Solution

The financial instrument issued by D Limited to G Limited is an optionally convertible redeemable preference share. This is because the preference share has two key features: the option to convert to equity instruments of the issuer, and the obligation of the issuer to redeem the preference share at the end of 10 years if the option is not exercised by the holder.

The option to convert the preference share to equity instruments of the issuer is at the discretion of the holder, which means that the holder can choose whether or not to exercise the option depending on the market conditions or other factors.

It is important to note that the specific classification of the instrument as either equity or financial liability will depend on the specific terms and conditions of the instrument.

In this case, the preference share has a fixed redemption date of 10 years from the date of issue, which creates an obligation for the issuer to pay cash to the holder at maturity. Therefore, it is likely that the instrument will be classified as a financial liability, as the issuer has an obligation to pay cash for the redemption of the preference shares. The specific classification will depend on the specific terms and conditions of the instrument, including the fair value of the liability component and the allocation of the proceeds between the liability and equity components.