall be estimated. If the intangible assets are not foreseen about their potential economic benefits for the Company in the future, they shall be regarded as the intangible assets with indefinite service life. The intangible assets with limited service life should be systematically and reasonably amortized over their service life. The amortization of intangible assets by the Company shall start from the time when the intangible assets are available for use till the date they shall not be recognized as intangible assets. The amortization method of intangible assets chosen by the Company reflects the expected realization of the economic benefits related to the intangible assets. If it cannot be reliably determined that the expected realization has taken place, it shall be amortized by straight-line method. The amortization amount of intangible assets shall be included in the current profit and loss. Intangible assets with indefinite service life should not be amortized. The Company shall, at least at the end of each year, review the service life and amortization method of the intangible assets with limited service life. If the service life and amortization method of intangible assets are different from those previously estimated, the amortization period and amortization method should be changed. The Company shall check the service life of intangible assets with uncertain service life during each accounting period. If there is evidence that the service life of an intangible asset is limited, its service life should be estimated and dealt with according to the regulations. 17. Goodwill Goodwill is generated when the stock investment cost exceeds the fair value of the invested entity at the acquisition date, or the investment cost is more than the fair value of the net assets of invested entity at the acquisition date when the business combinations is not under the same control. Goodwill generated from business combination should be listed separately in the consolidated financial statement. The difference between the cost of equity investment in the acquisition of joint ventures and joint ventures over the fair value of the invested party over the investment is included in the long-term equity investment. When the related asset group or combination of asset group which including goodwill are subject to impairment test and they have an indication of impairment, the related asset group or combination of asset group without goodwill should be tested for impairment, calculate the recoverable amount and compare with book value to confirm related impairment loss. 37 F-209 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements 18. Accounting Method of Long-Term Prepaid Expenses Long-term prepaid expenses are those already paid and their amortization period is longer than one year (one year excluded). The long-term prepaid expenses are amortized over their benefit periods by installments. Except for the fixed assets purchased and constructed, all expenses incurred during the preparation period shall be initially collected as the long-term expenses to be amortized, and the one-time amortization in the month of the production and operation commencement shall be calculated into current to the profit and loss. If the long-term prepaid expense item cannot benefit the future accounting period, the unamortized item and the amortized value shall all be transferred into current profits and losses. Long-term prepaid expenses are accounted for the actual cost incurred in the course of formation. 19. Determination Method of Asset Impairment and its Basis The impairment of assets other than inventories, financial assets and deferred income tax assets shall be determined according to the following methods: On the date of balance sheet, if there is evidence indicating that the assets are idle, there is a discontinued use plan or a significant drop of the market price, or there is a significant change in the external environment, the asset shall be tested for impairment and the impairment loss shall be determined according to the difference between the recoverable amount of the asset and its book value, calculate into current profits and losses and withdrawn for reserves. The Company does not make any provision for impairment of non-operating infrastructure assets that have been approved by the municipal government or relevant departments for the use of special funds for financial purposes. For goodwill and intangible assets with indefinite service life formed due to the business combination, impairment tests are conducted on an annual basis regardless of any indication of impairment. The recoverable amount is determined by the higher of the net amount of the fair value of the asset less the disposal expenses and the present value of the estimated future cash flow of the asset. The Company estimates its recoverable amount based on individual assets. If it is difficult to estimate the recoverable amount of a single asset, the recoverable amount of the asset group shall be determined on the basis of the asset group to which the asset belongs. After the asset impairment loss is recognized, the depreciation or amortization expense of the impaired asset will be adjusted accordingly in the future. Once the asset impairment loss is confirmed, it cannot be reversed in subsequent accounting periods. Goodwill impairment: Goodwill should be tested for impairment in combination with its related asset group or combination of asset groups, and the carrying amount of goodwill is allocated to the relevant asset group or combination of asset groups in a reasonable manner. During the process, the impairment test shall be conducted 38 F-210 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements according to the asset group or the combination of asset groups that does not contain goodwill, so that the corresponding asset impairment loss is confirmed. Then the asset group or the asset group combination containing the goodwill is tested for impairment, so that the corresponding loss of goodwill impairment is confirmed. 20. Determination of Assets Group Determination of Assets Group The Company determines an assets group based on whether the major cash inflows generated by it are independent of cash inflows from other assets or asset groups and in combination with the ways in which the Company manages production and operation activities and the continuous use or disposal of assets. Impairment of Assets Group (1) The basis of the Company's determination of the carrying amount of the asset group is consistent with the way in which its recoverable amount is determined. (2) The carrying amount of the assets group of the Company includes the carrying amount of the assets directly attributable to the asset group and the asset that can be allocated to the asset group in a reasonable and consistent manner, and generally excludes the carrying amount of the recognized liability, except those recoverable amount of the assets group cannot be determined if the liability amount is not considered. (3) The Company determines the recoverable amount of the asset group based on the higher of the net amount of the fair value of the asset group less the disposal expenses and the present value of the estimated future cash flow. (4) On the date of balance sheet, the Company tests the asset group for impairment. The asset impairment loss is recognized as the difference between the recoverable amount of the asset group or the asset group combination and its book value; the provision for impairment of the asset group is offset against the carrying amount of the goodwill allocated to the asset group or the asset group combination, and then the book value of other assets attributable to the asset group or asset group combination except goodwill are deducted proportionately and calculated into current profits and losses as the impairment loss of single asset. The carrying amount of each asset after offset shall not be less than the highest of the following: the net amount of the fair value of the asset less the disposal expenses, the present value of the asset's future cash flow, and zero. The unpaid depreciation reserves are apportioned according to the proportion of the book value of other assets in the relevant asset group or asset group combination. 21. Accounting Method of Borrowing Costs The borrowing costs refer to interests of borrowings and other relevant costs including loan interest, discount or premium amortization, subsidiary expenses and exchange balance due to foreign currency loans. 39 F-211 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements The borrowing costs shall be capitalized if they are arisen from construction or production of the assets meeting capitalization conditions, and shall be calculated into relevant asset cost. Other borrowing costs, when incurred, are recognized as expenses according to the amount of the borrowings and recorded in the current profits and losses. Assets eligible for capitalization refer to the fixed assets, investment real estate and inventories (only referring to inventories with over 1 year for purchase, construction and production) and other assets. That needs to go through a long period of acquisition and construction or production activities to achieve the intended use or sale. The borrowing costs shall be capitalized if the following requirements are simultaneously met: (1) The assets expenses have occurred; (2) The borrowing costs have occurred; (3) The necessary construction or production activities have been ready for the estimated serviceable or merchantable assets. When the capitalization-qualified assets are suspended abnormally or interrupted for a continuous period of more than three months in the process of purchase, construction or production, it shall suspend the capitalization of borrowing cost, which shall be recognized as current costs during the period until the asset purchase, construction or production restarts. Where the assets that meet the capitalization conditions are purchased or constructed or have reached the expected usable or salable status, the capitalization will cease and the borrowing costs incurred thereafter shall be recorded into the current profits and losses. The capitalization period refers to the beginning point to the ending point, except for suspension period. During the capitalization period, for the special borrowings for the acquisition, construction or production of assets eligible for capitalization, the interest expense actually incurred during the current period minus the interest income from the unused borrowings into the bank or income from temporary investment shall be recognized as the capitalized amount. For ordinary borrowings for the acquisition, construction or production of assets eligible for capitalization, the capitalized amount shall be calculated based on the weighted average of the capital expenditures of the accumulated borrowings exceeding the special borrowings multiplied by the capitalization rate of the ordinary borrowings; and the capitalization rate is determined based on the weighted average rate of ordinary borrowings. During the capitalization period, the exchange differences between special foreign borrowings' principal and interests should be capitalized, and then recognized into costs which eligible for capitalization. The exchange differences between other foreign borrowings' principal and interests except the special borrowings of foreign currency should be accounted as financial expenses which belong to the current profits or losses. 40 F-212 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements 22. Employee Benefits Employee benefits refer to various forms of remuneration or compensation given by enterprises for obtaining services provided by their employees or for canceling their labor relations. Employee benefits include short-term salary, post-employment benefits, termination benefits and other long-term employee benefits. Welfare benefits provided by the enterprise to employees' spouses, children, dependents, survivors of deceased employees and other beneficiaries also fall within the scope of employee benefits. The Company recognizes the employee benefits payable as liabilities in the accounting period in which the employees provide services. The Company participates in the social security system for employees established by government agencies as required, including the basic old-age insurance, medical insurance, housing provident fund and other social security systems. The corresponding expenses are charged to the related asset costs or current profits and losses as incurred. Where the employee's labor relationship is terminated before the expiration of the employee's labor contract or a suggestion is made to encourage the employee to voluntarily accept the reduction, if the Company has formulated a formal plan for canceling the labor relationship or proposing a voluntary reduction and is about to implement it, but cannot withdraw its plan to terminate its labor relationship or make a reduction proposal, the Company shall confirm the estimated liabilities arising from the compensation for the termination of the labor relationship with the employees, and record it into the current profits and losses. Employee internal retirement plans are handled in accordance with the same principle of termination benefits as above. The Company plans to pay the retired staff salaries and social insurance premiums during the period from the employee's stoppage of providing services until the normal retirement day, which shall be included in the current profits and losses (dismiss welfare) when meeting the conditions for the confirmation of the estimated liabilities. 23. Accrued Liabilities If the Company involved in litigation, debt guarantees and other matters, and it is likely to deliver assets or provide services in the future, the amount can be reliably measured, recognized as expected liability. (1) The Recognition Standard for Accrued Liabilities: Accrued liabilities are recognized when the obligations relevant to contingencies meet the following conditions: a. The obligation is the current obligation undertaken by the Company. 41 F-213 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements b. The implementation of the obligation is likely to result in the outflow of economic benefit from the Company. c. The amount of the obligation can be reliably measured. (2) Measurement Method of Accrued Liabilities: Accrued liabilities are initially measured at the best estimates on debt payment. 24. Principle of Income Recognition (1) Sales of goods: The Company transfers the main risks and rewards of ownership of the goods to the purchaser, and no longer retains the right of management and actual control of the goods, but the transaction-related price can be received, and the revenue-related cost of goods can be reliably measured to confirm the realization of income. (2) Sales of real estate: The developed products have been completed and passed the inspection, the sales contract has been signed and the obligation stipulated in the contract has been fulfilled, that is, the major risks and rewards of the ownership of the products are transferred to the purchaser, and the company no longer retains the right of management and actual control of the project, the relevant income has basically received or evidence of receipt has been obtained, and the relevant costs of the project can be reliably measured to confirm the realization of sales revenue. (3) Lease of developed products: Rent receivables from lessee at the lease date as agreed upon by the contract or agreement shall be recognized as the realization of operating income. (4) Provision of labor services: The labor services have been provided, the related costs can be calculated reliably, and its economic benefits can flow in to confirm the realization of income. (5) Property management: Property management services have been provided, economic benefits related to property management services can flow in, and costs related to property management services can be reliably measured to confirm the realization of the property management income. (6) Land consolidation: The Company is responsible for the land acquisition and house expropriation. According to the land consolidation plan, the management fee is withdrawn based on 8‰of the compensation for acquisition of state-owned and collective-owned land. The management fee can be withdrawn as operating income since the period of occurrence of compensation for acquisition of state-owned and collective-owned land. 25. Construction Contract Construction contract is a contract which is made one or more assets which are closely related to the design, technology, function and final use. The outcome can be measured reliably on the date of balance sheet recognized 42 F-214 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements as revenue and expenses according to the percentage of completion method. The percentage of completion method is the method that confirms the income and expense according to the progress of the contract. (1) The outcome of fixed price contract can be measured reliably, and at the same time meet the following conditions: a. The total revenue can be measured reliably; b. Economic benefits related to the contract are likely to flow to the enterprise; c. The actual contract costs can be clearly distinguished and measured reliably; d. Stage of completion of the contract and the costs to complete the contract can be measured reliably. (2) The outcome of cost-plus contracts can be measured reliably, and at the same time meets the following conditions: a. Economic benefits related to the contract are likely to flow to the enterprise; b. The actual contract costs can be clearly distinguished and measured reliably. (3) The stage of completion of the contract may be determined by choosing the following methods: a. The proportion of accumulative actual contract costs incurred against the expected total contract cost; b. The proportion of the total amount of work completed against the total amount of the contract; c. The actual stage of completion. (4) If the Company uses the proportion of accumulative actual contract costs incurred against the expected total contract costs, the actual accumulated contract costs not include the following: a. Uninstalled or unused material costs related to the future contract activities; b. Prepaid part to subcontractors before the construction is finished. (5) On the date of balance sheet, the Company shall recognize the income of the current contract according to the total contract revenue multiplied by the completion progress deducting the accumulated recognized income of the previous accounting periods. At the same time, the expenses of current contract shall be recognized according to the total expected contract cost multiplied by the completion progress deducting the confirmed accumulated expenses of the previous accounting periods. (6) The construction contract completed in the current period shall be recognized as the income current 43 F-215 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements contract according to the total contract revenue deducting the cumulative recognized income in the previous accounting periods; and at the same time, the expenses of the construction contract shall be recognized according to the actual contractual costs actually incurred deducting the confirmed accumulated expenses of the previous accounting periods. (7) The outcome of construction contract cannot be measured reliably and shall be dealt with the following conditions: a. If the contract cost can be recovered, the contract revenue should be recognized according to the actual recoverable contract costs. The contract costs should be recognized in current period. b. Unrecoverable contract costs shall be recognized as contract costs immediately if it occurs. (8) If there are no uncertainties leading to failure of reliable estimation, it should recognize the revenue and cost related to the construction cost according to the percentage of completion. (9) If the estimated total contract costs exceed the total contract revenue, the expected loss shall be recognized as expenses in current period. 26. Lease Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. (1) Operating leases Rental expenses under operating leases are recognized as expense over the lease term on a straight-line basis. (2) Financial leases The recorded value of leased assets is set based on the lower of the original book value of the lessee's leased asset and the present value of the minimum lease payment amount. The difference between the recorded value of the leased assets and the minimum lease payments is the unrecognized financing expenses, and the minimum lease payments are shown as the long-term payables. The fixed assets financed by leasing are depreciated according to the depreciation policy of fixed assets of the Company. The unrecognized financing costs are amortized by the effective interest method during the term of the financial leasing. 27. Government Grant Government grants refers to the monetary assets and non-monetary assets of the Company obtained from the government at no consideration, excluding the capital invested by the government as investors and the 44 F-216 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements corresponding owners' rights. Government grants are divided into government grants related to assets and government grants related to income. Where government grants are monetary assets, they shall be measured at the amount received or receivable. Where government grants are non-monetary assets, they shall be measured at fair value; if the fair value cannot be obtained reliably, they shall be measured at the nominal amount. The government subsidies measured at the nominal amount shall be directly included in the current profits and losses. The government grants related to assets are recognized as deferred income, and are amortized into the current profits and losses in a reasonable and systematic manner over the estimated useful lives of the related assets. Government grants related to income are used to compensate relevant costs and expenses or losses in subsequent periods and are recognized as deferred income and included in profit or loss for the current period in which the related costs and expenses are recognized. For the related costs and expenses or losses incurred for the compensation, they shall be directly included in the current profits or losses. Where government grants include assets-related parts and income-related parts, they shall be accounted separately for different parts. If it is indistinguishable, the whole is classified as government grants related to income. The government grants related to the daily activities of the Company are included in other income or offset the related costs according to the essence of the economic business. The government grants unrelated to the daily activities are included in the non-operating income and expenses. 28. Accounting of Income Tax The income tax of the Company shall be accounted by using the debt method of balance sheet. Income tax includes current income tax and deferred income tax. Except for the adjustment of goodwill arising from the business combination or transactions or matters directly included in ownership equity, they are charged to the current profits and losses as the income tax expense. Recognition of Deferred Income Tax Assets The Company recognizes the deferred tax assets arising from deductible temporary differences to the extent that it is probable that the taxable profit for deducting the deductible temporary differences will be available unless the deductible temporary differences are settled on the following transactions: (1) The transaction is not a business combination, and the transaction does not affect the accounting profit nor the taxable income upon occurrence; (2) The deductible temporary differences related to the investments of subsidiaries, associates and joint ventures cannot be satisfied simultaneously: The temporary differences are likely to be reversed in the foreseeable future, and it is likely to obtain the taxable income used for deducting deductible temporary differences. Recognition of Deferred Income Tax Liabilities 45 F-217 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements The Company recognizes all the taxable temporary differences as deferred income tax liabilities unless the taxable temporary difference arises from the following transactions: a. Initial recognition of goodwill or initial recognition of assets or liabilities arising from the transaction with the following characteristics: The transaction is not business combination, and the transaction will not affect the accounting profit nor the taxable income upon occurrence; b. For taxable temporary differences related to investments in subsidiaries, associates and joint ventures, the timing of the reversal of the temporary differences can be controlled and such temporary differences may not be reversed in the foreseeable future. On the date of balance sheet, the Company assesses the deferred income tax assets and deferred income tax liabilities according to the applicable tax rates in the period when the assets are expected to be recovered or the liabilities are expected to be settled according to the tax laws, reflecting the impacts on expected assets recovery or liabilities settlement on the date of balance sheet. Impairment of Deferred Income Tax Assets On the date of balance sheet, the Company reviews the book value of the deferred income tax assets. If it is probable that sufficient taxable income will not be available in the future to offset the benefit of the deferred tax assets, the carrying amount of the deferred tax assets shall be written down. When it is probable to obtain sufficient taxable income, the write-down amount is reversed. 29. Held-for-Sale Non-Current Assets and Disposal Groups If the Company mainly withdraws its book value by selling (including non-monetary assets with commercial substance, the same below) rather than continuously using a non-current asset or disposal group, it is classified as held for sale. Specific criteria are as follows: A non-current asset or disposal group can be immediately sold under current conditions based on the practice of selling such assets or disposal group in a similar transaction; the Company has already decided on the sales plan and has obtained the confirmed purchase commitment; the sale is expected to be completed within one year. Among them, the disposal group refers to a group of assets that are sold or disposed by other means together in a transaction, and the liabilities directly related to these assets transferred in the transaction. Where the disposal group belongs to the asset group or the asset group combination in accordance with Accounting Standards for Business Enterprises No. 8 - Impairment of Assets to allocate the goodwill acquired in the business merger, the disposal group shall include the goodwill allocated to the disposal group. When the Company initially measures or re-measures the non-current assets held for sale and the disposal group on the balance sheet date and its book value is higher than the net amount of the fair value minus the selling expenses, the book value shall be written down by the fair value deducting the selling expenses, and the reduced amount shall be recognized as the asset impairment loss, recorded in the current profits and losses and withdrawn 46 F-218 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements as provisions for available-for-sale assets. For the disposal group, the recognized impairment loss on assets is offset against the carrying amount of the goodwill in the disposal group, and then reduced in proportion based on the carrying amount of non-current assets measured and specified in Accounting Standards for Business Enterprises No. 42 - Held-for-Sale Non-current Assets, Disposal Group and Discontinued Operations (hereinafter referred to as "held for sale regulations"). On the subsequent balance sheet date, if the fair value less the selling expenses of held-for-sale disposal group increases, the amount previously written-down should be restored and then reversed within the loss of assets impairment recognized for non-current assets measured and specified in applicable held-for-sale regulations after being classified as held-for-sale assets, and included into the current profits and losses, and its carrying amount shall be increased in proportion of carrying amount of non-current assets as specified in the held-for-sale regulations except goodwill in the disposal group; the carrying amount of goodwill that has been offset and the impairment losses of non-current assets as specified in the held-for-sale regulations before they are classified as held-for-sale assets shall not be reversed. Non-current assets held for sale or non-current assets in the disposal group are not subject to depreciation or amortization. The interest and other expenses on liabilities held in the disposal group for sale are continuously recognized. When non-current assets or disposal group no longer meet the classification conditions for held-for-sale asset, the Company will not classify it as held-for-sale assets or will remove them from the held-for-sale disposal group, and measured at the lower of the following: (1) The amount adjusted according to the carrying amount by assuming that they are depreciated, amortized or impaired if they are not classified as held-for-sale assets; (2) recoverable amount. 30. Profit Distribution After-tax profits are distributed as the following orders after making up for the loss of the previous year: Items Proportion of Accrual Legal accumulation fund 10% Discretionary surplus reserve Decided by the general meeting of shareholders Dividend of ordinary shares Decided by the general meeting of shareholders 31. Explanation of Change of Accounting Policies and Accounting Estimation and Error Correction (1) Change of Accounting Policies The Ministry of Finance released Accounting Standard for Business Enterprises No. 42 - Held for Sale Non-current Assets, Disposal Group and Discontinued Operations (Caikuai [2017] No. 13) on April 28, 2017, and implemented as of May 28, 2017. The Ministry of Finance released Accounting Standard for Business Enterprises No. 16 - Government Grants (2017 Amendment) (Caikuai No. 15) on May 10, 2017, and implemented as of June 47 F-219 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements 12, 2017. The Company started to implement the aforesaid two accounting standards in accordance with the time required by the Ministry of Finance. The Accounting Standards for Business Enterprises No. 42 - Held for Sale Non-current Assets, Disposal Groups and Discontinued Operations standardize the classification, measurement and presentation of non-current assets or disposal groups held for sale and the discontinued operation. As of September 30, 2017, the Company had no non-current assets held for sale, disposal group and discontinued operation. Prior to the implementation of Accounting Standards for Business Enterprises No. 16 - Government Grants (2017 Amendment), the government grants received by the Company are included into non-operating income; and the government grants related to assets are recognized as deferred income, and the average amortization is included in current profits and losses within the useful life of the asset. After the implementation of Accounting Standards for Business Enterprises No. 16 - Government Grants (2017 Amendment), the government grants related to daily activities that occurred after January 1, 2017 are included into other income; and the government grants not related to daily activities are included into non-operating income. (2) Change of Accounting Estimation The Company does not need to disclose changes in accounting estimation. (3) Change of Significant Errors in Prior Period The Company does not need to disclose change of significant errors in prior period. V. Ta x 1. Main Tax Categories and Tax Rate Items Basis Tax Rate Before May 1, 2016, the Company's revenue Business Tax from leasing fixed assets and other operating 5% revenue are calculated at tax rate of 5%. Operating Income (According to the regulations of Cai Shui [2016] No. 36 of the State Administration of Taxation of the Ministry of 3%, 5%, 6%, 11%, VAT Finance, the taxable income of the original sales 13%, 17% tax of the Company will be changed to the applicable tax rate from May 1, 2016) 48 F-220 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Urban Maintenance Circulating Tax actually paid 7% and Construction Tax Additional Educational Circulating Tax actually paid 3% Tax Additional Local Circulating Tax actually paid 2% Educational Tax Anti-Flood Circulating Tax actually paid 1% Maintenance Tax Property Tax Property Residual Value or Rental Income 1.2% or 12% Ultra progressive tax VAT on Land Taxable Income from Selling Real Estate rate Corporate Income Tax Taxable Income 25% VI. Notes to Items of Consolidated Financial Statements Unless otherwise stated, as to the financial statement data, the “beginning of period” means Jan. 1, 2017 and the “end of period” means Sept. 30, 2017, the “current period” means the period from Jan. 1, 2017 to Sept. 30, 2017, the “previous period” refers to the period from Jan. 1, 2016 to Sept. 30, 2016, with the monetary unit of RMB Yuan. (I) Cash and Cash Equivalents 1. Details of Cash and Cash Equivalents: Items Closing Balance Opening Balance Cash on hand 143,670.55 170,670.12 Including: RMB 143,670.55 170,670.12 USD - - EUR - - Bank deposit 15,435,998,514.91 10,018,987,459.74 Including: RMB 15,375,111,514.43 9,963,553,622.90 USD 60,876,317.16 55,402,722.94 HKD 8,989.03 20,470.10 EUR 1,694.29 10,643.80 49 F-221 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Items Closing Balance Opening Balance Other monetary capitals 11,870,859.08 11,843,795.17 Including: RMB 11,870,859.08 11,843,795.17 Total 15,448,013,044.54 10,031,001,925.03 Including: total deposit overseas 74,815,127.63 68,901,884.36 Including: RMB 13,934,366.06 13,487,575.94 USD 60,871,772.54 55,393,838.32 HKD 8,989.03 20,470.10 2. Details of Limited funds: Items Closing Balance Opening Balance Guarantee deposit 15,788,000.00 15,788,000.00 Others 153,991,567.52 160,947,014.47 Total 169,779,567.52 176,735,014.47 3. The balance of cash and cash equivalents as of Sept. 30, 2017 includes account capital of RMB 11,870,859.08 Yuan jointly controlled by the subsidiary - Tianjin Metro Group Co., Ltd. and the subsidiary - Tianjin Haishun Real Estate Development Co., Ltd., includes account capital of RMB 142,120,708.44 Yuan jointly controlled by Tianjin Railway Construction Investment Holding (Group) Co., Ltd. and Tianjin Binli Small Town Construction Development Co., Ltd., and also includes guarantee deposit in Tianjin Metro Group Co., Ltd. of RMB 15,788,000.00 Yuan. 4. Except the amounts mentioned above, the balance of cash and cash equivalents as of Sept. 30, 2017 has no items with restricted use like the mortagaged or frozen ones or deposited overseas with potential recovery risk. (II) Bills Receivable 1. Bills Receivable Classified by Category Items Closing Balance Opening Balance Bank acceptance - 1,500,000.00 Trade acceptance - 100,000.00 Total - 1,600,000.00 (III) Accounts Receivable 1.1 Accounts Receivable Classified by Category Closing Balance Category Book Balance Bad-debt Provision Book Value 50 F-222 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Proportion Proportion of Amount Amount (%) Accrual (%) Accounts receivable with significant single - - - - - amount and single provision for bad-debt Accounts receivable with provision for bad-debt by combination Portfolio 1: Accounts receivable with provision for bad debt 268,908,311.98 8.27 20,067,954.77 7.46 248,840,357.21 by aging analysis method Portfolio 2: Accounts receivable without 2,977,106,185.35 91.60 - - 2,977,106,185.35 provision for bad debt Sub-total for portfolio 3,246,014,497.33 99.87 20,067,954.77 0.62 3,225,946,542.56 Accounts receivable with insignificant single amount but 4,051,607.68 0.13 4,051,607.68 100.00 - single provision for bad-debt Total 3,250,066,105.01 100.00 24,119,562.45 0.74 3,225,946,542.56 (To be continued) Opening Balance Book Balance Bad-debt Provision Category Proportion Proporti Book Value Amount Amount of Accrual on (%) (%) Accounts receivable with significant single - - - - - amount and single provision for bad-debt Other accounts receivable with provision for bad-debt by combination Portfolio 1: Other accounts receivable 641,758,954.11 19.24 17,035,168.20 2.65 624,723,785.91 with provision for bad 51 F-223 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Opening Balance Book Balance Bad-debt Provision Category Proportion Proporti Book Value Amount Amount of Accrual on (%) (%) debt by aging analysis method Portfolio 2: Other accounts receivable 2,689,424,858.09 80.64 - - 2,689,424,858.09 without provision for bad debt Sub-total for portfolio 3,331,183,812.20 99.88 17,035,168.20 0.51 3,314,148,644.00 Accounts receivable with insignificant single amount but 4,051,607.68 0.12 4,051,607.68 100.00 - single provision for bad-debt Total 3,335,235,419.88 100.00 21,086,775.88 0.63 3,314,148,644.00 1.2 Details of Accounts Receivable with Provision for Bad-debt by Aging Analysis Method Closing Balance Aging Proportion of Accounts Receivable Bad-debt Provision Accrual (%) Within 1 year 140,562,086.99 - - 1-2 years 78,042,339.64 3,902,116.98 5.00 2-3 years 27,261,862.90 2,726,186.29 10.00 3-4 years 8,213,852.17 1,642,770.43 20.00 4-5 years 218,850.50 109,425.25 50.00 Over 5 years 14,609,319.78 11,687,455.82 80.00 Total 268,908,311.98 20,067,954.77 (To be continued) Opening Balance Aging Proportion of Accounts Receivable Bad-debt Provision Accrual (%) Within 1 year 533,340,877.46 - - 1-2 years 56,185,421.28 2,809,271.06 5.00 2-3 years 37,104,344.47 3,710,434.45 10.00 3-4 years 418,850.50 83,770.10 20.00 4-5 years 4,452,919.13 2,226,459.57 50.00 52 F-224 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Opening Balance Aging Proportion of Accounts Receivable Bad-debt Provision Accrual (%) Over 5 years 10,256,541.27 8,205,233.02 80.00 Total 641,758,954.11 17,035,168.20 2. Bad-debt Provision Accrued, Recovered or Returned in Current Period (1) The amount of provision for bad debts accrued in current period was RMB 3,052,297.22 Yuan; the amount of bad-debt provision recovered or returned in the reporting period was RMB 19,510.65 Yuan. 3. Top 5 Debtors as of the End of the Period: Proportion of Bad-debt Total Account Provision Debtor Name Contents Closing Balance Aging Receivable Closing (%) Balance 1-2 117,661,508.34 years 3.62 - Tianjin Urban & 2-3 343,772,793.52 years 10.58 - Rural Construction 3-4 338,121,289.35 10.40 - Construction contract years 4-5 Commission 696,938,379.63 years 21.44 - Over 5 749,895,932.92 years 23.07 - Sub-total 2,246,389,903.76 69.11 Tianjin Yishang 1-2 Property 50,376,883.38 1.55 2,518,844.17 Friendship management years Famous Store fee Within Co., Ltd. 25,918,541.45 1 year 0.80 - Sub-total 76,295,424.83 2.35 2,518,844.17 Within 260,100,675.62 8.00 - Tianjin Operation 1 year Metropolitan Card Co., Ltd. fare 38,515,113.97 1-2 years 1.19 Sub-total 298,615,789.59 9.19 Third Railway Within Survey and Project 11,827,484.55 1 year 0.36 - Design Institute funds 1-2 Group 74,984,033.40 years 2.31 - Sub-total 86,811,517.95 2.67 Within Tianjin Nanhuan Project 32,101,454.00 1 year 0.99 - Railway Co., Ltd. funds 1-2 19,534,259.00 years 0.60 - Sub-total 51,635,713.00 1.59 Total / 2,759,748,349.13 / 84.91 2,518,844.17 53 F-225 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements 4. Accounts Receivable with Insignificant Single Amount but Single Provision for Bad-debt Year End Balance Proportion Debtor Name Bad-debt Book Balance Aging of Accrual Reason Amount (%) Tianjin Qisheng Storage & 1,960,000.00 1,960,000.00 Over 5 years 100.00 Uncollectable Transportation Co., Ltd. Tianjin Tanggu District Haisen 500,000.00 500,000.00 Over 5 years Uncollectable Industry and Trade 100.00 Co., Ltd. Tangshan Fengrun Railway Fittings 34,786.54 34,786.54 Over 5 years 100.00 Uncollectable Factory Tianjin Lifting Equipment 5th 35,313.14 35,313.14 Over 5 years 100.00 Uncollectable Factory 6th Engineering Company Limited of 411,508.00 411,508.00 Over 5 years 100.00 Uncollectable China Railway 18th Bureau Group Dagang Hongda Meat Aquatic 10,000.00 10,000.00 Over 5 years 100.00 Uncollectable Products Co., Ltd. Dagang District Construction 1,000,000.00 1,000,000.00 Over 5 years 100.00 Uncollectable Committee Lianyi Gas Engineering Co., 100,000.00 100,000.00 Over 5 years 100.00 Uncollectable Ltd. Total 4,051,607.68 4,051,607.68 5. The balance of account receivable in the reporting period should include the amount of RMB 8,676,200.00 Yuan which belongs to shareholders that hold more than 5% (including 5%) shares, see Note đ for details. (IV) Prepayments 1. Aging Analysis of Prepayments Closing Balance Opening Balance Aging Proportion Proportion Amount Amount (%) (%) 54 F-226 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Closing Balance Opening Balance Aging Proportion Proportion Amount Amount (%) (%) Within 1 year (including 1 year) 459,194,276.05 2.69 2,139,986,701.04 12.35 1-2 years 1,697,919,129.38 10.02 14,840,729,813.35 85.67 2-3 years 14,559,156,878.60 85.89 112,153,859.23 0.65 Over 3 years 237,632,545.67 1.40 231,265,279.44 1.33 Total 16,953,902,829.70 100.00 17,324,135,653.06 100.00 2. Top 5 Debtors as of the End of Period Proportion Debtor Name Contents Amount Aging (%) Tianjin Haihe Construction Project Over 3 Development & Investment Co., 133,212,133.00 0.79 Ltd. funds years China National Software & Service Project 20,943,631.70 1-2 years 0.12 Company Limited funds Project 490,860,000.00 1-2 years 2.90 Tianjin Jinyuan Investment and funds Development Co., Ltd. Project 14,466,953,400.00 2-3 years 85.34 funds Sub-total 14,957,813,400.00 88.24 Tianjin Binhai Municipal Project Construction Development Co., 1,000,000,000.00 1-2 years 5.90 Ltd. funds China Energy Engineering Group Project Tianjin Electric Power Construction 30,513,402.77 2-3 years 0.18 Co., Ltd. funds Total 16,142,482,567.47 95.23 3. The prepayments in the reporting period include no amount which belongs to shareholders that hold more than 5% (including 5%) shares. (V) Dividend Receivable Project (or Invested Unit) Closing Balance Opening Balance Tianjin Port Bulk Logistics Co., - 137,481.41 Ltd. Total - 137,481.41 55 F-227 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements (VI) Other Account Receivable 1.1 Other Account Receivables Classified by Category Closing Balance Book Balance Bad-debt Provision Category Proportion Proportion Book Value Amount Amount of Accrual (%) (%) Accounts receivable with significant single amount 7,232,357.79 0.06 7,232,357.79 100.00 - and single provision for bad-debt Other accounts receivable with provision - for bad-debt by combination Portfolio 1: Accounts receivable with provision 21,174,596.44 0.18 9,036,886.03 42.68 12,137,710.41 for bad debt by aging analysis method Portfolio 2: Other accounts receivable 11,934,498,160.94 99.74 - - 11,934,498,160.94 without provision for bad debt Sub-total for portfolio 11,955,672,757.38 99.92 9,036,886.03 0.08 11,946,635,871.35 Accounts receivable with insignificant single 2,738,359.00 0.02 2,738,359.00 100.00 - amount but single provision for bad-debt Total 11,965,643,474.17 100.00 19,007,602.82 0.16 11,946,635,871.35 (To be continued) Opening Balance Book Balance Bad-debt Provision Category Proportion Proportion Book Value Amount Amount of Accrual (%) (%) Accounts receivable with significant single 7,232,357.79 0.06 7,232,357.79 100.00 - amount and single provision for bad-debt Other accounts receivable with provision for bad-debt by combination Portfolio 1: Accounts receivable with provision for bad debt 1,101,939,093.78 9.27 8,444,841.05 0.77 1,093,494,252.73 by aging analysis method Portfolio 2: Other 10,771,022,309.93 90.64 - - 10,771,022,309.93 accounts receivable 56 F-228 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Opening Balance Book Balance Bad-debt Provision Category Proportion Proportion Book Value Amount Amount of Accrual (%) (%) without provision for bad debt Sub-total for portfolio 11,872,961,403.71 99.92 8,444,841.05 0.07 11,864,516,562.66 Accounts receivable with insignificant single 2,738,359.00 0.02 2,738,359.00 100.00 - amount but single provision for bad-debt Total 11,882,932,120.50 100.00 18,415,557.84 0.15 11,864,516,562.66 1.2 Accounts Receivable with Significant Single Amount and Single Provision for Bad-debt Closing Balance Proporti Debtor Name Book Bad-debt Aging on of Reason Balance Amount Accrual Tianjin Tianhe Silk Over 5 7,232,357.79 7,232,357.79 100.00% Uncollectable Mill years Total 7,232,357.79 7,232,357.79 1.3 Other Accounts Receivable with Provision for Bad-debt by Aging Analysis Method Closing Balance Aging Proportion of Other Receivables Bad-debt Provision Accrual (%) Within 1 year 6,034,976.43 - - 1-2 years 1,129,119.10 56,455.96 5.00 2-3 years 1,676,511.67 167,651.17 10.00 3-4 years 1,223,101.90 244,620.38 20.00 4-5 years 1,068,504.47 534,252.24 50.00 Over 5 years 10,042,382.87 8,033,906.28 80.00 Total 21,174,596.44 9,036,886.03 (To be continued) Opening Balance Aging Proportion of Other Receivables Bad-debt Provision Accrual (%) Within 1 year 1,087,206,344.02 - - 1-2 years 595,343.96 29,767.20 5.00 2-3 years 3,104,095.45 310,409.55 10.00 57 F-229 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements 3-4 years 1,166,504.47 233,300.89 20.00 4-5 years 73,604.28 36,802.14 50.00 Over 5 years 9,793,201.60 7,834,561.27 80.00 Total 1,101,939,093.78 8,444,841.05 1.4 Other Accounts Receivable with Insignificant Single Amount but Single Provision for Bad-debt Closing Balance Proportion Debtor Name Bad-debt Book Balance Aging of Accrual Reason Amount (%) Tianjin Binhai Local Railway Construction 240,841.70 240,841.70 Over 5 years 100.00 Uncollectable Company Jin Yi He Co., Ltd. 76,975.00 76,975.00 Over 5 years 100.00 Uncollectable Zhao Lizhi 67,600.00 67,600.00 Over 5 years 100.00 Uncollectable Tianjin Xianda Decoration 55,321.98 55,321.98 Over 5 years 100.00 Uncollectable Company Tianjin Xianda Binhai Construction Company 30,779.24 30,779.24 Over 5 years 100.00 Uncollectable Distribution Center Li Wenxuan 20,000.00 20,000.00 Over 5 years 100.00 Uncollectable Tianjin Xianda Binhai Construction Company 20,000.00 20,000.00 Over 5 years 100.00 Uncollectable Materials Trading Center Li Yinsheng 13,000.00 13,000.00 Over 5 years 100.00 Uncollectable Kong Fansen 12,000.00 12,000.00 Over 5 years 100.00 Uncollectable Liu Yanqiu 9,782.90 9,782.90 Over 5 years 100.00 Uncollectable Tianjin Xianda Binhai Construction Company 3,740.00 3,740.00 Over 5 years 100.00 Uncollectable Insurance Agent Du Qingxin 53,566.40 53,566.40 Over 5 years 100.00 Uncollectable Qiu Daqing 5,099.72 5,099.72 Over 5 years 100.00 Uncollectable Tianjin Tianhe Clothing 117,000.00 117,000.00 Over 5 years 100.00 Uncollectable Factory Dai Ying 39,480.00 39,480.00 Over 5 years 100.00 Uncollectable Guo Yongfu 30,000.00 30,000.00 Over 5 years 100.00 Uncollectable Zhao Jianguo (Ruan 15,000.00 15,000.00 Over 5 years 100.00 Uncollectable Shiming) Tianjin Local Railway 15,120.14 15,120.14 Over 5 years 100.00 Uncollectable Maintenance Department 58 F-230 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Shajingzi Township 158,676.60 158,676.60 Over 5 years 100.00 Uncollectable Government Original Repair Shop 3rd 733,832.09 733,832.09 Over 5 years 100.00 Uncollectable Branch (Ruan Shiming) Tianjin Jinnan District Palitai Town Dasunzhuang 6,000.00 6,000.00 Over 5 years 100.00 Uncollectable Village Committee The 4th Highway Office (Tianjin Port Coal 2,960.00 2,960.00 Over 5 years 100.00 Uncollectable Highway) Tianjin Port Hexing 496,725.60 496,725.60 Over 5 years 100.00 Uncollectable Earthworks Team Huarui Storage & 10,000.00 10,000.00 Over 5 years 100.00 Uncollectable Transportation Plant Way StationVillage 30,000.00 30,000.00 Over 5 years 100.00 Uncollectable Committee (Sidaogou) New Beiyang Construction 50,000.00 50,000.00 Over 5 years 100.00 Uncollectable Engineering Company Tianjin Jinnan District Shuangqiao Construction 30,000.00 30,000.00 Over 5 years 100.00 Uncollectable and Installation Company Tianxiang Real Estate 50,000.00 50,000.00 Over 5 years 100.00 Uncollectable Development Company Ruan Shiming 30,000.00 30,000.00 Over 5 years 100.00 Uncollectable Wang Changlong 25,674.00 25,674.00 Over 5 years 100.00 Uncollectable Tianjin Binhai Xingguo 289,183.63 289,183.63 Over 5 years 100.00 Uncollectable Technology Co., Ltd. Total 2,738,359.00 2,738,359.00 2. Bad-debt Provision Accrued, Recovered or Returned in Current Period Provision for bad debts was RMB 592,044.98 Yuan in current period; RMB 0.00 was recovered or returned in this period. 3. Top 5 Debtors as of the End of Period Bad-debt Provision Debtor Name Contents Closing Balance Aging Proportion (%) Closing Balance Subsidy Over 5 TEDA Finance 1,430,499,940.93 11.96 - payments, years Bureau interests 631,796,186.00 3-4 years 5.28 - Sub-total 2,062,296,126.93 17.24 - Within 1 Tianjin Nanhuan Land 304,500,000.00 year 2.54 - Railway Co., Ltd. requisition and 230,000,000.00 2-3 years 1.92 - 59 F-231 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Bad-debt Provision Debtor Name Contents Closing Balance Aging Proportion (%) Closing Balance demolishing 270,500,000.00 3-4 years 2.26 - funds 300,000,000.00 4-5 years 2.51 - Over 5 470,000,000.00 years 3.93 - Sub-total 1,575,000,000.00 13.16 - Within 1 141,059,797.69 year 1.18 - Tianjin Land 248,343,762.86 1-2 years 2.08 - Demolition Consolidation 309,147,696.60 2-3 years 2.58 - project funds Center 172,755,394.10 3-4 years 1.44 - 1,804,266,082.16 4-5 years 15.08 - Sub-total 2,675,572,733.41 22.36 - Tianjin Urban 4,169,236.11 3-4 years 0.03 - Infrastructure Current 62,980,347.21 4-5 years 0.53 - Construction & account, Over 5 Investment Group interests 815,427,529.32 6.81 - Co., Ltd. years Sub-total 882,577,112.64 7.37 - Within 1 172,084,691.86 year 1.44 - 400,469,083.57 1-2 years 3.35 - Current Tianjin Finance 1,849,797,811.82 2-3 years 15.46 - account, Bureau 249,892,353.71 3-4 years 2.09 - interests 612,004,946.66 4-5 years 5.11 - Over 5 443,658,032.94 years 3.71 - Sub-total 3,727,906,920.56 31.16 - Total / 10,923,352,893.54 / 91.29 - 4. The balance of other accounts receivable in the reporting period should include the amount of RMB 882,577,112.64 Yuan which belongs to the shareholders who hold more than 5% (including 5%), see Note đ for details. 5. In July 2003, it was approved by Tianjin Economic-Technological Development Area Finance Bureau that Tianjin TEDA Investment Holding Co., Ltd. would pay capital fund for the light rail project of the subsidiary - Tianjin Binhai Rapid Transit Development Co., Ltd., and the interests of the said project would be paid by Tianjin Economic-Technological Development Area Finance Bureau. The actually occurred interest expenditure is RMB 1,430,499,940.93 Yuan by the end of Aug. 31, 2013, credited to other accounts receivable of Tianjin Economic-Technological Development Area Finance Bureau. 60 F-232 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements 6. The subsidiary - Tianjin Binhai Rapid Transit Development Co., Ltd. does not grasp the rights to formulate the price of Tianjin Binhai Light Rail, and the operating income is even unable to compensate the cost of labor and energy costs. Due to such situation of the light rail operation, actually Tianjin Binhai Rapid Transit Development Co., Ltd. has paid total operating funds of RMB 631,796,186.00 Yuan for the government of Tianjin Economic-Technological Development Area from the year of 2004 to the year of 2013. According to the fact that the operation capital of Jinbin Light Rail is paid by the subsidiary - Tianjin Binhai Rapid Transit Development Co., Ltd. and the reports of Tianjin Finance Bureau about solving the project fund problems to city leaders on Dec. 5, 2014, the accumulated actual loss of Jinbin Light Rail Project as of the end of 2013 was RMB 630 million Yuan, which shall be settled by the Development Area. The minutes of the 30th meeting of the Mayor’s Office on February 17, 2015 determined the fund arrangement, among which the accumulative operating loss of Jinbin Light Rail Project before the year of 2015 shall be settled by the Development Area and the loss incurred since 2015 shall be jointly settled by the City and Binhai New Area and Development Zone. The General Manager’s Office of Tianjin Binhai Rapid Transit Development Co., Ltd. approved and confirmed the other accounts receivable of Tianjin Economic-Technological Development Area Finance Bureau on the basis of the amount that offset the operating costs which valued at RMB 506,485,131.06 Yuan in 2012 and RMB 125,311,054.94 Yuan in 2013. (VII) Inventories 1. Inventory Classification Closing Balance Items Falling Price Book Balance Book Value Reserves Raw materials 156,878,474.16 - 156,878,474.16 Low-value consumable products 20,002,104.67 - 20,002,104.67 Merchandise inventory 26,585,119.29 - 26,585,119.29 Engineering construction 6,288,136.87 - 6,288,136.87 Development cost 4,602,464,585.81 - 4,602,464,585.81 Including: Honghuli East Area project 23,915,524.08 - 23,915,524.08 North canal project 2,344,714,643.25 - 2,344,714,643.25 Subway central square project 2,015,750,766.44 - 2,015,750,766.44 Kangyingli project 197,565,282.30 - 197,565,282.30 Mianyi project of Liuwei Road, 20,518,369.74 - 20,518,369.74 Hedong Dist. Development products 58,456,765.33 - 58,456,765.33 Others - - - Total 4,870,675,186.13 4,870,675,186.13 61 F-233 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements (To be continued) Opening Balance Items Falling Price Book Balance Book Value Reserves Raw materials 131,941,694.29 - 131,941,694.29 Low-value consumable products 10,110,800.71 - 10,110,800.71 Merchandise inventory 29,235,659.50 - 29,235,659.50 Engineering construction 9,560,876.69 9,050,876.69 510,000.00 Development cost 4,489,560,154.53 - 4,489,560,154.53 Including: Honghuli East Area project 21,332,950.20 - 21,332,950.20 North canal project 2,328,448,520.99 - 2,328,448,520.99 Subway central square project 1,927,172,739.17 - 1,927,172,739.17 Kangyingli project 192,087,574.43 - 192,087,574.43 Mianyi project of Liuwei Road, 20,518,369.74 - 20,518,369.74 Hedong Dist. Development products 58,456,765.33 - 58,456,765.33 Others - - - Total 4,728,865,951.0 9,050,876.69 4,719,815,074.3 2. Inventory Mortgage at the End of Period Borrowing Company Pawn Appraised Value Balance Tianjin Metro Resources Land use right of Central 995,100,000.00 - Investment Co., Ltd. Square Land use right of north side of Jinpu Northern Road (A Tianjin TJ-Metro MTR housing block) (B housing 2,200,821,099.00 143,885,735.53 Construction Co., Ltd. block), Xiaowang Village, Hebei Dist. Total 3,195,921,099.00 143,885,735.53 The sub-subsidiary - Tianjin Metro Resources Investment Co., Ltd. of the subsidiary - Tianjin Metro Group Co., Ltd. has used the land use right of the Central Square to get mortgage from Shanghai Pudong Development Bank Tianjin Branch, with the loan amount of RMB 189,999,976.50 Yuan and the loan term from Sept. 11, 2015 to Oct. 29, 2017. The loan was prepaid in Sept. 2017 and the mortgage has not yet ended as of Sept. 30, 2017. Sub-subsidiary of Tianjin TJ-Metro MTR Construction Co. Ltd. of the subsidiary - Tianjin Metro Group Co., Ltd. has used the land use right of north side of Jinpu Northern Road (A housing block) (B housing block), Xiaowang Village, Hebei Dist. to get mortgage from Industrial and Commercial Bank of China Co., Ltd. Tianjin Branch Office, with the loan amount of RMB 143,885,735.53 Yuan and the loan term from June 27, 2016 to June 62 F-234 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements 7, 2024. (VIII) Non-current Assets Due within One Year Items Closing Balance Opening Balance Trust products of Tianjin Trust 77,000,000.00 - Co., Ltd. Total 77,000,000.00 - (IX) Other Current Assets Items Closing Balance Opening Balance Offset against VAT payable 124,775,416.32 95,533,953.63 Advance Payment of VAT 14,313,803.37 - Advance Payment of Income Tax 429,715.65 1,609,900.80 Other prepayment tax 1,576,110.40 1,359,508.08 Total 141,095,045.74 98,503,362.51 (X) Financial Assets Available for Sale 1. Financial Assets Available for Sale Closing Balance Opening Balance Items Asset Asset Book Balance Impairme Book Value Book Balance Impairme Book Value nt nt Available-for-sale debt instruments: ------ Available-for-sale equity instruments: 19,997,479,135.41 - 19,997,479,135.41 19,997,229,135.41 - 19,997,229,135.41 Measured by fair value 1,108,173.74 - 1,108,173.74 1,108,173.74 - 1,108,173.74 Measured by cost 19,996,370,961.67 - 19,996,370,961.67 19,996,120,961.67 - 19,996,120,961.67 Total 19,997,479,135.41 - 19,997,479,135.41 19,997,229,135.41 - 19,997,229,135.41 2. Financial Assets Available for Sale Measured by Fair Value at the End of Period Closing Balance Opening Balance Category Initial Accumulated Fair Initial Accumulated Fair Value Changes Value Changes Investment Cost Investment Cost Stock of Tianjin Quanyechang (Group) Co., 75,000.00 716,673.74 75,000.00 716,673.74 Ltd. Stock of Tianjin Real Estate Development 80,000.00 236,500.00 80,000.00 236,500.00 (Group) Co., Ltd. 63 F-235 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Category Closing Balance Opening Balance Total 155,000.00 953,173.74 155,000.00 953,173.74 3. Financial Assets Available for Sale Measured by Cost at the End of Period Book Balance Invested Unit Increase in Decrease in Opening Balance Current Current Closing Balance Period Period Tianjin Port Bulk Logistics Co., 26,836,217.99 - - 26,836,217.99 Ltd. Tianjin Hualian Commercial 288,000.00 - - 288,000.00 Building Co., Ltd. Tianjin Binhai Insurance Brokers 500,000.00 - - 500,000.00 Co., Ltd. Polytec CITIC Real Estate 34,573,314.10 - - 34,573,314.10 (Tianjin) Co., Ltd. Beijing-Shanghai High Speed 5,887,953,600.00 - - 5,887,953,600.00 Railway Co., Ltd. Jinbao Railway Limited Liability 3,310,000,000.00 - - 3,310,000,000.00 Company Jinqin Railway Passenger 4,581,505,000.00 - - 4,581,505,000.00 Dedicated Line Co., Ltd. Beijing-Tianjin-Hebei Inter-city 900,000,000.00 - - 900,000,000.00 Railway Investment Company Jinbin Intercity Railway Limited 2,865,000,000.00 - - 2,865,000,000.00 Liability Company Tianjin Bank Co., Ltd. 38,500,000.00 - - 38,500,000.00 Beijing-Tianjin Intercity Railway 2,203,060,001.59 - - 2,203,060,001.59 Limited Liability Company Tianjin Jigang Railway Co., Ltd. 16,873,433.66 - - 16,873,433.66 Tianjin Jeshing Real Estate 9,000,000.00 - - 9,000,000.00 Development Co., Ltd. Tianjin Jinnuo Real Estate 3,000,000.00 - - 3,000,000.00 Development Co., Ltd. Tianjin Jinju Real Estate 9,000,000.00 - - 9,000,000.00 Development Co., Ltd. Hutchison Whampoa Properties 76,804,650.00 - - 76,804,650.00 (Tianjin) Co., Ltd. Tianjin Metro Junyi Investment 5,100,000.00 - - 5,100,000.00 Co., Ltd. Tianjin Metro Jietong Real 1,800,000.00 - - 1,800,000.00 Estate Investment Co., Ltd. 64 F-236 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Book Balance Invested Unit Increase in Decrease in Opening Balance Current Current Closing Balance Period Period Tianjin Lianfeng Zhiye Real 3,000,000.00 - - 3,000,000.00 Estate Co., Ltd. Tianjin Metropolitan Card Co., 11,399,534.02 - - 11,399,534.02 Ltd. Tianjin TJ-Metro Real Estate 6,000,000.00 - - 6,000,000.00 Co., Ltd. Tianjin Hongya Engineering 827,210.31 - - 827,210.31 Consulting Co., Ltd. Tianjin Tianyuan Zhenghe Real 5,100,000.00 - - 5,100,000.00 Estate Development Co., Ltd. Beijing China Metro Railway Transportation Research Institute - 250,000.00 - 250,000.00 Co., Ltd. Total 19,996,120,961.67 250,000.00 19,996,370,961.67 (To be continued) Asset Impairment Shareholdi ng Ratio in Cash Bonus in Invested Unit Increas Decreas the Current Period Opening e in e in Closing Invested Balance Current Current Balance Unit (%) Period Period Tianjin Port Bulk Logistics Co., - - - - 5.00 - Ltd. Tianjin Hualian Commercial - - - - - Building Co., Ltd. Tianjin Binhai Insurance Brokers - - - - 5.00 - Co., Ltd. Polytec CITIC Real Estate - - - - 10.00 - (Tianjin) Co., Ltd. Beijing-Shanghai High Speed - - - - 4.51 119,695,357.74 Railway Co., Ltd. Jinbao Railway Limited Liability - - - - 20.28 - Company Jinqin Railway Passenger - - - - 27.97 - Dedicated Line Co., Ltd. Beijing-Tianjin-Hebei Inter-city - - - - 30.00 - Railway Investment Company Jinbin Intercity Railway Limited - - - - 50.00 - 65 F-237 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Asset Impairment Shareholdi ng Ratio in Cash Bonus in Invested Unit Increas Decreas the Current Period Opening e in e in Closing Invested Balance Current Current Balance Unit (%) Period Period Liability Company Tianjin Bank Co., Ltd. - - - - About 1% 9,937,082.60 Beijing-Tianjin Intercity Railway - - - - 25.25 - Limited Liability Company Tianjin Jigang Railway Co., Ltd. - - - - 0.81 - Tianjin Jeshing Real Estate - - - - 30.00 - Development Co., Ltd. Tianjin Jinnuo Real Estate - - - - 30.00 - Development Co., Ltd. Tianjin Jinju Real Estate - - - - 30.00 - Development Co., Ltd. Hutchison Whampoa Properties - - - - 20.00 - (Tianjin) Co., Ltd. Tianjin Metro Junyi Investment - - - - 51.00 - Co., Ltd. Tianjin Metro Jietong Real Estate - - - - 18.00 - Investment Co., Ltd. Tianjin Lianfeng Zhiye Real - - - - 30.00 - Estate Co., Ltd. Tianjin Metropolitan Card Co., - - - - 7.00 - Ltd. Tianjin TJ-Metro Real Estate Co., - - - - 51.00 - Ltd. Tianjin Hongya Engineering - - - - 10.00 300,000.00 Consulting Co., Ltd. Tianjin Tianyuan Zhenghe Real - - - - 51.00 - Estate Development Co., Ltd. Beijing China Metro Railway Transportation Research Institute - - - - 5.00 - Co., Ltd. Total - - - - 129,932,440.34 (XI) Held-to-maturity Investment 1. Held-to-maturity Investment Items Closing Balance Opening Balance 66 F-238 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Asset Asset Book Balance Impairment Book Value Book Balance Impairment Book Value Trust products - - - 154,000,000.00 - 154,000,000.00 Total - - - 154,000,000.00 - 154,000,000.00 The subsidiary - Tianjin Rail Transit Group Engineering Construction Co., Ltd. has held-to-maturity investment valued at RMB 154,000,000.00 Yuan for engineering construction of Metro Line 5 (Bidding No.: 12002014024006). The section of the tendering uses the civil construction bidding mode with financing conditions. The winning bidder will buy a single trust plan issued by Tianjin Trust Co., Ltd. which is divided into two phases with each interval of six months. The subsidiary - Tianjin Rail Transit Group Engineering Construction Co., Ltd. invested in the single trust plan of Tianjin Trust Co., Ltd. based on the agreed financing amount as the client of the trust plan as well as the trust beneficiary. In August 2017, the first tranche of investment of RMB 77 million Yuan was recovered and the remaining investment will be recovered in Dec. 2017. The closing balance has been reclassified to non-current assets due within one year. (XII) Long-term Receivable 1. Long-term Receivable Closing Balance Opening Balance Items Bad-debt Bad-debt Book Balance Book Value Book Balance Book Value Provision Provision Long term claim 60,000,000.00 - 60,000,000.00 60,000,000.00 - 60,000,000.00 Total 60,000,000.00 - 60,000,000.00 60,000,000.00 - 60,000,000.00 2. Long-term Receivable by Aging Closing Balance Opening Balance Item Bad-debt Bad-debt Book Balance Book Value Book Balance Book Value Provision Provision Within 1 year ------1-2 years ------2-3 years ------Over 3 years 60,000,000.00 - 60,000,000.00 60,000,000.00 - 60,000,000.00 Total 60,000,000.00 - 60,000,000.00 60,000,000.00 - 60,000,000.00 (XIII) Long-term Equity Investment Increase/Decrease in Current Year Neg Profit and Other Other Balance at ative Loss on Invested Unit Additional Comprehens Changes Beginning of Year Inve Investment Investment ive Income in stme Recognized Adjustment Equity nt under the 67 F-239 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Equity Method I. Subsidiaries Tianjin Jinkatong Investment and ------Development Co., Ltd. Tianjin Metro (Hong Kong) Co., Ltd. ------ Local Railway Technology ------Development Company Sub-total ------ II. Joint Ventures Tianjin Nanhuan Railway Co., Ltd. 2,813,723,772.19 - - 40,533,307.70 - - Tianjin Yatie Advertising Media Co., - 4,000,000.00 - - - - Ltd. Tianjin Metro Real Estate Trading 10,046,649.39 - - - - - Co., Ltd. Tianjin Fudaojia Property 1,123,858.85 - - - - - Management Co., Ltd. Sub-total 2,824,894,280.43 4,000,000.00 - 40,533,307.70 - - Total 2,824,894,280.43 4,000,000.00 - 40,533,307.70 - - 68 F-240 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements (To be continued) Increase/Decrease in Current Year Declare the Impairment Payment of Provision Year End Provision Invested Unit Cash Other Balance Year End for Dividend or Balance Impairme Profits nt I. Subsidiaries Tianjin Jinkatong Investment - - - - 5,977,168.04 and Development Co., Ltd. Tianjin Metro (Hong Kong) - - - - 87,077.45 Co., Ltd. Sub-total - - - - 6,064,245.49 II. Joint Ventures - Tianjin Nanhuan Railway Co., 67,600,018.47 - - 2,786,657,061.42 - Ltd. Tianjin Yatie Advertising - - - 4,000,000.00 - Media Co., Ltd. Tianjin Metro Real Estate - - - 10,046,649.39 - Trading Co., Ltd. Tianjin Fudaojia Property - - - 1,123,858.85 - Management Co., Ltd. Sub-total 67,600,018.47 - - 2,801,827,569.66 - Total 67,600,018.47 - - 2,801,827,569.66 6,064,245.49 Explanation: (1) The sub-subsidiary -Tianjin Jinkatong Investment and Development Co., Ltd. of the subsidiary - Tianjin Metro Group Co., Ltd. has closed down in 2009, the shares cannot be recovered, and Tianjin Metro Group Co., Ltd. has full provision for impairment of the long-term equity investment. (2) The sub-subsidiary - Tianjin Metro (HongKong) Co., Ltd. of the subsidiary - Tianjin Metro Group Co., Ltd. has closed down in 2009, the shares cannot be recovered, and Tianjin Metro Group Co., Ltd. has full provision for impairment of long-term equity investment. (XIV) Investment Properties Investment Properties by Fair Value Econometric Mode Decrease in Current Fair value at the Increase in Current Year Year Fair value at the Items beginning of Own-occu Chan Transfer end of period period Purchase Disposal pied ges in to 69 F-241 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Property Fair Own-occu or Value pied Inventory Property Transferre d I. Total cost 3,084,001,128.14 23,721,499.08 - - - - 3,107,722,627.22 Houses and buildings 3,084,001,128.14 23,721,499.08 - - - - 3,107,722,627.22 Land use right ------II. Total changes in fair value 1,057,368,269.89 - - - - - 1,057,368,269.89 Houses and buildings 1,057,368,269.89 - - - - - 1,057,368,269.89 Land use right ------III. Total book value of investment property 4,141,369,398.03 23,721,499.08 - - - - 4,165,090,897.11 Houses and buildings 4,141,369,398.03 23,721,499.08 - - - - 4,165,090,897.11 Land use right ------ Explanation: (1) The fair value of the property of the subsidiary - Tianjin Railway Construction Investment Holding (Group) Co., Ltd. located at No. 258, Jiefang South Road, Hexi District has verified by the assessment report ((2017) No. 014) issued by Tianjin Kirin Real Estate Land Appraisal Consulting Co., Ltd. on March 13, 2017; the fair value of the properties of the subsidiary - Tianjin Binhai Rapid Transit Development Co., Ltd. respectively located in the Citizen Cultural Plaza (address: No. 86, First Avenue, TEDA), Zhongshan Gate Transfer Building (address: No. 138, Jintang Road, Hedong District), the ground floor building (address: No. 97-17, Jintang Road, Hedong District), Zhongshan Gate Nanli Premise (address: Room 2, Gate 1, Zhongshang Gate Nanli) has been confirmed by the assessment report ((2017) No. 012) issued by Tianjin Kirin Real Estate Land Appraisal Consulting Co., Ltd. on Feb. 28, 2017; the fair value of the investment property belonging to the subsidiary - Tianjin Xianda Hotel which is located at No. 65, Huanhu Central Road, Hexi District has been verified by the assessment report ((2017) No. 013) issued by Tianjin Kirin Real Estate Land Appraisal Consulting Co., Ltd. on Feb. 8, 2017; the fair value of the properties of the subsidiary - Tianjin Metro Group Co., Ltd., including the Xiangyu Park located in No.18, San Ma Road, Nankai District, the Qinian Mansion located at the northwest side of the intersection of Anshan Road and Nanjing Road in Heping Dist., the Global Landmark Building located in No. 309, Nanjing Road, Nankai District, the Hexie Mansion located in No. 3, Hankou West Road in Heping Dist., the Jinlong Apartments (Building No. 1, 2 and 3) located in the north road of Water Park in Nankai Dist., the west 70 F-242 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements buildings of Fengshang Apartment located on the south side of No. 3 Road of Dingzigu, and the Spring Style located on the southwest side of the intersection of Huanghe Road and Guangkaisima Road in Nankai Dist., has been verified by the assessment report ((2017) No. 006) issued by Tianjin Kirin Real Estate Land Appraisal Consulting Co., Ltd. on January 9, 2017; the fair value of the Global Landmark Square located in No.309, Nanjing Road, Nankai District, belonging to the sub-subsidiary - Tianjin Haishun Real Estate Development Co., Ltd. of the subsidiary of Tianjin Metro Group Co., Ltd., has been verified by the assessment report ((2017) No. 003) issued by Tianjin Kirin Real Estate Land Appraisal Consulting Co., Ltd. on January 8, 2017. (2) The fair value of the Zhongshan Gate Transfer Building, belonging to the subsidiary - Tianjin Binhai Rapid Transit Development Co., Ltd. and located in No. 138, Zhongshan Gate, Jintang Road, Hedong District., is RMB 387,828,348.00 Yuan as of Sept. 30, 2017, and there is no ownership documentary evidence for such property. ˄3˅The sub-subsidiary –Tianjin Haishun Real Estate Development Co., Ltd. of the subsidiary – Tianjin Metro Group Co., Ltd. pledged 12 houses at No. 309, Nanjing Road (Metro Building) (with the building area of 13213.88 m2) to Tianjin Hedong Branch of Agricultural Bank of China to obtain the entrusted loan of Metro Group with the amount of RMB 200 million Yuan, by the end of September 30, 2017, the value of the mortgages was RMB 213,355,099.21 Yuan. (XV) Fixed Assets 1. Classification of Fixed Assets Opening Increase in Current Decrease in Current Items Closing Balance Balance Period Period I. Original Value Including: Houses 1,571,679,817.58 32,008,473.91 - 1,603,688,291.49 and buildings Transportation 56,569,457.20 104,124.28 560,360.00 56,113,221.48 equipment Office equipment 19,011,385.43 1,662,713.77 32,982.56 20,641,116.64 Electronic 14,714,088.30 - 58,000.55 14,656,087.75 equipment Xiangyu Park 73,911,025.43 - - 73,911,025.43 Machinery 272,848,063.96 23,541,675.53 94,200.00 296,295,539.49 71 F-243 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Opening Increase in Current Decrease in Current Items Closing Balance Balance Period Period equipment Metro Line 1 9,555,756,021.43 - - 9,555,756,021.43 Special equipment 9,733,665.67 4,534,217.25 - 14,267,882.92 Instrumentation, measuring standard instruments and 4,334,594.21 169,816.58 - 4,504,410.79 measuring/weightin g tools Others 89,686,714.91 3,022,697.31 846,280.08 91,863,132.14 Total 11,668,244,834.12 65,043,718.63 1,591,823.19 11,731,696,729.56 Including: fixed assets under 3,964,548,078.63 - - 3,964,548,078.63 financial leasing II. Accumulated Depreciation Including: Houses 185,955,758.08 38,717,127.91 - 224,672,885.99 and buildings Transportation 42,566,172.23 2,087,418.32 443,056.72 44,210,533.83 equipment Office equipment 11,128,355.69 2,559,958.79 30,779.99 13,657,534.49 Electronic 11,019,881.83 243,824.03 3,012.30 11,260,693.56 equipment Xiangyu Park 23,694,064.27 1,013,932.98 - 24,707,997.25 Machinery 82,201,080.93 17,641,992.12 66,709.55 99,776,363.50 equipment Metro Line 1 - - - - Special equipment 2,065,706.05 651,906.80 - 2,717,612.85 Instrumentation, measuring standard 2,890,986.88 221,335.35 - 3,112,322.23 instruments and 72 F-244 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Opening Increase in Current Decrease in Current Items Closing Balance Balance Period Period measuring/weightin g tools Others 54,851,159.05 3,676,520.54 802,809.05 57,724,870.54 Total 416,373,165.01 66,814,016.84 1,346,367.61 481,840,814.24 Including: fixed assets under - - - - financial leasing III. Depreciation Reserves Including: Houses - - - - and buildings Transportation - - - - equipment Office equipment - - - - Electronic - - - - equipment Xiangyu Park - - - - Machinery - - - - equipment Metro Line 1 - - - - Special equipment - - - - Instrumentation, measuring standard instruments and - - - - measuring/weightin g tools Others 14,896,111.64 - - 14,896,111.64 Total 14,896,111.64 - - 14,896,111.64 73 F-245 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Opening Increase in Current Decrease in Current Items Closing Balance Balance Period Period Including: fixed assets under financial leasing IV. Net Book Value of Fixed Assets Including: Houses 1,385,724,059.50 - - 1,379,015,405.50 and buildings Transportation 14,003,284.97 - - 11,902,687.65 equipment Office equipment 7,883,029.74 - - 6,983,582.15 Electronic 3,694,206.47 - - 3,395,394.19 equipment Xiangyu Park 50,216,961.16 - - 49,203,028.18 Machinery 190,646,983.03 - - 196,519,175.99 equipment Metro Line 1 9,555,756,021.43 - - 9,555,756,021.43 Special equipment 7,667,959.62 - - 11,550,270.07 Instrumentation, measuring standard instruments and 1,443,607.33 - - 1,392,088.56 measuring/weightin g tools Others 19,939,444.22 - - 19,242,149.96 Total 11,236,975,557.47 - - 11,234,959,803.68 Including: fixed assets under 3,964,548,078.63 - - 3,964,548,078.63 financial leasing 2. The increased amount includes the amount of projects under construction transferring to fixed assets is RMB 45,803,877.62 Yuan. 74 F-246 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements 3. As to the sub-subsidiary – Tianjin Metro Operation Co., Ltd. of the subsidiary – Tianjin Metro Group Co., Ltd., Metro Line 1’s non-profit infrastructure is not to be depreciated. 4. The subsidiary - Tianjin Metro Group Co., Ltd. entered into the Assets Financial Leasing Contract of Tianjin Metro Line 1 with ICBC Financial Leasing Co., Ltd., Tianjin Bohai Leasing Co., Ltd. and Bank of Communications Financial Leasing Co., Ltd. (lessor) in 2011, according to which the lessor agreed to pay the amount of RMB 4,732,342,680.92 Yuan to the Company to purchase the fixed assets of the lessee specified in the contract and valued at RMB 4,732,342,680.92 Yuan, which shall be leased back to Tianjin Metro Group Co., Ltd. with the principal of RMB 4,732,342,680.92 Yuan and interests and the lease term is 10 years. Tianjin Urban Infrastructure Construction &Investment Group Co., Ltd. signed the guarantee contract with the lessor on the same day, providing guarantee for the above obligations. Details of Leased Fixed Assets: Increas Decreas Opening e in e in Closing Name of Fixed Assets Lease Term Balance Current Current Balance Period Period 1) The equipment of Metro Line 1 2007/3/30-2018/11/30 320,000,000.00 - - 320,000,000.00 2) The equipment of Metro Line 1 2007/12/17-2019/12/7 650,000,000.00 - - 650,000,000.00 3) The equipment of Metro Line 1 2011/3/28-2021/3/15 1,100,000,000.00 - - 1,100,000,000.00 4 ) The equipment of Metro Line 1 2011/4/8-2021/4/16 467,513,304.52 - - 467,513,304.52 5) The equipment of Metro Line 1 2011/6/28-2021/6/15 798,919,574.17 - - 798,919,574.17 6) The equipment of Metro Line 1 2011/8/30-2021/8/16 118,943,223.94 - - 118,943,223.94 7) The equipment of Metro Line 1 2012/3/29-2022/3/16 365,619,176.00 - - 365,619,176.00 8) Total assets of Metro Lines 1, 2 and 3 (contract amount of RMB 1,337,754,362.00 Yuan) including Metro 2012/3/26-2022/3/16 143,552,800.00 - - 143,552,800.00 Line 1’s assets value of RMB 143,552,800.00 Yuan) Total 3,964,548,078.63 - - 3,964,548,078.63 5. Some houses and buildings of the subsidiary do not have property certificates as of Sept. 30, 2017. See details as follows: 75 F-247 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements (1) The original value of the commercial property - Lixin Apartment (Floor 1-4) of the subsidiary - Tianjin Binhai Rapid Transit Development Co., Ltd. which is the demolition asset along the light rail, is RMB 47,500,054.00 Yuan, with the accumulated depreciation of RMB 7,075,356.30 Yuan and the net value of RMB 40,424,697.70 Yuan. The proof of ownership has not yet been completed. (2) The original book value of the Jingcai Building owned by the subsidiary - Tianjin Metro Group Co., Ltd. is RMB 110,296,040.00 Yuan at the end of the period, the accumulated depreciation is RMB 19,269,239.15 Yuan, and the net value is RMB 91,026,800.85 Yuan. The original book value of Line 5 headquarters is RMB 13,994,599.42 Yuan, the accumulated depreciation is RMB 1,529,134.48 Yuan, and the net value is RMB 12,465,464.94 Yuan. The original book value of Line 6 headquarters is RMB 59,567,866.76 Yuan, the accumulated depreciation is RMB 6,246,288.60 Yuan, and the net value is RMB 53,321,578.16 Yuan. The proof of ownership has not yet been completed. (3) As of Sept. 30, 2016, the original book value of the Wanglanzhuang Building of the subsidiary - Tianjin Rail Transit Group Engineering Construction Co., Ltd. is RMB 811,790.00 Yuan, the accumulated depreciation is RMB 482,930.21 Yuan and the net value is RMB 328,859.79 Yuan. According to the certificate of ownership, the property right belongs to Tianjin Local Railway Administration. (XVI) Construction in Process 1. Balance of Construction in Progress Closing Balance Opening Balance Depreciat Depreciat Items Book Balance ion Book Value Book Balance ion Book Value Reserves Reserves Tianjin Railway Station 9,485,985,477.81 - 9,485,985,477.81 9,188,356,168.26 - 9,188,356,168.26 transportation hub project Tianjin West Railway Station 3,565,514,151.27 - 3,565,514,151.27 3,549,960,255.24 - 3,549,960,255.24 transportation hub project Beijing-Shanghai express railway “three electricity” 39,088,102.60 - 39,088,102.60 39,088,102.60 - 39,088,102.60 rerouting and transformation project 76 F-248 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Mail processing center underpass 19,501,960.00 - 19,501,960.00 19,501,960.00 - 19,501,960.00 project of West Station Metro Line 1 east 6,156,581,089.35 - 6,156,581,089.35 4,419,210,489.27 - 4,419,210,489.27 extension project Binhai International 2,403,749,395.34 - 2,403,749,395.34 2,330,558,407.82 - 2,330,558,407.82 Airport hub project Airport extension 1,000,748,325.26 - 1,000,748,325.26 988,682,164.82 - 988,682,164.82 line Supporting Traffic Engineering of South 1,042,972,057.45 - 1,042,972,057.45 1,003,369,306.44 - 1,003,369,306.44 Railway Station Cultural Center 3,123,374,837.33 - 3,123,374,837.33 3,078,412,263.75 - 3,078,412,263.75 pivotal project Metro Line 2 11,909,086,482.45 - 11,909,086,482.45 11,796,112,108.63 - 11,796,112,108.63 Metro Line 3 16,004,960,400.45 - 16,004,960,400.45 15,710,646,852.79 - 15,710,646,852.79 Metro Line 3 urgent danger prevention 189,559,401.69 - 189,559,401.69 189,559,401.69 - 189,559,401.69 fees Metro Line 4 4,160,221,851.06 - 4,160,221,851.06 3,491,144,828.21 - 3,491,144,828.21 Metro Line 5 24,662,497,658.52 - 24,662,497,658.52 22,283,391,690.94 - 22,283,391,690.94 Metro Line 6 33,769,916,969.97 - 33,769,916,969.97 31,564,672,681.20 - 31,564,672,681.20 Metro Line 10 2,939,153,788.73 - 2,939,153,788.73 2,503,286,353.52 - 2,503,286,353.52 Metro Line 11 83,859,491.14 - 83,859,491.14 74,128,679.41 - 74,128,679.41 Bus starting/terminal station and bus 52,506,446.36 - 52,506,446.36 52,537,904.27 - 52,537,904.27 parking lot Cultural Center 52,835,497.70 - 52,835,497.70 52,835,497.70 - 52,835,497.70 project - lighthouse Jiefang South Road (underneath pass 158,961,654.07 - 158,961,654.07 87,547,414.94 - 87,547,414.94 Wushui Road) underpass Gejia House demolition and 38,751,273.05 - 38,751,273.05 20,406,312.50 - 20,406,312.50 allocation Supporting Traffic Engineering of West 769,983,362.81 - 769,983,362.81 769,477,516.34 - 769,477,516.34 Railway Station Caozhuang staff 48,588,956.21 - 48,588,956.21 47,850,856.21 - 47,850,856.21 quarter project 77 F-249 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements New Badali supporting 262,711,038.60 - 262,711,038.60 259,144,760.13 - 259,144,760.13 engineering Metro Line 7 project 903,006,584.93 - 903,006,584.93 860,286,882.08 - 860,286,882.08 Metro Line 1 signaling system 293,586,522.97 - 293,586,522.97 210,804,337.13 - 210,804,337.13 modification works Metro Line 1 35,540,600.00 - 35,540,600.00 35,540,600.00 - 35,540,600.00 security project Security project 17,036,129.78 - 17,036,129.78 17,036,129.78 - 17,036,129.78 Xiaobailou plot 62,905,508.07 62,905,508.07 - 62,905,508.07 62,905,508.07 - Metro Line 1 3,016,462,193.30 - 3,016,462,193.30 2,950,069,727.95 - 2,950,069,727.95 development plot Metro Line 2 11,031,561,994.21 - 11,031,561,994.21 10,569,372,511.03 - 10,569,372,511.03 development plot Metro Line 3 786,703,222.44 - 786,703,222.44 722,481,388.52 - 722,481,388.52 development plot Metro Line 5 2,951,503,153.37 - 2,951,503,153.37 2,649,271,053.67 - 2,649,271,053.67 development plot Metro Line 6 3,121,903,222.23 - 3,121,903,222.23 2,704,962,182.00 - 2,704,962,182.00 development plot Old towns reconstruction in 491,352,611.08 - 491,352,611.08 477,097,329.54 - 477,097,329.54 Tongyi Village, Hongqiao Dist. Sitiao Road project 21,333,388.25 - 21,333,388.25 21,333,388.25 - 21,333,388.25 Honghu East Road 20,182,118.00 - 20,182,118.00 20,182,118.00 - 20,182,118.00 project Amortized 650,687,191.38 - 650,687,191.38 654,752,492.69 - 654,752,492.69 investment East section of Light 13,757,002,297.17 - 13,757,002,297.17 13,756,969,679.17 - 13,756,969,679.17 Rail Donghai Road 144,933,538.39 - 144,933,538.39 126,894,343.57 - 126,894,343.57 Station Binhai University 141,269,108.47 - 141,269,108.47 120,233,928.27 - 120,233,928.27 Station Zhangguizhuang 137,311,959.91 - 137,311,959.91 117,863,798.35 - 117,863,798.35 Station West section of 8,781,362,123.98 - 8,781,362,123.98 8,321,231,961.37 - 8,321,231,961.37 Light Rail Operation preparation of Metro 105,473,515.35 - 105,473,515.35 38,360,267.37 - 38,360,267.37 Line 5 78 F-250 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Jiefang Road 367,841,586.86 - 367,841,586.86 367,841,586.86 - 367,841,586.86 underpass project Yangzhuangzi rainwater pumping 27,855,759.00 - 27,855,759.00 27,833,047.30 - 27,833,047.30 station project Beijing-Shanghai 3,969,770,317.28 - 3,969,770,317.28 3,794,296,680.79 - 3,794,296,680.79 project Northwest 521,115,720.83 - 521,115,720.83 521,115,720.83 - 521,115,720.83 connecting line West Railway Station project - 175,554,600.00 - 175,554,600.00 175,554,600.00 - 175,554,600.00 Triangle Land Dibo Yayuan project 132,839,558.17 - 132,839,558.17 132,695,206.89 - 132,695,206.89 Yideyuan project 10,205,044.02 - 10,205,044.02 10,201,935.10 - 10,201,935.10 Jintangnanli project 39,200,000.00 - 39,200,000.00 39,200,000.00 - 39,200,000.00 Qinhai Apartment 31,993,106.18 - 31,993,106.18 31,993,106.18 - 31,993,106.18 Beijing-Shanghai connecting line 19,399,981.71 - 19,399,981.71 18,075,562.71 - 18,075,562.71 underpass Dongli Dist. No. 8 Road (underneath pass Junliangcheng 9,476,908.40 - 9,476,908.40 1,081,400.00 - 1,081,400.00 power plant) railway special line project Others 86,070,019.24 - 86,070,019.24 78,198,144.62 - 78,198,144.62 Total 173,803,549,254.19 62,905,508.07 173,740,643,746.12 163,155,618,594.77 62,905,508.07 163,092,713,086.70 2. Changes of Significant Construction in Process in Current Period Increase in Amount Current Period Transferred to Fixed Decrease in Assets and Current Items Opening Balance Closing Balance Intangible Period Amount Assets in Amount Current Period Tianjin Railway Station 9,188,356,168.26 297,629,309.55 - - 9,485,985,477.81 transportation hub project Tianjin West Railway Station 3,549,960,255.24 15,553,896.03 - - 3,565,514,151.27 transportation 79 F-251 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Amount Current Period Transferred to Fixed Decrease in Assets and Current Items Opening Balance Closing Balance Intangible Period Amount Assets in Amount Current Period hub project Beijing-Shangh ai express railway “three electricity” 39,088,102.60 - - - 39,088,102.60 rerouting and transformation project Mail processing center underpass 19,501,960.00 - - - 19,501,960.00 project of West Station Metro Line 1 east extension 4,419,210,489.27 1,737,370,600.08 - - 6,156,581,089.35 project Binhai International 2,330,558,407.82 73,190,987.52 - - 2,403,749,395.34 Airport hub project Airport 988,682,164.82 12,066,160.44 - - 1,000,748,325.26 extension line Supporting Traffic Engineering of 1,003,369,306.44 39,603,197.03 - 446.02 1,042,972,057.45 South Railway Station Cultural Center 3,078,412,263.75 44,962,573.58 - - 3,123,374,837.33 pivotal project Metro Line 2 11,796,112,108.63 112,974,373.82 - - 11,909,086,482.45 Metro Line 3 15,710,646,852.79 294,313,547.66 - - 16,004,960,400.45 Metro Line 3 urgent danger 189,559,401.69 - - - 189,559,401.69 prevention fees Metro Line 4 3,491,144,828.21 669,077,022.85 - - 4,160,221,851.06 80 F-252 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Amount Current Period Transferred to Fixed Decrease in Assets and Current Items Opening Balance Closing Balance Intangible Period Amount Assets in Amount Current Period Metro Line 5 22,283,391,690.94 2,379,105,967.58 - - 24,662,497,658.52 Metro Line 6 31,564,672,681.20 2,205,244,288.77 - - 33,769,916,969.97 Metro Line 10 2,503,286,353.52 435,867,435.21 - - 2,939,153,788.73 Metro Line 11 74,128,679.41 9,730,811.73 - - 83,859,491.14 Bus starting/termina 52,537,904.27 - - 31,457.91 52,506,446.36 l station and bus parking lot Cultural Center project - 52,835,497.70 - - - 52,835,497.70 lighthouse Jiefang South Road (underneath 87,547,414.94 71,414,239.13 - - 158,961,654.07 pass Wushui Road) underpass Gejia House demolition and 20,406,312.50 18,344,960.55 - - 38,751,273.05 allocation Supporting Traffic Engineering of 769,477,516.34 505,846.47 - - 769,983,362.81 West Railway Station Caozhuang staff 47,850,856.21 738,100.00 - - 48,588,956.21 quarter project New Badali supporting 259,144,760.13 3,566,278.47 - - 262,711,038.60 engineering Metro Line 7 860,286,882.08 42,719,702.85 - - 903,006,584.93 project Metro Line 1 210,804,337.13 82,782,185.84 - - 293,586,522.97 signaling 81 F-253 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Amount Current Period Transferred to Fixed Decrease in Assets and Current Items Opening Balance Closing Balance Intangible Period Amount Assets in Amount Current Period system modification works Metro Line 1 35,540,600.00 - - - 35,540,600.00 security project Security project 17,036,129.78 - - - 17,036,129.78 Xiaobailou plot - - - - - Metro Line 1 development 2,950,069,727.95 66,392,465.35 - - 3,016,462,193.30 plot Metro Line 2 development 10,569,372,511.03 462,189,483.18 - - 11,031,561,994.21 plot Metro Line 3 development 722,481,388.52 64,221,833.92 - - 786,703,222.44 plot Metro Line 5 development 2,649,271,053.67 302,232,099.70 - - 2,951,503,153.37 plot Metro Line 6 development 2,704,962,182.00 416,941,040.23 - - 3,121,903,222.23 plot Old towns reconstruction in Tongyi 477,097,329.54 14,255,281.54 - - 491,352,611.08 Village, Hongqiao Dist. Sitiao Road 21,333,388.25 - - - 21,333,388.25 project Honghu East 20,182,118.00 - - - 20,182,118.00 Road project Amortized 654,752,492.69 106,001,495.04 - 110,066,796.35 650,687,191.38 investment East section of 13,756,969,679.17 32,618.00 - - 13,757,002,297.17 Light Rail 82 F-254 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Amount Current Period Transferred to Fixed Decrease in Assets and Current Items Opening Balance Closing Balance Intangible Period Amount Assets in Amount Current Period Donghai Road 126,894,343.57 22,232,333.05 - 4,193,138.23 144,933,538.39 Station Binhai University 120,233,928.27 22,110,099.52 - 1,074,919.32 141,269,108.47 Station Zhangguizhuan 117,863,798.35 20,447,770.46 - 999,608.90 137,311,959.91 g Station West section of 8,321,231,961.37 473,920,858.97 - 13,790,696.36 8,781,362,123.98 Light Rail Metro Line 5 38,360,267.37 67,113,247.98 - - 105,473,515.35 Jiefang Road underpass 367,841,586.86 - - - 367,841,586.86 project Yangzhuangzi rainwater 27,833,047.30 22,711.70 - - 27,855,759.00 pumping station project Beijing-Shangh 3,794,296,680.79 175,473,636.49 - - 3,969,770,317.28 ai project Northwest 521,115,720.83 - - - 521,115,720.83 connecting line West Railway Station project - 175,554,600.00 - - - 175,554,600.00 Triangle Land Dibo Yayuan 132,695,206.89 144,351.28 - - 132,839,558.17 project Yideyuan 10,201,935.10 3,108.92 - - 10,205,044.02 project Jintangnanli 39,200,000.00 - - - 39,200,000.00 project Qinhai 31,993,106.18 - - - 31,993,106.18 Apartment Beijing-Shangh ai connecting 18,075,562.71 1,324,419.00 - - 19,399,981.71 line underpass 83 F-255 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Amount Current Period Transferred to Fixed Decrease in Assets and Current Items Opening Balance Closing Balance Intangible Period Amount Assets in Amount Current Period Dongli Dist. No. 8 Road (underneath pass 1,081,400.00 8,395,508.40 - - 9,476,908.40 Junliangcheng power plant) railway special line project Others 78,198,144.62 58,348,501.47 45,803,877.62 4,672,749.23 86,070,019.24 Total 163,092,713,086.70 10,828,564,349.36 45,803,877.62 134,829,812.32 173,740,643,746.12 3. Tianjin Branch of China Construction Bank offered the security for enterprise bond with total value of RMB 600 million Yuan of the shareholder Tianjin TEDA Investment Holding Co., Ltd. of the Company, and the subsidiary – Tianjin Binhai Rapid Transit Development Co., Ltd. offered counter guarantee for Tianjin Branch of China Construction Bank with its own machinery, by the end of September 30, 2017, the book value of mortgage assets is RMB 1,512,407,207.72 Yuan. 4. The closing balance includes the financing and leased equipment of Tianjin Metro (Group) Co., Ltd. amounting to RMB 17,031,895,858.54 Yuan. See details as follows: Increase in Decrease in Asset Name Lease Term Opening Balance Closing Balance Current Period Current Period 1) Total assets of Metro Line 1, Line 2 and Line 3 (RMB 1,337,754,362.00 Yuan), including the 2012.3.26-2022.3.16 1,194,201,562.00 - - 1,194,201,562.00 assets of Metro Line 2 and Line amounting to RMB 1,194,201,562.00 Yuan 2˅Part of infrastructure of 2013.7.29-2018.7.28 1,000,000,000.00 - - 1,000,000,000.00 Metro Line 3 84 F-256 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Decrease in Asset Name Lease Term Opening Balance Closing Balance Current Period Current Period 3˅Civil engineering 2013.9.15-2023.9.14 600,000,000.00 - - 600,000,000.00 of Metro Line 2 4˅Civil engineering 2013.9.15-2023.9.14 1,000,000,000.00 - - 1,000,000,000.00 of Metro Line 2 5) Management and Control Center of Tianjin Railway Station transportation junction project, 2014.3.31-2029.3.30 1,021,283,481.00 - - 1,021,283,481.00 Transfer Center, Haihe East Road underpass western section 6) 194 items of Tianjin Railway Station transportation junction project, 2014.9.18-2017.9.17 1,674,414,742.00 - - 1,674,414,742.00 including Wujing Road underpass auxiliary equipment 7˅10 items of Metro line 2, including weak 2014.12.18- current system 224,226,558.54 - - 224,226,558.54 2020.12.17 equipment installation engineering 8) Civil engineering assets of outer ring of Xiqing Dist. to Huayuan car depot, Huayuan car depot contracted by Tianjin 2014.12.11- Urban Construction 350,740,074.00 - - 350,740,074.00 2019.12.10 Group, and Huayuan car depot contracted by China Railway Major Bridge Engineering Group Co., Ltd. 9) Main materials and additional engineering 2015.2.12-2020.2.11 709,857,881.00 - - 709,857,881.00 construction of the relocation project of 85 F-257 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Decrease in Asset Name Lease Term Opening Balance Closing Balance Current Period Current Period Ligonglou Rainwater Pumping Station and Metro Line 3 of Section 2 of Tianjin Railway Station transportation junction project 10) Facilities of Tianjin Culture Center transportation junction Section 1, 2, 3 and 4, Culture Center project 2015.3.26-2021.3.25 1,200,000,000.00 - - 1,200,000,000.00 headquarter and Tianjin Culture Center transportation junction ground foundation pit 11) Facilities of Tianjin Culture Center transportation hub underground traffic engineering and related equipment, related 2015.3.30-2021.2.28 1,007,109,440.00 - - 1,007,109,440.00 engineering of substation electrical equipment of bus starting/terminal station and underground space 12) Related supporting facilities of Jingjiang Road Station of Metro Line 2015.5.13-2017.5.14 522,472,368.43 - 522,472,368.43 - 2 and some stations and roadside facilities and equipment of Metro Line 2 13) a. Facilities of Metro Line 2 from 2015.12.8-2018.11.25 143,827,629.00 - - 143,827,629.00 CK2+150-Yanan 86 F-258 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Decrease in Asset Name Lease Term Opening Balance Closing Balance Current Period Current Period Road Station (including) to Jieyuan West Road Station (not including) 13) b. Facilities of section of Metro Line 2 from Jieyuan West Road Station (including) to 2015.12.8-2018.11.25 178,935,119.00 - - 178,935,119.00 Xianyang Road Station (not including) to Hongqi South Road Station (not including) 13) c. Tianjin Railway Station (not including) - car depot 2015.12.8-2018.11.25 53,670,380.00 - - 53,670,380.00 tracks and car depot facilities of Limingzhuang 14) Power supply system equipment, water chilling unit, combined air 2016.6.24-2024.6.24 451,531,598.00 - - 451,531,598.00 conditioning unit and supporting equipment of Metro Line 6 15) Signal system, escalator equipment, electric bus electric traction system, power supply system, 2016.6.24-2021.5.3 1,350,536,635.00 - - 1,350,536,635.00 electromechanical system, electric motor coach of Metro Line 6 16) Electric motor 2016.6.24-2021.5.3 1,326,780,000.00 - - 1,326,780,000.00 coach of Metro Line 6 17) Equipment and facilities along Metro 2016.12.5-2019.12.5 150,000,000.00 - - 150,000,000.00 Line 2, Equipment and facilities of 87 F-259 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Decrease in Asset Name Lease Term Opening Balance Closing Balance Current Period Current Period Jieyuan Road Station and Xianyang Road Station 18) Equipment and facilities along the 2016.12.5-2019.12.5 200,000,000.00 - - 200,000,000.00 Metro Line 2 19) Equipment and 2016.10.26- facilities along the 150,000,000.00 - - 150,000,000.00 2019.10.25 Metro Line 2 20) Equipment and facilities in the 2016.8.9-2019.8.9 200,000,000.00 - - 200,000,000.00 stations along the Metro Line 3 21) Equipment and facilities along the 2016.6.24-2019.6.24 350,000,000.00 - - 350,000,000.00 Metro Line 2 22) Equipment and facilities along the Metro Line 2 (including but not limited to the related equipment and facilities of Caozhuang Station and Limingzhuang Station (including but not limited to: awning steel structure, curtain 2017.01.06- wall, etc.); the related - 20,000,000.00 - 20,000,000.00 2020.01.07 equipment and facilities of Xinanjiao Station and Gulou Station (including but not limited to ventilation, lighting, sanitation, water supply and drainage, monitoring and other living services equipment and facilities) 23) Signal appliance 2017.01.23- - 411,249,137.00 - 411,249,137.00 88 F-260 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Decrease in Asset Name Lease Term Opening Balance Closing Balance Current Period Current Period 2024.01.23 23) Fire fighting 2017.01.23- - 89,004,490.00 - 89,004,490.00 apparatus 2024.01.23 23) Monitoring 2017.01.23- - 25,050,542.00 - 25,050,542.00 equipment 2024.01.23 24) Metro Line 6 2017.01.10- project - elevator - 23,168,000.00 - 23,168,000.00 2019.01.10 equipment 24) Metro Line 6 project - police 2017.01.10- - 96,456,719.00 - 96,456,719.00 communication 2019.01.10 system 24) Metro Line 6 project -environmental 2017.01.10- - 67,536,126.00 - 67,536,126.00 control, electric 2019.01.10 control cabinet and ancillary equipment 24) Metro Line 6 project - AC40.5KV 2017.01.10- Gas-insulated - 63,427,990.00 - 63,427,990.00 2019.01.10 switchgear and ancillary equipment 24) Metro Line 6 - fan 2017.01.10- (including silencer) - 55,168,110.00 - 55,168,110.00 2019.01.10 equipment 25) Related facilities of Shuangjie parking lot to Happiness Park Station (including but not limited to 35KV substation, ring network cable, stray current system, etc.), 2017.04.01- - 600,000,000.00 - 600,000,000.00 related equipment and 2020.03.31 facilities (including but not limited to substation expansion, access equipment installation and power cord, etc.) at Liyuantou and 89 F-261 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Decrease in Asset Name Lease Term Opening Balance Closing Balance Current Period Current Period Zhangxingzhuang Station, safety door system of stations of Metro Line 5 26) Related facilities at some subway stations within the range of Beichen Science Park North Station to Liqizhuang 2017.05.27- Station of Metro Line - 100,000,000.00 - 100,000,000.00 2020.05.26 5 (including but not limited to water fire fighting system, gas fire extinguishing system equipment, etc.) 27) Shuangjie parking lot, Liyuantou depot and Liyuantou main substation, automatic fire alarm system 2017.05.27- equipment at some - 100,000,000.00 - 100,000,000.00 2020.05.26 subway stations within the range of Beichen Science Park North Station to Liqizhuang Station 28) Metro Line 6 multi-connected air-conditioning unit 2017.05.27- - 10,000,000.00 - 10,000,000.00 equipment and spare 2020.05.26 parts, special tools, test equipment 29) Metro Line 6 wireless communication system equipment and 2017.05.27- - 70,000,000.00 - 70,000,000.00 spare parts, special 2020.05.26 tools, laboratory equipment, etc., fire fighting apparatus on 90 F-262 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Decrease in Asset Name Lease Term Opening Balance Closing Balance Current Period Current Period Metro Line 6 from Xinwaihuan Station to Meilin Road Station, Metro Line 6 cooling tower and spare parts, special tools, test equipment, etc. 30) Metro Line 6 rectifier transformer equipment procurement and spare parts, special tools, test equipment, 2017.05.27- etc., Metro Line 6 - 20,000,000.00 - 20,000,000.00 2020.05.26 AC35KV power transformer procurement and spare parts, special tools, test equipment, etc. 31) Tianjin Metro Line 5 project - 2017.08.17- - 226,980,000.00 - 226,980,000.00 escalator equipment 2019.08.17 and related services 31) Tianjin Metro Line 5 project - 2017.08.17- - 17,326,000.00 - 17,326,000.00 escalator equipment 2019.08.17 and related services 31) Tianjin Metro Line 5 project - fan 2017.08.17- - 53,672,595.00 - 53,672,595.00 (including silencer) 2019.08.17 equipment 31) Tianjin Metro Line 5 project - 2017.08.17- - 3,241,050.00 - 3,241,050.00 cooling tower and 2019.08.17 ancillary equipment 32) Tianjin Metro Line 6 project - 2017.08.08- Switchgear and - 300,000,000.00 - 300,000,000.00 2020.08.07 ancillary equipment, electrical and 91 F-263 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase in Decrease in Asset Name Lease Term Opening Balance Closing Balance Current Period Current Period mechanical system equipment 33) Tianjin Metro Line 6 project -depot public works 2017.09.30- equipment, automated - 142,500,000.00 - 142,500,000.00 2010.09.29 warehouse and a number of shelf ancillary equipment Total 15,059,587,467.97 2,494,780,759.00 522,472,368.43 17,031,895,858.54 1) ICBC Financial Leasing Co., Ltd. (lessor) agreed to purchase assets of Metro Line 1, Line 2 and Line 3 under the contract signed between Metro Group and ICBC Financial Leasing Co., Ltd. on March 22, 2012, which would be leased back to Metro Group with the principal of RMB 1,337,754,362.00 Yuan (including total assets of RMB 1,194,201,562.00 Yuan of Metro Line 2 and Line 3) and the lease term of 10 years. The Company’s controlling shareholder - Tianjin Urban Infrastructure Construction &Investment Group Co., Ltd. signed the Guarantee Contract (No. 005) with the lessor on the same day, providing guarantee for the above obligations. 2) Tianjin Jiayong Leasing Co., Ltd. (lessor) agreed to purchase part of infrastructure of Metro Line 3 under the Financial Leasing Contract signed between Metro Group and Tianjin Jiayong Leasing Co., Ltd. on July 29, 2013, which would be leased back to Metro Group with the principal of RMB 1,000,000,000.00 Yuan and the lease term of 5 years. The Company’s controlling shareholder - Tianjin Urban Infrastructure Construction &Investment Group Co., Ltd. signed the Guarantee Contract (No. 2013JYC0006) with the lessor on the same day, providing guarantee for the above obligations. 3) Dao Sheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase civil engineering assets of Metro Line 2 under the Financial Leasing Contract (Leaseback) signed between Metro Group and Dao Sheng International Financial Leasing Co., Ltd. on Sept. 15, 2013, which would be leased back to Metro Group, and they signed the Assets Transfer Contract (No. DSZR20130006), with the principal of RMB 600,000,000.00 Yuan and total period including the pre-lease and lease for 10 years. Metro Group pledged the toll rights of tickets of Tianjin Metro Line 2 and Line 3 of the proportional part of all amounts of Metro Line 2 and Line 3 under the Pledge Contract signed with Dao Sheng International Financial Leasing Co., Ltd. (pledgee). The Company’s controlling shareholder - Tianjin Urban Infrastructure Construction &Investment Group Co., Ltd. signed the Guarantee Contract (No. DSBZ20130009) with the lessor on the same day, providing guarantee for the above obligations. 92 F-264 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements 4) Dao Sheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase civil engineering assets of Metro Line 2 under the Financial Leasing Contract (Leaseback) signed between Metro Group and Dao Sheng International Financial Leasing Co., Ltd. on Sept. 15, 2013, which would be leased back to Metro Group, and they signed the Assets Transfer Contract (No. DSZR20130005), with the principal of RMB 1,000,000,000.00 Yuan and total period including the pre-lease and lease for 10 years. Metro Group pledged the toll rights of tickets of Tianjin Metro Line 2 and Line 3 of the proportional part of all amounts of Metro Line 2 and Line 3 under the Pledge Contract signed with Dao Sheng International Financial Leasing Co., Ltd. (pledgee). The Company’s controlling shareholder - Tianjin Urban Infrastructure Construction & Investment Group Co., Ltd. signed the Guarantee Contract (No. DSBZ20130008) with the lessor on the same day, providing guarantee for the above obligations. 5) ABC Financial Leasing Co., Ltd. (lessor) agreed to purchase management control center, transfer center, the western part of Haihe East Road underpass of Tianjin Railway Station transportation hub project under the Financial Leasing Contract signed between Metro Group and ABC Financial Leasing Co., Ltd. on March 31, 2014, which would be leased back to Metro Group with the principal of RMB 1,000,000,000.00 Yuan and the lease term of 15 years. The Company’s controlling shareholder - Tianjin Urban Infrastructure Investment Group Co., Ltd. signed the Guarantee Contract (No. 201400008) with the lessor on the same day, providing guarantee for the above obligations. 6) Guangdong Yitong Financial Leasing Co., Ltd. (lessor) agreed to purchase 194 assets including underpass auxiliary equipment of Wujing Road of Tianjin Railway Station transportation hub project under the Financial Leasing Leaseback Contract signed between Metro Group and Guangdong Yitong Financial Leasing Co., Ltd. on Aug. 25, 2014, which would be leased back to Metro Group with the principal of RMB 1,528,365,000.00 Yuan (USD 250 million) and the lease term of 3 years. It is approved by board of directors on Dec. 26, 2014 that the Company provides guarantee for the above obligations. 7) CMB Financial Leasing Co., Ltd. (lessor) agreed to purchase 10 assets including weak current systems engineering construction of Metro Line 2 under the Financial Leasing Contract signed between Metro Group and CMB Financial Leasing Co., Ltd. on Dec. 18, 2014, which would be leased back to Metro Group with the principal of RMB 200,000,000.00 Yuan and the lease term of 6 years. And the Company signed the Guarantee Contract (No. ZLDBTJGD1412096003) with the lessor, providing the irrevocable joint liability guaranty for all debts under the contract. 8) Tianjin Jiayong Leasing Co., Ltd. (lessor) agreed to purchase the civil engineering assets of outer ring of Xiqing Dist. to Huayuan car depot, Huayuan car depot contracted by Tianjin Urban Construction Group, and 93 F-265 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Huayuan car depot contracted by China Railway Major Bridge Engineering Group Co., Ltd. under the financial leasing contract signed between Metro Group and Tianjin Jiayong Leasing Co., Ltd. on Dec. 11, 2014, which would be leased back to Metro Group (Contract No.: 2014JYA12080015) with the principal of RMB 350,000,000.00 Yuan and the lease term of 5 years. The Company’s controlling shareholder - Tianjin Urban Infrastructure Construction &Investment Group Co., Ltd. signed the Guarantee Contract with the lessor on the same day, providing guarantee for the above obligations. 9) Huaxia Financial Leasing Co., Ltd. (lessor) agreed to purchase 4 assets including the relocation project of Ligonglou rainwater pumping station under the Financial Leasing Contract (No. HXZL-XZ-2015108) signed between Metro Group and Huaxia Financial Leasing Co., Ltd. on Feb. 12, 2015, which would be leased back to Metro Group with the principal of RMB 700,000,000.00 Yuan and the lease term of 5 years. The Company’s controlling shareholder - Tianjin Urban Infrastructure Construction &Investment Group Co., Ltd. signed the Guarantee Contract (No. HXZL-XZ-2015108-001) with the lessor on the same day, providing guarantee for the above obligations. 10) Everbright Financial Leasing Co., Ltd. (lessor) agreed to purchase 8 assets including the facilities of Section 1 of Tianjin Culture Center transportation hub construction under the Financial Leasing Contract (Corporation) (No. 1503-02-00006) on Mar. 27, 2015, which would be leased back to Metro Group with the principal of RMB 1,200,000,000.00 Yuan and the lease term of 6 years. The Company signed the Guarantee Contract (Corporation) with the lessor on the same day, providing guarantee for the above obligations. 11) Metro Group agreed to transfer 14 assets including the facilities of Tianjin Culture Center transportation hub construction’s underground traffic engineering to CCB Financial Leasing Co., Ltd. (lessor) under the Leasing Agreement on Mar. 30, 2015, which would be leased back from the lessor, and they signed the Transfer Contract (No. 001-0000354-001), with the principal of RMB 1,000,000,000.00 Yuan and the lease term of 6 years. The Company signed the Guarantee Contract with the lessor on the same day, providing guarantee for the above obligations. 12) Dao Sheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase the supporting facilities of Jingjiang Road Station of Metro Line 2 and some stations’ and roadside facilities and equipment of Metro Line 2 under the Financial Leasing Contract (Leaseback) signed between Metro Group and Dao Sheng International Financial Leasing Co., Ltd. on May 13, 2015, which would be leased back to Metro Group, and also they signed Assets Transfer Contract (No. DSTJHZ2015001), with the principal of RMB 520,000,000.00 Yuan and the lease term of 732 days. Metro Group signed the Purchaser Factoring Agreement(for Financial Leasing Factoring 94 F-266 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Business) (No. 77092014280188-1) with SPD Bank Tianjin Branch on May 14, 2015ˈaccording to which, the Company shall transfer the creditor’s rights with the rental of RMB 520,000,000.00 Yuan under the Financial Leasing Contract (Leaseback) to SPD Bank Tianjin Branch. 13) The Company signed the Financial Leasing Contract (No. LTYX-2015003-HZ) with Longtai Yinxin Financial Leasing Co., Ltd. (lessor) on Dec. 8, 2015, with the Metro Group as the co-lessee, according to which, the lessor shall transfer the facilities of section from Metro Line 2 CK2+150-Yanan Road Station (including) to Jieyuan West Road Station (not including), facilities of section from Metro Line 2-Jieyuan West Road Station (including) - Xianyang Road Station (not including) - Hongqi South Road Station (not including), as well as Tianjin Railway Station (not including) - car depot tracks and car depot facilities of Limingzhuang, Contract No.: LTYX-2015003-HZ, with the principal of RMB 350,000,000.00 Yuan and the lease term of 1083 days. 14) Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) agreed to purchase power supply system equipment, water chilling unit, combined air conditioning unit and supporting equipment of Metro Line 6 under the Financial Leasing Contract (Leaseback) signed between Metro Group and Tianjin Rail Transit Group Financial Leasing Co., Ltd. on June 23, 2016, which shall be leased back to Metro Group, and also they signed Assest Transfer Contract (No. GDZL-ZR-2016-06-04) with the lessor, with the lease term of 8 years and lease principal of RMB 450,000,000.00 Yuan. 15) Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) agreed to purchase signal system, escalator equipment, electric bus electric traction system, power supply system, electromechanical system and electric motor coach of Metro Line 6 under the Financial Leasing Contract (Leaseback) signed between Metro Group and Tianjin Rail Transit Group Financial Leasing Co., Ltd. on June 23, 2016, which shall be leased back to Metro Group, and they also signed Assets Transfer Contract (No. GDZL-ZR-2016-06-06) with the lessor, with the leasing term of 1774 days and the lease principal of RMB 1,300,000,000.00 Yuan. The Company signed the Guarantee Contract with the lessor on the same day, providing guarantee for the above obligations. 16) Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) agreed to purchase electric motor coach of Metro Line 6 under the Financial Leasing Contract (Leaseback) signed between Metro Group and Tianjin Rail Transit Group Financial Leasing Co., Ltd. on June 23, 2016, which shall be leased back to Metro Group, and they also signed Assets Transfer Contract (No. GDZL-ZR-2016-06-05), with the leasing term of 1774 days and the lease principal of RMB 1,320,000,000.00 Yuan. 17) Dao Sheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase equipment and facilities along the Metro Line 2 and the equipment and facilities of Jieyuan Road Station and Xianyang Road Station under 95 F-267 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements the Financial Leasing Contract (Leaseback) signed between Metro Group and Dao Sheng International Financial Leasing Co., Ltd. on Dec. 5, 2016, which shall be leased back to Metro Group, and they also signed Assets Transfer Contract (No. DSTJHZ2016006), with the leasing term of 1095 days and lease principal of RMB 150,000,000.00 Yuan. The Company signed the Guarantee Contract with the lessor on the same day, providing guarantee for the above obligations. 18) Dao Sheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase the equipment and facilities along the Metro Line 2 under the Financial Leasing Contract (Leaseback) signed between Metro Group and Dao Sheng International Financial Leasing Co., Ltd. on Dec. 5, 2016, which shall be leased back to Metro Group, and they also signed Assets Transfer Contract (No. DSTJHZ2016007), with the leasing term of 1096 days and lease principal of RMB 200,000,000.00 Yuan. The Company signed the Guarantee Contract with the lessor on the same day, providing guarantee for the above obligations. 19) Dao Sheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase the equipment and facilities along the Metro Line 2 under the Financial Leasing Contract (Leaseback) signed between Metro Group and Dao Sheng International Financial Leasing Co., Ltd. on Oct. 26, 2016, which shall be leased back to Metro Group, and they also signed Assets Transfer Contract (No. DSTJHZ2016005), with the leasing term of 1095 days and lease principal of RMB 150,000,000.00 Yuan. The Company signed the Guarantee Contract with the lessor on the same day, providing guarantee for the above obligations. 20) Dao Sheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase the related equipment and facilities of the stations along the Metro Line 3 under the Financial Leasing Contract (Leaseback) signed between Metro Group and Dao Sheng International Financial Leasing Co., Ltd. on Aug. 9, 2016, which shall be leased back to Metro Group, and they also signed Assets Transfer Contract (No. DSTJHZ2016004), with the leasing term of 1096 days and lease principal of RMB 200,000,000.00 Yuan. The Company signed the Guarantee Contract with the lessor on the same day, providing guarantee for the above obligations. 21) Dao Sheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase the related equipment and facilities along the Metro Line 2 under the Financial Leasing Contract (Leaseback) signed between Metro Group and Dao Sheng International Financial Leasing Co., Ltd. on June 24, 2016, which shall be leased back to Metro Group, and they also signed Assets Transfer Contract (No. DSTJHZ2016003), with the leasing term of 1096 days and lease principal of RMB 350,000,000.00 Yuan. The Company signed the Guarantee Contract with the lessor on the same day, providing guarantee for the above obligations. 22˅Tianjin Metro Group Co., Ltd. and Dao Sheng International Financial Leasing Co., Ltd. (lessor) signed 96 F-268 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements the Financing Lease Contract on January 6, 2017, contract No.: DSTJHZ2016008, the contract agreed that the lessor purchased the related equipment and facilities along the Metro Line 2 in Tianjin from Tianjin Metro Group Co., Ltd., and provided leaseback to Tianjin Metro Group Co., Ltd., with the leasing term of 1096 days and lease principal of RMB 20,000,000.00 Yuan. 23˅Tianjin Metro Group Co., Ltd. and Guoyue International Financial Leasing (Tianjin) Co., Ltd. (lessor) signed the Financing Lease Contract on January 23, 2017, contract No.:GYZL20161130ZL, the contract agreed that the lessor purchased signal equipment, firefighting equipment and monitoring equipment from Tianjin Metro Group Co., Ltd., and provided leaseback to Tianjin Metro Group Co., Ltd., with the leasing term of 7 years and lease principal of RMB 525,000,000.00 Yuan. 24˅Tianjin Metro Group Co., Ltd. and Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) signed the Financial Leasing Contract (Leaseback)on January 6, 2017, the contract agreed that the lessor purchased elevator equipment, police communication system, environmental control cabinet and related equipment, AC40.5KV gas insulated switchgear and ancillary equipment, fans (including muffler) equipment of Metro Line 6Project from Metro Group, which shall be leased back to Metro Group, and they also signed Assets Transfer Contract (No. GDZL-ZR-2017-01-01), with the leasing term of 730 days and lease principal of RMB 300,000,000.00 Yuan. 25˅Tianjin Metro Group Co., Ltd. and Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) signed the Financing Lease Contract on April 1, 2017, contract No.: GDZL-HZ-2017-04-01, the contract agreed that the lessor purchased the related facilities from Shuangjie Parking Lot to Xingfu Park Station, the related equipment and facilities in the Liyuantou and Zhangxingzhuang Stations, the screen door system of Metro Line 5, etc. from Tianjin Metro Group Co., Ltd., and provided leaseback to Tianjin Metro Group Co., Ltd., with the leasing term of 1097 days and lease principal of RMB 600,000,000.00 Yuan. 26˅Tianjin Metro Group Co., Ltd. and Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) signed the Financing Lease Contract on May 27, 2017, contract No.: GDZL-HZ-2017-05-01, the contract agreed that the lessor purchased the related facilities of some metro stations from Beichen Science and Technology Park North Station to Liqizhuang Station of Metro Line 5 from Tianjin Metro Group Co., Ltd., and provided leaseback to Tianjin Metro Group Co., Ltd., with the leasing term of 1097 days and lease principal of RMB 100,000,000.00 Yuan. 27˅Tianjin Metro Group Co., Ltd. and Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) signed the Financing Lease Contract on May 27, 2017, contract No.: GDZL-HZ-2017-05-05, the contract agreed that the 97 F-269 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements lessor purchased main transformer substations of Shuangjie Parking Lot, Liyuantou Depot and Liyuantou Station, automatic fire alarm system equipment of some metro stations from Beichen Science and Technology Park North Station to Liqizhuang Station from Tianjin Metro Group Co., Ltd., and provided leaseback to Tianjin Metro Group Co., Ltd., with the leasing term of 1097 days and lease principal of RMB 100,000,000.00 Yuan. 28˅Tianjin Metro Group Co., Ltd. and Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) signed the Financing Lease Contract on May 27, 2017, contract No.:GDZL-HZ-2017-05-04, the contract agreed that the lessor purchased multi-air-conditioning unit equipment and spare parts, special tools, test equipment, etc. of Metro Line 6 from Tianjin Metro Group Co., Ltd., and provided leaseback to Tianjin Metro Group Co., Ltd., with the leasing term of 1097 days and lease principal of RMB 10,000,000.00 Yuan. 29˅Tianjin Metro Group Co., Ltd. and Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) signed the Financing Lease Contract on May 27, 2017, contract No.: GDZL-HZ-2017-05-02, the contract agreed that the lessor purchased dedicated wireless communication system and its spare parts, special tools, laboratory equipment, etc. of Metro Line 6, the firefighting equipment within the stations from New Outer Ring Station to Meilin Road Station of Metro Line 6 and engineering cooling towers and its spare parts, special tools, test equipment, etc. of Metro Line 6 from Tianjin Metro Group Co., Ltd., and provided leaseback to Tianjin Metro Group Co., Ltd., with the leasing term of 1097 days and lease principal of RMB 70,000,000.00 Yuan. 30˅Tianjin Metro Group Co., Ltd. and Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) signed the Financing Lease Contract on May 27, 2017, contract No.: GDZL-HZ-2017-05-03, the contract agreed that the lessor purchased rectifier transformer equipment and its spare parts, special tools, test instruments, etc. of Metro Line 6 Project, and AC35KV power transformer and its spare parts, special tools, test instruments, etc. of Metro Line 6 from Tianjin Metro Group Co., Ltd., and provided leaseback to Tianjin Metro Group Co., Ltd., with the leasing term of 1097 days and lease principal of RMB 20,000,000.00 Yuan. 31˅Tianjin Metro Group Co., Ltd. and Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) signed the Financing Lease Contract (Leaseback) on August 16, 2017, contract No.: GDZL-HZ-2017-08-02, the contract agreed that the lessor purchased escalator equipment and related services of Metro Line 5 Project, elevator equipment and related services of Tianjin Metro Line 5 Project, fan (including muffler) equipment of Tianjin Metro Line 5 and cooling towers and ancillary equipment of Metro Line 5 Project from Tianjin Metro Group Co., Ltd., and provided leaseback to Tianjin Metro Group Co., Ltd., with the leasing term of 2 years and lease principal of RMB 300,000,000.00 Yuan. 32˅Tianjin Metro Group Co., Ltd. and Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) signed 98 F-270 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements the Financing Lease Contract (Leaseback) on August 8, 2017, contract No.: GDZL-HZ-2017-08-01, the contract agreed that the lessor purchased switchgear and ancillary equipment, electrical and mechanical system equipment, etc. of Tianjin Metro Line 6 from Tianjin Metro Group Co., Ltd., and provided leaseback to Tianjin Metro Group Co., Ltd., with the leasing term of 1097 days and lease principal of RMB 300,000,000.00 Yuan. 33˅Tianjin Metro Group Co., Ltd. and Tianjin Rail Transit Group Financial Leasing Co., Ltd. (lessor) signed the Financing Lease Contract (Leaseback) on August 8, 2017, contract No.:GDZL-HZ-2017-09-01, the contract agreed that the lessor purchased depot public works equipment, automated stereoscopic warehouse and a number of shelf ancillary equipment, etc. of Tianjin Metro Line 6 from Tianjin Metro Group Co., Ltd., and provided leaseback to Tianjin Metro Group Co., Ltd., with the leasing term of 1097 days and lease principal of RMB 142,500,000.00 Yuan. 5. The closing balance includes the financial leasing assets of the subsidiary - Tianjin Binhai Rapid Transit Development Co., Ltd. Jinbin Light Rail Line 9 due to leaseback amounting to RMB 6,142,532,877.00 Yuan. See details as follows: Increase in Decrease in Asset Name Lease Term Opening Balance Current Current Closing Balance Period Period 1) Equipment of east and west sections of Light Rail 2010/5/28-2020/5/28 2,814,986,709.00 - - 2,814,986,709.00 Line 9 2) East section houses, buildings and pipeline 2015/9/7-2025/9/20 640,016,930.00 - - 640,016,930.00 grooves of Light Rail Line 9 3) Equipment installation of east and west sections of 2015/4/30-2021/4/21 1,505,620,199.00 - - 1,505,620,199.00 Light Rail Line 9 4) East section house and equipment of Light Rail 2015/4/1-2021/4/1 1,181,909,039.00 - - 1,181,909,039.00 Line 9 Total 6,142,532,877.00 - - 6,142,532,877.00 1) The subsidiary – Tianjin Binhai Rapid Transit Development Co., Ltd. signed the Financial Leasing 99 F-271 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Contract with Bank of Communications Financial Leasing Co., Ltd. and ICBC Financial Leasing Co., Ltd. (lessor) on May 28, 2010, according to which, the lessor shall purchase equipments of east and west sections and lease back to the subsidiary – Tianjin Binhai Rapid Transit Development Co., Ltd. with the lease principal of RMB 2,600,000,000.00 Yuan and the lease term of 10 years. Tianjin TEDA Investment Holding Co., Ltd. signed the Guarantee Contract (BOCOM Leasing No. 20100033 and ICBC Leasing No. 026) with the lessor on the same day, providing guarantee for the above obligations. 2) Dao Sheng International Financial Leasing Co., Ltd. (lessor) agreed to purchase the house property, structures and pipeline grooves of the east and west sections under the Financial Leasing Contract signed between Tianjin Binhai Rapid Transit Development Co., Ltd. and Dao Sheng International Financial Leasing Co., Ltd. on Sept. 17, 2015, which shall be leased back to Tianjin Binhai Rapid Transit Development Co., Ltd. with the lease principle of RMB 500,000,000.00 Yuan and the lease term of 10 years. The Company signed the Guarantee Contract (No. DSHZ20150013-BZ) with the lessor on the same day, providing guarantee for the above obligations. On Sept. 25, 2015ˈthe subsidiary - Tianjin Binhai Rapid Transit Development Co., Ltd. signed the Rights and Interests Transfer Agreement on Leasing Asset and Rent Receivable with Dao Sheng International Financial Leasing Co., Ltd. (assignor) and ABC Financial Leasing Co., Ltd. (assignee), according to which, the assignor shall transfer the rental earnings rights under the leasing contract to the assignee and the assignee shall purchase above assets. 3) Jianxin Financial Leasing Co., Ltd. (lessor) agreed to purchase the equipment installation of east and west sections under the Financial Leasing Contract signed between Tianjin Binhai Rapid Transit Development Co., Ltd. and Jianxin Financial Leasing Co., Ltd. on Apr. 30, 2015, which shall be leased back to Tianjin Binhai Rapid Transit Development Co., Ltd. with the lease principle of RMB 1,500,000,000.00 Yuan and the lease term of 6 years. The Company signed the Guarantee Contract (No. 001-0000366-001) with the lessor on the same day, providing guarantee for the above obligations. 4) Everbright Financial Leasing Co., Ltd. (lessor) agreed to purchase the equipment installation of east and west sections under the Financial Leasing Contract signed between Tianjin Binhai Rapid Transit Development Co., Ltd. and Everbright Financial Leasing Co., Ltd. on Mar. 26, 2015, which shall be leased back to Tianjin Binhai Rapid Transit Development Co., Ltd. with the lease principle of RMB 800,000,000.00 Yuan and the lease term of 6 years. Tianjin Metro Group Co., Ltd. signed the Guarantee Contract (Everbright Financial Leasing (1504) No. 02-00003) with the lessor on the same day, providing guarantee for the above obligations. 100 F-272 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements (XVII) Disposal of Fixed Assets Items Closing Balance Opening Balance Disposal of fixed assets 797,649.35 797,649.35 Total 797,649.35 797,649.35 (XVIII) Intangible Assets Increase in Opening Decrease in Items Current Closing Balance Balance Current Period Period I. Total original book value 158,505,857.32 2,622,705.28 1,537,273.38 159,591,289.22 Software 2,772,856.53 2,622,705.28 1,537,273.38 3,858,288.43 Land use right 150,943,000.79 - - 150,943,000.79 Others 4,790,000.00 - - 4,790,000.00 II. Total accumulated 9,820,027.71 600,327.04 415,717.42 10,004,637.33 amortization Software 1,423,673.00 34,603.78 415,717.42 1,042,559.36 Land use right 6,600,104.71 565,723.26 - 7,165,827.97 Others 1,796,250.00 - - 1,796,250.00 III. Total net book value of 148,685,829.61 - - 149,586,651.89 intangible assets Software 1,349,183.53 - - 2,815,729.07 Land use right 144,342,896.08 - - 143,777,172.82 Others 2,993,750.00 - - 2,993,750.00 IV. Total impairment provision - - - - Software - - - - Land use right - - - - Others - - - - V. Total book value of 148,685,829.61 - - 149,586,651.89 intangible assets 101 F-273 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Software 1,349,183.53 - - 2,815,729.07 Land use right 144,342,896.08 - - 143,777,172.82 Others 2,993,750.00 - - 2,993,750.00 (XIX) Goodwill Increase in Decrease in Opening Closing Name of Invested Unit or Current Current Balance Balance Goodwill Matter Period Period Goodwill generated by acquisition 87,435.85 - - 87,435.85 of Guangyun Equipment Co., Ltd. Total 87,435.85 - - 87,435.85 Explanation: (1) The company acquired Guangyun Equipment Co., Ltd. with the stock rights of 100% in January 2016 which formed the business combinations under different control. The goodwill amount in consolidated statements is RMB 87,435.85 Yuan. (2) Guangyun Equipment Co., Ltd. has performed goodwill impairment test at the end of the period and didn’t discover an indication of goodwill impairment. (XX) Long-term Prepaid Expenses Amortization Increase in Decrease in Opening Amount in Items Current Current Closing Balance Balance Current Period Period Period Financial leasing service 96,077,247.91 - 16,366,852.44 - 79,710,395.47 charge Guarantee fees of financial 6,066,666.53 - 1,365,000.06 - 4,701,666.47 leasing Guarantee fees of west 104,287,200.00 - 13,053,824.97 - 91,233,375.03 section borrowings Financial leasing 149,791,186.43 - 22,416,571.71 - 127,374,614.72 early-period expense Operation preparation 19,374,140.74 - - - 19,374,140.74 expense Employee-training expense 5,022,157.74 - - - 5,022,157.74 Others 6,989,008.72 8,666,258.71 614,540.88 - 15,040,726.55 Total 387,607,608.07 8,666,258.71 53,816,790.06 - 342,457,076.72 102 F-274 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements (XXI) Deferred Income Tax Assets / Deferred Income Tax Liabilities 1. Unrealized Deferred Income Tax Assets Closing Balance Opening Balance Items Deductable Deferred Income Deductable Deferred Income Temporary Tax Assets Temporary Tax Assets Provision for impairment of 50,097,616.61 12,524,404.19 46,544,120.96 11,636,030.27 assets Investment real estate measured by fair value 64,019,136.84 16,004,784.21 64,019,136.83 16,004,784.21 Unrealized internal profits 50,475,524.64 12,618,881.16 24,622,616.08 6,155,654.02 Organization costs 900,156.47 225,039.12 900,156.47 225,039.12 Anticipation liabilities 418,859.65 104,714.91 1,449,487.15 362,371.79 Accrued expenses 10,904.70 2,726.18 10,904.70 2,726.18 Deposit received 1,500,000.00 375,000.00 1,500,000.00 375,000.00 Low priced and easily worn 356,353.36 89,088.33 356,353.36 89,088.33 Personnel education fund 1,993,545.72 498,386.43 1,993,545.72 498,386.43 Total 169,772,097.99 42,443,024.53 141,396,321.27 35,349,080.35 2. Unrealized Deferred Income Tax Liabilities Closing Balance Opening Balance Items Taxable Temporary Deferred Taxable Deferred Income Differences Income Tax Temporary Tax Liabilities Li biliti Diff Changes in fair value of available-for-sale financial 953,173.74 238,293.45 953,173.74 238,293.45 assets included in capital Depreciation of fixed assets 577,402,723.64 144,350,680.92 577,402,723.64 144,350,680.92 Changes in the fair value of investment real estate in the 1,957,106,407.32 489,276,601.86 1,957,106,407.32 489,276,601.86 fair value mode Total 2,535,462,304.75 633,865,576.23 2,535,462,304.75 633,865,576.23 (XXII) Other Non-current Assets Items Closing Balance Opening Balance Unsettled assets profit and loss 187,537,386.07 187,537,386.07 Less: Provision for impairment of unsettled 14,632,034.07 14,632,034.07 assets profit and loss Total 172,905,352.00 172,905,352.00 103 F-275 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements (XXIII) Assets with Limited Ownership Book Value at the End of Items Reason Period See Note VI Cash and cash equivalents 169,779,567.52 (I) for details. See Note VI Inventories 3,195,921,099.00 (VII) for details. See Note VI Investment properties 213,355,099.21 (XIV) for details. See Note VI Construction in process 1,512,407,207.72 (XXI) for details. Total 5,091,462,973.45 (XXIV) Short-term Borrowing 1. Short-term Borrowing Listed by Borrowing Conditions: Items Closing Balance Opening Balance Pledge borrowings - - Mortgage borrowings - - Guarantee borrowings 375,990,000.00 696,000,000.00 Credit borrowings 2,220,000,000.00 600,000,000.00 Total 2,595,990,000.00 1,296,000,000.00 Including: (1) Guarantee Borrowings: Loan Unit Closing Balance Loan Term Guarantor China Construction Bank Tianjin Rail Transit Group 7,000,000.00 2017.6.2-2018.6.2 Tianjin Hexi Sub-branch Co., Ltd. China Construction Bank Tianjin Rail Transit Group 19,000,000.00 2017.3.27-2018.3.27 Tianjin Hexi Sub-branch Co., Ltd. Bank of Tianjin Jincai Tianjin Rail Transit Group 16,000,000.00 2017.1.23-2018.1.22 Sub-branch Co., Ltd. Bank of Tianjin Jincai Tianjin Rail Transit Group 4,000,000.00 2017.1.17-2018.1.16 Sub-branch Co., Ltd. 104 F-276 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Loan Unit Closing Balance Loan Term Guarantor China Zheshang Bank Co., Tianjin Rail Transit Group 329,990,000.00 2017.3.07-2017.10.04 Ltd. Tianjin Branch Co., Ltd. Total 375,990,000.00 (2) Credit Borrowings Loan Unit Closing Balance China Zheshang Bank Co., Ltd. Tianjin Branch 220,000,000.00 China Merchants Bank Co., Ltd. Tianjin Branch 1,000,000,000.00 China CITIC Bank Co., Ltd. Tianjin Branch 500,000,000.00 China Development Bank Co., Ltd. 500,000,000.00 Total 2,220,000,000.00 (XXV) Bills Payable Category Closing Balance Opening Balance Trade acceptance - - Bank acceptance - 5,000,000.00 Total - 5,000,000.00 (XXVI) Accounts Payable 1. Accounts Payable Aging Closing Balance Opening Balance Within 1 year 2,010,055,766.43 3,404,297,846.87 1-2 years (including 2 years) 1,390,345,248.81 269,139,494.10 2-3 years (including 3 years) 206,059,247.97 137,072,232.61 Over 3 years 309,728,089.57 489,563,893.52 Total 3,916,188,352.78 4,300,073,467.10 2. Top 5 Accounts Payable Units: Proportion in Total Closing Creditor Unit Closing Balance Aging Contents Balance of Accounts Payable (%) Within 1 CRRC Tangshan Co., Ltd. 319,539,758.65 8.16 Project funds year China Railway No. 3 Within 1 129,341,208.29 3.30 Project funds Engineering Group Co., Ltd. year 105 F-277 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Proportion in Total Closing Creditor Unit Closing Balance Aging Contents Balance of Accounts Payable (%) 31,680,359.54 1-2 years 0.81 Sub-total 161,021,567.83 4.11 Within 1 Tianjin Sanjian Construction 97,745,064.92 2.50 Project funds year Engineering Co., Ltd. 11,020,569.10 1-2 years 0.28 Project funds Sub-total 108,765,634.02 2.78 Within 1 China Railway No. 18 91,626,511.73 2.34 Project funds year Engineering Group Co., Ltd. 15,272,251.33 1-2 years 0.39 Project funds Sub-total 106,898,763.06 2.73 Within 1 Tianjin Urban Construction 94,958,808.78 2.42 Project funds year Group Co., Ltd. 2,309,233.00 2-3 years 0.06 Project funds Sub-total 97,268,041.78 2.48 Total 793,493,765.34 20.26 (XXVII) Advance from Customers 1. Advance from Customers Items Closing Balance Opening Balance Within 1 year 290,741,761.83 460,650,829.35 1-2 years (including 2 years) 427,346,413.29 1,119,495,036.23 2-3 years (including 3 years) 1,119,495,036.23 98,758,115.80 Over 3 years 2,554,557,247.09 2,500,499,131.29 Total 4,392,140,458.44 4,179,403,112.67 2. Top 5 Advance Receipts Units: Proportio n in Total Closing Balance Creditor Unit Closing Balance Aging Contents of Advance Receipts (%) 106 F-278 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Tianjin Jinyuan Investment 772,690,000.00 2-3 years 17.59 Project funds Development Co., Ltd. 2,314,550,000.00 Over 3 years 52.7 Project funds Sub-total 3,087,240,000.00 70.29 Tianjin Zhongye Mingrui Real Within 1 191,174,324.32 4.35 Project funds Estate Co., Ltd. year Tianjin Haihe Construction 4,900,000.00 4-5 years 0.11 Project funds Investment & Development Co., 16,014,909.00 Over 5 years 0.36 Project funds Ltd. Sub-total 20,914,909.00 0.47 Tianjin Urban Road Network Supporting Construction Investment 20,182,118.00 Over 5 years 0.46 Project funds Co., Ltd. Beijing Railway Bureau Tianjin Railway Station Renovation and 19,700,000.00 Over 3 years 0.45 Project funds Expansion Project Construction Headquarters Total 3,339,211,351.32 76.02 (XXVIII) Payroll Payable 1. Payroll Payable Opening Increase in Decrease in Items Closing Balance Balance Current Period Current Period I. Short-term remuneration 59,403,881.79 1,020,328,333.74 1,041,424,523.67 38,307,691.86 II. Post-employment benefits - 46,953.52 87,921,239.84 87,923,711.13 44,482.23 defined contribution plans Total 59,450,835.31 1,108,249,573.58 1,129,348,234.80 38,352,174.09 2. Short-term Remuneration Opening Increase in Decrease in Closing Items Balance Current Period Current Period Balance I. Salary, bonus, subsidies & 28,128,102.09 779,933,529.68 801,864,086.95 6,197,544.82 allowance II. Employee services and benefits 477,774.13 24,556,407.06 24,631,063.63 403,117.56 III. Social insurance charges 33,011.61 126,060,351.52 126,027,493.32 65,869.81 Including: Medical insurance 31,037.37 121,503,876.93 121,471,018.73 63,895.57 premiums Industrial injury insurance 1,150.49 2,474,323.15 2,474,323.15 1,150.49 premium Birth insurance premium 823.75 2,082,151.44 2,082,151.44 823.75 Others - - - - IV. Housing fund 35,882.00 72,421,024.00 72,418,777.00 38,129.00 107 F-279 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Opening Increase in Decrease in Closing Items Balance Current Period Current Period Balance V. Labour union expenditure and 30,729,111.96 17,300,798.60 16,426,879.89 31,603,030.67 personnel education fund VI. Non-monetary welfare - 56,222.88 56,222.88 - VII. Compensation for the - - - - termination of labor relations Total 59,403,881.79 1,020,328,333.74 1,041,424,523.67 38,307,691.86 3. Defined Contribution Plans Opening Increase in Decrease in Closing Items Balance Current Period Current Period Balance I. Endowment insurance 44,482.23 85,115,292.41 85,115,292.41 44,482.23 II. Unemployment insurance 2,471.29 2,805,947.43 2,808,418.72 - expense Total 46,953.52 87,921,239.84 87,923,711.13 44,482.23 (XXIX) Tax Payable Items Closing Balance Opening Balance Added-value tax 8,819,451.11 9,765,879.02 Business tax 12,640,680.18 12,276,375.93 City maintenance and construction tax 461,163.27 799,564.48 Extra charges of education funds 192,640.32 337,957.55 Local extra charges of education funds -96,546.16 -3,322.47 Flood prevention charges 467,662.20 508,648.89 Corporate income tax -29,776,194.00 -20,091,021.64 Individual income tax 944,233.40 770,249.93 House property tax 326,650.28 564,033.68 Stamp duty 9,561.18 34,432.07 Land value increment tax -37,038,412.08 -36,186,569.84 Land use tax - 13,020.83 Others -513,524.20 -302,964.16 Total -43,562,634.50 -31,513,715.73 (XXX) Interest Payable 1. Interest Payable Items Closing Balance Opening Balance 108 F-280 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Items Closing Balance Opening Balance Interest of long-term borrowings whose principles are paid at 195,844.54 190,985.77 maturity date and whose interests are paid in installment Corporate bond interest - - Interest payable of long-term - - borrowings Total 195,844.54 190,985.77 (XXXI) Other Payables 1. Other Payables Listed by the Nature of Payment Aging Closing Balance Opening Balance Accounts current 886,547,902.31 1,003,955,737.16 Temporary deposit and 188,632,571.63 181,954,812.85 guarantee deposit Collection and payment for 51,882,530.11 169,005,558.20 another Project funds 173,022,727.21 71,951,875.56 Borrowings 381,991,333.34 55,325,333.33 Insurance claims payment 276,439,330.70 173,964,074.47 Management expense 5,115,552.06 2,941,887.77 Safety production cost - 2,500,086.23 Personal payment 314,167.40 1,381,463.48 Others 88,558,897.20 129,944,105.01 Total 2,052,505,011.96 1,792,924,934.06 2. Top 5 Other Payables Units Proportion Creditor Unit Closing Balance Aging Contents (%) Within 1 Accounts current 399,229,526.90 19.45 year (operating fare) Tianjin Metropolitan Card Co., Ltd. Accounts current 58,353,788.50 1-2 years 2.84 (operating fare) Sub-total 457,583,315.40 22.29 Tianjin Finance Bureau 370,811,333.34 Within 1 18.07 Borrowings 109 F-281 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Proportion Creditor Unit Closing Balance Aging Contents (%) year Over 3 939,995.76 0.05 Borrowings years Sub-total 371,751,329.10 18.12 Tianjin Binli Small Town Construction Construction funds of 98,727,400.00 1-2 years 4.81 and Development Co., Ltd. cooperation projects 30,000,000.00 3-4 years 1.46 Accounts current Tianjin TJ-Metro Investment Co., Ltd. 55,000,000.00 4-5 years 2.68 Accounts current Sub-total 85,000,000.00 4.14 162,905,352.00 1-2 years 7.94 Insurance indemnity Bohai Property Insurance Co., Ltd., 10,125,700.00 2-3 years 0.49 Insurance indemnity Tianjin Branch 897,784.63 3-4 years 0.04 Insurance indemnity Sub-total 173,928,836.63 8.47 Total 1,186,990,881.13 57.83 (XXXII) Non-current Liabilities Due within One Year 1. Non-current Liabilities Due within One Year Items Closing Balance Opening Balance Long-term borrowings due within 7,864,421,039.66 7,690,064,115.50 one year Bonds payable due within one 5,184,218,082.20 3,860,502,274.34 year Long-term payable due within 3,148,652,821.78 3,018,466,666.66 one year Other long-term debt due within - - one year Total 16,197,291,943.64 14,569,033,056.50 2. Long-term borrowings Due within One Year Items Closing Balance Opening Balance Pledge borrowings 112,500,000.00 225,000,000.00 Mortgage borrowings - 189,999,976.50 Guaranteed borrowings 4,434,921,039.66 4,222,964,139.00 Credit borrowings 3,317,000,000.00 3,052,100,000.00 Total 7,864,421,039.66 7,690,064,115.50 Including: (1) Pledge borrowings: 110 F-282 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Loan Unit Closing Balance Loan Term Pledge Land-transferring fees and China Development Bank ticket right of Jinbin Rail 112,500,000.00 2003.3.17-2017.11.15 Co., Ltd. Rapid Transit (Tianjin Urban Area - Binhai New Area) Total 112,500,000.00 (2) Guaranteed borrowings: Loan Unit Closing Balance Loan Term Guarantor China Construction Bank Tianjin Metro Group Co., Co., Ltd. Tianjin Dongli 10,000,000.00 2014.6.30-2017.11.20 Ltd. Sub-branch Tianjin Rural Commercial Tianjin Metro Group Co., 290,500,000.00 2015.10.28-2018.9.28 Bank Co., Ltd. Ltd. Beijing Rural Commercial Tianjin Metro Group Co., Bank Co., Ltd. Shijingshan 290,500,000.00 2015.10.28-2018.9.29 Ltd. Sub-branch Tianjin Urban Taikang Assets Management Infrastructure Construction 2,700,000,000.00 2012.12.26-2017.12.25 Co., Ltd. & Investment Group Co., Ltd. Tianjin Urban Shanghai Pudong Infrastructure Construction Development Bank Co., Ltd. 133,060,000.00 2014.8.29-2018.7.27 & Investment Group Co., Tianjin Pulong Sub-branch Ltd. Tianjin Urban Shanghai Pudong Infrastructure Construction Development Bank Co., Ltd. 332,682,414.18 2014.8.29-2018.7.27 & Investment Group Co., Tianjin Pulong Sub-branch Ltd. Industrial and Commercial Tianjin TEDA Investment 25,000,000.00 2003.1.23-2017.12.20 Bank of China Co., Ltd. Holding Co., Ltd. Postal Savings Bank of China Tianjin TEDA Investment 178,500,000.00 2011.5.10-2017.11.10 Co., Ltd. Tianjin Branch Holding Co., Ltd. Postal Savings Bank of China Tianjin TEDA Investment 194,500,000.00 2011.5.10-2018.05.10 Co., Ltd. Tianjin Branch Holding Co., Ltd. Tianjin Binhai Rural Tianjin Rail Transit Group Commercial Bank Co., Ltd. 91,000,000.00 2015.12.14-2017.12.14 Co., Ltd. Guangdong Road Sub-branch Bank of Tianjin 2nd Center Tianjin Rail Transit Group 5,000,000.00 2016.11.03-2017.12.21 Sub-branch Co., Ltd. Bank of Tianjin 2nd Center Tianjin Rail Transit Group 5,000,000.00 2016.11.03-2018.06.21 Sub-branch Co., Ltd. Guangdong Development 146,606,712.00 2016.5.23-2018.5.23 Tianjin Rail Transit Group 111 F-283 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Bank Co., Ltd. Tianjin Co., Ltd. Branch Guangdong Development Tianjin Rail Transit Group Bank Co., Ltd. Tianjin 31,371,913.48 2016.2.4-2018.2.4 Co., Ltd. Branch China Development Bank 1,200,000.00 2004.3.25-2017.11.25 Tianjin Finance Bureau Co., Ltd. Total 4,434,921,039.66 (3) Credit borrowings Loan Unit Closing Balance Bank consortium led by Tianjin Branch, Industrial 1,000,000,000.00 Commercial Bank of China Co., Ltd. Industrial and Commercial Bank of China Co., Ltd. 50,000,000.00 Tianjin Branch Office China Everbright Bank Co., Ltd. Tianjin Branch 250,000,000.00 China Bohai Bank Co., Ltd. Tianjin Branch 525,000,000.00 China Bohai Bank Co., Ltd. Tianjin Branch 990,000,000.00 Bank of China Limited Tianjin Hexi Sub-branch 2,000,000.00 TTCO Trust Co., Ltd. 500,000,000.00 Total 3,317,000,000.00 (XXXIII) Other Current Liabilities 1. Classification of Other Current Liabilities: Items Closing Balance Opening Balance Unrealized profit or losses on the sale and leaseback -4,540,096.12 -6,053,461.33 transactions Short-term finance bonds 1,505,750,000.00 1,622,888,767.12 Total 1,501,209,903.88 1,616,835,305.79 2. Unrealized Profit and Loss on the Sale and Leaseback for Financial Leasing Increase Original Amortization Opening in Accumulated Closing Items Amount in Current Balance Current Amortization Balance Incurred Period Period China Developmen t Bank -24,213,842.70 -6,053,461.33 - 1,513,365.21 19,673,746.58 -4,540,096.12 Leasing Co., Ltd. 112 F-284 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Increase Original Amortization Opening in Accumulated Closing Items Amount in Current Balance Current Amortization Balance Incurred Period Period Total -24,213,842.70 -6,053,461.33 - 1,513,365.21 19,673,746.58 -4,540,096.12 The fixed assets under financing lease are as follows: A financial leasing contract was signed between the subsidiary - Tianjin Metro Group Co., Ltd. (lessee) and China Development Bank Leasing Co., Ltd. (lessor) on Dec. 7, 2007, providing that the lessor shall purchase the subway train and related equipment from Tianjin Metro Group Co., Ltd. and lease back to the lessee, with the lease period of 12 years and the principal for the leaseback of RMB 650,000,000.00 Yuan. On the same day, the subsidiary - Tianjin Metro Group Co., Ltd. signed the agreement of fund supervision and account pledge with the lessor, Shenzhen Branch of Bank of China Co., Ltd. (Party C) and Tianjin Branch of Bank of China Co., Ltd. (Party D), agreeing to pledge its special bank account for the leaseback to Party C and Party D. A guarantee contract was signed by Tianjin Infrastructure Construction & Investment (Group) Co., Ltd. and the lessor on Dec. 7, 2007 to provide guarantee for above obligations. The total book value of the above financial leasing assets is RMB 674,213,842.70 Yuan, the total lease principal for the leaseback assets is RMB 650,000,000.00 Yuan, and the difference of RMB 24,213,842.70 Yuan was recognized as other current liability-unrealized loss on sale and leaseback. 3. Short-term Financing Bonds Maturity of Bond Name Face Value Issuing Date Issuing Amount Bond 16 Tianjin Railway 100.00 2016/7/7 1 year 1,600,000,000.00 CP001 17 Tianjin Rail Transit 100.00 2017/8/21 9 months 1,500,000,000.00 SCP001 Total 100.00 3,100,000,000.00 (To be continued) Accrued Issuing Amount in Refund in Current Year End Bond Name Beginning Balance Interest by Face Current Period Year Balance Value 16 Tianjin Railway 1,622,888,767.12 24,311,232.88 1,647,200,000.00 - CP001 17 Tianjin Rail Transit - 1,500,000,000.00 5,750,000.00 1,505,750,000.00 SCP001 113 F-285 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Accrued Issuing Amount in Refund in Current Year End Bond Name Beginning Balance Interest by Face Current Period Year Balance Value Total 1,622,888,767.12 1,500,000,000.00 30,061,232.88 1,647,200,000.00 1,505,750,000.00 Explanation: (1) On July 7, 2016, the subsidiary - Tianjin Railway Construction & Investment Holding (Group) Co., Ltd. issued the 2016 2nd phase short-term financing bonds called No. 16 Tianjin Railway CP001, with the total value of RMB 1,600,000,000.00 Yuan, code for the bond of 041658038, maturity of 1 year and face value of RMB 100 Yuan, by the end of September 30, 2017, the short term financing bond has been fully repaid. ˄2˅The company issued the 2017 1st phase ultra-short term of Tianjin Rail Transit Group Co., Ltd. called No. 17 Tianjin Rail Transit SCP001, with the total value of RMB 1,500,000,000.00 Yuan, code for the bond of 011754133, maturity of 1 year and face value of RMB 100 Yuan. (XXXIV) Long-term Borrowings 1. Classification of Long-term Borrowings Items Closing Balance Opening Balance Pledge Borrowings 12,425,000,000.00 675,000,000.00 Mortgage Borrowings 143,885,735.53 131,248,775.63 Guaranteed Borrowings 8,800,641,956.38 21,042,589,451.61 Credit Borrowings 44,177,858,497.12 36,370,524,044.50 Total 65,547,386,189.03 58,219,362,271.74 Including: (1) Pledge Borrowings Loan Unit Closing Balance Loan Term Pledge Tianjin Metro Group Co., Ltd. entered into a pledge contract under the syndicated loan contract numbered 1200201501501100000289 on Jan. 27, 2005, agreeing that China Tianjin Metro Group Co., Ltd. shall take all the rights and Development benefits under the Tianjin West Railway Station 2005.6.21- Bank Co., Ltd. 11,750,000,000.00 Transportation Hub Supporting Public Utilities Project 2029.12.31 (bank Commission Construction Agreement signed with Tianjin consortium) Urban Infrastructure Construction &Investment Co., Ltd. on July 10, 2014 as the pledge, and Tianjin Urban Infrastructure Construction & Investment Group Co., Ltd. shall provide the guarantor to the lender as the guarantor. China Land-transferring fees and ticket right of Jinbin Rail Rapid Development 675,000,000.00 2003.3.17-2021.3.16 Transit (Tianjin Urban Area - Binhai New Area) Bank Co., Ltd. 114 F-286 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Loan Unit Closing Balance Loan Term Pledge Total 12,425,000,000.00 (2) Mortgage Borrowings Loan Unit Closing Balance Loan Term Pledge Industrial and Commercial Bank of China Co., Ltd. 143,885,735.53 2016.6.27-2024.6.7 Land use rights Tianjin Branch Office Total 143,885,735.53 (3) Guaranteed Borrowings Loan Unit Closing Balance Loan Term Guarantor China Everbright Bank Co., Ltd. Tianjin Rail Transit 20,000,000.00 2017.5.27.-2020.5.26. Tianjin Branch Group Co., Ltd. China Everbright Bank Co., Ltd. Tianjin Rail Transit 20,000,000.00 2017.7.19.-2020.7.18. Tianjin Branch Group Co., Ltd. China Everbright Bank Co., Ltd. Tianjin Rail Transit 20,000,000.00 2017.9.19.-2020.9.18. Tianjin Branch Group Co., Ltd. Tianjin TEDA Industrial and Commercial Bank of 1,331,250,000.00 2003.1.23-2027.1.20 Investment Holding China Co., Ltd. Co., Ltd. Tianjin TEDA Postal Savings Bank of China Co., 483,569,864.00 2010.6.30-2020.6.29 Investment Holding Ltd. Tianjin Branch Co., Ltd. Tianjin Rural Commercial Bank Tianjin Rail Transit 1,522,500,000.00 2015.9.22-2018.9.22 Co., Ltd Group Co., Ltd. Tianjin TEDA Bank of Communications Co., Ltd. 1,899,519,055.99 2009.9.25-2029.10.22 Investment Holding Co., Ltd. Binhai Rural Commercial Bank Tianjin Rail Transit 91,000,000.00 2015.12.16-2017.12.13 Co., Ltd. Group Co., Ltd. China Development Bank Co., Ltd. Tianjin Finance 8,502,478.97 2003.8.27-2027.8.27 (USD) Bureau China Development Bank Co., Ltd. Tianjin Finance 94,373,040.98 2004.3.25-2028.3.25 (EURO) Bureau Bank of Tianjin 2nd Center Tianjin Rail Transit 272,682,853.99 2016.11.3-2018.11.2 Sub-branch Group Co., Ltd. Tianjin Rail Transit Bohai International Trust Co., Ltd. 200,000,000.00 2016.6.27-2019.6.27 Group Co., Ltd. China Merchants Bank Co., Ltd. Tianjin Rail Transit 46,601,390.60 2017.1.3-2019.1.2 Tianjin Branch Group Co., Ltd. China Construction Bank Co., Ltd. Tianjin Metro Group 600,000,000.00 2014.6.30-2019.6.29 Tianjin Dongli Sub-branch Co., Ltd. 115 F-287 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Loan Unit Closing Balance Loan Term Guarantor China Development Bank Co., Ltd. Tianjin Finance 142,400,031.50 2004.12.15-2029.12.15 (EURO) Bureau Tianjin Urban Infrastructure China Development Bank Co., Ltd. 78,500,000.00 2014.6.27-2038.10.27 Construction & Tianjin Branch Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 4,800,000.00 2014.11.20-2018.11.20 Construction & Hebei Sub-branch Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 300,000,000.00 2015.1.22-2018.11.20 Construction & Hebei Sub-branch Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 100,000,000.00 2015.2.13-2018.11.20 Construction & Hebei Sub-branch Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 3,570,000.00 2015.3.20-2018.11.20 Construction & Hebei Sub-branch Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 6,260,000.00 2015.6.19-2018.11.20 Construction & Hebei Sub-branch Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 6,283,240.35 2015.9.21-2018.11.20 Construction & Hebei Sub-branch Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 6,280,000.00 2015.12.18-2018.11.20 Construction & Hebei Sub-branch Investment Group Co., Ltd. Bank of Communications Co., Ltd. 5,610,000.00 2016.3.18-2018.11.20 Tianjin Urban 116 F-288 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Loan Unit Closing Balance Loan Term Guarantor Tianjin Branch Infrastructure Construction & Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 5,210,000.00 2016.6.20-2018.11.20 Construction & Hebei Sub-branch Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 5,260,000.00 2016.9.20-2018.11.20 Construction & Hebei Sub-branch Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 5,260,000.00 2016.12.20-2018.11.20 Construction & Hebei Sub-branch Investment Group Co., Ltd. Shanghai Pudong Development Tianjin Rail Transit 50,000,000.00 2016.12.21-2019.6.19 Bank Tianjin Branch Group Co., Ltd. China Everbright Bank Co., Ltd. Tianjin Rail Transit 200,000,000.00 2017.1.22-2019.1.21 Tianjin Branch Group Co., Ltd. Guangdong Development Bank Tianjin Rail Transit 720,000,000.00 2017.1.24-2020.1.23 Co., Ltd. Tianjin Branch Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 5,260,000.00 2017.3.20-2018.11.20 Construction & Tianjin Branch Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 5,440,000.00 2017.6.20-2018.11.20 Construction & Tianjin Branch Investment Group Co., Ltd. Tianjin Urban Infrastructure Bank of Communications Co., Ltd. 5,510,000.00 2017.9.20-2018.11.20 Construction & Tianjin Branch Investment Group Co., Ltd. Guangdong Development Bank Tianjin Rail Transit 135,000,000.00 2017.3.7-2020.3.6 Co., Ltd. Tianjin Branch Group Co., Ltd. Guangdong Development Bank 400,000,000.00 2017.5.12-2020.5.11 Tianjin Rail Transit 117 F-289 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Loan Unit Closing Balance Loan Term Guarantor Co., Ltd. Tianjin Branch Group Co., Ltd. Total 8,800,641,956.38 (4) Credit Borrowings Loan Unit Closing Balance Hongkong and Shanghai Banking Corporation Limited 300,000,000.00 Bank consortium led by Tianjin Branch, Industrial and Commercial 5,000,000,000.00 Bank of China Co., Ltd. China Bohai Bank Co., Ltd. Tianjin Branch 995,000,000.00 Bank of China Limited Tianjin Hexi Sub-branch 496,000,000.00 Bank of China Limited Tianjin Hexi Sub-branch 109,000,000.00 Bank of China Limited Tianjin Hexi Sub-branch 301,000,000.00 Shanghai Pudong Development Bank Co., Ltd. Tianjin Branch 659,500,000.00 China Merchants Bank Co., Ltd. Tianjin Branch 955,000,000.00 Industrial and Commercial Bank of China Co., Ltd. Tianjin Branch 500,000,000.00 Office Industrial and Commercial Bank of China Co., Ltd. Tianjin Branch 1,000,000,000.00 Office Bank of Beijing Co., Ltd. Tianjin Hongqiao Sub-branch 250,000,000.00 Agricultural Bank of China Co., Ltd. Tianjin Branch 500,000,000.00 Agricultural Bank of China Co., Ltd. Tianjin Branch 1,050,000,000.00 China Minsheng Banking Co., Ltd. Tianjin Branch 469,000,000.00 Bank of China Limited Tianjin Branch (bank consortium) 11,448,084,197.12 Industrial and Commercial Bank of China Co., Ltd. Tianjin Branch 16,819,814,300.00 (bank consortium) Agricultural Bank of China Co., Ltd. Tianjin Branch (bank consortium) 2,754,460,000.00 China Minsheng Banking Co., Ltd. Tianjin Branch 100,000,000.00 China Securities Co., Ltd. 100,000,000.00 Industrial and Commercial Bank of China Co., Ltd. Tianjin Branch 370,000,000.00 Office China Development Bank Co., Ltd. (bank consortium) 1,000,000.00 Total 44,177,858,497.12 (XXXV) Bonds Payable 1. Bonds Payable Items Closing Balance Opening Balance First Phase of 2016 Medium Term Notes 3,000,000,000.00 3,036,570,833.33 of Tianjin Rail Transit Group Co., Ltd. 118 F-290 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements 2015 Bond of Tianjin Railway Construction & Investment Holding 2,412,189,993.12 2,478,147,093.04 (Group) Co., Ltd. First Phase of 2017 Medium Term Notes 2,000,000,000.00 - First Phase of 2013 Medium Term Notes 2,067,697,777.78 First Phase Private Placement Bond in 1,527,961,643.84 1,548,378,082.19 2015 Second Phase Private Placement Bond in 1,039,610,410.96 1,006,027,671.23 2015 Tianjin Metro Group Co., Ltd.’s Bond in 2,602,363,013.70 2,521,350,000.00 2014 First Phase Private Securities in 2016 1,019,931,506.85 1,029,383,561.64 Second Phase Private Securities in 2016 1,018,152,876.71 1,028,645,734.36 First Phase Private Securities in 2017 100,808,150.68 - 2019 Bond 1,332,318,582.20 1,380,388,683.92 2021 Bond 1,985,123,235.30 2,054,407,543.57 Preferred Share 586,164,199.39 586,164,199.39 Total 18,624,623,612.75 18,737,161,180.45 2. Changes in Bonds Payable (Excluding Preference Shares Classified as Financial Liabilities, Perpetual Bonds and Other Financial Instruments): Issuing Amount Issuing Bond Name Face Maturity of Bond Issuing Amount Opening Balance in Current Date Value Period First Phase of 2016 Medium Term Notes of Tianjin 100.00 2016.8.23 2016.8.23-2021.8.23 3,000,000,000.00 3,036,570,833.33 - Rail Transit Group Co., Ltd. 2015 Bond of Tianjin Railway 100.00 2015.4.15 2015.4.15-2025.4.13 2,400,000,000.00 2,478,147,093.04 - Construction 119 F-291 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements &Investment Holding (Group) Co., Ltd. First Phase of 2017 Medium Term 100.00 2017.8.22 2017.8.24-2020.8.21 2,000,000,000.00 - 2,000,000,000.00 Notes First Phase of 2012 Medium Term 100.00 2012.11.21 2012.11.21-2017.11.21 3,000,000,000.00 3,018,466,666.66 - Notes First Phase of 2013 Medium Term 100.00 2013.5.7 2013.5.7-2018.5.7 2,000,000,000.00 2,067,697,777.78 - Notes First Phase Private Placement Bond in 100.00 2015.5.28 2015.5.28-2020.5.28 1,500,000,000.00 1,548,378,082.19 - 2015 Second Phase Private Placement 100.00 2015.11.13 2015.11.13-2020.11.12 1,000,000,000.00 1,006,027,671.23 - Bond in 2015 2015 Enterprise 100.00 2015.10.16 2015.10.16-2025.10.16 2,500,000,000.00 2,521,350,000.00 - Bond First Phase Private Placement Bond in 100.00 2016.3.18 2016.3.21-2021.3.20 1,000,000,000.00 1,029,383,561.64 - 2016 Second Phase Private Placement 100.00 2016.4.20 2016.4.22-2021.4.21 1,000,000,000.00 1,028,645,734.36 - Bond in 2016 First Phase Private Placement Bond in 100.00 2017.1.24 2017.1.24-2020.1.14 100,000,000.00 - 100,000,000.00 2017 1,387,400,000.00 1,380,388,683.92 USD - 2019 Bond 2016.5.4 2016.5.13-2019.5.13 ˄USD 200 ˄USD 198,989,28 100 - million˅ 7.00) 2,081,100,000.00 2,054,407,543.57 USD - 2021 Bond 2016.5.4 2016.5.13-2021.5.13 ˄USD 300 ˄USD 100 - million˅ 296,152,161.39˅ Total 18,150,996,981.06 2,100,000,000.00 (To be continued) Exchange Refund in Bond Name Closing Balance Accrued Amortization Gains and Current Period Non-current Interest by of Premium Losses Liabilities Due Face Value and Discount Adjustment in within One Year Current Period First Phase - - - 36,570,833.33 - 3,000,000,000.00 120 F-292 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Exchange Refund in Bond Name Closing Balance Accrued Amortization Gains and Current Period Non-current Interest by of Premium Losses Liabilities Due Face Value and Discount Adjustment in within One Year Current Period of 2016 Medium Term Notes of Tianjin Rail Transit Group Co., Ltd. 22015 Bond of Tianjin Railway Construction & 67,962,900.08 - - 133,920,000.00 - 2,412,189,993.12 Investment Holding (Group) Co., Ltd. First Phase of 2017 Medium - - - - - 2,000,000,000.00 Term Notes First Phase of 2012 124,510,867.59 - - - 3,142,977,534.25 - Medium Term Notes First Phase of 75,942,770.17 - - 102,400,000.00 2,041,240,547.95 - 2013Medium Term Notes First Phase Private Placement 60,583,561.65 - - 81,000,000.00 - 1,527,961,643.84 Bond in 2015 Second Phase Private 33,582,739.73 - - - - 1,039,610,410.96 Placement Bond in 2015 121 F-293 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Exchange Refund in Bond Name Closing Balance Accrued Amortization Gains and Current Period Non-current Interest by of Premium Losses Liabilities Due Face Value and Discount Adjustment in within One Year Current Period 2015 Enterprise 81,013,013.70 - - - - 2,602,363,013.70 Bond First Phase Private Placement 28,047,945.21 - - 37,500,000.00 - 1,019,931,506.85 Bond in 2016 Second Phase Private 24,807,250.68 - - 35,300,108.33 - 1,018,152,876.71 Placement Bond in 2016 First Phase Private Placement 2,919,817.35 - - 2,111,666.67 - 100,808,150.68 Bond in 2017 25,359,937.50 3,413,489.33 17,221,000.00 1,332,318,582.20 - 2019 Bond ˄USD ˄USD -59,622,528.55 ˄USD ˄USD - 3,750,000.00˅ 504,822.78˅ 2,500,000.00˅ 200,744,109.78˅ 43,745,892.19 5,379,369.11 29,706,225.00 1,985,123,235.30 2021 Bond ˄USD ˄USD -88,703,344.57 ˄USD - ˄USD 6,468,750.00˅ 795,573.19˅ 4,312,500.00˅ 299,103,984.58˅ Total 443,965,828.26 8,792,858.44 148,325,873.12 475,729,833.33 5,184,218,082.20 18,038,459,413.36 On Aug. 19, 2016, Tianjin Rail Transit Group Co., Ltd issued the first phase of 2016 medium term notes called No. 16 Tianjin Rail Transit MTN001 with the amount of RMB 3,000,000,000.00 Yuan, which is issued at par with the payback period of 5 years, code for the bond of 101651042, face value of RMB 100 Yuan. On Apr. 17, 2014, the subsidiary - Tianjin Railway Construction & Investment Holding (Group) Co., Ltd. issued its bond called No. 15 Tianjin Railway Investment Bond in 2015, with the total value of RMB 2,400,000,000.00 Yuan, code for the bond of 1580112, payback period of 10 years and the face value of RMB 100 Yuan for one bond. On Aug. 22, 2016, Tianjin Rail Transit Group Co., Ltd issued the first phase of 2017 medium term notes 122 F-294 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements called No. 17 Tianjin Rail Transit MT0001 with the amount of RMB 2,000,000,000.00 Yuan, which is issued at par with the payback period of 3 years, code for the bond of 101751026, face value of RMB 100 Yuan. Tianjin Metro Group Co., Ltd. issued the first phase of 2012 medium term notes called 12 Tianjin Metro MTN1 with the value of RMB 3,000,000,000.00 Yuan on Nov. 21, 2012. This bond is issued at par, for a period of 5 years. The bond code is 1282485 and the issue price is RMB 100 Yuan of face value, the medium-term note has been fully paid Tianjin Metro Group Co., Ltd. issued the first phase of 2013 medium term notes called 13 Tianjin Metro MTN1 with the value of RMB 2,000,000,000.00 Yuan on May 7, 2013. This bond is issued at par, for a period of 5 years. The bond code is 1382213 and the issue price is RMB 100 Yuan of face value. Tianjin Metro Group Co., Ltd. issued the first phase 2015 non-public directional debt financing tool called 15 Tianjin Metro PPN001 on May 28, 2015, with the value of RMB 1,500,000,000.00 Yuan. This bond is issued at par, for a period of 5 years. The bond code is 031553023 and the issue price is RMB 100 Yuan of face value. Tianjin Metro Group Co., Ltd. issued the second phase 2015 non-public directional debt financing tool abbreviated as 15 Tianjin Metro PPN002 on Nov. 13, 2015, with the value of RMB 1,000,000,000.00 Yuan.. This bond is issued at par, for a period of 5 years. The bond code is 031560094 and the issue price is RMB 100 Yuan of face value. On Oct. 16, 2015, Tianjin Metro Group Co., Ltd. issued its 2015 Bond called No. 14 Tianjin Metro Investment Bond, with the total value of RMB 2,500,000,000.00 Yuan. The payback period is10 years and the face value is RMB 100 Yuan for one bond. Tianjin Metro Group Co., Ltd. issued the first phase of 2016 non-public directional debt financing tool abbreviated as 16 Tianjin Metro PPN001 on Mar. 18, 2016, with the amount of RMB 1,000,000,000.00 Yuan. This bond is issued at par, for a period of 5 years. The issue price is RMB 100 Yuan of face value. Tianjin Metro Group Co., Ltd. issued the second phase of 2016 non-public directional debt financing tool abbreviated as 16 Tianjin Metro PPN002 on Apr. 20, 2016, with the amount of RMB 1,000,000,000.00 Yuan. The bond is issued at par, for a period of 5 years. The issue price is RMB 100 Yuan of face value. Tianjin Metro Group Co., Ltd. issued the first phase of direct financing tools for 2017 on Jan. 24, 2017, with the amount of RMB100 million Yuan, the period from Jan. 24, 2017 to Jan. 14, 2020. On May 4, 2016, the subsidiary - Rail Transit Investments International Co., Ltd. issued the bond with the amount of $200,000,000.00 (2019 Bond) in Hong Kong. On May 13, 2016, the bond went public in HKSE. After deducting the transaction costs, the yield on the bond is $197,951,295.66. On May 4, 2016, the subsidiary - Rail Transit International Investments Co., Ltd. issued the bond with the amount of $300,000,000.00 (2021 Bond) in Hong Kong. On May 13, 2016, the bond went public in HKSE. After 123 F-295 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements deducting the transaction costs, the yield on the bond is $294,424,943.50. According to the fixed interest rate, the coupon rate is 2.875% and interest is paid once half a year. (3) See other equity instrument for preference shares explanation. (XXXVI). Long-term Payable 1ˊ Long-term Payable Listed According to Nature of the Funds Items Closing Balance Opening Balance Infrastructure projects 45,362,683.74 45,362,683.74 Transfer amount of usufruct of trust stock right of Tianjin 393,677,611.11 1,014,560,509.72 Trust LLC. Financial lease expenses 10,805,865,121.28 10,737,682,781.57 Transfer amount of usufruct of stock right of Huaneng - 678,555,416.67 Guicheng Trust Co., Ltd. Total 11,244,905,416.13 12,476,161,391.70 Details of finance leases are as the following: Units Term Closing Balance Opening Balance ICBC and BCM Financial Leasing Co., 2011.5.24-2020.5.24 704,276,518.00 942,244,394.00 Ltd. Everbright Financial Leasing Co., Ltd. 2015.4.1-2021.4.1 403,985,307.22 496,549,472.44 Jianxin Financial Leasing Co., Ltd. 2015.7.21-2021.4.21 546,674,661.45 741,234,855.00 ABC Financial Leasing Co., Ltd. 2015.12.20-2025.9.20 417,711,117.22 407,487,127.02 China Financial Leasing Co., Ltd. 2013.11.26-2018.11.25 340,730,482.44 323,550,116.51 Longtai Yinxin Financial Leasing Co., 2015.12.10-2018.11.26 347,271,944.44 335,097,728.75 Ltd. CDB Leasing Co., Ltd. 2007.12.07-2019.12.06 162,500,000.00 195,000,000.00 ICBC Financial Leasing Co., Ltd. 2011.12.31-2021.12.30 385,000,000.53 467,500,000.47 ICBC Financial Leasing Co., Ltd. 2011.12.31-2021.12.30 299,594,840.92 359,513,808.91 BOCOM Financial Leasing Co., Ltd. 2011.12.31-2021.12.30 47,829,845.65 56,859,461.80 BOCOM Financial Leasing Co., Ltd. 2011.12.31-2021.12.30 164,528,629.20 191,950,067.40 BOCOM Financial Leasing Co., Ltd. 2011.12.31-2021.12.30 177,154,913.96 212,643,167.11 Tianjin Jiayong Financial Leasing Co., 2013.07.29-2018.07.28 - 389,273,352.90 Ltd. Daosheng International Financial 2013.09.15-2023.09.14 666,666,667.00 750,000,000.25 Leasing Co., Ltd. Daosheng International Financial 2013.09.15-2023.09.14 400,000,000.32 450,000,000.24 Leasing Co., Ltd. ABC Financial Leasing Co., Ltd. 2014.03.31-2029.03.30 788,475,357.45 850,135,957.34 CMB Financial Leasing Co., Ltd. 2014.12.18-2020.12.17 115,316,323.48 139,640,683.82 Tianjin Jiayong Financial Leasing Co., 2014.12.12-2019.12.11 157,500,000.00 210,000,000.00 Ltd. 124 F-296 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Units Term Closing Balance Opening Balance Huaxia Financial Leasing Co., Ltd. 2015.02.13-2021.02.12 434,347,044.04 519,001,405.94 Jianxin Financial Leasing Co., Ltd. 2015.03.27-2021.03.26 583,333,333.30 708,333,333.31 Everbright Financial Leasing Co., Ltd. 2015.03.27-2021.03.26 738,322,231.89 941,667,848.36 Daosheng International Financial 2016.12.05-2019.12.05 200,000,000.00 200,000,000.00 Leasing Co., Ltd. Daosheng International Financial 2016.10.26-2019.10.25 150,000,000.00 150,000,000.00 Leasing Co., Ltd. Daosheng International Financial 2016.06.24-2019.06.24 350,000,000.00 350,000,000.00 Leasing Co., Ltd. Daosheng International Financial 2016.08.09-2019.08.09 200,000,000.00 200,000,000.00 Leasing Co., Ltd. Daosheng International Financial 2016.12.05-2019.12.05 150,000,000.00 150,000,000.00 Leasing Co., Ltd. Daosheng International Financial 2017.01.06-2020.01.07 20,000,000.00 - Leasing Co., Ltd. Guoyue Financial Leasing (Tianjin) Co., 2017.01.23-2024.01.23 504,284,652.77 - Ltd. Tianjin Rail Transit Group Financial 2017.04.01-2020.03.31 604,034,861.11 - Leasing Co., Ltd. Tianjin Rail Transit Group Financial 2017.05.27-2020.05.26 101,688,888.89 - Leasing Co., Ltd. Tianjin Rail Transit Group Financial 2017.05.27-2020.05.26 100,000,000.00 - Leasing Co., Ltd. Tianjin Rail Transit Group Financial 2017.05.27-2020.05.26 10,000,000.00 - Leasing Co., Ltd. Tianjin Rail Transit Group Financial 2017.05.27-2020.05.26 70,000,000.00 - Leasing Co., Ltd. Tianjin Rail Transit Group Financial 2017.05.27-2020.05.26 20,000,000.00 - Leasing Co., Ltd. Tianjin Rail Transit Group Financial 2017.08.17-2019.08.17 302,137,500.00 - Leasing Co., Ltd. Tianjin Rail Transit Group Financial 2017.09.30-2010.09.29 142,500,000.00 - Leasing Co., Ltd. Total 10,805,865,121.28 10,737,682,781.57 (XXXVII). Special Payable Increase in Decrease in Items Opening Balance Closing Balance Current Period Current Period Infrastructure project 757,232,400.00 180,000,000.00 - 937,232,400.00 appropriation Interest of infrastructure project 2,455,221,371.13 586,711,218.59 482,507,552.08 2,559,425,037.64 appropriation Investment in subway 17,595,297.68 - - 17,595,297.68 Pre-project fees 227,775,900.00 - - 227,775,900.00 Research expenses 380,000.00 - 95,000.00 285,000.00 Technology innovation prize project of the small and - - - - medium-sized enterprise Special fund for safety 2,200,000.00 - - 2,200,000.00 inspection by Public Security 125 F-297 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Bureau Special financial fund 25,000,000.00 - - 25,000,000.00 Others 53,950.00 - - 53,950.00 Fund for replacement of local 8,625,000,000.00 - - 8,625,000,000.00 government debt Special payable financial 8,587,770.99 - - 8,587,770.99 interest Railway construction cost - 216,300,000.00 - 216,300,000.00 Total 12,119,046,689.80 766,711,218.59 482,602,552.08 12,619,455,356.31 (XXXVIII). Estimated Liabilities Items Closing Balance Opening Balance The estimated compensation for delayed delivery of 5,727.00 5,727.00 Honghu Yayuan Delayed compensation of Taiping Life Insurance Co., Ltd. 413,132.65 1,443,760.15 Total 418,859.65 1,449,487.15 (XXXIX). Deferred Income Opening Increase in Decrease in Closing Item/Category Reasons Balance Current Period Current Period Balance Financial - 963,953,400.00 758,318,800.00 205,634,600.00 subsidy Total - 963,953,400.00 758,318,800.00 205,634,600.00 Projects Involving with Government Subsidies: Decrease in Current Period Account Increase in Subsidy Beginning ed in Accounted Closing Related with Current Other Items Balance Balance assets/income Non-ope into Other Offset Period Decrease rating Incomes Cost Income Operation Related with - 463,953,400.00 - 321,952,250.00 - 16,366,550.00 125,634,600.00 subsidy assets Constructi on funds of south Related with extension - 500,000,000.00 - 420,000,000.00 - - 80,000,000.00 income project of Metro Line 3 Total - 963,953,400.00 - 741,952,250.00 - 16,366,550.00 205,634,600.00 126 F-298 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements (XL). Paid-in Capital Opening Balance Increase or Closing Balance Names of Investors Decrease in Proportion Amount Proportion Amount Current Year Tianjin Infrastructure 86.34% 34,536,000,000.00 228,438,372.00 86.34% 34,764,438,372.00 Investment Group Tianjin TEDA Investment 13.66% 5,464,000,000.00 36,141,628.00 13.66% 5,500,141,628.00 Holding Co., Ltd. Total 100.00% 40,000,000,000.00 264,580,000.00 100.00% 40,264,580,000.00 The company’s registered capital is 40,000,000,000.00 Yuan, which is verified by Tianjin Industrial Limited Liability Accounting Firm’s JXYYZ (2014) No.068 Capital Verification Report issued on October 29, 2014. According to the Notice of Forming the Tianjin Rail Transit Group Co., Ltd. issued by State-owned Assets Supervision and Administration Commission of Tianjin Municipal People’s Government (JGZQG[2014]No.188)ˈ the company applied to increase the registered capital of RMB 38,991,617,945.30 Yuan by way of turning the capital reserves. The registered capital is RMB 40,000,000,000.00 Yuan after the change. After the change of registered capital, the shareholders of the company are changed to Tianjin Infrastructure Investment Group and Tianjin TEDA Investment Holding Co., Ltd. On May 18, 2017, approved by Tianjin SASAC according to the document Approval of Tianjin State-owned Assets Supervision and Administration Commission on Revising the Articles of Association of Tianjin Rail Transit Group Co., Ltd. (Jinguozifagui [2017] No. 49): The Company was agreed to change the “Article 6: The Company’s registered capital is RMB 40 billion Yuan.” to “Article 7: The Company’s registered capital RMB 40,264,580,000.00 Yuan” of Article of Association of Tianjin Rail Transit Group Co., Ltd, and change the “Article 8 Capital Contribution of Shareholders” as well according to the documents of Jinguoziyusuan [2014] No. 68 and No.73, Jinguoziyusuan [2015] No. 48, No.54 and No.55, and Jinguoziyusuan [2016] No.49 issued by Tianjin SASAC. After the capital increase, the shareholding ratios of Tianjin Urban Infrastructure Construction & Investment Group Co., Ltd. and Tianjin TEDA Investment Holding Co., Ltd. remained at 86.34% and 13.66% respectively. (XLI). Other Equity Instruments Increase in Decrease in Items Opening Balance Closing Balance Current Year Current Year Preference stock 5,113,835,800.61 - - 5,113,835,800.61 Total 5,113,835,800.61 - - 5,113,835,800.61 127 F-299 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Explanation: ˄1˅In 2015, the subsidiary Tianjin Metro (Group) Co., Ltd. received the investment amount of RMB 3,000,000,000.00 Yuan in the form of capital increase from CDB Development Fund Co., Ltd. According to the investment contract signed between CDB Development Fund Co., Ltd. and this company and Tianjin Metro (Group) Co., Ltd. (a subsidiary of this company), the above-mentioned investment amount was input into the subsidiary Tianjin Metro (Group) Co., Ltd. in the form of capital increase. At the same time, the contract stipulates that, CDB Development Fund Co., Ltd. has the right to require this company to buy back its shares. Within the investment period, the annual investment return rate of CDB Development Fund Co., Ltd has been determined. According to the Guiding Opinions of the State Council on Implementing Pilot Projects of Preference Stock [GF(2013) No.46] issued by the State Council, Tianjin Metro (Group) Co., Ltd., a subsidiary of this company, confirmed the aforesaid investment as preference stock. Meanwhile, according to the notice of issuing the Regulations on Distinction of Financial Liabilities and Equity Instruments and Relevant Accounting Treatment in CK (2014) No.13 Document of Ministry of Finance, Tianjin Metro (Group) Co., Ltd., a subsidiary of this company, confirmed part of the investment as financial liability, for which compulsory interest should be paid according to the contract and obligation of paying cash should be undertaken. The average loan interest on the market was adopted. At the same time, in consideration of the discounting factors, the financial liability was confirmed to be RMB 297,983,409.05 Yuan. The above financial liability was accounted into the bonds payable – preference stock for accounting. The remained other equity instrument with the amount of RMB 2,702,016,590.95 Yuan after division was accounted into other equity instrument-preference stocks for accounting. ˄2˅In 2015, the subsidiary Tianjin Metro (Group) Co., Ltd. received the investment amount of RMB 900,000,000.00 Yuan in total in the form of capital increase from ADBC Construction Fund Co., Ltd. According to the investment contract signed between ADBC Construction Fund Co., Ltd. and this company and Tianjin Metro (Group) Co., Ltd. (a subsidiary of this company), the above-mentioned investment amount will be input into the subsidiary Tianjin Metro (Group) Co., Ltd. in the form of capital increase. At the same time, the contract stipulates that, ADBC Construction Fund Co., Ltd. has the right to require this company to buy back its shares. Within the investment period, the annual investment return rate of ADBC Construction Fund Co., Ltd. has been determined. According to the Guiding Opinions of the State Council on Implementing Pilot Projects of Preference Stock [GF(2013) No.46] issued by the State Council, Tianjin Metro (Group) Co., Ltd., a subsidiary of this company, confirmed the aforesaid investment as preference stock. Meanwhile, according to the notice of issuing the Regulations on Distinction of Financial Liabilities and Equity Instruments and Relevant Accounting Treatment in CK (2014) No.13 Document of Ministry of Finance, Tianjin Metro (Group) Co., Ltd., a subsidiary of this company, confirmed part of the investment as financial liability, for which compulsory interest should be paid according to the contract and obligation of paying cash should be undertaken. The average loan interest on the market was adopted. At the same time, in consideration of the discounting factors, the financial liability was 128 F-300 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements confirmed to be RMB 104,168,317.43 Yuan. The above financial liability was accounted into the bonds payable – preference stock for accounting. The remained other equity instrument with the amount of RMB 795,831,682.57 Yuan after division was accounted into other equity instrument-preference stocks for accounting. ˄3˅In 2016, the subsidiary Tianjin Metro (Group) Co., Ltd. received the investment amount of RMB 1,000,000,000.00 Yuan in the form of capital increase from CDB Development Fund Co., Ltd. According to the investment contract signed between CDB Development Fund Co., Ltd. and this company and Tianjin Metro (Group) Co., Ltd. (a subsidiary of this company), the above-mentioned investment amount was input into the subsidiary Tianjin Metro (Group) Co., Ltd. in the form of capital increase. At the same time, the contract stipulates that, CDB Development Fund Co., Ltd. has the right to require this company to buy back its shares. Within the investment period, the annual investment return rate of CDB Development Fund Co., Ltd has been determined. According to the Guiding Opinions of the State Council on Implementing Pilot Projects of Preference Stock [GF(2013) No.46] issued by the State Council, Tianjin Metro (Group) Co., Ltd., a subsidiary of this company, confirmed the aforesaid investment as preference stock. Meanwhile, according to the notice of issuing the Regulations on Distinction of Financial Liabilities and Equity Instruments and Relevant Accounting Treatment in CK (2014) No.13 Document of Ministry of Finance, Tianjin Metro (Group) Co., Ltd., a subsidiary of this company, confirmed part of the investment as financial liability, for which compulsory interest should be paid according to the contract and obligation of paying cash should be undertaken. The average loan interest on the market was adopted. At the same time, in consideration of the discounting factors, the financial liability was confirmed to be RMB 91,268,219.85 Yuan. The above financial liability was accounted into the bonds payable – preference stock for accounting. The remained other equity instrument with the amount of RMB 908,731,780.15 Yuan after division was accounted into other equity instrument-preference stocks for accounting. ˄4˅In 2016, the subsidiary Tianjin Metro (Group) Co., Ltd. received the investment amount of RMB 800,000,000.00 Yuan in the form of capital increase from CDB Development Fund Co., Ltd. According to the investment contract signed between CDB Development Fund Co., Ltd. and this company and Tianjin Metro (Group) Co., Ltd. (a subsidiary of this company), the above-mentioned investment amount was input into the subsidiary Tianjin Metro (Group) Co., Ltd. in the form of capital increase. At the same time, the contract stipulates that, CDB Development Fund Co., Ltd. has the right to require this company to buy back its shares. Within the investment period, the annual investment return rate of CDB Development Fund Co., Ltd has been determined. According to the Guiding Opinions of the State Council on Implementing Pilot Projects of Preference Stock [GF(2013) No.46] issued by the State Council, Tianjin Metro (Group) Co., Ltd., a subsidiary of this company, confirmed the aforesaid investment as preference stock. Meanwhile, according to the notice of issuing the Regulations on Distinction of Financial Liabilities and Equity Instruments and Relevant Accounting Treatment in CK (2014) No.13 Document of Ministry of Finance, Tianjin Metro (Group) Co., Ltd., a subsidiary of this company, confirmed part of the investment as financial liability, for which compulsory interest should be paid according to the contract and obligation of paying cash should be undertaken. The average loan interest on the 129 F-301 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements market was adopted. At the same time, in consideration of the discounting factors, the financial liability was confirmed to be RMB 92,744,253.06 Yuan. The above financial liability was accounted into the bonds payable – preference stock for accounting. The remained other equity instrument with the amount of RMB 707,255,746.94 Yuan after division was accounted into other equity instrument-preference stocks for accounting. (XLII). Capital Surplus Increase in Decrease in Items Opening Balance Closing Balance Current Year Current Year I. Capital (equity) premium 69,122,784,380.65 6,194,592,700.00 264,580,000.00 75,052,797,080.65 II. Other capital reserves 1,721,536,916.54 - - 1,721,536,916.54 Total 70,844,321,297.19 6,194,592,700.00 264,580,000.00 76,774,333,997.19 Explanation of changes of capital reserve in current period: Amount of Items Change in Official Documents Current Period Notice of Tianjin Finance Bureau on Special Funds of Railway Special funds for railway construction 161,200,000.00 Construction Allocated to Tianjin Rail Transit Group Co., Ltd. allocated by Tianjin Finance Bureau – JCZ [2017] No. 31 Capital fund of Metro Line 6 Project Notice of Tianjin Finance Bureau on Special Funds Allocated 309,742,700.00 allocated by Tianjin Finance Bureau to Tianjin Rail Transit Group Co., Ltd. – JCJZ [2017] No. 9 Approval of Tianjin SASAC on Agreeing the amendments of Capital reserve converted into share capital -264,580,000.00 Articles of Association of Tianjin Rail Transit Group Co., Ltd. – JGZFG [2017] No. 49 Special funds of central infrastructure Notice of Tianjin Finance Bureau on Special Funds of Central construction investment for the reform of the Infrastructure Construction Investment for Reform of state-owned industrial and mining shanty State-owned Industrial and Mining Shanty Towns in 2017 and towns in 2017 and the construction of the 100,000,000.00 Construction of Supporting Infrastructure for Second Batch of supporting infrastructure for the second batch Economy Housing Projects Allocated to Tianjin Rail Transit of economy housing projects allocated by Group Co., Ltd. – JCJZ [2017] No. 16 Tianjin Finance Bureau Notice of Tianjin Finance Bureau on special Funds of Railway Special funds for railway construction 240,500,000.00 Construction Allocated to Tianjin Rail Transit Group Co., Ltd. allocated by Tianjin Finance Bureau – JCZ [2017] No. 86 Capital fund of metro construction project 5,260,000,000.00 allocated by Tianjin Finance Bureau Capital fund of Rail Transit Group increased Notice of Tianjin SASAC on Increase of Capital to Tianjin 123,150,000.00 by Tianjin Finance Bureau Rail Transit Group Co., Ltd. – JGZYS [2017] No. 43 Total 5,930,012,700.00 (XLIII). Other Comprehensive Income Chang Shares of Shares Profits and Profits Effecti Cur Other of Other Losses and ve renc es of Comprehens Compre From Losses Part of y Net ive Income hensive Changes of of Profits Tra Liabili of Invested Income Fair Value Held-t and nsla Items Others Sub-total ties or party, of of o-mat Losses tion Which Invested Available-fo urity of Diff Net Can’t be party, r-sale Invest Cash-f eren Assets Reclassified Which Financial ment low ces of into Profits Will be Assets Reclas Hedge in 130 F-302 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Define and Losses Reclassi sified Fin Under the fied into as anci d Equity Profits Availa al Benefi Method and ble-for Stat t Plan Losses -sale eme After Under Financ nt the ial Re-me Equity Assets asure Method ment I. Opening balance in - 606,543.31 - 649,750.79 - - - 455,180,836.69 456,437,130.79 prior year II. Increase and decrease in the - - - 65,129.50 - - - - 65,129.50 prior year (file “-” for decrease) III. Opening balance in - 606,543.31 - 714,880.29 - - - 455,180,836.69 456,502,260.29 current year IV. Increase and decrease in the ------current year (file “-” for decrease) V. Closing balance in - 606,543.31 - 714,880.29 - - - 455,180,836.69 456,502,260.29 current year (XLIV). Special Reserve Opening Withdrawal in Use in Current Closing Items Balance Current Period Period Balance Safe production cost 5,829,939.96 6,337,659.15 968,087.33 11,199,511.78 Total 5,829,939.96 6,337,659.15 968,087.33 11,199,511.78 (XLV). Surplus Reserve Opening Increase in Decrease in Closing Items Balance Current Period Current Period Balance Statutory surplus reserve 480,528,440.99 - - 480,528,440.99 131 F-303 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Opening Increase in Decrease in Closing Items Balance Current Period Current Period Balance Other surplus reserve - - - - Reserve fund - - - - Enterprise development - - - - fund Others - - - - Total 480,528,440.99 - - 480,528,440.99 (XLVI) Undistributed Profit Amount in Items Amount in 2016 Current Period Undistributed profits in the end of prior period before 1,651,229,338.81 1,370,239,572.50 adjustment Adjusted total amount of undistributed profits at the - - beginning of the period (increase +, decrease -) Undistributed profits in the beginning of the period after 1,651,229,338.81 1,370,239,572.50 the adjustment Add: net profits belong to owner of the parent company 184,771,246.62 453,205,548.61 in current period Less: withdrawal of legal surplus reserves - 61,735,782.30 Withdraw discretionary surplus reserve - - Withdraw general risk reserves - - Common stock dividends payable 163,150,000.00 110,480,000.00 Dividends transferred to capital - - Undistributed profits at the end of the period 1,672,850,585.43 1,651,229,338.81 (XLVII). Operating Revenue and Operating Costs Items Amount in Current Period Amount in Prior Period Main business revenue 1,006,007,118.61 1,644,170,475.30 Other business revenue 56,635,970.98 33,187,421.25 Total 1,062,643,089.59 1,677,357,896.55 Main business costs 1,477,117,917.42 2,075,234,859.67 Other business costs 7,585,052.73 2,740,693.27 Total 1,484,702,970.15 2,077,975,552.94 Main businesses are listed according to industries as the following: Amount in Current Period Amount in Prior Period Industry Names Main Business Main Business Main Business Main Business Revenue Revenue Revenue Revenue Commodity sales 2,328,262.81 2,115,530.25 139,368,578.53 84,033,899.17 Metro operation 511,232,057.79 1,021,650,990.75 451,777,683.44 1,067,155,911.84 132 F-304 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Amount in Current Period Amount in Prior Period Industry Names Main Business Main Business Main Business Main Business Revenue Revenue Revenue Revenue Lease 13,110,923.41 24,434,520.80 50,904,962.89 26,040,745.72 Project settlement 329,970,469.94 326,500,139.01 892,539,411.34 842,338,410.56 Labor and other 105,103,049.90 91,473,624.90 63,513,421.25 43,980,421.45 service Land consolidation and management - - 4,138,550.63 6,142,810.41 fee Others 44,262,354.76 10,943,111.71 41,927,867.22 5,542,660.52 Total 1,006,007,118.61 1,477,117,917.42 1,644,170,475.30 2,075,234,859.67 Other businesses are shown as the following according to industry: Amount in Current Period Amount in Prior Period Industry Names Other Business Revenu Other Business Costs Other Business Other Business e Revenue Cost Service fee 889,662.01 110,039.58 2,589,292.45 2,217,135.42 Lease 17,238,827.35 - 8,396,285.68 Others 38,027,592.77 7,475,013.15 22,201,843.12 523,557.85 Total 56,635,970.98 7,585,052.73 33,187,421.25 2,740,693.27 (XLVIII). Taxes and Surcharges Items Amount Incurred in Current Period Amount incurred in Prior Period Business tax - 28,366,561.97 City maintenance and construction 2,227,318.65 2,653,726.45 tax Educational surtax 963,449.21 1,137,179.78 Local educational surtax 627,255.80 758,119.87 Cultural development fee 645,923.02 1,091,327.78 Flood prevention charges 315,788.57 258,289.15 House property tax 22,171,920.34 8,331,996.95 Land use tax 2,915,310.30 1,023,464.05 Stamp tax 3,030,725.41 18,804,982.97 Vehicle and vessel tax 80,421.07 57,567.92 Total 32,978,112.37 62,483,216.89 (XLIX). Sales Expenses Items Amount Incurred in Current Period Amount incurred in Prior Period Marketing expenses 1,363,772.90 927,058.50 Advertising and exhibition expenses 41,471.02 28,895.03 133 F-305 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Items Amount Incurred in Current Period Amount incurred in Prior Period Commodity maintenance expenses 176,580.00 224,734.69 Salary 11,793,113.58 12,685,810.28 Travel expenses 56,187.89 107,391.20 Agency fees 1,599,365.60 743,045.16 Office expenses 1,744,335.24 494,658.97 Asset use fees 241,223.12 223,725.88 Intermediary fees 1,261,757.49 1,062,716.70 Others 2,439,707.36 3,536,701.04 Total 20,717,514.20 20,034,737.45 (L). Administrative Expenses Items Amount Incurred in Current Period Amount incurred in Prior Period Salary 152,778,060.44 126,833,210.69 Repair and material consumption costs 1,204,648.09 1,388,763.75 Amortization of low priced and easily 481,716.74 176,826.83 worn articles Office expenses 13,749,916.37 11,953,082.88 Travel expenses 2,504,865.06 3,728,767.48 Utilities expenses 75,330.92 14,987.25 Business entertainment expenses 95,145.64 189,688.20 Depreciation cost 49,997,070.60 52,589,598.74 Insurance expenses 164,220.12 387,772.06 Financing lease expenses 16,366,852.44 58,593,762.85 Expenses for employment of intermediary 10,833,276.41 5,731,266.49 organ Amortization of intangible assets 854,122.20 1,210,737.10 Amortization of long-term unamortized 464,540.85 - expenses Lease cost 1,207,040.33 1,156,869.48 House property tax - 13,265,040.14 Vehicle and vessel tax - 7,820.53 Stamp tax - 2,085.00 Land use tax - 637,568.63 Flood prevention charges - 232,717.56 Property management fee 4,718,409.30 5,927,198.20 Service fee 626,279.08 3,199,931.05 134 F-306 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Items Amount Incurred in Current Period Amount incurred in Prior Period Others 49,290,149.09 31,756,863.00 Total 305,411,643.68 318,984,557.91 (LI). Financial Expenses Items Amount Incurred in Current Period Amount Incurred in Prior Period Expenditure of interests of financial 137,672,578.87 100,898,486.41 institutions (positive sign) Revenue of interests of financial 5,261,730.17 10,224,141.76 institutions (positive sign) Service charge (positive sign) 487,405.01 15,908,705.68 Exchange gain or loss (net income 19,646,436.87 47,345,498.55 negative sign ) Total 152,544,690.58 153,928,548.88 (LII). Asset Impairment Losses Amount Incurred in Current Amount Incurred in Prior Items Period Period I. Bad debts losses 3,624,831.55 -947.00 II. Inventory impairment losses - - III. Available-for-sale finance assets - - impairment losses IV. Held-for-maturity investment - - impairment losses V. Long-term equity investment - - impairment losses VI. Investment property impairment losses - - VII. Fixed assets impairment losses - - VIII. Engineering materials impairment - - losses IX. Impairment losses of projects under - - construction X. Impairment losses of productive - - biological assets XI. Oil & gas assets impairment losses - - XII. Intangible assets impairment losses - - XIII. Goodwill impairment losses - - XIV. Others - - Total 3,624,831.55 -947.00 (LIII). Investment Income Amount Incurred in Amount Incurred in Items Current Period Prior Period 135 F-307 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Amount Incurred in Amount Incurred in Items Current Period Prior Period Income of long-term equity investment accounted by 40,533,307.70 equity method Investment income of held-to-maturity investment 4,456,000.76 5,262,742.90 during the holding period Investment income from available-for-sale financial 129,932,440.34 20,803,637.04 assets and etc Others 27,135,498.48 4,805,462.43 Total 202,057,247.28 30,871,842.37 (LIV). Other Revenues Amount Incurred in Current Items Amount Incurred in Prior Period Period Operating subsidies for metro, Jinbin light railway and comprehensive transportation 424,210,795.00 - hub of Tianjin Station provided by Tianjin Finance Bureau Security staff expense by Tianjin Finance 18,900,000.00 - Bureau Operating subsidies for Jinbin Light Rail by Bureau of Public Utilities of Tianjin 14,788,000.00 - Economic-Technological Development Area Operating funds for new transportation project by Bureau of Public Utilities of 15,000,000.00 - Tianjin Economic-Technological Development Area Operating subsidies for Jinbin light railway provided by Finance Bureau of Binhai New 1,586,600.00 - Area Construction funds of south extension 420,000,000.00 - project of Metro Line 3 Total 894,485,395.00 - Explanation: Items Amount Content Approval Documents Operating subsidies for metro, Jinbin light Operating subsidies for railway and metro, Jinbin light railway comprehensive and comprehensive Notice of Tianjin Finance 424,210,795.00 transportation hub of transportation hub of Tianjin Bureau on Approval of Tianjin Station Station provided by Tianjin Expenditure Budget for provided by Tianjin Finance Bureau Financial Projects in 2016 Finance Bureau (JCYZ[2016] No.104) Security staff expense Security staff expense by by Tianjin Finance 18,900,000.00 Tianjin Finance Bureau Bureau 136 F-308 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Items Amount Content Approval Documents Confirmation Sheet for Operating subsidies Operating subsidies for Completion of Acquisition of for Jinbin Light Rail Jinbin Light Rail by Bureau Operation Fund for New by Bureau of Public 14,788,000.00 of Public Utilities of Tianjin Transportation and Jinbin Utilities of Tianjin Economic-Technological Light Railway in 2017 of Economic-Technologi Development Area Development Area at the End cal Development Area of the Year Operating funds for Operating funds for new new transportation Confirmation Sheet for transportation project by project by Bureau of Completion of Operation Bureau of Public Utilities of Public Utilities of 15,000,000.00 Fund for New Transportation Tianjin Tianjin and Jinbin Light Railway in Economic-Technological Economic-Technologi 2016 of Development Area Development Area cal Development Area Operating subsidies Operating subsidies for for Jinbin light The Minutes of the 30th Jinbin light railway provided railway provided by 1,586,600.00 Mayor Office Meeting on by Finance Bureau of Binhai Finance Bureau of February 17th, 2015 New Area Binhai New Area Construction funds of Construction funds of south Agreement on Construction south extension 420,000,000.00 extension project of Metro Funds of South Extension project of Metro Line Line 3 Project of Metro Line 3 3 Total 894,485,395.00 (LV). Non-operating Revenue 1. Details of Non-operating Revenue Amount Incurred in Current Items Amount Incurred in Prior Period Period Total gains from disposing non-current 27,217.00 64.60 assets Including: gains from disposing fixed assets 27,217.00 64.60 Gains from disposing intangible assets - - Accepted donations - 24,235.85 Government subsidies 663,452,878.44 Compensation income 15,960.00 Others 18,233,010.07 1,449,173.74 Total 18,276,187.07 664,926,352.63 (LVI). Non-operating Expenses Amount Incurred in Prior Items Amount Incurred in Current Period Period Total losses from disposing non-current 75,503.77 18,425.49 assets 137 F-309 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Including: losses from disposing fixed 75,503.77 18,425.49 assets Losses from disposing - - intangible assets Fine expenses 91,919.00 19,697.77 Expenses such as compensation and 1,065,314.18 5,069,823.96 liquidated damages Others 83,340.54 2,669,634.96 Total 1,316,077.49 7,777,582.18 (LVII). Income Tax Expenses Amount Incurred in Current Amount Incurred in Prior Items Period Period Current income tax expenses 7,154,635.27 3,342,514.77 Deferred income tax expenses -7,093,944.18 - Total 60,691.09 3,342,514.77 (LVIII). Supplementary Information of Cash Flow Statement 1. Supplementary Information of Cash Flow Statement Amount in Amount in Prior Supplementary Information Current Period Period 1. Adjust net profits to cash flow of operation: Net profits 176,105,387.83 -271,369,672.47 Add: asset impairment reserves 3,624,831.55 -947 Depreciation of fixed assets, depreciation of oil and gas assets and 65,467,649.23 8,511,754.68 depreciation of productive biological assets Amortization of intangible assets 184,609.62 1,031,294.98 Amortization of long-term unamortized expenses 53,816,790.06 35,196,190.47 Losses from disposing fixed assets, intangible assets and other 48,286.77 110.4 long-term assets (file “-” for income) Losses from retirement of fixed assets (file “-” for income) - 2,142.00 Losses from changes of fair value (file “-” for income) - - Financial expenses (file “-” for income) 137,672,578.87 100,898,486.41 Investment loss (file “-” for income) -202,057,247.28 -34,194,525.45 Decrease of deferred income tax assets (file “-” for increase) -7,093,944.18 - Increase of deferred income tax liabilities (file “-” for decrease) - - Inventory decreases (file “-” for increase) -150,860,111.77 -290,277,559.64 Decrease of operational receivables (file “-” for increase) 328,237,658.88 -2,146,113,723.86 Increase of operational payables (file “-” for decrease) 630,229,204.88 2,000,037,642.83 Others - - 138 F-310 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Amount in Amount in Prior Supplementary Information Current Period Period Net value of cash flow of operations 1,035,375,694.46 -596,278,806.65 2. Investment and fundraising not involving cash receipt and payment: Capital transferred from debt - - Convertible enterprise bonds due within one year - - Fixed assets under financing lease - - 3ˊNet changes of cash and cash equivalents: Closing balance of cash 15,278,233,477.02 15,299,695,939.55 Less: opening balance of cash 9,854,266,910.56 10,927,287,672.47 Add: closing balance of cash equivalents - - Less: opening balance of cash equivalents - - Net increase of cash and cash equivalents 5,423,966,566.46 4,372,408,267.08 2. Components of Cash and Cash Equivalents Items Closing Balance Opening Balance I. Cash 15,278,233,477.02 15,299,695,939.55 Including: cash on hand 143,670.55 148,054.97 Bank deposit which can be used for payment at any time 15,278,089,806.47 15,299,547,884.58 Other monetary capital which can be used for payment at any - - time Deposit in Central Bank which can be used for payment - - Deposit in other banks - - Loans from other banks - - II. Cash equivalents - - Including: bond investment due within three months - - III. Balance of cash and cash equivalents at the end of the 15,278,233,477.02 15,299,695,939.55 period Including: cash and cash equivalents with limited use for parent - - company or subsidiaries within the group (LIX). Foreign Currency Monetary Items Foreign Currency Translate into RMB Items Exchange Rate Balance in in Period End Period End Monetary fund 60,887,000.48 Including: USD 9,172,402.35 6.64 60,876,317.16 EUR 216.57 7.82 1,694.29 HKD 10,579.56 0.85 8,989.03 139 F-311 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Long-term borrowings (including - 246,475,551.45 long-term borrowings due within 1 year ) Including: USD 1,281,091.92 6.64 8,502,478.96 EUR 30,418,502.74 7.82 237,973,072.49 HKD - - - Bonds payable 3,317,441,817.50 Including: USD 499,848,094.37 6.64 3,317,441,817.50 EUR HKD - - - VII. Changes of Consolidation Scope The Company has 1 new investment subsidiary in this period, and the invested enterprise is Tianjin Station for Vocational Skill Authentication for Industry of Urban Rail Transit, the established capital is RMB 200,000 Yuan, and the actual capital contribution is RMB 200,000 Yuan, and the share ratio is 100%, which is included in the scope of the merger. VIII. Equity in Other Subjects (I) Equity in Subsidiaries 1. Composition of Enterprise Group (1) Composition of Enterprise Group Main Shareholding Acquiring Names of Registered Place of Business Ratio (%) Method Subsidiaries Location Business Direct Indirect Retail of cigarette; enterprise management; property management; house lease; house information consultation; lease of mechanical Established Tianjin equipment; edible agricultural products and Tianjin Tianjin with Xianda Hotel wholesale and retail of artwares. (For the items 100.00 - investment which need to be approved according to laws, the operation activities can be carried out only after approval by relevant departments.) Comprehensive engineering construction of railways; civil engineering construction; Tianjin Local maintenance of railway and railway Established Railway Tianjin Tianjin communication facilities. (For the items which with Construction 100.00 - need to be approved according to laws, the investment Company operation activities can be carried out only after approval by relevant departments.) Tianjin Rail Tianjin Tianjin General construction contracting of railway 100.00 - Established 140 F-312 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Transit Group engineering, general construction contracting with Engineering of municipal engineering, and general investment Construction construction contracting of housing buildings Co., Ltd. engineering; professional contracting of earth and rock engineering; contracting of maintenance of railways and railway communication facilities; house lease; restricted to branch: construction of earth and rock engineering; engineering hoisting; automobile transportation; engineering supervision service; engineering bidding agent; engineering cost consultation; engineering project management.(For the items which need to be approved according to laws, the operation activities can be carried out only after approval by relevant departments.) Building construction engineering, railway engineering construction; wholesale and retail of knitwear, textile, general merchandise, daily groceries, hardwares, electric materials, decoration materials, railway equipment, steels, construction materials, chemical products (except for dangerous chemical products and precursor chemicals); material storage(except for dangerous chemical Tianjin products and precursor chemicals); panel Established Xianda Binhai beating; processing of knitwear and textiles; Tianjin Tianjin with Construction manufacture and processing of sculpture 100.00 - investment Company artwares, cement products and concrete structure elements; manufacture and processing of plastic products; conference service; restricted to branch: pool bath, shower, culture and entertainment service, karaoke, bar, accommodation service and hairdressing. (For the items which need to be approved according to laws, the operation activities can be carried out only after approval by relevant departments.) Tianjin Special investment on railway freight; Merging of Railway investment and construction of urban enterprises Construction infrastructure; land consolidation; real estate Tianjin Tianjin under the Investment development. (For the items which need to be 100.00 - same Holding approved according to laws, the operation control (Group) Co., activities can be carried out only after approval 141 F-313 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Ltd. by relevant departments) Construction and management of urban rail transit project; general contracting of project; tender and bidding consultation (not including intermediary), engineering supervision; operation and comprehensive development and operation of rail transit; purchase, debugging, operation, lease and maintenance of domestic and foreign vehicles and mechanical and electrical equipment and rail transit related business; real estate development and commercial housing sales; house lease; property management; accommodation; Chinese food processing and operation (dinner); advertisement business; wholesale and retail of general merchandise, textile, Merging of Tianjin Binhai jewelry, shoes and hats, cosmetics, watches enterprises Rapid Transit and glasses, leather products and construction Tianjin Tianjin under the Development materials; exhibition service, house 100.00 - same Co., Ltd. intermediary and agency service, technology control consulting, business service and cleaning service. The following items are restricted to branch: hotel management; conference service; sale of artwares; hotel: processing and operation of staple food, hot dishes and cold dishes, and decorative cake; canteen: processing and operation of staple food and hot dishes; guest accommodation; indoor swimming pool; tobacco retail; gift sales; own equipment rental; venue rental; faxing services; office supplies leasing; parking lot management service.(For the items which need to be approved according to laws, the operation activities can be carried out only after approval by relevant departments.) Organization and management of investment and development, construction, design, supervision and operation of urban rail transit Merging of Tianjin Metro projects; technology consultation and enterprises (Group) Co., Tianjin Tianjin technology service; real estate development; under the 100.00 - Ltd. municipal engineering and service in early same stage of the engineering; production and sales control service of construction materials; sales of commercial housing; lease of own houses 142 F-314 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements (within the above scope, if there are franchise regulations of the state, follow the regulations.) Tianjin City Senior: training of watchman, coach driver, Rail Established track driver, hostler, electrician, Vocational Tianjin Tianjin with electromechanical worker, communication 100.00 - Training investment worker and signalman Center Tianjin Rail Established Hong Hong Transit Group None with Kong Kong 100.00 - (HK) Co., Ltd. investment Financial leasing business; leasing business; Tianjin Rail purchase leasing property from home and Transit Group abroad; disposal and maintenance of salvage Established Financing Tianjin Tianjin value of the leasing property. (For the items with 70.00 30.00 Lease Co., which need to be approved according to laws, investment Ltd. the operation activities can be carried out only after approval by relevant departments.) Junior, intermediate, advanced, technician, advanced technician: traffic attendant, electric bus driver, railcar driver, vehicle maintenance Tianjin worker, electrical and mechanical worker, Station for power worker, communications worker, signal Vocational worker, urban rail vehicle maintenance Established Skill worker, urban rail mechanics, urban rail power Tianjin Tianjin with Authentication supply worker, urban rail line worker, rail 100.00 - investment for Industry of signal worker, urban rail communication Urban Rail worker, urban rail station attendant; Transit intermediate, advanced, technician, advanced technician: city rail driver; junior, intermediate, advanced, technician: urban rail dispatcher. (2) The Situation of Holding Subsidiaries Not Included in the Scope of Consolidated Accounting Statement Explanation Registered Investment of Not Capital Amount of Shareholding Ratio Enterprise Name Business Scope Included in ˄RMB ’0000 This ˄%˅ Consolidation Yuan˅ Company (RMB ’0000 Scope 143 F-315 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Yuan) Direct Indirect Manufacturing, issuing, Tianjin Jinkatong settlement, management Investment Close down, and maintenance of 1,000.00 600.00 60.00 Development Co., not control intelligent card for public Ltd. transport Metro project finance advisory and intermediary services; International procurement of metro equipment and Tianjin Metro technology; Property HK $10 Close down, (HongKong) Co., 162.62 51.00 development and Million not control Ltd. management services; Information and management consulting; Cultural and academic exchanges, etc. IX. Related Parties and Related Party Transaction (I) Situation of Parent Company of This Company Shareholding Voting Right Name of Parent Registered Business Registered Ratio of Parent Ratio of Parent Company Location Nature Capital Company in This Company in This Company (%) Company (%) Tianjin Urban Infrastructure Infrastructure RMB 68,8 construction, 86.34 86.34 Construction Tianjin 21,100,000 investment, &Investment Yuan etc. Group Co., Ltd. (II) Situation of Subsidiaries of This Company 144 F-316 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements See “(I) Equity in Subsidiaries of VIII. Equity in Other Subjects” for details. (III) Situation of Joint Ventures and Associated Enterprises of This Company See the situation of joint ventures and associated enterprises in Note VI (XIII) Long-term Equity Investment. (IV) Situation of Other Related Parties Relationship Between Other Related Parties and This Name of Other Related Parties Company Tianjin TEDA Investment Holding Co., Ltd. Shareholders of the Company Tianjin Jinyuan Investment and Development Co., Ltd. Controlled by the same ultimate control party Tianjin Infrastructure Construction and Engineering Controlled by the same ultimate control party Management Consulting Co., Ltd. Tianjin Urban Road Network Supporting Construction Controlled by the same ultimate control party Investment Co., Ltd. Tianjin Haihe Construction Development & Investment Controlled by the same ultimate control party Co., Ltd. Tianjin Chengtou Urban Resources Management Co., Controlled by the same ultimate control party Ltd. (V) Related Party Transaction Accounting Amount in Amount in Corporate Name Items Subject Current Period Prior Period Tianjin Nanhuan Railway Operating Consulting fee 2,106,796.12 - Co., Ltd. income Tianjin Nanhuan Railway Other business Lease of houses 976,071.42 1,024,875.00 Co., Ltd. income Railway transformation Tianjin Nanhuan Railway Main business project of Southwest Ring 31,308,793.61 225,720,856.00 Co., Ltd. income Road Newly built Lubeikou Tianjin Nanhuan Railway Main business outdoor electrical 218,646.60 433,033.00 Co., Ltd. income integrated work area project Lubeikou outdoor Tianjin Nanhuan Railway Main business electrical integrated work 1,207,774.77 - Co., Ltd. income area project Top culvert project for Tianjin Urban Road special line of water Network Supporting Main business supply pipeline at - 5,188,857.28 Construction Investment income Guoyuan South Road and Co., Ltd. Guoyuan North Road 145 F-317 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Accounting Amount in Amount in Corporate Name Items Subject Current Period Prior Period Railway transformation Tianjin Nanhuan Railway Main business project of Southwest Ring - 1,300,000.00 Co., Ltd. income Road (VI) Receivables and Payables of Related Party Item Name Related Party Contents Closing Balance Opening Balance Tianjin Urban Road Network Accounts Supporting Construction Project funds 2,094,647.00 6,961,437.75 receivable Investment Co., Ltd. Accounts Tianjin Nanhuan Railway Co., Project funds 51,635,713.00 38,431,711.31 receivable Ltd. Tianjin Haihe Construction Accounts Development & Investment Project funds 4,824,265.00 4,824,265.00 receivable Co., Ltd. Accounts Tianjin TEDA Investment Project funds 8,676,200.00 8,676,200.00 receivable Holding Co., Ltd. Tianjin Infrastructure Prepaid Construction and Engineering Project funds 5,606,000.00 5,606,000.00 account Management Consulting Co., Ltd. Tianjin Haihe Construction Prepaid Project funds, parking Development & Investment 133,212,133.00 133,212,133.00 account fee, meal fee Co., Ltd. Prepaid Tianjin Jinyuan Investment Accounts current 14,957,813,400.00 14,957,813,400.00 account and Development Co., Ltd. Other Tianjin Nanhuan Railway Co., Land acquisition and 1,575,000,000.00 1,270,500,000.00 receivables Ltd. demolition payments Compensation for land Other Tianjin Jinyuan Investment acquisition and 45,240,270.00 45,240,270.00 receivables and Development Co., Ltd. demolition Tianjin Urban Road Network Other Supporting Construction Accounts current 361,593,205.31 353,046,788.64 receivables Investment Co., Ltd. Tianjin Urban Infrastructure Other Construction &Investment Accounts current 882,577,112.64 882,577,112.64 receivables Group Co., Ltd. Tianjin Chengtou Urban Other Resources Management Co., Accounts current 3,620,000.00 3,620,000.00 receivables Ltd Long-term Tianjin Metro Real Estate Long-term claims 60,000,000.00 60,000,000.00 146 F-318 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Item Name Related Party Contents Closing Balance Opening Balance receivables Trading Co., Ltd. Tianjin Urban Road Network Deposit Supporting Construction Project funds 3,250,222.00 - received Investment Co., Ltd. Tianjin Urban Road Network Deposit Supporting Construction Accounts current 20,182,118.00 20,221,318.00 received Investment Co., Ltd. Tianjin Haihe Construction Deposit Development & Investment Accounts current 20,914,909.00 20,914,909.00 received Co., Ltd. Deposit Tianjin Jinyuan Investment Project funds 3,087,240,000.00 3,087,240,000.00 received and Development Co., Ltd. Other Tianjin Urban Infrastructure accounts Construction &Investment Accounts current 2,058,965.81 2,058,965.81 payables Group Co., Ltd. Other Tianjin TEDA Investment Accounts current is accounts 7,351,817.34 7,351,817.34 Holding Co., Ltd. not yet paid. payables Other Tianjin Urban Road Network accounts Supporting Construction Construction deposit 100,000.00 - payables Investment Co., Ltd. Other Tianjin Chengtou Urban accounts Resources Management Co., Construction deposit 30,000.00 30,000.00 payables Ltd Other Tianjin Metro Real Estate accounts Construction deposit 100,000.00 100,000.00 Trading Co., Ltd. payables Interest transferred to infrastructure project, Special Tianjin Urban Infrastructure initial cost of the accounts Construction &Investment project, initial 3,221,611,264.73 3,105,051,221.13 payable Group Co., Ltd. information inquiry fee of the project, project funds (VII). Situation of Related-party Guarantee (1) This company provides external guarantee for the related party: Guaranteed Party Type of Guarantee Amount of Guarantee Guarantee Time Tianjin TEDA Investment Mortgage and Guarantee: 600,000,000.00 Holding Co., Ltd. guarantee 2007.10-2019.10 147 F-319 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Mortgage: 2007.10-2017.10 Total 600,000,000.00 (2) The related party provides the guarantee for this company: Name of Guaranteed Type of Guarantor Loan Balance Guaranty Period Company Guarantee Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction 2,700,000,000.00 2012.12.26-2017.12.25 Co., Ltd. warranty &Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction 133,060,000.00 2014.8.29-2018.7.27 Co., Ltd. warranty &Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction 332,682,414.18 2014.8.29-2018.7.27 Co., Ltd. warranty &Investment Group Co., Ltd. Tianjin TEDA Tianjin Binhai Rapid Guarantee Investment Holding Co., Transit Development 25,000,000.00 2003.1.23-2017.12.20 warranty Ltd. Co., Ltd. Tianjin TEDA Tianjin Binhai Rapid Guarantee Investment Holding Co., Transit Development 178,500,000.00 2011.05.10-2017.11.10 warranty Ltd. Co., Ltd. Tianjin TEDA Tianjin Binhai Rapid Guarantee Investment Holding Co., Transit Development 194,500,000.00 2011.05.10-2018.05.10 warranty Ltd. Co., Ltd. Tianjin TEDA Tianjin Binhai Rapid Guarantee Investment Holding Co., Transit Development 1,331,250,000.00 2003.1.23-2027.1.20 warranty Ltd. Co., Ltd. Tianjin TEDA Tianjin Binhai Rapid Guarantee Investment Holding Co., Transit Development 483,569,864.00 2010.6.30-2020.6.29 warranty Ltd. Co., Ltd. Tianjin TEDA Tianjin Binhai Rapid Guarantee Investment Holding Co., Transit Development 1,899,519,055.99 2009.9.25-2029.10.22 warranty Ltd. Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro Guarantee 78,500,000.00 2014.6.27-2038.10.27 Construction (Group) Co., Ltd. warranty &Investment Group Co., 148 F-320 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Name of Guaranteed Type of Guarantor Loan Balance Guaranty Period Company Guarantee Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction 4,800,000.00 2014.11.20-2018.11.20 Co., Ltd. warranty &Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction 300,000,000.00 2015.1.22-2018.11.20 Co., Ltd. warranty &Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction 100,000,000.00 2015.2.13-2018.11.20 Co., Ltd. warranty &Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction 3,570,000.00 2015.3.20-2018.11.20 Co., Ltd. warranty &Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction 6,260,000.00 2015.6.19-2018.11.20 Co., Ltd. warranty &Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction 6,283,240.35 2015.9.21-2018.11.20 Co., Ltd. warranty &Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction 6,280,000.00 2015.12.18-2018.11.20 Co., Ltd. warranty &Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction 5,610,000.00 2016.3.18-2018.11.20 Co., Ltd. warranty &Investment Group Co., Ltd. Tianjin Urban Tianjin Metro (Group) Guarantee 5,210,000.00 2016.6.20-2018.11.20 149 F-321 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Name of Guaranteed Type of Guarantor Loan Balance Guaranty Period Company Guarantee Infrastructure Co., Ltd. warranty Construction &Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction & 5,260,000.00 2016.9.20-2018.11.20 Co., Ltd. warranty Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction & 5,260,000.00 2016.12.20-2018.11.20 Co., Ltd. warranty Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction & 5,260,000.00 2017.3.20-2018.11.20 Co., Ltd. warranty Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction & 5,440,000.00 2017.6.20-2018.11.20 Co., Ltd. warranty Investment Group Co., Ltd. Tianjin Urban Infrastructure Tianjin Metro (Group) Guarantee Construction & 5,510,000.00 2017.9.20-2018.11.20 Co., Ltd. warranty Investment Group Co., Ltd. X. Commitment and Contingencies This company has no significant commitment which needs to be disclosed. XI. Events after the Balance Sheet Date By the date of report of the financial statement, there is no event after the balance sheet date which needs to be disclosed. XII. Other Significant Matters In the “812 Explosion Accident”, partial assets of the subsidiary Tianjin Binhai Rapid Transit 150 F-322 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Development Co., Ltd. were damaged. The book value of impaired assets is RMB 187,287,386.07 Yuan. And insurance indemnities received from Bohai Property Insurance Co., Ltd. are RMB 172,905,352.00 Yuan. The subsidiary Tianjin Binhai Rapid Transit Development Co., Ltd. accounted the book value of impaired assets in other non-current assets. And it withdrew asset impairment reserves for the difference between the book value of impaired assets and the insurance indemnity with the amount of RMB 14,382,034.07 Yuan. XIII. Main Items of Accounting Statement of Parent Company (I) Accounts Receivable 1.1 Accounts Receivable Based on Categories Closing Balance Book Balance Bad-debt Provision Category Proporti Proportion on of Book Value Amount Amount ˄%˅ Accrual ˄%˅ Accounts receivable with significant single amount - - - - - and single provision for bad-debt Account receivable for which bad-debt provision - - - - - is withdrawn according to combination Combination 1: account receivables for which bad-debt provision is 136,875.00 0.58 - - 136,875.00 withdrawn with aging analysis method Combination 2: account receivables for which 23,596,728.04 99.42 - - 23,596,728.04 bad-debt provision isn’t withdrawn Sub-total of the 23,733,603.04 100.00 - - 23,733,603.04 combination Accounts receivable with insignificant single - - - - - amount but single provision for bad-debt Total 23,733,603.04 100.00 - - 23,733,603.04 (To be continued) 151 F-323 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Opening Balance Book Balance Bad-debt Provision Category Proporti Proportion on of Book Value Amount Amount ˄%˅ Accrual ˄%˅ Account receivable with significant single amount - - - - - and single provision for bad-debt Account receivable for which bad-debt provision - - - - - is withdrawn according to combination Combination 1: account receivables for which bad-debt provision is 136,875.00 0.55 - - 136,875.00 withdrawn with aging analysis method Combination 2: account receivables for which 24,696,728.04 99.45 - - 24,696,728.04 bad-debt provision isn’t withdrawn Sub-total of the 24,833,603.04 100.00 - - 24,833,603.04 combination Accounts receivable with insignificant single - - - - - amount but single provision for bad-debt Total 24,833,603.04 100.00 - - 24,833,603.04 1.2 Accounts Receivable for Which Bad-debt Provision is Withdrawn with Aging Analysis Method in the Combination Closing Balance Aging Proportion of Account Receivable Bad-debt Provision Accrual˄%˅ Within 1 year 136,875.00 - - 1-2 years - - - 2-3 years - - - 3-4 years - - - 4-5 years - - - 152 F-324 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Closing Balance Aging Proportion of Account Receivable Bad-debt Provision Accrual˄%˅ More than 5 years - - - Total 136,875.00 - - ˄To be continued˅ Opening Balance Aging Proportion of Account Receivable Bad-debt Provision Accrual˄%˅ Within 1 year 136,875.00 - - 1-2 years - - - 2-3 years - - - 3-4 years - - - 4-5 years - - - More than 5 years - - - Total 136,875.00 - - 2. There is no withdrawn, regained or returned bad-debt provision in current period. 3. There is no receivables of shareholders with more than 5% (including 5%) voting right in the account receivable balance in the report period. (II) Other Account Receivable 1.1 Disclosure of Other Account Receivable Based on Categories Closing Balance Category Book Balance Bad-debt Provision Proportion Proportion Book Value Amount Amount ˄%˅ ˄%˅ Other receivables with significant single amount - - - - - and single provision for bad-debt Other receivables for which bad-debt provision is - - - - - withdrawn according to combination Combination 1: other receivables for which bad-debt provision is 2,185,037.66 0.01 1,663,668.00 76.14 521,369.66 withdrawn with aging analysis method Combination 2: other receivables for which 17,357,248,954.50 99.99 - - 17,357,248,954.50 bad-debt provision isn’t 153 F-325 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Closing Balance Category Book Balance Bad-debt Provision Proportion Proportion Book Value Amount Amount ˄%˅ ˄%˅ withdrawn Sub-total of combination 17,359,433,992.16 100.00 1,663,668.00 0.01 17,357,770,324.16 Other receivable with insignificant single amount - - - - - but single provision for bad-debt Total 17,359,433,992.16 100.00 1,663,668.00 0.01 17,357,770,324.16 (To be continued) Opening Balance Category Book Balance Bad-debt Provision Proportion Proportion Book Value Amount Amount ˄%˅ ˄%˅ Other receivables with significant single amount - - - - - and single provision for bad-debt Other receivables for which bad-debt provision is - - - - - withdrawn according to combination Combination 1: other receivables for which bad-debt provision is 2,219,759.35 0.02 1,663,668.00 74.95 556,091.35 withdrawn with aging analysis method Combination 2: other receivables for which 9,219,841,375.25 99.98 - - 9,219,841,375.25 bad-debt provision isn’t withdrawn Sub-total of combination 9,222,061,134.60 100.00 1,663,668.00 0.02 9,220,397,466.60 Other receivables with insignificant single amount - - - - - but single provision for bad-debt Total 9,222,061,134.60 100.00 1,663,668.00 0.02 9,220,397,466.60 1.2 Other Account Receivable for Which Bad-debt Provision is Withdrawn with Aging Analysis Method in the Combination Closing Balance Aging Other Account Proportion of Bad-debt Provision Receivable Accrual˄%˅ Within 1 year 105,452.66 - - 154 F-326 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Closing Balance Aging Other Account Proportion of Bad-debt Provision Receivable Accrual˄%˅ 1-2 years - - - 2-3 years - - - 3-4 years - - - 4-5 years - - - More than 5 years 2,079,585.00 1,663,668.00 80.00 Total 2,185,037.66 1,663,668.00 (To be continued) Opening Balance Aging Withdrawal Other Receivables Bad-debt Provision Proportion˄%˅ Within 1 year 140,174.35 - - 1-2 years - - - 2-3 years - - - 3-4 years - - - 4-5 years - - - More than 5 years 2,079,585.00 1,663,668.00 80.00 Total 2,219,759.35 1,663,668.00 2. There is no withdrawn, regained or returned bad-debt provision in current period. 3. The Situation of Other Receivables of Top 5 in Period End Balance Listed According to the Debtors: Ratio in Total Bad-debt Nature of the Closing Balance Provision Unit Name Period End Balance Aging Money of Other Closing Receivables (%) Balance Within 1 Current 5,889,524,388.54 33.92 - year account, Tianjin Metro administration (Group) Co., Ltd. expenses, 1,883,271,248.81 1-2 years 10.85 - interests Sub-total 7,772,187,341.65 44.77 - Within 1 2,479,038,053.64 14.28 - Tianjin Binhai Rapid Current year Transit Development account, 1,671,514,766.67 1-2 years 9.63 - Co., Ltd. interests 1,164,298,400.00 2-3 years 6.71 - 155 F-327 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Sub-total 5,314,851,220.31 30.61 - Tianjin Finance Borrowings 1,400,000,000.00 2-3 years 8.06 - Bureau Within 1 Tianjin Railway 1,496,686,293.59 8.62 - year Construction Investment Holding 1,011,744,966.94 1-2 years 5.83 - (Group) Co., Ltd. Sub-total 2,508,431,260.53 14.45 - Within 1 9,778,593.06 0.06 - Current year Tianjin Xianda Hotel Account More than 5 137,668,227.83 0.79 - years Sub-total 147,446,820.89 0.85 - Total 17,143,524,939.08 98.75 - 4. There is no receivables of shareholders with more than 5% (including 5%) voting right in other receivables balance in the report period. (III) Long-term Equity Investment Closing Balance Opening Balance Items Impairment Impairment Book Balance Book Value Book Balance Book Value Reserves Reserves Investment on 116,760,233,081.75 250,000.00 116,759,983,081.75 113,355,590,381.75 250,000.00 113,355,340,381.75 subsidiaries Investment on joint ventures and associated 2,729,786,509.15 - 2,729,786,509.15 2,758,723,772.19 - 2,758,723,772.19 enterprises Total 119,498,022,403.15 250,000.00 119,489,769,590.90 116,114,314,153.94 250,000.00 116,114,064,153.94 1. Investment on Subsidiaries Withdrawn Decrease Closing Impairment Increase in in Balance of Invested Unit Opening Balance Closing Balance Reserves in Current Period Current Impairment Current Period Reserves Period 156 F-328 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Withdrawn Decrease Closing Impairment Increase in in Balance of Invested Unit Opening Balance Closing Balance Reserves in Current Period Current Impairment Current Period Reserves Period Tianjin Metro (Group) 83,162,502,256.53 3,002,742,700.00 - 86,165,244,956.53 - - Co., Ltd. Tianjin Local Railway 9,813,541.21 - - 9,813,541.21 - - Construction Company Tianjin Xianda Hotel 48,450,000.00 - - 48,450,000.00 - - Tianjin Binhai Rapid Transit Development 12,815,329,590.25 - - 12,815,329,590.25 - - Co., Ltd. Tianjin Railway Construction 16,033,739,942.71 401,700,000.00 - 16,435,439,942.71 - - Investment Holding (Group) Co., Ltd. Tianjin Rail Transit Group Engineering 201,010,610.80 - - 201,010,610.80 - - Construction Co., Ltd. Tianjin Xianda Binhai 15,658,640.25 - - 15,658,640.25 - - Construction Company Tianjin City Rail Vocational Training 500,000.00 - - 500,000.00 - - Center Tianjin Rail Transit 368,335,800.00 - - 368,335,800.00 - - Group (HK) Co., Ltd. Tianjin Rail Transit Group Financing Lease 700,000,000.00 - - 700,000,000.00 - - Co., Ltd. Tianjin Station for Vocational Skill Authentication for - 200,000.00 - 200,000.00 - - Industry of Urban Rail Transit Total 113,355,340,381.75 3,404,642,700.00 - 116,759,983,081.75 - - 157 F-329 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements 2. Investment on Joint Ventures and Associated Enterprises Increase and Decrease in Current Period Profit and Loss Adjustment of Invested Unit Opening Added Reduced on Investment Other Investment Investment Confirmed with Comprehensive Equity Method Incomes Balance I. Joint ventures II. Associated enterprise Tianjin Nanhuan 2,758,723,772.19 - - 37,283,163.22 - Railway Co., Ltd. Sub-total 2,758,723,772.19 - - 37,283,163.22 - Total 2,758,723,772.19 - - 37,283,163.22 - (To be continued) Increase and Decrease in Current Period Closing Invested Withdrawn Withdrawn Closing Balance of Unit Other Equity Changes Impairment Impairment Others Impairment Balance Reserves Reserves Reserves I. Joint ventures II. Associated enterprise Tianjin Nanhuan - 66,220,426.26 - - 2,729,786,509.15 - Railway Co., Ltd. Sub-total - 66,220,426.26 - - 2,729,786,509.15 - Total - 66,220,426.26 - - 2,729,786,509.15 - (IV) Operating Revenue and Operating Costs Items Amount Incurred in Current Period Amount Incurred in Prior Period 158 F-330 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Income Cost Income Cost Main business 36,754,805.61 - 6,690,411.99 Other business 2,321,831.39 84,905.66 59,258.17 - Total 2,321,831.39 36,839,711.27 59,258.17 6,690,411.99 (V) Investment Income 1. Details of Investment Income Amount Incurred Amount Incurred Source of Investment Income in Current Period in Prior Period Income of long-term equity investment accounted by - - cost method Income of long-term equity investment accounted by 37,283,163.22 - equity method Investment income arising from disposing long-term - - equity investment Investment income of financial assets during the holding period, which is measured with fair value and - - the changes of which are accounted in profit and loss in the current period Investment income arising from disposing financial assets which is measured with fair value and the - - changes of which are accounted in profit and loss in the current period Investment income of held-to-maturity investment - 526,473.00 during the holding period Investment income of available-for-sale financial assets 9,937,082.60 8,943,374.34 during the holding period Investment income arising from disposing - - available-for-sale financial assets 159 F-331 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Amount Incurred Amount Incurred Source of Investment Income in Current Period in Prior Period Income of remained equity measured anew with fair - - value after losing the control right Total 47,220,245.82 9,469,847.34 (VI). Supplementary Information of Cash Flow Statement 1. Supplementary Information of Cash Flow Statement Amount in Amount in Prior Supplementary Information Current Period Period 1ˊ Adjust net profits to cash flow of operation: Net profits -33,302,160.64 -36,311,228.79 Add: asset impairment reserves - - Depreciation of fixed assets, depreciation of oil and gas assets and 451,689.10 302,370.45 depreciation of productive biological assets Amortization of intangible assets - - Amortization of long-term unamortized expenses - - Losses from disposing fixed assets, intangible assets and other - - long-term assets (file “-” for income) Losses from retirement of fixed assets (file “-” for income) - - Losses from changes of fair value (file “-” for income) - - Financial expenses (file “-” for income) 56,374,287.83 33,163,208.31 Investment loss (file “-” for income) -47,220,245.82 -9,469,847.34 Decrease of deferred income tax assets (file “-” for increase) - - Increase of deferred income tax liabilities (file “-” for decrease) - - Inventory decreases (file “-” for increase) - - Decrease of operational receivables (file “-” for increase) -8,318,046,524.00 -5,107,714,689.91 Increase of operational payables (file “-” for decrease) 1,782,146,334.69 -553,355,796.29 Others - - Net value of cash flow of operations -6,559,596,618.84 -5,673,385,983.57 2. Investment and fundraising not involving cash receipt and payment: - - Capital transferred from debt - - Convertible enterprise bonds due within one year - - Fixed assets under financing lease - - 160 F-332 Tianjin Rail Transit Group Co., Ltd. Notes to the Financial Statements Amount in Amount in Prior Supplementary Information Current Period Period 3ˊNet changes of cash and cash equivalents: Closing balance of cash 1,823,028,973.56 141,707,419.51 Less: opening balance of cash 37,639,207.13 372,207,292.19 Add: closing balance of cash equivalents - - Less: opening balance of cash equivalents - - Net increase of cash and cash equivalents 1,785,389,766.43 -230,499,872.68 2. Components of Cash and Cash Equivalents Items Closing Balance Opening Balance I. Cash 1,823,028,973.56 141,707,419.51 Including: cash on hand - - Bank deposit which can be used for payment at any time 1,823,028,973.56 141,707,419.51 Other monetary capital which can be used for payment at any - - time Deposit in Central Bank which can be used for payment - - Deposit in other banks - - Loans from other banks - - II. Cash equivalents - - Including: bond investment due within three months - - III. Balance of cash and cash equivalents at the end of the 1,823,028,973.56 141,707,419.51 period Including: cash and cash equivalents with limited use for parent company or subsidiaries within the group XIV. Additional information which should be disclosed according to relevant financial accounting criterion. None. Tianjin Rail Transit Group Co., Ltd. January 8, 2018 161 F-333 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED DIRECTOR'S REPORT for the year ended 31 December 2016 The sole director presents the report together with the audited consolidated financial statements of the Company and its i subsidiary ( the "Group") for the year ended 31 December 2016. I Principal activities During the year, the principal activities of the Company was engaged in general trading. The principal activities and other paiiiculars of the subsidiary are set out in note 19 to the consolidated financial statements. 1 i l Results and appropriations The loss of the Group for the year ended 31 December 2016 and the state of the Company and the Group's affairs as at that date are set out in the consolidated financial statements on pages 6 to 26. The director does not recommend payment of any dividends for the year. Share capital Details of the movements during the financial year in the share capital of the the Company are set out in note 17 to the consolidated financial statements. During the financial year, the Company has issued the following ordinary shares: Date of issue No. of share issued Total amount Purposes 26 January 2016 50,000,000 HKD 50,000,000 Increase the working capital Reserve Details of the movements during the financial year in the reserve of the Group set out in the consolidated statement of changes of equity. Distributable reserve As at 31 December 2016, there is no distributable reserve for the Group. (2015 : Nil) Loan from bank As at 31 December 2016, there is no loan from bank for the Group. (2015 : Nil) Interest capitalization During the financial year, no interest is capitalized by the Group. (2015 : Nil) Donations During the financial year, the Group made no donations for charitable purpose. (2015 : Nil) -!- F-334 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED DIRECTOR'S REPORT for the year ended 31 December 2016 Director i The director of the Company during the financial year was: WUTAO There being no provision in the Company's aiticles of association in connection with the retirement of directors by rotation, I all existing directors continue in office for the following financial year. The Company did not enter into any contract, other than the contracts of service with the director or any person engaged in the full-time employment of the Company, whereby any individual, firm or body corporate undertakes the management and administration of the whole, or any substantial part of any business of the Company. The directors of the subsidiary during the financial year were: WUTAO (Appointed on 5 January 2016) WUTANNA (Resigned on 5 January 2016) RICHFUL DEY ONG INT'L BUSINESS INC. (Resigned on 5 January 2016) )'R]L[g\lj (Appointed on 18 October 2016) _:E:fr;j!)' (Resigned on 18 October 2016) Permitted indemnity provision A11icle 31(1) of the Company's Articles provides that a director or former director of the Company may be indemnified out of the Company's assets against any liability incurred by the director to a person other than the Company or an associated company of the Company in connection with any negligence, default, breach of duty or breach of trust in relation to the Company or associated company ( as the case may be). This Article only applies if the indemnity does not cover the liability set out in Article 31(2) of the Company's Articles. This permitted indemnity provision is in force during the financial year and at the time of approval of this report. Business review The Company is a wholly owned subsidiary of another body corporate in the financial year, the Company is exempted from preparing a business review. Director's interests in contracts No contracts of significance to which the Group was a party and in which a director had a material interest, whether directly or indirectly, subsisted at any time during the period or at the end of the year. Management contracts No contracts for management the Group as a whole or party of its material interest are subsisted at any time during the period or at the end of the year. -2- F-335 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED j DIRECTOR'S REPORT for the year ended 31 December 2016 Arrangements to purchase shares or debentures I At no time during the was the Company a party to any arrangements to enable the directors of the Company to acquire l benefits by means of the acquisition of shares in, or debentures of the Company or any other body corporate. Related parties transactions During the year, the detail of the related parties transactions for the Group are set out in the note 20 to the consolidated financial statements. Auditors The consolidated financial statements have been audited by Richful CPA Limited, who retire and, being eligible, offer themselves for re-appointment. On behalf of the Board ········································~······ WUTAO Hong Kong 27 March 2017 -3- F-336 Tel. : +852 2568 3218 24/F., Fu Fai Commercial Centre, ~ichflll CPA Fax : +852 2568 5218 27 Hillier Street, Sheung Wan, E-mail : [email protected] Hong Kong li;;ll; : +852 2568 3218 W;i_c\!!llifU/ij27l!'E 11'1Jl: : +852 2568 5218 Jlllli[Jlli,l;q,,C,-2411 ii!:'liB : [email protected] INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED (Incorporated in Hong Kong with limited liability) Opinion We have audited the consolidated financial statements of TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ("the Company") and its subsidiaries ("the Group") set out on pages 6 to 26, which comprise the consolidated statement of financial position as at 31 December 2016, and the consolidated statement of profit or loss, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2016 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standard ("HKFRS") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and have been properly prepared in compliance with the Hong Kong Companies Ordinance. Basis for Opinion We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA's Code of Ethics for Professional Accountants ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Directors and Those Charged with Governance for the Consolidated Financial Statements The directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group's financial reporting process. -4- F-337 TeL : +852 2568 3218 24/F,, Fu Fai Commercial Centre, Riichful CPA Fax : +852 2568 52 l 8 27 Hillier Street, Sheung Wan. Li1nitad E-mail : cpa@richfuLhk Hong Kong ·\\~'.;1"\ij : +852 2568 32 l S .;±;<;1_ !:")~}~{,}'ijf§j27l;t~ N{~: +8522.5685218 'l'\t.1f i11L1E r[1,C,,24.f.'!! '!J}:!f.i ; cpa@richfuLhk INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED (Incorporated in Hong Kong with limited liability) Auditor's Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users 1 taken on the basis of these consolidated financial statements. RICHFUL CPA LIMITED f/M.l!W/rttffiljqFfi'~~i}iij Certified Puh/ic Accountanls (Practising) f/!~tiiJffff!i AUYEEHON ¥,lt*ilil!i'!lll/m Practising Certificate Number P06055 Hong Kong 27 March 2017 -5- F-338 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED 1 CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2016 2016 2015 Note USO USO Revenue 6 Cost Gross profit Other income 7 8,547,957.55 2,144.28 Administrative and operating expenses (37,815.45) (11,912.27) Other expenses (7,124.44) Finance costs 8 (9,577,709.38) Loss before tax 9 (1,074,691.72) (9,767.99) Income tax expense 11 Loss for the year/ period (1,074,691.72) {9,767.99) The notes on pages 10 to 26 fmm part of these financial statements. -6· F-339 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED j CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2016 I 2016 2015 j Note USD USD ASSETS l Current assets 'I l Cash and cash equivalent 12 10,020,432.70 5,832,722.65 l I Interest receivables 2,058,486.06 Deposit and prepayment 13 159,201.83 1 12,078,918.76 5,991,924.48 Non-current assets Goodwill 13,270.08 Investment in associate 14 45,574,004.59 Loan to related pruties 15 492,410,000.00 537,997,274.67 TOTAL ASSETS 550,076,193.43 5,991,924.48 LIABILITIES AND EQUITY Current liabilities Interest payables 1,703,125.00 Accruals 19,204.74 1,692.47 1,722,329.74 1,692.47 Non-current liabilities Guaranteed Bonds 16 493,438,323.40 TOTAL LIABILITIES 495,160,653.14 1,692.47 Equity Share capital 17 56,000,000.00 6,000,000.00 Accumulated losses (1,084,459.71) (9,767.99) 54,915,540.29 5,990,232.0 I TOTAL LIABILITIES AND EQUITY 550,076,193.43 5,991,924.48 Approved and authorised for issue by the sole director on 27 March 2017 and is signed on its: ~-It """"'""'""'"""'"'""""""~"""""' WUTAO Director The notes on pages 10 to 26 form patt of these financial statements. -7- F-340 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2016 Attributable to equity holders of the Company lI Accumulated ! l Share capital losses Total USD USD USO 'I Balance as at 11 September 2015 Issued of ordinary shares 6,000,000.00 6,000,000.00 i Loss for the financial period (9,767.99) (9,767.99) l 1 1 Balance as at 31 December 2015 6,000,000.00 (9,767.99) 5,990,232.0] Balance as at 31 December 2015 6,000,000.00 (9,767.99) 5,990,232.0 I Issued of ordinary shares 50,000,000.00 50,000,000.00 Loss for the financial year (1,074,691.72) (1,074,691.72) Balance as at 31 December 2016 56,000,000.00 (1,084,459.71) 54,915,540.29 The notes on pages IO to 26 form part of these financial statements. -8- F-341 l TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED i CONSOLIDATED STATEMENT OF CASH FLOWS j for the year ended 31 December 2016 ' 2016 2015 Note USD USD Operating activities Il ' Loss before tax (1,074,691.72) (9,767.99) l Adjustments for: Goodwill Bank interest income (72,023.57) (15.31) i Loan interest income (8,472,175.00) j Bank overdraft interest 0.14 Guaranteed bonds interest l' 9,577,709.24 Operating loss before changes in working capital (41,180.91) (9,783.30) Decrease / (Increase) in deposit and prepayment 159,201.83 (159,201.83) Decrease in Amount due to director (3,705.61) Increase in accruals 16,837.49 1,692.47 Cash generated from I (used in) operations 131,152.80 (167,292.66) Income tax paid Net cash generated from / used in operating activities 131,152.80 (167,292.66) Investing activities Investment in subsidiary (8,889.69) Investment in associate (45,574,004.59) New loan to related parties raised (492,410,000.00) Bank interest income received 72,023.57 15.31 Loan interest income received 6,413,688.94 Net cash (used in)/ generated frominvesting activities (531,507,181.77) 15.31 Financing activities Issues of guaranteed bonds 493,438,323.40 Proceeds from issuance of ordinary shares 50,000,000.00 6,000,000.00 Bank overdraft interest paid (0.14) Debenture interest paid (7,874,584.24) Net cash generated from financing activities 535,563,739.02 6,000,000.00 Net increase in cash and cash equivalents 4,187,710.05 5,832,722.65 Cash and cash equivalents at beginning of year 5,832,722.65 Cash and cash equivalents at end of year 12 10,020,432.70 5,832,722.65 The notes on pages IO to 26 fmm part of these financial statements. -9- F-342 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 1. General information TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED (the Company) is a company incorporated in Hong Kong with limited liability. The company's registered office is located at Rm. 19C, Lockhart Ctr., 301-307 Lockhmi Rd., Wan Chai, Hong Kong. Dnring the year, the principal activities of the Company was engaged in general trading. The principal activities and other particulars of the subsidiary are set out in note 19 to the consolidated financial statements. 2. Statement of compliance and basis of preparation of the financial statements These consolidated financial statements have been prepared in accordance with the Hong Kong Financial Reporting Standard (HKFRS) issued by the Hong Kong Institute of Certified Public Accountants and the requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention. The Hong Kong Institute of Certified Public Accountants has issued a number of new and revised HKFRs. These standards are in force for the first time in the accounting year of the Group or are available for advance use. Changes to the current and previous accounting policies arising from the initial application of these new and revised guidelines in the context of the Group are reflected in the financial statements. The Hong Kong Institute of Certified Public Accountants has issued a number of amendments to the HKFRs. These amendments take effect for the first time in the current accounting year of the Group. These changes have not seriously affected the operating results and financial position of the Group. The Group has not adopted any new guidelines or interpretations that have not yet entered into force in the current accounting year. Except the accounting policies set out below, the financial statements are based on the historical cost method. The preparation of financial statements complying with the HKFRs requires management to make judgments, estimations and assumptions. These judgments, estimations and assumptions affect the application of accounting policies and the amount of assets, liabilities, income and expenses reported. These estimations and related assumptions are based on past experience and on other factors that are considered reasonable in the circumstances. These estimations and related assumptions are used as a basis for judging the carrying amounts of assets and liabilities that can not be easily recognized from other sources. Actual results may differ from these estimations. These estimations and related assumptions will continue to be reviewed. If the amendment to the accounting estimations have an impact only on the revised year, the effect will only be recognized in the current year. If the revision of the accounting estimations have an impact on the revised year and the future year, the relevant impact will be recognized in the current and future years. The main sources of uncertainties involved in the judgment and estimates of the HKFRs that have a significant impact on the application of the financial statements are set out in Note 5. -10- F-343 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 2. Statement of compliance and basis of preparation of the financial statements (continued) 1 l 2.1. Basis of consolidation l These consolidated financial statements incorporate the financial statements of the Company and its subsidiary. A subsidiary is an entity (including special purpose entity) over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities, generally but not necessarily accompanying a shareholding of more than half of the voting power. The subsidiary is fully consolidated from the date on which control is transferred to the Group and is de-consolidated from the date that control ceases. All intragroup transactions, balances, income and expenses are eliminated. Accounting policies of the subsidiary has been charged where necessary to ensure consistency with the policies adopted by the Group. There is no difference in the repm1iug date of the financial statements of the Company and its subsidiary used in the preparation of the consolidated financial statements. In the Company's statement of financial position, the investment in a subsidiary is stated at cost less provision form impairment loss. The results of the subsidiary are accounted for by the Company on the basis of dividends received and receivable. 3. Basis of preparation and accounting policies 3.1. Foreign currency translation (a) Functional and presentation currency Items included in the consolidated financial statements of each of the Group are measured using the currency of the primary economic environment in which the Group operates (the functional currency). These financial statements are presented in US Dollars (USD), which is Group's financial and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit and loss within "finance costs". All other foreign exchange gains and losses are presented in 11 profit or loss within "other income" or "other expenses • -11- F-344 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 3. Basis of preparation and accounting policies (continued) 1 3.2. Cash and cash equivalents Cash and cash equivalents includes cash on hand, demaud deposits aud other short-term highly liquid investments with original maturities of three months or less. Bank overdraft is shown within borrowings in current liabilities on the consolidated statement of financial position. 3.3. Trade and other receivables Trade and other receivables are recognised initially at the trausaction price. They are subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. 3.4. Borrowings Borrowings are recognised initially at the trausaction price and are subsequently stated at amortised cost. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. 3.5. Deposit, issued debt securities Deposit and issued de bet securities are the sources of the funds of the Group. The Group classified the instruments into financial liabilities or equity instruments in according to the contract terms. After the initial recognition, the deposit aud issue of the debt securities are calculated based on the effective interest rate for amortization, except for the liabilities designated by the Company as profits or losses. -12- F-345 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 3. Basis of preparation and accounting policies (continued) l 3.6. Derivative Financial Instruments I 1 The main transactions of the Group are related to the exchange rate of the derivative financial instruments. The fair value of the derivative financial instruments held by the Group are as follow, as at the year end date, the contract/right of the derivative financial instruments provided a contrast basis for the fair value of assets or liabilities shown in the statement of financial position, this would not include the future cash flows or current fair value, therefore would not reflect the credit risk or market risk that the Group may face. As the foreign cmTency exchange rate fluctuates, the expected value of the derivative financial instruments may produce a positive (assets) or negative (liabilities) effect on the Group's financial statements, this effect would be different among different financial period. As at 31 December 2016 Fair value Foreign currency Contractual Assets Liabilities derivative financial value USD USD USD Foreign currency forward contract 3. 7. Investment in associate An associate is an entity, including an unincorporated entity such as a partnership, over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. The Group has elected to account for its investment in associate at cost less any accumulated impairment losses and there is no published price quotation available for the Group's associate. Dividend income from the investment in associate is recognised where the Group's right to receive payment has been established and is included in "other income". 3.8. Taxation Income tax expenses represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profits differs from profit as reported in the statement of income and retained earnings because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. -13- F-346 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 I 3. Basis of preparation and accounting policies (continued) 1 3.8. Taxation (continued) j • Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases using in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition ( other than in business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at the reporting date and reduced to the extent that is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year in which the liability is settled or the asset realised, based on tax rates ( and tax laws) that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which The Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. However, the measurement of deferred tax liabilities associated with an investment property measured at fair value does not exceed the amount of tax that would be payable on its sale to an unrelated market participant at fair value at the reporting date. Deferred tax is recognised in profit or loss, except when it relates to items that are recognised in consolidated income statement or directly in equity, in which case the deferred tax is also recognised in consolidated income statement or directly in equity respectively. 3.9. Contingent liabilities Provisions are recognised for liabilities of uncertain timing or amount when the Group has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, tl1e obligation is disclosed as a contingent liability, unless the probability of outflow is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow is remote. -14- F-347 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 3. Basis of preparation and accounting policies ( continued) I 3.10. Borrowings i Borrowings are recognised initially at the transaction price and are subsequently stated at amortised cost. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. i Interest expense is recognised on the basis of the effective interest method and is included in finance cost. 3.11. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and is shown net of discounts, rebates, returns, sales-related taxes and after eliminating sales within the Group. Revenue is recognised in profit or loss provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, as follows: (a) Dividend income Dividend income from the associate is recognised when the Group's right to receive payment has been established and is included in "other income". (b) Bank interest income Bank interest income is recognized on a time proportion basis taking into account the principal outstanding and the interest applicable and is included in "other income". 3.12. Related parties For the purpose of these consolidated financial statements, related party included a person and entity as defined below: (a) A person or a close member of that person's family is related to the Group if that person: (i) has control or joint control over the Group; (ii) has significant influence over the Group; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the Group. -15- F-348 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 3. Basis of preparation and accounting policies (continued) 3.12. Related parties (continued) (b) An entity is related to the Group if any of the following conditions applies: (i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). ( iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. If the Group is itself such a plan, the sponsoring employers are also related to the Group. (vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity ( or of a parent of the entity). Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity. 4. Financial risk management 4.1. Financial risk factors The business of the Group is subject to a variety of financial risks: credit risk, liquidity risk and interest rate risk. The Group's overall risk management procedures focus on the unpredictable nature of the financial performance of the subsidiaries and seek to minimize the potential adverse impact on the financial performance of the Company. Risk management is responsible for the management, in close cooperation with the company's business units to identify, assess and reduce financial risk. The Group manages and monitors such risks to ensure that appropriate measures are taken in a timely and effective manner. -16- F-349 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED j ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS I for the year ended 31 December 2016 i 4. Financial risk management (continued) 4.1. Financial risk factors ( continued) l (a) Credit risk Credit risk arising from cash and cash equivalents, deposits with banks and financial institutions, and other receivables, including receivables that have not yet been received and transactions that have not yet been fulfilled. As at 31 December 2016, all bank balances and bank deposits were deposited in reputable financial institutions. Management is not expected to have any significant losses due to the failure of the counte1party to pay the arrears. (b) Liquidity risk Prudential liquidity risk management refers to the amount of available debt financing that is sufficient to maintain ample cash and adequately and with a different repayment period to mitigate the risk of any refinancing in the year to provide working capital and make new investments. The Company has stable and sufficient financial resources to finance its business and future expansion. As at 31 December 2016, the Group's principal financial liabilities were the debentures (2015: Nil). ( c) Interest rate risk The Group has no significant interest-bearing assets, thus, the income and operating cash flows of the Group would have limited influence by changes in market interest rates, and the interest rate risk of the Group is mainly from RMB time deposits, related party borrowings and debentures issued. The Group bears the cash flow interest rate risk and fair value interest rate risk for the time deposit with fixed interest rate As at 31 December 2016, if all other variables being constant, the sensitivity of the losses before tax (through RMB time deposits, related party borrowings and debentures) and the equity of the Group subject to the interest rate is shown in the table below. Basis point Loss before tax Equity Increase/ Increase/ Increase/ (decrease) (decrease) ( decrease) As at 31 December 2016 USD 50.00 (5,148.76) 5,148.76 USD (50.00) 5,148.76 (5,148.76) -17- F-350 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED 1 ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 5. Key sources of estimation uncertainty (a) Income taxes There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group recognises tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the year in which such determination is made. (b) Impairment of non-financial assets The Group conducts impairment reviews of non-financial assets whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable or tests for impairment annually in accordance with the relevant accounting standards. Determining whether an asset is impaired requires an estimation of the value in use, which requires the Group to estimate the future cash flows and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. In 2016, after reviewing the business environment as well as the Group's objectives and past performance of the investments, management has concluded that there was no material impairment loss for the above assets at 31 December 2016. 6. Revenue There was no any revenue of the Group during the year and last period. 7, Other income 2016 2015 USD USD Bank interest income 72,023.57 15.31 Gain on exchange differences 2,128.97 Loan interest income 8,472,175.00 i Others 3,758.98 8,547,957.55 2,144.28 -18- F-351 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 8. Finance costs j 2016 2015 USD USD 1 Bank overdraft interest 0.14 j Guaranteed bonds interest 9,577,709.24 9,577,709.38 1 9. Loss before tax The following items have been recognised as expenses in determining loss before tax: 2016 2015 USD USD Auditor's remuneration 19,204.74 6,031.99 Legal and professional fee 8,205.53 Valuation fee 1,883.41 2,008.29 Translation fee 1,092.51 10. Director's remuneration Director's remuneration disclosed pursuant to section 383(1) of the Companies Ordinance is as follows: 2016 2015 USD USD Fees Retirement benefits Other emoluments -19- F-352 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 11. Income tax expense (a) Hong Kong Profits Tax had been provided at the rate of 16.5% on the Group's estimated assessable profits i arising from Hong Kong during the year. 2016 2015 l USD USD Current tax - Hong Kong Profits Tax j - Charge for the year - Under I (Over) provision in prior years Defened tax - Origination and reversal of temporary differences - Under I (Over) provision in prior years Income tax expense (b) Income tax for the year can be reconciled to the profit before taxation per the consolidated income statement as follows: 2016 2015 USD USD Loss before tax (1,074,691.72) (9,767.99) Tax calculated at the domestic income tax rate of 16.5% (177,324.13) (1,611.72) Tax effect on non-taxable revenue (11,810.47) (353.74) Tax effect on non-deductible expenses 3,600.79 Tax effect ofutilisation of tax losses not previously recognised Tax effect on tax loss not recognised 185,533.81 1,965.46 Under/ (Over) provision in prior years Income tax expense -20- F-353 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES j TO THE CONSOLIDATED FINANCIAL STATEMENTS I for the year ended 31 December 2016 l 12. Cash and cash equivalents i l ! Cash and cash equivalents include the following components: 2016 2015 USD USD Cash on hand, bank balances, and time deposits with original maturity of 10,020,432.70 5,832,722.65 less than three months I Time deposits with original maturity of more than three months I 0,020,432. 70 5,832,722.65 13. Deposit and prepayment An analysis of the Group's deposit and prepayment are as follows: 2016 2015 USD USD Deposit Prepayment 159,201.83 159,201.83 At the end of each reporting period, the Group's deposit and prepayment were individually determined to be impaired. The individually impaired receivables are recognised based on the credit history of customers, such as financial difficulties or default in payments, and current market conditions. The Group does not hold any collateral over these balances. 14. Investment in associate 2016 2015 USD USD Unlisted shares, at cost 45,574,004.59 Less: Impairment loss 45,574,004.59 -2 l- F-354 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 14. Investment in associate (continued) The following list contains the particulars of the associate which is an unlisted corporate entity and principally affected the assets of the Company: %of Place of incorporation ownership and principal place and voting Name of associate of operation power Nature of bnsiness 71:)f:Wl.lli:Y:.ffiji~i\ii!ll~til. China 30.00% Financial lease business; Operating ji1[!cl:0BJ lease business; Purchase of the leasing properties from worldwide; The residue treatment and maintenance of the leasing properties. 15. Loan to related parties 2016 2015 Note USD USD Loan to related parties (i) 196,970,000.00 Loan to related parties (ii) 295,440,000.00 492,410,000.00 Notes: (i) 5':5f!f,li,il[Y:Jmj;1Ji\iiifl~fil.J'i1[!cl:0BJ is the assoicate company of the Group. The balances are unsecured, with interest rate @3.17% and fully repayable before 13 May 2019. (ii) 5':ifmili:x:.Jmj;~ii\ii'R~til.J'i1ai!cl:0BJ is the assoicate company of the Group. The balances are unsecured, with interest rate@ 3.32% and fully repayable before 13 May 2019. 16. Gnaranteed Bonds (i) As at 13 May 2016, the Group issued guarantee bonds with a total value of USD 200 million for three-year bonds and expired in 2019. The bonds are listed on the Hong Kong Stock Exchange. The bonds are issued to professional investors. After deducting transaction costs, the bond proceeds were USD 198,364,287.01. The bonds are guaranteed unconditionally and irrevocably by the Company, and are financially supported by Tianjin Rail Transit Group Co., Ltd., a holding company of the Company. The fixed annual interest rate of the bonds is 2.5%. The bond holder has the right to sell the held bonds back to the issuer in advance. -22- F-355 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 16. Guaranteed Bonds (continued) (ii) As at 13 May 2016, the Group issued guarantee bonds with a total value of USD 300 million for three-year bonds and expired in 2019. The bonds are listed on the Hong Kong Stock Exchange. The bonds are issued to professional investors. After deducting transaction costs, the bond proceeds were USD 295,074,036.39. The bonds are guaranteed unconditionally and irrevocably by the Company, and are financially supported by Tianjin Rail Transit Group Co., Ltd., a holding company of the Company. The fixed annual interest rate of the bonds is 2.875%. The bond holder has the right to sell the held bonds back to the issuer in advance. 17. Share capital 2016 2015 USO USO Issued & fully paid - 6,000,000 ordinary shares 6,000,000.00 6,000,000.00 Issued of ordinary shares during the year - 50,000,000 ordinary shares 50,000,000.00 56,000,000.00 6,000,000.00 18. Business combination On 5 January 2015, the Group acquired the entire equity interests in BBC Limited for business expansion. BBC Limited is incorporated in China and engages in general trading. The acquisition had the following effect on the Group's assets and liabilities on the date of acquisition: USO Amount due to director (3,705.61) Accruals (674.78) Fair value of identifiable net liabilities (4,380.39) Total consideration, satisfied in cash 8,889.69 Goodwill 13,270.08 Total consideration, satisfied in cash 8,889.69 Less: cash at bank acquired Net outflow of cash in respect of the acquisition of subsidiary 8,889.69 -23- F-356 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 1 19. Statement of financial position of the Company i (a) Company-level statement of financial position 2016 2015 j USD USD Cnrrent assets Cash and cash equivalent 5,534,684.81 5,832,722.65 I Amount due from subsidiaries 400,000.00 98,919.38 Deposit and prepayment 10,282.45 Interest receivables 51,911.06 5,986,595.87 5,941,924.48 Non-current assets Investment in subsidiaiy 50,050,178.47 50,000.00 Total Assets 56,036,774.34 5,991,924.48 Current liabilities Accruals 16,755.82 1,171.23 Total liabilities 16,755.82 1,171.23 Equity Share capital 56,000,000.00 6,000,000.00 Retained eai-nings / (Accumulated losses) 20,018.52 (9,246.75) Total Equity 56,020,018.52 5,990,753.25 TOTAL LIABILITIES AND EQUITY 56,036,774.34 5,991,924.48 Approved and authorised for issue by the sole director on 27 March 2017 and is signed on its: ... 111 WUTAO Director -24- F-357 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 l 19. Statement of financial position of the Company (continned) ~ (b) Particulars of principal subsidiaries %of Place of incorporation ownership I and principal place and voting Name of subsidiaries of operation power Nature of business i Wide Luck Equipment Hong Kong 100% Investment Holding Co., Limited Rail Transit International British Virgin 100% Investment and Bonds issue Investment Company Islands 20. Material related party transactions Except as disclosed in the consolidated financial statements, the Group had entered into transactions with related paities which, in the opinion of the directors, were carried out on normal commercial terms and in the ordinary course of the Group's business, during the year and last period: Loan interest income Amount of Amount of transactions outstanding balances 2016 2015 2016 2015 USD USD USD USD :*":5tm~::x:mt*llwit'll"f.ll. ~1'1,~05] 8,472,175.00 2,058,486.06 Note: During the year, the Group earns an interest income from :"*: ;,It 'lift ill X lei~ II !Iii Jl "f..ll. ~ 1'1,~ 0 5] which is the assoicate company of the Group. The detail of the loans are set out in note 16 to the consolidated financial statements. 21. Immediate controlling company As at 31 December 2016, the directors regard Tianjin Rail Transit Group Co., Ltd., a company incorporated in PRC, as being the immediate controlling company. This entity does not produce financial statement available for public use. 22. Ultimate controlling company As at 31 December 2016, the directors regard :;!;:;fthlGrn~l//i!il9-1Jfil@:il9JJ:!-Jl~ll1'l",~0 5], a company incorporated in PRC, as being the ultimate controlling company. This entity does not produce financial statement available for public use. -25- F-358 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED j ACCOUNTING POLICIES AND EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2016 ! 23. Financial guarantee contract The Company provides repayment guarantees for its subsidiru-y, Rail Transit International Investment Company Limited, for the three-year and five-year bonds issued on 13 May 2016 respectively. Once the Subsidiary has failed to pay the interest on the Bonds on the Maturity Date, the Company is obliged to pay to the Bondholder the interest on the unpaid bonds payable by the Subsidiary. With reference to the "Keepwill and Liquidity Support Deed', if the Company could not afford the interest generated by the bonds of the subsidiary, the immediate controlling company should be informed immediately in order for the payment of the interest on the Bonds. 24. Comparative figures I l As a result of the comparative figures of first set of financial statements covers a four-month period from 11 Septmber 2015 to 31 December 2015, and the current financial period covers a twelve-month period from! January 2016 to 31 December 2016. Therefore, the comparative figures are not comparable with those of current year. 25. Approval of consolidated financial statements These consolidated financial statements were authorised for issue by the Company's sole director on 27 March 2017. - End of Report - -26- F-359 TIANJIN RAIL TRANSIT GROUP (HONG KONG) CO., LIMITED For Management 1 DETAILED CONSOLIDATED INCOME STATEMENT Information I 1 for the year ended 31 December 2016 Pwpose Only ' 2016 2015 USD USD i Revenue ] I Sale of goods l' 1 Cost of sales Purchase of goods Gross profit Other income Bank interest income 72,023.57 15.31 Gain on exchange differences 2,128.97 Loan interest income 8,472,175.00 Others 3,758.98 8,547,957.55 2,144.28 Administrative and operating expenses Accounting fees (2,171.16) (803.32) Auditor's remuneration (19,204.74) (6,031.99) Bank charges (316.44) Business registration fees (64.44) Company secretarial fees (5,119.73) (530.19) Valuation fee (1,883.41) (2,008.29) Translation fee (1,092.51) Agency fee (1,445.97) Annual fee (850.00) Legal and professional fee (8,205.53) (37,815.45) (11,912.27) Other expenses Loss on exchange differences (7,124.44) I Finance costs Bank overdraft interest (0.14) Guaranteed bonds interest (9,577,709.24) (9,577,709.38) Loss for the year / period (1,074,691.72) (9,767.99) F-360 F-361 F-362 F-363 F-364 F-365 F-366 F-367 F-368 F-369 F-370 F-371 F-372 F-373 F-374 F-375 ISSUER Rail Transit International Development Company Limited Sertus Incorporations (BVI) Limited Sertus Chambers, P.O. Box 905 Quastisky Building, Road Town, Tortola British Virgin Islands GUARANTOR Tianjin Rail Transit Group (Hong Kong) Co., Limited Rm. 19C, Lockhart Ctr. 301-307 Lockhart Rd., Wan Chai Hong Kong COMPANY Tianjin Rail Transit Group Co., Ltd. No. 36, Caizhi Road Xiqing District, Tianjin PRC TRUSTEE PRINCIPAL PAYING AGENT, REGISTRAR AND TRANSFER AGENT The Hongkong and Shanghai Banking The Hongkong and Shanghai Banking Corporation Limited Corporation Limited Level 30, HSBC Main Building Level 30, HSBC Main Building 1 Queen’s Road Central 1 Queen’s Road Central Hong Kong Hong Kong LEGAL ADVISERS To the Issuer as to To the Issuer as to To the Issuer as to English law PRC law British Virgin Islands law Latham & Watkins Jingtian & Gongcheng Ogier 18th Floor 34th Floor 11th Floor, Central Tower One Exchange Square Tower 3 China Central Place 28 Queen’s Road Central 8 Connaught Place, Central 77 Jiangou Road, Beijing Central Hong Kong PRC Hong Kong To the Joint Lead Managers and To the Joint Lead Managers as to the Trustee as to English law PRC law Linklaters JunHe LLP 10th Floor 20th Floor, China Resources Building Alexandra House 8 Jiangguomenbei Avenue, Beijing Chater Road PRC Hong Kong INDEPENDENT AUDITORS OF THE COMPANY INDEPENDENT AUDITOR OF THE GUARANTOR For the years ended For the nine months ended For the years ended 31 December 2014, 30 September 2017 31 December 2015 2015 and 2016 and 2016 and the nine months ended 30 September 2017 CAC CPA Limited Peking Certified Richful CPA Limited Liability Partnership Public Accountants 24/F, Fu Fai Commercial Centre 52/F Centre Plaza 11 Floor, NO.110 27 Hillier Street, Sheung Wan No.188 Jiefang Road ZhongTang Building Hong Kong Heping District, Tianjin Xizhimenwai Street PRC Beijing, P.R.C Printed by ProTop Financial Press Limited 170730-01