[Company Information](index=3&type=section&id=Company%20Information) This section details the company's fundamental registration, governance, and operational support entities - This section provides a detailed list of the company's core corporate governance and operational support entities, including basic registration information, board members, committee compositions, main office addresses, auditors, legal advisors, principal bankers, and share registrars[6](index=6&type=chunk) [Management Discussion and Analysis](index=4&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review and Outlook](index=4&type=section&id=Business%20Review%20and%20Outlook) In H1 2019, the company expanded its domestic waste treatment business with **10 new projects** and **RMB 2.87 billion** investment, while maintaining stable overseas operations through BCG NZ - Despite macroeconomic uncertainties, the company benefited from China's policy support for the green economy and environmental protection industry, viewing it as a new growth driver and unprecedented opportunity[7](index=7&type=chunk) H1 2019 Market Expansion Achievements | Metric | Value | | :--- | :--- | | New Projects | 10 | | Total Investment | Approximately RMB 2.87 billion | | New Annual Designed Treatment Capacity | 2.265 million tons of municipal solid waste | | New Daily Treatment Capacity | 6,300 tons | H1 2019 Domestic Project Operating Data | Metric | Value | | :--- | :--- | | Municipal Solid Waste Processed | Approximately 1.92 million tons | | Waste Electrical Appliances Disassembled | Approximately 1.62 million units | | On-grid Power Generation | 145 million kWh | - As of June 30, 2019, the company had a domestic project pipeline of **73 projects** with a total investment of approximately **RMB 18.7 billion** and a total designed annual municipal solid waste treatment capacity of approximately **15.99 million tons**[12](index=12&type=chunk) - In overseas markets, the company holds a **51% stake** in BCG NZ, New Zealand's largest waste management service provider, which holds over **30% market share** and serves over **200,000 customers** in New Zealand[13](index=13&type=chunk) [Financial Review](index=6&type=section&id=Financial%20Review) In H1 2019, profit attributable to owners increased by **99%** to **RMB 171.2 million**, driven by domestic project growth and impairment reversal, despite a **75.3%** rise in finance costs due to green bond issuance H1 2019 Key Financial Indicators | Metric | H1 2019 | H1 2018 | YoY Change | | :--- | :--- | :--- | :--- | | Net Profit Attributable to Owners | RMB 171.2 million | RMB 86 million | +99% | | Waste Treatment Business Revenue | RMB 2.8368 billion | - | +27.0% | | Gross Profit Margin | Approximately 27.5% | - | - | | Administrative Expenses | RMB 321.9 million | - | +8.8% | | Finance Costs | RMB 213.5 million | - | +75.3% | - A significant reason for the substantial profit growth was the reversal of prior year impairment losses and recovery of related interest for the Nanchang project, impacting net profit by approximately **RMB 59.8 million**[14](index=14&type=chunk) Financial Position Summary (As of June 30, 2019) | Metric | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | RMB 16.2644 billion | - | | Gearing Ratio | Approximately 69% | Approximately 68% | | Current Ratio | Approximately 1.46 | Approximately 1.59 | | Cash and Bank Balances | RMB 1.9247 billion | RMB 2.4115 billion | | Outstanding Borrowings | RMB 6.4040 billion | RMB 5.8347 billion | - The Board resolved not to declare an interim dividend for the six months ended June 30, 2019[26](index=26&type=chunk) [Review Report on Interim Condensed Consolidated Financial Statements](index=8&type=section&id=Review%20Report%20on%20Interim%20Condensed%20Consolidated%20Financial%20Statements) This section presents the independent auditor's review report on the interim condensed consolidated financial statements, confirming their preparation in accordance with relevant accounting standards - Independent auditor Ernst & Young conducted a review of the company's interim financial information in accordance with Hong Kong Standard on Review Engagements 2410[30](index=30&type=chunk) - The review concluded that the auditor found no matters leading them to believe the interim financial information was not prepared in all material respects in accordance with Hong Kong Accounting Standard 34, Interim Financial Reporting[31](index=31&type=chunk) [Interim Financial Report](index=9&type=section&id=Interim%20Financial%20Report) [Interim Condensed Consolidated Statement of Profit or Loss](index=9&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) For the six months ended June 30, 2019, revenue increased by **27.0%** to **RMB 2.837 billion**, gross profit rose by **43.4%** to **RMB 779 million**, and profit attributable to owners grew **99.0%** to **RMB 171 million** Statement of Profit or Loss Summary (For the six months ended June 30) | Metric (RMB thousands) | 2019 | 2018 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 2,836,775 | 2,233,769 | +27.0% | | Gross Profit | 778,717 | 543,041 | +43.4% | | Profit Before Tax | 344,771 | 194,632 | +77.1% | | Profit for the Period | 232,825 | 144,247 | +61.4% | | Profit Attributable to Owners of the Parent | 171,194 | 86,036 | +99.0% | | Basic Earnings Per Share | RMB 1.20 cents | RMB 0.60 cents | +100% | [Interim Condensed Consolidated Statement of Comprehensive Income](index=10&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) For the six months ended June 30, 2019, total comprehensive income was **RMB 206 million**, with **RMB 153 million** attributable to owners of the parent, after accounting for profit for the period and other comprehensive income items Statement of Comprehensive Income Summary (For the six months ended June 30) | Metric (RMB thousands) | 2019 | 2018 | | :--- | :--- | | Profit for the Period | 232,825 | 144,247 | | Other Comprehensive Income for the Period (after tax) | (27,229) | (75,183) | | Total Comprehensive Income for the Period | 205,596 | 69,064 | | Total Comprehensive Income Attributable to Owners of the Parent | 152,907 | 42,237 | [Interim Condensed Consolidated Statement of Financial Position](index=11&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2019, total assets increased by **9.2%** to **RMB 16.264 billion**, with total liabilities at **RMB 11.209 billion** and net assets at **RMB 5.055 billion**, driven by growth in non-current assets Statement of Financial Position Summary | Metric (RMB thousands) | June 30, 2019 | December 31, 2018 | Change | | :--- | :--- | :--- | :--- | | Total Non-current Assets | 11,981,970 | 10,545,812 | +13.6% | | Total Current Assets | 4,282,460 | 4,340,221 | -1.3% | | **Total Assets** | **16,264,430** | **14,886,033** | **+9.2%** | | Total Current Liabilities | 2,940,387 | 2,723,517 | +8.0% | | Total Non-current Liabilities | 8,268,918 | 7,358,598 | +12.4% | | **Total Liabilities** | **11,209,305** | **10,082,115** | **+11.2%** | | **Net Assets** | **5,055,125** | **4,803,918** | **+5.2%** | | Equity Attributable to Owners of the Parent | 3,515,269 | 3,362,362 | +4.5% | [Interim Condensed Consolidated Statement of Changes in Equity](index=13&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) As of June 30, 2019, equity attributable to owners of the parent increased from **RMB 3.362 billion** to **RMB 3.515 billion**, primarily driven by profit and total comprehensive income for the period - The increase in equity attributable to owners of the parent during the period was primarily driven by current period profit, alongside the combined impact of exchange rate fluctuations, fair value changes in financial assets, and cash flow hedges[41](index=41&type=chunk) [Interim Condensed Consolidated Statement of Cash Flows](index=15&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) In H1 2019, net cash outflow from operating activities was **RMB 471 million**, net cash outflow from investing activities was **RMB 497 million**, and net cash inflow from financing activities was **RMB 433 million**, resulting in a **RMB 546 million** decrease in cash and cash equivalents Statement of Cash Flows Summary (For the six months ended June 30) | Metric (RMB thousands) | 2019 | 2018 | | :--- | :--- | | Net Cash Flows Used in Operating Activities | (470,779) | (142,629) | | Net Cash Flows Used in Investing Activities | (496,631) | (441,999) | | Net Cash Flows From Financing Activities | 432,517 | 976,303 | | Net Decrease in Cash and Cash Equivalents | (534,893) | 391,675 | | Cash and Cash Equivalents at Beginning of Period | 2,403,522 | 892,790 | | Cash and Cash Equivalents at End of Period | 1,857,178 | 1,290,421 | [Notes to Interim Condensed Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20Interim%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, key estimates, and judgments, covering the adoption of HKFRS 16, segment information, revenue breakdown, borrowings, related party transactions, and fair value of financial instruments [3. Accounting Policies and Disclosures Changes](index=17&type=section&id=3.%20Accounting%20Policies%20and%20Disclosures%20Changes) The most significant accounting policy change was the adoption of HKFRS 16 Leases, leading to the recognition of **RMB 280 million** in right-of-use assets and lease liabilities as of January 1, 2019 - The adoption of HKFRS 16 Leases significantly impacted the statement of financial position by increasing both assets and liabilities, and altered the presentation of subsequent lease-related expenses in the statement of profit or loss from operating lease rentals to depreciation and interest expenses[52](index=52&type=chunk)[56](index=56&type=chunk) [4. Operating Segment Information](index=22&type=section&id=4.%20Operating%20Segment%20Information) The Group's operations are segmented by geography into China and New Zealand, with China's waste treatment and waste-to-energy segment showing significant revenue growth in H1 2019 Segment Revenue and Results (For the six months ended June 30) | Segment (RMB thousands) | 2019 Revenue | 2018 Revenue | 2019 Results | 2018 Results | | :--- | :--- | :--- | :--- | :--- | | China | 1,646,779 | 1,114,964 | 148,538 | 55,936 | | New Zealand | 1,189,996 | 1,118,805 | 84,287 | 88,311 | | **Total** | **2,836,775** | **2,233,769** | **232,825** | **144,247** | [5. Revenue, Other Income and Gains](index=24&type=section&id=5.%20Revenue%2C%20Other%20Income%20and%20Gains) Total Group revenue is primarily derived from construction services under service concession arrangements, waste collection, landfill services, and electrical appliance dismantling, with construction services being the largest and fastest-growing component Revenue from Contracts with Customers (For the six months ended June 30) | Revenue Source (RMB thousands) | 2019 | 2018 | | :--- | :--- | | Construction services under service concession arrangements | 1,056,702 | 835,022 | | Waste collection services | 750,084 | 726,487 | | Landfill services | 257,985 | 216,295 | | Electrical appliance dismantling | 215,231 | 97,888 | | Operation services under service concession arrangements | 190,661 | 96,954 | | Others | 274,320 | 198,036 | [21. Interest-bearing Bank and Other Borrowings](index=33&type=section&id=21.%20Interest-bearing%20Bank%20and%20Other%20Borrowings) As of June 30, 2019, total interest-bearing borrowings amounted to **RMB 6.404 billion**, comprising **RMB 2.759 billion** in secured and **RMB 3.645 billion** in unsecured borrowings, with approximately **79%** classified as non-current liabilities Borrowing Structure (As of June 30, 2019) | Category (RMB thousands) | Amount | | :--- | :--- | | Secured bank and other borrowings | 2,758,850 | | Unsecured bank and other borrowings | 3,645,123 | | **Total** | **6,403,973** | | Of which: Due within one year | 1,326,134 | | Of which: Non-current portion | 5,077,839 | [26. Related Party Transactions](index=37&type=section&id=26.%20Related%20Party%20Transactions) The Group engages in various related party transactions, primarily with its controlling shareholder Beijing Capital Group and its subsidiaries, including significant interest payments and guarantee fees - The Group's financing activities are highly dependent on the support of its controlling shareholder, Beijing Capital Group, and its subsidiaries, including direct loans, guarantees, and keepwell undertakings for bond issuance[130](index=130&type=chunk)[131](index=131&type=chunk)[137](index=137&type=chunk) [Disclosure of Interests and Other Information](index=44&type=section&id=Disclosure%20of%20Interests%20and%20Other%20Information) [Major Shareholders' Interests](index=44&type=section&id=Major%20Shareholders%27%20Interests) This section discloses major shareholders' equity, with Beijing Capital Group Company Limited holding a combined **66.92%** stake through its subsidiaries as of June 30, 2019 Major Shareholders' Shareholding (As of June 30, 2019) | Shareholder Name | Capacity | Number of Shares (Long Position) | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Capital (Hong Kong) Limited | Beneficial owner | 6,449,026,736 | 45.11% | | Capital Huaxing International Investment Limited | Beneficial owner | 3,116,767,072 | 21.80% | | Beijing Capital Group Company Limited | Interest in controlled corporation | 9,565,793,808 | 66.92% | [Corporate Governance](index=45&type=section&id=Corporate%20Governance) The company maintains high corporate governance standards, fully complying with the HKEX Corporate Governance Code, with the Audit Committee reviewing interim results and external auditors conducting an independent review - The company complied with all code provisions of the HKEX Corporate Governance Code during the review period[164](index=164&type=chunk) - The Audit Committee, comprising three independent non-executive directors, reviewed the Group's accounting principles, internal controls, and the unaudited interim results[166](index=166&type=chunk)

[Table of Contents](index=2&type=section&id=Table%20of%20Contents) [Company Information](index=3&type=section&id=Company%20Information) [Company Information Overview](index=3&type=section&id=Company%20Information%20Overview) This chapter provides fundamental information about Capital Environment Holdings Limited, including board members, committee composition, principal offices, auditors, legal advisors, principal bankers, and share registrars, offering an overview of the company's governance structure and operational support system - The Board of Directors comprises four executive directors and three independent non-executive directors, with Ms. Zhang Meng serving as Chairperson and Mr. Cao Guoxian as Chief Executive Officer[8](index=8&type=chunk) - The company has established an Audit Committee, Nomination Committee, and Remuneration Committee to enhance corporate governance[8](index=8&type=chunk) - The company is incorporated in the Cayman Islands, with its principal place of business in Central, Hong Kong, and stock code **03989**[2](index=2&type=chunk)[8](index=8&type=chunk) [Chairman's Statement](index=5&type=section&id=Chairman's%20Statement) [2018 Review and Outlook](index=5&type=section&id=2018%20Review%20and%20Outlook) The Chairman reviewed 2018, noting global economic challenges from US-China trade friction, yet China's environmental protection industry achieved rapid development under the 'Beautiful China' initiative. The company actively seized opportunities, rapidly expanded its environmental sector, broadened its business scope and geographical footprint, achieving significant financial growth and market leadership - In 2018, the company successfully secured 11 waste treatment projects, with a total investment of approximately **RMB 2.12 billion**, adding a designed annual capacity of **2.24 million tons** of domestic waste treatment[13](index=13&type=chunk) - As of the end of 2018, the company's projects covered 16 provinces and municipalities in China, expanded into the overseas New Zealand market, and implemented 63 domestic environmental projects with a total investment exceeding **RMB 15.8 billion**[13](index=13&type=chunk) Key Financial Indicators for 2018 | Indicator | 2018 (RMB) | 2017 (RMB) | YoY Growth | | :-------- | :--------- | :--------- | :--------- | | Main Business Revenue | 4.65 billion | - | 33% | | Total Assets | 14.89 billion | - | 39% | | Net Assets | 4.8 billion | - | 8% | - The company will be guided by the 'Eco+' development strategy, leveraging the high-quality assets of its solid waste business to fully build a light-asset business model, aiming to become the most trusted ecological environment enterprise[15](index=15&type=chunk)[16](index=16&type=chunk) [Management Discussion and Analysis](index=8&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review and Outlook](index=9&type=section&id=Business%20Review%20and%20Outlook) The Chief Executive Officer elaborated on the company's significant operating achievements and industry recognition in 2018, navigating complex international economic conditions by seizing opportunities from China's environmental policies through market expansion, engineering construction, operational management, technological innovation, and market financing, while outlining future business expansion in depth, length, and breadth - The company was honored for the seventh time as one of the 'Top Ten Influential Enterprises in China's Solid Waste Industry' and received multiple environmental and investor relations awards[24](index=24&type=chunk) 2018 Operating Performance | Indicator | 2018 (RMB) | YoY Growth | | :-------- | :--------- | :--------- | | Total Assets | 14.886 billion | 39.35% | | Operating Revenue | 4.648 billion | 33% | | Profit for the Year | 311 million | 13.49% | | Net Profit Attributable to Parent Company | 183 million | 23.18% | - Regarding project reserves, the company has 63 environmental projects in China, with a total investment of approximately **RMB 15.8 billion**, and a total designed capacity of approximately **13.65 million tons** of annual waste treatment and **3.2 million units** of annual electrical and electronic equipment dismantling[25](index=25&type=chunk) - In market expansion, 11 waste treatment projects were successfully secured, adding a designed annual capacity of **2.24 million tons** of domestic waste treatment, forming a full-chain environmental protection business model[27](index=27&type=chunk) - In operational management, 32 projects were in operation or trial operation, achieving an annual domestic waste treatment volume of **3.1275 million tons**, dismantling **2.1408 million units**, and providing **238,479,156 kWh** of grid-connected electricity[28](index=28&type=chunk) - In market financing, the company successfully issued **USD 300 million** in 3-year senior unsecured green bonds and obtained **RMB 1.4 billion** in bank credit facilities[31](index=31&type=chunk) - In overseas markets, the company holds a **51% stake** in BCG NZ Group, New Zealand's largest waste management service provider, with a market share exceeding **30%**[31](index=31&type=chunk) - Future plans include consolidating domestic market share, accelerating technological innovation, becoming a comprehensive solid waste industry chain service provider, and leveraging national policies to expand projects in specific economic zones, thereby achieving business expansion in depth, length, and breadth[33](index=33&type=chunk) [Financial Review](index=13&type=section&id=Financial%20Review) This section provides a detailed review of the 2018 financial performance, including the change in functional currency, significant growth in revenue and profit, increased finance costs, and changes in the asset and liability structure, particularly the improvement in the current ratio - Effective July 1, 2018, the company's functional currency changed from RMB to USD, reflecting the internationalization trend of future business transactions[36](index=36&type=chunk) 2018 Financial Performance | Indicator | 2018 (RMB) | 2017 (RMB) | YoY Growth | | :-------- | :--------- | :--------- | :--------- | | Revenue from Waste Treatment and Waste-to-Energy Business | 4.648 billion | 3.495 billion | 33% | | Profit Attributable to Owners | 183 million | 148 million | 23% | | Finance Costs | 310 million | 196 million | 58% | 2018 Financial Position | Indicator | Dec 31, 2018 (RMB) | Dec 31, 2017 (RMB) | Change | | :-------- | :----------------- | :----------------- | :----- | | Total Assets | 14.886 billion | - | 39.35% | | Net Assets Attributable to Owners | 3.362 billion | - | - | | Gearing Ratio | 68% | 58% | Up 10 percentage points | | Current Ratio | 1.59 | 0.56 | Increased | - The increase in current ratio was primarily due to cash inflows from bond issuance and the reclassification of shareholder loans to non-current liabilities[38](index=38&type=chunk) - As of December 31, 2018, cash and bank balances were approximately **RMB 2.412 billion**, an increase of approximately **RMB 1.502 billion** from the end of 2017, mainly attributable to debt financing and new bank loans[39](index=39&type=chunk) - Outstanding borrowings were approximately **RMB 5.835 billion**, an increase of approximately **RMB 1.136 billion** from the end of 2017, with fixed-rate borrowings accounting for **67.3%** and floating-rate borrowings for **32.7%**[41](index=41&type=chunk) [Board of Directors and Senior Management](index=14&type=section&id=Board%20of%20Directors%20and%20Senior%20Management) [Board Members](index=15&type=section&id=Board%20Members) This section introduces the backgrounds, professional experiences, and appointments of the company's executive and independent non-executive directors, showcasing the diversity and professionalism of the Board members - Ms. Zhang Meng (Chairperson) has a professional background in environmental resource assessment and holds key positions at Beijing Capital Group[48](index=48&type=chunk) - Mr. Cao Guoxian (Chief Executive Officer) possesses extensive experience in overseas investment and financing and an international perspective[48](index=48&type=chunk)[49](index=49&type=chunk) - Ms. Hao Chunmei is a senior accountant, certified public accountant, and certified appraiser, with extensive experience in finance, corporate management, mergers and acquisitions, and corporate finance[49](index=49&type=chunk) - Independent Non-executive Directors Mr. Pu Bingrong, Mr. Zheng Qitai, and Dr. Chan Yee Wah possess profound professional knowledge in urban planning, accounting, financial management, and corporate governance[51](index=51&type=chunk)[52](index=52&type=chunk) [Senior Management](index=17&type=section&id=Senior%20Management) This section outlines the responsibilities, educational backgrounds, and professional experiences of the company's senior management members, covering key areas such as corporate management, capital markets, technology and engineering, operations management, legal affairs, and investment - Mr. Gu Jinshan (Deputy General Manager) is responsible for corporate management, holding a Ph.D. in Engineering and experience in telecommunications and government administration[54](index=54&type=chunk) - Mr. Liu Yanjun (Deputy General Manager) is responsible for capital markets and company board management, with over ten years of experience in environmental protection and capital markets[54](index=54&type=chunk)[55](index=55&type=chunk) - Mr. Xu Jinjun (Deputy General Manager) is responsible for technology, engineering, and hazardous industry operations management, with nearly twenty years of experience in the environmental protection sector[55](index=55&type=chunk) - Mr. Yan Shengli (Vice President) is responsible for the operations center and legal affairs, serving as a practicing lawyer and arbitrator[57](index=57&type=chunk) - Mr. Hu Zaichun (Vice President) is responsible for Investment Department I and anaerobic treatment industry operations management, with a background in ecological environment research and investment management experience[57](index=57&type=chunk)[58](index=58&type=chunk) - Mr. Yin Hang (Assistant President) is responsible for the Beijing-Tianjin-Hebei Investment Center and South China regional business management, familiar with franchise operating models and corporate internal controls[59](index=59&type=chunk) - Ms. Wang Bingni (Company Secretary) has over twenty years of experience in company secretarial matters, internal control, and financial management for Hong Kong listed companies[59](index=59&type=chunk) [Corporate Governance Report](index=19&type=section&id=Corporate%20Governance%20Report) [Board of Directors](index=19&type=section&id=Board%20of%20Directors) The company's Board of Directors is committed to maintaining high corporate governance standards, responsible for setting strategic direction, objectives, and business development plans, and overseeing senior management performance. The Board's diverse composition, including four executive and three independent non-executive directors, ensures appropriate power balance and independent judgment - The Board is responsible for formulating the Group's strategic direction, objectives, and business development plans, and monitoring the performance of senior management[63](index=63&type=chunk) - The Board comprises four executive directors (Ms. Zhang Meng, Mr. Cao Guoxian, Mr. Cheng Jialin, Ms. Hao Chunmei) and three independent non-executive directors (Mr. Pu Bingrong, Mr. Zheng Qitai, Dr. Chan Yee Wah)[64](index=64&type=chunk) - All directors participate in continuous professional development to update their knowledge and skills, ensuring their full contribution to the Board[70](index=70&type=chunk) 2018 Board Meetings and General Meetings Attendance | Director Name | Board Meetings Attended/Held | General Meetings Attended/Held | | :------------ | :--------------------------- | :----------------------------- | | Ms. Zhang Meng | 9/9 | 1/1 | | Mr. Cao Guoxian | 9/9 | 1/1 | | Mr. Cheng Jialin | 9/9 | 1/1 | | Ms. Hao Chunmei | 5/6 | 1/1 | | Mr. Pu Bingrong | 9/9 | 1/1 | | Mr. Zheng Qitai | 9/9 | 1/1 | | Dr. Chan Yee Wah | 9/9 | 1/1 | [Board Committees](index=22&type=section&id=Board%20Committees) The company has established a Nomination Committee, Remuneration Committee, and Audit Committee to assist the Board in fulfilling its duties, ensuring compliance with corporate governance codes in director appointments, remuneration determination, financial reporting, risk management, and internal controls - The Nomination Committee is responsible for reviewing the Board structure, identifying suitable director candidates, and making recommendations on director appointments, re-election, and succession planning[76](index=76&type=chunk) - The Remuneration Committee is responsible for making recommendations on the remuneration policy and structure for directors and senior management, and approving the terms of executive directors' service contracts[79](index=79&type=chunk) - The Audit Committee is responsible for considering the appointment of external auditors, reviewing financial information, overseeing risk management and internal control systems, and maintaining appropriate relations with external auditors[83](index=83&type=chunk) 2018 Auditor's Remuneration | Service Type | Amount (RMB Thousand) | | :------------- | :-------------------- | | Audit Services | 4,280 | | Non-Audit Services | | | - Tax Services | 476 | | - Interim Financial Statement Review | 825 | | - Others | 1,345 | | **Total** | **6,926** | [Risk Management and Internal Control](index=26&type=section&id=Risk%20Management%20and%20Internal%20Control) The Board is responsible for establishing and maintaining effective risk management and internal control systems, aiming to identify and manage significant risks, safeguard assets, ensure financial information reliability, and comply with laws and regulations. The company has established a clear risk governance framework and conducts regular internal audits and external independent reviews - The Board is responsible for determining the nature and extent of acceptable risks and ensuring the establishment and maintenance of effective risk management and internal control systems[89](index=89&type=chunk) - Management is responsible for detailed risk identification, assessment, and management, and for formulating key management guidelines for daily operational processes[90](index=90&type=chunk) - The Internal Audit Department and Corporate Management Department are responsible for leading internal control construction, risk assessment, compiling a risk register, and conducting independent internal control supervision and evaluation[92](index=92&type=chunk) - The Board has reviewed the risk management and internal control systems for the year ended December 31, 2018, and considers them effective and adequate[99](index=99&type=chunk) [Shareholder Rights and Investor Relations](index=28&type=section&id=Shareholder%20Rights%20and%20Investor%20Relations) The company is committed to upholding shareholder rights, providing clear procedures for convening general meetings, proposing resolutions, and nominating directors. Concurrently, the company actively communicates with shareholders, media, analysts, and fund managers through various channels to enhance investor relations and ensure information transparency - Shareholders may request to convene an extraordinary general meeting in accordance with the articles of association and have the right to propose resolutions at general meetings[103](index=103&type=chunk)[104](index=104&type=chunk) - The company maintains close communication with media, analysts, and fund managers through one-on-one meetings, roadshows, and conferences, and designates senior management to conduct regular dialogues[108](index=108&type=chunk) - The directors confirm their responsibility for preparing financial statements that give a true and fair view of the Group's financial position and for maintaining proper accounting records[110](index=110&type=chunk) [Directors' Report](index=30&type=section&id=Directors'%20Report) [Principal Activities and Performance](index=31&type=section&id=Principal%20Activities%20and%20Performance) The company primarily engages in waste treatment technologies and services, particularly waste-to-energy projects. The 2018 performance is disclosed in the consolidated statement of profit or loss and other comprehensive income, and the Board does not recommend a final dividend, having adopted a new dividend policy - The company primarily engages in providing waste treatment technologies and services, focusing on technology development, design, system integration, project investment, consulting, operation, and maintenance of waste treatment facilities, especially waste-to-energy projects[114](index=114&type=chunk) - The Board does not recommend the declaration of a final dividend for the year ended December 31, 2018[116](index=116&type=chunk) - The company adopted a dividend policy on March 21, 2019, and will consider financial performance, working capital, capital expenditures, debt-to-equity ratio, economic conditions, and other factors when determining future dividend distributions[116](index=116&type=chunk) [Financial Position and Financing Activities](index=31&type=section&id=Financial%20Position%20and%20Financing%20Activities) This section outlines the company's financial position changes in 2018, including movements in property, plant, and equipment, share capital, and significant financing activities such as green bond issuance and bank borrowings - On September 11 and October 18, 2018, the company successfully issued **USD 300 million** in aggregate principal amount of 5.625% senior unsecured green bonds due 2021, for financing or refinancing eligible green assets and projects[123](index=123&type=chunk) - The green bonds received a 'BBB' rating from Fitch Ratings and benefited from a keepwell and liquidity support deed provided by the controlling shareholder, Beijing Capital Group[123](index=123&type=chunk) [Directors and Major Shareholders Information](index=32&type=section&id=Directors%20and%20Major%20Shareholders%20Information) This section provides information on changes in Board members, confirmation of independent non-executive directors' independence, and major shareholders' interests in the company's shares, emphasizing the company's commitment to independence and transparency - Mr. Cheng Jialin, Ms. Hao Chunmei, Mr. Pu Bingrong, and Dr. Chan Yee Wah will retire at the forthcoming Annual General Meeting and are eligible for re-election[126](index=126&type=chunk) - The company has received annual confirmations of independence from each independent non-executive director and considers them all to be independent, even though Mr. Pu Bingrong and Mr. Zheng Qitai have served for over 9 years[127](index=127&type=chunk) Major Shareholder Holdings as of December 31, 2018 | Shareholder Name | Capacity | Number of Shares/Relevant Shares | Approximate Percentage of Shareholding | | :--------------- | :------- | :------------------------------- | :------------------------------------- | | Capital (Hong Kong) Limited | Beneficial Owner | 6,449,026,736 (L) | 45.11% | | Beijing Capital Co., Ltd. | Controlled Corporate Interest | 6,449,026,736 (L) | 45.11% | | Capital Huaxing International Investment Co., Ltd. | Beneficial Owner | 3,116,767,072 (L) | 21.80% | | Beijing Capital Group Co., Ltd. | Controlled Corporate Interest | 9,565,793,808 (L) | 66.92% | [Connected Transactions and Customers & Suppliers](index=35&type=section&id=Connected%20Transactions%20and%20Customers%20%26%20Suppliers) This section discloses the company's continuing connected transactions in 2018, particularly corporate finance guarantee services related to the controlling shareholder, Beijing Capital Group, and provides information on sales and procurement concentration with major customers and suppliers - Capital Investment, a wholly-owned subsidiary of the company, entered into an entrusted guarantee contract with Beijing Capital Group, where Beijing Capital Group provides corporate finance guarantee services, with an annual guarantee fee cap of **RMB 6 million**[140](index=140&type=chunk) - As of December 31, 2018, the company drew down a loan of **RMB 100 million** from Ping An Asset under a financing contract, with a guarantee fee payable to Beijing Capital Group of **RMB 6 million**[140](index=140&type=chunk) - Sales to the Group's five largest customers accounted for **22.7%** of total sales for the year, with the largest customer accounting for **7.6%**. Purchases from the five largest suppliers accounted for **14.4%** of total purchases, with the largest supplier accounting for **5.8%**[145](index=145&type=chunk) [Independent Auditor's Report](index=37&type=section&id=Independent%20Auditor's%20Report) [Auditor's Opinion](index=37&type=section&id=Auditor's%20Opinion) Ernst & Young issued an unqualified opinion on the consolidated financial statements of Capital Environment Holdings Limited and its subsidiaries, stating that the statements present a true and fair view of the company's financial position as of December 31, 2018, and its financial performance and cash flows for the year then ended, in accordance with Hong Kong Financial Reporting Standards - The auditor believes that the consolidated financial statements present a true and fair view of the Group's consolidated financial position as of December 31, 2018, and its consolidated financial performance and consolidated cash flows for the year then ended, in accordance with Hong Kong Financial Reporting Standards[155](index=155&type=chunk) - The auditor's work was conducted in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants and is independent of the Group[156](index=156&type=chunk) [Key Audit Matters](index=37&type=section&id=Key%20Audit%20Matters) The auditor identified three key audit matters: accounting for service concession arrangements, impairment of franchise financial assets, and impairment of goodwill and intangible assets with indefinite useful lives, all involving significant management judgment and estimates with substantial impact on the financial statements - Accounting for service concession arrangements was identified as a key audit matter due to significant management judgments and estimates involved in determining the accounting model, estimating future guaranteed receivables, construction gross profit margins, discount rates, and percentage of completion for construction services[159](index=159&type=chunk) - Impairment of franchise financial assets is a key audit matter; as of December 31, 2018, its balance was **RMB 1.835 billion**, representing **38%** of the Group's net assets, involving management's judgment on expected credit loss provisions and adjustments for forward-looking factors[161](index=161&type=chunk) - Impairment of goodwill and intangible assets with indefinite useful lives is a key audit matter, as their impairment tests involve highly judgmental assumptions such as future revenue growth rates, operating profit margins, perpetual growth rates, and discount rates, and the related asset balances are significant (**goodwill RMB 2.05 billion**, **intangible assets RMB 853 million**)[163](index=163&type=chunk) [Annual Financial Report](index=41&type=section&id=Annual%20Financial%20Report) [Consolidated Statement of Profit or Loss](index=42&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) The consolidated statement of profit or loss shows that for the year ended December 31, 2018, the company's revenue grew significantly, with both profit for the year and profit attributable to owners of the parent company increasing, but finance costs also rose substantially Key Data from 2018 Consolidated Statement of Profit or Loss | Indicator | 2018 (R