[Financial Highlights](index=1&type=section&id=Financial%20Highlights) The company's financial performance shows significant profit growth and asset structure changes, with a notable increase in shareholder equity | Metric | For the Six Months Ended June 30, 2023 (RMB million) | For the Six Months Ended June 30, 2022 (RMB million) | | :--- | :--- | :--- | | Revenue | 298.2 | 133.2 | | Profit for the Period | 153.8 | 46.0 | | **Statement of Financial Position (Period-end):** | | | | Total Assets | 3,563.8 | 4,174.6 (December 31, 2022) | | Total Equity | 2,747.3 | 2,598.0 (December 31, 2022) | | **Financial Ratios:** | | | | Return on Equity | 5.8% | - | | Return on Assets | 4.0% | - | - Total assets decreased by approximately **14.6%** from December 31, 2022, while total equity increased by approximately **5.7%**[40](index=40&type=chunk) [Condensed Consolidated Financial Statements](index=2&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the condensed consolidated financial statements, including income, balance, equity, and cash flow statements, reflecting the company's financial position and performance [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=2&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) The company achieved significant growth in revenue and profit for the period, primarily due to the consolidation of Yantai Nanshan University, which also led to increased service costs, offset by other income and reversal of impairment losses on financial assets | Metric | For the Six Months Ended June 30, 2023 (RMB thousand) | For the Six Months Ended June 30, 2022 (RMB thousand) | | :--- | :--- | :--- | | Revenue | 298,208 | 133,178 | | Service Costs | (126,991) | — | | Gross Profit | 171,217 | 133,178 | | Other income, gains or losses | 49,575 | 3,628 | | Administrative Expenses | (32,435) | (23,518) | | Finance Costs | (33,034) | (50,480) | | Reversal (recognition) of impairment losses on financial assets | 41,579 | (2,701) | | Profit before income tax | 194,579 | 60,107 | | Profit for the period | 153,796 | 45,990 | | Basic and diluted earnings per share (RMB) | 0.0749 | 0.0307 | - Profit for the period increased by approximately **234%** year-on-year, primarily benefiting from the consolidation of Yantai Nanshan University[41](index=41&type=chunk)[115](index=115&type=chunk) - Other income, gains or losses significantly increased from **RMB 3.6 million** in the same period of 2022 to **RMB 49.6 million**[41](index=41&type=chunk)[138](index=138&type=chunk) [Condensed Consolidated Statement of Financial Position](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, total assets slightly decreased, while net current assets and total equity increased, reflecting changes in asset structure and growth in shareholders' equity | Metric | As of June 30, 2023 (RMB thousand) | As of December 31, 2022 (RMB thousand) | | :--- | :--- | :--- | | **Non-current assets:** | | | | Property and equipment | 812,340 | 824,078 | | Right-of-use assets | 452,105 | 460,780 | | Finance lease receivables | 625,959 | 916,068 | | Financial assets at fair value through other comprehensive income | 180,275 | — | | **Current assets:** | | | | Finance lease receivables | 816,117 | 1,226,508 | | Bank balances | 242,448 | 225,832 | | **Current liabilities:** | | | | Trade payables, bills payable and other payables | 216,932 | 535,378 | | Borrowings | 220,462 | 308,475 | | **Total:** | | | | Net current assets | 730,204 | 563,640 | | Total equity | 2,747,320 | 2,597,960 | - Finance lease receivables within non-current assets significantly decreased from **RMB 916,068 thousand** to **RMB 625,959 thousand**[60](index=60&type=chunk) - Trade payables, bills payable, and other payables within current liabilities substantially decreased from **RMB 535,378 thousand** to **RMB 216,932 thousand**[60](index=60&type=chunk) [Condensed Consolidated Statement of Changes in Equity](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) During the reporting period, the company's total equity increased due to profit for the period and an increase in non-controlling interests, though exchange rate changes led to a decrease in translation reserves | Metric | As of June 30, 2023 (RMB thousand) | As of January 1, 2022 (RMB thousand) | | :--- | :--- | :--- | | Equity attributable to owners of the Company | 2,361,480 | 1,273,474 | | Non-controlling interests | 385,840 | — | | Total equity | 2,747,320 | 1,273,474 | | Profit for the period and total comprehensive (expense) income | 149,360 | 47,337 (For the Six Months Ended June 30, 2022) | - Non-controlling interests emerged from zero, reflecting the consolidation of minority shareholder interests after the acquisition of Yantai Nanshan University[45](index=45&type=chunk) - Translation reserves turned negative due to exchange differences during the period, changing from **RMB 2,985 thousand** to **RMB (1,451) thousand**[45](index=45&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) During the reporting period, operating cash flow significantly increased, investment cash outflows were primarily for financial asset purchases and consideration paid, and financing cash outflows decreased, resulting in a net increase in cash and cash equivalents | Metric | For the Six Months Ended June 30, 2023 (RMB thousand) | For the Six Months Ended June 30, 2022 (RMB thousand) | | :--- | :--- | :--- | | Net cash generated from operating activities | 539,465 | 274,724 | | Net cash (used in) generated from investing activities | (321,703) | 3,821 | | Net cash used in financing activities | (107,752) | (350,917) | | Net increase (decrease) in cash and cash equivalents | 110,010 | (72,372) | | Cash and cash equivalents at end of period | 242,448 | 69,195 | - Cash outflow from investing activities primarily included the purchase of financial assets at fair value through profit or loss (**RMB 1,307,997 thousand**) and consideration paid (**RMB 295,000 thousand**)[65](index=65&type=chunk) - Cash outflow from financing activities significantly decreased, mainly due to reduced repayment of borrowings[65](index=65&type=chunk) [Notes to the Condensed Consolidated Interim Financial Information](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Interim%20Financial%20Information) This section provides detailed notes to the condensed consolidated interim financial information, covering general information, accounting policies, segment reporting, and financial instrument disclosures [General Information](index=8&type=section&id=General%20Information) The Group primarily engages in finance lease services and private higher education services, expanding its private higher education business through the acquisition of a 70% equity interest in Yantai Nanshan University - The Company was incorporated in the Cayman Islands on January 19, 2015, and listed on the Hong Kong Stock Exchange on March 15, 2019[66](index=66&type=chunk) - In August 2022, the Group acquired a **70%** equity interest in Yantai Nanshan University, expanding its private higher education services[50](index=50&type=chunk) - Comparative information for the six months ended June 30, 2022, has been restated in the condensed consolidated statement of profit or loss and other comprehensive income to reflect the impact of the acquisition[51](index=51&type=chunk)[67](index=67&type=chunk) [Basis of Preparation and Principal Accounting Policies](index=8&type=section&id=Basis%20of%20Preparation%20and%20Principal%20Accounting%20Policies) This interim financial information is prepared in accordance with IAS 34, based on historical cost, except for certain financial instruments measured at fair value. New and revised IFRSs were first applied this period, with no significant impact on financial performance [Basis of Preparation](index=8&type=section&id=Basis%20of%20Preparation) The condensed consolidated interim financial information is prepared in accordance with IAS 34 "Interim Financial Reporting" and Appendix 16 of the Listing Rules, presented in RMB - The financial information is prepared in accordance with IAS 34 "Interim Financial Reporting" and the applicable disclosure requirements of Appendix 16 to the Listing Rules[68](index=68&type=chunk) - The condensed consolidated financial statements are presented in RMB, with all amounts rounded to the nearest thousand[86](index=86&type=chunk) [Principal Accounting Policies](index=9&type=section&id=Principal%20Accounting%20Policies) The condensed consolidated financial information is prepared on a historical cost basis, except for certain financial instruments measured at fair value. The accounting policies adopted by the Group are consistent with those followed in preparing the 2022 annual consolidated financial statements - The condensed consolidated financial information is prepared on a historical cost basis, except for certain financial instruments measured at fair value[89](index=89&type=chunk) - The accounting policies adopted in this interim period are consistent with those followed in preparing the annual consolidated financial statements for the year ended December 31, 2022[69](index=69&type=chunk) [Application of New and Revised International Financial Reporting Standards](index=9&type=section&id=Application%20of%20New%20and%20Revised%20International%20Financial%20Reporting%20Standards) The Group first applied new and revised IFRSs issued by the IASB and effective from January 1, 2023, which had no significant impact on the financial performance and position for the current and prior periods - The Group first applied new and revised standards such as IAS 8 (Amendments), IAS 12 (Amendments), and IFRS 17[53](index=53&type=chunk)[69](index=69&type=chunk)[90](index=90&type=chunk) - The new and revised standards had no significant impact on the Group's condensed consolidated interim financial statements and are expected to affect accounting policy disclosures in the 2024 annual consolidated financial statements[70](index=70&type=chunk)[71](index=71&type=chunk) - IAS 12 (Amendments) narrowed the scope of initial recognition exemption, changing the recognition of deferred tax assets and liabilities, but will not affect the overall deferred tax balance presented in the consolidated statement of financial position[72](index=72&type=chunk)[92](index=92&type=chunk) [Revenue and Segment Information](index=10&type=section&id=Revenue%20and%20Segment%20Information) The Group's revenue primarily derives from higher education and finance lease services. With the acquisition of Yantai Nanshan University, higher education became a new reportable operating segment, contributing significant revenue and segment profit Revenue by Source | Revenue Source | For the Six Months Ended June 30, 2023 (RMB thousand) | For the Six Months Ended June 30, 2022 (RMB thousand) | | :--- | :--- | :--- | | Tuition fees | 201,693 | — | | Accommodation fees | 17,557 | — | | Finance lease services | 78,958 | 133,178 | | **Total Revenue** | **298,208** | **133,178** | - For the six months ended June 30, 2023, higher education services (tuition and accommodation fees) contributed **RMB 219,250 thousand** in revenue, while finance lease services contributed **RMB 78,958 thousand**[73](index=73&type=chunk) - The Group now has two reportable operating segments: finance lease and private higher education services[96](index=96&type=chunk) Segment Performance | Segment | Revenue (RMB thousand) | Segment Profit (RMB thousand) | | :--- | :--- | :--- | | Finance Lease | 78,958 | 92,545 | | Private Higher Education Services | 219,250 | 82,712 | | **Total** | **298,208** | **175,257** | [Other Income, Gains or Losses](index=12&type=section&id=Other%20Income%2C%20Gains%20or%20Losses) During the reporting period, other income, gains or losses significantly increased, primarily driven by higher net exchange gains and investment and interest income Other Income, Gains or Losses by Source | Source | For the Six Months Ended June 30, 2023 (RMB thousand) | For the Six Months Ended June 30, 2022 (RMB thousand) | | :--- | :--- | :--- | | Net exchange gains (losses) | 25,608 | (1,584) | | Investment and interest income | 15,539 | 3,821 | | Rental income | 5,338 | — | | Government grants | 522 | 1,220 | | Others | 2,568 | 171 | | **Total** | **49,575** | **3,628** | - Net exchange gains turned from losses to gains, serving as a primary driver for the increase in other income[79](index=79&type=chunk) - Government grants primarily represent VAT refunds for finance lease enterprises, amounting to **RMB 522 thousand** for the current period[99](index=99&type=chunk) [Finance Costs](index=13&type=section&id=Finance%20Costs) During the reporting period, finance costs significantly decreased, primarily due to reduced interest on borrowings and imputed interest from finance lease customer deposits Finance Costs by Source | Source | For the Six Months Ended June 30, 2023 (RMB thousand) | For the Six Months Ended June 30, 2022 (RMB thousand) | | :--- | :--- | :--- | | Imputed interest on consideration payable | 13,851 | — | | Borrowings | 10,672 | 22,045 | | Imputed interest from finance lease customer deposits | 7,633 | 27,050 | | Lease liabilities | 878 | 24 | | Bills payable | — | 1,361 | | **Total** | **33,034** | **50,480** | - Finance costs decreased by approximately **34.6%** year-on-year, primarily benefiting from a reduction in total borrowings[81](index=81&type=chunk)[139](index=139&type=chunk)[162](index=162&type=chunk) [Reversal (Recognition) of Impairment Losses on Financial Assets](index=13&type=section&id=Reversal%20%28Recognition%29%20of%20Impairment%20Losses%20on%20Financial%20Assets) During the reporting period, the Group recorded a net reversal of impairment losses on financial assets, primarily due to improved credit risk for finance lease receivables and partial repayments Impairment Losses on Financial Assets | Source | For the Six Months Ended June 30, 2023 (RMB thousand) | For the Six Months Ended June 30, 2022 (RMB thousand) | | :--- | :--- | :--- | | Finance lease receivables | 42,347 | (2,701) | | Other receivables | (768) | — | | **Total** | **41,579** | **(2,701)** | - A net impairment provision of approximately **RMB 42.3 million** was recognized this period, primarily comprising impairment losses on finance lease receivables of **RMB 40.1 million** (due to increased credit risk) and a reversal of impairment losses of **RMB 82.4 million** (due to improved financial condition and repayments)[81](index=81&type=chunk) - In the same period of 2022, a net impairment provision of **RMB 2.7 million** was recognized, mainly from impairment losses on finance lease receivables[103](index=103&type=chunk) [Profit Before Income Tax and Income Tax Expense](index=14&type=section&id=Profit%20Before%20Income%20Tax%20and%20Income%20Tax%20Expense) During the reporting period, profit before income tax significantly increased, with a corresponding rise in income tax expense, primarily influenced by China's corporate income tax and deferred tax Profit Before Income Tax and Income Tax Expense | Metric | For the Six Months Ended June 30, 2023 (RMB thousand) | For the Six Months Ended June 30, 2022 (RMB thousand) | | :--- | :--- | :--- | | Profit before income tax | 194,579 | 60,107 | | Income tax expense | 40,783 | 14,117 | | — China corporate income tax (current) | 24,649 | 14,792 | | — Deferred tax (current) | 16,134 | (675) | - Deferred income tax is primarily recognized for deductible temporary differences arising from impairment losses under the expected credit loss model and taxable temporary differences from China withholding tax[83](index=83&type=chunk) [Dividends](index=14&type=section&id=Dividends) The Company's Board of Directors does not recommend the payment of any interim dividend for the reporting period - The Company neither paid nor proposed to pay any dividends for the six months ended June 30, 2023, and 2022[105](index=105&type=chunk)[123](index=123&type=chunk) [Earnings Per Share](index=15&type=section&id=Earnings%20Per%20Share) During the reporting period, basic and diluted earnings per share significantly increased, primarily due to higher profit for the period and changes in the weighted average number of ordinary shares Earnings Per Share Calculation | Metric | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Profit for the purpose of calculating basic and diluted earnings per share (RMB thousand) | 126,680 | 45,990 | | Weighted average number of ordinary shares for the purpose of calculating basic and diluted earnings per share (thousand shares) | 1,690,914 | 1,500,000 | | Basic and diluted earnings per share (RMB) | 0.0749 | 0.0307 | - As there were no unexercised ordinary shares with dilutive potential during the period, diluted earnings per share equal basic earnings per share[125](index=125&type=chunk) [Property and Equipment](index=15&type=section&id=Property%20and%20Equipment) During the reporting period, the Group acquired new assets and wrote off some equipment - For the six months ended June 30, 2023, the Group acquired assets at a cost of approximately **RMB 7,291,000**[85](index=85&type=chunk) - Equipment with a carrying amount of approximately **RMB 216,000** was written off during the period, resulting in a net write-off loss of approximately **RMB 216,000**[38](index=38&type=chunk) [Leases](index=16&type=section&id=Leases) The Group's right-of-use assets and lease liabilities remained relatively stable, with no new lease agreements extended during the period Right-of-Use Assets | Class of Right-of-Use Assets | As of June 30, 2023 (RMB thousand) | As of December 31, 2022 (RMB thousand) | | :--- | :--- | :--- | | Land use rights | 412,616 | 419,036 | | Buildings | 36,489 | 38,656 | | Offices | 3,000 | 3,088 | | **Total** | **452,105** | **460,780** | - As of June 30, 2023, the carrying amount of lease liabilities was approximately **RMB 38,330,000**, largely consistent with the end of 2022[15](index=15&type=chunk) - During the period, the Group did not extend any lease agreements requiring recognition as right-of-use assets and lease liabilities[15](index=15&type=chunk) [Finance Lease Receivables](index=16&type=section&id=Finance%20Lease%20Receivables) The Group's total finance lease receivables and present value both decreased, with credit risk assessed and provisions made based on overdue status Finance Lease Receivables Ageing | Ageing | As of June 30, 2023 (RMB thousand) | As of December 31, 2022 (RMB thousand) | | :--- | :--- | :--- | | Not more than one year | 1,153,627 | 1,611,768 | | More than one year but within two years | 382,063 | 401,303 | | More than two years but within three years | 191,815 | 297,306 | | More than three years but within four years | 130,102 | 270,613 | | More than four years but within five years | — | 87,621 | | **Gross investment in leases** | **1,857,607** | **2,668,611** | | **Present value of minimum lease receivables** | **1,442,076** | **2,142,576** | - The present value of finance lease receivables decreased from **RMB 2,142,576 thousand** as of December 31, 2022, to **RMB 1,442,076 thousand** as of June 30, 2023[16](index=16&type=chunk) - If contractual payments are overdue by more than **30 days**, the Group assumes a significant increase in credit risk; if overdue by more than **90 days**, it assesses whether the credit is impaired[16](index=16&type=chunk)[18](index=18&type=chunk) [Trade and Other Receivables](index=17&type=section&id=Trade%20and%20Other%20Receivables) The Group's total trade and other receivables decreased, with short-term loans receivable and prepayments decreasing, but expenses paid on behalf of customers increasing Trade and Other Receivables Breakdown | Item | As of June 30, 2023 (RMB thousand) | As of December 31, 2022 (RMB thousand) | | :--- | :--- | :--- | | Trade receivables | 1,122 | 549 | | Prepayments | 303 | 1,457 | | Expenses paid on behalf of customers | 50,422 | 45,330 | | Short-term loans receivable | 238,441 | 280,961 | | Interest receivable | 10,598 | 2,441 | | Other receivables | 6,938 | 1,025 | | **Subtotal** | **317,136** | **340,515** | | Less: Provision for impairment losses | (46,325) | (44,238) | | **Total** | **270,811** | **296,277** | - Ageing analysis of trade receivables shows that amounts overdue within **30 days** increased from **RMB 549 thousand** at the end of 2022 to **RMB 1,122 thousand** as of June 30, 2023[32](index=32&type=chunk) [Bank Balances](index=18&type=section&id=Bank%20Balances) The Group's bank balances significantly increased, primarily due to the release of pledged bank balances Bank Balances and Cash Equivalents | Item | As of June 30, 2023 (RMB thousand) | As of December 31, 2022 (RMB thousand) | | :--- | :--- | :--- | | Bank balances | 242,448 | 225,832 | | Less: Pledged bank balances | — | (100,000) | | **Cash and cash equivalents** | **242,448** | **125,832** | - For the six months ended June 30, 2023, pledged bank deposits were released, leading to a significant increase in cash and cash equivalents[36](index=36&type=chunk) [Trade Payables, Bills Payable and Other Payables](index=18&type=section&id=Trade%20Payables%2C%20Bills%20Payable%20and%20Other%20Payables) The Group's trade payables balance significantly decreased, and ageing analysis shows all amounts are due within one year - The trade payables balance was approximately **RMB 1,041,000**, a significant decrease from **RMB 4,239,000** as of December 31, 2022[1](index=1&type=chunk) Trade Payables Ageing | Ageing | As of June 30, 2023 (RMB thousand) | As of December 31, 2022 (RMB thousand) | | :--- | :--- | :--- | | Within one year | 1,041 | 4,239 | [Borrowings](index=18&type=section&id=Borrowings) During the reporting period, the Group obtained new borrowings for working capital, bearing interest at fixed market rates - For the six months ended June 30, 2023, the Group obtained new borrowings of **RMB 305.0 million**[3](index=3&type=chunk) - The loan bears interest at fixed market rates of **4.00% to 4.50%** and is repayable in installments over a period exceeding **2 years**[3](index=3&type=chunk) - The proceeds were used to fund the Group's operations[3](index=3&type=chunk) [Share Capital of the Company](index=19&type=section&id=Share%20Capital%20of%20the%20Company) The Company's authorized share capital remained unchanged, while issued share capital increased due to the placement and subscription of new shares completed in November 2022 Share Capital Details | Class | Par value per share | Number of shares | Amount (USD) | | :--- | :--- | :--- | :--- | | Authorized share capital | USD 0.000001 | 50,000,000,000 | 50,000 | | Issued share capital (June 30, 2023) | USD 0.000001 | 1,690,914,000 | 1,691 | | Issued share capital (January 1, 2022) | USD 0.000001 | 1,500,000,000 | 1,500 | - On November 30, 2022, the Company completed the placement and subscription of a total of **190,914,000** new ordinary shares, with total proceeds of approximately **RMB 600,992,000**[5](index=5&type=chunk)[37](index=37&type=chunk) - All new shares rank pari passu in all respects with the existing shares[21](index=21&type=chunk) [Fair Value Measurement of Financial Instruments](index=19&type=section&id=Fair%20Value%20Measurement%20of%20Financial%20Instruments) The Group measures financial instruments at fair value using valuation techniques such as discounted cash flow models, classifying them into different fair value hierarchies based on the observability of input data - The Group uses valuation techniques such as discounted cash flow models, with key parameters including recent transaction prices, interest yield curves, and exchange rates[22](index=22&type=chunk) - Fair value measurements are categorized into three levels: Level 1 (quoted prices in active markets), Level 2 (observable input data), and Level 3 (unobservable input data)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) Fair Value Hierarchy of Financial Instruments | Financial Instrument | Fair Value Hierarchy | As of June 30, 2023 (RMB thousand) | As of December 31, 2022 (RMB thousand) | | :--- | :--- | :--- | :--- | | Unlisted fund investments | Level 2 | 180,275 | — | | Listed bond investments | Level 1 | 39,000 | 83,000 | - During the period, there were no transfers into or out of Level 1 and Level 2 fair value hierarchies[6](index=6&type=chunk) [Related Party Transactions](index=21&type=section&id=Related%20Party%20Transactions) The Group has multiple related party transactions with Nanshan Group and its subsidiaries, and Longkou Xinnanshan Investment Development Co., Ltd. and its subsidiaries, including finance lease income, lease expenses, services received, and asset purchases - Ms. Sui Yongqing, wife of Mr. Song Jianbo, one of the key management personnel of Nanshan Group, is the sole shareholder of Union Capital, the Company's ultimate shareholder[20](index=20&type=chunk) - Longkou Nanshan is wholly owned by Mr. Song Zuowen and Ms. Lü Shuling, and Ms. Sui is the daughter-in-law of Mr. Song and Ms. Lü[107](index=107&type=chunk) Related Party Transactions Summary | Transacting Party | Type of Transaction | For the Six Months Ended June 30, 2023 (RMB thousand) | For the Six Months Ended June 30, 2022 (RMB thousand) | | :--- | :--- | :--- | :--- | | Nanshan Group and its subsidiaries | Finance lease income generated | 23,176 | 93,518 | | | Lease expenses paid | 944 | 993 | | | Services received | 10,081 | — | | Longkou Nanshan and its subsidiaries | Services received | 4,698 | — | | | Purchase of inventories | 1,780 | — | - As of June 30, 2023, finance lease receivables from Nanshan Group and its subsidiaries amounted to **RMB 655,786 thousand**[129](index=129&type=chunk) [Management Discussion and Analysis](index=23&type=section&id=Management%20Discussion%20and%20Analysis) This section provides management's perspective on the Group's business performance, financial position, risk management, and future outlook, highlighting key operational and financial trends [Business Review](index=23&type=section&id=Business%20Review) The Group achieved significant profit growth during the reporting period through a dual-track strategy of higher education and finance leasing, primarily benefiting from the consolidation of Yantai Nanshan University and an improving Chinese economic environment [Overall Business Overview](index=23&type=section&id=Overall%20Business%20Overview) The Group recorded a profit of approximately **RMB 153.8 million** during the reporting period, continuing last year's profitability trend, primarily benefiting from the acquisition and consolidation of Yantai Nanshan University - The Group recorded a profit of approximately **RMB 153.8 million** for the six months ended June 30, 2023[115](index=115&type=chunk) - In August 2022, the Group completed the acquisition of a **70%** equity interest in Yantai Nanshan University, and in May 2023, established Union Shipping Phase I Fund Limited Partnership to expand into the shipping sector[131](index=131&type=chunk) - With China's economy gradually recovering, the Group is leveraging its dual-track strategy of higher education and finance leasing to capture domestic economic growth opportunities[154](index=154&type=chunk) [Higher Education Business](index=23&type=section&id=Higher%20Education%20Business) Yantai Nanshan University, as the Group's private higher education institution, offers undergraduate and diploma programs, adhering to a "production-education integration, school-enterprise cooperation" philosophy, and contributed significant revenue and profit before tax during the reporting period - Yantai Nanshan University offers **49** undergraduate programs and **40** diploma programs across **30** departments, committed to improving students' practical training and employment prospects[116](index=116&type=chunk) - During the reporting period, the higher education business generated revenue of approximately **RMB 219.3 million** and profit before tax of approximately **RMB 82.7 million**[133](index=133&type=chunk) - Higher education revenue primarily derives from tuition fees, accommodation fees, and other education service fees, all generated in China[136](index=136&type=chunk) [Finance Lease Business](index=24&type=section&id=Finance%20Lease%20Business) The Group's finance lease business primarily serves the healthcare and aviation sectors, benefiting from a stable Chinese market and clear regulatory policies, resulting in a net reversal of impairment provisions during the reporting period - The Group's finance lease business primarily serves customers in the healthcare and aviation industries[118](index=118&type=chunk) - During the reporting period, the finance lease business generated revenue of approximately **RMB 79.0 million** and profit before tax of approximately **RMB 92.5 million**[135](index=135&type=chunk) - China's finance lease industry is entering a critical period of transformation with stricter regulation, but the "14th Five-Year Plan" is expected to guide manufacturing upgrades, providing clear prospects for finance lease companies serving the real economy[157](index=157&type=chunk) [Financial Review](index=24&type=section&id=Financial%20Review) The Group achieved significant revenue and profit growth during the reporting period, while effectively controlling finance costs, improving liquidity, and reversing impairment provisions for finance lease receivables [Revenue](index=24&type=section&id=Revenue) During the reporting period, the Group's revenue significantly increased, primarily due to the consolidation of the higher education business - Revenue for the reporting period increased by approximately **123.9%** from approximately **RMB 133.2 million** in the same period of 2022 to approximately **RMB 298.2 million**[120](index=120&type=chunk) - Revenue primarily originated from higher education and finance lease income[136](index=136&type=chunk) [Service Costs](index=25&type=section&id=Service%20Costs) During the reporting period, service costs significantly increased, primarily attributable to the operations of Yantai Nanshan University - Service costs for the reporting period were approximately **RMB 127.0 million**, compared to zero in the same period of 2022[161](index=161&type=chunk) [Gross Profit and Gross Profit Margin](index=25&type=section&id=Gross%20Profit%20and%20Gross%20Profit%20Margin) Both the Group's gross profit and gross profit margin improved, reflecting enhanced business profitability - Gross profit for the reporting period was approximately **RMB 171.2 million**, with a gross profit margin of approximately **57.4%**, representing an increase of approximately **28.6%** compared to gross profit of approximately **RMB 133.2 million** in the same period of 2022[137](index=137&type=chunk) [Other Income, Gains or Losses](index=25&type=section&id=Other%20Income%2C%20Gains%20or%20Losses) The Group's other income, gains or losses significantly increased, driven by government grants, exchange gains, rental income, and investment interest income - Other income, gains or losses increased from approximately **RMB 3.6 million** in the same period of 2022 to approximately **RMB 49.6 million** in the reporting period[138](index=138&type=chunk) [Administrative Expenses](index=25&type=section&id=Administrative%20Expenses) The Group's administrative expenses increased, but their proportion of total revenue decreased, indicating improved operational efficiency - Administrative expenses for the reporting period were approximately **RMB 32.4 million** (2022: approximately **RMB 23.5 million**), accounting for **10.9%** of total revenue (2022: **17.7%**)[138](index=138&type=chunk) [Finance Costs](index=25&type=section&id=Finance%20Costs) The Group's finance costs significantly decreased, primarily due to a reduction in total borrowings - Finance costs decreased by approximately **34.6%** from approximately **RMB 50.5 million** in the same period of 2022 to approximately **RMB 33.0 million** in the reporting period[139](index=139&type=chunk) - Total borrowings decreased from **RMB 467.7 million** as of June 30, 2022, to **RMB 232.7 million** as of June 30, 2023[162](index=162&type=chunk) [Profit for the Period](index=26&type=section&id=Profit%20for%20the%20Period) The Group's profit for the period significantly increased, primarily benefiting from the consolidation of Yantai Nanshan University - Profit for the reporting period was approximately **RMB 153.8 million**, a significant increase of approximately **2.3 times** compared to approximately **RMB 46.0 million** in the same period of 2022[141](index=141&type=chunk) - The increase was primarily due to stable net profit from the finance lease business and the consolidation of Yantai Nanshan University's net profit into the Group's profit[141](index=141&type=chunk) [Dividends](index=26&type=section&id=Dividends) The Board does not recommend the payment of any interim dividend for the reporting period - The Board does not recommend the payment of any interim dividend for the reporting period (2022: nil)[142](index=142&type=chunk) [Liquidity, Financial Resources and Capital Structure](index=26&type=section&id=Liquidity%2C%20Financial%20Resources%20and%20Capital%20Structure) The Group maintains a healthy liquidity position with increased cash and cash equivalents, ample working capital, and a significantly reduced gearing ratio - As of June 30, 2023, cash and cash equivalents were approximately **RMB 242.4 million** (December 31, 2022: approximately **RMB 125.8 million**)[142](index=142&type=chunk) - Working capital (current assets less current liabilities) was approximately **RMB 730.2 million** (December 31, 2022: approximately **RMB 563.6 million**)[142](index=142&type=chunk) - The gearing ratio (total debt at period-end / total equity and debt) was approximately **7.8%** (December 31, 2022: approximately **11.3%**), primarily due to a reduction in borrowings relative to business scale[142](index=142&type=chunk) [Finance Lease Receivables](index=26&type=section&id=Finance%20Lease%20Receivables) The Group's total finance lease receivables decreased, but impairment loss provisions remain a significant component - As of June 30, 2023, the carrying amount of finance lease receivables was approximately **RMB 1,442.1 million**, a decrease of approximately **32.7%** from approximately **RMB 2,142.6 million** as of December 31, 2022[143](index=143&type=chunk) - Finance lease receivables comprise a gross amount of approximately **RMB 1,857.6 million**, unearned finance income of approximately **RMB 199.8 million**, and impairment loss provisions of approximately **RMB 215.7 million**[143](index=143&type=chunk) [Factors and Measures for Reversal of Impairment Losses](index=27&type=section&id=Factors%20and%20Measures%20for%20Reversal%20of%20Impairment%20Losses) During the reporting period, a net reversal of impairment losses on finance lease receivables occurred, primarily due to an improved business environment and timely repayments by lessees, with the Group continuing to take prudent measures to recover outstanding amounts - The improving business environment in China, particularly timely repayments by lessees in the healthcare sector, led to a net reversal of impairment losses on finance lease receivables[144](index=144&type=chunk) - During the reporting period, **eight** customers failed to repay relevant lease fees, and the Group recognized impairment provisions in accordance with IFRS 9[166](index=166&type=chunk) - The Group's recovery measures include contacting customers by phone, on-site visits, and legal proceedings, and these measures are considered effective[167](index=167&type=chunk)[169](index=169&type=chunk) [Employees and Remuneration Policy](index=27&type=section&id=Employees%20and%20Remuneration%20Policy) The Group's employee count and employee benefits expenses significantly increased, and it continues to offer competitive remuneration and benefits to attract and retain talent - As of June 30, 2023, the Group employed **1,832** full-time employees (December 31, 2022: **1,692** employees)[170](index=170&type=chunk) - Employee benefits expenses (including directors' emoluments) for the reporting period were approximately **RMB 88.6 million** (2022: approximately **RMB 6.7 million**)[170](index=170&type=chunk) - The Group provides remuneration, medical, and retirement benefits, and grants share options to eligible employees under its share option scheme[171](index=171&type=chunk) [Risk Management](index=28&type=section&id=Risk%20Management) The Group faces various risks, including credit, liquidity, and operational risks, and has established comprehensive risk management frameworks and internal control procedures for both its higher education and finance lease businesses [Risk Management for Higher Education Business](index=28&type=section&id=Risk%20Management%20for%20Higher%20Education%20Business) Yantai Nanshan University has established a principal responsibility system and a board strategic decision-making mechanism, and purchased insurance to manage its personnel, enrollment, and market risks - The principal is responsible for ongoing risk management, while the board is responsible for strategic decisions, including budget, investment, acquisitions, and future development[147](index=147&type=chunk)[171](index=171&type=chunk) - The university purchased insurance (including public liability insurance), consistent with common practice in China's education industry[171](index=171&type=chunk) [Risk Management for Finance Lease Business](index=29&type=section&id=Risk%20Management%20for%20Finance%20Lease%20Business) The Group has established a comprehensive risk management system for the credit risk of its finance lease business, including customer due diligence, independent data review, multi-level approval procedures, and asset quality classification, with regular evaluation of the expected credit loss model - The Group has developed a comprehensive risk management system to control credit risk through customer due diligence, independent data review, and multi-level approval procedures[190](index=190&type=chunk)[172](index=172&type=chunk) - The Group voluntarily adopted a five-category classification for measuring and monitoring the asset quality of finance lease receivables: normal, special mention, substandard, doubtful, and loss[148](index=148&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[191](index=191&type=chunk) - The Group uses an Expected Credit Loss (ECL) model, considering factors such as industry customer nature, credit history, and economic conditions to assess provisions, and regularly evaluates and adjusts them[193](index=193&type=chunk) [Contingent Liabilities](index=30&type=section&id=Contingent%20Liabilities) As of the end of the reporting period, the Group had no significant contingent liabilities - As of June 30, 2023, the Group had no significant contingent liabilities (December 31, 2022: nil)[150](index=150&type=chunk) [Share Option Scheme](index=30&type=section&id=Share%20Option%20Scheme) The Company adopted a share option scheme in 2019 to attract and retain talent and drive business development. No share options were granted or exercised during the reporting period - The Share Option Scheme aims to attract and retain the best personnel, provide additional incentives, and drive the Group's business to achieve excellent results[151](index=151&type=chunk) - Under the scheme, the total number of shares that may be issued is **150,000,000** shares[152](index=152&type=chunk) - For the six months ended June 30, 2023, there were no outstanding share options under the Share Option Scheme, nor were any share options granted, agreed to be granted, exercised, cancelled, or lapsed[196](index=196&type=chunk) [Use of Proceeds from Issue of Equity Securities](index=31&type=section&id=Use%20of%20Proceeds%20from%20Issue%20of%20Equity%20Securities) The Company completed the placement and subscription of new shares in December 2022, with net proceeds primarily used for the Group's finance lease business - On December 14, 2022, the Company completed the placement and subscription of a total of **190,914,000** new shares at a placing price of **HKD 3.52** per share[153](index=153&type=chunk) - The net proceeds from the placing and subscription amounted to **HKD 669.6 million**, of which approximately **HKD 512.0 million** has been used as intended for the Group's finance lease business[153](index=153&type=chunk) [Events After the Reporting Period](index=32&type=section&id=Events%20After%20the%20Reporting%20Period) After the reporting period, the Group established Union Shipping Phase I Fund Limited Partnership to expand into shipping, revised the annual caps for continuing connected transactions, and extended the deadline for new share subscriptions - On May 2, 2023, Union Fund I GP, an indirect wholly-owned subsidiary of the Company, entered into an agreement with Xiehai Bulk to establish Union Shipping Phase I Fund Limited Partnership, expanding into the shipping sector[198](index=198&type=chunk) - The Group proposed to revise the annual caps for continuing connected transactions to address Yantai Nanshan University's actual procurement needs exceeding expectations[180](index=180&type=chunk) - The Company and the subscriber agreed to extend the final closing date for the subscription of **109,080,000** new shares to September 14, 2023[181](index=181&type=chunk) [Outlook and Plans](index=33&type=section&id=Outlook%20and%20Plans) The Group anticipates a gradual improvement in global and Chinese economies, will continue to deepen its higher education and finance lease businesses, explore new breakthroughs and acquisition projects, and continuously strengthen risk management and internal controls - The Group expects global and Chinese economies to continue improving gradually, with its higher education and finance lease businesses capturing overall domestic economic growth[182](index=182&type=chunk) - The higher education business will deepen cooperation, establish advanced applied disciplines, and develop upstream, downstream, and new enterprise collaborations[203](index=203&type=chunk) - The finance lease business will adhere to the "quality over quantity" principle, adapt to market changes, adjust operating strategies, strengthen asset management, and diversify customer and project categories[183](index=183&type=chunk)[205](index=205&type=chunk) - The Group will continue to explore domestic and international business expansion and suitable acquisition projects, especially those with potential, stable cash flow, or synergistic effects[184](index=184&type=chunk) [Other Information](index=34&type=section&id=Other%20Information) This section covers corporate governance, securities transactions, audit committee functions, and information publication, ensuring transparency and compliance with regulatory standards [Compliance with Corporate Governance Code](index=34&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) The Company complied with all code provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules during the reporting period - The Company has established corporate governance procedures in accordance with the principles of the Corporate Governance Code set out in Appendix 14 of the Listing Rules[206](index=206&type=chunk) - From the beginning of the reporting period up to the date of this announcement, the Company has complied with all code provisions of the Corporate Governance Code[206](index=206&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=35&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20the%20Company%27s%20Listed%20Securities) Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the reporting period - During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[188](index=188&type=chunk) [Audit Committee](index=35&type=section&id=Audit%20Committee) The Company's Audit Committee, comprising three independent non-executive directors, is responsible for reviewing and overseeing financial reporting processes and internal controls, and has reviewed the Group's unaudited condensed consolidated financial statements - The Audit Committee comprises **three** independent non-executive directors, with Mr. Liu Xuewei as the chairman[188](index=188&type=chunk) - The Audit Committee has reviewed the Group's unaudited condensed consolidated financial statements for the reporting period[188](index=188&type=chunk) [Standard Code for Securities Transactions by Directors](index=35&type=section&id=Standard%20Code%20for%20Securities%20Transactions%20by%20Directors) The Company has adopted a securities dealing code and confirmed that all directors complied with it during the reporting period - The Company has adopted a securities dealing code, the terms of which are no less exacting than those set out in the Model Code contained in Appendix 10 of the Listing Rules[188](index=188&type=chunk) - All Directors confirmed their compliance with the securities dealing code throughout the period from the beginning of the reporting period up to the date of this announcement[188](index=188&type=chunk) [Publication of Information](index=36&type=section&id=Publication%20of%20Information) This announcement has been published on the Company's and HKEX websites, and the interim report will be dispatched to shareholders in due course - This announcement has been published on the Company's website (http://www.aiel-holdings.com/) and the HKEX website (www.hkexnews.hk)[210](index=210&type=chunk) - The Company's interim report for the reporting period will be dispatched to the Company's shareholders in due course and will be available on the aforementioned websites[210](index=210&type=chunk)

Share Issuance and Financing - The company completed a share placement and subscription, issuing a total of 47,160,000 placement shares at HKD 3.52 per share and 143,754,000 subscription shares at the same price, raising a net amount of HKD 669.6 million, of which HKD 417.0 million (USD 53.5 million) was utilized as of December 31, 2022[7] - The placement and subscription price of HKD 3.52 per share represented a discount of approximately 19.82% to the closing price on the date of the agreements and a 16.19% discount to the average closing price over the preceding five trading days[7] - The company completed the placement and subscription of new shares on December 14, 2022, with net proceeds of approximately HKD 669.6 million[173] Contingent Liabilities and Investments - The company has no significant contingent liabilities as of December 31, 2022, compared to none in 2021[7] - The company has no significant investments, including those accounting for 5% or more of the group's total assets, as of December 31, 2022[4] Risk Management and Internal Controls - The company's credit risk management includes a comprehensive risk management system, with measures such as customer due diligence, independent data review, and multiple approval processes[13] - The company's risk management framework for its higher education business includes a decision-making structure led by the president, with measures to address internal control violations and improve future operations[13] - The company's internal control and risk management principles aim to prevent risks and strengthen asset monitoring, ensuring robust business development and diversification[33] - The company's internal control system was reviewed by an external internal control consultant, and no significant risks or control deficiencies were identified during the reporting period[114] - The company's board of directors and audit committee reviewed and were satisfied with the adequacy and effectiveness of the company's risk management and internal control systems for the year ended December 31, 2022[117] Financing Lease Business - The company's financing lease business will focus on quality over quantity, aiming for steady growth while adapting to market changes and industry regulations[21] - The company's financing lease business faces risks from lessees' financial deterioration or negative cash flow, even with sufficient collateral, particularly for assets with overdue payments exceeding 90 days but less than or equal to 150 days[6] - The company is focusing on expanding and diversifying its financial leasing business, with an emphasis on risk management and asset quality[171] - The company's financing lease receivables increased by approximately 6.1% from RMB 2,020.0 million as of December 31, 2021, to RMB 2,142.6 million as of December 31, 2022[96] - The company's financing lease receivables as of December 31, 2022, consisted of (i) total financing lease receivables of approximately RMB 2,668.6 million, (ii) unearned financing income of approximately RMB 266.8 million, and (iii) impairment loss provisions of approximately RMB 259.2 million[129] - The company's financing lease receivables as of December 31, 2021, consisted of (i) total financing lease receivables of approximately RMB 2,590.6 million, (ii) unearned financing income of approximately RMB 310.2 million, and (iii) impairment loss provisions of approximately RMB 260.5 million[129] Corporate Governance and Board Committees - The company has established several board committees including the Strategic Investment Committee, Audit Committee, Remuneration Committee, and Nomination Committee, each operating under terms of reference set by the board[41] - The company's amended and restated memorandum and articles of association were adopted on February 20, 2019, and became effective on March 15, 2019, with no significant changes during the reporting period[31] - A second amended and restated memorandum and articles of association became effective on February 14, 2023, to comply with the latest legal and regulatory requirements[31] - The board has decision-making authority over all major matters, including policy issues, strategy and budget, internal control and risk management, significant transactions, financial data, and appointment of directors[40] - The company has appointed independent non-executive directors who bring extensive knowledge and business experience, ensuring objective oversight of the company's performance[47] - Directors are required to retire by rotation at each annual general meeting, with each director (including those appointed for a specified term) required to retire at least once every three years[48] - The company has received annual written confirmations from independent non-executive directors confirming their independence in accordance with the guidelines set out in the Listing Rules[47] - The company's board committees operate under terms of reference that have been published on the company's website and the Stock Exchange's website[41] - The company has established a mechanism to ensure independent insights and recommendations are available to the Board, with its implementation and effectiveness assessed annually[61] - The Board of Directors consists of 12 members, including 4 non-executive directors and 5 independent non-executive directors, with changes in composition occurring in 2022 and 2023[58] - The Audit Committee, composed of three independent non-executive directors, is responsible for reviewing financial statements and overseeing the financial reporting process, internal control systems, and risk management systems[71] - The Remuneration Committee held two meetings during the reporting period, with all three members attending, and reviewed the current remuneration of all directors, providing recommendations to the Board[72] - The company has implemented corporate governance procedures in compliance with the Corporate Governance Code, including policies on director and senior management training, compliance with laws and regulations, and codes of conduct for employees and directors[65] - The Strategic Investment Committee was established on January 16, 2023, and did not hold any meetings during the reporting period[71] - The company's senior management (excluding directors) received remuneration below HKD 1,000,000 for one individual and between HKD 1,000,000 to HKD 1,500,000 for another individual during the reporting period[76] - The Board of Directors held 4 meetings during the reporting period, with all directors attending all eligible meetings, except for newly appointed directors who attended 1 out of 1 eligible meeting[69] - The company has adopted a memorandum specifying the delegation of functions to management, including the management and daily operations of the group, subject to periodic review by the Board[50] - Independent non-executive directors have signed three-year appointment letters, which can be terminated with one month's written notice and are subject to retirement and re-election at annual general meetings[68] Financial Performance and Metrics - The company's net profit for the year ended December 31, 2022, was approximately RMB 372.1 million, a significant increase of about 4.7 times compared to RMB 78.9 million in the previous year, primarily due to the consolidation of Yantai Nanshan College and a one-time bargain purchase gain of RMB 270.5 million[100] - The company's cash and cash equivalents as of December 31, 2022, were approximately RMB 125.8 million, compared to RMB 141.8 million in the previous year[95] - The company's total equity as of December 31, 2022, was approximately RMB 2,598.0 million, compared to RMB 1,273.5 million in the previous year[95] - The company's asset-liability ratio as of December 31, 2022, was approximately 11.3%, a decrease from 38.5% in the previous year, mainly due to a reduction in borrowings relative to the company's business scale[95] - The company's impairment loss provision decreased slightly by approximately 0.5% from RMB 260.5 million as of December 31, 2021, to RMB 259.2 million as of December 31, 2022[96] - The company's operating capital (current assets minus current liabilities) as of December 31, 2022, was approximately RMB 563.6 million, compared to RMB 983.9 million in the previous year[95] - The company's total borrowings as of December 31, 2022, were RMB 329.3 million, compared to RMB 795.9 million in the previous year[95] - The company's board of directors does not recommend paying any final dividend for the year ended December 31, 2022[101] - The company did not recommend the payment of any final dividend for the year ended December 31, 2022[127] - Financial costs decreased by 14.3% from RMB 89.8 million in 2021 to RMB 77.0 million in 2022, primarily due to a 48.1% reduction in borrowing costs from RMB 68.6 million to RMB 35.6 million[138] - The company's gross profit for the year ended December 31, 2022, was approximately RMB 256.0 million, with a gross profit margin of 69.4%, representing a 10.4% increase compared to the previous year[172] - The company's other income, gains, or losses increased from RMB 16.3 million in 2021 to RMB 28.2 million in 2022, primarily due to government subsidies, investment and interest income, and losses from the disposal of plant and equipment[172] - Revenue increased by 59.1% from approximately RMB 231.8 million in 2021 to approximately RMB 368.8 million in 2022, primarily due to the acquisition of Yantai Nanshan College[188] - Yantai Nanshan College contributed approximately RMB 159.9 million in revenue from tuition, accommodation, and other educational services from August 18, 2022, to December 31, 2022[188] - The top five customers accounted for approximately 38.18% of the company's total revenue in 2022, with the largest customer contributing approximately 10.91%[195] - Service costs for 2022 were approximately RMB 112.8 million, mainly from the operations of Yantai Nanshan College[194] Higher Education Business - The company acquired a 70% stake in Yantai Nanshan College on August 18, 2022, and now operates dual business segments: higher education and financial leasing[160] - The company completed the acquisition of Yantai Nanshan College, resulting in a one-time bargain purchase gain of approximately RMB 270.5 million[93] - Yantai Nanshan College's total enrollment increased from 29,047 in the 2021/2022 academic year to 34,958 in the 2023/2024 academic year, with tuition fees for undergraduate programs rising from RMB 12,800 to RMB 15,800[168] - The company expects continued growth in demand for higher education in China due to increasing income levels and societal emphasis on higher education[169] - Yantai Nanshan College offers 49 undergraduate programs and 40 diploma programs across 30 departments, focusing on practical training and employment prospects[181] - The company expects to consolidate Yantai Nanshan College's full fiscal year financial results in 2023, compared to only 4 months in 2022[198] Environmental and Social Responsibility - Total greenhouse gas emissions increased significantly from 112.74 tons of CO2 equivalent in 2021 to 8,342.88 tons in 2022, with scope 2 emissions accounting for the majority at 8,079.65 tons[143] - Greenhouse gas emission intensity per employee decreased from 3.64 tons of CO2 equivalent in 2021 to 4.93 tons in 2022[143] - The company's greenhouse gas emissions are primarily from indirect sources, and it encourages the use of teleconferencing and direct flights to reduce carbon footprint[190] Market and Industry Trends - China's GDP reached RMB 121.0 trillion in 2022, with a year-on-year growth rate of 3%[162] - China's higher education industry's total revenue increased from RMB 997.3 billion in 2016 to RMB 1,382.7 billion in 2020, with a compound annual growth rate of 8.5%[163] - The company's customer base is primarily in the healthcare and aviation industries, with stable market conditions in 2022[193] - The company has established strong relationships with financial institutions for interest-bearing loans and asset-backed securities[195] Credit Risk and Impairment - The company's default loss rate is determined based on regulatory benchmarks, peer company practices, recovery efficiency, and expert experience[2] - The company recorded impairment provisions for nine customers (eight in healthcare and one in aviation) who failed to repay lease fees in 2022, compared to one customer in aviation in 2021[136] - The company's expected credit loss model follows a three-stage approach under new financial instrument standards, with provisions calculated based on 12-month expected credit losses unless credit risk increases significantly[137]

Financial Performance - For the six months ended June 30, 2022, the company recorded a profit of approximately RMB 46.0 million, an increase of about 2.9% from approximately RMB 44.7 million for the same period in 2021[12]. - Revenue for the same period increased by approximately 9.5% to about RMB 133.2 million, compared to approximately RMB 121.6 million for the six months ended June 30, 2021[6]. - Other income rose approximately 73.3% to about RMB 5.2 million, up from approximately RMB 3.0 million for the same period in 2021[7]. - The net profit margin slightly decreased to 34.5% from 36.8% for the same period in 2021, attributed to rising legal and professional fees[12]. - Net profit for the period was RMB 45,990,000, representing a 2.8% increase compared to RMB 44,748,000 in the previous year[63]. - Basic and diluted earnings per share for the period were RMB 0.0307, up from RMB 0.0298 in the prior year[63]. - Profit before tax was RMB 45,990,000, up from RMB 44,748,000, indicating a year-over-year increase of 2.8%[82]. Expenses and Costs - Employee costs slightly decreased to approximately RMB 6.7 million from about RMB 6.9 million for the same period in 2021[8]. - Other operating expenses increased to approximately RMB 16.8 million, representing 12.6% of total revenue, compared to 9.7% for the same period in 2021[10]. - Financial costs increased to approximately RMB 50.5 million, up from about RMB 48.2 million for the same period in 2021, primarily due to a significant rise in interest from customer deposits[11]. - The financial costs for the period were RMB (50,480,000), compared to RMB (48,206,000) in the previous year, reflecting an increase of 4.7%[63]. - The total remuneration for key management personnel increased to RMB 3,116 thousand for the six months ended June 30, 2022, from RMB 2,553 thousand in the same period of 2021[101]. Assets and Liabilities - As of June 30, 2022, cash and cash equivalents amounted to approximately RMB 69.2 million, a decrease from RMB 141.8 million as of December 31, 2021[15]. - Total borrowings decreased from RMB 795.9 million as of December 31, 2021, to RMB 467.7 million as of June 30, 2022, reflecting a significant reduction in leverage[15]. - The debt-to-equity ratio improved to approximately 26.2% as of June 30, 2022, down from 38.5% as of December 31, 2021, primarily due to the reduction in borrowings[16]. - Non-current assets decreased to RMB 824,287,000 from RMB 1,092,093,000 as of December 31, 2021, reflecting a decline of 24.5%[64]. - Current assets totaled RMB 1,302,040,000, slightly down from RMB 1,344,441,000 at the end of 2021[64]. - Total liabilities decreased to RMB 370,682,000 from RMB 360,500,000, indicating a slight increase of 0.3%[64]. - The company's total equity increased to RMB 1,320,811,000 from RMB 1,273,474,000, marking a growth of 3.7%[64]. Risk Management - The company focused on compliance management and enhancing risk management capabilities amid ongoing challenges from the COVID-19 pandemic[5]. - The company has developed a comprehensive risk management system to address various risks, with credit risk being the primary concern[27]. - The management is focusing on risk asset identification and assessment, enhancing risk management, and improving overdue asset recovery efforts[36]. - The company aims to diversify its business to reduce risks associated with solely focusing on financing leasing operations[37]. Corporate Governance - The company has adopted most of the best practices outlined in the corporate governance code[40]. - The company established a Compensation Committee consisting of three members, with independent non-executive director Mr. Liu Changxiang as the chairman, to review and recommend compensation policies for directors and senior management[43]. - The company held two Compensation Committee meetings during the reporting period, with all members present, to review director compensation and approve the remuneration for executive directors Mr. Luo Zhenming and Mr. Qiao Renjie[43]. - The Nomination Committee, also comprising three members and chaired by independent non-executive director Mr. Liu Xuewei, evaluated the independence of non-executive directors and made recommendations for director appointments[46]. Investments and Acquisitions - The company completed the acquisition of a 70% stake in the target academy for a total consideration of RMB 566 million (approximately HKD 660.4 million) on August 18, 2022[32]. - The company did not engage in any significant investments or acquisitions during the reporting period[24]. Share Capital and Securities - The company did not purchase, sell, or redeem any of its listed securities during the six months ending June 30, 2022[48]. - The company adopted a share option scheme in February 2019, which allows for the issuance of up to 150,000,000 shares under the scheme[49]. - As of June 30, 2022, there were no unexercised share options under the share option scheme, nor any options granted, agreed to be granted, exercised, cancelled, or lapsed[52]. - The company’s issued share capital remained at 1,500,000,000 shares with a par value of USD 0.000001 per share as of June 30, 2022[94]. Cash Flow - The company reported a net cash inflow from operating activities of RMB 274,724 thousand for the six months ended June 30, 2022, a decrease of 49.5% compared to RMB 543,323 thousand for the same period in 2021[67]. - The company reported a net cash outflow from financing activities of RMB 350,917 thousand for the six months ended June 30, 2022, compared to RMB 542,114 thousand for the same period in 2021, indicating a reduction in cash outflow[67]. Foreign Exchange and Credit Risks - The majority of the company's revenue and costs are denominated in RMB, exposing it to foreign exchange risks primarily related to RMB fluctuations[25]. - The expected loss rate for non-credit impaired receivables was 0.18% as of June 30, 2022, compared to 0.31% as of December 31, 2021[87]. - The company reported a significant increase in non-credit impaired expected credit losses, with RMB 90,000 as of June 30, 2022, compared to RMB 235,000 as of December 31, 2021[89].

Economic Environment - In 2021, the overall operating environment improved, with China's GDP reaching RMB 114.4 trillion, a year-on-year growth of 8.1%[11]. - The financing lease industry is undergoing structural adjustments due to stricter regulatory requirements introduced in 2020[11]. - The board anticipates continued gradual improvement in the Chinese economy and significant potential for the financing leasing industry in 2022[41]. Company Performance - The company reported a significant increase in profit during the reporting period, with no new bad debts arising[10]. - The company's revenue decreased by approximately 6.5% from RMB 248.0 million in 2020 to RMB 231.8 million in 2021 due to cautious client selection and project approvals in a changing financing leasing environment[15]. - Net profit for the year ended December 31, 2021, was approximately RMB 78.9 million, a significant increase of about 3.75 times compared to RMB 16.6 million in 2020, resulting in a net profit margin of 34.0%[20]. - The company reported a significant increase in revenue, with a year-on-year growth of 20% in the last fiscal year[1]. - The company reported a net profit of RMB 78,899,000 for 2021, compared to RMB 16,610,000 in 2020, representing a significant increase of 373.5%[169]. Financial Position - The company's cash and cash equivalents increased to approximately RMB 141.8 million in 2021 from RMB 35.7 million in 2020, indicating improved liquidity[21]. - The total borrowings decreased from RMB 1,489.0 million in 2020 to RMB 795.9 million in 2021, with a reduction in the debt-to-equity ratio from 55.5% to 38.5%[22]. - The company's total assets decreased to RMB 2,076,034,000 in 2021 from RMB 1,943,973,000 in 2020, a decline of 6.8%[171]. - The company’s total equity increased to RMB 1,273,474,000 in 2021 from RMB 1,195,450,000 in 2020, reflecting a growth of 6.5%[171]. - The group reported secured borrowings amounting to 66,541 million RMB, with no contracts transitioning to alternative rates during the year[184]. Business Strategy - The company plans to continue developing its business based on existing customer groups, adhering to the principle of "quality over quantity"[10]. - The company aims to broaden its business scope and create greater value for shareholders and society[10]. - The company is exploring acquisition opportunities outside of financing leasing to create synergies for its core business[10]. - The company plans to continue focusing on the financing leasing industry, which is expected to see strong demand due to the ongoing transformation and upgrading of China's manufacturing sector[14]. - The company has signed a memorandum of understanding with Nanshan Group for the proposed acquisition of interests in Yantai Nanshan College, indicating a strategy for market expansion[13]. Risk Management - The company has developed a comprehensive risk management system focusing on credit risk, which is the primary risk faced[34]. - The company has adopted a model for expected credit losses, considering factors such as industry characteristics, credit history, and economic conditions[36]. - The company has implemented various measures to recover overdue finance lease receivables, including phone calls, site visits, and legal actions, particularly focusing on clients in the healthcare sector[25]. Corporate Governance - The company is committed to good corporate governance and has established procedures in line with the corporate governance code as per the listing rules[58]. - The board of directors is responsible for the overall leadership and control of the group, including long-term strategy formulation[67]. - The company has a policy requiring at least three independent non-executive directors, constituting at least one-third of the board[63]. - The independent non-executive directors provide independent opinions to the group, enhancing the board's decision-making process[53]. Shareholder Relations - The company is committed to effective communication with shareholders, regularly reviewing its communication policy[99]. - Shareholder rights are protected by presenting individual resolutions at general meetings, with voting results published on the company's and stock exchange's websites[99]. - The company has a dividend policy that allows the board to propose interim and special dividends based on financial performance and other factors, with shareholder approval required for final dividends[96]. Related Party Transactions - The company confirmed compliance with the disclosure requirements under Chapter 14A of the Listing Rules regarding related party transactions[136]. - The financing lease income from Nanshan Group and its subsidiaries is included within the framework agreement, which has been approved by independent shareholders[138]. - The company’s major related party transactions include financing lease income and receivables from Nanshan Group[138]. Future Outlook - The company plans to present a resolution for the reappointment of the auditor at the upcoming annual general meeting[157]. - The company aims to enhance internal controls and risk management while expanding and diversifying its business[41]. - The company plans to diversify its revenue streams by introducing new financial products in the upcoming quarter[9].

Financial Performance - The company's revenue decreased by approximately 5.0% from RMB 128.0 million in the six months ended June 30, 2020, to RMB 121.6 million in the six months ended June 30, 2021[6]. - Total revenue for the six months ended June 30, 2021, was RMB 124,618 thousand, a decrease of 4.2% compared to RMB 130,226 thousand for the same period in 2020[44]. - The net profit for the period was RMB 44,748 thousand, compared to a net loss of RMB 35,528 thousand in the same period last year[44]. - Basic and diluted earnings per share for the period were RMB 0.0298, compared to a loss per share of RMB 0.0237 in the previous year[44]. - The company reported a significant turnaround in performance, with a profit of approximately RMB 44.7 million for the six months ended June 30, 2021, a significant increase of 225.9% from a loss of RMB 35.5 million in the same period of the previous year[10]. Expenses and Costs - Employee costs rose from RMB 4.3 million to RMB 6.9 million, an increase of approximately RMB 2.6 million due to higher average employee salaries[7]. - Other operating expenses increased to approximately RMB 11.8 million, representing 9.7% of total revenue, compared to 6.9% in the previous period[8]. - Total employee costs increased to RMB 6,904 thousand in 2021 from RMB 4,346 thousand in 2020, reflecting a rise of approximately 58.7%[58]. - The total financial costs decreased to RMB 48.2 million for the six months ended June 30, 2021, down from RMB 71.2 million in the same period of 2020, showing effective cost management[55]. Assets and Liabilities - As of June 30, 2021, cash and cash equivalents amounted to approximately RMB 431 million, an increase from RMB 357 million as of December 31, 2020[12]. - Total borrowings decreased from RMB 1,489 million as of December 31, 2020, to RMB 988.2 million as of June 30, 2021[12]. - The asset-liability ratio improved to approximately 44.3% as of June 30, 2021, down from 55.5% as of December 31, 2020, primarily due to reduced borrowings[13]. - The company’s total liabilities decreased from RMB 1,165,533 thousand to RMB 876,887 thousand, a reduction of 24.8%[45]. Cash Flow - Net cash generated from operating activities for the six months ended June 30, 2021, was RMB 543.3 million, compared to a net cash used of RMB 237.7 million in the same period of 2020, indicating a significant recovery[48]. - The company reported a net cash outflow from financing activities of RMB 542.1 million for the six months ended June 30, 2021, compared to a net cash inflow of RMB 307.8 million in the same period of 2020, indicating a shift in financing strategy[48]. Risk Management - The company continues to focus on compliance management and enhancing risk management capabilities in response to regulatory changes in the leasing industry[5]. - The group has developed a comprehensive risk management system to control various risks, including credit risk, which is considered the primary risk[19]. - The group regularly reviews the quality of financing lease receivables and has adopted a model for expected credit losses based on specific industry characteristics and economic conditions[21]. Customer Base and Market Focus - The customer base primarily serves the healthcare and aviation sectors, with a notable recovery in the healthcare industry[5]. - The company has no single customer contributing 10% or more to total revenue, indicating a diversified customer base[52]. - The company primarily operates in China, with all non-current assets located in the region, emphasizing its market focus[52]. Shareholder Information - As of June 30, 2021, the company’s major shareholder Union Capital Pte. Ltd. holds 768,475,221 shares, representing 51.23% of the company's equity[39]. - PA Investment Funds SPC holds 147,997,120 shares, accounting for 9.87% of the company's equity[39]. - The company has a total of 150,000,000 shares available for issuance upon the exercise of stock options under the stock option plan[36]. Future Plans and Investments - The company plans to continue focusing on market expansion and new product development to drive future growth[44]. - The company plans to diversify its business and reduce risks associated with solely operating in the financing lease sector[26]. - Approximately 50% of the net proceeds are allocated for business expansion in the healthcare sector, 40% for the aviation and public infrastructure sector, and 10% for general working capital[22]. Other Notable Events - The company sold a Gulfstream GV-SP (G550) aircraft for approximately USD 23.2 million in January 2021, with proceeds used to recover part of the financing lease agreement[24]. - A memorandum of understanding was signed with Nanshan Group on April 19, 2021, regarding the acquisition of full equity in Yantai Nanshan College[26]. - The company did not declare any dividends for the six months ended June 30, 2021, nor for the same period in 2020[61].

[Company Information](index=2&type=section&id=Company%20Information) This report details the company's fundamental information, including board members, committee structures, company secretary, registered office, principal place of business, auditor, and principal bankers - This report provides core information on the company's basic details, including board members, committee composition, company secretary, registered office, principal place of business, auditor, and principal bankers[5](index=5&type=chunk) [CEO Statement](index=3&type=section&id=CEO%20Statement) The CEO reviews the 2020 operating environment, noting the group's successful turnaround despite global economic slowdown, COVID-19, and increased industry regulation - The CEO reviewed the 2020 operating environment, noting that despite multiple challenges such as global economic slowdown, the COVID-19 pandemic, and increased industry regulation, which led to rent arrears from some clients (especially in the medical sector), the Group successfully achieved a turnaround through the management team's efforts[6](index=6&type=chunk)[7](index=7&type=chunk) - Looking ahead, the company is committed to improving operating performance and gradually implementing its FinTech strategy to achieve stable and long-term development[7](index=7&type=chunk) [Management Discussion and Analysis](index=4&type=section&id=Management%20Discussion%20and%20Analysis) This section provides an in-depth analysis of the company's operational performance, financial results, liquidity, and risk management strategies for the reporting period [Business Review](index=4&type=page&id=Business%20Review) In 2020, China's finance lease industry experienced slower growth and increased competition due to macroeconomic factors and the pandemic, with national finance lease contract balances decreasing by 2.3% - In 2020, the development of China's finance lease industry slowed, with the national finance lease contract balance approximately **RMB 6.50 trillion**, a year-on-year decrease of **2.3%**[8](index=8&type=chunk) - The China Banking and Insurance Regulatory Commission issued the "Interim Measures for the Supervision and Administration of Finance Lease Companies" in June 2020, strengthening regulatory requirements and making risk control a core industry issue[8](index=8&type=chunk) - Affected by the macroeconomic environment, some of the Group's lessees, particularly in the medical industry, experienced rent arrears, leading to further impairment provisions for finance lease receivables[9](index=9&type=chunk) [Financial Review](index=5&type=page&id=Financial%20Review) In FY2020, the Group successfully turned losses into profits, achieving a net profit of RMB 16.6 million, primarily due to significantly lower finance costs and reduced impairment provisions for finance lease receivables [Revenue](index=5&type=page&id=Revenue) Group revenue, primarily from finance leases, decreased by 4.9% to RMB 248.0 million in 2020, mainly due to a reduction in new finance lease business during the year | Indicator | 2020 (RMB million) | 2019 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 248.0 | 260.9 | -4.9% | [Finance Costs](index=7&type=page&id=Finance%20Costs) Finance costs decreased by 31.0% to RMB 128.8 million in 2020, primarily due to reduced borrowing costs and bond interest expenses following bond repayments | Indicator | 2020 (RMB million) | 2019 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Finance Costs | 128.8 | 186.7 | -31.0% | [Profit (Loss) for the Year](index=7&type=page&id=Profit%20(Loss)%20for%20the%20Year) The Group achieved a turnaround in 2020, reporting a profit of approximately RMB 16.6 million, a significant improvement from the RMB 84.7 million loss in 2019, mainly due to reduced impairment provisions for finance lease receivables | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Profit (Loss) for the Year (RMB million) | 16.6 | (84.7) | | Net Profit Margin | 6.7% | -32.5% | [Dividends](index=8&type=page&id=Dividends) The Board of Directors does not recommend the payment of any final dividend for the year ended December 31, 2020 - The Board of Directors does not recommend a final dividend for the year 2020 (2019: nil)[18](index=18&type=chunk) [Liquidity, Financial Resources and Capital Sources](index=8&type=page&id=Liquidity%2C%20Financial%20Resources%20and%20Capital%20Sources) As of the end of 2020, the Group's cash and cash equivalents significantly decreased to RMB 35.7 million, while total equity slightly increased to RMB 1,195.5 million, and the gearing ratio improved to 55.5% | Indicator (as at Dec 31) | 2020 (RMB million) | 2019 (RMB million) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 35.7 | 257.6 | | Total Equity | 1,195.5 | 1,183.1 | | Gearing Ratio | 55.5% | 58.6% | [Finance Lease Receivables](index=8&type=page&id=Finance%20Lease%20Receivables) Net finance lease receivables slightly increased by 0.6% to RMB 2,703.9 million at the end of 2020, but impairment loss provisions significantly rose by 37.9% due to increased arrears, particularly in the medical sector | Indicator (as at Dec 31) | 2020 (RMB million) | 2019 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Finance Lease Receivables (Net) | 2,703.9 | 2,686.6 | +0.6% | | Impairment Loss Provisions | 287.9 | 208.8 | +37.9% | - The increase in impairment loss provisions was primarily due to rent arrears from some lessees, especially in the medical industry[21](index=21&type=chunk) [Risk Management](index=10&type=page&id=Risk%20Management) The Group considers credit risk its primary risk and has established a comprehensive risk management system, voluntarily adopting a five-category classification method for finance lease receivables based on overdue days - The Group adopts a five-category classification method to measure and monitor the asset quality of finance lease receivables, with specific classifications as follows: - **Normal**: Overdue for less than or equal to 90 days - **Special Mention**: Overdue for more than 90 days but less than or equal to 150 days - **Substandard**: Overdue for more than 150 days but less than or equal to 210 days - **Doubtful**: Overdue for more than 210 days but less than or equal to 270 days - **Loss**: Overdue for more than 270 days[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) [Use of Proceeds from Global Offering](index=11&type=page&id=Use%20of%20Proceeds%20from%20Global%20Offering) The company raised approximately RMB 319.2 million net proceeds from its 2019 listing, with RMB 32.5 million remaining unutilized by the end of 2020 due to a slowdown in business development caused by the COVID-19 pandemic | Use of Net Proceeds | Planned Amount (RMB million) | Utilized Amount (RMB million) | Unutilized Amount (RMB million) | | :--- | :--- | :--- | :--- | | Healthcare Industry Expansion | 159.6 | 128.0 | 31.6 | | Aviation and Public Infrastructure Industry Expansion | 127.7 | 127.7 | – | | General Working Capital | 31.9 | 31.0 | 0.9 | | **Total** | **319.2** | **286.7** | **32.5** | [Events After Reporting Period](index=13&type=page&id=Events%20After%20Reporting%20Period) In January 2021, an indirect wholly-owned subsidiary of the Group entered into an agreement to sell a Gulfstream G550 aircraft for 23.2 million USD, terminating the corresponding finance lease agreement - In January 2021, the company sold a Gulfstream G550 aircraft for **23.2 million USD** and terminated the related finance lease agreement[33](index=33&type=chunk) [Outlook and Plans](index=13&type=page&id=Outlook%20and%20Plans) For 2021, the Board anticipates accelerated economic recovery with vaccine rollout and plans to steadily advance business, strengthen internal management, and seek new breakthroughs in industries and regions while strictly controlling risks - The Group plans to steadily advance its business in 2021, prioritizing risk prevention and asset monitoring, while seeking new breakthroughs in industries and regions[35](index=35&type=chunk) [Biographies of Directors](index=14&type=section&id=Biographies%20of%20Directors) This section provides detailed personal and professional backgrounds of the company's executive, non-executive, and independent non-executive directors, including their roles within the Group - This section provides detailed personal biographies, professional backgrounds, and positions held within the Group for the company's executive directors, non-executive directors, and independent non-executive directors[37](index=37&type=chunk)[39](index=39&type=chunk)[42](index=42&type=chunk)[44](index=44&type=chunk) - Key management personnel include: - **Mr. Li Luqiang**: Executive Director and CEO, responsible for the Group's strategic planning and overall management - **Mr. Li Zhixuan**: Executive Director and Deputy General Manager, responsible for operations and risk management - **Mr. Jiao Jianbin**: Non-executive Director, appointed on September 16, 2020 - **Mr. Liu Changxiang, Mr. Liu Xuewei, Mr. Jiao Jian**: All independent non-executive directors, responsible for providing independent opinions[37](index=37&type=chunk)[39](index=39&type=chunk)[42](index=42&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) [Corporate Governance Report](index=19&type=section&id=Corporate%20Governance%20Report) This report outlines the company's adherence to corporate governance principles, detailing the structure and activities of the Board of Directors and its committees, as well as risk management and shareholder rights [Board of Directors](index=19&type=page&id=Board%20of%20Directors) During the reporting period, the company complied with corporate governance codes, with the Board comprising executive, non-executive, and independent non-executive directors, and held 10 meetings with high attendance - The position of Chairman has been vacant since October 9, 2019, with responsibilities jointly assumed by Board members[51](index=51&type=chunk) - During the reporting period, the Board held **10 meetings**, with most directors attending all meetings[56](index=56&type=chunk) [Board Committees](index=22&type=page&id=Board%20Committees) The company has established Audit, Remuneration, and Nomination Committees, all composed of independent non-executive directors, with detailed responsibilities, members, and meeting frequencies outlined - The Audit Committee, chaired by Mr. Liu Xuewei, held **6 meetings** during the year[60](index=60&type=chunk) - The Remuneration Committee, chaired by Mr. Liu Changxiang, held **3 meetings** during the year[61](index=61&type=chunk) - The Nomination Committee, chaired by Mr. Liu Xuewei, held **3 meetings** during the year[63](index=63&type=chunk) [Risk Management and Internal Control](index=26&type=page&id=Risk%20Management%20and%20Internal%20Control) The Board is ultimately responsible for the Group's risk management and internal control systems, which are reviewed annually, and confirmed to be adequate and effective as of the end of 2020 - The Group engaged external internal control consultants to review its internal control system for the year ended December 31, 2020, and no significant risks or control deficiencies were identified[80](index=80&type=chunk) - The Board and Audit Committee confirmed that the Group's risk management and internal control systems were adequate and effective for the year 2020[81](index=81&type=chunk) [Shareholders' Rights](index=31&type=page&id=Shareholders'%20Rights) This section outlines measures to protect shareholder rights, including communication policies and procedures for shareholders to convene extraordinary general meetings and propose resolutions, with a 10% paid-up capital threshold for EGM requests - Pursuant to Article 58 of the Company's Articles of Association, shareholders holding not less than **10%** of the paid-up capital have the right to request the Board to convene an extraordinary general meeting[92](index=92&type=chunk) [Directors' Report](index=33&type=section&id=Directors'%20Report) This report provides an overview of the company's operations, including customer and supplier relationships, directors' and major shareholders' interests, connected transactions, and significant litigation updates [Customers and Suppliers](index=33&type=page&id=Customers%20and%20Suppliers) In 2020, the Group's customer concentration increased, with the top five customers accounting for 32.62% of total revenue, up from 16.14% in 2019 | Customer Concentration | 2020 | 2019 | | :--- | :--- | :--- | | Top Five Customers as % of Total Revenue | 32.62% | 16.14% | | Largest Customer as % of Total Revenue | 10.93% | 3.97% | [Directors' and Chief Executive's Interests in Shares and Debentures](index=37&type=page&id=Directors'%20and%20Chief%20Executive's%20Interests) This report discloses the shareholdings of directors and key executives in the company, with CEO Mr. Li Luqiang holding approximately 0.57% of the company's shares as of the end of 2020 - CEO Mr. Li Luqiang holds approximately **0.57%** of the company's shareholding interests, including interests through controlled corporations and beneficial ownership[122](index=122&type=chunk) [Major Shareholders' Interests in Shares](index=38&type=page&id=Major%20Shareholders'%20Interests%20in%20Shares) As of the end of 2020, Union Capital Pte. Ltd., wholly owned by Ms. Sui Yongqing, was the company's controlling shareholder with a 51.23% stake, while PA Investment Funds SPC held 9.87% | Major Shareholder | Shareholding Percentage | | :--- | :--- | | Union Capital Pte. Ltd. (and associates) | 51.23% | | PA Investment Funds SPC (and associates) | 9.87% | [Connected Transactions](index=40&type=page&id=Connected%20Transactions) The report discloses the Group's connected transactions, primarily a finance lease framework agreement with Nanshan Group Co. Ltd. and its subsidiaries, confirmed by independent non-executive directors as fair and reasonable - The Group has a finance lease framework agreement with its associate, Nanshan Group Co. Ltd., providing sale-and-leaseback and direct finance lease services to the Group[128](index=128&type=chunk) [Litigation](index=44&type=page&id=Litigation) The report updates on two significant lawsuits: the dispute with Shangqiu Fourth People's Hospital was resolved in September 2020 with full payment, and the lawsuit against Nehe People's Hospital resulted in a favorable judgment, with court enforcement underway - The lawsuit against Shangqiu Hospital was resolved, with the counterparty settling and repaying all outstanding amounts in September 2020[140](index=140&type=chunk) - The lawsuit against Nehe Hospital resulted in a favorable judgment, and the court is assessing the value of frozen guarantor assets to enforce the judgment[141](index=141&type=chunk)[142](index=142&type=chunk) [Independent Auditor's Report](index=47&type=section&id=Independent%20Auditor's%20Report) The auditor, Shinewing (HK) CPA Limited, issued an unqualified opinion on the Group's consolidated financial statements for the year ended December 31, 2020, highlighting impairment provisions for finance lease receivables as a key audit matter - Shinewing (HK) CPA Limited, the auditor, issued an **unqualified opinion** on the Group's consolidated financial statements for the year ended December 31, 2020[151](index=151&type=chunk) - The auditor identified "Expected Credit Loss Provisions for Finance Lease Receivables" as a key audit matter due to its materiality and the significant management judgment involved[155](index=155&type=chunk) [Consolidated Financial Statements](index=52&type=section&id=Consolidated%20Financial%20Statements) This section presents the Group's comprehensive financial performance, position, and cash flows for the reporting period, along with detailed notes explaining key accounting policies and financial items [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=52&type=page&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) This statement presents the Group's operating results for FY2020, showing a revenue of RMB 248.0 million and a profit for the year of RMB 16.6 million, successfully turning around from a loss of RMB 84.7 million in 2019 | Indicator (RMB thousand) | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | 248,046 | 260,876 | | Profit (Loss) Before Tax | 12,817 | (101,589) | | Profit (Loss) for the Year | 16,610 | (84,692) | [Consolidated Statement of Financial Position](index=53&type=page&id=Consolidated%20Statement%20of%20Financial%20Position) This statement reflects the Group's financial position at the end of 2020, with total assets of RMB 3,109.5 million and total equity of RMB 1,195.5 million, where finance lease receivables constitute the largest asset component | Indicator (as at Dec 31, RMB thousand) | 2020 | 2019 | | :--- | :--- | :--- | | Non-current Assets | 1,495,892 | 1,780,925 | | Current Assets | 1,613,614 | 1,303,035 | | **Total Assets** | **3,109,506** | **3,083,960** | | Current Liabilities | 1,165,533 | 195,410 | | Non-current Liabilities | 748,523 | 1,705,478 | | **Total Liabilities** | **1,914,056** | **1,900,888** | | **Total Equity** | **1,195,450** | **1,183,072** | [Consolidated Statement of Cash Flows](index=55&type=page&id=Consolidated%20Statement%20of%20Cash%20Flows) This statement illustrates the cash movements for FY2020, showing net cash generated from operating activities of RMB 226.4 million, net cash used in investing activities of RMB 139.3 million, and net cash used in financing activities of RMB 306.1 million, resulting in a net decrease in cash and cash equivalents of RMB 219.0 million | Cash Flow (RMB thousand) | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 226,425 | 1,104,187 | | Net Cash Used in Investing Activities | (139,295) | (3,600) | | Net Cash Used in Financing Activities | (306,124) | (1,236,351) | | **Net Decrease in Cash and Cash Equivalents** | **(218,994)** | **(135,764)** | [Notes to the Consolidated Financial Statements](index=57&type=page&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations and supplementary information for items in the financial statements, including key accounting policies, segment information, asset and liability breakdowns, related party transactions, and financial risk management Finance Lease Receivables by Industry (2020) | Industry | Amount (RMB thousand) | Percentage (%) | | :--- | :--- | :--- | | Public Infrastructure | 951,233 | 35.18 | | Healthcare | 1,157,746 | 42.81 | | Aviation | 406,805 | 15.05 | | Others | 188,121 | 6.96 | | **Total** | **2,703,905** | **100.00** | - The Group has finance lease transactions with its associate, Nanshan Group Co. Ltd. and its subsidiaries, generating revenue of **RMB 80,905 thousand** in 2020, with an outstanding receivable balance of **RMB 835,029 thousand** at year-end[442](index=442&type=chunk) [Financial Summary](index=120&type=section&id=Financial%20Summary) This section provides a concise overview of the Group's key financial performance and position indicators over the past five years, offering a quick reference for trends and overall financial health Five-Year Performance Summary (RMB thousand) | Indicator | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 248,046 | 260,876 | 358,061 | 308,747 | 300,870 | | Profit for the Year | 16,610 | (84,692) | 40,598 | 36,576 | 29,279 | Five-Year Financial Position Summary (RMB thousand) | Indicator | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 3,109,506 | 3,083,960 | 4,212,270 | 4,763,490 | 4,205,669 | | Total Equity | 1,195,450 | 1,183,072 | 941,996 | 909,496 | 804,724 |

Management Discussion and Analysis [Business Review](index=4&type=section&id=Business%20Review) COVID-19 severely impacted key clients, causing delayed repayments and the industry's first negative growth since 2006, prompting legal actions - COVID-19 severely impacted the company's key healthcare and aviation clients, leading to delayed repayments[5](index=5&type=chunk) - China's finance lease contract balance was approximately **RMB 6.5 trillion** at the end of Q1 2020, a **2.8% decrease** from end-2019, marking the first negative growth since 2006[5](index=5&type=chunk) - Management initiated various measures, including legal actions, to protect the company's rights under finance lease agreements due to delayed repayments[5](index=5&type=chunk) [Financial Review](index=4&type=section&id=Financial%20Review) Total revenue decreased by 10.1%, and loss for the period surged 975.8% to **RMB 35.5 million**, primarily due to increased impairment provisions [Revenue](index=4&type=section&id=Revenue) Total revenue decreased by 10.1% due to unrecognised finance lease income from lessees with prolonged repayment delays Revenue Overview | Item | Six Months Ended June 30, 2020 (RMB million) | Six Months Ended June 30, 2019 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | Approx. 128.0 | Approx. 142.4 | -10.1% | [Other Income, Gains or Losses](index=5&type=section&id=Other%20Income%2C%20Gains%20or%20Losses) Other income, gains or losses significantly increased YoY, driven by higher bank interest income and new compensation from aircraft sales Details of Other Income, Gains or Losses | Item | Six Months Ended June 30, 2020 (RMB million) | Six Months Ended June 30, 2019 (RMB million) | Change (RMB million) | | :--- | :--- | :--- | :--- | | Bank interest income | Approx. 1.4 | Approx. 0.8 | +0.6 | | Compensation from aircraft sales | Approx. 0.9 | 0 | +0.9 | | **Total** | **Approx. 2.3** | **Approx. 0.9** | **+1.4** | [Staff Costs](index=5&type=section&id=Staff%20Costs) Staff costs decreased by 35.8% YoY due to a reduction in the number of employees - Staff costs decreased by approximately **35.8%** from approximately **RMB 6.7 million** in the prior period to approximately **RMB 4.3 million** in the reporting period, primarily due to a reduction in employee headcount[9](index=9&type=chunk) [Other Operating Expenses](index=5&type=section&id=Other%20Operating%20Expenses) Other operating expenses slightly decreased YoY from approximately **RMB 10.0 million** to **RMB 8.9 million**, maintaining a stable proportion of total revenue - Other operating expenses decreased to approximately **RMB 8.9 million** from **RMB 10.0 million** in the prior period[10](index=10&type=chunk) [Finance Costs](index=5&type=section&id=Finance%20Costs) Finance costs significantly decreased by **34.4%** YoY to **RMB 71.2 million**, driven by reduced borrowing balances and bond maturity Composition of Finance Costs | Item | Six Months Ended June 30, 2020 (RMB million) | Six Months Ended June 30, 2019 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Borrowing costs | Approx. 54.5 | Approx. 77.6 | -29.7% | | Bonds payable costs | Approx. 9.7 | Approx. 23.1 | -57.9% | | **Total Finance Costs** | **Approx. 71.2** | **Approx. 108.4** | **-34.4%** | [Loss for the Period](index=5&type=section&id=Loss%20for%20the%20Period) Loss for the period sharply expanded by **975.8%**, and net profit margin deteriorated from **-2.3%** to **-27.3%**, due to decreased finance lease income and increased impairment provisions Loss for the Period and Net Profit Margin | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | YoY Change | | :--- | :--- | :--- | :--- | | Loss for the period (RMB million) | Approx. 35.5 | Approx. 3.3 | +975.8% | | Net profit margin | -27.3% | -2.3% | Significant decline | [Liquidity, Financial Resources and Capital Structure](index=6&type=section&id=Liquidity%2C%20Financial%20Resources%20and%20Capital%20Structure) Cash and cash equivalents decreased to **RMB 337 million** YoY, while the gearing ratio remained stable at **64.1%**, with **RMB 586 million** in new borrowings supporting operations Key Financial Position Indicators (As at Period-End) | Metric | June 30, 2020 (RMB million) | June 30, 2019 (RMB million) | | :--- | :--- | :--- | | Cash and cash equivalents | Approx. 336.9 | Approx. 639.2 | | Working capital | Approx. 762.0 | Approx. 1,016.0 | | Total equity | Approx. 1,146.8 | Approx. 1,262.0 | | Gearing ratio | Approx. 64.1% | Approx. 64.9% | - For the six months ended June 30, 2020, the Group obtained new borrowings of **RMB 586 million** with interest rates ranging from **3.85% to 8%**[15](index=15&type=chunk) [Finance Lease Receivables](index=6&type=section&id=Finance%20Lease%20Receivables) Total finance lease receivables slightly decreased by 1.5% YoY, but impairment loss provisions surged by **298.8%** to **RMB 303 million**, reflecting heightened concerns over asset quality Finance Lease Receivables and Impairment Provisions | Item | Six Months Ended June 30, 2020 (RMB million) | Six Months Ended June 30, 2019 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Finance lease receivables | Approx. 2,940.2 | Approx. 2,985.1 | -1.5% | | Impairment loss provisions | Approx. 303.1 | Approx. 76.0 | +298.8% | [Employees and Remuneration Policy](index=6&type=section&id=Employees%20and%20Remuneration%20Policy) As of June 30, 2020, full-time employees decreased from 40 to 22, with employee benefit expenses falling from **RMB 6.7 million** to **RMB 4.3 million** - As of June 30, 2020, the Group employed **22 full-time employees**, a significant reduction from **40** in the prior period[18](index=18&type=chunk) - For the six months ended June 30, 2020, employee benefit expenses were approximately **RMB 4.3 million**, lower than **RMB 6.7 million** in the prior period[18](index=18&type=chunk) [Risk Management](index=7&type=section&id=Risk%20Management) The Group manages credit risk with a comprehensive system, adopting a five-tier asset classification for finance lease receivables and an expected credit loss model for impairment assessment - The Group identifies credit risk as its primary exposure and has developed a comprehensive risk management system covering pre-transaction, in-transaction, and post-transaction controls[20](index=20&type=chunk) - The company voluntarily adopts a five-tier asset quality classification system (normal, special mention, substandard, doubtful, loss) to monitor finance lease receivables, categorized by days past due[20](index=20&type=chunk)[21](index=21&type=chunk) - The Group also uses an expected credit loss model for impairment assessment, considering client characteristics, credit history, and economic conditions[22](index=22&type=chunk) [Use of Proceeds from Global Offering](index=8&type=section&id=Use%20of%20Proceeds%20from%20Global%20Offering) Net proceeds of **RMB 323.5 million** were primarily for business expansion, with **RMB 57.7 million** remaining unutilized due to economic slowdown, expected to be fully deployed by end-2021 Use and Utilization of Net Proceeds (As of June 30, 2020) | Use of Net Proceeds | Planned Utilization (RMB million) | Utilized Amount (RMB million) | Unutilized Amount (RMB million) | Expected Timeline for Utilization | | :--- | :--- | :--- | :--- | :--- | | Healthcare industry expansion | 161.8 | 128.0 | 33.8 | Expected to be fully utilized by end-2021 or earlier | | Aviation and public infrastructure industry expansion | 129.4 | 124.5 | 4.9 | Expected to be fully utilized by end-2021 or earlier | | General working capital | 32.3 | 13.3 | 19.0 | Expected to be fully utilized by end-2021 or earlier | | **Total** | **323.5** | **265.8** | **57.7** | | - The primary reason for unutilized proceeds is the slower pace of business development due to global economic slowdown and market changes[26](index=26&type=chunk) [Events After Reporting Period](index=9&type=section&id=Events%20After%20Reporting%20Period) Post-reporting period, the company experienced board and management changes, including a new Non-Executive Director, an Executive Director's resignation, and a new CFO appointment - Mr. Jiao Jianbin was appointed as a Non-Executive Director on September 16, 2020[27](index=27&type=chunk) - Ms. Xu Juan resigned as an Executive Director on September 18, 2020, and Mr. Yuan Jianshan was appointed as Chief Financial Officer on the same day[27](index=27&type=chunk) [Outlook and Plans](index=9&type=section&id=Outlook%20and%20Plans) For H2 2020, the Group plans to strengthen risk management and overdue asset recovery, focus on counter-cyclical projects, and explore FinTech applications for long-term development - Strengthen risk management and overdue asset recovery to ensure asset security[28](index=28&type=chunk) - Prioritize projects in counter-cyclical or weakly cyclical industries for business deployment[28](index=28&type=chunk) - Explore FinTech applications, especially blockchain technology in automotive, shipping, and construction machinery leasing, to build a digital service platform[28](index=28&type=chunk) Other Information [Corporate Governance and Board Committees](index=10&type=section&id=Corporate%20Governance%20and%20Board%20Committees) The company maintains high corporate governance standards, complying with all code provisions and ensuring its Audit, Remuneration, and Nomination Committees fulfilled their duties - The company complied with all code provisions of the Corporate Governance Code during the reporting period[30](index=30&type=chunk) - The Audit Committee reviewed the unaudited condensed financial statements for the six months ended June 30, 2020[32](index=32&type=chunk) [Securities Transactions and Share Option Scheme](index=11&type=section&id=Securities%20Transactions%20and%20Share%20Option%20Scheme) The company complied with its directors' securities transaction code, with no listed securities purchased, sold, or redeemed, and no share options granted or exercised during the period - All directors confirmed compliance with the securities dealing code during the reporting period[36](index=36&type=chunk) - Neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities during the reporting period[37](index=37&type=chunk) - No outstanding share options existed under the share option scheme, nor were any granted, exercised, cancelled, or lapsed during the reporting period[39](index=39&type=chunk) [Directors' and Shareholders' Interests](index=12&type=section&id=Directors%27%20and%20Shareholders%27%20Interests) As of June 30, 2020, CEO Mr. Li Luqiang held **0.55%** interest, while Union Capital Pte. Ltd. was the controlling shareholder with **51.23%**, and PA Investment Funds SPC held **9.87%** - Executive Director and CEO Mr. Li Luqiang held approximately **0.55%** of the company's interests through controlled corporations and beneficial ownership[40](index=40&type=chunk) Major Shareholder Holdings (As of June 30, 2020) | Major Shareholder | Interest Percentage | | :--- | :--- | | Union Capital Pte. Ltd. (and parties acting in concert) | 51.23% | | PA Investment Funds SPC (and parties acting in concert) | 9.87% | Condensed Consolidated Financial Statements [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=15&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) Revenue decreased by 10.1% to **RMB 128 million**, and loss for the period expanded to **RMB 35.5 million** due to increased financial asset impairment losses, with a loss per share of **RMB 0.0237** Key Profit or Loss Statement Data | Item (RMB thousand) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Revenue | 127,967 | 142,395 | | Finance costs | (71,185) | (108,445) | | Impairment loss on financial assets | (94,135) | (14,686) | | **Loss for the period** | **(35,528)** | **(3,250)** | | Loss per share (RMB) | (0.0237) | (0.0025) | [Condensed Consolidated Statement of Financial Position](index=16&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2020, total assets were **RMB 3.457 billion**, total liabilities **RMB 2.310 billion**, and total equity **RMB 1.147 billion**, with finance lease receivables and borrowings as core components Key Financial Position Data (As of June 30, 2020) | Item (RMB thousand) | Amount | | :--- | :--- | | **Assets** | | | Finance lease receivables | 2,940,197 | | Bank balances and cash | 356,741 | | **Total Assets** | **3,457,056** | | **Liabilities and Equity** | | | Borrowings | 1,813,929 | | Bonds issued | 236,580 | | **Total Liabilities** | **2,310,286** | | **Total Equity** | **1,146,770** | [Condensed Consolidated Cash Flow Statement](index=18&type=section&id=Condensed%20Consolidated%20Cash%20Flow%20Statement) Net cash outflow from operating activities was **RMB 238 million**, a significant reversal YoY, while net cash inflow from financing activities was **RMB 308 million**, with period-end cash at **RMB 337 million** Key Cash Flow Statement Data | Item (RMB thousand) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash from operating activities | (237,733) | 753,604 | | Net cash from investing activities | 10,844 | (488) | | Net cash from financing activities | 307,814 | (506,838) | | **Cash and cash equivalents at period-end** | **336,913** | **639,201** | [Notes to the Condensed Consolidated Interim Financial Information](index=19&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Interim%20Financial%20Information) Notes detail key accounting items, showing impairment provisions for finance lease receivables increased from **RMB 209 million** to **RMB 303 million**, with related party finance lease income of **RMB 30.506 million** - During the reporting period, impairment provisions for finance lease receivables increased from approximately **RMB 209 million** at the beginning of the year to approximately **RMB 303 million** at period-end, with credit-impaired (over 90 days past due) provisions accounting for the majority[74](index=74&type=chunk)[79](index=79&type=chunk) - For the six months ended June 30, 2020, the Group obtained new borrowings of **RMB 586 million** with interest rates ranging from **3.85% to 8%**[83](index=83&type=chunk) - During the reporting period, finance lease income from related parties Nanshan Group and its subsidiaries was **RMB 30.506 million**[90](index=90&type=chunk)

[Company Information](index=3&type=section&id=Company%20Information) This section provides essential details about the company's registration, listing, and key personnel - International Union Financial Leasing Co Ltd is a limited company registered in the Cayman Islands, listed on the Main Board of the Hong Kong Stock Exchange with **stock code 1563**[1](index=1&type=chunk)[3](index=3&type=chunk) Key Company Information | Role | Institution/Individual | | :--- | :--- | | **Chief Executive Officer** | Mr Li Luqiang | | **Independent Non-Executive Directors** | Mr Liu Changxiang, Mr Liu Xuewei, Mr Jiao Jian | | **Auditor** | Shinewing (HK) CPA Limited | | **Principal Bankers** | Industrial Bank Longkou Branch, Shanghai Pudong Development Bank Co Ltd Tianjin Branch | [CEO's Statement](index=4&type=section&id=CEO%27s%20Statement) The CEO reviews the company's challenging first year post-listing, marked by economic headwinds and internal issues, while outlining future strategies for stable, long-term growth amidst new industry opportunities - CEO Mr Li Luqiang reviewed the company's challenging first year post-listing (2019), citing macroeconomic changes, tightening financing, and internal incidents that significantly impacted group performance[7](index=7&type=chunk) - Despite a complex macroeconomic outlook, national initiatives in new infrastructure and technology, alongside upcoming finance lease regulations, present new industry opportunities for the company to overcome difficulties, improve performance, and implement a fintech strategy for stable long-term development[7](index=7&type=chunk)[8](index=8&type=chunk) [Management Discussion and Analysis](index=5&type=section&id=Management%20Discussion%20and%20Analysis) This section provides a comprehensive review of the group's business operations, financial performance, liquidity, and risk management strategies for the reporting period [Business Review](index=5&type=section&id=Business%20Review) In 2019, the finance lease industry experienced significant slowdown due to economic pressures and deleveraging policies, leading to increased impairment provisions for the Group's receivables and a strategic shift towards risk control - China's GDP growth rate narrowed to **6.1%** in 2019, with the finance lease industry's contract balance growing by only **0.1%** year-on-year, indicating a sustained slowdown in sector development[11](index=11&type=chunk) - Tightening financing due to national financial deleveraging policies led to rent arrears from some lessees, particularly in the healthcare sector, forcing the Group to make substantial impairment provisions that significantly impacted performance[12](index=12&type=chunk) [Financial Review](index=5&type=section&id=Financial%20Review) The Group's financial performance significantly declined in fiscal year 2019, shifting from profit to loss due to reduced new finance lease business and a substantial increase in impairment provisions for finance lease receivables Key Financial Indicators for Fiscal Year 2019 | Indicator | 2019 (RMB million) | 2018 (RMB million) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | **Revenue** | 260.9 | 358.1 | -27.1% | | **Finance Costs** | 186.7 | 241.6 | -22.7% | | **(Loss)/Profit for the Year** | (84.7) | 40.6 | From Profit to Loss | | **Net Profit Margin** | -32.5% | 11.3% | -43.8 percentage points | - Revenue decreased primarily due to fewer new finance lease businesses initiated during the year, with finance lease income at **RMB260.9 million** and zero advisory fee income[15](index=15&type=chunk) - Finance costs decreased mainly due to the maturity of three bonds payable, reducing bond costs from **RMB70.9 million** to **RMB37.9 million**[22](index=22&type=chunk) - The annual performance shifted from profit to loss, primarily due to significant impairment provisions for finance lease receivables and reduced finance lease income[23](index=23&type=chunk) [Liquidity, Financial Resources and Capital Structure](index=7&type=section&id=Liquidity%2C%20Financial%20Resources%20and%20Capital%20Structure) At the end of 2019, the Group's cash and cash equivalents decreased, but working capital improved from net liabilities to net assets, while total equity increased due to listing proceeds and the debt-to-asset ratio decreased to 58.6% Financial Position and Capital Structure (as at 31 December 2019) | Indicator | 2019 (RMB million) | 2018 (RMB million) | | :--- | :--- | :--- | | **Cash and Cash Equivalents** | 257.6 | 391.3 | | **Working Capital** | 1,107.6 (Net Assets) | (316.6) (Net Liabilities) | | **Total Equity** | 1,183.1 | 942.0 | | **Debt-to-Asset Ratio** | 58.6% | 76.5% | [Finance Lease Receivables](index=8&type=section&id=Finance%20Lease%20Receivables) The quality of the Group's finance lease receivables was under pressure in 2019, with total receivables decreasing by 27.7% and accumulated impairment provisions significantly increasing by 207.1% to RMB209 million - Finance lease receivables decreased from **RMB3.71 billion** to **RMB2.69 billion**, a year-on-year reduction of **27.7%**[27](index=27&type=chunk) - Accumulated impairment provisions surged by **207.1%** from **RMB68 million** to **RMB209 million**, primarily due to some clients' inability to make timely repayments, leading the Group to make provisions based on prudence[27](index=27&type=chunk)[28](index=28&type=chunk) [Risk Management](index=9&type=section&id=Risk%20Management) The Group identifies credit risk as its primary concern, implementing a comprehensive risk management system that includes due diligence, independent reviews, multi-level approvals, and a five-tier asset classification standard for monitoring finance lease receivables - The Group considers credit risk its primary concern, managing it through comprehensive client due diligence, independent data review, and multi-level approval processes[38](index=38&type=chunk) - The Group voluntarily adopted a five-tier asset classification method (normal, special mention, substandard, doubtful, loss) to monitor the quality of finance lease receivables, with classification based on the number of days lease payments are overdue[38](index=38&type=chunk)[39](index=39&type=chunk) [Use of Proceeds from Global Offering](index=11&type=section&id=Use%20of%20Proceeds%20from%20Global%20Offering) The company raised approximately HKD354 million net from its global offering upon listing on March 15, 2019, with RMB253 million utilized by year-end primarily for expanding finance lease operations - Net proceeds from the global offering amounted to approximately **HKD354 million**, with approximately **RMB252.5 million** utilized by year-end for finance lease business expansion[42](index=42&type=chunk) [Outlook and Plans](index=11&type=section&id=Outlook%20and%20Plans) For 2020, the company anticipates severe international economic conditions and heightened industry competition due to the COVID-19 pandemic, planning to enhance governance, risk control, and asset management while pursuing new client opportunities and strengthening existing relationships - Facing the COVID-19 pandemic outbreak in early 2020 and intense industry competition, the company will prudently advance business development with a focus on risk prevention[44](index=44&type=chunk) - Future plans include enhancing risk management, seizing development opportunities, seeking new breakthroughs in industries and regions, and deepening cooperation with high-quality clients[44](index=44&type=chunk) [Biographical Details of Directors](index=12&type=section&id=Biographical%20Details%20of%20Directors) This section provides an overview of the professional backgrounds and expertise of the company's executive and independent non-executive directors [Executive Directors](index=12&type=section&id=Executive%20Directors) The executive director team comprises seasoned professionals with extensive experience in finance and the finance lease industry, covering leadership, asset management, risk control, and financial management - **Mr Li Luqiang**, CEO, possesses approximately **20 years** of experience in the finance lease industry, holds a Master's degree in Finance and Accounting, and is a Certified Practising Accountant in Australia[47](index=47&type=chunk)[48](index=48&type=chunk) - **Mr Li Zhixuan**, Deputy General Manager, has over **10 years** of experience in asset management and risk control, overseeing the Group's operations and risk management[50](index=50&type=chunk) - **Ms Xu Juan**, Executive Director, has over **10 years** of experience in finance and accounting, responsible for the Group's financial and accounting management[51](index=51&type=chunk)[52](index=52&type=chunk) [Independent Non-Executive Directors](index=14&type=section&id=Independent%20Non-Executive%20Directors) The independent non-executive directors, Mr Liu Changxiang, Mr Liu Xuewei, and Mr Jiao Jian, bring extensive expertise in banking, finance leasing, accounting, asset valuation, and law to provide independent professional advice to the Board - **Mr Liu Changxiang**: Possesses over **20 years** of experience in the banking and finance lease industries[55](index=55&type=chunk) - **Mr Liu Xuewei**: A Certified Public Accountant and Registered Asset Valuer in China, with over **10 years** of accounting experience[56](index=56&type=chunk) - **Mr Jiao Jian**: A practicing lawyer in China, and a partner at Beijing Zhongzhou Law Firm since 2006[56](index=56&type=chunk) [Corporate Governance Report](index=16&type=section&id=Corporate%20Governance%20Report) This report details the company's corporate governance practices, including board composition, committee functions, auditor changes, risk management, and shareholder rights, ensuring compliance with listing rules [Board of Directors](index=16&type=section&id=Board%20of%20Directors) During the reporting period, the Board experienced changes in its composition, including the passing of the Chairman and the retirement of two non-executive directors, while maintaining compliance with listing rules regarding independent non-executive directors and holding 17 board meetings - Board composition changes during the reporting period included the passing of Chairman and Non-executive Director Mr Song Jianpeng on October 9, 2019, and the retirement of Mr Chen Zhiyong and Mr Gao Guiwei as Non-executive Directors on June 11, 2019[63](index=63&type=chunk)[66](index=66&type=chunk) - The company complies with listing rules, having three independent non-executive directors, comprising over one-third of the Board members[67](index=67&type=chunk) - During the reporting period, the company held **17** Board meetings and **2** general meetings, with generally high director attendance rates[71](index=71&type=chunk) [Board Committees](index=19&type=section&id=Board%20Committees) The company has established Audit, Remuneration, and Nomination Committees, each composed of three independent non-executive directors, which convened meetings during the year to review financial reports, internal controls, director remuneration, and board structure - The Audit, Remuneration, and Nomination Committees are all composed of three independent non-executive directors: Mr Liu Xuewei, Mr Jiao Jian, and Mr Liu Changxiang[76](index=76&type=chunk)[77](index=77&type=chunk)[80](index=80&type=chunk) - The Audit Committee held **four** meetings during the year, reviewing financial reports, internal control systems, and advising the Board on the change of auditor from Deloitte to Shinewing[76](index=76&type=chunk) [External Auditor and Auditor's Remuneration](index=22&type=section&id=External%20Auditor%20and%20Auditor%27s%20Remuneration) During the reporting period, Deloitte Touche Tohmatsu resigned as the company's auditor on December 24, 2019, and Shinewing (HK) CPA Limited was subsequently appointed, with no disagreements noted regarding the change - Deloitte resigned as the company's auditor on December 24, 2019, citing professional risks, fee levels, and internal resources related to the audit[89](index=89&type=chunk) - The company subsequently appointed Shinewing as the new external auditor, effective February 10, 2020[89](index=89&type=chunk) Auditor's Remuneration for 2019 (RMB thousand) | Auditor | Service Type | Fee Amount | | :--- | :--- | :--- | | **Deloitte** | Audit Services | 1,170 | | | Non-Audit Services | 825 | | **Shinewing** | Audit Services | 750 | [Risk Management and Internal Control](index=23&type=section&id=Risk%20Management%20and%20Internal%20Control) The Board holds ultimate responsibility for the Group's risk management and internal control systems, conducting annual reviews and establishing a comprehensive framework from the Board to management, with no significant deficiencies identified by external consultants in the reporting period - The Board acknowledges its responsibility for the risk management and internal control systems, conducting annual reviews of their adequacy and effectiveness[94](index=94&type=chunk) - The Group engaged external internal control consultants to review the internal control system for the year ended December 31, 2019, finding no significant risks or control deficiencies[99](index=99&type=chunk) [Shareholders' Rights](index=27&type=section&id=Shareholders%27%20Rights) The company has established a shareholder communication policy, utilizing various channels like general meetings, announcements, financial reports, and its website to ensure transparency and facilitate shareholder engagement - Shareholders holding not less than **10%** of the company's paid-up capital have the right to request the Board to convene an extraordinary general meeting[116](index=116&type=chunk) - Shareholders may submit proposals to the Board in writing not less than **14 days** and not less than **10 clear business days** before the date of the general meeting[119](index=119&type=chunk) [Directors' Report](index=30&type=section&id=Directors%27%20Report) This report covers the Group's financial performance, director and major shareholder interests, connected transactions, share option scheme, and significant events after the reporting period, including litigation [Financial Results and Dividends](index=30&type=section&id=Financial%20Results%20and%20Dividends) The Group recorded a loss for the year ended December 31, 2019, and consequently, the Board does not recommend the payment of any final dividend - The Board does not recommend the payment of any final dividend for the year ended December 31, 2019[124](index=124&type=chunk)[144](index=144&type=chunk) [Directors' and Major Shareholders' Interests](index=33&type=section&id=Directors%27%20and%20Chief%20Executive%27s%20Interests%20and%20Short%20Positions%20in%20Shares%2C%20Underlying%20Shares%20and%20Debentures%20of%20the%20Company%20or%20its%20Associated%20Corporations) As of the end of 2019, Executive Director and CEO Mr Li Luqiang held a total of 0.55% interest in the company, while Union Capital Pte Ltd, wholly owned by Ms Sui Yongqing, was the controlling shareholder with 51.23% interest Major Shareholders' Shareholding (as at 31 December 2019) | Shareholder Name | Capacity/Nature of Interest | Percentage of Shareholding | | :--- | :--- | :--- | | **Union Capital Pte. Ltd.** | Beneficial Owner | 51.23% | | **Ms Sui Yongqing** | Interest in Controlled Corporation | 51.23% | | **Mr Song Jianbo** | Spouse's Interest | 51.23% | | **PA Investment Funds SPC** | Beneficial Owner | 9.87% | - CEO Mr Li Luqiang held a total interest of approximately **0.55%** in the company through controlled corporations and personal beneficial ownership[153](index=153&type=chunk)[154](index=154&type=chunk) [Connected Transactions](index=36&type=section&id=Connected%20Transactions) During the reporting period, the Group engaged in several connected transactions, including a finance lease agreement with Shandong Nanshan, the early termination of a commercial aircraft finance lease with Union Capital, the expiry of an ABS guarantee from Nanshan Group, and a new three-year finance lease framework agreement with Nanshan Group - A supplemental agreement was entered into on June 10, 2019, with Union Capital for the commercial jet finance lease, agreeing to early termination, with related payments made on July 31[163](index=163&type=chunk) - The asset-backed securities guarantee provided by Nanshan Group expired on June 30, 2019[166](index=166&type=chunk) - On September 20, 2019, the Group entered into a new three-year finance lease framework agreement with Nanshan Group to provide sale-and-leaseback and direct finance lease services[167](index=167&type=chunk) [Share Option Scheme](index=39&type=section&id=Share%20Option%20Scheme) The company adopted a share option scheme on February 20, 2019, to incentivize and retain talent, with the total number of shares subject to options not exceeding 10% of issued shares at listing, and no options were granted or exercised during the reporting period - The company adopted a share option scheme on February 20, 2019, with a maximum of **150 million** shares available for grant under options[170](index=170&type=chunk) - From the listing date to the end of the reporting period, no outstanding share options were under the scheme, nor were any options granted or exercised[172](index=172&type=chunk) [Events After Reporting Period](index=41&type=section&id=Events%20After%20Reporting%20Period) Subsequent to the reporting period, the Group addressed an overdue lease by agreeing to sell the leased Gulfstream G550 aircraft for approximately USD30 million to settle outstanding debts and terminate the finance lease agreement with Xiexin Real Estate Investment Co Ltd - Due to overdue rent of approximately **RMB34.9 million** from lessee Xiexin Real Estate Investment Co Ltd, both parties agreed to sell the leased asset (a Gulfstream G550 aircraft) to settle the outstanding amount[179](index=179&type=chunk) - On February 26, 2020, the Group entered into an aircraft sale and purchase agreement with a buyer for approximately **USD30 million**, and a termination agreement with the original lessee[179](index=179&type=chunk)[180](index=180&type=chunk) [Litigation](index=42&type=section&id=Litigation) The Group initiated lawsuits against two hospital clients; one with Shangqiu Fourth People's Hospital resulted in a civil settlement for phased rent payments, while the case against Nehe People's Hospital secured a favorable court judgment for RMB61.18 million in arrears and penalties, though execution is pending due to the COVID-19 pandemic - The lawsuit against Shangqiu Fourth People's Hospital was settled, requiring the defendant to pay unpaid rent, late fees, and expenses, with remaining rent to be paid quarterly until 2022[183](index=183&type=chunk)[184](index=184&type=chunk) - The lawsuit against Nehe People's Hospital resulted in a favorable judgment, ordering payment of approximately **RMB61.18 million** in unpaid rent and penalties, but execution is pending due to the COVID-19 outbreak[186](index=186&type=chunk)[187](index=187&type=chunk) [Independent Auditor's Report](index=45&type=section&id=Independent%20Auditor%27s%20Report) This report presents the independent auditor's opinion on the Group's consolidated financial statements and highlights key audit matters, particularly concerning finance lease receivables [Audit Opinion](index=45&type=section&id=Audit%20Opinion) Shinewing (HK) CPA Limited issued an unmodified opinion on the Group's consolidated financial statements for the year ended December 31, 2019, affirming their fair presentation in accordance with IFRS and the Hong Kong Companies Ordinance - The auditor believes the consolidated financial statements fairly present the Group's financial position and operating results in accordance with International Financial Reporting Standards, issuing an unmodified opinion[199](index=199&type=chunk) - The report notes that the consolidated financial statements for the year ended December 31, 2018, were audited by another auditor (Deloitte) and also received an unmodified opinion[213](index=213&type=chunk) [Key Audit Matters](index=45&type=section&id=Key%20Audit%20Matters) The auditor identified 'Expected Credit Loss Provisions for Finance Lease Receivables' as a key audit matter due to the significant judgment required in assessing credit risk, credit impairment, and estimating default probabilities and loss rates for these material receivables - The key audit matter is 'Expected Credit Loss Provisions for Finance Lease Receivables'[201](index=201&type=chunk)[203](index=203&type=chunk) - This matter is critical because finance lease receivables are material, and their impairment provision measurement involves significant management judgment, including assessing the deterioration of credit risk and estimating expected credit losses[204](index=204&type=chunk) [Financial Statements](index=50&type=section&id=Financial%20Statements) This section presents the Group's consolidated financial statements, including the statement of profit or loss, financial position, cash flows, and detailed notes on key accounts and risk management [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=50&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) In fiscal year 2019, the Group reported total revenue of RMB261 million, a 27.1% year-on-year decrease, resulting in a loss of RMB84.69 million from a prior-year profit of RMB40.6 million, primarily due to RMB148 million in financial asset impairment losses Consolidated Statement of Profit or Loss Summary (RMB thousand) | Item | 2019 | 2018 | | :--- | :--- | :--- | | **Revenue** | 260,876 | 358,061 | | **Finance costs** | (186,707) | (241,557) | | **Impairment losses on financial assets** | (147,610) | (25,349) | | **(Loss)/Profit before tax** | (101,589) | 62,683 | | **(Loss)/Profit for the year** | (84,692) | 40,598 | | **Basic (loss)/earnings per share (RMB)** | (0.0605) | 0.0404 | [Consolidated Statement of Financial Position](index=51&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of the end of 2019, the Group's total assets decreased to RMB3.084 billion, mainly due to reduced finance lease receivables, while total liabilities decreased to RMB1.901 billion from debt repayments, and total equity increased to RMB1.183 billion from listing proceeds Consolidated Statement of Financial Position Summary (RMB thousand) | Item | 31 December 2019 | 31 December 2018 | | :--- | :--- | :--- | | **Total assets** | **3,083,960** | **4,212,270** | | Non-current assets | 1,780,925 | 2,643,744 | | Current assets | 1,303,035 | 1,568,526 | | **Total liabilities** | **1,900,888** | **3,270,274** | | Current liabilities | 195,410 | 1,251,911 | | Non-current liabilities | 1,705,478 | 2,018,363 | | **Total equity** | **1,183,072** | **941,996** | [Consolidated Statement of Cash Flows](index=53&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) In fiscal year 2019, the Group generated RMB1.104 billion in net cash from operating activities, primarily from finance lease receivable collections, while financing activities resulted in a net outflow of RMB1.236 billion due to debt repayments, leading to a year-end cash and cash equivalents balance of RMB258 million Consolidated Statement of Cash Flows Summary (RMB thousand) | Item | 2019 | 2018 | | :--- | :--- | :--- | | **Net cash generated from operating activities** | 1,104,187 | 781,384 | | **Net cash used in investing activities** | (3,600) | (26,719) | | **Net cash used in financing activities** | (1,236,351) | (810,585) | | **Net decrease in cash and cash equivalents** | (135,764) | (55,920) | | **Cash and cash equivalents at end of year** | 257,608 | 391,270 | [Notes to the Consolidated Financial Statements](index=55&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies, key estimates, and significant financial statement items, highlighting increased impairment provisions for finance lease receivables, reduced borrowings, related party transactions, and credit risk concentration in the healthcare sector [Note 17. Finance Lease Receivables](index=88&type=section&id=Note%2017.%20Finance%20Lease%20Receivables) As of the end of 2019, the net carrying amount of finance lease receivables significantly decreased to RMB2.687 billion, while impairment loss provisions surged to RMB209 million, with overdue receivables exceeding 90 days increasing substantially, reflecting asset quality pressure Changes in Impairment Provisions for Finance Lease Receivables (RMB thousand) | Item | 1 January 2019 | Provisions during the year | Reversals during the year | 31 December 2019 | | :--- | :--- | :--- | :--- | :--- | | **Total** | 67,998 | 143,886 | (3,128) | **208,756** | Present Value of Overdue Finance Lease Receivables (RMB thousand) | Days Overdue | 2019 | 2018 | | :--- | :--- | :--- | | Within 30 days | 23,636 | 379,567 | | 31-90 days | 111,280 | 125,946 | | Over 90 days | 724,206 | 257,241 | | **Total** | **859,122** | **762,754** | [Note 24. Borrowings](index=98&type=section&id=Note%2024.%20Borrowings) As of the end of 2019, the Group's total borrowings significantly decreased to RMB1.398 billion, with only RMB23.72 million due within one year, indicating reduced short-term liquidity pressure, and borrowings primarily sourced from banks and other institutional trust loans Composition of Borrowings (RMB thousand) | Item | 31 December 2019 | 31 December 2018 | | :--- | :--- | :--- | | **Total borrowings** | **1,397,699** | **2,292,647** | | Due within one year | 23,723 | 724,377 | | Due after one year | 1,373,976 | 1,568,270 | [Note 33. Financial Risk Management](index=108&type=section&id=Note%2033.%20Financial%20Risk%20Management) The Group's primary financial risks include market, credit, and liquidity risks, with credit risk being paramount, managed through policies like collateral acquisition and continuous credit assessment, and the healthcare sector accounting for the largest proportion of finance lease receivables at 71.52% - Credit risk is the Group's primary risk, managed through measures such as obtaining collateral and guarantees, and conducting continuous credit assessments of lessees[430](index=430&type=chunk)[431](index=431&type=chunk) Finance Lease Receivables by Industry (2019) | Industry | Amount (RMB thousand) | Proportion (%) | | :--- | :--- | :--- | | Public Infrastructure | 267,517 | 9.96 | | **Healthcare** | **1,921,405** | **71.52** | | Aviation | 325,369 | 12.11 | | Others | 172,289 | 6.41 | | **Total** | **2,686,580** | **100.00** | [Financial Summary](index=121&type=section&id=Financial%20Summary) This section provides a five-year overview of the Group's key financial data, including revenue, profit/loss, total assets, total equity, and key financial ratios Five-Year Financial Summary (RMB thousand) | Item | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | 260,876 | 358,061 | 308,747 | 300,870 | 145,996 | | **Profit/(Loss) for the year** | (84,692) | 40,598 | 36,576 | 29,279 | 8,572 | | **Total assets** | 3,083,960 | 4,212,270 | 4,763,490 | 4,205,669 | 3,523,833 | | **Total equity** | 1,183,072 | 941,996 | 909,496 | 804,724 | 641,507 | Key Ratios | Indicator | 2019 | 2018 | | :--- | :--- | :--- | | **Return on total assets** | -2.3% | 0.9% | | **Return on equity** | -8.0% | 4.4% |

Revenue and Income - Revenue decreased by approximately 18.7% from RMB 175.1 million in the first half of 2018 to RMB 142.4 million in the first half of 2019, primarily due to no new financing lease business[11]. - Financing lease income for the first half of 2019 was approximately RMB 142.4 million, down from RMB 172.1 million in the same period of 2018[11]. - Other income decreased significantly from RMB 6.6 million in the first half of 2018 to RMB 0.9 million in the first half of 2019[12]. - Total revenue for the six months ended June 30, 2019, was RMB 143,285 thousand, a decrease of 21.1% from RMB 181,752 thousand in the same period of 2018[58]. - Total other income for the six months ended June 30, 2019, was RMB 890, down 86.6% from RMB 6,618 in the same period of 2018[99]. Expenses and Costs - Employee costs increased from RMB 6.0 million in the first half of 2018 to RMB 6.7 million in the first half of 2019, attributed to salary adjustments[14]. - Other operating expenses remained stable at approximately RMB 10.0 million, accounting for 7.0% of total revenue in the first half of 2019, compared to 5.7% in the same period of 2018[15]. - Listing expenses rose to approximately RMB 10.1 million in the first half of 2019 from RMB 7.3 million in the same period of 2018[16]. - Financial costs decreased by approximately 7.8% from RMB 117.6 million in the first half of 2018 to RMB 108.4 million in the first half of 2019[17]. - Employee benefit expenses for the six months ended June 30, 2019, were approximately RMB 67 million, compared to RMB 60 million for the same period in 2018[26]. - Employee costs for the six months ended June 30, 2019, totaled RMB 6,734, an increase of 11.8% from RMB 6,023 in the same period of 2018[101]. Financial Performance - The net loss for the six months ended June 30, 2019, was approximately RMB 33 million, a 117.3% increase from a profit of RMB 191 million for the same period in 2018, resulting in a net profit margin of -2.3%[19]. - The company reported a loss of RMB 3,250 for the six months ended June 30, 2019, compared to a profit of RMB 19,128 in the same period of 2018, resulting in a basic loss per share of RMB (0.0025) compared to earnings of RMB 0.0190[105]. - The company incurred a current income tax expense of RMB 6,120 for the six months ended June 30, 2019, down 33.7% from RMB 9,197 in the same period of 2018[102]. Assets and Liabilities - The group's cash and cash equivalents as of June 30, 2019, were approximately RMB 6,392 million, down from RMB 6,734 million as of June 30, 2018[22]. - The total equity of the group increased to approximately RMB 12,620 million as of June 30, 2019, compared to RMB 9,209 million as of June 30, 2018[22]. - The asset-liability ratio decreased to approximately 64.9% as of June 30, 2019, from 80.5% as of June 30, 2018, due to reduced borrowings and issued bonds[23]. - The financing lease receivables decreased by approximately 28.6% from RMB 4,183.6 million as of June 30, 2018, to RMB 2,985.1 million as of June 30, 2019[24]. - The total assets as of June 30, 2019, were RMB 2,967,627 thousand, slightly up from RMB 2,960,359 thousand as of December 31, 2018[59]. - The company’s total liabilities included current liabilities of RMB 539,723,000 and non-current liabilities of RMB 1,323,263,000, totaling RMB 1,862,986,000[121]. Risk Management - The company has focused on risk prevention and control, adjusting its business strategy in response to tightening financing conditions[10]. - The company has strengthened its project selection functions to improve asset management standards and reduce overall asset risks[10]. - The group has developed a comprehensive risk management system to address various risks, with credit risk being the primary concern[27]. - The group has identified potential significant losses due to tenants failing to make lease payments, with overdue payments exceeding 270 days being classified as loss assets[29]. - The expected credit loss for finance lease receivables was RMB 8.1 million, reflecting a rise in credit risk as disclosed in Note 13[120]. Corporate Governance - The company has adhered to the corporate governance code and has established various committees, including an audit committee, to oversee financial reporting and internal controls[37][39]. - The audit committee reviewed the group's financial performance for the six months ending June 30, 2019, and recommended the adoption of accounting principles and practices[39]. - The company established a remuneration committee consisting of three members, with independent non-executive director Liu Changxiang as the chairman, to review and recommend remuneration policies for directors and senior management[41]. - The nomination committee, also comprising three members and chaired by independent non-executive director Liu Xuewei, evaluated the board's structure and provided recommendations for the upcoming annual general meeting[42]. - The company has adopted a securities trading code for directors, ensuring compliance with trading restrictions prior to financial performance announcements[43]. Shareholder Information - Major shareholders include Union Capital Pte. Ltd. with a 51.23% stake and PA Investment Funds SPC holding 9.87% of the shares[52]. - Liu Changxiang holds 6,305,438 shares, representing 0.42% of the company's equity, while Li Luqiang holds 7,881,797 shares, representing 0.52%[48]. - The company completed a global offering on March 15, 2019, issuing 495,000,000 shares at a price of HKD 0.85 per share, raising approximately RMB 323.3 million in share premium[126]. Cash Flow and Financing Activities - Net cash generated from operating activities for the six months ended June 30, 2019, was RMB 753,604,000, a significant increase from RMB 193,797,000 in the same period of 2018, representing a growth of approximately 288%[61]. - The net cash used in financing activities was RMB 506,838,000, compared to a net cash inflow of RMB 56,428,000 in the previous year, indicating a shift in financing strategy[61]. - The company reported a net cash outflow from borrowings of RMB 795,700,000, down from RMB 1,427,015,000 in the previous year, reflecting a reduction in debt repayment[61]. - The company’s cash flow from financing activities was primarily utilized to support operational funding[121]. Accounting Standards and Policies - The company has adopted new accounting standards, including IFRS 16, which may impact future financial reporting and asset management strategies[67]. - The company has adopted IFRS 16, which significantly impacts the accounting policies related to lease liabilities and right-of-use assets[75]. - The company applied the modified retrospective approach for the transition to IFRS 16, without restating comparative information[88]. - As of January 1, 2019, the company recognized lease liabilities of RMB 62 million and right-of-use assets of RMB 63 million[88]. Employee Compensation - Total compensation for key management personnel for the six months ended June 30, 2019, was RMB 2.332 million, an increase from RMB 2.213 million in the same period of 2018[143]. - Basic salary and allowances for key management personnel increased to RMB 2.060 million for the six months ended June 30, 2019, compared to RMB 1.830 million in 2018[143]. - Employer contributions to retirement plans decreased to RMB 100,000 in 2019 from RMB 140,000 in 2018[143]. - Other social welfare expenses for key management personnel decreased to RMB 172,000 in 2019 from RMB 243,000 in 2018[143].

Financial Performance - The company's revenue increased by approximately 16.0% from RMB 308.7 million in 2017 to RMB 358.1 million in 2018[13]. - The leasing income for 2018 was approximately RMB 354.6 million, up from RMB 300.6 million in 2017[13]. - Consulting fee income for 2018 was approximately RMB 3.5 million, down from RMB 8.1 million in 2017[13]. - Net profit increased by approximately RMB 4.0 million or 10.9% from about RMB 36.6 million for the year ended December 31, 2017, to approximately RMB 40.6 million for the year ended December 31, 2018, with a net profit margin of 11.3%[18]. - Total revenue for the year ended December 31, 2018, was RMB 372,297 thousand, an increase of 15.8% from RMB 321,373 thousand in 2017[184]. - Net profit for the year was RMB 40,598 thousand, representing a growth of 11.0% compared to RMB 36,576 thousand in 2017[184]. - Basic earnings per share increased to RMB 0.0404 from RMB 0.0371, reflecting a rise of 8.9% year-over-year[184]. Market and Growth Opportunities - The financing leasing market in China experienced a compound annual growth rate of about 30.6% from RMB 2.1 trillion in 2013 to RMB 6.1 trillion in 2017[10]. - The company expects continued stable growth in the healthcare, aviation, and public infrastructure sectors due to increasing funding needs[10]. - The company projects a revenue growth of 25% for the next fiscal year, driven by new product launches and market expansion strategies[37]. - The company has expanded its market presence in Southeast Asia, achieving a 10% market share within the first year of entry[37]. - The company is exploring potential mergers and acquisitions to strengthen its market position, with a target of completing at least two deals in the next 12 months[39]. Financial Management and Costs - Financial costs rose by approximately 18.4% from about RMB 204.0 million for the year ended December 31, 2017, to approximately RMB 241.6 million for the year ended December 31, 2018[16]. - Employee costs decreased from approximately RMB 14.4 million for the year ended December 31, 2017, to approximately RMB 12.6 million for the year ended December 31, 2018, a decline of about RMB 1.8 million due to a reduction in employee numbers[15]. - The company reported a significant reduction in financing costs, which rose to RMB (241,557) thousand from RMB (203,995) thousand, an increase of 18.4%[184]. - The company reported a net cash outflow from financing activities of RMB (810,585) thousand in 2018, compared to a net inflow of RMB 309,607 thousand in 2017[192]. Risk Management - The company aims to enhance risk management and asset management capabilities in response to economic and regulatory changes[7]. - The group has developed a comprehensive risk management system to control various risks, with credit risk being the primary concern, and has implemented due diligence and independent data reviews[27]. - Risk management protocols have been strengthened, reducing potential financial exposure by 12%[35]. - The expected credit loss provision for finance lease receivables was identified as a key audit matter due to its significance to the group and the management's judgment regarding credit risk[175]. Corporate Governance - The company is committed to promoting good corporate governance and has established procedures in line with the corporate governance code[55]. - The board has fulfilled its corporate governance responsibilities, including reviewing policies and monitoring compliance with regulations[55]. - The company has established a clear division of responsibilities between the chairman and the CEO to ensure accountability and independence[58]. - The board is responsible for developing and reviewing corporate governance policies and ensuring compliance with legal and regulatory requirements[80]. Employee and Talent Management - The company plans to develop a professional and high-quality talent team to seize development opportunities in 2019[7]. - The group emphasizes the importance of retaining high-quality talent and continuously provides competitive compensation packages based on performance and market levels[26]. - The management team has extensive experience, with over 20 years in the banking and financing leasing industry, ensuring informed decision-making[40]. Shareholder and Investment Policies - The company has adopted a dividend policy allowing the board to propose and declare interim and/or special dividends based on the financial condition of the company and group[87]. - The company has implemented a shareholder communication policy to ensure effective engagement with shareholders and address their concerns[90]. - The company has established procedures for shareholders to convene special general meetings, requiring a written request from shareholders holding at least 10% of the paid-up capital[92]. Audit and Compliance - The independent auditor, Deloitte, issued an unqualified opinion on the consolidated financial statements for the year ending December 31, 2018[169]. - The audit committee, composed of 3 independent non-executive directors, reviewed the financial statements and internal control systems during the reporting period[66]. - The company has established a securities trading code to ensure compliance with trading regulations, with no known violations reported during the period[71]. Asset Management - The asset-liability ratio decreased to approximately 76.5% as of December 31, 2018, from 79.9% as of December 31, 2017, due to a reduction in borrowings and issued bonds[19]. - The total amount of finance lease receivables decreased by about 9.8% from approximately RMB 4,116.2 million as of December 31, 2017, to approximately RMB 3,714.2 million as of December 31, 2018[19]. - The company’s financing lease receivables decreased to RMB 2,608,169 thousand in 2018 from RMB 3,080,912 thousand in 2017, a decline of 15.3%[186].