INNOVATION AND METAMORPHOSIS FOR PROMISING FUTURE 鼎新・ 蛻變 未來可期 ANNUAL REPORT 2020 | stock code : 165 COVER STORY INNOVATION AND METAMORPHOSIS FOR PROMISING FUTURE The piano, known as the “King of Musical Instruments”, is built with 88 keys and 240 steel strings to orchestrate its sophisticated and complicated world. Changes in the internal and external environment will affect the timbre of a piano. A professional piano tuner, through precise adjustments to the structure, ensures the piano has a wide diapason and distinct and harmonious tones, bringing the essence of the “King” to the extreme. With a flexible and keen sense of touch as well as professional and powerful capabilities, CEL has fine-tuned its structure and optimised resource allocation to achieve breakthroughs and stay innovative, poised to orchestrate a more vigorous, lofty and promising new chapter. TABLE OF CONTENTS 28 Chairman’s Statement 8 Company Overview 32 Management Discussion 122 10 and Analysis Risk Management Report 2020 Business Development Highlights 52 130 Environmental, Social and Directors’ Report 16 Governance Report 2020 Review 144 98 Directors and Senior Corporate Governance Management Report Financial Section 149 Independent Auditor’s Report 155 Consolidated Statement of Profit or Loss 160 Consolidated Statement of Cash Flows 156 Consolidated Statement of Comprehensive Income 161 Notes to the Financial Statements 157 Consolidated Statement of Financial Position 254 Financial Summary 159 Consolidated Statement of Changes in Equity 255 Particulars of Major Properties 256 Corporate Information KEEN CAPITALISING ON THE SITUATION TO FORGE COMPETITIVE EDGES A piano tuner has a sharper sense of hearing and touch than the average, and thus can flexibly tune the tone optimal for the piano and the player through the cooperation of ears and hands. Built with a keen sense of the market, CEL is able to capitalise on the situation and opportunities to give full play to its advantages in cross-border asset management and investment while flexibly providing diversified products and services to investors at home and abroad. DEDICATED COMMITTED TO THE STRATEGY AND FOCUSING ON GOALS Tuning requires calm and concentration. The tuner uses the tuning fork to find the pitch before the rhythm of the entire piano is fine-tuned. CEL is committed to the “One Four Three” development strategy, unwaveringly strives to become a global leader, focuses on cross-border asset management and constantly fine-tunes its structure to create greater value. DEDICATED PATIENCE PATIENCE MANAGEMENT IMPROVEMENT & CONTINUOUS OPTIMISATION The piano tuner employs the tuning hammer to repeatedly fine-tune the pins, with his other hand playing the keys to test the piano for fine-tuning until the perfect tones are found. CEL focuses on refined management and continuously improves the Company’s governance capabilities by fine-tuning its structure, optimising resource allocation, innovating its development mechanisms and strengthening its overall coordination and management and control. 008 CHINA EVERBRIGHT LIMITED COMPANY OVERVIEW China Everbright Limited (“CEL” or the “Company”, together with its subsidiaries, collectively the “Group”) is a leading cross-border asset management and investment company in China, and a company listed in Hong Kong with alternative asset management as the core business. China Everbright Group Ltd. (“Everbright Group”) is the largest shareholder of the Company, holding 49.74% of the shares of CEL. CEL is committed to become the “world’s leading cross-border asset management company”, and has more than two decades of experience in cross-border asset management and private equity (PE) investment. Meanwhile, CEL is also regarded as one of the top PE firms in China. CEL’s key operating business mainly comprises fund management and principal investment businesses. At the same time, CEL uses seed capital to nurture the fund management business. In addition, the Group’s principal investment arm directly invests in multiple industry platforms with promising growth potential, in order to create a unique CEL business model, to form robust synergy between industrial and asset management capabilities, and to further achieve sustainable growth. For Fund Management Business, as of the end of 2020, the total assets under management (AUM)1 of CEL was approximately HK$182.8 billion, with 78 funds under management, including Primary Market Funds, Secondary Market Investment and Funds-of-Funds. CEL’s fund management business has nurtured many valuable enterprises with high growth potential alongside with its investors. Based on the needs of Chinese economy, CEL also strives to forge the synergy between Chinese and overseas products/technologies, and to provide comprehensive financial services to Chinese and overseas investors. HKD 182.8 billion AUM 78 Investment Funds In respect of Principal Investments Business, CEL developed EBA Investments’ Real Estate Fund (“EBA incubated China Aircraft Leasing Group Holdings Limited Investments”)/Everbright Jiabao Co., Ltd. (“Everbright (”CALC”), the largest independent aircraft leasing Jiabao”) platform2, a leading real estate private equity operator in China; consolidated mid-end to high-end fund in China. Meanwhile, CEL also invests in structured senior healthcare companies to form a quality senior financing products to achieve a balanced return and healthcare brand, China Everbright Senior Healthcare liquidity in its principal investments. In addition, CEL Company Limited (“Everbright Senior Healthcare”); holds part of the equity interests of China Everbright incubated Chongqing Terminus Technology Co., Ltd. Bank Company Limited (“China Everbright Bank”) and (“Terminus”), a unicorn company in the artificial Everbright Securities Company Limited (“Everbright intelligence and Internet of Things (“AIoT”) industry; and Securities”) as cornerstone investments. 1 Total assets under management refers to the committed capital of fund investors (including CEL as an investor). 2 Among these, EBA Investments’ real estate platform is under the Fund Management Business. ANNUAL REPORT 2020 009 FUND MANAGEMENT BUSINESS PRINCIPAL INVESTMENTS BUSINESS PRIMARY SECONDARY FUNDS-OF- STRATEGIC INDUSTRY FINANCIAL CORNERSTONE MARKET FUNDS MARKET FUNDS FUNDS PLATFORMS INVESTMENTS INVESTMENTS Fund products including primary market funds Strategic Industry Platforms: focusing on aircraft (including real estate private funds under EBA full life-cycle services, artificial intelligence and Investments), secondary market funds and funds- Internet of Things (AIoT) and senior healthcare of-funds, among others management Both Domestic and overseas investments, with Financial Investments: financial investments in USD and RMB-denominated products equity, debts and structured products AUM amounting to approximately HK$182.8 Cornerstone Investments: part of the equity billion, of which seed capital contributed by interests in China Everbright Bank and Everbright CEL accounts for 23%, with an amount of Securities approximately HK$41.7 billion The total asset value of the Principal Investments Business amounting to HK$40.4 billion Humongous resources and business network Market-oriented and international The parent company Everbright Group is a large-scale As a listed company based in Hong Kong for years, CEL enterprise group directly under the State Council and has a market-oriented and international investment team possesses huge business resources in China and governance experience Diversified multi-industry investment Cross-border dual currency platform Through the funds under its management and its own Possessing rich cross-border business licenses and funds, CEL has invested in more than 300 companies experience advantages, with both USD and RMB worldwide, involving more than ten industries products, fully capturing good investment opportunities domestically and abroad Financial strength Co-investment mechanism Possessing strong capital strength and market fund- CEL has funds and teams with expertise in operation raising ability to promote the rapid development of asset and management in each relevant industry, and has management business established a mature co-investment mechanism to ensure that the interests of the teams and the funds and the Company are highly aligned 010 CHINA EVERBRIGHT LIMITED 2020 BUSINESS DEVELOPMENT HIGHLIGHTS STRATEGIC TRANSFORMATION In 2019, CEL launched a strategic reform towards the goal of being the “world-leading cross-border asset management company”, and launched the “1-4-3” strategy. In the face of the COVID outbreak and the challenging macro- environment in 2020, CEL responded actively to the changing situations, and executed the “1-4-3” strategy during the year with confidence. The plan takes alternative asset management business as a core business, focusing on four key industries: real estate asset management, aircraft full life-cycle services, AIoT and senior healthcare, with an aim to expand as the leading company and synergise the development of the principal business, while improving the attributes of being market-oriented, professional and international to support the development of the principal business. The “1-4-3” strategy effectively supported CEL to achieve hard-won results in year of 2020. “1-4-3” STRATEGIC PLAN ESTABLISHING COMPETITIVE EDGE OF THE ALTERNATIVE ASSET MANAGEMENT BUSINESS ON KEY INDUSTRIES, AND BECOMING THE WORLD-LEADING CROSS-BORDER ASSET MANAGEMENT COMPANY FOUR KEY INDUSTRIES THREE MAJOR ONE CORE BUSINESS