Contents 2 Corporate Information 4 Financial Highlights About 5 Chairman’s Statement 8 Management Discussion and Zall Group Ltd. Analysis The Company is an investment holding company 21 Biographical Details of Directors and the Group is a leading developer and operator and Senior Management of large-scale, consumer product-focused wholesale 25 Report of the Directors shopping malls, as well as commercial space provider, in the PRC. The Group has been adjusting 38 Environment, Social and its principal business activities and concentrating Governance Report its resources on the core business segment, i.e. the 52 Corporate Governance Report development and operating of largescale consumer product-focused wholesale shopping malls and the 62 Independent Auditor’s Report related value-added business including e-commerce, 67 Consolidated Statement of Profit financial services, warehousing and logistics services. or Loss The Group will achieve its strategic goal of building 68 Consolidated Statement of Profit a leading intelligent trading ecosphere globally or Loss and Other Comprehensive by developing its online-offline integrated cloud Income market and actively promoting cross-border trading business, consumer-end business, financial services 69 Consolidated Statement of and logistics services, with the foundation of our Financial Position physical markets, commercial properties and logistics 71 Consolidated Statement of services. Changes in Equity 73 Consolidated Cash Flow Statement 74 Notes to the Financial Statements 163 Major Properties Information 166 Financial Summary Corporate Information DIRECTORS Executive Directors Mr. Yan Zhi (Co-chairman and Chief Executive Officer) Dr. Gang Yu (Co-chairman) Mr. Cui Jinfeng Mr. Wang Chuang (Resigned on 10 April 2017) Mr. Peng Chi (Re-designated on 11 April 2016) Independent Non-Executive Directors Mr. Cheung Ka Fai Mr. Wu Ying (Appointed on 29 February 2016) Mr. Wei Zhe, David (Appointed on 11 April 2016) Mr. Zhu Zhengfu (Appointed on 10 March 2017) Registered Office Cricket Square Hutchins Drive P. O. Box 2681 Grand Cayman KY1-1111 Cayman Islands Head Office in the PRC Zall Plaza No. 1 Enterprise Community 1 Chutian Avenue Panlongcheng Economics and Technology Development Zone Wuhan, Hubei Province China 430000 Principal Place of Business in Hong Kong Suite 2101, 21/F Two Exchange Square Central Hong Kong Audit Committee Mr. Cheung Ka Fai (Chairman) Mr. Wu Ying (Appointed on 29 February 2016) Mr. Wei Zhe, David (Appointed on 11 April 2016) 2 Zall Group Ltd. Annual Report 2016 Corporate Information (Continued) Nomination Committee Mr. Wu Ying (Chairman) (Appointed on 29 February 2016) Mr. Yan Zhi (Appointed on 31 March 2017) Mr. Cui Jinfeng (Resigned on 31 March 2017) Mr. Wei Zhe, David (Appointed on 11 April 2016) Remuneration Committee Mr. Wei Zhe, David (Chairman) (Appointed on 11 April 2016) Mr. Wu Ying (Appointed on 29 February 2016) Mr. Peng Chi Risk Management Committee Mr. Zhu Zhengfu (Chairman) (Appointed on 31 March 2017) (Established on 31 March 2017) Mr. Cui Jinfeng (Appointed on 31 March 2017) Mr. Cheung Ka Fai (Appointed on 31 March 2017) Company Secretary Mr. Lung Shei Kei (Appointed on 3 January 2017) Mr. Chan Yik Pun (Appointed on 8 September 2016 and resigned on 3 January 2017) Mr. Ma Wing Ming (Resigned on 8 September 2016) Company Website http://www.zallcn.com/ Authorized Representatives Mr. Cui Jinfeng Mr. Lung Shei Kei (Appointed on 3 January 2017) Mr. Chan Yik Pun (Appointed on 8 September 2016 and resigned on 3 January 2017) Mr. Ma Wing Ming (Resigned on 8 September 2016) Hong Kong Share Registrar Tricor Investor Services Limited Level 22 Hopewell Centre 183 Queen’s Road East Hong Kong Principal Share Registrar and Transfer Office Royal Bank of Canada Trust Company (Cayman) Limited 4th Floor, Royal Bank House 24 Shedden Road George Town Grand Cayman KY1-1110 Cayman Islands Legal Advisor Sidley Austin P. C. Woo & Co. Auditors KPMG Certified Public Accountants Principal Bankers Bank of Communications China Construction Bank China Mingsheng Banking Corp., Ltd. Hankou Bank Industrial Bank Industrial and Commercial Bank of China Annual Report 2016 Zall Group Ltd. 3 Financial Highlights 2016 2015 RMB’000 RMB’000 Revenue 1,213,375 1,029,482 Gross profit 361,307 271,210 Gross profit margin 29.8% 26.3% Profit for the year 2,056,571 2,045,988 Earnings per share — Basic (RMB) 0.191 0.193 — Diluted (RMB) 0.191 0.188 Total non-current assets 15,858,971 13,244,027 Total current assets 13,888,678 10,525,592 Total assets 29,747,649 23,769,619 Total non-current liabilities 9,377,568 7,906,997 Total current liabilities 8,230,849 5,552,091 Total liabilities 17,608,417 13,459,088 Net assets 12,139,232 10,310,531 4 Zall Group Ltd. Annual Report 2016 Chairman’s Statement The penetration and development of internet into different social and economical areas has brought to us more specialised and refined social division of labour, as well as the prevalence and application of information technology such as artificial intelligence and big data. The development of “intelligent trading” begins to surpass “e-commerce” which is basically mature, crossing the retail consumer-end, and extends deeply into the supply side and the business supply chain with an inexorable momentum. The “intelligent trading” era will present three main characteristics: the upcoming mass adoption of technologies in trading, such as artificial intelligence, big data and internet of things; the arrival of the industrial internet era; and the emergence of the ecological chain era with clusters of coordinated development. In this new wave, physical enterprises equipped with complete supply chains and service chains will have an irreplaceable first- mover advantage. Based on such judgements, last year in April, we clearly put forward the strategic transformation objective of constructing an ecosphere for the Group’s intelligent trading and planned our development path: develop a cloud market trading and service system combining online and offline businesses on the foundation of physical markets, logistics and properties and take the opportunity of Zall Cloud Market, and cross-border trading, customer-end business, integrated logistics and financial services are actively promoted to form the world’s largest intelligent trading platform and database. Over the past year, we have unswervingly advanced our goal and basically brought the ecosphere of the Group’s intelligent trading into being. I) A solid and stable infrastructure on the foundation of online and offline integrated wholesale trading platform of consumer goods has been constructed. North Hankou International Trade Centre was approved as the only national pilot market for procurement trade in central and western China, with further improvement in its number of merchants and trading volume; Tianjin E-commerce Mall has eased the non-core functions of the capital by expediting its absorption of merchants from market relocations including the Beijing Zoo Clothing Wholesale Market. Leveraged on the foundation and advantage of the ever-growing physical wholesale market of properties, customers, logistics and data, and through platforms such as Zallgo（卓爾購）, Zallsoon（卓集送） and Zallfuhui（卓服滙） under the Wuhan Zall Cloud Market Group Co., Ltd., we quickly achieved the online transformation of wholesale trading for merchants by providing logistics, warehousing and other comprehensive value-added services. Over the past year, Zallgo has become China’s largest integrated online and offline wholesale trading platform, standing among the top-ranked e-commerce providers, with coverage over 20 cities across the nation, more than 110,000 merchants and an annual transaction amount of approximately RMB50 billion. Annual Report 2016 Zall Group Ltd. 5 Chairman’s Statement (Continued) II) An open and efficient trading platform has been built. Since 2016, through intensive cross-regional and cross-industry mergers and acquisitions, the Group has become the largest shareholder of LightInTheBox Holding Co., Ltd. (“LightInTheBox”), a cross-border e-commerce platform, and acquired Shenzhen Sinoagri E-commerce Co., Ltd. (“Shenzhen Sinoagri”), the largest e-commerce company of agricultural products in China. The Group has built the core of a vibrant intelligent commercial trading ecosystem with abundant trading transactions, and entered into the rank of the hundred-billion yuan enterprises in industrial internet. III) A maturing service chain has been formed. In June 2016, the Group acquired three companies under Harvest Capital and established Zall Financial Services Group Limited (“Zall Financial Services Group”). A supply chain financial services portfolio comprising Jia16（嘉石榴）, Zalljinfu（卓金服）and Zhong Bong Financial Leasing（眾邦融資租賃）was formed to provide comprehensive financial services such as leasing, insurance, credit investigation and payment for merchants in the ecosphere. The Group set up 5 supply chain management companies including Zhuoyitong（卓 易 通 ）, North Hankou Import Export Services Co., Ltd. and Zall Heng Supply Chain Management (Wuhan) Co., Ltd. (“Wuhan Zall Heng”)（武漢卓恒） successively to provide merchants with wholesale distribution, import and export and other supply chain management services. With the global logistics business launched by Zallsoon and LanTingZhiTong（蘭亭智 通）, the trading platform is provided with strong support and services through a complete, efficient and convenient service chain. We will continue to extend our trading platform vertically to become the national