ESR AR 2019 EN

Notes to the Consolidated Financial Statements 31 December 2019 223 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ESR Annual Report 2019 44. RESERVES (a) Group The amount of the Group’s reserves and the movements therein are presented in the consolidated statement of changes in equity of the financial statements. (i) Statutory reserve In accordance with the Company Law of the People’s Republic of China, the subsidiaries in PRC are required to allocate 10% of the statutory after tax profits to the statutory reserve until the cumulative total of the reserve reaches 50% of the subsidiaries’ registered capital. Subject to approval from the relevant PRC authorities, the statutory reserve may be used to offset any accumulated losses or increase the registered capital of the subsidiaries. The statutory reserve is not available for dividend distribution to shareholders of PRC subsidiaries. (ii) Merger reserve The merger reserve of the Group represents the reserve arose pursuant to the reorganisation of subsidiaries. (iii) Exchange fluctuation reserve The exchange fluctuation reserve represents exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from the Group’s presentation currency.