Publication Announcement - :: HKEX :: HKEXnews ::

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities. This announcement does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States. The securities have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or with any securities regulatory authority of any state of the United States or other jurisdiction. The securities are being offered and sold outside the United States in reliance on Regulation S under the Securities Act and may not be offered or sold within the United States absent registration or an exemption from registration under the Securities Act. No public offering of the securities will be made in the United States or in any other jurisdiction where such an offering is restricted or prohibited. This announcement and the listing document referred to herein have been published for information purposes only as required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and do not constitute an offer to sell nor a solicitation of an offer to buy any securities. Neither this announcement nor anything referred to herein (including the listing document referred to herein) forms the basis for any contract or commitment whatsoever. For the avoidance of doubt, the publication of this announcement and the listing document referred to herein shall not be deemed to be an offer of securities made pursuant to a prospectus issued by or on behalf of the Issuer (as defined below) for the purposes of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) nor shall it constitute an advertisement, invitation or document containing an invitation to the public to enter into or offer to enter into an agreement to acquire, dispose of, subscribe for or underwrite securities for the purposes of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong). Notice to Hong Kong investors: The Issuer confirms that the Bonds (as defined below) are intended for purchase by Professional Investors (as defined in Chapter 37 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited) only and have been listed on The Stock Exchange of Hong Kong Limited on that basis. Accordingly, the Issuer confirms that the Bonds are not appropriate as an investment for retail investors in Hong Kong. Investors should carefully consider the risks involved.

PUBLICATION OF OFFERING CIRCULAR ON THE STOCK EXCHANGE OF HONG KONG LIMITED

WEIFANG URBAN CONSTRUCTION AND

DEVELOPMENT INVESTMENT GROUP CO., LTD. (濰坊市城市建設發展投資集團有限公司)

(incorporated with limited liability in the People’s Republic of China)

(the “Issuer”)

U.S.$400,000,000 2.60 per cent. Bonds due 2024

(the “Bonds”) (Stock Code: 40863)

This announcement is issued pursuant to Rule 37.39A of the Rules Governing the Listing of Securities

on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

Please refer to the offering circular dated 17 September 2021 (the “Offering Circular”) appended

hereto in relation to the issuance of the Bonds. As disclosed in the Offering Circular, the Bonds were

intended for purchase by Professional Investors (as defined in Chapter 37 of the Listing Rules) only

and have been listed on The Stock Exchange of Hong Kong Limited on that basis.

The Offering Circular does not constitute a prospectus, notice, circular, brochure or advertisement

offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make

offers to subscribe for or purchase any securities, nor is it circulated to invite offers by the public to

subscribe for or purchase any securities.

The Offering Circular must not be regarded as an inducement to subscribe for or purchase any

securities, and no such inducement is intended. No investment decision should be made based on the

information contained in the Offering Circular.

28 September 2021 As at the date of this announcement, the directors of the Issuer are Ma Yongjun, Wang Bo, Cao Qing, Tao Jingang, Wang Xiuping, Dou Maogong and Gao Mingqin.

TABLE OF CONTENTS

APPENDIX - OFFERING CIRCULAR DATED 17 SEPTEMBER 2021

APPENDIX - OFFERING CIRCULAR DATED 17 SEPTEMBER 2021

IMPORTANT NOTICE

NOT FOR DISTRIBUTION INTO THE UNITED STATES

IMPORTANT: You must read the following before continuing. The following applies to the offering circular (the‘‘Offering Circular’’) following this page, and you are therefore advised to read this carefully before reading,accessing or making any other use of the Offering Circular. In accessing the Offering Circular, you agree to bebound by the following terms and conditions, including any modifications to them any time you receive anyinformation from the Issuer (as defined in the Offering Circular) as a result of such access.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FORSALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DOSO. THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN, AND WILL NOT BE, REGISTEREDUNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), OR THESECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THESECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPT PURSUANTTO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATIONREQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIESLAWS. THIS OFFERING IS MADE SOLELY IN OFFSHORE TRANSACTIONS PURSUANT TOREGULATION S UNDER THE SECURITIES ACT.

THE FOLLOWING OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANYOTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND, INPARTICULAR, MAY NOT BE FORWARDED TO ANY UNITED STATES ADDRESS. ANYFORWARDING, DISTRIBUTION OR REPRODUCTION OF THE OFFERING CIRCULAR IN WHOLE ORIN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN AVIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.ANY INVESTMENT DECISION WOULD BE MADE ON THE BASIS OF THE TERMS AND CONDITIONSOF THE SECURITIES AND THE INFORMATION CONTAINED IN THE OFFERING CIRCULAR (ASAMENDED AND RESTATED) THAT WILL BE DISTRIBUTED TO YOU PRIOR TO THE PRICING DATEAND NOT ON THE BASIS OF THE ATTACHED DOCUMENTS. IF YOU HAVE GAINED ACCESS TOTHIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOTAUTHORISED AND WILL NOT BE ABLE TO PURCHASE ANY OF THE SECURITIES DESCRIBEDTHEREIN.

Confirmation of Your Representation:

In order to be eligible to view the Offering Circular or make an investment decision with respect to the securities,investors must be purchasing the securities outside the United States in an offshore transaction in reliance onRegulation S under the Securities Act. By accepting the e-mail and accessing the attached Offering Circular, youshall be deemed to have represented to the Managers (as defined in the Offering Circular) and the Issuer (1) thatyou and any customers you represent are not, and that the electronic mail address that you gave the Issuer and towhich this e-mail has been delivered is not, located in the United States, its territories or possessions, and (2) thatyou consent to delivery of the attached Offering Circular and any amendments or supplements thereto by electronictransmission.

You are reminded that the Offering Circular has been delivered to you on the basis that you are a person into whosepossession the Offering Circular may be lawfully delivered in accordance with the laws of jurisdiction in which youare located and you may not, nor are you authorised to, deliver the Offering Circular to any other person.

The materials relating to any offering of securities described in the Offering Circular do not constitute, and may notbe used in connection with, an offer or solicitation by or on behalf of any of the Issuer, the Managers, the Trusteeor the Agents (each as defined in the terms and conditions of the Bonds) in any place where offers or solicitationsare not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and theManagers or any affiliate of the Managers are licensed brokers or dealers in that jurisdiction, the offering shall bedeemed to be made by the Managers or such affiliate on behalf of the Issuer in such jurisdiction.

The Offering Circular has been sent to you in an electronic form. You are reminded that documents transmitted viathis medium may be altered or changed during the process of electronic transmission and consequently neither theManagers, the Trustee or the Agents or any person who controls the Managers, the Trustee or the Agents nor any oftheir director, officer, employee nor agent or affiliate of any such person accepts any liability or responsibilitywhatsoever in respect of any difference between the Offering Circular distributed to you in electronic format and thehard copy version available to you on request from the Managers.

You are responsible for protecting against viruses and other destructive items. Your use of this e-mail is atyour own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other itemsof a destructive nature.

The Offering Circular is being furnished in connection with an offering in offshore transactions outside the UnitedStates in compliance with Regulation S under the Securities Act solely for the purpose of enabling a potentialinvestor to consider the purchase of the securities described in the Offering Circular.

Actions that you may not take: If you receive this document by e-mail, you should not reply by e-mail to thisdocument, and you may not purchase any securities by doing so. Any reply e-mail communications, including thoseyou generate by using the ‘‘Reply’’ function on your e-mail software, will be ignored or rejected.

WEIFANG URBAN CONSTRUCTION ANDDEVELOPMENT INVESTMENT GROUP CO., LTD.

（濰坊市城市建設發展投資集團有限公司）(incorporated with limited liability in the PRC)

U.S.$400,000,000 2.60 per cent. Bonds due 2024Issue Price: 100.00 per cent.

The U.S.$400,000,000 2.60 per cent. Bonds due 2024 (the ‘‘Bonds’’) will be issued by Weifang Urban Construction and Development Investment Group Co., Ltd.（濰坊市城市建設發展投資集團有限公司）(the ‘‘Issuer’’), a company incorporated in the People’s Republic of China (the ‘‘PRC’’) with limited liability.

The Bonds will bear interest on their outstanding principal amount from and including 27 September 2021 at the rate of 2.60 per cent. per annum. Interest on the Bonds is payable semi-annually in arrear on 27 March and 27 September in each year, commencing on 27 March 2022. Payments on the Bonds will be made without deduction for or on account of taxes of the PRCor any authority therein or thereof having power to tax to the extent described under ‘‘Terms and Conditions of the Bonds - Taxation’’.

The Bonds will constitute direct, unconditional, unsubordinated and (subject to Condition 4(a) (Negative Pledge) of the terms and conditions of the Bonds (the ‘‘Terms and Conditions’’))unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save forsuch exceptions as may be provided by applicable law and subject to Condition 4(a) (Negative Pledge) of the Terms and Conditions, at all times rank at least equally with all its other presentand future unsecured and unsubordinated obligations.

The Issuer undertakes that it will (i) within 15 Registration Business Days (as defined in the Terms and Conditions) after the Issue Date (as defined below), submit or cause to be submittedan application for the registration of the Bonds with the State Administration of Foreign Exchange of the People’s Republic of China or its local branch (‘‘SAFE’’) pursuant to theAdministrative Measures for Foreign Debt Registration（外債登記管理辦法）and its operating guidelines, effective as of 13 May 2013 (the ‘‘Foreign Debt Registration’’), (ii) use its bestendeavours to complete the Foreign Debt Registration and obtain a registration record from SAFE on or before the Registration Deadline (being 120 Registration Business Days (as defined inthe Terms and Conditions) after the Issue Date), (iii) if applicable, as soon as possible upon being required or requested to do so by any relevant governmental authority, file or cause to befiled with SAFE the Bonds pursuant to the Circular of the People’s Bank of China on Matters concerning the Macro Prudential Management of Full-Covered Cross-Border Financing（中國人民銀行關於全口徑跨境融資宏觀審慎管理有關事宜的通知）(the ‘‘Cross Border Financing Circular’’) and (iv) comply with all applicable PRC laws and regulations in relation to the Bonds.

In accordance with the Circular on Promoting the Reform of the Administrative System on the Issuance by Enterprises of Foreign Debt Filings and Registrations（國家發展改革委關於推進企業發行外債備案登記制管理改革的通知（發改外資[2015]2044號））(the ‘‘NDRC Circular’’) issued by the National Development and Reform Commission of the People’s Republic of Chinaor its local counterparts (‘‘NDRC’’) on 14 September 2015 which came into effect on the same day, the Issuer has registered the issuance of the Bonds with NDRC and obtained a certificatefrom NDRC on 27 May 2021 evidencing such registration and has undertaken to provide the requisite information on the issuance of the Bonds to NDRC within 10 Registration BusinessDays after the Issue Date.

Unless previously redeemed, or purchased and cancelled, the Issuer will redeem each Bond at its principal amount on 27 September 2024 (the ‘‘Maturity Date’’). At any time, on giving notless than 30 nor more than 60 days’ notice to the Bondholders (as defined below) (which notice shall be irrevocable), the Issuer may redeem the Bonds in whole, but not in part, at theirprincipal amount, together with any interest accrued to, but excluding the date fixed for redemption, if, immediately before giving such notice, the Issuer satisfies the Trustee that the Issuerhas or will become obliged to pay Additional Tax Amounts (as defined in the Terms and Conditions) as a result of any change in, or amendment to, the laws or regulations of the PRC or anypolitical subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of, or any statement of an official position with respectto, such laws or regulations (including but not limited to any decision by a court of competent jurisdiction), which change or amendment becomes effective on or after 17 September 2021,and such obligation cannot be avoided by the Issuer taking reasonable measures available to it. At any time following the occurrence of a Relevant Event (as defined in the Terms andConditions), each holder of Bonds (each a ‘‘Bondholder’’) will have the right, at such Bondholder’s option, to require the Issuer to redeem all but not some only of that Bondholder’s Bondson the Put Settlement Date (as defined in the Terms and Conditions) at 101 per cent. (in the case of a redemption for a Change of Control (as defined in the Terms and Conditions)) or 100per cent. (in the case of a redemption for a No Registration Event (as defined in the Terms and Conditions)) of their principal amount, together in each case with accrued interest up to (butexcluding) such Put Settlement Date. See ‘‘Terms and Conditions - Redemption and Purchase’’.

For a more detailed description of the Bonds, see ‘‘Terms and Conditions of the Bonds’’ beginning on page 55.

The Bonds will be issued in denominations of U.S.$200,000 each and integral multiples of U.S.$1,000 in excess thereof.

Investing in the Bonds involves risks. See ‘‘Risk Factors’’ beginning on page 16 for a discussion of certain factors to be considered in connection with an investment in the Bonds.

The Bonds have not been and will not be registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’) and, subject to certain exceptions, may not beoffered or sold within the United States. The Bonds are being offered and sold outside of the United States in reliance on Regulation S under the Securities Act. For a description ofthese and certain further restrictions on offers and sales of the Bonds and the distribution of this Offering Circular, see ‘‘Subscription and Sale’’.

The PRC government (as defined below) (including the Weifang Government (as defined below), the Weifang SASAC (as defined below) and other governmental authorities and state-ownedentities) has no obligation to repay any amount under the Bonds, the Trust Deed or the Agency Agreement. Please see ‘‘Risk Factors - Risks relating to the Group’s Business - The PRCgovernment (including the Weifang Government, the Weifang SASAC and other governmental authorities and state-owned entities) has no obligation to repay any amount under the Bonds,the Trust Deed or the Agency Agreement’’ for further information.

Application will be made to The Stock Exchange of Hong Kong Limited (the ‘‘Hong Kong Stock Exchange’’) for the listing of the Bonds by way of debt issues to professional investors (asdefined in Chapter 37 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited) (‘‘Professional Investors’’) only and such permission is expected tobecome effective on or about 28 September 2021. This Offering Circular is for distribution to Professional Investors only.

Notice to Hong Kong investors: The Issuer confirms that the Bonds are intended for purchase by Professional Investors only and will be listed on the Hong Kong Stock Exchange on thatbasis. Accordingly, the Issuer confirms that the Bonds are not appropriate as an investment for retail investors in Hong Kong. Investors should carefully consider the risks involved.

The Hong Kong Stock Exchange has not reviewed the contents of this Offering Circular, other than to ensure that the prescribed form disclaimer and responsibility statements, anda statement limiting distribution of this Offering Circular to Professional Investors only have been reproduced in this Offering Circular. Listing of the Bonds on the Hong KongStock Exchange is not to be taken as an indication of the commercial merits or credit quality of the Bonds, the Issuer or the Group (as defined below) or quality of disclosure in thisOffering Circular. Hong Kong Exchanges and Clearing Limited and the Hong Kong Stock Exchange take no responsibility for the contents of this Offering Circular, make no representationas to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of thisOffering Circular.

The Bonds are expected to be rated ‘‘Baa3’’ by Moody’s Investors Service, Inc (‘‘Moody’s’’) and ‘‘BBB-’’ by Fitch Ratings Ltd. (‘‘Fitch’’). A credit rating is not a recommendation to buy,sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating agency.

The Bonds will be represented initially by interests in a global certificate (the ‘‘Global Certificate’’) in registered form which will be registered in the name of a nominee of, and shall bedeposited on or about 27 September 2021 (the ‘‘Issue Date’’) with, a common depositary for Euroclear Bank SA/NV (‘‘Euroclear’’) and Clearstream Banking S.A. (‘‘Clearstream’’).Beneficial interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream. Except as describedherein, definitive certificates for Bonds will not be issued in exchange for interests in the Global Certificate.

Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers

CEB International China International CapitalCorporation

Zhongtai International Hua Xia BankCo., Limited

Hong Kong Branch

Joint Bookrunners and Joint Lead Managers

Industrial Bank

Co., Ltd.

Hong Kong Branch

Bank

of China

BOCOM

International

CCB

International

CCIS China Minsheng

Banking

Corp., Ltd.,

Hong Kong Branch

CLSA CNCB

Capital

Guotai Junan

International

Shanghai Pudong

Development Bank

Hong Kong Branch

Shenwan Hongyuan

(H.K.)

SPDB International

Offering Circular dated 17 September 2021

NOTICE TO INVESTORS

THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL, OR ASOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION TO ANYPERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION IN SUCHJURISDICTION. NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR ANY SALEMADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEENNO CHANGE IN THE AFFAIRS OF THE ISSUER OR ANY OF ITS SUBSIDIARIES OR THAT THEINFORMATION SET FORTH IN THIS OFFERING CIRCULAR IS CORRECT AS AT ANY DATESUBSEQUENT TO THE DATE HEREOF.

This Offering Circular includes particulars given in compliance with the Rules Governing the Listing ofSecurities on The Stock Exchange of Hong Kong Limited for the purpose of giving information withregard to the Issuer and the Group (as defined below). The Issuer accepts full responsibility for theaccuracy of the information contained in this Offering Circular and confirms, having made all reasonableenquiries, that to the best of its knowledge and belief there are no other facts the omission of whichwould make any statement herein misleading.

The Issuer, having made all reasonable enquiries, confirms that: (i) this Offering Circular contains allinformation with respect to the Issuer and its subsidiaries (together with the Issuer, the ‘‘Group’’) andthe Bonds which is material in the context of the issue and offering of the Bonds (including allinformation required by applicable laws and all information which, according to the particular nature ofthe Issuer, the Group and the Bonds, is necessary to enable investors to make an informed assessment ofthe assets and liabilities, financial position, profits and losses, and prospects of the Issuer and the Groupand of the rights attaching to the Bonds); (ii) the statements contained herein relating to the Issuer, theGroup and the Bonds are in all material respects true and accurate and not misleading in any materialrespect in the context of the offering; (iii) the statements of opinion and intention contained in thisOffering Circular with regard to the Issuer and the Group are honestly held, have been reached afterconsidering all relevant circumstances and are based on reasonable assumptions; (iv) there are no otherfacts in relation to the Issuer, the Group or the Bonds, the omission of which would, in the context of anissue of the Bonds make any statement in this Offering Circular misleading in any material respect; (v)all reasonable enquiries have been made by the Issuer to ascertain such facts and to verify the accuracyof all such information and statements; (vi) the statistical, industry and market-related data and forwardlooking statements included in this Offering Circular (if any) are based on or derived or extracted fromsources which the Issuer believes to be accurate and reliable in all material respects; and (iv) thisOffering Circular does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements herein, in light of the circumstances under which they are made, notmisleading.

The Issuer has prepared this Offering Circular solely for use in connection with the proposed offering ofthe Bonds described in this Offering Circular. This Offering Circular does not constitute an offer of, oran invitation by or on behalf of CEB International Capital Corporation Limited, China InternationalCapital Corporation Hong Kong Securities Limited, Zhongtai International Securities Limited and HuaXia Bank Co., Limited Hong Kong Branch as joint global coordinators, joint bookrunners and joint leadmanagers and Industrial Bank Co., Ltd. Hong Kong Branch, Bank of China Limited, BOCOMInternational Securities Limited, CCB International Capital Limited, China Credit InternationalSecurities Co. Ltd, China Minsheng Banking Corp., Ltd., Hong Kong Branch, CLSA Limited, CNCB(Hong Kong) Capital Limited, Guotai Junan Securities (Hong Kong) Limited, Shanghai PudongDevelopment Bank Co., Ltd., Hong Kong Branch, Shenwan Hongyuan Securities (H.K.) Limited andSPDB International Capital Limited as joint bookrunners and joint lead managers (together, the‘‘Managers’’) or the Issuer to subscribe for or purchase any of the Bonds. The distribution of thisOffering Circular and the offering of the Bonds in certain jurisdictions may be restricted by law. Personsinto whose possession this Offering Circular comes are required by the Issuer, the Managers to informthemselves about and to observe any such restrictions. No action is being taken to permit a publicoffering of the Bonds or the distribution of this Offering Circular in any jurisdiction where action would

i

be required for such purposes. There are restrictions on the offer and sale of the Bonds, and thecirculation of documents relating thereto, in certain jurisdictions including the United States, the UnitedKingdom, Hong Kong, the PRC and Singapore, and to persons connected therewith. For a description ofcertain further restrictions on offers and sales of the Bonds, and distribution of this Offering Circular,see ‘‘Subscription and Sale’’. By purchasing the Bonds, investors represent and agree to all of thoseprovisions contained in that section of this Offering Circular. This Offering Circular is personal to eachofferee and does not constitute an offer to any other person or to the public generally to subscribe for,or otherwise acquire, the Bonds. Distribution of this Offering Circular to any other person other than thepotential investor and any person retained to advise such potential investor with respect to its purchaseis unauthorised. Each potential investor, by accepting delivery of this Offering Circular, agrees to theforegoing and to make no photocopies of this Offering Circular or any documents referred to in thisOffering Circular.

No person has been or is authorised to give any information or to make any representation concerningthe Issuer, the Group or the Bonds other than as contained herein and, if given or made, any such otherinformation or representation should not be relied upon as having been authorised by the Issuer, theManagers, the Trustee or the Agents (as defined in the Terms and Conditions) or their respectiveaffiliates, directors, officers, employees, agents, representatives or advisers. Neither the delivery of thisOffering Circular nor any offering, sale or delivery made in connection with the issue of the Bondsshall, under any circumstances, constitute a representation that there has been no change or developmentreasonably likely to involve a change in the affairs of the Issuer or the Group since the date hereof orcreate any implication that the information contained herein is correct as at any date subsequent to thedate hereof. This Offering Circular does not constitute an offer of, or an invitation by or on behalf of theIssuer, the Managers, the Trustee or the Agents or any of their respective affiliates, directors, officers,employees, agents, representatives or advisers to subscribe for or purchase the Bonds and may not beused for the purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in anycircumstances in which such offer or solicitation is not authorised or is unlawful.

This Offering Circular may not be copied or reproduced in whole or in part. It may be distributed onlyto, and its contents may be disclosed only to the potential investors to whom it is provided. Byaccepting delivery of this Offering Circular each investor agrees to these restrictions.

None of the Managers, the Trustee or the Agents or any of their respective affiliates, directors, officersor advisers has independently verified the information contained in this Offering Circular. Accordingly,no representation, warranty or undertaking, express or implied, is made or given and no responsibility orliability is accepted, by the Managers, the Trustee or the Agents or any of their respective affiliates,directors, officers or advisers, as to the accuracy, completeness or sufficiency of the informationcontained in this Offering Circular or any other information supplied in connection with the Bonds.Nothing contained in this Offering Circular is, or shall be relied upon as, a promise, representation orwarranty by the Managers, the Trustee or the Agents or any of their respective affiliates, directors,officers or advisers. This Offering Circular is not intended to provide the basis of any credit or otherevaluation, nor should it be considered as a recommendation by any of the Issuer, the Managers, theTrustee or the Agents or any of their respective affiliates, directors, officers, employees, agents,representatives or advisers that any recipient of this Offering Circular should purchase the Bonds. Eachperson receiving this Offering Circular acknowledges that such person has not relied on the Managers,the Trustee, the Agents or any of their respective affiliates, directors, officers or advisers in connectionwith its investigation of the accuracy of such information or its investment decision, and each suchperson must rely on its own examination of the Issuer and the merits and risks involved in investing inthe Bonds. See ‘‘Risk Factors’’ for a discussion of certain factors to be considered in connection with aninvestment in the Bonds.

To the fullest extent permitted by law, none of the Managers, the Trustee or the Agents or any of theirrespective affiliates, directors, officers or advisers accepts any responsibility for the contents of thisOffering Circular and assumes no responsibility for the contents, accuracy, completeness or sufficiency

ii

of any such information or for any other statement, made or purported to be made by the Managers, theTrustee or the Agents or any of their respective affiliates, directors, officers or advisers or on theirbehalf in connection with the Issuer or the issue and offering of the Bonds. Each of the Managers, theTrustee and the Agents and their respective affiliates, directors, officers or advisers accordinglydisclaims all and any liability, whether arising in tort or contract or otherwise, which it might otherwisehave in respect of this Offering Circular or any such statement. None of the Managers, the Trustee orthe Agents or any of their respective affiliates, directors, officers or advisers undertakes to review theresults of operations, financial condition or affairs of the Issuer during the life of the arrangementscontemplated by this Offering Circular nor to advise any investor or potential investor in the Bonds ofany information coming to the attention of the Managers, the Trustee or the Agents or their respectiveaffiliates, directors, officers or advisers.

Any of the Managers and their respective affiliates may purchase the Bonds for its or their own accountand enter into transactions, including credit derivatives, such as asset swaps, repackaging and creditdefault swaps relating to the Bonds and/or other securities of the Issuer or its subsidiaries or associatesat the same time as the offer and sale of the Bonds or in secondary market transactions. Suchtransactions may be carried out as bilateral trades with selected counterparties and separately from anyexisting sale or resale of the Bonds to which this Offering Circular relates (notwithstanding that suchselected counterparties may also be purchasers of the Bonds). Furthermore, investors in the Bonds mayinclude entities affiliated with the Group.

Potential investors should not construe anything in this Offering Circular as legal, business or taxadvice. Each potential investor should determine for itself the relevance of the information contained inthis Offering Circular and consult its own legal, business and tax advisers as needed to make itsinvestment decision and determine whether it is legally able to purchase the Bonds under applicablelaws or regulations.

In connection with Section 309B of the Securities and Futures Act (Chapter 289) of Singapore (the‘‘SFA’’) and the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore (the‘‘CMP Regulations 2018’’), the Issuer has determined the classification of the Bonds as prescribedcapital markets products (as defined in the CMP Regulations 2018) and Excluded Investment Products(as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS NoticeFAA-N16: Notice on Recommendations on Investment Products).

WARNING

The contents of this Offering Circular have not been reviewed by any regulatory authority of anyjurisdiction. You are advised to exercise caution in relation to the offering of the Bonds. If you are inany doubt about any of the contents of this Offering Circular, you should obtain independentprofessional advice.

Industry and Market Data

Market data and certain industry forecasts and statistics used throughout this Offering Circular havebeen obtained from, among other sources, internal surveys, market research, publicly availableinformation and industry publications. Industry publications generally state that the information that theycontain has been obtained from sources believed by the Issuer to be reliable and accurate but that theaccuracy and completeness of that information is not guaranteed. Similarly, internal surveys, industryforecasts and market research, while believed to be reliable, have not been independently verified, andnone of the Issuer, the Managers or their respective affiliates, directors, officers, employees, agents,representatives or advisers makes any representation as to the correctness, accuracy or completeness ofthat information. Such information may not be consistent with other information compiled within oroutside the PRC. In addition, third-party information providers may have obtained information frommarket participants and such information may not have been independently verified. Accordingly, suchinformation should not be unduly relied upon.

iii

Presentation of Financial Information

This Offering Circular contains consolidated financial information of the Issuer as at and for the yearsended 31 December 2018, 2019 and 2020, which was prepared and presented in accordance with theAccounting Standards for Business Enterprises in the PRC (‘‘PRC GAAP’’). The audited consolidatedfinancial statements of the Issuer as at and for the year ended 31 December 2020 have been audited byYongtuo Certified Public Accountants (Special General Partnership) (‘‘Yongtuo’’), the independentauditor of the Issuer for the year ended 31 December 2020.

This Offering Circular also contains the audited consolidated financial statements of the Issuer as at andfor the year ended 31 December 2019 which were prepared and presented in accordance with PRCGAAP and have been audited by Hexin Certified Public Accountants LLP (‘‘Hexin’’), the independentauditor of the Issuer for the year ended 31 December 2019.

PRC GAAP differs in certain respects from International Financial Reporting Standards (‘‘IFRS’’). See‘‘Summary of Certain Differences Between PRC GAAP and IFRS’’.

iv

CERTAIN DEFINITIONS, CONVENTIONS AND CURRENCY PRESENTATION

In this Offering Circular, unless otherwise specified or the context otherwise requires, all references tothe ‘‘PRC’’, ‘‘China’’ and ‘‘mainland China’’ are to the People’s Republic of China (excluding HongKong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan), and allreferences to the ‘‘United States’’ and ‘‘U.S.’’ are to the United States of America, all references to‘‘Hong Kong’’ are to the Hong Kong Special Administrative Region of the People’s Republic of China;all references to ‘‘CNY’’, ‘‘Renminbi’’ and ‘‘RMB’’ are to the lawful currency of the PRC, and allreferences to ‘‘USD’’, ‘‘U.S.$’’ and ‘‘U.S. dollars’’ are to the lawful currency of the United States ofAmerica.

Historical amounts translated into Renminbi have been translated at historical rates of exchange. Suchtranslations should not be construed as representations that the amounts referred to herein could havebeen or could be converted into Renminbi at those rates or any other rate at all. This Offering Circularcontains translation of certain Renminbi amounts into U.S. dollars at specified rates solely for theconvenience of the reader. Unless otherwise specified, where financial information in relation to theIssuer has been translated into U.S. dollars, it has been so translated, for convenience only, at the rate ofCNY6.5250 to U.S.$1.00 (the noon buying rate in New York City on 31 December 2020 as set forth inthe weekly H.10 statistical release of the Federal Reserve Board of the Federal Reserve Bank of NewYork). Further information regarding exchange rate is set forth in ‘‘Exchange Rates’’ in this OfferingCircular. No representation is made that the Renminbi amounts referred to in this Offering Circularcould have been or could be converted into U.S. dollars at any particular rate or at all.

In this Offering Circular, where information has been presented in thousands or millions of units,amounts may have been rounded up or down. Accordingly, totals of columns or rows of numbers intables may not be equal to the apparent total of the individual items and actual numbers may differ fromthose contained herein due to rounding. References to information in billions of units are to theequivalent of a thousand million units.

In this Offering Circular, unless otherwise indicated or the context otherwise requires, references to:

• ‘‘MOF’’ refers to the Ministry of Finance of the People’s Republic of China;

• ‘‘NDRC’’ refers to the National Development and Reform Commission of the People’s Republic ofChina or its local counterparts;

• ‘‘PBOC’’ refers to the People’s Bank of China, the central bank of the PRC;

• the ‘‘PRC government’’ refers to the central government of the PRC and its political subdivisions,including provincial, municipal and other regional or local government entities, andinstrumentalities thereof, or where the context requires, any of them;

• ‘‘SAFE’’ refers to the State Administration of Foreign Exchange of the People’s Republic of Chinaor its local branch;

• ‘‘SAT’’ refers to the State Administration of Taxation of the People’s Republic of China;

• ‘‘State Council’’ refers to the State Council of the People’s Republic of China;

• the ‘‘Weifang Finance Bureau’’ refers to the finance bureau of the Weifang Government;

• the ‘‘Weifang Government’’ refers to the Weifang Municipal People’s Government（濰坊市人民

政府）; and

v

• the ‘‘Weifang SASAC’’ refers to the Weifang State-owned Assets Supervision and AdministrationCommission of the People’s Republic of China.

The English names of the PRC nationals, entities, departments, facilities, laws, regulations, certificatestitles and the like are translations of their Chinese names and are included for identification purposesonly. In the event of any inconsistency, the Chinese name prevails.

vi

FORWARD-LOOKING STATEMENTS

The Issuer has made certain forward-looking statements in this Offering Circular. All statements otherthan statements of historical facts contained in this Offering Circular constitute ‘‘forward-lookingstatements’’. Some of these statements can be identified by forward-looking terms, such as ‘‘anticipate’’,‘‘target’’, ‘‘believe’’, ‘‘can’’, ‘‘would’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘aim’’, ‘‘intend’’, ‘‘may’’,‘‘plan’’, ‘‘will’’, ‘‘would’’ or similar words. However, these words are not the exclusive means ofidentifying forward-looking statements. All statements regarding expected financial condition and resultsof operations, business plans and prospects are forward-looking statements. These forward-lookingstatements include but are not limited to statements as to the business strategy, operating income andprofitability, planned projects and other matters as they relate to the Issuer and/or the Group discussedin this Offering Circular regarding matters that are not historical fact. These forward-looking statementsand any other projections contained in this Offering Circular (whether made by the Issuer or by anythird party) involve known and unknown risks, including those disclosed under the caption ‘‘RiskFactors’’, uncertainties and other factors that may cause the actual results, performance or achievementsof the Issuer or the Group to be materially different from any future results, performance orachievements expressed or implied by such forward-looking statements or other projections.

These forward-looking statements speak only as at the date of this Offering Circular. The Issuerexpressly disclaims any obligation or undertaking to release publicly any updates or revisions to anyforward-looking statement contained herein to reflect any change in the Group’s expectations withregard thereto or any change of events, conditions or circumstances, on which any such statement wasbased.

The factors that could cause the actual results, performances and achievements of the Issuer, the Groupor any member of the Group to be materially different include, among others:

• the Group’s ability to successfully implement its business plans and strategies;

• various business opportunities that the Group may pursue;

• financial condition, performance and business prospects of the Group;

• the Group’s capital expenditure plans and its ability to carry out those plans;

• access and cost of capital and financing;

• changes in the competition landscape in the industries where the Group operates;

• any changes in the laws, rules and regulations of the PRC government and the rules, regulationsand policies of the relevant governmental authorities relating to the Group’s business;

• general political and economic conditions, including those related to the PRC;

• changes or volatility in interest rates, foreign exchange rates, equity prices or other rates or prices,including those pertaining to the PRC and the industry and markets in which the Group operates;

• fluctuations in prices of and demand for products and services that the Group provides;

• macroeconomic measures taken by the PRC government to manage economic growth;

• natural disasters, industrial action, terrorist attacks and other events beyond the Group’s control;

• changes in the global economic conditions; and

• other factors, including those discussed in ‘‘Risk Factors’’.

vii

The Issuer cautions investors not to place undue reliance on these forward-looking statements whichreflect its managements’ view only as at the date of this Offering Circular. The Issuer does notundertake any obligation to update or revise publicly any of the opinions or forward-looking statementsexpressed in this Offering Circular as a result of any new information, future events or otherwise. Inlight of these risks, uncertainties and assumptions, the forward-looking events discussed in this OfferingCircular might not occur and the actual results of the Issuer or the Group could differ materially fromthose anticipated in these forward-looking statements.

viii

TABLE OF CONTENTS

Page

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SUMMARY CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

EXCHANGE RATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

TERMS AND CONDITIONS OF THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

SUMMARY OF PROVISIONS RELATING TO THE BONDS IN GLOBAL FORM . . . . . . . . 74

USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

CAPITALISATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

DESCRIPTION OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 104

PRC REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

SUBSCRIPTION AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

SUMMARY OF CERTAIN DIFFERENCES BETWEEN PRC GAAP AND IFRS . . . . . . . . . . 120

GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

ix

SUMMARY

The summary below is only intended to provide a limited overview of information described in moredetail elsewhere in this Offering Circular. As it is a summary, it does not contain all of the informationthat may be important to investors, and terms defined elsewhere in this Offering Circular shall have thesame meanings when used in this summary. Potential investors should therefore read this OfferingCircular in its entirety, including the section entitled ‘‘Risk Factors’’, before making an investmentdecision.

DESCRIPTION OF THE GROUP

OVERVIEW

Established in September 2016, the Issuer is a state-owned company wholly-owned by the WeifangSASAC, and is one of the primary entities undertaking the development and construction of urbaninfrastructure in Weifang City. The Group plays a strategic and crucial role in the municipaldevelopment and continued urbanisation of Weifang City. It is the largest comprehensive state-ownedasset management and operating entity in Weifang City and is responsible for Weifang City’s majorinfrastructure and urban-related projects, focusing in particular on transfer of land, landscaping,construction of major infrastructure facilities, inter-regional key water conservatory projects at themunicipal level and the development of tourism, leisure and cultural recreation industries.

Focusing its business operations in Weifang City, the Group is primarily engaged in the businesses oftransfer of self-owned land, landscaping, manufacture and sale of auto parts, trading, water conservatoryconstruction, water and heat supply, property leasing, financial services, tourism and others.

As at 31 December 2020, the Issuer had a paid-in capital of CNY5 billion and the Group had total assetsof approximately CNY106.73 billion. For the years ended 31 December 2018, 2019 and 2020, the Issuerreported total operating income of approximately CNY1.74 billion, CNY3.64 billion and CNY9.52billion, respectively, and net profit of approximately CNY538.11 million, CNY402.11 million andCNY220.69 million, respectively.

Transfer of Self-owned Land Business Segment

The Group is primarily engaged in the transfer of self-owned land purchased by the Group via bidinvitation, auction or listing for its transfer of self-owned land business segment. The Group conducts itstransfer of self-owned land business primarily through itself and two of its subsidiaries, namely,Weifang Dongxing Construction & Development Co., Ltd.（濰坊東興建設發展有限公司）(‘‘WeifangDongxing Construction’’) and Weifang Cultural Tourism Development Group Co., Ltd.（濰坊市文化旅

遊發展集團有限公司）(‘‘Weifang Cultural Tourism’’). As at 31 March 2021, approximately 50.16 percent., 48.64 per cent. and 0.12 per cent. of the equity interest in Weifang Dongxing Construction wereheld by the Issuer, Weifang Cultural Tourism and Weifang Luwei Industrial Co., Ltd.（濰坊魯偉實業有

限公司）(‘‘Weifang Luwei’’), respectively. As at 31 March 2021, the Issuer held approximately 51.28per cent. and 33.32 per cent. of the equity interest in Weifang Cultural Tourism and Weifang Luwei,respectively.

As at 31 March 2021, the Group owned a total of 9,191 mu（畝）of land, all of which is located in theurban areas in Weifang City. The market value of the land bank owned by the Group has increased inrecent years along with the advancement of infrastructure and facilities and continued economicdevelopment in Weifang City.

For the years ended 31 December 2018, 2019 and 2020, the operating income derived from the Group’stransfer of self-owned land business segment amounted to approximately CNY856.62 million,CNY1,140.69 million and CNY324.00 million, respectively, representing approximately 49.30 per cent.,31.32 per cent. and 3.40 per cent. of the Group’s total operating income, respectively.

1

Landscaping Business Segment

The Group commenced its landscaping business in 2019 upon completion of the Issuer’s purchases ofcertain equity interest in Shandong Meichen Ecology & Environment Co., Ltd.（山東美晨生態環境股份

有限公司）(‘‘Meichen Ecology’’). Meichen Ecology is a company listed on ChiNext of the ShenzhenStock Exchange (stock code: 300237) since 2011, and is primarily engaged in the manufacture and saleof auto parts and landscaping businesses. As at 31 March 2021, the Issuer held approximately 21.46 percent. of the equity interest in Meichen Ecology.

The Group conducts its landscaping business mainly through a wholly-owned subsidiary of MeichenEcology, namely, Hangzhou Saishi Garden Group Co., Ltd.（杭州賽石園林集團有限公司）(‘‘SaishiGarden’’). The major services and products provided by Saishi Garden include garden construction, saleof landscaping seedlings and project design. It mainly provides integrated greening and landscapingservices for municipal and real estate customers.

For the years ended 31 December 2019 and 2020, the operating income derived from the Group’slandscaping business segment amounted to approximately CNY1,032.03 million and CNY1,742.93million, respectively, representing approximately 28.34 per cent. and 18.30 per cent. of the Group’s totaloperating income, respectively.

Auto Parts Business Segment

The Group commenced its auto parts business in 2019 upon completion of the Issuer’s purchases ofcertain equity interest in Meichen Ecology. The Group conducts its auto parts business mainly throughMeichen Ecology.

Meichen Ecology is primarily engaged in the research and development, manufacture, sale and serviceof non-tyre rubber products. Meichen Ecology’s major products include hoses and shock-absorbingrubber products produced via blending, modification, compounding and formulation of polymerelastomer materials, which are mainly used in passenger cars and commercial vehicles in the automotiveindustry.

For the years ended 31 December 2019 and 2020, the operating income derived from the Group’s autoparts business segment amounted to approximately CNY478.30 million and CNY1,279.01 million,respectively, representing approximately 13.13 per cent. and 13.43 per cent. of the Group’s totaloperating income, respectively.

Trading Business Segment

The Group commenced its trading business in 2020. The Group conducts its trading business mainlythrough its subsidiary, namely, Weifang Urban Investment Junhe International Trade Co., Ltd.（濰坊市

城投均和國際貿易有限公司）(‘‘Weifang Urban Investment’’). In April 2020, the Issuer and ShanghaiJunhe Group International Trading Co., Ltd.（上海均和集團國際貿易有限公司）(‘‘Shanghai Junhe’’)entered into a strategic cooperation agreement to establish Weifang Urban Investment with a registeredcapital of CNY2 billion in June 2020. As at 31 March 2021, the Issuer held approximately 51 per cent.of the equity interest in Weifang Urban Investment. Weifang Urban Investment is primarily engaged inthe sale of rubber products, chemical products (excluding licensed chemical products) and metalmaterials. The Group’s main trading product is electrolytic copper, which is a type of non-ferrous metal.The Group’s products are primarily sold domestically in South China.

For the year ended 31 December 2020, the operating income derived from the Group’s trading businesssegment amounted to approximately CNY5,032.21 million, representing approximately 52.85 per cent.of the Group’s total operating income.

2

Water Conservatory Construction Business Segment

The Group’s water conservatory construction business is conducted by its subsidiary, namely, ShandongHaobo Water Conservancy Construction Co., Ltd.（山東浩博水利建設有限公司）(‘‘Haobo Water’’). Asat 31 March 2021, the Issuer held approximately 63.83 per cent. of the equity interest in Haobo Water.The Group is responsible for the construction of water conservatory facilities in all districts and countiesof Weifang City, including river channels reconstruction, barrage dam construction and reinforcementand other water conservatory-related projects.

For the years ended 31 December 2018, 2019 and 2020, the operating income derived from the Group’swater conservatory construction business segment amounted to approximately CNY269.64 million,CNY346.07 million and CNY505.94 million, respectively, representing approximately 15.52 per cent.,9.50 per cent. and 5.31 per cent. of the Group’s total operating income, respectively.

Water and Heat Supply Business Segment

The Group commenced its water and heat supply business in 2016. The Group conducts its water supplybusiness primarily through Haobo Water. The Group primarily supplies water to domestic customers inthe southern parts of Weifang City.

The Group conducts its heat supply business primarily through its subsidiary, namely, Weifang MinshengThermal Power Holding Co., Ltd.（濰坊民生熱電控股有限公司）(‘‘Weifang Thermal Power’’). Asat 31 March 2021, Weifang Thermal Power was a wholly-owned subsidiary of Weifang DongxingConstruction. The operating income derived from the Group’s heat supply business is primarily generatedfrom charges received from heat supply companies for the use of the Group’s heating pipeline networks.

For the years ended 31 December 2018, 2019 and 2020, the operating income derived from the Group’swater and heat supply business segment amounted to approximately CNY234.17 million, CNY296.67million and CNY424.47 million, respectively, representing approximately 13.48 per cent., 8.15 per cent.and 4.46 per cent. of the Group’s total operating income, respectively.

Property Leasing Business Segment

Since 2016, the Issuer has actively expanded its sources for generating revenue from self-operatedassets. For example, the Group leased some of its properties, including the Lutai Convention andExhibition Centre（魯台會展中心）, LED lights and pipe networks (all of which are owned by theIssuer) to the Weifang Government to generate stable operating income from collecting royalties from itsproperty leasing business.

For the years ended 31 December 2018, 2019 and 2020, the operating income derived from the Group’sproperty leasing business segment amounted to approximately CNY292.45 million, CNY284.13 millionand CNY84.23 million, respectively, representing approximately 16.83 per cent., 7.80 per cent. and 0.88per cent. of the Group’s total operating income, respectively.

Financial Services Business Segment

The Group commenced its financial services business in 2016. The Group conducts its financial servicesbusiness mainly through its wholly-owned subsidiary, namely, Weifang Dongxing Financial HoldingsCo., Ltd.（濰坊市東興金融控股有限公司）(‘‘Weifang Financial Holdings’’) and its subsidiary, namely,Weifang Urbanization Construction Investment Management Co., Ltd.（濰坊市城鎮化建設投資管理有限

公司）(‘‘Weifang Investment Management’’). As at 31 March 2021, Weifang Financial Holdings heldapproximately 40 per cent. of the equity interest in Weifang Investment Management.

For the years ended 31 December 2018, 2019 and 2020, the operating income derived from the Group’sfinancial services business segment amounted to approximately CNY25.96 million, CNY15.07 millionand CNY9.92 million, respectively, representing approximately 1.49 per cent., 0.41 per cent. and 0.10per cent. of the Group’s total operating income, respectively.

3

Tourism Business Segment

The Group is engaged in the tourism industry. The Group owns the Bailanghe Wetland Park（白浪河濕

地公園）and Beichen Oasis. The Group’s tourism business is mainly conducted by the Issuer’s wholly-owned subsidiary, namely, Weifang New Fuhua Hotel Management Co., Ltd.（濰坊新富華大酒店管理有

限公司）(‘‘Weifang New Fuhua Hotel Management’’) and its subsidiary, namely, Weifang New FuhuaAmusement Park Management Co., Ltd.（濰坊新富華游樂園管理有限公司）(‘‘Weifang New FuhuaAmusement Park Management’’). As at 31 March 2021, Weifang New Fuhua Amusement ParkManagement was a wholly-owned subsidiary of Weifang New Fuhua Hotel Management.

For the years ended 31 December 2018 and 2020, the operating income derived from the Group’stourism business segment amounted to approximately CNY19.72 million and CNY11.57 million,respectively, representing approximately 1.13 per cent. and 0.12 per cent. of the Group’s total operatingincome, respectively. For the year ended 31 December 2019, the Group did not record any operatingincome from its tourism business segment. The decrease in operating income from its tourism businesssegment was primarily due to the renovation of The Farrington Hotel（濰坊富華大酒店）and FuhuaAmusement Park（濰坊富華遊樂園）. Since 2018, part of the operating income from the Group’s tourismbusiness segment has been allocated to the operating income from the Group’s other business segment.

Other Business Segment

The Group is also engaged in other businesses such as urban infrastructure construction.

For the years ended 31 December 2018, 2019 and 2020, the operating income derived from the Group’sother business segment amounted to approximately CNY39.06 million, CNY48.97 million andCNY107.84 million, respectively, representing approximately 2.25 per cent., 1.35 per cent. and 1.13 percent. of the Group’s total operating income, respectively.

RECENT DEVELOPMENTS

Unaudited and Unreviewed Consolidated Financial Information of the Group as at and for the SixMonths Ended 30 June 2021

As at the date of this Offering Circular, the Group has prepared the Group’s unaudited and unreviewedconsolidated financial information as at and for the six months ended 30 June 2021 (the ‘‘June 2021Financial Information’’). For the six months ended 30 June 2021, the Group recorded decreases in,among others, other income, investment income and other comprehensive income after tax and increasesin, among others, total operating costs, operating costs, taxes and surcharges, selling expenses, R&Dexpenses, financial expenses and income tax expense when compared to the corresponding period in2020.

As at 30 June 2021, the Group recorded decreases in, among others, transactional financial assets,accounts receivable, receivables financing, contract assets, non-current assets due within one year, long-term receivables, investment real estate and public welfare biological assets and increases in, amongothers, short-term loan, accounts payable, advance from customers, contract liabilities, non-currentliabilities due within one year, long-term loan, bonds payable, long-term payables, estimated liabilities,deferred income, deferred income tax liabilities, other non-current liabilities, total non-current liabilitiesand total liabilities when compared to their respective balances as at 31 December 2020.

Save for the financial information disclosed in the preceding paragraphs, the June 2021 FinancialInformation is not included in and does not form a part of this Offering Circular. The June 2021Financial Information has not been audited or reviewed by a certified public accountant, and should notbe relied upon by investors to provide the same quality of information associated with information thathas been subject to an audit or review. None of the Managers, the Trustee or the Agents or any of theirrespective directors, officers, employees, affiliates, advisers, representatives or agents makes anyrepresentation or warranty, express or implied, regarding the accuracy or sufficiency of the June 2021

4

Financial Information for an assessment of, and potential investors must exercise caution when usingsuch data to evaluate, the Group’s financial condition and results of operations. In addition, the June2021 Financial Information should not be taken as an indication of the expected financial condition orresults of operations of the Issuer or the Group for the full financial year ending 31 December 2021.

Entrustment of Voting Rights in Weifang Yaxing Chemical Co., Ltd.

As at 31 March 2021, the Issuer held approximately 12.67 per cent. of the equity interest andapproximately 21.20 per cent. of the voting rights in Weifang Yaxing Chemical Co., Ltd.（濰坊亞星化

學股份有限公司）(‘‘Yaxing Chemical’’).

Pursuant to an entrustment agreement entered into between the Issuer and Weifang Yaxing Group Co.,Ltd.（濰坊亞星集團有限公司）(‘‘Yaxing Group’’) in January 2021, the Issuer was entrusted with thevoting rights held by Yaxing Group in respect of approximately 8.53 per cent. of the equity interest inYaxing Chemical and became the controlling shareholder of Yaxing Chemical.

Yaxing Chemical is a company listed on the Shanghai Stock Exchange (stock code: 600319) and isprimarily engaged in the manufacture and marketing of basic chemicals.

The Outbreak of COVID-19

The recent outbreak of COVID-19 has caused substantial disruptions in the PRC and internationaleconomies and markets as well as additional uncertainties in the Group’s operating environment. TheGroup has been closely monitoring the impact of the outbreak and continued escalation of COVID-19 onthe Group’s businesses, and will keep its contingency measures and risk management under review asthe situation evolves. Please see ‘‘Risk Factors – Risks Relating to the Group’s Business – The extent towhich the COVID-19 pandemic will impact the Group’s business, financial condition, results ofoperations and prospects is uncertain and cannot be predicted.’’ and ‘‘Risk Factors – Risks Relating tothe Group’s Business – The Group’s operations are subject to force majeure events, natural disastersand outbreaks of contagious diseases.’’ for further information.

COMPETITIVE STRENGTHS

The Issuer believes that the Group has the following competitive strengths:

• Strategic role in the municipal development of Weifang City;

• Strong support from the Weifang Government;

• Land resources advantages;

• Strong financing capability;

• Prudent financial structure;

• Comprehensive internal control and risk management systems; and

• Experienced management team with support from a dedicated team of staff.

BUSINESS STRATEGIES

The Group’s objective is to strengthen its position in the various industries in which the Group operatesand further expand its business operations in Weifang City. The Group intends to implement thefollowing strategies to achieve this objective:

5

• Continue to fulfil its role as a leading player in the various industries in which the Group operatesin Weifang City;

• Continue to expand its existing business operations and invest in new businesses;

• Strengthen management structure and internal control system;

• Adhere to prudent financial policy with stringent risk control;

• Explore new financing channels; and

• Continue to build a professional management team.

6

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The summary consolidated financial information of the Issuer as at and for the years ended 31 December2018, 2019 and 2020 set forth below is derived from and should be read in conjunction with the auditedconsolidated financial statements of the Issuer as at and for the years ended 31 December 2019 and2020, including the notes thereto and the auditor’s reports in respect of the years ended 31 December2019 and 2020 included elsewhere in this Offering Circular. The audited consolidated financialstatements of the Issuer as at and for the year ended 31 December 2020 were prepared and presented inaccordance with PRC GAAP and have been audited by Yongtuo, the independent auditor of the Issuerfor the year ended 31 December 2020. The audited consolidated financial statements of the Issuer as atand for the year ended 31 December 2019 were prepared and presented in accordance with PRC GAAPand have been audited by Hexin, the independent auditor of the Issuer for the year ended 31 December2019.

PRC GAAP differs in certain respects from IFRS. See ‘‘Summary of Certain Differences between PRCGAAP and IFRS’’.

According to the Circular of the National Development and Reform Commission and the Ministry ofFinance on Improvement of Market Regulatory Regime and Strict Prevention of Foreign Debt Risks andLocal Government Indebtedness Risks（國家發展改革委、財政部關於完善市場約束機制嚴格防範外債

風險和地方債務風險的通知）(the ‘‘Joint Circular’’), any public assets such as public schools, publichospitals, public cultural facilities, parks, public squares, office buildings of government departmentsand public institutions, municipal roads, non-toll roads, non-operating water conservancy facilities, no-charge pipe network facilities and other public assets and the usage rights of reserve land (together,‘‘Public Assets’’) cannot be counted towards the Group’s assets for the purposes of issuing medium- andlong-term foreign debts. The Issuer estimates that the Group’s Public Assets represented approximately20 per cent. of the Group’s total assets as at 31 December 2020. Potential investors should not take intoaccount the Group’s Public Assets when assessing the Group’s business, financial condition, results ofoperations and prospects as the Group’s Public Assets cannot be utilised to discharge any obligations ofthe Group, including the repayment of any amount under the Bonds. As the Group’s Public Assets havenot been excluded from the Issuer’s consolidated financial statements included elsewhere in this OfferingCircular, potential investors must therefore exercise caution when using such consolidated financialstatements to evaluate the Group’s business, financial condition, results of operations and prospects.Please see ‘‘Risk Factors – Risks relating to the Group’s Business – Any public assets of the Groupshould not be taken into account when the Group’s business, financial condition, results of operationsand prospects are assessed’’ for further information.

7

SUMMARY CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the year ended 31 December

2018 2019 2020

(CNY) (CNY) (CNY)(audited) (audited) (audited)

I. Total operating income . . . . . . . . . . . . . . . . . . . . . . 1,737,624,160.34 3,641,932,365.79 9,522,122,113.59Including: Operating income . . . . . . . . . . . . . . . . . . . . . 1,737,624,160.34 3,641,932,365.79 9,522,122,113.59II. Total operating costs . . . . . . . . . . . . . . . . . . . . . . . 1,847,709,508.09 3,774,854,842.77 9,831,551,359.98Of which: Operating costs . . . . . . . . . . . . . . . . . . . . . . 1,414,105,451.29 2,701,465,527.39 8,521,662,016.84Taxes and surcharges . . . . . . . . . . . . . . . . . . . . . . . . . . 109,333,861.08 106,739,545.76 109,731,572.74Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,443,441.60 82,272,738.63 139,963,008.43G&A expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,308,501.84 233,853,820.84 349,864,000.79R&D expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 61,145,986.96 127,111,054.77Financial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,518,252.28 589,377,223.19 583,219,706.41Including: interest expense . . . . . . . . . . . . . . . . . . . . . . 333,206,806.13 675,827,895.53 912,948,969.73

Interest income . . . . . . . . . . . . . . . . . . . . . . 131,559,880.63 151,818,927.57 261,940,620.02Add: other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,476,882.40 474,159,539.23 545,898,264.43Investment income (losses are listed with ‘‘–’’) . . . . . . . . 315,892,791.42 135,336,689.05 384,110,514.50Including: investment income from associates and joint

ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,324,145.53 145,334,384.01 293,710,299.09Credit impairment loss (losses are listed with ‘‘–’’) . . . . . – 24,895,082.26 -135,344,486.56Asset impairment loss (losses are listed with ‘‘–’’) . . . . . . -2,309,087.29 -1,298,862.08 -216,676,374.01Income from asset disposal (losses are listed with ‘‘–’’) . . 212,922.69 -1,380,853.49 27,503,798.22III. Operating profit (losses are listed with ‘‘–’’) . . . . . . 524,188,161.47 498,789,117.99 296,062,470.19Plus: non-operating income . . . . . . . . . . . . . . . . . . . . . . 22,313,647.61 12,518,760.90 13,825,192.34Less: non-operating expenses . . . . . . . . . . . . . . . . . . . . 3,960,474.98 78,299,058.09 15,972,876.61IV. Total profit (total loss is listed with ‘‘–’’) . . . . . . . . 542,541,334.10 433,008,820.80 293,914,785.92Deduct: income tax expense . . . . . . . . . . . . . . . . . . . . . 4,432,235.08 30,901,203.57 73,219,795.09V. Net profit (net loss is listed with ‘‘–’’) . . . . . . . . . . . 538,109,099.02 402,107,617.23 220,694,990.83Net profit attributable to shareholder of the parent

company (net loss is listed with ‘‘–’’) . . . . . . . . . . . . . 501,027,055.05 404,504,209.26 174,163,671.65Gains and losses from non-controlling interests (net losses

are listed with ‘‘–’’) . . . . . . . . . . . . . . . . . . . . . . . . . 37,082,043.97 -2,396,592.03 46,531,319.18VI. Other comprehensive income after tax . . . . . . . . . . 21,878,567.81 514,201.46 -8,420,751.32Other comprehensive income after tax attributable to

owner of the parent company . . . . . . . . . . . . . . . . . . 21,878,567.81 462,798.43 -6,900,835.37(I) Other comprehensive income that cannot be

reclassified into profit and loss . . . . . . . . . . . . . . . . . – – -429,200.00(II) Other comprehensive income

reclassified into profit and loss . . . . . . . . . . . . . . . . . 21,878,567.81 462,798.43 -6,471,635.37Other comprehensive income after tax attributable to

non-controlling interests . . . . . . . . . . . . . . . . . . . . . . – 51,403.03 -1,519,915.95VII. Total comprehensive income . . . . . . . . . . . . . . . . 559,987,666.83 402,621,818.69 212,274,239.51Total comprehensive income attributable to

owner of the parent company . . . . . . . . . . . . . . . . . . 522,905,622.86 404,967,007.69 167,262,836.28Total comprehensive income attributable to non-

controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . 37,082,043.97 -2,345,189.00 45,011,403.23

8

SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December

2018 2019 2020


Current assets:Monetary funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,112,904,111.61 6,892,096,927.43 7,695,944,097.31Transactional financial assets . . . . . . . . . . . . . . . . . . . . – 2,700,000,000.00 1,301,714,049.92Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,292,846.00 11,655,550.56 60,063,921.09Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,196,519,203.50 3,458,176,011.59 4,619,367,472.97Receivables financing . . . . . . . . . . . . . . . . . . . . . . . . . – 134,529,791.33 243,601,934.52Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192,967,829.92 225,035,121.45 245,567,682.42Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,985,101,488.60 4,428,311,853.00 5,222,685,870.83Including: Interest receivable. . . . . . . . . . . . . . . . . . . . . 18,547,866.46 59,042,603.64 8,460,472.62

Dividend receivable . . . . . . . . . . . . . . . . . . . – – 12,252,709.80Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,992,875,331.74 15,356,481,303.07 10,858,887,129.56Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 5,646,628,149.81Non-current assets due within one year. . . . . . . . . . . . . . – 80,038,463.52 50,061,309.66Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,132,181,130.86 280,151,138.19 348,240,276.37Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 24,613,841,942.23 33,566,476,160.14 36,292,761,894.46Non-current assets:Available-for-sale financial assets . . . . . . . . . . . . . . . . . 1,032,085,920.00 – –

Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . 8,087,238,129.44 7,811,010,309.95 8,388,767,201.16Long-term equity investment . . . . . . . . . . . . . . . . . . . . . 3,277,397,565.67 4,259,152,630.41 6,772,192,296.38Investment in other equity instruments . . . . . . . . . . . . . . – 1,113,435,920.00 1,307,969,504.42Other non-current financial assets . . . . . . . . . . . . . . . . . – 1,700,000.00 –

Investment real estate. . . . . . . . . . . . . . . . . . . . . . . . . . 68,759,730.13 52,562,552.42 78,988,736.23Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,848,766,851.67 13,416,792,892.85 8,726,259,157.80Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . 36,735,393,697.74 37,406,008,208.53 38,936,604,185.25Public welfare biological assets . . . . . . . . . . . . . . . . . . . – 7,719,179.81 7,717,179.77Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489,536,451.17 933,126,782.47 908,240,231.85Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 843,799,913.65 686,069,434.80Long-term deferred expenses. . . . . . . . . . . . . . . . . . . . . 4,388,105.25 30,839,676.44 64,902,720.76Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . 9,155,514.42 48,420,097.99 152,644,307.00Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . 100,557,991.37 37,664,374.79 4,409,545,262.60Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . 62,653,279,956.86 65,962,232,539.31 70,439,900,218.02Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,267,121,899.09 99,528,708,699.45 106,732,662,112.48Current liabilities:Short-term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700,000,000.00 2,900,320,000.00 3,327,294,809.52Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,000,000.00 1,769,719,443.99 1,203,108,880.51Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,821,979,384.73 4,903,098,715.33 4,810,828,573.80Advance from customers . . . . . . . . . . . . . . . . . . . . . . . 180,593,847.25 194,556,079.65 532,606,518.42Contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 99,431,731.21Employee compensation payable . . . . . . . . . . . . . . . . . . 1,389,814.94 78,961,044.61 85,418,547.31Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,036,575.09 197,053,043.36 160,377,394.76Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,639,388,530.01 7,757,142,207.52 7,499,015,817.36Including: Interest payable . . . . . . . . . . . . . . . . . . . . . . 299,049,598.13 404,066,533.55 494,040,574.49

Dividend payable . . . . . . . . . . . . . . . . . . . . – – –

Non-current liabilities due within one year . . . . . . . . . . . 3,515,182,905.58 3,928,813,810.43 5,227,927,888.00Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . – 120,661,625.26 138,693,000.31Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 19,202,571,057.60 21,850,325,970.15 23,084,703,161.20Non-current liabilities:Long-term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,078,485,415.43 8,763,311,893.39 12,787,203,691.26Bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,632,964,849.40 16,326,131,032.70 16,990,002,473.66Long-term payables . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,006,593,285.29 5,062,538,452.89 5,293,334,400.18Estimated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . – 38,411,519.70 64,276,429.10Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,493,684.66 177,958,679.60 205,869,333.94Deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . – 128,174,341.45 132,691,361.54Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . – 17,410,780.14 24,837,500.00Total non-current liabilities . . . . . . . . . . . . . . . . . . . . 25,869,537,234.78 30,513,936,699.87 35,498,215,189.68Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,072,108,292.38 52,364,262,670.02 58,582,918,350.88Owner’s equity (or shareholder’s equity):Equity (or paid-in capital). . . . . . . . . . . . . . . . . . . . . . . 5,000,000,000.00 5,000,000,000.00 5,000,000,000.00Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,265,927,766.50 28,305,159,093.58 28,916,124,811.72Other comprehensive income. . . . . . . . . . . . . . . . . . . . . 21,878,567.81 22,341,366.24 15,440,530.87Surplus reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,128,076.78 136,751,241.02 166,298,990.04Undistributed profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,436,339,517.37 2,759,625,277.07 2,748,468,026.56

9

As at 31 December

2018 2019 2020


Total owner’s equity (or shareholder’s equity) attributableto the parent company . . . . . . . . . . . . . . . . . . . . . . . 34,821,273,928.46 36,223,876,977.91 36,846,332,359.19

Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . 7,373,739,678.25 10,940,569,051.52 11,303,411,402.41Total owner’s equity (or shareholders’ equity) . . . . . . . 42,195,013,606.71 47,164,446,029.43 48,149,743,761.60Total liabilities and owner’s equity

(or shareholders’ equity) . . . . . . . . . . . . . . . . . . . . 87,267,121,899.09 99,528,708,699.45 106,732,662,112.48

10

Other Financial Data

As at or for the year ended31 December

2018 2019 2020

EBITDA(1) (CNY million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,224.53 1,540.34 1,611.05EBITDA margin(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70% 42% 17%

Notes:

(1) EBITDA is calculated as net profit plus income tax expense, interest expense, depreciation of fixed assets and investmentreal estate, amortisation of intangible assets and long-term deferred expenses. EBITDA is not a standard measure under PRCGAAP or IFRS. EBITDA is a widely used financial indicator of a company’s ability to service and incur debt. EBITDAshould not be considered in isolation or construed as an alternative to cash flows, net income or any other measure ofperformance or as an indicator of the Issuer’s operating performance, liquidity, profitability or cash flows generated byoperating, investing or financing activities. In evaluating EBITDA, investors should consider, among other things, thecomponents of EBITDA and the amount by which EBITDA exceeds capital expenditures and other charges. The Issuer hasincluded EBITDA because the Issuer believes that it is a useful supplement to cash flow data as a measure of the Issuer’sperformance and its ability to generate cash flow from operations to cover debt service and taxes. EBITDA presented hereinmay not be comparable to similarly titled measures presented by other companies. Investors should not compare the Issuer’sEBITDA to EBITDA presented by other companies because not all companies use the same definition.

(2) The Issuer calculates EBITDA margin as EBITDA over total operating income. Investors should not compare the Issuer’sEBITDA margin to EBITDA margin presented by other companies because not all companies use the same definition.

11

THE OFFERING

The following is a brief summary of the offering and is qualified in its entirety by the remainder of thisOffering Circular. Some of the terms described below are subject to important limitations andexceptions. Words and expressions defined in "Terms and Conditions of the Bonds’’ and "Summary ofProvisions Relating to the Bonds in Global Form’’ shall have the same meanings in this summary. For amore complete description of the terms and conditions of the Bonds, see "Terms and Conditions of theBonds’’ in this Offering Circular.

Issuer . . . . . . . . . . . . . . Weifang Urban Construction and Development Investment Group Co.,Ltd.（濰坊市城市建設發展投資集團有限公司）. The Issuer’s Legal EntityIdentifier number is 3003009FPXBA05W36D22.

The Bonds . . . . . . . . . . . U.S.$400,000,000 2.60 per cent. Bonds due 2024.

Issue Price . . . . . . . . . . . The Bonds will be issued at 100.00 per cent. of their principal amount.

Form and Denomination . The Bonds will be issued in registered form in denominations ofU.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof.

Issue Date . . . . . . . . . . . 27 September 2021.

Interest . . . . . . . . . . . . . The Bonds will bear interest on their outstanding principal amount fromand including 27 September 2021, at the rate of 2.60 per cent. per annum,payable semi-annually in arrear in equal instalments on 27 March and 27September in each year, commencing on 27 March 2022.

Maturity Date . . . . . . . . 27 September 2024.

Status of the Bonds . . . . The Bonds will constitute direct, unconditional, unsubordinated and(subject to Condition 4(a) (Negative Pledge) of the Terms andConditions) unsecured obligations of the Issuer which will at all timesrank pari passu and without preference among themselves. The paymentobligations of the Issuer under the Bonds shall, save for such exceptionsas may be provided by applicable law and subject to Condition 4(a)(Negative Pledge) of the Terms and Conditions, at all times rank at leastequally with all its other present and future unsecured and unsubordinatedobligations.

Negative Pledge . . . . . . . The Bonds will contain a negative pledge provision as further describedin Condition 4(a) (Negative Pledge) of the Terms and Conditions.

Use of Proceeds . . . . . . . See ‘‘Use of Proceeds’’.

Events of Default . . . . . . The Bonds will contain certain events of default as further described inCondition 9 (Events of Default) of the Terms and Conditions.

Cross-Default. . . . . . . . . The Bonds are subject to a cross-default provision in respect of present orfuture indebtedness for or in respect of monies borrowed or any guaranteeand/or indemnity thereof of the Issuer or of any of its Subsidiaries inaggregate equals or exceeds U.S.$15,000,000 or its equivalent. SeeCondition 9(c) (Cross-Default) of the Terms and Conditions.

12

Taxation . . . . . . . . . . . . All payments of principal, premium (if any) and interest by or on behalfof the Issuer in respect of the Bonds shall be made free and clear of, andwithout set-off or counterclaim and withholding or deduction for, anytaxes, duties, assessments or governmental charges of whatever natureimposed, levied, collected, withheld or assessed by the PRC or anypolitical subdivision or any authority therein or thereof having power totax, unless such withholding or deduction is required by law.

Where such set-off, counterclaim, withholding or deduction is made bythe Issuer by or within the PRC up to and including the aggregate rateapplicable on 17 September 2021 (the ‘‘Applicable Rate’’), the Issuerwill increase the amounts paid by it to the extent required, so that the netamount received by Bondholders equals the amounts which wouldotherwise have been receivable by them had no such set-off,counterclaim, withholding or deduction been required.

If the Issuer is required to make a deduction or withholding by or withinthe PRC in excess of the Applicable Rate, the Issuer shall pay suchadditional amounts (the ‘‘Additional Tax Amounts’’) as will result inreceipt by the Bondholders of such amounts as would have been receivedby them had no such withholding or deduction been required, except thatno such Additional Tax Amounts shall be payable in the circumstances setout in Condition 8 (Taxation) of the Terms and Conditions.

Final Redemption. . . . . . Unless previously redeemed, or purchased and cancelled, the Bonds willbe redeemed at their principal amount on the Maturity Date.

Redemption for RelevantEvents . . . . . . . . . . . .

Following the occurrence of a Relevant Event, the Holder of any Bondwill have the right, at such Holder’s option, to require the Issuer toredeem all, but not some only, of such Holder’s Bonds at 101 per cent. (inthe case of a redemption for a Change of Control) or 100 per cent. (in thecase of a redemption for a No Registration Event) of their principalamount, together in each case with accrued interest, as further describedin Condition 6(c) (Redemption for Relevant Events) of the Terms andConditions.

Redemption for TaxationReasons . . . . . . . . . . .

The Bonds may be redeemed at the option of the Issuer in whole, but notin part, at any time, on giving not less than 30 nor more than 60 days’notice to the Bondholders (which notice shall be irrevocable) at theirprincipal amount, together with unpaid interest accrued to, but excludingthe date fixed for redemption, if, immediately before giving such notice,the Issuer satisfies the Trustee that:

(A) the Issuer has or will become obliged to pay Additional TaxAmounts as a result of any change in, or amendment to, the laws orregulations of the PRC or any political subdivision or any authoritythereof or therein having power to tax, or any change in theapplication or official interpretation of, or any statement of anofficial position with respect to, such laws or regulations (includingbut not limited to any decision by a court of competent jurisdiction),which change or amendment becomes effective on or after 17September 2021; and

13

(B) such obligation cannot be avoided by the Issuer taking reasonablemeasures available to it,

provided, however, that no such notice of redemption shall be givenearlier than 90 days prior to the earliest date on which the Issuer would beobliged to pay such Additional Tax Amounts if a payment in respect ofthe Bonds were then due, as further described in Condition 6(b)(Redemption for Taxation Reasons) of the Terms and Conditions.

Further Issues . . . . . . . . The Issuer may from time to time without the consent of the Bondholdersand in accordance with the Trust Deed (as defined in the Terms andConditions), create and issue further bonds having the same terms andconditions as the Bonds in all respects (or in all respects save for theissue date, the first payment of interest on them and the timing forcomplying with the Registration Conditions, for completing the NDRCPost-Issue Filing, for making the Foreign Debt Registration and, ifapplicable, for filing of the Bonds pursuant to the Cross Border FinancingCircular) so as to form a single series with the outstanding Bonds, asfurther described in Condition 15 (Further Issues) of the Terms andConditions.

Trustee . . . . . . . . . . . . . Citicorp International Limited.

Principal Paying Agentand Transfer Agent. . .

Citibank N.A., London Branch.

Registrar . . . . . . . . . . . . Citibank N.A., London Branch.

Clearing Systems . . . . . . The Bonds will be represented initially by beneficial interests in theGlobal Certificate, which will be registered in the name of a nominee of,and deposited on the Issue Date with, a common depositary for Euroclearand Clearstream. Beneficial interests in the Global Certificate will beshown on, and transfers thereof will be effected only through, recordsmaintained by Euroclear and Clearstream. Except as described in thisOffering Circular, certificates for the Bonds will not be issued inexchange for beneficial interests in the Global Certificate.

Clearance and Settlement The Bonds have been accepted for clearance through Euroclear andClearstream under Common Code 236121119 and the ISIN for the Bondsis XS2361211191.

Notices and Payment . . . So long as the Global Certificate is held on behalf of Euroclear andClearstream, any notice to the holders of the Bonds shall be validly givenby the delivery of the relevant notice to Euroclear and Clearstream, forcommunication by the relevant clearing system to entitled accountholdersin substitution for notification as required by the Terms and Conditionsand shall be deemed to have been given on the date of delivery to suchclearing system.

Governing Law . . . . . . . English law.

14

Listing . . . . . . . . . . . . . Application will be made to the Hong Kong Stock Exchange for thelisting of, and permission to deal in, the Bonds by way of debt issues toProfessional Investors only, and such permission is expected to becomeeffective on or about 28 September 2021.

Selling Restrictions . . . . The Bonds will not be registered under the Securities Act or under anystate securities laws of the United States and will be subject to customaryrestrictions on transfer and resale. See ‘‘Subscription and Sale’’.

Rating . . . . . . . . . . . . . . The Bonds are expected to be rated ‘‘Baa3’’ by Moody’s and ‘‘BBB-’’ byFitch. A rating is not a recommendation to buy, sell or hold securities andmay be subject to revision, suspension or withdrawal at any time by theassigning rating agency.

15

RISK FACTORS

An investment in the Bonds is subject to a number of risks. Investors should carefully consider all of theinformation in this Offering Circular and, in particular, the risks described below, before deciding toinvest in the Bonds. The following describes some of the significant risks relating to the Issuer, theGroup, the Group’s business, the market in which the Group operates and the value of the Bonds. PRClaws and regulations may differ from the laws and regulations in other countries. Some risks may beunknown to the Issuer or the Group and other risks, currently believed to be immaterial, could in factbe material. Any of these could materially and adversely affect the business, financial condition, resultsof operations, profitability or prospects of the Issuer or the Group or the value of the Bonds. All ofthese factors are contingencies which may or may not occur, and the Issuer or the Group is not in aposition to express a view on the likelihood of any such contingency occurring. This Offering Circularalso contains forward-looking statements that involve risks and uncertainties. The actual results of theGroup could differ materially from those anticipated in these forward-looking statements as a result ofcertain factors, including but not limited to the risks described below and elsewhere in this OfferingCircular.

The Issuer or the Group does not represent that the statements below regarding the risk factors areexhaustive. Potential investors should also read the detailed information set out elsewhere in thisOffering Circular and reach their own views prior to making any investment decision.

RISKS RELATING TO THE GROUP’S BUSINESS

The Group’s business, financial condition, results of operations and prospects are heavily dependenton the level of economic development in Weifang City.

The Group’s businesses and assets are primarily concentrated in Weifang City, which is located inShandong Province, China. Therefore, the Group’s business, financial condition, results of operationsand prospects have been, and will continue to be, heavily dependent on the social conditions, localgovernment policies and level of economic activity in Weifang City. Weifang City has experienced rapideconomic growth in recent years.

However, in recent years, there was a slowdown in the overall growth of the PRC’s economy. It isdifficult to predict how the economic development of Weifang City will be affected by this slowdown inthe growth of the PRC economy. As such, there can be no assurance that the level of economicdevelopment in Weifang City will continue to be maintained at the past rate of growth, if at all.

The Group may not be able to establish or invest in any new businesses outside Weifang City in thefuture and it is expected that the Group’s future business and operations will continue to be primarilyconcentrated in Weifang City. If economic growth slows, adverse changes in social conditions or localgovernment policies arise or any severe natural disasters or catastrophic events occur in Weifang City,the Group’s business, financial condition, results of operations and prospects would be materially andadversely affected.

The Group’s business, financial condition, results of operations, profitability and prospects aresubject to effects of global economic events.

The Group’s business, financial condition, results of operations, profitability and prospects are affectedby general global economic conditions. The outlook for the global economy and financial marketsremains uncertain. In Asia and other emerging markets, some countries are expecting increasinginflationary pressure as a result of liberal monetary policy or excessive foreign fund inflow, or both. TheUnited Kingdom’s exit from the European Union has resulted in volatility in global financial markets,and it is expected to create mid-to long-term economic uncertainty to not only the economies of theUnited Kingdom and the European Union but also globally. In addition, the U.S. government’s policiesmay create uncertainty for the global economy and financial markets. The United States and the PRChave been involved in controversy over trade barriers in recent years that have triggered the

16

implementation or proposed implementation of tariffs on certain imported products into the twocountries. On 15 January 2020, the U.S. government and the PRC government signed the U.S.-ChinaEconomic and Trade Agreement (the ‘‘Phase I Agreement’’) pursuant to which the United States agreedto cancel a portion of tariffs imposed on products from the PRC, and the PRC agreed to additionalpurchases of goods and services from the United States. Both parties expressed a commitment to furtherimprove various trade issues. However, there can be no assurance that the Phase I Agreement will beadhered to by both governments or successfully reduce trade tensions. Geopolitical events such ascontinued tensions in the Middle East and the Korean peninsula, as well as the escalation of tensionsbetween the United States and the PRC over trade policies, political and other issues could significantlyundermine the stability of the global economy and financial markets.

More recently, the ongoing COVID-19 pandemic has adversely affected the global economy andfinancial markets. In December 2019, the first case of a novel strain of coronavirus, COVID-19, wasidentified. The pandemic has since spread globally and there have been increasing initial infection andfatality rates across the world. On 11 March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The ongoing COVID-19 pandemic and policies implemented by governmentsto deter the spread of the disease have had and may continue to have a material adverse effect onconsumer confidence and the general economic conditions which the Group’s business is subject to.Governments of many countries (including the PRC) have declared a state of emergency, closed theirborders to international travellers and issued stay-at-home orders with a view to containing thepandemic. There can be no assurance that such measures will be effective in ending or deterring thespread of the COVID-19 pandemic. Whilst the PRC has recently seen a rebound and a degree ofnormalisation of supply and demand, the pandemic situation continues to be affected by localised re-emergences of the virus. While a number of biopharmaceutical manufacturers have developed COVID-19 vaccines, there remains uncertainty regarding the efficacy, safety, and durability of such vaccines, aswell as how quickly and widely the vaccines might be made available. The COVID-19 pandemiccontinues to affect many countries globally and there remains significant uncertainty as to when thepandemic will end and whether governments will extend or implement further travel restrictions or otherrestrictive measures to contain the COVID-19 pandemic. The resultant disruptions to the supply chainand reduced levels of consumption, commercial activities and industrial production in the affectedcountries may result in an economic slowdown in such economies which, if prolonged, could cause aglobal recession. As the situation of the COVID-19 pandemic is still evolving, the heighteneduncertainties surrounding the pandemic may pose a material adverse effect on the Group’s business,financial condition, results of operations, profitability and prospects.

While the central banks of various countries, including the Federal Reserve Board of Governors of theUnited States, have cut policy rates and/or announced stimulus packages, and national governments haveproposed or adopted various forms of economic relief, there can be no assurance that such monetary andfiscal policy measures will have the intended effects or that a global economic downturn will not occuror market volatilities will not persist. There can be no assurance that changes in the economic, socialand political conditions in the PRC or the global economy would not have a material adverse effect onthe Group’s business, financial condition, results of operations, profitability and prospects. Please see ‘‘–

The Group’s operations are subject to force majeure events, political unrest or civil disobediencemovements, natural disasters, outbreaks of contagious diseases and other disasters’’ and ‘‘– The extentto which the COVID-19 pandemic will impact the Group’s business, financial condition, results ofoperations and prospects is uncertain and cannot be predicted’’ for further information.

The PRC economy is sensitive to global economic conditions, and it is impossible to predict how thePRC economy will develop in the future and whether it may slow down due to a global crisis orexperience a financial crisis. In addition, instability in the global economy may materially and adverselyaffect the markets in which the Group operates, which may lead to a decline in the general demand forthe Group’s services and products. If economic conditions were to worsen or if the economic recoveryfails to continue or if an economic slowdown were to return, the Group may have difficulty accessingthe financial markets, which could make it more difficult or expensive to obtain funding and, in

17

addition, there can be no assurance that the Group will be able to raise finance at a reasonable cost, orat all. The Group may also be subject to solvency risks of banks and of its counterparties in its financialarrangements and contracts. Therefore, changes in the economic, social and political conditions in thePRC or the global economy could have a material adverse effect on the Group’s business, financialcondition, results of operations, profitability and prospects.

The Group’s business and future prospects depend to a large extent upon the public spending oninfrastructure and fixed asset investments by the Weifang Government.

The Group’s businesses largely depend on continued spending and investment by the WeifangGovernment to build government supported urban infrastructure. The Group undertakes a number ofurban infrastructure construction projects within Weifang City; as such, the Group plays a key role inthe urbanisation and development of Weifang City.

The Group’s business, results of operations and future prospects can be significantly affected by theWeifang Government’s budget and policies, in particular those in relation to the acquisition and transferof land, urban infrastructure construction or the urbanisation and development of Weifang City ingeneral. For example, the Group’s urban infrastructure construction projects are generally conductedaccording to the project development agreements the Group enters into with the Weifang Government(or its subdivisions), and the Group’s operating income from these projects is derived from the fees andproject buyback amounts paid by the Weifang Government. In addition, the Group cooperates with anumber of local governmental entities to undertake landscaping projects based on the public-private-partnership (PPP) model. The Group also undertakes a number of traditional municipal landscapingprojects. Any significant reduction in the Weifang Government’s public budgets and changes in policiesrelating to acquisition and transfer of land, urban infrastructure construction or the urbanisation anddevelopment of Weifang City in general could materially and adversely affect the Group’s business.

There are a number of factors affecting the nature, scale, location and timing of the WeifangGovernment’s budget and policies in the infrastructure construction or the urbanisation and developmentof Weifang City in general. The key factors include the policies and priority relating to the developmentof Weifang City and its fiscal and monetary policies. The Weifang Government’s investments inWeifang City are also affected by the level of government income and the general economic conditionsin the PRC, Shandong Province and Weifang. If the Weifang Government’s public budget or spendingon infrastructure construction in Weifang City or the development of Weifang City in general decreasesor the Weifang Government adopts adverse changes in its policies, the Group’s business, financialcondition, results of operations and prospects could be materially and adversely affected.

The Group may not make decisions, take action or invest or operate in businesses or projects that arealways in the Group’s best interests or that aim to maximise the Group’s profits since the WeifangGovernment can exert significant influence on the Group.

The Issuer is a leading entity undertaking the development and construction of urban infrastructure inWeifang City. Given the Group’s strategic role in the development of Weifang City, the Group may notalways be able to make decisions, take action or invest or operate in businesses or projects that are inthe Group’s best interests or that aim to maximise the Group’s profits. The Weifang Government is in aposition to exert significant influence on the Group’s major business decisions and strategies, includingthe scope of its activities, investment decisions and dividend policy. Further, the Group generally relieson the Weifang Government to select and propose new projects for the Group to undertake. There canbe no assurance that the Weifang Government would always take action that is in the Group’s bestinterests or that aims to maximise the Group’s profits. The Weifang Government may use its ability toinfluence the Group’s business and strategy in a manner which is beneficial to Weifang City as a whole,but which may not necessarily be in the Group’s best interests. The Weifang Government may alsochange its policies, intentions, preferences, views, expectations, projections, forecasts and opinions, as aresult of changes in the economic, political and social environment as well as its projections ofpopulation and employment growth in Weifang City and any such change may have a material effect on

18

the Group’s business and prospects. Any amendment, modification or repeal of the WeifangGovernment’s existing policies could result in a modification of the existing regulatory regime which inturn could have a material adverse effect on the Group’s financial condition and results of operations.

The PRC government (including the Weifang Government, the Weifang SASAC and othergovernmental authorities and state-owned entities) has no obligation to repay any amount under theBonds, the Trust Deed or the Agency Agreement.

As at the date of this Offering Circular, the Issuer is wholly-owned by the Weifang SASAC. As a state-owned enterprise, the Group may generally be perceived to have access to liquidity support from itsshareholder, the Weifang SASAC, or the PRC government (including the Weifang Government) in lightof its ownership structure, particularly in the event that the Group becomes financially distressed.However, the PRC government (including the Weifang Government, the Weifang SASAC and othergovernmental authorities and state-owned entities) is not an obligor and shall under no circumstanceshave any obligation arising out of or in connection with the Bonds, the Trust Deed or the AgencyAgreement. This position has been reinforced by the Circular of the Ministry of Finance on Issuesrelevant to the Regulation on the Financing Activities Conducted by Financial Institutions for LocalGovernments and State-owned Enterprises（財政部關於規範金融企業對地方政府和國有企業投融資行

為有關問題的通知（財金 [2018] 23 號）(the ‘‘MOF Circular’’) promulgated on 28 March 2018, andwhich took effect on the same day, the Circular of the National Development and Reform Commissionand the Ministry of Finance on Improvement of Market Regulatory Regime and Strict Prevention ofForeign Debt Risks and Local Government Indebtedness Risks（國家發展改革委、財政部關於完善市場

約束機制嚴格防範外債風險和地方債務風險的通知）(the ‘‘Joint Circular’’) promulgated on 11 May2018 and which took effect on the same day and the Circular of the General Office of the NationalDevelopment and Reform Commission on Relevant Requirements for Record-filing and Registration ofIssuance of Foreign Debts by Local State-owned Enterprises（國家發展改革委辦公廳關於對地方國有企

業發行外債申請備案登記有關要求的通知）(‘‘Circular 666’’) promulgated on 6 June 2019 and whichtook effect on the same day.

According to the MOF Circular: (i) state-owned financial enterprises are prohibited from providingfinancing in any form for local governments and their departments directly or through local state-ownedenterprises (‘‘SOEs’’) and public institutions and other indirect channels or increasing loans provided tolocal government financing platform companies (‘‘LGFV’’) in violation of regulations that include thenew Budget Law of the PRC, which took effect on 29 December 2018, and Enhancing theAdministration of Fiscal Debts of Local Governments（關於加強地方政府性債務管理的意

見）(‘‘Circular 43’’), except in the case of purchasing local government debt; (ii) state-owned financialenterprises shall ensure that the capital raised for financing SOEs, LGFV or public-private partnershipconstruction projects is lawfully sourced and that the financing satisfies all required capital ratios; (iii)state-owned financial enterprises when providing agency services to local SOEs are obliged to evaluatethe financial capabilities of the entity seeking to raise capital and the source of the funds such as when alocal SOE issues domestic or overseas notes. As for the sources of income from debt-issuing enterprisesinvolved in the arrangement of financial funds, state-owned financial enterprises shall carry out duediligence investigations and carefully verify that the arrangement complies with all applicable laws andregulations; and (iv) documents including offering circulars shall not disclose information that canimplicitly or explicitly indicate the government’s endorsement of the local SOE’s capital-raising, such aslocal financial revenues and expenditures and government debt information, or create misleadingpublicity that implies an association with the government’s credit. According to the Joint Circular, anyenterprise that intends to issue medium- and long-term debt outside of the PRC is prohibited from doingso for the purpose of funding public schools, public hospitals, public cultural facilities, parks, publicsquares, office buildings of government departments and public institutions, municipal roads, non-tollbridges, non-operating water conservancy facilities, not-charged pipe network facilities and other publicinterest assets. The Joint Circular also reaffirms the restrictions in the MOF Circular that offeringcirculars shall not disclose information that can implicitly or explicitly indicate the government’sendorsement of the new debt or create misleading publicity that implies an association with thegovernment’s credit. According to Circular 666, local state-owned entities, as independent legal persons,

19

shall bear the responsibility for repaying foreign debts. Local governments shall not directly repay orpromise to repay the foreign debts of local state-owned entities with financial funds. Local governmentsshall not provide a guaranty for the foreign debts of local state-owned entities. Circular 666 also setsforth that the proceeds of the issue of foreign debts from the financing vehicles of local governmentsshall be used for repayment of existing middle-term or long-term debt. These circulars do not, however,prohibit the PRC government from providing support (in various forms such as capital injection andsubsidies, but excluding the injection of any kind of public assets and land reserves) to the Group duringits ordinary course of business in compliance with PRC laws and regulations.

The repayment obligations under the Bonds remain the sole obligation of the Issuer and all obligationsunder the Bonds, the Trust Deed and the Agency Agreement shall solely be fulfilled by the Issuer as anindependent legal person. The PRC government via the Weifang Government made various equitycontributions to the Group. However, the PRC government (including the Weifang Government, theWeifang SASAC and other governmental authorities and state-owned entities) is not an obligor and shallunder no circumstances have any obligation arising out of or in connection with the Bonds, the TrustDeed or the Agency Agreement if the Issuer fails to meet its obligations under the Bonds, the TrustDeed or the Agency Agreement (as the case may be). Investors of the Bonds are relying solely on thecredit risk of the Issuer. In the event the Issuer does not fulfil its obligations under the Bonds, the TrustDeed or the Agency Agreement (as the case may be), investors will only be able to claim as anunsecured creditor against the Issuer and its assets, and not any other person including the PRCgovernment, the Weifang Government, the Weifang SASAC and other local or municipal government orany other state-owned entities. As the MOF Circular, the Joint Circular and Circular 666 are relativelynew, and given the limited volume of published decisions related to these circulars, the interpretationand enforcement of these laws and regulations involve uncertainties.

In addition, any ownership or control of the Group by the PRC government (including the WeifangGovernment and the Weifang SASAC) does not necessarily correlate to, or provide any assurance as to,the Issuer’s financial condition. If the Issuer does not fulfil its obligations under the Bonds and the TrustDeed, the Bondholders will only have recourse against the Issuer, and not any other person including thePRC government or other government entities.

Therefore, investors should base their investment decisions on the financial condition of the Issuer andthe Group and any perceived credit risk associated with an investment in the Bonds based on thefinancial information of the Group as reflected in the Issuer’s financial statements.

Any public assets of the Group should not be taken into account when the Group’s business, financialcondition, results of operations and prospects are assessed.

According to the Joint Circular, any public assets such as public schools, public hospitals, publiccultural facilities, parks, public squares, office buildings of government departments and publicinstitutions, municipal roads, non-toll roads, non-operating water conservancy facilities, no-charge pipenetwork facilities and other public assets and the usage rights of reserve land cannot be counted towardsthe Group’s assets for the purposes of issuing medium- and long-term foreign debts.

The Issuer estimates that the Group’s Public Assets represented approximately 20 per cent. of theGroup’s total assets as at 31 December 2020. Potential investors should not take into account theGroup’s Public Assets when assessing the Group’s business, financial condition, results of operationsand prospects as the Group’s Public Assets cannot be utilised to discharge any obligations of the Group,including the repayment of any amount under the Bonds. As the Group’s Public Assets have not beenexcluded from the Issuer’s consolidated financial statements included elsewhere in this OfferingCircular, potential investors must therefore exercise caution when using such consolidated financialstatements to evaluate the Group’s business, financial condition, results of operations and prospects.

20

As the Joint Circular is relatively new and given the limited volume of published decisions relating tothe Joint Circular, the interpretation and implementation of the Joint Circular involves uncertainties. Inaddition, there can be no assurance that the PRC government will not impose additional or stricter lawsand regulations relating to foreign debt financing, which may increase the Group’s financing costs andin turn could materially and adversely affect the Group’s business, financial condition, results ofoperations and prospects.

PRC regulations on the administration of the financing platforms of local governments may have amaterial impact on the Group’s business and sources of financing.

The Group’s results of operations and financial condition may be affected by changes in the regulationof the PRC government concerning local government debts and the financing platforms of localgovernments. In September 2014, the State Council of the PRC released Circular 43 with an aim tocontrol a significant increase in local government debts and associated risks in the PRC’s bankingsystem. Circular 43 generally prohibits local governments to incur ‘‘off-balance’’ indebtedness to financethe development of government projects and other public interest projects with the proceeds of theborrowings incurred by financing platforms that the relevant local governments own or control.

MOF, together with NDRC, PBOC, China Securities Regulatory Commission, the China BankingRegulatory Commission (which was merged with the China Insurance Regulatory Commission to formthe China Banking and Insurance Regulatory Commission in April 2018) and the Ministry of Justice ofthe PRC, released the Notice concerning Further Regulation of Local Government Borrowing andFinancing Conduct（關於進一步規範地方政府舉債融資行為的通知）to emphasise the principles andpolicies set out in Circular 43 in April 2017.

The PRC government issued the MOF Circular, effective on 28 March 2018, which aims to increase theresponsibility of the PRC state-owned financial institutions to investigate into the financial independenceand liquidity level of the local government financing vehicles that they assist in fundraising. On 11 May2018, the Joint Circular was released which reiterates the PRC government’s position to isolate the debtof local government financing vehicles from the relevant local government and to control the increase ofthe local governments’ debt. The Joint Circular requires companies that plan to borrow medium- andlong-term foreign debt to establish a sound and standardised corporate governance structure,management decision-making mechanism and financial management system. It further requires that theassets owned by such companies should be of good quality and have clear ownership, and states that itis forbidden to include public assets in corporate assets. See ‘‘– The PRC government (including theWeifang Government, the Weifang SASAC and other governmental authorities and state-owned entities)has no obligation to repay any amount under the Bonds, the Trust Deed or the Agency Agreement’’.

The PRC government may continue to release new policies or amend existing regulations to control theincrease in local government debts in China. There can be no assurance that the Group’s financingmodel and business model will not be materially affected by future changes in the regulatory regimeconcerning the financing platforms of local governments.

The Group heavily relies on government support and a reduction or discontinuance of governmentsupport could materially and adversely affect the financial condition and results of operations of theGroup.

In light of the strategic importance of some of the Group’s businesses in Weifang City, the Group hasreceived significant support, but not including credit support, from the Weifang Government, includingthe Weifang Finance Bureau and the Weifang SASAC, for the development and operations of itsbusiness. For example, the Weifang Finance Bureau enhanced the Group’s financial strengths byincreasing the Issuer’s capital via capital injections. In addition, the Group has received governmentsupport in the form of fiscal subsidies to support the Group’s operations. For the years ended 31December 2018, 2019 and 2020, the Group received fiscal subsidies of approximately CNY320.48million, CNY474.16 million and CNY545.90 million, respectively.

21

There can be no assurance that the Weifang Government will continue to provide support to the Groupor that the fiscal subsidies or other types of government support will not be adjusted or terminated dueto changes in government policy or otherwise. Any ownership or control of the Group by the PRCgovernment (including the Weifang Government and the Weifang SASAC) does not necessarily correlateto, or provide any assurance as to, the Issuer’s financial condition. If the favourable fiscal subsidies orother incentives which are currently available to the Group are reduced or eliminated in the future, theviability of the Group’s businesses may be affected and the financial condition and results of operationsof the Group will be materially and adversely affected.

The Group faces risks associated with contracting with public bodies.

As a leading entity undertaking the development and construction of urban infrastructure in WeifangCity, the Group collaborates with the Weifang Government. Although the Issuer believes that the Groupcurrently maintains a close working relationship with the Weifang Government, there can be noassurance that these close working relationships will continue to be maintained in the future. TheWeifang Government may: (i) have economic or business interests or considerations that are inconsistentwith the Group’s best interests; (ii) be unable or unwilling to fulfil its obligations; (iii) encounterfinancial difficulties; or (iv) have disputes with the Group as to the contractual terms or other matters.The Weifang Government, its controlled agencies or entities may not honour their contractualobligations in a timely manner, if at all, or may, without prior notice or consent from the Group, changeexisting policies and project plans in Weifang City for a number of reasons, such as governmentbudgeting. Failure by the Weifang Government to fulfil its contractual obligations or any adverse changeto the policies or business plans may require the Group to adjust its construction and development plansand thus adversely affect its operating results. If there is any material disagreement between the Groupand the Weifang Government or any of its controlled agencies or entities, the Group may not be able tosuccessfully resolve the disagreement in a timely manner. Disputes with public bodies may last for aconsiderably longer period of time than for those with private sector counterparties, and payments fromthe public bodies may be delayed as a result. Any of these factors may materially and adversely affectthe business relationship between the Group and the Weifang Government, which may in turn materiallyand adversely affect the Group’s business, financial condition, results of operations and prospects.

The Group may fail to obtain sufficient capital resources for its continued growth and other operationneeds.

Most of the Group’s business activities, such as its transfer of self-owned land and urban infrastructureconstruction businesses are capital-intensive and require substantial capital expenditure for, among otherthings, the acquisition of land, purchase of materials, construction and maintenance of plant andequipment used in its operations as well as compliance with environmental laws.

The Group intends to use cash on hand, funds from operations, additional debt financing as well as thefinancial support provided by the Weifang Government, such as fiscal subsidies and capital injections, tofinance its capital expenditure going forward. The Group’s ability to access and raise capital dependsupon a number of factors, such as the PRC’s economic condition, relationships with key commercialbanks, prevailing conditions in capital markets, regulatory requirements, the Group’s financial condition,and costs of financing. Some of these factors are beyond the Group’s control. There can be no assurancethat the relevant funding sources will provide the Group with sufficient amounts of capital in a timelymanner. Also, there can be no assurance that additional financing will be available to the Group or, ifavailable, that it can be obtained on terms acceptable to the Group and within the covenants andlimitations imposed by the Group’s existing or any future financings and the applicable regulationswhich the Group may be subject to.

22

Some of the Group’s members may not possess valid land-use rights or building-ownership certificatesto certain properties, and some of the Group’s properties are subject to usage for special purposes andrestrictions on transfer.

Some of the Group’s members may not possess valid land-use rights certificates or building ownershipcertificates to certain land or properties. Some of these members may be in the process of applying for,or will apply for, the relevant certificate, permits or approvals for certain land or properties (includingthose properties where construction is in progress). In addition, some members may lease propertiesfrom owners who do not possess valid land-use rights certificates or building-ownership certificates.There can be no assurance that such certificates and permits will be obtained in a timely manner, or atall, and any delay may result in a disruption to their business operations and may adversely affect theirfinancial performance. Under PRC laws and regulations, approvals from, and payment of the landpremium to, the relevant land authorities is necessary for any transfer, lease, sale and disposal of suchallocated land or the buildings attached thereto. There can be no assurance that the relevantgovernmental authority will continue to allow the Group to use the land and properties allocated to it inthe same manner as currently used or at all. In addition, restrictions on the transfer of such land andproperties may have a material adverse impact on the liquidity of the Group’s assets.

The Group may not be able to obtain land reserves that are suitable for its transfer of self-owned landbusiness at commercially suitable prices or at all.

The Group’s transfer of self-owned land business segment had been a significant source of operatingincome. For the years ended 31 December 2018, 2019 and 2020, the operating income derived from theGroup’s transfer of self-owned land business segment represented approximately 49.30 per cent., 31.32per cent. and 3.40 per cent. of the Group’s total operating income, respectively. To maintain or grow theGroup’s business in the future, the Group will be required to identify and capitalise on land acquisitionopportunities with potential and to replenish its land bank with suitable sites at reasonable costs. Therecan be no assurance that the parcels of land which the Group has acquired will appreciate in value in thefuture or that the Group will continue to be able to identify or capitalise on similar land acquisitionopportunities or that the Group will be able to successfully acquire attractive land sites.

Land prices have increased significantly in the PRC in recent years and may continue to increase in thefuture. In addition, the PRC government’s policy to grant state-owned land use rights at competitivemarket prices is likely to increase the acquisition cost of land reserves generally in the PRC. TheGroup’s ability to identify and acquire suitable sites is subject to a number of factors that are beyond theGroup’s control. The PRC government controls land supply in the PRC and regulates land sales in thesecondary market. These PRC government policies toward land supply may lead to a decrease in landsupply and directly impact the Group’s ability to acquire land and the costs of such acquisitions, therebyaffecting the Group’s future investment plans. In recent years, the PRC government promulgated anumber of regulations to strengthen the control of land reserves and increase the land use fees chargedfor construction land. The implementation of these policies or relevant regulations may increase landtransfer prices. Furthermore, changes in government policies, zoning and design plans and land userights sales plans with respect to sale of land in Weifang City may adversely affect the Group’s businessplans. Government authorities may implement changes to the existing policies and plans for sale of landin Weifang City or implement new policies or plans, which may adversely affect the Group’s operationsand/or require the Group to adjust its development plans. In addition, there may not be land available inattractive locations in Weifang City. As a result, the Group may have difficulty in continuing to acquiresites suitable for its future investment plan at acceptable prices, or at all. There can be no assurance thatthe Group will be able to identify and acquire sufficient and appropriate sites at reasonable prices in thefuture. Any inability to identify and acquire sufficient and appropriate sites for the Group’s land reserveswould result in uncertainties in its future investment plans, which in turn would have an adverse effecton the Group’s future growth prospects and profitability.

23

The Group consists of a number of companies operating in various business segments and is subjectto challenges not found in companies with a single business line.

The Group conducts businesses in various industries and is exposed to risks associated with multiplebusinesses.

The Group is exposed to business, market and regulatory risks relating to different industries andmarkets, and may from time to time expand its businesses to new industries and markets in which it haslimited operating experience. The Group needs to devote substantial resources to become familiar with,and monitor changes in, different operating environments so that it can succeed in its businesses.

In addition, as the Issuer has a number of subsidiaries, successful operation of the Group requires aneffective management system. As the Group continues to grow its businesses and expand into variousindustries, the Group’s operations may become more complex, which would increase the difficulty ofimplementing its management system.

The Issuer may provide direct funding, guarantees and other support to certain of its subsidiaries fromtime to time. For example, the Issuer may provide shareholder loans to, or act as a guarantor for theborrowings of, certain subsidiaries. If a subsidiary defaults on any borrowings lent or guaranteed by theIssuer, the Issuer will not receive the repayment as planned or the relevant lender may exercise its rightunder the guarantee to demand repayment from the Issuer. The occurrence of either of these types ofevents may result in a funding shortage for the Issuer and may materially and adversely affect theIssuer’s ability to provide financial support to its other subsidiaries. If the Issuer’s financial or non-financial support ceases or diminishes for any reason, the operations of the relevant subsidiaries may bematerially and adversely affected, which in turn may have a material adverse effect on the Group’sbusiness, financial condition and results of operations.

The Group may not be successful in integrating and managing future investments and/or acquisitions.

The Group may from time to time consider investment and acquisition opportunities that maycomplement its core business portfolio and capabilities, and assist in expanding the market share of itscore business operations. For example, in 2018, the Issuer purchased approximately 13.58 per cent. ofthe equity interest in Bank of Weifang Co., Ltd.（濰坊銀行股份有限公司）(‘‘Bank of Weifang’’), anurban commercial bank registered in Weifang, Shandong Province; and in 2019, the Group commencedits landscaping and auto parts businesses upon completion of the Issuer’s purchases of certain equityinterest in Shandong Meichen Ecology & Environment Co., Ltd.（山東美晨生態環境股份有限公司）(‘‘Meichen Ecology’’). The ability of the Group’s operations to grow by investments in and/oracquisitions of its target businesses is dependent upon, and may be limited by, the availability ofattractive projects, its ability to agree commercial, technical and financing terms to the satisfaction ofthe Group and to obtain required approvals from relevant regulatory authorities.

Such investments and/or acquisitions may expose the Group to potential difficulties that could prevent itfrom achieving the strategic objectives for the investments and/or acquisitions or the anticipated levelsof profitability from the investments and/or acquisitions. These difficulties include:

• diversion of management’s attention from the Group’s existing businesses;

• increases in the Group’s expenses and working capital requirements, which may reduce its returnon invested capital;

• difficulty of expanding into different markets and challenges of operating in markets and industriesthat the Group does not have substantial experience in;

• increases in debt, which may increase the Group’s financing costs as a result of higher interestpayments;

24

• exposure to unanticipated contingent liabilities to acquired businesses; and

• difficulties in integrating acquired businesses or investments into the Group’s existing operations,which may prevent it from achieving, or may reduce, the anticipated synergies.

In addition, where the Group invests in joint ventures, it may not have management control over itsinvestments and there can be no assurance that such joint ventures will operate smoothly or successfully,if at all. There can also be no assurance that joint venture partners will act in a way which is consistentwith the interests of the Group and be able and willing to fulfil their obligations under the relevant jointventure or other agreements.

The Group may not be able to successfully identify, acquire, invest in or operate suitable investmentprojects, acquisition targets or businesses.

There can be no assurance that the Group will be able to identify suitable investments and acquisitiontargets, or complete the investments and acquisitions on satisfactory terms, if at all, or, if any suchinvestments and acquisitions are consummated, satisfactorily integrate the acquired businesses andinvestments. Any failure of the Group to implement its expansion plans through investments andacquisitions could have a material adverse effect on the Group’s business, financial condition, results ofoperations and prospects.

In addition, the Group’s subsidiaries operating in different segments may determine that it is in theirshareholders’ interests to pursue new business ventures. There can be no assurance that such businessventures will be successful or generate the synergies expected, if any. The successful completion of thistype of transaction will depend on several factors, including satisfactory due diligence findings and thereceipt of necessary regulatory approval, among others. If the Group fails to complete such businessventures or such ventures prove to be unsuccessful, the Group’s operating segments involved may beadversely affected.

There are risks associated with any material acquisitions by the Group in the future.

The Group may consider expanding its business by acquiring certain interests in other companies.During the course of these transactions, the Group will conduct due diligence investigations with respectto the target companies, but the due diligence with respect to any acquisition opportunity may not revealall relevant facts that are necessary or useful in evaluating such opportunity, which could subject theGroup to unknown financial, legal and other risks and liabilities. When determining the considerationfor any acquisition, the Group will consider various factors, including but not limited to the quality ofthe target business, estimated costs associated with the acquisition and the management of the targetbusiness, prevailing market conditions and intensity of competition. The Group will also face variousissues arising from the acquisition after the relevant transaction is completed, such as integration of thebusiness into its operations and allocation of internal resources. There can be no assurance that theGroup will be able to address these issues effectively.

In addition, any major acquisition or transaction of a similar nature may consume substantialmanagement attention and financial resources of the Group or even cause the Group to incur significantindebtedness. Any material decrease in its financial resources may limit the Group’s ordinary operatingactivities and increase pressure on its liquidity, and in turn could adversely affect its business, financialcondition and results of operations.

The Group is unable to predict whether there will be any target suitable for acquisition or when anysuitable acquisition opportunities could arise. In the event that the Group enters into any letter of intentor agreement for any material acquisition after the issue of the Bonds, the market price and the tradingvolume of the Bonds may be adversely affected.

25

The Group may not be able to execute successfully or fully its business strategy with respect to assets,projects or subsidiaries in which the Issuer has minority interests.

The Group may not be able to execute successfully or fully its business strategy with respect to assets,projects or subsidiaries in which the Issuer has minority interests. The Group may also fail to managesuch assets, projects or subsidiaries successfully. The Group’s involvement with such assets, projectsand subsidiaries is generally subject to the terms of applicable agreements and arrangements. The Groupmay not have any board representation, veto power or power to exercise control over the management,policies, business and affairs of certain of its subsidiaries in which the Issuer does not have majorityinterests.

In addition, the Group conducts some of its business activities through one or more joint venturecompanies. The Group generally enters into such joint ventures where it believes it is able to benefitfrom the strong industry insight and experience of its partners. If any of the other equity owners or theGroup’s partners fails to perform its respective obligations or otherwise breach the terms and conditionsof the Group’s shareholding arrangements or joint venture agreements, or if the Group has differentviews or strategies with its partners, it could have a material adverse effect on the Group’s business,financial condition or results of operations.

The Group engages in related party transactions with its associates and joint ventures from time totime which may create potential conflicts of interest.

The Group has engaged in and will continue to engage in a variety of transactions with its associatesand joint ventures, which primarily include providing guarantees. There can be no assurance that thosetransactions would be deemed as arm’s-length, or that its related parties will not take actions that favourtheir interests over the Group’s. If a borrower defaults on any borrowings guaranteed by the relevantGroup’s member, the relevant lender may exercise its right under the guarantee to demand repaymentfrom the Group, which may result in a funding shortage at the Group level. The internal controlregarding the management of various related party transactions can be also challenging and demandingfor the Group. Failure to adequately control and manage its related party transaction could have anadverse effect on the Group’s business, financial condition or results of operations.

The Group may be exposed to credit risk relating to guarantees.

The Group has in the ordinary course of its business provided, and may from time to time provide,guarantees in respect of indebtedness of entities in Weifang City which were not members of the Group.As at 31 December 2020, the balance of such guarantees amounted to approximately CNY8.53 billion,representing approximately 17.71 per cent. of the Group’s net assets. For details of such guarantees as at31 December 2020, please see ‘‘Notes to Financial Statements for the Year of 2020 – IX. Commitmentsand contingencies – 2. Contingencies’’ of the audited consolidated financial statements of the Issuer asat and for the year ended 31 December 2020 included elsewhere in this Offering Circular. If there is adownturn in the general economic conditions in Weifang City or the financial condition of theguaranteed entities deteriorates, and the guaranteed entities are unable to fulfil their obligations undertheir respective indebtedness requiring the Group to pay the outstanding debt obligations on behalf ofthe guaranteed entities, the Group’s financial condition, results of operations and prospects could bematerially and adversely affected.

The Group has substantial indebtedness and may incur additional indebtedness in the future, whichcould adversely affect its future strategy and operations and its ability to generate sufficient cash tosatisfy its outstanding and future debt obligations.

The Group currently has a large amount of indebtedness and its indebtedness has been increasing inrecent years. As at 31 December 2020, the short-term loan of the Group amounted to approximatelyCNY3.33 billion, the total current liabilities of the Group amounted to approximately CNY23.08 billionand the long-term loan of the Group amounted to approximately CNY12.79 billion while the monetary

26

funds of the Group amounted to approximately CNY7.70 billion. Please see the audited consolidatedfinancial statements of the Issuer as at and for the year ended 31 December 2020 included elsewhere inthis Offering Circular for further information.

The Group may incur additional indebtedness and continuing liabilities in the future, including theissuance of debt securities or entering into financing or other loan arrangements. The level of existingindebtedness and incurrence of further indebtedness could have important consequences to the Group’sbusiness, including:

• increasing the Group’s vulnerability to adverse general economic and industry conditions;

• requiring the Group to dedicate a substantial portion of its cash flows from operations to servicingand repaying its indebtedness, thereby reducing the availability of its cash flows to fund workingcapital, capital expenditures and other general corporate purposes;

• limiting the Group’s ability to capture investment and/or acquisition opportunities and inhibiting itsability to grow and expand its business;

• increasing the Group’s interest exposure as a proportion of its costs of doing business;

• limiting the Group’s flexibility in planning for or reacting to changes in its businesses and theindustries in which it operates;

• reducing the Group’s competitiveness compared to its competitors that have less debt; and

• increasing the costs of additional financing.

Creditors of the Issuer’s subsidiaries would have a claim on the Issuer’s subsidiaries’ assets that wouldbe prior to the claims of the Issuer’s creditors. As a result, the payment obligations under the Issuer’sindebtedness and liabilities will be effectively subordinated to all existing and future obligations of theIssuer’s subsidiaries, and all claims of creditors of the Issuer’s subsidiaries will have priority as to theassets of such entities over the Issuer’s claims and those of its creditors.

In addition, the Group continually reviews its current and expected future funding requirements andevaluates and engages in discussions with financial institutions and other market participants, from timeto time, on proposals regarding different sources of funding. In incurring indebtedness and liabilitiesfrom time to time, members of the Group may create security over their assets, receivables or equityinterests in companies or entities held by them (which may include the Issuer’s subsidiaries) in favour ofthe relevant creditors. For example, as at 31 March 2021, 109,130,807 and 46,770,346 shares ofMeichen Ecology held by the Issuer were pledged to Bank of Communications Co., Ltd. WeifangBranch（交通銀行股份有限公司濰坊分行）and Weifang Kuiwen Branch of Agricultural Bank of ChinaLimited（中國農業銀行股份有限公司濰坊奎文支行）, respectively. Examples of security interests givenby the Group also include fixed charges and pledges which have been created on the receivables or landof some members within the Group. Should any of such secured indebtedness becomes immediately dueand payable as a result of any default in payment or the occurrence of other events of default as definedunder the relevant secured indebtedness, the relevant secured creditors would be entitled to takeenforcement actions against such secured assets, receivables and equity interests. The secured creditorsmight take over the relevant subsidiaries’ titles to the secured assets, receivables and equity interests orsell them through auction. In such an event, the value of the Group’s assets portfolio will diminish andfewer assets and/or equity interests will be available for distribution to unsecured creditors if therelevant subsidiaries are in liquidation. If any member of the Group incurs additional debt, the risks thatthe Group faces as a result of its already substantial indebtedness and leverage could intensify.

27

Also, if the Issuer or the relevant subsidiaries are unable to comply with the restrictions (includingrestrictions on the Group’s future investments) and covenants in its current or future debt obligationsand other agreements, a default under the terms of such agreements may occur. In the event of a defaultunder such agreements, the holders of the debt could terminate their commitments to the Issuer or itssubsidiaries, accelerate the debt and declare all amounts borrowed due and payable or terminate theagreements, as the case may be. Some of the financing arrangements entered into by the Issuer and itssubsidiaries may contain cross‑acceleration or cross-default provisions. As a result, a default by theIssuer or any of its subsidiaries under any of such agreements may cause the acceleration of repaymentof not only such debt but also other debts, or result in a default under other debt agreements. If any ofthese events occurs, there can be no assurance that the assets and cash flows of the Issuer or itssubsidiaries would be sufficient to repay in full all of their respective debts as they become due, or thatthe Issuer or its subsidiaries would be able to find alternative financing. Even if the Issuer and itssubsidiaries could obtain alternative financing, there can be no assurance that it would be on terms thatare favourable or acceptable to the Issuer or, as the case may be, its subsidiaries.

The revenue derived from the Group’s trading business segment may be subject to volatility.

The Group commenced its trading business in 2020. The Group’s trading business segment depends,amongst others, on the Group’s ability to source products which can address the changing needs of itscustomers or suppliers, which in turn exposes the Group to potential volatility in the revenue derivedfrom such business. There can be no assurance that the Group’s existing customers will continue to seekits trading products or place purchase orders with the Group at the same level or at all. The Group maynot be able to locate new or alternative customers required to replace any decreased demand or purchaseorders. Similarly, there can be no assurance that the Group’s suppliers will continue to supply productsto the Group at its desired quality, quantity or price, or in a timely manner or commercially acceptableterms or that the Group is able to locate new suppliers to supply the required products on commerciallyacceptable terms, if at all. In addition, significant fluctuations in foreign exchange rates may also have amaterial adverse effect on the Group’s trading business.

The Group reported negative cash flow from operating activities. If the Group continues to havenegative cash flow from operating activities in the future, the Group’s liquidity and financialcondition may be materially and adversely affected.

For the year ended 31 December 2020, the Group experienced negative cash flow from operatingactivities of approximately CNY2.25 billion. In addition, negative cash flow from operating activities forthe six months ended 30 June 2021 was recorded in the Group’s unaudited and unreviewed consolidatedfinancial information as at and for the six months ended 30 June 2021 (the ‘‘June 2021 FinancialInformation’’). Please see ‘‘Description of the Group – Recent Developments – Unaudited andUnreviewed Consolidated Financial Information of the Group as at and for the Six Months Ended 30June 2021’’ for further information. Negative cash flow from operating activities may reduce theGroup’s financial flexibility and its ability to obtain additional borrowings from banks. There can be noassurance that the Group will be able to record positive cash flow from operating activities in the future.The Group’s liquidity and financial condition may be materially and adversely affected should theGroup’s future cash flow from operating activities remain negative, and there can be no assurance that itwill have sufficient cash from other sources to fund its operations. If the Group resorts to otherfinancing activities to generate additional cash, the Group will incur additional financing costs and therecan be no assurance that the Group will be able to obtain the financing on terms acceptable to the Groupor at all.

The Group’s ability to generate cash to service its indebtedness depends on many factors beyond itscontrol.

The Group’s ability to make payments on, and to refinance its indebtedness, including the Bonds, and tofund planned capital expenditures and project development will depend on the Group’s ability togenerate cash. This, to a certain extent, is subject to general economic, financial, competitive,legislative, regulatory and other factors that are beyond the Group’s control. The Group’s businesses

28

might not generate sufficient cash flow from operations to enable it to pay its indebtedness, includingthe Bonds, or to fund the Group’s other liquidity needs. The Group may need to refinance all or aportion of its indebtedness, including the Bonds, on or before maturity. However, the Group might notbe able to refinance any of its indebtedness, including the Bonds, on commercially reasonable terms orat all. If the Group is unable to service its indebtedness or obtain refinancing on terms acceptable to theGroup, it may be forced to adopt an alternative strategy that may include reducing or delaying capitalexpenditures, selling assets or seeking equity capital. These strategies may not be instituted onsatisfactory terms, if at all.

Any failure by the Group to maintain relationships with its major customers and suppliers would havean adverse effect on the Group’s trading business.

The Group relies on certain major customers and suppliers in its trading business segment. For the yearended 31 December 2020 and the three months ended 31 March 2021, the Group’s five largestcustomers for its trading business accounted for over 40 per cent. of the Group’s operating incomederived from its trading business segment, and the Group’s five largest suppliers for its trading businessaccounted for over 30 per cent. and 40 per cent. of the Group’s procurement amount for its tradingproducts, respectively. There can be no assurance that the Group will be able to maintain or improve itsrelationships with its major customers and suppliers, or that it will be able to continue to supply tradingproducts to these customers or source trading products from these suppliers at current pricing levels orat all.

In addition, demand for the Group’s trading products is affected by the performance of its customers.Therefore, any decline in its major customers’ businesses could lead to a decline in purchase ordersfrom these customers. If any of the Group’s major customers were to substantially reduce the size orvalue of the orders they place with the Group or were to terminate their business relationships with theGroup entirely, there can be no assurance that the Group would be able to obtain orders from othercustomers to replace any such lost sales on comparable terms or at all. If any of these relationships wereto be so terminated and the Group were unable to obtain replacement orders, its business, financialcondition, results of operations and prospects may be materially and adversely affected.

The Group is exposed to risks in relation to its increasing level of accounts receivables.

The Group’s accounts receivables have substantially increased in recent years. As at 31 December 2018,2019 and 2020, the Group’s accounts receivables amounted to approximately CNY3.20 billion, CNY3.46billion and CNY4.62 billion, respectively. If a substantial amount of the Group’s accounts receivablesare not paid off by the Group’s debtors on time, or at all, the Group’s financial condition and results ofoperation may be materially and adversely affected. Also, if the Group’s accounts receivables were tocontinue to increase without the corresponding financing alternatives being available to fund its workingcapital, it may also materially and adversely affect its operating cash flow, financial condition andresults of operations.

The Group is exposed to risks in relation to the inventory it maintains.

The Group’s businesses, in particular the Group’s construction- and property-related businesses, requirea large amount of working capital prior to the completion of the projects and the subsequent paymentsby the Weifang Government or other relevant governmental entities. As at 31 December 2018, 2019 and2020, the Group’s inventory amounted to approximately CNY9.99 billion, CNY15.36 billion andCNY10.86 billion, respectively. The Group’s inventory mainly comprised raw material, work inprogress, semi-finished goods, finished goods, land, consigned processing material, circulating materials,construction work, project settlement, design costs, development costs, consumable biological assets(landscaping seedlings), etc. In the event that the value of the Group’s inventory decreases significantly,the Group’s business, financial condition, results of operations or prospects could be materially andadversely affected.

29

The Group requires various approvals, permits and licences to operate its businesses.

Pursuant to the applicable laws and regulations in the PRC, the Group is required to obtain or renewapprovals, permits and licences with respect to its relevant operations. There can be no assurance thatthe Group will be able to obtain or renew all necessary approvals, permits and licences on a timely basisor at all. Failure to comply with the applicable laws and regulations or the inability to obtain therelevant approvals, permits and licences could expose the Group to the imposition of sanctions, fines,penalties, revocation of licence or other punitive actions, including suspension of the Group’s businessoperations or restrictions or prohibitions on certain of the Group’s business activities, which mayadversely affect the Group’s financial condition and results of operations.

Delays or defaults in repurchase payments by the Weifang Government or the Weifang FinanceBureau to the Group may affect its working capital and cash flow.

The payment collection period of some of the Group’s construction and landscaping projects is relativelylong, and all or a large portion of the agreed repurchase payment is generally paid only after theWeifang Government or the relevant authorities or entities complete(s) its or their testing and inspectionworks and provide(s) its or their approval for the project or a phase of the project. However, the Groupincurs costs such as material, equipment and labour costs, at the beginning of a project on an ongoingbasis, and before achieving any project milestones the Group already bears the risk of such expendituresrelating to the project. The Weifang Government or the relevant authorities or entities may postponepayment or even fail to make the repurchase payment. Therefore, any delay or default in the repurchasepayments by the Weifang Government or the relevant authorities or entities may increase the Group’scash flow pressure, which will in turn increase its financial vulnerability and adversely affect itsfinancial condition and results of operations.

As at 31 March 2021, the Group had not experienced any significant delay in payment by the WeifangGovernment or the relevant authorities or entities in accordance with the agreed payment timetable.However, there can be no assurance that the Weifang Government or the relevant authorities or entitieswill continue to make all payments in a timely manner, or that no events of default will occur in thefuture.

Non-compliance with environmental regulations, including those to be implemented in the future, mayresult in material adverse effects on the Group’s results of operations.

A variety of general and industry-specific PRC environmental laws and regulations apply to the Group’soperations, such as damage caused by air emissions, noise emissions, wastewater discharges, wastepollution and solid and hazardous waste handling and disposal. Costs and liabilities relating tocompliance with applicable environmental laws and regulations are an inherent part of the Group’sbusiness operations. These laws can impose liability for non‑compliance or clean-up liability on thegeneration of hazardous waste and other substances from the Group’s business operations that aredisposed of either on or off-site, regardless of fault or the legality of the disposal activities. The Groupmay also be required to investigate and remedy contamination at its properties or where the Groupconducts operations, including contamination that was caused in whole or in part by previous owners ofproperties.

In addition, environmental laws and regulations are becoming increasingly stringent and may in thefuture impose onerous obligations on the Group or significant penalties for non-compliance. While theGroup intends to comply with applicable environmental legislation and regulatory requirements, it ispossible that such compliance may materially restrict the operation of its business and/or result insignificant costs for the Group.

In addition to potential clean-up liability, the Group may become subject to monetary fines and penaltiesfor violation of applicable environmental laws, regulations or administrative orders. This may result inclosure or temporary suspension or the imposition of restrictions on the Group’s operations. The Groupmay become involved in legal proceedings that may require it to pay fines, comply with more rigorous

30

standards or incur capital and operating expenses for environmental compliance. Third parties may suethe Group for damages and costs resulting from environmental contamination from its properties and/orproduction facilities. There can be no assurance that changes in laws or regulations, in particularenvironmental laws and regulations, will not result in the Group having to incur substantial capitalexpenditure to upgrade or supplement its existing facilities, or becoming subject to any fines orpenalties. If the Group were to incur significant fines or penalties or become involved in protractedlitigation, or if any of its facilities are closed down or required to be temporarily suspended or if anyupgrade is required to comply with the applicable laws and regulations, then the Group’s financialcondition and results of operations may be adversely affected.

The Group is subject to extensive regulatory requirements and any failure to comply with theapplicable laws, rules and regulations may materially and adversely affect the Group’s financialcondition and results of operations.

Certain segments of the Group’s business activities are extensively regulated in the PRC. The Group issubject to extensive laws, policies and regulatory requirements issued by the relevant governmentalauthorities in the PRC, including but not limited to extensive health and safety regulations in the PRC.The Group is also subject to the supervision of a number of government ministries and departments,including but not limited to NDRC and the State Administration of Work Safety. Any breach of theapplicable laws or regulations to which the Group is subjected may result in the imposition of fines andpenalties, the suspension or closure of its relevant operations or the suspension or revocation of itslicences or permits to conduct its relevant businesses.

Given the magnitude and complexity of the laws and regulations to which the Group is subjected,compliance with such laws and regulations or the establishment of effective monitoring systems may beonerous or may require a significant amount of financial and other resources. Although the Group isobliged to comply with all applicable laws and regulations, there can be no assurance that the Groupwill be in compliance with all applicable laws and regulations at all times due to the capricious,arbitrary and unpredictable nature of such applicable laws and regulations in the PRC. Any failure of theGroup to comply with applicable laws and regulations could subject the Group to, among other things,civil liabilities and penalties.

As at 31 March 2021, the Group had not received any notice regarding non-compliance with theapplicable safety regulations or requirements from any government authority. However, PRC health andsafety laws and regulations are constantly evolving. There can be no assurance that the PRC governmentwill not impose additional or stricter health and safety laws or regulations, which may increase theGroup’s compliance costs and in turn could materially and adversely affect the Group’s operations andfinancial condition.

Any failure of the Group’s key contractors may have an adverse effect on the Group’s business.

The Group engages contractors for the provision of various services, including but not limited to certainconstruction work for the construction of infrastructure. There can be no assurance that servicesrendered by any of the Group’s contractors will always be satisfactory and up to the standard specifiedin the relevant contracts. If the performance of any contractor is unsatisfactory, the Group may need toreplace such contractor or take other necessary remedial action, which could increase costs and delay theconstruction progress of the affected projects. In addition, the Group is also exposed to the risk wherebyits contractors may require additional capital in excess of the price originally tendered to complete theirengagement and, as a result, the Group may have to bear these additional costs. If any of the Group’skey contractors fails to perform its contractual obligations, the Group’s operations, business andfinancial condition may be materially and adversely affected.

31

In addition, the Group may not be able to find suitable alternative contractors at commerciallyreasonable terms, if at all, should the Group’s contracts with its current contractors terminate or in theevent its current contractors choose not to renew any expired contracts. This may cause delays in thecompletion of the Group’s projects or incur additional costs, which could materially and adversely affectthe Group’s business, financial condition and results of operations.

The PRC government may impose fines or penalties on the Group or revoke the land‑use rights withrespect to certain land held by the Group.

Under applicable PRC laws and regulations, the PRC government may impose an idle land fee equal to20 per cent. of the land premium or allocation fees if (i) the Group does not commence development onthe land held by the Group for more than one year after the date specified in the relevant land-use rightsgrant contract, (ii) the Group commences development on an area which is less than one-third of thearea granted and then suspends the development for more than one year without government approval,or (iii) the capital invested is less than one-fourth of the total investment approved for the developmentand then the Group suspends the development for more than one year without government approval. ThePRC government may revoke the land-use rights certificate without offering any compensation if theGroup does not commence development for more than two years after the date specified in the relevantland-use rights grant contract without compelling causes.

The State Council issued the Notice on Promoting the Saving and Intensification of Use of Land（國務

院關於促進節約集約用地的通知）which states, among other things, that the Ministry of Land andResources and other authorities are required to research and commence the drafting of theimplementation rules concerning the levy of land appreciation fees on idle land. In addition, theMinistry of Land and Resources issued the Notice on Restricting the Administration of ConstructionLand and Promoting the Use of Approved Land（關於嚴格建設用地管理促進批而未用土地利用的通

知）in August 2009, which reiterates its policy on idle land. The Group may from time to time have idleland, and the imposition of fines and penalties in relation to any idle land could have a material adverseeffect on the Group’s business, financial condition and results of operations.

The Group is not insulated from the rising operating costs of labour, construction materials andconstruction equipment.

As a result of economic growth in the PRC, wages for construction workers and the prices ofconstruction materials as well as building equipment have undergone substantial increases in recentyears. In addition, the Labour Contract Law of the PRC (the ‘‘Labour Contract Law’’) which cameinto effect on 1 July 2013 enhanced the protection for employees and increased the liability ofemployers in many circumstances, which may further increase the Group’s labour costs. The Groupbears the risk in respect of fluctuations in wages and the price of construction materials, and is alsoexposed to the price volatility of construction equipment used in construction projects. If the Group isunable to pass on any increase in the cost of labour, construction materials and construction equipmentto its customers, its results of operations may be negatively affected. There can be no assurance as to thefuture price movements of any construction materials required by the Group, and any detrimentalmovements in the future could have a material adverse effect on the Group’s financial condition andresults of operations.

The Group is subject to project development risks and cost overruns, and delays may adversely affectits results of operations.

There are a number of construction, financing, operating and other risks associated with projectdevelopment in the PRC. Construction projects that the Group undertakes, for example in its urbaninfrastructure construction business segment, typically require substantial capital expenditure during theconstruction phase. The time taken and the costs involved in completing construction can be adverselyaffected by many factors, including shortages of raw materials, equipment and labour, adverse weatherconditions, natural disasters, terrorism, labour disputes, disputes with subcontractors, accidents, changesin governmental priorities and other unforeseen circumstances. Any of these instances could give rise to

32

delays in the completion of the Group’s infrastructure construction projects, which in turn could lead tocost overruns. Construction delays can result in loss of operating income. In addition, as constructioncosts for new projects have generally increased due to factors that are generally beyond the Group’scontrol, construction delays may further increase such costs. Although the majority of the Group’sconstruction projects have been completed on schedule, there can be no assurance that this will remainthe case or that future construction projects will be completed on time, or at all, and generatesatisfactory returns.

Failure to recruit and retain key managerial personnel and highly skilled employees and theoccurrence of labour unrest may materially and adversely affect the Group’s operations.

The success of the Group’s business depends, to a large extent, on the strategic vision of its board ofdirectors, the continued service of key managerial personnel, including directors and key seniorexecutives, and the ability to attract and retain highly skilled personnel. If the Group is not successful inrecruiting or retaining its employees, its operations may be adversely affected. In addition, if any ofthem fails to observe and perform his/her obligations under the relevant service agreements, this mayhave a material adverse effect on the Group’s results of operations and profits.

Also, the Group’s urban infrastructure construction, landscaping and auto parts businesses are labourintensive. As such, labour shortages or labour disputes could materially and adversely affect the Group’sbusiness, prospects and results of operations. Industrial action or other labour unrest could directly orindirectly prevent or hinder the progress of the affected construction projects and/or manufacturingprocesses, and, if not resolved in a timely manner, could lead to delays in completion and/or delivery.

In addition, as at 31 March 2021, the Group employed approximately 543 employees. Some of theGroup’s employees are currently represented by labour unions. Also, certain employees of some of theGroup’s suppliers, contractors or companies in which the Group has investments are or may becomeunionised in the future or experience labour-related instability. Although the Group enjoys good labourrelations with its employees and has not experienced any labour disputes that could cause materialadverse effect to the Group’s operation and performance as at 31 March 2021, the Group is unable topredict the outcome of any future labour negotiations. Any conflicts with the Group’s employees orcontractors and/or their respective unions could have a material adverse effect on its financial conditionand results of operations.

The Group may not be able to detect and prevent fraud or other misconduct committed by its officers,employees, representatives, agents, customers or other third parties.

Following the 18th Chinese Communist Party Congress in 2012 and the wide-reaching anticorruptioncampaign in the PRC, the Central Leading Group for Inspection Work (the ‘‘Inspection LeadingGroup’’), a coordination body set up under the Central Committee of the Chinese Communist Party forthe purpose of managing party disciplinary inspections nationwide, has despatched inspection teams toprovinces and central government organs such as ministries and state-owned enterprises, including theIssuer, in the PRC to conduct inspection work on party disciplinary enforcement.

The Issuer believes that the inspection team’s findings will not materially and adversely affect thebusiness, financial condition and results of operations of the Group. However, there can be no assurancethat there will not be any further investigations or actions against the Group or its officers or employeesresulting from the findings taken by the Inspection Leading Group or other governmental authorities, orthat such investigations or actions would not affect the Group as a result.

In addition, the Group may be exposed to fraud or other misconduct committed by its officers,employees, representatives, agents, customers or other third parties that could subject it to litigation,financial losses and sanctions imposed by governmental authorities, which in turn affects its reputation.Such misconduct could include:

33

• hiding unauthorised or unsuccessful activities, resulting in unknown and unmanaged risks orlosses;

• intentionally concealing material facts, or failing to perform necessary due diligence proceduresdesigned to identify potential risks, which are material to the Group in deciding whether to makeinvestments or dispose of assets;

• improperly using or disclosing confidential information;

• recommending products, services or transactions that are not suitable for the Group’s customers;

• misappropriation of funds;

• conducting transactions that exceed authorised limits;

• engaging in misrepresentation or fraudulent, deceptive or otherwise improper activities;

• engaging in unauthorised or excessive transactions to the detriment of the Group’s customers;

• engaging in improper activities such as offering bribes to counterparties in return for any type ofbenefit or gain or accepting bribes;

• conducting any inside dealing; or

• otherwise not complying with applicable laws or the Group’s internal policies and procedures.

In particular, the Group is required to comply with applicable anti-money laundering, anti‑terrorism lawsand other regulations in the PRC and other relevant jurisdictions.

The Group’s internal control procedures are designed to monitor its operations and ensure overallcompliance. In particular, the Group has adopted policies and procedures aimed at detecting andpreventing the use of its business platforms to facilitate money laundering activities and terrorist acts.However, such internal control procedures may be unable to identify all incidents of non-compliance orsuspicious transactions in a timely manner if at all. In addition, it is not always possible to detect andprevent fraud and other misconduct, and the precautions undertaken by the Group to prevent and detectsuch activities may not be effective. Hence, it is possible that fraud or other misconduct may havepreviously occurred but was undetected, or that fraud or other misconducts may occur in the future. Ifsuch fraud or other misconduct does occur, it may create negative publicity as a result, and the relevantgovernment agencies may freeze the Group’s assets or impose fines or other penalties on the Group. Anyof these may materially and adversely affect the Group’s reputation, financial condition and results ofoperations.

The Group faces increasing competition from existing and new market participants in the industriesin which it operates.

The Group competes with other urban construction companies, particularly those in Weifang City orother regions of Shangdong Province. Competitors may have greater access to capital, technology,management and other resources and may be capable of providing a wider range of services than theGroup does. These competitors may also merge or form joint ventures with the other domestic or foreigncompetitors, which may intensify the competition which the Group faces. Whether the Group couldsuccessfully compete depends on its ability to anticipate and respond to many competitive factors,including continuity of its relationships with governmental entities, customers, suppliers, partners andthird-party contractors, quality of products and services provided, corporate image and businessreputation, changes in customer preferences, funding and financing resources and introduction of new orimproved technology, products or services in the related industries or markets. There can be noassurance that the Group’s existing or potential competitors will not provide similar products or services

34

with comparable or even better quality at the same or even lower prices, or be more adaptable toindustry trends or market changes than the Group. If the Group fails to compete effectively or thecompetition with respect to the Group’s products or services continues to increase, there would be anadverse effect on the Group’s financial results and return on capital expenditures, which could cause adecline in the Group’s growth rates and reduce the Group’s income. The Group cannot predict the extentto which this competition will affect the Group’s future results of operations.

Any failure to maintain an effective quality control system could have an adverse effect on theGroup’s business and operations.

The Group relies heavily on its quality control systems to ensure the safety and quality of its projects.Therefore, it needs to maintain an effective quality control system for the Group’s land acquisition,development and construction activities as well as other operational activities. The effectiveness of theGroup’s quality control system depends significantly on a number of factors, including the design of thesystem, the related training programme as well as its ability to ensure that the Group’s employees adhereto its quality control policies and guidelines. Any failure or deterioration of the Group’s quality controlsystems could result in defects in its projects, which in turn may subject the Group to contractual,product liability and other claims. Any such claims, regardless of whether they are ultimately successful,could cause the Group to incur significant costs, harm its business reputation and result in significantdisruption to its operations. In addition, if any such claims were ultimately successful, the Group couldbe required to pay substantial monetary damages or penalties. Although the Issuer believes that theGroup’s quality control systems have functioned properly, there can be no assurance that failures in itsquality control systems will not occur in the future, and any such failure could have an adverse effect onthe Group’s business and operations.

Accidents in the Group’s business operations may expose the Group to liabilities and harm itscorporate image.

Some of the Group’s operations, such as its construction-related operations, are exposed to inherentoccupational hazards involving handling of heavy machinery and hazardous chemicals as well as theoccurrence of other industrial accidents. Mishandling of heavy machinery, hazardous chemicals andindustrial accidents could result in project delays, interruption of operations, personal injury or fatality,environmental damage, monetary losses and legal liabilities. The occurrence of any such incident mayhave a material adverse effect on the Group’s business and results of operations. Also, it couldsignificantly damage the Group’s corporate image.

Although the Group has established and implemented internal protocols and systems relating tooccupational safety, there can be no assurance that those protocols and systems will be able to addressall the potential risks effectively or that they will be strictly followed. As at 31 March 2021, there hadbeen no industrial accident which caused material monetary losses or severe personal injuries or fatalityduring the process of the Group’s business. However, there can be no assurance that the Group will notexperience any such accidents in the future.

The Group’s financial condition and results of operations may be affected by material fluctuations ofinterest rates.

The Group’s bank loans may bear interests that accrue at rates linked to the benchmark lending ratespublished by PBOC (the ‘‘PBOC Benchmark Rate’’). On 28 December 2019, PBOC published No. 30Announcement（中國人民銀行公告[2019]第30號）(‘‘No. 30 Announcement’’) requiring financialinstitutions to, beginning on 1 January 2020, shift from using the PBOC Benchmark Rate to the loanprime rate (the ‘‘LPR’’) as the reference rate for all floating rate loans (except for Personal HousingAccumulation Fund Loan). For existing floating rate loans using the PBOC Benchmark Rate, financialinstitutions are required under No. 30 Announcement to renegotiate with the borrowers during 1 March2020 to 31 August 2020 to adjust the terms of the pricing mechanism by either changing the referencerate to the LPR or adopting a fixed rate interest. As the LPR represents the monthly average of the bestlending rates used by selected banks at the time, the LPR is more susceptible to changes in the

35

economic and market conditions and is subject to more fluctuations. Although the Group’s financialcondition and results of operations may benefit from a low-interest environment, there can be noassurance that such an environment will continue. Any increase in the PBOC Benchmark Rate (forexisting floating rate loans prior to renegotiations of the pricing mechanisms) and the LPR (for newloans) in the future will increase the Group’s financing costs and adversely affect its profitability,financial condition and results of operations.

The Group may be subject to risks related to tax law changes.

On 23 March 2016, MOF and SAT issued the Notice of the Ministry of Finance and the StateAdministration of Taxation on Implementing the Pilot Programme of Replacing Business Tax withValue-Added Tax in an All-round Manner（財政部、國家稅務總局關於全面推開營業稅改徵增值稅試

點的通知）(‘‘Circular 36’’), which stipulates that, as at 1 May 2016, all payers of business tax,including taxpayers engaged in the construction and real estate industries, shall be included in the scopeof the pilot programme and subject to value-added tax (‘‘VAT’’) instead of business tax. According toCircular 36, the VAT for provision of construction services and transfer of land use rights shall be 11per cent. Circular 36 may increase the Group’s tax burden, which in turn may have an impact on theGroup’s business model. On 4 April 2018, MOF and SAT issued the Notice of the Ministry of Financeand the State Administration of Taxation on Adjusting Value-added Tax Rates（財政部、稅務總局關於

調整增值稅稅率的通知）(‘‘Circular 32’’), which stipulates that the tax rate for provision of constructionservices and transfer of land use rights shall be reduced from 11 per cent. to 10 per cent. from 1 May2018 onwards. In addition, on 20 March 2019, MOF, SAT and the General Administration of Customsissued the Announcement of the Ministry of Finance, the State Taxation Administration and the GeneralAdministration of Customs on Relevant Policies for Deepening the Value-Added Tax Reform（財政部、稅務總局、海關總署關於深化增值稅改革有關政策的公告）(‘‘Circular 39’’), which stipulates that thetax rate for provision of construction services and transfer of land use rights shall be reduced from 10per cent. to 9 per cent. from 1 April 2019 onwards.

As Circular 36, Circular 32 and Circular 39 are relatively new, and given the limited volume ofpublished decisions related to these circulars, there are uncertainties as to the interpretation andenforcement of Circular 36, Circular 32 and Circular 39 and/or any tax-related laws and regulationswhich may be promulgated in the future from time to time. These tax law changes and the relateduncertainties may have a material adverse effect on the Group’s operating income and could in turnmaterially and adversely affect the Group’s business, financial condition and results of operations.

The Group may be subject to legal, litigation and regulatory proceedings.

The Group may be involved, from time to time, in legal proceedings arising in the ordinary course of itsoperations. Please see ‘‘Description of the Group – Legal and Regulatory Proceedings’’ for furtherinformation. Litigation arising from any failure, injury or damage from the Group’s operations mayresult in the relevant member of the Group being named as defendant in lawsuits asserting large claimsagainst such member of the Group or subject such member of the Group to significant regulatorypenalties. These risks often may be difficult to assess or quantify and their existence and magnitudeoften remains unknown for a substantial period of time. Actions brought against the Group may result insettlements, injunctions, fines, penalties or other sanctions adverse to the Group’s reputation, financialcondition and results of operations. Even if the Group is successful in defending against these actions,the costs associated with the Group’s defence may be significant. When the market experiences adownturn, the number of legal claims and amount of damages sought in litigations and regulatoryproceedings may increase. A significant judgment, arbitration award or regulatory action against theGroup, or a disruption in the Group’s business arising from adverse adjudications in proceedings againstthe Group’s directors, senior management or key employees, would materially and adversely affect theGroup’s liquidity, business, financial condition, reputation, results of operations and prospects.

36

In addition, the Group may have disagreements with regulatory bodies in the course of its operations,which may subject it to administrative proceedings and unfavourable decrees that result in liabilities.Also, in the event that the Group makes any other investments or acquisitions in the future, there can beno assurance that the Group would not have any exposure to any litigation or arbitration proceedings orother liabilities relating to the acquired businesses or entities.

The Group’s operations are subject to force majeure events, natural disasters and outbreaks ofcontagious diseases.

Force majeure events, natural disasters, catastrophe or other events could result in severe personal injuryto the Group’s staff, property damage and environmental damage, which may curtail the Group’soperations, cause delays in estimated completion dates for the Group’s various construction projects andcould, in turn, materially and adversely affect The Group’s cash flows and, accordingly, adversely affectits ability to repay any debt.

The Group’s operations are mainly based in Weifang City, which is exposed to potential naturaldisasters including, but not limited to, flooding, typhoons, rainstorms, storm surges, hailstorms, low-temperature conditions and drought. If any of the Group’s developments are damaged by severe weatheror any other disasters, accidents, catastrophes or other events, the Group’s operations may besignificantly interrupted. The occurrence or continuance of any of such unforeseen events or similarevents could increase the costs associated with the Group’s operations and reduce its ability to operateits businesses effectively, thereby reducing its operating income and profits.

In addition, the Group’s contracts with its suppliers and other counterparties may have force majeureprovisions that permit such parties to suspend, terminate or otherwise not perform their obligationsunder the relevant contracts upon the occurrence of certain events such as strikes and other industrial orlabour disturbances, terrorism, restraints of government, civil protests or disturbances, or any naturaldisasters; all of which are beyond the control of the party asserting such force majeure event. If one ormore of the Group’s suppliers or other counterparties do not fulfil their contractual obligations for anyextended period of time due to a force majeure event or otherwise, the Group’s results of operations andfinancial condition could be materially and adversely affected.

Risks of substantial costs and liabilities are inherent in the Group’s principal operations and there can beno assurance that significant costs and liabilities will not be incurred, including those relating to claimsfor damages to property or persons. Insurance policies for civil liability and damages taken out by theGroup could prove to be significantly inadequate, and there can be no assurance that the Group willalways be able to maintain an adequate level of coverage at least equal to the Group’s current coverageand at the same cost. The frequency and magnitude of natural disasters seen over the past few years,could have a significant impact on the capacities of the insurance and reinsurance market and on thecosts of civil liability and damages insurance cover for the Group. Please see ‘‘– Risks relating to theGroup’s Business – The insurance coverage of the Group may not adequately protect it against alloperational risks or any potential liabilities or losses’’ in this section for further information.

The Group’s operations and financial condition could also be materially and adversely affected by anyoutbreak, epidemic and/or pandemic of (or the escalation and/or intensification of any outbreak,epidemic and/or pandemic of) infectious or contagious diseases and/or other adverse public healthdevelopments in the PRC or elsewhere. In particular, the ongoing COVID-19 pandemic in the PRC andother countries has led to business suspension, travel and other restrictions, labour shortages and supplyor delivery chain constraints in the PRC and globally. It is difficult to predict the level of impact of theongoing COVID-19 pandemic on the PRC and global economies, and there can be no assurance that itwould not have a material adverse effect on the Group’s business, financial condition, results ofoperations and prospects. Furthermore, the outbreak of SARS that began in the PRC and Hong Kong inearly 2003 had an adverse effect on all levels of business in Hong Kong and the PRC. There had beensporadic outbreaks of the H5N1 virus or ‘‘Avian Influenza A’’ among birds, in particular, poultry, aswell as some isolated cases of transmission of the virus to humans. There had also been outbreaks

37

among humans of the influenza A/H1N1 virus globally. The COVID-19 pandemic and the outbreak ofSARS and the influenza A/H1N1 virus led to a significant decline in travel volumes and businessactivities throughout most of the Asian region as well as globally. The occurrence of another outbreak ofhighly contagious disease may result in another economic downturn and may have an adverse effect onthe overall level of business and travel in the affected areas. It may also disrupt the Group’s businessoperations and consequently have an adverse effect on its financial condition and results of operations.Please see ‘‘– The extent to which the COVID-19 pandemic will impact the Group’s business, financialcondition, results of operations and prospects is uncertain and cannot be predicted’’ for furtherinformation.

The extent to which the COVID-19 pandemic will impact the Group’s business, financial condition,results of operations and prospects is uncertain and cannot be predicted.

The ongoing COVID-19 pandemic in the PRC and other parts of the world since late 2019 couldmaterially and adversely affect the overall business sentiment and environment in the PRC and in themarkets in which the Group operates, particularly if the pandemic is inadequately controlled. Inparticular, the administrative actions taken by local governmental authorities to control the spread of theCOVID-19 pandemic may have an adverse impact on the Group’s business and operations. For example,the ongoing COVID-19 pandemic may cause disruptions to the Group’s construction-and property-related, trading and tourism businesses. The Group’s businesses may also be adversely affected bycertain relief measures such as rent reduction measures implemented by the PRC government. Althoughthe Group has adopted various remedial measures to minimise the adverse impact of the ongoingCOVID-19 pandemic on its businesses and operations, there can be no assurance that remedial measuresadopted by the Group will have the intended effects or that the adverse impact of the ongoing COVID-19 pandemic on the Group will not persist.

Substantially all of the Group’s operating income is derived from its operations in the PRC, and anylabour shortages, fall in occupancy rates or contraction or slowdown in the growth of domesticconsumption in the PRC as a result of the adverse impact of the COVID-19 pandemic could materiallyand adversely affect the Group’s business, financial condition, results of operations and prospects. Inaddition, if any of the Group’s management or employees are affected by the COVID-19 pandemic, theGroup may be required to close down its offices, warehouses and facilities to prevent the spread of thepandemic. The ongoing COVID-19 pandemic in the PRC may also affect the operations and financialcondition of the Group’s customers and suppliers, which in turn could materially and adversely affectthe Group’s business, financial condition, results of operations and prospects. The ongoing COVID-19pandemic in the PRC, especially in the cities or provinces where the Group has operations, may alsodelay completion of the Group’s projects as scheduled, causing substantial increase in development costsand/or late delivery of properties, which may adversely affect the Group’s business, financial condition,results of operations and prospects.

The ongoing COVID-19 pandemic is expected to have an adverse impact on the Group’s businesses, andit is impossible to predict the magnitude of such impact, which could vary based on the duration of theoutbreak and the ability of the global community to contain the disease and implement economicstimulus measures. There are uncertainties as to how the COVID-19 pandemic will evolve, and there canbe no assurance that the ongoing COVID-19 pandemic in the PRC and other parts of the world wouldnot have a material adverse effect on the Group’s business, financial condition, results of operations,profitability and prospects.

The insurance coverage of the Group may not adequately protect it against all operational risks orany potential liabilities or losses.

The Group faces various operational risks in connection with its business, including but not limited to:

• construction interruptions caused by operational errors, electricity outages, raw material shortages,equipment failure and other operational risks;

38

• operating limitations imposed by environmental or other regulatory requirements;

• defective quality of the real estate property it develops;

• work-related personal injuries;

• on-site construction related accidents;

• credit risks relating to the performance of customers or other contractual third parties;

• disruption in the global capital markets and the economy in general;

• loss on investments;

• environmental or industrial accidents; and

• catastrophic events such as fires, earthquakes, explosions, floods or other natural disasters.

To manage operating risks, the Group maintains insurance policies that provide different types of riskcoverage, which the Issuer believes to be consistent with market practice within the relevant industriesthat the Group operates in and in amounts that the Issuer believes to be adequate. However, the Groupfaces various risks in connection with its businesses and may lack adequate insurance coverage or mayhave no relevant insurance coverage. There can be no assurance that the insurance policies maintainedby the Group will provide adequate coverage in all circumstances. Although each of the Group’sfacilities has had a track record of safe operation and none of them has suffered any material hazardsover the last three years, there can be no assurance that hazards, accidents or mishaps will not occur inthe future. The occurrence of any such incident for which the Group is uninsured or inadequatelyinsured may have a material adverse effect on its business, financial condition and results of operations.

In addition, the Group may not always be able to obtain the required type and amount of insurance atcommercially reasonable rates. Over time, premiums and deductibles for insurance policies maysubstantially increase, and certain insurance policies could become unavailable or only available withreduced amounts of coverage. There are also certain types of losses, such as loss caused by wars, acts ofterrorism or acts of God, business interruption, property risks and third party (public) liability, that aregenerally not covered by insurance policies as such events are deemed economically uninsurable. If theGroup were to incur significant liability for which the Group is not insured or not fully insured, suchliability could have a material adverse effect on its financial position and results of operations. Inaddition, any claims made under any insurance policies maintained by the Group may not be paid in atimely manner, or at all, and may be insufficient if such an event were to occur.

The Group relies on information technology systems for its business, and any information technologysystem limitations or failures could adversely affect its business, financial condition and results ofoperations.

The Group’s business depends on the integrity and performance of its business, accounting and otherdata processing systems. If the Group’s systems cannot cope with increased demand or otherwise fail toperform, the Group could experience unanticipated business disruptions, slower response times andlimitation on its ability to monitor and manage data and exposure to risk, control financial and operationconditions, and keep accurate records. These consequences could result in operating outages, pooroperating performance, financial losses, and potential intervention by regulatory authorities.

Although the Group’s systems have not experienced major system failures and delays in the past, therecan be no assurance that the Group’s systems would not experience future system failures and delays, orthat the measures taken by the Group to reduce the risk of system disruptions are effective or adequate.If internet traffic and communication volume increase unexpectedly, or other unanticipated events occur,the Group may need to expand and upgrade the Group’s technology, systems and network infrastructure.

39

There can be no assurance that the Group will be able to accurately project the rate, timing or cost ofany increases, or expand and upgrade the Group’s systems and infrastructure to accommodate anyincreases in a timely manner.

The Group may not be able to adequately protect its intellectual property, which could adversely affectits business operations.

The Group may rely on patents, copyrights, trademarks and/or contractual rights to protect itsintellectual property. There can be no assurance that any protective measures adopted by the Group willbe sufficient to prevent any misappropriation of the Group’s intellectual property. The legal regimegoverning intellectual property in the PRC is still evolving and the level of protection afforded inrespect of intellectual property rights in the PRC differs from that in other jurisdictions. In the event thatthe measures taken by the Group and the protections afforded by law do not adequately safeguard theGroup’s proprietary technology or property, the Group could suffer significant losses due to the sales ofcompeting products or services that appoint the Group’s intellectual property, which in turn couldadversely affect its business, financial condition and results of operations.

Changes in the organisational structure of the Group may affect the Group’s financial condition andresults of operations.

The Group may undergo certain organisational restructuring from time to time which may involvedisposal by the Issuer of certain subsidiaries or affect whether certain subsidiaries of the Issuer will beconsolidated in the Issuer’s consolidated financial statements. There can be no assurance that any suchorganisational restructuring or changes in the Issuer’s shareholding structure will not have a materialadverse effect on the Group’s business, financial condition, results of operations and prospects.

Under applicable PRC laws and regulations, the Issuer and other members of the Group are required tocomplete necessary registrations for changes in organisational structure, including any shareholdingchanges and capital injections by their respective shareholders. There can be no assurance as to howlong the registration processes will take place or whether the Group is able to complete the requiredregistrations within the prescribed timing, or at all. While the Group has not been subject to any fines oradministrative action regarding its failure to complete the required registrations for changes inorganisational structure, there can be no assurance that the relevant administrative authorities will nottake any action against the Issuer or the Group in relation to their failure to complete any necessaryregistration for changes in organisational structure in the future. In such event, the Issuer and/or theGroup may be subject to an order by regulatory authorities to complete the necessary registrations andmay be subject to monetary penalties, either of which could have a material adverse effect on theGroup’s business, financial condition and results of operations.

Members of the Group may become listed and therefore may be subject to regulatory restrictions andlisting requirements, and the Issuer’s shareholding or voting interests in such subsidiaries may bediluted.

The shares of one or more members of the Group may become listed on one or more stock exchanges.As a result, the entering into certain transactions by any such member may be subject to variousregulatory restrictions. Intra-group transactions may also be subject to applicable listing requirements,such as the issuance of press notices and public announcements, the obtaining of independentshareholders’ approval at general meetings and/or disclosure in annual reports and accounts. Memberswith funding needs may therefore not be able to obtain financial support from the Group in a timelymanner, or at all.

In addition, in the event that the shares of one or more subsidiaries of the Issuer become listed on astock exchange, the Issuer’s shareholding or voting interests in such subsidiaries may be diluted. Therecan be no assurance that any such dilution in shareholding or voting interests will not have a materialadverse effect on the Group’s business, financial condition and results of operations.

40

RISKS RELATING TO DOING BUSINESS IN THE PRC

The Group’s business, financial condition, results of operations and prospects could be adverselyaffected by slowdown in the PRC economy.

The Group’s businesses are primarily concentrated in Weifang City, and substantially all of the Group’sassets are located in the PRC; and all of the Group’s operating income is derived from its operatingactivities in the PRC. Therefore, the performance of the PRC economy affects, to a significant degree,the Group’s business, prospects, financial condition and results of operations.

The economy of the PRC experienced rapid growth in the past 40 years. However, there has been aslowdown in the growth of the PRC’s GDP since the second half of 2013. According to the NationalStatistics Bureau of the PRC, the annual growth rate of the PRC’s GDP slowed down from 7.3 per cent.in 2014 to 6.1 per cent. in 2019. This has raised market concerns that the historic rapid growth of theeconomy of the PRC may not be sustainable.

In recent years, as a result of recurring liquidity tightening in the banking system, alternative lendingand borrowing outside of traditional banking practices, generally known as ‘‘shadow banking’’, hasgrown to become an integral and significant aspect of the PRC economy. Such alternative lending isloosely regulated and has led to an increase in China’s debt levels leading to concerns over rising baddebts and financial problems. As some of the funds obtained from shadow banking are being used forinvestments in speculative and risky products, should a widespread default on such investments occur,this could harm the growth prospects of the PRC economy. In 2014, there were reports of a number ofshadow banking defaults in the PRC resulting in increased scrutiny and oversight by regulators whohave proposed draft rules to control the industry. Even if the PRC government increases regulation oversuch alternative lending and borrowing, there can be no assurance that such regulations will besuccessful, or that they would not have an adverse impact on the overall loan markets and liquidity inthe PRC, which will negatively impact the PRC economy. Although the PRC government has takenseveral measures with the intention of increasing investor confidence in the PRC economy, there can beno assurance that such measures will be effective. There can be no assurance that the PRC governmentwill continue to implement reforms which may conflict with any targeted growth rate. The Group’sbusiness, financial conditions and results of operations could be adversely affected by the PRCgovernment’s inability to effect timely economic reforms.

Any slowdown in the PRC economy may increase the Group’s exposure to material losses from itsinvestments, decrease the opportunities for developing the Group’s businesses, create a credit tighteningenvironment, increase the Group’s financing costs, or reduce government subsidies to the Group, any ofwhich may result in a material adverse effect on the Group’s business, results of operations and financialcondition.

The future performance of the PRC economy is not only affected by the economic and monetary policiesof the PRC government, but has been, and will in the future continue to be, materially affected byglobal or regional geopolitical, economic and market conditions, including factors such as the liquidityof the global financial markets, the level and volatility of debt and equity prices, interest rates, currencyand commodities prices, investor sentiment, inflation and the availability and cost of capital and credit.Please see ‘‘– Risks Relating to the Group’s Business – The Group’s business, financial condition,results of operations, profitability and prospects are subject to effects of global economic events’’ forfurther information.

Economic, political and social conditions in the PRC and government policies could affect theGroup’s business and prospects.

The PRC economy differs from the economies of developed countries in many respects, including,among other things, level of government involvement, level of economic development, growth rate,foreign exchange controls and resource allocation.

41

The PRC economy is in the process of transitioning from a centrally-planned economy to a moremarket-oriented economy. For more than three decades, the PRC government has implemented variouseconomic reform measures to utilise market forces in the development of the PRC economy. In addition,the PRC government continues to play a significant role in regulating certain industries and the economythrough numerous policy measures. The Group cannot predict whether changes in the nation’s economic,political or social conditions or in any laws, regulations and policies will adversely affect its business,financial condition or results of operations.

In addition, many of the economic reforms carried out by the PRC government are unprecedented orexperimental and are expected to be refined and improved over time. Other political, economic andsocial factors may also lead to further adjustments of the reform measures. This refining and adjustmentprocess may not necessarily have a positive effect on the Group’s operations and business development.

The Group’s business, financial condition and results of operations may be adversely affected by:

• changes in PRC political, economic and social conditions;

• changes in policies of the PRC government, including changes in policies in relation to theGroup’s business segments;

• changes in laws and regulations or the interpretation of laws and regulations;

• measures that may be introduced to control inflation or deflation;

• changes in the rate or method of taxation;

• the imposition of additional restrictions on currency conversion and remittances abroad; and

• a reduction in tariff protection and other import restrictions.

If the PRC’s economic growth slows down or if the PRC economy experiences a recession, the Group’sbusiness, results of operations and financial condition could be materially and adversely affected.

The operations of the Group may be affected by inflation and deflation within the PRC.

Economic growth in the PRC has historically been accompanied by periods of high inflation. Increasinginflation rates have, in the past, been caused by many factors beyond the Group’s control, such as risingproduction and labour costs, high lending levels, changes in national and foreign governmental policiesand regulations as well as movements in exchange rates and interest rates. It is impossible to accuratelypredict future inflationary trends. If inflation rates rise beyond the Group’s expectations, the Group maybe unable to increase the price of its services and products in amounts that are sufficient to cover itsincreasing operating costs. Further inflationary pressures within the PRC may have a material adverseeffect on the Group’s business, financial condition or results of operations.

Recently, concerns have arisen over deflationary pressures in the PRC as a result of weak domesticdemand and a slowing economy. Inflation rates within the PRC have been on a downward trend inrecent years. A prolonged period of deflation may result in falling profits, closure of plants andshrinking employment and incomes for companies and individuals, any of which could adversely affectthe Group’s business, financial condition or results of operations.

The PRC legal system is evolving and may cause uncertainty which could limit the legal protectionavailable to or against the Group.

The Group is generally subject to laws and regulations of the PRC. The PRC legal system is based onwritten statutes. Prior court decisions may be cited for reference, but they have limited precedentialvalue. Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded

42

to market participants in the PRC. However, since these laws and regulations are relatively new and thePRC legal system continues to rapidly evolve, the enforcement of these laws, regulations and rules maybe uncertain and their interpretation may not be as consistent or predictable as compared to other moredeveloped jurisdictions. Such uncertainty may impede the Group’s ability to enforce contracts that theGroup has entered into with its investors, creditors, customers, suppliers and business partners. TheGroup cannot predict the effect of future developments in the PRC legal system or the integration ofsuch developments under the legal systems of other jurisdictions, including the promulgation of newlaws, changes to existing laws or the interpretation or enforcement thereof, the pre-emption of localregulations by national laws, or the overturn of local government’s decisions by itself, provincial ornational governments. This uncertainty may limit legal protections available to or against the Group.

In addition, any litigation in the PRC may be protracted and could result in substantial costs and maydivert the Group’s resources or management’s attention, all of which could have a material adverseeffect on the Group’s business, prospects, financial condition and results of operations.

Certain PRC regulations governing PRC companies are less developed than those applicable tocompanies incorporated in more developed countries.

Substantially all members of the Group are established in the PRC and are subject to PRC regulationsgoverning PRC companies. These regulations contain certain provisions that are required to be includedin the joint venture contracts, articles of association and all other major operational agreements of thesePRC companies and are intended to regulate the internal affairs of these companies. These regulations ingeneral, and the provisions for protection of shareholders’ rights and access to information in particular,are less developed than those applicable to companies incorporated in Hong Kong, the United States, theUnited Kingdom and other developed countries or regions.

It may be difficult to effect service of process upon, or to enforce against, the Issuer or its directors ormembers of the Issuer’s senior management who reside in the PRC in connection with judgmentsobtained in non-PRC courts.

Substantially all of the Group’s assets and the Group’s members are located in the PRC. In addition,substantially all of the assets of the Issuer’s directors and the members of its senior management may belocated within the PRC. Therefore, it may not be possible for investors to effect service of process uponthe Issuer or its directors or members of its senior management inside the PRC. The PRC has notentered into treaties or arrangements providing for the recognition of judgments made by courts of mostother jurisdictions.

On 14 July 2006, Hong Kong and the PRC entered into the Arrangement on Reciprocal Recognition andEnforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of theHong Kong Special Administrative Region Pursuant to Choice of Court Agreements Between PartiesConcerned（關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安

排）(the ‘‘Arrangement’’), pursuant to which a party with a final court judgment rendered by a HongKong court requiring payment of money in a civil and commercial case according to a ‘‘choice of court’’agreement in writing may apply for recognition and enforcement of the judgment in the PRC. Similarly,a party with a final court judgment rendered by a PRC court requiring payment of money in a civil andcommercial case pursuant to a ‘‘choice of court’’ agreement in writing may apply for recognition andenforcement of such judgment in Hong Kong. A ‘‘choice of court’’ agreement in writing is defined asany agreement in writing entered into between parties after the effective date of the Arrangement inwhich a Hong Kong court or a PRC court is expressly designated as the court having sole jurisdictionfor the dispute. Therefore, it is not possible to enforce a judgment rendered by a Hong Kong court in thePRC if the parties in dispute do not enter into a ‘‘choice of court’’ agreement in writing. As a result, itmay be difficult or impossible for investors to effect service of process against the Group’s assets or theIssuer’s directors in the PRC in order to seek recognition and enforcement for foreign judgments in thePRC. On 18 January 2019, Hong Kong and the PRC entered into the Arrangement on ReciprocalRecognition and Enforcement of Judgments in Civil and Commercial Matters between the Courts of the

43

Mainland and of the Hong Kong Special Administrative Region（關於內地與香港特別行政區法院相互

認可和執行民商事案件判決的安排）(the ‘‘2019 Arrangement’’), which seeks to establish a bilaterallegal mechanism with greater clarity and certainty for recognition and enforcement of judgments in awider range of civil and commercial matters between the courts of Hong Kong and the PRC. The 2019Arrangement will be implemented by local legislation in Hong Kong and will take effect after bothHong Kong and the PRC have completed the necessary procedures to enable implementation, and shallapply to judgments made by the courts of Hong Kong and the PRC on or after the date of thecommencement of the 2019 Arrangement. Upon commencement of the 2019 Arrangement, the Choice ofCourt Arrangement shall be terminated, except for ‘‘choice of court’’ agreements in writing madebetween parties before the commencement of the 2019 Arrangement, in which case the Choice of CourtArrangement shall continue to apply. However, the recognition and enforcement of judgments renderedby a Hong Kong court in the PRC are subject to the provisions, limits, procedures and other terms andrequirements of the 2019 Arrangement. There can be no assurance that investors can successfully effectservice of process against the Issuer or the Issuer’s directors or members of its senior management in thePRC and/or seek recognition and enforcement for judgments rendered by a Hong Kong court in thePRC.

Furthermore, the PRC does not have treaties or agreements providing for the reciprocal recognition andenforcement of judgments awarded by courts of the United States, the United Kingdom, or most otherEuropean countries or Japan. Hence, the recognition and enforcement in the PRC of judgment of a courtin any of these jurisdictions in relation to any matter not subject to a binding arbitration provision maybe difficult or even impossible.

The payment of dividends by the Issuer’s operating subsidiaries in the PRC is subject to restrictionsunder the PRC law.

The Issuer operates its businesses primarily through its operating subsidiaries in the PRC. The PRC lawsrequire that dividends be paid only out of net profit, calculated according to the PRC accountingprinciples, which differ from generally accepted accounting principles in other jurisdictions. In addition,the PRC law requires enterprises set aside part of their net profits as statutory reserves beforedistributing the net profits for the current financial year. These statutory reserves are not available fordistribution as cash dividends. Since the availability of funds to pay for the Issuer’s operations and toservice its indebtedness depends upon dividends received from these subsidiaries, any legal restrictionson the availability and usage of dividend payments from the Issuer’s subsidiaries may impact the Issuer’sability to fund its operations and to service its indebtedness.

The Group is subject to restrictions on the remittance of Renminbi into and out of the PRC andgovernmental controls on currency conversion, and may be affected by the risks relating tofluctuations in exchange rates in the future.

The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and theremittance of currency out of PRC. Substantially all of the Group’s operating income is denominated inRenminbi, a portion of which may need to be converted into other currencies in order to meet theGroup’s foreign currency obligations, such as payments of principal and interests under the Bonds orother foreign currency denominated debt, if any.

Under the existing PRC laws and regulations on foreign exchange, payments of current account items,including profit distributions, interest payments and trade and service related foreign exchangetransactions, can be made in foreign currencies without prior approval from SAFE, provided that certainprocedural requirements are complied with. Approval from or registration with competent governmentauthorities is required where Renminbi is to be converted into foreign currency and remitted out of thePRC to pay capital expenses such as the repayment of loans denominated in foreign currencies. ThePRC government may, at its discretion, take measures to restrict access to foreign currencies for currentaccount and capital account transactions under certain circumstances. If the foreign exchange controlsystem prevents the Group from obtaining sufficient foreign currencies to satisfy the Group’s foreign

44

currency demands, the Group may not be able to pay interests and/or principal to holders of the Bondsor other foreign currency denominated debt, if any. In addition, there can be no assurance that new lawsor regulations will not be promulgated in the future that would have the effect of further restricting theremittance of Renminbi into or out of the PRC.

The proceeds from the offering of the Bonds will be received in U.S. dollars. As a result, anyappreciation of Renminbi against U.S. dollars or any other foreign currencies may result in the decreasein the value of the Group’s foreign currency-denominated assets and the Group’s proceeds from theoffering of the Bonds. Conversely, any depreciation of Renminbi may adversely affect the Group’sability to service the Bonds.

The value of Renminbi against U.S. dollars and other foreign currencies is subject to changes in thePRC’s policies, as well as international economic and political developments. On 21 July 2005, the PRCgovernment adopted a more flexible managed floating exchange rate system to allow the value ofRenminbi to fluctuate within a regulated band that is based on market supply and demand with referenceto a basket of currencies. From 21 July 2005 to 17 March 2014, the floating band of interbank spotforeign exchange market trading price of Renminbi against U.S. dollars was gradually widened from 0.3per cent. to 2 per cent. On 11 August 2015, PBOC adjusted the mechanism for market makers to formthe central parity rate by requiring them to consider the closing exchange rate of the last trading date,the supply and demand of foreign exchange and the rate change at primary international currencies. On11 December 2015, the China Foreign Exchange Trade System, a sub-institutional organisation ofPBOC, published the China Foreign Exchange Trade System (CFETS) Renminbi exchange rate index forthe first time which weighs the Renminbi based on 13 currencies, to guide the market in order tomeasure the Renminbi exchange rate from a new perspective. Although, starting from 1 October 2016,Renminbi has been added to the Special Drawing Rights basket created by the International MonetaryFund, there can be no assurance that the PRC government will continue to gradually liberalise thecontrol over cross-border Renminbi remittances in the future, that any pilot schemes for Renminbi cross-border utilisation will not be discontinued or that new PRC regulations will not be promulgated in thefuture which have the effect of restricting the remittance of Renminbi into or outside the PRC.

In addition, the value of Renminbi has depreciated significantly against U.S. dollars since the end of2015, and there can be no assurance that the Renminbi will not experience significant depreciation orappreciation against U.S. dollars or against any other currency in the future. Furthermore, the Group isrequired to obtain SAFE’s approval before converting significant amounts of foreign currencies intoRenminbi. As a result, any significant increase in the value of Renminbi against foreign currencies couldreduce the value of the Group’s foreign currency‑denominated revenue and assets and could materiallyand adversely affect the Group’s business, financial condition, results of operations and prospects.

The enforcement of the Labour Contract Law and other labour-related regulations in the PRC mayadversely affect the Group’s business and results of operations.

On 28 December 2012, the PRC government enacted the Labour Contract Law, which became effectiveon 1 July 2013. The Labour Contract Law establishes additional restrictions and increases the cost toemployers upon termination of employees, including specific provisions related to fixed-termemployment contracts, temporary employment, probation, consultation with the labour union andemployee general assembly, employment without a contract, dismissal of employees, compensation upontermination and overtime work, and collective bargaining. According to the Labour Contract Law, anemployer is obligated to sign an unlimited term labour contract with an employee if the employercontinues to employ the employee after two consecutive fixed term labour contracts. The employer mustalso pay compensation to employees if the employer terminates an unlimited term labour contract unlessan employee refuses to extend the labour contract with the employee under the same terms or betterterms than those in the original contract. Further, under the Regulations on Paid Annual Leave forEmployees（職工帶薪年休假條例）which became effective on 1 January 2008, employees who haveserved more than one year with an employer are entitled to a paid vacation ranging from five to 15 days,depending on their length of service. Employees who waive such vacation time at the request of

45

employers shall be compensated at three times their normal salaries for each waived vacation day. Underthe National Leisure and Tourism Outline 2013-2020（國民旅遊休閒綱要（2013-2020年））, whichbecame effective on 2 February 2013, regulations on paid annual leave of employees shall have beenimplemented on a general basis by 2020. As a result of these protective labour measures or anyadditional future measures, the Group’s labour costs may increase. There can be no assurance that anydisputes, work stoppages or strikes will not arise in the future.

RISKS RELATING TO FINANCIAL AND OTHER INFORMATION

The Group’s auditors may receive adverse regulatory decisions and warnings issued by relevant PRCauthorities from time to time.

Hexin, the independent auditor of the Issuer for the year ended 31 December 2019, and Yongtuo, theindependent auditor of the Issuer for the year ended 31 December 2020, are registered accounting firmsin the PRC supervised by relevant PRC regulatory agencies, including MOF and China SecuritiesRegulatory Commission (‘‘CSRC’’). In recent years, as part of an effort to improve effective regulatoryoversight, PRC regulatory agencies have increased their examinations of PRC public accountants. As aresult, auditors in the PRC have been subject to more frequent examinations.

Each of Hexin and Yongtuo was previously investigated by CSRC in connection with its provision ofaudit services to certain PRC companies. In recent years, CSRC had issued warning notices to Hexinand Yongtuo relating to the violation and non-compliances of the accounting standards, certainprofessional ethical standards and auditing guidelines, instructed them on certain reform and correctiveactions and imposed deadlines for rectification and submitting reports to CSRC. According to Hexin andYongtuo, the CSRC investigations against them were not related to their respective teams serving as theindependent auditors of the Issuer and do not otherwise qualify the teams in the offering of the Bonds.Hexin and Yongtuo have confirmed that rectifications have been made in accordance with the regulatorydecisions and warnings issued by CSRC. Hexin and Yongtuo have also confirmed that their audit workfor the Group, including in respect of the financial statements of the Group as at and for the years ended31 December 2019 and 2020 included elsewhere in this Offering Circular, is not affected by CSRC’sinvestigations, regulatory decisions and/or warnings above.

However, the Issuer’s auditors and their management, officers or employees may from time to time beinvestigated by PRC regulatory agencies such as MOF and CSRC and may be subject to adverseregulatory and/or criminal decisions, warnings, sanctions, penalties and/or revocations and suspension ofbusiness operations as a result of such investigations. Adverse regulatory and/or criminal decisions,warnings, sanctions, penalties and/or revocations and suspension of business operations against theIssuer’s auditors may restrict the relevant auditors from providing audit services or other services inconnection with the Group’s financing transactions. In that case, the Issuer may have to discontinue itsengagement with the relevant auditors, which may adversely affect the Issuer’s business operations andharm its reputation. Also, any adverse regulatory and/or criminal decisions, warnings, sanctions,penalties and/or revocations and suspension of business operations against the Issuer’s auditors mayaffect investor’s confidence in the Issuer’s financial statements audited by its auditors. Potentialinvestors should consider these factors prior to making any investment decision.

The Issuer’s audited consolidated financial statements have been prepared and presented inaccordance with PRC GAAP, which is different from IFRS in certain respects.

The Issuer’s audited consolidated financial statements included in this Offering Circular have beenprepared and presented in accordance with PRC GAAP. PRC GAAP is substantially in line with IFRS,except for certain modifications which reflect the PRC’s unique circumstances and environment. Pleasesee ‘‘Summary of Certain Differences between PRC GAAP and IFRS’’ for details. Each investor shouldconsult its own professional adviser for an understanding of the differences between PRC GAAP andIFRS and/or between PRC GAAP and other generally accepted accounting principles, and how thosedifferences might affect the financial information contained herein.

46

Historical consolidated financial information of the Group may not be indicative of its current orfuture results of operations.

The historical financial information of the Group included in this Offering Circular is not indicative ofits future financial results. The historical financial information is not intended to represent or predict theGroup’s results of operations of any future periods. The Group’s future results of operations may changematerially if its future growth deviates from the historical trends for various reasons, including factorsbeyond its control, such as changes in economic environment, PRC environmental rules and regulationsand the competitive landscape of the industries in which the Group operates its businesses. The Groupmay also acquire businesses or companies or dispose of its subsidiaries or assets from time to time inaccordance with the Group’s business objectives. Period-to-period comparisons of the Group’s historicaloperating results must be evaluated in light of the impact of any such transactions.

The Issuer has published, and may continue to publish periodical financial information in the PRCpursuant to applicable PRC regulatory rules. Investors should be cautious and not place any relianceon the financial information other than that disclosed in this Offering Circular.

The Issuer from time to time issues corporate bonds and short-term commercial paper in the domesticcapital markets in the PRC. According to applicable PRC securities regulations on debt capital markets,the Issuer needs to publish its quarterly, semi-annual and annual financial information to satisfy itscontinuing disclosure obligations relating to its corporate bonds and short-term commercial paper. Afterthe Bonds are issued, the Issuer is obligated by the terms of the Bonds, among others, to provide holdersof the Bonds with its audited financial statements and certain unaudited periodical financial statements.The quarterly and semi-annual financial information published by the Group in the PRC is normallyderived from the Group’s management accounts which have not been audited or reviewed byindependent auditors. As such, this financial information published in the PRC, should not be referred toor relied upon by potential purchasers to provide the same quality of information associated with anyaudited or reviewed information. The Issuer is not responsible to holders of the Bonds for the unauditedand unreviewed financial information from time to time published in the PRC and therefore investorsshould not place any reliance on any such financial information.

Certain facts and statistics in this Offering Circular are derived from publications not independentlyverified by the Issuer, the Managers, the Trustee, the Agents or their respective advisers.

This Offering Circular contains facts and statistics relating to the economy of the PRC, Weifang Cityand the industries in which the Group operates. While the Issuer has taken reasonable care to selectreputable and reliable information sources and ensure that the facts and statistics relating to the PRC,Weifang City economy and the industries in which the Group operates are accurately presented andextracted from such reliable sources, such facts and statistics have not been independently verified bythe Issuer, the Managers, the Trustee, the Agents or their respective advisers and, therefore, none ofthem makes any representation as to the accuracy of such facts and statistics, which may not beconsistent with other information compiled within or outside the PRC. Due to ineffective calculation andcollection methods and other problems, the facts and statistics herein may be inaccurate or may not becomparable to facts and statistics produced for other economies and should not be unduly relied upon.

Public corporate disclosure about the Issuer may be limited.

As the Issuer is a private company, there may be less publicly available information about the Issuerthan is regularly made available by public companies in certain other countries.

47

RISKS RELATING TO THE BONDS

Any failure to complete the relevant filings under the NDRC Circular within the prescribed time-frame following the completion of the issue of the Bonds may have adverse consequences for theIssuer and/or the investors in the Bonds.

The NDRC issued the NDRC Circular on 14 September 2015, and it came into effect on the same day.According to the NDRC Circular, domestic enterprises and their overseas controlled entities shallprocure the registration of any debt securities issued outside the PRC with the NDRC prior to the issueof the securities and notify the particulars of the relevant issues within 10 working days after thecompletion of the issue of the securities. The Issuer obtained the NDRC pre-issuance registrationcertificate on 27 May 2021. Failure to comply with the post-issue notification requirement may result inthe relevant entities being placed on the credit blacklist in the PRC, and subject them to credit-relatedsanctions. However, there is no clarity on the actual legal consequences of non-compliance with thepost-issue notification requirement under the NDRC Circular. In the worst-case scenario, such non-compliance with the post-issue notification requirement under the NDRC Circular may result in it beingunlawful for the Issuer to perform or comply with any of its obligations under the Bonds, and the Bondsmight be subject to enforcement as provided in Condition 9 (Events of Default) of the Terms andConditions of the Bonds. Potential investors in the Bonds are advised to exercise due caution whenmaking their investment decisions. The Issuer has undertaken to notify the NDRC of the particulars ofthe issue of the Bonds within the prescribed time-period after the Issue Date.

The Bonds are unsecured obligations.

As the Bonds are unsecured obligations, their repayment may be compromised if:

• the Issuer enters into bankruptcy, liquidation, reorganisation or other winding-up proceedings;

• there is a default in payment under the Issuer’s secured indebtedness or other unsecuredindebtedness; or

• there is an acceleration of any of the Issuer’s indebtedness.

If any of these events were to occur, the Issuer’s assets and any amounts received from the sale of suchassets may not be sufficient to pay amounts due on the Bonds.

Bonds may not be a suitable investment for all investors.

The Bonds are complex financial instruments and may be purchased as a way to reduce risk or enhanceyield with a measured and appropriate addition of risk to the investor’s overall portfolios. A potentialinvestor should not invest in the Bonds unless they have the expertise (either alone or with the help of afinancial adviser) to evaluate how the Bonds will perform under changing conditions, the resultingeffects on the value of such Bonds, and the impact this investment will have on the potential investor’soverall investment portfolio.

Additionally, the investment activities of certain investors are subject to legal investment laws andregulations, or review or regulation by certain authorities. Each potential investor should consult itslegal advisers to determine whether and to what extent (a) Bonds are legal investments for it, (b) Bondscan be used as collateral for various types of borrowing and (c) other restrictions apply to its purchaseof any Bonds. Financial institutions should consult their legal advisers or the appropriate regulators todetermine the appropriate treatment of Bonds under any applicable risk-based capital or similar rules.

Each potential investor in the Bonds must determine the suitability of that investment in light of its owncircumstances. In particular, each potential investor should:

48

• have sufficient knowledge and experience to make a meaningful evaluation of the Bonds, themerits and risks of investing in the Bonds and the information contained or incorporated byreference in this Offering Circular or any applicable supplement;

• have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of itsparticular financial situation, an investment in the Bonds and the impact such investment will haveon its overall investment portfolio;

• have sufficient financial resources and liquidity to bear all of the risks of an investment in theBonds;

• understand thoroughly the terms of the Bonds and be familiar with the behaviour of any relevantindices and financial markets; and

• be able to evaluate (either alone or with the help of a financial adviser) possible economicscenarios, such as interest rate and other factors which may affect its investment and the ability tobear the applicable risks.

An active trading market for the Bonds may not develop.

The Bonds are a new issue of securities for which there is currently no trading market. Althoughapplication has been made to the Hong Kong Stock Exchange for the Bonds to be admitted for tradingon the Hong Kong Stock Exchange, no assurance can be given as to the ability of holders to sell theirBonds or the price at which holders will be able to sell their Bonds or that a liquid market will develop.The liquidity of the Bonds will be adversely affected if the Bonds are held or allocated to limitedinvestors. None of the Managers is obligated to make a market in the Bonds, and if the Managers do sothey may discontinue such market making activity at any time at their sole discretion. In addition, theBonds are being offered pursuant to exemptions from registration under the Securities Act and, as aresult, holders will only be able to resell their Bonds in transactions that have been registered under theSecurities Act or in transactions not subject to or exempt from registration under the Securities Act.

Investors in the Bonds may be subject to foreign exchange risks.

The Bonds are denominated and payable in U.S. dollars. An investor who measures investment returnsby reference to a currency other than U.S. dollars would be subject to foreign exchange risks by virtueof an investment in the Bonds, due to, among other things, economic, political and other factors overwhich the Issuer has no control. Depreciation of U.S. dollars against such currency could cause adecrease in the effective yield of the Bonds below their stated coupon rates and could result in a losswhen the return on the Bonds is translated into such currency. In addition, there may be taxconsequences for investors as a result of any foreign currency gains resulting from any investment in theBonds.

The Issuer may be unable to redeem the Bonds upon the due date for redemption thereof.

On the Maturity Date (as defined in the Terms and Conditions), the Bonds will be redeemed at theirprincipal amount, or, following the occurrence of a Relevant Event (as defined in the Terms andConditions), the Issuer may, at the option of any Bondholder, be required to redeem all, but not someonly, of such holder’s Bonds on the Put Settlement Date at 101 per cent. of their principal amount,together with accrued interest up to (but excluding) such Put Settlement Date. On the Maturity Date, orif such Relevant Event were to occur, the Issuer may not have sufficient cash in hand and may not beable to arrange financing to redeem the Bonds in time, or on acceptable terms, or at all. The ability toredeem the Bonds on the Maturity Date or in such event may also be limited by the terms of other debtinstruments. The Issuer’s failure to repay, repurchase or redeem tendered Bonds could constitute anevent of default under the Bonds, which may also constitute a default under the terms of the Issuer’sother indebtedness.

49

A change in English law which governs the Bonds may adversely affect the Bondholders.

The Terms and Conditions are governed by English law. No assurance can be given as to the impact ofany possible judicial decision or change to English law or administrative practice after the date of issueof the Bonds.

Modifications and waivers may be made in respect of the Terms and Conditions and the Trust Deedby the Trustee or less than all of the holders of the Bonds, and decisions may be made on behalf ofall holders of the Bonds that may be adverse to the interests of the individual holders of the Bonds.

The Terms and Conditions contain provisions for calling meetings of the holders of the Bonds toconsider matters affecting their interests generally. These provisions permit defined majorities to bind allBondholders, including those Bondholders who did not attend and vote at the relevant meeting and thoseBondholders who voted in a manner contrary to the majority. There is a risk that the decision of themajority of holders of the Bonds may be adverse to the interests of individual holders of the Bonds.

The Terms and Conditions also provide that the Trustee may, without the consent of the holders of theBonds, agree (i) to any modification of the Trust Deed, the Terms and Conditions and/or the AgencyAgreement (other than in respect of a Reserved Matter) which in the opinion of the Trustee will not bematerially prejudicial to the interests of the holders of the Bonds and (ii) to any modification of theBonds, the Trust Deed or the Agency Agreement which, in the opinion of the Trustee is of a formal,minor or technical nature or is to correct a manifest error.

In addition, the Trustee may, without the consent of the holders of the Bonds, authorise or waive anyproposed breach or breach of the Bonds, the Trust Deed or the Agency Agreement (other than aproposed breach, or a breach relating to the subject of certain Reserved Matters) if, in the opinion of theTrustee, the interests of the holders of the Bonds will not be materially prejudiced thereby.

The Trustee may request Bondholders to provide an indemnity and/or security and/or pre-funding toits satisfaction.

In certain circumstances (including, without limitation, the giving of notice pursuant to Condition 9(Events of Default) of the Terms and Conditions and the taking of any actions and/or steps and/or theinstituting of any proceedings pursuant to Condition 13 (Enforcement) of the Terms and Conditions), theTrustee may (in its sole discretion) request the Bondholders to provide an indemnity and/or security and/or pre-funding to its satisfaction before it takes any action on behalf of Bondholders. The Trustee shallnot be obliged to take any such actions if not indemnified and/or secured and/or pre-funded to itssatisfaction. Negotiating and agreeing to any indemnity and/or security and/or pre-funding can be alengthy process and may impact on when such actions can be taken. The Trustee may not be able to takeactions, notwithstanding the provision of an indemnity or security or pre-funding to it, in breach of theterms of the Trust Deed (as defined in the Terms and Conditions) and in such circumstances, or wherethere is uncertainty or dispute as to the applicable laws or regulations, to the extent permitted by theagreements and the applicable law, it will be for the Bondholders to take such actions directly.

The Bonds will be represented by a Global Certificate and holders of a beneficial interest in a GlobalCertificate must rely on the procedures of the Clearing Systems.

The Bonds will be represented by beneficial interests in a Global Certificate. Such Global Certificatewill be registered in the name of a nominee for, and deposited with, a common depositary for Euroclearand Clearstream (the ‘‘Clearing Systems’’). Except in the circumstances described in the GlobalCertificate of the Bonds, investors will not be entitled to receive Individual Certificates. The ClearingSystem will maintain records of the beneficial interests in the Global Certificate. While the Bonds arerepresented by the Global Certificate, investors will be able to trade their beneficial interests onlythrough the Clearing Systems.

50

While the Bonds are represented by the Global Certificate, the Issuer will discharge its paymentobligations under the Bonds by making payments to the relevant Clearing System for distribution totheir account Bondholders.

A holder of a beneficial interest in a Global Certificate must rely on the procedures of the relevantClearing System to receive payments under the Bonds. The Issuer has no responsibility or liability forthe records relating to, or payments made in respect of, beneficial interests in the Global Certificate.

Holders of beneficial interests in the Global Certificate will not have a direct right to vote in respect ofthe Bonds. Instead, such holders will be permitted to act only to the extent that they are enabled by therelevant Clearing System to appoint appropriate proxies.

Bondholders should be aware that an Individual Certificate which has a principal amount that is notan integral multiple of the minimum specified denomination may be illiquid and difficult to trade.

In relation to any Bond which has a principal amount consisting of a minimum specified denominationplus a higher integral multiple of another smaller amount, it is possible that the Bonds may be traded inamounts in excess of the minimum specified denomination that are not integral multiples of suchminimum specified denomination. In addition, after partial redemption by the Issuer, holders may ceaseto hold the Bonds in specified denomination. In such a case, a Bondholder who, as a result of tradingsuch amounts or partial redemption by the Issuer, holds a principal amount of less than the minimumspecified denomination will not receive an Individual Certificate in respect of such holding (shoulddefinitive Bonds be printed) and would need to purchase a principal amount of Bonds such that it holdsan amount equal to one or more specified denominations. If definitive Bonds are issued, holders shouldbe aware that an Individual Certificate which has a principal amount that is not an integral multiple ofthe minimum specified denomination may be illiquid and difficult to trade.

Changes in market interest rates may adversely affect the value of the Bonds.

The Bonds will carry a fixed rate of interest. Consequently, investment in the Bonds involves the riskthat subsequent changes in market interest rates may adversely affect the value of the Bonds. Generally,a rise in interest rates may cause a fall in the prices of the Bonds, resulting in a capital loss for theBondholders. However, the Bondholders may re-invest the interest payments at higher prevailing interestrates. Conversely, when interest rates fall, the prices of the Bonds may rise. The Bondholders may enjoya capital gain, but interest payments received may be reinvested at lower prevailing interest rates.

As the Bonds will carry a fixed rate of interest, the trading price of the Bonds will consequently varywith the fluctuations in interest rates. If Bondholders sell the Bonds they hold before the maturity ofsuch Bonds, they may receive an offer less than their investment.

The ratings of the Bonds may be downgraded or withdrawn.

The Bonds are expected to be rated ‘‘Baa3’’ by Moody’s and ‘‘BBB-’’ by Fitch.

Each rating represents only the current opinion of the rating agency and its current assessment of theability of the Issuer to perform its obligations under the Bonds and the Trust Deed and credit risks indetermining the likelihood that payments will be made when due under the Bonds. Ratings are notrecommendations to buy, sell or hold the Bonds, and may be subject to suspension, reduction, or beingwithdrawn at any time. The Issuer is not obligated to inform Bondholders if the ratings are lowered orwithdrawn. Each rating should be evaluated independently of the other rating. A downgrade orwithdrawal of the ratings may materially and adversely affect the market price of the Bonds and theIssuer’s ability to access the debt capital markets.

51

The Bonds will be structurally subordinated to the existing and future indebtedness and otherliabilities of the Issuer’s existing and future subsidiaries, and effectively subordinated to the Issuer’ssecured debt to the extent of the value of the collateral securing such indebtedness.

The Bonds will be structurally subordinated to any debt and other liabilities and commitments, includingtrade payables and lease obligations, of the Issuer’s existing and future subsidiaries, whether or notsecured. The Bonds will not be guaranteed by any of the Issuer’s subsidiaries, and the Issuer may nothave direct access to the assets of such subsidiaries unless these assets are transferred by dividend orotherwise to the Issuer. The ability of such subsidiaries to pay dividends or otherwise transfer assets tothe Issuer is subject to various restrictions under applicable law. The Issuer’s subsidiaries are separatelegal entities that have no obligation to pay any amounts due under the Bonds or make any fundsavailable therefor, whether by dividends, loans or other payments.

The Issuer’s right to receive assets of any of the Issuer’s subsidiaries upon that subsidiary’s liquidationor reorganisation will be effectively subordinated to the claim of that subsidiary’s creditors (except tothe extent that the Issuer is a creditor of that subsidiary). Consequently, the Bonds will be effectivelysubordinated to all liabilities, including trade payables and lease obligations, of any of the Issuer’ssubsidiaries and any subsidiaries that the Issuer may in the future acquire or establish.

The Bonds are the Issuer’s unsecured obligations, and will: (i) rank equally in right of payment with allthe Issuer’s other present and future unsecured indebtedness; (ii) be effectively subordinated to all of theIssuer’s present and future secured indebtedness to the extent of the value of the collateral securing suchobligations; and (iii) be senior to all of the Issuer’s present and future subordinated obligations. As aresult, claims of secured lenders, whether senior or junior, with respect to assets securing their loans willtake priority with respect to those assets. In the event of the Issuer’s bankruptcy, insolvency, liquidation,reorganisation, dissolution or other winding up, or upon any acceleration of the Bonds, these assets willbe available to pay obligations on the Bonds only after all other debt secured by these assets has beenrepaid in full. Any remaining assets will be available to the Bondholders rateably with all of the Issuer’sother unsecured creditors, including trade creditors. If there are not sufficient assets remaining to pay allthese creditors, then all or a portion of the Bonds then outstanding would remain unpaid.

If the Issuer is unable to comply with the restrictions and covenants in its debt agreements, therecould be a default under the terms of these agreements, which could cause repayment of its debt to beaccelerated.

If the Issuer is unable to comply with its current or future debt obligations and other agreements, therecould be a default under the terms of these agreements. In the event of a default under these agreements,the holders of the debt could terminate their commitments to lend to the Issuer, accelerate repayment ofthe debt and declare all outstanding amounts due and payable or terminate the agreements, as the casemay be. Furthermore, some of the Issuer’s debt agreements contain cross-acceleration or cross-defaultprovisions. As a result, the Issuer’s default under one debt agreement may cause the acceleration ofrepayment of not only such debt, but also other debt, including the Bonds, or result in a default underthe Issuer’s other debt agreements. If any of these events occurs, the Issuer cannot assure holders that itsassets and cash flows would be sufficient to repay in full all of its indebtedness, or that the Issuer wouldbe able to find alternative financing. Even if it could obtain alternative financing, it cannot assureholders that it would be on terms that are favourable or acceptable to it.

The Issuer’s subsidiaries, jointly controlled entities and associated companies are subject torestrictions on the payment of dividends and the repayment of intercompany loans or advances to theIssuer, its jointly controlled entities and associated companies.

As a holding company, the Issuer depends on the receipt of dividends and the interest and principalpayments on intercompany loans or advances from its subsidiaries, jointly controlled entities andassociated companies to satisfy its obligations, including its obligations under the Bonds. The ability ofthe Issuer’s subsidiaries, jointly controlled entities and associated companies to pay dividends and make

52

payments on intercompany loans or advances to their shareholders is subject to, among other things,distributable earnings, cash flow conditions, restrictions contained in the articles of association of thesecompanies, applicable laws and restrictions contained in the debt instruments of such companies.

The Issuer cannot guarantee that its subsidiaries, jointly controlled entities and associated companieswill have distributable earnings or will be permitted to distribute their distributable earnings to it as itanticipates, or at all. In addition, dividends payable to it by these companies are limited by thepercentage of its equity ownership in these companies. Some portfolio companies may conclude that it isin the best interest of their shareholders to retain earnings, if any, for use in the operation and expansionof their businesses. The shareholders or the board of directors of a portfolio company (as the case maybe) have the power to determine whether to pay dividends based on conditions then existing, includingthe company’s earnings, financial condition and capital requirements, as well as economic and otherconditions that the shareholders or the board may deem relevant. Further, if any of these companiesraises capital by issuing equity securities to third parties, dividends declared and paid with respect tosuch shares would not be available to the Issuer to make payments on the Bonds. These factors couldreduce the payments that the Issuer receives from its subsidiaries, jointly controlled entities andassociated companies, which would restrict its ability to meet its payment obligations under the Bonds.

The Group may issue additional Bonds in the future.

The Group may, from time to time, and without prior consultation of the Bondholders, create and issuefurther Bonds (see ‘‘Terms and Conditions of the Bonds – Further Issues’’) or otherwise raise additionalcapital through such means and in such manner as it may consider necessary. There can be no assurancethat such future issuance or capital-raising activity will not adversely affect the market price of theBonds.

Additional procedures may be required to be taken to bring English law governed matters or disputesto the Hong Kong courts, and the Bondholders would need to be subject to the exclusive jurisdictionof the Hong Kong courts. There is also no assurance that courts in China will recognise and enforcejudgments of the Hong Kong courts in respect of English law governed matters or disputes.

The Terms and Conditions and the transaction documents are governed by English law, whereas partiesto these documents have submitted to the exclusive jurisdiction of the Hong Kong courts. In order tohear English law governed matters or disputes, Hong Kong courts may require certain additionalprocedures to be taken. Under the Arrangement on Reciprocal Recognition and Enforcement ofJudgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong KongSpecial Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned（關

於內地與香特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排）, judgments ofHong Kong courts are likely to be recognised and enforced by courts in China where the contractingparties to the transactions pertaining to such judgments have agreed to submit to the exclusivejurisdiction of Hong Kong courts.

However, recognition and enforcement of a Hong Kong court judgment could be refused if courts inChina consider that the enforcement of such judgment is contrary to the social and public interest ofChina. While it is expected that courts in China will recognise and enforce a judgment given by HongKong courts governed by English law, there can be no assurance that the courts in China will do so forall such judgments as there is no established practice in this area. Compared to other similar debtsecurities issuances in the international capital markets, where the relevant holders of the debt securitieswould not typically be required to submit to an exclusive jurisdiction, the Bondholders will be deemedto have submitted to the exclusive jurisdiction of the Hong Kong courts, and thus the Bondholders’ability to initiate a claim outside of Hong Kong will be limited.

53

EXCHANGE RATES

PBOC sets and publishes on a daily basis a base exchange rate with reference primarily to the supplyand demand of Renminbi against a basket of currencies in the market during the previous day. PBOCalso takes into account other factors, such as the general conditions existing in the international foreignexchange markets. On 21 July 2005, the PRC government introduced a managed floating exchange ratesystem to allow the value of Renminbi to fluctuate within a regulated band based on market supply anddemand and by reference to a basket of currencies. On the same day, the value of Renminbi appreciatedby two per cent. against the U.S. dollar. The PRC government has since made and in the future maymake further adjustments to the exchange rate system. On 18 May 2007, PBOC enlarged, effective on21 May 2007, the floating band for the trading prices in the inter-bank spot exchange market ofRenminbi against the U.S. dollar from 0.3 per cent. to 0.5 per cent. around the central parity rate. Thisallows Renminbi to fluctuate against the U.S. dollar by up to 0.5 per cent. above or below the centralparity rate published by PBOC. The floating band was further widened to 1.0 per cent. on 16 April2012. These changes in currency policy resulted in Renminbi appreciating against the U.S. dollar byapproximately 26.9 per cent. from 21 July 2005 to 31 December 2013. On 14 March 2014, PBOCfurther widened the floating band against the U.S. dollar to 2.0 per cent. On 11 August 2015, PBOCannounced improvements to the central parity quotations of Renminbi against the U.S. dollar byauthorizing market-makers to provide central parity quotations to the China Foreign Exchange TradingCentre daily before the opening of the interbank foreign exchange market with reference to the interbankforeign exchange market closing rate of the previous day, the supply and demand for foreign exchangeas well as changes in major international currency exchange rates. Following the announcement byPBOC on 11 August 2015, Renminbi depreciated significantly against the U.S. dollar. In January andFebruary 2016, Renminbi experienced further fluctuations in value against the U.S. dollar. The PRCgovernment may adopt further reforms of its exchange rate system, including making Renminbi freelyconvertible in the future.

The following table sets forth information concerning exchange rates between Renminbi and the U.S.dollar for the periods presented:

Renminbi per U.S. Dollar Noon Buying Rate(1)

Period Period end Average(2) High Low

(CNY per U.S.$1.00)2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4778 6.2869 6.4896 6.18702016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9430 6.6549 6.9580 6.44802017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5063 6.7350 6.9575 6.47732018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8755 6.6292 6.9737 6.26492019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9618 6.9014 7.1786 6.68222020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5250 6.8878 7.1681 6.52082021

January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4282 6.4672 6.4822 6.4282February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4730 6.4601 6.4869 6.4344March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5518 6.5109 6.5716 6.4648April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4749 6.5186 6.5649 6.4710May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3674 6.4321 6.4749 6.3674June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4566 6.4250 6.4811 6.3796July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4609 6.4763 6.5104 6.4562August (to 27 August) . . . . . . . . . . . . . . . . . . . . 6.4711 6.4782 6.5012 6.4608

(1) Exchange rates between Renminbi and U.S. dollar represent the noon buying rates as set forth in the H.10 statistical releaseof the Federal Reserve Board.

(2) Annual averages have been calculated from month-end rates. Monthly averages have been calculated using the average ofthe daily rates during the relevant period.

54

TERMS AND CONDITIONS OF THE BONDS

The following are the terms and conditions of the Bonds substantially in the form in which they (otherthan the text in italics) will be endorsed on the definitive Certificates (as defined below) and referred toin the global certificate.

The U.S.$400,000,000 2.60 per cent. bonds due 2024 (the ‘‘Bonds’’, which expression, unless thecontext requires otherwise, includes any further bonds issued pursuant to Condition 15 and to beconsolidated and forming a single series therewith) of Weifang Urban Construction and DevelopmentInvestment Group Co., Ltd.（濰坊市城市建設發展投資集團有限公司）(the ‘‘Issuer’’) are constituted bya trust deed (as amended, restated or supplemented from time to time, the ‘‘Trust Deed’’) dated on orabout 27 September 2021 (the ‘‘Issue Date’’) made between the Issuer and Citicorp InternationalLimited (the ‘‘Trustee’’, which expression shall include all persons for the time being the trustee ortrustees under the Trust Deed) as trustee for itself and the Bondholders (as defined below). Thestatements in these terms and conditions (these ‘‘Conditions’’) include summaries of, and are subject to,the detailed provisions of and definitions in the Trust Deed.

The issue of the Bonds was authorised by resolutions of the board of directors of the Issuer dated 2March 2021 and shareholder’s resolutions of the Issuer dated 15 March 2021.

Copies of the Trust Deed and the agency agreement (as amended, restated or supplemented from time totime, the ‘‘Agency Agreement’’) dated on or about 27 September 2021 made between the Issuer, theTrustee, Citibank N.A., London Branch as principal paying agent (the ‘‘Principal Paying Agent’’,which expression shall include its successor(s)), as registrar (the ‘‘Registrar’’, which expression shallinclude its successor(s)) and as transfer agent (the ‘‘Transfer Agent’’, which expression shall include itssuccessor(s)) and any other Agents (as defined below) appointed thereunder are available for inspectionat all reasonable times during normal business hours by the Holders (as defined below) at the principaloffice for the time being of the Trustee, being at the Issue Date at 20/F, Citi Tower, One Bay East, 83Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong and at a specified office of the Principal PayingAgent following prior written request and proof of holding to the satisfaction of the Trustee or, as thecase may be, the Principal Paying Agent. References herein to ‘‘Paying Agents’’ includes the PrincipalPaying Agent, and ‘‘Agents’’ means the Principal Paying Agent, the Registrar, the Transfer Agent andany other agent or agents appointed from time to time under the Agency Agreement with respect to theBonds. The Holders are entitled to the benefit of, are bound by, and are deemed to have notice of, allthe provisions of the Trust Deed and are deemed to have notice of those provisions of the AgencyAgreement applicable to them.

All capitalised terms that are not defined in these Conditions will have the meanings given to them inthe Trust Deed.

1. FORM, SPECIFIED DENOMINATION AND TITLE

The Bonds are issued in the specified denomination of U.S.$200,000 and integral multiples ofU.S.$1,000 in excess thereof. The Bonds are represented by registered certificates (‘‘Certificates’’)and, save as provided in Condition 3(b), each Certificate shall represent the entire holding ofBonds by the same Holder.

Title to the Bonds shall pass by transfer and registration in the Register as described in Condition3. The Holder of any Bond shall (except as ordered by a court of competent jurisdiction or asotherwise required by law) be treated as its absolute owner for all purposes whether or not it isoverdue and regardless of any notice of ownership, trust or an interest in it, any writing on theCertificate (other than the endorsed form of transfer) representing it or the theft or loss of suchCertificate and no person shall be liable for so treating the Holder.

55

In these Conditions, ‘‘Bondholder’’ or, in respect of any Bond, ‘‘Holder’’ means the person inwhose name a Bond is registered in the Register (or in the case of a joint holding, the first namethereof).

Upon issue, the Bonds will be represented by a global certificate (the ‘‘Global Certificate’’)registered in the name of a nominee of, and deposited with, a common depository for EuroclearBank SA/NV and Clearstream Banking S.A. The Conditions are modified by certain provisionscontained in the Global Certificate while any of the Bonds are represented by the GlobalCertificate. See ‘‘Summary of Provisions relating to the Bonds in Global Form’’.

Except in the limited circumstances described in the Global Certificate, owners of interests inBonds represented by the Global Certificate will not be entitled to receive definitive Certificate inrespect of their individual holdings of Bonds. The Bonds are not issuable in bearer form.

2. STATUS

The Bonds constitute direct, unconditional, unsubordinated and (subject to Condition 4(a))unsecured obligations of the Issuer and shall at all times rank pari passu and without anypreference among themselves. The payment obligations of the Issuer under the Bonds shall, savefor such exceptions as may be provided by applicable law and subject to Condition 4(a), at alltimes rank at least equally with all its other present and future unsecured and unsubordinatedobligations.

3. TRANSFERS OF BONDS AND ISSUE OF CERTIFICATES

(a) Register

The Issuer will cause the register (the ‘‘Register’’) to be kept at the specified office of theRegistrar and in accordance with the terms of the Agency Agreement, on which shall beentered the names and addresses of the Holders and the particulars of the Bonds held by themand of all transfers of the Bonds. Each Holder shall be entitled to receive only one Certificatein respect of its entire holding of Bonds.

(b) Transfer

Subject to the Agency Agreement and to Conditions 3(e) and 3(f), a Bond may be transferredby depositing the Certificate issued in respect of that Bond, with the form of transfer on theback of the Certificate (or another form of transfer substantially in the same form andcontaining the same representations and certifications (if any), unless otherwise agreed by theIssuer) duly completed and signed, at the specified office of the Registrar or any TransferAgent and with any other evidence as the Registrar or such Transfer Agent may require toprove the title of the transferor and the authority of the individuals who have executed suchform of transfer.

In the case of a transfer of part only of a holding of Bonds represented by one Certificate, anew Certificate shall be issued to the transferee in respect of the part transferred and a furthernew Certificate in respect of the balance of the holding not transferred shall be issued to thetransferor. In the case of a transfer of Bonds to a person who is already a Holder, a newCertificate representing the enlarged holding shall only be issued against surrender of theCertificate representing the existing holding. No transfer of title to a Bond will be validunless and until entered on the Register.

Transfers of interests in the Bonds evidenced by the Global Certificate will be effected inaccordance with the rules of the relevant clearing systems.

56

(c) Delivery of New Certificates

Each new Certificate to be issued upon transfer of Bonds pursuant to Condition 3(b) shall bemade available for delivery within three business days of receipt by the Registrar or, as thecase may be, the relevant Transfer Agent of a duly completed form of transfer and surrenderof the existing Certificate(s). Delivery of the new Certificate(s) shall be made at the specifiedoffice of any Transfer Agent or of the Registrar (as the case may be) to whom delivery orsurrender of such form of transfer and Certificate shall have been made or, at the option ofthe Holder making such delivery or surrender as aforesaid and as specified in the relevantform of transfer or otherwise in writing, be mailed by uninsured post at the risk of the Holderentitled to the new Certificate to such address as may be so specified, unless such Holderrequests otherwise and pays in advance to the relevant Transfer Agent or the Registrar (as thecase may be) the costs of such other method of delivery and/or such insurance as it mayspecify. In this Condition 3(c), ‘‘business day’’ means a day, other than a Saturday, Sundayor public holiday, on which banks are generally open for business in the place of thespecified office of the relevant Transfer Agent or the Registrar (as the case may be).

(d) Formalities Free of Charge

Registration of a transfer of Bonds and issuance of new Certificates will be effected withoutcharge by or on behalf of the Issuer or any Agent but upon (i) payment (or the giving of suchindemnity and/or security and/or prefunding as the Issuer or any Agent may require) inrespect of any taxes, duties or other governmental charges which may be imposed in relationto such transfer; (ii) the Registrar being satisfied in its absolute discretion with the documentsof title or identity of the person making the application and (iii) the relevant Agent beingsatisfied that the regulations concerning transfer of Bonds have been complied with.

(e) Closed Periods

No Holder may require the transfer of a Bond to be registered (i) during the period of sevendays ending on (but excluding) the due date for any payment of principal (or premium) inrespect of that Bond; or (ii) during the period of seven days ending on (and including) anyRecord Date (as defined in Condition 7(a)); or (iii) after notice of redemption has been givenpursuant to Condition 6(b); or (iv) after any such Bond has been put for redemption pursuantto Condition 6(c).

(f) Regulations

All transfers of Bonds and entries on the Register will be made subject to the detailedregulations concerning transfer and registration of Bonds scheduled to the AgencyAgreement. The regulations may be changed by the Issuer, with the prior written approval ofthe Registrar and the Trustee or by the Registrar, with the prior written approval of theTrustee. A copy of the current regulations will be made available for inspection by theRegistrar to any Holder upon prior written request and satisfactory proof of holding.

4. COVENANTS

(a) Negative Pledge

So long as any Bond remains outstanding (as defined in the Trust Deed), the Issuer will not,and the Issuer will ensure that none of its Subsidiaries will create, or have outstanding, anymortgage, charge, lien, pledge or other security interest, upon the whole or any part of itspresent or future undertaking, assets or revenues (including any uncalled capital) to secureany Relevant Indebtedness, or to secure any guarantee or indemnity in respect of anyRelevant Indebtedness, without at the same time or prior thereto according to the Bonds thesame security as is created or subsisting to secure any such Relevant Indebtedness, guarantee

57

or indemnity or such other security as either (i) the Trustee may in its absolute discretiondeem not materially less beneficial to the interest of the Bondholders or (ii) shall be approvedby an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders.

(b) Undertakings relating to Foreign Debt Registration and applicable PRC Laws

The Issuer undertakes that it will (i) within 15 Registration Business Days after the IssueDate, submit or cause to be submitted an application for the registration of the Bonds withSAFE pursuant to the Administrative Measures for Foreign Debt Registration and itsoperating guidelines, effective as of 13 May 2013 (the ‘‘Foreign Debt Registration’’), (ii)use its best endeavours to complete the Foreign Debt Registration and obtain a registrationrecord from SAFE on or before the Registration Deadline, (iii) if applicable, as soon aspossible upon being required or requested to do so by any relevant governmental authority,file or cause to be filed with SAFE the Bonds pursuant to the Circular of the People’s Bankof China on Matters concerning the Macro Prudential Management of Full-Covered Cross-Border Financing（中國人民銀行關於全口徑跨境融資宏觀審慎管理有關事宜的通知）(the‘‘Cross Border Financing Circular’’) and (iv) comply with all applicable PRC laws andregulations in relation to the Bonds.

(c) Notification to NDRC

The Issuer undertakes that it will within 10 Registration Business Days after the Issue Datefile or cause to be filed with the NDRC the requisite information and documents inaccordance with the Circular on Promoting the Reform of the Administrative System on theIssuance by Enterprises of Foreign Debt Filings and Registrations（國家發改委關於推進企業

發行外債備案登記制管理改革的通知）（發改外資[2015]2044號）issued by NDRC andeffective on 14 September 2015 and any implementation rules as issued by the NDRC fromtime to time (the ‘‘NDRC Post-Issue Filing’’).

(d) Notification of Completion of the Foreign Debt Registration and the NDRC Post-IssueFiling

The Issuer shall (a) provide the Trustee within ten Registration Business Days after the laterof submission of the NDRC Post-Issue Filing and receipt of the registration record fromSAFE (or any other document evidencing the completion of the Foreign Debt Registrationissued by SAFE), and (b) use its best endeavours to provide the Trustee on or before theRegistration Deadline with (i) a certificate in English signed by an Authorised Signatory (asdefined in the Trust Deed) of the Issuer confirming (A) the completion of the NDRC Post-Issue Filing and the Foreign Debt Registration and (B) no Change of Control, Event ofDefault or any event or circumstance which could, with the giving of notice, lapse of time,the issuing of a certificate and/or fulfilment of any other requirement provided for inCondition 9 become an Event of Default has occurred; and (ii) copies of the relevantdocuments evidencing the NDRC Post-Issue Filing (if any) and the completion of the ForeignDebt Registration, each certified in English as being a true and complete copy of the originalby an Authorised Signatory of the Issuer (the items specified in (i) and (ii) together, the‘‘Registration Documents’’). In addition, the Issuer shall within ten Registration BusinessDays after the documents comprising the Registration Documents are delivered to the Trusteegive notice to the Bondholders (in accordance with Condition 16) confirming the completionof the NDRC Post-Issue Filing and the Foreign Debt Registration.

The Trustee shall have no obligation or duty to monitor or ensure (or otherwise assist with)the filing or completion of the NDRC Post-issue Filing and/or the Foreign Debt Registrationon or before the deadline referred to above or to verify the accuracy, validity and/orgenuineness of any certificate, confirmation or other document in relation to or in connectionwith the NDRC Post-issue Filing and/or the Foreign Debt Registration, and shall not be liableto Bondholders or any other person for not doing so.

58

(e) Financial Information

So long as any Bond remains outstanding (as defined in the Trust Deed) the Issuer willfurnish the Trustee with:

(i) a Compliance Certificate (on which the Trustee may rely conclusively as to suchcompliance) and a copy of the relevant Audited Financial Reports, in each case within150 days of the end of each Relevant Period prepared in accordance with theAccounting Standards for Business Enterprises in China (‘‘PRC GAAP’’) (audited by anationally or internationally recognised firm of independent accountants) and if suchstatements shall be in the Chinese language, together with an English translation of thesame translated by (A) a nationally or internationally recognised firm of independentaccountants or (B) a professional translation service provider and checked by anationally or internationally recognised firm of independent accountants, together with acertificate in English signed by an Authorised Signatory of the Issuer certifying thatsuch translation is complete and accurate;

(ii) a copy of the Unaudited Financial Reports within 90 days of the end of each RelevantPeriod prepared on a basis consistent with the Audited Financial Reports and if suchstatements shall be in the Chinese language, together with an English translation of thesame and translated by (A) a nationally or internationally recognised firm ofindependent accountants or (B) a professional translation service provider and checkedby a nationally or internationally recognised firm of independent accountants, togetherwith a certificate in English signed by an Authorised Signatory of the Issuer certifyingthat such translation is complete and accurate; and

(iii) a Compliance Certificate (on which the Trustee may rely conclusively as to suchcompliance) within 14 days of any request therefor from the Trustee.

The Trustee shall not be required to review any other financial report furnished or deliveredto it as contemplated in this Condition 4(e) and, if the same shall not be in the Englishlanguage, shall not be required to request or obtain or arrange for an English languagetranslation of the same, and the Trustee shall not be liable to any Bondholder or any otherperson for not doing so.

(f) Ratings

For so long as any Bond remains outstanding, save with the approval of an ExtraordinaryResolution of the Bondholders, the Issuer will maintain a rating on the Bonds by a RatingAgency.

(g) Definitions

In these Conditions:

‘‘Audited Financial Reports’’ means, for a Relevant Period, the annual audited consolidatedstatement of financial position, statement of profit or loss, cash flow statement and statementof changes in owner’s equity of the Issuer together with any statements, reports (includingany directors’ and auditors’ reports) and notes attached to or intended to be read with any ofthem;

‘‘Compliance Certificate’’ means a certificate of the Issuer in English substantially in theform scheduled to the Trust Deed signed by an Authorised Signatory of the Issuer that,having made all reasonable enquiries, to the best of the knowledge, information and belief ofthe Issuer as at a date (the ‘‘Certification Date’’) not more than five days before the date ofthe certificate:

59

(i) no Event of Default (as defined in Condition 9) or Potential Event of Default (asdefined in the Trust Deed) had occurred since the Certification Date of the last suchcertificate or (if none) the date of the Trust Deed or, if such an event had occurred,giving details of it; and

(ii) the Issuer has complied with all its obligations under the Trust Deed and the Bonds;

‘‘Hong Kong’’ means the Hong Kong Special Administrative Region of the People’sRepublic of China;

‘‘NDRC’’ means the National Development and Reform Commission of the PRC or its localcounterparts;

‘‘person’’ means any individual, corporation, partnership, limited liability company, jointventure, trust, unincorporated organisation or government or any agency or politicalsubdivision thereof;

‘‘PRC’’ means the People’s Republic of China, which shall for the purpose of theseConditions only, exclude Hong Kong, the Macau Special Administrative Region of thePeople’s Republic of China and Taiwan;

‘‘Rating Agency’’ means (i) Fitch Ratings and its successors and credit rating agencyaffiliates (‘‘Fitch’’), (ii) Moody’s Investors Service, Inc, a subsidiary of Moody’sCorporation, and its successors and credit rating agency affiliates (‘‘Moody’s’’), (iii) S&PGlobal Ratings and its successors and credit rating agency affiliates (‘‘S&P’’) or (iv) if oneor more of Fitch, Moody’s or S&P shall not make a rating of the Bonds publicly available,any internationally recognised securities rating agency or agencies, as the case may be,selected by the Issuer, which shall be substituted for Fitch, Moody’s or S&P or anycombination thereof, as the case may be;

‘‘Registration Business Day’’ means a day, other than a Saturday, Sunday or public holiday,on which commercial banks are generally open for business in Beijing;

‘‘Registration Deadline’’ means the day falling 120 Registration Business Days after theIssue Date;

‘‘Relevant Indebtedness’’ means any indebtedness incurred outside the PRC which is in theform of, or represented or evidenced by, bonds, notes, debentures, loan stock or othersecurities which for the time being are, or are intended to be or capable of being, quoted,listed or dealt in or traded on any stock exchange or over-the-counter or other securitiesmarket (which, for the avoidance of doubt, does not include bilateral loans, syndicated loansor club deal loans);

‘‘Relevant Period’’ means (i) in relation to the Audited Financial Reports, each period oftwelve months ending on the last day of the Issuer’s financial year (being 31 December ofthat financial year); or (ii) in relation to the Unaudited Financial Reports, each period of sixmonths ending on the last day of the Issuer’s first half financial year (being 30 June of thatfinancial year);

‘‘SAFE’’ means the State Administration of Foreign Exchange of the People’s Republic ofChina or its local branch;

‘‘Subsidiary’’ means, with respect to any person, any corporation, association or otherbusiness entity (a) of which more than 50 per cent. of the voting power of the outstandingVoting Stock is owned, directly or indirectly, by such person and one or more other

60

Subsidiaries of such person; or (b) any corporation, association and other business entitywhich at any time has its accounts consolidated with those of that person or which, under thelaws, regulations or generally accepted accounting principles of the jurisdiction ofincorporation of such person from time to time, should have its accounts consolidated withthose of that person;

‘‘Unaudited Financial Reports’’ means, for a Relevant Period, the semi-annual unauditedconsolidated statement of financial position, statement of profit or loss of the Issuer togetherwith any statements, reports (including any directors’ and auditors’ review reports, if any)and notes attached to or intended to be read with any of them, if any; and

‘‘Voting Stock’’ means, with respect to any person, capital stock of any class or kindordinarily having the power to vote for the election of directors, managers or other votingmembers of the governing body of such person.

5. INTEREST

(a) Interest Rate and Interest Payment Dates

The Bonds bear interest on their outstanding principal amount from and including 27September 2021 at the rate of 2.60 per cent. per annum, payable semi-annually in arrear inequal instalments of U.S.$13.00 per Calculation Amount (as defined below) on 27 March and27 September in each year (each an ‘‘Interest Payment Date’’) commencing on 27 March2022.

Each Bond will cease to bear interest from the due date for redemption unless, uponsurrender of the Certificate representing such Bond, payment of principal or premium (if any)is improperly withheld or refused. In such event it shall continue to bear interest at such rate(both before and after judgment) until whichever is the earlier of (i) the day on which allsums due in respect of such Bond up to that day are received by or on behalf of the relevantHolders, and (ii) the day falling seven days after the Trustee or the Principal Paying Agenthas notified Bondholders of receipt of all sums due in respect of all the Bonds up to thatseventh day (except to the extent that there is failure in the subsequent payment to therelevant Holders under these Conditions).

If interest is required to be calculated for a period of less than a complete Interest Period (asdefined below), the relevant day count fraction will be determined on the basis of a 360-dayyear consisting of 12 months of 30 days each and, in the case of an incomplete month, thenumber of days elapsed. In these Conditions, the period beginning on and including the IssueDate and ending on but excluding the first Interest Payment Date and each successive periodbeginning on and including an Interest Payment Date and ending on but excluding the nextsucceeding Interest Payment Date are each called an ‘‘Interest Period’’.

Interest in respect of any Bond shall be calculated per U.S.$1,000 in principal amount of theBonds (the ‘‘Calculation Amount’’). The amount of interest payable per Calculation Amountfor any period shall, save as provided above in relation to equal instalments, be equal to theproduct of the rate of interest specified above, the Calculation Amount and the day-countfraction for the relevant period, rounding the resulting figure to the nearest cent (half a centbeing rounded upwards).

6. REDEMPTION AND PURCHASE

(a) Final Redemption

Unless previously redeemed, or purchased and cancelled, the Bonds will be redeemed at theirprincipal amount on 27 September 2024 (the ‘‘Maturity Date’’). The Bonds may not beredeemed at the option of the Issuer other than in accordance with this Condition 6.

61

(b) Redemption for Taxation Reasons

The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at any time,on giving not less than 30 nor more than 60 days’ notice (a ‘‘Tax Redemption Notice’’) tothe Bondholders in accordance with Condition 16 (which shall be irrevocable) and in writingto the Trustee and the Principal Paying Agent, at their principal amount (together with anyinterest accrued to, but excluding the date fixed for redemption) if the Issuer satisfies theTrustee immediately prior to the giving of such notice that (i) the Issuer has or will becomeobliged to pay Additional Tax Amounts as provided or referred to in Condition 8 as a resultof any change in, or amendment to, the laws or regulations of the PRC or any politicalsubdivision or any authority thereof or therein having power to tax, or any change in theapplication or official interpretation of, or any statement of an official position with respectto, such laws or regulations (including but not limited to any decision by a court ofcompetent jurisdiction), which change or amendment becomes effective on or after 17September 2021, and (ii) such obligation cannot be avoided by the Issuer taking reasonablemeasures available to it, provided that no Tax Redemption Notice shall be given earlier than90 days prior to the earliest date on which the Issuer would be obliged to pay suchAdditional Tax Amounts were a payment in respect of the Bonds then due.

Prior to the giving of any Tax Redemption Notice pursuant to this Condition 6(b), the Issuershall deliver to the Trustee (A) a certificate in English signed by an Authorised Signatory ofthe Issuer stating that the obligation referred to in (i) above of this Condition 6(b) cannot beavoided by the Issuer taking reasonable measures available to it, and (B) an opinion, in formand substance satisfactory to the Trustee, of independent tax or legal advisers of recognisedstanding to the effect that the Issuer has or will become obliged to pay such Additional TaxAmounts as a result of such change, amendments or statements. The Trustee shall be entitled(but shall not be obliged) to accept and rely upon such certificate and opinion as sufficientevidence of the satisfaction of the conditions precedent set out in (i) and (ii) above of thisCondition 6(b), in which event they shall be conclusive and binding on the Bondholders.

(c) Redemption for Relevant Events

Following the occurrence of a Relevant Event, the Holder of any Bond will have the right(the ‘‘Relevant Event Put Right’’), at such Holder’s option, to require the Issuer to redeemall, but not some only, of such Holder’s Bonds on the Put Settlement Date (as defined belowin this Condition 6(c)) at 101 per cent. (in the case of a redemption for a Change of Control)or 100 per cent. (in the case of a redemption for a No Registration Event) of their principalamount, together in each case with accrued interest up to (but excluding) the Put SettlementDate. To exercise such right, the Holder of the relevant Bond must deposit at the specifiedoffice of the Principal Paying Agent or any other Paying Agent a duly completed and signednotice of redemption, in the form for the time being current, obtainable from the specifiedoffice of any Paying Agent (a ‘‘Put Exercise Notice’’), together with the Certificateevidencing the Bonds to be redeemed, by not later than 30 days following a Relevant Event,or, if later, 30 days following the date upon which notice thereof is given to Bondholders bythe Issuer in accordance with Condition 16.

The ‘‘Put Settlement Date’’ shall be the fourteenth day (in the case of a redemption for aChange of Control) or the fifth day (in the case of a redemption for a No Registration Event)after the expiry of such period of 30 days as referred to above.

A Put Exercise Notice, once delivered, shall be irrevocable and the Issuer shall redeem theBonds the subject of the Put Exercise Notices delivered as aforesaid on the Put SettlementDate.

62

Not later than 14 days (in the case of a Change of Control) or five days (in the case of a NoRegistration Event) following the day on which the Issuer becomes aware of a RelevantEvent, the Issuer shall procure that notice regarding such Relevant Event shall be delivered tothe Trustee in writing and to the Holders (in accordance with Condition 16) stating:

(i) the Put Settlement Date;

(ii) the date of the Relevant Event and, briefly, the events causing, as applicable, theChange of Control or No Registration Event;

(iii) the date by which the Put Exercise Notice must be given;

(iv) the redemption amount and the method by which such amount will be paid;

(v) the names and addresses of all Paying Agents;

(vi) the procedures that Holders must follow and the requirements that Holders must satisfyin order to exercise the Relevant Event Put Right; and

(vii) that a Put Exercise Notice, once validly given, may not be withdrawn.

Neither the Agents or the Trustee shall be required to monitor or to take any steps toascertain whether a Relevant Event or any event which could lead to a Relevant Event hasoccurred or may occur and none of them shall have any obligation or duty to verify theaccuracy, validity and/or genuineness of any documents in relation to or connection with theRegistration Conditions and none of them shall be liable to Holders, the Issuer or any otherperson for not doing so.

For the purpose of this Condition 6:

(A) ‘‘Control’’ means (i) the ownership, acquisition or control of more than 50 per cent. ofthe voting rights of the issued share capital of the relevant Person or (ii) the right toappoint and/or remove all or the majority of the members of the relevant Person’s boardof directors or other governing body, whether obtained directly or indirectly, andwhether obtained by ownership of share capital, the possession of voting rights, contractor otherwise; the term ‘‘Controlled’’ has meanings correlative to the foregoing;

(B) a ‘‘Change of Control’’ occurs when:

(i) Weifang SASAC and any other person(s) directly or indirectly Controlled by thecentral government of the PRC together cease to directly or indirectly hold or own100 per cent. of the issued share capital of the Issuer; or

(ii) the Issuer consolidates with or merges into or sells or transfers all or substantiallyall of the Issuer’s assets to any other Person, except where such Person(s) (in thecase of asset sale or transfer) or the surviving entity (in the case of consolidationor merger) is/are directly or indirectly Controlled by the central government of thePRC;

(C) a ‘‘No Registration Event’’ occurs when the Registration Conditions are not satisfiedon or before the Registration Deadline;

63

(D) a ‘‘Person’’ includes any individual, company, corporation, firm, partnership, jointventure, undertaking, association, organisation, trust, state or agency of a state (in eachcase whether or not being a separate legal entity) but does not include the Issuer’s boardof directors or any other governing board and does not include the Issuer’s wholly-owned direct or indirect subsidiaries;

(E) ‘‘Registration Conditions’’ means the receipt by the Trustee of the RegistrationDocuments relating to the Foreign Debt Registration as set forth in Condition 4(d);

(F) a ‘‘Relevant Event’’ will be deemed to occur if:

(i) there is a No Registration Event; or

(ii) there is a Change of Control; and

(G) ‘‘Weifang SASAC’’ means the State-owned Assets Supervision and AdministrationCommission of Weifang City（濰坊市國有資產監督管理委員會）.

(d) Purchase

The Issuer or any of its Subsidiaries may at any time purchase Bonds in the open market orotherwise at any price. The Bonds so purchased, while held by or on behalf of the Issuer orany such Subsidiary, shall not entitle the Holder to vote at any meetings of the Holders andshall not be deemed to be outstanding for certain purposes, including without limitation forthe purpose of calculating quorums at meetings of the Holders or for the purposes ofCondition 9, Condition 12(a) and Condition 13.

(e) Notice of redemption

All Bonds in respect of which any notice of redemption is given under this Condition 6 shallbe redeemed on the date, in such place and in such manner as specified in such notice inaccordance with this Condition 6. If there is more than one notice of redemption given inrespect of any Bond (which shall include any notice given by the Issuer pursuant toCondition 6(b) and any Put Exercise Notice given by a Bondholder pursuant to Condition6(c)), the notice given first in time shall prevail and in the event of two notices being givenon the same date, the first to be given shall prevail. Neither the Trustee nor any of theAgents shall be responsible for calculating or verifying any calculations of any amountspayable under any notice of redemption and none of them shall be liable to Holders, theIssuer or any other person for not doing so.

(f) Cancellation

All Certificates representing Bonds purchased by or on behalf of the Issuer and itsSubsidiaries shall be surrendered for cancellation to the Registrar and, upon surrenderthereof, all such Bonds shall be cancelled forthwith. Any Certificates so surrendered forcancellation may not be reissued or resold and the obligations of the Issuer in respect of anysuch Bonds shall be discharged.

7. PAYMENTS

(a) Method of Payment:

(i) Payments of principal and premium (if any) shall be made (subject to surrender of therelevant Certificates at the specified office of the Principal Paying Agent or any otherPaying Agent if no further payment falls to be made in respect of the Bonds representedby such Certificates) in the manner provided in Condition 7(a)(ii) below.

64

(ii) Interest on each Bond shall be paid on the due date to the person shown on the Registerat the close of business on the fifth Payment Business Day before the due date forpayment thereof (the ‘‘Record Date’’). Payments of interest on each Bond shall bemade in U.S. dollars by transfer to an account in U.S. dollars maintained by the payeewith a bank.

(iii) If the amount of principal being paid upon surrender of the relevant Certificate is lessthan the outstanding principal amount of such Certificate, the Registrar will annotatethe Register with the amount of principal so paid and will (if so requested in writing bythe Issuer or a Bondholder) issue a new Certificate with a principal amount equal to theremaining unpaid outstanding principal amount. If the amount of premium (if any) orinterest being paid is less than the amount then due, the Registrar will annotate theRegister with the amount of premium (if any) or interest so paid.

Notwithstanding the foregoing, so long as the Global Certificate is held on behalf ofEuroclear Bank SA/NV, Clearstream Banking S.A. or any other clearing system, eachpayment in respect of the Global Certificate will be made to the person shown as the holderin the Register at the close of business of the relevant clearing system on the ClearingSystem Business Day before the due date for such payments, where ‘‘Clearing SystemBusiness Day’’ means a weekday (Monday to Friday, inclusive) except 25 December and 1January.

(b) Payments subject to Fiscal Laws: Payments will be subject in all cases to (i) any fiscal orother laws and regulations applicable thereto in the place of payment, but without prejudiceto the provisions of Condition 8 and (ii) any withholding or deduction required pursuant toan agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the‘‘Code’’) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, anyregulations or agreements thereunder, any official interpretations thereof, or (withoutprejudice to the provisions of Condition 8) any law implementing an intergovernmentalapproach thereto. No commission or expenses shall be charged to the Bondholders in respectof such payments.

(c) Payment Initiation: Payment instructions (for value on the due date or, if that is not aPayment Business Day, for value the first following day which is a Payment Business Day)will be initiated on the due date for payment, or in the case of payments of principal andpremium (if any) where the relevant Certificate has not been surrendered at the specifiedoffice of any Transfer Agent or of the Registrar, on the first Payment Business Day on whichthe Principal Paying Agent is open for business and on or following which the relevantCertificate is surrendered.

(d) Appointment of Agents: The Principal Paying Agent, the Registrar and the Transfer Agentinitially appointed by the Issuer and their respective specified offices are listed below. ThePrincipal Paying Agent, the Registrar and the Transfer Agent act solely as agents of theIssuer and do not assume any obligation or relationship of agency or trust for or with anyBondholder. The Issuer reserves the right at any time with the prior written approval of theTrustee to vary or terminate the appointment of the Principal Paying Agent, the Registrar,any Transfer Agent or any of the other Agents and to appoint additional or other Agents,provided that the Issuer shall at all times maintain (i) a Principal Paying Agent, (ii) aRegistrar, (iii) a Transfer Agent and (iv) such other agents as may be required by any stockexchange on which the Bonds may be listed.

Notice of any such termination or appointment or any change of any specified office of anAgent shall promptly be given by the Issuer to the Bondholders.

65

(e) Delay in Payment: Bondholders will not be entitled to any interest or other payment for anydelay after the due date in receiving the amount due on a Bond if the due date is not aPayment Business Day, if the Bondholder is late in surrendering or cannot surrender itsCertificate (if required to do so).

(f) Non-Payment Business Days: If any date for payment in respect of any Bond is not aPayment Business Day, the Holder shall not be entitled to payment until the next followingPayment Business Day nor to any interest or other sum in respect of such postponedpayment. In this Condition 7, ‘‘Payment Business Day’’ means a day (other than a Saturday,a Sunday or a public holiday) on which banks and foreign exchange markets are generallyopen for business in New York City, the place in which the specified office of the PrincipalPaying Agent is located, the place where payment is to be made by transfer to an accountmaintained with a bank in U.S. dollars and the place on which foreign exchange transactionsmay be carried on in U.S. dollars in the principal financial centre of the country of suchcurrency.

8. TAXATION

All payments of principal, premium (if any) and interest by or on behalf of the Issuer in respect ofthe Bonds shall be made free and clear of, and without set-off or counterclaim and withholding ordeduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed,levied, collected, withheld or assessed by the PRC or any political subdivision or any authoritytherein or thereof having power to tax, unless such withholding or deduction is required by law.

Where such set-off, counterclaim, withholding or deduction is made by the Issuer by or within thePRC up to and including the aggregate rate applicable on 17 September 2021 (the ‘‘ApplicableRate’’), the Issuer will increase the amounts paid by it to the extent required, so that the netamount received by Bondholders equals the amounts which would otherwise have been receivableby them had no such set-off, counterclaim, withholding or deduction been required.

If the Issuer is required to make a deduction or withholding by or within the PRC in excess of theApplicable Rate, the Issuer shall pay such additional amounts (‘‘Additional Tax Amounts’’) aswill result in receipt by the Bondholders of such amounts as would have been received by themhad no such withholding or deduction been required, except that no Additional Tax Amounts shallbe payable in respect of any Bond:

(i) Other connection: to a Holder (or to a third party on behalf of a Holder) who is liable tosuch taxes, duties, assessments or governmental charges in respect of such Bond by reason ofhis having some connection with the PRC other than the mere holding of the Bond or wherethe withholding or deduction could be avoided by the holder making a declaration of non-residence or other similar claim for exemption to the appropriate authority; or

(ii) Surrender more than 30 days after the Relevant Date: in respect of which the Certificaterepresenting it is presented (where presentation is required) for payment more than 30 daysafter the Relevant Date except to the extent that the Holder of it would have been entitled tosuch Additional Tax Amounts on surrendering the Certificate representing such Bond forpayment on the last day of such period of 30 days.

References in these Conditions to principal, premium and interest shall be deemed also to refer toany Additional Tax Amounts which may be payable under this Condition 8 or any undertaking orcovenant given in addition thereto or in substitution therefor pursuant to the Trust Deed.

‘‘Relevant Date’’ in respect of any Bond means the date on which payment in respect of it firstbecomes due or (if any amount of the money payable is improperly withheld or refused) the dateon which payment in full of the amount outstanding is made or (if earlier) the date seven days

66

after that on which notice is duly given to the Bondholders that, upon further surrender of theCertificate representing such Bond being made in accordance with these Conditions, such paymentwill be made, provided that payment is in fact made upon such surrender.

Neither the Trustee nor any Agent shall be responsible for paying any tax, duty, charges,withholding or other payment referred to in this Condition 8 or for determining whether suchamounts are payable or the amount thereof, and shall not be responsible or liable for any failure bythe Issuer or the Bondholders or any other person to pay such tax, duty, charges, withholding orother payment in any jurisdiction.

9. EVENTS OF DEFAULT

If an Event of Default (as defined below) occurs the Trustee at its discretion may, and if sorequested in writing by Holders of at least 25 per cent. of the aggregate principal amount of theBonds then outstanding or if so directed by an Extraordinary Resolution shall (provided in anysuch case that the Trustee shall have first been indemnified and/or secured and/or pre- funded toits satisfaction), give notice to the Issuer that the Bonds are, and they shall immediately become,due and payable at their principal amount together (if applicable) with accrued but unpaid interest.

An ‘‘Event of Default’’ occurs if:

(a) Non-Payment: there has been a failure to pay (i) the principal of the Bonds when due or (ii)any interest on the Bonds when due and such failure to pay interest continues for a period ofseven days; or

(b) Breach of Other Obligations: the Issuer does not perform or comply with any one or moreof its other obligations under the Bonds or the Trust Deed (other than those referred to inCondition 9(a) and where such default gives rise to a redemption pursuant to Condition 6(c)),which such default (i) is incapable of remedy or, (ii) if capable of remedy, is not remediedwithin 30 days after the Trustee has given written notice thereof to the Issuer; or

(c) Cross-Default: (i) any other present or future indebtedness of the Issuer or any of itsSubsidiaries for or in respect of moneys borrowed or raised becomes (or becomes capable ofbeing declared) due and payable prior to its stated maturity by reason of any actual orpotential default, event of default or the like (howsoever described), or (ii) any suchindebtedness is not paid when due or, as the case may be, within any originally applicablegrace period, or (iii) the Issuer or any of its Subsidiaries fails to pay when due any amountpayable by it under any present or future guarantee for, or indemnity in respect of, anymoneys borrowed or raised provided that the aggregate amount of the relevant indebtedness,guarantees and indemnities in respect of which one or more of the events mentioned above inthis Condition 9(c) have occurred equals or exceeds U.S.$15,000,000 or its equivalent in anyother currency (on the basis of the middle spot rate for the relevant currency against the U.S.dollar as quoted by any leading bank on the day on which this Condition 9(c) operates); or

(d) Enforcement Proceedings: a distress, attachment, execution or other legal process is levied,enforced or sued out on or against the whole or a material part of the property, assets orrevenues of the Issuer or any of the Principal Subsidiaries and is not discharged or stayedwithin 30 days; or

(e) Security Enforced: any mortgage, charge, pledge, lien or other encumbrance, present orfuture, created or assumed by the Issuer or any of the Principal Subsidiaries on the whole ora material part of its assets becomes enforceable and any step is taken to enforce it (includingthe taking of possession or the appointment of a receiver, manager or other similar person)and is not discharged or stayed within 30 days; or

67

(f) Insolvency: the Issuer or any of the Principal Subsidiaries is (or is deemed by law to be)insolvent or bankrupt or unable to pay its debts as and when such debts fall due, stops,suspends or threatens to stop or suspend payment of all or a material part of its debts,proposes or makes any agreement for the deferral, rescheduling or other readjustment of allof its debts, proposes or makes a general assignment or an arrangement or composition withor for the benefit of the relevant creditors in respect of all or a material part of its debts or amoratorium is agreed or declared in respect of or affecting all or a material part of the debtsof the Issuer or any of the Principal Subsidiaries; or

(g) Winding-up: an order of any court of competent jurisdiction is made or an effectiveresolution is passed for the winding-up or dissolution of the Issuer or any of the PrincipalSubsidiaries, (except for any voluntary solvent winding-up of any of the PrincipalSubsidiaries), or the Issuer or any of the Principal Subsidiaries ceases or threatens to ceaseto carry on all or substantially all of its business or operations, except for the purpose of andfollowed by a solvent winding-up, dissolution, reconstruction, amalgamation, reorganisation,merger or consolidation (i) on terms approved by an Extraordinary Resolution of theBondholders, or (ii) in the case of a Principal Subsidiary, (A) whereby the undertaking andassets of such Principal Subsidiary are transferred to or otherwise vested in the Issuer oranother Subsidiary of the Issuer or (B) otherwise than any disposal or sale of such PrincipalSubsidiary to any other person on arm’s length terms for market consideration, where theproceeds (whether in cash or otherwise) resulting from such disposal or sale are transferred toor vested in the Issuer or another Subsidiary of the Issuer in any combination; or

(h) Nationalisation: any step is taken by any person acting under the authority of any national,regional or local government with a view to the seizure, compulsory acquisition,expropriation or nationalisation of all or a material part of the assets of the Issuer or any ofthe Principal Subsidiaries, except pursuant to a court decree or order or direction of anygovernment authority in respect of the Issuer or Weifang Dongxing Construction &Development Co., Ltd.; or

(i) Authorisation and Consents: any action, condition or thing (including the obtaining oreffecting of any necessary consent, approval, authorisation, exemption, filing, licence, order,recording or registration) at any time required to be taken, fulfilled or done in order (i) toenable the Issuer lawfully to enter into, exercise its rights and perform and comply with itsobligations under the Bonds and the Trust Deed, (ii) to ensure that those obligations arelegally binding and enforceable and (iii) to make the Bonds and the Trust Deed admissible inevidence in the courts of Hong Kong is not taken, fulfilled or done; or

(j) Illegality: it is or will become unlawful for the Issuer to perform or comply with any one ormore of its obligations under any of the Bonds or the Trust Deed; or

(k) Analogous Events: any event occurs which under the laws of any relevant jurisdiction has ananalogous effect to any of the events referred to in any of Conditions 9(d) to 9(h) (bothinclusive).

In this Condition 9, ‘‘Principal Subsidiary’’ means any Subsidiary of the Issuer:

(a) whose total revenue or (in the case of a Subsidiary which itself has Subsidiaries) consolidatedtotal revenue, as shown by its latest audited income statement is at least five per cent. of theconsolidated total revenue as shown by the latest published audited consolidated incomestatement of the Issuer and its Subsidiaries including, for the avoidance of doubt, the Issuerand its consolidated Subsidiaries’ share of profits of Subsidiaries not consolidated and ofjointly controlled entities and after adjustments for minority interests; or

68

(b) whose net profit or (in the case of a Subsidiary which itself has Subsidiaries) consolidatednet profit, as shown by its latest audited income statement is at least five per cent. of theconsolidated net profit as shown by the latest published audited consolidated incomestatement of the Issuer and its Subsidiaries including, for the avoidance of doubt, the Issuerand its consolidated Subsidiaries’ share of profits of Subsidiaries not consolidated and ofjointly controlled entities and after adjustments for minority interests; or

(c) whose total assets or (in the case of a Subsidiary which itself has Subsidiaries) consolidatedtotal assets, as shown by its latest audited balance sheet, is at least five per cent. of theconsolidated total assets of the Issuer and its Subsidiaries as shown by the latest publishedaudited consolidated balance sheet of the Issuer and its Subsidiaries including, the investmentof the Issuer in each Subsidiary whose accounts are not consolidated with the consolidatedaudited accounts of the Issuer and after adjustment for minority interests; or

(d) to which is transferred the whole or substantially the whole of the assets of a Subsidiarywhich immediately prior to such transfer was a Principal Subsidiary, provided that (xx) thePrincipal Subsidiary which so transfers its assets shall forthwith upon such transfer cease tobe a Principal Subsidiary and the Subsidiary to which the assets are so transferred shallforthwith become a Principal Subsidiary and (yy) on or after the date on which the firstpublished audited accounts (consolidated, if appropriate) of the Issuer prepared as of a datelater than such transfer are issued, whether such transferor Subsidiary or such transfereeSubsidiary is or is not a Principal Subsidiary shall be determined on the basis of suchaccounts by virtue of the provisions of paragraphs (a), (b) or (c) above of this definition;

provided that, in relation to paragraphs (a), (b) and (c) above of this definition:

(i) in the case of a corporation or other business entity becoming a Subsidiary after the endof the financial period to which the latest consolidated audited accounts of the Issuerrelate, the reference to the then latest consolidated audited accounts of the Issuer for thepurposes of the calculation above shall, until consolidated audited accounts of the Issuerfor the financial period in which the relevant corporation or other business entitybecomes a Subsidiary are published be deemed to be a reference to the then latestconsolidated audited accounts of the Issuer adjusted to consolidate the latest auditedaccounts (consolidated in the case of a Subsidiary which itself has Subsidiaries) of suchSubsidiary in such accounts;

(ii) if at any relevant time in relation to the Issuer or any Subsidiary which itself hasSubsidiaries no consolidated accounts are prepared and audited, total revenue, net profitor total assets of the Issuer and/or any such Subsidiary shall be determined on the basisof pro forma consolidated accounts prepared for this purpose by or on behalf of theIssuer;

(iii) if at any relevant time in relation to any Subsidiary, no accounts are audited, its totalrevenue, net profit or total assets (consolidated, if appropriate) shall be determined onthe basis of pro forma accounts (consolidated, if appropriate) of the relevant Subsidiaryprepared for this purpose by or on behalf of the Issuer; and

(iv) if the accounts of any Subsidiary (not being a Subsidiary referred to in proviso (i)above) are not consolidated with those of the Issuer, then the determination of whetheror not such Subsidiary is a Principal Subsidiary shall be based on a pro formaconsolidation of its accounts (consolidated, if appropriate) with the consolidatedaccounts (determined on the basis of the foregoing) of the Issuer.

69

10. PRESCRIPTION

Claims against the Issuer for payment in respect of the Bonds shall be prescribed and become voidunless made within 10 years (in the case of principal or premium (if any)) or five years (in thecase of interest) from the appropriate Relevant Date in respect of them.

11. REPLACEMENT OF CERTIFICATES

If any Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject toapplicable laws, regulations or other relevant regulatory authority regulations, at the specifiedoffice of the Registrar or any Transfer Agent, in each case on payment by the claimant of the feesand costs incurred in connection therewith and on such terms as to evidence, security, indemnityand otherwise as the Issuer, the Registrar or the relevant Transfer Agent may require. Mutilated ordefaced Certificates must be surrendered before replacements will be issued.

12. MEETINGS OF BONDHOLDERS, MODIFICATION, WAIVER, AUTHORISATION,DETERMINATION AND ENTITLEMENT OF TRUSTEE

(a) Meetings of Bondholders

The Trust Deed contains provisions for convening meetings of the Bondholders to considerany matter affecting their interests, including the sanctioning by Extraordinary Resolution ofa modification of any of these Conditions and/or any of the provisions of the Trust Deed and/or the Agency Agreement. Such a meeting may be convened by the Trustee or the Issuer andshall be convened by the Trustee upon request in writing from Bondholders holding not lessthan 10 per cent. in aggregate principal amount of the Bonds for the time being outstandingand subject to the Trustee being indemnified and/or secured and/or pre-funded to itssatisfaction against all costs and expenses. The quorum for any meeting convened to consideran Extraordinary Resolution will be two or more persons holding or representing more than50 per cent. in aggregate principal amount of the Bonds for the time being outstanding, or atany adjourned meeting two or more persons being or representing Bondholders whatever theprincipal amount of the Bonds held or represented unless the business of such meetingincludes the modification or abrogation of certain of the provisions of these Conditions andcertain of the provisions of the Trust Deed, including consideration of proposals, inter alia,(i) to modify the maturity date of the Bonds or the dates on which interest is payable inrespect of the Bonds, (ii) to reduce or cancel the principal amount of, any premium payableon redemption of, or interest on, the Bonds, (iii) to change the currency of payment of theBonds or (iv) to modify the provisions concerning the quorum required at any meeting ofBondholders or the majority required to pass an Extraordinary Resolution, in which case thenecessary quorum for passing an Extraordinary Resolution will be two or more personsholding or representing not less than 75 per cent., or at any adjourned meeting not less than25 per cent., in aggregate principal amount of the Bonds for the time being outstanding. AnyExtraordinary Resolution duly passed shall be binding on Bondholders, whether or not theywere present at the meeting at which such resolution was passed.

The Trust Deed provides that a resolution in writing signed by or on behalf of theBondholders of not less than 90 per cent. in aggregate principal amount of the Bonds for thetime being outstanding or passed by Electronic Consent (as defined in the Trust Deed) shallfor all purposes be as valid and effective as an Extraordinary Resolution passed at a meetingof Bondholders duly convened and held. Such a resolution in writing may be contained inone document or several documents in the same form, each signed by or on behalf of one ormore Bondholders.

70

(b) Modification, Waiver, Authorisation and Determination

The Trustee may (but shall not be obliged to) agree, without the consent of the Bondholders,to any modification of, or to the waiver or authorisation of any breach or proposed breach of,or any failure to comply with any of these Conditions or any of the provisions of the TrustDeed which in its opinion is not materially prejudicial to the interest of the Bondholders, ormay agree, without any such consent as aforesaid, to any modification which, in its opinion,is of a formal, minor or technical nature or to correct a manifest error or to comply with anymandatory provision of applicable law. Any such modification, waiver or authorisation shallbe binding on the Bondholders and, unless the Trustee agrees otherwise, such modification,waiver or authorisation shall be notified to the Bondholders by the Issuer as soon aspracticable thereafter in accordance with Condition 16.

(c) Entitlement of the Trustee

In connection with the exercise of its functions, rights, powers and/or discretions (includingbut not limited to those referred to in this Condition 12), the Trustee shall have regard to theinterests of the Bondholders as a class and shall not have regard to the consequences of suchexercise for individual Bondholders and the Trustee shall not be entitled to require, nor shallany Bondholder be entitled to claim, from the Issuer or the Trustee any indemnification orpayment in respect of any tax consequence of any such exercise upon individualBondholders.

13. ENFORCEMENT

At any time after the Bonds become due and payable, the Trustee may, at its discretion andwithout further notice, take such actions and/or steps and/or institute such proceedings against theIssuer as it may think fit to enforce the terms of the Trust Deed and/or the Bonds, but it need nottake any such actions or steps and/or institute any such proceedings unless (a) it shall have been sodirected by an Extraordinary Resolution or so requested in writing by Bondholders holding at least25 per cent. in aggregate principal amount of the Bonds then outstanding, and (b) it shall havebeen indemnified and/or secured and/or pre-funded to its satisfaction. No Bondholder may proceeddirectly against the Issuer unless the Trustee, having become bound so to proceed, fails to do sowithin a reasonable time and such failure is continuing.

14. INDEMNIFICATION OF THE TRUSTEE

The Trust Deed contains provisions for the indemnification of the Trustee, its directors, officers,employees and agents and for its and their relief from responsibility. The Trustee is entitled toenter into business transactions with the Issuer and/or any entity related directly or indirectly to theIssuer without accounting for any profit.

The Trustee may rely without liability to Holders, the Issuer or any other person on any report,information, confirmation or certificate from or any opinion or advice of any accountants, auditors,lawyers, valuers, auctioneers, surveyors, brokers, financial advisers, financial institution or anyother expert, whether or not addressed to it and whether their liability in relation thereto is limited(by its terms or by any engagement letter relating thereto or in any other manner) by reference to amonetary cap, methodology or otherwise. The Trustee may accept and shall be entitled to rely onany such report, information, confirmation, certificate, opinion or advice, in which case suchreport, information, confirmation, certificate, opinion or advice shall be binding on the Issuer andthe Holders.

Whenever the Trustee is required or entitled by the terms of the Trust Deed, the AgencyAgreement or these Conditions to exercise any discretion or power, take any action, make anydecision or give any direction, the Trustee is entitled, prior to exercising any such discretion or

71

power, taking any such action, making any such decision or giving any such direction, to seekdirections from the Bondholders by way of Extraordinary Resolution, and the Trustee shall not beresponsible for any loss or liability incurred by the Issuer, the Bondholders or any other person asa result of any delay in it exercising such discretion or power, taking such action, making suchdecision or giving such direction as a result of seeking such direction from the Bondholders or inthe event that no direction is given to the Trustee by the Bondholders.

None of the Trustee or any of the Agents shall be responsible for the performance by the Issuerand any other person appointed by the Issuer in relation to the Bonds of the duties and obligationson their part expressed in respect of the same and, unless it has written notice from the Issuer tothe contrary, the Trustee and each Agent shall be entitled to assume that the same are being dulyperformed. None of the Trustee or any Agent shall be liable to any Bondholder, the Issuer or anyother person for any action taken by the Trustee or such Agent in accordance with the instructionsof the Bondholders. The Trustee shall be entitled to rely on any direction, request or resolution ofBondholders given by Bondholders holding the requisite principal amount of Bonds outstanding orpassed at a meeting of Bondholders convened and held in accordance with the Trust Deed.

Neither the Trustee nor any of the Agents shall have any obligation to monitor compliance withthe provisions of the Trust Deed, the Agency Agreement or these Conditions or to monitor whetheran Event of Default or a Potential Event of Default or a Relevant Event has occurred, and shall notbe responsible or liable to the Issuer, the Holders or any other person for not doing so.

Each Bondholder shall be solely responsible for making and continuing to make its ownindependent appraisal and investigation into the financial condition, creditworthiness, condition,affairs, status and nature of the Issuer, and the Trustee shall not at any time have any responsibilityfor the same and each Bondholder shall not rely on the Trustee in respect thereof.

15. FURTHER ISSUES

The Issuer may from time to time without the consent of the Bondholders and in accordance withthe Trust Deed, create and issue further bonds having the same terms and conditions as the Bondsin all respects (or in all respects save for the issue date, the first payment of interest on them andthe timing for complying with the Registration Conditions, for completing the NDRC Post- IssueFiling, for making the Foreign Debt Registration and, if applicable, for filing of the Bondspursuant to the Cross Border Financing Circular) and so that the same shall be consolidated andform a single series with the outstanding Bonds. References in these Conditions to the Bondsinclude (unless the context requires otherwise) any further bonds issued pursuant to this Condition15. However, such further bonds may only be issued if (i) such issue will not result in any adversechange in the then credit rating of the Bonds, and (ii) such supplemental documents are executedand further opinions are obtained as the Trustee may require, all as further set out in the TrustDeed.

16. NOTICES

All notices to the Holders will be valid if (i) mailed to them by uninsured mail at their respectiveaddresses in the Register and (ii) published in a leading newspaper having general circulation inAsia. The Issuer shall also ensure that notices are duly published in a manner that complies withthe rules and regulations of any stock exchange or other relevant authority on which the Bonds arefor the time being listed. Any notice shall be deemed to have been given, on the date of suchpublication or, if published more than once, on the first date on which publication is made.

So long as the Bonds are represented by the Global Certificate and the Global Certificate is heldon behalf of Euroclear Bank SA/NV or Clearstream Banking S.A. or the Alternative ClearingSystem (as defined in the form of the Global Certificate), notices to the holders of the Bonds shall

72

be validly given by the delivery of the relevant notice to Euroclear Bank SA/NV or ClearstreamBanking S.A. or the Alternative Clearing System, for communication by it to entitledaccountholders in substitution for notification as required by the Conditions.

17. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

No person shall have any right to enforce any term or condition of the Bonds under the Contracts(Rights of Third Parties) Act 1999.

18. GOVERNING LAW AND JURISDICTION

(a) Governing Law

The Trust Deed, the Agency Agreement and the Bonds and any non-contractual obligationsarising out of or in connection with them are governed by, and shall be construed inaccordance with, English law.

(b) Jurisdiction

The courts of Hong Kong are to have exclusive jurisdiction to settle any disputes that mayarise out of or in connection with the Bonds, the Trust Deed and the Agency Agreement andaccordingly any legal action or proceedings arising out of or in connection with any Bonds,the Trust Deed and the Agency Agreement (‘‘Proceedings’’) may be brought in such courts.The Issuer has in the Trust Deed, irrevocably submitted to the exclusive jurisdiction of suchcourts and waived any objection to Proceedings in any such courts whether on the ground ofvenue or on the ground that the Proceedings have been brought in an inconvenient forum.

(c) Agent for Service of Process

The Issuer has irrevocably appointed in the Trust Deed an agent in Hong Kong to receiveservice of process in any Proceedings in Hong Kong.

(d) Waiver of Immunity

The Issuer has waived any right to claim sovereign or other immunity from jurisdiction orexecution and any similar defence, and has irrevocably consented to the giving of any reliefor the issue of any process, including, without limitation, the making, enforcement orexecution against any property whatsoever (irrespective of its use or intended use) or anyorder or judgment made or given in connection with any Proceedings.

73

SUMMARY OF PROVISIONS RELATING TO THE BONDS IN GLOBAL FORM

The Global Certificate contains provisions which apply to the Bonds while they are in global form,some of which modify the effect of the Terms and Conditions set out in this Offering Circular. Thefollowing is a summary of certain of those provisions. Terms defined in the Terms and Conditions setout in this Offering Circular have the meaning in the paragraphs below.

The Bonds will be represented by a Global Certificate which will be registered in the name of a nomineeof, and deposited with, a common depositary on behalf of Euroclear and Clearstream.

Under the Global Certificate, the Issuer, for value received, will promise to pay such principal, interestand premium (if any) on the Bonds to the holder of the Bonds on such date or dates as the same maybecome payable in accordance with the Terms and Conditions.

Owners of interests in the Bonds in respect of which the Global Certificate is issued will be entitled tohave title to the Bonds registered in their names and to receive individual definitive Certificates if eitherEuroclear or Clearstream or any other clearing system (an ‘‘Alternative Clearing System’’) is closed forbusiness for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) orannounces an intention permanently to cease business or does in fact do so.

Individual definitive Certificates will be issued in an aggregate principal amount equal to the principalamount of the Global Certificate. Such exchange will be effected in accordance with the provisions ofthe Trust Deed, the Agency Agreement and the regulations concerning the transfer and registration ofthe Bonds scheduled thereto and, in particular, shall be effected without charge to any holder of theBonds or the Trustee, but against such indemnity and/or security as the Registrar or the relevantTransfer Agent may require in respect of any tax or other duty of whatsoever nature which may belevied or imposed in connection with such exchange.

The Issuer will cause sufficient individual definitive Certificates to be executed and delivered to theRegistrar for completion, authentication and despatch to the relevant holders of the Bonds. A personwith an interest in the Bonds in respect of which the Global Certificate is issued must provide theRegistrar not less than 30 days’ notice at its specified office of such holder’s intention to effect suchexchange and a written order containing instructions and such other information as the Issuer and theRegistrar may require to complete, execute and deliver such individual definitive Certificates. Inaddition, the Global Certificate will contain provisions which modify the Terms and Conditions as theyapply to the Bonds evidenced by the Global Certificate. The following is a summary of certain of thoseprovisions:

PAYMENT

So long as the Bonds are represented by the Global Certificate, each payment will be made to the personshown as the holder in the Register at the close of business of the relevant clearing system on theClearing System Business Day before the due date for such payments, where ‘‘Clearing SystemBusiness Day’’ means a weekday (Monday to Friday, inclusive) except 25 December and 1 January.

NOTICES

So long as the Bonds are represented by the Global Certificate and the Global Certificate is held onbehalf of Euroclear or Clearstream or any Alternative Clearing System, notices to holders of the Bondsshall be given by delivery of the relevant notice to Euroclear or Clearstream or such AlternativeClearing System, for communication by it to accountholders entitled to an interest in the Bonds insubstitution for notification as required by the Terms and Conditions.

74

MEETINGS

For the purposes of any meeting of Bondholders, the holder of the Bonds represented by the GlobalCertificate shall (unless the Global Certificate represents only one Bond) be treated as two persons forthe purposes of any quorum requirements of a meeting of Bondholders and as being entitled to one votein respect of each U.S.$1,000 in principal amount of Bonds for which the Global Certificate is issued.

AUTHENTICATION

The Global Certificate shall not become valid for any purpose until authenticated by or on behalf of theRegistrar.

BONDHOLDER’S REDEMPTION

The Bondholder’s redemption option in Condition 6(c) of the Terms and Conditions may be exercised bythe holder of the Global Certificate giving notice to the Principal Paying Agent of the principal amountof Bonds in respect of which the option is exercised within the time limits specified in the Terms andConditions.

ISSUER’S REDEMPTION

The option of the Issuer provided for in Condition 6(b) of the Terms and Conditions shall be exercisedby the Issuer giving notice to the Bondholders within the time limits set out in and containing theinformation required by the Terms and Conditions.

TRANSFERS

Transfers of interests in the Bonds will be effected through the records of Euroclear and Clearstream (orany Alternative Clearing System) and their respective participants in accordance with the rules andprocedures of Euroclear and Clearstream (or any Alternative Clearing System) and their respective directand indirect participants.

CANCELLATION

Cancellation of any Bond by the Issuer following its redemption or purchase by the Issuer will beeffected by a reduction in the principal amount of the Bonds in the register of Bondholders.

TRUSTEE’S POWERS

In considering the interests of Bondholders while the Global Certificate is registered in the name of anominee for a clearing system, the Trustee may, to the extent it considers it appropriate to do so in thecircumstances, but without being obligated to do so, (a) have regard to any information as may havebeen made available to it by or on behalf of the relevant clearing system or its operator as to the identityof its accountholders (either individually or by way of category) with entitlements in respect of theBonds and (b) consider such interests on the basis that such accountholders were the holders of theBonds in respect of which the Global Certificate is issued.

75

USE OF PROCEEDS

The gross proceeds from the offering of the Bonds will be U.S.$400,000,000. Such proceeds, afterdeducting commissions to be charged by the Managers and other estimated expenses payable inconnection with the offering of the Bonds, will be used for project investment, replenishment of theGroup’s working capital and repayment of the Group’s offshore indebtedness.

76

CAPITALISATION AND INDEBTEDNESS

The following table sets forth the consolidated total indebtedness (both current and non-currentportions), total equity and total capitalisation of the Issuer as at 31 December 2020 (i) on an actual basisand (ii) on an adjusted basis to give effect to the Bonds to be issued. The summary consolidatedfinancial information below should be read in conjunction with the Issuer’s consolidated financialstatements and the notes to those statements included elsewhere in this Offering Circular.

As at 31 December 2020

Actual As adjusted

(CNY) (U.S.$)(1) (CNY) (U.S.$)(1)

Short-term indebtednessShort-term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,327,294,809.52 509,930,239.01 3,327,294,809.52 509,930,239.01Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,203,108,880.51 184,384,502.76 1,203,108,880.51 184,384,502.76Long-term loans due within 1 year . . . . . . . . . . . . . . . . . . . 528,523,605.17 80,999,786.23 528,523,605.17 80,999,786.23Bonds payable due within 1 year . . . . . . . . . . . . . . . . . . . . 4,422,631,029.37 677,797,858.91 4,422,631,029.37 677,797,858.91

Total short-term indebtedness(2) . . . . . . . . . . . . . . . . . . . . 9,481,558,324.57 1,453,112,386.91 9,481,558,324.57 1,453,112,386.91Long-term indebtednessLong-term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,787,203,691.26 1,959,724,703.64 12,787,203,691.26 1,959,724,703.64Bonds payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,990,002,473.66 2,603,831,796.73 16,990,002,473.66 2,603,831,796.73Bonds to be issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 2,610,000,000.00 400,000,000.00

Total long-term indebtedness(3) . . . . . . . . . . . . . . . . . . . . 29,777,206,164.92 4,563,556,500.37 32,387,206,164.92 4,963,556,500.37

Total indebtedness(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,258,764,489.49 6,016,668,887.28 41,868,764,489.49 6,416,668,887.28Total owner’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,149,743,761.60 7,379,271,074.57 48,149,743,761.60 7,379,271,074.57

Total capitalisation(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,408,508,251.09 13,395,939,961.85 90,018,508,251.09 13,795,939,961.85

Notes:

(1) For convenience only, all translations from Renminbi into U.S. dollars are made at the rate of CNY6.5250 to U.S.$1.00,based on the noon buying rate as set forth in the H.10 statistical release of the Federal Reserve Bank of New York on 31December 2020.

(2) Total short-term indebtedness equals the sum of short-term loan, notes payable, long-term loans due within 1 year andbonds payable due within 1 year.

(3) Total long-term indebtedness equals the sum of long-term loan, bonds payable and bonds to be issued.

(4) Total indebtedness equals the sum of short-term indebtedness and long-term indebtedness.

(5) Total capitalisation equals the sum of total indebtedness and total owner’s equity.

Except as otherwise disclosed in this Offering Circular, there has been no material adverse change in theconsolidated capitalisation and indebtedness of the Issuer since 31 December 2020.

77

DESCRIPTION OF THE GROUP

OVERVIEW

Established in September 2016, the Issuer is a state-owned company wholly-owned by the WeifangSASAC, and is one of the primary entities undertaking the development and construction of urbaninfrastructure in Weifang City. The Group plays a strategic and crucial role in the municipaldevelopment and continued urbanisation of Weifang City. It is the largest comprehensive state-ownedasset management and operating entity in Weifang City and is responsible for Weifang City’s majorinfrastructure and urban-related projects, focusing in particular on transfer of land, landscaping,construction of major infrastructure facilities, inter-regional key water conservatory projects at themunicipal level and the development of tourism, leisure and cultural recreation industries.


As at 31 December 2020, the Issuer had a paid-in capital of CNY5 billion and the Group had total assetsof approximately CNY106.73 billion. For the years ended 31 December 2018, 2019 and 2020, the Issuerreported total operating income of approximately CNY1.74 billion, CNY3.64 billion and CNY9.52billion, respectively, and net profit of approximately CNY538.11 million, CNY402.11 million andCNY220.69 million, respectively.


The Group is primarily engaged in the transfer of self-owned land purchased by the Group via bidinvitation, auction or listing for its transfer of self-owned land business segment. The Group conducts itstransfer of self-owned land business primarily through itself and two of its subsidiaries, namely,Weifang Dongxing Construction & Development Co., Ltd.（濰坊東興建設發展有限公司）(‘‘WeifangDongxing Construction’’) and Weifang Cultural Tourism Development Group Co., Ltd.（濰坊市文化旅

遊發展集團有限公司）(‘‘Weifang Cultural Tourism’’). As at 31 March 2021, approximately 50.16 percent., 48.64 per cent. and 0.12 per cent. of the equity interest in Weifang Dongxing Construction wereheld by the Issuer, Weifang Cultural Tourism and Weifang Luwei Industrial Co., Ltd.（濰坊魯偉實業有

限公司）(‘‘Weifang Luwei’’), respectively. As at 31 March 2021, the Issuer held approximately 51.28per cent. and 33.32 per cent. of the equity interest in Weifang Cultural Tourism and Weifang Luwei,respectively.

As at 31 March 2021, the Group owned a total of 9,191 mu（畝）of land, all of which is located in theurban areas in Weifang City. The market value of the land bank owned by the Group has increased inrecent years along with the advancement of infrastructure and facilities and continued economicdevelopment in Weifang City.



The Group commenced its landscaping business in 2019 upon completion of the Issuer’s purchases ofcertain equity interest in Meichen Ecology. Meichen Ecology is a company listed on ChiNext of theShenzhen Stock Exchange (stock code: 300237) since 2011, and is primarily engaged in the manufactureand sale of auto parts and landscaping businesses. As at 31 March 2021, the Issuer held approximately21.46 per cent. of the equity interest in Meichen Ecology.

78

The Group conducts its landscaping business mainly through a wholly-owned subsidiary of MeichenEcology, namely, Hangzhou Saishi Garden Group Co., Ltd.（杭州賽石園林集團有限公司）(‘‘SaishiGarden’’). The major services and products provided by Saishi Garden include garden construction, saleof landscaping seedlings and project design. It mainly provides integrated greening and landscapingservices for municipal and real estate customers.







The Group commenced its trading business in 2020. The Group conducts its trading business mainlythrough its subsidiary, namely, Weifang Urban Investment Junhe International Trade Co., Ltd.（濰坊市

城投均和國際貿易有限公司）(‘‘Weifang Urban Investment’’). In April 2020, the Issuer and ShanghaiJunhe Group International Trading Co., Ltd.（上海均和集團國際貿易有限公司）(‘‘Shanghai Junhe’’)entered into a strategic cooperation agreement to establish Weifang Urban Investment with a registeredcapital of CNY2 billion in June 2020. As at 31 March 2021, the Issuer held approximately 51 per cent.of the equity interest in Weifang Urban Investment. Weifang Urban Investment is primarily engaged inthe sale of rubber products, chemical products (excluding licensed chemical products) and metalmaterials. The Group’s main trading product is electrolytic copper, which is a type of non-ferrous metal.The Group’s products are primarily sold domestically in South China.



The Group’s water conservatory construction business is conducted by its subsidiary, namely, ShandongHaobo Water Conservancy Construction Co., Ltd.（山東浩博水利建設有限公司）(‘‘Haobo Water’’). Asat 31 March 2021, the Issuer held approximately 63.83 per cent. of the equity interest in Haobo Water.The Group is responsible for the construction of water conservatory facilities in all districts and countiesof Weifang City, including river channels reconstruction, barrage dam construction and reinforcementand other water conservatory-related projects.

79



The Group commenced its water and heat supply business in 2016. The Group conducts its water supplybusiness primarily through Haobo Water. The Group primarily supplies water to domestic customers inthe southern parts of Weifang City.

The Group conducts its heat supply business primarily through its subsidiary, namely, Weifang MinshengThermal Power Holding Co., Ltd.（濰坊民生熱電控股有限公司）(‘‘Weifang Thermal Power’’). Asat 31 March 2021, Weifang Thermal Power was a wholly-owned subsidiary of Weifang DongxingConstruction. The operating income derived from the Group’s heat supply business is primarily generatedfrom charges received from heat supply companies for the use of the Group’s heating pipeline networks.

For the years ended 31 December 2018, 2019 and 2020, the operating income derived from the Group’swater and heat supply business segment amounted to approximately CNY234.17 million, CNY296.67million and CNY424.47 million, respectively, representing approximately 13.48 per cent., 8.15 per cent.and 4.46 per cent. of the Group’s total operating income, respectively.


Since 2016, the Issuer has actively expanded its sources for generating revenue from self-operatedassets. For example, the Group leased some of its properties, including the Lutai Convention andExhibition Centre（魯台會展中心）, LED lights and pipe networks (all of which are owned by theIssuer) to the Weifang Government to generate stable operating income from collecting royalties from itsproperty leasing business.



The Group commenced its financial services business in 2016. The Group conducts its financial servicesbusiness mainly through its wholly-owned subsidiary, namely, Weifang Dongxing Financial HoldingsCo., Ltd.（濰坊市東興金融控股有限公司）(‘‘Weifang Financial Holdings’’) and its subsidiary, namely,Weifang Urbanization Construction Investment Management Co., Ltd.（濰坊市城鎮化建設投資管理有限

公司）(‘‘Weifang Investment Management’’). As at 31 March 2021, Weifang Financial Holdings heldapproximately 40 per cent. of the equity interest in Weifang Investment Management.



The Group is engaged in the tourism industry. The Group owns the Bailanghe Wetland Park（白浪河濕

地公園）and Beichen Oasis. The Group’s tourism business is mainly conducted by the Issuer’s wholly-owned subsidiary, namely, Weifang New Fuhua Hotel Management Co., Ltd.（濰坊新富華大酒店管理有

限公司）(‘‘Weifang New Fuhua Hotel Management’’) and its subsidiary, namely, Weifang New Fuhua

80

Amusement Park Management Co., Ltd.（濰坊新富華游樂園管理有限公司）(‘‘Weifang New FuhuaAmusement Park Management’’). As at 31 March 2021, Weifang New Fuhua Amusement ParkManagement was a wholly-owned subsidiary of Weifang New Fuhua Hotel Management.

For the years ended 31 December 2018 and 2020, the operating income derived from the Group’stourism business segment amounted to approximately CNY19.72 million and CNY11.57 million,respectively, representing approximately 1.13 per cent. and 0.12 per cent. of the Group’s total operatingincome, respectively. For the year ended 31 December 2019, the Group did not record any operatingincome from its tourism business segment. The decrease in operating income from its tourism businesssegment was primarily due to the renovation of The Farrington Hotel（濰坊富華大酒店）and FuhuaAmusement Park（濰坊富華遊樂園）. Since 2018, part of the operating income from the Group’s tourismbusiness segment has been allocated to the operating income from the Group’s other business segment.




HISTORY AND DEVELOPMENT

The predecessor of the Issuer, Weifang City State-owned Assets Investment Company（濰坊市國有資產

經營投資公司）(‘‘WCSAIC’’), was established in July 1994 by the Weifang Finance Bureau. Pursuant tocertain approvals and notices issued by the relevant government authorities in 2015 and 2016, the urbanconstruction and investment business of WCSAIC was spun off and, following corporate reorganisationand restructuring, the Issuer was established in September 2016, with state-owned assets ofapproximately CNY18.96 billion injected into the Issuer, of which CNY5 billion was used as paid-incapital and the remaining as capital reserve.

In October 2016, the Issuer changed its name to Weifang Urban Construction and DevelopmentInvestment Group Co., Ltd.（濰坊市城市建設發展投資集團有限公司）. As at 31 December 2020, theIssuer’s registered share capital was CNY5 billion.

The table below sets forth selected key milestones in the Group’s development history:

Time Milestone

1994 . . . . . . . . . . . . . . . In July 1994, the predecessor of the Issuer, WCSAIC, was established.

2015 to 2016 . . . . . . . . . Following corporate reorganisation and restructuring, the Issuer wasestablished in September 2016, with state-owned assets of approximatelyCNY18.96 billion injected into the Issuer, of which CNY5 billion wasused as paid-in capital and the remaining as capital reserve. The soleshareholder of the Issuer was Weifang SASAC.

2016 . . . . . . . . . . . . . . . In October 2016, the Issuer changed its name to Weifang UrbanConstruction and Development Investment Group Co., Ltd.

2017 . . . . . . . . . . . . . . . The star-reviewed renovation of The Farrington Hotel was completedsuccessfully.

81

Time Milestone

2018 . . . . . . . . . . . . . . . The Issuer was assigned an investment grade rating of ‘‘BBB-’’ by Fitch.It issued U.S.$250 million offshore bonds due 2021 and CNY2 billiononshore corporate bonds due 2023.

In August 2018, the Issuer purchased approximately 13.58 per cent. of theequity interest in Bank of Weifang at the consideration of approximatelyCNY2.70 billion and became the largest shareholder of Bank of Weifang.Bank of Weifang is an urban commercial bank registered in Weifang,Shandong Province.

As at 31 March 2021, the Issuer held approximately 13.58 per cent. of theequity interest in Bank of Weifang.

2019 . . . . . . . . . . . . . . . Weifang railway station south plaza Cangnan Street Main Road（濰坊市

火車站南廣場片區倉南街主路）line was fully commissioned.

In July 2019, the Issuer completed its purchases of approximately 21.46per cent. in total of the equity interest in Meichen Ecology.

The Issuer issued CNY1.5 billion corporate bonds due 2024, CNY1.5billion corporate bonds due 2024 and CNY500 million corporate bondsdue 2022.

2020 . . . . . . . . . . . . . . . The Issuer was assigned a rating of ‘‘AAA’’ with Stable Outlook byDagong Global Credit Rating（大公國際資信評估有限公司）.

The Weifang Connecting Line of the Weifang-Rizhao Expressway（濰日

高速濰坊連接線）, a CNY2.1 billion investment project of the Group incooperation with Shandong Hi-Speed Group（山東高速集團）, wascompleted and commissioned.

The Issuer issued CNY500 million, CNY1 billion and CNY1.5 billioncorporate bonds due 2025 and CNY1 billion super & short-termcommercial paper (‘‘SCP’’) with a tenor of 270 days.

In April 2020, the Issuer and Shanghai Junhe entered into a strategiccooperation agreement to establish Weifang Urban Investment with aregistered capital of CNY2 billion.

As at 31 December 2020, the Issuer’s paid-in capital was CNY5 billion.

2021 . . . . . . . . . . . . . . . The Group entered into an agreement with the Fangzi District government（坊子區政府）, Shandong Weifang Department Store Group（山東濰坊百

貨集團）and Weifang Taihe Premises Businesses Co., Ltd.（濰坊泰和置業

有限公司）in relation to the construction of Gude Dayi City（谷德大藝

城）, a high-end commercial complex.

The Issuer was assigned an investment grade rating of ‘‘Baa3’’ withStable Outlook by Moody’s and became the first prefecture-level citystate-owned enterprise with an investment grade rating from Moody’s andthe only prefecture-level city state-owned enterprise with investmentgrade ratings from both Moody’s and Fitch.

82

RECENT DEVELOPMENTS

Unaudited and Unreviewed Consolidated Financial Information of the Group as at and for the SixMonths Ended 30 June 2021

As at the date of this Offering Circular, the Group has prepared the June 2021 Financial Information.For the six months ended 30 June 2021, the Group recorded decreases in, among others, other income,investment income and other comprehensive income after tax and increases in, among others, totaloperating costs, operating costs, taxes and surcharges, selling expenses, R&D expenses, financialexpenses and income tax expense when compared to the corresponding period in 2020.

As at 30 June 2021, the Group recorded decreases in, among others, transactional financial assets,accounts receivable, receivables financing, contract assets, non-current assets due within one year, long-term receivables, investment real estate and public welfare biological assets and increases in, amongothers, short-term loan, accounts payable, advance from customers, contract liabilities, non-currentliabilities due within one year, long-term loan, bonds payable, long-term payables, estimated liabilities,deferred income, deferred income tax liabilities, other non-current liabilities, total non-current liabilitiesand total liabilities when compared to their respective balances as at 31 December 2020.

Save for the financial information disclosed in the preceding paragraphs, the June 2021 FinancialInformation is not included in and does not form a part of this Offering Circular. The June 2021Financial Information has not been audited or reviewed by a certified public accountant, and should notbe relied upon by investors to provide the same quality of information associated with information thathas been subject to an audit or review. None of the Managers, the Trustee or the Agents or any of theirrespective directors, officers, employees, affiliates, advisers, representatives or agents makes anyrepresentation or warranty, express or implied, regarding the accuracy or sufficiency of the June 2021Financial Information for an assessment of, and potential investors must exercise caution when usingsuch data to evaluate, the Group’s financial condition and results of operations. In addition, the June2021 Financial Information should not be taken as an indication of the expected financial condition orresults of operations of the Issuer or the Group for the full financial year ending 31 December 2021.

Entrustment of Voting Rights in Weifang Yaxing Chemical Co., Ltd.

As at 31 March 2021, the Issuer held approximately 12.67 per cent. of the equity interest andapproximately 21.20 per cent. of the voting rights in Weifang Yaxing Chemical Co., Ltd.（濰坊亞星化

學股份有限公司）(‘‘Yaxing Chemical’’).

Pursuant to an entrustment agreement entered into between the Issuer and Weifang Yaxing Group Co.,Ltd.（濰坊亞星集團有限公司）(‘‘Yaxing Group’’) in January 2021, the Issuer was entrusted with thevoting rights held by Yaxing Group in respect of approximately 8.53 per cent. of the equity interest inYaxing Chemical and became the controlling shareholder of Yaxing Chemical.

Yaxing Chemical is a company listed on the Shanghai Stock Exchange (stock code: 600319) and isprimarily engaged in the manufacture and marketing of basic chemicals.

The Outbreak of COVID-19

The recent outbreak of COVID-19 has caused substantial disruptions in the PRC and internationaleconomies and markets as well as additional uncertainties in the Group’s operating environment. TheGroup has been closely monitoring the impact of the outbreak and continued escalation of COVID-19 onthe Group’s businesses, and will keep its contingency measures and risk management under review asthe situation evolves. Please see ‘‘Risk Factors – Risks Relating to the Group’s Business – The extent towhich the COVID-19 pandemic will impact the Group’s business, financial condition, results ofoperations and prospects is uncertain and cannot be predicted.’’ and ‘‘Risk Factors – Risks Relating tothe Group’s Business – The Group’s operations are subject to force majeure events, natural disastersand outbreaks of contagious diseases.’’ for further information.

83

CORPORATE STRUCTURE

The following chart sets forth a simplified corporate structure of the Group, which shows the Issuer, itsshareholder and selected subsidiaries and affiliates as at 31 March 2021:

40%

100%

100%

100%

100%

48.64%

100%

63.83% 51.28% 50.16%(1) 51% 21.46%55.77%(2)

100%

Weifang State-owned Assets Supervision and

Administration Commission

（濰坊市國有資產監督管理委員會）

Weifang Urban Construction and

Development Investment Group Co., Ltd.

（濰坊市城市建設發展投資集團有限公司）(the Issuer)

Weifan

g U

rban

ization C

onstru

ction

Investm

ent M

anag

emen

t Co., L

td.

（濰坊市城鎮化建設投資管理有限公司）

Weifan

g D

ongxin

g F

inan

cial Hold

ings C

o., L

td.

（濰坊市東興金融控股有限公司）

Weifan

g N

ew F

uhua A

musem

ent

Park

Man

agem

ent C

o., L

td.

（濰坊新富華遊樂園管理有限公司）

Weifan

g N

ew F

uhua H

otel M

anag

emen

t Co., L

td.

（濰坊新富華大酒店管理有限公司）

Weifan

g M

insh

eng T

herm

al Pow

er

Hold

ing C

o., L

td.

（濰坊民生熱電控股有限公司）

Han

gzh

ou S

aishi G

arden

Gro

up C

o., L

td.

（杭州賽石園林集團有限公司）

Shan

dong H

aobo W

ater Conserv

ancy

Constru

ction C

o., L

td.

（山東浩博水利建設有限公司）

Weifan

g C

ultu

ral & T

ourism

Dev

elopm

ent

Gro

up C

o., L

td.

（濰坊市文化旅遊發展集團有限公司）

Weifan

g U

rban

Investm

ent Ju

nhe

Intern

ational T

rade C

o., L

td.

（濰坊市城投均和國際貿易有限公司）

Shan

dong M

eichen

Eco

logy &

Env

ironm

ent C

o., L

td.

（山東美晨生態環境股份有限公司）

Weifan

g H

igh-en

d In

dustry

Investm

ent C

o., L

td.

（濰坊高端產業投資有限公司）

Weifan

g D

ongxin

g

Constru

ction &

Dev

elopm

ent C

o., L

td.

（濰坊東興建設發展有限公司）

Notes:

(1) As at 31 March 2021, approximately 50.16 per cent., 48.64 per cent. and 0.12 per cent. of the equity interest in WeifangDongxing Construction was held by the Issuer, Weifang Cultural Tourism and Weifang Luwei, respectively. As at 31 March2021, the Issuer held approximately 33.32 per cent. of the equity interest in Weifang Luwei.

(2) As at 31 March 2021, 109,130,807, and 467,770,346 shares of Meichen Ecology held by the Issuer were pledged to Bank ofCommunications Co., Ltd. Weifang Branch and Weifang Kuiwen Branch of Agricultural Bank of China Limited, respectively.

84

WEIFANG

As substantially all of the Group’s business operations and investments are located in Weifang City, theGroup’s business, operations and prospects are to a significant degree affected by the development andeconomic conditions in Weifang.

Overview

Weifang is a prefecture-level city located in central Shandong Province which comprises four districts,two counties and under its jurisdiction six county-level cities. It covers an area of approximately 15,859square kilometres. Its permanent residents（常住人口）reached approximately 9.39 million by the end of2020.

Geographical location

Weifang borders Qingdao to the east and Zibo to the west, and is an important transportation hubconnecting the coastal and inland areas in Shandong Province. A number of expressways, including theJinan-Qingdao Expressway（濟清高速公路）and five railway lines pass through Weifang. Weifang Portis a Class One open port（一類開放口岸）, while Weifang Airport is one of the four major airmailsorting centres in the PRC. In addition, Weifang is also located in Shandong Peninsula Blue EconomicZone（山東半島藍色經濟區）and Yellow River Delta High-efficiency Ecological Economic Zone（黃河

三角洲高效生態經濟區）. There are three national development zones in Weifang, namely, WeifangBinhai Economic and Technological Development Zone（濰坊濱海經濟技術開發區）, Weifang NationalHi-Tech Industrial Development Zone（濰坊國家高新技術產業開發區）and Weifang ComprehensiveBonded Zone（濰坊綜合保稅區）. Under the 14th Five-Year Plan of the PRC（國家十四五規劃）,Weifang is designated to be a national integrated transportation hub.

Economy

Leveraging its geographical advantages and coupled with the rapid development and growth in WeifangCity, Weifang City’s economy has strengthened in recent years supported by the six pillar industries,namely, marine chemicals, power machinery, food processing, textile and apparel, electronic informationand paper and packaging. In 2018, 2019 and 2020, Weifang City’s gross domestic product reachedapproximately CNY549.56 billion, CNY568.85 billion and CNY587.22 billion, respectively. WeifangCity’s gross domestic product in 2020 ranked fourth among the 16 prefecture-level cities in ShandongProvince. Based on the number of permanent residents by the end of 2020, Weifang City’s GDP percapita reached approximately CNY62,537 in 2020.

COMPETITIVE STRENGTHS

The Issuer believes that the Group has the following competitive strengths:

Strategic role in the municipal development of Weifang City.

The Group plays a strategic role in the municipal development and urbanisation of Weifang City,particularly in areas of construction of infrastructure and economic and social development.

As one of the primary entities undertaking the development and construction of urban infrastructure inWeifang City and backed with strong support (but not including credit support) from the Weifang CityCouncil and Weifang Government, the Group plays a strategic and crucial role in the investment,financing and construction of major infrastructure projects in Weifang City and has a leading position inindustries such as municipal construction, transportation and tourism. In recent years, the Group hasbeen advancing key urban infrastructure construction projects through multiple financing channels withthe aim to enhance the functionality and living environment of Weifang City. For example, the Groupcompleted two urban infrastructure construction projects in 2016, including Phase I of the WeifangJunkou District reconstruction project（濰坊軍埠口片區改造一期工程）and Phase I of the Anshun NewDistrict renewal project（濰坊市安順新區改造一期工程）, both of which involved urban renewal and

85

construction of roads, public green space, municipal utility and infrastructure facilities. Other projectsinclude river improvement, transportation infrastructure, complementary facilities (such as water heatingpipelines), water conservatory construction, exhibition centre, landscaping and ecology engineering andconstruction of key city roads. Currently, the Group has invested approximately CNY120 billion ininfrastructure construction projects in Weifang City, including 21 key projects, such as Baotong StreetHighway (寶通街快速路）, Weifang-Yantai High Speed Railway（濰煙高鐵）, Elderly University（老年

大學）, Weifang City Central Business District（濰坊市中央商務區）, Weifang City Cultural and ArtCentre（濰坊市文化藝術中心）, Cross-Strait Exchange Centre（兩岸交流中心）, Lutai Convention andExhibition Centre, Bailanghe Wetland Park and The Farrington Hotel. In addition, as at 31 March 2021,the Group’s major urban infrastructure construction projects under construction included, but were notlimited to, the Jinan-Qingdao Expressway middle lane project（濟清高速公路中線項目）, the Weifangrailway station south plaza reconstruction project（濰坊市火車站南廣場片區改造項目）and the highspeed rail new area project（高鐵新片區項目）.

Leveraging on the Group’s state-owned background and its close relationship with the WeifangGovernment, the Issuer believes that it will be able to continue to play a strategic role in the municipaldevelopment and urbanisation of Weifang City, and further expand its business operations in theGroup’s various business segments in Weifang City.

Strong support from the Weifang Government.

The Issuer is a state-owned company wholly-owned by the Weifang SASAC. It plays a strategic andcrucial role in the municipal development and continued urbanisation of Weifang City. In light of theGroup’s state-owned background and the strategic role it plays in the municipal development of WeifangCity, the Group has received, and expects to continue to receive, various kinds of financial and policysupport, but not including credit support, from the Weifang City Council and Weifang Government forthe development and operations of its business. The strong government support can be illustrated by thefollowing examples:

• The Weifang Government has injected state-owned assets and registered capital into the Issuer. Forexample, state-owned assets of approximately CNY18.96 billion were injected into the Issuer in2016.

• The Group has received significant support from the Weifang Government in the form of fiscalsubsidies and other related forms of income to support the Group’s operations. For the years ended31 December 2018, 2019 and 2020, the fiscal subsidies received by the Group from the WeifangGovernment amounted to approximately CNY320.48 million, CNY474.16 million and CNY545.90million, respectively, which included fees for the use of urban public facilities, subsidies for heatsupply season and special subsidies for the improvement project of the three major rivers inWeifang City, namely, Bailanghe（白浪河）, Zhangmianhe（張面河）and Yuhe（虞河）.

• The Weifang Government has granted the Group the right to conduct primary land development,land management rights, asset management rights and the important functions of construction ofinfrastructure facilities and urban development in Weifang City.

The Weifang Government’s strong support (but not including credit support) to the Group, including tothe Group’s urban infrastructure, landscaping, land consolidation and development businesses, enhancedthe Group’s operational capability, ensured a flow of stable income to the Group and improved thesustainability of the Group’s main businesses. With such continued support from the WeifangGovernment, the Issuer believes that the Group will be able to continue to further expand its businessoperations to consolidate its existing position in Weifang City. However, the Weifang Government hasno obligation to repay any amount under the Bonds. Please see ‘‘Risk Factors – Risks relating to theGroup’s Business – The PRC government (including the Weifang Government, the Weifang SASAC andother governmental authorities and state-owned entities) has no obligation to repay any amount underthe Bonds, the Trust Deed or the Agency Agreement’’ for further information.

86

Land resources advantages.

In light of the rapid economic development of, and the acceleration of urbanisation in, Weifang City, theGroup continues to increase its land resources to develop its transfer of self-owned land business. As thevalue attached to land for construction is directly linked to the level of economic development, the paceof urbanisation and the size of the city in which the land is located, the Group has benefited from, andthe Issuer believes that the Group will continue to benefit from, the continued growth and expansion ofWeifang City’s economy. As at 31 March 2021, the Group owned a total of approximately 9,191 mu ofland, all of which is located in the urban areas in Weifang City, with an aggregate book value ofapproximately CNY8.55 billion.

The Issuer believes that the Group will continue to leverage on its advantage of abundant land reservesand continue to expand the scale of operations of the Group’s transfer of self-owned land businesssegment and enhance the Group’s profitability in the future.

Strong financing capability.

The Group maintains good and long-term relationships with a number of banks and has access todifferent sources of funding to support its business development. The Group proactively diversifies itsfinancing channels. With a relatively low leverage ratio, the debt-to-asset ratio of the Group was 54.9per cent. as at 31 December 2020, which is lower than the industry average. A number of commercialbanks, such as Bank of Communications, Bank of Beijing, Industrial and Commercial Bank of China,Industrial Bank, China CITIC Bank, Bank of Weifang, China Bohai Bank, Agricultural Bank of China,China Everbright Bank, China Minsheng Bank, China Merchants Bank and China Guangfa Bank, haveprovided banking facilities to the Group to support its various funding needs. As at 31 March 2021, theGroup had aggregate banking facilities of approximately CNY42.70 billion, of which approximatelyCNY17.75 billion was unused. In addition, the Group diversifies its source of funding through theissuance of various debt securities. The Group extensively explores different financing channels,including SCP, medium-term notes, corporate bonds, enterprise bonds, offshore bonds and privateplacement notes. As at 31 March 2021, the Group had an outstanding balance of bonds issued in thePRC of approximately CNY20 billion. The Group intends to use innovative financing tools such asstructured finance and special industrial investment funds to further revitalise existing assets.

The Issuer believes that the Group is in a robust liquidity position with access to different fundingsources. The Group also actively manages its cash flow and capital commitments to ensure that it hassufficient funds to meet its existing and future cash flow requirements. The Group’s ability to accessdiversified sources of funding and its strong financing capability have enabled it to fulfil the capitalneeds of its businesses and capitalise on various business opportunities.

Prudent financial structure.

The Group puts great emphasis on maintaining a prudent financial structure, which the Issuer believes isthe key to sustainable business development and maximising returns on the Group’s investments. TheGroup has adopted prudent financial management policies to achieve greater financial efficiency. Forexample, the Group has maintained an adequate level of cash balance and current assets to fulfil itsliquidity needs and has made investments which are in line with the Group’s business strategies. As at31 December 2020, the Group held cash and cash equivalents of approximately CNY7.51 billion, whilethe Group’s current assets were approximately CNY36.29 billion. Also, the Group’s current ratio, whichis defined as current assets over current liabilities, was maintained at a reasonable level. As at 31December 2020, the Group’s current ratio was approximately 1.57. With respect to its investmentmanagement, the Group has implemented effective control measures from the commencement to thecompletion of its projects, which enable it to control operational costs to improve its results ofoperations.

87

Comprehensive internal control and risk management systems.

The Group has established a comprehensive internal control system and developed a set of internalmanagement guidelines and procedures to regulate its internal business operations. The Group’s internalcontrol system includes a decision-making system for the Group’s leadership team, a financialmanagement system, a financing management system, an information disclosure management system,related party transaction management measures, human resources management measures and anemergency management system. Further, as a state-owned company, the Issuer is subject to strictsupervision and regular performance evaluations by the PRC government to ensure the propermanagement and operation of its business. The Issuer’s senior management and the government havediscussions regarding the key investment projects from time to time, and essential appraisal proceduresare conducted before investment decisions are taken. In addition, the Group’s risk managementcommittee has developed a set of guidelines and procedures which, among other things, require theIssuer and its subsidiaries to conduct comprehensive examinations regularly to ensure their operationsare in compliance with applicable laws and internal risk control mechanisms. The Issuer believes thatthe Group’s comprehensive corporate governance system ensures an efficient management of the Group’sbusiness operations and allows it to promptly identify, deal with and mitigate various risks emergingfrom its operations.

Experienced management team with support from a dedicated team of staff.

The Group has an experienced management team with extensive knowledge in the industries in whichthe Group operates, in particular in the area of construction and operation of urban infrastructureinvestment. The Issuer believes that the team’s industry knowledge and technical expertise enable theGroup to make prudent business decisions so as to strengthen its operations in the relevant sectors inWeifang City. Please see ‘‘Directors, Supervisors and Senior Management’’ for further information onthe Group’s senior management team.

The Group’s experienced management team is also supported by a dedicated team of staff with extensivetechnical and industry knowledge. As at 31 March 2021, the Group had a total of approximately 543employees, approximately 56.35 per cent. of whom each holds an undergraduate degree or above.

The Issuer believes in the benefits of improving the skills and knowledge of its management team andemployees, and regularly conducts both in-house and external management and professional trainingprogrammes.

BUSINESS STRATEGIES

The Group’s objective is to strengthen its position in the various industries in which the Group operatesand further expand its business operations in Weifang City. The Group intends to implement thefollowing strategies to achieve this objective:

Continue to fulfil its role as a leading player in the various industries in which the Group operates inWeifang City.

In relation to the Group’s transfer of self-owned land business, leveraging the Group’s abundant landreserve advantage and strong support, but not including credit support, from the Weifang Government,the Group intends to continue to increase its land reserves and expand its transfer of self-owned landbusiness in Weifang City, particularly through authorised development or joint development of land. TheIssuer believes that with the increasing demand for land due to urbanisation and social and economicdevelopment in Weifang City, the Group’s abundant land reserves will be able to provide attractivereturn to the Group’s transfer of self-owned land business segment. As at 31 March 2021, the Group hadtotal land reserves of approximately 9,191 mu, all of which are located in the urban areas in WeifangCity. The Issuer believes that, with the continued development in and urbanisation of and the rapid

88

economic growth in Weifang City, the demand for land and infrastructure construction will continue toincrease and the Group is well-positioned to capture any opportunities which may arise and capitalisethis growth with its abundant land reserves.

The Group has been a leading player in the development and construction of urban infrastructure inWeifang City. The Group is the largest comprehensive state-owned asset management and operatingentity in Weifang City and is responsible for Weifang City’s major infrastructure and urban-relatedprojects. The Group (including the predecessor of the Issuer, WCSAIC) had completed more than 30 keyurban infrastructure construction projects and as at 31 March 2021, approximately five key urbaninfrastructure construction projects were under construction. Being one of the primary entitiesundertaking the development and construction of urban infrastructure in Weifang City and leveragingthe Group’s extensive industry experience and track record in the development and construction of urbaninfrastructure, the Group will continue to actively seek opportunities to further develop its urbaninfrastructure construction and landscaping business segments in Weifang City and strengthen its leadingposition in the industry.

Continue to expand its existing business operations and invest in new businesses.

The Group plans to increase investment in its existing businesses and utilise its abundant resources andstrong government support, but not including credit support, in Weifang City to strengthen its businessoperations in the various industries in which it operates to increase its operating income. For example,the Group plans to continue to leverage the continued urbanisation and rapid economic growth ofWeifang City to expand its urban infrastructure construction and landscaping business segments.

The Group is also actively expanding its sources of revenue. In 2018, the Issuer purchasedapproximately 13.58 per cent. of the equity interest in Bank of Weifang, an urban commercial bankregistered in Weifang, Shandong Province. In 2019, the Group commenced its landscaping and autoparts businesses upon completion of the Issuer’s purchases of certain equity interest in MeichenEcology. Meichen Ecology is a company listed on ChiNext of the Shenzhen Stock Exchange (stockcode: 300237) since 2011 and is primarily engaged in the manufacture and sale of auto parts andlandscaping businesses. For the years ended 31 December 2019 and 2020, the operating income derivedfrom the Group’s landscaping business segment amounted to approximately CNY1,032.03 million andCNY1,742.93 million, respectively, representing approximately 28.34 per cent. and 18.30 per cent. ofthe Group’s total operating income, respectively, while the operating income derived from the Group’sauto parts business segment amounted to approximately CNY478.30 million and CNY1,279.01 million,respectively, representing approximately 13.13 per cent. and 13.43 per cent. of the Group’s totaloperating income, respectively. In 2020, the Group commenced its trading business upon theestablishment of Weifang Urban Investment. For the year ended 31 December 2020, the operatingincome derived from the Group’s trading business segment amounted to approximately CNY5,032.21million, representing approximately 52.85 per cent. of the Group’s total operating income. Goingforward, the Group will also invest in other new businesses with development potential to furtherdiversify its business portfolio and create new sources of operating income, in particular those thatwould create synergy with the Group’s existing businesses. It will continue to invest in areas that are inline with the Group’s business strategies to strengthen its profitability. The Issuer believes thatdiversified sources of revenue will contribute to a steady growth of the Group’s operating income.

Strengthen management structure and internal control system.

The Group will continue to improve and streamline its management structure and internal control systemso as to further increase its capability in terms of safety and quality control. In addition, the Groupconsiders effective project management to be critical to enhancing its overall operational efficiency. TheGroup will allocate more resources for the research and development of construction methods, newtechnologies and project and operation management methods, while gradually implementing acentralised management system over its fixed assets, such as key technical equipment.

89

Adhere to prudent financial policy with stringent risk control.

The Issuer believes that a prudent financial management system can reduce operational and financialrisks and help achieve long-term sustainable growth.

The Group has established a standardised capital management mechanism to monitor capital, capitalefficiency and capital risk prevention. For financial management, the Group focuses on financial riskcontrol, value creation, implementation of budget management and establishment of an informationplatform in order to encourage communications and interactions between business operations, contributeto the sustainable, healthy and rapid development of the Group and provide financial stability. Forinterest rate risks, the Group will adjust its composition of onshore and offshore debts as well as itsdirect and indirect financing structure in accordance with its credit policies and market changes. TheGroup has developed a set of prudent liquidity management indicators to control its liquidity risks andwill maintain its liquidity ratio, accounts receivable turnover ratio, inventory turnover ratio and otherrelevant liquidity ratios at a reasonable level. It will also maintain a sufficient amount of bankingfacilities to support the Group’s business operations. The Group strives to prudently manage itsfinancials while fulfilling investment and development needs to drive its profitability.

Explore new financing channels.

The Group has traditionally funded its business operation and working capital through bank loans andissuance of debt securities in the domestic market. The Group intends to explore and employ newfinancing channels, such as issuing bonds in international capital markets. In addition, the Group seeksto build and reinforce cooperative relationships with financial institutions to secure funding on morefavourable terms to better support the Group’s financing needs for its construction projects and furtherdevelopment and maintain a reasonable and balanced debt structure.

Continue to build a professional management team.

The Issuer believes that the Group’s experienced management team has been a key factor in contributingto its growth and development, in particular, in achieving its market position in the various industries inwhich the Group operates in Weifang City. The Group will continue to build a professional managementteam with well-qualified and experienced personnel, carry out regular training so as to enable the Groupto continue to improve the efficiency of its operations and achieve its strategic goals through theexpertise, and continuity, of the Group’s management team.

BUSINESS SEGMENTS


90

The following table sets forth a breakdown of the Group’s total operating income by business segmentfor the periods indicated:

For the year ended 31 December

Business Segment 2018 2019 2020

(CNYmillion) %

(CNYmillion) %

(CNYmillion) %

Transfer of self-owned land . . . . . . . . . . . . . . . . 856.62 49.30 1,140.69 31.32 324.00 3.40Landscaping . . . . . . . . . . . . . . . . . . . . . . . . . . – – 1,032.03 28.34 1,742.93 18.30Auto parts . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 478.30 13.13 1,279.01 13.43Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – – – 5,032.21 52.85Water conservatory construction . . . . . . . . . . . . . . 269.64 15.52 346.07 9.50 505.94 5.31Water and heat supply. . . . . . . . . . . . . . . . . . . . 234.17 13.48 296.67 8.15 424.47 4.46Property leasing. . . . . . . . . . . . . . . . . . . . . . . . 292.45 16.83 284.13 7.80 84.23 0.88Financial services. . . . . . . . . . . . . . . . . . . . . . . 25.96 1.49 15.07 0.41 9.92 0.10Tourism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.72 1.13 – – 11.57 0.12Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.06 2.25 48.97 1.35 107.84 1.13

Total operating income . . . . . . . . . . . . . . . . . . 1,737.62 100.00 3,641.93 100.00 9,522.12 100


The Group is primarily engaged in the transfer of self-owned land acquired by the Group via bidinvitation, auction or listing for its transfer of self-owned land business segment. The Group conducts itstransfer of self-owned land business primarily through itself and two of its subsidiaries, namely,Weifang Dongxing Construction and Weifang Cultural Tourism. As at 31 March 2021, approximately50.16 per cent., 48.64 per cent. and 0.12 per cent. of the equity interest in Weifang DongxingConstruction was held by the Issuer, Weifang Cultural Tourism and Weifang Luwei, respectively. As at31 March 2021, the Issuer held approximately 51.28 per cent. and 33.32 per cent. of the equity interestin Weifang Cultural Tourism and Weifang Luwei, respectively.


The following table sets forth certain operating data of and the Group’s operating income derived fromits transfer of self-owned land business for the years ended 31 December 2018, 2019 and 2020:

Year

Total areaof land

transferredTotal cost ofobtaining land

Total revenuederived fromtransfer of

land

(mu) (CNY million) (CNY million)2018 656.20 561.21 856.622019 613.16 555.76 1,140.692020 98.92 122.37 324.00

Land acquired by the Group which has not been transferred to third parties forms part of the Group’sland bank. As at 31 March 2021, the Group owned a total of 9,191 mu of land, all of which is located inthe urban areas in Weifang City, including 6,309.82 mu owned by the Issuer, 1,610.20 mu owned byWeifang Dongxing Construction, and 1,270.98 mu owned by Weifang Cultural Tourism, respectively.The following table sets forth particulars of land bank held by the Group as at 31 March 2021:

No. Description of the land Area (mu)Book value

(CNY million)

1 West of Wei’an Road, South of Zhuguang Street, High-tech Zone, Weifang City（濰坊市高新區珠光街以南、濰安路以西）

345.09 247.47

2 West of Wei’an Road, South of Baotong Street, High-tech Zone, Weifang City（濰坊市高新區寶通街以南、濰安路以西）

188.69 135.31

3 Beihai Road East, Taixiang Street South（北海路東、泰祥街南） 433.90 453.934 East of Weixian Middle Road, North of Baotong Street, High-tech Zone（高新區寶

通街以北、濰縣中路以東）42.72 51.51

91


(CNY million)

5 West of Yongchun Road, North of Yingqian Street, Hi-tech Zone（高新區櫻前街以北、永春路以西）

230.36 240.99

6 East of Qingping Road, South of Yuqing West Street, Weicheng District（濰城區玉清西街以南、清平路以東）

208.53 284.01

7 East of Qingping Road, North of Yuqing West Street, Weicheng District（濰城區玉清西街以北、清平路以東）

38.86 40.65

8 East of Yong’an Road, South of Xuanwu Street, Weicheng District（濰城區玄武街以南、永安路以東）

101.68 106.38

9 North of Lechuan Street, East of Yuehe Road, Weicheng District（濰城區樂川街以北、月河路以東）

65.66 68.69

10 North of Lechuan Street, West of Yuehe Road, Weicheng District 濰城區樂川街以北、月河路以西

175.73 183.84

11 South of Lechuan Street, East of Yuehe Road, Weicheng District（濰城區樂川街以南、月河路以東）

140.24 146.71

12 East of Yuehe Road, South of Yuqing West Street, Weicheng District（濰城區玉清西街以南、月河路以東）

61.85 84.22

13 North of Lechuan Street, West of Yong’an Road. Weicheng District（濰城區永安路以西、樂川街以北）

174.49 182.55

14 North of Lechuan Street, West of Youai Road, Weicheng District（濰城區友愛路以西、樂川街以北）

210.33 220.09

15 West of Interval Road, East of Heping Road, Weicheng District（濰城區和平路以東、區間路以西）

7.05 12.74

16 West of Bailanghe, Weicheng District（濰城區白浪河以西） 11.77 21.2617 West of Younan Road, South of Phoenix Street, Fangzi District（坊子區鳳凰街以

南、油南路以西）79.91 83.60

18 North of Wolong West Street, West of Lichang Road, Weicheng District（濰城區利昌路以西、臥龍西街以北）

203.13 145.67

19 South of Wolong West Street, West Outer Ring East, Weicheng District（濰城區西外環以東、臥龍西街以南）

11.55 8.70

20 North of Wolong West Street, West Outer Ring East, Weicheng District（濰城區西外環以東、臥龍西街以北）

210.03 150.68

21 South of Lechuan Street, West of Qingping Road, Weicheng District（濰城區清平路以西、樂川街以南）

71.36 74.66

22 North of Yuqing West Street, West of Yiyuan Road, Weicheng District（濰城區怡園路以西、玉清西街以北）

58.99 61.72

23 South of Xuanwu Street, East of Xiangyang Road, Weicheng District（濰城區向陽路以東、玄武街以南）

58.08 60.76

24 West of Reservoir Road, North of Gaojia Street, East of Yuehe Road, WeichengDistrict（濰城區月河路以東、高家街以北、水庫路以西）

170.48 232.14

25 West of Huixian Road, South of Liyuan Street, Hi-tech Zone（高新區梨園街以南、惠賢路以西）

136.87 143.19

26 West of Huixiang Road, South of Futing Street, Hanting District（寒亭區富亭街以南、卉香路以西）

100.61 72.15

27 Weifang City State-owned Assets Management and Investment Corporation West,Hanxiang Street South, Hanting District（寒亭區寒祥街南、濰坊市國有資產經營投資公司西）

136.70 98.03

28 Weifang City State-owned Assets Management and Investment Corporation North,West of Huixiang Road, Hanting District（寒亭區卉香路以西、濰坊市國有資產經營投資公司北）

78.44 56.25

29 North of Yunxiang Street, West of Huixiang Road, Hanting District（寒亭區卉香路以西、雲祥街以北）

194.28 139.33

30 South of Baotong Street, East of Qingping Road, Weicheng District（濰城區清平路以東、寶通街以南）

201.34 158.30

31 West of Yuehe Road, South of Baotong Street, Weicheng District（濰城區寶通街以南、月河路以西）

124.86 98.17

32 East of Yuehe Road, North of Taixiang Street, Economic Zone（經濟區泰祥街以北、月河路以東、規劃向陽路以西）

182.33 130.75

33 West of Planned Xiangyang Road, East of Yuehe Road, South of Democratic Street,Economic Zone（經濟區民主街以南、月河路以東、規劃向陽路以西）

147.92 106.08

34 South of Planned Guting Street, East of Yuehe Road, North of Taixiang Street,Economic Zone（經濟區泰祥街以北、月河路以東、規劃古亭街以南）

110.81 79.46

35 East of Planned Xiangyang Road, South of Democratic Street, Economic Zone（經濟區民主街以南、規劃向陽路以東）

175.37 121.41

36 South of Planned Guting Street, East of Planned Xiangyang Road, North of TaixiangStreet, Economic Zone（經濟區泰祥街以北、規劃向陽路以東、規劃古亭街以南）

52.50 28.38

37 West of Huixiang Road, South of Yunxiang Street, Hanting District（寒亭區雲祥街以南、卉香路以西）

109.16 78.29

38 North of Zhongying Street, East of Sanlizhuang Road, Weicheng District（濰城區三里莊路以東、中營街以北）

93.09 97.39

39 North of Zhongying Street, West of Qingping Road, Weicheng District（濰城區清平路以西、中營街以北）

149.78 156.69

92


(CNY million)

40 Jixiang Street South, Youyi Road West, Hanting District（寒亭區友誼路西、吉祥街南）

119.57 85.75

41 Huixiang Road land, North of Yunxiang Street, West of Youyi Road, HantingDistrict（寒亭區友誼路以西、卉香路用地、雲祥街以北）

5.17 3.71

42 South of Yunxiang Street, West of Huixiang Road, Hanting District（寒亭區卉香路以西、雲祥街以南）

17.73 12.71

43 West of Huixian Road, South of Liyuan Street, Hi-tech Zone（高新區梨園街以南、惠賢路以西）

2.28 2.39

44 East of Changsong Road, North of Yuqing West Street, Weicheng District（濰城區玉清西街以北、長松路以東）

121.50 127.11

45 East of Changsong Road, South of Beigong Street, Weicheng District（濰城區北宮街以南、長松路以東）

11.14 15.17

46 East of Huixian Road, South of Yingqian Street, Hi-tech Zone（高新區櫻前街以南、惠賢路以東）

225.66 139.46

47 Futing Street South, Weifang City State-owned Assets Management and InvestmentCorporation West（濰坊市國有資產經營投資公司西、富亭街南）

100.00 78.78

48 Hanxiang Street North, Weifang City State-owned Assets Management andInvestment Corporation East, Hanting District（寒亭區濰坊市國有資產經營投資公司東、寒祥街以北）

61.93 47.51

49 Weifang City State-owned Assets Management and Investment Corporation North,Youyi Road West, Hanting District（寒亭區友誼路西、濰坊市國有資產經營投資公司北）

156.54 115.26


165.05 121.53


77.37 56.97

52 West of Weixian Middle Road, South of Baotong Street, High-tech Zone（高新區寶通街以南、濰縣中路以西）

4.63 4.41

53 West of Huixian Road, North of Baotong Street, Hi-tech Zone（高新區寶通街以北、惠賢路以西）

33.84 25.21

54 North of Yuqing West Street, West of Yiyuan Road, Weicheng District（濰城區怡園路以西、玉清西街以北）

127.70 98.24

55 West of Yiyuan Road, South of Lechuan Street, Weicheng District（濰城區樂川街以南、怡園路以西）

134.37 103.37

56 West of Huixian Road, North of Yingqian Street, Hi-tech Zone（高新區櫻前街以北、惠賢路以西）

66.71 52.46

57 East of Weixian Middle Road, South of Zhuguang Street, Weifang Hi-tech Zone（濰坊高新區珠光街以南、濰縣中路以東）

86.01 119.87


51.65 71.99


57.19 79.72

60 West of Zhiyuan Road, South of Zhuguang Street, Weifang Hi-tech Zone（濰坊高新區珠光街以南、志遠路以西）

48.50 67.59

61 West of Zhiyuan Road, North of Yintong Street, Weifang Hi-tech Zone（濰坊高新區銀通街以北、志遠路以西）

53.60 74.70

62 East of Yongchun Road, South of Zhuguang Street, Weifang Hi-tech Zone（濰坊高新區珠光街以南、永春路以東）

32.50 45.29

63 East of Yongchun Road, South of Baotong Street, Hi-tech Zone（高新區寶通街以南、永春路以東）

63.64 94.12

64 East of Yongchun Road, North of Zhuguang Street, Hi-tech Zone（高新區珠光街以北、永春路以東）

42.56 62.94


42.75 60.61


16.40 23.26

67 West of Wei’an Road, South of Yintong Street, Weifang Hi-tech Zone（濰坊高新區銀通街以南、濰安路以西）

175.82 163.70

68 West of Zhiyuan Road, South of Zhuguang Street, Hi-tech Zone（高新區珠光街以南、志遠路以西）

162.04 225.84

69 South of Yuqing West Street, West of Changsong Road, Weicheng District（濰城區長松路以西、玉清西街以南）

173.80 101.96

70 North of Yuqing West Street, West of Changsong Road, Weicheng District（濰城區長松路以西、玉清西街以北）

124.05 72.86

71 South of Yuqing West Street, West of Changsong Road, Weicheng District（濰城區長松路以西、玉清西街以南）

112.44 65.80

72 East of Beihai Road, South of Yingqian Street, Hi-tech Zone（高新區櫻前街以南、北海路以東）

50.64 85.83

73 East of Jinma Road, North of Yingqian Street, Weifang High-tech Zone（濰坊高新區櫻前街以北、金馬路以東）

58.43 81.94

93


(CNY million)

74 East of Weixian Middle Road, South of Baotong Street, Weifang High-tech Zone（濰坊高新區寶通街以南、濰縣中路以東）

74.28 92.25

75 East of Reservoir Road, South of Baotong Street, Weicheng District（濰城區寶通街以南、水庫路以東）

29.83 32.98


58.04 64.16


35.57 39.32


66.61 73.64


6.34 7.01

80 East Yiyuan Road, West of Yuehe Road (Reservoir Road), South of Baotong Street,Weicheng District（濰坊市寶通街以南、月河路（水庫路）以西、怡園路東）

166.24 70.50

81 West side of Yuehe Road (Reservoir Road), South of Baotong Street, WeichengDistrict（濰坊市寶通街以南、月河路（水庫路）西側）

161.87 178.94

82 West of Yuehe Road (Reservoir Road), South of Baotong Street, Weicheng District（濰城區寶通街以南、月河路（水庫路）以西）

54.17 22.97


76.28 84.33

84 West of Yiyuan Road, South of Baotong Street, Weicheng District（濰城區寶通街以南、怡園路以西）

220.44 243.69


59.40 65.67


34.31 41.17

87 North of Yuqing West Street, West of Heping Road, Weicheng District（濰城區和平路以西、玉清西街以北）

63.57 86.56

Total: 9,191.00 8,553.43

Business Model

The business model of the Group’s transfer of self-owned land business segment is as follows:

Purchase of land

Firstly, the Group acquires land from the relevant land department authorities in Weifang City throughbid invitation, auction or listing. After payment of the full amount of the transfer fees and related taxesand duties, the land acquired by the Group will form part of the Group’s land bank.

Sale of land

If the Group wishes to sell a piece of land from its land bank, the selling process will be conducted bythe relevant land department through bid invitation, auction or listing. The purchaser of the land willpay the purchase price for the land to the relevant finance department, who will transfer such purchaseprice (after deducting related fees and taxes) to the Group. The proceeds from the sale of the land willcontribute to the Group’s operating income under its transfer of self-owned land business segment.Completion of the sale of land in turn reduces the land bank inventories held by the Group.


The Group commenced its landscaping business in 2019 upon completion of the Issuer’s purchases ofcertain equity interest in Meichen Ecology. Meichen Ecology is a company listed on ChiNext of theShenzhen Stock Exchange (stock code: 300237) since 2011 and is primarily engaged in the manufactureand sale of auto parts and landscaping businesses. In September 2018, the Issuer and Zhang Lei, thecontrolling shareholder of Meichen Ecology, entered into a share transfer agreement pursuant to whichthe Issuer has agreed to purchase, and Zhang Lei has agreed to sell, approximately 10 per cent. of theequity interest in Meichen Ecology. In November 2018, the Issuer, Zhucheng Economic Development &Investment Corporation（諸城市經濟開發投資公司）(‘‘Zhucheng Investment’’), Zhang Lei and LiXiaonan (acting in concert with Zhang Lei) entered into a share transfer agreement pursuant to whichthe Issuer and Zhucheng Investment agreed to purchase, and Zhang Lei and Li Xiaonan agreed to sell,approximately 16.86 per cent. of the equity interest in Meichen Ecology. In July 2019, the Issuer

94

completed the purchases of approximately 21.46 per cent. in total of the equity interest in MeichenEcology at the consideration of approximately CNY1.6 billion. As at 31 March 2021, the Issuer heldapproximately 21.46 per cent. of the equity interest in Meichen Ecology.

The Group conducts its landscaping business mainly through a wholly-owned subsidiary of MeichenEcology, namely, Saishi Garden. The major services and products provided by Saishi Garden includegarden construction, sale of landscaping seedlings and project design. It mainly provides integratedgreening and landscaping services for municipal and real estate customers.

Saishi Garden and its subsidiaries hold landscaping qualifications such as grade I qualification forancient architectural project special contracting（古建築工程專業承包一級資質）, grade I qualificationfor cultural relics protection construction（文物保護工程施工一級資質）, grade I qualification formunicipal public construction project general contracting（市政公用工程施工總承包一級資質）, grade IIqualification for building renovation and decoration project special contracting（建築裝修裝飾工程專業

承包二級資質）, grade A qualification for landscaping project design（風景園林工程設計專項甲級資

質）, forestation seedling production and operation licence（林木種子生產經營許可證）, grade Aqualification for environmental pollution control project general contracting (water pollution control andenvironmental ecology)（環境污染治理工程總承包（水治理污染、環境生態）甲級）and grade Aqualification for environmental pollution control project design (water pollution control andenvironmental ecology)（環境污染防治工程專項設計（水治理污染、環境生態）甲級）. Saishi Garden isone of the few landscaping enterprises in the PRC which offers landscaping, ancient architecture andcultural protection services.


As at 31 March 2021, the Group had approximately 15 key landscaping projects under construction,which can be categorised into public-private-partnership (PPP) projects, traditional municipallandscaping projects and real estate landscaping projects.

The following table sets forth the Group’s key landscaping projects under construction as at 31 March2021:

Project

Contractamount

(CNY million)Progress

(%)

Accumulatedcost

(CNY million)

Accumulatedincome

(CNY million)

Accumulatedpaybackamount

(CNY million)

PPP projectsBin County Greening Construction Project PPP Project（彬縣東花西苗南北林建設項目PPP項目）. . . . . . . . . . . . . . . . 254.84 96.67 151.19 225.59 –

Wusu City Integrated Ecology and Environment RestorationConstruction Project

（烏蘇市生態環境綜合整治建設項目）. . . . . . . . . . . . . . . . . . . 498.06 63.42 184.95 289.77 –

Quzhou City Kecheng District Huacai Town and Tongjing RoadConstruction PPP Project

（衢州市柯城區花彩小鎮及通景道路建設工程PPP項目）. . . . . . . . 220.00 4.86 6.57 11.79 –

Licheng County Living Environment Integrated Enhancement Project（黎城縣縣城人居環境綜合提質工程）. . . . . . . . . . . . . . . . . . . 275.98 98.81 175.57 250.19 –

Yicheng County Artificial Wetland Construction PPP Project（翼城縣人工濕地建設工程PPP項目）. . . . . . . . . . . . . . . . . . . 88.75 1.74 0.89 1.42 –

Traditional municipal landscaping projectsShan County Huacai Town Rural Complex (South District)

Construction Project General Contracting（單縣花彩小鎮田園綜合體（南區）建設項目工程總承包）. . . . . . . 328.58 79.12 159.21 238.50 –

Hangzhou Longwuzhen Core Area Development Construction andLandscape Design Integration Project

（杭州龍塢茶鎮核心區開發建設景觀設計、施工一體化工程）. . . . 327.15 60.82 124.10 182.10 77.60

95

Project

Contractamount

(CNY million)Progress

(%)

Accumulatedcost

(CNY million)

Accumulatedincome

(CNY million)

Accumulatedpaybackamount

(CNY million)

Mount Putuo Guanyin Dharma Realm Lecture Temple Project OutdoorOverall and Auxiliary Facilities Professional Subcontracting

（普陀山觀音法界正法講寺工程室外總體及附屬配套專業分包工程） 232.74 100.00 176.70 213.03 189.85Quzhou City Kecheng District Town (Shiliang Town) Integrated

Environment Restoration Project Design Procurement andConstruction (EPC) General Contracting

（衢州市柯城區小城鎮（石樑鎮）環境綜合整治工程設計採購施

工(EPC)總承包）. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124.43 100.00 71.63 113.41 85.30Longgang City Binhai Cultural Tourism Enhancement Project（龍港市濱海文化旅遊提升工程） . . . . . . . . . . . . . . . . . . . . . 95.51 37.77 24.59 33.09 26.03

Real estate landscaping projectsShuangshi Huahai Hot Spring Tourism Project Huahai Amusement

Park Project（雙石花海溫泉旅遊項目花海遊樂園工程）. . . . . . . . . . . . . . . . 63.00 100.00 40.84 57.13 50.40

Tai’an Tianfang Wyndham Hotel Back Plaza Outdoor LandscapeGreening Project

（泰安天房溫德姆酒店後廣場室外景觀綠化工程） . . . . . . . . . . . 42.68 83.20 23.10 34.48 11.54Shuangshi Huahai Hot Spring Tourism Project Recluse Wooden House

Landscape Greening Project（雙石花海溫泉旅遊項目隱居木屋景觀綠化工程） . . . . . . . . . . . 30.12 75.37 17.08 20.83 24.09

Hanyu Financial Business Centre A5-3# Floor LandscapeProject Design and Construction

（漢峪金融商務中心A5-3#樓景觀工程施工圖設計及施工）. . . . . . 19.40 81.54 12.33 14.51 13.38Baoting Village Luogangtou Plot Phase II Landscape

Greening Project Section III（鮑亭村羅崗頭地塊二期景觀綠化工程三標段）. . . . . . . . . . . . . 16.16 87.85 9.59 12.97 11.11

Procurement Model

Depending on the amount of usage and the significance to its landscaping projects, Saishi Gardendivides its raw materials into two categories: key materials and auxiliary materials. The key materialsrequired for landscaping projects are greening materials and building materials, which include seedlings,cement, stone, wood, steel, sand, bricks, tiles and water and electricity. The procurement of keymaterials is typically conducted on a centralised basis by the procurement management department ofSaishi Garden, while auxiliary materials are typically purchased by the project management units ofSaishi Garden.

The procurement management department of Saishi Garden coordinates purchase orders submitted byeach project management unit, taking into account the quantity required and the available stock. Theprocurement management department will make the relevant purchase with qualified suppliers selectedbased on prices, delivery dates and settlement methods.

The procurement management department will typically prepare a draft procurement contract after it hasselected a supplier. The draft contract has to be reviewed by the relevant operation managementdepartment and engineering-related business department and subsequently approved by the deputygeneral manager and general manager. While the procurement management department is responsible forthe procurement, the project management unit will conduct inspection of the materials together with theprocurement management department. Payment will be settled based on the terms of the procurementcontract.

Sales Model

Leveraging the Group’s state-owned background and favourable national infrastructure investmentpolicies, the Group cooperates with a number of local governmental entities to undertake landscapingprojects based on the public-private-partnership (PPP) model. Typically, the Group will participate in thetendering process for a construction project contract. The Group typically determines the bid price based

96

on its market and industry knowledge and customer requirements. The customer will typically determinethe winning bidder taking into account the capabilities and experience of the company and the price itoffers.

The Group typically adopts the build-operate-transfer (BOT) model for its landscaping projects. TheGroup is typically responsible for undertaking the design, financing, construction, operation,maintenance and user service of the projects, and will, during the contract period, obtain the right tocharge franchise fees for the project and a partial payment from the relevant government entity. Aftertermination of the contract, the relevant project assets and related rights will be transferred to therelevant government entity.





Major Products

The major products of Meichen Ecology, namely hoses and shock-absorbing rubber products, are twoimportant sub-categories of non-tyre rubber products, both of which are used for industrial purposes.

Hoses and shock-absorbing rubber products are generally supplied to the automotive industry. MeichenEcology is one of the leading enterprises in the PRC in the production of non-tyre rubber products foruse in passenger cars and commercial vehicles.

Production

Meichen Ecology adopts advanced technologies in its production process and is equipped with acomprehensive product and technology chain from base materials to key components to assembly（基礎

材料–關鍵零部件–系統總成）.

The following table sets forth the core technology requirements and the corresponding technologypossessed by Meichen Ecology:

StageCore technologyrequirements

Technology possessed by MeichenEcology Examples

Assembly . . . . . . . . . . . . System assembly integrationdesign adaptation

Virtual prototyping technology andsystem verification technology

Suspension assembly product platformsincluding chassis air suspension, rubbersuspension, split balance axle suspensionand cab suspension

Key components . . . . . . . Core production process Patented and non-patented productiontechnologies such as the vulcanisationof the inner bladder of the air intakesystem hose and the coreless weavingprocess of the hose

Thrust rod, air spring, fender bracket, rubberbearing and hose

97

StageCore technologyrequirements

Technology possessed by MeichenEcology Examples

Assembly . . . . . . . . . . . . System assembly integrationdesign adaptation

Virtual prototyping technology andsystem verification technology

Suspension assembly product platformsincluding chassis air suspension, rubbersuspension, split balance axle suspensionand cab suspension

Key components . . . . . . . Core production process Patented and non-patented productiontechnologies such as the vulcanisationof the inner bladder of the air intakesystem hose and the coreless weavingprocess of the hose

Thrust rod, air spring, fender bracket, rubberbearing and hose

Structural design of keycomponents

Key component product structure designcapabilities such as key componentproducts which pass the finite elementanalysis with rigidity adaptation designsystem and ability

Mould design andmanufacturing

Tooling and mould design capabilities A large number of independently designedtooling moulds, including four authorisedpatented moulds

Base materials . . . . . . . . . Processing and applicationof modern polymermaterials

Polymer material blending, modification,compounding and formula technology,independent research and developmentof unique formulae

14 authorised patented formulae


The Group commenced its trading business in 2020. The Group conducts its trading business mainlythrough Weifang Urban Investment. In April 2020, the Issuer and Shanghai Junhe entered into astrategic cooperation agreement to establish Weifang Urban Investment with a registered capital ofCNY2 billion in June 2020. As at 31 March 2021, the Issuer held approximately 51 per cent. of theequity interest in Weifang Urban Investment. Weifang Urban Investment is primarily engaged in sale ofrubber products, chemical products (excluding licensed chemical products) and metal materials. TheGroup’s main trading product is electrolytic copper, which is a type of non-ferrous metal. The Group’sproducts are primarily sold domestically in South China.


Due to high transaction amounts and turnover rate, a large amount of low-cost capital has been injectedinto the non-ferrous metals industry, resulting in a low gross profit margin across the industry in recentyears. The Group has been leveraging its low gross profit margins to increase its reputation, marketposition and market share to obtain a stronger bargaining power. The Issuer believes that thedevelopment of the Group’s trading business is conducive to improving the profit margins for the Group.

Upstream Procurement

The Group’s main trading product under its trading business segment is electrolytic copper. The Groupformulates procurement plans based on the price and supply offered by different sourcing channels atdifferent points of time to ensure a stable supply of goods. For the year ended 31 December 2020 andthe three months ended 31 March 2021, the Group’s five largest suppliers for its trading businessaccounted for over 30 per cent. and 40 per cent. of the Group’s procurement amount for its tradingproducts, respectively.

98

Downstream Sales

In terms of sales strategy, Weifang Urban Investment formulates its sales plan based on the cost of rawmaterials and the quantity of raw materials available, and the level of profitability is based on thedifference in sales prices between different sales channels. For the year ended 31 December 2020 andthe three months ended 31 March 2021, the Group’s five largest customers for its trading businessaccounted for over 40 per cent. of the Group’s operating income derived from its trading businesssegment.


The Group’s water conservatory construction business is conducted by Haobo Water. The Group isresponsible for the construction of water conservatory facilities in all districts and counties of WeifangCity, including river channels reconstruction, barrage dam construction and reinforcement and otherconservatory-related projects.

The business model of the Group’s water conservatory construction business firstly involves HaoboWater participating in bidding for projects organised by the relevant water conservancy authorities inWeifang City. If Haobo Water becomes the successful bidder, typically construction contracts will besigned with the relevant water conservancy bureau and the Group will commence construction of suchprojects. Haobo Water will receive the relevant construction fees after completion of the projects andsatisfactory inspection by the relevant water conservancy bureau.



The Group commenced its water and heat supply business in 2016. For the years ended 31 December2018, 2019 and 2020, the operating income derived from the Group’s water and heat supply businesssegment amounted to approximately CNY234.17 million, CNY296.67 million and CNY424.47 million,respectively, representing approximately 13.48 per cent., 8.15 per cent. and 4.46 per cent. of the Group’stotal operating income, respectively.

Water Supply Business Segment

The Group conducts its water supply business primarily through Haobo Water. The Group primarilysupplies water from Bailanghe Reservoir（白浪河水庫）, Xiashan Reservoir（峽山水庫）and GaoyaReservoir（高崖水庫）to domestic customers in the southern parts of Weifang City. For the years ended31 December 2018, 2019 and 2020, Haobo Water’s total water sales volume amounted to approximately6.10 million cubic metres, 5.54 million cubic metres and 5.62 million cubic metres, respectively.

Heat Supply Business Segment

The Group conducts its heat supply business primarily through Weifang Thermal Power. The Group’sheating pipeline networks connect the formerly decentralised heating pipeline network in Weifang City,and laid down a new pipeline network for the city of Kuiwen. The operating income derived from theGroup’s heat supply business segment is primarily generated from charges received from heat supplycompanies for the use of the Group’s heating pipeline networks. Weifang Thermal Power typically entersinto heat supply contracts with downstream heating companies prior to the heat supply season everyyear, which is generally from November to March (subject to adjustments or fluctuations depending onthe weather conditions). For the years ended 31 December 2018, 2019 and 2020, the heating areasupported by the Group amounted to approximately 15.50 million square metres, 23.65 million squaremetres and 27.05 million square metres, respectively.

99


Since 2016, the Issuer has actively expanded its sources for generating revenue from self-operatedassets. For example, the Group leased some of its properties, including the Lutai Convention andExhibition Centre, LED lights and pipe networks (all of which are owned by the Issuer) to the WeifangGovernment to generate stable operating income from collecting royalties from its property leasingbusiness.



The Group commenced its financial services business in 2016. The Group’s operating income isgenerated from its financial investment funds-related operations (primarily includes management offunds). The Group operates its financial services business mainly through Weifang Financial Holdingsand Weifang Investment Management.



The Group is also engaged in the tourism industry. The Group owns the Bailanghe Wetland Park andBeichen Oasis, which are categorised as National AAAA and National AA scenic spots, respectively.Operating income generated from the Group’s tourism business is primarily derived from fees andincome generated from the various facilities in the parks including hotels (which are operated by theIssuer’s subsidiary, namely, Weifang New Fuhua Hotel Management), amusement park (which isoperated by Weifang New Fuhua Amusement Park Management) and RV camping sites (which areoperated by Weifang Cultural Tourism).

For the years ended 31 December 2018 and 2020, the operating income derived from the Group’stourism business segment amounted to approximately CNY19.72 million and 11.57 million, respectively,representing approximately 1.13 per cent. and 0.12 per cent. of the Group’s total operating income,respectively. For the year ended 31 December 2019, the Group did not record any operating incomefrom its tourism business segment. The decrease in operating income from its tourism business segmentwas primarily due to the renovation of The Farrington Hotel and Fuhua Amusement Park（濰坊富華遊樂

園）. Since 2018, part of the operating income from the Group’s tourism business segment has beenallocated to the operating income from other business segment.




CORPORATE GOVERNANCE STRUCTURE

The Issuer has established a sound corporate governance structure comprising the board of directors,board of supervisors and operating management entities.

100

The following diagram sets forth a simplified corporate governance structure of the Issuer as at 31March 2021:

Deputy General Manager

General Manager

Chairman of the Board of Directors

Board of Directors

Specialised Committees

Secretary of Party Committee

Party Committee

Audit Committee

Appraisal and Remuneration Committee

Investment Risk Control Committee

Board of Supervisors

Weifang Urban Construction and

Development Investment Group Co., Ltd.

Work

Offi

ce

Hum

an R

esources D

epartm

ent

Fin

ance D

epartm

ent

Audit D

epartm

ent

Leg

al Dep

artmen

t

Fin

ancial C

o-o

peratio

n D

epartm

ent

Engin

eering M

anag

emen

t Dep

artmen

t

Investm

ent M

anag

emen

t Dep

artmen

t

Asset M

anag

emen

t Dep

artmen

t

Party

Work

Offi

ce

Discip

line In

spectio

n an

d S

uperv

ision O

ffice

Corp

orate M

anag

emen

t Dep

artmen

t

101

OCCUPATIONAL SAFETY AND ENVIRONMENTAL PROTECTION

The Group adopts a comprehensive work safety system to ensure employee safety. The Group hasestablished safety protocols and also implemented guidelines setting out the responsibilities of safetyofficers. The safety officer is involved in the planning and implementation of each project to ensure thatsafety objectives are met and plays a key role in monitoring the effectiveness of the safety measures,educating project members on the safety requirements, handling any infractions, ensuring safety recordsare properly kept and managing onsite safety and emergency incidents. The Issuer believes that theGroup is in compliance in all material respects with applicable safety regulations. As at the date of thisOffering Circular, the Group had not been subject to any fines or administrative action that had beenfiled with any PRC government authorities involving material non-compliance with any relevant safetyregulations, nor was it required to take any specific compliance measures that could have a materialadverse effect on the Group’s business and results of operations.

The Group is subject to environmental laws and regulations governing air pollution, noise emissions,hazardous substances, water and waste discharge and other environmental matters issued by thegovernmental authorities in the PRC. The Issuer believes that the Group is in compliance in all materialrespects with applicable environmental laws and regulations. As at the date of this Offering Circular, theGroup was not aware of any material environmental proceedings or investigations to which it is or mightbecome a party.

EMPLOYEES

As at 31 March 2021, the Group had a total of approximately 543 employees, approximately 56.35 percent. of whom each holds an undergraduate degree or above. The Group maintains a good workingrelationship with its employees and, as at the date of this Offering Circular, the Group had notexperienced any labour disputes that could cause material adverse effect to the operation andperformance of the Group.

In accordance with the applicable regulations, the Group makes contributions to the pension contributionplan, medical insurance and personal injury insurance. In addition to statutory contributions, the Groupgenerally provides annual bonuses and supplemental commercial insurance policies to employees. TheGroup generally enters into employment contracts with employees in accordance with applicable PRClaws. Such contracts typically include provisions on wages, vacation, employee benefits, trainingprogrammes, health and safety, confidentiality obligations and grounds for termination.

INSURANCE

The Group is covered by insurance policies which primarily cover fire, flood, other material damage toproperty and public liability. The Issuer believes that the Group’s properties are covered with adequateinsurance provided by reputable independent insurance companies and with commercially reasonabledeductibles and limits on coverage, which are normal for the type and location of the properties towhich they relate. The Group is also required to obtain contractors all-risk and third-party liabilityinsurance for most of the construction projects it undertakes. Such policies generally extend for theentire contract period, including the maintenance period following completion of the project.

The Group maintains insurance coverage in amounts that the Issuer believes are commensurate with itsrisk of loss and industry practice. Consistent with what the Group believes to be customary practice inthe PRC, it does not carry any business interruption insurance, key-man insurance or insurance coveringpotential environmental damage claims. Such insurance is not mandatory under the laws and regulationsof the PRC, and such insurance is either unavailable in the PRC or requires substantial cost. In addition,damage to the vehicles, buildings, facilities, equipment or other properties as a result of occurrencessuch as fire, flood, water damage, explosion, power loss, typhoons and other natural disasters orterrorism, or any decline in the Group’s business as a result of any threat of war, outbreak of disease orepidemic, may potentially have a material adverse effect on the Group’s financial condition and results

102

of operations. Please see ‘‘Risk Factors – Risks Relating to the Group’s Business – The insurancecoverage of the Group may not adequately protect it against all operational risks or any potentialliabilities or losses’’ in this Offering Circular for a discussion of the risks associated with the Group’sinsurance coverage.

LEGAL AND REGULATORY PROCEEDINGS

The Group is involved, from time to time, in legal proceedings arising in the ordinary course of itsoperations. See ‘‘Risk Factors – Risks Relating to the Group’s Business – The Group may be subject tolegal, litigation and regulatory proceedings’’.

Except as disclosed in this Offering Circular, to the best of the knowledge of the Issuer, there arecurrently no litigation or arbitration proceedings against the Group or any of its senior management teammembers as at the date of this Offering Circular that could have a material adverse effect on itsbusiness, financial condition and results of operations.

103

DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

BOARD OF DIRECTORS

The following table sets forth the members of the board of directors of the Issuer as at the date of thisOffering Circular:

Name Position

Ma Yongjun（馬永軍）. . . . . . . . . . . Chairman of the board of directorsWang Bo（王波）. . . . . . . . . . . . . . . Director and general managerCao Qing（曹卿）. . . . . . . . . . . . . . . Employee director and deputy general managerTao Jingang（陶金剛）. . . . . . . . . . . Director and deputy general managerWang Xiuping（王秀萍）. . . . . . . . . . Director and chief financial officer（財務總監）Dou Maogong（竇茂功）. . . . . . . . . . Director and investment director（投資總監）Gao Mingqin（高明芹） . . . . . . . . . . Director

Ma Yongjun

Mr. Ma is the chairman of the board of directors of the Issuer. He is also the chairman of the board ofdirectors of Weifang Dongxing Construction. He was the office manager of Weifang City State-ownedAssets Management and Investment Centre（濰坊市國有資產經營投資中心）. He previously heldpositions as deputy section manager and section manager of the department of enterprise and commerce

（企業處商貿科）of the Weifang Finance Bureau. Mr. Ma holds a bachelor’s degree and is a senioreconomist specialised in taxation.

Wang Bo

Mr. Wang is a director and the general manager of the Issuer. He is also a director and the generalmanager of Weifang Dongxing Construction. He previously served as a banking general manager ofChina Merchants Bank Weifang Branch. He was also the president assistant and the vice president at theBank of Communications Weifang Branch. In addition, he served as the general manager of thecorporate business department and the financial institutions and Shandong branch market department ofBank of Communications Shandong Branch. Mr. Wang holds a bachelor’s degree and is an intermediateeconomist.

Cao Qing

Mr. Cao is an employee director and a deputy general manager of the Issuer. He previously worked forthe Weifang Finance Bureau, the Weifang Audit Bureau（濰坊市審計局）and Weifang City State-ownedAssets Management and Investment Group Co., Ltd.（濰坊市國有資產經營投資集團有限公

司）(‘‘WCSAMI’’). Mr. Cao holds a postgraduate degree and is an intermediate economist.

Tao Jingang

Mr. Tao is a director and a deputy general manager of the Issuer. He previously held various positionsat the integrated section of the Agricultural and Industrial Office（農工辦綜合科）and the organisationsection of the Organisation Department（組織部組織科）of Weifang City. Mr. Tao holds a postgraduatedegree.

Wang Xiuping

Ms. Wang is a director and the chief financial officer of the Issuer. She is also a director and the chieffinancial officer of Weifang Dongxing Construction and the chief financial officer of Weifang ThermalPower. She previously served as a staff member and deputy chief at the Weifang Finance Bureau andwas a manager of the financial management department of WCSAMI. Ms. Wang holds a postgraduatedegree.

104

Dou Maogong

Mr. Dou is a director and the investment director of the Issuer. He was previously the principal of theeducation committee of Jiayue Town, Zhucheng City, the chief of administrative and political affairsdepartment（行政政法科科長）of the Weifang Finance Bureau and a business development departmentmanager of WCSAMI. Mr. Dou holds a postgraduate degree and is an economist.

Gao Mingqin

Ms. Gao is a director of the Issuer. She was a deputy to the 11th and 12th National People’s Congressand the 11th and 12th party representative of Weifang City. Ms. Gao is the secretary and head of thejoint party branch of Shandong Yuanduyinghe Law Firm（山東鳶都英合律師事務所）, member of AllChina Lawyers Association（中華全國律師協會）, vice president of the Shangdong Province LawyersAssociation（山東省律師協會）, honorary president of Weifang Lawyers Association（濰坊市律師協會）,designated supervisor of the Supreme People’s Court of China（最高人民法院）, vice chairman ofWeifang Federation of Trade Unions（濰坊市總工會）and president of Weifang City Model WorkersAssociation（濰坊市勞模協會）. Ms. Gao holds a postgraduate degree.

BOARD OF SUPERVISORS

The following table sets forth the members of the board of supervisors of the Issuer as at the date of thisOffering Circular:

Name Position

Lv Tiantian（呂甜甜）. . . . . . . . . . . . Chairman of the board of supervisorsWang Haocheng（王顥程）. . . . . . . . SupervisorZhang Xiaonuo（張曉娜）. . . . . . . . . SupervisorLiu Guichao（劉桂超）. . . . . . . . . . . Employee supervisorTan Tengfei（譚騰飛）. . . . . . . . . . . Employee supervisor

Lv Tiantian

Ms. Lv is the chairman of the board of supervisors of the Issuer. She is also a supervisor of WeifangDongxing Construction. She previously worked at the Finance Bureau of Anqiu City, Weifang, AnqiuCity Hua’an State-owned Assets Management and Investment Co., Ltd.（安丘市華安國有資產經營投資

公司）and WCSAMI.

Wang Haocheng

Mr. Wang is a supervisor of the Issuer. He was assistant to the secretary of Changle County Wutu StreetDongjiafangzi Village Branch Office（昌樂縣五圖街道董家坊子村支部）and the work coordinator ofthe staff and discipline inspection and supervision office of the Issuer.

Zhang Xiaonuo

Ms. Zhang is a supervisor of the Issuer. She was a university student village official（大學生村官）ofWeifang City Kuiwen District Weizhou Street Road（濰坊市奎文區濰州路街道）and previously workedat WCSAMI and the Issuer.

Liu Guichao

Mr. Liu is an employee supervisor of the Issuer. He previously held positions as operation controlmanager, performance appraisal manager and strategic control manager at Weichai Group（濰柴集團）and also worked at the reform office of Weifang SASAC.

105

Tan Tengfei

Mr. Tan is an employee supervisor of the Issuer. He previously worked at Delisi Group（得利斯集團）,Shandong Yatai Zhonghui Group（山東亞太中慧集團）, Da Bei Nong Group（大北農集團）andWCSAMI.

SENIOR MANAGEMENT

The following table sets forth the senior management members of the Issuer as at the date of thisOffering Circular:

Name Position

Wang Bo（王波）. . . . . . . . . . . . . . . Director and general managerCao Qing（曹卿）. . . . . . . . . . . . . . . Director and deputy general managerTao Jingang（陶金剛）. . . . . . . . . . . Director and deputy general managerWang Xiuping（王秀萍）. . . . . . . . . . Director and chief financial officerDou Maogong（竇茂功）. . . . . . . . . . Director and investment directorHou Jijun（侯紀軍）. . . . . . . . . . . . . Chief engineering officerYao Yuying（姚玉英）. . . . . . . . . . . Secretary of the disciplinary committeeJiang Bo（江波）. . . . . . . . . . . . . . . Deputy general managerLi Jian（李劍） . . . . . . . . . . . . . . . . Deputy general manager

Wang Bo

Please refer to the profile of Mr. Wang in ‘‘– Board of Directors’’ above.

Cao Qing

Please refer to the profile of Mr. Cao in ‘‘– Board of Directors’’ above.

Tao Jingang

Please refer to the profile of Mr. Tao in ‘‘– Board of Directors’’ above.

Wang Xiuping

Please refer to the profile of Ms. Wang in ‘‘– Board of Directors’’ above.

Dou Maogong

Please refer to the profile of Mr. Dou in ‘‘– Board of Directors’’ above.

Hou Jijun

Mr. Hou is the chief engineering officer of the Issuer. He previously served as the head of the WeifangCity Construction Bureau（濰坊市建設局局長）and held various positions at the Weifang City GardenManagement Bureau（濰坊市園林管理局）and the Weifang City Construction Project BiddingManagement Office（濰坊市建設工程招投標管理辦公室）.

Yao Yuying

Ms. Yao is a secretary of the disciplinary committee of the Issuer. She previously held various positionsat the Weifang City Discipline Inspection Commission（濰坊市紀委）. Ms. Yao holds a bachelor’sdegree.

106

Jiang Bo

Mr. Jiang is a deputy general manager of the Issuer. He previously worked at Weifang CommercialBank（濰坊市商業銀行）, Weifang Federation of Trade Unions, the People’s Government of Anqiu City,the Municipal Committee of Anqiu City and the District Committees of Kuiwen District, Fangzi Districtand Weicheng District.

Li Jian

Mr. Li is a deputy general manager of the Issuer. He previously worked at China Civil EngineeringConstruction Corporation Ltd.（中國土木工程集團有限公司）, China Railway 15th Bureau Group Co.,Ltd.（中鐵十五局集團有限公司）and China Railway International Co., Ltd.（中國鐵路國際有限公司）.

107

PRC REGULATIONS

This section is a high-level overview of the PRC legal system and a summary of the principal PRC lawsand regulations relevant to the issue of the Bonds by the Issuer. As this is a summary, it does notcontain a detailed analysis of the PRC laws and regulations.

Record Filing and Registration

The NDRC Circular relates to the matters as listed below:

• remove the quota review and approval system for the issuance of foreign debts by enterprises,reform and innovate with respect to the ways that foreign debts are managed, and implement theadministration of record-filing and the registration system. Realise the supervision andadministration of the size of foreign debts borrowed on a macro level with the record-filing,registration and information reporting of the issuance of foreign debts by enterprises;

• before the issuance of foreign debts, enterprises shall first apply to NDRC for the handling of therecord-filing and registration procedures and shall report the information on the issuance to NDRCwithin 10 working days of completion of each issuance;

• record-filing and registration materials to be submitted by an enterprise for the issuance of foreigndebts shall include: application report for the issuance of foreign debts and issuance plan,including the currency, size, interest rate and maturity of foreign debts, the purpose of the fundsraised, back flow of funds, etc. The applicant shall be responsible for the authenticity, legality andcompleteness of the application materials and information;

• NDRC shall decide whether to accept the application for record-filing and registration within fiveworking days of receiving it and shall issue a Certificate for Record-filing and Registration of theIssuance of Foreign Debts by Enterprises within seven working days of accepting the applicationand within the limit of the total size of foreign debts;

• the issuer of foreign debts shall handle the procedures related to the outflow and inflow of foreigndebt funds with the Certificate for Record-filing and Registration according to the regulations.When the limit of the total size of foreign debts is exceeded, NDRC shall make a publicannouncement and no longer accept applications for record-filing and registration; and

• if there is a major difference between the actual situation of the foreign debts issued by theenterprises and the situation indicated in the record-filing and registration, an explanation shall begiven when reporting relevant information. NDRC shall enter the poor credit record of anenterprise which maliciously and falsely reports the size of its foreign debts for record-filing andregistration into the national credit information platform.

In accordance with the Foreign Debt Registration Measures issued by SAFE on 28 April 2013, whichcame into effect on 13 May 2013, an issuer of foreign debts shall complete the foreign debt registrationin respect of its issue of foreign debts with the local branch of SAFE in accordance with applicable lawsand regulations. According to the Operation Guidelines for Administration of Foreign Debt Registration

（外債登記管理操作指引）promulgated together with the Foreign Debt Registration Measures, the Issueris required to register its foreign debt issue within 15 working days after the execution of the financingdocuments and to complete such registration in accordance with the Foreign Debt RegistrationMeasures. In the unlikely event that, having exercised its best endeavours, the Issuer is unable tocomplete such registration within the abovementioned time period, investors will have the right torequire the Issuer to redeem their holding of Bonds.

Obtaining Land Use Rights

All land in the PRC is either state-owned or collectively-owned, depending on the location of the land.

108

All land in the urban areas of a city or town is state-owned, and all land in the rural or suburban areasand all farm land are, unless otherwise specified by law, collectively-owned. The PRC government hasthe right to resume its land ownership or the land use rights according to the relevant law if required forpublic interest (and compensation must be paid by the PRC government).

Although all land in the PRC is owned by the PRC government or by collectives, individuals andentities may obtain land use rights and hold such land use rights for development purposes. Individualsand entities may acquire land use rights in different ways. The two most important ways are land grantsfrom local land authorities and land transfers from land users who have already obtained the land userights.

Grant of Land Use Rights

Under the Interim Regulations of the People’s Republic of China on Assignment and Transfer of theState-owned Land Use Rights in Urban Areas（中華人民共和國城鎮國有土地使用權出讓和轉讓暫行條

例）(the ‘‘Interim Regulations on Assignment and Transfer’’) promulgated and enforced by the StateCouncil on 19 May 1990, a system of assignment and transfer of the right to use state-owned land hasbeen adopted. A land user shall pay a premium to the PRC government as consideration for theassignment of land use rights within certain terms, and a land user may transfer, lease, and mortgage orotherwise commercially exploit the land use rights within the terms of use. Under the InterimRegulations on Assignment and Transfer and the Urban Real Estate Administration Law of the PRC（中

華人民共和國城市房地產管理法）promulgated by the Standing Committee of the National People’sCongress (the ‘‘SCNPC’’) on 27 August 2009, the land administration authority under the localgovernment of the relevant city or county shall enter into an assignment contract with the land user foran assignment of land use rights. The land user shall pay the assignment price as stipulated in theassignment contract. After paying the assignment price in full, the land user shall register with the landadministration authority and obtain a land use rights certificate (the ‘‘Land Use Rights Certificate’’).The Land Use Rights Certificate is evidence of the acquisition of land use rights.

The grant of land use rights by way of competitive processes is subject to the Regulations on the Grantof State-owned Land Use Rights by Invitation of Tender, Auction or Listings-for-sale（招標拍賣挂牌出

讓國有土地使用權規定）, issued by the Ministry of Land and Resources of the PRC (‘‘MLR’’) on 9May 2002 and revised as of 28 September 2007 by the Regulations on Granting State-ownedConstruction Land Use Right through Tenders, Auction and Listing for Sale（招標拍賣挂牌出讓國有建

設用地使用權規定）(the ‘‘2007 Regulations’’), and the Rules on the Assignment of State-owned LandUse Right through Tenders, Auction and Putting up for Bidding（招標拍賣挂牌出讓國有土地使用權規

範）promulgated by MLR on 31 May 2006. In addition, MLR requires that, with effect from 31 August2004, the grant of land use rights must be made pursuant to auctions or listings at a land exchange andthat no land use rights for commercial uses may be granted by way of agreement. The 2007 Regulationsspecifically provide that land to be used for industrial, commercial, tourism, entertainment or commodityresidential purposes, or where there are two or more intended users for a certain piece of land, must begranted by way of competitive processes. A number of measures are provided in the 2007 Regulations toensure such grant of land use rights for commercial purposes is conducted openly and fairly. Forinstance, the relevant local land bureau must take into account various social, economic and planningconsiderations when deciding on the use of a certain piece of land, and its decision regarding land usedesignation is subject to the approval of the city or provincial government. The grantee shall apply forland registration and obtain the state-owned land use rights certificate upon full payment of the landpremium of the granted land according to the state-owned land use right granting contract. In the eventthat the land premium of the granted land is not paid in full, the grantee will not receive the land userights certificate. In addition, the announcement of tender, auction or listing-forbidding must be made 20days prior to the date on which such competitive process begins. Further, the 2007 Regulations alsostipulate that for listing at a land exchange, the time period for accepting bids must not be less than 10days.

109

In the case of tender, the relevant local land bureau granting land use rights should examine thequalifications of intended bidders and inform those qualified to participate in the bidding processes bysending out tender invitations. Bidders are required to submit sealed bids and pay a security deposit.

When land use rights are granted by way of tender, a tender evaluation committee consisting of not lessthan five members (including a representative of the grantor and other experts), formed by the relevantlocal land bureau is responsible for opening the tenders and deciding on the successful bidder. Thesuccessful bidder will then sign the land grant contract with the relevant local land bureau and pay thebalance of the land grant fee before obtaining the land use rights certificate.

Where land use rights are granted by way of auction, a public auction will be held by the relevant localland bureau. The land use rights are granted to the highest bidder. The successful bidder will then beasked to sign the land grant contract with the relevant local land bureau and pay the relevant land grantfee within a prescribed period.

Where land use rights are granted by way of listings-for-sale administered by the local government, apublic notice will be issued by the relevant local land bureau to specify the location, area and purpose ofuse of land and the initial bidding price, period for receiving bids and terms and conditions upon whichthe land use rights are proposed to be granted. The land use rights are granted to the bidder with thehighest bid who satisfies the terms and conditions. The successful bidder will enter into a land grantcontract with the relevant local land bureau and pay the relevant land grant fee within a prescribedperiod.

Land use rights granted by way of bilateral agreement are subject to the Regulation Concerning theGrant of Land Use Right Through Bilateral Agreement（協議出讓國有土地使用權規定）promulgated byMLR, effective on 1 August 2003. It provides that only when the methods of tender or auction or listingfor sale are not required by the laws, regulations and rules may land use rights be granted by bilateralagreement between the relevant land authority and the grantee party. The land grant fees relating to suchbilateral agreement should not be lower than the minimum price set by the central government. For landin areas with standard land prices, the purchase price of land pursuant to any bilateral agreement shouldnot be less than 70 per cent. of the standard land price of the relevant land category. If the priceguidelines are not followed, the validity of the provision of land grant fees in the land grant contractmay be deemed to be invalid. Only when there is only one prospective land user on the land to begranted may the land authority grant the land use rights through bilateral agreement, with the exceptionof land used for business, tourism, entertainment, commodity properties and others. After payment infull of the land grant fee, the land user may register with the land administration authority and obtain aLand Use Rights Certificate as evidence of the acquisition of the land use rights.

Land Transfer from Current Land User

In addition to a direct grant from the government, an investor may also acquire land use rights from landusers that have already obtained the land use rights by entering into a transfer contract or a jointdevelopment agreement with the land user. The transfer contract or joint development agreement mustbe registered with the relevant local land bureau at the municipal or county level for land use rights titlechange purposes. Upon a transfer of land use rights, all rights and obligations contained in the landgrant contract are deemed to be incorporated as part of the terms and conditions of such transfer.

Bidding and Tendering Management

Bidding and tendering of various construction projects have been provided for in the Bidding andTendering Law of the PRC（中華人民共和國招標投標法）(the ‘‘Bidding and Tendering Law’’)promulgated by the SCNPC on 30 August 1999 and amended by No. 86 Presidential Decree in 2017which became effective on 28 December 2017, the Regulation on the Implementation of the Bidding andTendering Law of the PRC（中華人民共和國招標投標法實施條例）promulgated by the State Councilon 20 December 2011 and amended on 1 March 2017 which became effective on 1 March 2017 and 19March 2018 which became effective on the same date, the Measures for the Construction Bidding and

110

Tendering of Construction Projects of the PRC（工程建設項目施工招標投標辦法）jointly promulgatedby NDRC, the then Ministry of Construction (‘‘MOC’’), the then Ministry of Railways, the thenMinistry of Communications, the Ministry of Information Industry of the PRC, the Ministry of WaterResources of the PRC, and the Civil Aviation Administration of China in 8 March 2003 and amended on11 March 2013 which became effective on 1 May 2013, the Administrative Measures for the Biddingand Tendering of Design of Construction Projects（建築工程設計招標投標管理辦法）issued by Ministryof Housing and Urban-Rural Development (‘‘MOHURD’’) on 24 January 2017 and became effective on1 May 2017, the Provisions on the Tendering Scope and Scale Standards of Construction Projects（工程

建設項目招標範圍和規模標準規定）issued by NDRC on 1 May 2000 and became effective on the samedate, the Administrative Measures for the Bidding and Tendering of Housing Construction andMunicipal Infrastructure Work（房屋建築和市政基礎設施工程施工招標投標管理辦法）issued by MOCon 1 June 2001 and became effective on the same date, and the Administrative Measures for the Biddingand Tendering of Highway Engineering Construction Project（公路工程建設項目招標投標管理辦法）promulgated by MOF on 8 December 2015 which became effective on 1 February 2016.

In accordance with the Bidding and Tendering Law, certain types of projects shall go through biddingprocesses during phases, including project survey, design, construction, supervision and procurement ofessential equipment and materials relating to project construction. Such projects include projects relatedto social public interests and public security, which include large infrastructure and utilities projects,projects using state-owned funds or financed by the government in whole or in part and projects usingloans or aid funds of international organisations or foreign governments.

The process of bidding and tendering consists of five stages including bid invitation, tendering, bidopening, bid evaluation and bid award. The principles of openness, fairness and equal competition shallbe followed in the bidding and tendering for construction project contracting, and the contractor shall bechosen after evaluation. After the contractor is determined, the tenderee shall issue the notification to thesuccessful bidder. The notification is legally binding on both the tenderee and the bid winner.

In accordance with the Bidding and Tendering Law and the Measures for the Construction Bidding andTendering of Construction Projects, if any project that shall undergo bidding as required by law failed togo through the bidding process, or the items subject to bidding are broken up into pieces or the biddingrequirement is otherwise evaded, the relevant administrative supervision department shall orderrectification within a specified period, and may impose a fine of 0.5 per cent. to up to 1 per cent. of thecontract amount of the relevant project. For projects using state-owned funds in whole or in part, theproject approval authority may suspend the implementation of the relevant project or suspend the fundappropriation, and impose punishment on the person directly in charge of the entity or other persondirectly liable. In addition, in accordance with the provisions of the Interpretations of the SupremePeople’s Court on Issues of Law Application during the Trial of Construction Contracts for BuildingProjects（最高人民法院關於審理建設工程施工合同糾紛案件適用法律問題的解釋）issued by theSupreme People’s Court on 25 October 2004 and became effective on 1 January 2005, if any projectthat is required to undergo a bidding process failed to go through the bidding process or the bid award isinvalid, the construction contract for such building projects shall become invalid.

Quality Management

Laws and regulations on project quality mainly include the Construction Law of the PRC（中華人民共

和國建築法）issued by SCNPC on 22 April 2011 and became effective on 1 July 2011, the Regulationon Quality Management of Construction Projects（建設工程質量管理條例）issued by the State Councilon 30 January 2000 and amended on 7 October 2017 which became effective on the same date, theMeasures for the Administration of Quality Warranty Funds of Construction Projects（建設工程質量保

證金管理辦法）issued jointly by MOHURD and MOF on 12 January 2005 and amended on 20 June2017 which became effective on 1 July 2017, the Administrative Measures for Completion AcceptanceRecord of Building Construction and Municipal Infrastructure Projects（房屋建築和市政基礎設施工程

竣工驗收備案管理辦法）issued by MOHURD on 19 October 2009 and became effective on the samedate, the Measures for Quality Warranty of Building Construction Projects（房屋建築工程質量保修辦

111

法）issued by MOC on 30 June 2000 and became effective on the same date, and the Measures forCompletion (Delivery) Acceptance of Highway Works（公路工程竣（交）工驗收辦法）promulgated bythe then Ministry of Transport (‘‘MOT’’) on 31 March 2004 and became effective on 1 October 2004,and its Implement promulgated by MOT on 1 May 2010.

According to the Regulation on Quality Management of Construction Projects, all building, surveying,designing, construction and supervision units shall be responsible for the quality of the constructionprojects. The competent administrative department of construction at or above county level is thecompetent authority for quality supervision and management of construction projects.

Environmental Protection Management

Major laws and regulations on environmental protection during the project construction process includethe Environmental Protection Law of the PRC（中華人民共和國環境保護法）promulgated by SCNPCon 26 December 1989 and became effective on the same date and amended by SCNPC on 24 April 2014which became effective on 1 January 2015, the Law on Environmental Impact Assessment of the PRC

（中華人民共和國環境影響評價法）promulgated by SCNPC on 28 October 2002 and amended on 2 July2016 which became effective on 1 September 2016, the Administrative Regulations on EnvironmentalProtection of Construction Projects（建設項目環境保護管理條例）issued by the State Council on 29November 1998 and amended on 16 July 2017 which became effective on 1 October 2017, and theAdministrative Measures for Environmental Protection Acceptance of Construction Projects uponCompletion（建設項目竣工環境保護驗收管理辦法）promulgated by the then State EnvironmentalProtection Administration on 27 December 2001 which became effective on 1 February 2002 andamended on 22 December 2010 which amendment became effective on the same date.

In accordance with the provisions of the Administrative Regulations on Environmental Protection ofConstruction Projects and the Administrative Measures for Environmental Protection Acceptance ofConstruction Projects upon Completion, the PRC government implements the system of environmentalimpact assessment on construction projects. No construction project shall commence operation, unlessinspected and approved by the relevant environmental protection bureau. After the completion of aconstruction project, the competent administrative department of environmental protection will undergoenvironmental protection acceptance process and assess whether the construction project has met therequirements for environmental protection.

112

TAXATION

The following summary of certain tax consequences of the purchase, ownership and disposition of theBonds is based upon applicable laws, regulations, rulings and decisions in effect as at the date of thisOffering Circular, all of which are subject to change (possibly with retroactive effect). This discussiondoes not purport to be a comprehensive description of all the tax considerations that may be relevant toa decision to purchase, own or dispose of the Bonds and does not purport to deal with consequencesapplicable to all categories of investors, some of which may be subject to special rules. Neither thesestatements nor any other statements in this Offering Circular are to be regarded as advice on the taxposition of any Bondholder or any persons acquiring, selling or otherwise dealing in the Bonds or onany tax implications arising from the acquisition, sale or other dealings in respect of the Bonds.

Persons considering the purchase of the Bonds should consult their own tax advisers concerning thepossible tax consequences of buying, holding or selling any Bonds under the laws of their country ofcitizenship, residence or domicile.

HONG KONG TAXATION

Withholding tax

No withholding tax is payable in Hong Kong in respect of payments of principal, premium (if any) orinterest in respect of the Bonds or in respect of any capital gains arising from the sale of the Bonds.

Profits tax

Hong Kong profits tax is chargeable on every person carrying on a trade, profession or business in HongKong in respect of profits arising in or derived from Hong Kong from such trade, profession or business(excluding profits arising from the sale of capital assets).

Interest on the Bonds may be deemed to be profits arising in or derived from Hong Kong from a trade,profession or business carried on in Hong Kong in the following circumstances:

(a) interest on the Bonds is derived from Hong Kong and is received by or accrues to a companycarrying on a trade, profession or business in Hong Kong;

(b) interest on the Bonds is derived from Hong Kong and is received by or accrues to a person otherthan a company (such as a partnership), carrying on a trade, profession or business in Hong Kongand is in respect of the funds of that trade, profession or business; or

(c) interest on the Bonds is received by or accrues to a financial institution (as defined in the InlandRevenue Ordinance (Cap. 112) of Hong Kong) and arises through or from the carrying on by thefinancial institution of its business in Hong Kong.

Sums received by or accrued to a financial institution by way of gains or profits arising through or fromthe carrying on by the financial institution of its business in Hong Kong from the sale, disposal andredemption of the Bonds will be subject to Hong Kong profits tax.

Sums derived from the sale, disposal or redemption of the Bonds will be subject to Hong Kong profitstax where received by or accrued to a person, other than a financial institution, who carries on a trade,profession or business in Hong Kong and the sum has a Hong Kong source unless otherwise exempted.The source of such sums will generally be determined by having regard to the manner in which theBonds are acquired and disposed of.

Stamp duty

No Hong Kong stamp duty will be chargeable upon the issue or transfer of a Bond.

113

PRC TAXATION

The following summary accurately describes the principal PRC tax consequences of ownership of theBonds by beneficial owners who, or which, are not residents of mainland China for the PRC taxpurposes. These beneficial owners are referred to as non-resident Bondholders in this ‘‘PRC Taxation’’section. In considering whether to invest in the Bonds, investors should consult their individual taxadvisers with regard to the application of PRC tax laws to their particular situations as well as any taxconsequences arising under the laws of any other tax jurisdiction. Reference is made to PRC taxes fromthe taxable year beginning on or after 1 January 2008.

Pursuant to the EIT Law effective on 1 January 2008, as amended on 24 February 2017 and effective onthe same date, and the PRC Individual Income Tax Law, as amended on 30 June 2011 and effective on1 September 2011, and their implementation regulations, an income tax is imposed on the interests byway of withholding in respect of the Bonds, paid by the Issuer (if such interests are regarded as incomederived from sources within the PRC under the EIT Law and/or the Individual Income Tax Law) to non-resident Bondholders, including non-resident enterprises and non-resident individuals. The current ratesof such income tax are 20 per cent. (for non-resident individuals) and 10 per cent. (for non-residententerprises) of the gross amount of the interest. However, the tax so charged on interests paid on theBonds to non-resident Bondholders who or which are residents of Hong Kong (including enterpriseholders and individual holders) as defined under the Arrangement between mainland China and HongKong for Purpose of the Avoidance of Double Taxation will be 7 per cent. of the gross amount of theinterest pursuant to the arrangement between mainland China and Hong Kong and relevant interpretationof the arrangement formulated by the State Administration of Taxation of China.

Under the EIT Law and its implementation rules, any gains realised on the transfer of the Bonds byholders who are deemed under the EIT Law as non-resident enterprises may be subject to PRCenterprise income tax if such gains are regarded as income derived from sources within the PRC. Underthe EIT Law, a ‘‘non-resident enterprise’’ means an enterprise established under the laws of ajurisdiction other than the PRC and whose actual administrative organisation is not in the PRC, whichhas established offices or premises in the PRC, or which has not established any offices or premises inthe PRC but has obtained income derived from sources within the PRC. In addition, there is uncertaintyas to whether gains realised on the transfer of the Bonds by individual holders who are not PRC citizensor residents will be subject to PRC individual income tax. If such gains are subject to PRC income tax,the 10 per cent. enterprise income tax rate and 20 per cent. individual income tax rate will applyrespectively unless there is an applicable tax treaty or arrangement that reduces or exempts such incometax. The taxable income will be the balance of the total income obtained from the transfer of the Bondsminus all costs and expenses that are permitted under PRC tax laws to be deducted from the income.According to an arrangement between mainland China and Hong Kong for avoidance of double taxation,Bondholders who are Hong Kong residents, including both enterprise holders and individual holders,will be exempted from PRC income tax on capital gains derived from a sale or exchange of the Bonds.

On 23 March 2016, MOF and the State Administration of Taxation issued Circular 36, which introduceda new value-added tax (‘‘VAT’’) from 1 May 2016. Under Circular 36, VAT is applicable where theentities or individuals provide services within the PRC. The operating income generated from theprovision of taxable sale of services by entities and individuals, such as financial services, shall besubject to PRC VAT if the seller or buyer of the services is within the PRC. In the event that foreignentities or individuals do not have a business establishment in the PRC, the purchaser of services shallact as the withholding agent. According to the Explanatory Notes to Sale of Services, Intangible Assetsand Real Property attached to Circular 36, financial services refer to the business activities of financialand insurance operations, including loan processing services, financial services of direct charges,insurance services and the transfer of financial instruments, and the VAT rate is 6 per cent. Accordingly,the interest and other interest-like earnings received by a non-PRC resident Bondholder from the Issuerwill be subject to PRC VAT at the rate of 6 per cent. The Issuer will be obligated to withhold VAT of 6per cent. and certain surcharges on VAT for payments of interest and certain other amounts on the

114

Bonds paid by the Issuer to Bondholders that are non-resident enterprises or individuals. And as thewithholding agent, the Issuer shall calculate the withholding tax according to the following formula:withholding tax = price paid by the purchaser ÷ (1 + tax rate) × tax rate. Pursuant to the InterimRegulation of the PRC on City Maintenance and Construction Tax, the Interim Provisions on theCollection of Educational Surcharges and the Notice of the Ministry of Finance on the Relevant Mattersregarding Unifying the Policies on Local Education Surcharges, construction tax up to 7 per cent., aneducational surcharge of 3 per cent. and a local educational surcharge of 2 per cent. will be applicablewhen entities and individuals are obliged to pay VAT (for an aggregate of up to 12 per cent. on anyVAT payable). However, there is uncertainty as to whether gains derived from a sale or exchange ofBonds consummated outside of the PRC between non-PRC resident Bondholders will be subject to PRCVAT. VAT is unlikely to be applicable to any transfer of Bonds between entities or individuals locatedoutside of the PRC and therefore unlikely to be applicable to gains realised upon such transfers ofBonds, but there is uncertainty as to the applicability of VAT if either the seller or buyer of Bonds islocated inside the PRC. As Circular 36 together with other laws and regulations pertaining to VAT arerelatively new, the interpretation and enforcement of such laws and regulations involve uncertainties.

The Issuer has agreed to pay additional amounts to holders of the Bonds so that holders of the Bondswould receive the full amount of the scheduled payment, as further set out in ‘‘Terms and Conditions ofthe Bonds’’.

No PRC stamp duty will be imposed on non-resident Bondholders either upon issuance of the Bonds orupon a subsequent transfer of Bonds.

115

SUBSCRIPTION AND SALE

The Issuer has entered into a subscription agreement with the Managers dated 17 September 2021 (the‘‘Subscription Agreement’’), pursuant to which and subject to certain conditions contained therein, theIssuer has agreed to sell to the Managers, and the Managers have agreed to, severally but not jointly,subscribe and pay for, or to procure subscribers to subscribe and pay for, the aggregate principal amountof the Bonds indicated in the following table.

Principalamount of theBonds to besubscribed

U.S.$CEB International Capital Corporation Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000,000China International Capital Corporation Hong Kong Securities Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000,000Zhongtai International Securities Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,000,000Hua Xia Bank Co., Limited Hong Kong Branch. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000,000Industrial Bank Co., Ltd. Hong Kong Branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,000,000Bank of China Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000BOCOM International Securities Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000CCB International Capital Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000China Credit International Securities Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000China Minsheng Banking Corp., Ltd., Hong Kong Branch. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000CLSA Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000CNCB (Hong Kong) Capital Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000Guotai Junan Securities (Hong Kong) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000Shenwan Hongyuan Securities (H.K.) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000SPDB International Capital Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000,000

The Subscription Agreement provides that the Managers and their respective affiliates, and theirrespective directors, officers and employees, will be indemnified against certain liabilities in connectionwith the offer and sale of the Bonds. The Subscription Agreement provides that the obligations of theManagers are subject to certain conditions precedent, and entitles the Managers to terminate it in certaincircumstances prior to payment being made to the Issuer.

The Managers and certain of their respective subsidiaries or affiliates have performed certain investmentbanking and advisory services for, and entered into certain commercial banking transactions with, theIssuer and/or its subsidiaries, from time to time, for which they have received customary fees andexpenses. The Managers and their respective subsidiaries or affiliates may, from time to time, engage intransactions with and perform services for the Issuer and/or its subsidiaries in the ordinary course ofbusiness.

In connection with the offering of the Bonds, the Managers and/or their respective affiliate(s) may act asan investor for their own account and may take up Bonds in the offering and in that capacity may retain,purchase or sell for its own account such securities and any securities of the Issuer, and may offer orsell such securities or other investments otherwise than in connection with the offering. Accordingly,references herein to the Bonds being ‘‘offered’’ should be read as including any offering of the Bonds tothe Managers and/or their respective affiliates acting in such capacity. Such persons do not intend todisclose the extent of any such investment or transactions otherwise than in accordance with any legal orregulatory obligation to do so. The Managers or their respective affiliates may purchase the Bonds fortheir own account or for the accounts of their customers and enter into transactions, including creditderivatives such as asset swaps, repackaging and credit default swaps relating to the Bonds and/or othersecurities of the Issuer or its subsidiaries or associates at the same time as the offer and sale of theBonds or in secondary market transactions. Such transactions would be carried out as bilateral tradeswith selected counterparties and separately from any existing sale or resale of the Bonds to which thisOffering Circular relates (notwithstanding that such selected counterparties may also be purchasers ofthe Bonds).

116

GENERAL

The distribution of this Offering Circular or any offering material and the offering, sale or delivery ofthe Bonds is restricted by law in certain jurisdictions. Therefore, persons who may come into possessionof this Offering Circular or any offering material are advised to consult their own legal advisers as towhat restrictions may be applicable to them and to observe such restrictions. This Offering Circular maynot be used for the purpose of an offer or invitation in any circumstances in which such offer orinvitation is not authorised.

No action has been or will be taken in any jurisdiction by the Issuer or the Managers that would permita public offering, or any other offering under circumstances not permitted by applicable law, of theBonds, or possession or distribution of this Offering Circular, any amendment or supplement theretoissued in connection with the proposed resale of the Bonds or any other offering or publicity materialrelating to the Bonds, in any country or jurisdiction where action for that purpose is required.Accordingly, the Bonds may not be offered or sold, directly or indirectly, and neither this OfferingCircular nor any other offering material or advertisements in connection with the Bonds may bedistributed or published, by the Issuer or the Managers, in or from any country or jurisdiction, except incircumstances which will result in compliance with all applicable rules and regulations of any suchcountry or jurisdiction and will not impose any obligations on the Issuer or the Managers. If ajurisdiction requires that an offering of Bonds be made by a licensed broker or dealer and the Managersor any affiliate of the Managers is a licensed broker or dealer in that jurisdiction, such offering shall bedeemed to be made by the Managers or such affiliate on behalf of the Issuer in such jurisdiction.

UNITED STATES

The Bonds have not been and will not be registered under the Securities Act and, subject to certainexceptions, may not be offered or sold within the United States or to U.S. persons.

The Bonds are being offered and sold outside of the United States in reliance on Regulation S.

In addition, until 40 days after the commencement of any offering, an offer or sale of Bonds from thatoffering within the United States by any dealer whether or not participating in the offering may violatethe registration requirements of the Securities Act. Terms used in this paragraph have the meaningsgiven to them by Regulation S.

UNITED KINGDOM

Each of the Managers has represented, warranted and agreed that:

(a) it has only communicated or caused to be communicated, and will only communicate or cause tobe communicated, any invitation or inducement to engage in investment activity (within themeaning of Section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) receivedby it in connection with the issue or sale of any Bonds in circumstances in which Section 21(1) ofthe FSMA does not apply to the Issuer; and

(b) it has complied and will comply with all applicable provisions of the FSMA with respect toanything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom.

HONG KONG

Each of the Managers has represented and agreed that

(i) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, anyBonds other than: (a) to ‘‘professional investors’’ as defined in the Securities and FuturesOrdinance (Cap. 571) of Hong Kong (the ‘‘SFO’’) and any rules made under the SFO; or (b) in

117

other circumstances which do not result in the document being a ‘‘prospectus’’ as defined in theCompanies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong (the‘‘C(WUMP)O’’) or which do not constitute an offer to the public within the meaning of theC(WUMP)O; and

(ii) it has not issued or had in its possession for the purposes of issue, and will not issue or have in itspossession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement,invitation or document relating to the Bonds, which is directed at, or the contents of which arelikely to be accessed or read by, the public of Hong Kong (except if permitted to do so under thesecurities laws of Hong Kong) other than with respect to the Bonds which are or are intended to bedisposed of only to persons outside Hong Kong or only to ‘‘professional investors’’ as defined inthe SFO and any rules made under the SFO.

THE PEOPLE’S REPUBLIC OF CHINA

Each of the Managers has represented, warranted and undertaken that the Bonds are not being offered orsold and may not be offered or sold, directly or indirectly, in the PRC (for such purposes, not includingthe Hong Kong and Macau Special Administrative Regions or Taiwan), except as permitted by thesecurities laws of the PRC.

SINGAPORE

Each of the Managers has acknowledged that this Offering Circular has not been registered as aprospectus with the Monetary Authority of Singapore. Accordingly, each of the Managers hasrepresented, warranted and agreed that it has not offered or sold any Bonds or caused such Bonds to bemade the subject of an invitation for subscription or purchase, and will not offer or sell such Bonds orcause such Bonds to be made the subject of an invitation for subscription or purchase, and has notcirculated or distributed, nor will it circulate or distribute, this Offering Circular or any other documentor material in connection with the offer or sale, or invitation for subscription or purchase, of suchBonds, whether directly or indirectly, to any person in Singapore other than (i) to an institutionalinvestor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, asmodified or amended from time to time (the ‘‘SFA’’)), (ii) to a relevant person (as defined in Section275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) ofthe SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwisepursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the Bonds are subscribed or purchased under Section 275 of the SFA by a relevant person whichis:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the solebusiness of which is to hold investments and the entire share capital of which is owned by one ormore individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investmentsand each beneficiary of the trust is an individual who is an accredited investor,

securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) ofthat corporation or the beneficiaries’ rights and interests (howsoever described) in that trust shall not betransferred within six months after that corporation or that trust has acquired the Bonds pursuant to anoffer made under Section 275 of the SFA except:

(1) to an institutional investor or to a relevant person, or to any person arising from an offer referredto in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(2) where no consideration is or will be given for the transfer;

118

(3) where the transfer is by operation of law;

(4) as specified in Section 276(7) of the SFA; or

(5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securitiesand Securities-based Derivatives Contracts) Regulations 2018.

119

SUMMARY OF CERTAIN DIFFERENCES BETWEEN PRC GAAP AND IFRS

The consolidated financial statements of the Issuer included in this Offering Circular were prepared andpresented in accordance with PRC GAAP. PRC GAAP is substantially in line with IFRS, except forcertain modifications. The following is a general summary of certain differences between PRC GAAPand IFRS on recognition and presentation as applicable to the Issuer. Since the summary is not meantto be exhaustive, there can be no assurance regarding the completeness of the financial information andrelated footnote disclosure between PRC GAAP and IFRS and no attempt has been made to quantifysuch differences. Had any such quantification or reconciliation been undertaken by the Issuer, otherpotentially significant accounting and disclosure differences may have been required that are notidentified below. Additionally, no attempt has been made to identify possible future differences betweenPRC GAAP and IFRS as a result of prescribed changes in accounting standards. Regulatory bodies thatpromulgate PRC GAAP and IFRS have significant ongoing projects that could affect future comparisonsor events that may occur in the future.

GOVERNMENT GRANT

Under PRC GAAP, the relocation compensation for public interests is required to be recognised asspecial payables. The income from compensation attributable to losses of fixed assets and intangibleassets, related expenses, losses from production suspension incurred during the relocation andreconstruction period and purchases of assets after the relocation shall be transferred from specialpayables to deferred income and accounted for in accordance with the government grants standard. Thesurplus reached after deducting the amount transferred to deferred income shall be recognised in capitalreserve.

Under IFRS, if an entity relocates for reasons of public interests, the compensation received shall berecognised in profit or loss.

REVERSAL OF AN IMPAIRMENT LOSS

Under PRC GAAP, once an impairment loss is recognised for a long-term asset (including investmentproperty valued under cost model, long-term equity investments, fixed assets, intangible assets andgoodwill, etc.), it shall not be reversed in any subsequent period.

Under IFRS, an impairment loss recognised in prior periods for an asset other than goodwill could bereversed if there has been a change in the estimates used to determine the asset’s recoverable amountsince the last impairment loss was recognised. The increased carrying amount due to reversal should notbe more than what the depreciated historical cost would have been if the impairment had not beenrecognised.

FIXED ASSETS AND INTANGIBLE ASSETS

Under PRC GAAP, only the cost model is allowed. Under IFRS, an entity can choose either the costmodel or the revaluation model as its accounting policy.

120

GENERAL INFORMATION

1. Clearing System: The Bonds have been accepted for clearance through Euroclear and Clearstreamunder Common Code 236121119 and the ISIN for the Bonds is XS2361211191.

2. Authorisations: The Issuer has obtained all necessary consents, approvals and authorisations inconnection with the issue and performance of its obligations under the Bonds, the Trust Deed andthe Agency Agreement. The issue of the Bonds was authorised by resolutions of the board ofdirectors of the Issuer dated 2 March 2021 and shareholders’ resolutions of the Issuer dated 15March 2021.

3. No Material and Adverse Change: Except as otherwise disclosed in this Offering Circular, therehas been no material adverse change, or any development or event involving a prospective change,in the condition (financial or other), prospects, results of operations or general affairs of the Issueror the Group, which is material and adverse in the context of the issue and offering of the Bondssince 31 December 2020.

4. Litigation: Except as otherwise disclosed in this Offering Circular, none of the Issuer or anymember of the Group is involved in any litigation or arbitration proceedings which could have amaterial and adverse effect on the Group’s business, results of operations and financial condition,nor is the Issuer aware that any such proceedings are pending or threatened. The Issuer may fromtime to time become a party to various legal or administrative proceedings arising in the ordinarycourse of its business.

5. Available Documents: Copies of the Issuer’s audited consolidated financial statements as at andfor the years ended 31 December 2019 and 2020, the Trust Deed and the Agency Agreementrelating to the Bonds will be available for inspection from the Issue Date at the specified office ofthe Principal Paying Agent, and upon prior written request and proof of holding at the principalplace of business of the Trustee at all reasonable times during normal business hours (being 9.00a.m. to 3.00 p.m.), so long as any Bond is outstanding.

6. Financial Statements: The Issuer’s financial statements, which are included elsewhere in thisOffering Circular, have been audited by Hexin as stated in its report dated 29 April 2020. TheIssuer’s financial statements for the year ended 31 December 2020, which are included elsewherein this Offering Circular, have been audited by Yongtuo as stated in its report dated 29 April 2021.

7. Listing of Bonds: Application will be made to the Hong Kong Stock Exchange for the listing of,and permission to deal in, the Bonds by way of debt issues to Professional Investors only, andsuch permission is expected to become effective on or about 28 September 2021.

8. Legal Entity Identifier: The Issuer’s Legal Entity Identifier number is 3003009FPXBA05W36D22.

121

INDEX TO FINANCIAL STATEMENTS

The audited consolidated financial statements of the Issuer as at and for the year ended31 December 2020

Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6

Consolidated Statement of Profit or Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10

Consolidated Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12

Consolidated Statement of Changes in Owner’s Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-18

The audited consolidated financial statements of the Issuer as at and for the year ended31 December 2019

Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-149

Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-155

Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-159

Consolidated Statement of Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-161

Consolidated Statement of Changes in Owners’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-163

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-167

Note: According to the Joint Circular, any public assets such as public schools, public hospitals, public cultural facilities, parks,public squares, office buildings of government departments and public institutions, municipal roads, non-toll roads, non-operating water conservancy facilities, no-charge pipe network facilities and other public assets and the usage rights ofreserve land cannot be counted towards the Group’s assets for the purposes of issuing medium and long-term foreign debts.The Issuer estimates that the Group’s Public Assets represented approximately 20 per cent. of the Group’s total assets as at31 December 2020. Potential investors should not take into account the Group’s Public Assets when assessing the Group’sbusiness, financial condition, results of operations and prospects as the Group’s Public Assets cannot be utilised todischarge any obligations of the Group, including the repayment of any amount under the Bonds. As the Group’s PublicAssets have not been excluded from the Issuer’s consolidated financial statements included elsewhere in this OfferingCircular, potential investors must therefore exercise caution when using such consolidated financial statements to evaluatethe Group’s business, financial condition, results of operations and prospects. Please see ‘‘Risk Factors – Risks relating tothe Group’s Business – Any public assets of the Group should not be taken into account when the Group’s business,financial condition, results of operations and prospects are assessed’’ for further information.

F-1

Prepared by: Weifang Urban Construction and Development Investment Group Co., Ltd. Expressed in RMB

Assets Note V 2020 2019

Current assets:

Monetary funds 1 7,695,944,097.31 6,892,096,927.43

Settlement provisions

Lending funds

Transactional financial assets 2 1,301,714,049.92 2,700,000,000.00

Derivative financial assets

Notes receivable 3 60,063,921.09 11,655,550.56

Accounts receivable 4 4,619,367,472.97 3,458,176,011.59

Receivables financing 5 243,601,934.52 134,529,791.33

Prepayments 6 245,567,682.42 225,035,121.45

Premiums receivable

Reinsurable accounts receivable

Reinsurance contract reserves receivable

Other receivables 7 5,222,685,870.83 4,428,311,853.00

Recoursable financial assets acquired

Inventory 8 10,858,887,129.56 15,356,481,303.07

Contract assets 9 5,646,628,149.81

Assets held for sale

Non-current assets due within one year 10 50,061,309.66 80,038,463.52

Other current assets 11 348,240,276.37 280,151,138.19

Total current assets 36,292,761,894.46 33,566,476,160.14

Non-current assets:

Granted loans and advances

Debt investment

Other debt investments

Long-term receivables 12 8,388,767,201.16 7,811,010,309.95

Long-term equity investment 13 6,772,192,296.38 4,259,152,630.41

Investment in other equity instruments 14 1,307,969,504.42 1,113,435,920.00

Other non-current financial assets 0.00 1,700,000.00

Investment real estate 15 78,988,736.23 52,562,552.42

Fixed assets 16 8,726,259,157.80 13,416,792,892.85

Construction in progress 17 38,936,604,185.25 37,406,008,208.53

Public welfare biological assets 18 7,717,179.77 7,719,179.81

Oil and gas asset

Intangible assets 19 908,240,231.85 933,126,782.47

Development expenditure

Goodwill 20 686,069,434.80 843,799,913.65

Long-term deferred expenses 21 64,902,720.76 30,839,676.44

Deferred income tax assets 22 152,644,307.00 48,420,097.99

Other non-current assets 23 4,409,545,262.60 37,664,374.79

Total non-current assets 70,439,900,218.02 65,962,232,539.31

Total assets 106,732,662,112.48 99,528,708,699.45

Legal Representative: Accounting Principal: Manager of the Finance Dept.:

Consolidated Statement of Financial Position

For the year ended December 31, 2020

F-6

Expressed in RMB

Liabilities and owner's equity Note V 2020 2019

Current liabilities:

Short-term loan 24 3,327,294,809.52 2,900,320,000.00

Borrow from the central bank

Money deposits accepted and interbank deposits

Borrowed funds

Transactional financial liabilities

Derivative financial liabilities

Notes payable 25 1,203,108,880.51 1,769,719,443.99

Accounts payable 26 4,810,828,573.80 4,903,098,715.33

Advance from customers 27 532,606,518.42 194,556,079.65

Contract liabilities 28 99,431,731.21

Financial assets sold under repurchase agreements

Money deposits accepted and interbank deposits

Agent trading securities

Agent securities underwriting

Employee compensation payable 29 85,418,547.31 78,961,044.61

Taxes payable 30 160,377,394.76 197,053,043.36

Other payables 31 7,499,015,817.36 7,757,142,207.52

Fees and commissions

Reinsurance accounts payable

Held for sale liabilities

Non-current liabilities due within one year 32 5,227,927,888.00 3,928,813,810.43

Other current liabilities 33 138,693,000.31 120,661,625.26

Total current liabilities 23,084,703,161.20 21,850,325,970.15

Non-current liabilities

Insurance contract reserve

Long term loan 34 12,787,203,691.26 8,763,311,893.39

Bonds payable 35 16,990,002,473.66 16,326,131,032.70

Of which: preferred shares

Perpetual bond

Long-term payables 36 5,293,334,400.18 5,062,538,452.89

Long-term employee compensation payable

Estimated liabilities 37 64,276,429.10 38,411,519.70

Deferred income 38 205,869,333.94 177,958,679.60

Deferred income tax liabilities 22 132,691,361.54 128,174,341.45

Other non-current liabilities 39 24,837,500.00 17,410,780.14

Total non-current liabilities 35,498,215,189.68 30,513,936,699.87

Total Liabilities 58,582,918,350.88 52,364,262,670.02

Owner's equity (or shareholder's equity):

Equity (or paid-in capital) 40 5,000,000,000.00 5,000,000,000.00

Other equity instruments


Perpetual bond

Capital reserve 41 28,916,124,811.72 28,305,159,093.58

Less: treasury stocks 0.00

Other comprehensive income 42 15,440,530.87 22,341,366.24

Special reserves

Surplus reserve 43 166,298,990.04 136,751,241.02

General risk provision

Undistributed profit 44 2,748,468,026.56 2,759,625,277.07

Total owner's equity (or shareholder's equity) attributable to the parent company 36,846,332,359.19 36,223,876,977.91

Non-controlling interests 11,303,411,402.41 10,940,569,051.52

Total owner's equity (or shareholders' equity) 48,149,743,761.60 47,164,446,029.43

Total liabilities and owner’s equity (or shareholders’ equity) 106,732,662,112.48 99,528,708,699.45


Consolidated Statement of Financial Positon

For the year ended December 31, 2020Prepared by: Werifng Urban Construction and Development Investment Group Co., Ltd.

F-7


Assets Note XII 2020 2019

Current assets:

Monetary funds 2,526,361,340.88 2,668,166,446.70

Transactional financial assets 1,400,000,000.00

Derivative financial assets

Notes receivable 0.00

Accounts receivable 1 377,481,300.00 773,971,800.00

Receivables financing 0.00

Prepayments 619,811.32

Other receivables 2 4,800,219,826.14 4,311,407,336.81

Inventory 5,759,090,239.45 5,775,200,514.03

Contract assets

Assets held for sale

Non-current assets due within one year 573,426,349.77

Other current assets 24,712,621.65 33,538,878.14

Total current assets 14,061,911,489.21 14,962,284,975.68

Non-current assets:

Debt investment 0.00

Other debt investments 0.00

Long-term receivables 316,443,900.00 316,443,900.00

Long-term equity investment 3 14,924,257,424.93 11,889,721,190.02

Investment in other equity instruments 698,000,000.00 496,850,000.00

Other non-current financial assets

Investment real estate

Fixed assets 2,225,964,064.92 2,291,468,932.27

Construction in progress 30,793,087,497.14 29,993,187,051.47

Productive biological assets

Oil and gas asset

Intangible assets 114,476,320.86 122,336,193.50

Development expenditure

Goodwill

Long-term prepaid expenses

Deferred income tax assets 34,593,003.08 8,644,294.88

Other non-current assets 699,646,349.77

Total non-current assets 49,106,822,210.93 45,818,297,911.91

Total assets 63,168,733,700.14 60,780,582,887.59


Statement of Financial Position


F-8


Assets Note 12For the year ended December 31, 2020December 31, 2019

Current liabilities:

Short-term loan 1,450,000,000.00 1,100,000,000.00

Transactional financial liabilities

Derivative financial liabilities

Notes payable 135,000,000.00 300,000,000.00

Accounts payable 3,198,494,389.59 3,479,862,452.48

Advance from customers 4,149,222.80 4,604,267.81

Contract liabilities 0.00

Employee compensation payable 1,846,532.00 1,584,670.00

Taxes payable 33,445,565.11 21,594,013.34

Other payables 16,209,873,612.75 19,421,263,249.01

Held for sale liabilities

Non-current liabilities due within one year 2,739,031,029.37 1,869,442,634.81

Other current liabilities 0.00

Total current liabilities 23,771,840,351.62 26,198,351,287.45

Non-current liabilities:

Long term loan 2,993,000,000.00 1,325,000,000.00

Bonds payable 9,647,347,609.97 7,192,865,936.85


Perpetual bond

Long-term payables 1,203,675,779.81 1,212,374,885.61

Long-term employee compensation payable

Estimated liabilities 0.00

Deferred income 0.00

Deferred income tax liabilities 0.00

Other non-current liabilities

Total non-current liabilities 13,844,023,389.78 9,730,240,822.46

Total Liabilities 37,615,863,741.40 35,928,592,109.91

Owner' equity (or shareholder' equity):

Equity (or paid-in capital) 5,000,000,000.00 5,000,000,000.00

Other equity instruments


Perpetual bond

Capital reserve 18,987,677,199.89 18,503,913,194.68

Less: treasury stocks

Other comprehensive income 15,845,139.30 22,327,321.05

Special reserves

Surplus reserve 166,298,990.04 136,751,241.02

Undistributed profit 1,383,048,629.51 1,188,999,020.93

Total owner's equity (or shareholder's equity) 25,552,869,958.74 24,851,990,777.68

Total Liabilities and Owner's Equity 63,168,733,700.14 60,780,582,887.59


Statement of Financial Position


F-9


Item Note V 2020 2019

I. Total operating income 9,522,122,113.59 3,641,932,365.79

Including: Operating income 45 9,522,122,113.59 3,641,932,365.79

Interest income

Premiums earned

Fee and commission income

II. Total operating costs 9,831,551,359.98 3,774,854,842.77

Of which: Operating costs 45 8,521,662,016.84 2,701,465,527.39

Interest expense

Bank charge and commission expenses

Surrender charge

Net payouts

Withdrawal of net insurance contract reserves

Bond insurance expense

Reinsurance costs

Taxes and surcharges 46 109,731,572.74 106,739,545.76

Selling expenses 47 139,963,008.43 82,272,738.63

G&A expenses 48 349,864,000.79 233,853,820.84

R&D expenses 49 127,111,054.77 61,145,986.96

Financial expenses 50 583,219,706.41 589,377,223.19

Including: interest expense 912,948,969.73 675,827,895.53

Interest income 261,940,620.02 151,818,927.57

Add: other income 51 545,898,264.43 474,159,539.23

Investment income (losses are listed with "-") 52 384,110,514.50 135,336,689.05

Including: investment income from associates and joint ventures 293,710,299.09 145,334,384.01

Derecognized income of financial assets measured at amortized cost (losses are listed with

"—")

Exchange gains (losses are listed with "-")

Net exposure hedging gains (losses are listed with "—")

Gains from changes in fair value (losses are listed with "-")

Credit impairment loss (losses are listed with "-") 53 -135,344,486.56 24,895,082.26

Asset impairment loss (losses are listed with "-") 54 -216,676,374.01 -1,298,862.08

Income from asset disposal (losses are listed with "-") 55 27,503,798.22 -1,380,853.49

III. Operating profit (losses are listed with "-") 296,062,470.19 498,789,117.99

Plus: non-operating income 56 13,825,192.34 12,518,760.90

Less: non-operating expenses 57 15,972,876.61 78,299,058.09

IV. Total profit (total loss is listed with "-") 293,914,785.92 433,008,820.80

Deduct: income tax expense 58 73,219,795.09 30,901,203.57

V. Net profit (net loss is listed with "-") 220,694,990.83 402,107,617.23

(1) Classification by business continuity

1. Net profit from going concern (net loss is listed with "-") 220,694,990.83 402,107,617.23

2. Net profit from discontinued operations (net loss is listed with "-")

(2) Classification by ownership

1. Net profit attributable to shareholder of the parent company (net loss is listed with "-") 174,163,671.65 404,504,209.26

2. Gains and losses from non-controlling interests (net losses are listed with "-") 46,531,319.18 -2,396,592.03

VI. Other comprehensive income after tax -8,420,751.32 514,201.46

i. Other comprehensive income after tax attributable to owner of the parent company -6,900,835.37 462,798.43

1. Other comprehensive income that cannot be reclassified into profit and loss -429,200.00

(1) Re-measurement of changes in defined benefit plans (2) Other comprehensive income that cannot be transferred to profit or loss under the equity

method (3) Changes in the fair value of investments in other equity instruments -429,200.00

(4) Changes in fair value of the company's own credit risk

(5) Other

2. Other comprehensive income reclassified into profit and loss -6,471,635.37 462,798.43

(1) Other comprehensive income that can be converted to profit or loss under the equity method -6,482,181.75 448,753.24

(2) Gains and losses from changes in the fair value of other debt investments

(3) Gains and losses from changes in fair value of available-for-sale financial assets

(4) Amount of financial assets reclassified and included in other comprehensive income

(5) Gains and losses from reclassification of the held-to-maturity investment to available-for-sale financial asset

(6) Credit impairment reserves for other debt investment

(7) Hedge reserve for cash flow

(8) Translation differences of foreign currency financial statements 10,546.38 14,045.19

(9) Other

ii. Other comprehensive income after tax attributable to non-controlling interests -1,519,915.95 51,403.03

VII. Total comprehensive income 212,274,239.51 402,621,818.69

Of which: total comprehensive income attributable to owner of the parent company 167,262,836.28 404,967,007.69

Total comprehensive income attributable to non-controlling interests 45,011,403.23 -2,345,189.00

VIII. Earnings per share:

i. Basic earnings per share

ii. Diluted earnings per share


Consolidated Statement of Profit or LossFor the year ended December 31, 2020

F-10


Item Note XII 2020 2019

I. Operating income 4 42,485,976.18 992,242,256.06

Less: operating costs 4 76,283,398.33 524,903,122.52

Taxes and surcharges 52,002,199.64 43,171,304.77

Selling expenses 0.00

G&A expenses 56,632,203.16 32,927,683.28

R&D expenses 0.00

Financial expenses 119,425,212.08 405,734,510.07

Including: interest expense 439,648,068.70 387,526,013.48

Interest income 211,826,315.52 19,382,763.91

Add: other income 271,661,001.39 271,500,000.00

Investment income (losses are listed with "-") 5 336,313,212.81 140,418,565.30

Including: investment income from associates and joint ventures 296,102,743.48 139,209,052.27

Derecognized income of financial assets measured at amortized cost (losses are listed with "—")

Net exposure hedging gains (losses are listed with "—")

Gains from changes in fair value (losses are listed with "-")

Credit impairment loss (losses are listed with "-") -99,987,408.08 -761,100.00

Asset impairment loss (losses are listed with "-") 0.00

Income from asset disposal (losses are listed with "-") 36,591,542.04 -1,129,204.66

II. Operating profit (losses are listed with "-") 282,721,311.13 395,533,896.06

Plus: non-operating income 3,494,800.00 2,235,050.00

Less: non-operating expenses 972,866.44 1,112,303.67

III. Total profit (total loss is listed with "-") 285,243,244.69 396,656,642.39

Deduct: income tax expense -10,234,245.50 425,000.00

IV. Net profit (net loss is listed with "-") 295,477,490.19 396,231,642.39

i. Net profit from going concern (net loss is listed with "-") 295,477,490.19 396,231,642.39

ii. Net profit from discontinued operations (net loss is listed with "-") - -

V. Net after-tax of other comprehensive income -6,482,181.75 448,753.24

i. Other comprehensive income that cannot be reclassified into profit and loss

1. Re-measurement of changes in defined benefit plans

2. Other comprehensive income that cannot be transferred to profit or loss under the equity method

3. Changes in the fair value of investments in other equity instruments

4. Changes in fair value of the company's own credit risk

5. Other

ii. Other comprehensive income reclassified into profit and loss -6,482,181.75 448,753.24

1. Other comprehensive income that can be converted to profit or loss under the equity method -6,482,181.75 448,753.24

2. Gains and losses from changes in the fair value of other debt investments

3. Gains and losses from changes in fair value of available-for-sale financial assets

4. Amount of financial assets reclassified and included in other comprehensive income

5. Gains and losses from reclassification of the held-to-maturity investment to available-for-sale financial asset

6. Credit impairment reserves for other debt investment

7. Hedge reserve for cash flow

8. Translation differences of foreign currency financial statements

9. Other

VI. Total comprehensive income 288,995,308.44 396,680,395.63

VII. Earnings per share:

i. Basic earnings per share

ii. Diluted earnings per share


Statement of Profit or Loss


F-11


Item Note V 2020 2019

I. Cash flow from operating activities:

Cash received from the sale of goods and the provision of labor services 8,277,828,134.91 2,941,901,907.17

Net increase in customer deposits and interbank deposits

Net increase in borrowings from the central bank

Net increase in funds borrowed from other financial institutions

Cash received from the original insurance contract premium

Net cash received from reinsurance business

Net increase in insurance deposits and investment funds

Cash for interest, handling fee and commission

Net increase in borrowed funds

Net increase in repurchase business funds

Net cash received from agent of buying and selling of securities

Tax Refund 30,595,221.90 12,964,756.45

Cash received related to other operating activities 4,619,412,536.13 6,449,720,923.08

Subtotal of cash inflow from operating activities 12,927,835,892.94 9,404,587,586.70

Cash paid for purchasing goods and receiving labor services 8,417,264,445.21 1,381,805,181.50

Net increase in loans and advances to customers

Net increase in deposits with central bank and interbank funds

Cash paid for the original insurance contract

Net increase in lending funds

Cash for payment of interest, handling fee and commission

Cash to pay policy dividends

Cash paid to and for employees 352,684,357.24 185,174,937.11

Various taxes and fees paid 271,984,144.89 162,706,390.63

Other cash paid related to operating activities 6,137,177,763.30 6,502,768,378.82

Subtotal of cash outflow from operating activities 15,179,110,710.64 8,232,454,888.06

Net cash flow from operating activities -2,251,274,817.70 1,172,132,698.64

II. Cash flow from investing activities:

Cash received from investment recovery 182,516,415.58 1,143,660,000.00

Cash received from investment income 71,768,826.66 13,014,190.11

Net cash received from the disposal of fixed assets, intangible assets and other long-term assets 21,859,412.53 12,239,928.46

Net cash received from disposal of subsidiaries and other companies 0.00 958,301.59

Other cash received relating to investing activities 2,927,491,704.77 261,970,491.88

Subtotal of cash inflows from investing activities 3,203,636,359.54 1,431,842,912.04

Cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets 1,446,210,475.26 2,480,099,556.48

Cash Investment 2,366,192,877.61 2,600,443,266.32

Net increase in pledged loans

Net cash paid by subsidiaries and other companies

Other cash paid relating to investing activities 356,114,049.92 1,456,937,401.93

Subtotal of cash outflows from investing activities 4,168,517,402.79 6,537,480,224.73

Net cash flows from investing activities -964,881,043.25 -5,105,637,312.69

II. Cash flow from financing activities:

Cash received from attracting investment 602,686,643.00 144,326,200.00

Including: cash received by the subsidiary from minority shareholders' investment 595,670,000.00 22,926,200.00

Cash received from borrowing 18,140,548,359.52 18,315,875,000.00

Other cash received related to financing activities 1,139,682,168.18 104,139,563.73

Subtotal of cash inflows from financing activities 19,882,917,170.70 18,564,340,763.73

Cash paid for debt repayment 11,322,584,952.26 12,600,084,196.93

Cash paid for dividends, profits, or interest payments 1,958,107,031.32 1,634,287,930.80

Including: dividends and profits paid by subsidiaries to minority shareholders

Other cash paid related to financing activities 1,512,599,558.80 344,629,632.66

Subtotal of cash outflows from financing activities 14,793,291,542.38 14,579,001,760.39

Net cash flow from financing activities 5,089,625,628.32 3,985,339,003.34

IV. Effect of foreign exchange rate changes -869,045.91 -1,523,016.48

V. Net increase in cash and cash equivalents 1,872,600,721.46 50,311,372.81

Plus: cash and cash equivalents at January 1 5,639,971,698.82 5,589,660,326.01

VI. Cash and cash equivalents at December 31 7,512,572,420.28 5,639,971,698.82


Consolidated Cash Flow Statement


F-12


Item Note XII 2020 2019

I. Cash flow from operating activities

Cash received from the sale of goods and the provision of labor services 439,709,774.25 1,076,586,401.50

Tax Refund 12,215,082.54

Cash received related to other operating activities 1,992,657,930.48 3,922,492,960.31

Subtotal of cash inflow from operating activities 2,444,582,787.27 4,999,079,361.81

Cash paid for purchasing goods and receiving labor services

Cash paid to and for employees 16,945,148.69 12,297,773.97

Various taxes and fees paid 50,088,881.17 66,385,574.28

Other cash paid related to operating activities 5,563,715,245.40 6,773,617,144.06

Subtotal of cash outflow from operating activities 5,630,749,275.26 6,852,300,492.31

Net cash flow from operating activities -3,186,166,487.99 -1,853,221,130.50

II. Cash flow from investing activities:

Cash received from investment recovery

Cash received from investment income 40,210,469.33

Net cash received from the disposal of fixed assets, intangible assets and other

long-term assets1,759,357.07 950,000.00

Net cash received from disposal of subsidiaries and other companies

Other cash received relating to investing activities 1,831,717,445.86 27,399,541.02

Subtotal of cash inflows from investing activities 1,873,687,272.26 28,349,541.02

Cash paid for the purchase and construction of fixed assets, intangible assets and

other long-term assets618,870,202.23 1,073,946,933.87

Cash Investment 2,520,236,159.99 1,280,792,700.00

Net cash paid by subsidiaries and other companies

Other cash paid relating to investing activities 289,780,000.00 2,099,646,349.77

Subtotal of cash outflows from investing activities 3,428,886,362.22 4,454,385,983.64

Net cash flows from investing activities -1,555,199,089.96 -4,426,036,442.62

III. Cash flow from financing activities:

Cash received from attracting investment 7,016,643.00

Cash received from borrowing 9,497,700,000.00 8,645,000,000.00

Other cash received related to financing activities 75,391,882.53 39,136,964.21

Subtotal of cash inflows from financing activities 9,580,108,525.53 8,684,136,964.21

Cash paid for debt repayment 4,105,677,469.09 3,014,329,148.16

Cash paid for dividends, profits, or interest payments 798,787,799.66 580,484,835.02

Other cash paid related to financing activities 147,128,213.95 33,410,000.00

Subtotal of cash outflows from financing activities 5,051,593,482.70 3,628,223,983.18

Net cash flow from financing activities 4,528,515,042.83 5,055,912,981.03

IV. Effect of foreign exchange rate changes -116,785.85 -1,303,169.69

V. Net increase in cash and cash equivalents -212,967,320.97 -1,224,647,761.78

Plus: cash and cash equivalents at January 1 2,389,705,649.07 3,614,353,410.85

VI. Cash and cash equivalents at December 31 2,176,738,328.10 2,389,705,649.07


Cash Flow Statement


F-13

Pre

par

ed b

y: W

eifa

ng

Urb

an C

onst

ruct

ion

an

d D

evel

opm

ent

Inv

estm

ent

Gro

up

Co.

, Ltd

.E

xpre

ssed

in

RM

B

Pre

ferr

ed

stoc

k

Per

pet

ual

bon

dO

ther

I. D

ecem

ber

31,

20

195

,000

,000

,00

0.00

--

-28

,305

,159

,093

.58

-22

,341

,366

.24

-13

6,75

1,2

41.

02-

2,75

9,62

5,2

77.0

736

,22

3,87

6,97

7.9

110

,94

0,5

69,0

51

.52

47

,164

,44

6,0

29.4

3

Ad

d: A

ccou

ntin

g po

licy

chan

ges

-83,

893,

040

.55

-83,

893,

040.

55

-30

7,0

34,4

55

.00

-390

,92

7,4

95.5

5

C

orre

ctio

n of

pre

viou

s er

rors

--

B

usin

ess

com

bina

tion

und

er t

he s

ame

cont

rol

--

O

ther

--

II.

Jan

uar

y 1,

202

05

,000

,000

,00

0.00

--

-28

,305

,159

,093

.58

-22

,341

,366

.24

-13

6,75

1,2

41.

02-

2,67

5,73

2,2

36.5

236

,13

9,98

3,93

7.3

610

,63

3,5

34,5

96

.52

46

,773

,51

8,5

33.8

8

III.

Th

e am

oun

t of

in

crea

se o

r d

ecre

ase

in 2

020

(d

ecre

ase

is l

iste

d w

ith

"-

")

--

--

610

,965

,718

.14

--6

,900

,835

.37

-2

9,54

7,7

49.

02-

72,7

35,

790

.04

706,

348,

421.

83

669

,876

,80

5.8

91

,376

,22

5,2

27.7

2

i.

Tot

al c

omp

rehe

nsiv

e in

com

e-6

,900

,835

.37

174,

163,

671

.65

167,

262,

836.

28

45

,011

,40

3.2

32

12,2

74

,239

.51

ii.

Ow

ner'

s in

vest

men

t an

d re

duct

ion

of c

apit

al-

--

-20

2,4

82,4

79.5

6-

--

--

-20

2,48

2,47

9.5

662

5,8

76,7

18

.88

828

,35

9,1

98.4

4

1

. Ord

inar

y sh

ares

inv

este

d by

sha

reho

lder

s-

568,

000

,00

0.0

05

68,0

00

,000

.00

2

. Cap

ital

inv

este

d by

hol

der

s of

oth

er e

quit

y in

stru

men

ts-

-

3

. The

am

ount

of

shar

e-ba

sed

paym

ent

incl

uded

in

owne

r's

equi

ty-

-

4

. Oth

er20

2,4

82,4

79.5

620

2,48

2,47

9.5

65

7,8

76,7

18

.88

260

,35

9,1

98.4

4

iii

. Pro

fit

dist

ribu

tion

--

--

--

--

29,

547

,74

9.02

--1

01,4

27,8

81.6

1-7

1,88

0,13

2.5

9-1

,011

,31

6.2

2-7

2,8

91

,448

.81

1

. Wit

hdra

w s

urp

lus

rese

rve

29,

547

,74

9.02

-29,

547,

749

.02

--

2

. Wit

hdra

w g

ener

al r

isk

rese

rves

--

3

. Dis

trib

uti

on t

o ow

ners

(or

sha

reho

lder

s)-7

1,88

0,1

32.5

9-7

1,88

0,13

2.5

9-1

,011

,31

6.2

2-7

2,8

91

,448

.81

4

. Oth

er-

-

iv

. Int

erna

l tr

ansf

er o

f sh

areh

olde

rs' e

quit

y-

--

--

--

--

--

--

-

1

. Con

vers

ion

of c

apit

al r

eser

ve in

to c

apit

al (

or s

hare

cap

ital

)-

-

2

. Con

vers

ion

of s

urp

lus

rese

rves

into

cap

ital

(or

equ

ity)

--

3

. Sur

plu

s re

serv

es m

ake

up f

or lo

sses

--

4

. Und

istr

ibu

ted

prof

its

tran

sfer

red

to c

apit

al (

or s

hare

cap

ital

)-

-

5

. Car

ryov

er o

f re

tain

ed e

arni

ngs

from

cha

nges

in

the

defi

ned

ben

efit

pla

n-

-

6

. Oth

er c

ompr

ehen

sive

inco

me

carr

ied

forw

ard

to r

etai

ned

earn

ings

--

7

. Oth

er-

-

v.

Spe

cial

res

erve

s-

--

--

--

--

--

--

-

1

. Wit

hdra

wal

in c

urre

nt p

erio

d-

-

2

. Use

d in

cur

rent

per

iod

--

vi

. Oth

er40

8,4

83,2

38.5

840

8,48

3,23

8.5

84

08,4

83

,238

.58

IV. F

or t

he

yea

r en

ded

Dec

emb

er 3

1, 2

020

5,0

00,0

00,0

00.

00-

--

28,9

16,1

24,8

11.7

2-

15,4

40,5

30.8

7-

166,

298

,99

0.04

-2,

748,

468,

026

.56

36,8

46,

332,

359.

19

11,3

03

,411

,40

2.4

14

8,1

49,7

43

,761

.60

Leg

al R

epre

sent

ativ

e:

Acc

ount

ing

Pri

ncip

al:

Man

ager

of

the

Fin

ance

Dep

t.:

Item

2020

Eq

uity

att

rib

utab

le t

o pa

rent

com

pan

y

Co

nso

lid

ate

d S

tate

men

t o

f C

ha

ng

es i

n O

wn

er’s

Eq

uit

y

Fo

r th

e y

ear

end

ed D

ecem

ber

31

, 2

02

0

Oth

er e

quit

y in

stru

men

ts

Cap

ital

res

erve

Les

s: t

reas

ury

stoc

ks

Oth

er

com

preh

ensi

ve

inco

me

Spe

cial

rese

rves

Su

rplu

s re

serv

eG

ener

al r

isk

prep

arat

ion

Und

istr

ibut

ed p

rofi

t S

ubto

tal

Non

-con

trol

ling

inte

rest

sT

otal

ow

ner's

equ

ity

Equ

ity

(or

pai

d-in

capi

tal)

F-14

Pre

par

ed b

y: W

erif

ng

Urb

an C

onst

ruct

ion

An

dD

evel

opm

ent

Inv

estm

ent

Gro

up

Co.

, Ltd

.E

xpre

ssed

in

RM

B

Pre

ferr

ed

stoc

k

Per

pet

ual

bon

dot

her

I. D

ecem

ber

31,

20

185

,000

,000

,00

0.00

27,2

65,9

27,7

66.5

021

,878

,567

.81

97,

128

,07

6.78

0.00

2,43

6,33

9,5

17.3

734

,82

1,27

3,92

8.4

67

,37

3,7

39,6

78

.25

42

,195

,01

3,6

06.7

1

Ad

d: A

ccou

ntin

g po

licy

chan

ges

--

C

orre

ctio

n of

pre

viou

s er

rors

--

B

usin

ess

com

bina

tion

und

er t

he s

ame

cont

rol

--

o

ther

--

II.

Jan

uar

y 1,

201

95

,000

,000

,00

0.00

--

-27

,265

,927

,766

.50

-21

,878

,567

.81

-9

7,12

8,0

76.

78-

2,43

6,33

9,5

17.3

734

,82

1,27

3,92

8.4

67

,37

3,7

39,6

78

.25

42

,195

,01

3,6

06.7

1

III.

Th

e am

oun

t of

in

crea

se o

r d

ecre

ase

in 2

020

(d

ecre

ase

is l

iste

d w

ith

"-"

)-

--

-1,

039

,231

,327

.08

-46

2,7

98.4

3-

39,

623

,16

4.24

-32

3,28

5,7

59.7

01,

402,

603,

049.

45

3,5

66

,829

,37

3.2

74

,969

,43

2,4

22.7

2

i.

Tot

al c

omp

rehe

nsiv

e in

com

e46

2,7

98.4

340

4,50

4,2

09.2

640

4,96

7,00

7.6

9-2

,345

,18

9.0

04

02,6

21

,818

.69

ii.

Ow

ner'

s in

vest

men

t an

d re

duct

ion

of c

apit

al-

--

-1,

039

,231

,327

.08

--

--

-1,

039,

231,

327.

08

3,5

69

,174

,56

2.2

74

,608

,40

5,8

89.3

5

1

. Ord

inar

y sh

ares

inv

este

d by

sha

reho

lder

s-8

57,3

89.8

4-8

57,3

89.8

4-6

8,0

56,3

49

.75

-68

,91

3,7

39.5

9

2

. Cap

ital

inv

este

d by

hol

der

s of

oth

er e

quit

y in

stru

men

ts-

-

3

. The

am

ount

of

shar

e-ba

sed

paym

ent

incl

uded

in

owne

r's

equi

ty-

-

4

. Oth

er1,

040

,088

,716

.92

1,04

0,08

8,71

6.9

23

,63

7,2

30,9

12

.02

4,6

77,3

19

,628

.94

iii

. Pro

fit

dist

ribu

tion

--

--

--

--

39,

623

,16

4.24

--8

1,21

8,4

49.5

6-4

1,59

5,28

5.3

2-

-41

,59

5,2

85.3

2

1

. Wit

hdra

w s

urp

lus

rese

rve

39,

623

,16

4.24

-39,

623,

164

.24

--

2

. Wit

hdra

w g

ener

al r

isk

rese

rves

--

3

. Dis

trib

uti

on t

o ow

ners

(or

sha

reho

lder

s)-4

1,59

5,2

85.3

2-4

1,59

5,28

5.3

2-4

1,5

95

,285

.32

4

. Oth

er-

-

iv

. Int

erna

l tr

ansf

er o

f sh

areh

olde

rs' e

quit

y-

--

--

--

--

--

--

-

1

. Con

vers

ion

of c

apit

al r

eser

ve in

to c

apit

al (

or s

hare

cap

ital

)-

-

2

. Con

vers

ion

of s

urp

lus

rese

rves

into

cap

ital

(or

equ

ity)

--

3

. Sur

plu

s re

serv

es m

ake

up f

or lo

sses

--

4

. Und

istr

ibu

ted

prof

its

tran

sfer

red

to c

apit

al (

or s

hare

cap

ital

)-

-

5

. Car

ryov

er o

f re

tain

ed e

arni

ngs

from

cha

nges

in

the

defi

ned

ben

efit

pla

n-

-

6

. Oth

er c

ompr

ehen

sive

inco

me

carr

ied

forw

ard

to r

etai

ned

earn

ings

--

v.

Spe

cial

res

erve

s-

--

--

--

--

--

--

-

1

. Wit

hdra

wal

in c

urre

nt p

erio

d-

-

2

. Use

d in

cur

rent

per

iod

--

vi

. Oth

er-

-

IV. F

or t

he

yea

r en

ded

Dec

emb

er 3

1, 2

019

5,0

00,0

00,0

00.

00-

--

28,3

05,1

59,0

93.5

8-

22,3

41,3

66.2

4-

136,

751

,24

1.02

-2,

759,

625,

277

.07

36,2

23,

876,

977.

91

10,9

40

,569

,05

1.5

24

7,1

64,4

46

,029

.43

Leg

al R

epre

sent

ativ

e:

Acc

ount

ing

Pri

ncip

al:

Man

ager

of

the

Fin

ance

Dep

t.:

Equ

ity

(or

pai

d-in

capi

tal)

Oth

er e

quit

y in

stru

men

tsC

apit

al r

eser

veL

ess:

tre

asur

y

stoc

ks

Oth

er

com

preh

ensi

ve

inco

me

Co

nso

lid

ate

d S

tate

men

t o

f C

ha

ng

es i

n O

wn

er's

Eq

uit

y (

Co

nti

nu

ed)

Spe

cial

rese

rves

Su

rplu

s re

serv

eG

ener

al r

isk

prep

arat

ion

Und

istr

ibut

ed p

rofi

t S

ubto

tal

Item

2019

Eq

uity

att

ribu

tabl

e to

equ

ity

hold

ers

Non

-con

trol

ling

inte

rest

sT

otal

ow

ner's

equ

ity

F-15

Pre

pa

red

by

: W

eifa

ng

Urb

an

Con

stru

ctio

n a

nd

Dev

elop

men

t In

ves

tmen

t G

rou

p C

o.,

Ltd

.E

xpre

ssed

in

RM

B

Pre

ferr

ed

stoc

k

Per

petu

al

bon

dO

ther

I. D

ecem

ber

31,

201

95,

000

,00

0,0

00.0

0-

--

18,

503

,913

,19

4.6

8-

22,

327

,32

1.0

5-

136,

751,

241

.02

-1,

188

,99

9,0

20.9

32

4,8

51,9

90,

777

.68

Add

: A

ccou

ntin

g po

licy

ch

ange

s0

.00

Cor

rect

ion

of

prev

ious

err

ors

-

Bus

ines

s co

mbi

nati

on u

nder

the

sam

e co

ntr

ol

-

Oth

er-

II.

Jan

uar

y 1

, 20

20

5,0

00,0

00,

000

.00

--

-1

8,5

03,9

13,1

94.

68

-2

2,3

27,3

21.

05

-13

6,75

1,2

41.0

2-

1,1

88,9

99,

020

.93

24,

851

,99

0,7

77.6

8

III.

Th

e a

mou

nt

of i

ncr

ease

or

dec

reas

e in

202

0 (d

ecre

ase

is l

iste

d w

ith

"-"

)-

--

-4

83,7

64,0

05.

21

--6

,482

,18

1.7

5-

29,

547,

749

.02

-1

94,0

49,

608

.58

700

,87

9,1

81.0

6

i

. T

otal

com

pre

hens

ive

inco

me

-6,4

82,1

81.

75

295

,47

7,4

90.1

92

88,9

95,

308

.44

i

i. O

wner

's i

nves

tmen

t an

d r

educ

tion

of

capi

tal

--

--

75,0

96,4

76.

77

--

--

--

75,0

96,

476

.77

1. O

rdin

ary

shar

es i

nve

sted

by

shar

ehol

der

s-

2. C

apit

al i

nves

ted

by

ho

lder

s o

f ot

her

equ

ity

inst

rum

ents

-

3. T

he

amou

nt o

f sh

are-

base

d p

aym

ent

incl

uded

in

ow

ner

's e

quit

y-

4. O

ther

75,0

96,4

76.

77

75,0

96,

476

.77

i

ii.

Pro

fit

dis

trib

utio

n-

--

--

--

-2

9,54

7,7

49.0

2-

-101

,42

7,8

81.6

1-7

1,88

0,1

32.5

9

1. W

ithd

raw

su

rplu

s re

serv

e2

9,54

7,7

49.0

2-2

9,54

7,7

49.0

2-

2. W

ithd

raw

gen

eral

ris

k re

serv

es-

3. D

istr

ibut

ion

to o

wn

ers

(or

shar

ehol

der

s)-7

1,88

0,1

32.5

9-7

1,88

0,1

32.5

9

4. O

ther

-

i

v. I

nter

nal

tra

nsfe

r of

sh

areh

olde

rs' e

quit

y-

--

--

--

--

--

-

1. C

onv

ersi

on

of

capi

tal

rese

rve

into

cap

ital

(o

r sh

are

capi

tal)

-

2. C

onv

ersi

on

of

surp

lus

rese

rves

int

o ca

pita

l (o

r eq

uit

y)

-

3. S

urp

lus

rese

rves

mak

e u

p fo

r lo

sses

-

4. U

ndis

trib

uted

pro

fits

tra

nsfe

rred

to

cap

ital

(or

sh

are

capi

tal)

-

5.

Car

ryove

r of

ret

ain

ed e

arni

ngs

from

cha

nge

s in

th

e d

efin

ed b

enef

it

plan

6. O

ther

co

mp

rehe

nsiv

e in

com

e ca

rrie

d fo

rwar

d to

ret

aine

d ea

rnin

gs-

7. O

ther

v

. S

peci

al r

eser

ves

--

--

--

--

--

--

1. W

ithd

raw

al i

n cu

rren

t pe

riod

-

2. U

sed

in c

urre

nt

per

iod

-

v

i. O

ther

408

,667

,52

8.4

44

08,6

67,

528

.44

IV.

For

th

e ye

ar e

nd

ed D

ecem

ber

31,

202

05,

000

,00

0,0

00.0

0-

--

18,

987

,677

,19

9.8

9-

15,

845

,13

9.3

0-

166,

298,

990

.04

-1,

383

,04

8,6

29.5

12

5,5

52,8

69,

958

.74

Leg

al R

epre

sen

tati

ve:

Acc

ount

ing

Pri

nci

pal:

Man

ager

of

the

Fin

ance

Dep

t.:

Sta

tem

ent

of C

han

ges

in O

wn

er‘s

Eq

uit

y

For

th

e y

ear

end

ed D

ecem

ber

31,

202

0

Item

2020

Equ

ity

(or

paid

-in

capi

tal)

Oth

er e

quit

y in

stru

men

ts

Cap

ital

res

erve

Les

s: t

reas

ury

stoc

ks

Oth

er

com

preh

ensi

ve

inco

me

Sp

ecia

l

rese

rves

Sur

plu

s re

serv

eG

ener

al r

isk

pre

para

tion

Und

istr

ibut

ed p

rofi

tT

otal

ow

ner

's e

quit

y

F-16

Pre

pa

red

by

: W

eifa

ng

Urb

an

Con

stru

ctio

n a

nd

Dev

elop

men

t In

ves

tmen

t G

rou

p C

o.,

Ltd

.E

xpre

ssed

in

RM

B

Pre

ferr

ed

stoc

k

Per

petu

al

bon

dot

her

I. D

ecem

ber

31,

201

85,

000

,00

0,0

00.0

01

8,0

33,1

30,9

10.

80

21,

878

,56

7.8

19

7,12

8,0

76.7

88

73,9

85,

828

.10

24,

026

,12

3,3

83.4

9

Add

: A

ccou

ntin

g po

licy

ch

ange

s-

Cor

rect

ion o

f pr

evio

us e

rro

rs-

Bus

ines

s co

mbi

nati

on u

nder

th

e sa

me

cont

rol

-

oth

er-

II.

Jan

uar

y 1

, 20

19

5,0

00,0

00,

000

.00

--

-1

8,0

33,1

30,9

10.

80

-2

1,8

78,5

67.

81

-9

7,12

8,0

76.7

8-

873

,98

5,8

28.1

02

4,0

26,1

23,

383

.49

III.

Th

e a

mou

nt

of i

ncr

ease

or

dec

reas

e in

202

0 (d

ecre

ase

is l

iste

d w

ith

"-"

)-

--

-4

70,7

82,2

83.

88

-4

48,7

53.

24

-3

9,62

3,1

64.2

4-

315

,01

3,1

92.8

38

25,8

67,

394

.19

i

. T

otal

com

pre

hens

ive

inco

me

448

,75

3.2

43

96,2

31,

642

.39

396

,68

0,3

95.6

3

i

i. O

wne

r's

inve

stm

ent

and

red

ucti

on o

f ca

pita

l-

--

-4

70,7

82,2

83.

88

--

--

--

470

,78

2,2

83.8

8

1. O

rdin

ary

shar

es i

nve

sted

by

shar

ehol

der

s-

2. C

apit

al i

nves

ted

by

ho

lder

s o

f ot

her

equ

ity

inst

rum

ents

-

3. T

he

amou

nt o

f sh

are-

base

d p

aym

ent

incl

uded

in

ow

ner

's e

quit

y-

4. O

ther

470

,782

,28

3.8

84

70,7

82,

283

.88

i

ii.

Pro

fit

dis

trib

utio

n-

--

--

--

-3

9,62

3,1

64.2

4-

-81,

218,

449

.56

-41,

595,

285

.32

1. W

ithd

raw

su

rplu

s re

serv

e3

9,62

3,1

64.2

4-3

9,62

3,1

64.2

4-

2. W

ithd

raw

gen

eral

ris

k re

serv

es-4

1,59

5,2

85.3

2-4

1,59

5,2

85.3

2

3. D

istr

ibut

ion

to o

wn

ers

(or

shar

ehol

der

s)-

4. O

ther

-

i

v. I

nter

nal

tra

nsfe

r of

sh

areh

olde

rs' e

quit

y-

--

--

--

--

--

-

1. C

onv

ersi

on

of

capi

tal

rese

rve

into

cap

ital

(o

r sh

are

capi

tal)

-

2. C

onv

ersi

on

of

surp

lus

rese

rves

int

o ca

pita

l (o

r eq

uit

y)

-

3. S

urp

lus

rese

rves

mak

e u

p fo

r lo

sses

-

4. U

ndis

trib

uted

pro

fits

tra

nsfe

rred

to

cap

ital

(or

sh

are

capi

tal)

-

5.

Car

ryove

r of

ret

ain

ed e

arni

ngs

from

cha

nge

s in

th

e d

efin

ed b

enef

it

plan

-

6. O

ther

co

mp

rehe

nsiv

e in

com

e ca

rrie

d f

orw

ard

to r

etai

ned

earn

ings

-

v

. S

peci

al r

eser

ves

--

--

--

--

--

--

1. W

ithd

raw

al i

n cu

rren

t pe

riod

-

2. U

sed

in c

urre

nt

per

iod

-

v

i. O

ther

-

IV.

For

th

e ye

ar e

nd

ed D

ecem

ber

31,

201

95,

000

,00

0,0

00.0

0-

--

18,

503

,913

,19

4.6

8-

22,

327

,32

1.0

5-

136,

751,

241

.02

-1,

188

,99

9,0

20.9

32

4,8

51,9

90,

777

.68

Leg

al R

epre

sen

tati

ve:

Acc

ount

ing

Pri

nci

pal:

Man

ager

of

the

Fin

ance

Dep

t.:

Sta

tem

ent

of c

han

ges

in o

wn

er's

eq

uit

y o

f th

e p

aren

t co

mp

any

(co

nti

nu

ed)

Item

2019

Equ

ity

(or

paid

-in

capi

tal)

Oth

er e

quit

y in

stru

men

tsC

apit

al r

eser

veL

ess:

tre

asur

y

stoc

ks

Oth

er

com

preh

ensi

ve

inco

me

Sp

ecia

l

rese

rves

Sur

plu

s re

serv

eG

ener

al r

isk

pre

para

tion

Und

istr

ibut

ed p

rofi

tT

otal

ow

ner

's e

quit

y

F-17

1

WEIFANG URBAN CONSTRUCTION AND

DEVELOPMENT INVESTMENT GROUP CO., LTD.

NOTES TO FINANCIAL STATEMENTS FOR THE YEAR

OF 2020

(Unless otherwise specified, the following amounts are presented

in RMB)

I.Basic Information of the Company

1. Company profile

Weifang Urban Construction and Development Investment Group Co., Ltd. (hereinafter referred to

as the “Company” or “Group Company”), formerly known as Weifang State-owned Assets

Operation and Investment Company (hereinafter referred to as the “State-owned Company”). The

State-owned Company was established in 1994. It was a public institution adopting a

commercialized approach to management, and was accountable for its own revenues and

expenditures. According to “Reply by the Municipal People’s Government of Weifang in Respect of

Proposal for the Reform and Restructuring of Weifang State-owned Assets Operation and

Investment Company” (Wei Zheng Fu [2016] No.53) dated 9 September 2016 the State-owned

Company implemented the “transformation from a public institution to an enterprise”, and

established the Weifang Urban Construction and Development Investment Group Co., Ltd which is

a state-owned company. Intermediary agencies were engaged by the Municipal Fiscal Bureau of

Weifang to carry out assets counting, capital verification, auditing and assessment, and the results

of which were used as the basis for the transfer of assets. Net assets of RMB18.963 billion, as audited

and assessed, were invested into Weifang Urban Construction and Development Investment Group

Co., Ltd. as state-owned capital, of which, RMB5 billion was used as the registered capital, and the

rest was used as capital reserve.

As of December 31, 2020, the shareholding structure of the Company was as follows:

Name of shareholder Amount of

investment(yuan) Percentage of registered capital

(%) Weifang State-owned Assets Supervision and Administration

5,000,000,000.00 100.00

F-18

2

Name of shareholder Amount of

investment(yuan) Percentage of registered capital

(%)

Commission

Total 5,000,000,000.00 100.00

Uniform social credit code of the Company：91370700MA3CH7UY48

Legal representative of the Company：Ma Yongjun

Registered capital of the Company：RMB5,000,000,000.00

Date of establishment of the Company: September 22, 2016

Domicile of the Company：No. 439, Wenhua Road, Kuiwen District, Weifang, Shandong China

Scope of business: investment and capital operation to state-owned asset; state-owned asset

management; development and construction of urban and agricultural infrastructure; land

consolidation and real estate development; property management, house leasing, etc. (Projects that

are subject to approval in accordance with the law can be operated only after being approved by

relevant departments).

The scope of consolidated financial statements of the current year and its changes.

For details, please refer to Note VII. Equity in other entities.

II.The basis for the preparation of financial statements

1．Basis of preparation

The company’s financial statements are prepared based on the assumption of going concern, based

on actual transactions and events, in accordance with the Accounting Standards for Business

Enterprises-Basic Standards issued by the Ministry of Finance (issued in the Order No. 33 by the

Ministry of Finance, revised by Order No. 76 by the Ministry of Finance), the specific accounting

standards promulgated and revised on or after February 15, 2006, the application guide of the

accounting standards for business enterprises, the interpretation of the accounting standards for

business enterprises, and other relevant regulations (hereinafter collectively referred to as the

Accounting Standards for Business Enterprises).

According to the relevant provisions of the Accounting Standards for Business Enterprises, the

company's accounting is based on the accrual basis. Except for certain financial instruments, the

financial statements are based on historical cost. If an asset is impaired, the corresponding provision

F-19

3

for impairment shall be made in accordance with relevant regulations.

2. Going concern

The Company has the ability to continue its operation on a going concern basis for at least 12 months

from the end of the reporting period and there is no significant event that may affect its operation

on a going concern basis.

III.Significant Accounting Policies and Estimates

1.Statement of compliance with the accounting standards for business enterprises

This financial statement complies with the requirements of the Accounting Standards for Business

Enterprises, and truly and completely reflects the company's financial status, operating results and

cash flow and other relevant information.

2.Accounting period

The accounting period of the Company is from 1 January to 31 December of each calendar year.

3.Operating period

A normal operating period represents a period from purchase of assets used for production to

realization of cash or cash equivalents by the Company. The Company adopts a 12-month period as

its operating cycle and the basis for classification of the liquidity of assets and liabilities.

4.Functional currency

The Company uses RMB as its functional currency.

5.Accounting treatment for business combinations involving entities under common control

and not under common control

(1) Business combination under common control

The business combination under the same control refers to the condition that an enterprise

participating in the merger is ultimately controlled by the same party or the same multiple parties

before and after the merger, and the control is not temporary. Under normal conditions, a business

combination under the same control refers to a combination between enterprises within the same

enterprise group. Other than that, it is generally not a business combination under the same control.

The assets and liabilities acquired by the company as the merging party in a business combination

are measured according to their book value on the merged party on the date of the merger. For the

long-term equity investment formed by the merger under the same control, the company shall take

F-20

4

the share of the book owner’s equity of the merged party on the merger date as the initial investment

cost for the formation of the long-term equity investment. For related accounting treatments, please

refer to the long-term equity investment; The assets and liabilities obtained in the merger are

accounted for by the company based on the original book value of the relevant assets and liabilities

in the merged party. The difference between the book value of the net assets obtained by the

company and the book value of the merged consideration paid (or the total face value of the issued

shares) shall be adjusted to the capital reserve; if the capital reserve is insufficient to offset, the

retained earnings shall be adjusted.

As the merging party, the company’s various direct related expenses incurred for the business

combination, including audit fees, evaluation fees, legal service fees, etc., are included in the current

profits and losses when they occur.

Bonds issued for a business combination or handling fees and commissions paid for other debts

shall be included in the initial measurement amount of the bonds and other debts issued. The

handling fees, commissions and other expenses incurred in the issuance of equity securities in a

business combination shall be offset against the premium income of equity securities. If the

premium income is insufficient to offset, the retained earnings shall be offset.

Where a merger of holdings under the same control forms a parent-subsidiary relationship, the

parent company shall prepare a consolidated financial statement on the date of the merger, including

a consolidated balance sheet, a consolidated income statement, and a consolidated cash flow

statement.

In the consolidated balance sheet, the book value of the assets and liabilities of the merged party is

incorporated into the consolidated financial statements. The transactions between the merging party

and the merged party on and before the merger date are treated as internal transactions in accordance

with the relevant principles of offset of the consolidated financial statements; consolidated income

statement and cash flow statement, including the net profit and cash flow generated by the merging

party and the merged party from the beginning of the current period to the date of the merger, the

cash flow generated by the transactions and internal transactions between the two parties in the

current period are offset in accordance with the relevant principles of the consolidated financial

statements.

F-21

5

(2) Business combination not under common control

A business combination not under common control is a business combination in which all of the

combining entities are not ultimately controlled by a same party or parties both before and after the

combination.

Determine the cost of a business combination: The cost of a business combination includes the fair

value of the purchaser's cash or non-cash assets paid for the business combination, debts issued or

assumed, and equity securities issued on the purchase date.

In a business combination not under the same control, the purchaser’s audit, legal services,

evaluation and consulting and other intermediary expenses and other related general and

administrative expenses incurred by the purchaser are accounted in the current profits and losses

when incurred; the transaction costs of equity securities or debt securities issued by the purchaser

as a combined consideration shall be included in the initial recognized amount of equity securities

or debt securities.

For long-term equity investment obtained by a merger not under the same control, the company uses

the business combination cost determined on the purchase date (excluding cash dividends and

profits that should be collected from the company being invested) as the initial investment cost in

the long-term equity investment in the acquired company; All identifiable assets and liabilities that

meet the recognition conditions obtained in a merger not under the same control are recognized as

the assets and liabilities of the company at their fair value on the purchase date. In a case that the

company uses non-monetary assets as consideration to obtain control of the purchased party or

various identifiable assets and liabilities, the difference between the fair value of the non-monetary

asset on the purchase date and its book value is included in the disposal gains and losses of the asset

and accounted in the income statement of the current merger period.

In a business combination not under the same control, the difference between the cost of the business

combination and the fair value of the acquiree’s identifiable net assets obtained in the combination

is recognized as goodwill; in the case of consolidation by merger, the difference is recognized in the

parent company’s individual financial statements as goodwill; in the case of a merger of holdings,

the difference is recognized as goodwill in the consolidated financial statements.

The difference between the business combination cost and the fair value of the acquiree’s

F-22

6

identifiable net assets obtained in the combination is included in the current profit and loss of the

combination (non-operating income) after the company's review. In the case of a consolidation by

merger, the difference is accounted in the individual income statement of the parent company for

the current period of the merger; in the case of a holding merger, the difference is included in the

current consolidated income statement of the current period of the merger.

If a business combination not under the same control is realized step by step through multiple

exchange transactions, if it is a package transaction, each transaction will be accounted for as a

transaction that obtains control; If it is not a package transaction, the equity of the purchased party

held before the purchase date shall be remeasured at the fair value of the equity on the purchase date,

and the difference between the fair value and its book value shall be accounted in the current

investment income; if the equity of the acquiree held before the purchase date involves other

comprehensive income, other comprehensive income related to it shall be converted into investment

income of the current period on the purchase date, except for other comprehensive income arising

from changes in net liabilities or net assets due to remeasurement of the benefit plan by the investee.

6.Method of the preparation of consolidated financial statements

(1) Scope of consolidated financial statements

The scope of consolidation of the consolidated financial statements is determined on the basis of

control. Control means that the company has the power over the investee, enjoys variable returns by

participating in the relevant activities of the investee, and has the ability to use the power over the

investee to affect the amount of its return. Subsidiary refers to the entity controlled by the company

(including the divisible part of the enterprise, invested entity, structured entity, etc).

(2) Preparation of consolidated financial statements

The consolidated financial statements of the company are based on the financial statements of the

parent company and each subsidiary and are prepared in accordance with other relevant data. The

important investments, transactions, inventory purchases and sales between the parent company and

each subsidiary and among subsidiaries and unrealized profits are offset item by item, and the non-

controlling interests’ equity and non-controlling interests’ income for the current period are

calculated. If the accounting policy and accounting period of the subsidiary is inconsistent with that

of the parent company, adjust the accounting statements of the subsidiary according to the

F-23

7

accounting policy and accounting period of the parent company before the merger.

(3) Increasing and reducing of subsidiaries in the processing of consolidated statements during the

reporting period

During the reporting period, to the subsidiaries added due to a business combination under the same

control, adjustment should be made to the opening balance of the consolidated balance sheet when

preparing the consolidated balance sheet. For subsidiaries added in a business combination not under

the same control, the opening balance of the consolidated balance sheet shall not be adjusted when

preparing the consolidated balance sheet. When disposing subsidiaries during the reporting period,

the opening balance of the consolidated balance sheet is not adjusted when preparing the

consolidated balance sheet.

During the reporting period, a subsidiary company added due to a business combination under the

same control, the income, expenses, and profits of the subsidiary from the beginning of the

combined period to the end of the reporting period should be accounted into the consolidated income

statement, and the cash flow from the beginning of the current period to the end of the reporting

period of the subsidiary should be accounted in the consolidated cash flow statement. Subsidiaries

added due to business combination not under the same control, the income, expenses and profits of

the subsidiary from the purchase date to the end of the reporting period should be accounted into

the consolidated income statement, and the cash flow from the purchase date to the end of the

reporting period should be accounted into the consolidated cash flow statement. During the reporting

period, when a subsidiary is disposed of, the income, expenses, and profits of the subsidiary from

the beginning of the period to the disposal date should be included in the consolidated income

statement, and the cash flow of the subsidiary from the beginning of the period to the disposal date

should be included in the consolidated cash flow statement.

When the control of the subsidiary is lost due to the disposal of part of the equity or other reasons,

the remaining equity investment after the disposal shall be remeasured at its fair value on the date

of loss of control. The sum of the consideration obtained from the disposal of equity and the fair

value of the remaining equity, minus the difference between the share of the original subsidiary’s

net assets and the sum of goodwill calculated according to the original shareholding ratio, which

shall be calculated continuously since the date of purchase, is accounted to the current investment

F-24

8

income in the period of the loss of control right. Other comprehensive income related to the equity

investment of the original subsidiary will be converted to investment income for the current period

when the control is lost, except for other comprehensive income arising from changes in net

liabilities or net assets of the investee's re-measurement of the defined income plan.

To the difference between the long-term equity investment newly acquired as a result of the purchase

of a minority share and the share of the subsidiary’s identifiable net assets calculated according to

the newly added shareholding ratio, and the difference between the disposal price obtained from the

partial disposal of the subsidiary’s equity without losing control and the subsidiary’s net asset share

from the disposal of the long-term equity investment, adjustment should be made to the stock

premium in the capital reserve in the consolidated balance sheet, and adjust retained earnings if the

stock premium in the capital reserve is insufficient to offset.

(4) Accounting to the step-by-step disposal of equity until the loss of control in the consolidated

statement

If the disposal of the equity investment in the subsidiary until the loss of control is a package

transaction, each transaction shall be treated as a transaction for the disposal of the subsidiary and

the loss of control; however, the difference between the price for each disposal before the loss of

control and the share of the subsidiary’s net assets corresponding to the disposal of the investment

is recognized as other comprehensive income in the consolidated financial statements, and is

transferred to the current profit and loss when the control is lost, except for other comprehensive

income arising from changes in net liabilities or net assets by the reset of the income plan by the

investor. If it is not a package transaction, before the loss of control, the difference between the

disposal price and the net assets of the corresponding subsidiary that has been continuously

calculated from the date of purchase shall adjust the capital reserve. If the capital reserve is

insufficient to offset, adjust the retained earnings; In the event of loss of control, the accounting

treatment shall be implemented in accordance with the aforementioned accounting policies at the

time of loss of control of the original subsidiary.

7.Classification of joint arrangements and accounting treatment methods for joint

operations

A joint arrangement is an arrangement jointly controlled by the company as a participant. There are

F-25

9

two types of joint arrangements: joint operations and joint ventures. Joint operation refers to a joint

arrangement in which the participants are in joint control of an arrangement and have the right to

the assets related to the arrangement and assume the liabilities related to the arrangement; a joint

venture is an arrangement that the participants in the joint control of an arrangement only have the

joint venture arrangements rights to the net assets.

(1) Identification of joint arrangements

As long as two or more participants exercise joint control over the arrangement, an arrangement can

be considered a joint arrangement, and it is not required that all participants have joint control over

the arrangement.

(2) Re-evaluation

If the legal form, contract terms and other relevant facts and circumstances change, the parties

involved in the joint arrangement should re-evaluate the joint arrangement, one is to assess whether

the original joint party still has joint control over the arrangement; the other is to assess whether the

type of the joint arrangement has changed.

(3) Accounting treatment of participants in joint operations

①．The accounting treatment of the joint venture party in the joint operation

A. General accounting treatment principles:

The joint venture party shall confirm the following items related to its share of interests in the joint

operation, and perform accounting treatment in accordance with the relevant enterprise accounting

standards: firstly, confirm the assets held separately, and confirm the jointly held assets according

to their shares; secondly to recognize the liabilities borne separately and the liabilities to be jointly

borne by its share; thirdly, confirm the income from the sale of its share of the joint operating output;

fourthly, to recognize the income generated from the joint operation according to the shares; fifthly,

confirm the expenses incurred separately and the expenses incurred in joint operations according to

its share.

The joint venture party may use its own assets for joint operations. If the joint venture party retains

all ownership or control of these assets, the accounting of these assets will be same as the joint

venture’s own assets.

The joint venture may also purchase assets with other joint ventures to invest in joint operations,

F-26

10

and jointly assume the liabilities of the joint operations. At this time, the joint venture shall confirm

its share of interests in these assets and liabilities in accordance with the relevant provisions of the

Accounting Standards for Business Enterprises. For example, confirm the interest share in the

relevant fixed assets according to No. 4-Fixed Assets of the Accounting Standards for Business

Enterprises, and confirm the share in the relevant financial assets and financial liabilities according

to the financial instrument recognition and measurement standards.

When a joint operation is achieved through a separate entity, the joint venture party shall confirm

the liabilities separately assumed in accordance with the above principles and the jointly assumed

liabilities based on the company's share. However, if the joint venture party is jointly and severally

liable in accordance with relevant Chinese laws or relevant contractual provisions because other

shareholders have not provided funds to the joint venture arrangement as agreed, the accounting

treatment shall follow No. 13 One contingencies of the Accounting Standards for Business

Enterprises.

B. Accounting treatment for the joint venture to invest or sell assets that do not constitute

a business:

The joint venture invests or sells assets, etc. to the joint operation (except if the asset constitutes a

business), before the joint operation sells the relevant assets to a third party or the relevant assets

are consumed (that is, unrealized internal profits are still included in the assets held by the joint

operation in the book value), only the gains or losses attributable to other participants in the joint

operation should be recognized. If the transaction shows that the assets invested or sold have

suffered impairment losses in accordance with No. 8-Asset Impairment of the Accounting Standards

for Business Enterprises (hereinafter referred to as Asset Impairment Loss Standards) and other

provisions, the joint venture party shall fully confirm the loss.

C. Accounting treatment for joint ventures to purchase assets that do not constitute

business:

The joint venture party purchases assets, etc. from the joint operation (except if the assets constitute

a business), before selling the assets, etc. to a third party (that is, when the unrealized internal profit

is still included in the book value of the assets held by the joint venture party), the part of the profits

and losses arising from the transaction that should be enjoyed by the joint venture party shall not be

F-27

11

confirmed. That is, at this time, only the part of the profit and loss arising from the transaction that

is attributable to other participants in the joint operation should be confirmed.

D. The accounting treatment for the share of the interests when the joint venture obtains

joint operation that constitutes the business:

When the joint venture party obtains the share of the interests in the joint operation, and the joint

operation constitutes a business, it shall perform corresponding accounting treatment in accordance

with the corporate merger standards and other relevant standards, but the provisions of other relevant

standards shall not conflict with the provisions of the joint arrangement standards. The enterprise

shall judge whether the joint operation constitutes a business in accordance with the relevant

provisions of the enterprise merger standards. This treatment principle is not only applicable to the

acquisition of the share of interests in the joint operation of the existing constituent business, but

also is applicable to the establishment of a joint operation with other participants, and the joint

operation has the business at the time of establishment due to other participant inject its existing

business.

② Accounting treatment principles for parties that do not enjoy joint control in

joint operations:

For a participant (non-joint party) that does not enjoy joint control in a joint operation, if it enjoys

the assets of the joint operation and bears the liabilities related to the joint operation, the accounting

treatment shall be carried out in the same way as the joint venture party. That is, the parties involved

in a joint operation, regardless of whether they have joint control or not, as long as they can enjoy

the rights to jointly operate related assets and assume the obligations of related liabilities of joint

operations, the same accounting treatment as the joint venture party is adopted for the share of

benefits in the joint operation. Otherwise, it should be accounted for in accordance with the relevant

enterprise accounting standards.

（4）. Accounting treatment of participants in joint ventures

In a joint venture, the participants shall account their investment in the joint venture in accordance

with No. 2-Long-term Equity Investment of the Accounting Standards for Business Enterprises.

Participants (non-joint parties) that do not have joint control over the joint venture shall conduct

relevant accounting treatments according to their degree of influence on the joint venture: if it has a

F-28

12

significant influence, it shall account the investment in the joint venture in accordance with the

provisions of the long-term equity investment standards; if it does not have a significant impact on

the joint venture, its investment in the joint venture shall be accounted for in accordance with the

provisions of the recognition and measurement standards of the financial instrument.

8.Criteria for determining cash and cash equivalents

The company’s cash includes cash on hand and deposits that can be used for payment at any time;

cash equivalents include the company’s short term (generally refers to maturity within three months

from the date of purchase), strong liquidity, and easy conversion to a known amount cash and

investment with little risk of value changes.

9.Foreign currency business and foreign currency financial statement conversion

(1) Foreign currency business

The company's foreign currency transactions are converted into the amount in the functional

currency for bookkeeping at the spot exchange rate on the transaction date.

On the balance sheet date, foreign currency monetary items and foreign currency non-monetary

items are handled in accordance with the following regulations: foreign currency monetary items

are converted at the spot exchange rate on the balance sheet date. The exchange difference arising

from the difference between the spot exchange rate on the balance sheet date and the spot exchange

rate at the time of initial recognition or the previous balance sheet date is included in the current

profit and loss; Foreign currency non-monetary items measured at historical cost are still converted

at the spot exchange rate on the transaction date, and the amount in the functional currency is not

changed;; non-monetary items in foreign currencies measured at fair value are converted at the spot

exchange rate on the date when the fair value is determined, The difference between the converted

accounting standard currency amount and the original accounting standard currency amount is

treated as fair value changes (including exchange rate changes) and accounted in the current profit

and loss; During the capitalization period, the exchange difference of the principal and interest of

the foreign currency special loan is capitalized and included in the cost of the assets that meet the

capitalization conditions.

(2) Conversion of foreign currency financial statements

The company complies with the following regulations when translating its financial statements in

F-29

13

foreign currencies: The assets and liabilities in the balance sheet are converted at the spot exchange

rate on the balance sheet date, Except for the "undistributed profit" items, other items of owners'

equity are converted at the spot exchange rate at the time of occurrence; the income and expense

items in the income statement are converted at the spot exchange rate on the transaction date (or an

exchange rate determined in accordance with a systematic and reasonable method that is similar to

the spot exchange rate on the transaction date). The translation difference of the foreign currency

financial statements generated in accordance with the above conversion is recognized as other

comprehensive income. The translation of comparative financial statements shall be handled in

accordance with the above regulations.

10. Financial instruments (excluding impairment)

A financial asset or financial liability is recognized when the company becomes a party

to a financial instrument contract.

(1) Classification, confirmation and measurement of financial assets:

Based on the business model of managing financial assets and the contractual cash flow

characteristics of financial assets, the company divides financial assets into the following three

categories, financial assets measured at amortized cost, financial assets measured at fair value with

changes included in other comprehensive income and financial assets measured at fair value and

whose changes are included in the current profit and loss.

(2) Financial assets are measured at fair value at the time of initial recognition.

For financial assets that are measured at fair value and whose changes are included in the current

profit and loss, the relevant transaction costs are directly included in the current profit and loss; for

other types of financial assets, the relevant transaction costs are included in the initial recognition

amount.

(3) Financial assets measured at amortized cost:

The company’s business model for managing financial assets measured at amortized cost is to

collect contractual cash flow, and the contractual cash flow characteristics of such financial assets

are consistent with the basic lending arrangement, that is, the cash flow generated on a specific date

needs only the payment of principal and interest based on the outstanding principal amount. For

such financial assets, the company uses the actual interest rate method, and perform subsequent

F-30

14

measurement based on amortized costs, and the gains or losses resulting from amortization or

impairment are included in the current profits and losses.

(4) Financial assets measured at fair value with changes are included in other comprehensive

income:

The company's business model for managing such financial assets is to both collect contractual cash

flow and sell as the target, and the contractual cash flow characteristics of such financial assets are

consistent with the basic lending arrangements. The company measures such financial assets at fair

value and their changes are included in other comprehensive income, but impairment losses or gains,

exchange gains and losses, and interest income calculated in accordance with the actual interest rate

method are included in current profits and losses.

In addition, the company designates some non-trading equity instrument investments as financial

assets that are measured at fair value and whose changes are included in other comprehensive

income. The company includes the relevant dividend income of such financial assets in the current

profit and loss, and changes in fair value are included in other comprehensive income. When the

financial asset is derecognized, the accumulated gains or losses previously included in other

comprehensive income will be transferred from other comprehensive income to retained earnings,

and is not included in the current profit and loss.

1. Financial assets that are measured at fair value and whose changes are included in

the current profit and loss

The company classifies financial assets other than financial assets measured at amortized cost and

financial assets measured at fair value with changes included in other comprehensive income as

financial assets measured at fair value with changes included in current profits and losses. In

addition, at the time of initial recognition, in order to eliminate or significantly reduce accounting

mismatches, the company designated part of the financial assets as financial assets measured at fair

value and whose changes are included in the current profits and losses. For such financial assets,

the company uses fair value for its subsequent measurement, and changes in fair value are included

in the current profit and loss.

(2) Classification, confirmation and measurement of financial liabilities:

Financial liabilities are classified into financial liabilities that are measured at fair value and whose

F-31

15

changes are included in the current profit and loss at the time of initial recognition and other financial

liabilities. For financial liabilities that are measured at fair value and whose changes are included in

the current profit and loss, the relevant transaction costs are directly included in the current profit

and loss, and the related transaction costs of other financial liabilities are included in the initial

recognition amount.

1) Financial liabilities that are measured at fair value and whose changes are included in the

current profit and loss:

Financial liabilities that are measured at fair value and whose changes are included in the current

profits and losses include transactional financial liabilities (including derivatives that are financial

liabilities) and financial liabilities designated as fair value at the initial recognition and whose

changes are included in the current profits and losses.

Trading financial liabilities (including derivatives that are financial liabilities) are subsequently

measured at fair value. Except for hedge accounting, changes in fair value are accounted in the

current profit and loss.

To the financial liability designated to be measured at fair value and whose changes are included in

the current profit and loss, the change in the fair value of the liability caused by the company's own

credit risk changes is included in other comprehensive income, and when the liability is terminated,

the accumulated changes in fair value caused by changes in its own credit risk accounted in other

comprehensive income are transferred to retained earnings. The remaining changes in fair value are

included in the current profit and loss. If the impact of changes in the credit risk of such financial

liabilities in the above manner will cause or enlarge the accounting mismatch in the profit and loss,

the company shall have all the gains or losses of the financial liabilities (including the impact of

changes in the company’s own credit risk on the amount) included in the current profit and loss.

2) Other financial liabilities:

Other financial liabilities except for that whose transferring of financial assets do not meet the

conditions for termination of recognition, or financial liabilities formed when continue to involved

in the transferred financial assets, financial guarantee contracts are classified as financial liabilities

measured at amortized cost, and subsequent measurement is carried out at amortized cost. The gains

or losses arising from derecognition or amortization shall be accounted in the current profits and

F-32

16

losses.

3) Confirmation basis and measurement method of financial asset transfer

A financial asset that meets one of the following conditions shall be derecognized: ①The

contractual right to receive the cash flow of the financial asset is terminated; ②The financial asset

has been transferred, and almost all risks and rewards of the ownership of the financial asset have

been transferred to the transferee; ③The financial asset has been transferred. Although the

company neither transfers nor retains almost all the risks and rewards of the ownership of the

financial asset, it has given up control of the financial asset.

If the enterprise neither transfers nor retains almost all the risks and rewards of the ownership of

financial assets, and does not give up control of the financial assets, the relevant financial assets

shall be recognized according to the degree of continued involvement in the transferred financial

assets, and the relevant liabilities shall be recognized accordingly. The degree of continued

involvement in the transferred financial assets refers to the level of risk faced by the enterprise due

to changes in the value of the financial assets.

If the overall transfer of financial assets meets the conditions for termination of recognition, the

difference between the book value of the transferred financial assets and the consideration received

due to the transfer and the sum of the accumulated fair value changes originally included in other

comprehensive income shall be included in the current profit and loss.

If the partial transfer of financial assets meets the conditions for termination of recognition, the book

value of the transferred financial assets will be amortized between the derecognized and

unterminated parts according to their relative fair value, and the difference between the sum of the

consideration received due to the transfer and the accumulated amount of fair value changes

originally included in other comprehensive income that should be allocated to the derecognized part

and the amortized book amount is included in the current profit and loss.

The company should determine whether almost all the risks and rewards of the ownership of the

financial assets have been transferred to the financial assets sold by the method of recourse or the

financial assets it holds endorsed to transfer. If almost all the risks and rewards of the ownership of

the financial asset have been transferred to the transferee, the recognition of financial asset shall be

terminated; if almost all the risks and rewards of the ownership of the financial asset have been

F-33

17

retained, the recognition of the financial asset shall not be terminated; If almost all the risks and

rewards related to the ownership of financial assets has neither been transferred nor has been

retained, then continue to determine whether the company retains control over the assets, and

conduct accounting treatments in accordance with the principles described in the preceding

paragraphs.

4) Derecognition of financial liabilities

If the current obligation of the financial liability (or part of it) has been discharged, the company

shall terminate the recognition of the financial liability (or this part of the financial liability). The

company (the borrower) and the lender sign an agreement to replace the original financial liability

by assuming a new financial liability, and if the contractual terms of the new financial liability and

the original financial liability are substantially different, the recognition of original financial liability

shall be terminated and the new one should be recognized. New financial liabilities. If the company

makes a substantial modification to the contract terms of the original financial liability (or part of

it), it shall terminate the recognition of the original financial liability and at the same time recognize

a new financial liability in accordance with the revised terms.

When financial liabilities (or part of them) are derecognized, the company shall include the

difference between its book value and the consideration paid (including non-cash assets transferred

out or liabilities assumed) into the current profit and loss.

5) Offsetting of financial assets and financial liabilities:

When the company has the statutory right to offset the confirmed amount of financial assets and

financial liabilities, and the statutory rights are currently enforceable, and the company plans to net

settle the financial assets or realize the financial assets and pay off the financial liabilities at the

same time, financial assets and financial liabilities are listed in the balance sheet at the net amount

after offsetting each other. Otherwise, financial assets and financial liabilities are listed separately

in the balance sheet and can’t offset against each other.

(6) Methods for determining the fair value of financial assets and financial liabilities:

Fair value refers to the price that market participants can receive for the sale of an asset or pay for

the transfer of a liability in an orderly transaction that occurs on the measurement date. If there is

an active market for a financial instrument, the company uses the quoted price in the active market

F-34

18

to determine its fair value. The quotation in the active market refers to the price that can be easily

obtained from exchanges, brokers, industry associations, and pricing service agencies on a regular

basis, and represents the price of market transactions that actually occur in fair transactions. If there

is no active market for a financial instrument, the company uses valuation techniques to determine

its fair value. Valuation techniques include reference to the prices used in recent market transactions

by parties familiar with the situation and voluntary transactions, reference to the current fair value

of other financial instruments that are substantially the same, discounted cash flow method and

option pricing models, etc. At the time of valuation, the company adopts valuation techniques that

are applicable under current circumstances and have sufficient available data and other information

to support, and select those values that are consistent with the characteristics of the assets or

liabilities considered by market participants in the transactions of related assets or liabilities, and

the relevant observable input value will be priority. When the relevant observable input value cannot

be obtained or is not practicable, the non-input value is used.

(7) Equity instruments:

An equity instrument refers to a contract that can prove that the ownership of the remaining equity

in the company's assets after deducting all liabilities. The company's issuance (including

refinancing), repurchase, sale or cancellation of equity instruments are treated as changes in equity,

and transaction costs related to equity transactions are deducted from equity. The company does not

recognize changes in the fair value of equity instruments.

If there are distribute dividends (including the interest generated by the instruments classified as

equity instruments) during the existence period to the company's equity instruments, they shall be

treated as profit distribution.

11. Impairment of financial instruments

The financial instruments for which the company needs to recognize impairment losses are financial

assets (including receivables and contract assets) measured at amortized cost, investment in debt

instruments measured at fair value with changes included in other comprehensive income, and lease

receivables, mainly including notes receivable, accounts receivable, other receivables, debt

investments, other debt investments, long-term receivables, etc. In addition, for some financial

guarantee contracts, impairment reserves and credit impairment losses shall be recognized in

F-35

19

accordance with the accounting policies described in this section.

(1) Recognition method of impairment provision

Based on expected credit losses, the company makes provision for impairment of each of the above

items in accordance with its applicable expected credit loss measurement method and recognizes

credit impairment losses.

Credit loss refers to the difference between discounted at the original actual interest rate, all

contractual cash flows receivable under the contract and all cash flows expected to be received by

the company, that is, the present value of all cash shortages. Among them, for the financial assets

purchased or originated by the company that have been credit-impaired, they shall be discounted

according to the credit-adjusted actual interest rate of the financial assets.

The general method of measuring expected credit losses means that the company assesses on each

balance sheet date whether the credit risk of financial assets has increased significantly since the

initial recognition. If the credit risk has increased significantly since the initial recognition, the

company measures the loss provision at an amount equivalent to the expected credit loss during the

entire lifetime; if the credit risk has not increased significantly since the initial recognition, the

company measures the loss provision at an amount equivalent to the expected credit loss in the next

12 months. The company considers all reasonable and supportable information, including forward-

looking information, when assessing expected credit losses.

For financial instruments with lower credit risk on the balance sheet date, the company assumes that

the credit risk has not increased significantly since the initial recognition, and chooses to measure

the loss provision based on the expected credit losses in the next 12 months.

(2) Judgment criteria for whether the credit risk has increased significantly since the initial

recognition.

If the default probability of a certain financial asset within the expected duration determined on the

balance sheet date is significantly higher than the default probability determined during the initial

recognition, it indicates that the credit risk of the financial asset has increased significantly. Except

for special circumstances, the company uses the change in default risk that occurs in the next 12

months as a reasonable estimate of the change in default risk during the entire duration to determine

whether the credit risk has increased significantly since the initial recognition.

F-36

20

(3) Evaluate expected credit risk based on portfolio

The company evaluates the credit risk of bills receivable, accounts receivable and other receivables

that have significantly different credit risks and have the following characteristics individually. Such

as: receivables that have disputes with the other party or involve litigation or arbitration; notes

receivable and receivables that have obvious signs that the debtor is likely to be unable to perform

the repayment obligation.

In addition to financial assets that assess credit risk individually, the company divides financial

assets into different groups based on common risk characteristics, and assesses credit risk on a

portfolio basis.

(4) Accounting treatment methods for impairment of financial assets

At the end of the period, the company calculates the expected credit loss of various financial assets.

If the expected credit loss is greater than the book amount of its current impairment provision, the

difference is recognized as an impairment loss; if it is less than the book amount of the current

impairment provision, the difference is recognized as an impairment gain.

(5) Methods for determining credit losses of financial assets

For financial assets with a individual assessment of credit risk, the company always chooses to

measure the loss provision at an amount equivalent to the expected credit loss during the duration.

Based on the credit risk characteristics of financial assets that have not been credit-impaired in a

individual assessment, the company divides them into different combinations:

A. The basis for determining the combination of notes receivable is as follows:

Notes Receivable Portfolio 1: Commercial Acceptance Draft

Notes Receivable Portfolio 2: Bank Acceptance Draft

For notes receivable classified into portfolios, the company calculates expected credit losses

referring to historical credit loss experience, combining with current conditions and forecasts of

future economic conditions, and basing on default risk exposure and the expected credit loss rate of

entire duration. The company does not make provision for bad debts on bank acceptance drafts.

For commercial acceptance notes, the company uses aging as a combination of credit risk

characteristics. The company determines the proportion of bad debt provision for each age segment

of the commercial acceptance notes receivable this year based on the actual loss rate of each segment

F-37

21

of commercial acceptance notes receivable divided by age in previous years and combined with the

current situation, and calculate the provision for bad debts in current year accordingly.

The proportions of the provision for bad debts for the combination of commercial acceptance notes

receivable in each age range are as follows:

Aging Expected credit loss rate of commercial acceptance notes

receivable (%)

Within 1 year (including 1 year) 5

1-2 years (including 2 years) 10




More than 5 years 100

For the initial recognition of the accounts receivable at the time of income recognition, and then

transferring of the accounts receivable to commercial acceptance notes for settlement subsequently,

the company shall make provision for bad debts for the notes receivable in accordance with the

principle of continuous aging calculation.

B. The basis for determining the combination of accounts receivable and other receivables is

as follows:

a. The basis for determining the combination of credit risk characteristics

Item The basis of the combination

Combination 1 (age combination)

Except for the accounts receivable and other accounts receivable that have been individually measured for loss reserves, the company's expectations are based on the same or similar accounts receivable portfolio with similar credit risk characteristics in the previous years and divided by age. Based on the credit loss, considering forward-looking information, determine the loss reserve.

Combination 2 (combination of financial assets with extremely low credit risk)

According to the calculation of expected credit loss, financial assets with extremely low credit risk.

Combination 3 (related party combination)

Receivables from related parties.

b. When performing credit risk assessments based on a portfolio approach, based on the financial

asset portfolio structure and similar credit risk characteristics (the debtor’s ability to repayment in

accordance with contract terms), combined with historical default loss experience and current

economic conditions, and considering forward-looking information, the company predicts the

expected credit losses on a period basis, and confirms the loss reserves of financial assets.

F-38

22

The calculation method of different combinations of loss reserves:

Item Withdrawal method

Combination 1 (age combination) Estimated duration

Combination 2 (combination of financial assets with extremely low credit risk)

Estimated duration

Combination 3 (combination of internal related parties) Estimated duration

c. Determination of the expected credit loss rate of each combination

Combination 1 (age combination)

Account age Expected credit loss rate of accounts

receivable (%) Expected credit loss rate of other

receivables (%)

Within 1 year 5 5

1-2 years 10 10

2-3 years 15-20 15-20

3-4 years 30 30

4-5 years 50 50

More than 5 years 100 100

Combination 2 (combination of accounts receivable with extremely low credit risk):

Combining historical default loss experience and current economic conditions, considering forward-

looking information, the expected credit loss rate is 0;

Combination 3 (related party combination):

Combining historical default loss experience and current economic conditions, considering forward-

looking information, the expected credit loss rate is 0;

C. The basis for determining the combination of contract assets is as follows:

For contract assets, the company recognizes the impairment for contract assets based on objective

evidence of impairment losses that have occurred and considers forward-looking information, and

measure its expected credit loss based on the expected duration.

When it cannot evaluate the expected credit loss information at a reasonable cost to a single contract

asset, the company divides the contract asset into several combinations based on the characteristics

of credit risk, and calculates the expected credit loss on the basis of the combination. The basis for

determining the combination is as follows:

Contract asset portfolio 1: PPP projects

F-39

23

Contract asset portfolio 2: Non-PPP projects

Contract asset portfolio 3: Unexpired Warranty Fund

The calculation method of loss reserves for different combinations:

Item Withdrawal method

Combination 1 (PPP project) Accrual according to the balance percentage method, the accrual ratio is 5%

Combination 2 (non-PPP projects) According to the balance percentage method, the accrual ratio is 10%

Combination 3 (unexpired quality guarantee deposit)

Accrual based on the aging combination of accounts receivable

12. Inventory

(1) Classification of inventory

Inventory refers to the finished products or commodities that an enterprise holds for sale in daily

activities, the products in the production process, and the materials consumed in the production

process or the process of providing labor services. Mainly include: raw materials, products in

progress, semi-finished products, finished products, land use rights, commissioned processing

materials, turnover materials, project construction, project settlement, design costs, development

costs, consumable biological assets (green seedlings), etc.

(2) Valuation method for inventory acquisition and delivery

When the inventories are acquired, they are initially measured at cost, including purchase costs,

processing costs and other costs. Land is accounted for using the individual valuation method, and

the inventory other than land is valued using the weighted average method at the time of stock-out.

(3) Measurement of inventory at the end of the period

On the balance sheet date, inventories are measured at the lower of cost and net realizable value,

and provision for impairment of inventories is made for an individual inventory item. However, for

inventories with a large quantity and low unit price, impairment of inventories is made according to

the inventory category. The net realizable value refers to the amount of the estimated selling price

of the inventory minus the estimated cost, estimated selling expenses and related taxes and fees at

the time of completion in daily activities.

For sold inventories, the cost should be carried forward to the current profit and loss, and the

corresponding inventory depreciation provision should also be carried forward.

(4) Inventory system

F-40

24

Perpetual inventory system is adopted for inventory.

(5) Amortization methods for low-value consumables and packaging materials

The company adopts one-time resale method for low-value consumables and packaging materials.

13. Contract assets and contract liabilities

(Only applicable to Shandong Meichen Ecology & Environment Co., Ltd. and its subsidiaries)

In the contract between the company and the customer, the company has the right to collect the

contract price for the transfer of goods and related services to the customer, and at the same time

assume the performance obligation of transferring the goods or services to the customer. When the

company has transferred goods or services to the customer before the customer actually pays the

contract consideration or the consideration is due and payable, the right to receive the consideration

due to the transferred goods or services shall be listed as contract assets, and the company shall

recognize accounts receivable or long-term receivables when obtaining unconditional right of

payment.

In the contract between the company and the customer, the company has the right to collect the

contract consideration before the goods or services are transferred to the customer, and at the same

time, the obligation to transfer the goods or services to the customer due to the consideration

received or receivable from the customer is listed as contract liabilities. When the company fulfills

its obligations to transfer goods or provide services to customers, contract liabilities are recognized

as revenue.

The company presents the contract assets and contract liabilities under the same contract as a net

amount.

14. Long-term equity investment

Long-term equity investments include equity investments in subsidiaries, joint ventures and

associates.

(1) Initial measurement

The company conducts initial measurement of long-term equity investment in the following two

situations:

① The initial investment cost of long-term equity investment formed by business combination shall

be determined in accordance with the following regulations:

F-41

25

A. In a business combination under the same control, if the merging party pays cash, transfers non-

cash assets or assumes debts as the merger consideration, the book value of the owner’s equity of

the merged party in the ultimate controlling party’s consolidated financial statements on the merger

date will be treated as the initial investment cost of long-term equity investment. The difference

between the initial investment cost of long-term equity investment and the cash paid, the transferred

non-cash assets and the book value of the debt assumed shall be adjusted to the capital reserve; if

the capital reserve is insufficient to offset, the retained earnings shall be adjusted. All direct related

expenses incurred for the business combination, including audit fees, evaluation fees, legal service

fees, etc. paid for the business combination, are included in the current profits and losses when they

are incurred.

B. In a business combination not under the same control, the company determines the combination

cost based on the following circumstances:

a) For a business combination realized by an exchange transaction, the combination cost is the fair

value of the assets paid and the liabilities incurred or assumed to obtain control of the acquiree on

the purchase date;

b) For a business combination realized step by step through multiple exchange transactions, the sum

of the book value of the equity investment of the purchased party held before the purchase date and

the new investment cost on the purchase date is used as the initial investment cost of the investment;

c) Intermediary expenses such as auditing, legal services, evaluation and consulting and other

related management expenses incurred for the business combination shall be included in the current

profits and losses when they are incurred;

d) If the future events that may affect the merger cost are agreed in the merger contract or agreement,

if it is estimated that the future events are likely to occur and the amount of influence on the merger

cost can be reliably measured on the purchase date, they will be included in the merger cost.

②In addition to the long-term equity investment formed by the merger of enterprises, the initial

investment cost of the long-term equity investment obtained by other methods shall be determined

in accordance with the following regulations:

A. For long-term equity investments obtained by paying cash, the actual purchase price paid shall

be used as the initial investment cost. The initial investment cost includes expenses, taxes and other

F-42

26

necessary expenditures directly related to the acquisition of long-term equity investments.

B. For long-term equity investments obtained through non-monetary asset exchange, the initial

investment cost is determined in accordance with No. 7 Non-monetary Asset Exchange of the

Accounting Standards for Business Enterprises.

C. For long-term equity investments obtained through debt restructuring, the initial investment cost

is determined in accordance with No. 12-Debt Restructuring of the Accounting Standards for

Business Enterprises.

③No matter how long-term equity investment is obtained, when the investment is obtained, the

cash dividends or profits that the investee has declared but have not yet distributed that are included

in the consideration paid are accounted separately as receivables, and do not constitute the initial

investment cost of equity investment.

(2) Follow-up measurement

The long-term equity investment that can exercise control over the investee is accounted for by the

cost method in individual financial statements. Long-term equity investments that have joint control

or significant influence on the investee are accounted for using the equity method.

(1) The long-term equity investment calculated by the cost method is priced according to the initial

investment cost. Adjustments to the cost of long-term equity investment should be made when

adding or withdrawing the investment. The cash dividends or profits declared to be distributed

by the investee shall be recognized as investment income for the current period.

(2) For long-term equity investment accounted by the equity method, if the initial investment cost

is greater than the fair value of the investee's identifiable net assets at the time of investment,

the initial investment cost of the long-term equity investment will not be adjusted; If the initial

investment cost of a long-term equity investment is less than the fair value of the investee's

identifiable net assets at the time of investment, the difference is included in the current profit

and loss, and the cost of the long-term equity investment is adjusted.

After the long-term equity investment is obtained, the investment income and other comprehensive

income shall be recognized according to the share of the net profit and loss and other comprehensive

income realized by the invested entity that shall be enjoyed or shared, and the book value of the

long-term equity investment shall be adjusted at the same time; calculate the portion that should be

F-43

27

enjoyed based on the declared profit or cash dividends of the invested entity, and reduce the book

value of the long-term equity investment accordingly; for other changes in the owner’s equity of the

investee in addition to the net profit and loss, other comprehensive income and profit distribution,

the book value of the long-term equity investment is adjusted and included in the owner’s equity.

When determining the share of the net profit and loss of the investee, the net profit of the investee

is adjusted based on the fair value of the investee's identifiable net assets at the time the investment

is obtained. If the accounting policy and accounting period adopted by the investee are inconsistent

with the company, the financial statements of the investee shall be adjusted in accordance with the

company's accounting policies and accounting period, and investment income and other

comprehensive income shall be recognized accordingly. To confirm the net loss incurred by the

investee, the book value of the long-term equity investment and other long-term equity that actually

constitute the net investment in the investee has a limit of zero, unless the company is liable for

additional losses. If the investee realizes net profits in the future, the company resumes recognizing

its share of profits after its share of profits makes up for the share of unrecognized losses.

When calculating and confirming that the net profit and loss of the investee should be enjoyed or

should be shared, the unrealized internal transaction profit and loss between the associates and joint

ventures is calculated according to the proportion that should be enjoyed, and the part attributable

to the company is offset. The investment income should be confirmed on this base. If the unrealized

internal transaction loss between the company and the investee is an asset impairment loss, it shall

be fully recognized.

The company’s equity investment in associates is partly held indirectly through venture capital

institutions, mutual funds, trust companies or similar entities including investment-linked insurance

funds, regardless of whether the above entities have a significant influence on this part of the

investment. In accordance with the relevant provisions of the No. 22-Recognition and Measurement

of Financial Instruments Accounting Standards for Business Enterprises, the company chooses to

measure the investment indirectly held at fair value and its changes are included in profit and loss,

and adopt the equity method for the rest.

③When the company disposes of long-term equity investment, the difference between its book

value and the actual purchase price shall be included in the current profit and loss. For a long-term

F-44

28

equity investment accounted for by the equity method, when disposing of the investment, the same

basis as the direct disposal of related assets or liabilities by the investee shall be adopted, and the

portion originally included in other comprehensive income shall be accounted for according to the

corresponding proportion.

(3) The basis for determining joint control and significant influence on the invested entity

Joint control refers to the common control of an arrangement in accordance with relevant

agreements, and the relevant activities of the arrangement must be agreed by the participants who

share control rights before making decisions. Significant influence means that the investor has the

power to participate in the decision-making of the financial and operating policies of the investee,

but cannot control or jointly control the formulation of these policies with other parties. When

determining whether to exercise control or exert significant influence on the investee, the current

convertible bonds of the investee held by the company and other parties, and the current executable

warrants and other potential voting factors should be considered.

15. Investment real estate

The types of investment real estate include leased land use rights, leased buildings, and land use

rights held and ready to be transferred after appreciation. The company's investment real estate is

initially measured at cost, and the cost model is used for subsequent measurement.

The leased buildings in the company’s investment real estate are depreciated using the average life

method. The specific accounting policy is the same as that of fixed assets. Straight line method of

amortization is adopted in the leased land use rights in investment real estates and the land use rights

held and ready to be transferred after appreciation, the specific accounting policy is the same as that

of intangible assets.

For details on the method of impairment testing and provision for impairment of investment real

estate, please refer to Asset Impairment in Note III. Important Accounting Policies and Accounting

Estimates.

16. Fixed assets

The company’s fixed assets refer to the tangible assets that are held for the production of goods,

provide labor services, lease or operation and management, and have a useful life of more than one

year, and the economic benefits related to the assets are likely to flow into the company and whose

F-45

29

costs can be reliably measured.

(1) Classification of fixed assets

The company's fixed assets are divided into houses and buildings, machinery and equipment,

transportation equipment, electronic equipment, and other equipment.

(2) Depreciation of fixed assets

The depreciation of fixed assets is calculated and accrued by the average life method, and the

depreciation rate is determined according to the fixed asset category, estimated useful life and

estimated net residual value rate. Except for fixed assets that have been fully depreciated and are

still in use, the company accrues depreciation for all fixed assets.

The fixed assets formed by using special reserve expenditures shall be used to offset the special

reserve at the cost of forming the fixed assets, and the accumulated depreciation of the same amount

shall be confirmed. The fixed asset will no longer be depreciated in future periods.

The company determines the useful life and estimated net residual value of fixed assets based on

the nature and use of fixed assets. And at the end of the year, the useful life, estimated net residual

value and depreciation method of the fixed assets are reviewed, and if there is a difference with the

original estimate, corresponding adjustments will be made.

The useful life, residual value rate, and annual depreciation rate of various fixed assets are listed as

follows:

Category Estimated service life

(years) Net residual value rate (%)

Annual depreciation rate (%)

Houses and buildings 20-40 5 2.38-4.75

Mechanical equipment 3-10 5 9.5-31.67

Transportation Equipment

4-10 5 9.5-23.75

Electronic equipment 3 5 31.67

Other devices 5 5 19

(3) Fixed assets under financing leasing

The company recognizes the lease of the fixed asset as a financial lease when the leased fixed asset

has substantially transferred all the risks and rewards related to the asset.

The cost of a fixed asset obtained by a financial lease is determined by the lower of the fair value of

the leased asset on the lease start date and the present value of the minimum lease payment.

F-46

30

The fixed assets acquired by finance lease adopt the depreciation policy consistent with the self-

owned depreciable assets. If it can be reasonably determined that the ownership of the leased asset

will be obtained at the expiration of the lease term, depreciation shall be accrued within the useful

life of the leased asset; if it cannot be reasonably determined that the ownership of the leased asset

will be obtained at the expiration of the lease term, depreciation is accrued in the shorter period of

the lease term and the remaining useful life of the leased asset.

17. Construction in progress

The company's construction in progress refers to the plant, equipment and other fixed assets under

construction, which are calculated according to the project item and recorded at actual cost,

including direct construction and installation costs, and borrowing costs that meet the capitalization

conditions. When the construction in progress reaches the expected usable state, the temporary

assessment shall be carried forward to fixed assets, the interest capitalization shall be stopped, and

the depreciation shall be accrued according to the determined fixed asset depreciation method. After

the final project is completed, the original temporary estimated amount shall be adjusted according

to the completed final account, however, no adjustment will be made to the amount of depreciation

originally accrued.

18. Borrowing costs

(1) Recognition principle and capitalization period of capitalization of borrowing costs

The borrowing costs incurred by the company, and can be directly attributable to the purchase,

construction or production of assets which meet the conditions for capitalization, are capitalized

when the following conditions are met at the same time, and included in the cost of related assets:

① Asset expenditure has occurred;

② Borrowing costs have incurred;

③ The purchase, construction or production activities necessary to make the assets reach the

expected usable or saleable state have started.

If an asset that meets the capitalization conditions is abnormally interrupted during the acquisition,

construction or production process, and the interruption lasts for more than 3 months, the

capitalization of borrowing costs shall be suspended. The borrowing costs incurred during the

interruption period are recognized as expenses and included in the current profit and loss until the

F-47

31

acquisition, construction or production activities of the asset restart. If the interruption is the

necessary procedures for the acquisition, construction or production of assets that meet the

capitalization conditions to reach the intended usable or saleable state, the capitalization of

borrowing costs continues.

When the acquisition, construction or production of assets that meet the capitalization conditions

reaches the expected usable or saleable state, the capitalization of borrowing costs shall cease.

Borrowing costs incurred in the future are recognized as expenses in the current period.

(2) Calculation method of the capitalized amount of borrowing costs

If special loans are borrowed for the purpose of purchasing, constructing or producing assets that

meet the capitalization conditions, the actual interest expenses incurred in the current period of the

special loans shall be used to deduct the interest income obtained by depositing the unused borrowed

funds in the bank or the investment income obtained from temporary investment to unused borrowed

funds to recognize the capitalized amount of borrowing costs.

Where general borrowings are occupied for the purchase, construction or production of assets that

meet the capitalization conditions, the capitalization rate of general borrowings shall be calculated

and determined based on the amount of weighted average of the asset expenditures of the

accumulated asset expenditure exceeding the special borrowings, and multiplied by the

capitalization rate of the occupied general borrowings. The capitalization rate is calculated and

determined based on the weighted average interest rate of general borrowings.

19. Biological assets

(1) Classification of biological assets

The company's biological assets are seedling assets, all of which are consumable biological assets.

(2) Valuation method of biological assets

The company's biological assets are initially measured at cost.

(3) Subsequent measurement of biological assets

The actual expenses incurred by consumable biological assets before canopy closure constitute the

cost of consumable biological assets, and subsequent expenditures incurred after canopy closure are

included in the current profit and loss. The nursery grown plant are divided into four types, arbor,

large shrub, shrub and ground cover to determine the canopy closure according to the physiological

F-48

32

characteristics and morphology of the seedlings produced by the company. According to the growth

characteristics of consumable biological assets and the requirements for canopy closure indicators,

the criteria for determining the canopy closure of various consumable biological assets are as

follows:

(1) Arbors

The canopy closure for type A arbors is determined to be 0.545 and 0.577

When the row spacing is about 300CM*300CM, the DBH is 8-10CM, and the crown diameter is

about 250CM,

Canopy closure: 3.14*125*125/ (300*300)=0.545.

When the row spacing is about 350CM*350CM, the DBH is 8-10CM, and the crown diameter is

about 300CM,

Canopy closure: 3.14*150*150/(350*350)=0.577.

The canopy closure for type B arbors is determined to be 0.60. When the row spacing is about

400CM*400CM, the DBH is 10-15CM, and the crown diameter is about 350CM,

Canopy closure: 3.14*175*175/(400*400)=0.601.

(2) Large shrubs

The canopy closure of type A large shrubs is determined to be 0.601.

When the row spacing is about 400CM*400CM, the height is 350-400CM, and the crown diameter

is about 350CM,

Canopy closure: 3.14*175*175/(400*400)=0.601.

The canopy closure of type B large shrubs is determined to be 0.723.

When the row spacing is about 500CM*500CM, the height is 500-600CM, and the crown diameter

is about 480CM,

Canopy closure: 3.14*240*240/(500*500)=0.723

① Shrubs

Shrubs: Canopy closure is determined to be 0.502, When the row spacing is about 150CM*150CM,

and the crown diameter is about 120CM, Canopy closure: 3.14*60*60/(150*150)=0.502

② Ground cover

Ground cover: Canopy closure is determined to be 0.785, When the row spacing is about

F-49

33

50CM*50CM, and the crown diameter is about 50CM, Canopy closure: 3.14*25*25/(50*50)=0.785

(4) Valuation method for the delivery of biological assets

The cost are carried forward to consumable biological assets according to the weighted average

method.

(5) Impairment test method and method of provision for biological asset

At the end of each year, the company inspects consumable biological assets, and if there is evidence

that the net realizable value of the consumable biological assets is lower than its book value, the

depreciation reserve for the consumable biological assets is made according to the difference and

accounted in the current profit and loss; If the factor of impairment of consumptive biological assets

disappears, the provision for impairment that has been withdrawn will be reversed, and the reversed

amount is included in the current profit and loss.

20. Public welfare biological assets

The company's public welfare biological assets refer to biological assets whose main purpose is

protection and environmental protection, including wind-proof and sand-fixing forests, soil and

water conservation forests, and water conservation forests, etc. The cost of outsourcing biological

assets includes the purchase price, relevant taxes, transportation fees, insurance premiums, and other

expenses directly attributable to the purchase of the asset. The cost of self-constructed public welfare

biological assets shall be determined in accordance with the necessary expenditures such as

afforestation fees, nurturing fees, forest protection fees, afforestation facility fees, experimental fees

for improved varieties, survey and design fees, and indirect expenses that should be apportioned

before canopy closure. There is no provision for impairment of public welfare biological assets.

21. Intangible assets

The company recognizes the identifiable non-monetary assets that are owned or controlled by the

company and have no physical form, and the expected future economic benefits related to the asset

are likely to flow into the company, and the cost of the asset can be reliably measured as intangible

assets.

The company's intangible assets are accounted for at the amount actually paid or determined value.

① If the payment of the purchase price of intangible assets is delayed and beyond the normal

credit conditions, which is essentially of financing nature, the cost of intangible assets is determined

F-50

34

on the basis of the current value of the purchase price. The difference between the actual payment

and the current value of the purchase price shall be included in the current profits and losses within

the credit period, except for those that should be capitalized in accordance with regulations.

② The cost of intangible assets invested by investors shall be based on the value stipulated in the

investment contract or agreement, unless the value stipulated in the contract or agreement is unfair.

③ The expenditures of the company's internal research and development projects are divided into

research phase expenditures and development phase expenditures. Research refers to an original and

planned investigation to acquire and understand new scientific or technical knowledge.

Development refers to the application of research results or other knowledge to a certain plan or

design before commercial production or use to produce new or substantially improved materials,

devices, products, etc.

Expenditures in the research phase of internal research and development projects are included in the

current profits and losses when they occur. Expenditures in the development stage of internal

research and development projects that meet the following conditions are recognized as intangible

assets: it is technically feasible to complete the intangible asset so that it can be used or sold; it has

the intention to complete the intangible asset and use or sell it; ways to generate economic benefits

from the intangible asset, including the ability to prove that the products produced by the intangible

assets has market or the intangible assets themselves has the market. If the intangible assets will be

used internally, their usefulness should be proved; technology, financial resources and other

resources support are adequate in order to complete the development of the intangible asset and the

company have the ability to use or sell the intangible asset; the expenditure attributable to the

development stage of the intangible asset can be reliably measured.

The company's intangible assets with limited-service life are amortized evenly during the service

life from the time when the intangible asset is available for use. Intangible assets with uncertain

service life are not amortized. The amortization amount of intangible assets is the amount after

deducting the estimated residual value from its cost. For intangible assets that have been impaired,

it is also necessary to deduct the accumulated amount of intangible asset impairment that have been

withdrawn.

The amortization methods of important intangible assets with limited useful lives are as follows:

F-51

35

Asset category Service life (years) Basis

Land use rights 50 Term of land use rights

22. Goodwill

Goodwill is the difference between the cost of a business combination not under the same control

and the fair value share of the investee or the identifiable net assets of the purchased party that it

should enjoy on the date of acquisition or purchase.

Goodwill related to subsidiaries is separately listed on the consolidated financial statements, and

goodwill related to associates and joint ventures is included in the book value of long-term equity

investments.

The impairment of goodwill listed separately in the financial statements shall be tested at least at

the end of each year. In the impairment test, the book value of goodwill is allocated to the benefited

asset group or combination of asset groups based on the fact that the relevant asset group or

combination of asset groups can benefit from the synergies of the business combination.

23. Long-term deferred expenses

Long-term deferred expenses are accounted according to the actual amount and amortized evenly

in installments during the benefit period or the prescribed period. If the long-term amortized expense

item cannot benefit the future accounting period, all the amortized value of the item that has not

been amortized shall be transferred to the current profit and loss.

24. Employee compensation

Employee compensation refers to various forms of remuneration or compensation provided by the

company for obtaining services provided by employees or terminating labor relations. Employee

compensation includes short-term compensation, post-employment benefits, dismissal benefits and

other long-term employee benefits. The benefits provided by the company to the spouses, children,

dependents and survivors of deceased employees and other beneficiaries are also employee

compensation.

(1) Short-term compensation

The company recognizes the actual short-term compensation as a liability during the accounting

period when the employees provide services to them, and includes it in the current profit and loss,

except for those required by other accounting standards or permitted to be included in the cost of

F-52

36

assets.

(2) Post-employment benefits

The company classifies post-employment benefit plans into defined contribution plans and defined

benefit plans. Post-employment welfare plan refers to the agreement reached between the company

and employees on post-employment benefits, or the company’s rules or provisions for providing

post-employment benefits to employees. Among them, the defined contribution plan refers to a post-

employment benefit plan in which the company no longer undertakes further payment obligations

after paying fixed fees to an independent fund; a defined benefit plan refers to a post-employment

benefit plan other than the defined contribution plan.

(3) Dismissal benefits

If the company provides dismissal benefits to employees, the employee compensation liabilities

arising from the dismissal benefits shall be recognized on the earlier date of the following: 1. when

the company cannot unilaterally withdraw the dismissal benefits provided due to the termination of

labor relations plan or reduction proposal; 2. when the company confirms the costs or expenses

related to the restructuring involving the payment of termination benefits. And the company shall

be included in the current profit and loss

(4) Other long-term employee benefits

Other long-term employee benefits provided by the company to employees that meet the conditions

of the defined contribution plan shall be accounted in accordance with the accounting policy of the

above defined contribution plan; otherwise, the employee benefits net liabilities or net assets of

other long-term employee benefits shall be recognized and measured in accordance with the

accounting policy of the above defined benefit plan.

25. Estimated liabilities

(1) Recognition standard of estimated liabilities

If the company's obligations related to contingencies meet the following conditions at the same time,

they are recognized as estimated liabilities:

① The obligation is the current obligation undertaken by the enterprise;

② The fulfillment of this obligation is likely to cause economic benefits flow out of the enterprise;

③ The amount of the obligation can be reliably measured.

F-53

37

(2) Measurement of estimated liabilities

The estimated liabilities are initially measured in accordance with the best estimate of the

expenditure required to perform the relevant current obligations. If there is a continuous range of

required expenditures, and the probability of occurrence of various results in this range is the same,

the best estimate is determined according to the median value in this range. In other cases, the best

estimate shall be dealt with in the following cases:

①If a contingent event involves an individual item, it shall be determined according to the

most likely amount.

②Contingencies involving multiple items shall be calculated and determined in accordance

with various possible results and their related probabilities.

When determining the best estimate, comprehensive consideration is given to factors such as risks,

uncertainties and time value of money related to contingencies. If the time value of money has a

significant impact, the best estimate is determined after discounting the relevant future cash outflows.

If all or part of the expenditures required by the company to settle the estimated liabilities are

expected to be compensated by a third party, the compensation amount can only be separately

recognized as an asset when it is basically certain that it can be received. The recognized

compensation amount does not exceed the book value of the estimated liability.

The company reviews the book value of estimated liabilities on the balance sheet date. If there is

conclusive evidence that the book value cannot truly reflect the current best estimate, the book value

shall be adjusted according to the current best estimate.

26. Revenue

(Only applicable to Shandong Meichen Ecology & Environment Co., Ltd. and its subsidiaries)

(1) Principles of revenue recognition

On the starting date of the contract, the company evaluates the contract, identifies each individual

performance obligation contained in the contract, and determines whether each individual

performance obligation is performed within a certain period of time or at a certain point in time.

When one of the following conditions is met, it belongs to the performance obligation within a

certain period of time, otherwise, it belongs to the performance obligation at a certain point of time:

① The customer obtains and consumes the economic benefits brought by the company's

F-54

38

performance at the same time as the company performs; ②The customer can control the goods or

services under construction during the performance; ③The goods or services produced during the

performance of the company have irreplaceable uses, and the company has the right to collect

payments for the cumulative performance part that has been completed during the entire contract

period.

For performance obligations performed within a certain period of time, the company recognizes

revenue in accordance with the performance progress during that period of time. When the

performance progress cannot be reasonably determined, if the cost incurred is expected to be

compensated, the revenue shall be recognized according to the amount of the cost incurred until the

performance progress can be reasonably determined. For performance obligations performed at a

certain point of time, revenue is recognized at the point when the customer obtains control of the

relevant goods or services. When judging whether the customer has obtained control of the product,

the company considers the following factors: ①The company has the current right to receive

payment for the product, that is, the customer has the current payment obligation for the product;

②The company has transferred the legal ownership of the product to the customer, that is, the

customer already has the legal ownership of the product; ③The company has transferred the

product to the customer in kind, that is, the customer has physically taken possession of the product;

④The company has transferred the main risks and rewards of the ownership of the product to the

customer, that is, the customer has obtained the main risks and rewards of the ownership of the

product; ⑤The customer has accepted the product; ⑥Other signs that the customer has obtained

control of the product.

(2) Principles of revenue measurement

1.The company measures revenue based on the transaction price allocated to each individual

performance obligation. The transaction price is the amount of consideration that the company

expects to be entitled to receive due to the transfer of goods or services to customers, and does not

include payments received on behalf of third parties and payments expected to be returned to

customers.

2. If there is variable consideration in the contract, the company shall determine the best estimate of

the variable consideration according to the expected value or the most likely amount, however the

F-55

39

transaction price including the variable consideration shall not exceed the amount at which the

accumulated confirmed revenue will most likely not undergo a significant reversal when the relevant

uncertainty is eliminated.

3. If there is a significant financing component in the contract, the company shall determine the

transaction price based on the amount payable in cash when the customer assumes control of the

goods or services. The difference between the transaction price and the contract consideration shall

be amortized by the effective interest method during the contract period. On the starting date of the

contract, if the company expects that the interval between the customer's acquisition of control of

the goods or services and the customer's payment of the price will not exceed one year, there is no

need to consider significant financing components in the contract.

4. If the contract contains two or more performance obligations, the company will allocate the

transaction price to each individual performance obligation in accordance with the relative

proportion of the stand-alone selling price of the goods promised by each individual performance

obligation on the date of contract commencement.

(3) Specific methods of revenue recognition

① Revenue recognized on time

The company's sales of rubber hoses, shock absorbers and other series of products belong to the

performance obligations at a certain point of time. Recognition of domestic product income must

meet the following conditions: the company has delivered the product to the customer in accordance

with the contract and the customer has accepted the product, the payment has been recovered or the

receipt of payment has been obtained, and the relevant economic benefits are likely to flow into the

company, the main risk of product ownership and the reward has been transferred, and the legal

ownership of the goods has been transferred. The following conditions must be met to confirm the

revenue of export products: the company has declared the product in accordance with the contract,

obtained the bill of lading, has received the payment or obtained the receipt of payment and related

economic benefits are likely to flow into the company, and the main risks and rewards of the

ownership of the product have been transferred and the legal ownership of the goods has been

transferred.

For the landscape design business, the company recognizes revenue when the customer obtains

F-56

40

control of the relevant goods or services based on the nature of the specific business and contractual

provisions.

① Revenue recognized according to the progress of contract performance

The company provides services such as landscaping construction. Since the company performs the

contract, the customer obtains and consumes the economic benefits brought by the company's

performance, and the customer can control the goods or services under construction in the

company's performance, and the services or the goods provided by the company during the

performance of the contract have irreplaceable uses, and the company has the right to collect

payment for the performance part that has been completed so far during the entire contract period.

The company regards it as a performance obligation performed within a certain period of time. The

revenue is recognized according to the performance progress, except when the performance progress

cannot be reasonably confirmed. The company determines the progress of the performance of the

service in accordance with its input. When the performance progress cannot be reasonably

determined, if the company's incurred costs are expected to be compensated, the revenue shall be

recognized according to the amount of the incurred costs until the performance progress can be

reasonably determined.

27. Revenue

(Applicable to other companies in the group except Shandong Meichen Ecology & Environment

Co., Ltd. and its subsidiaries)

Revenue is the total inflow of economic benefits formed in the company's daily activities that will

increase shareholders' equity and have nothing to do with the capital invested by shareholders.

Revenue is recognized when its amount and related costs can be reliably measured, the relevant

economic benefits are likely to flow into the company, and other recognition conditions for the

following different types of revenue are met at the same time.

(1) Sales of goods

In selling of commodities, the realization of operating income will be recognized when important

risks and rewards of commodity ownership has been transfers to the buyer, and the company no

longer implements continued management and actual control over these commodities, economic

benefits related to the transaction can flow into the enterprise, and related income and costs can be

F-57

41

reliably measured. Among them: in the domestic sales business, the company recognizes revenue

when the product is issued and the customer signs for confirmation the receipt of goods, and the

foreign sales business, the company recognizes the revenue when the product is issued and the bill

of lading is obtained.

(2) Provide labor services

When the company provides external labor services, the relevant revenue is recognized when the

labor services have been actually provided. The revenue is recognized based on the premise that the

labor services have been provided, the transaction-related prices can flow in, and the costs related

to the labor services can be reliably measured.

(3) Transfer of the right to use assets

Revenue from the transfer of asset use rights includes interest income, royalty income, etc. The

company recognizes the revenue from the transfer of asset use rights when the amount of income

can be reliably measured and the relevant economic benefits are likely to flow into the enterprise.

28. Government grants

Government grants are confirmed when the company meets the conditions attached to the

government subsidies and the economic benefits can be received.

Government subsidies for monetary assets are measured according to the amount received or

receivable. Government subsidies for non-monetary assets shall be measured at fair value; if the fair

value cannot be obtained reliably, it shall be measured at a nominal amount of 1 yuan.

Asset-related government grants refer to government grants obtained by the company for purchase

and construction or to form long-term assets in other ways; otherwise, they are accounted as

government grants related to income.

For the items with which government documents that do not clearly specify subsidy object, and can

form long-term assets, the part of the government grants corresponding to the asset value is regarded

as the government grants related to the asset, and the rest is regarded as the government grants

related to income; if it is difficult to distinguish, the government grants as a whole is regarded as a

government grants related to income.

Government grants related to assets are recognized as deferred income and recorded in profit and

loss in installments according to a reasonable and systematic method within the useful life of the

F-58

42

relevant assets. Government grants related to income are included in the current profit and loss if

they are used to compensate related costs or losses that have occurred; those used to compensate

related costs or losses in subsequent periods are included in deferred income and accounted to the

relevant costs or losses, and is included in the current profit and loss of the costs or losses period.

Government grants measured at nominal amounts are directly accounted in the current profits and

losses. The company adopts the same method to deal with the same or similar government grant.

Government grants related to daily activities are accounted in other income in accordance with the

nature of economic business. Government grants not related to daily activities are included in non-

operating income and expenditure.

When the recognized government subsidy needs to be returned, if the book value of the relevant

asset is offset at the initial recognition, the book value of the asset is adjusted; if there is a relevant

deferred income balance, the book balance of the relevant deferred income is offset, and the excess

is accounted in the current profit and loss; In other cases, it shall be directly included in the current

profit and loss.

For the obtained policy-based preferential loan interest discount, if the finance authorities allocate

the interest-subsidized funds to the lending bank, the actual loan amount received is used as the

accounting value of the loan, and the borrowing cost is calculated according to the loan principal

and the preferential interest rate policy. If the finance authorities directly allocate the interest subsidy

funds to the company, the interest subsidy will offset the borrowing costs.

29. Deferred income tax assets/deferred income tax liabilities

The company uses the balance sheet debt method for income tax accounting.

(1) Deferred income tax assets

1. If there is a deductible temporary difference between the book value of assets and liabilities and

its tax base, the deferred income tax assets arising from the deductible temporary differences are

calculated and confirmed, with the taxable income that is likely to be obtained in the future to deduct

the deductible temporary difference as a limit, and according to the expected tax rate during the

period when the asset is recovered or the liability is settled.

2. On the balance sheet date, if there is conclusive evidence showing that sufficient taxable income

is likely to be obtained in the future to offset the deductible temporary differences, the deferred

F-59

43

income tax assets that have not been recognized in the previous period shall be recognized.

3. On the balance sheet date, review the book value of deferred income tax assets. If it is probable

that sufficient taxable income cannot be obtained in the future to offset the benefits of deferred

income tax assets, the book value of the deferred income tax assets shall be written down. When it

is possible to obtain sufficient taxable income, the reduced amount shall be reversed.

(2) Deferred income tax liabilities

If there is a taxable temporary difference between the book value of assets and liabilities and its tax

base, the deferred income tax liabilities arising from the taxable temporary difference shall be

recognized according to the expected tax rate during the period when the asset is recovered or the

liability is paid off.

30. Lease

(1) Operating lease

As a lessee, the company’s operating lease rents are accounted in the relevant asset cost or current

profit and loss on a straight-line basis during each period of the lease term; the initial direct costs

incurred are included in the current profit and loss; contingent rents are included in the current profit

and loss when they actually occur.

As a lessor, the company includes the assets used for operating leases in the balance sheet according

to the nature of the assets; for operating leases, rents for operating leases are recognized as current

profits and losses during each period of the lease period according to the straight-line method; The

initial direct expenses are included in the current profit and loss; for the fixed assets in the operating

lease assets, the depreciation policy of similar assets is used to accrue depreciation; for other

operating lease assets, a systematic and reasonable method is used for amortization; contingent rents

are actually incurred accounted in the current profit and loss.

(2) Finance lease

①As a lessee

The company uses the lower of the fair value of the leased asset at the start date of the lease and the

present value of the minimum lease payment as the booking value of the leased asset at the beginning

of the lease term, and the minimum lease payment as the booking value of the long-term payable.

The difference is regarded as an unrecognized financing expense; the initial direct expenses such as

F-60

44

handling fees, attorney fees, travel expenses, stamp duty, etc., incurred during lease negotiation and

signing of the lease contract that can be attributed to the lease item are included in the value of the

leased asset; unrecognized financing expenses are allocated during each period of the lease period,

and the actual interest rate method is used to calculate and confirm the current financing costs;

contingent rents are included in the current profits and losses when they actually occur.

When calculating the present value of the minimum lease payment, if the interest rate implicit in the

lease of the lessor can be obtained, the interest rate implicit in the lease shall be used as the discount

rate; otherwise, the interest rate specified in the lease contract shall be adopted as the discount rate.

If the interest rate cannot be obtained and the lease contract does not specify an interest rate, the

bank loan interest rate of the same period shall be used as the discount rate.

The company adopts a depreciation policy consistent with that of its own fixed assets to accrue

depreciation of leased assets. If it can be reasonably determined that the ownership of the leased

asset will be obtained at the expiration of the lease term, depreciation shall be accrued during the

useful life of the leased asset. If it cannot be reasonably determined that the ownership of the leased

asset can be obtained at the expiration of the lease term, depreciation shall be accrued during the

shorter of the lease term and the useful life of the leased asset.

②As a lessor

At the beginning of the lease term, the company uses the sum of the minimum lease payment on the

lease start date and the initial direct cost as the booking value of the financial lease receivable, and

records the unguaranteed residual value; the difference between the sum of the minimum lease

receipts, initial direct costs and unguaranteed residual value and the sum of its present value is

recognized as unrealized financing income; the unrealized financing income is distributed during

each period of the lease term; the actual interest rate method is used to calculate and recognize the

current financing income; contingent rent is included in the current profit and loss when it is incurred.

31. Asset impairment

When there are the following signs, it indicates that the asset may be impaired:

(1) The market price of assets fell sharply in the current period, and the drop was significantly higher

than the expected impairment due to the passage of time or normal use.

(2) The economic, technological or legal environment in which the company operates and the

F-61

45

market in which the assets are located undergo major changes in the current period or in the near

future, which will adversely affect the company.

(3) The market interest rate or the rate of return on other market investments has increased in the

current period, which affects the discount rate used by the enterprise to calculate the present value

of the expected future cash flow of the asset, resulting in a substantial reduction in the recoverable

amount of the asset.

(4) There is evidence showing that the asset is obsolete or has been damaged.

(5) Assets have been or will be idled, terminated or planned to be disposed of in advance.

(6) Evidence from the company's internal report shows that the economic performance of the assets

has been lower or will be lower than expected, such as the net cash flow generated from the assets

or the realized operating profit (or loss) is far lower than the expected amount, etc.

(7) Other evidence shows that the asset may have been impaired.

The company applies No. 8-Asset Impairment of Accounting Standards for Business Enterprises on

the balance sheet date for long-term equity investments, investment real estate, fixed assets,

construction materials, construction in progress, intangible assets (except those with uncertain

service life), etc. to make judgments on each asset, and when there is evidence of impairment,

conduct an impairment test on it to estimate its recoverable amount. The recoverable amount is

determined by the higher of the net value of the asset's fair value minus the disposal expenses and

the present value of the asset's expected future cash flow. If the recoverable amount of the asset is

lower than its book value, the book value of the asset is written down to the recoverable amount.

The written down amount is recognized as asset impairment loss and included in the current profit

and loss, and the corresponding asset impairment provision is made at the same time.

If there are evidence that an asset may be impaired, the company usually estimates its recoverable

amount on the basis of an individual asset. When it is difficult to estimate the recoverable amount

of an individual asset, the recoverable amount of the asset group shall be determined on the basis of

the asset group to which the asset belongs.

An asset group is the smallest combination of assets that can be identified by the company, and the

cash inflow generated by it is basically independent of other assets or asset groups. The asset group

consists of assets related to the creation of cash inflows. The identification of an asset group is based

F-62

46

on whether the main cash inflow generated by the asset group is independent of the cash inflows of

other assets or asset groups.

Regardless of whether there are signs of impairment, the company conducts impairment test

annually for the goodwill formed by business combination and the intangible assets with uncertain

service life and not yet ready for use. The impairment test of goodwill is carried out in conjunction

with its related asset group or combination of asset groups.

Once an asset impairment loss is recognized, it will not be reversed in subsequent accounting periods.

32. Fair value measurement

Fair value refers to the price that market participants can receive for the sale of an asset or pay for

the transfer of a liability in an orderly transaction that occurs on the measurement date.

The company measures related assets or liabilities at fair value, assuming that an orderly transaction

of selling assets or transferring liabilities takes place in the main market of the relevant asset or

liability; if there is no major market, the company assumes that the transaction is taken place at a

place which is most beneficial to the relevant asset or liability. The main market (or the most

favorable market) is the trading market that the company can enter on the measurement date. The

company adopts the assumptions used by market participants to maximize their economic benefits

when pricing the asset or liability.

When measuring non-financial assets at fair value, consider the ability of market participants to use

the asset for the best purpose to generate economic benefits, or to sell the asset to other market

participants that can be used for the best purpose to generate economic benefits.

The company adopts valuation techniques that are applicable under current circumstances and have

sufficient available data and other information to support, prioritize the use of relevant observable

input values, and only use unobservable input value when observable input values cannot be

obtained or are not practicable.

For assets and liabilities measured or disclosed in financial statements at fair value, determine the

fair value level to which they belong based on the lowest level of input value that is important to the

fair value measurement as a whole: The input value of the first level is the unadjusted quotation of

the same asset or liability in the active market that can be obtained on the measurement date; the

second-level input value is the directly or indirectly observable input value of the related asset or

F-63

47

liability in addition to the first-level input value; The input value of the third level is the

unobservable input value of related assets or liabilities.

On each balance sheet date, the company re-evaluates the assets and liabilities recognized in the

financial statements that are continuously measured at fair value to determine whether there is a

conversion between the fair value measurement levels.

33. Changes in important accounting policies and accounting estimates

(1) Changes in important accounting policies

① Changes in accounting policies caused by changes in Accounting Standards for Business

Enterprise

A. Shandong Meichen Ecology & Environment Co., Ltd. and its subsidiaries began to implement

the No. 14-Revenue of Accounting Standards for Business Enterprises (hereinafter referred to as

New Revenue Standards) revised by the Ministry of Finance from January 1, 2020. In accordance

with the relevant regulations on the convergence of the old and new standards, the comparable

period information is not adjusted, and the cumulative impact of the implementation of the new

standards on the first implementation date is retrospectively adjusted to the amount of retained

earnings at the beginning of the reporting period and other related items in the financial statements.

The main impacts of the implementation of the new revenue standard on the company's consolidated

financial statements on January 1, 2020 are as follows:

Item

Balance sheet

December 31, 2019 The impact of the new

revenue standard adjustment

January 1, 2020

Accounts receivable 3,458,176,011.59 -21,390,612.76 3,436,785,398.83

Inventory 15,356,481,303.07 -5,314,910,418.28 10,041,570,884.79

Contract assets 4,883,194,111.82 4,883,194,111.82

Construction in progress 37,406,008,208.53 -11,824.82 37,405,996,383.71

Deferred tax assets 48,420,097.99 66,512,865.21 114,932,963.20

Advance from customers 194,556,079.65 -24,300,460.59 170,255,619.06

Other current liabilities 120,661,625.26 2,795,628.21 123,457,253.47

Contract liabilities 21,504,832.38 21,504,832.38

F-64

48

Item

Balance sheet

December 31, 2019 The impact of the new

revenue standard adjustment

January 1, 2020

Accrued liabilities 38,411,519.70 4,321,616.72 42,733,136.42

Undistributed profit 2,759,625,277.07 -83,893,040.55 2,675,732,236.52

Non-controlling interests' equity

10,940,569,051.52 -307,034,455.00 10,633,534,596.52

B. From January 1, 2020, the company implemented the Interpretation No. 13 of the Accounting

Standards for Business Enterprises promulgated by the Ministry of Finance in 2019, and this

accounting policy change was handled by the future applicable law.

②Other accounting policy changes

None.

(2) Changes in important accounting estimates

It was decided on the 30th meeting of the 4th Board of Directors of Shandong Meichen Ecology &

Environment Co., Ltd. that the accrual ratio of the three guarantees for auto parts product quality

was changed from 4% of sales revenue to the principal of the accrual separately according to

customers and product types. After the change, the product quality and after-sales service for

passenger cars and construction machinery are accrued at 2% of sales revenue, and the product

quality and after-sales service for commercial vehicles are accrued at 3.5% of sales revenue. This

change of accounting estimate would be implemented from the fourth quarter of 2020.

IV. Taxation

1.Main taxes and tax rates

Tax categories Tax basis Tax rate

VAT

Calculate the output tax based on the sales of goods and taxable labor income calculated

according to the tax law. After deducting the input tax that is allowed to be deducted in the

current period, the difference is the value-added tax payable

3%、5%、6%、9%、13%

Urban maintenance and construction tax

Pay VAT and export VAT exemption 7%、5%

Education surcharge Pay VAT and export VAT exemption 3%

Corporate income tax Taxable income 25%、15%

2. Tax incentives

(1) According to the relevant provisions of the Enterprise Income Tax Law of the People’s Republic

F-65

49

of China, high-tech enterprises enjoy a preferential tax rate of 15% of their corporate income tax.

The details are as follows:

Name of the company High-tech enterprise certificate

number Preferential period

Shandong Meichen Ecology & Environment Co., Ltd.

GR202037000787 2020-2022

Shandong Meichen Industry Group Co., Ltd. GR201837000146 2018-2020

Dongfeng Meichen (Shiyan) Automotive Fluid System Co., Ltd.

GR201942000136 2019-2021

Hangzhou Saishi Garden Group Co., Ltd. GR201833001306 2018-2020

Hangzhou Landscape Engineering Co., Ltd. GR201933003404 2019-2021

Faya Ecological Environment Group Co., Ltd. GR201942001452 2019-2021

(2) According to the notice of the Ministry of Finance and the State Administration of Taxation on

Ganzhou’s Implementation of the Taxation Policy for the Western Development (Caishui [2013]

No. 4), from January 1, 2012 to December 31, 2020, the domestic enterprises and foreign-invested

enterprises in encouraged industries and advantageous industries established in Ganzhou will be

levied corporate income tax at a reduced rate of 15%. Shangyou Saishi Ecological Construction Co.,

Ltd. complies with domestic enterprises in encouraged industries in the Industrial Structure

Adjustment Guidance Catalog.

(3) In accordance with the provisions of Paragraph 1 in Article 15 of the Provisional Regulations on

Value-Added Tax of the People's Republic of China on the exemption of value-added tax on self-

produced agricultural products sold by agricultural producers, Hangzhou Saishi Ecological

Agriculture Co., Ltd. and Hangzhou Saishi Nursery Co., Ltd. Company, Hangzhou Lin'an Saishi

Huachao Gardening Co., Ltd., Wuxi Saishi Container Seedling Co., Ltd., Changyi Saishi Container

Flowers and Trees Co., Ltd., Qihe Saishi Landscaping Co., Ltd., Binzhou Saishi Gardening Co.,

Ltd., Shandong Zhonghe Gardening Co., Ltd. , Jiangxi Shuangshi Flowers and Trees Co., Ltd. and

Weifang Hongfeng Agricultural Science and Technology Development Co., Ltd. are exempt from

VAT on the sale of self-produced agricultural products.

(4) According to the relevant provisions of the Enterprise Income Tax Law of the People's Republic

of China, Implementation Regulations of the Enterprise Income Tax Law of the People's Republic

of China and Administrative Measures for Enterprise Income Tax Reduction and Exemption (Trial),

income from agricultural and forestry projects is exempted from corporate income tax. Hangzhou

F-66

50

Saishi Ecological Agriculture Co., Ltd., Hangzhou Saishi Nursery Co., Ltd., Hangzhou Lin'an Saishi

Huachao Gardening Co., Ltd., Wuxi Saishi Container Seedling Co., Ltd., Changyi Saishi Container

Flowers and Trees Co., Ltd., Qihe Saishi Landscaping Co., Ltd. , Binzhou Saishi Horticulture Co.,

Ltd., Shandong Zhonghe Gardening Co., Ltd., Jiangxi Shuangshi Flowers and Trees Co., Ltd. and

Weifang Hongfeng Agricultural Technology Development Co., Ltd. are exempt from corporate

income tax on income from agricultural and forestry projects.

V. Notes to the consolidated financial statements

1. Monetary funds

(1) Monetary funds are listed by category

Item December 31, 2020 December 31, 2019

Cash on hand 840,379.24 1,124,465.76

Cash in bank 6,110,289,382.79 5,638,847,233.06

Other monetary fund 1,584,814,335.28 1,252,125,228.61

Total 7,695,944,097.31 6,892,096,927.43

(2) Other monetary funds are listed in details


Margin 1,086,416,648.47 954,843,917.42

Time deposit 495,000,000.00 296,417,300.00

Deposit investment funds 4,769.48 4,752.64

Restricted funds 2,950,259.08 859,258.55

Securities account funds 442,658.25

Total 1,584,814,335.28 1,252,125,228.61

(3) As of the end of the reporting period, except for the securities account funds, other monetary

funds are all restricted in use. In addition, there are no funds that are restricted in use due to

mortgages, pledges, etc., or funds deposited in overseas that are subject to restrictions on repatriation

of funds.

2. Transactional financial assets


Financial assets that are measured at fair value and whose changes

1,301,714,049.92 2,700,000,000.00

F-67

51


are included in the current profit and loss

Of which: structured deposits 1,300,000,000.00 2,700,000,000.00

Financial product 1,000,000.00

Time treasury bond deposits 714,049.92

Total 1,301,714,049.92 2,700,000,000.00

3. Notes receivable

(1) Classification of notes receivable

Category December 31, 2020 December 31, 2019

Bank acceptance draft 2,122,100.00 -

Trade acceptance draft 60,991,390.62 12,269,000.59

Less: Provision for impairment 3,049,569.53 613,450.03

Total 60,063,921.09 11,655,550.56

(2) At the end of the period, the company has endorsed or discounted notes receivable that are

not yet due on the balance sheet date

Item Derecognized amount at the

period ending Unterminated amount at the period

ending

Trade acceptance draft 9,013,820.00

Total 9,013,820.00

4. Accounts receivable

(1) Disclosure of accounts receivable by classification

Category

December 31, 2020

Book balance Bad debt provision Book

Amount Proportion(%) Amount Expected credit loss rate (%)

value

Accounts receivable with single provision for bad debts

21,750,663.50 0.45 18,250,663.50 83.91 3,500,000.00

Accounts receivable with provision for bad debts based on the combination of credit risk characteristics

4,784,383,284.99 99.55 168,515,812.02 4,615,867,472.97

Combination 1: Aging combination

1,355,344,348.38 28.20 168,515,812.02 12.43 1,186,828,536.36

Combination 2: Combination with extremely low credit risk

3,421,627,964.14 71.19 3,421,627,964.14

Combination 3: Related party combination

7,410,972.47 0.16 7,410,972.47

F-68

52

Category

December 31, 2020



value

Total 4,806,133,948.49 100.00 186,766,475.52 4,619,367,472.97

Continued

Category

December 31, 2019


Amount Proportion(%) Amount

Expected credit

loss rate (%)

value


19,414,611.89 0.54 14,081,581.53 72.53 5,333,030.36


3,594,002,321.56 99.46 141,159,340.33 3,452,842,981.23


1,293,048,189.64 35.79 141,159,340.33 10.92 1,151,888,849.31


2,292,163,159.45 63.43 2,292,163,159.45


8,790,972.47 0.24 8,790,972.47

Total 3,613,416,933.45 100.00 155,240,921.86 3,458,176,011.59

In the combination, accounts receivable with provision for bad debts based on the age combination:

Aging

December 31, 2020

Book balance Bad debt provision Expected credit loss rate (%)

Within 1 year 877,848,277.02 43,892,413.86 5.00

1 to 2 years 135,459,117.97 13,545,911.79 10.00

2 to 3 years 245,814,547.29 36,887,662.88 15．00/20.00

3 to 4 years 9,796,287.06 2,938,886.12 30.00

4 to 5 years 30,350,363.37 15,175,181.70 50.00

More than 5 years 56,075,755.67 56,075,755.67 100.00

Total 1,355,344,348.38 168,515,812.02

(2) Provision for bad debts accrued, recovered or reversed in the current period

F-69

53

Item January 1, 2020

Increase in the current period

Decrease in the current period December 31,

2020 Accrual Others

Collected or written off

Others

Bad debt provision

152,362,769.77 34,409,678.52 5,972.77 186,766,475.52

Total 152,362,769.77 34,409,678.52 5,972.77 186,766,475.52

(3) The top five accounts receivable of the ending balance collected by the debtor

The top five accounts receivable at the end of the period aggregated by debtor are totally

2,023,882,141.73-yuan, accounting for 42.11% of the total ending balance of accounts receivable,

and the corresponding ending balance of bad debt provision was 0 yuan.

5. Receivable’s financing

(1) Financing of receivables


Notes receivable that are measured at fair value and whose changes are included in other comprehensive income

243,601,934.52 134,529,791.33

Total 243,601,934.52 134,529,791.33

(2) Financing of receivables that the company has endorsed or discounted at the end of the

period and is not yet due on the balance sheet date

Item Derecognized amount at the end of the period

Unterminated confirmation amount at the end of the period

Bank acceptance note 504,360,970.15

Total 504,360,970.15

6. Prepayment

Aging

December 31, 2020 December 31, 2019

Amount Ratio (%) Amount Ratio (%)

Within 1 year 146,622,376.44 59.71 137,002,202.45 60.88

1 to 2 years 30,531,815.26 12.43 17,251,910.84 7.67

2 to 3 years 4,808,690.50 1.96 2,343,756.86 1.04

over 3 years 63,604,800.22 25.90 68,437,251.30 30.41

Total 245,567,682.42 100.00 225,035,121.45 100.00

7. Other receivables

F-70

54


Interest receivable 8,460,472.62 59,042,603.64

Dividend receivable 12,252,709.80

Other receivables 5,201,972,688.41 4,369,269,249.36

Total 5,222,685,870.83 4,428,311,853.00

7.1 Interest receivable


Margin and deposit interest 4,677,869.94 1,639,684.91

Interest of funds receivable 3,782,602.68 57,402,918.73

Total 8,460,472.62 59,042,603.64

7.2 Dividends receivable


Bank of Weifang Co., Ltd. 12,252,709.80

Total 12,252,709.80

7.3 Other receivables

(1) Disclosure of other receivables by classification

Category

December 31, 2020



Value

Other accounts receivable with single provision for bad debts

66,218,011.54 1.23 64,584,239.62 97.53 1,633,771.92

Other accounts receivable with provision for bad debts based on the combination of credit risk characteristics

5,309,457,501.69 98.77 109,118,585.20 5,200,338,916.49


258,632,233.11 4.81 109,118,585.20 42.19 149,513,647.91


3,667,845,482.00 68.23 3,667,845,482.00


1,382,979,786.58 25.73 1,382,979,786.58

Total 5,375,675,513.23 100.00 173,702,824.82 5,201,972,688.41

Continued

F-71

55

Category

December 31, 2019


Amount Proportion

(%) Amount

Expected credit loss rate (%)

Value


11,839,652.91 0.27 10,245,823.62 86.54 1,593,829.29


4,432,651,497.30 99.73 64,976,077.23 4,367,675,420.07


340,929,600.41 7.67 64,976,077.23 19.06 275,953,523.18


2,938,947,787.69 66.12 2,938,947,787.69


1,152,774,109.20 25.94 1,152,774,109.20

Total 4,444,491,150.21 100.00 75,221,900.85 4,369,269,249.36

In the portfolio, other accounts receivable with provision for bad debts based on the aging portfolio:

Aging

December 31, 2020

Other receivables Bad debt provision Expected credit loss rate (%)

Within 1 year 81,634,832.88 4,081,741.65 5.00

1 to 2 years 36,725,225.30 3,672,522.55 10.00

2 to 3 years 32,409,644.06 4,917,477.15 15.00/20.00

3 to 4 years 10,418,747.16 3,125,624.16 30.00

4 to 5 years 8,245,128.05 4,122,564.03 50.00

More than 5 years 89,198,655.66 89,198,655.66 100.00

Total 258,632,233.11 109,118,585.20

(2) Provision for bad debts accrued, recovered or reversed in the current period

Item December 31,

2019

Increase in the current

period

Decrease in the current

period December 31,

2020 Accrual Others

Collected or

write off Others

Bad debt

provision 75,221,900.85 98,498,688.54 17,764.57 173,702,824.82

Total 75,221,900.85 98,498,688.54 17,764.57 173,702,824.82

(3) Classification of other receivables according to the nature of the funds

Nature of payment December 31, 2020 December 31, 2019

Related party payments 1,382,979,786.58 1,389,350,669.10

F-72

56


Accounts with other companies 3,779,233,188.76 2,860,791,258.11

Deposit, security deposit 158,263,762.71 147,973,486.50

Reserve funds and others 55,198,775.18 46,375,736.50

Total 5,375,675,513.23 4,444,491,150.21

(4) Other receivables of the top five ending balances collected by the debtor

Name of debtor Nature of payment

Ending balance Aging

Proportion to the total balance of

other receivables at the end of the period

(%)

Ending balance of bad debt provision

Weifang Bincheng Investment Development Co., Ltd.

Current payment

200,000,000.00 Within 1 year

13.02

500,000,000.00 1 to 2 years

Weifang Greenland Urban Investment Land Co., Ltd.

Current payment

86,824.69 Within 1 year

12.14

50,056,029.37 1 to 2 years

602,243,600.02 2 to 3 years

Weifang Water Investment Co., Ltd.

Current payment

500,000,000.00 Within 1 year 9.30

Weifang Henghe Real Estate Co., Ltd.

Current payment

267,697,909.00 More than 5 years

4.98

Jun Fu Nonwovens Co., Ltd.

Current payment

220,000,000.00 Within 1 year 4.09

Total 2,340,084,363.08 43.53

8. Inventory

(1) Inventory list by category

Inventory category


Book balance Reserve for depreciation

Book value Book balance Reserve for depreciation

Book value

Raw materials 96,314,863.89 96,314,863.89 106,308,673.53 106,308,673.53

Consumable biological assets

112,703,950.74 112,703,950.74 119,268,702.80 119,268,702.80

Work in progress and self-made semi-finished products

12,353,288.01 12,353,288.01 10,636,395.05 10,636,395.05

Stock goods 8,799,088,340.19 6,952,270.91 8,792,136,069.28 9,054,877,022.41 10,435,160.39 9,044,441,862.02

Of which: land use rights

8,643,988,361.25 8,643,988,361.25 8,933,587,275.75 8,933,587,275.75

Consigned processing materials

1,174,046.41 1,174,046.41 1,132,828.67 1,132,828.67

F-73

57

Inventory category


Book balance Reserve for depreciation

Book value Book balance Reserve for depreciation

Book value

Engineering construction

173,965,273.22 173,965,273.22 5,385,342,567.01 5,385,342,567.01

Development costs

1,636,889,161.42 1,636,889,161.42 660,937,668.08 660,937,668.08

Design cost 32,828,824.47 32,828,824.47 27,808,142.71 27,808,142.71

Others 521,652.12 521,652.12 604,463.20 604,463.20

Total 10,865,839,400.47 6,952,270.91 10,858,887,129.56 15,366,916,463.46 10,435,160.39 15,356,481,303.07

(2) List of inventory depreciation reserves

Inventory December 31, 2019 Withdrawal in current period

Decrease in current period December 31,

2020 Roll back Resell

Stock goods 10,435,160.39 2,818,605.43 - 6,301,494.91 6,952,270.91

Total 10,435,160.39 2,818,605.43 - 6,301,494.91 6,952,270.91

(3) As of December 31, 2020, the book value of the land use rights used for mortgage in the

inventory is 106,076,390.40 yuan, and the book value of the land use rights for the transfer of income

rights is 156,693,844.80 yuan.

(4) As of December 31, 2020, the book value of the land use right that has not obtained the property

right certificate is 59,986,227.67 yuan.

9. Contract assets

(1) Contract assets

Item


Book balance Impairment provision

Book value Book

balance Impairment

Book value

Contract warranty

31,790,397.15 6,033,027.21 25,757,369.94

PPP project 2,306,732,648.37 115,336,632.42 2,191,396,015.95

Non-PPP project

3,810,527,515.46 381,052,751.54 3,429,474,763.92

Total 6,149,050,560.98 502,422,411.17 5,646,628,149.81

(2) The amount and reason for the significant change in the book value of the current period

There was no significant change in the book value during the period.

(3) Provision for impairment of contract assets in the current period

F-74

58

Item January 1, 2020 Withdrawal in current period

Reversal Write-off amount in current period

December 31, 2020

Contract warranty

2,878,152.09 3,154,875.12 - - 6,033,027.21

PPP project 87,677,806.40 27,658,826.02 - - 115,336,632.42

Non-PPP project

355,739,162.96 25,313,588.58 - - 381,052,751.54

Total 446,295,121.45 56,127,289.72 - - 502,422,411.17

10. Non-current assets due within one year


Long-term receivables due within 1 year 50,061,309.66 80,038,463.52

Including: receivables from BT project 50,061,309.66 80,481,203.93

Less: Unrealized financing income 442,740.41

Net 50,061,309.66 80,038,463.52

11. Other current assets


Prepaid expenses 53,000.00 76,000.00

Input tax to be deducted, retained tax credit

335,936,630.43 274,681,623.15

Tax reclassification 9,357,564.18 4,420,899.61

Others 2,893,081.76 972,615.43

Total 348,240,276.37 280,151,138.19

12.Long-term receivables

Item


Book balance Bad debt provision

Book value Book balance Bad debt provision

Book value

Land Fund for the East District of Weifang Hospital of Traditional Chinese Medicine

316,443,900.00 316,443,900.00 316,443,900.00 316,443,900.00

Shanty Town Renovation Fund

4,871,404,992.69 4,871,404,992.69 5,004,973,759.81 5,004,973,759.81

Large-class project funds for urban primary and secondary schools

543,165,425.00 543,165,425.00 564,960,635.00 564,960,635.00

Demolition funds of Weifang Yaxing Chemical Co., Ltd.

1,418,712,057.15 1,418,712,057.15 420,000,000.00 420,000,000.00

Accounts receivable of BT project engineering

1,357,499,000.00 1,357,499,000.00 1,628,999,000.00 1,628,999,000.00

F-75

59

Item



Book value Book balance Bad debt provision

Book value

Receivables of PPP project engineering

4,517,439.76 4,517,439.76 16,030,675.20 16,030,675.20

Unrealized financing income

-122,975,613.44 -122,975,613.44 -140,397,660.06 -140,397,660.06

Net 8,388,767,201.16 8,388,767,201.16 7,811,010,309.95 7,811,010,309.95


Invested company December 31,

2019

Changes in the current period

Additional investment

Reduce investment

Investment gains and losses recognized under the equity

method

Other comprehensive income adjustment

Joint venture

Weifang Investment Energy Holdings Co., Ltd.

86,632,159.77 82,600,000.00 554,252.40

SIIC Environmental Water Co., Ltd.

301,967,891.22 31,294,949.81

Zhongyi Health City Real Estate Investment Co., Ltd.

28,347,469.97 -2,466,066.76

Weifang Water Supply Co., Ltd.

117,900,133.60 3,289,493.54

Bank of Weifang Co., Ltd. 2,964,052,644.85 108,681,255.20 -6,082,335.84

China-Israel Health United International Medical Technology Co., Ltd.

267,734,422.23 -11,376,345.66

Shandong High-speed Chengtou Ring Expressway Co., Ltd.

439,192,700.00 127,502,000.00


280,000,000.00 166,360,767.54 -399,845.91

Weifang Aocheng Real Estate Development Co., Ltd.

35,000,000.00 -430,996.89

Tianrui Magnetic Levitation Intelligent Technology (Shandong) Co., Ltd.

35,000,000.00 195,434.30

Shandong High Speed Jiqing Middle Route Highway Co., Ltd.

495,144,400.00

Weifang Yaxing Chemical Co., Ltd.

196,805,600.00

Shandong Haoxin Machinery Co., Ltd.

449,999,999.99

Shandong Zhizhi Natural Education Development Co., Ltd.

1,659,834.02 17,166.44

Weifang Jinyin Warehouse Operation Co., Ltd.

1,909,918.86 450,967.04

F-76

60

Invested company December 31,

2019


Additional investment

Reduce investment

Investment gains and losses recognized under the equity

method

Other comprehensive income adjustment

China Railway Construction Investment Weifang Urban Development and Construction Co., Ltd.

25,000,000.00

China Railway (Weifang) Urban Development Investment Co., Ltd.

20,000,000.00

Cloud Song (Beijing) Technology Co., Ltd.

137,831.12 -137,831.12

Zhejiang Greentown Environmental Engineering Consulting Management Co., Ltd.

7,985,028.88 1,800,000.0

0 977,142.08

Zhejiang Dechen Tourism Development Co., Ltd.

40,894,967.29 -1,292,439.17

Shandong Quanxin Fund Management Co., Ltd.

737,628.60 2,310,000.00 226,152.03

Meihuawangxin (Weifang) Equity Investment Fund Partnership (Limited Partnership)

16,000,000.00 -900,946.18

Shanghai Zhenhao Enterprise Management Consulting Co., Ltd.

1,500,000.00 -1,308,327.05

Shandong Chengxuan Real Estate Co., Ltd.

42,000,000.00

Weifang Huayi Agricultural Technology Co., Ltd.

20,000,000.00 -589,650.85

Zhoushan Huajindi Tourism Development Co., Ltd.

2,500,000.00 52.39

Dehong Huajiang Investment Development Co., Ltd.

Luming Construction Management Co., Ltd.

Total 4,259,152,630.41 1,831,361,999.9

9 1,800,000.0

0 293,545,029.09 -6,482,181.75

Continued

Invested company


December 31, 2020 Ending balance of

impairment provision Changes in

other equity

Declare a cash dividend or

profit

Provision for

impairment Others

Joint venture

Weifang Investment Energy Holdings Co., Ltd.

169,786,412.17


333,262,841.03

Zhongyi Health City Real Estate Investment Co.,

25,881,403.21

F-77

61

Invested company




other equity


profit

Provision for

impairment Others

Ltd.


121,189,627.14

Bank of Weifang Co., Ltd. 407,092,528.30 12,252,709.80 3,461,491,382.71


1,575,000.14 257,933,076.71


566,694,700.00

Jun Fu Nonwovens Co., Ltd. 445,960,921.63


34,569,003.11


35,195,434.30


495,144,400.00


196,805,600.00


449,999,999.99

Shandong Zhizhi Natural Education Development Co., Ltd.

1,677,000.46

Weifang Jinyin Warehouse Operation Co., Ltd.

2,360,885.90

China Railway Construction Investment Weifang Urban Development and Construction Co., Ltd.

25,000,000.00

China Railway (Weifang) Urban Development Investment Co., Ltd.

20,000,000.00

Cloud Song (Beijing) Technology Co., Ltd.

- 7,392,257.43


7,162,170.96

Zhejiang Dechen Tourism Development Co., Ltd.

39,602,528.12

Shandong Quanxin Fund Management Co., Ltd.

3,273,780.63

Meihuawangxin (Weifang) Equity Investment Fund Partnership (Limited Partnership)

15,099,053.82

Shanghai Zhenhao Enterprise Management Consulting Co., Ltd.

191,672.95

Shandong Chengxuan Real Estate Co., Ltd.

42,000,000.00

Weifang Huayi Agricultural Technology Co., Ltd.

19,410,349.15

Zhoushan Huajindi Tourism Development Co., Ltd.

2,500,052.39

F-78

62

Invested company




other equity


profit

Provision for

impairment Others

Dehong Huajiang Investment Development Co., Ltd.

Luming Construction Management Co., Ltd.

Total 408,667,528.44 12,252,709.80 - - 6,772,192,296.38 7,392,257.43

14. Investment in other equity instruments

(1) List by items


Weifang Binhai Investment Development Co., Ltd. 50,000,000.00 50,000,000.00

Weifang International Financial Hotel Management Co., Ltd. 2,250,000.00 2,250,000.00

Weifang Lvhai Forestry Development Co., Ltd. 11,000,000.00 11,000,000.00

Weifang Re-guarantee Co., Ltd. 270,000,000.00 270,000,000.00

Weifang Credit Financing Guarantee Co., Ltd. 35,000,000.00 35,000,000.00

Weifang Luwei Industrial Co., Ltd. 16,660,000.00 16,660,000.00

Weifang Urban Construction Investment Partnership Enterprise (Limited Partnership)

203,600,000.00 3,600,000.00

Weifang Port Co., Ltd. 128,340,000.00

Zhongcai Junbao Equity Investment Management (Weifang) Co., Ltd.

150,000.00

Shandong Zhongcai City Investment Medical Care New Kinetic Energy Industry Development Fund Partnership (Limited Partnership)

1,000,000.00

Shandong Bohai Bay Port Group Co., Ltd. 128,340,000.00

Weifang Luxin Houyuan Venture Capital Center (Limited Partnership)

15,000,000.00 15,000,000.00

Weifang Junyuan Equity Investment Center Partnership 17,400,000.00 18,300,000.00

Qingdao SDIC Dongxing Venture Capital Fund Partnership (Limited Partnership)

26,283,584.42 30,000,000.00

Shandong Denuo Biological Technology Co., Ltd. 5,000,000.00 5,000,000.00

Shandong Hongyi Media Holdings Co., Ltd. 7,995,920.00 7,995,920.00

Guangzhou Nansha District Huiming Investment Business Co., Ltd.

40,000,000.00 40,000,000.00

Weifang Dongxing Agricultural Products Circulation Industry Fund Partnership (Co., Ltd.)

5,000,000.00 5,000,000.00

Weifang Economic Zone Urban Construction Development Co., Ltd.

3,270,000.00 3,270,000.00

Weifang Xiashan City Investment Development Co., Ltd. 4,630,000.00 4,630,000.00

F-79

63


Linqu Yishan Industrial Co., Ltd. 42,310,000.00 42,310,000.00

Weifang Hengjian Asset Management Co., Ltd. 37,951,700.00 37,951,700.00

Changle Qicheng New Countryside Construction Investment Co., Ltd.

12,102,300.00 12,102,300.00

Qingzhou City Construction Investment Development Co., Ltd.

47,471,400.00 47,471,400.00

Weifang Jinda Venture Capital Co., Ltd. 2,871,900.00 2,871,900.00

Weifang TEDA Urban and Rural Construction Investment Co., Ltd.

24,918,200.00 24,918,200.00

Zhucheng Ansha Construction Investment Co., Ltd. 14,183,400.00 14,183,400.00

Changyi City State-owned Assets Management Investment Co., Ltd.

9,864,800.00 9,864,800.00

Gaomi Fengcheng New Countryside Construction Investment Co., Ltd.

30,608,600.00 30,608,600.00

Shouguang Huinong New Countryside Construction Investment Development Co., Ltd.

104,754,700.00 104,754,700.00

Weifang Weicheng Cultural Assets Operation Co., Ltd. 18,519,100.00 18,519,100.00

Shantou Media Co., Ltd. 10,000,000.00 10,000,000.00

Weifang Xiashan Urban Construction Investment Development Co., Ltd.

6,516,400.00 6,516,400.00

Weifang Economic Zone Urban Construction Investment Development Co., Ltd.

20,872,200.00 20,872,200.00

Weifang Huafu Investment Center (Limited Partnership) 4,500,000.00 4,500,000.00

Shandong Gaochuangshe Investment Group Co., Ltd. 22,195,300.00 22,195,300.00

Beijing Zhike Industry Investment Holding Group Co., Ltd. 30,000,000.00 30,000,000.00

Zhejiang Xiangyue Investment Management Co., Ltd. 750,000.00 750,000.00

Protection and Utilization of Equity Investment Fund Partnership Enterprises in Ancient Villages (Traditional Villages) in Zhejiang Province

25,000,000.00 25,000,000.00

Qingdao Zhiyu Automation Co., Ltd. - 2,000,000.00

Total 1,307,969,504.42 1,113,435,920.00

(2) Other explanations: Shandong Meichen Ecology & Environment Co., Ltd. invested

15,000,000.00 yuan in Shaanxi Dongming Vehicle System Co., Ltd., and made provision for

impairment of this equity instrument and gains and losses from changes in fair value of -

15,000,000.00 yuan. The book value of this equity instrument is 0 yuan.

15. Investment real estate

(1) List of investment real estate details

F-80

64

Item Building Total

I. Original book value

1. December 31, 2019 89,694,783.79 89,694,783.79

2. Increase in the current period 44,316,807.18 44,316,807.18

(1) Outsourcing

(2) Transfer in of fixed assets 44,316,807.18 44,316,807.18

(3) Other increases

3. Decrease in the current period

(1) Transfer to fixed assets

(2) Other transfer out

4.December 31, 2020 134,011,590.97 134,011,590.97

II. Accumulated depreciation and amortization

1. December 31, 2019 37,132,231.37 37,132,231.37

2. Increase in the current period 17,890,623.37 17,890,623.37

(1) Provision or amortization 8,332,624.52 8,332,624.52

(2) Other transfers 9,557,998.85 9,557,998.85

3. Reduction in the current period

(1) Transfer to fixed assets

(2) Other transfer out

4. December 31, 2020 55,022,854.74 55,022,854.74

III. Provision for impairment

1. December 31, 2019

2. Increase in the current period


4.December 31, 2020

IV. Book value

1. December 31, 2020 78,988,736.23 78,988,736.23

2. December 31, 2019 52,562,552.42 52,562,552.42

(2) Investment real estate for mortgage use purpose at the end of the period

F-81

65

Ownership Ownership certificate

number Located

Building area (m2)

Book value (yuan)


Lu (2019) Zhucheng Real Estate Property No. 0002449

No. 2277 Changcheng Avenue, Zhucheng

3,260.25 1,053,174.27

5,100.37 4,296,768.61

Hangzhou Saishi Garden Group Co., Ltd.

Yu Fang Quan Zheng Cang Yi Zi No. 14311825

Room 201, Unit 1, Building 19, No. 1218, Wenyi West Road, Cangqian Street, Yuhang District, Hangzhou

248.94

7,418,487.55 Hangzhou Saishi Garden Group Co., Ltd.



248.87




256.67

Hangzhou Landscape Engineering Co., Ltd.

Hang Fang Quan Zheng Xi Yi Zi No. 14663870

7th Floor, Building 1, Huahong Building, No. 238 Tianmushan Road, Xihu District, Hangzhou

1,642.95 4,090,690.36


Hang Fang Quan Zheng Xi Yi No. 16364191

Room 101, Building 1, Huahong Building, 238 Tianmushan Road, Xihu District, Hangzhou

34.20 935,420.78

Faya Ecological Environment Group Co., Ltd.

Wu Fang Quan Zheng Hu Zi No. 2007060044

Block 3B, Contemporary International Garden, No. 2 Guanfeng Avenue, East Lake New Technology Development Zone

1,690.08 3,244,600.64

Total 12,482.33 21,039,142.21

16. Fixed assets


Fixed assets 8,824,575,325.93 13,524,250,045.16

Disposal of fixed assets -93,787,839.10 -93,787,839.10

Less: Provision for impairment 4,528,329.03 13,669,313.21

Total 8,726,259,157.80 13,416,792,892.85

16.1 Fixed assets

(1) Details of fixed assets

Item Building Mechanical equipment

Transportation vehicles

Electronic equipment

Other devices total

I. Original book value


15,591,050,889.17 353,954,470.10 79,377,343.92 37,419,093.95 25,315,912.10 16,087,117,709.24


203,630,868.37 19,091,332.14 8,015,302.68 2,969,256.53 2,424,379.63 236,131,139.35

(1) Purchase 235,558.71 5,414,952.75 5,822,198.39 1,589,359.06 676,152.48 13,738,221.39

F-82

66




Other devices total

(2) Transfer of construction in progress

138,194,372.22 13,676,379.39 144,417.29 1,031,445.82 1,499,692.15 154,546,306.87

(3) Consolidated increase

2,048,687.00 348,451.65 248,535.00 2,645,673.65

(4) Other 65,200,937.44 65,200,937.44


5,575,030,489.14 38,974,956.36 33,579,286.60 3,237,107.55 1,272,900.64 5,652,094,740.29

(1) Disposal or scrap

141,022,141.41 38,974,956.36 33,509,892.50 3,237,107.55 1,272,900.64 218,016,998.46

(2) Transfer to investment real estate

44,316,807.18 44,316,807.18

(3) Reclassification to other non-current assets

5,315,950,317.86 5,315,950,317.86

(4) Other 73,741,222.69 69,394.10 73,810,616.79

4.December 31, 2020

10,219,651,268.40 334,070,845.88 53,813,360.00 37,151,242.93 26,467,391.09 10,671,154,108.30

II. Accumulated depreciation


2,340,852,573.42 156,303,004.51 36,671,928.33 17,072,215.53 11,967,942.29 2,562,867,664.08


271,182,255.00 30,973,418.90 9,590,996.12 5,501,590.24 3,026,479.23 320,274,739.49

(1) Withdrawal

271,182,255.00 30,973,418.90 7,907,510.69 5,235,278.85 2,831,932.83 318,130,396.27

(2) Consolidated increase

1,683,485.43 266,311.39 194,546.40 2,144,343.22


997,854,028.52 21,140,765.62 15,586,241.46 1,039,865.37 942,720.23 1,036,563,621.20


262,294.33 21,140,765.62 15,556,026.00 1,039,865.37 942,720.23 38,941,671.55

(2) Transfer to investment real estate

9,557,998.85 9,557,998.85

(3) Reclassification to other non-current assets

982,640,845.27 982,640,845.27

(4) Other 5,392,890.07 30,215.46 5,423,105.53

4.December 31, 2020

1,614,180,799.90 166,135,657.79 30,676,682.99 21,533,940.40 14,051,701.29 1,846,578,782.37

III. Provision for impairment


13,409,338.34 6,147.77 129,781.08 124,046.02 13,669,313.21

F-83

67




Other devices total



8,885,336.14 6,147.77 129,781.08 119,719.19 9,140,984.18


8,885,336.14 6,147.77 129,781.08 119,719.19 9,140,984.18

4.December 31, 2020

4,524,002.20 4,326.83 4,528,329.03

IV. Book value


8,605,470,468.50 163,411,185.89 23,136,677.01 15,617,302.53 12,411,362.97 8,820,046,996.90


13,250,198,315.75 184,242,127.25 42,699,267.82 20,217,097.34 13,223,923.79 13,510,580,731.95

(2) Fixed assets for mortgage at the end of the period

As of the end of the reporting period, the details of the properties for mortgage loans of the company

are as follows:


number Location Building area (m2)

Book value (yuan)



2277 Changcheng Avenue, Zhucheng 43,493.32 21,739,939.02

Shandong Meichen Industry Group Co., Ltd.

Jianzi No. 370782201700092, Jianzi No. 370782201700093

No. 12001 Mizhou East Road, Zhucheng, Weifang, Shandong

67,552.00

【Note】 134,537,525.25




225.24

33,276,060.20




91.62




254.00




249.62




175.14




227.25




253.97




249.58




175.12




284.93

F-84

68



Book value (yuan)




294.05




289.63




184.39


Hangyu Chu Guo Yong (2014) No. 116-682


49.60




20.20




54.80




55.90




55.00




38.60




50.00




54.80




55.90




54.90




38.60




56.50




62.70




64.70




63.80




40.60


Yu Real Estate Zhengcang Yizi No. 15392021


175.14 14,415,282.14

F-85

69



Book value (yuan)




249.62




254.00




248.94




248.94




91.62


Wufang Quanzhenghu Zi No. 2007060044

Block 3B, Contemporary International Garden, No. 2 Guanfeng Avenue, East Lake New Technology Development Zone

1,690.08 3,618,724.64

Total 117,774.80 207,587,531.25

Note: On April 19, 2018, Shandong Meichen Industrial Group Co., Ltd. and Industrial Bank signed

a Mortgage Contract with Xingyinwei Gaodizi No. 2018-015. And the construction in progress with

code of Jianzi No. 370782201700092 and Jian Zi No. 370782201700093 was handled as mortgage

for the loans. As of the end of the period, the restricted construction in progress was completed and

converted into fixed assets, with a net book value of 134,537,500 yuan.

As of the end of the reporting period, the details of the machinery and equipment of the company

for mortgage loans are as follows:

Ownership Asset Name Original value of

assets Net asset

value

Shandong Meichen Industry Group Co., Ltd. Metallographic microscope 154,490.02 71,662.18

Shandong Meichen Industry Group Co., Ltd. Double-head drive phase type automatic friction welding machine

3,525,721.94 1,492,294.25

Shandong Meichen Industry Group Co., Ltd. Friction welding machine 197,144.14 73,011.82

Shandong Meichen Industry Group Co., Ltd. Painting production line 579,895.76 392,508.83

Shandong Meichen Industry Group Co., Ltd. Double station shock absorber dry filling machine

416,489.31 336,130.29

Shandong Meichen Industry Group Co., Ltd. Horizontal cutting machine 234,797.89 107,952.88

Shandong Meichen Industry Group Co., Ltd. Special-shaped winding forming machine CRC-1

134,735.85 80,144.41

Shandong Meichen Industry Group Co., Ltd. Industrial robot winding machine MTR-2 393,076.73 237,827.74

Shandong Meichen Industry Group Co., Ltd. Hydraulic press 345,931.14 87,855.55


F-86

70


assets Net asset

value


Shandong Meichen Industry Group Co., Ltd. CNC laser cutting machine 1,450,975.24 642,433.77

Shandong Meichen Industry Group Co., Ltd. Friction welding machine (including fixture) 149,922.44 39,823.06

Shandong Meichen Industry Group Co., Ltd. Single-head phase friction welding machine 649,572.66 428,447.31

Shandong Meichen Industry Group Co., Ltd. 200T flat vulcanizing press 286,324.79 191,121.71

Shandong Meichen Industry Group Co., Ltd. Sulfur waste gas treatment equipment 462,322.29 319,580.34

Shandong Meichen Industry Group Co., Ltd. Painting waste gas treatment equipment 673,239.89 545,891.63

Shandong Meichen Industry Group Co., Ltd. Single-head phase friction welding machine 649,572.60 449,017.05

Shandong Meichen Industry Group Co., Ltd. Exhaust gas treatment equipment 358,027.36 250,320.92

Shandong Meichen Industry Group Co., Ltd. RH rubber automatic injection molding machine

233,333.33 164,986.19


233,333.34 164,986.20


233,333.34 164,986.20


233,333.33 164,986.19

Shandong Meichen Industry Group Co., Ltd. Special-shaped winding forming machine (including calculation program)

128,205.12 91,666.56

Shandong Meichen Industry Group Co., Ltd. Special-shaped winding forming machine (including calculation program)

128,205.12 91,666.56

Shandong Meichen Industry Group Co., Ltd. Shot blasting machine spray dust collector 113,239.32 81,862.52

Shandong Meichen Industry Group Co., Ltd. FRP cleaning tower and activated carbon adsorber

279,906.56 234,630.56


Auxiliary system of 110 internal mixer 2,901,709.49 145,085.47


Transformer 1,570,000.00 90,929.40


Argentox ozone aging test chamber 1,195,009.00 88,131.68


PVT testing machine 2,104,275.18 1,121,403.03

Total 20,928,885.45 8,583,156.94

By the end of the reporting period, the details of the transportation equipment of the company for

mortgage loans are as follows:


assets Net asset value


Mercedes-Benz 600 Car 3,034,457.02 872,406.46

Total 3,034,457.02 872,406.46

F-87

71

(3) The situation of fixed assets for which the company has not completed the property right

certificate at the end of the period

Ownership Property name Located Book value (yuan)


3D Library No. 1 No. 12001 Mizhou East Road, Zhucheng, Weifang, Shandong Province

5,609,227.93


3D Library No. 2 No. 12001 Mizhou East Road, Zhucheng, Weifang, Shandong Province

11,583,041.24


3D library No. 12001 Mizhou East Road, Zhucheng, Weifang, Shandong Province

9,525,322.56


Plant 4 No. 12001 Mizhou East Road, Zhucheng, Weifang, Shandong Province

28,453,065.09



38,220,973.47



29,824,846.47


Rubber mixing center No. 12001 Mizhou East Road, Zhucheng, Weifang, Shandong Province

11,321,048.49


Two layers office building No. 12001 Mizhou East Road, Zhucheng, Weifang, Shandong Province

12,255,570.11


Dormitory Building No. 1 No. 12001 Mizhou East Road, Zhucheng, Weifang, Shandong Province

12,616,019.34


Dormitory Building No. 2 No. 12001 Mizhou East Road, Zhucheng, Weifang, Shandong Province

12,616,019.33

Total 172,025,134.03

(4) Fixed assets leased through financial leases

Item Original book value Accumulated depreciation

Impairment provision Book value

Assets of amusement park project

260,746,425.59 115,597,582.11 145,148,843.48

Total 260,746,425.59 115,597,582.11 145,148,843.48

16.2 Fixed assets disposal


Weifang Sports Center -27,784,225.00 -27,784,225.00

2007-H128 Lot -98,499,076.00 -98,499,076.00

2007-H127 Lot -10,647,990.90 -10,647,990.90

2007-H126 Lot 43,143,452.80 43,143,452.80

Total -93,787,839.10 -93,787,839.10

17. Construction in progress


Construction in progress 38,936,604,185.25 37,406,008,208.53

Engineer material

Total 38,936,604,185.25 37,406,008,208.53

F-88

72

17.1 Construction in progress

Item



Book value Book balance Impairment provision

Book value

Road 10,747,230,909.07 10,747,230,909.07 10,221,251,940.12 10,221,251,940.12

Square and park 7,963,451,910.10 7,963,451,910.10 7,610,840,617.98 7,610,840,617.98

Among them: Railway Station Square

68,436,771.19 68,436,771.19 56,623,043.61 56,623,043.61

Changsong Road and Anshun Plaza Phase II

69,764,342.98 69,764,342.98 68,453,980.01 68,453,980.01

Fuyanshan Flying Field

87,960,162.22 87,960,162.22 86,308,032.57 86,308,032.57

Temple of Heaven

136,406,319.59 136,406,319.59 133,844,240.13 133,844,240.13

Botanical Garden

435,982,793.09 435,982,793.09 427,793,857.55 427,793,857.55

Cultural Center 4,983,485,162.36 4,983,485,162.36 4,815,244,338.03 4,815,244,338.03

National Games venue infrastructure

134,677,935.76 134,677,935.76 132,148,320.02 132,148,320.02

Olympic Sports Center

1,105,347,081.23 1,105,347,081.23 1,084,585,674.71 1,084,585,674.71

Urban reconstruction, supporting category

9,125,768,414.04 9,125,768,414.04 8,692,512,068.27 8,692,512,068.27

Of which: Comprehensive Domestic Waste Treatment Plant

207,613,643.74 207,613,643.74 203,714,095.84 203,714,095.84

Electric power renovation project

80,973,360.48 80,973,360.48 79,456,669.77 79,456,669.77

Weifang Old City Reconstruction Project

58,219,028.39 58,219,028.39 57,125,519.10 57,125,519.10

Weifang Center for Disease Control and Prevention

84,488,675.74 84,488,675.74 82,901,816.28 82,901,816.28

Weifang Sewage Treatment Plant Upgrade and Transformation Cost

61,045,048.68 61,045,048.68 59,907,871.89 59,907,871.89

Digital City Management

56,230,949.80 56,230,949.80 55,031,226.82 55,031,226.82

Urban Geographic Information System

49,697,282.24 49,697,282.24 48,764,405.71 48,764,405.71

Road strong electricity into the ground project

108,947,995.92 108,947,995.92 106,901,656.07 106,901,656.07

Anshun New District

1,577,582,234.13 1,577,582,234.13 1,547,950,974.99 1,547,950,974.99

Bicycle Project 170,344,684.92 170,344,684.92 155,914,885.68 155,914,885.68

AB Area 680,661,282.14 680,661,282.14 667,876,624.93 667,876,624.93

Anshun Area 948,961,418.96 948,961,418.96 919,330,159.82 919,330,159.82

F-89

73

Item



Book value Book balance Impairment provision

Book value

Bailang River Project 5,681,195,709.58 5,681,195,709.58 5,421,288,741.67 5,421,288,741.67

Yuhe Project 1,325,378,159.90 1,325,378,159.90 1,300,483,974.86 1,300,483,974.86

Zhangmian River Project

286,538,053.29 286,538,053.29 279,033,527.93 279,033,527.93

High Speed Rail North Station Project

1,986,308,238.76 1,986,308,238.76 1,949,000,000.00 1,949,000,000.00

Weifang Cross-Strait Exchange Center Project

4,213,826.72 4,213,826.72 4,084,150.95 4,084,150.95

Water Conservancy Project

213,739,054.46 213,739,054.46 211,063,404.41 211,063,404.41

Among them: introducing the Yellow River to the Xiashan Reservoir and the Yellow River to the Bailang Water Project

211,590,377.24 211,590,377.24 209,313,105.83 209,313,105.83

Tourist attractions, architecture

219,836,535.45 219,836,535.45 172,824,843.22 172,824,843.22

Of which: Lushan Project

11,795,820.86 11,795,820.86 7,316,112.37 7,316,112.37

Tongtianzhai Scenic Area

39,832,364.50 39,832,364.50 29,978,881.10 29,978,881.10

Distribution Center

60,697,204.77 60,697,204.77 36,396,391.04 36,396,391.04

Hot Spring Hotel

96,356,989.41 96,356,989.41 92,012,258.82 92,012,258.82

other 1,382,943,373.88 1,382,943,373.88 1,543,624,939.12 1,543,624,939.12

Total 38,936,604,185.25 38,936,604,185.25 37,406,008,208.53 37,406,008,208.53

18. Public welfare biological assets

Item December 31, 2019 Increase in

current period Decrease in

current period December 31, 2020

Forestry 7,715,013.18 7,715,013.18

Animal husbandry 4,166.63 2,000.04 2,166.59

Total 7,719,179.81 2,000.04 7,717,179.77

19. Intangible assets

(1) Information of intangible assets

Item Land use rights Patent Trademark rights Software and

others Total

1. Original book value

1. December 31, 2019 644,053,502.82 103,301,700.00 203,225,659.52 66,118,389.29 1,016,699,251.63


29,757,375.70 54,073.39 1,097,678.23 30,909,127.32

F-90

74

Item Land use rights Patent Trademark rights Software and

others Total

(1) Purchase 29,757,375.70 54,073.39 1,097,678.23 30,909,127.32


1,672,178.53 1,672,178.53

(1) Disposal

(2) Other 1,672,178.53 1,672,178.53

4.December 31, 2020 672,138,699.99 103,355,773.39 203,225,659.52 67,216,067.52 1,045,936,200.42

2. Accumulated amortization

1. December 31, 2019 56,110,325.31 6,146,561.47 11,517,071.92 9,798,510.46 83,572,469.16


17,013,157.73 10,384,243.69 20,091,524.68 6,634,573.31 54,123,499.41

(1) Withdrawal 17,013,157.73 10,384,243.69 20,091,524.68 6,634,573.31 54,123,499.41


(1) Disposal

(2) Other

4.December 31, 2020 73,123,483.04 16,530,805.16 31,608,596.60 16,433,083.77 137,695,968.57

3. Provision for impairment



(1) Withdrawal


(1) Disposal

(2) Other

4.December 31, 2020

4. Book value

1. December 31, 2020 599,015,216.95 86,824,968.23 171,617,062.92 50,782,983.75 908,240,231.85

2.December 31, 2019 587,943,177.51 97,155,138.53 191,708,587.60 56,319,878.83 933,126,782.47

(2) Situation of intangible assets used for mortgage at the end of the period

Ownership Land certificate number Geographical Location Area (m2) Book value

(yuan)



No. 2277 Changcheng Avenue, Zhucheng

65,501.00 7,123,221.96


Lu 2018 Zhucheng Real Estate Property No. 0003479

Mizhou Street, Zhucheng 96,667.00 18,432,131.36

F-91

75

Ownership Land certificate number Geographical Location Area (m2) Book value

(yuan)

Total 162,168.00 25,555,353.32

(3) Intangible assets for which the company has not completed the property right certificate at the

end of the period

Ownership Project name Net book value Estimated time to complete the property right certificate


Land use rights 10,396,993.80 2021

Shandong Chende Agricultural Technology Co., Ltd.

Land use rights 7,041,399.70 2021

Jingyuan County Faya Cultural Tourism Development Co., Ltd.

Land use rights 9,461,299.97 2021

Total 26,899,693.47

20. Goodwill

(1) Original book value of goodwill

The name of the investee or the matters forming goodwill

Opening Balance

Increase in this period Decrease in

current period Ending balance Business

merger formation

others Dispose

of others


843,799,913.65 843,799,913.65

Total 843,799,913.65 843,799,913.65

(2) Provision for impairment of goodwill

The name of the investee or the matters forming goodwill

Opening Balance

Increase in current period

Decrease in current period

Ending balance

Accrual others Dispose

of others


157,730,478.85 157,730,478.85

Total 157,730,478.85 157,730,478.85

21. Long-term deferred expenses

Item December 31,

2019 Increase in the current period

Amortization in the current

period

Other reductio

ns

December 31, 2020

Financial leasing fee 16,708,655.56 24,967,362.12 13,332,671.19 28,343,346.49

Renovation costs 11,877,944.02 11,058,445.02 3,250,901.60 19,685,487.44

Land rental 492,070.57 1,572,603.10 586,528.37 1,478,145.30

Guarantee fee 1,761,006.29 8,000,000.00 2,816,561.84 6,944,444.45

Consulting fee for finance lease

7,200,000.00 2,000,000.00 5,200,000.00

Advisory service fee on private debt

4,742,452.72 1,491,155.64 3,251,297.08

Total 30,839,676.44 57,540,862.96 23,477,818.64 64,902,720.76

F-92

76

22. Deferred income tax assets/deferred income tax liabilities

(1) Un-offset deferred income tax assets

Item


Deductible temporary differences

Deferred tax assets Deductible temporary differences

Deferred tax assets

Impairment of assets 858,840,554.20 142,953,437.61 260,721,570.10 39,535,097.67

Payroll payable 220,345.93 33,051.91

Accrued liabilities 58,848,765.53 8,790,503.00 38,154,205.32 5,630,121.24

Deferred income 5,445,527.68 816,829.15 7,027,858.13 1,054,178.72

Unrealized internal trading gains and losses

10,747,289.27 1,612,093.39

Other 334,148.96 83,537.24 3,249,319.45 555,555.06

Total 923,468,996.37 152,644,307.00 320,120,588.20 48,420,097.99

(2) Un-offset deferred income tax liabilities

Item


Taxable temporary difference

Deferred income tax liabilities

Taxable temporary difference

Deferred income tax liabilities

Depreciation policy and tax law differences

104,545,929.52 15,681,889.43 68,383,180.00 10,257,477.01

Difference between the fair value and the book value of the consolidated subsidiary

479,090,107.43 77,879,494.59 552,688,498.62 87,987,608.25

Confirm interest during PPP project construction period

156,519,910.12 39,129,977.52 119,717,024.50 29,929,256.19

Total 740,155,947.07 132,691,361.54 740,788,703.12 128,174,341.45

23. Other non-current assets


Public welfare assets 4,381,926,837.13

Prepayment for purchase of non-current assets

24,618,425.47 34,664,374.79

Others 3,000,000.00 3,000,000.00

Total 4,409,545,262.60 37,664,374.79

24. Short-term loans

(1) Classification of short-term loans


Guaranteed loan 2,103,371,000.00 2,375,000,000.00

F-93

77


Mortgage loan 239,423,809.52 340,000,000.00

Pledge loan 384,500,000.00 185,320,000.00

Credit loan 600,000,000.00

Total 3,327,294,809.52 2,900,320,000.00

(2) Description of short-term loans

① Guaranteed loan

Borrower Borrowing bank Loan period Loan amount Guarantee unit

Weifang Urban Construction and Development Investment Group Co., Ltd.

Weifang Branch of Ping An Bank Co., Ltd.

January 20, 2020-January 20, 2021

250,000,000.00 Weifang Investment Group Co., Ltd.


Yantai Branch of Bohai Bank Co., Ltd.

April 8, 2020-April 8, 2021




August 4, 2020-August 4, 2021




August 26, 2020-August 26, 2021



Weifang Branch of China Minsheng Banking Corporation Limited

June 29, 2020-June 29, 2021

200,000,000.00

Weifang Binhai Investment Development Co., Ltd.


Weifang Branch of China Minsheng Banking Corporation Limited

September 27, 2020-September 27, 2021

200,000,000.00



Weifang Zhucheng Sub-branch of Industrial Bank Co., Ltd.

July 15, 2020-July 14, 2021

50,000,000.00



Zhucheng Branch of Shanghai Pudong Development Bank Co., Ltd.


50,000,000.00

Shandong Meichen Industrial Group Co., Ltd.; Hangzhou Saishi Garden Group Co., Ltd.


Bank of Beijing February 12, 2020-February 11, 2021

30,000,000.00



Bank of Beijing June 19, 2020-June

18, 2021 40,000,000.00



Minsheng Bank November 24, 2020-

May 24, 2021 1,000,000.00




May 20, 2021 49,000,000.00

Weifang Urban Construction and Development

F-94

78


Investment Group Co., Ltd.



May 20, 2021 50,000,000.00



Weihai Commercial Bank April 2, 2020-April 1,

2021 50,000,000.00

Weifang Development Investment Group Co., Ltd.

Jiangxi Shuangshi Hot Spring Hotel Co., Ltd.

Ganzhou Shicheng Sub-branch of Jiangxi Bank Co., Ltd.

July 9, 2020-July 2, 2021

3,380,000.00 Jiangxi Shicheng Tourism Co., Ltd.


Hangzhou High-tech Sub-branch of Shanghai Pudong Development Bank Co., Ltd.

September 8, 2020-March 8, 2021

40,000,000.00 Shandong Meichen Ecology & Environment Co., Ltd.


Hangzhou High-tech Sub-branch of Shanghai Pudong Development Bank Co., Ltd.

September 22, 2020-March 22, 2021



Hangzhou Branch of China Minsheng Banking Corporation

April 23, 2020-April 23, 2021

25,000,000.00

Shandong Meichen Ecology & Environment Co., Ltd./Hangzhou Landscape Engineering Co., Ltd.


Hangzhou Xixi Sub-branch of Bank of Beijing

June 15, 2020-June 15, 2021



Gudang Sub-branch of Hangzhou United Rural Commercial Bank Co., Ltd.

March 19, 2020-March 19, 2021



Gudang Sub-branch of Hangzhou United Rural Commercial Bank Co., Ltd.

July 1, 2020-June 30, 2021



Bank of Nanjing Co., Ltd. Hangzhou Yuhang Sub-branch

November 13, 2020-November 2, 2021



Hangzhou High-tech Development Zone Sub-branch of Bank of China Co., Ltd.

December 23, 2020-December 21, 2021

30,000,000.00



Hangzhou Qianjiang Sub-branch of China Everbright Bank

August 10, 2020-February 9, 2021



Wuhan Branch of Bohai Bank


10,000,000.00

Shandong Meichen Ecology & Environment Co., Ltd. provided Faya Eco-Environment Group Co., Ltd. with an unconditional and irrevocable maximum joint liability guarantee.

Usuzaishi Xingrong Garden Construction Co., Ltd.

Wusu Rural Commercial Bank Co., Ltd.

August 19, 2020-August 19, 2021

79,991,000.00 Shandong Meichen Ecology &

F-95

79


Environment Co., Ltd. provides joint liability guarantee for 50 million yuan; 50 million bank acceptance deposit

Dongfeng Meichen (Shiyan) Automotive Fluid System Co., Ltd.

Zhangwan Sub-branch of Hubei Shiyan Rural Commercial Bank Co., Ltd.

April 16, 2020-April 16, 2021

5,000,000.00

Shiyan Credit Information Financing Guarantee Co., Ltd., Zhang Wei

Total 2,103,371,000.00

② Mortgage loans

Borrower Borrowing bank Loan period Loan amount Guarantee unit/collateral


Industrial Bank Weifang Zhucheng Sub-branch


100,000,000.00 Hangzhou Saishi Garden Group Co., Ltd., Zhang Lei/Lu (2019) Zhucheng Real Estate Property Rights No. 0002449


Moutai (Shanghai) Financial Leasing Co., Ltd.

December 7, 2020-December 6,

2021 9,523,809.52

Machinery and equipment, transportation equipment


Hengfeng Bank Co., Ltd. Hangzhou Branch

July 9, 2020-July 1, 2021

50,000,000.00

Ownership of the house: No. 14311837/14311835/14311834/14311833/14311832 Land use rights: Hang Yu Chu Guo Yong (2014) No. 116-675/116-671/116-664/116-668 Pledge: 420 million shares of Jiangxi Shicheng Tourism Co., Ltd.


Hengfeng Bank Co., Ltd. Hangzhou Branch

July 14, 2020-July 1, 2021

70,000,000.00

Real Estate Certificate No. Yufang Quanzheng Cangyi No. 14311820 to 14311827, No. 14311836, No. 14311830, 14311831; Hang Yu Chu Guo Yong (2014) No. 1 116-682, 116-681, 116-676, 116-674 , 116-669, 116-672, 116-665 to 116-667, 116-673, 117-670; Housing-Hangfang Quanzheng Xiyi No. 14663870; Land-Hangxi Guoyong (2014) No. 002867.


Industrial and Commercial Bank of China Donghu Branch

May 19, 2020-May 18, 2021

9,900,000.00

No. 04 house and land, Floor 1-5, Block 3B, Contemporary International Garden, No. 2, Guanfeng Avenue, East Lake Development Zone

Total 239,423,809.52

③Pledged loan

Borrower Borrowing bank Loan period Loan amount Pledge

Weifang Cultural Tourism Development Group Co., Ltd.

Weifang Branch of Bank of Qingdao Co., Ltd.

October 28, 2020-October 28, 2021

38,500,000.00 40 million deposit certificates


Weifang Branch of Zheshang Bank Co., Ltd.


120,000,000.00 Asset Pool/Weifang Urban Construction and Development Investment Group Co., Ltd.

Weifang Infrastructure Investment Construction Development Co., Ltd.






November 25, 2020-February 23, 2021

39,500,000.00

8 million account receivables of Chongqing Yongchuan District Great Wall Auto Parts Co., Ltd., 22.5 million accounts receivables

F-96

80

Borrower Borrowing bank Loan period Loan amount Pledge

of Shaanxi Heavy Truck Co., Ltd., and 9.5 million accounts receivables of SAIC-Iveco Hongyan Commercial Vehicle Co., Ltd.


Hangzhou High-tech Sub-branch of Shanghai Pudong Development Bank

May 27, 2020-May 26, 2021

66,500,000.00 70 million deposit certificates

Total 384,500,000.00

④Credit loans

Borrower Borrowing bank Loan period Loan amount


Weifang Hanting Sub-branch of Rizhao Bank Co., Ltd.

August 27, 2020-August 27, 2021

100,000,000.00


Weifang Branch of Qilu Bank Co., Ltd.


150,000,000.00




150,000,000.00




200,000,000.00

Total 600,000,000.00

(3) At the end of the period, the company had no short-term loans that were overdue and outstanding.

25. Notes payable

(1) Details of notes payable by categories


Bank acceptance draft 1,155,018,880.51 1,769,719,443.99

Trade acceptance draft 48,090,000.00

Total 1,203,108,880.51 1,769,719,443.99

(2) At the end of the period, the company has no outstanding notes payable due.

26. Accounts Payable

(1) Accounts payable are listed by age as follows

Aging December 31, 2020 December 31, 2019

Within 1 year 1,461,702,992.21 1,193,055,341.43

1-2 years 1,438,102,876.75 1,930,568,985.97

2-3 years 346,473,263.18 226,851,516.65

Over 3 years 1,564,549,441.66 1,552,622,871.28

F-97

81


Total 4,810,828,573.80 4,903,098,715.33

(2) Important accounts payable with age over 1 year

Name of company December 31, 2020 Nature or content

Weifang Municipal Finance Bureau 336,002,000.00 Current payment


235,000,000.00 Current payment

China Pacific Construction Group Co., Ltd. 28,130,000.00 Engineering section

Hangzhou Xiaohong Construction Labor Service Co., Ltd.

27,451,261.59 Subcontracting payment for labor

service

Total 626,583,261.59

27. Advance from customers

(1) Advance from customers are listed by age as follows


Within 1 year 521,186,381.59 171,248,855.16

1-2 years 6,388,748.74 13,063,572.03

2-3 years 1,724,384.09 7,871,840.41

Over 3 years 3,307,004.00 2,371,812.05

Total 532,606,518.42 194,556,079.65

(2) During the reporting period, the company had no important advance from customers aged over

1 year.

28. Contract liabilities


Advance payment for transfer of goods or construction

99,431,731.21

Total 99,431,731.21

29. Payroll payable

(1) List of payroll payable

Item December 31,

2019 Increase in


current period December 31,

2020

1. Short-term salary 78,705,227.02 346,415,889.51 340,118,727.90 85,002,388.63

2. Post-employment benefits-setting up a deposit plan

255,817.59 9,678,451.32 9,518,110.23 416,158.68

Total 78,961,044.61 356,094,340.83 349,636,838.13 85,418,547.31

F-98

82

(2) List of short-term salary

Item December 31,

2019 Increase in this

period Decrease in


2020

1. Salaries, bonuses, allowances and subsidies

76,718,543.72 301,388,827.37 295,992,612.11 82,114,758.98

2. Employee welfare 1,358,527.00 14,776,640.98 14,033,042.88 2,102,125.10

3. Social insurance funds 212,351.27 12,387,293.69 12,326,078.08 273,566.88

Including: medical insurance 184,270.81 11,969,958.13 11,889,007.31 265,221.63

Work injury insurance 7,022.79 148,154.02 147,315.25 7,861.56

Maternity insurance 21,057.67 269,181.54 289,755.52 483.69

4. Housing provident fund 8,661.00 13,914,931.39 13,816,474.87 107,117.52

5. Labor union funds and employee education funds

407,144.03 3,587,454.03 3,589,777.91 404,820.15

6. Others 360,742.05 360,742.05

Total 78,705,227.02 346,415,889.51 340,118,727.90 85,002,388.63

(3) List of contribution plan

Item December 31,

2019 Increase in



2020

1. Basic pension insurance 246,988.94 6,863,134.03 6,707,068.78 403,054.19

2. Unemployment insurance premiums

8,828.65 226,836.80 222,560.96 13,104.49

3. Corporate annuity payment 2,588,480.49 2,588,480.49

Total 255,817.59 9,678,451.32 9,518,110.23 416,158.68

30. Taxes payable


VAT 23,325,064.49 35,058,906.87

Corporate income tax 108,926,227.93 41,398,279.34

Urban maintenance and construction tax

1,279,869.94 3,493,034.01

Education surcharge 649,159.30 1,658,665.58

Local education surcharge 219,710.90 831,252.62

Local water conservancy construction fund

72,641.04 295,110.43

Property tax 2,259,056.31 90,241,657.69

Land holding tax 19,630,162.18 21,664,022.34

Personal Income Tax 1,589,266.79 663,801.02

F-99

83


Others 2,426,235.88 1,748,313.46

Total 160,377,394.76 197,053,043.36

31. Other payables


Interest payable 494,040,574.49 404,066,533.55

Other payables 7,004,975,242.87 7,353,075,673.97

Total 7,499,015,817.36 7,757,142,207.52

31.1 Interest payable


Interest of Corporate Bond 487,396,503.38 392,702,701.08

Borrowings 6,644,071.11 11363,832.47

Total 494,040,574.49 404,066,533.55

31.2 Other payables

(1) Classification of other payables according to the nature of the payment


Current accounts 2,231,821,665.65 2,394,533,270.40

Government bonds and swap bonds 4,526,473,828.12 4,665,184,328.12

Engineering equipment 148,392,164.58 213,908,391.10

Security deposit 33,846,411.06 24,009,084.33

Accrued expenses 747,972.04 490,912.00

Others 63,693,201.42 54,949,688.02

Total 7,004,975,242.87 7,353,075,673.97

(2) Important other payables aged over 1 year

Name of company December 31, 2020 December 31, 2019

Weifang Municipal Finance Bureau

4,526,473,828.12 Government bonds, swap bonds

Weifang Municipal Engineering and Construction Industry Development Service Center

386,764,700.00 Project construction fund

Fujian Huakun Investment Co., Ltd.

300,000,000.00 Land payment

F-100

84

Name of company December 31, 2020 December 31, 2019

Weifang Xinyue Fuhua Hotel Management Co., Ltd.

13,865,808.50 Current payment

Weifang Economic Development Zone Finance Bureau

12,571,175.20 Land replacement, land payment

Total 5,239,675,511.82

32. Non-current liabilities due within one year


Long-term loans due within 1 year 528,523,605.17 3,585,442,740.83

Bonds payable due within 1 year 4,422,631,029.37

Long-term payables due within 1 year

276,773,253.46 343,371,069.60

Total 5,227,927,888.00 3,928,813,810.43

33. Other current liabilities


Output tax to be transferred 138,693,000.31 120,661,625.26

Total 138,693,000.31 120,661,625.26

34. Long-term loans

(1) Classification of long-term loans


Mortgage loan 175,014,057.64 192,000,000.00

Guaranteed loan 9,376,765,170.37 7,286,349,150.94

Credit loan 1,829,286,768.90 249,478,682.79

Pledge loan 1,405,000,000.00 1,035,484,059.66

Entrusted loan 1,137,694.35

Total 12,787,203,691.26 8,763,311,893.39

(2) Description of long-term loans

① Mortgage loan

Borrower Borrowing bank Loan period Loan amount Collateral/guarantee company


Beijing Wenhua Technology Financial Leasing Co., Ltd.


76,783,168.27

Collateral: Patent Guaranteed by Weifang Urban Construction and Development Investment Group Co., Ltd.


Beijing Wenhua Technology Financial Leasing Co., Ltd.

May 28, 2020-May 27, 2023

84,647,188.89 Guarantor: Weifang Urban Guaranteed by Construction and Development Investment Group Co., Ltd.

F-101

85


Zhucheng Sub-branch of Industrial Bank Weifang

April 20, 2018-April 19, 2024

70,000,000.00

Collateral: Lu 2017 Zhucheng Real Estate Property Rights No. 005700, Jianzi No. 370782201700092, Jianzi No. 370782201700093, Fixed Assets Equipment, Zhang Lei, Shandong Meichen Ecological Co., Ltd.


Zhucheng Sub-branch of Industrial Bank Weifang

May 18, 2018-April 19, 2024

52,500,000.00

Collateral: Lu 2017 Zhucheng Real Estate Property Rights No. 005700, Jianzi No. 370782201700092, Jianzi No. 370782201700093, Fixed Assets Equipment, Zhang Lei, Shandong Meichen Ecological Co., Ltd.

Total 283,930,357.16

Note: RMB 108,916,299.52 is reclassified to non-current liabilities due within one year.

②Guaranteed loans

Borrower Borrowing bank Loan period Loan amount Guarantor/Pledge


Bank of Weifang Co., Ltd.

December 23, 2020- December 22, 2023

50,000,000.00

Weifang Dongxing Construction Development Co., Ltd., Weifang Cultural Tourism Development Group Co., Ltd.


Weifang Branch of Everbright Bank

June 12, 2020- June 12, 2023

300,000,000.00

Weifang Binhai Investment Development Co., Ltd./Lu (2017) Weifang Hanting District Real Estate Property No. 0081847 specific income right of land use rights


Weifang Branch of China Guangfa Bank Co., Ltd.

September 25, 2020- September 24, 2023



CCB Trust Co., Ltd.


200,000,000.00 Weifang Cultural Tourism Construction Investment Co., Ltd.


Xiamen International Trust Co., Ltd.

March 27, 2020- March 27, 2022


Shandong Haobo Water Conservancy Construction Co., Ltd.

Industrial Bank Co., Ltd. Weifang Branch

July 23, 2015- July 22, 2024

192,000,000.00 Weifang Urban Construction and Development Investment Group Co., Ltd.


Sunshine Building Sub-branch of Weifang Bank

May 21, 2019- February 2, 2023




July 10, 2020- July 6, 2023



Weifang Branch of Bank of Qingdao Co., Ltd.





October 30, 2020- October 29, 2023


Weifang Dongxing Construction Development Co., Ltd.

Sub-branch of Weifang Bank Co., Ltd. Weicheng

August 31, 2020- August 24, 2023



Shandong International Trust Co., Ltd.

August 29, 2017- January 19, 2024


F-102

86



Weifang Branch of Weihai Commercial Bank Co., Ltd.

February 14, 2017- February 14, 2027



New Era Trust Co., Ltd.

March 23, 2017- February 7, 2036

1,864,910,000.00 Weifang Urban Construction and Development Investment Group Co., Ltd.

Weifang Minsheng Thermal Power Holding Co., Ltd.

Weifang Branch of China CITIC Bank Co., Ltd.

January 16, 2017- September 8, 2025



Weifang Branch of Bank of Communications

April 8, 2019- April 2, 2029



Gaoxin Sub-branch of Weifang Rural Commercial Bank Co., Ltd.




Weihai City Commercial Bank Co., Ltd. Weifang Branch





January 23, 2020- January 23, 2023

1,008,000,000.00 Weifang Urban Construction and Development Investment Group Co., Ltd.






Ping An International Financial Leasing (Tianjin) Co., Ltd.




Ping An International Financial Leasing (Tianjin) Co., Ltd.




Changjiang United Financial Leasing Co., Ltd.

September 15, 2020-September 15, 2025



Western Trust Co., Ltd.

July 30, 2019-July 30, 2022



China Foreign Trade Financial Leasing Co., Ltd.




Industrial International Trust Co., Ltd.




Everbright Sun Life Asset Management Co., Ltd.



Quzhou Saishi Pastoral Development Co., Ltd.

Quzhou Branch of China Agricultural Development Bank

April 21, 2020-October 15, 2027

259,000,000.00

Pledge of rights to accounts receivable under Shandong Meichen Ecology & Environment Co., Ltd., Hangzhou Saishi Garden Group Co., Ltd. / "PPP Project Contract for the Construction of Huacai Town and Tongjing Road"

Luzhai Saishi Ecological Garden Construction Co.,

Luzhai Sub-branch of Bank of

December 31, 2019-July 1, 2030

95,000,000.00 Shandong Meichen Ecology & Environment Co., Ltd. / Liuzhou

F-103

87


Ltd.

China Borrowing bank Bank of Weifang Co., Ltd.

January 21, 2020-July 1, 2030

47,500,000.00 City Luzhai Saishi Eco-Tourism Environment Phase I PPP Project

September 22, 2020-July 1, 2030

19,000,000.00

Total 9,696,680,170.37

Note: RMB 319,915,000.00 is reclassified to non-current liabilities due within one year.

③Credit loans

Borrower Borrowing bank Loan period Loan amount


Fuzhou Branch of Xiamen International Bank Co., Ltd.

September 4, 2020- August 31, 2022

374,400,000.00


Everbright Xinglong Trust Co., Ltd.

April 29, 2020- April 29, 2022

200,000,000.00


Tangshan Bank Co., Ltd. September 3, 2020- September 2, 2022

300,000,000.00


Fangzi Agricultural Development

March 31, 2017- March 21, 2027

56,431,270.93


World Bank June 7, 2007- June 7, 2027

96,235,415.43

Weifang Affordable Housing Construction Investment Co., Ltd.

Weifang Branch of Industrial Bank Co., Ltd.

April 25, 2017- April 24, 2037

220,120,000.00


Binhai Sub-branch of Weifang Rural Commercial Bank Co., Ltd.

July 31, 2018- April 27, 2037

66,822,739.75


Binhai Sub-branch of Weifang Rural Commercial Bank Co., Ltd.

April 28, 2018- April 27, 2037

180,821,917.79


Weifang Kuiwen Sub-branch of Agricultural Bank of China Co., Ltd.

April 28, 2018- December 20, 2037

121,570,000.00


Agricultural Bank of China Co., Ltd. Weifang Kuiwen Sub-branch

March 27, 2018- December 20, 2037

72,090,000.00


Weifang Xinhua Branch of China Construction Bank Corporation

April 1, 2017- March 31, 2037

44,108,800.00



April 1, 2017- March 31, 2037

40,696,000.00



April 1, 2017- March 31, 2037

18,498,200.00



May 2, 2017- May 1, 2037

24,048,505.00



March 1, 2017- February 28, 2037

38,846,220.00



January 25, 2017- January 24, 2037

36,997,700.00

Total 1,891,686,768.90

Note: Among them, RMB 62,400,000.00 is reclassified to non-current liabilities due within one year.

④Pledged loan

F-104

88

Borrower Borrowing bank Loan period Loan amount Pledge/guarantee company


Weifang Branch of Bank of Communications

July 25, 2019- May 1, 2026

690,000,000.00

Pledge: 109,130,807 shares of Meichen Ecology (stock code: 300237) held by Weifang Urban Development Investment Group Co., Ltd.; Guarantor: Weifang Investment Group Co., Ltd.


Weifang Kuiwen Sub-branch of Agricultural Bank of China Co., Ltd.

August 5, 2019-

July 24, 2026 295,000,000.00

Pledge: 46,770,346 shares of Meichen Eco (stock code: 300237) held by Weifang Urban Development Investment Group Co., Ltd.; Guarantor: Weifang Dongxing Construction Development Co., Ltd.



November 2, 2020-

November 1, 2023




November 11, 2020-January

10, 2022 160,000,000.00

Asset Pool/Weifang Urban Construction and Development Investment Group Co., Ltd.


Zheshang Bank Co., Ltd. Weifang Branch


15, 2022 15,000,000.00





23, 2022 25,000,000.00


Total 1,435,000,000.00

Note: RMB 30,000,000.00 is reclassified as non-current liabilities due within one year.

⑤Entrusted loan

Borrower Borrowing bank Loan period Loan amount Principal


Shanghai Huarui Bank Co., Ltd.

2019/9/25-2022/9/24 8,430,000.00 Ping An International Financial Leasing Co., Ltd.

Total 8,430,000.00

Note: RMB 7,292,305.65 is reclassified as non-current liabilities due within one year.

35. Bonds payable


Urban Investment 2018 USD Bond 1,730,218,474.52

18 Weichengtou 1,988,907,573.89 1,985,182,301.22

19 Weifang 02 1,490,248,581.82 1,487,546,771.83

19 Weifang 03 1,494,546,631.25 1,492,984,427.02

19 Weifang Y1 497,473,846.45 496,933,962.26

20 Weifang 01 498,230,993.96

20 Weifang 02 993,718,902.67

20 Weifang 03 1,494,472,839.80

F-105

89


20 Weifang Urban Construction SC P001

20 Lu Weifang Urban Construction ZR001 841,960,134.67

20 Lu Weifang Urban Construction ZR002 347,788,105.46

20 Weiwen 01 590,229,981.55

2016 Dongjian Bond 100,000,000.00

16 Dongxing Construction PPN1 1,200,000,000.00

16 Dongxing Construction PPN2 500,000,000.00

18 Dongxing Construction MNT001 492,841,020.08 489,256,304.62

18 Dongxing Construction MNT002 985,210,219.65 978,084,416.76

17 Lu Dongxing ZR001 (debt financing plan) 600,000,000.00

18 Lu Dongxing ZR001 (debt financing plan) 198,334,594.62 198,220,844.41

19 Weidong 01 1,294,758,007.04 1,293,317,487.38

19 Weidong 03 1,493,766,626.35 1,492,141,370.89

19 Weidong 05 1,194,960,379.73 1,193,623,252.97

17 Michen 01 398,601,401.70 397,784,101.77

19 Meichen G1 693,952,632.97 690,837,317.05

Total 16,990,002,473.66 16,326,131,032.70

F-106

90

Cha

nges

in

bond

s pa

yabl

e: (

excl

udin

g p

refe

rred

sto

cks,

per

petu

al b

ond

s an

d ot

her

fin

anci

al i

nstr

umen

ts c

lass

ifie

d as

fin

anci

al l

iab

ilit

ies)

Nam

e o

f b

on

d

Fac

e va

lue

Issu

e d

ate

Bo

nd

mat

uri

ty

Issu

ance

am

ou

nt

Dec

emb

er 3

1,

2019

C

urr

ent

issu

e

Urb

an

Inve

stm

ent

20

18

US

D B

ond

1

,73

3,9

25,0

00.0

0 O

cto

ber

23

, 201

8 3

yea

rs

1,7

33

,925

,000

.00

1,7

30

,218

,474

.52

18

Wei

chen

gto

u 2

,00

0,0

00,0

00.0

0 O

cto

ber

29

, 201

8 5

yea

rs (

can

be

sold

bac

k in

th

e 3

rd y

ear)

2

,00

0,0

00,0

00.0

0 1

,98

5,1

82,3

01.2

2

19

Wei

fan

g 0

2

1,5

00

,000

,000

.00

Ap

ril

29

, 201

9 5

yea

rs

1,5

00

,000

,000

.00

1,4

87

,546

,771

.83

19

Wei

fan

g 0

3

1,5

00

,000

,000

.00

May

31

, 2

019

5 y

ears

(ca

n b

e so

ld b

ack

in t

he

3rd

yea

r)

1,5

00

,000

,000

.00

1,4

92

,984

,427

.02

19

Wei

fan

g Y

1

50

0,00

0,0

00.0

0 D

ecem

ber

23

, 20

19 3

yea

rs

50

0,00

0,0

00.0

0 4

96,

933

,962

.26

20

Wei

fan

g 0

1

50

0,00

0,0

00.0

0 M

ay 2

8,

202

0 5

yea

rs (

can

be

sold

bac

k in

th

e 3

rd y

ear)

5

00,

000

,000

.00

5

00,

000

,000

.00

20

Wei

fan

g 0

2

1,0

00

,000

,000

.00

May

28

, 2

020

5 y

ears

1

,00

0,0

00,0

00.0

0

1,0

00

,000

,000

.00

20

Wei

fan

g 0

3

1,5

00

,000

,000

.00

Au

gust

3,

2020

5 y

ears

(ca

n b

e so

ld b

ack

in t

he

3rd

yea

r)

1,5

00

,000

,000

.00

1

,50

0,0

00,0

00.0

0

20

W

eifa

ng

Urb

an

Co

nst

ruct

ion

SC

P00

1 1

,00

0,0

00,0

00.0

0 N

ove

mb

er 2

6, 2

020

27

0 d

ays

1,0

00

,000

,000

.00

1

,00

0,0

00,0

00.0

0

20

Lu

W

eifa

ng

Urb

an

Co

nst

ruct

ion

ZR

001

85

0,00

0,0

00.0

0 Ja

nu

ary

17

, 2

020

3 y

ears

8

50,

000

,000

.00

8

50,

000

,000

.00

20

Lu

W

eifa

ng

Urb

an

Co

nst

ruct

ion

ZR

002

35

0,00

0,0

00.0

0 A

pri

l 3

0, 2

020

3 y

ears

3

50,

000

,000

.00

3

50,

000

,000

.00

20

Wei

wen

01

60

0,00

0,0

00.0

0 A

pri

l 2

0, 2

020

5 y

ears

(ca

n b

e so

ld b

ack

in t

he

3rd

yea

r)

60

0,00

0,0

00.0

0

60

0,00

0,0

00.0

0

20

16 D

on

gjia

n B

ond

2

,00

0,0

00,0

00.0

0 M

ay 2

5,

201

6 5

yea

rs (

can

be

sold

bac

k in

th

e 3

rd y

ear)

2

,00

0,0

00,0

00.0

0 1

00,

000

,000

.00

F-107

91

Nam

e o

f b

on

d

Fac

e va

lue

Issu

e d

ate

Bo

nd

mat

uri

ty

Issu

ance

am

ou

nt

Dec

emb

er 3

1,

2019

C

urr

ent

issu

e

16

Don

gxin

g C

on

stru

ctio

n P

PN

1 1

,20

0,0

00,0

00.0

0 M

ay 2

5,

201

6 5

yea

rs

1,2

00

,000

,000

.00

1,2

00

,000

,000

.00

16

Don

gxin

g C

on

stru

ctio

n P

PN

2 5

00,

000

,000

.00

Jun

e 20

, 201

6 5

yea

rs

50

0,00

0,0

00.0

0 5

00,

000

,000

.00

18

Don

gxin

g C

on

stru

ctio

n M

NT

00

1 5

00,

000

,000

.00

Mar

ch 2

7, 2

018

5 y

ears

(ca

n b

e so

ld b

ack

in t

he

3rd

yea

r)

50

0,00

0,0

00.0

0 4

89,

256

,304

.62

18

Don

gxin

g C

on

stru

ctio

n M

NT

00

2 1

,00

0,0

00,0

00.0

0 A

pri

l 2

7, 2

018

5 y

ears

(ca

n b

e so

ld b

ack

in t

he

3rd

yea

r)

1,0

00

,000

,000

.00

97

8,08

4,4

16.7

6

17

Lu

D

ongx

ing

ZR

001

(Bo

nd

Fin

anci

ng

Pla

n)

60

0,00

0,0

00.0

0 S

epte

mb

er 5

, 2

017

6 y

ears

(ca

n b

e so

ld b

ack

in t

he

3rd

yea

r)

60

0,00

0,0

00.0

0 6

00,

000

,000

.00

18

Lu

D

ongx

ing

ZR

001

(deb

t fi

nan

cin

g p

lan

) 2

00,

000

,000

.00

May

4,

20

18 6

yea

rs (

can

be

sold

bac

k in

th

e 3

rd y

ear)

2

00,

000

,000

.00

19

8,22

0,8

44.4

1

19

Wei

don

g 01

1

,30

0,0

00,0

00.0

0 Ju

ly 2

2,

2019

5 y

ears

(ca

n b

e so

ld b

ack

in t

he

3rd

yea

r)

1,3

00

,000

,000

.00

1,2

93

,317

,487

.38

19

Wei

don

g 03

1

,50

0,0

00,0

00.0

0 A

ugu

st 1

9, 2

019

5 y

ears

(ca

n b

e so

ld b

ack

in t

he

3rd

yea

r)

1,5

00

,000

,000

.00

1,4

92

,141

,370

.89

19

Wei

don

g 05

1

,20

0,0

00,0

00.0

0 S

epte

mb

er 1

2,

2019

5 y

ears

(ca

n b

e so

ld b

ack

in t

he

3rd

yea

r)

1,2

00

,000

,000

.00

1,1

93

,623

,252

.97

17

Mic

hen

01

40

0,00

0,0

00.0

0 A

ugu

st 1

, 20

17 5

yea

rs

40

0,00

0,0

00.0

0 3

97,

784

,101

.77

19

Mei

chen

G1

7

00,

000

,000

.00

Oct

ob

er 2

4, 2

019

3 y

ears

7

00,

000

,000

.00

69

0,83

7,3

17.0

5

Tot

al

24

,133

,92

5,00

0.0

0

2

4,1

33,9

25,

000

.00

16

,326

,13

1,03

2.7

0 5

,80

0,0

00,0

00.0

0

Con

tinu

ed

F-108

92

Nam

e o

f b

on

d In

tere

st a

ccru

ed a

t fa

ce v

alu

e P

rem

ium

an

d d

isco

unt

amo

rtiz

atio

n R

epay

men

t o

r re

clas

sifi

cati

on

in

crea

se

Exc

han

ge g

ain

s an

d l

oss

es

Dec

emb

er 3

1,

2020

Urb

an I

nve

stm

ent

20

18 U

SD

Bo

nd

11

0,08

3,0

30.8

6 5

,94

5,1

02.0

2 1

,62

3,3

38,5

76.5

4 -1

12,8

25,

000

.00

18

Wei

chen

gto

u 1

28,

000

,000

.00

3,7

25

,272

.67

1,9

88

,907

,573

.89

19

Wei

fan

g 0

2

94

,500

,00

0.00

2

,70

1,8

09.9

9

1

,49

0,2

48,5

81.8

2

19

Wei

fan

g 0

3

78

,216

,66

6.67

1

,56

2,2

04.2

3

1

,49

4,5

46,6

31.2

5

19

Wei

fan

g Y

1

28

,500

,00

0.00

5

39,

884

.19

49

7,47

3,8

46.4

5

20

Wei

fan

g 0

1

10

,500

,00

0.00

-1

,76

9,00

6.0

4

4

98,

230

,993

.96

20

Wei

fan

g 0

2

26

,940

,00

0.00

-6

,28

1,09

7.3

3

9

93,

718

,902

.67

20

Wei

fan

g 0

3

26

,385

,41

6.67

-5

,52

7,16

0.2

0

1

,49

4,4

72,8

39.8

0

20

Wei

fan

g U

rban

Co

nst

ruct

ion

SC

P

001

-

-707

,54

7.1

7 9

99,

292

,452

.83

20

Lu

Wei

fan

g U

rban

Co

nst

ruct

ion

ZR

001

4

7,3

82,7

77.

78

-8,0

39,

865

.33

84

1,96

0,1

34.6

7

20

Lu

Wei

fan

g U

rban

Co

nst

ruct

ion

ZR

002

1

1,7

63,8

88.

89

-2,2

11,

894

.54

34

7,78

8,1

05.4

6

20

Wei

wen

01

21

,250

,00

0.00

-9

,77

0,01

8.4

5

5

90,

229

,981

.55

20

16 D

on

gjia

n B

ond

5

,29

0,0

00.0

0

10

0,00

0,0

00.0

0

16

Do

ngx

ing

Co

nst

ruct

ion

PP

N1

63

,600

,00

0.00

1,2

00

,000

,000

.00

F-109

93

Nam

e o

f b

on

d In

tere

st a

ccru

ed a

t fa

ce v

alu

e P

rem

ium

an

d d

isco

unt

amo

rtiz

atio

n R

epay

men

t o

r re

clas

sifi

cati

on

in

crea

se

Exc

han

ge g

ain

s an

d l

oss

es

Dec

emb

er 3

1,

2020

16

Do

ngx

ing

Co

nst

ruct

ion

PP

N2

24

,500

,00

0.00

50

0,00

0,0

00.0

0

18

Do

ngx

ing

Co

nst

ruct

ion

MN

T0

01

27

,500

,00

0.00

3

,58

4,7

15.4

6

4

92,

841

,020

.08

18

Do

ngx

ing

Co

nst

ruct

ion

MN

T0

02

51

,200

,00

0.08

7

,12

5,8

02.8

9

9

85,

210

,219

.65

17

Lu

D

ongx

ing

ZR

001

(Bo

nd

Fin

anci

ng

Pla

n)

13

,440

,00

0.00

60

0,00

0,0

00.0

0

18

L

u

Do

ngx

ing

ZR

001

(deb

t fi

nan

cin

g p

lan

) 2

6,1

26,6

66.

66

11

3,75

0.2

1

1

98,

334

,594

.62

19

Wei

don

g 01

7

1,4

99,9

99.

96

1,4

40

,519

.66

1,2

94

,758

,007

.04

19

Wei

don

g 03

7

5,0

00,0

00.

00

1,6

25

,255

.46

1,4

93

,766

,626

.35

19

Wei

don

g 05

5

8,8

00,0

00.

00

1,3

37

,126

.76

1,1

94

,960

,379

.73

17

Mic

hen

01

23

,120

,00

0.00

8

17,

299

.93

39

8,60

1,4

01.7

0

19

Mei

chen

G1

4

9,0

00,0

00.

00

3,1

15

,315

.92

69

3,95

2,6

32.9

7

Tot

al

1,0

72

,598

,447

.57

-672

,52

9.6

7 5

,02

2,6

31,0

29.3

7 -1

12,8

25,

000

.00

16

,990

,00

2,47

3.6

6

F-110

94

36. Long-term payables


Long-term payables 4,338,033,963.15 3,912,447,332.53

Special payables 955,300,437.03 1,150,091,120.36

Total 5,293,334,400.18 5,062,538,452.89

36.1 Long-term payables


Finance lease 1,664,099,842.87 1,381,013,794.81

Bond issuance fee 19,326,132.05 26,083,537.72

Shanty town renovation fee 2,244,350,000.00 2,351,350,000.00

China Agricultural Development Key Construction Fund Corporation South Square Project of Railway Station

140,000,000.00 154,000,000.00

Shed reform loan funds 27,598,584.90

Weifang Municipal Finance Bureau 16,000,000.00

Compensation for demolition of the introducing the Water of Yellow River into Bailang River project

19,736,339.00

Introducing the water of Yellow River into Bailang River and Xiashan Reservoir construction funds

155,065,141.00

Use fee for water diversion project of introducing the water of Yellow River into Bailang River

51,857,923.33

Total 4,338,033,963.15 3,912,447,332.53

36.2 Special accounts payable


Sinking fund 788,000,000.00 788,000,000.00

Special funds for land reserve 164,454,836.82 164,454,836.82

Compensation for demolition of the introducing the Water of Yellow River into Bailang River project

19,736,339.00

Introducing the water of Yellow River into Bailang River and Xiashan Reservoir construction funds

107,196,421.00

Use fee for water diversion project of introducing the water of Yellow River into Bailang River

51,857,923.33

Weifang Municipal Finance Bureau 16,000,000.00

Special Fund of Weifang Municipal Circular Economy 1,050,000.00 1,050,000.00

Other 1,795,600.21 1,795,600.21

Total 955,300,437.03 1,150,091,120.36

37. Accrued liabilities

F-111

95

Item January 1, 2020 Increase in



Cause of formation

Product quality assurance

38,411,519.70 45,936,000.46 25,498,754.63 58,848,765.53 Three-

guarantees fee

Design cost 4,321,616.72 1,106,046.85 5,427,663.57 Accrued cost

Total 42,733,136.42 47,042,047.31 25,498,754.63 64,276,429.10

38. Deferred income

(1) Deferred income is listed by category


Government grants 205,869,333.94 177,958,679.60

Total 205,869,333.94 177,958,679.60

(2) Projects involving government grants

Item December 31,

2019

New subsidy amount for the current period

The amount of other income in

the current period

Other changes

December 31, 2020

Related to assets/income

2016-11 land appreciation income

137,243,684.66 3,000,000.00 134,243,684.66 Related to assets

Weimei international project renovation and construction fund

36,236,000.00 36,236,000.00 Related to assets

Flood control project of Beichen Oasis River

33,687,136.80 3,743,015.20 29,944,121.60 Related to assets

Rubber air spring technical transformation project

38,810.54 38,810.54 Related to assets

Industrialization project of sophorolipids for preventing ocean red tide

4,500,000.00 900,000.00 3,600,000.00 Related to assets

100,000 sets of air suspension project

671,881.10 278,019.84 393,861.26 Related to assets

High temperature oil mist resistant heavy truck air intake hose manufacturing technology introduction and development project

1,600,499.92 315,500.04 1,284,999.88 Related to assets

High-air-tightness composite air spring industrialization project

216,666.58 50,000.04 166,666.54 Related to assets

Total 177,958,679.60 36,236,000.00 8,325,345.66 205,869,333.94

39. Other non-current liabilities


Output tax to be transferred 243,280.14

Minority shareholder investment funds of PPP project companies that do not participate in dividends

24,837,500.00 17,167,500.00

Total 24,837,500.00 17,410,780.14

40. Paid-in capital

F-112

96

Shareholder name December 31, 2019 Increase in



Weifang State-owned Assets Supervision and Administration Commission

5,000,000,000.00 5,000,000,000.00

Total 5,000,000,000.00 5,000,000,000.00

41. Capital Reserve

(1) Details

Item December 31, 2019 Increase in current

period Decrease in current

period December 31, 2020

Capital premium (stock premium) 3,046,444,466.65 7,046,591.10 3,053,491,057.75

Other capital reserve 25,258,714,626.93 614,852,995.14 10,933,868.10 25,862,633,753.97

Total 28,305,159,093.58 621,899,586.24 10,933,868.10 28,916,124,811.72

(2) Details of changes in capital reserve

Name of the company Total amount increased in

the current period Of which: attributable to

the parent company Attributable to non-controlling interests


494,513,583.45 494,513,583.45

Weifang Cultural Tourism Construction Investment Co., Ltd.

61,450,687.07 31,511,912.33 29,938,774.74


127,661,904.74 95,874,090.46 31,787,814.28

Total 683,626,175.26 621,899,586.24 61,726,589.02

Continued

Name of the company Total amount reduced

in this period Of which: attributable to

the parent company Attributable to non-controlling interests

Weifang Urban Construction and Development Investment Group Co., Ltd. 10,749,578.24 10,749,578.24

Decrease in business combination 184,289.86 184,289.86

Total 10,933,868.10 10,933,868.10

(3) Main changes in capital reserve

1.According to the document of Weifang Municipal Finance Bureau, Weicaizi [2020] No. 40

Notice on Transferring the Real Estate and Land of the Original Beijing Office to the Municipal

State-owned Assets Operation Center, the relevant assets were transferred to the Municipal State-

owned Assets Operation Center to offset the capital reserve 10,749,578.24 yuan;

2.According to the document Wei Guo Zi Fa [2017] No. 78 on the issuance of the Three

Supply and One Industry Separation and Transfer Standards for the Family Areas of State-owned

F-113

97

Enterprises in Weifang, the company received assets with a total amount of 49,414,717.46 yuan of

the "Three Supply and One Industry" in 2020, which increased the capital reserve by RMB

49,414,717.46;

3.From 2016 to 2019, taxes of RMB 127,661,904.74 related to the paid use fee of Lutai

Convention and Exhibition Center by the Weifang Dongxing Construction Development Co., Ltd.

was transferred to the capital reserve, which increased the capital reserve by RMB 127,661,904.74

yuan;

4.According to Weifang Finance Bureau Wei Cai Jian Han [2020] No. 2 Letter on the

Opinions on the Resource Gap in Reform and Restructuring, the government allocates the resource

gap of Weifang Cultural Tourism Construction Investment Co., Ltd. to cover government bonds,

which increased the capital reserve by 61,450,687.07 yuan.

42. Other comprehensive income

Item Opening balance

Current period Ending balance

Amount incurred

before income tax in the

current period

Less: included in other comprehensive income in the previous period

and transferred to profit and loss in the

current period

Deduct:

income tax

expense

Attributable to the parent

company after tax

Attributable to non-

controlling interests after

tax

Changes in the fair value of other equity instrument investments

-2,000,000.00 -429,200.00 -1,570,800.00 -429,200.00

Other comprehensive income that can be converted to profit or loss under the equity method

22,327,321.05 -6,482,181.75 -6,482,181.75 15,845,139.30

Translation difference of foreign currency in financial statements

14,045.19 61,430.43 10,546.38 50,884.05 24,591.57

Total 22,341,366.24 -8,420,751.32 -6,900,835.37 -1,519,915.95 15,440,530.87

43. Surplus reserve

F-114

98

Item December 31, 2019 Increase in this

period Decrease in current

period December 31, 2020

Statutory surplus reserve 136,751,241.02 29,547,749.02 166,298,990.04

Total 136,751,241.02 29,547,749.02 166,298,990.04

44. Undistributed profits

Item 2020 2019

Undistributed profit at the end of the previous period before adjustment

2,759,625,277.07 2,436,339,517.37

Adjust the total amount of undistributed profits at the beginning of the period (increase +, decrease -)

-83,893,040.55

Adjusted undistributed profit at the beginning of the period

2,675,732,236.52 2,436,339,517.37

Plus: net profit attributable to owners of the parent company for the current period

174,163,671.65 404,504,209.26

Less: withdraw statutory surplus reserve 29,547,749.02 39,623,164.24

Withdraw surplus reserve

Withdraw general risk reserves

Ordinary stock dividend payable 71,880,132.59 41,595,285.32

Ordinary stock dividends converted into capital

Undistributed profit at the end of the period 2,748,468,026.56 2,759,625,277.07

45. Sales and costs

Item

2020 2019

Sales Cost Sales Cost

Major business 9,492,016,128.58 8,472,165,710.54 3,617,312,991.15 2,677,421,300.09

Other business 30,105,985.01 49,496,306.30 24,619,374.64 24,044,227.30

Total 9,522,122,113.59 8,521,662,016.84 3,641,932,365.79 2,701,465,527.39

46. Taxes and surcharges

Item 2020 2019

Urban maintenance and construction tax 8,280,794.87 3,037,557.86

Education surcharge 3,609,957.69 1,333,246.82

Local education surcharge 2,389,469.13 892,178.31

Local water conservancy construction fund 554,883.55 210,943.50

Stamp duty 8,338,892.37 2,541,551.55

Land use tax 68,906,569.31 65,369,947.74

F-115

99

Item 2020 2019

Property tax 12,598,326.24 27,771,368.89

Resource tax 2,800,703.30 3,340,554.58

Land value increment tax 324,466.33 516,810.95

Others 1,927,509.95 1,725,385.56

Total 109,731,572.74 106,739,545.76

47. Selling expenses

Item 2020 2019

Salary expenses 19,278,760.14 10,222,002.69

Garden maintenance costs 59,965,219.49 27,569,133.21

Three Guarantees Fee 38,575,083.22 22,375,098.40

Warehousing logistics fees 87,052.00 13,117,905.87

Depreciation and amortization 6,939,595.72 2,706,565.15

Office and travel expenses 8,951,159.53 3,058,785.42

Business hospitality 2,372,193.80 1,174,994.54

Others 3,793,944.53 2,048,253.35

Total 139,963,008.43 82,272,738.63

48. G&A expenses

Item 2020 2019

Salary 155,226,518.13 108,482,959.97


Office and travel expenses 38,053,667.65 10,081,724.41

Consultancy fee 25,240,043.16 12,465,825.34

Business hospitality 8,378,332.47 5,710,663.76

Maintenance fees 3,749,844.56 3,317,452.48

Garden maintenance fee 4,043,811.73 2,812,759.19

Land management fees 1,149,245.37 1,279,776.74

Utilities 1,364,497.14 1,247,538.65

Start-up fee 894,494.23

F-116

100

Item 2020 2019

Other 9,993,473.37 18,679,871.37

Total 349,864,000.79 233,853,820.84

49. R&D expenses

Item 2020 2019

Labor cost 57,476,876.08 33,848,082.02

Material fee 59,519,917.54 10,951,327.16


Other fee 5,924,606.80 15,255,353.91

Total 127,111,054.77 61,145,986.96

50. Financial expenses

Item 2020 2019

Interest expense 912,948,969.73 675,827,895.53

Less: interest income 261,940,620.02 151,818,927.57

Exchange gains and losses -111,920,373.74 29,350,518.79

Bank charges and others 44,131,730.44 36,017,736.44

Total 583,219,706.41 589,377,223.19

51. Other income

(1) Details of other income

Item 2020 2019

Government grants related to daily activities

545,898,264.43 474,159,539.23

Total 545,898,264.43 474,159,539.23

(2) Details of government grants related to daily activities

Item 2020 Related to

assets/income Grant documents

Heating season subsidy 51,543,300.00 Related to income Weichengtou【2020】No. 50

Bonus for advanced heating units 150,000.00 Related to income

Withholding personal income tax handling fee refund

246,947.37 Related to income

Fees for the use of public welfare assets

461,500,000.00 Related to income Wei Cai Yu Zhi [2020] No. 42

Direct debt financing guidance incentive


F-117

101



Entrusted management fee 999,800.00 Related to income

Financial subsidy for Lutai hydroelectric heating energy saving income


Small and micro enterprise tax relief


"Notice of the Ministry of Finance and the State Administration of Taxation on the Implementation of Inclusive Tax Reduction and Exemption Policies for Small and Micro Enterprises" (Caishui [2019] No. 13

Water supply price subsidy in 2019

5,835,000.00 Related to income

Weifang Municipal Finance Bureau "Notice on the Appropriation of Water Supply Price Subsidies" (Wei Cai Nong Zheng Zhi [2020] No. 60)

Stable post return 436,584.58 Related to income

Shandong Provincial Department of Human Resources and Social Security, Shandong Provincial Department of Finance, Shandong Provincial Development and Reform Commission, Shandong Provincial Department of Industry and Information Technology, Shandong Provincial Taxation Bureau of State Administration of Taxation, "Notice on Further Implementing the Unemployment Insurance Stable Job Refund Policy" (Lurenshezi [2020] No. 26, Ezhengbanfa (2020) No. 5, Wurenshefa (2020) No. 5

2019 financial water damage project repair subsidy funds


Weifang Municipal Finance Bureau "Notice on Issuing the Budget Indicators for Subsidy Funds for the Repair of the Municipal Financial Flood Project in 2019 (Weicainong Zhi [2019] No. 58)

Incentives for advanced taxation enterprises


2016-11 amortization of land value-added proceeds


Funds for rectification of hidden dangers in Bailanghe oasis

3,743,015.20 Related to income Wei Cai Jian Zhi (2019) No. 23 and No. 62

Rubber air spring technical transformation project

38,810.54 Related to income Shandong Provincial Department of Finance issued Lu Cai Qi Zhi [2010] No. 55

Industrialization project of sophorolipids for preventing ocean red tide

900,000.00 Related to income Lu Fa Gai Investment [2012] No. 1189

100,000 sets of air suspension project

278,019.84 Related to income Lu Fa Gai Investment [2012] No. 1250

High temperature oil mist resistant heavy truck air intake hose manufacturing technology introduction and development project

315,500.04 Related to income Guoke Facai (2014) No. 42 and Guoke Facai (2014) No. 110

High-air-tightness composite air spring industrialization project

50,000.04 Related to income Wei Jing Xin Ji Zi (2013) No. 46

F-118

102



Reward and support funds 3,960,264.00 Related to income

Leading talents in Taishan industry

2,000,000.00 Related to income Weifang Municipal Finance Bureau Lu Cai Gong Zhi [2020] No. 16

Special funds for the development of SMEs


2018 Financial Support Fund for the Xixi Huachao Festival in Hangzhou, China


Tourism award supplement 726,100.00 Related to income

Promotion of employment and entrepreneurship subsidies


Talent support funds 600,000.00 Related to income

Leading Talents in Taishan Industry in 2019


Weifang Municipal Finance Bureau Wei Cai Xing Zhi [2020] No. 29 Notice on the Allocation of Special Funds for Talents

Sino-US trade friction subsidies 224,480.00 Related to income

Weifang patent special fund management measures


Leading talents in Yuandu industry


Weifang Municipal Finance Bureau Weicai Xingzhi [2020] No. 14 Notice on Issuing the Funds for the Leading Talents of the Yuandu Industry in 2017 and 2018

High-tech enterprise rewards 100,000.00 Related to income Wuzheng Regulation (2019) No. 20, Wu Xinguan (2019) No. 18

Post stabilizing and returning bonus to enterprises in difficulties


Value-added tax deduction 67,318.70 Related to income

Announcement of the Ministry of Finance and the State Administration of Taxation on Clarifying the Policies for the Value-Added Tax Deduction for the Life Service Industry Announcement No. 87 (2019) of the Ministry of Finance and the State Administration of Taxation

2019 Provincial Science and Technology Innovation Development Fund (Enterprise Research and Development Financial Subsidy Fund)


2020 R&D subsidy 39,800.00 Related to income

Shandong Provincial Department of Science and Technology and Shandong Provincial Department of Finance Luke [2020] No. 118

Weifang municipal supporting facilities

38,300.00 Related to income Weifang Science and Technology Bureau Weike [2020] No. 17

Municipal financial subsidy funds 26,600.00 Related to income

Patent grant 19,767.09 Related to income

F-119

103



Subsidies for training by work 19,500.00 Related to income Wu Renshe Han (2020) No. 49

Party building work funding 10,000.00 Related to income

2019 intellectual property special funds

10,000.00 Related to income Wu Xin Guan Zhi Ban (2019) No. 5

Social security subsidies 6,169.27 Related to income

Internship subsidy 4,000.00 Related to income Wu Ren She Letter (2020) No. 15

Refund of employment security fund for the disabled

252.32 Related to income

Subsidies from the Bureau of Commerce

74.13 Related to income

Total 545,898,264.43

52. Investment income

Item 2020 2019

Long-term equity investment income calculated by cost method 37,500.00

Long-term equity investment income calculated by equity method 293,710,299.09 145,334,384.01

Investment income from disposal of long-term equity investments -59,705,437.46

Investment income of other equity instrument investments during the holding period

1,883,323.97

Income from structured deposit 53,535,342.19 11,095,890.41

Others 36,864,873.22 36,691,028.12

Total 384,110,514.50 135,336,689.05

53. Impairment loss of credit

Item 2020 2019

Provision for bad debts of accounts receivable -34,409,678.52 11,904,334.60

Provision for bad debts of other receivables -98,498,688.54 13,604,197.69

Provision for bad debt of notes receivable -2,436,119.50 -613,450.03

Total -135,344,486.56 24,895,082.26

54. Asset impairment loss

Item 2020 2019

Loss of inventory impairment -2,818,605.43 -1,298,862.08

Loss contract asset impairment -56,127,289.73

Loss from goodwill impairment -157,730,478.85

Total -216,676,374.01 -1,298,862.08

F-120

104

55. Gains on disposal of assets

Item 2020 2019

Gains from disposal of fixed assets and intangible assets

27,503,798.22 -1,380,853.49

Total 27,503,798.22 -1,380,853.49

56. Non-operating income

Item 2020 2019

Government subsidies not related to the daily activities of the company

124,609.91 7,567,794.85

Subsidy funds of US dollar bonds 2,235,050.00

Gain on restructuring of debts 1,096,299.50

Default compensation income 98,773.22 708,955.51

Fine income 556,137.02 449,652.17

Gains from non-current assets damage and retirement 7,766.99 600.00

Tax return 7,892.14

Tax deduction 9,135,359.06

Assignment of creditor's rights 3,494,100.00

Others 400,554.00 460,408.87

Total 13,825,192.34 12,518,760.90

57. Non-operating expenses

Item 2020 2019

Non-recurring loss 74,324,044.10

Public welfare donation expenditure 2,237,178.00 2,366,470.80

Non-current asset retirement losses 7,155,063.75 816,697.83

Loss of non-current assets 772,215.83

Loss on retirement of current assets 232,433.64

Overdue payment and fines 5,325,939.44 411,807.97

Others 482,479.59 147,603.75

Total 15,972,876.61 78,299,058.09

58. Income tax expenses

F-121

105

Item 2020 2019

Current term income tax expense 106,265,866.33 23,273,493.89

Deferred income tax expense -33,046,071.24 7,627,709.68

Total 73,219,795.09 30,901,203.57

59. Supplementary information on cash flow statement

(1) Supplementary information on cash flow statement

Supplemental materials 2020 2019

1. Adjust net profit to cash flow from operating activities:

Net profit 220,694,990.83 402,107,617.23

Add: asset impairment provision/credit impairment loss 352,020,860.57 -23,596,220.18

Depreciation of fixed assets, depletion of oil and gas assets, depreciation of productive biological assets

326,463,020.79 396,291,247.14

Amortization of intangible assets 54,123,499.41 16,564,189.78

Amortization of long-term deferred expenses 23,603,604.80 18,643,209.40

Losses on disposal of fixed assets, intangible assets and other long-term assets (returns are listed with "-")

-21,689,879.40 1,380,853.49

Loss from retirement of fixed assets (returns are listed with "-") 964,628.81 816,697.83

Loss from changes in fair value (returns are listed with "-")

Financial expenses (returns are listed with "-") 872,932,570.15 675,827,895.53

Investment loss (return is listed with "-") -384,110,514.50 -135,336,689.05

Decrease in deferred income tax assets (increase is listed with "-") -37,279,940.79 -39,264,583.57

Increase in deferred income tax liabilities (decrease is listed with "-")

4,517,020.09 128,174,341.45

Decrease in inventory (increase is listed with "-") -1,570,947,351.70 -5,373,295,494.66

Decrease in operating receivables (increase is listed with "-") 1,331,103,929.39 -3,037,434,830.01

Increase in business payable items (decrease is listed with "-") -3,585,039,815.70 8,141,254,464.26

Other 161,368,559.55

Net cash flow from operating activities -2,251,274,817.70 1,172,132,698.64

2. Major investment and financing activities that do not involve cash receipts and expenditures:

Conversion of debt into capital

Convertible corporate bonds due within one year

Financing lease of fixed assets

3. Net changes in cash and cash equivalents:

Ending balance of cash

6,111,572,420.28 5,639,971,698.82

F-122

106

Supplemental materials 2020 2019

Less: the beginning balance of cash

5,639,971,698.82 5,589,660,326.01

Add: ending balance of cash equivalents

1,401,000,000.00

Less: opening balance of cash equivalents

Net increase in cash and cash equivalents

1,872,600,721.46 50,311,372.81

(2) Composition of cash and cash equivalents


1. Cash 6,111,572,420.28 5,639,971,698.82

Including: cash on hand 840,379.24 1,124,465.76

Bank deposit that can be used for payment at any time 6,110,289,382.79 5,638,847,233.06

Other currency funds that can be used for payment at any time

442,658.25

2. Cash equivalents 1,401,000,000.00

Of which: structured deposits maturing within three months

1,300,000,000.00

Wealth management products maturing within three months

1,000,000.00

Margin deposits due within three months 100,000,000.00

3. Balance of cash and cash equivalents at the end of the period

7,512,572,420.28 5,639,971,698.82

Among them: cash and cash equivalents by the parent company or its subsidiaries with restricted use

1,401,000,000.00

60. Assets with restricted ownership or use rights

Item Book value at the end of

the period Reason for restriction

Monetary funds 1,584,371,677.03 Margin, frozen money, guarantee deposit

Notes receivable 50,000,000.00 Pledge financing

Receivables financing 11,900,000.00 Pledge financing

Accounts receivable 40,000,000.00 Pledge loan

Inventory 262,770,235.20 Mortgage loans, transfer of specific income rights

Fixed assets 217,043,094.65 (Real estate, equipment) mortgage loan

Intangible assets 25,555,353.32 Mortgage loan

Investment real estate 21,039,142.21 Mortgage loan

Total 2,212,679,502.41

61. Foreign currency monetary items

F-123

107

Item Foreign currency

balance at the end of the period

Converted exchange rate

Converted RMB balance at the end of

the period

Monetary funds

Of which: USD 511,197.21 6.5249 3,335,510.69

JPY 0.27 6.3236 1.71

Australian dollar 6,308.04 5.0163 31,643.02

Hong Kong dollar 1,140,480.54 0.8416 959,874.04

Accounts receivable

Of which: USD 815,207.06 6.5249 5,319,144.55

EUR 21,624.27 8.0250 173,534.77

Australian dollar 27.56 5.0163 138.25

Advance from customers

Of which: USD 275,457.01 6.5249 1,797,329.44

EUR 8,877.67 8.0250 71,243.30

VI. Changes in the scope of consolidation

1. Business combination not under common control

None.

2. Business combination under the common control

(1) Business combinations under the common control that occurred in the current period

Name of merged party

Proportion of equity obtained

in business combination

Basis for a business combination under the

same control Merger date

Basis for determining the merger date

Weifang Water Conservancy Engineering Construction Supervision Center Co., Ltd.

100% Ultimately controlled

by the same party both before and after

the merger

December 7, 2020

Business change date of the merged party Weifang Water

Conservancy Architectural Design and Research Institute Co., Ltd.

100% December 4,

2020

(Continued)

Income of the merged party from the beginning of the

current period to the date of the merger

Net profit of the merged party from the beginning of the current period to the date of the merger

Income of the merged party during the

comparison period

Net profit of the merged party during the comparison

period

12,104,805.24 -2,802,906.10 7,356,464.12 -1,884,382.94

33,457,290.17 1,626,780.49 29,884,747.06 2,306,655.38

F-124

108

(2) Consolidation cost

The cost of business combination under the common control in the current period is 0 yuan.

(3) Book value of assets and liabilities of the merged party on the merger date

Item

Weifang Water Conservancy Engineering Construction Supervision Centre Co., Ltd.

Merger date At the end of the previous period

Assets:

Monetary funds 9,005,139.99 6,012,324.03

Accounts receivable 1,963,009.26 1,991,634.46

Other receivables 423,987.28 1,472,612.71

Prepayments 31,436.19 31,436.19

Fixed assets 250,101.55 262,711.48

Liabilities:

Payable 1,110,377.34

Advance from customers 235,800.00

Employee compensation payable

3,282,213.87

Taxes payable 226,829.87 27,063.01

Other payables 8,146.00 -434.00

Net assets 6,810,307.19 9,744,089.86

Less: Non-controlling interests' equity

Net assets acquired 6,810,307.19 9,744,089.86

Continued

Item


Merger date Ending balance of the previous period

Assets:

Monetary funds 11,085,875.50 10,446,328.44

Notes receivable 250,000.00

Accounts receivable 18,675,369.18 10,747,812.02

F-125

109

Item


Merger date Ending balance of the previous period

Other receivables 1,503,106.00 1,712,916.00

Fixed assets 251,228.88 336,958.36

Liabilities:

Accounts payable 1,660,000.00 60,000.00

Advance from customers 1,030,000.00

Employee compensation payable

6,668,495.01 1,030,046.55

Taxes payable 828,597.19 104,087.72

Other payables 4,100.00 40,000.00

Net assets 22,604,387.36 20,979,880.55

Less: Non-controlling interests' equity

Net assets acquired 22,604,387.36 20,979,880.55

3. Changes in the scope of consolidation due to other reasons

Name of subsidiary Reason for change

Weifang Unban Investment Junhe International Trade Co., Ltd.

Newly established in 2020

Weifang Huawei New Kinetic Energy Technology Industry Equity Investment Fund Partnership (Limited Partnership)

Newly established in 2020

Bailang River Investment Co., Ltd. Newly established in 2020

Wulian Faya Forestry Development Co., Ltd. Cancellation in 2020

Hainan Meichen Ecological Development Co., Ltd. Newly established in 2020

VII. Equity in other entities

1. Equity in subsidiaries

(1) The information of important subsidiaries of the company

Subsidiary name Principal place of business

Registered place

Shareholding ratio (%)

Obtain method

Direct Indirect

Weifang Cross-Strait Exchange Center Construction Management Co., Ltd.

Weifang, Shandong

Weifang, Shandong

100.00 Investment in establishment

F-126

110

Subsidiary name Principal place of business

Registered place

Shareholding ratio (%)

Obtain method

Direct Indirect

Weifang New Fuhua Hotel Management Co., Ltd.

Weifang, Shandong

Weifang, Shandong


Weifang Dongxing Financial Holdings Co., Ltd.

Weifang, Shandong

Weifang, Shandong


Weifang Ocean Industry Investment Co., Ltd.

Weifang, Shandong

Weifang, Shandong



Weifang, Shandong

Weifang, Shandong

63.83 Free transfer

Weifang High-end Industry Investment Co., Ltd.

Weifang, Shandong

Weifang, Shandong



Weifang, Shandong

Weifang, Shandong

51.28 Free transfer

Weifang Urban Investment Junhe International Trade Co., Ltd.

Weifang, Shandong

Weifang, Shandong



Weifang, Shandong

Weifang, Shandong

50.16 24.94 Investment in establishment


Weifang, Shandong

Weifang, Shandong

76.73 Free transfer


Zhucheng, Shandong

Zhucheng, Shandong

21.46 Business in combination

Shandong Meichen Industry Group Co., Ltd. Zhucheng, Shandong

Zhucheng, Shandong


Hangzhou Saishi Garden Group Co., Ltd. Hangzhou, Zhejiang

Hangzhou, Zhejiang


Hangzhou Landscape Engineering Co., Ltd. Hangzhou, Zhejiang

Hangzhou, Zhejiang


Hangzhou Landscape Design Co., Ltd. Hangzhou, Zhejiang

Hangzhou, Zhejiang


(2) Important non-wholly-owned subsidiaries

Name of subsidiary

Non-controlling interests'

shareholding ratio (%)

Profit and loss attributable to non-

controlling interests in the current period

Declared dividends distributed to non-

controlling interests in the current period

Balance of non-controlling interests' equity at the end of

the period


36.17 2,623,951.99 212,424,437.83


48.72 45,377,598.87 3,871,215,691.41

Weifang Urban Investment Junhe International Trade Co., Ltd.

49.00 11,364,718.74 599,364,718.74


24.90 2,183,400.14 3,074,094,352.48


23.27 1,103,810.94 624,071,881.76


78.54 9,636,728.64 2,451,280,964.36

(3) Major financial information of important non-wholly-owned subsidiaries

Name of subsidiary

Ending balance

Current assets Non-current assets Total assets

Shandong Haobo Water Conservancy Construction Co., Ltd. 928,865,587.75 675,775,724.64 1,604,641,312.39

F-127

111

Name of subsidiary

Ending balance

Current assets Non-current assets Total assets

Weifang Cultural Tourism Construction Investment Co., Ltd. 3,846,659,901.17 7,961,673,154.13 11,808,333,055.30

Weifang Urban Investment Junhe International Trade Co., Ltd. 1,228,797,926.66 1,228,797,926.66

Weifang Dongxing Construction Development Co., Ltd. 8,120,367,140.98 21,493,948,361.88 29,614,315,502.86


2,795,186,620.61 5,538,620,247.84 8,333,806,868.45

Shandong Meichen Ecology & Environment Co., Ltd. 8,989,115,075.71 2,135,857,504.20 11,124,972,579.91

Continued

Name of subsidiary

Ending balance

Current liabilities Non-current liabilities Total Liabilities


647,174,069.77 370,659,403.33 1,017,833,473.10


1,527,126,335.26 2,339,974,910.13 3,867,101,245.39

Weifang Investment Junhe International Trade Co., Ltd.

5,604,623.11 5,604,623.11


5,237,406,320.08 9,651,630,658.78 14,889,036,978.86


1,725,153,594.13 3,737,768,522.47 5,462,922,116.60


5,153,111,501.44 2,610,676,593.52 7,763,788,094.96

2. Equity in joint ventures and associates

(1) Material associates

Joint venture name Principal place

of business Registered place

Shareholding ratio (%) Accounting Treatment Method of Investment in Joint

Ventures Direct Indirect

Weifang Water Supply Co., Ltd. Weifang, Shandong

Weifang, Shandong

32.00 Equity method

Bank of Weifang Co., Ltd. Weifang, Shandong

Weifang, Shandong

13.58 Equity method


Weifang, Shandong

Weifang, Shandong

24.50 Equity method


Weifang, Shandong

Weifang, Shandong

49.00 Equity method


Weifang, Shandong

Weifang, Shandong

26.65 Equity method

Junfu Nonwovens Co., Ltd. Weifang, Shandong

Weifang, Shandong

27.24 Equity method


Weifang, Shandong

Weifang, Shandong

20.63 Equity method

(1) Major financial information of important associates

F-128

112

Item

Ending balance / amount in current period





Current assets 84,618,583.22 30,172,038,490.72 1,375,628,910.71 253,954,397.90

Non-current assets 508,895,802.17 145,475,072,591.57 2,840,566,390.17 355,722,272.04

Total assets 593,514,385.39 175,647,111,082.29 4,216,195,300.88 609,676,669.94

Current liabilities 190,365,142.61 156,298,088,197.31 1,432,223,731.32 17,330.00

Non-current liabilities 24,431,657.96 5,555,358,943.94 905,434,078.78

Total Liabilities 214,796,800.57 161,853,447,141.25 2,337,657,810.10 17,330.00


165,643,456.05 518,280,996.78

Equity attributable to shareholders of the parent company

378,717,584.82 13,628,020,484.99 1,360,256,494.00 609,659,339.94

Share of net assets calculated based on shareholding ratio

121,189,627.14 1,850,685,181.86 333,262,841.03 298,733,076.57

Book value of equity investment in associates

121,189,627.14 3,461,491,382.71 333,262,841.03 257,933,076.71

Operating income 179,802,258.34 4,314,353,644.01 996,710,518.35

Net profit 10,279,667.31 805,540,672.36 153,022,400.81 -2,851,636.88

Total comprehensive income

10,279,667.31 760,751,748.66 153,022,400.81 -2,851,636.88

Dividends received from associates this year

Continued

Item


Shandong High-speed Chengtou Ring Expressway

Co., Ltd. Junfu Nonwovens Co., Ltd.


Current assets 263,344,636.77 936,432,104.35 47,574,311.25

Non-current assets 1,396,261,826.17 1,396,784,358.48 3,258,844,552.76

Total assets 1,659,606,462.94 2,333,216,462.83 3,306,418,864.01

Current liabilities 105,944,800.91 821,630,281.52 1,931,701,364.01

Non-current liabilities 596,992,962.03 140,875,318.89

Total Liabilities 702,937,762.94 962,505,600.41 1,931,701,364.01


23,937,893.19

Equity attributable to shareholders of the parent company

956,668,700.00 1,346,772,969.23 1,374,717,500.00

Share of net assets calculated based on

254,952,208.55 366,860,956.82 283,604,220.25

F-129

113

Item


Shandong High-speed Chengtou Ring Expressway

Co., Ltd. Junfu Nonwovens Co., Ltd.


shareholding ratio

Book value of equity investment in associates

566,694,700.00 445,960,921.63 495,144,400.00

Operating income 1,444,099,460.14

Net profit 620,732,827.08

Total comprehensive income

619,264,963.97

Dividends received from associates this year

(2) Consolidated financial information of immaterial associates

Item Balance at the end of the period /

amount for the period Beginning balance / previous

period amount

Associated enterprises:

Total book value of investment 1,090,515,347.16 168,304,838.51

The total of the following items calculated according to the shareholding ratio

--Net profit -4,705,091.34 -5,526,335.75

--Other comprehensive income

--Total comprehensive income -4,705,091.34 -5,526,335.75

VIII. Related parties and related transactions

1. The company’s parent company

Name of parent company Registration

Location

The parent company's shareholding ratio in the

company (%)

Proportion of voting rights of the parent company to

the company (%) Weifang State-owned Assets Supervision and Administration Commission

Weifang, Shandong

100 100

2. The company’s subsidiaries

For details of the company's subsidiaries, please refer to Note VII. 1 Equity in subsidiaries. 3.

3. The company's associates

For details of the company’s subsidiaries, please refer to Note VII. 2 Equity in joint ventures and

associates.

4. Other related parties

Company Name Relationship with the company

Zhongyi Health City Real Estate Investment (Anqiu) Co., Ltd.

Subsidiary of Zhongyi Health City Real Estate Investment Co., Ltd. (the company holds 29% of the shares)

F-130

114

Company Name Relationship with the company


The company's shareholding ratio is 35%

Jun Fu Nonwovens Co., Ltd. The company's shareholding ratio is 27.24%

Weifang Luwei Industrial Co., Ltd. The company's shareholding ratio is 33.32%

Weifang Water Supply Co., Ltd. The company's shareholding ratio is 32%

Weifang Binhai Investment Development Co., Ltd. The company's shareholding ratio is 50%

Weifang Gold and Silver Warehouse Investment Operation Co., Ltd.

The company’s subsidiary, Weifang Affordable Housing Construction Investment Co., Ltd., holds 30% of the shares

Weifang Greenland Urban Investment Land Co., Ltd.

The company's subsidiary, Weifang Infrastructure Investment Construction Development Co., Ltd., holds 35% of the shares

Saishi Group Co., Ltd. (referred to as "Saishi Group")

Shareholders holding more than 5% of Shandong Meichen Ecology & Environment Co., Ltd. ("Meichen Eco") at the beginning of the period; holding less than 5% at the end

Guo Bofeng The actual controller of Saishi Group

Zhang Lei Shareholders who hold more than 5% of Meichen Ecological shares at the beginning of the period; the shareholding ratio at the end of the period is less than 5%

Tibet Fumei Investment Co., Ltd. A company controlled by Zhang Lei, a shareholder of Meichen Ecology and a shareholder who holds more than 5% of the shares of Meichen Ecology

Dehong Huajiang Real Estate Development Co., Ltd.

Saishi Group holds 32% of the shares


Hangzhou Landscape Engineering Co., Ltd. holds 30% of the shares

Hongyue Flower Co., Ltd. Affiliated companies of Saishi Group

Shandong Ginkgo Huachao Cultural Tourism Co., Ltd.

Companies controlled by executive of the subsidiary company, Xu Haiqin

Xu Haiqin, Wang Di Executives of the subsidiary, Wang Di and Xu Haiqin are husband and wife

Zhang Wei Executives of the Subsidiary

5. Related party transactions

(1) Related-party transactions in the purchase and sale of commodities, provision and acceptance

of labor services

Related party Type of related

transaction Related transaction

content

Related transaction

pricing

2020 (by million yuan)


Weifang Binhai Investment Development Co., Ltd. Providing services Rubber Dam Project on Binhai Shugang Road

Market price 3.54

Saishi Group Co., Ltd. Providing services Engineering construction Market price 2.65 26.44

Saishi Group Co., Ltd. Accept labor Maintenance fees, etc. Market price 0.19

Dehong Huajiang Real Estate Development Co., Ltd. Providing services Engineering construction Market price 0.20 4.51


Providing services Design fees, etc. Market price 0.23 0.89

F-131

115

Related party Type of related

transaction Related transaction

content

Related transaction

pricing



Hongyue Flower Co., Ltd. Buy goods Seedlings, etc. Market price 7.79 20.04

Shandong Ginkgo Huachao Cultural Tourism Co., Ltd.

Providing services Engineering construction Market price 0.32 0.42

Jinan Saishi Tourism Development Co., Ltd. Providing services Landscape design Market price 1.11 0.00

(2) Funds borrowing from related parties

For details, please refer to Footnote VIII. Related parties and related transactions 6. Due to

and due from related parties.

(3) Related party guarantees

①Associated guarantee within the scope of consolidation

Guarantor Guaranteed party Amount of main creditor's rights (million yuan)

Starting date of the main creditor's

rights

Maturity date

Whether the guarantee has been fulfilled



91 May 21,

2019 February 2,

2023 No



247 September

6, 2019 September 6,

2024 No



38 January 2,

2020 January 2, 2023 No



100 February 11, 2020

February 11, 2021

No



92 April 15,

2020 April 15, 2025 No



600 April 20,

2020 April 20, 2023 No



200 July 10,

2020 July 6, 2023 No



300 August 7,

2020 August 10, 2025 No



200 August 20,

2020 August 20, 2025 No



100 September 27, 2020

September 25, 2025

No



120 October 26,

2020 October 25,

2021 No



250 October 30,

2020 October 29,

2023 No



300 December 18, 2020

December 18, 2025

No

Weifang Urban Construction and Development Investment Group Co.,

Shandong Haobo Water Conservancy

192 July 23,

2015 July 22, 2024 No

F-132

116



rights

Maturity date


Ltd. Construction Co., Ltd.



170 December 13, 2019

December 11, 2021

No



168 July 30,

2019 July 30, 2022 No



247 September

6, 2019 September 6,

2024 No



205 December 25, 2019

December 25, 2022

No



187 December 27, 2019

December 27, 2022

No



1,008 January 23,

2020 January 23,

2023 No



85 January 10,

2020 January 9, 2023 No



105 January 10,

2020 January 9, 2023 No




September 15, 2025

No



250 November

2, 2020 November 1,

2023 No



120 November

9, 2020 November 9,

2021 No



50 July 15,

2020 July 14, 2021 No




September 28, 2021

No




March 28, 2021 No



700 October 25,

2019 October 25,

2022 No



60 June 19,

2020 June 19, 2021 No

F-133

117



rights

Maturity date




40 June 19,

2020 June 18, 2021 No



70 June 23,

2020 June 23, 2021 No



30 February 12, 2020

February 11, 2021

No



1 November 24, 2020

May 24, 2021 No



49 November 25, 2020

May 20, 2021 No




May 20, 2021 No



77 January 20,

2020 January 15,

2023 No



85 May 28,

2020 May 27, 2023 No



100 January 16,

2020 January 15,

2021 No



30 March 20,

2020 March 20, 2021 No



50 April 2,

2020 April 1, 2021 No




September 24, 2022

No



160 November 11, 2020

January 10, 2022

No




January 15, 2022

No




January 23, 2022

No



200 December 25, 2020

December 24, 2023

No



288 August 31,

2020 August 24, 2023 No



692 August 29,

2017 January 19,

2024 No



453 February 14, 2017

February 14, 2027

No



1,865 March 23,

2017 March 23, 2036 No

F-134

118



rights

Maturity date




200 May 4, 2018 May 4, 2024 no



395 January 16,

2017 September 8,

2025 No



475 April 8,

2019 April 2, 2029 No



295 August 5,

2019 July 24, 2026 No

Weifang Dongxing Construction Development Co., Ltd., Weifang Cultural Tourism Construction Investment Co., Ltd.


50 December 23, 2020

December 22, 2023

No




September 15, 2026

No



200 December 30, 2019

December 30, 2021

No



123 April 20,

2018 April 19, 2024 No



30 March 19,

2020 March 19, 2021 No



30 July 1, 2020 June 30, 2021 No



20 June 15,

2020 June 15, 2021 No




November 2, 2021

No




March 22, 2021 No



40 September

8, 2020 March 8, 2021 No



50 July 9, 2020 July 1, 2021 No



50 August 10,

2020 February 9,

2021 No




December 21, 2021

No




December 31, 2021

No

F-135

119



rights

Maturity date




70 July 14,

2020 July 1, 2021 No


Luzhai Saishi Ecological Garden Construction Co., Ltd.


July 1, 2030 No



48 January 21,

2020 July 1, 2030 No




July 1, 2030 No


Jingyuan County Jinghua Tourism Operation Management Co., Ltd.

17 February 13, 2018

February 13, 2021

No



10 July 21,

2020 January 21,

2021 No



15 August 18,

2020 August 28, 2021 No



25 August 19,

2020 August 19, 2021 No



10 January 8,

2020 January 7, 2021 No



259 April 21,

2020 October 15,

2027 No



25 April 23,

2020 April 13, 2021 No



50 January 15,

2020 January 14,

2021 No




December 21, 2021

No



259 April 16,

2020 October 16,

2029 No



50 January 15,

2020 January 14,

2021 No

Jiangxi Shicheng Tourism Co., Ltd. Jiangxi Shuangshi Hot Spring Hotel Co., Ltd.

3 July 9, 2020 July 2, 2021 No

②Associated guarantee outside the scope of consolidation

Guarantee Secured party Amount of main creditor's rights (million yuan)

Starting date of the main

creditor's rights Maturity date




417 January 9, 2017 January 15,

2023 No



900 June 22, 2018 June 20, 2025 No



398 March 27, 2020 March 23,

2022 No

F-136

120

Guarantee Secured party Amount of main creditor's rights (million yuan)


creditor's rights Maturity date




74 April 17, 2020 April 17,

2027 No



297 July 17, 2020 April 17,

2027 No



80 March 6, 2020 March 6,

2021 No



18 April 9, 2020 March 9,

2021 No



200 June 29, 2020 June 29, 2021 No



200 September 27,

2020 September 27, 2021

No



300 June 12, 2020 June 12, 2023 No



850 January 17,

2020 January 17,

2023 No

Shenzhen Hi-tech Investment Group Co., Ltd.


400 August 2, 2017 August 2,

2022 No

Zhang Lei Shandong Meichen Industry Group Co., Ltd.

123 April 20, 2018 April 19,

2024 No

Zhang Wei Dongfeng Meichen (Shiyan) Automotive Fluid System Co., Ltd.

5 April 16, 2020 April 16,

2021 No

Xu Haiqin, Wang Di Faya Ecological Environment Group Co., Ltd.

10 May 19, 2020 May 18, 2021 No

(4) Other related transactions

None.

6. Due from and due to related parties

(1) Receivables

Item Related party




Accounts receivable Weifang Binhai Investment Development Co., Ltd.

7,410,972.47 8,790,972.47

Notes receivable Weifang Binhai Investment Development Co., Ltd.

180,000.00

F-137

121

Item Related party




Accounts receivable Saishi Group Co., Ltd. 113,041,231.99 7,559,935.08 42,086,254.87 2,364,337.75

Accounts receivable Dehong Huajiang Real Estate Development Co., Ltd.

199,106.54 59,450.79 1,080,145.04 78,719.84

Accounts receivable Zhejiang Greentown Environmental Engineering Consulting Management Co., Ltd.

645,960.37 37,778.02 397,445.42 22,272.27

Accounts receivable Shandong Ginkgo Huachao Cultural Tourism Co., Ltd.

1,500,000.00 75,000.00

Other receivables Zhongyi Health City Real Estate Investment (Anqiu) Co., Ltd.

158,050,000.00 295,000,000.00

Other receivables Weifang Aocheng Real Estate Development Co., Ltd.

143,731,500.00

Other receivables Junfu Nonwovens Co., Ltd. 220,000,000.00

Other receivables Weifang Luwei Industrial Co., Ltd. 3,000,000.00 3,000,000.00

Other receivables Weifang Water Supply Co., Ltd. 90,000,000.00 90,000,000.00

Other receivables Weifang Gold and Silver Warehouse Investment Operation Co., Ltd.

115,811,832.50 202,474,479.71

Other receivables Weifang Greenland Urban Investment Land Co., Ltd.

652,386,454.08 652,299,629.39

Other receivables Saishi Group Co., Ltd. 146,900,000.00 7,345,000.00

Other receivables Zhang Lei 3,782,602.68

(2) Payables

Item Related party December 31,

2020 December 31,

2019

Accounts payable Weifang Binhai Investment Development Co., Ltd.

235,000,000.00 235,000,000.00

Accounts payable Saishi Group Co., Ltd. 49,819.70 83,936.20

Accounts payable Hongyue Flower Co., Ltd. 1,688,857.43 13,083,194.43

Advance from customers Weifang Lvhai Forestry Development Co., Ltd.

500,000.00

Advance from customers Saishi Group Co., Ltd. 224,999.99

Other payables Weifang Binhai Investment Development Co., Ltd.

20,291,316.22

Other payables Weifang Luwei Industrial Co., Ltd. 600,000.00 600,000.00

Contract liabilities Saishi Group Co., Ltd. 1,101,598.45

Contract liabilities Dehong Huajiang Urban Construction Co., Ltd.

736,657.41

Other payables Wuxi Kowloon Bay Tourism Development Co., Ltd.

180,000.00

Ⅸ. Commitments and contingencies

F-138

122

1. Important commitments

As of December 31, 2020, the company has no commitments that should be disclosed in this

footnote.

2. Contingencies

As of December 31, 2020, the company's guarantees with non-related parties are as follows:

Guarantor Guaranteed party

Amount of main

creditor's rights (million

yuan)


creditor's rights

Maturity date

Whether the

guarantee has been fulfilled


Weifang Investment Group Co., Ltd. 300 August 6, 2018 August 6, 2021

No


Weifang Investment Group Co., Ltd. 280 January 2, 2020 December 13, 2022

No


Weifang Investment Group Co., Ltd. 80 January 9, 2020 January 5, 2021

No


Weifang Investment Group Co., Ltd. 60 March 23, 2020 March 22, 2021

No


Weifang Investment Group Co., Ltd. 20 April 2, 2020 March 22, 2021

No


Weifang Investment Group Co., Ltd. 199 April 24, 2020 April 23, 2023

No


Weifang Investment Group Co., Ltd. 300 July 31, 2020 July 30, 2022

No


Weifang Investment Group Co., Ltd. 100 August 27, 2020 August 27, 2021

No


Weifang Investment Group Co., Ltd. 100 October 15, 2020

October 15, 2021

No


Weifang Investment Group Co., Ltd. 150 October 23, 2020

October 22, 2023

No


Weifang Binhai Blue Water Development Co., Ltd.

100 March 24, 2020 March 24, 2021

No


Weifang Binhai Blue Water Development Co., Ltd.


September 1, 2025

No


Weifang Yiran Natural Gas Co., Ltd. 480 December 20, 2019

December 19, 2022

No



466 December 25, 2019

December 25, 2022

No



934 January 2, 2020 January 2, 2023

No


Weifang Daily 69 March 16, 2020 March 15, 2023

No

F-139

123

Guarantor Guaranteed party

Amount of main

creditor's rights (million

yuan)


creditor's rights

Maturity date

Whether the

guarantee has been fulfilled


Weifang Economic Zone Urban Construction Investment Development Group Co., Ltd.

225 January 15, 2016

January 14, 2028

No


Weifang Weizhou Investment Holdings Co., Ltd.

527 March 30, 2017 March 30, 2031

No

Weifang Investment Group Co., Ltd. Weifang Urban Construction and Development Investment Group Co., Ltd.

250 January 20, 2020

January 20, 2021

No


250 April 8, 2020 April 8, 2021

No


200 August 4, 2020 August 4, 2021

No


250 August 26, 2020 July 6, 2021

No


690 July 25, 2019 May 1, 2026

No



September 24, 2023

No


500 March 27, 2020 March 27, 2022

No

Zhongzhai Credit Promotion Investment Co., Ltd.


500 March 27, 2018 March 27, 2023

No

Zhongzhai Credit Promotion Investment Co., Ltd.


1,000 April 27, 2018 April 27, 2023

No

X. Subsequent events

As of the audit report date, the company does not have any matter after the balance sheet date that

needs to be disclosed.

Ⅺ. Other important matters

As of December 31, 2020, the company has no other important matters that should be disclosed in

this note.

Ⅻ. Notes to the major items of the financial statements of the company

1. Accounts receivable

(1) Disclosure of accounts receivable by categories

Category

December 31, 2020


Amount Proportion

(%) Amount


Value


F-140

124

Category

December 31, 2020


Amount Proportion

(%) Amount


Value


377,481,300.00 100.00 377,481,300.00



377,481,300.00 100.00 377,481,300.00


Total 377,481,300.00 100.00 377,481,300.00

Continued

Category

December 31, 2019


Amount Proportion (%) Amount Expected credit

loss rate (%) value



773,971,800.00 100.00 773,971,800.00



773,971,800.00 100.00 773,971,800.00


Total 773,971,800.00 100.00 773,971,800.00

(2) The provision for bad debts accrued, recovered or reversed in the current period

There was no provision for bad debts accrued, recovered or reversed in the current period.

(3) The top five accounts receivable of the ending balance listed by the debtors

The total of the top five accounts receivable by the debtors at the end of the period is

377,481,300.00-yuan, accounting for 100.00% of the total balance of the accounts receivable, and

the corresponding bad debt provision at the end of the period is 0 yuan.

2. Other receivables


Interest receivable

Dividend receivable

F-141

125


Other receivables 4,787,967,116.34 4,311,407,336.81

Total 4,787,967,116.34 4,311,407,336.81

2.1 Other receivables

(1) Disclosure of other receivables by categories

Category

December 31, 2020


Book value Amount

Proportion (%)

Amount Expected credit loss rate (%)


53,000,000.00 1.08 53,000,000.00 100.00 -


Combination 1: Aging combination 105,611,275.59 2.14 85,372,012.32 80.84 20,239,263.27


2,228,098,300.07 45.23 2,228,098,300.07


2,539,629,553.00 51.55 2,539,629,553.00

Total 4,926,339,128.66 100.00 138,372,012.32 4,787,967,116.34

Continued

Category

December 31, 2019


Book value Amount Proportion (%) Amount

Expected credit loss rate

(%) Other accounts receivable with single provision for bad debts

Other accounts receivable with provision for bad debts based on the

4,349,791,941.05 100.00 38,384,604.24 3,593,716,130.55


54,217,408.94 1.25 38,384,604.24 70.80 150,022,641.51


1,530,323,645.80 35.18


2,765,250,886.31 63.57 3,443,693,489.04

Total 4,349,791,941.05 100.00 38,384,604.24 3,593,716,130.55

Other accounts receivable with single provision for bad debts at the end of the period,

Other receivables

December 31, 2020

Other receivables Bad debt provision Expected credit loss rate

(%) Reason for provision

Weifang Centralized Payment Center

53,000,000.00 53,000,000.00 100.00 The payment is confirmed to be

uncollectible

Total 53,000,000.00 53,000,000.00

F-142

126

In the portfolio, other receivables to which provision for bad debts is accrued based on the aging

portfolio:

Aging

December 31, 2020

Other receivables Bad debt provision Expected credit loss rate

(%)

Within 1 year 10,554,066.65 527,703.33 5

1 to 2 years 9,680,999.94 968,099.99 10

2 to 3 years 20

3 to 4 years 30

4 to 5 years 3,000,000.00 1,500,000.00 50

More than 5 years 82,376,209.00 82,376,209.00 100

Total 105,611,275.59 85,372,012.32

(2) Provision for bad debts accrued, recovered or written off in the current period

Item December 31,

2019

Increase in the current period

Decrease in the current period December 31,

2020 Accrual Other

Collected or written-off

amount

Other

Bad debt provision

38,384,604.24 99,987,408.08 138,372,012.32

Total 38,384,604.24 99,987,408.08 138,372,012.32

(3) Classification of other receivables according to the nature of the funds


Due from related parties 2,539,629,553.00 2,855,250,886.31

Due from other companies 2,361,414,748.28 1,474,961,144.43

Deposit and security deposit 5,200,000.00 5,000,000.00

Reserve funds and others 20,094,827.38 14,579,910.31

Total 4,926,339,128.66 4,349,791,941.05

(4) Ending balances of top five other receivables by debtors




other receivables at the end of the

period (%)



Current payment

100,959,583.34 1 to 2 years

21.97

201,165,583.33 2 to 3 years

144,581,694.45 3 to 4 years

F-143

127




other receivables at the end of the

period (%)


445,710,902.78 4 to 5 years

190,000,000.00 Over 5years


Current payment

200,000,000.00 Within 1 year

14.21

500,000,000.00 1 to 2 years

Weifang Water Investment Co., Ltd.

Current payment

500,000,000.00 Within 1 year 10.15

Weifang Henghe Real Estate Co., Ltd.

Current payment

267,697,909.00 Over 5 years 5.43

Jun Fu Nonwovens Co., Ltd. Current payment

220,000,000.00 Within 1 year 4.47

Total 2,770,115,672.90 56.23


(1) Breakdown

Item


Book balance Impairment allowance

Book value Book balance Impairment allowance

Book value

Investment in subsidiaries

8,330,369,024.90 8,330,369,024.90 7,683,920,170.35 7,683,920,170.35

Investment in associates and joint ventures

6,593,888,400.03 6,593,888,400.03 4,205,801,019.67 4,205,801,019.67

Total 14,924,257,424.93 14,924,257,424.93 11,889,721,190.02 11,889,721,190.02

(2) Investment in subsidiaries

Investee December 31,

2019 Increase in current

period


December 31, 2020

Provision for impairment in

the current period

Ending balance of impairment provision


4,472,396,539.79 4,472,396,539.79

Weifang High-end Industry Investment Co., Ltd.

400,000,000.00 400,000,000.00

Weifang Ocean Industry Investment Co., Ltd.

300,000,000.00 300,000,000.00

Weifang Dongxing Financial Holdings Co., Ltd.

133,000,000.00 133,000,000.00

Weifang Urbanization Construction Investment Management Co.,

4,034,160.00 4,034,160.00

F-144

128



period


December 31, 2020


the current period


Ltd.

Weifang Dongxing Property Management Co., Ltd.

800,000.00 800,000.00


5,000,000.00 5,000,000.00

Weifang New Fuhua Hotel Management Co., Ltd.

200,000.00 200,000.00

Weifang Tongxing Asset Operation Management Co., Ltd.

5,000,000.00 5,000,000.00

Weifang Shangjia Accounting Service Co., Ltd.

500,000.00 500,000.00

Weifang Huawei New Kinetic Energy Technology Industry Equity Investment Fund Partnership (Limited Partnership)

1,000,000.00 1,000,000.00

Weifang Investment Junhe International Trade Co., Ltd.

612,000,000.00 612,000,000.00


260,077,668.98 260,077,668.98


100,000,000.00 100,000,000.00


376,945,961.99 376,945,961.99

Weifang Jiatai Investment Development Co., Ltd.

30,000,000.00 30,000,000.00


1,599,999,999.59 1,599,999,999.59

Weifang Water Conservancy Engineering Construction Supervision Center Co., Ltd.

6,810,307.19 6,810,307.19

F-145

129



period


December 31, 2020


the current period


Weifang Water Conservancy Architectural Design and Research Institute Co., Ltd.

22,604,387.36 22,604,387.36

Total 7,683,920,170.35 646,448,854.55 8,330,369,024.90

(3) Investment in joint ventures


2019


Increase of investment

Decrease of investment

Investment gains and losses recognized under the equity method

Other comprehensive income adjustments

Joint venture

Weifang Urban Investment Energy Holdings Co., Ltd.

86,605,757.80 82,600,000.00 554,252.40


301,967,891.22 31,294,949.81


28,347,469.97 -2,466,066.76


117,900,133.60 3,289,493.54

Bank of Weifang Co., Ltd. 2,964,052,644.85 108,681,255.20 -6,082,335.84


267,734,422.23 -11,376,345.66


439,192,700.00 127,502,000.00

Jun Fu Nonwovens Co., Ltd. 280,000,000.00 166,360,767.54 -399,845.91


35,000,000.00 -430,996.89


35,000,000.00 195,434.30


495,144,400.00


196,805,600.00


449,999,999.99

Total 4,205,801,019.67 1,702,051,999.99 296,102,743.48 -6,482,181.75

Continued

F-146

130

Investee

Changes in the current period December 31,

2020


Changes on other equity

Declare a cash dividend or profit

Provision for impairment

Others

Joint venture

Weifang Urban Investment Energy Holdings Co., Ltd.

169,760,010.20


333,262,841.03


25,881,403.21


121,189,627.14


407,092,528.30 12,252,709.80 3,461,491,382.71


1,575,000.14 257,933,076.71


566,694,700.00


445,960,921.63


34,569,003.11


35,195,434.30


495,144,400.00


196,805,600.00


449,999,999.99

Total 408,667,528.44 12,252,709.80 6,593,888,400.03

4. Operating income and operating costs

Item

2020 2019

Sales Cost Sales Cost

Sales 42,485,976.18 76,283,398.33 992,242,256.06 524,903,122.52

Other business

Total 42,485,976.18 76,283,398.33 992,242,256.06 524,903,122.52

5. Investment income

F-147

131

Item 2020 2019

Long-term equity investment income calculated by equity method

296,102,743.48 139,209,052.27

Long-term equity investment income calculated by cost method

720,000.00

Financial income 39,490,469.33

Other 1,209,513.03

Total 336,313,212.81 140,418,565.30


April 29, 2021

F-148

WEIFANG URBAN CoNsTRUCTIoN AND DEVELOPMENTINVEsTMENT GROUP Co,LTDNoTEs To THE FrNANCIAL sTATEMENTs

(3〉 Principal business incomc and cost are set ollt as foⅡ ows

Product name

2019 2018

PⅡncipal

bus1ncss1ncome

Prinoipal busincss

0ost

Principal business

Inoome

Prinoipal business

C0st

Land busincss 974,304,67730 464,610,69265 694,I17,97500 454,337,36544

Paid usc of灬scts I7,937,57876 60,292,42987 I5,785,68858 27,360,59377

Total 992,242,25606 524,903,I2252 709,903,66358 481,697、 9592I

NOte5.Investmentincome

Items 2019 2018

Longˉtcrm equity investmcn】

income calcula1cd、 vith equity

mcthodI39,209,05227 I45,288,12961

Investmentincome from holding

ofal/,ailable-for-sale flnanciaI

assets

2,575,91883

othcrs 1,209,51303

TotaI 140,4I8,56530 I47,864,04842

WEIFANC URBAN Co DEVELOPⅣΙENT

’o冫0°°°o9嘹

︱l

l

"

"

Ⅱ

″

{

汛空l、

2020 ′′夕J

F-282

ISSUER

Weifang Urban Construction and Development Investment Group Co., Ltd.（濰坊市城市建設發展投資集團有限公司）

No. 439, Wenhua RoadKuiwen District, Weifang City

Shandong Province, PRC

AUDITORS OF THE ISSUER

Hexin Certified Public Accountants LLPUnit A, 4th Floor

Demeng Commercial Plaza227 Dongfeng Street

Weifang CityShandong Province, PRC

(For the year ended31 December 2019)

Yongtuo Certified Public Accountants(Special General Partnership)13th Floor Guoan Building

No. 1 Guandongdian North StreetChaoyang District, Beijing

(For the year ended31 December 2020)

TRUSTEE PRINCIPAL PAYING AGENTREGISTRAR AND TRANSFER AGENT

Citicorp International Limited20/F, Citi TowerOne Bay East

83 Hoi Bun RoadKwun Tong, Kowloon

Hong Kong

Citibank, N.A., London Branchc/o Citibank, N.A., Dublin Branch

1 North Wall QuayDublin 1Ireland

LEGAL ADVISERS

To the Issueras to English law

To the Issueras to PRC law

Deacons5th Floor

Alexandra House18 Chater Road

Central, Hong Kong

Shandong Yuanduyinghe Law Firm10/F, HengXin Building

No. 7199 Jiankang East StreetHigh-tech ZoneWeifang City

Shandong Province, PRC

To the Managers andTrustee as to English law

To the Managersas to PRC law

Clifford Chance27th Floor, Jardine HouseOne Connaught House

CentralHong Kong

Beijing Deheng Law Offices LLP12/F, Tower B

Focus Place No. 19 Finance StreetXicheng DistrictBeijing, PRC

A.Plus InternationalFINANCIAL PRESS LIMITED180680302

Publication Announcement - :: HKEX :: HKEXnews ::

Documents

Transcript of Publication Announcement - :: HKEX :: HKEXnews ::