Corporate Vision :
To be
“an international investment holdings company
with a primary focus on expressway infrastructure
investment and operation”
Content
2
4
5
6
8
Definition of Terms
Company Profile
Corporate Structure of the Group
Review of Major Corporate Events
Particulars of Major Road Projects
10
Financial and Operating Highlights
13
17
32
35
45
59
68
70
78
83
Chairman’s Statement
Management Discussion and Analysis
Principal Risks and Uncertainties
Corporate Governance Report
Directors, Supervisors and Senior
Management Profiles
Report of the Directors
Report of the Supervisory Committee
Connected Transactions
Independent Auditor’s Report
Consolidated Financial
Statements & Notes
209
Independent Auditor’s Report
(Issued by a third country auditor registered with
the UK Financial Reporting Council)
Corporate Information
Location Map of Expressways in
215
217
Zhejiang Province
Audit Committee
the audit committee of the Company
Board
the board of directors of the Company
Company or Zhejiang Expressway Zhejiang Expressway Co., Ltd., a joint stock limited company
incorporated in the PRC with limited liability on March 1,
1997
Communications Group
Zhejiang Communications Investment Group Co., Ltd. (浙江
省交通投資集團有限公司), a wholly State-owned enterprise
established on December 29, 2001
Directors
GDP
Group
H Shares
Hanghui Co
Huihang Co
the directors of the Company
gross domestic product
the Company and its subsidiaries
the overseas listed foreign shares of Rmb1.00 each in the
share capital of the Company which are primarily listed on
the Hong Kong Stock Exchange and traded in Hong Kong
dollars since May 15, 1997
Zhejiang Hanghui Expressway Co., Ltd. (浙江杭徽高速公路有
限公司), a 88.674% owned subsidiary of the Company
Huangshan Yangtze Huihang Expressway Co., Ltd (黃山長江
徽杭高速公路有限責任公司), a wholly-owned subsidiary of the
Company
Hong Kong Stock Exchange
The Stock Exchange of Hong Kong Limited
Jiaxing Co
Zhejiang Jiaxing Expressway Co., Ltd. (浙江嘉興高速公路有限
責任公司), a 99.9995% owned subsidiary of the Company
2
Definition of Terms Jinhua Co
Zhejiang Jinhua Yongjin Expressway Co., Ltd. (浙江金華
甬金高速公路有限公司), a wholly-owned subsidiary of the
Company
Listing Rules
the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited
Period
PRC
Rmb
SFO
the period from January 1, 2017 to December 31, 2017
the People’s Republic of China
Renminbi, the lawful currency of the PRC
Securities and Futures Ordinance (Chapter 571, Laws of
Hong Kong)
Shangsan Co
Zhejiang Shangsan Expressway Co., Ltd. (浙江上三高速公路
有限公司), a 73.625% owned subsidiary of the Company
Shareholders
the shareholders of the Company
Shengxin Co
Shengxin Expressway Co., Ltd. (浙江紹興嵊新高速公路有限公
司), a 50% owned joint venture of the Company
Supervisory Committee
the supervisory committee of the Company
Yangtze Financial Leasing
Yangtze United Financial Leasing Co., Ltd. (長江聯合金融租賃
有限公司), a 13% owned associate of the Company
Yuhang Co
Zhejiang Yuhang Expressway Co., Ltd. (浙江余杭高速公路有
限責任公司), a 51% owned subsidiary of the Company
Zheshang Securities
Zheshang Securities Co., Ltd. (浙商證券股份有限公司), a
63.74475% owned subsidiary of the Shangsan Co
Zhejiang Communications Finance Zhejiang Communications Investment Group Finance Co.,
Ltd. (浙江省交通投資集團財務有限責任公司), a 35% owned
associate of the Company
3
Zhejiang Expressway is an infrastructure company principally engaged in investing in, developing
and operating of high-grade roads. The Company and its subsidiaries are also engaged in the
expressway related development and operation, as well as securities business.
Major assets under management of the Group include the 248km Shanghai-Hangzhou-Ningbo
Expressway, the 142 km Shangsan Expressway, the 70 km Jinhua section of Ningbo-Jinhua
Expressway, the 122 km Hanghui Expressway and the 82 km Huihang Expressway, ancillary
facilities along the five expressways, and Zheshang Securities. Among which, apart from Huihang
Expressway which is situated within Anhui Province in the PRC, the rest of the four expressways
are situated within Zhejiang Province in the PRC. As at December 31, 2017, total assets of the
Company and its subsidiaries amounted to Rmb73,650.52 million.
The Company was incorporated on March 1, 1997 as the main vehicle of the Zhejiang Provincial
Government for investing in, developing and operating expressways and Class 1 roads in
Zhejiang Province.
Incorporated on December 29, 2001, Communications Group, the controlling shareholder of
the Company, is a provincial-level communications company which is wholly-owned by the
State and established by the Zhejiang Provincial Government. It mainly operates a diversity of
businesses, such as investment, operations, maintenance, toll collection and ancillary services
of expressways; construction and building of transportation project, ocean and coastal transport;
as well as real estates. On July 11, 2016, Zhejiang Provincial Government carried out a merger
and restructuring of Communications Group and Zhejiang Railroad Investment Group Co., Ltd.
Upon merger and restructuring, Communications Group will be responsible for the investment
and financing, construction, operation and management of transport related fundamental facilities
including expressways, railroads, key cross-region mass transit railways and integrated transport
hubs.
The H Shares of the Company, which represent approximately 33% of the issued share capital of
the Company, were listed on the Hong Kong Stock Exchange on May 15, 1997, and the Company
subsequently obtained a secondary listing on the London Stock Exchange on May 5, 2000.
With a solid foundation built on the Group’s expressway business, the Company will expand its
main businesses scale, enhance its core competitiveness, and grow its financial and securities
business so as to increase its profit contribution to the Group. Looking ahead, the Company will
seize investment opportunities to acquire new projects, and strive to develop the Company into
an international investment holdings company with a primary focus on expressway infrastructure
investment and operation.
4
Company Profile Set out below is the corporate and business structure of the Group as at December 31, 2017:
Holders of H Shares
Communications Group
33%
67%
The Company
100%
88.674%
100%
73.625%
99.9995%
51%
13%
35%
50%
Jinhua
Co
Hanghui
Co
Huihang
Co
Shangsan
Co
Jiaxing
Co
Yuhang
Co
Yangtze
Financial
Leasing
Zhejiang
Communications
Finance
Shengxin
Co
63.74475%
Zheshang
Securities
Hotel
Operations
Finance
Lease
Financial
Services
Jinhua
Section of
Ningbo-
Jinhua
Expressway
69.7 km
Hanghui
Expressway
122.3 km
Huihang
Expressway
81.6 km
Shangsan
Expressway
142.0 km
Jiaxing
Section
88.1 km
Yuhang
Section
11.1 km
Hangzhou
Section
3.4 km
Hangzhou-
Ningbo
Expressway
145.0 km
100%
100%
Shanghai-Hangzhou
Expressway
102.6 km
Shaoxing
Section
of Ningbo-
Jinhua
Expressway
73.4 km
subsidiary
associate
joint venture
5
Corporate Structure of the Group 1.
On March 27, 2017, the Company announced its 2016 annual results in Hong Kong and
thereafter conducted its annual results presentation in Hong Kong and Singapore.
2.
On April 21, 2017, the Company issued zero coupon convertible bonds due 2022 in an
aggregate amount of Euro365,000,000.
3.
On April 28, 2017, the Company published its 2017 first quarterly results.
4.
On May 15, 2017, the Company organised a hiking activity in celebration of the 20th
anniversary of its establishment and listing.
5.
On May 18, 2017, the Company held its Annual General Meeting to approve, inter alia,
the resolutions regarding the payment of a final dividend of Rmb0.295 per share, the
reappointment of Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong as
the Hong Kong auditors of the Company, the re-appointment of Pan-China Certified Public
Accountants LLP. as the PRC auditors of the Company, and the grant of general mandate to
the Board to issue, allot and deal in new H shares of no more than 20% of the issued H shares
of the Company.
6.
On June 26, 2017, Zheshang Securities Co., Ltd., a subsidiary of the Company, was officially
listed on the Shanghai Stock Exchange (Stock Code: 601878). The total number of issued
shares of Zheshang Securities was 333,333,400 and the issue price was Rmb8.45 per share.
7.
On August 23, 2017, the Company published its 2017 interim results and thereafter
conducted its interim results presentation in Hong Kong and Singapore.
8.
On September 27, 2017, the Company, as one of the syndicate members, participated in
the PPP project in relation to the North Link Expressway of Jiaxing Qiantang River Tunnel,
responsible for the construction and management of the project and the operation and
maintenance upon completion of construction.
9.
On October 31, 2017, the Company announced its 2017 third quarterly results.
6
Review of Major Corporate Events 10. On December 18, 2017, the Company held its Extraordinary General Meeting to approve,
among others, the resolutions regarding the payment of the 2017 interim dividend of Rmb0.06
per share and the inclusion of party construction into the articles of association. In addition,
upon listing of Zheshang Securities, the amount representing 10% of the total issued shares
of the listed company held by Shangsan Co will be transferred to National Social Security
Fund and Communications Group, the state-owned shareholder of the Company, shall
compensate Rmb0.0328 per share to the H shareholders of the Company. The compensation
was paid to the H shareholders of the Company together with the interim dividend on January
19, 2018.
11. On December 27, 2017, the Company entered into the Agreement on Outsourced Operation
and Management of S45 Yiwu-Dongyang Expressway with Yiwu Transportation Investment
and Construction Group Co., Ltd. with respect to the outsourced management of expressway
from Yiwu to Dongyang with a length of approximately 21.6 km, marking the first outsourcing
project regarding the management of expressway of the Company.
12. On February 8, 2018, the Company and Zhejiang Hongtu Transportation Construction
Company Limited obtained the notice of bid award from Deqing Transportation Bureau,
responsible for the PPP project in relation to the construction of bridges, tunnels and public
service stations in Deqing.
7
Length in
Kilometers
Number of
Lanes
Number
of Toll
Stations
Number
of Service
Areas
Start of
Operation
Remaining
Years of
Operation
Expressway
Shanghai-Hangzhou Expressway
– Jiaxing Section
– Yuhang Section
– Hangzhou Section
Hangzhou-Ningbo Expressway
– Hangzhou to Hongken section
– Hongken to Duantang section
– Duantang to Dazhujia section
Percentage
of
Ownership
99.9995%
51%
100%
100%
100%
100%
Shangsan Expressway
73.625%
88.1
11.1
3.4
16.0
124.0
5.0
142.0
Ningbo-Jinhua Expressway
– Jinhua Section
Hanghui Expressway
– Changyu Section
– Changhang Section
Huihang Expressway
100%
69.7
88.674%
88.674%
100%
36.7
85.6
81.6
8
6
4
4
8
4
4
4
4
4
4
7
1
2
1
9
1
11
7
5
8
5
2
0
0
0
2
0
3
1
1
1
2
1998
1995-1998
1995
1992
1995
1996
2000
2005
2004
2006
2004
11
11
11
10
10
10
13
13
12
14
16
Current toll rates on the expressways under the group
1. passenger vehicle classification and toll rates
Vehicle
Class
Classification Standard
Entrance Fee
(Rmb/vehicle)
Mileage Fee
(Rmb/vehicle/km)
Huihang
Expressway
Mileage fee
(No entrance fee)
Zhejiang Expressway
1
2
3
4
5
Passenger vehicle with up to 7 seats
Truck with tonnage of 2 tons or below
Passenger vehicle with seats 8 to 19
Truck with tonnage of above 2 tons and up to 5 tons
Passenger vehicle with seats 20 to 39
Truck with tonnage of above 5 tons and up to 10 tons
Passenger vehicle with seats above 40
Truck with tonnage above 10 tons and up to 15 tons
Truck with tonnage above 15 tons
5
5
5
10
10
15
15
15
20
0.45
0.45
0.45
0.80
0.80
1.20
1.20
1.40
1.60
0.45
0.45
0.80
0.80
1.10
1.10
1.30
1.30
1.50
8
Particulars of Major Road Projects 2. toll rates on goods vehicles on the Zhejiang expressway
Load
Toll standards
Up to 5 tons
Rmb0.09/ton per km
Legally loaded
Above 5 tons and up to 15 tons
Rmb0.09/ton per km x 1.5 is reduced in a linear manner to Rmb0.09/ton per km
Above 15 tons and up to 30 tons
Rmb0.09/ton per km is reduced in a linear manner to Rmb0.06/ton per km
Over 30 tons
Based on 30 tons calculation
Overloaded below 10%
Calculation based on the basic fee standard for legally loaded
Overloaded up to 30%
The overloaded portion over 10% is calculated based on Rmb0.09/ton
Overloaded
vehicle
Overloaded above 30%
and up to 50%
Overloaded above
50% and up to 100%
Overloaded over 100%
per km x 1.2; the remaining portion is calculated based on the fee standard of
“Overloaded below 10%”
The legally loaded portion and the overloaded portion up to 30% is calculated
based on the fee standard of “Overloaded up to 30%”; the remaining portion is
calculated based on Rmb0.09/ton per km x 2
The legally loaded portion and the overloaded portion up to 30% is calculated
based on the fee standard of “Overloaded up to 30%”; the remaining portion is
calculated based on Rmb0.09/ton per km x 3
The legally loaded portion and the overloaded portion up to 30% is calculated
based on the fee standard of “Overloaded up to 30%”; the remaining portion is
calculated based on Rmb0.09/ton per km x 4
3. toll rates on goods vehicles on the huihang expressway
Load
Toll standards
Up to 10 tons
Rmb0.09/ton per km
Legally loaded
Above 10 tons and
up to 40 tons
Over 40 tons
Rmb0.09/ton per km is reduced in a linear manner to
Rmb0.05/ton per km
Rmb0.05/ton per km
Overloaded
vehicle
Overloaded up to 30%
Calculation based on the basic fee standard for legally
loaded
Overloaded above 30% and
Calculation based on the fee standard X 3 is increased in
up to 100%
a linear manner to fee standard X 6
Overloaded over 100%
Calculation based on the fee standard X 6
* The mileage fee for Class 1 vehicle on the Shangsan Expressway, Jinhua section of Ningbo-Jinhua Expressway and
Hanghui Expressway is Rmb0.40/vehicle/km. The toll rates for other passenger vehicles and trucks are the same as
those for the Shanghai-Hangzhou-Ningbo Expressway.
9
results
Continuing operations:
Revenue
Profit Before Tax
Income Tax Expense
Profit for the year from
continuing operations
Discontinued operations:
Profit for the year from
discontinued operations
Profit for the year (from continuing
and discontinued operations)
attributable to:
Owners of the Company
Non-controlling interests
Basic Earnings Per Share (EPS)
(From continuing and
discontinued operations)
Year ended December 31,
2013
Rmb’000
(Restated)
2014
Rmb’000
(Restated)
2015
Rmb’000
(Restated)
2016
Rmb’000
2017
Rmb’000
6,055,104
2,733,424
(720,632)
2,012,792
7,171,810
3,564,510
(882,625)
2,681,885
10,724,781
5,365,724
(1,396,774)
3,968,950
9,735,347
4,888,585
(1,161,570)
3,727,015
9,626,340
5,183,301
(1,192,269)
3,991,032
70,964
64,087
60,830
81,594
–
1,801,687
282,069
41.48 cents
2,264,994
480,978
52.15 cents
2,989,680
1,040,100
68.84 cents
3,037,405
771,204
69.94 cents
3,202,130
788,902
73.73 cents
return on equity (roe)
2013
2014
2015
2016
2017
ROE
11.2%
13.3%
17.9%
16.6%
15.5%
segMental reVenue / 2017
(continuing operations)
segMental net proFit / 2017
1.5%
Other Business
4.8%
Other Business
26.2%
Securities
Business
Toll Road
Business
62.2%
Toll Road
Business
69.0%
36.3%
Securities
Business
10
Financial and Operating Highlights 12,000
10,000
8,000
6,000
4,000
2,000
0
5,000
4,000
3,000
2,000
1,000
0
80
70
60
50
40
30
20
10
0
20
15
10
5
0
revenue / rmb Million (Continuing operations)
10,725
9,735
9,626
6,055
7,172
2013
(Restated)
2014
(Restated)
2015
(Restated)
2016
2017
net profit / rmb Million (Continuing and discontinued operations)
4,030
3,809
3,991
2,084
2,746
2013
2014
2015
2016
2017
Basic eps / rmb Cents (Continuing and discontinued operations)
68.84
69.94
73.73
41.48
52.15
2013
2014
2015
2016
2017
roe / %
17.9
16.6
15.5
11.2
13.3
2013
2014
2015
2016
2017
11
ZHAN Xiaozhang
Chairman
12
12
Chairman’s Statement Dear Shareholders,
It is my pleasure to present the annual results of Zhejiang Expressway (“ZJE” or “the Company”,
collectively referred to as “the Group” with subsidiaries) for the year 2017 on behalf of the Board of
Directors.
In 2017, China’s economy grew 6.9%, which was the first year-over-year improvement in the last
seven years and beat the official target of “around 6.5%.” The encouraging performance was
driven by growth in both the old and new economic sectors. Foreign trade has been recovering,
consumer demand remained steady, and a variety of high-tech sectors saw strong growth. Against
this backdrop, the economic transformation of Zhejiang Province continued as the Province’s GDP
reached a record-high of over RMB5 trillion, up 7.8% over the last year.
In line with the macro trend, the Company’s operating results in 2017 saw steady growth, with
net profit hitting a new high. In particular, toll revenue in the Company’s core toll-road operations
business rose 13.4% to RMB5.99 billion, contributing 62.2% of the Group’s overall revenue.
Our strong toll road operating performance was mainly driven by Zhejiang Province’s favorable
economic development momentum, and further boosted by our efforts to improve service quality
and control costs, in particular by implementing a variety of new technologies, including the ETC
(Electronic Toll Collection) lane for trucks and mobile payment. We are also exploring more
technology solutions in early 2018 to build a solid foundation as we look to upgrade our technology
to a comprehensive smart logistics system that will give us the opportunity to take advantage of big
data. We believe advanced technologies will not only help us remain competitive by lowering costs
and enhancing efficiency, but will also enable us to become a crucial player in the smart mobility
value chain.
1313
Chairman’s Statement On the financial side of our business, we achieved a major milestone when our subsidiary Zheshang
Securities successfully listed on the Shanghai Stock Exchange on June 26, 2017. The period since
the listing has been especially challenging due to a decline in commission rates in the market, which
caused a decline in revenue and net profit for Zheshang Securities. Its investment banking business
segment, however, continued to progress steadily. Meanwhile, our minority investments in the
financial sector continued to yield positive results. Taiping Science and Technology Insurance Co.,
Ltd. successfully launched its business in January 2018, and Yangtze United Financial Leasing Co.,
Ltd. grew rapidly and contributed Rmb265 million in net profit in 2017.
Another highlight of the Company is the financing breakthrough. In addition to the IPO of Zheshang
Securities which allows us to have A+H equity platforms, we raised Euro365 million in April
by issuing zero coupon convertible bonds on the offshore market, the first Euro-denominated
convertible bonds among Chinese issuers. We have demonstrated strong financing capability on
both domestic and offshore markets, which will facilitate our business expansion going forward.
2017 also marked the Company’s 20th anniversary since its public listing on the Hong Kong
Stock Exchange. Back in 1997, when we filed for an IPO, we were only operating the Shanghai-
Hangzhou-Ningbo Expressway. 20 years later, as of 31 December 2017, we have become a
diversified holdings company that not only has five major expressways under operation within and
outside of Zhejiang Province, but also controls the A-share listed Zheshang Securities and holds a
range of minority stakes in a number of financial-related businesses, with the aiming of becoming an
international investment holdings company. Over the past two decades, the Company’s total assets
increased by over 6 times from RMB11.5 billion in 1997 to RMB73.7 billion by the end of 2017,
and its net assets increased by over 4 times from RMB8.2 billion to RMB29.2 billion, making it the
largest subsidiary under the parent Zhejiang Communications Investment Group Co., Ltd. in terms
of asset scale.
14
Chairman’s Statement The Company strives to create shareholder value and improve shareholder return. Throughout
the past 20 years, despite cyclical fluctuations in the global and Chinese economy, the Company
has delivered a stable dividend policy and distributed a total of nearly RMB20 billion in dividends
to shareholders. We remain in continuous dialogue with shareholders and potential investors and
uphold a policy of open communication and fair disclosure.
Looking ahead to 2018, we will remain focused on our core toll road business and aim to become
“the leading toll-road operator in China and a top-notch operator globally”. To create further
synergies, we will explore investment opportunities in the infrastructure sector. For Zheshang
Securities, we will strengthen its risk management capabilities and expand into more new areas.
We will continue to explore suitable investment and development projects via different channels,
thereby growing its management capability to operate diversified businesses, with the goal of
achieving high-quality and sustainable development.
On behalf of the Board, I would like to thank everyone who has supported the Group, including
our investors, shareholders, business partners, customers, management team and employees. As
we look ahead to new achievements, we will work hard to safeguard the overall interests of the
Company and add value for shareholders.
Zhan xiaozhang
Chairman
March 16, 2018
15
1616
Management Discussion and AnalysisCelebrating 20th listing anniversary with 2 decades of success2017 marked the Company’s 20th anniversary since its public listing on the Hong Kong Stock Exchange. Over the past 20 years, the Company has become a diversified investment holdings company that not only operate five major expressways within and outside of Zhejiang Province, but also controls the A-share listed Zheshang Securities and holds a range of minority stakes in a number of financial-related businesses. The Company’s total assets increased by 6 times to RMB73.7 billion over the past two decades, making it the largest subsidiary under the parent Zhejiang Communications Investment Group Co., Ltd. Management
discussion and
analysis
Business reView
The global economy recovered substantially in 2017, continuing with the revival trend. China’s
economy steadily expanded, with a 6.9% increase in national GDP during the Period compared
with last year. During the Period, Zhejiang Province’s economy benefited from a stable increase
in services, manufacturing, and import and export trade as well as strong consumer demand. In
2017, Zhejiang Province’s GDP grew by 7.8% year-on-year, 0.9 percentage points higher than the
national rate.
During the Period, revenue from the Group’s overall operations decreased 1.1% year-on-year. Total
revenue reached Rmb9,626.34 million, of which Rmb5,986.25 million was generated from the five
major expressways operated by the Group, representing an increase of 13.4% year-on-year and
62.2% of the total revenue, and Rmb3,491.25 million was from the securities business, representing
a decrease of 16.4% year-on-year and 36.3% of the total revenue. A breakdown of the Group’s
revenue for the Period is set out below:
1717
LUO Jianhu
director and general Manager
1818
Management Discussion and Analysis 2017
2016
Rmb’000
Rmb’000
% Change
3,772,880
1,244,280
362,345
477,656
129,088
3,342,577
1,112,297
335,090
446,392
42,992
2,088,310
1,402,940
2,664,959
1,510,281
47,865
100,976
196,928
83,831
12.9%
11.9%
8.1%
7.0%
200.3%
–21.6%
–7.1%
–75.7%
20.5%
9,626,340
9,735,347
–1.1%
Toll revenue
Shanghai-Hangzhou-Ningbo Expressway
Shangsan Expressway
Jinhua section, Ningbo-Jinhua Expressway
Hanghui Expressway
Huihang Expressway
Securities business revenue
Commission and fee income
Interest income
Other operation revenue
Property sales
Hotel operation
Total revenue
toll road operations
Benefiting from Zhejiang Province’s favorable economic development momentum, during the
Period, traffic volume on the Group’s expressways registered satisfactory organic growth. During
the Period, the organic traffic volume growth rates for the Group’s five expressways, namely the
Shanghai-Hangzhou-Ningbo Expressway, the Shangsan Expressway, the Jinhua Section of the
Ningbo-Jinhua Expressway, the Hanghui Expressway, and Huihang Expressway, were 9.8%,
10.8%, 9.6%, 9.8% and 7.4%, respectively, with the varied rates of growth due to the different
regions where the five expressways are located.
During the Period, driven by a number of positive factors, traffic volume on the Company’s
expressways registered steady growth. Since the G20 Hangzhou Summit was held in 2016, the
“post-G20 effect” has positively impacted the region, leading to rapid development of tourism in
Zhejiang Province and also further development of the Internet economy as well as transformation
and upgrade of the real economy, leading to different sections of the expressways having recorded
varied growth in traffic volume and toll revenue. In addition, the Ministry of Communication and
Transport started nationwide special rectification measures following the release of “Regulations
on Overloaded Trucks on Roadways” on September 21, 2016. As a result, the increase of truck
traffic on the expressways operated by the Company were approximately 5 percentage points
higher than that of passenger vehicles. In addition, starting from November 25, 2016, trucks were
able to resume and use the Second Bridge over Qiantang River along the Shanghai-Hangzhou-
Ningbo Expressway, which is also conducive to the growth of traffic volume between Qiaosi
Interchange and Hongken Interchange of the Shanghai-Hangzhou-Ningbo Expressway, a section of
approximately 23.7 kilometers.
19
2020
Management Discussion and Analysisupgrading the Core expressway Business with smart technologiesThe Company is one of the first operators to adapt smart technologies into its core expressway business, including the deployment of smart toll station on a trial basis, the expansion of ETC lanes and the utilization of a mobile payment processing system. These initiatives help the Company reduce operating costs and improve management efficiency.In the future, Internet, big data and artificial intelligence are expected to be integrated with the transportation industry, which will gradually change the current industry operating model. The Company will proactively adapt to the smart transportation trend and enhance the competitiveness of its core expressway business by taking advantage of various advanced technologies. During the Period, the opening of neighboring new roadways caused certain traffic volume diversion
for some expressways operated by the Group. On December 1, 2016, the Hangzhou-Xin’anjiang-
Jingdezhen Expressway was opened, and during the Period this expressway continued to cause
various degrees of diversion impact on traffic volume along the Hanghui Expressway and the
Huihang Expressway. In addition, the Dongyang-Yiwu Provincial Highway was opened to traffic on
June 30, 2017, leading to a decline in short-distance traffic volume on the Jinhua Section of the
Ningbo-Jinhua Expressway.
During the Period, the average daily traffic volume in full-trip equivalents along the Group’s
Shanghai-Hangzhou-Ningbo Expressway was 57,275, representing an increase of 13.2% year-
on-year. In particular, the average daily traffic volume in full trip equivalents along the Shanghai-
Hangzhou section of the Shanghai-Hangzhou-Ningbo Expressway was 59,814, representing
an increase of 22.1% year-on-year, and that along the Hangzhou-Ningbo Section was 55,461,
representing an increase of 10.1% year-on-year. Average daily traffic volume in full-trip equivalents
along the Shangsan Expressway was 30,223, representing an increase of 11.6% year-on-year.
Average daily traffic volume in full-trip equivalents along the Jinhua Section of the Ningbo-Jinhua
Expressway was 19,708, representing an increase of 9.9% year-on-year. Average daily traffic
volume in full-trip equivalents along the Hanghui Expressway was 17,500 representing an increase
of 8.2% year-on-year. Average daily traffic volume in full-trip equivalents along the Huihang
Expressway was 7,240, representing a decrease of 2.3% year-on-year.
During the Period, total toll revenue from the 248km Shanghai-Hangzhou-Ningbo Expressway, the
142km Shangsan Expressway, the 70km Jinhua Section of the Ningbo-Jinhua Expressway, the
122km Hanghui Expressway and the 82km Huihang Expressway was Rmb5,986.25 million. Among
which, toll revenue from the Shanghai-Hangzhou-Ningbo Expressway was Rmb3,772.88 million,
representing an increase of 12.9% year-on-year; toll revenue from the Shangsan Expressway
was Rmb1,244.28 million, representing an increase of 11.9% year-on-year; toll revenue from
the Jinhua Section of the Ningbo-Jinhua Expressway was Rmb362.35 million, representing an
increase of 8.1% year-on-year; toll revenue from the Hanghui Expressway was Rmb477.66 million,
representing an increase of 7.0% year-on-year; and toll revenue from the Huihang Expressway was
Rmb129.09 million.
securities Business
During the Period, domestic market conditions remained lackluster due to volatility, and trading
volume on the Shanghai and Shenzhen stock markets decreased 11.7% year-on-year in aggregate.
Though revenue from Zheshang Securities’ investment banking business experienced growth, its
other business segments including securities brokerage, margin financing and securities lending
recorded varied levels of revenue decreases year-on-year.
21
2222
Management Discussion and AnalysisOn June 26, 2017, Zheshang Securities Co., Ltd., a subsidiary of the Company, was listed on the Shanghai Stock Exchange under the short name “Zheshang Securities” with the stock code “601878”. The IPO offering price was Rmb8.45 per share and the net proceeds raised was Rmb2,757 million.The listing has created favorable conditions for market financing, market capitalization management and business development. Zheshang Securities continues to strengthen its internal control management and optimize its business structure, stepping up business expansion and bolstering its high-quality project pipeline to overcome the unfavorable operational impact brought about by market conditions.Zheshang securities listed on shanghai stock exchange During the Period, Zheshang Securities recorded total revenue of Rmb3,491.25 million, a decrease
of 16.4% year-on-year. Of which, commission and fee income declined 21.6% year-on-year to
Rmb2,088.31 million, and interest income from the securities business was Rmb1,402.94 million,
representing a decrease of 7.1% year-on-year. In addition, during the Period, securities investment
gains of Zheshang Securities included in the consolidated statement of profit or loss and other
comprehensive income of the Group was Rmb778.80 million, representing an increase of 279.4%
year-on-year (2016: securities investment gains of Rmb205.28 million).
Zheshang Securities was listed and issued new shares (A-shares) on the Shanghai Stock
Exchange on June 26, 2017. The listing has created favorable conditions for market financing,
market capitalization management and business development. Zheshang Securities continued to
strengthen its internal control management, optimize its business structure, stepping up business
expansion, and bolstering its high-quality project pipeline to overcome the unfavorable operational
impact brought about by the market conditions.
other Business operations
Other business income was mainly derived from hotel operations and sales of ancillary apartments,
namely the Qiyu Apartments.
Grand New Century Hotel, owned by Zhejiang Yuhang Expressway Co., Ltd. (a 51% owned
subsidiary of the Company), realized revenue of Rmb100.98 million for the Period. Qiyu Apartments
during the Period realized sales revenue of Rmb47.87 million.
long-term investments
Zhejiang Shaoxing Shengxin Expressway Co., Ltd. (“Shengxin Co”, a 50% owned joint venture of
the Company) operates the 73.4km Shaoxing Section of the Ningbo-Jinhua Expressway. During the
Period, the average daily traffic volume in full-trip equivalents was 19,211, representing an increase
of 13.2% year-on-year. Toll revenue during the Period was Rmb399.34 million. During the Period,
the joint venture reported a net profit of Rmb35.34 million (2016: net profit of Rmb19.59 million).
During the Period, Zhejiang Communications Investment Group Finance Co., Ltd. (a 35% owned
associate of the Company), derived income mainly from interest, fees and commissions for
providing financial services, including arranging loans and receiving deposits, for the subsidiaries of
Zhejiang Communications Investment Group Co., Ltd., the controlling shareholder of the Company.
During the Period, the associate company realized a net profit of Rmb321.40 million (2016: net profit
of Rmb122.57 million).
23
Zheshang securities listed on shanghai stock exchange During the Period, Yangtze United Financial Leasing Co., Ltd. (a 13% owned associate of the
Company), was involved in the finance leasing business, transferring and receiving financial leasing
assets, fixed-income securities investment businesses, and other businesses approved by the
China Banking Regulatory Commission. During the Period, the associate company realized a net
profit of Rmb265.25 million (2016: net profit of Rmb134.15 million).
FinanCial analysis
The Group adopts a prudent financial policy with an aim to provide shareholders of the Company
with sound returns over the long term.
During the Period, profit attributable to owners of the Company was approximately Rmb3,202.13
million, representing an increase of 5.4% year-on-year, basic earnings per share for the Company
from continuing and discontinued operations was Rmb73.73 cents, representing an increase of
5.4%, diluted earnings per share for the Company from continuing and discontinued operations
was Rmb71.36 cents, representing an increase of 2.0%, and return on owners’ equity was 15.5%,
representing a decline of 6.6% year-on-year.
liquidity and financial resources
As at December 31, 2017, current assets of the Group amounted to Rmb53,952.25 million
in aggregate (December 31, 2016: Rmb52,158.22 million), of which bank balances, clearing
settlement fund, deposits and cash accounted for 10.4% (December 31, 2016: 14.1%), bank
balances and clearing settlement fund held on behalf of customers accounted for 27.9% (December
31, 2016: 38.5%), held for trading investments accounted for 23.3% (December 31, 2016: 15.6%)
and loans to customers arising from margin financing business accounted for 14.6% (December 31,
2016: 15.2%). The current ratio (current assets over current liabilities) of the Group as at December
31, 2017 was 1.7 (December 31, 2016: 1.2). Excluding the effect of the customer deposits arising
from the securities business, the resultant current ratio of the Group (current assets less bank
balances and clearing settlement fund held on behalf of customers over current liabilities less
balance of accounts payable to customers arising from securities business) was 2.2 (December 31,
2016: 1.4).
The amount of held for trading investments of the Group as at December 31, 2017 was
Rmb12,568.69 million (December 31, 2016: Rmb8,144.13 million), of which 97.0% was invested in
bonds, 0.6% was invested in stocks, and the rest was invested in open-end equity funds.
During the Period, net cash used in the Group’s operating activities amounted to Rmb829.67 million.
The currency mix in which cash and cash equivalents are held has not substantially changed as
compared to the same period last year.
The Directors do not expect the Company to experience any problems with liquidity and financial
resources in the foreseeable future.
24
Management Discussion and Analysis Cash and cash equivalents
Time deposits
Held for trading investments
Available-for-sale investments
Total
Borrowings and solvency
As at December 31,
2017
Rmb’000
2016
Rmb’000
5,588,814
20,000
12,568,694
1,800,835
7,198,745
165,000
8,144,132
1,342,920
19,978,343
16,850,797
As at December 31, 2017, total liabilities of the Group amounted to Rmb 44,446.17 million
(December 31, 2016: Rmb49,585.51 million), of which 1.1% was bank and other borrowings, 1.7%
was short-term financing note payable, 22.8% was bonds payable, 6.1% was convertible bond,
23.7% was financial assets sold under repurchase agreements and 33.6% was accounts payable to
customers arising from securities business.
As at December 31, 2017, total interest-bearing borrowings of the Group amounted to
Rmb14,113.45 million, representing a decrease of 15.2% compared to that as at December
31, 2016. The borrowings comprised outstanding balances of a domestic financial institution of
Rmb420.00 million, borrowings from a domestic institution of Rmb60.00 million, subordinated bonds
of Rmb5.95 billion, corporate bonds of Rmb3.40 billion, beneficial certificates of Rmb1,562.80
million, and convertible bond denominated in Euro and equivalents to Rmb2,720.65 million. Of the
interest-bearing borrowings, 82.4% was not payable within one year.
As at December 31, 2017, the annual floating interest rate of the Group’s borrowings from a
domestic financial institution was 4.2195%. The annual fixed interest rate from a domestic institution
was 3.0%. Beneficial certificates amounted Rmb1.80 million with annual floating rate at 2.0%, and
the beneficial certificates amounted Rmb1,561.00 million with annual fixed rates between 3.7% and
5.3%. The annual interest rates for subordinated bonds were fixed at rates between 3.63% and
6.3%. The annual interest rates for corporate bonds were fixed at 3.08% and 4.9%. The annual
coupon rate for convertible bond was nil. While the annual interest rate for accounts payable to
customers arising from the securities business was fixed at 0.35%.
25
Maturity Profile
Gross
amount
Within
1 year
2-5 years
inclusive
Beyond
5 years
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Floating rates
Borrowings from a domestic
420,000
420,000
financial institution
Beneficial certificates
Fixed rates
1,800
1,800
–
–
Borrowings from a domestic institution
Beneficial certificates
Subordinated bonds
Corporate bonds
Convertible bond
60,000
1,561,000
5,950,000
3,400,000
2,720,654
–
1,561,000
500,000
–
–
60,000
–
5,450,000
3,400,000
2,720,654
Total as at December 31, 2017
14,113,454
2,482,800
11,630,654
Total as at December 31, 2016
16,644,735
9,944,735
6,700,000
–
–
–
–
–
–
–
–
–
Total interest expenses and profit before interest and tax for the Period amounted to Rmb611.75
million and Rmb5,795.05 million, respectively. The interest cover ratio (profit before interest and tax
over interest expenses) stood at 9.5 (2016: 8.4) times.
Profit before tax and interest
Interest expenses
Interest cover ratio (times)
2017
Rmb’000
2016
Rmb’000
5,795,048
611,747
9.5
5,668,523
671,387
8.4
As at December 31, 2017, the asset-liability ratio (total liabilities over total assets) of the Group
was 60.3% (December 31, 2016: 67.2%). Excluding the effect of customer deposits arising from
the securities business, the resultant asset-liability ratio (total liabilities less balance of accounts
payable to customers arising from securities business over total assets less bank balances and
clearing settlement fund held on behalf of customers) of the Group was 50.3% (December 31, 2016:
55.0%).
26
Management Discussion and Analysis Capital structure
As at December 31, 2017, the Group had Rmb29,204.35 million in total equity, Rmb39,148.79
million in fixed-rate liabilities, Rmb421.80 million in floating-rate liabilities, and Rmb4,875.58 million
in interest-free liabilities, representing 39.7%, 53.2%, 0.6% and 6.5% of the Group’s total capital,
respectively. The gearing ratio, which is computed by dividing the total liabilities less accounts
payable to customers arising from the securities business by total equity, was 101.1% as at
December 31, 2017 (December 31, 2016: 122.1%).
Total equity
Fixed rate liabilities
Floating rate liabilities
Interest-free liabilities
As at December 31, 2017
As at December 31, 2016
Rmb’000
%
Rmb’000
%
29,204,351
39,148,787
421,800
4,875,582
39.7% 24,175,927
53.2% 44,473,878
431,035
4,680,592
0.6%
6.5%
32.8%
60.3%
0.6%
6.3%
Total
73,650,520
100.0% 73,761,432
100.0%
Long-term interest-bearing liabilities
Gearing ratio 1 (note)
Gearing ratio 2 (note)
Asset-liabilities ratio1 (note)
Asset-liabilities ratio 2 (note)
11,630,654
6,700,000
15.8%
101.1%
39.8%
60.3%
50.3%
9.1%
122.1%
27.7%
67.2%
55.0%
Note: Gearing ratio 1 represents the total liabilities less balance of accounts payable to customers arising from securities
business to the total equity; Gearing ratio 2 represents the total amount of the long-term interest-bearing liabilities
to the total equity; Asset-liabilities ratio 1 represents total liabilities to total assets; Asset-liabilities ratio 2 represents
total liabilities less balance of accounts payable to customers arising from securities business to total assets less
bank balances and clearing settlement fund held on behalf of customers.
27
Capital expenditure commitments and utilization
During the Period, capital expenditure of the Group totaled Rmb436.31 million. Amongst the total
capital expenditure, Rmb218.91 million was incurred for acquiring equity investments, Rmb51.06
million was incurred for acquisition and construction of properties, and Rmb166.34 million was
incurred for purchase and construction of equipment and facilities.
As at December 31, 2017, the capital expenditure committed by the Group totaled Rmb812.14
million. Amongst the total capital expenditures committed by the Group, Rmb360.00 million will
be used for acquiring equity investments, Rmb162.02 million will be used for acquisition and
construction of properties and Rmb290.12 million for acquisition and construction of equipment and
facilities.
The Group will consider financing the above-mentioned capital expenditure commitments with
internally generated cash flow first and then will comprehensively consider using debt financing and
equity financing to meet any shortfalls.
Contingent liabilities and pledge of assets
Pursuant to the board resolution of the Company dated November 16, 2012, the Company and
Shaoxing Communications Investment Group Co., Ltd. (the other joint venture partner that holds
50% equity interest in Shengxin Co) provided Shengxin Co with joint guarantee for its bank loans
of Rmb2.2 billion, in accordance with their proportionate equity interest in Shengxin Co. During
the Period, Rmb209.00 million of the bank loans had been repaid. As at December 31, 2017, the
remaining bank loan balance is Rmb1,683.00 million.
Except for the above, as at December 31, 2017, the Group did not have any other contingent
liabilities, pledge of assets or guarantees.
28
Management Discussion and Analysis Foreign exchange exposure
During the Period, save for (i) dividend payments to the holders of H shares in Hong Kong dollars,
(ii) borrowing HK$432.53 million on June 8, 2016 and repayment on the borrowing on June 8,
2017, and (iii) Zheshang International Financial Holding Co., Limited. (a wholly owned subsidiary
of Zheshang Securities) operating in Hong Kong, (iv) issuance of the zero coupon convertible bond
in an aggregate principal amount of Euro 365.00 million in Hong Kong capital market, the Group’s
principal operations were transacted and booked in Renminbi.
During the Period, the Group completed one-year HK dollar forwards of equivalent amount to hedge
the foreign exchange risk derived from the Hong Kong dollar borrowing, which was purchased in
2016. Except for the above, the Group has not used any other financial instruments for hedging
purpose during the Period.
outlooK
Looking ahead to 2018, the global economy continues to recover gradually, but still faces multiple
uncertainties. Under the Chinese government’s prudent macroeconomic policy, the domestic
economy is expected to maintain stable growth as it transitions from a high-speed to a high-quality
development stage. Zhejiang Province will focus on the real economy as well as growing the new
economy with the digital sector as the core component, and accelerating economic restructuring,
transformation and upgrading. The performance of the overall economy is expected to be steady
and positive, which will provide a stable external environment for the Company’s development. The
overall traffic volume of the expressways operated by the Company is expected to maintain steady
growth in 2018.
The Company will continue to promote the construction of electronic toll collection (ETC) lanes, fully
promote mobile payment at all toll stations and set up self-service payment lanes on a trial basis to
improve the efficiency of toll collection systems. The Company will continue to apply technological
tools to attract more vehicles and improve its service standards in multiple aspects so as to enhance
service quality and customer satisfaction. The Company will also increase the usage of big data
applications, establish a vehicle confidence system, improve expressway operation capacity
under the Group to assure safe and smooth traffic flow, with an aim to establish the Company’s
brand recognition in the industry. By fully leveraging advantages in expressway operations and
management, the Group will seek to export its management capabilities in the expressway sector
using market principles.
29
3030
Management Discussion and AnalysisAchieving high-quality and sustainable development under the new economic environmentThe Company will continue to leverage on its development advantages, expand and enhance the core expressway business, and strengthen its securities business. The management will continue to monitor government policies and the external environment to appropriately adjust the Company’s operational strategy. With a focus on effective risk control, the Company will continue to explore suitable investment and development projects via different channels, thereby growing its management capability to operate diversified businesses, with the goal of achieving high-quality and sustainable development. As the government continues to actively promote the healthy development of the multi-tiered capital
market and the China Securities Regulatory Commission gradually improves the supervision system
of the business chain and facilitates the enhancement of capital market services, these measures
will bring new opportunities and challenges to the securities business of the Group. In order to
address market and industry challenges and promote the sustainable and healthy development
of all its businesses, Zheshang Securities will transform and upgrade its traditional businesses,
actively grow innovative businesses, optimize and adjust its business structure and continuously
improve profitability and competitiveness.
In order to adapt to the new economic transformation and developments in 2018, the Company will
leverage on its development advantages, expand and enhance the core expressway business, and
strengthen its securities business. The management will continue to monitor government policies
and the external environment to appropriately adjust the Company’s operational strategy. With
a focus on effective risk control, the Company will continue to explore suitable investment and
development projects via different channels, thereby growing its management capability to operate
diversified businesses, with the goal of achieving high-quality and sustainable development.
huMan resourCes
During the Period, the Company actively revamped its human resource management, enhanced
its remuneration and performance policy, and prompted the increase in overall payment of
remuneration to be linked to the operating performance of Company and the productivity of
employees. As at December 31, 2017, there were 6,871 employees within the Group, amongst
whom 1,453 worked in the managerial, administrative and technical positions, while 5,418 worked
in fields such as toll collection, maintenance, service areas, securities and futures business outlets.
31
toll road Business risKs
economic environment
As the global economy continues to struggle for recovery, China’s economy is moving into a “new
normal” as it downshifts from rapid growth to more moderate levels of growth. The overall economy
is still subject to downside pressure to a certain extent. As the expressway toll road business is
closely related to the macroeconomy, it is subject to the macroeconomic performance. Growth in the
traffic volume and toll revenue of the Group’s expressways is expected to remain uncertain, creating
uncertainties for the operations, financial conditions and operating results of the Group.
roads Competition
At present, since the commencement of service of Hangxinjing Expressway from Kaihua section
to Jiande section in December 2016, there will be continuing considerable diversion impact on
traffic volume of Hanghui Expressway and Huihang Expressway of the Group. Accordingly, we
cannot be assured as to whether traffic volume to be generated on the Group’s expressways will be
maintained at the same levels as before or will increase in the future, or whether or not the operating
results of the Group will be negatively affected.
toll policy
With the implementation of the toll waiver policy on small passenger vehicles on key festivals and
holidays by the PRC government on September 30, 2012, the expressway operators who charge for
toll are negatively affected. In addition, due to the introduction of a special project by five ministries
and commissions for the rectification of the toll road policy in Zhejiang province, a number of new
policies focusing on adjusting the toll policy of expressways within the province such as “Provisions
on the Administration of the Running of Transport Vehicles with Out-of-gauge Goods on the Road”
(《超限運輸車輛行駛公路處理規定》) were successively issued. At the same time, as the consultation
paper “Regulation on Administration of Toll Roads” (《高速公路收費管理條例》) 2015 has not been
officially promulgated at present, despite that we expect the possibility of further significant changes
in the policies of the expressway industry in the near term is minimal, we cannot be assured that
they will not have any adverse effects on the toll revenue of the Group.
32
Principal Risks and Uncertainties seCurities Business risKs
Market Fluctuations
The securities business is highly susceptible to market fluctuations and may experience periods of
high volatility accompanied by reduced liquidity. It may be materially affected by economic and other
factors such as the global market conditions; the availability and cost of capital; the liquidity of the
global markets; the level and volatility of stock prices, commodity prices and interest rates; currency
values and other market indices; inflation; natural disasters; acts of war or terrorism; as well as
investor sentiment and confidence in the financial markets. There is no assurance as to whether our
securities business will be adversely affected by fluctuations in the market, or whether our securities
business will continue to contribute to our overall profit margin.
regulation of the securities Business
We are subject to extensive regulations in the PRC that govern how we conduct our securities
business, and we are subject to risks of intervention by the PRC regulatory authorities. We could
be fined, prohibited from engaging in some of our business activities or subject to limitations or
conditions on our business activities, among other things. Significant regulatory actions against
us could have material adverse impacts on our financial position, cause us significant reputational
harm, or harm our business prospects. New laws, regulations or changes in the enforcement of
existing laws or regulations applicable to our clients may also adversely affect our business.
FinanCial risKs
For financial risks and uncertainties of the Group, please see notes 4, 51 and 52 to the Consolidated
Financial Statements.
33
stateMent oF responsiBility FroM the direCtors with respeCt
to the annual report and the CoMpany’s aCCounts
The Directors of the Company, whose names and functions are listed on pages 45 to 52, duly
confirm that to the best of their knowledge:
–
the consolidated financial statements prepared and subject to disclosure under the Hong
Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public
Accountants give a true and fair view of the assets, liabilities, financial position and profit of
the Group, and cover the enterprises that have been consolidated into the Company; and
–
the “Management Discussion and Analysis” section included in this annual report includes
a fair review of the development and performance of the business and the position of the
Group, covers the enterprises that have been consolidated into the Company and describes
the principal risks and uncertainties faced by the Group.
From the beginning of year 2017 up to now, there has been no occurrence of significant events that
would have a material impact on the normal operation of the Group.
By Order of the Board
tony Zheng
Company Secretary
Hangzhou, Zhejiang Province, the PRC
March 16, 2018
34
Principal Risks and Uncertainties Corporate goVernanCe praCtiCes
To govern the daily functioning of the Board of Directors of the Company, the Company has
adopted its own Guidelines on Corporate Governance that closely followed the principles of good
governance in Appendix 14 of the Listing Rules (available at www.hkex.com.hk) (“CG Code”).
During the Period, the Company has complied with all code provisions in the CG Code and adopted
the recommended best practices in the CG Code as and when applicable.
direCtors’ seCurities transaCtions
The Company has adopted the Rules on Securities Dealings (“Rules on Securities Dealings”) for
the Directors, supervisors, senior management personnel and other employees of the Company
on terms no less exacting than the required standard set out in the Model Code for Securities
Transactions by Directors of Listed Issuers (the “Model Code”) set out in Appendix 10 of the Listing
Rules.
Upon specific inquiries to all the Directors, the Directors have confirmed their respective compliance
with the required standards for securities transactions by Directors as set out in the Model Code and
the Rules on Securities Dealings during the Period.
Board oF direCtors oF the CoMpany (the “Board”)
The executive directors of the Company during the Period were:
Mr. ZHAN Xiaozhang (Chairman)
Mr. CHENG Tao
Ms. LUO Jianhu (General Manager)
The non-executive directors of the Company during the Period were:
Mr. WANG Dongjie
Mr. DAI Benmeng
Mr. ZHOU Jianping (Resigned on December 22, 2017)
The independent non-executive directors of the Company during the Period were:
Mr. ZHOU Jun
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang, Rosa
35
Corporate Governance Report During the Period, the Board held a total of eight meetings. Individual attendances by the directors
(as indicated by the numbers of meetings attended/numbers of relevant meetings held) are as
follows:
Mr. ZHAN Xiaozhang (Chairman)
Mr. CHENG Tao
Ms. LUO Jianhu (General Manager)
Mr. WANG Dongjie
Mr. DAI Benmeng
Mr. ZHOU Jianping
Mr. ZHOU Jun
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang, Rosa
attendance
attendance
attendance
through
in person
by proxy
communication
5/8
5/8
6/8
1/8
4/8
6/8
4/8
6/8
4/8
1/8
1/8
4/8
1/8
1/8
2/8
2/8
2/8
2/8
2/8
2/8
2/8
2/8
2/8
2/8
During the Period, the Company held two general meetings of the shareholders. The meetings were
chaired by Chairman, and all executive directors were present at the meetings.
The Board is charged with duties as well as given powers that are expressly specified in the articles
of association of the Company, the scope of which includes, amongst others: to determine the
business plans and investment proposals of the Company; to prepare the financial budget and final
accounts of the Company; to determine the dividend policy of the Company; to appoint or dismiss
senior managerial officers of the Company as well as to determine their remuneration; and to draw
up proposals for any material acquisition or sale by the Company.
To assist the Board to effectively discharge its duties, the Board has set up the Audit Committee, the
Nomination Committee, the Remuneration Committee, and the Strategic Committee.
While the Board fully retains its power to decide on matters within its scope of duties and
powers, relevant preparation and drawing up of plans or proposals were usually delegated to the
management.
The Company has complied with the requirements under Rules 3.10(1) and (2) of the Listing Rules
regarding the appointment of independent non-executive directors, with three independent non-
executive directors appointed, representing at least one-third of the Board and at least one of whom
possessing the appropriate professional qualification or accounting or related financial management
expertise.
36
Corporate Governance Report Pursuant to Rule 3.13 of the Listing Rules, the Company had specifically inquired with all three
independent non-executive directors and received their respective confirmation of independence
during the Period. The three independent non-executive directors have all confirmed their
compliance with requirements regarding independence under Rule 3.13 of the Listing Rules. The
Company still considers the independent non-executive directors to be independent.
There were no financial, business, family or other material or relevant relationships between
members of the Board, including that between the Chairman and the General Manager of the
Company.
Each newly appointed director receives induction on the first occasion of his or her appointment,
so as to ensure that he or she has appropriate understanding of the business and operations of
the Company and that he or she is fully aware of his or her responsibilities and obligations under
the Listing Rules and relevant regulatory requirements. Directors are also regularly updated on
the Group’s business and industry environments where appropriate in the management’s monthly
reports to the Board as well as briefings and materials circulated to the Board before board
meetings.
In addition, during the Period, the Company has arranged for all its executive and non-executive
directors to undergo continuous trainings designed to develop and refresh their knowledge and
skills so as to ensure that their contribution to the Board remains informed and relevant. However,
as the management considers that the independent non-executive directors of the Company are
very experienced, knowledgeable and resourceful, the Company did not arrange any professional
briefings or training programs for its independent non-executive directors and has decided to leave
it to the independent non-executive directors to undergo appropriate training as they see fit.
ChairMan and general Manager
During the Period, Mr. ZHAN Xiaozhang and Ms. LUO Jianhu served as Chairman and General
Manager of the Company, respectively. The roles of Chairman and General Manager are fully
segregated as expressly set out in the articles of association of the Company.
non-exeCutiVe direCtors
Terms for the non-executive directors of current session of the Board started on July 1, 2015 and
will expire on June 30, 2018.
37
speCial CoMMittees under the Board
The Board has set up the Audit Committee, the Nomination Committee, the Remuneration
Committee, and the Strategic Committee. Roles and responsibilities for each committee are
specified in its terms of reference, details of which can be found under the “Corporate Governance”
section in the Company’s website.
The Audit Committee comprised of the three independent non-executive directors and two non-
executive directors, namely Mr. ZHOU Jun, Mr. PEI Ker-Wei, Ms. LEE Wai Tsang, Rosa, Mr. WANG
Dongjie and Mr. ZHOU Jianping, of whom Mr. ZHOU Jun serves as the Chairman of the Audit
Committee.
The Nomination Committee comprised of the three independent non-executive directors, one
executive director and one non-executive director, namely Mr. ZHAN Xiaozhang, Mr. ZHOU Jun,
Mr. PEI Ker-Wei, Ms. LEE Wai Tsang, Rosa and Mr. DAI Benmeng, of whom Mr. ZHAN Xiaozhang
serves as Chairman of the Nomination Committee.
The Company believes that diversification of board members is a key element to maintain the
Company’s competitive advantage, improve business performances, and promoting the Company’s
continued development. When setting up the board member composition, the Company takes into
consideration a number of aspects that determine board member diversification, including but not
limited to gender, age, culture, education background, professional experience, work and living
background, knowledge and skill, etc. The Company’s Nomination Committee is responsible for
assessing the board’s structure, number of members, as well as a diversified composition, providing
recommendation or suggestion on candidates to serve as new directors of the Company to the
board when needed. The assessment as well as recommendation or suggestion above would have
fully taken into consideration any pros and cons to the diversification of board members.
The Remuneration Committee comprised of the three independent non-executive directors and
two non-executive directors, namely, Mr. PEI Ker-Wei, Mr. ZHOU Jun, Ms. LEE Wai Tsang Rosa,
Mr. DAI Benmeng and Mr. ZHOU Jianping, of whom Mr. PEI Ker-Wei, serves as Chairman of the
Remuneration Committee.
The Strategic Committee comprised of the three executive directors, namely Mr. ZHAN Xiaozhang,
Mr. CHENG Tao and Ms. LUO Jianhu as well as Mr. ZHANG Jingzhong, Mr. WANG Dehua, Mr.
Tony ZHENG and several outside experts and advisors, of whom Mr. ZHAN Xiaozhang serves as
chairman of the Strategic Committee.
38
Corporate Governance Report During the Period, the Audit Committee held a total of four meetings. Individual attendances by the
members of the Audit Committee (as indicated by the numbers of meetings attended/numbers of
meetings held) are as follows:
Mr. ZHOU Jun
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang, Rosa
Mr. WANG Dongjie
Mr. ZHOU Jianping
Attendance
Attendance
in person
by proxy
2/4
4/4
4/4
1/4
4/4
1/4
2/4
In the meetings held during the Period, the Audit Committee conducted, amongst others, review
of financial statements for the quarterly, interim and annual results, discussed the internal audit,
the effectiveness of internal control system, and total risk management of the Company, as well as
recommendation on the re-appointment of external auditors.
During the Period, there were no changes to the remuneration policies of the members of the Board
or senior management of the Company.
During the Period, Mr. ZHOU Jianping submitted his resignation to the Company on December
22, 2017 due to his reaching retirement age. Furthermore, due to posting elsewhere by the
Communications Group, Mr. FANG Zhexing was relieved from his position as Deputy General
Manager of the Company on December 18, 2017.
Other than the above, there were no other changes to members of the Board of Directors and senior
management of the Company.
During the Period, the Remuneration Committee, the Nomination Committee and the Strategic
Committee did not hold any meeting.
The Board is responsible for developing and reviewing the Company’s corporate governance
policies and practices, monitoring the Company’s compliance with the Code and its disclosure
within this report; the Board reviews and monitors the training and continuous professional
development of Directors and senior management through the works of human resources
department, and review and monitor the Company’s policies and practices on compliance with legal
and regulatory requirements through the works of legal and internal audit department.
39
During the Period, the Directors have all confirmed their responsibility for preparing the accounts,
and that there were no events or conditions which would have a material impact on the Company’s
ability to continue to operate as a going concern basis.
auditors’ reMuneration
During the Period, the Company had paid approximately Rmb3.56 million and Rmb0.89 million to
Deloitte Touche Tohmatsu Certified Accountants (the Hong Kong auditors) and Pan-China Certified
Public Accountants LLP (the PRC auditors), respectively, for audit services conducted in 2017.
Besides, the Company had paid Rmb0.26 million to Pan-China Certified Public Accountants LLP
(the PRC auditors) for other assurance service provided.
seCretary to the Board
During the Period, the Secretary to the Board had complied with Rule 3.29 of the Listing Rules
regarding undergoing relevant professional trainings.
direCtors, superVisors and ChieF exeCutiVe’s interests in
shares and underlying shares oF the CoMpany
As at December 31, 2017, none of the Directors, Supervisors and General Manager had any
interests or short positions in the shares, underlying shares or debentures of the Company or any of
its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register
required to be kept pursuant to Section 352 of the SFO, or as otherwise notified to the Company and
the Hong Kong Stock Exchange pursuant to the Model Code.
40
Corporate Governance Report interests and short positions oF other persons in shares and
underlying shares
As at December 31, 2017, the interests and short positions of other persons in the shares and
underlying shares of the Company according to the register required to be kept by the Company
pursuant to Section 336 of the SFO, or as otherwise notified to the Company and the Hong Kong
Stock Exchange are set out below:
percentage
of the
total interests
issued share
in number
of ordinary
shares of
the Company
2,909,260,000
total interests
in number
of ordinary
capital of
the Company
(domestic
shares)
100%
percentage
of the
issued share
capital of
shares of
the Company
the Company
(h shares)
159,925,446 (L)
2,908,345 (S)
61,980,136 (P)
11.01%
0.20%
4.32%
9.03%
5.23%
4.86%
substantial shareholders
Capacity
Communications Group
Beneficial owner
substantial shareholders
Capacity
JP Morgan Chase & Co.
Beneficial owner,
investment manager and
custodian corporation/
approved lending agent
BlackRock, Inc.
Interest of controlled corporations
129,499,281 (L)
The Bank of New York Mellon
Interest of controlled corporations
Corporation
74,989,261 (L)
69,658,505 (P)
The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes interest in a lending pool.
Save as disclosed above, as at December 31, 2017, no other persons had any interests or short
positions in the shares or underlying shares of the Company that was required to be recorded
pursuant to Section 336 of the SFO, or as otherwise notified to the Company and the Hong Kong
Stock Exchange.
41
shareholders’ rights
Pursuant to the Articles of Association of the Company, two or more Shareholders who in aggregate
hold 10% or more of the voting rights of all the shares of the Company having the right to vote may
write to the Board to request the convening of an extraordinary general meeting and specifying
the agenda of the meeting. Upon receipt of the request in writing, the Board shall convene the
extraordinary general meeting as soon as possible. Shareholders who hold in aggregate 5% or
more of the voting rights of all the shares of the Company having the right to vote are entitled to
propose additional motions in annual general meeting, provided that such motions are served on the
Company within 30 days after the issue of the notice of annual general meeting.
Written requests, proposals and enquiries may be sent to the Company through contact details
listed on page 215 of this report.
inVestor relations
The Board is committed to ensuring that all shareholders and the investment community have equal
and timely access to information about the Company so as to enable their accurate assessment
of the Company’s fair value. Such information is available through channels including financial
reports, shareholder meetings, statutory announcements, the Hong Kong Stock Exchange website
(www.hkexnews.hk) and the Company’s own website (www.zjec.com.cn).
Activities such as investor and analyst briefings, one-on-one meetings, conference calls,
roadshows, and press conferences are held regularly by senior management of the Company,
particularly after results announcements.
Great importance is also attached to maintaining clear and effective communications channels
with investors as part of the Company’s bid to enhance its transparency and to promote the
understanding of its business in the investment community. Any parties who wish to learn more
about the Company may do so via the contact details listed below:
Mr. tony Zheng
Company Secretary
5/F, #2 Mingzhu International Business Center,
199 Wuxing Road, Hangzhou, Zhejiang 310020 the PRC.
Tel: 86-571-87987700
Fax: 86-571-87950329
mail: zhenghui@zjec.com.cn
42
Corporate Governance Report During the Period, the last shareholders’ meeting of the Company took place at 10:00 a.m. on
Monday, December 18, 2017 at the headquarters of the Company. Details of this extraordinary
general meeting of the shareholders were set out in the announcement dated December 18, 2017
on resolutions passed at the extraordinary general meeting of the shareholders.
The next annual general meeting of the Company is expected to be held in June, 2018 with exact
date and resolutions for review to be specified in notice of annual general meeting when it is
published.
The Company has an issued share capital of 4,343,114,500 shares comprised of domestic shares
and H shares. The domestic shares are held by Zhejiang Communications Investment Group Co.,
Ltd. as to 2,909,260,000 shares, representing approximately 67% of the total issued capital of the
Company. The remaining 1,433,854,500 shares are H shares, representing approximately 33% of
the total issued capital of the Company. As at the date of this report, and to the best of the Directors’
knowledge, 100% of the H shares of the Company are held by the public.
There were some changes made to the articles of association of the Company during the Period,
which were set out in the circular to shareholders dated November 3, 2017.
internal Controls and risK ManageMent
The Company has set up an internal monitoring system that aims to protect assets, preserve
accounting and financial information, as well as to ensure the accuracy of financial statements,
including the establishment of departments and units, setting out responsibilities, execution
of management systems and quality control mechanisms, and the management system on
environment, occupational health and safety. The system is capable of taking necessary steps
to react to possible changes in our businesses as well as external operating environments.
Throughout the operating process, the Company’s various internal control measures are being
continuously enhanced, fulfilled and are deemed effective.
The Company attaches great importance to risk management. The Company established its risk
management mechanism and relevant regulations, implemented risk management responsibilities
of various branches and departments, conducted risk investigation and assessment, established
risk management strategy and took risk control measures in response to major risks faced by the
Company.
The Board takes overall responsibility for the risk management and internal control systems, and is
responsible for reviewing the effectiveness of these systems.
43
The Company’s Audit Committee is charged with the duties of reviewing internal controls, directing
monitoring activities. Aside from reviewing the annual reporting by external auditors, the committee
also reviews the effectiveness of internal control system and risk management mechanism through
reviewing the internal special audit report on the Company’s various core businesses prepared by
internal audit department on a regular basis. During the Period, the Audit Committee focused on
a special audit of electro-mechanic projects of the Company, as well as control of liquidity risk at
Zheshang Securities. The internal audit department carried out specific audit into these compliance
issues and monitored relevant rectifications, ensuring the effectiveness of the Company’s
management systems.
The Company’s risk management and internal control systems will be reviewed by the Board on
an annual basis, which covers the period from 1 January to 31 December each year. During the
Period, the Directors of the Company had carried out a view on the effectiveness of the Company’s
internal control system, covering all material aspects of internal control, including financial control,
operational control, compliance control and risk management functions. There were no major
breaches in the internal control system that may have had an impact to Shareholders’ interests, and
the internal control system was deemed to be effective and sufficient. The risk management of the
Company was deemed to be effective and controllable.
disClosure oF inside inForMation
The Company has developed its disclosure policy to provide a general guide to the Company’s
Directors, supervisors, senior management and relevant employees in handling confidential
information, monitoring information disclosure and responding to enquiries, Control procedures
have been implemented to ensure that unauthorized access and use of inside information are
strictly prohibited.
ManageMent FunCtions
The management functions of the Board and the management are expressly stipulated in the
articles of association of the Company. Pursuant to the articles of association of the Company,
the management of the Company is assigned the functions to be in charge of the production and
business operation of the Company and to organize the implementation of the resolutions of the
board of directors, to organize the implementation of the annual business plan and investment
program of the Company, to prepare plans for the establishment of the internal management
structure of the Company, to prepare the basic management systems of the Company, and to
formulate basic rules and regulations of the Company, etc.
44
Corporate Governance Report direCtors
Chairman
Mr. YU Zhihong
born in 1964, is a graduate from the Department of Electro-mechanic
Engineering, Zhejiang University, and holds a Master’s Degree in
management from the Management Institute of Zhejiang University.
Starting from 1985, Mr. Yu Zhihong worked at Xiushui Township
in Central District of Jiaxing City as Deputy Manager of Township
Industrial Company and Deputy Head of Township, from 1987
successively served as Secretary to Central District Office, Secretary
of the Central District Youth League, Deputy Party Secretary and Party
Secretary of Tanghui Township in Central District, from 1995 working
as Deputy Director, Deputy Party Secretary, Director and then Party
Secretary of Management Committee for the Economic Development
Zone of Jiaxing City, from 2005 as Party Secretary of Haining City
and as Member of Party Standing Committee of Jiaxing City, from
2010 as Deputy Mayor of Hangzhou City, Party Secretary of Qianjiang
New Development Zone’s Construction Committee, and then Party
Secretary of Xiaoshan District, Member of Party Standing Committee
of Hangzhou City, before he became the Deputy Party Secretary and
then Mayor of Shaoxing City in 2013. Mr. Yu Zhihong assumed the
position of Chairman and Party Secretary of Zhejiang Communications
Investment Group Co., Ltd. since October 2016, and became Member
of Provincial Party Committee since June 2017.
Mr. ZHAN Xiaozhang
born in 1964, is a Senior Economist. He has been appointed as
the Chairman of the Company since June 2012. Mr. Zhan holds a
bachelor’s degree in law. He further obtained a master’s degree in public
administration from the Business Institute of Zhejiang University in 2005.
From 1985 to 1991, Mr. Zhan worked as an officer at Transport
Administrative Division under Waterway Transport Authority of Zhejiang
Provincial Bureau of Construction. From 1991 to 1998, he served as
Deputy Secretary and Secretary of the Communist Youth League
Commission at Zhejiang Provincial Bureau of Communications. From
1998 to 2002, he was Deputy Director of Waterway Transport Authority
under Zhejiang Provincial Bureau of Communications. From 2002 to
2003, he was Deputy Director of Human Resources Department at
Zhejiang Provincial Bureau of Communications. From 2003 to 2006, Mr.
Zhan was Chairman of Zhejiang Wenzhou Yongtaiwen Expressway Co.,
Ltd. From 2006 to 2008, he became Chairman of Zhejiang Jinji Property
Co., Ltd. Mr. Zhan has been Deputy General Manager, Assistant
to General Manager and Manager of Research and Development
Department at Zhejiang Communications Investment Group Co., Ltd
from 2006 to 2016.
He served as an Executive Director and the General Manager of the
Company from March 2009 to June 2012. Mr. ZHAN currently also
serves as General Manager of Zhejiang Communications Investment
Group Co., Ltd.
Mr. ZHAN resigned the position of Chairman of the Company on April 2,
2018.
45
Directors, Supervisors and Senior Management Profiles executive directors
Mr. CHENG Tao
born in 1964, is the party committee secretary of the Company. Mr.
Cheng graduated from Changsha University of Science & Technology
with a bachelor’s degree in transportation engineering. He is a Senior
Administration Engineer and Senior Economist. Mr. Cheng has been
appointed as an Executive Director of the Company since July 2015.
Mr. Cheng began his career in September 1983 and held the positions
of Secretary of CYL Committee at Zhejiang Shipping and Technical
School (浙江省航運技工學校); Secretary of CYL Committee at Zhejiang
Road and Bridge Engineering Office (浙 江 省 路 橋 工 程 處); Secretary
of Party General branch at No.3 Company of Zhejiang Provincial
Transportation Engineering & Construction Group Co., Ltd. (浙江省交
通工程建設集團三公司); Party Committee Deputy Secretary of Zhejiang
Provincial Transportation Engineering & Construction Group Co., Ltd.;
Vice Chairman, Party Committee Secretary and Chairman of Zhejiang
Provincial Transportation Engineering & Construction Group Co., Ltd.
Ms. LUO Jianhu
born in 1971, successively graduated from the Hangzhou University
and the Zhejiang University with a bachelor’s degree in law and
a master’s degree in international trade. She graduated from the
National Accounting Institute in 2016 with an EMBA degree, majoring
in Financial Accounting.. She is a lawyer and Senior Economist. Ms.
Luo has been appointed as an Executive Director and the General
Manager of the Company since June 2012.
Since she started her career in August 1994, Ms. Luo had held
such positions as the board secretary of Zhejiang Transportation
Engineering Construction Group Co., Ltd., the Deputy Director,
Director of the Legal Affairs Department, the Deputy Director, Director
of the Secretarial Office to the Board, Board Secretary and the
Manager of the Investment and Development Department of Zhejiang
Communications Investment Group Co., Ltd.
46
Directors, Supervisors and Senior Management Profiles non-executive directors
Mr. DAI Benmeng
born in 1965, graduated from the Party School of the Zhejiang
Committee of the Communist Party of China (浙 江 省 委 黨 校) with a
bachelor’s degree specialising in economics and management and
is a Senior Economist. He began working in February 1987 and has
been a director and the Deputy General Manager of Wenzhou Shipping
Co., Ltd. (溫州海運有限公司), a Director and the General Manager of
Zhejiang Wenzhou Yongtaiwen Expressway Co., Ltd. (浙江溫州甬台溫
高速公路有限公司), a Director and the General Manager of Zhejiang
Jinji Property Co., Ltd. (浙江金基置業有限公司), the person in charge
of Zhejiang Province North Zhejiang Expressway Management Co.,
Ltd. (浙 江 浙 北 高 速 公 路 管 理 有 限 公 司), the Chairman of Zhejiang
ShenSuZheWan Expressway Co., Ltd. (浙 江 申 蘇 浙 皖 高 速 公 路 有 限
公 司), and the General Manager of the Shanghai-Jiaxing-Huzhou-
Hangzhou branch of the Communications Group (交 通 集 團 申 嘉 湖 杭
分 公 司). Mr. Dai is currently the Department Head of Organization
Department of the Communications Group.
Mr. YU Qunli
born in 1968, graduated from Xi’an Roadway Institute with a Bachelor’s
Degree in Roads and Bridges Engineering. Mr. Yu Qunli also holds
a Master’s Degree in Structure Engineering and a MBA Degree in
Business Administration, both from Zhejiang University. Mr. Yu Qunli
started his career in 1990 at Zhejiang Provincial Roads and Bridges
Bureau and Zhejiang Communications Engineering Construction
Group Co., moved to Zhejiang Communications Engineering Group
Co., Ltd. in 2000, and to Zhejiang Communications Investment
Group Co., Ltd. in 2002. Starting from 2005, Mr. Yu Qunli served
as Deputy General Manager at Zhejiang Zhoushan Continent to
Island Construction Expressway Co., Ltd., and from 2006, as Deputy
General Manager at Zhejiang Ningbo Yongtaiwen Expressway Co.,
Ltd. and Zhejiang Zhoushan Bay Bridge Co., Ltd. Beginning from
2010, Mr. Yu Qunli served as Deputy Manager of Safety Management
D e p a r t m e n t a n d M a n a g e r o f S a f e t y M o n i t o r i n g M a n a g e m e n t
Department at Zhejiang Communications Investment Group Co.,
Ltd. He served as General Manager at Zhejiang Ningbo Yongtaiwen
Expressway Co., Ltd. in 2013, and as General Manager at Zhejiang
Taizhou Expressway Co., Ltd. and Zhejiang Zhoushan Bay Bridge
Co., Ltd. Since 2015, Mr. Yu Qunli served as General Manager
of Expressway Operations Management Department at Zhejiang
Communications Investment Group Co., Ltd., and as General Manager
at Communications Operations Management Department since 2016.
47
Mr. WANG Dongjie
born in 1977, graduated from Southeast University majoring in
Highway and Railway Engineering with a Master’s degree in
engineering. He is a Senior Engineer.
Since he started his career in March 2002, Mr. Wang had served as an
Engineer of the Executive Commission of Hangzhou Ring Road North
Line Project, the Deputy Executive Chief of the Executive Commission
for the interflow renovation of Hangzhou airport road, the Engineering
Division Chief of Management Office of Chun’an section of Hangqian
Expressway and the Director and Deputy General Manager of
Hangzhou Transportation Road and Bridge Construction Company.
H e j o i n e d Z h e j i a n g C o m m u n i c a t i o n s I n v e s t m e n t G r o u p C o . ,
Ltd. in January 2007 and is currently the chairman of Zhejiang
Communications Investment Group Industrial Development Co., Ltd.
Mr. WANG resigned the position of Non-Executive Director of the
Company on April 2, 2018.
Mr. YU Ji
born in 1975, is an Engineer. He graduated from Zhejiang University
with a Master’s Degree in Structure Engineering. Mr. Yu Ji began
his career at Jinwen Railroad Engineering Construction Project
Management Division (Qingtian County Lianggang section) and
General Headquarter from 1996, worked at Zhejiang Local Railroad
Survey and Design Bureau and Zhejiang Tiezi Engineering Co., Ltd.
from 1998, and became a Structure Design Engineer at Zhejiang
Urban Construction Design and Research Institute from 2005. Starting
from 2007, Mr. Yu Ji worked as staff, Deputy Manager and then
Manager at Project Management Department of Zhejiang Railroad
Investment Group Co., Ltd., and became General Manager of Railroad
Project Department in 2015, Manager of Communications Investment
Department of Zhejiang Communications Investment Group Co.,
Ltd. in 2016. Since 2018, Mr. Yu Ji became General Manager of
Strategic Development and Legal Affairs Department of Zhejiang
Communications Investment Group Co., Ltd.
48
Directors, Supervisors and Senior Management Profiles Mr. ZHOU Jianping
born in 1957, graduated from Xi’an Highway College (西 安 公 路
學 院) with a bachelor’s degree specialising in vehicular transport
and is a Senior Engineer at professor level. He began working in
September 1975 and has been the Deputy Supervisor of the Business
Management Office, Supervisor of the office, Assistant of the General
Manager, and Deputy General Manager of Zhejiang Province
Vehicular Transport General Company (浙 江 省 汽 車 運 輸 總 公 司), the
Deputy Head of Quzhou Municipal Communications Bureau, Zhejiang
Province, the manager of the Asset Management Department of the
Communications Group, and the person in charge of the Hangjinqu
Branch of the Communications Group (交通集團杭金衢分公司).
Mr. ZHOU resigned the position of Non-executive Director of the
Company on December 22, 2017.
49
independent non-executive directors
Mr. PEI Ker-Wei
born in 1957, is a full Professor of Accountancy at the School of
Accountancy at the W. P. Carey School of Business Arizona State
University.
Mr. Pei received his Ph.D. degree in Accounting from University of
North Texas in 1986. He served as the chairman of the Globalization
Committee of the American Accounting Association in 1997 and as
the president of the Chinese Accounting Professors Association-North
America in 1993 to 1994.
Mr. Pei currently also serves as an External Director of Baosteel Group
and China Merchant Group, and Independent Director of Want Want
China Holdings (HK Stock Code: 00151), Zhong An Real Estate (HK
Stock Code: 00672) and MMG Limited (HK Stock Code: 01208).
50
Directors, Supervisors and Senior Management Profiles Ms. LEE Wai Tsang, Rosa
born in 1977, has been an Executive Director of Grand Investment
International Ltd. (Stock code: 1160) since 1 June 2005 and
appointed as its Chairman for the period from 1 May 2013 to 15
June 2017. Ms. Lee holds a Bachelor degree from the University of
Southern California. She also holds Master of Science in Finance
from Boston College and MBA from University of Chicago. Ms. Lee
has been working with Grand Investment International Ltd. since its
incorporation in April 2003 and overseeing its investment, operation
and administration. Ms. Lee is a licensed person for the regulated
activities of dealing and advising in securities and asset management
under the Securities and Futures Ordinance (“SFO”). Ms. Lee is a
Director of Grand Finance Group Company Ltd (“GFG”), and Tianjin
Yishang Friendship Holdings Company Ltd.
Mr. CHEN Bin
born in 1967, is a graduate from University of South China in computer
science. He also holds a second Bachelor’s degree from Chongqing
University in management engineering. Mr. Chen worked at Tianshi
Network Company of TCL Group as Deputy General Manager
from 1998 to 2004, at Webex Group as General Manager of China
Investment from 2005 to 2006, and at Cybernaut China Investment
Fund as Senior Partner from 2007 to 2008. Mr. Chen became Chief
Executive and Funding Partner of Zhejiang Cybernaut Investment
Management Co., Ltd. since 2008. Mr. Chen also serves as Director
at Sundy Land Investment Co., Ltd., (a company listed on Shanghai
Stock Exchange, SH Stock Code: 600077) and Shenzhen Fountain
Corporation (a company listed on Shenzhen Stock Exchange, SZ
Stock Code: 000005).
51
Mr. ZHOU Jun
born in 1969, is the Executive Director and President of Shanghai
Industrial Investment (Holdings) Co. Ltd. (“SIIC”). Mr. Zhou graduated
from Nanjing University and Fudan University with a bachelor’s degree
of arts and a master’s degree of economics in international finance.
He also serves as the Chairman of S.I. Infrastructure Holdings Ltd.
and seven other companies, the Chairman of SIIC Environment
Holdings Ltd. in Singapore (SGX: BHK), Executive Director and CEO
of Shanghai Industrial Holdings Ltd. (HK Stock Code: 0363), Executive
Director of Shanghai Industrial Urban Development Group Ltd. (HK
Stock Code: 0563). He worked for Guotai Securities Co., Ltd. (now
Guotai Junan Securities Co).
Before joining SIIC in April 1996, the management positions he
had held within the SIIC group of companies were Deputy General
Manager of SIIC Real Estate Holdings (Shanghai) Co., Ltd., Shanghai
Pharmaceuticals Holding Co., Ltd. (SH Stock Code: 601607 / HK
Stock Code: 02607), Managing Director of Shanghai Cyber Galaxy
Investment Co., Ltd. and General Manager of the Strategic Investment
Department of SIIC. Mr. Zhou has about 20 years’ professional
experience in general management, financial investment, real estate
and project planning.
Mr. Zhou is a member of the Standing Committee of the CPC Shanghai
Municipal Committee and is currently the Chairman of Shanghai
Shengtai Investment Management Co., Ltd. (上海盛太投資管理有限公
司) of Shanghai Charity Foundation.
Mr. ZHOU resigned the position of Independent Non-Executive
Director on April 2, 2018.
52
Directors, Supervisors and Senior Management Profiles superVisor
supervisor representing shareholders
Mr. YAO Huiliang
born in 1972, graduated from the Zhejiang University and is a senior
accountant.
Since he started his career in August 1990, Mr. YAO had served as
Project Management Manager at Zhejiang Zhetong Road Operation
Co., Ltd., Finance Manager of the Management Committee of the
Ningbo Second Phase of Yongtaiwen Expressway, Assistant to the
General Manager and Finance Manager of the Zhejiang Ningbo-
Taizhou-Wenzhou Expressway Co., Limited and Deputy Manager
of the Finance Management Department, and Vice Manager of the
Finance Center of the Communications Group.
Mr. YAO currently serves as General Manager of the Finance
Management Centre of the Communications Group.
53
independent supervisors
Ms. HE Meiyun
born in 1964, is a Senior Economist. She graduated from the Zhejiang
University in 1986 and later received an Executive Master of Business
Admiration (EMBA) in Cheung Kong Graduate School of Business (長
江商學院).
Ms. He had served as the Secretary of Youth League Committee at the
Hangzhou Business School (杭州商業學校) and as a Deputy General
Manager, General Manager and Vice Chairman at Baida Group Co.,
Ltd. (百大集團股份有限公司), a company listed on the Shanghai Stock
Exchange (stock code: 600865). Ms. He currently serves as a General
Manager of Ping An Securities Company Limited, Zhejiang Branch.
She is also a Vice Chairman of the Professional Committee of the
Board Secretary of Listed Company Association of Zhejiang (浙江省上
市公司協會).
Mr. WU Qingwang
born in 1965, is a PRC lawyer. He graduated from Hangzhou
University (杭 州 大 學 ) with a Bachelor degree in law in 1989 and
later received a Master’s degree and a Doctoral degree in Civil and
Commercial Law in Southwest University of Political Science and Law
(西南政法大學) in 1995 and 2004, respectively.
Mr. Wu had worked in Chun’an Justice Bureau (淳安司法局) since 1989
and in Zhejiang Securities Co., Ltd. (浙江證券有限公司) from 1995 to
1996. Since May 1996, Mr. Wu has been working in Zhejiang Xinyun
Law Firm (浙江星韻律師事務所) and is currently a Partner, specializing
in civil and commercial litigation, arbitration and project negotiation.
Mr. Wu is on the panel of arbitrators in China International Economic
and Trade Arbitration Commission. Mr. Wu serves as an Independent
Director of the following companies: Yiwu Huading Nylon Co., Ltd.
(義 烏 華 鼎 錦 綸 股 份 有 限 公 司) (stock code: 601113), and Top Choice
Medical Investment Co., Inc.(通策醫療投資股份有限公司) (stock code:
600763), both companies listed on the Shanghai Stock Exchange.
From August 2011 to April 2016, Mr. Wu served as an Independent
Director of OB Telecom Electronics Co., Ltd (杭 州 中 威 電 子 股 份 有
限 公 司) (stock code: 300270), a company listed on the Shenzhen
StockExchange.
54
Directors, Supervisors and Senior Management Profiles Supervisor Representing Employees
Mr. ZHAN Huagang
born in 1961, is the party committee member and labour union
chairman of the Company. He is a professor-level Senior Engineer.
Mr. Zhan graduated from Zhejiang University with a bachelor’s degree
of engineering in internal combustion engine from the department of
thermophysical engineering.
From July 1982 to June 1991, he worked at Zhejiang Province
Vehicular Transport Company (浙 江 省 汽 車 運 輸 公 司 ), Zhejiang
Office of Motor Vehicles (浙 江 省 車 輛 監 理 所) and Zhejiang Highway
Management Bureau (浙江省公路管理局). From June 1991 to January
1996, he worked at Zhejiang Road and Bridge Engineering Office
(浙 江 省 路 橋 工 程 處). From January 1996 to March 1997, he worked
at the Operation Division and Maintenance Division of the Zhejiang
Provincial Expressway Executive Commission as Senior Engineer.
Since March 1997, he has been working at Zhejiang Expressway Co.,
Ltd. as Deputy Manager and Manager of the Operations Management
Department, Manager of the Investment Development Division,
Manager of the Equipment Management Department, Manager of the
Engineering Management Department and Head of the Maintenance
Management Office. He is concurrently the Deputy General Manager
of Zhejiang Expressway Investment Development Co., Ltd. and
Chairman and General Manager of Zhejiang Expressway Advertising
Co., Ltd.
Mr. LU Xinghai
born in 1967, graduated from the Department of Psychology of
the Hangzhou University with a doctorate degree in Management
Psychology and is a Senior Economist, the Supervisor Representing
Employees of the Company.
Mr. Lu had served as Manager of the Human Resources Department
of Hangzhou BC Foods Co., Ltd., Deputy Manager of the Human
Resources Department of the Company.
He currently also serves as the Head of the Party-Staff Work
Department and Director of Labour Union Office of the Company.
55
other MeMBers oF senior ManageMent
Mr. FANG Zhexing
born in 1965, is a Senior Engineer, the Deputy General Manager of
the Company. Mr. Fang graduated from Zhejiang University where he
received a master’s degree in engineering in 1991.
From 1986 to 1988 he was the Assistant Engineer in the Project
Management Office of the Electric Power and Water Conservancy
Bureau in Taizhou, Zhejiang Province. From 1991 until 1997, he was
the Engineer in the Project Management Office of Zhejiang Provincial
Expressway Executive Commission, where he participated in the
project management of Shanghai-Hangzhou-Ningbo Expressway.
Since March 1997, he has served as the Deputy Manager and the
Manager of the Planning and Development Department, the Manager
of the Project Development Department, the Director of Quality
Management Office, the Director of Internal Audit Department of the
Company, the Manager of the Human Resources Department and the
Secretary of Disciplinary Committee.
Mr. Fang resigned the position of the Deputy General Manager of the
Company on December 18, 2017.
Mr. ZHU Yimin
born in 1961, is an Engineer, Mr. Zhu graduated from Chang’an
University with professional programme in Roads and Transportation
Engineering in July 2007. He joined the People’s Liberation Army
garrison 83026 from December 1978 to January 1982. From January
1982 to December 1998, he worked in Anji County Water Traffic
Control Department, Huzhou Port and Water Traffic Administration
Department and Huzhou City Water Traffic Administration Department.
From June 1994 to December 1998, he was the Director of Huzhou
City Traffic Engineering Department. From December 1998 to
September 2000, he served as the Assistant to Director of Huzhou City
Water Traffic Control and Administration Department. From January
2003 to August 2004, he was the Assistant Manager of Huzhou City
Transportation Investment and Development Corporation. From
August 2004 to May 2015, Mr. Zhu has served in different positions
including the Deputy General Manager of Zhejiang Shenjiahuhang
Expressway Co., Ltd, the Deputy General Manager of Zhejiang
Province North Zhejiang Expressway Management Co., Ltd., the
Deputy General Manager of Zhejiang Shensuzhewan Expressway Co.
Ltd., the Deputy General Manager of Zhejiang Province West Zhejiang
Expressway Co., Ltd., and Deputy General Manager of Zhejiang
Hanghui Expressway Co. Ltd.
He has been the Deputy General Manager and party committee
member of the Company since July 1, 2015.
56
Directors, Supervisors and Senior Management Profiles Mr. WANG Dehua
born in 1974, graduated with an undergraduate degree in Accounting
from Hangzhou Institute of Electronics Engineering in 1996. He
worked in the Foreign Funds Utilization Audit Department of Zhejiang
Provincial Audit Office from 1996 to 2003. Mr. Wang worked at the
Corporation Division of the Administrative and Finance Department of
Liaison Office of the Central Government in the Hong Kong S.A.R. from
2003 to 2011, serving as its Deputy Director upon departure. Mr. Wang
studied at School of Economics and Finance of the Faculty of Business
and Economics of the University of Hong Kong from 2005 to 2007, and
graduated in 2007 with a master’s degree in Economics. Mr. Wang has
professional accounting qualifications, including CPA, HKICPA, FCCA,
etc. He worked at Zhejiang Communications Investment Group Co.,
Ltd. from 2011 to 2014, serving as its Deputy General Manager upon
departure.
Mr. Wang Dehua has been appointed as the Chief Financial Officer of
the Company with effect from March 17, 2014.
Mr. Tony ZHENG
born in 1969, is the Deputy General Manager and Company Secretary
of the Company. Mr. Zheng graduated from University of California
at Berkeley in 1995 with a BS degree in Civil Engineering. He joined
the Company in June 1997, and has served as Deputy Director of the
Secretarial Office to the Board and Assistant Company Secretary.
Mr. Zheng continues to serve as Director of the Secretarial Office to
the Board, and Director of Hong Kong Representative Office of the
Company.
57
Ms. ZHANG Xiuhua
born in 1969, is a Senior Economist, the Deputy General Manager
of the Company. Ms. Zhang graduated from Chongqing Jiaotong
University majoring in transportation management with a bachelor’s
degree in science, and obtained a master’s degree in business
administration from Zhejiang University in 2006.
From July 1991 to February 1997, she worked in the Operation
Division of the Zhejiang Provincial Expressway Executive Commission.
She joined the Company since March 1997, and had served as
Assistant manager, Deputy Manager, Manager of the Operation
Department and Assistant to General Manager.
58
Directors, Supervisors and Senior Management Profiles The Directors of the Company hereby present their report and the audited financial statements of
the Group for the year ended December 31, 2017.
prinCipal aCtiVities
The principal activities of the Group comprise the operation, management of high grade roads, as
well as provision of security broking service and proprietary securities trading.
Business reView
A review of the business of the Group and analysis of the Group’s performance using key
performance indicators is provided in the section headed “Management Discussion and Analysis” of
this annual report.
In addition, discussions on the Group’s environmental policies and performance and an account
of the Group’s key relationships with its employees, customers, suppliers and others that have a
significant impact on the Group and on which the Group’s success depends are provided in the
Company’s 2017 Environmental and Social Responsibility Report.
segMent inForMation
During the Period, the entire revenue and segment profit of the Group were derived from the
People’s Republic of China (“PRC”). Accordingly, no further analysis of the revenue and segment
profit by geographical area is presented. An analysis of the Group’s revenue and segment profit
by principal activities for the year ended December 31, 2017 is set out in note 5 to the financial
statements.
results and diVidends
The Group’s profit for the year ended December 31, 2017 and the state of financial position at that
date are set out in the financial statements on pages 83 to 208.
An interim dividend of Rmb0.06 per share (approximately HK$0.072) was paid on January 19,
2018. The Directors have recommended the payment of a final dividend of Rmb0.30 (approximately
HK$0.363) per share in respect of the year. The final dividend is subject to shareholders’ approval
at the 2017 annual general meeting of the Company and is expected to be paid by no later than
August 31, 2018. This recommendation has been incorporated in the financial statements as an
allocation of retained earnings within the capital and reserves section in the consolidated statement
of financial position. The dividend payout ratio reached 48.8% during the Period. Further details of
the dividends are set out in note 15 to the financial statements.
59
Report of the Directors FiVe year suMMary FinanCial inForMation
The following is a summary of the published consolidated results, and of the assets, liabilities and
non-controlling interests of the Group prepared on the basis set out in the notes below.
results
Continuing operations
Revenue
Operating costs
Gross profit
Security investment gains
Other income and gains and losses
Administrative expenses
Other expenses
Share of profit of associates
Share of profit/(loss) of a joint venture
Finance costs
Profit before tax
Income tax expense
Profit for the year from continuing operations
discontinued operations
Profit for the year from discontinued operations
profit for the year
Profit for the year attributable to owners of
the Company
– Continuing operations
– Discontinued operations
Profit for the year attributable to
non-controlling interests
– Continuing operations
– Discontinued operations
earnings per share
From continuing and discontinued operations
Basic (Rmb cents)
Diluted (Rmb cents)
From continuing operations
Basic (Rmb cents)
Diluted (Rmb cents)
60
2017
rmb’000
9,626,340
(4,656,163)
4,970,177
774,885
103,639
(98,496)
(134,327)
161,502
17,668
(611,747)
5,183,301
(1,192,269)
3,991,032
year ended december 31,
2016
Rmb’000
2015
Rmb’000
(Restated)
2014
Rmb’000
(Restated)
2013
Rmb’000
(Restated)
9,735,347
10,724,781
7,171,810
6,055,104
(4,596,048)
(5,278,650)
(3,617,851)
(3,137,004)
5,139,299
5,446,131
3,553,959
2,918,100
223,573
289,390
(81,687)
(85,099)
64,699
9,797
584,114
191,887
(88,421)
(158,714)
48,289
(25,067)
278,252
144,016
(87,462)
(83,098)
65,020
(33,277)
99,663
171,295
(81,754)
(63,946)
21,537
(36,010)
(671,387)
(632,495)
(272,900)
(295,461)
4,888,585
5,365,724
3,564,510
2,733,424
(1,161,570)
(1,396,774)
(882,625)
(720,632)
3,727,015
3,968,950
2,681,885
2,012,792
–
81,594
60,830
64,087
70,964
3,991,032
3,808,609
4,029,780
2,745,972
2,083,756
3,202,130
2,957,291
2,932,903
2,204,982
1,741,694
–
80,114
56,777
60,012
59,993
788,902
769,724
1,036,047
–
1,480
4,053
476,903
4,075
271,098
10,971
73.73
71.36
73.73
71.36
69.94
69.94
68.09
68.09
68.84
68.84
67.53
67.53
52.15
52.15
50.77
50.77
41.48
41.48
40.10
40.10
Report of the Directors
as at december 31,
2017
rmb’000
73,650,520
44,446,169
29,204,351
2016
Rmb’000
2015
Rmb’000
2014
Rmb’000
2013
Rmb’000
73,761,432
73,891,763
54,987,056
35,947,318
49,585,505
51,893,114
33,858,586
16,175,239
24,175,927
21,998,649
21,128,470
19,772,079
assets and liabilities
Total assets
Total liabilities
Net assets
Notes:
1.
The consolidated results of the Group for the three years ended December 31, 2015 have been restated in
accordance with relevant Hong Kong Financial Reporting Standard issued by Hong Kong Institute of Certified Public
Accountants, while those for the year ended December 31, 2017 and December 31, 2016 were prepared based on
the consolidated statement of profit or loss and other comprehensive income as set out on page 83 of the financial
report.
2.
The 2017 basic earnings per share (from continuing and discontinued operations) is based on the profit attributable
to owners of the Company for the year ended December 31, 2017 of Rmb3,202,130,000 (2016: Rmb3,037,405,000)
and the 4,343,114,500 (2016: 4,343,114,500) ordinary shares in issue during the year.
The 2017 diluted earnings per share (from continuing and discontinued operations) is based on the profit for the
purpose of diluted earnings per share attributable to owners of the Company for the year ended December 31, 2017
of Rmb3,218,310,000 and the 4,509,861,000 weighted average number of ordinary shares for the purpose of diluted
earnings per share during the year. The diluted earnings per share is the same as the basic earnings per share for
2016.
3.
Differences in financial statements prepared under PRC GAAP and HKFRSs
profit
for the year ended
net assets
december 31,
as at december 31,
2017
2016
2017
2016
rmb’000
Rmb’000
rmb’000
Rmb’000
As reported in the statutory financial
statements of the Group prepared in
accordance with PRC GAAP
3,999,920
3,816,689
29,495,719
24,458,407
HK GAAP adjustments:
(a) Goodwill
–
–
(b) Amortization provided, net of deferred tax
(2,041)
(1,952)
(c) Assessment on impact of appreciation, net of
(199,769)
(171,053)
(199,769)
(169,012)
deferred tax
(d) Others
(e) Non-controlling interests
(3,475)
–
(3,372)
(3,658)
719
(3,189)
45,658
7,666
26,130
49,133
7,666
29,502
As restated in the financial statements
3,991,032
3,808,609
29,204,351
24,175,927
61
MaJor CustoMers and suppliers
In the year under review, the five largest customers and suppliers of the Group accounted for less
than 30% of the total turnover and purchases, respectively.
None of the directors of the Company or any of their associates or any shareholders (which, to the
best knowledge of the directors, own more than 5% of the Company’s issued share capital) had any
beneficial interest in the Group’s five largest customers.
related party transaCtions
During the year, details of the related party transactions that the company and its subsidiaries
have entered into with Communications Group and its subsidiaries of are set out in note to the
consolidated financial statements. The transactions including the deposit services provided
by Zhejiang Communications Finance, the road maintenance services provided by Zhejiang
Expressway Maintenance Co., Ltd, the asphalt road geothermal power regeneration services
provided by Zhejiang Shunchang High-grade Expressway Maintenance Co., Ltd, the information
system redevelopment services, the data center infrastructure platform development project, the
highway equipment management system, the monitoring system improvement phase II project,
and the electronic toll collection construction project provided by Zhejiang Expressway Information
Engineering Technology Co., Ltd, the technological cooperation and service provided by Zhejiang
Intelligent Expressway Services Co., Ltd, and etc, constitute non-exempt continuing connected
transactions as defined in Chapter 14A of the Listing Rules. For further details in relation to the
connected transactions, please refer to the section of “Connected Transactions”. Save as disclosed
in the Company’s announcement dated March 16, 2018, the Company has complied with the
disclosure requirements in respect of such connected transactions in accordance with Chapter 14A
of the Listing Rules.
donation
During the year, the total amount of donation made by the group is Rmb5,373,000 for charitable or
other purposes.
property, plant and equipMent
Details of movements in property, plant and equipment of the Group during the year are set out in
note 17 to the financial statements.
Capital CoMMitMents
Details of the capital commitments of the Group as at December 31, 2017 are set out in note 50 to
the financial statements.
62
Report of the Directors reserVes
Details of movements in the reserves of the Group during the year are set out in the consolidated
statement of changes in equity on page 87 to the financial statements.
distriButaBle reserVes
As at December 31, 2017, before the proposed final dividend, the Company’s reserves available for
distribution by way of cash or in kind, as determined based on the lower of the amount determined
under PRC accounting standards and the amount determined under HKGAAP, amounted to
Rmb3,491,910,000. In addition, in accordance with the Company Law of the PRC, the amount of
approximately Rmb3,645,726,000 standing to the credit of the Company’s share premium account
as prepared in accordance with the PRC accounting standards was available for distribution by way
of capitalization issues.
trust deposits
As at December 31, 2017, other than the deposits placed with a non-bank financial institution of
Rmb1,301,639,000, the Group’s deposits have been placed with commercial banks in the PRC and
the Group has not encountered any difficulty in the withdrawal of funds.
purChase, redeMption or sale oF the listed seCurities oF the
CoMpany
Neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company’s
listed securities during the year.
63
direCtors
The Directors of the Company during the year and as at the date of this report are:
exeCutiVe direCtors
Mr. ZHAN Xiaozhang (Chairman)
Mr. CHENG Tao
Ms. LUO Jianhu (General Manager)
non-exeCutiVe direCtors
Mr. WANG Dongjie
Mr. DAI Benmeng
Mr. ZHOU Jianping (Resigned on December 22, 2017)
independent non-exeCutiVe direCtors
Mr. ZHOU Jun
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang, Rosa
direCtors’ and senior ManageMent’s Biographies
Biographical details of the Directors of the Company and the senior management of the Group are
set out on pages 45 to 58 in the Company’s annual report.
direCtors’ serViCe ContraCts
Each of the Directors of the Company has entered into a service agreement with the Company,
which effect from July 1, 2015 to June 30, 2018.
Save as disclosed above, none of the Directors and Supervisors has entered into any service
contract with the Company which is not terminable by the Company within one year without payment
of compensation, other than statutory compensation.
64
Report of the Directors direCtors’ and superVisors’ interests in ContraCts
As at December 31, 2017 or during the year, none of the Directors or Supervisors had a material
interest, either directly or indirectly, in any contract of significance to the business of the Group to
which the Company, its holding company, or any of its subsidiaries or fellow subsidiaries was a
party.
d i r e C t o r s , s u p e r V i s o r s a n d C h i e F e x e C u t i V e ’ s r i g h t s t o
suBsCriBe For shares or deBentures
At no time during the year were there rights to acquire benefits by means of the acquisition of
shares in or debentures of the Company granted to any Director, Supervisor and chief executive
or their respective spouse or minor children, or were any such rights exercised by them; or was
the Company, its holding company, or any of its subsidiaries or fellow subsidiaries a party to any
arrangement to enable any such persons to acquire such rights in any other body corporate.
share Capital
There were no movements in the Company’s issued share capital during the year.
pre-eMptiVe rights
There is no provision for pre-emptive rights in the Company’s Articles of Association or the laws
of the PRC which would require the Company to offer new shares on a pro rata basis to existing
shareholders.
d i r e C t o r s ’ a n d C o n t r o l l i n g s h a r e h o l d e r s ’ i n t e r e s t s i n
CoMpeting Business
Save for their respective interests in the Group, none of the directors and controlling shareholders
of the Company was interested in any business which competes or is likely to complete with the
businesses of the Group for the Period.
ContraCt oF signiFiCanCe with Controlling shareholders
Save as disclosed in this annual report, there is no contract of significance entered into between
the Company, or one of its subsidiary companies, and a controlling shareholder or any of its
subsidiaries.
65
taxation and tax relieF
According to a Notice issued jointly by PRC Ministry of Finance and State Administration of Taxation
regarding individual income tax policies (Caishuizi 【1994】 No.020), the dividend incomes received
by foreign individuals from a foreign-invested enterprise are exempt from individual income tax.
As stipulated by a Notice issued by the PRC State Administration of Taxation in relation to the
withholding and payment of enterprise income tax by Chinese resident enterprises for payment
of dividend to H shareholders Who are overseas non-resident enterprises (Guoshuihan 【 2008 】
No.897), the Company as a Chinese resident enterprises is required to withhold 10% enterprise
income tax when it distributes dividends for the year 2008 and thereafter to all non-resident
enterprise holders of H shares of the Company (including HKSCC Nominees Limited, other
nominees, trustees or other entities and organizations, who will be deemed as non-resident
enterprise holders of H shares) whose names appear on the H share register of members of the
Company on the record date.
Dividends payable to the Shareholders who are mainland individual investors or corporate investors
investing in the H Shares via the Shanghai-Hong Kong Stock Connect or the Shenzhen-Hong Kong
Stock Connect will be paid in Rmb by China Securities Depository and Clearing Corporation Limited
Shanghai Branch (“CSDC Shanghai Branch”) or Shenzhen Branch (“CSDC Shenzhen Branch”) as
entrusted by the Company.
According to the requirements of the “Notice on Taxation Policies Concerning the Shanghai-Hong
Kong Stock Connect Pilot Program (Finance Tax 【2014】 No. 81)《(關於滬港股票市場交易互聯互
通機制試點有關稅收政策的通知》(財稅【2014】81號)) and “Notice on Taxation Policies Concerning
the Shenzhen-Hong Kong Stock Connect Pilot Program (Finance Tax 【2016】 No. 127)及《關於深港
股票市場交易互聯互通機制試點有關稅收政策的通知》(財稅【2016】127號) jointly published by the
Ministry of Finance, State Administration of Taxation and China Securities Regulatory Commission,
the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect tax
arrangements are as follows: (i) for Chinese Mainland individual investors who invest in the H
Shares via the Shanghai-Hong Kong Stock Connect or the Shenzhen-Hong Kong Stock Connect,
the Company will withhold individual income tax at the rate of 20% in the distribution of final
dividend. Individual investors may, by producing valid tax payment proofs, apply to the competent
tax authority of China Securities Depository and Clearing Company Limited for tax credit relating to
the withholding tax already paid abroad; and (ii) for Chinese Mainland securities investment funds
that invest in the H Shares via the Shanghai-Hong Kong Stock Connect or the Shenzhen-Hong
Kong Stock Connect, the Company will withhold individual income tax in the distribution of final
dividend pursuant to the foregoing provisions.
For Chinese mainland corporate investors that invest in the H Shares via the Shanghai-Hong Kong
Stock Connect or the Shenzhen-Hong Kong Stock Connect, the Company will not withhold the
income tax in the distribution of final dividend and such investors shall file the tax returns on their
own.
66
Report of the Directors Under current practice of the Hong Kong Inland Revenue Department, no tax is payable in Hong
Kong in respect of dividends paid by the Company.
Shareholders of the Company are taxed and/or enjoy tax relief in accordance with the
aforementioned regulations.
suFFiCienCy oF puBliC Float
Based on the information that is publicly available to the Company and within the knowledge of the
Directors, as at the latest practicable date prior to the issue of this annual report, the Company has
maintained sufficient amount of public float as required under the Listing Rules.
direCtors’ perMitted indeMnity proVision
Pursuant to insurance arrangements taken out by the Company, every director or other officer of the
Company shall be indemnified and secured harmless out of the assets and profits of the Company
from and against all actions, costs, charges, losses, damages and expenses which they or any
of them may sustain or incur in connection with their duties or the exercise of their powers. The
Company arranged appropriate directors’ and officers’ liability insurance coverage for the director
and officers of the Group during the year ended 31 December 2017.
auditors
Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong, who has served as the
Company’s Hong Kong auditors since 2005, will retire and a resolution for their re-appointment as
Hong Kong auditors of the Company will be proposed at the forth coming Annual General Meeting
of the shareholders.
By Order of the Board
Zhan xiaozhang
Chairman
Hangzhou, Zhejiang Province, the PRC
March 16, 2018
67
During the Period, the Supervisory Committee duly performed its supervisory responsibilities, and
safe guarded the legitimate interests of the shareholders and the Company in accordance with
relevant rules and regulations under the Company Law of the PRC, the Company ’s Articles of
Association and the Rules of the Supervisory Committee.
Main tasks undertaken by the Supervisory Committee during the Period were to assess and
supervise lawfulness and appropriateness of the activities of the Directors, General Manager and
other senior management of the Company in their business decision-making and daily management
processes, through a combination of activities including holding meetings of the Supervisory
Committee and attending general meetings of shareholders and meetings of the Board. The
Supervisory Committee has carefully examined the operating results and the financial standing of
the Company, discussed and reviewed the financial statements to be submitted by the Board to the
general meeting of shareholders.
During the Period, the Supervisory Committee held a total of two meetings of its own, and
attended six meetings held by the Board and two general meetings. The Supervisory Committee
considered that the Company has strengthened the accountability system, stepped up reform and
innovation and seized the implementation of tasks by capitalising on the strategic positioning of
“three platforms” and centering around the growth objective of becoming the “leading operator in
China and a top-notch operator globally” to fully accomplish various targets set at the beginning
of the year. The operating results of the Company set another record high alongside with full-
scale optimisation and upgrade of the highway business as well as effective attempts made in the
capital operations. Industry development continued to grow steadily with a more comprehensive and
effective risk management system.
The Supervisory Committee has reviewed the financial statements of the Company for 2017
prepared by the Board for submission to the general meeting of shareholders, and concluded
that the financial statements accurately reflected the financial position of the Company in 2017,
and complied with the relevant laws, regulations and the Company’s Articles of Association. The
Company maintained a relatively stable dividend in recent years, providing satisfactory return to its
shareholders.
68
Report of the Supervisory Committee During the Period, the members of the Board, General Manager and other senior management of
the Company have complied with their fiduciary duties and have acted in good faith and diligently
while carrying out their responsibilities. There was no incident of abuse of power or infringement of
the interests of shareholders or employees.
The Supervisory Committee is satisfied with the performances across various lines of business
achieved by the Board and the management of the Company.
By the order of the Supervisory Committee
yao huiliang
Chairman of the Supervisory Committee
Hangzhou, Zhejiang Province, the PRC
March 16, 2018
69
During the year ended December 31, 2017, the Company had the following non-exempt connected
transactions and continuing connected transactions.
Connected transaction
1. Financial adviser agreement
On May 12, 2017, Zheshang Securities entered into the Independent Financial Adviser
Agreement with Zhejiang Communications Technology Co., Ltd. (“Zhejiang Communications
Technology”), pursuant to which Zheshang Securities agreed to provide financial advisory
services with respect to its substantial assets transaction to Zhejiang Communications
Technology at the consideration of Rmb19,200,000. Such assets transaction refers to the
acquisition of 100% equity interests in Zhejiang Communications Engineering Group Co., Ltd.
by Zhejiang Communications Technology and the raising of counterpart funds (please refer
to the announcement of the Company dated March 16, 2018 on Connected Transaction –
Independent Financial Adviser Agreement for details).
Communications Group, which holds approximately 67% of the issued share capital of
the Company, is a controlling shareholder of the Company. Zhejiang Communications
Technology is a non-wholly-owned subsidiary of Communications Group. Zheshang
Securities is an indirect non-wholly owned subsidiary of the Company. Therefore, Zhejiang
Communications Technology is a connected person of the Company and as a result, the
transaction under the Independent Financial Adviser Agreement constitutes a connected
transaction for the Company under Chapter 14A of the Listing Rules.
Continuing Connected transactions
1. daily road Maintenance services
On April 8, 2016, the Company and the relevant subsidiaries of the Company entered into
a number of Road Maintenance Agreements with Zhejiang Expressway Maintenance Co.,
Ltd. (“Maintenance Co”), pursuant to which Maintenance Co agreed to provide the daily
maintenance services to the Group’s four expressways, namely: the Shanghai-Hangzhou-
Ningbo Expressway, the Shangsan Expressway, Jinhua section, Ningbo-Jinhua Expressway
and the Hanghui Expressway. Each of the Road Maintenance Agreements has a term of three
years from January 1, 2016 to December 31, 2018. The total service fees in respect of the
daily maintenance services shall be Rmb182,307,362 and the aggregate annual service fees
payable by the Group to Maintenance Co in respect of the daily maintenance services shall
not exceed Rmb85 million (please refer to the announcement of the Company dated April 8,
2016 on Continuing Connected Transactions for details).
70
Connected Transactions Communications Group is a controlling shareholder of the Company. Maintenance Co (being
a subsidiary of Communications Group) is a connected person of the Company. As such,
under the Chapter 14A of the Listing Rules, the provision of daily maintenance services
constitutes a continuing connected transaction for the Company.
During the period, the total service fees paid by the Company and its subsidiaries
to Maintenance Co in respect of the daily road maintenance services amounted to
Rmb63,411,000.
2.
information system redevelopment
On September 13, 2016, the Company and the relevant subsidiaries of the Company
entered into the Information System Redevelopment Agreements with Zhejiang Expressway
Information Technology Engineering Co., Ltd. (“Zhejiang Information”, a wholly-owned
subsidiary of the controlling shareholder of the Company), pursuant to which Zhejiang
Information agreed to provide the Information System Redevelopment Services to the Target
Expressways for a period of 12 months ending September 12, 2017 at the consideration of
Rmb30,984,318.61 (please refer to the announcement of the Company dated September
13, 2016 on Continuing Connected Transaction – Information System Redevelopment
Agreements for details).
Communications Group is a controlling shareholder of the Company. Zhejiang Information
(being a wholly-owned subsidiary of Communications Group) is a connected person of
the Company. As such, under the Chapter 14A of the Listing Rules, the transaction under
the Information System Redevelopment Agreements constitutes a continuing connected
transaction for the Company.
During the period, the service fees paid by the Company and its subsidiaries to Zhejiang
Information with respect to the continuing connected transaction under the Information
System Redevelopment Agreements amounted to Rmb11,598,000.
71
3. deposit services with Zhejiang Communications Finance
Pursuant to the new financial services agreement (the “New Financial Services Agreement”)
dated March 30, 2016 entered into between the Company and Zhejiang Communications
Finance, Zhejiang Communications Finance agreed to provide the Company and its
subsidiaries with a range of financial services including certain deposit services (the “Deposit
Services”) for a term of three years from the date of the New Financial Services Agreement
subject to the terms and conditions provided therein (please refer to the announcement of the
Company dated March 30, 2016 on Continuing Connected Transactions in relation to New
Financial Services Agreement with Zhejiang Communications Investment Group Finance Co.,
Ltd. for details).
As the issued share capital of Zhejiang Communications Finance is owned as to 35%,
40% and 25% by the Company, Communications Group and Zhejiang Ningbo Yongtaiwen
Expressway Co., Ltd. (“Ningbo Expressway Co”) respectively, Zhejiang Communications
Finance is a connected person of the Company. As such, under the Chapter 14A of the Listing
Rules, the provision of Deposit Services constitutes a continuing connected transaction for
the Company.
Pursuant to the New Financial Services Agreement, the Deposit Services to be provided by
Zhejiang Communications Finance to the Company and its subsidiaries include the current
deposit, time deposit, call deposit and agreement deposit services. The Deposit Services
will be provided under the New Financial Services Agreement on a non-exclusive basis and
the Company and its subsidiaries are entitled to determine whether to accept the Deposit
Services provided by Zhejiang Communications Finance or decide to accept deposit services
provided by other financial institutions. The Company and its subsidiaries are not obliged to
accept any Deposit Services provided by Zhejiang Communications Finance.
The interest rate to be paid by Zhejiang Communications Finance for the deposits of the
Company and its subsidiaries with Zhejiang Communications Finance shall be determined
based on the prevailing deposit interest rate promulgated by the People’s Bank of China for
the same period and should not be lower than the deposit interest rates offered by major
commercial banks in the PRC for comparable deposits of comparable periods. The maximum
amount of the daily deposit balance (including any interest accrued thereon) for the deposits
of the Company and its subsidiaries with Zhejiang Communications Finance shall not be more
than Rmb1,500,000,000 during the term of the New Financial Services Agreement.
72
Connected Transactions During the period, the maximum amount of the daily deposit balance (including any interest
accrued thereon) for the deposits of the Company and its subsidiaries with Zhejiang
Communications Finance under the New Financial Services Agreement amounted to
Rmb1,301,639,000.
4. roa d Maintenance agreement and asphalt road geothermal power
regeneration agreement
On June 23, 2017, the Company entered into the Road Maintenance Agreement with
Maintenance Co, pursuant to which Maintenance Co agreed to provide maintenance services
to four expressways of the Group at the consideration of Rmb244,412,627 (please refer to the
announcement of the Company dated June 23, 2017 on Continuing Connected Transactions
in relation to the Provision of Services by Maintenance Co and Zhejiang Shunchang for
details).
On June 23, 2017, the Company entered into the Asphalt Road Geothermal Power
Regeneration Agreement with Zhejiang Shunchang High-grade Expressway Maintenance
Co., Ltd. (“Zhejiang Shunchang”), pursuant to which Zhejiang Shunchang agreed to
provide the Regeneration Services to the Group’s five expressways at the consideration of
Rmb34,683,906 (please refer to the announcement of the Company dated June 23, 2017 on
Continuing Connected Transactions in relation to the Provision of Services by Maintenance
Co and Zhejiang Shunchang for details).
Communications Group, is a controlling shareholder of the Company. Maintenance Co and
Zhejiang Shunchang, as subsidiaries of Communications Group, are connected persons
of the Company and as a result, the transactions under the Road Maintenance Agreement
and the Asphalt Road Geothermal Power Regeneration Agreement constitute continuing
connected transactions for the Company under Chapter 14A of the Listing Rules. As the
Road Maintenance Agreement and the Asphalt Road Geothermal Power Regeneration
Agreement are entered into by the Group with parties who are connected with one another
within a 12-month period and are similar in nature, the continuing connected transactions
contemplated under the Road Maintenance Agreement and the Asphalt Road Geothermal
Power Regeneration Agreement should be aggregated in accordance with Rule 14A.81 of the
Listing Rules.
73
During the period, the total service fees in respect of the daily maintenance services paid
to Maintenance Co by the Company and its subsidiaries under the Road Maintenance
Agreement amounted to Rmb240,979,000; and Zhejiang Shunchang has fulfilled the Asphalt
Road Geothermal Power Regeneration Agreement and the total Service Fees (Regeneration)
paid by the Company and its subsidiaries to Zhejiang Shunchang under the Asphalt Road
Geothermal Power Regeneration Agreement amounted to Rmb32,455,000.
5. agreements on data Center infrastructure platform development project
and etc
5.1 data Center infrastructure platform development project
On January 9, 2017, the Company entered into the Agreement on Data Center Infrastructure
Platform Development Project with Zhejiang Information (a wholly owned subsidiary of the
controlling shareholder of the Company), pursuant to which Zhejiang Information agreed to
provide the data center infrastructure platform development services to the Company in 2017
at the consideration of Rmb8,985,000 (please refer to the supplemental announcement of
the Company dated January 4, 2018 on the Continuing Connected Transactions – Zhejiang
Information Transactions for details).
5.2 highway equipment Management system
On January 12, 2017, the Company entered into the Agreement on Highway Equipment
Management System with Zhejiang Information, pursuant to which Zhejiang Information
agreed to provide the highway equipment management system development and
implementation services to the Company in 2017 at the consideration of Rmb353,590 (please
refer to the supplemental announcement of the Company dated January 4, 2018 on the
Continuing Connected Transactions – Zhejiang Information Transactions for details).
5.3 Monitoring system improvement phase ii project
On August 1, 2017, the Company entered into the Agreement on Monitoring System
Improvement Phase II Project with Zhejiang Information, pursuant to which Zhejiang
Information agreed to provide the monitoring system and security facilities improvement
services to the Company in 2017 at the consideration of Rmb280,000 (please refer to the
supplemental announcement of the Company dated January 4, 2018 on the Continuing
Connected Transactions – Zhejiang Information Transactions for details).
74
Connected Transactions 5.4 electronic toll Collection (“etC”) Construction project
On December 15, 2017, the Company and certain of its subsidiaries entered into the
Agreement on ETC Construction Project with Zhejiang Information, pursuant to which
Zhejiang Information agreed to provide the ETC construction services to the Company
and certain of its subsidiaries for a term ended on March 15, 2018 at the consideration
of Rmb19,955,733 (please refer to the supplemental announcement of the Company
dated January 4, 2018 on the Continuing Connected Transactions – Zhejiang Information
Transactions for details).
Communications Group is a controlling shareholder of the Company. Zhejiang Information is
a wholly-owned subsidiary of Communications Group. Therefore, Zhejiang Information is a
connected person of the Company. As such, under the Chapter 14A of the Listing Rules, the
transaction under the Zhejiang Information Transactions constitutes a continuing connected
transaction for the Company.
During the period, the total service fees in respect of road maintenance paid by the Company
and certain of its subsidiaries pursuant to the Agreement on Data Center Infrastructure
Platform Development Project to Zhejiang Information amounted to Rmb8,985,000; the
total service fees paid by the Company and certain of its subsidiaries pursuant to the
Agreement on Highway Equipment Management System to Zhejiang Information amounted
to Rmb212,000; the total service fees paid by the Company and certain of its subsidiaries
pursuant to the Agreement on Monitoring System Improvement Phase II Project to Zhejiang
Information amounted to Rmb280,000; and the total service fees paid by the Company and
certain of its subsidiaries pursuant to the Agreement on ETC Construction Project to Zhejiang
Information amounted to Rmb17,532,000.
75
6. technological Cooperation and service agreements
On December 22, 2017, the Company and certain of its subsidiaries entered into the
Technological Cooperation and Service Agreements with Zhejiang Intelligent Expressway
Services Co., Ltd. (“Zhejiang Intelligent”, a non-wholly-owned subsidiary of the controlling
shareholder of the Company), pursuant to which Zhejiang Intelligent agreed to provide the
highway operations monitoring and public travel information services to the Company and
certain of its subsidiaries in 2017 at the consideration of Rmb9,267,000 (please refer to the
announcement of the Company dated December 22, 2017 on the Continuing Connected
Transactions – Technological Cooperation and Service Agreements for details).
Communications Group is a controlling shareholder of the Company. Zhejiang Information is
a wholly-owned subsidiary of Communications Group, and Zhejiang Intelligent is a 89.36%
owned subsidiary of Zhejiang Information. Therefore, Zhejiang Information and Zhejiang
Intelligent are connected persons of the Company and as a result, the transactions under the
Zhejiang Information Transactions and the transactions under the Technological Cooperation
and Service Agreements with Zhejiang Intelligent constitute continuing connected
transactions for the Company under Chapter 14A of the Listing Rules. Pursuant to Rules
14A.81 and 14A.82 of the Listing Rules, as the the Zhejiang Information Transactions and
the transactions contemplated under the Technological Cooperation and Service Agreements
were entered into with parties who are connected with one another and within a 12-month
period, the Zhejiang Information Transactions and the transactions with Zhejiang Intelligent
are required to be aggregated for the calculation of the relevant percentage ratios to
determine the classification of the transactions.
During the period, the total service fees paid by the Company and certain of its subsidiaries
pursuant to the Technological Cooperation and Service Agreements to Zhejiang Intelligent
amounted to Rmb9,267,000.
76
Connected Transactions The independent non-executive Directors have reviewed the continuing connected
transactions described above and confirmed that the continuing connected transactions have
been entered into:
(a)
In the ordinary and usual course of business of the Company;
(b) On normal commercial terms or on terms no less favorable to the Company than terms
available to or from independent third parties; and
(c)
In accordance with the relevant agreement governing them on terms that are fair and
reasonable and in the interests of the shareholders of the Company as a whole.
The Company’s auditor was engaged to report on the Group’s continuing connected
transactions in accordance with Hong Kong Standard on Assurance Engagements
HKSAE3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial
Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing
Connected Transactions under the Hong Kong Listing Rules” issued by the Hong Kong
Institute of Certified Public Accountants. The auditors have issued their unqualified letter
containing their findings and conclusions in respect of the continuing connected transactions
in accordance with the Rule 14A.56 of the Listing Rules. A copy of the auditor’s letter has
been provided to the Hong Kong Stock Exchange.
77
to the MeMBers oF ZheJiang expressway Co., ltd.
浙江滬杭甬高速公路股份有限公司
(Incorporated in the People’s Republic of China with limited liability)
Opinion
We have audited the consolidated financial statements of Zhejiang Expressway Co., Ltd. (the “Company”) and its
subsidiaries (collectively referred to as the “Group”) set out on pages 83 to 208, which comprise the consolidated
statement of financial position as at December 31, 2017, and the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows
for the year then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies.
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position
of the Group as at December 31, 2017, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued
by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in
compliance with the disclosure requirements of the Hong Kong Companies Ordinance.
Basis for Opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA.
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with
the HKICPA’s Code of Ethics for Professional Accountants (“the Code”), and we have fulfilled our other ethical
responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
78
Independent Auditor’s Report Key audit matter
how our audit addressed the key audit matter
Impairment of available for sale ("AFS") equity instruments measured at fair value
We identified the impairment of AFS equity
Our procedures in relation to the impairment
instruments measured at fair value, which included
assessment of AFS equity instruments measured at
equity securities, funds, and other investments, as
fair value included:
a key audit matter as the Group applied significant
judgement in determining the impairment of AFS
• Understanding the processes and controls in
equity instruments measured at fair value of
determining impairment of AFS equity instruments
Rmb2,495,253,000 as at December 31, 2017.
measured at fair value;
For those AFS equity instruments measured at
• Challenging and assessing the management
fair value, the Group applied significant judgement
judgement in determining the criteria of
in assessing whether there is objective evidence
impairment;
of impairment. As disclosed in note 4, for listed
AFS equity investments and other equity related
• Checking, on a sample basis, the data used by the
investments measured at fair value, a significant
management, including quoted market prices and
or prolonged decline in fair value below cost is
the duration for the continued decline of the fair
considered to be the objective evidence of impairment.
value below the cost, against market data; and
The cumulative amount of impairment recognised
up to December 31, 2017 was Rmb34,865,000 as
• Checking the management's calculations of the
disclosed in Note 25.
impairment allowance for AFS equity instruments
measured at fair value.
79
Independent Auditor’s Report
Key audit matter
how our audit addressed the key audit matter
Our procedures in relation to the management’s
determination of consolidation scope included:
• Understanding the process and controls of the
management in determining the consolidation
scope as set out in HKFRS10 of interests in
structured entities;
• Checking the information used by the management
in accessing the consolidation criteria of significant
structured entities against the related supporting,
including sales and purchase agreements and
other related service agreements of investments in
structured entities newly acquired or with changes
in investment holdings or terms during the year;
and
• Challenging and assessing the management
judgement in applying HKFRS 10 to each of the
significant structured entities and the conclusion
about whether or not the consolidation criteria are
met.
Determination of consolidation scope
We identified the determination of consolidation scope
as a key audit matter as the Group held a number
of interests in structured entities including collective
asset management schemes and investment funds
where the Group was involved as an investment
manager. The Group applied significant judgement in
determining whether such investments fall within the
consolidation scope under HKFRS 10 "Consolidated
Financial Statements". The effect of consolidation or
not of these structured entities would have significant
impact on the consolidated financial statements of the
Group.
As disclosed in note 4, for collective asset
management schemes and investment funds where
the Group involved as a manager, the Group assessed
whether the combination of investments it was
together with its remuneration and credit enhancement
creates exposure to variability of returns from the
activities of the collective asset management schemes
and investment funds that was of such significance
that it indicated that the Group is a principal. The
collective asset management schemes and investment
funds were consolidated if the Group acted in the role
of principal.
Details of consolidated structured entities and
unconsolidated structured entities were set out
in notes 44 and 58 to the consolidated financial
statements, respectively.
Other Information
The directors of the Company are responsible for the other information. The other information comprises the
information included in the annual report, but does not include the consolidated financial statements and our
auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
80
Responsibilities of Directors and Those Charged with Governance for the
Consolidated Financial Statements
The directors of the Company are responsible for the preparation of the consolidated financial statements that give
a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the
Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, the directors of the Company are responsible for assessing
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors of the Company either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no
other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of
this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
●
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
●
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Group’s internal control.
81
Independent Auditor’s Report
●
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors of the Company.
●
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
●
Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
●
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsible
for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in the independent auditor’s report is Tse Ming Fai.
deloitte touche tohmatsu
Certified Public Accountants
Hong Kong
March 16, 2018
82
Continuing operations
Revenue
Operating costs
Gross profit
Securities investment gains
Other income and gains and losses
Administrative expenses
Other expenses
Share of profit of associates
Share of profit of a joint venture
Finance costs
Profit before tax
Income tax expense
Profit for the year from continuing operations
discontinued operations
Profit for the year from discontinued operations
Profit for the year
Profit for the year attributable to Owners of the Company
– Continuing operations
– Discontinued operations
Profit for the year attributable to non-controlling interests
– Continuing operations
– Discontinued operations
year ended
Year ended
NOTES
12/31/2017
12/31/2016
rmb’000
Rmb’000
5
6
7
8
9
10
11
9,626,340
9,735,347
(4,656,163)
(4,596,048)
4,970,177
5,139,299
774,885
103,639
(98,496)
(134,327)
161,502
17,668
223,573
289,390
(81,687)
(85,099)
64,699
9,797
(611,747)
(671,387)
5,183,301
4,888,585
(1,192,269)
(1,161,570)
3,991,032
3,727,015
–
81,594
3,991,032
3,808,609
3,202,130
2,957,291
–
80,114
3,202,130
3,037,405
788,902
–
788,902
769,724
1,480
771,204
83
Consolidated Statement of Profit or Loss and Other Comprehensive IncomeFor the year ended December 31, 2017
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended December 31, 2017
year ended
Year ended
NOTES
12/31/2017
12/31/2016
rmb’000
Rmb’000
other comprehensive income
12
Items that may be reclassified subsequently to profit or loss:
Available-for-sale financial assets:
– Fair value gain during the year
– Reclassification adjustments for cumulative gain
upon disposal
Share of other comprehensive expense of associates
Exchange differences arising on translation
Income tax relating to items that may be
reclassified subsequently
Other comprehensive income for the year, net of income tax
total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
earnings per share
16
From continuing and discontinued operations
Basic (Rmb cents)
Diluted (Rmb cents)
From continuing operations
Basic (Rmb cents)
Diluted (Rmb cents)
276,849
114,883
(105,560)
(64,791)
(2,672)
(605)
(205)
511
(42,822)
(12,523)
125,190
37,875
4,116,222
3,846,484
3,259,347
3,057,158
856,875
789,326
4,116,222
3,846,484
73.73
71.36
73.73
71.36
69.94
69.94
68.09
68.09
84
NON-CURRENT ASSETS
Property, plant and equipment
Prepaid lease payments
Expressway operating rights
Goodwill
Other intangible assets
Interests in associates
Interest in a joint venture
Available-for-sale investments
Deferred tax assets
CURRENT ASSETS
Inventories
Trade receivables
Loans to customers arising from margin financing business
Other receivables and prepayments
Prepaid lease payments
Derivative financial assets
Available-for-sale investments
Held for trading investments
Financial assets held under resale agreements
Bank balances and clearing settlement fund
held on behalf of customers
Bank balances, clearing settlement fund, deposits and cash
– Time deposits with original maturity over three months
– Cash and cash equivalents
year ended
Year ended
NOTES
12/31/2017
12/31/2016
rmb’000
Rmb’000
17
18
19
20
21
23
24
25
43
26
27
28
18
41
25
29
30
31
32
32
2,948,134
3,066,571
65,300
52,522
13,379,674
14,498,800
86,867
161,486
86,867
148,906
1,686,227
1,310,486
303,065
711,715
355,803
285,397
1,790,978
362,681
19,698,271
21,603,208
131,261
244,587
7,851,609
911,226
2,137
4,587
1,800,835
12,568,694
9,793,492
206,814
275,318
7,910,032
2,855,099
1,639
10,931
1,342,920
8,144,132
3,965,329
15,035,007
20,082,265
20,000
165,000
5,588,814
7,198,745
53,952,249
52,158,224
85
Consolidated Statement of Financial PositionAt December 31, 2017
Consolidated Statement of Financial Position
At December 31, 2017
CURRENT LIABILITIES
Placements from other financial institutions
Accounts payable to customers arising from
securities business
Trade payables
Tax liabilities
Other taxes payable
Other payables and accruals
Dividends payable
Derivative financial liabilities
Bank and other borrowings
Short-term financing note payable
Bonds payable
Financial assets sold under repurchase agreements
Financial liabilities at fair value through profit or loss
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Bank and other borrowings
Bonds payable
Convertible bond
Deferred tax liabilities
CAPITAL AND RESERVES
Share capital
Reserves
Equity attributable to owners of the Company
Non-controlling interests
year ended
Year ended
NOTES
12/31/2017
12/31/2016
rmb’000
Rmb’000
33
34
35
36
41
37
38
40
39
44
37
40
42
43
45
46
–
700,000
14,933,719
20,073,435
628,592
608,284
90,266
2,515,399
261,239
3,941
420,000
762,800
1,300,000
10,523,414
373,427
784,300
455,249
76,631
2,431,148
261,046
413
2,116,395
4,828,340
3,000,000
7,486,743
293,658
32,421,081
42,507,358
21,531,168
9,650,866
41,229,439
31,254,074
60,000
8,850,000
2,720,654
394,434
–
6,700,000
–
378,147
12,025,088
7,078,147
29,204,351
24,175,927
4,343,115
4,343,115
16,311,385
13,974,042
20,654,500
18,317,157
8,549,851
5,858,770
29,204,351
24,175,927
The consolidated financial statements on pages 83 to 208 were approved and authorised for issue by the board of
directors on March 16, 2018 and are signed on its behalf by:
DIRECTOR
Zhan xiaozhang
DIRECTOR
luo Jianhu
86
Attributable to owners of the Company
Share of
Investment
differences
Share
capital
Share
Statutory
Capital
revaluation
arising on
Dividend
Special
Retained
premium
reserve
reserve
reserve
translation
reserve
reserves
profits
Non-
Sub-
total
controlling
interests
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
(Note i)
(Note ii)
4,343,115
3,355,621
4,505,773
1,712
56,332
191
1,216,072
18,666
3,239,176
16,736,658
5,261,991
21,998,649
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
262,051
–
–
–
–
–
–
–
–
–
–
–
19,486
19,486
–
–
–
–
–
–
–
–
267
267
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,216,072)
1,281,219
–
–
–
–
–
–
–
–
–
–
–
3,037,405
3,037,405
771,204
3,808,609
–
19,753
18,122
37,875
3,037,405
3,057,158
789,326
3,846,484
–
–
–
–
–
–
(260,587)
(260,587)
–
(1,216,072)
(1,281,219)
(262,051)
–
–
(178,816)
(178,816)
(8,731)
(8,731)
(5,000)
(5,000)
–
–
–
–
(260,587)
(1,216,072)
–
–
At January 1, 2016
Profit for the year
Other comprehensive income
for the year
Total comprehensive income
for the year
Dividend declared to
non-controlling-interests
Disposal of a subsidiary
Withdrawal of
non-controlling-interests
2016 interim dividend
2015 final dividend
Proposed 2016 final dividend
Transfer to reserves
At December 31, 2016
4,343,115
3,355,621
4,767,824
1,712
75,818
458
1,281,219
18,666
4,472,724
18,317,157
5,858,770
24,175,927
Profit for the year
Other comprehensive income
(expense) for the year
Total comprehensive Income
(expense) for the year
Dividend declared to
non-controlling-interests
Dilution impact arising from Spin-off
and Offering (as defined and
see details in Note iii)
Share issue cost in respect of
Spin-off and Offering (Note iii)
Payment to National Social Security
Fund upon Spin-off and Offering
as deemed distribution (Note iii)
2017 interim dividend
2016 final dividend
Proposed 2017 final dividend
Transfer to reserves
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
267,192
–
–
–
–
–
–
–
–
–
–
–
–
–
57,513
(296)
57,513
(296)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,281,219)
1,302,934
–
–
–
–
–
790,449
(28,096)
(142,551)
3,202,130
3,202,130
788,902
3,991,032
–
57,217
67,973
125,190
3,202,130
3,259,347
856,875
4,116,222
–
–
–
–
–
(109,176)
(109,176)
790,449
2,026,219
2,816,668
(28,096)
(31,770)
(59,866)
(142,551)
(51,067)
(193,618)
–
–
–
–
(260,587)
(260,587)
–
(1,281,219)
(1,302,934)
(267,192)
–
–
–
–
–
–
(260,587)
(1,281,219)
–
–
At December 31, 2017
4,343,115
3,355,621
5,035,016
1,712
133,331
162
1,302,934
638,468
5,844,141
20,654,500
8,549,851
29,204,351
87
Consolidated Statement of Changes in EquityFor the year ended December 31, 2017
Consolidated Statement of Changes in Equity
For the year ended December 31, 2017
Notes:
(i)
Statutory reserves comprise:
(a)
(b)
(c)
Statutory surplus reserve
In accordance with the Company Law of the people’s Republic of China (the “PRC”) and the respective
articles of association of the Company and its subsidiaries (collectively the “Entities”), the Entities are
required to allocate 10% of the profit after tax, as determined in accordance with the PRC accounting
standards and regulations applicable to the Entities, to the statutory surplus reserve until such reserve
reaches 50% of the registered capital of the respective Entities. Subject to certain restrictions set out in
the Company Law of the PRC and the respective articles of association of the Entities, part of the statutory
surplus reserve may be converted to increase the respective Entities’ capital.
General risk reserve
In accordance with the Finance Regulation for Financial Enterprises, securities companies are required to
allocate 10% of the profit after tax, as determined in accordance with the PRC accounting standards and
regulations, to the general risk reserve. This general risk reserve may be used to cover potential losses on
risk exposures.
Transaction risk reserve
In accordance with the securities law of the PRC, securities companies are required to allocate not less
than 10% of the profit after tax, as determined in accordance with the PRC accounting standards and
regulations, to the transaction risk reserve. This transaction risk reserve may be used to cover potential
losses on securities transactions.
(ii)
As at January 1, 2017, special reserves mainly comprise:
(a)
(b)
Other reserve which was arising from the Group’s acquisition of additional interest in a subsidiary and the
difference between the carrying value of net assets attributable to the Group acquired and the payment
consideration arising from acquisition; and
Merger reserve which was arising from the acquisition of subsidiaries under common control using the
merger accounting method. This includes the capital of the combining entities at their existing book values
since the first date they were under common control and were reduced by the Group’s payment of cash
consideration to the controlling party and the excess in payment for the acquisition of additional interest to
non-controlling interest of its carrying amount to the controlling party.
(iii)
On June 26, 2017, an indirect non-wholly-owned subsidiary of the Company, Zheshang Securities Co., Ltd.
(“Zheshang Securities”), which is held by Zhejiang Shangsan Expressway Co., Ltd (“Shangsan Co”), has
completed the spin-off and separate listing on the Shanghai Stock Exchange (the “Spin-off and Offering”). On
the date of the Spin-off and Offering, Zheshang Securities issued 333,333,400 new ordinary shares at Rmb8.45
each, the net proceeds after deducting the issuance costs amounted to Rmb2,756,802,000 (representing proceeds
on offering of Rmb2,816,668,000, net of the share issue cost of Rmb59,866,000). Upon completion of the
Spin-off and Offering, the Group’s effective interest in Zheshang Securities has been diluted from approximately
52.15% to approximately 46.93%, the directors of the Company (the “Directors”) are of the view that, the Group
is still able to exert control over Zheshang Securities. The dilution impact of the Group’s interest in Zheshang
Securities has resulted in an increase in non-controlling interests of Rmb1,994,449,000 and the resulting gain of
Rmb762,353,000 recognised in special reserves.
Pursuant to the “Implementing Measures for the Transfer of Certain State-owned Shares from the Domestic
Securities Market to the National Social Security Fund” (Cai Qi No. 【2009】94) (《境內證券市場轉持部分國有股
充實全國社會保障基金實施辦法》(財企【2009】94號)), the state-owned shareholders of Zheshang Securities are
required, upon the listing, to transfer a number of shares in Zheshang Securities they hold which, in aggregate,
represents 10% of the total number of shares issues under the Listing to the National Social Security Fund
(“NSSF”). Such obligation was fully fulfilled by Shangsan Co, a non-wholly-owned subsidiary of the Company and
the direct shareholder of Zheshang Securities in cash payment of Rmb193,618,000 on August 15, 2017, according
to the “Reply on the Proposal of the State-owned Share Transfer in the Initial Public Offerings of Zheshang
Securities Co., Ltd. In A Shares Market” (Zhe Guo Zi Chan Quan No. 【2013】9) (《關於浙商證券股份有限公司A
股首發上市國有股轉持方案的批復》(浙國資產權【2013】9號)). Such payment has been accounted for as deemed
distribution.
88
Profit before tax
Adjustments for:
Finance costs
Interest income
Foreign exchange loss
Gain on additional investment in an associate
Share of profit of associates
Share of profit of a joint venture
Depreciation of property, plant and equipment
Amortisation of expressway operating rights
Release of prepaid lease payments
Amortisation of other intangible assets
Impairment loss on available-for-sale investments
Cumulative gain reclassified from equity on disposal of
Available-for-sale investments
Interest income and dividend from available-for-sale investments
Loss (gain) on disposal of property, plant and equipment
Allowance for write-down of inventories
Allowance for trade receivables and other receivables
Reversal of allowance for advance to customers
arising from margin financing business
Recognition (reversal) of allowance for financial assets
held under the resale agreement
Gain on disposal of a subsidiary
Gain on decrease in fair value in respect of derivative component of
Convertible Bond (as defined in note 42)
Issue cost relating to derivative component of Convertible Bond
Operating cash flows before movements in working capital
Decrease in inventories
Decrease (increase) in trade receivables
Decrease in loans to customers arising from margin financing business
Decrease (increase) in other receivables and prepayments
Increase in held for trading investments
(Increase) decrease in financial assets held under resale agreements
Decrease in bank balances and clearing settlement fund
held on behalf of customers
Decrease (increase) in net derivative financial assets
(Decrease) increase in placements from other financial institutions
Decrease in accounts payable to customers arising from securities business
(Decrease) increase in trade payables
Increase (decrease) in other taxes payable
Increase (decrease) in other payables and accruals
Increase in financial liabilities at fair value through profit or loss
Increase in financial assets sold under repurchase agreement
Cash generated from operations
Income taxes paid
Interest paid
year ended
12/31/2017
rmb’000
5,183,301
Year ended
12/31/2016
Rmb’000
4,997,136
611,747
(26,017)
119,653
–
(161,502)
(17,668)
266,217
1,119,126
1,639
26,101
11,621
(105,560)
(21,223)
3,565
5,993
1,713
671,387
(31,281)
20,156
(5,555)
(64,699)
(9,797)
264,267
1,034,202
1,939
24,095
33,942
(64,791)
(57,290)
(648)
2,638
1,141
(294)
(13,269)
40,076
–
(14,167)
(56,993)
(149,479)
3,079
6,912,088
21,383
29,909
58,717
1,572,255
(4,424,562)
(5,868,239)
5,047,258
9,872
(700,000)
(5,139,716)
(9,656)
13,635
162,913
79,769
3,036,671
802,297
(1,044,791)
(587,173)
–
–
6,732,413
87,421
(126,158)
2,653,827
(1,860,076)
(4,382,908)
1,007,993
6,996,309
(12,488)
500,000
(6,936,206)
54,335
(8,863)
(207,065)
293,658
2,101,363
6,893,555
(1,427,772)
(746,547)
NET CASH (USED IN) FROM OPERATING ACTIVITIES
(829,667)
4,719,236
89
Consolidated Statement of Cash FlowsFor the year ended December 31, 2017
Consolidated Statement of Cash Flows
For the year ended December 31, 2017
INVESTING ACTIVITIES
Interest received
Investment in associates
Proceeds from disposal of an associate
Proceeds from disposal of a subsidiary
Net cash outflows arising from acquisition of
Huihang Co (as defined in Note 48)
Dividends received from associates
Proceeds on disposal of property, plant and equipment
Entrusted loans to a related party
Repayment of entrusted loans from a related party
Purchases of property, plant and equipment
Purchases of other intangible assets
Purchases of prepaid lease payments
Purchase of available-for-sale investments
Proceeds on disposal of available-for-sale investments
Placement of time deposits
Withdrawal of time deposits
year ended
NOTES
12/31/2017
49
48
rmb’000
28,979
(218,911)
–
–
(28,500)
2,000
30,003
(210,000)
552,350
(276,703)
(38,681)
(14,915)
(1,161,943)
2,069,742
(20,000)
165,000
Year ended
12/31/2016
Rmb’000
62,104
(656,900)
42,018
111,373
(541,264)
20,494
3,210
(540,000)
720,000
(480,906)
(17,889)
–
(397,949)
70,890
(165,000)
270,000
NET CASH FROM (USED IN) INVESTING ACTIVITIES
878,421
(1,499,819)
FINANCING ACTIVITIES
Dividends paid
Dividends paid to non-controlling shareholders
Issue of Convertible Bond
Issue cost in respect of Convertible Bond
New bank and other borrowings raised
Repayment of bank and other borrowings
New issue of bonds payable
Repayment of bonds payable
Issue of short-term financing note payable
Repayment of short-term financing note payable
Capital reduction by non-controlling-interests
Proceeds on Spin-off and Offering
Share issue cost in respect of Spin-off and Offering paid
Payment to National Security Fund upon Spin-off and Offering
(1,537,627)
(1,216,072)
(108,983)
2,684,880
(16,725)
2,490,000
(178,690)
–
–
2,916,239
(4,117,269)
(5,832,951)
3,450,000
4,700,000
(3,000,000)
(5,600,000)
762,800
7,928,340
(4,828,340)
(3,716,100)
–
(5,000)
2,816,668
(59,866)
(193,618)
–
–
–
NET CASH USED IN FINANCING ACTIVITIES
(1,658,080)
(1,004,234)
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT JANUARY 1
Effect of foreign exchange rate changes
(1,609,326)
7,198,745
2,215,183
4,983,051
(605)
511
CASH AND CASH EQUIVALENTS AT DECEMBER 31
32
5,588,814
7,198,745
90
1. CORPORATE INFORMATION
Zhejiang Expressway Co., Ltd. (the “Company”) was established in the People’s Republic of China (the “PRC”)
with limited liability on March 1, 1997. The H shares of the Company (“H Shares”) were subsequently listed on The
Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on May 15, 1997.
All of the H Shares of the Company were admitted to the Official List of the United Kingdom Listing Authority (the
“Official List”). Dealings in the H Shares on the London Stock Exchange commenced on May 5, 2000.
On July 18, 2000, with the approval of the Ministry of Foreign Trade and Economic Co-operation of the PRC, the
Company changed its business registration into a Sino-foreign joint stock limited company.
In the opinion of the Directors, the immediate and ultimate holding company of the Company is Zhejiang
Communications Investment Group Co., Ltd. (the “Communications Group”), a state-owned enterprise established
in the PRC.
The addresses of the registered office and principal place of business of the Company are disclosed in the
corporate information section of the annual report.
The consolidated financial statements are presented in Renminbi (“Rmb”), which is also the functional currency of
the Company.
The Company is an investment holding company. The Company and its subsidiaries (collectively referred to as the
“Group”) are involved in the following principal activities:
(a)
the operation, maintenance and management of high grade roads;
(b)
the provision of securities broking services, margin financing and securities lending services, securities
underwriting and sponsorship services, asset management, advisory services and proprietary trading;
(c)
the operation of hotel, the provision of catering service and sales of properties.
91
Notes to the Consolidated Financial StatementsFor the year ended December 31, 2017 Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
REPORTING STANDARDS (“HKFRSs”)
Amendments to HKFRSs that are mandatorily effective for the current year
The Group has applied the following amendments to HKFRSs issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”) for the first time in the current year.
Amendments to HKAS 7
Disclosure Initiative
Amendments to HKAS 12
Recognition of Deferred Tax Assets for Unrealised Losses
Amendments to HKFRS 12
As part of the Annual Improvements to HKFRSs 2014-2016 Cycle
Except as described below, the application of the amendments to HKFRSs in the current year has had no material
impact on the Group’s financial performance and positions for the current and prior years and/or on the disclosures
set out in these consolidated financial statements.
Amendments to HKAS 7 Disclosure Initiative
The Group has applied these amendments for the first time in the current year. The amendments require an
entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising
from financing activities, including both cash and non-cash changes. In addition, the amendments also require
disclosures on changes in financial assets if cash flows from those financial assets were, or future cash flows will
be, included in cash flows from financing activities.
Specifically, the amendments require the following to be disclosed: (i) changes from financing cash flows; (ii)
changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in
foreign exchange rates; (iv) changes in fair values; and (v) other changes.
A reconciliation between the opening and closing balances of these items is provided in note 53. Consistent with
the transition provisions of the amendments, the Group has not disclosed comparative information for the prior
year. Apart from the additional disclosure in note 53, the application of these amendments has had no impact on
the Group’s consolidated financial statements.
92
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
REPORTING STANDARDS (“HKFRSs”) (Continued)
New and revised HKFRSs in issue but not yet effective
The Group has not early applied the following new and revised HKFRSs that have been issued but are not yet
effective:
HKFRS 9
HKFRS 15
HKFRS 16
HKFRS 17
Financial Instruments1
Revenue from Contracts with Customers and the related Amendments1
Leases2
Insurance Contracts4
HK(IFRIC)-Int 22
HK(IFRIC)-Int 23
Foreign Currency Transactions and Advance Consideration1
Uncertainty over Income Tax Treatments2
Amendments to HKFRS 2
Classification and Measurement of Share-based Payment Transactions1
Amendments to HKFRS 4
Applying HKFRS 9 Financial Instruments with HKFRS 4
Insurance Contracts1
Amendments to HKFRS 9
Prepayment Features with Negative Compensation2
Amendments to HKFRS 10
Sale or Contribution of Assets between an Investor and
and HKAS 28
its Associate or Joint Venture3
Amendments to HKAS 28
Long-term Interests in Associates and Joint Ventures2
Amendments to HKAS 40
Transfers of Investment Property1
Amendments to HKAS 28
As part of the Annual Improvements to HKFRSs 2014-2016 Cycle1
Amendments to HKFRSs
Annual Improvements to HKFRSs 2015-2017 Cycle2
1
2
3
4
Effective for annual periods beginning on or after January 1, 2018.
Effective for annual periods beginning on or after January 1, 2019.
Effective for annual periods beginning on or after a date to be determined.
Effective for annual periods beginning on or after January 1, 2021
Except for the new HKFRSs mentioned below, the Directors anticipate that the application of all other new and
amendments to HKFRSs and interpretations will have no material impact on the consolidated financial statements
in the foreseeable future.
93
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 9 Financial Instruments
HKFRS 9 introduces new requirements for the classification and measurement of financial assets, financial
liabilities, general hedge accounting and impairment requirements for financial assets.
Key requirements of HKFRS 9 which are relevant to the Group are:
•
all recognised financial assets that are within the scope of HKFRS 9 are required to be subsequently
measured at amortised cost or fair value. Specifically, debt investments that are held within a business
model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are
solely payments of principal and interest on the principal outstanding are generally measured at amortised
cost at the end of subsequent accounting periods. Debt instruments that are held within a business model
whose objective is achieved both by collecting contractual cash flows and selling financial assets, and
that have contractual terms that give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding, are generally measured at fair value through
other comprehensive income (“FVTOCI”). All other financial assets are measured at their fair value at
subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to
present subsequent changes in the fair value of an equity investment (that is not held for trading) in other
comprehensive income, with only dividend income generally recognised in profit or loss.
•
in relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model, as
opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity
to account for expected credit losses and changes in those expected credit losses at each reporting date to
reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit
event to have occurred before credit losses are recognised.
Based on the Group’s financial instruments and risk management policies as at December 31, 2017, the Directors
anticipate the following potential impacts on initial application of HKFRS 9:
94
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 9 Financial Instruments (Continued)
Classification and measurement
•
Equity instruments, funds and other investments classified as AFS financial assets carried at fair value as
disclosed in note 25: Equity instruments are qualified for designation as measured at FVTOCI under HKFRS
9 and the Group does not elect this option, while funds and other investments are not qualified for the
designation at FVTOCI. Therefore, all these financial assets will be measured at fair value with subsequent
fair value gains or losses to be recognised in profit or loss. Upon initial application of HKFRS 9, investment
revaluation reserve relating to these financial assets will be transferred to retained profits as at January 1,
2018.
•
Equity instruments classified as AFS financial assets carried at costs less impairment as disclosed in note
25: All of these financial assets are qualified for designation as measured at FVTOCI under HKFRS 9 but
the Group will not elect this option for designation at FVTOCI for the financial assets carried at cost less
than impairment. Therefore, these financial assets will be measured at fair value with subsequent fair value
gains or losses to be recognised in profit or loss. Upon initial application of HKFRS 9, fair values changes,
representing the differences between the cost less impairment and fair value, will be adjusted to retained
profits as at January 1, 2018.
•
All other financial assets and liabilities will continue to be measured on the same basis as are currently
measured under HKAS 39.
Impairment
In general, the Directors anticipate that the application of the expected credit loss model of HKFRS 9 will result
in earlier provision of credit losses which are not yet incurred in relation to the Group’s financial assets measured
at amortised costs and other items that subject to the impairment provision upon application of HKFRS 9 by the
Group.
Based on the assessment by the Directors, the adoption of the new classification and measurement basis
and expected credit loss model mentioned above in respect of financial assets will increase and decrease the
retained profits and the investment revaluation reserve as at January 1, 2018 respectively by less than 1% of the
total equity attributable to owners of the Company as at December 31, 2017. The net impact to the total equity
attributable to owners of the Company as at January 1, 2018 is insignificant.
95
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 15 Revenue from Contracts with Customers
HKFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for
revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue recognition guidance
including HKAS 18 Revenue, HKAS 11 Construction Contracts and the related Interpretations when it becomes
effective.
The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue
recognition:
•
•
•
•
•
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when
‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer.
Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore,
extensive disclosures are required by HKFRS 15.
In 2016, the HKICPA issued Clarification to HKFRS15 in relation to the identification of performance obligations,
principal versus agent considerations, as well as licensing application guidance.
Revenue of the Group comprises primarily toll revenue, sales of properties, hotel and catering revenue,
commission on securities and futures dealing and broking, interest income arising from margin financing
and securities lending, deposits and financial assets under resale agreements, asset management and fund
management fees and underwriting and financial advisory fees. Interest income is not under the scope of
HKFRS15. The Group has assessed the impact of HKFRS 15 on the remaining revenue and does not expect that
the application of HKFRS15 will have a significant impact on recognition or measurement of income from majority
of these operations. However, the application of HKFRS 15 may result in more disclosures in the consolidated
financial statements.
96
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 16 Leases
HKFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting
treatments for both lessors and lessees. HKFRS 16 will supersede HKAS 17 Leases and the related interpretations
when it becomes effective.
HKFRS 16 distinguishes lease and service contracts on the basis of whether an identified asset is controlled by a
customer. Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced
by a model where a right-for-use asset and a corresponding liability have to be recognised for all leases by
lessees, except for short-term leases and leases of low value assets.
The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain
exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease
liability. The lease liability is initially measured at the present value of the lease payments that are not paid at
that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of
lease modifications, amongst others. For the classification of cash flows, the Group currently presents upfront
prepaid lease payments as investing cash flows in relation to leasehold lands for owned use and those classified
as investment properties while other operating lease payments are presented as operating cash flows. Upon
application of HKFRS 16, lease payments in relation to lease liability will be allocated into a principal and an
interest portion which will be presented as financing and operating flows by the Group.
Under HKAS 17, the Group has already recognised an asset for prepaid lease payments for leasehold lands where
the Group is a lessee. The application of HKFRS 16 may result in potential changes in classification of these
assets depending on whether the Group presents right-of-use assets separately or within the same line item at
which the corresponding underlying assets would be presented if they were owned.
In contrast to lessee accounting, HKFRS 16 substantially carries forward the lessor accounting requirements in
HKAS 17, and continues to require a lessor to classify a lease either as an operating lease or a finance lease.
Furthermore, extensive disclosures are required by HKFRS 16.
As at December 31, 2017, the Group has non-cancellable operating lease commitments of Rmb101,668,000 as
disclosed in note 54. A preliminary assessment indicates that these arrangements will meet the definition of a
lease. Upon application of HKFRS 16, the Group will recognise a right-of-use asset and a corresponding liability in
respect of all these leases unless they qualify for low value or short-term leases.
97
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 16 Leases (Continued)
In addition, the Group currently considers refundable rental deposits paid of Rmb8,126,000 and refundable rental
deposits received of Rmb1,714,000 as rights and obligations under leases to which HKAS 17 applied. Based on
the definition of lease payments under HKFRS 16, such deposits are not payments relating to the right to use the
underlying assets, accordingly, the carrying amounts of such deposits may be adjusted to amortised cost and such
adjustments are considered as additional lease payments. Adjustments to refundable rental deposits paid would be
included in the carrying amount of right-of-use assets. Adjustments to refundable rental deposits received would be
considered as advanced lease payments.
Furthermore, the application of new requirements may result changes in measurement, presentation and
disclosure as indicated above.
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with HKFRs issued by the HKICPA. In
addition, the consolidated financial statements include applicable disclosures required by the Rules Governing
the Listing of Securities on the Stock Exchange of Hong Kong Limited (“Listing Rules”) and by the Hong Kong
Companies Ordinance.
The consolidated financial statements have been prepared on the historical cost basis, except for certain financial
instruments that are measured at fair values at the end of each reporting period, as explained in the accounting
policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes
into account the characteristics of the asset or liability if market participants would take those characteristics into
account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure
purposes in these consolidated financial statements is determined on such a basis, except leasing transactions
that are within the scope of HKAS 17 Leases, and measurements that have some similarities to fair value but are
not fair value, such as net realisable value in HKAS 2 Inventories or value in use in HKAS 36 Impairment of Assets.
For financial instruments which are transferred at fair value and a valuation technique that unobservable inputs is
to be used to measure fair value in subsequent periods, the valuation technique is calibrated so that the results of
the valuation technique equals the transaction price.
98
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on
the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to
the fair value measurement in its entirety, which are described as follows:
•
•
•
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset
or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including
structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
•
•
•
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
When the Group has less than a majority of the voting rights of an investee, it has power over the investee
when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee
unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group’s
voting rights in an investee are sufficient to give it power, including:
•
•
•
•
the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other
vote holders;
potential voting rights held by the Group, other vote holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Group has, or does not have, the current ability
to direct the relevant activities at the time that decisions need to be made, including voting patterns at
previous shareholders’ meetings.
99
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of consolidation (Continued)
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the
Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated statement of profit or loss and other comprehensive income from
the date the Group gains control until the date when the Group ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the
non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies in line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation.
Change in the Group’s ownership interests in existing subsidiaries
Changes in the Group’s ownership interests in existing subsidiaries that do not result in the Group losing control
over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s relevant
components of equity and the non-controlling interests are adjusted to reflect the changes in their relative interests
in the subsidiaries, including re-attribution of relevant reserves between the Group and the non-controlling interests
according to the Group’s and the non-controlling interests’ proportionate interests.
Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, the assets and liabilities of that subsidiary and non-controlling
interests (if any) are derecognised. A gain or loss is recognised in the profit or loss and is calculated as the
difference between (i) the aggregate of the fair value of the consideration received and the fair value of any
retained interest and (ii) the carrying amount of assets (including goodwill), and liabilities of the subsidiary
attributable to the owners of the Company. All amounts previously recognised in other comprehensive income in
related to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities
of the subsidiary (i.e., reclassified to profit or loss or transferred to another category of equity as specified/
permitted by applicable HKFRSs). The fair value of any investment retained in the former subsidiary at the date
when the control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS
39 or, when applicable, the cost on initial recognition of an investment in an associate of a joint venture.
100
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values
of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and
the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are
generally recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair
value, except that:
•
deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are
recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits
respectively;
•
liabilities or equity instruments related to share-based payment arrangements of the acquiree or
share-based payment arrangements of the Group entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with HKFRS 2 Share-based Payment at the
acquisition date (see the accounting policy below); and
•
assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-current
Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any)
over the net amount of the identifiable assets acquired and the liabilities assumed as at acquisition date. If, after
re-assessment, the net amount of the identifiable assets acquired and liabilities assumed exceeds the sum of the
consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the
acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as
a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of
the relevant subsidiary’s net assets in the event of liquidation are initially measured at the non-controlling interests’
proportionate share of the recognised amounts of the acquiree’s identifiable net assets or at fair value. The choice
of measurement basis is made on a transaction-by-transaction basis.
101
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or
groups of cash-generating units) that is expected to benefit from the synergies of the combination, which represent
the lowest level at which the goodwill is monitored for internal management purpose and not larger than an
operating segment.
A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for
impairment annually or more frequently when there is indication that the unit may be impaired. For goodwill arising
on an acquisition in a reporting period, the cash-generating unit (or group of cash-generating units) to which
goodwill has been allocated is tested for impairment before the end of that reporting period. If the recoverable
amount is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any
goodwill and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit (or
group of cash-generating units).
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the amount of the profit or loss on disposal (or any of the cash-generating unit within group of
cash-generating units in which the Group monitors goodwill).
The Group’s policy for goodwill arising on the acquisition of associates and joint venture is described below.
Investments in associates and a joint venture
An associate is an entity over which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee but is not control or joint control over
those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights
to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require unanimous consent of the
parties sharing control.
102
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments in associates and a joint venture (Continued)
The results and assets and liabilities of associates and joint ventures are incorporated in these consolidated
financial statements using the equity method of accounting. Under the equity method, an investment in an
associate or a joint venture is initially recognised in the consolidated statement of financial position at cost and
adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the
associate or joint venture. Changes in net assets of the associate/joint venture other than profit and loss and other
comprehensive income are not accounted for unless such changes resulted in changes in ownership interest held
by the Group. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in
that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s
net investment in the associate or joint venture), the Group discontinues recognising its share of further losses.
Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or
made payments on behalf of the associate or joint venture.
An investment in an associate or a joint venture is accounted for using the equity method from the date on which
the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint
venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable
assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the
investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the
cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the
investment is acquired.
The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss
with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying
amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment
of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs
of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the
investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the
recoverable amount of the investment subsequently increases.
When the Group ceases to have significant influence over an associate or joint control over a joint venture, it is
accounted for as a disposal of the entire interest in the investee with a resulting gain or loss being recognised in
profit or loss.
When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from
the transactions with the associate or joint venture is recognised in the Group’s consolidated financial statements
only to the extent of interests in the associate or joint venture that are not related to the Group.
103
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for
estimated customer returns, rebates and other similar allowances.
Revenue is recognised when the amount of revenue can be reliably measured; when it is probable that future
economic benefits will flow to the Group and when specific criteria have been met for each of the Group’s
activities, as described below.
Revenue from the sale of goods is recognised when the goods are delivered and titles have passed.
Revenue from sale of properties in the ordinary course of business is recognised when the respective properties
have been completed and delivered to the buyers. Deposits and instalments received from purchasers prior to
meeting the above criteria for revenue recognition are included in the consolidated statement of financial position
under current liabilities.
Service income is recognised when services are provided.
Revenue from room rental, food and beverage sales and other ancillary service in the hotel are recognised when
the relevant service have been rendered.
Commission income from securities broking business is recognised on a trade date basis.
Advisory and handling fee income are recognised when the relevant transactions have been provided or the
relevant services have been rendered.
Underwriting and sponsors fees are recognised as income in accordance with the terms of the underwriting
agreement or deal mandate when the relevant significant acts have been completed.
Asset management fee income is recognised when management services are provided in accordance with the
management contracts.
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been
established (provided that it is probable that the economic benefits will flow to the Group and the amount of
revenue can be measured reliably).
104
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue recognition (Continued)
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to
the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by
reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly
discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net
carrying amount on initial recognition.
The Group’s accounting policy for recognition of revenue from operating leases is described in the accounting
policy for leasing below.
Property, plant and equipment
Property, plant and equipment including buildings, leasehold land (classified as finance leases) held for use in the
production or supply of goods or services, or for administrative purposes (other than properties under construction
as described below), are stated in the consolidated statement of financial position at cost, less subsequent
accumulated depreciation and subsequent accumulated impairment losses, if any.
Properties in the course of construction for production, supply or administrative purposes are carried at cost,
less any recognised impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs
capitalised in accordance with the Group’s accounting policy. Such properties are classified to the appropriate
categories of property, plant and equipment when completed and ready for intended use. Depreciation of these
assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Depreciation is recognised so as to write off the cost of assets (other than properties under construction) less
their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual
values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in
estimate accounted for on a prospective basis.
105
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, plant and equipment (Continued)
The estimated useful life and annual depreciation rate (except for construction in progress), after taking into
account the residual value, adopted by the Group are set out below:
Leasehold land and buildings
Hotel
Ancillary facilities
Communication and signaling equipment
Motor vehicles
Machinery and equipment
estimated
annual
useful life
depreciation rate
20 – 50 years
1.9% – 4.9%
30 years
3.2%
10 – 30 years
3.2% – 9%
5 years
19.4%
5 – 8 years
12.1% – 19.4%
5 – 8 years
12.1% – 19.4%
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an
item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in profit or loss.
Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is
recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period, with the effect of any changes in estimate being
accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately
are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of
impairment losses on tangible and intangible assets below).
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are recognised separately from goodwill are initially
recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination with finite useful lives are
reported at cost less accumulated amortisation and any accumulated impairment losses, on the same basis as
intangible assets that are acquired separately.
106
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible assets (Continued)
Intangible assets acquired in a business combination (Continued)
Intangible assets with indefinite useful lives are carried at cost less subsequent accumulated impairment losses
(see accounting policy in respect of impairment losses on tangible and intangible assets below).
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use
or disposal. Gains and losses arising from derecognition of an intangible assets are measured at the difference
between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss in the
period when the asset is derecognised.
Expressway operating rights under service concession arrangements
When the Group has a right to charge for usage of concession infrastructure, it recognises concession intangible
assets based on fair value of the consideration paid upon initial recognition. Subsequent costs incurred on
expressway widening projects and upgrading services are recognised as additional costs of the expressway
operating rights. The concession intangible assets representing expressway operating rights are carried at cost
less accumulated amortisation and any accumulated impairment losses.
The concession intangible assets are amortised to write-off their cost over their expected useful lives in the
remaining concession period on a straight-line basis.
Costs in relation to the day-to-day servicing, repairs and maintenance of the expressway infrastructures are
recognised as expenses in the periods in which they are incurred.
Impairment on tangible and intangible assets other than goodwill (see the
accounting policy in respect of goodwill above)
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets
with finite useful lives to determine whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any).
When it is not possible to estimate the recoverable amount of an individual asset individually, the Group estimates
the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent
basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or
otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
107
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment on tangible and intangible assets other than goodwill (see the
accounting policy in respect of goodwill above) (Continued)
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset (or a cash-generating
unit) for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised immediately in profit or loss. In allocating the impairment loss, the impairment loss is allocated
first to reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis
based on the carrying amount of each asset in the unit. The carrying amount of an asset is not reduced below
the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero. The
amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the
other assets of the unit. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the
asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit
or loss.
Inventories
Inventories include properties held for sale, consumables and parts for toll road operation, maintenance and hotel
service and those commodities held for sale arising from the securities business.
Inventories are stated at the lower of cost and net realisable value. Cost of properties held for sale includes the
costs of land, development expenditure incurred and, where appropriate, borrowing costs capitalised. Costs of
other inventories are calculated using the weighted average method. Net realisable value represents the estimated
selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
108
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the
relevant lease.
The Group as lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased
asset are consumed.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from
the leased asset are consumed.
Leasehold land and building
When the Group makes payments for a property interest which includes both leasehold land and building elements,
the Group assesses the classification of each element as a finance or an operating lease separately based on the
assessment as to whether substantially all the risks and rewards incidental to ownership of each element have
been transferred to the Group, unless it is clear that both elements are operating leases in which case the entire
property is accounted as an operating lease. Specifically, the entire consideration (including any lump-sum upfront
payments) are allocated between the leasehold land and the building elements in proportion to the relative fair
values of the leasehold interests in the land element and building element at initial recognition.
To the extent the allocation of the relevant payments can be made reliably, interest in leasehold land that is
accounted for as an operating lease is presented as ‘prepaid lease payments’ in the consolidated statement of
financial position and is amortised over the lease term on a straight-line basis. When the lease payments cannot
be allocated reliably between the leasehold land and building elements, the entire property is generally classified
as if the leasehold land is under finance lease.
109
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies other than the
functional currency of that entity (foreign currencies) are recognised at the rates of exchange prevailing at the
dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are
recognised in profit or loss in the period in which they arise.
For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s
operations are translated into the presentation currency of the Group (i.e., Rmb) using exchange rates prevailing
at the end of each reporting period. Income and expenses items are translated at the average exchange rates for
the period. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated
in equity under the heading of share of differences arising on translation (attributed to non-controlling interests as
appropriate).
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to
the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the
conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group
recognises as expenses the related costs for which the grants are intended to compensate. Specifically,
government grants whose primary condition is that the Group should purchase, construct or otherwise acquire
non-current assets are recognised as deferred income in the consolidated statement of financial position and
transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose
of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the
period in which they become receivable.
110
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Retirement benefit costs
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have
rendered services entitling them to the contributions.
Short-term employee benefits
Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as
and when employees rendered the services. All short-term employee benefits are recognised as an expense unless
another HKFRS requires or permits the inclusion of the benefit in the cost of an asset.
A liability is recognised for benefits accruing to employees (such as wages and salaries, annual leave and sick
leave) after deducting any amount already paid.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as
reported in the consolidated statement of profit or loss and other comprehensive income because of items of
income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The
Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the
end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in
the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are
generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will
be available against which those deductible temporary differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit
nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries
and interests in associates and a joint venture, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments and interests
are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
111
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Taxation (Continued)
The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent
that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the
manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in
other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised
in other comprehensive income or directly in equity respectively.
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual
provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in
profit or loss.
Financial assets
Financial assets are classified into the following specified categories: financial assets at fair value through profit
or loss (“FVTPL”), AFS financial assets and loans and receivables. The classification depends on the nature and
purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or
sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales
are purchases or sales of financial assets that require delivery of assets within the time frame established by
regulation or convention in the marketplace.
112
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts (including all fees and points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where
appropriate, a shorter period, to the net carrying amount on initial recognition.
Interest income is recognised on an effective interest basis for debt instruments other than those financial assets
classified as at FVTPL, of which interest income is included in net gains or losses.
Financial assets at FVTPL
Financial assets classified as at FVTPL include financial asset held for trading.
A financial asset is classified as held for trading if:
•
•
it has been acquired principally for the purpose of selling in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
together and has a recent actual pattern of short-term profit-taking; or
•
it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised
in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the
financial asset and is included in the ‘securities investment gains’ line item. Fair value is determined in the manner
described in Note 52(c).
113
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
AFS financial assets
AFS financial assets are non-derivatives that are either designated as AFS or are not classified as (a) loans and
receivables, (b) held-to-maturity investments or (c) financial assets at FVTPL.
Equity and debt securities held by the Group that are classified as AFS financial assets and are traded in an active
market are measured at fair value at the end of each reporting period except for unquoted equity investment
whose fair value cannot be reliably measured. Changes in the carrying amount of AFS debt instruments relating to
interest income calculated using the effective interest method are recognised in profit or loss. Dividends on AFS
equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established.
Other changes in the carrying amount of AFS financial assets are recognised in other comprehensive income
and accumulated under the heading of investments revaluation reserve. When the investment is disposed of or
is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation
reserve is reclassified to profit or loss (see the accounting policy in respect of impairment of financial assets
below).
Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the
dividends is established.
AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be
reliably measured are measured at cost less any identified impairment losses at the end of each reporting period
(see the accounting policy in respect of impairment loss on financial assets below).
Loan and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. Loans and receivables (including trade receivables, loans to customers arising from margin
financing business, other receivables, financial assets held under resale agreements, bank balances and clearing
settlement fund held on behalf of customers and bank balances, clearing settlement fund, deposits and cash) are
measured at amortised cost using the effective interest method, less any identified impairment losses (see the
accounting policy in respect of impairment of financial assets below).
114
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting
period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or
more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the
financial assets have been affected.
For an AFS equity investment, a significant or prolonged decline in the fair value of the security below its cost is
considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
•
•
•
•
significant financial difficulty of the issuer or counterparty; or
breach of contract, such as default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
the disappearance of an active market for that financial asset because of financial difficulties.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference
between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the
financial asset’s original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the
asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market
rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods (see the
accounting policy below).
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the
exception of trade receivables and loans to customers arising from margin financing business, where the carrying
amount is reduced through the use of an allowance account.
When trade receivables are considered uncollectible, they are written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognised in profit or loss.
115
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)
For the loans to customers arising from margin financing business, the Group reviews its advances to customers to
assess impairment on a periodic basis. In determining whether an impairment loss should be recognised in profit or
loss, the Group reviews the value of the securities collateral received from the customers firstly on individual basis,
then on collective basis in determining the impairment. The methodology and assumptions used for estimating
both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss
estimates and actual loss experience.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in
other comprehensive income are reclassified to profit or loss in the period.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment losses was
recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the
carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised.
In respect of AFS equity investments, impairment losses previously recognised in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other
comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of AFS
debt investments, impairment losses are subsequently reversed through profit or loss if an increase in the fair
value of the investment can be objectively related to an event occurring after the recognition of the impairment
loss.
Financial liabilities and equity instruments
Debt and equity instruments issued by a group entity are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all
of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue
costs.
116
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial liabilities and equity instruments (Continued)
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments (including all fees and points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability,
or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest expense is
recognised on an effective interest basis other than those financial liabilities classified as at FVTPL, of which the
interest expense is included in net gains or losses.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is (i) held for trading or (ii) it is designated
as at FVTPL.
A financial liability is classified as held for trading if:
•
•
•
it has been acquired principally for the purpose of repurchasing it in the near term; or
on initial recognition it is a part of a portfolio of identified financial instruments that the Group manages
together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial
recognition if:
•
•
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed
and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk
management or investment strategy, and information about the grouping is provided internally on that basis;
or
•
it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire
combined contract (asset or liability) to be designated as at FVTPL.
117
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial liabilities and equity instruments (Continued)
Financial liabilities at amortised cost
Financial liabilities (including accounts payable to customers arising from securities business, trade payables,
other payables, dividends payable, bank and other borrowings, placements from other financial institutions,
short-term financing note payable, financial guarantee, financial assets sold under repurchase agreements, bonds
payable and convertible bond) are subsequently measured at amortised cost, using the effective interest method.
Convertible bond
A conversion option that will be settled other than by the exchange of a fixed amount of cash or another financial
asset for a fixed number of the Group’s own equity instruments is a conversion option derivative.
At the date of issue, both the debt component and derivative components are recognised at fair value. In
subsequent periods, the debt component of the convertible bond is carried at amortised cost using the effective
interest method. The derivative component is measured at fair value with changes in fair value recognised in profit
and loss.
Transaction costs that relate to the issue of the convertible bond are allocated to the debt and derivative
components in proportion to their relative fair values. Transactions costs relating to the derivative component are
charged to profit or loss immediately. Transaction costs relating to the debt component are included in the carrying
amount of the debt portion and amortised over the period of the convertible bond using the effective interest
method.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date derivative contracts are entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is
recognised in profit or loss immediately, unless the derivative is designated and effective as a hedging instruments,
in which event the timing of recognition in profit or loss depends on the nature of the hedge relationship.
Embedded derivatives
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the
definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and
the host contracts are not measured at FVTPL. Generally, multiple embedded derivatives in a single instrument are
treated as a single compound embedded derivative unless those derivatives relate to different risk exposures and
are readily separable and independent of each other.
118
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets held under resale agreements
Financial assets held under resale agreements where the Group acquires financial assets which will be resold at
a predetermined price at a future date under resale agreements, the cash advanced by the Group is recognised
as secured loans and receivables and presented as amounts held under resale agreements in the consolidated
statement of financial position. The difference between the purchase and resale consideration is amortised over
the period of the respective agreements using the effective interest method and is included in interest income.
Financial assets sold under repurchase agreements
Financial assets sold subject to agreements with a commitment to repurchase at a specific future date and price
are not derecognised in the consolidated statement of financial position. The proceeds from selling such assets are
presented under “financial assets sold under repurchase agreements” in the consolidated statement of financial
position. The difference between the selling price and repurchasing price is recognised as interest expense during
the term of the agreement using the effective interest method.
Securities lending arrangement
The Group lends investment securities to clients and requires cash and/or equity securities from customers held
as collaterals under such securities lending agreements. The cash collaterals arisen from these are included in
“accounts payable to customers arising from securities business”. For those securities held by the Group and lent
to client that do not result in the derecognition of financial assets, they are included in AFS investments.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the
holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms
of a debt instrument. Financial guarantee contracts issued by the Group are initially measured at their fair values
and are subsequently measured at the higher of:
(i)
the amount of obligation under the contract, as determined in accordance with HKAS 37 Provisions,
Contingent Liabilities and Contingent Assets; and
(ii)
the amount initially recognised less, where appropriate, cumulative amortisation
r e c o g n i s e d o v e r t h e
guarantee period.
119
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial guarantee contracts (Continued)
Derecognition
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to
another entity. If the Group retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of
the consideration received and receivable and the cumulative gain or loss that had been recognised in other
comprehensive income and accumulated in equity is recognised in profit or loss.
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged,
cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and
the consideration paid and payable is recognised in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
120
4. C R I T I C A L A C C O U N T I N G J U D G E M E N T A N D K E Y S O U R C E S O F
ESTIMATION UNCERTAINTY
Critical judgements in applying accounting policies
The followings are the critical judgements, apart from those involving estimations (see below), that management
has made in the process of applying the Group’s accounting policies and that have the most significant effect on
the amounts recognised in the consolidated financial statements.
Impairment of AFS investments
The determination of whether an AFS investment is impaired requires significant judgment. For listed AFS equity
investments and other equity related investments measured at fair value, a significant or prolonged decline in fair
value below cost is considered to be objective evidence of impairment. Judgment is required when determining
whether a decline in fair value has been significant or prolonged. In making this judgment, the Group evaluates
the duration and extent to which the fair value of an investment is less than its cost. In assessing whether it is
prolonged, the decline is evaluated against the period in which the fair value of the asset has been below its
original cost at initial recognition. In assessing whether it is significant, the decline in fair value is evaluated
against the original cost of the asset at initial recognition. The Group also takes into account other factors,
such as the historical data on market volatility and the price of the specific investment, significant changes in
technology, markets, economics or the law, as well as industry and sector performance and the consolidated
financial statements regarding the investee that provides evidence that the cost of the equity securities may not
be recovered. Judgment is also required to determine whether historical performance remains representative of
current and future economic conditions. For AFS debt instruments, the Group makes the judgments as to whether
there is an objective evidence of impairment which indicates a measurable decrease in the estimated future cash
flows of these debt instruments. For unlisted AFS equity instruments measured at cost, the Group makes the
judgement as to whether there is an objective evidence of impairment exists based on the investee’s financial
conditions and business prospects, including industry environment, as well as operating and financing cash flows.
This requires a significant level of management judgement which would affect the amount of impairment losses in
profit or loss. Details of the AFS investments are set out in Note 25.
Determination of consolidation scope
All facts and circumstances must be taken into consideration in the assessment of whether the Group, as an
investor, controls the investee. The principle of control sets out the following three elements of control: (a) power
over the investee; (b) exposure, or rights, to variable returns from involvement with the investee; and (c) the ability
to use power over the investee to affect the amount of the investor’s returns. The Group reassesses whether or
not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three
elements of control listed above.
121
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
4. C R I T I C A L A C C O U N T I N G J U D G E M E N T A N D K E Y S O U R C E S O F
ESTIMATION UNCERTAINTY (Continued)
Critical judgements in applying accounting policies (Continued)
Determination of consolidation scope (Continued)
For collective asset management schemes and investment funds where the Group involves as a manager, the
Group considers the scope of its decision-making authority and assesses whether the combination of investments
it holds, if any, together with its remuneration and credit enhancements creates exposure to variability of returns
from the activities of the collective asset management schemes and investment funds that is of such significance
that it indicates that the Group is a principal. The collective asset management schemes and investment funds are
consolidated if the Group acts in the role of principal.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty
at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying
amounts of assets within the next financial year.
Estimated impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the recoverable amount use of the
cash-generating units to which goodwill has been allocated, which is the higher of the value in use or fair value
less costed The value in use calculation requires the Group to estimate the future cash flows expected to arise
from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the
actual future cash flows are less than expected, a material impairment loss may arise. As at December 31, 2017,
the carrying amount of goodwill is Rmb86,867,000 (without accumulated impairment loss) (2016: Rmb86,867,000
(without accumulated impairment loss)). Details of the impairment testing are disclosed in Note 22.
Estimated impairment of intangible assets with indefinite useful lives
Determining whether intangible assets with indefinite useful lives are impaired requires an estimation of the value
in use of themselves or the cash-generating unit to which they belong. The value in use calculation requires the
Group to estimate the future cash flows expected to arise from themselves or the cash-generating unit to which
they belong and a suitable discount rate in order to calculate the present value. Where the actual future cash flows
are less than expected, a material impairment loss may arise. As at December 31, 2017, the carrying amounts of
intangible assets with indefinite useful lives were Rmb68,235,000 (without accumulated impairment loss) (2016:
Rmb66,563,000 (without accumulated impairment loss)). Details of the impairment testing are disclosed in Note 22.
122
4. C R I T I C A L A C C O U N T I N G J U D G E M E N T A N D K E Y S O U R C E S O F
ESTIMATION UNCERTAINTY (Continued)
Key sources of estimation uncertainty (Continued)
Impairment of loans to customers arising from margin financing business and
financial assets held under resale agreements
The Group reviews its loans to customers arising from margin financing business and financial assets held under
resale agreements to assess impairment on a periodic basis. When there is objective evidence of impairment loss
for loans to customers arising from margin financing business and financial assets held under resale agreements,
the Group takes into consideration the estimation of future cash flows. Specifically, the Group reviews the value
of the cash and securities collateral received from the customers firstly on an individual basis, then on a collective
basis in determining the impairment.
The policy for collective impairment allowances for loans to customers arising from margin financing business and
financial assets held under resale agreements of the Group is based on the evaluation of probability of default, loss
given default and exposure at default of accounts and on the management’s judgement. A considerable amount
of judgement is required in assessing the ultimate realisation of these loans to customers arising from margin
financing business and financial assets held under resale agreements, including the current creditworthiness, and
the past collection history. Details are set out in Notes 27 and 30.
Estimated impairment of interests in a joint venture and associates
The Group regularly reviews whether there are any indications of impairment and recognises an impairment
loss if the carrying amount of the Group’s interest in a joint venture or associates are lower than their respective
recoverable amount. The Group tests for impairment for the interests in a joint venture and associates whenever
there is an indication that the asset may be impaired. The recoverable amounts have been determined based on
the higher of the fair value less costs of disposal and value in use calculations. These calculations require the
use of estimates, such as discount rates, future profitability and growth rates. Where the actual future cash flows
are less than expected, a material impairment loss may arise. As at December 31, 2017, the carrying amount of
interest in a joint venture was Rmb303,065,000 (without accumulated impairment loss) (2016: Rmb285,397,000
(without accumulated impairment loss)), and the carrying amount of interests in associates was Rmb1,686,227,000
(without accumulated impairment loss) (2016: Rmb1,310,486,000 (without accumulated impairment loss)).
123
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
4. C R I T I C A L A C C O U N T I N G J U D G E M E N T A N D K E Y S O U R C E S O F
ESTIMATION UNCERTAINTY (Continued)
Key sources of estimation uncertainty (Continued)
Provision for financial guarantee contract
The Directors based on its best estimate of the financial position and credit rating of the guarantee to determine
the probability of incurring a claim by the counterparty to the Company to estimate fair value or the respective
obligation under the financial guarantee contract. Based on expectations at the end of the reporting period, the
Group considers that it is more likely than not that no amount will be payable under the arrangement. However, this
estimate is subject to change depending on the probability of the counterparty claiming under the guarantee which
is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer
credit losses. As at December 31, 2017, in respect of the financial guarantee contract provided to a joint venture
of the Group in the amount of Rmb842,643,000 (2016: Rmb947,275,000), the Directors considered that the fair
value of the financial guarantee obligation was insignificant on the date of initial recognition and determined that no
provision was recognised for both years.
Fair value measurements and valuation processes
Some of the Group’s assets and liabilities are measured at fair value for financial reporting purposes. The board
of directors of the Group has set up a valuation team, which is headed up by the Chief Financial Officer (“CFO”) of
the Group, to determine the appropriate valuation techniques and inputs for fair value measurements.
In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is
available, Where Level 1 inputs are not available, the Group engages qualified valuers to perform the valuation.
The CFO works closely with the qualified external valuers to establish the appropriate valuation techniques and
inputs to the model. The CFO reports the valuation committee’s findings to the board of directors of the Group at
the end of each reporting period to explain the cause of fluctuations in the fair value of the assets and liabilities.
124
5. SEGMENT INFORMATION
Information reported to the General Manager of the Company, being the chief operating decision maker, for the
purposes of resource allocation and assessment of segment performance focuses on types of goods or services
delivered or provided.
Specifically, the Group’s reportable and operating segments under HKFRS 8 are as follows:
(i)
Toll operation – the operation and management of high grade roads and the collection of the expressway
tolls.
(ii)
Securities operation – the securities broking, margin financing and securities lending, securities
underwriting and sponsorship, asset management, advisory services and proprietary trading.
(iii)
Other operation – properties development, hotel operation and other ancillary services.
Segment revenue and results
The following is an analysis of the Group’s revenue and results by reportable and operating segment.
For the year ended december 31, 2017
Continuing operations
toll operation
securities
operation
others
total
rmb’000
rmb’000
rmb’000
rmb’000
Revenue – external customers
5,986,249
3,491,250
148,841
9,626,340
Segment profit
2,754,152
1,045,237
191,643
3,991,032
For the year ended December 31, 2016
Continuing operations
Toll operation
Securities
operation
Others
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Revenue – external customers
5,279,348
4,175,240
280,759
9,735,347
Segment profit
2,477,506
1,247,877
1,632
3,727,015
The accounting policies of the operating segments are the same as the Group’s accounting policies described in
Note 3. Segment profit represents the profit after tax of each operating segment. This is the measure reported to
the chief operating decision maker for the purposes of resource allocation and performance assessment.
125
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
5. SEGMENT INFORMATION (Continued)
Segment assets and liabilities
The following is an analysis of the Group’s assets and liabilities by reportable and operating segment:
Continuing operations
Toll operation
Securities operation
Others
segment assets
segment liabilities
12/31/2017
12/31/2016
12/31/2017
12/31/2016
rmb’000
Rmb’000
rmb’000
Rmb’000
18,261,586
17,883,833
(4,995,482)
(5,261,742)
53,215,230
53,839,312
(39,424,352)
(44,172,118)
2,086,837
1,951,420
(26,335)
(151,645)
Total segment assets (liabilities)
73,563,653
73,674,565
(44,446,169)
(49,585,505)
Goodwill
86,867
86,867
–
–
Consolidated assets (liabilities)
73,650,520
73,761,432
(44,446,169)
(49,585,505)
Segment assets and segment liabilities represent the assets and liabilities of the subsidiaries operating in the
respective reportable and operating segment.
126
5. SEGMENT INFORMATION (Continued)
Other segment information
Amounts included in the measure of segment profit/loss or segment assets:
For the year ended december 31, 2017
Continuing operations
Income tax expense
845,248
339,462
7,559
1,192,269
toll operation
securities
operation
others
total
rmb’000
rmb’000
rmb’000
rmb’000
Interest income on bank balances and
entrusted loan receivables
Interest expense
Interests in associates
Interest in a joint venture
Share of (loss) profit of associates
Share of profit of a joint venture
Gain on fair value changes on held for
trading investments
Gain on decrease in fair value in
respect of the derivative
component of Convertible Bond
(as defined in Note 42)
Additions to non-current assets (Note)
Depreciation and amortisation
Loss on disposal of property,
plant and equipment
(7,466)
168,968
25,945
135,275
–
303,065
–
17,668
–
476,472
317,163
–
–
174
525,491
149,479
106,652
1,283,545
–
306,397
110,401
72
–
26,017
611,747
1,369,064
1,686,227
–
–
–
–
30,356
19,137
303,065
161,502
17,668
525,665
149,479
443,405
1,413,083
2,484
1,081
–
3,565
127
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
5. SEGMENT INFORMATION (Continued)
Other segment information (Continued)
For the year ended December 31, 2016
Continuing operations
Income tax expense
Interest income on bank balances and
entrusted loan receivables
Interest expense
Interests in associates
Interest in a joint venture
Share of profit of associates
Share of profit of a joint venture
Gain on fair value changes on held for
trading investments
Additions to non-current assets (Note)
Depreciation and amortisation
(Gain) loss on disposal of property,
Toll operation
Rmb’000
761,688
27,459
134,351
–
285,397
–
9,797
6,819
2,564,064
1,174,338
Securities
operation
Rmb’000
399,882
–
537,036
109,401
–
5,397
–
198,434
169,388
104,227
Others
Total
Rmb’000
Rmb’000
–
40
–
1,161,570
27,499
671,387
1,201,085
1,310,486
–
285,397
59,302
–
–
595,094
17,849
64,699
9,797
205,253
3,328,546
1,296,414
plant and equipment
(2,414)
(239)
2
(2,651)
Note: Non-current assets excluded financial instruments and deferred tax assets.
128
5. SEGMENT INFORMATION (Continued)
Revenue from major services
An analysis of the Group’s revenue from continuing operations, net of discounts and taxes, for the year is as
follows:
Toll operation revenue
Commission and fee income from securities operation
Interest income from securities operation
Revenue from sales of properties
Hotel and catering revenue
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
5,986,249
2,088,310
1,402,940
47,865
100,976
Rmb’000
5,279,348
2,664,959
1,510,281
196,928
83,831
9,626,340
9,735,347
Geographical information
The Group’s operations are located in the PRC. All non-current assets of the Group are located in the PRC.
All of the Group’s revenue from external customers is attributed to the group entities’ country of domicile (i.e., the
PRC).
Information about major customers
During the years ended December 31, 2017 and 2016, there are no individual customer with sales over 10% of the
total revenue of the Group.
6. SECURITIES INVESTMENT GAINS
Continuing operations
Gain on held for trading investments
Cumulative gain reclassified from equity on disposal of AFS investments
Interest income and dividends from AFS investments
Gain (loss) on fair value changes on derivatives financial instruments
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
525,665
105,560
21,223
122,437
774,885
205,253
64,791
57,290
(103,761)
223,573
129
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
7. OTHER INCOME AND GAINS AND LOSSES
Continuing operations
Interest income on bank balances and entrusted loan receivables
Rental income (Note)
Handling fee income
Towing income
Gain on decrease in fair value in respect of the derivative component of
Convertible Bond
Exchange loss, net
Gain on commodity trading, net
Others
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
26,017
42,498
2,818
7,128
149,479
(212,146)
21,125
66,720
103,639
27,499
38,696
2,449
7,718
–
(22,758)
126,905
108,881
289,390
Note: Rental income included contingent rent of approximately Rmb3,817,000 (2016: Rmb3,649,000) during the year.
8. FINANCE COSTS
Continuing operations
Bank and other borrowings
Short-term loan note
Bonds payable
Convertible Bond
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
61,626
121,289
362,891
65,941
121,860
69,284
480,243
–
Convertible Bond
65,941
–
Total finance costs
611,747
671,387
130
9. PROFIT BEFORE TAX
The Group’s profit before tax from continuing operations has been arrived at after charging (crediting):
Depreciation of property, plant and equipment
Release of prepaid lease payments
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
266,217
1,639
Rmb’000
236,493
1,639
Amortisation of expressway operating rights (included in operating costs)
1,119,126
1,034,202
Amortisation of other intangible assets (included in operating costs)
26,101
24,080
Total depreciation and amortisation
1,413,083
1,296,414
Staff costs (including directors and supervisors):
– Wages, salaries and bonuses
– Pension scheme contributions
Auditors’ remuneration
Reversal of allowance for loans to customers arising from
margin financing business
Allowance for trade receivables
Allowance for other receivables
Recognition (reversal) of allowance for financial assets
held under resale agreements
Loss (gain) on disposal of property, plant and equipment
Impairment loss on AFS investments
Allowance for write-down of inventories
1,183,475
1,216,231
127,207
128,127
1,310,682
1,344,358
8,374
9,081
(294)
822
891
40,076
3,565
11,621
5,993
(13,269)
253
975
(14,167)
(2,651)
33,942
2,638
131
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
10.
INCOME TAX EXPENSE
Continuing operations
Current tax:
PRC Enterprise Income Tax
Deferred tax (Note 43)
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
1,211,926
1,216,487
(19,657)
(54,917)
1,192,269
1,161,570
Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT
Law, the tax rate of the PRC subsidiaries is 25%.
Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit. No Hong Kong Profits Tax has
been provided as the Group has no estimated assessable profit in Hong Kong for both years.
The tax charge for the year can be reconciled to the profit before tax from continuing operations per the
consolidated statement of profit or loss and other comprehensive income as follows:
Profit before tax
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
5,183,301
Rmb’000
4,888,585
Tax at the PRC enterprise income tax rate of 25% (2016:25%)
1,295,825
1,222,146
Tax effect of share of profit of associates
Tax effect of share of profit of a joint venture
Utilisation of unused tax loss previously not recognised
Tax effect of expenses not deductible for tax purposes
Tax effect of income not subjected to tax purposes
(40,376)
(4,417)
(35,505)
25,126
(48,384)
(16,174)
(2,449)
(24,045)
13,143
(31,051)
Tax charge for the year
1,192,269
1,161,570
132
11. DISCONTINUED OPERATION
As set out in Note 49, for the year ended December 31, 2016, the Company disposed of its 100% equity interest
in Zhejiang Expressway Development Investment Co., Ltd (“Development Co”), which carried out substantially all
of the Group’s toll related operation. The disposal was effected in order to allow the Company to focus on the toll
operation business. This disposal was completed on December 29, 2016, on which date control of Development Co
passed to the acquirer.
The profit for the year ended December 31, 2016 from the discontinued toll related operation was set out below.
Profit of toll related operation for the year
Gain on disposal of toll related operation (see Note 49)
Income tax from gain on disposal of toll related operation
Year ended
12/31/2016
Rmb’000
39,943
56,993
(15,342)
81,594
The results of the toll related operation for the period from January 1, 2016 to December 29, 2016, which had been
included in the consolidated statement of profit or loss and other comprehensive income, were as follows:
For the Period from
1/1/2016 to 12/29/2016
Revenue
Cost of sales
Other income
Administrative expenses
Other expenses
Profit before tax
Income tax expense
Profit for the period
Profit for the year ended December 31, 2016 from discontinued operating include the following:
Loss on disposal of property, plant and equipment
Auditor’s remuneration
Rmb’000
654,227
(693,470)
122,605
(20,432)
(11,372)
51,558
(11,615)
39,943
2,003
144
133
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
11. DISCONTINUED OPERATION (Continued)
During the year ended December 31, 2016, Development Co contributed Rmb82,622,000 to the Group’s net
operating cash inflows, paid Rmb41,542,000 in respect of investing activities, and paid Rmb28,716,000 in respect
of financing activities.
The carrying amounts of the assets and liabilities of Development Co at the date of disposal were disclosed in Note
49.
12. OTHER COMPREHENSIVE INCOME
Tax effect relating to other comprehensive income is as follows:
year ended 12/31/2017
Year ended 12/31/2016
Before-tax
amount
tax
impact
net-of-
income-tax
amount
Before-tax
amount
Tax
impact
Net-of-
income-tax
amount
rmb’000
rmb’000
rmb’000
Rmb’000
Rmb’000
Rmb’000
Fair value gain on AFS financial assets
arising during the year
276,849
(69,212)
207,637
114,883
(28,721)
86,162
Reclassification adjustments for the
cumulative gain included upon
disposal of AFS financial assets
Other comprehensive expense
arising from associates
Share of exchange differences of
a subsidiary
Total
(105,560)
26,390
(79,170)
(64,791)
16,198
(48,593)
(2,672)
(605)
–
–
(2,672)
(205)
(605)
511
–
–
(205)
511
168,012
(42,822)
125,190
50,398
(12,523)
37,875
134
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T
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
13. D I R E C T O R S ’ , S U P E R V I S O R S ’ A N D S E N I O R M A N A G E M E N T S ’
EMOLUMENTS (Continued)
The emoluments paid or payable to each of the other 6 (2016: 8) senior managements are as follows:
Ding
Huikang
Zhang
Jingzhong
Fang
Zhexing
Zhu
Yimin
Wang
Dehua
Zhan
Huagang
Zheng
Hui
Zhang
Xiuhua
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
note
note
2017
Salaries, allowances and
benefits in kind
Bonuses paid and payable
Pension scheme contributions
Total emoluments
2016
Salaries, allowances and
benefits in kind
Bonuses paid and payable
Pension scheme contributions
Total emoluments
–
–
–
–
60
306
–
366
–
–
–
–
74
337
3
414
335
367
24
726
445
342
22
809
335
367
24
726
445
301
22
768
335
367
24
726
445
337
22
804
335
367
24
726
445
337
22
804
335
367
24
726
445
337
22
804
335
367
24
726
445
337
22
804
2,010
2,202
144
4,356
2,804
2,634
135
5,573
Note: Resigned on February 18, 2016.
The emoluments of each of the senior managements were below HK$1,000,000 (equivalent to Rmb835,900 (2016:
Rmb894,510)) in both years. Bonuses paid to senior managements are performance-rated and are determined by
the board of Directors.
No senior management waived any emoluments and no incentive was paid to any senior management as an
inducement to join the Company and no compensation for loss of office was paid to any senior management, past
senior management during both years. Bonuses are determined by reference to the individual performance of the
senior managements.
136
14. EMPLOYEES’ EMOLUMENTS
The emoluments of the five highest paid individuals in the Group are as follows:
Salaries, allowances and benefits in kind
Bonuses paid and payable (Note)
Pension scheme contributions
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
4,912
32,023
220
37,155
4,329
33,404
165
37,898
Note: The bonuses paid and payable are determined by reference to the performance of the relevant business of the
Group for the years ended December 31, 2017 and 2016.
No emoluments nor incentive was waived as an inducement to join the Company and no compensation for loss
of office was paid to any five highest paid individuals in the Group during both years. Bonuses are determined by
reference to the individual performance of the five highest paid individuals in the Group.
The five individuals with the highest emoluments in the Group during the year included five (2016: five)
non-director employees.
Their emoluments are within the following bands:
HK$6,000,001 to HK$6,500,000 (equivalent to Rmb5,015,401
(2016: Rmb5,367,061) to Rmb5,433,350 (2016: Rmb5,814,315))
HK$7,000,001 to HK$7,500,000 (equivalent to Rmb5,851,301
(2016: Rmb6,261,571) to Rmb6,269,250 (2016: Rmb6,708,825))
HK$8,000,001 to HK$8,500,000 (equivalent to Rmb6,687,201
(2016: Rmb7,156,081) to Rmb7,105,150 (2016: Rmb7,603,335))
HK$8,500,001 to HK$9,000,000 (equivalent to Rmb7,105,151
(2016: Rmb7,603,336) to Rmb7,523,100 (2016: Rmb8,050,590))
HK$10,500,001 to HK$11,000,000 (equivalent to Rmb8,776,951
(2016: Rmb9,392,356) to Rmb9,194,900 (2016: Rmb9,839,610))
HK$11,500,001 to HK$12,000,000 (equivalent to Rmb9,612,851
(2016: Rmb10,286,866) to Rmb10,030,800 (2016: Rmb10,734,120))
HK$12,000,001 to HK$12,500,000 (equivalent to Rmb10,030,801
(2016: Rmb10,734,121) to Rmb10,448,750 (2016: Rmb 11,181,375))
no. of individuals
year ended
Year ended
12/31/2017
12/31/2016
–
1
1
2
–
1
–
2
1
–
–
1
–
1
137
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
15. DIVIDENDS
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
Dividends recognised as distribution during the year:
2017 Interim – Rmb6 cents (2016: 2016 interim Rmb6 cents) per share
260,587
260,587
2016 Final – Rmb29.5 cents (2016: 2015 Final Rmb28 cents) per share
1,281,219
1,216,072
1,541,806
1,476,659
Final dividend of Rmb30.0 cents per share in respect of the year ended December 31, 2017 (2016: final
dividend of Rmb29.5 cents per share in respect of the year ended December 31, 2016) in the total amount of
Rmb1,302,934,000 (2016: Rmb1,281,219,000) has been proposed by the Directors and is subject to approval by
the shareholders in the annual general meeting.
16. EARNINGS PER SHARE
For continuing operations
The calculation of the basic and diluted earnings per share attributable to the owners of the Company is based on
the following data:
Earnings figures are calculated as follows:
Profit for the year attributable to owners of the Company
Less:
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
3,202,130
Rmb’000
3,037,405
Profit for the year from discontinued operations
–
(80,114)
Earnings for the purpose of basic earnings per share from continuing
operations
3,202,130
2,957,291
Effect of dilutive potential ordinary shares arising from Convertible Bond:
Interest expense
Exchange loss (net of income tax)
Gain on decrease in fair value on derivative component
Earnings for the purpose of diluted earnings per share from continuing
operations
65,941
99,718
(149,479)
–
–
–
3,218,310
2,957,291
138
16. EARNINGS PER SHARE (Continued)
Number of shares
year ended
Year ended
12/31/2017
12/31/2016
’000
’000
Number of ordinary shares for the purpose of basic earnings per share
4,343,115
4,343,115
Effect of dilutive potential ordinary shares arising from Convertible Bond
166,746
–
Weighted average number of ordinary shares for
the purpose of diluted earnings per share
4,509,861
4,343,115
For continuing and discontinued operations
The calculation of the basic and diluted earnings per share from continuing and discontinued operations
attributable to the owners of the Company is based on the following data:
Earnings for the purpose of basic earnings per share
(Profit for the year attributable to owners of the Company)
Effect of dilutive potential ordinary shares arising from Convertible Bond:
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
3,202,130
Rmb’000
3,037,405
Interest expense
Exchange loss (net of income tax)
Gain on decrease in fair value on derivative component
65,941
99,718
(149,479)
–
–
–
Earnings for the purpose of diluted earnings per share
3,218,310
3,037,405
For discontinued operations
For the year ended December 31, 2016, basic earnings per share for discontinued operations was Rmb1.85 cents
per share, based on profit for the year attributable to owners of the Company from the discontinued operations of
Rmb80,114,000 and the denominators detailed above. Diluted earnings per share was the same as basic earnings
per share since there were no potential ordinary shares outstanding as at December 31, 2016.
139
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
17. PROPERTY, PLANT AND EQUIPMENT
leasehold
land and
buildings
hotel
rmb’000
rmb’000
ancillary
facilities
rmb’000
Communication
and signaling
equipment
Motor
vehicles
Machinery
and equipment
Construction
in progress
total
rmb’000
rmb’000
rmb’000
rmb’000
rmb’000
Cost
At January 1, 2016
Additions
Acquired on acquisition of a subsidiary
Transfer
Transfer from inventory
Disposals
Disposal of a subsidiary (Note 49)
1,591,310
549,543
1,232,092
413,440
8,334
467
7,643
15,470
(6,300)
(4,311)
–
–
–
–
–
–
5,639
26,740
49,155
–
(8,810)
(307,571)
19,670
4,506
362,338
–
(48,601)
(27,178)
227,129
11,364
309
–
–
(40,808)
(13,907)
818,558
48,117
484
102,169
231,220
1,326
(172,236)
(246,900)
–
(137,623)
(48,268)
–
–
(829)
Disposal of a subsidiary (Note 49)
(4,311)
–
(307,571)
(27,178)
(13,907)
(48,268)
(829)
(402,064)
At December 31, 2016
1,612,613
549,543
997,245
724,175
Additions
Transfer
Disposals
566
35,951
(11)
27,218
15,469
–
5,625
16,971
(5,782)
20,602
43,904
(4,534)
184,087
12,998
–
509,032
48,759
86,986
55,130
142
(112,437)
–
(13,496)
(77,856)
–
(101,679)
At December 31, 2017
1,649,119
592,230
1,014,059
784,147
183,589
480,077
29,679
4,732,900
DEPRECIATION
At January 1, 2016
Provided for the year
Transfer
Disposals
Disposal of a subsidiary (Note 49)
308,504
64,701
1,040
(6,300)
(1,966)
10,365
17,769
–
–
–
425,641
64,816
(4,558)
(7,920)
(146,778)
276,554
50,878
142,130
(44,077)
(21,210)
154,981
14,864
579,702
51,239
–
(138,612)
(32,715)
(8,939)
(114,097)
(38,902)
–
–
–
–
–
Disposal of a subsidiary (Note 49)
(1,966)
–
(146,778)
(21,210)
(8,939)
(38,902)
–
(217,795)
At December 31, 2016
Provided for the year
Disposals
at december 31, 2017
CARRYING VALUES
At December 31, 2017
At December 31, 2016
365,979
55,917
(11)
421,885
28,134
19,060
–
331,201
45,607
(2,506)
404,275
73,388
(4,341)
128,191
11,690
(12,683)
339,330
60,555
(59,020)
47,194
374,302
473,322
127,198
340,865
–
–
–
–
1,227,234
545,036
639,757
310,825
1,246,634
521,409
666,044
319,900
56,391
55,896
139,212
169,702
29,679
2,948,134
86,986
3,066,571
4,934,241
324,344
33,832
–
15,470
(242,142)
(402,064)
4,663,681
170,898
1,755,747
264,267
–
(205,109)
(217,795)
1,597,110
266,217
(78,561)
1,784,766
The property, plant and equipment are located in the PRC.
140
18. PREPAID LEASE PAYMENTS
Analysed for reporting purposes as:
Current assets
Non-current assets
12/31/2017
12/31/2016
rmb’000
Rmb’000
2,137
65,300
67,437
1,639
52,522
54,161
The amount represents prepayment of rentals under operating leases for “land use rights” of land situated in the
PRC.
19. EXPRESSWAY OPERATING RIGHTS
COST
At January 1, 2016
Acquired on acquisition of a subsidiary (Note 48)
At December 31, 2016 and 2017
Amortisation
At January 1, 2016
Charge for the year
At December 31, 2016
Charge for the year
At December 31, 2017
Carrying values
At December 31, 2017
At December 31, 2016
Rmb’000
23,963,062
2,303,560
26,266,622
10,733,620
1,034,202
11,767,822
1,119,126
12,886,948
13,379,674
14,498,800
The above expressway operating rights were granted by the Zhejiang Provincial Government and Anhui Provincial
Government for a period ranging from 25 to 30 years. During the expressway concessionary period, the Group
has the rights of operations and management of Shanghai-Hangzhou-Ningbo Expressway, Shangsan Expressway,
Jinhua Section of the Ningbo-Jinhua Expressway, Hanghui Expressway and Huihang Expressway and the
toll-collection rights thereof. The Group is required to manage and operate the expressways in accordance with
the regulations promulgated by the Ministry of Communication and relevant government authorities. Upon the end
of the respective concession service periods, the toll expressways and their toll station facilities without residual
value, will be returned to the grantors at nil consideration.
141
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
20. GOODWILL
Cost and carrying VALUES
At January 1, 2016, December 31, 2016 and December 31, 2017
Particulars regarding impairment testing on goodwill are disclosed in Note 22.
21. OTHER INTANGIBLE ASSETS
Rmb’000
86,867
Cost
At January 1, 2016
Additions
Disposal of a subsidiary (Note 49)
At December 31, 2016
Additions
Customer
bases
Securities/
futures firm
licenses
Trading
seats
Software
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
101,147
63,083
3,480
125,691
293,401
–
–
–
–
101,147
63,083
–
–
–
–
3,480
1,672
17,889
17,889
(154)
(154)
143,426
311,136
37,009
38,681
At December 31, 2017
101,147
63,083
5,152
180,435
349,817
Amortisation
At January 1, 2016
Charge for the year
Disposal of a subsidiary (Note 49)
At December 31, 2016
Charge for the year
At December 31, 2017
CARRYING VALUES
At December 31, 2017
At December 31, 2016
66,679
6,266
–
72,945
6,266
79,211
–
–
–
–
–
–
–
–
–
–
–
–
71,503
17,829
138,182
24,095
(47)
(47)
89,285
19,835
162,230
26,101
109,120
188,331
21,936
63,083
28,202
63,083
5,152
3,480
71,315
161,486
54,141
148,906
The customer bases of Zheshang Securities and Zheshang Futures Broker Co., Ltd. (“Zheshang Futures”) are
amortised on a straight-line basis over fifteen years and three years, respectively.
The securities/futures firm licenses of the securities operation are considered by the management of the Group
to have indefinite useful lives because they can be renewed at minimal cost even though the current licenses are
effective for three years.
142
21. OTHER INTANGIBLE ASSETS (Continued)
The trading seats of the securities operation is considered by the management of the Group to have an indefinite
useful life because there is no economic or regulatory limit to their useful life.
Software are amortised on a straight-line basis over three to five years.
Particulars of the impairment testing on intangible assets with indefinite useful lives are disclosed in Note 22.
IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH
22.
INDEFINITE USEFUL LIVES
For the purposes of impairment testing, goodwill and other intangible assets with indefinite useful lives set
out in Notes 20 and 21 have been allocated to four individual cash generating units (“CGUs”), comprising two
subsidiaries in toll operation segment and two subsidiaries in securities operation segment. The carrying amounts
of goodwill and other intangible assets (net of accumulated impairment losses) as at December 31, 2017 and 2016
allocated to these units are as follows:
Toll operation
– Zhejiang Jiaxing Expressway
Co., Ltd. (“Jiaxing Co”)
– Shangsan Co
Securities operation
– Zheshang Securities
– Zheshang Futures
Goodwill
Securities/futures firm licenses
Trading seats
12/31/2017
12/31/2016
12/31/2017
12/31/2016
12/31/2017
12/31/2016
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
75,137
10,335
–
1,395
75,137
10,335
–
1,395
86,867
86,867
–
–
51,783
11,300
63,083
–
–
51,783
11,300
63,083
–
–
2,080
3,072
5,152
–
–
2,080
1,400
3,480
During the years ended December 31, 2017 and 2016, the management of the Group determines that there are no
impairment of any of its CGUs containing goodwill and other intangible assets with indefinite useful lives.
The basis of the recoverable amounts of the above CGUs and their major underlying assumptions are summarised
below:
143
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH
22.
INDEFINITE USEFUL LIVES (Continued)
Jiaxing Co and Shangsan Co
The recoverable amounts of Jiaxing Co and Shangsan Co are determined based on value in use calculations.
The key assumptions for the value in use calculations relate to discount rates, growth rates, and expected
changes in toll revenue and direct costs during the forecast period. Those calculations use cash flow projections
based on financial budgets approved by the management covering a five-year period and a discount rate the
management considered appropriate. No growth rate has been assumed beyond the five-year period up to the
remaining toll road operating rights which are 11 years (2016: 12 years) and 13 years (2016: 14 years) for Jiaxing
Co. and Shangsan Co., respectively. Management believes that any reasonably possible change in any of these
assumptions would not cause the aggregate carrying amount of Jiaxing Co’s and Shangsan Co’s goodwill to
exceed their aggregate recoverable amounts.
Zheshang Securities & Zheshang Futures
The recoverable amounts of Zheshang Securities & Zheshang Futures are determined based on value in use
calculations. The key assumptions for the value in use calculations relate to the discount rate, growth rates and
profit margin during the forecast period. Those calculations use cash flow projections based on financial budgets
approved by the management covering a five-year period with discount rates management believe appropriate.
Growth rate beyond the five-year period is assumed to be 1%. Management believes that any reasonably possible
change in any of these assumptions would not cause the carrying amount of Zheshang Securities & Zheshang
Futures’ other intangible assets to exceed its aggregate recoverable amounts.
23.
INTERESTS IN ASSOCIATES
Unlisted investments in associates, at cost less impairment
Share of post-acquisition profit and other comprehensive expense, net of
dividends received
12/31/2017
12/31/2016
rmb’000
1,358,560
Rmb’000
1,139,649
327,667
170,837
1,686,227
1,310,486
144
23.
INTERESTS IN ASSOCIATES (Continued)
At December 31, 2017 and 2016, the Group had interests in the following associates:
Name of entity
Form of
business
structure
Place of
registration
Percentage of equity interest
and operation
attributable to the Group
Principal activities
12/31/2017
12/31/2016
Zhejiang Concord Property Investment
Corporate
The PRC
Co., Ltd. (“Zhejiang Concord Property”)
Zhejiang Communications Investment
Corporate
The PRC
Group Finance Co., Ltd. (“Zhejiang
Communications Finance”)
Zheshang Fund Management Co., Ltd.
Corporate
The PRC
(“Zheshang Fund”) (Note i)
Yangtze United Financial Leasing Co., Ltd.
Corporate
The PRC
(“Yangtze United Financial Leasing”)
(Note ii)
Zhejiang Zheshang Innovation Capital
Corporate
The PRC
Management Co., Ltd. (“Zheshang
Innovation Capital Management”)
Zhejiang Big Data Exchange Center Co.,
Corporate
The PRC
Ltd. (‘’Zhejiang Big Data”) (Note iii)
Ningbo Equity Exchange Co., Ltd.
Corporate
The PRC
(‘’Ningbo Equity Exchange”)
%
45
35
25
13
40
19.8
40
%
45
Investment and real
estate development
35
Finance and
investment
25
Asset fund
management
13
Provision of financial
leasing services
40
Investment
management and
consulting
19.8
Big data asset
transaction
40
Listing, registration,
custody, settlement
service for equity
product
Taiping Science and Technology Insurance
Corporate
The PRC
15
15
Science and
Co., Ltd. (“Taiping Insurance”) (Note iv)
technology
related insurance
Hangzhou XingYuanJuJin Investment
Partnership
The PRC
5.05
5.05
Investment
Management LP (‘’XingYuan
Investment’) (Note v)
management
Pujiang JuJinFengAn Investment
Partnership
The PRC
17.86
–
Investment
Management LP (“FengAn Investment”)
(Note v)
management
Zheshang FoF for Industry Transformation
Partnership
The PRC
24.99
24.99
Investment
and Upgrading LP (“Zheshang FoF”)
(Note vi)
management
and consulting
All of the above associates are accounted for using the equity method in these consolidated financial statements.
145
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
23.
INTERESTS IN ASSOCIATES (Continued)
Notes:
(i)
The Group is able to exercise significant influence over Zheshang Fund because it has the power to appoint one
out of four directors of that company under the provisions stated in the Articles of Association of that company.
On August 14, 2014, Zheshang Securities, together with one of the shareholders of Zheshang Fund,
Yangshengtang Co., Ltd., auctioned off their respective 25% equity interest (totalling 50%) in Zheshang Fund. The
hammer price reached at Rmb414,000,000 offered by Tonglian Capital Management Co., Ltd. (“Tonglian Capital”),
another shareholder of Zheshang Fund which is independent to the Group, and Zheshang Securities will receive a
consideration of Rmb207,000,000 accordingly.
As at December 31, 2017, the disposal transaction has not been completed and the refundable deposit of
Rmb165,600,000 (2016: Rmb165,600,000) in respect of such transfer reversed by Zheshang Securities was
included in other payables in Note 36.
The Directors consider the disposal required approval by China Securities Regulatory Commission and equity
transfer registration, which was a lengthy process and they are not able to estimate the timing when and whether
such approval would be granted. The amount of deposit received would be refundable to Tonglian Capital if the
transfer eventually cannot be completed.
(ii)
The Group is able to exercise significant influence over Yangtze United Financial Leasing because it has
the power to appoint one out of eight directors of that company under the provisions stated in the Articles of
Association of that company.
(iii)
Zheshang Captial Management Co., Ltd. (‘’Zheshang Capital Management”), a subsidiary of Group, contributed
capital of Rmb19,800,000 for 19.8% shareholding of Zhejiang Big Data. The Group is able to exercise significant
influence over Zhejiang Big Data because it has the power to appoint one out of five directors of that company
under the provisions stated in the Articles of Association of that company.
(iv)
The Group is able to exercise significant influence over Taiping Insurance because it has the power to appoint one
out of eleven directors of that company under the provisions stated in the Articles of Association of that company.
(v)
XingYuan Investment and FengAn Investment were established on January 7, 2016 and April 24, 2017,
respectively, as limited partnerships. Dong Fang Ju Jin (as defined in Note 57) is the general partner of XingYuan
Investment and FengAn Investment who holds 0.05% and 0.1786% partnership shares, respectively, and
Zheshang Capital Management is one of their limited partners who holds 5% and 17.6786% partnership shares,
respectively. The Group is able to exercise significant influence over XingYuan Investment and FengAn Investment
because it has voting rights in the investment committee of XingYuan Investment and FengAn Investment.
Rmb10,100,000 and Rmb2,911,000 were contributed by the Group for the partnership shares in XingYuan
Investment and FengAn Investment in 2016 and 2017, respectively.
(vi)
The Company hold 24.99% partnership shares and is able to exercise significant influence. Rmb200,000,000 was
contributed to Zheshang FoF by the Company in 2017.
146
23.
INTERESTS IN ASSOCIATES (Continued)
The summarised financial information in respect of the Group’s material associates at the end of the reporting
period is set out below. This represents amounts shown in the associate’s financial statements prepared in
accordance with HKFRSs:
Zhejiang Communications Finance
Current assets
Non-current assets
Current liabilities
Revenue
Profit for the year
Other comprehensive expense for the year
Total comprehensive income for the year
Dividends received from the associate during the year
12/31/2017
12/31/2016
rmb’000
Rmb’000
19,575,483
12,102,365
11,250,792
6,307,941
28,241,765
16,144,368
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
817,525
Rmb’000
315,685
321,398
122,565
(2,826)
–
318,572
122,565
–
–
Reconciliation of the above summarised financial information to the carrying amount of the interest in Zhejiang
Communications Finance recognised in the consolidated financial statements:
Net asset of the associate
Proportion of the Group’s ownership interest in Zhejiang Communications
Finance
Carrying amount of the Group’s interest in Zhejiang
Communications Finance
12/31/2017
12/31/2016
rmb’000
2,584,510
Rmb’000
2,265,938
35%
35%
904,579
793,079
147
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
23.
INTERESTS IN ASSOCIATES (Continued)
Yangtze United Financial Leasing
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue
Profit for the year
Dividends received from the associate during the year
12/31/2017
12/31/2016
rmb’000
Rmb’000
846,378
1,049,557
21,926,541
14,794,597
19,868,790
13,605,278
500,000
100,000
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
1,389,035
Rmb’000
775,746
265,253
134,147
–
–
Reconciliation of the above summarised financial information to the carrying amount of the interest in Yangtze
United Financial Leasing recognised in the consolidated financial statements:
Net asset of the associate
Proportion of the Group’s ownership interest in
Yangtze United Financial Leasing
12/31/2017
12/31/2016
rmb’000
2,404,129
Rmb’000
2,138,876
13%
13%
312,537
278,054
148
23.
INTERESTS IN ASSOCIATES (Continued)
Aggregate information of associates that are not individually material
The Group’s share of profit, net of dividends received
The Group’s share of other comprehensive expense
The Group’s share of total comprehensive income,
net of dividends received
Aggregate carrying amount of the Group’s interests in these associates
24.
INTEREST IN A JOINT VENTURE
Unlisted investment in a joint venture, at cost less impairment
Share of post-acquisition loss
12/31/2017
12/31/2016
rmb’000
Rmb’000
12,530
(1,683)
10,847
469,111
9,728
(205)
9,523
239,353
12/31/2017
12/31/2016
rmb’000
Rmb’000
373,470
(70,405)
303,065
373,470
(88,073)
285,397
At December 31, 2017 and 2016, the Group had interest in the following joint venture:
Name of entity
Form of
business
structure
Place of
registration
Percentage of equity interest
and operation
attributable to the Group
Principal activities
Zhejiang Shaoxing Shengxin
Corporate
The PRC
Expressway Co., Ltd.
(“Shengxin Co”)
12/31/2017
12/31/2016
%
50
%
50
Management of the Shaoxing
section of the Ningbo-Jinhua
Expressway
149
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
24.
INTEREST IN A JOINT VENTURE (Continued)
The summarised financial information in respect of the Group’s interest in Shengxin Co which is accounted for
using the equity method at the end of the reporting period is set out below. This represents amounts shown in the
joint venture’s financial statements prepared in accordance with HKFRSs:
Shengxin Co
Current assets
Non-current assets
Current liabilities
Non-current liabilities
The above amounts of assets and liabilities include the following:
Cash and cash equivalents
Non-current financial liabilities
12/31/2017
12/31/2016
rmb’000
64,152
Rmb’000
65,467
2,326,551
2,500,949
43,541
41,127
1,741,031
1,954,495
55,679
58,221
(excluding trade and other payables and provisions)
1,683,000
1,892,000
Revenue
Profit for the year
Dividend received from the joint venture
The above profit for the year includes the following:
Depreciation and amortisation
Interest income
Interest expense
Income tax expense
For the
For the
year ended
year ended
12/31/2017
12/31/2016
rmb’000
399,335
Rmb’000
364,515
35,337
19,594
–
–
(180,867)
(180,977)
663
810
(79,240)
(88,376)
(4,464)
(4,464)
150
24.
INTEREST IN A JOINT VENTURE (Continued)
The summarised financial information in respect of the Group’s interest in Shengxin Co which is accounted for
using the equity method at the end of the reporting period is set out below. This represents amounts shown in the
joint venture’s financial statements prepared in accordance with HKFRSs: (Continued)
Shengxin Co (Continued)
Reconciliation of the above summarised financial information to the carrying amount of the interest in Shengxin Co
recognised in the consolidated financial statements:
Net asset of the joint venture
Proportion of the Group’s ownership interest in the joint venture
12/31/2017
12/31/2016
rmb’000
606,131
50%
Rmb’000
570,794
50%
Carrying amount of the Group’s interest in Shengxin Co
303,065
285,397
25. AVAILABLE-FOR-SALE INVESTMENTS
AFS investments comprise:
Non-current assets:
Unlisted equity securities investments, at cost (Note i)
Listed equity securities investments, at fair value (Note ii)
Other investments (Note iii)
Less: provision for impairment loss
Current assets:
Equity securities
Funds
Corporate bonds
Other investments (Note iii)
Less: provision for impairment loss (Note iv)
12/31/2017
12/31/2016
rmb’000
Rmb’000
21,294
694,418
48,594
315,878
–
1,430,503
(3,997)
(3,997)
711,715
1,790,978
264,537
402,144
6,500
1,169,019
(41,365)
297,492
92,804
36,500
956,567
(40,443)
1,800,835
1,342,920
2,512,550
3,133,898
As at December 31, 2017, the Group has entered into securities lending arrangement with clients that resulted
in the transfer of listed AFS investments with total fair value of Rmb3,511,000 (2016: Rmb1,958,000) to external
clients, which did not result in derecognition of the financial assets. Details of the collaterals were set out in Note
30.
151
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
25. AVAILABLE-FOR-SALE INVESTMENTS (Continued)
Notes:
(i)
Unlisted equity securities investments represent investments in unlisted equity securities issued by private entities
established in the PRC. They are measured at cost less impairment at the end of the reporting period because the
range of reasonable fair value estimated is so significant that the Directors are of the opinion that their fair values
cannot be measured reliably.
(ii)
Listed equity securities investments represent stocks listed in PRC with lock-up period for 3 years since the
subscription. The financial instruments was measured at fair value based on a valuation model taking into account
the relevant features including the restrictions.
(iii)
Except for the investment described below, others comprise of financial products and trust products where funds
are mainly invested in listed securities or open-ended funds and the Group’s return of investment is tied to the
result of such investments.
As at December 31, 2016, balance of AFS financial assets included the unlisted equity investment in a special
account managed by China Securities Finance Corporation Limited (the “CSFCL”). Pursuant to the agreement the
Company entered into with the CSFCL, the Company contributed to a special account managed by the CSFCL in
2015. The Company is entitled to the profit or loss derived from the special account in proportion to the funding
portion contributed. The Company determined the total fair value of the investment according to the evaluation
report provided by the CSFCL. The investment was fully disposed during the current year.
(iv)
Included in the balance as at December 31, 2017, Rmb34,865,000 (2016: Rmb33,942,000) is the cumulative
amount of impairment recognised in relation to AFS equity instruments measured at fair value.
26. TRADE RECEIVABLES
Trade receivables comprise:
Fellow subsidiaries
Third parties
Total trade receivables
Less: Allowance for doubtful debts
12/31/2017
12/31/2016
rmb’000
Rmb’000
10,207
236,608
246,815
8,068
268,656
276,724
(2,228)
(1,406)
244,587
275,318
152
26. TRADE RECEIVABLES (Continued)
The Group has no credit period granted to its trade customers of toll operation business. The Group’s trade
receivable balance for toll operation is toll receivables from the respect expressway fee settlement centre of
Zhejiang Province and Anhui Province, which are normally settled within 3 months. All of these trade receivables
were neither past due nor impaired in both years.
In respect of the Group’s asset management service, security commission and financial advisory service operated
by Zheshang Securities, trading limits are set for customers. The Group seeks to maintain tight control over its
outstanding accounts receivable in order to minimise credit risk. Overdue balances are regularly monitored by the
management.
The following is an aged analysis of trade receivables net of allowance for doubtful debts presented based on the
invoice date at the end of the reporting period, which approximated the respective revenue recognition dates:
Within 3 months
3 months to 1 year
1 to 2 years
Over 2 years
Movement of allowance for doubtful debts
At the beginning of the year
Impairment recognised for the year
Amount reversed during the year
Disposal of a subsidiary
At the end of the year
12/31/2017
12/31/2016
rmb’000
222,020
20,468
2,010
89
Rmb’000
263,822
9,409
1,484
603
244,587
275,318
12/31/2017
12/31/2016
rmb’000
Rmb’000
1,406
947
(125)
–
2,228
1,292
449
(244)
(91)
1,406
The Group determines the allowance for impaired debts based on the evaluation of collectability and aged analysis
of accounts and on the management’s judgement including the assessment of change in credit quality and the past
collection history of each client. The Directors consider the credit risk of the balance to be minimal.
153
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
27. L O A N S TO C U S TO M E R S A R I S I N G F R O M M A R G I N F I N A N C I N G
BUSINESS
Loans to margin clients
Less: Allowance for doubtful debts
12/31/2017
12/31/2016
rmb’000
7,893,616
Rmb’000
7,952,333
(42,007)
(42,301)
7,851,609
7,910,032
The Group has provided customers with margin financing and security lending for securities transactions, the credit
facility limits to margin clients are determined by the discounted market value of the pledged securities accepted by
the Group or the market value of cash collaterals.
All of the loans to margin clients which are secured by the underlying pledged securities are interest bearing. The
Group maintains a list of approved stocks for margin lending at a specified loan to collateral ratio. Any excess in
the lending ratio will trigger a margin call which the customers have to make good of the shortfall. The Group has
the right to process forced liquidation if the customer fails to make good of the shortfall within a short period of
time.
As at December 31, 2017, loans to customers under the margin financing and securities lending activities carried
out in the PRC were secured by the customers’ stock securities and cash collaterals. The undiscounted market
value of the stock security collaterals was amounted to Rmb22,140,435,000 (2016: Rmb27,105,442,000). Cash
collateral of Rmb491,032,000 (2016: Rmb1,298,722,000) received from clients was included in accounts payable
to customers arising from securities business in Note 34. As of December 31, 2017 and 2016, no individual
customer with fair value of pledged securities fell below the carry amount of its respective margin loan.
No aged analysis is disclosed as in the opinion of the Directors, the aged analysis does not give additional value in
view of the nature of business of securities margin financing.
Movement in the allowance for doubtful debts
Allowance for doubtful debts at the beginning of the year
Amount reversed during the year
At end of the year
12/31/2017
12/31/2016
rmb’000
Rmb’000
42,301
(294)
42,007
55,570
(13,269)
42,301
154
27. L O A N S TO C U S TO M E R S A R I S I N G F R O M M A R G I N F I N A N C I N G
BUSINESS (Continued)
Movement in the allowance for doubtful debts (Continued)
The directors of the Group are of the opinion that the aging analysis does not give additional value in view of
the nature of the business. As a result, no ageing analysis is disclosed. The Group determines the allowance for
impaired debts based on the evaluation of collectability and the management’s judgment including the assessment
of change in credit quality, collateral and the past collection history of each client. The concentration of credit risk is
limited due to the customer base, being large and unrelated.
28. OTHER RECEIVABLES AND PREPAYMENTS
Entrusted loan and interest receivable from a related party (Note 56(ii))
Interest receivables
Prepayments
Advances in relation to asset management plans
Receivables from Zhejiang Expressway Maintenance Co., Ltd.
(“Maintenance Co”) in relation to disposal of maintenance
equipment (Note 56(i)(b))
Others
12/31/2017
12/31/2016
rmb’000
Rmb’000
78,300
449,848
73,173
229,070
423,613
298,741
77,563
1,973,221
24,021
56,814
34,471
47,490
911,226
2,855,099
155
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
29. HELD FOR TRADING INVESTMENTS
Held for trading investments include:
Listed securities in the PRC, at fair value:
Equity securities
Open-end equity funds
Bonds in the PRC, at fair value:
Listed in Shanghai/Shenzhen Stock Exchange with fixed interest
ranging from 0.2% to 9.5% (2016: 0.2% to 11.8%) per annum
Unlisted with fixed interest ranging from 2.7% to 8.6%
(2016: 2.6% to 8.6%) per annum
12/31/2017
12/31/2016
rmb’000
Rmb’000
76,734
300,502
68,996
1,279,339
5,569,010
4,686,320
6,622,448
2,109,477
12,568,694
8,144,132
30. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS
Analysed by collateral type:
Bonds
Stock securities
Analysed by market:
Inter bank market
Shanghai/Shenzhen Stock Exchange
12/31/2017
12/31/2016
rmb’000
Rmb’000
5,147,924
4,645,568
1,865,992
2,099,337
9,793,492
3,965,329
2,687,848
7,105,644
1,340,492
2,624,837
9,793,492
3,965,329
The collaterals include both equity and debt securities listed in the PRC. As at December 31, 2017, the fair value
of equity securities and debt securities held as collaterals was Rmb11,098,959,000 (2016: Rmb6,394,960,000) and
Rmb4,523,618,000 (2016: Rmb1,871,182,000), respectively.
156
31. BANK BALANCES AND CLEARING SETTLEMENT FUND HELD ON
BEHALF OF CUSTOMERS
For the Group’s securities operation carried out by Zheshang Securities, the Group receives and holds money
deposited by customers (including other institutions). These customers’ money is maintained in one or more
segregated bank accounts. The Group has recognised the corresponding accounts payable to respective
customers and other institutions.
Bank balances and clearing settlement fund held on behalf of customers carry interest at market rates which range
from 0.35% to 6% (2016: 1.55% to 2.37%) per annum.
Bank balances and clearing settlement fund held on behalf of customers that are denominated in currencies other
than the functional currency of the respective group entities are set out below:
As at December 31, 2017
As at December 31, 2016
hKd
USD
rmb’000
Rmb’000
18,093
20,669
97,592
108,693
32. BANK BALANCES, CLEARING SETTLEMENT FUND, DEPOSITS AND
CASH
Time deposits with original maturity over three months
Unrestricted bank balances and cash
Time deposits with original maturity of less than three months
Cash and cash equivalents
12/31/2017
12/31/2016
rmb’000
20,000
Rmb’000
165,000
5,583,691
7,160,804
5,123
37,941
5,588,814
7,198,745
5,608,814
7,363,745
Bank balances carry interest at the average market rate is 0.35% (2016: 0.35%) per annum. Time deposits carry
interest at fixed rates ranging from 0.80% to 2.06% (2016: 0.20% to 2.25%) per annum.
Bank balances, clearing settlement fund, deposits and cash that are denominated in currencies other than the
functional currency of the respective group entities are set out below:
As at December 31, 2017
As at December 31, 2016
hKd
rmb’000
46,096
13,692
USD
Rmb’000
1,560,278
36,574
157
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
33. PLACEMENTS FROM OTHER FINANCIAL INSTITUTIONS
CSFCL (secured)
12/31/2017
12/31/2016
rmb’000
–
Rmb’000
700,000
As at December 31, 2016, the placements carried interest at a fixed rate of 3.00% per annum are repayable within
1 year from the end of the reporting period. The placements were secured by a cash deposit of Rmb51,494,000
and debt and equity securities with total fair value of Rmb123,219,000 as at December 31, 2016. The amount has
been repaid by the Group upon its maturity during the year ended December 31, 2017.
34. ACCOUNTS PAYABLE TO CUSTOMERS ARISING FROM SECURITIES
BUSINESS
The amounts mainly represent money held on behalf of clients at the banks and clearing houses by the Group.
The amounts also include payables for securities/futures business as well as cash collaterals from customers for
securities lending and/or margin financing arrangement.
The majority of the accounts payable balance is repayable on demand except where certain accounts payable to
brokerage clients represent margin deposits received from clients for their trading activities under normal course
of business. No aged analysis is disclosed as in the opinion of the Directors, an aged analysis does not give any
additional value in view of the nature of the business.
As at December 31, 2017, Rmb491,032,000 (2016: Rmb1,298,722,000) cash collaterals have been received from
clients for securities lending or margin financing arrangement, of which under normal course of business. Only the
excess amounts over the required margin deposits stipulated are repayable on demand.
Accounts payable to customers arising from securities business that are denominated in currencies other than the
functional currency of the respective group entities are set out below:
As at December 31, 2017
As at December 31, 2016
hKd
USD
rmb’000
Rmb’000
18,093
20,669
97,592
108,693
158
35. TRADE PAYABLES
Trade payables mainly represent the construction payables for the improvement projects of toll expressways. The
following is an aged analysis of trade payables presented based on the invoice date:
Within 3 months
3 months to 1 year
1 to 2 years
2 to 3 years
Over 3 years
36. OTHER PAYABLES AND ACCRUALS
Other liabilities:
Accrued payroll and welfare
Advance from rental and other customers
Toll collected on behalf of other toll roads
Retention payable
Deposit received for disposal of an associate (Note 23(i))
Other investors’ interests in consolidated limited partnership
Payables to fund management companies for clients
Consideration payable for acquisition of Huihang Co
(as defined in Note 48)
Others
Other accruals
12/31/2017
12/31/2016
rmb’000
Rmb’000
267,464
73,433
112,374
70,812
104,509
628,592
339,391
117,706
190,561
38,879
97,763
784,300
12/31/2017
12/31/2016
rmb’000
Rmb’000
1,190,986
1,454,992
44,879
9,543
98,713
165,600
421,782
130,731
–
219,270
33,079
9,149
77,746
165,600
178,180
8,830
28,500
199,811
2,281,504
2,155,887
233,895
275,261
2,515,399
2,431,148
159
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
37. BANK AND OTHER BORROWINGS
Bank loans, unsecured
Loan from related parties, unsecured (Note 56(i), 56(ii))
Carrying amount repayable:
Within one year
More than two years but not more than five years
Less: Amounts due within one year
Amounts shown under non-current liabilities
The bank and other borrowings comprise:
Fixed-rate borrowings
Variable-rate borrowings
12/31/2017
12/31/2016
rmb’000
Rmb’000
–
2,101,395
480,000
15,000
480,000
2,116,395
420,000
60,000
2,116,395
–
480,000
2,116,395
(420,000)
(2,116,395)
60,000
–
12/31/2017
12/31/2016
rmb’000
Rmb’000
60,000
420,000
1,714,500
401,895
480,000
2,116,395
The range of effective interest rates (which are also agreed to contracted interest rates) on the Group’s borrowings
are as follows:
Effective interest rate:
Fixed-rate borrowings
Variable-rate borrowings
12/31/2017
12/31/2016
rmb’000
Rmb’000
3.00%
4.22%
3.92%-4.35%
2.23%-3.92%
Except that the Group’s borrowings of $432,527,000 were dominated in Hong Kong Dollars as at December
31, 2016, the Group’s other borrowings were all dominated in the functional currency of the group entities as at
December 31, 2017 and 2016.
160
38. SHORT-TERM FINANCING NOTE PAYABLE
Unsecured:
Short-term loan note (Note i)
Beneficial certificates (Note ii)
Notes:
12/31/2017
12/31/2016
rmb’000
Rmb’000
–
762,800
1,500,000
3,328,340
762,800
4,828,340
(i)
During the year ended December 31, 2016, the Company issued short-term loan notes at the principle amount
of Rmb700,000,000 and Rmb800,000,000, which beared fixed interest rates of 2.62% and 2.78% per annum,
respectively. These amounts had been repaid in full upon maturity during the year ended December 31, 2017.
(ii)
During the year ended December 31, 2017, there were Rmb762,800,000 (2016: Rmb5,428,340,000) principals
received from investors for subscription of beneficial certificates issued by Zheshang Securities, which bear
interest rates ranging from 2.0% to 5.3% (2016: 1.0% to 6.0%) per annum, and Rmb3,328,340,000 (2016:
Rmb2,116,100,000) was matured and repaid. As at December 31, 2017, the remaining beneficial certificates and
its interests are repayable upon maturity.
39. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS
Analysed as collateral type:
Bonds
Other rights and interests in debt instruments
Analysed by market:
Shanghai/Shenzhen Stock Exchange
Inter-bank market
Over the counter
12/31/2017
12/31/2016
rmb’000
Rmb’000
8,263,414
2,260,000
5,186,743
2,300,000
10,523,414
7,486,743
4,018,588
4,244,826
2,260,000
3,119,475
2,067,268
2,300,000
10,523,414
7,486,743
As of December 31, 2017, the above financial assets sold under repurchase agreements include those repurchase
agreements entered into with qualified investors, with maturities within 1 year.
161
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
39. FI NANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS
(Continued)
Sales and repurchase agreements are transactions in which the Group sells a security and simultaneously agrees
to repurchase it (or an asset that is substantially the same) at a fixed price on a future date. Since the repurchase
prices are fixed, the Group is still exposed to substantially all the credit risks and market risks and rewards of those
securities sold. These securities are not derecognised from the financial statements but regarded as “collateral”
for the liabilities because the Group retains substantially all the risks and rewards of these securities. The cash
proceed received is recognised as financial liability.
As at December 31, 2017, the Group enters into repurchase agreements with certain counterparties. The proceeds
from selling such securities are presented as financial assets sold under repurchase agreements. Because
the Group sells the contractual rights to the cash flows of the securities, it does not have the ability to use the
transferred securities during the term of the arrangement.
The following tables provides a summary of carrying amounts and fair values related to transferred financial assets
that are not derecognised in their entirety and the associated liabilities as at December 31, 2017 and December
31, 2016.
Held for
trading
investments
Financial
assets held
under resale
agreements
Loans to
customers
arising from
margin
financing
business
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
as at december 31, 2017
Carrying amount of transferred assets
7,228,533
1,887,301
2,382,625
11,498,459
Carrying amount of associated liabilities
(6,429,268)
(1,834,146)
(2,260,000)
(10,523,414)
Net position
799,265
53,155
122,625
975,045
as at december 31, 2016
Carrying amount of transferred assets
4,382,376
918,296
2,495,669
7,796,341
Carrying amount of associated liabilities
(4,294,522)
(892,221)
(2,300,000)
(7,486,743)
Net position
87,854
26,075
195,669
309,598
162
40. BONDS PAYABLE
Subordinated bonds with redemption option (Note i)
Subordinated bonds without redemption option (Note ii)
Long term beneficial certificates (Note iii)
Less: subordinated bonds due within 1 year
Less: beneficial certificates due within 1 year
Amounts shown under non-current liabilities
Notes:
12/31/2017
12/31/2016
rmb’000
2,500,000
6,850,000
800,000
Rmb’000
4,000,000
4,900,000
800,000
10,150,000
9,700,000
(500,000)
(3,000,000)
(800,000)
–
(1,300,000)
(3,000,000)
8,850,000
6,700,000
i)
This balance represented 2 (2016: 3) subordinated bonds due by year 2020 to 2021 (2016: 2019 to 2021) issued
by Zheshang Securities carried fixed interest rate ranging from 3.63% to 4.90% (2016: 3.63% to 5.80%) per
annum, with redemption option of the Group exercisable at the second or third anniversary since the date of issue.
If the redemption option is not exercised, the interest rate would be increased to a fixed rate of 6.63% (2016:
6.63% to 8.80%) per annum for the remaining period till maturity.
As at December 31, 2017, these subordinated bonds carried at fixed interest rates ranging from 3.63% to 4.9%
(2016: 3.63% to 5.80%) per annum.
ii)
This balance represented 5 (2016: 5) subordinated bonds due by year 2018 to 2021 (2016: 2017 to 2021) issued
by Zheshang Securities, without redemption option, with a fixed interest rates ranging from 3.08% to 6.30% (2016:
3.08% to 6.30%) per annum.
iii)
Long term beneficial certificates due by 2018 issued by Zheshang Securities bear fixed interest rates rated ranging
from 3.70% to 3.79% per annum.
41. DERIVATIVE FINANCIAL ASSETS/LIABILITIES
Derivative financial assets of Rmb4,587,000 and derivative financial liabilities of Rmb3,941,000 has been
recognised for the fair values of commodity options as at December 31, 2017.
Derivative financial assets of Rmb10,931,000 and derivative financial liabilities of Rmb413,000 has been
recognised for the fair values of those foreign exchange forward transaction and commodity options as at
December 31, 2016.
163
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
42. CONVERTIBLE BOND
On April 21, 2017, the Company issued a zero coupon convertible bond due 2022 in an aggregate principal amount
of Euro365,000,000 (the “Convertible Bond”). The Convertible Bond is listed on the Stock Exchange.
The principal terms of the Convertible Bond are set out below:
(1) Conversion right
The Convertible Bond will, at the option of the holder (the “Bondholders”), be convertible (unless previously
redeemed, converted or purchased and cancelled) on or after June 1, 2017 up to April 11, 2022 into fully paid
ordinary shares with a par value of Rmb1.00 each at an initial conversion price (the “Conversion Price”) of
HK$13.10 per H share and a fixed exchange rate of HK$8.2964 to Euro1.00 (the “Fixed Exchange Rate”).
The Conversion Price is subject to the anti-dilutive adjustments and certain events including mainly: share
consolidation, subdivision or re-classification, capitalisation of profits or reserves, capital distributions, rights issues
of shares or options over shares, rights issues of other securities and issues at less than current market price. The
latest Conversion Price is HK$12.54 per H share.
(2) Redemption
(i) Redemption at maturity
Unless previously redeemed, converted or purchased and cancelled as provided herein, the Company will redeem
each Convertible Bond at 100 percent of its outstanding principal amount on April 21, 2022 (the “Maturity Date”).
(ii) Redemption at the option of the Company
The Company may, having given not less than 30 nor more than 60 days’ notice, redeem the Convertible Bond in
whole and not some only at 100 percent of their outstanding principal amount as at the relevant redemption date:
(a)
at any time after April 21, 2020 but prior to the Maturity Date, provided that no such redemption may be
made unless the closing price of an H share translated into Euro at the prevailing rate applicable to each
Stock Exchange business day, for any 20 Stock Exchange business days within a period of 30 consecutive
Stock Exchange business days, the last of such Stock Exchange business day shall occur not more than
10 days prior to the date upon which notice of such redemption is given, was, for each such 20 Stock
Exchange business days, at least 130 percent of the Conversion Price (translated into Euro at the Fixed
Exchange Rate); or
(b)
if at any time the aggregate principal amount of the Convertible Bond outstanding is less than 10 percent of
the aggregate principal amount originally issued.
164
42. CONVERTIBLE BOND (Continued)
(2) Redemption (Continued)
(iii) Redemption at the option of the Bondholders
The Company will, at the option of the Bondholders, redeem whole or some of that holder’s bond on April 21, 2020
(the “Put Option Date”) at 100 percent of their outstanding principal amount on the Put Option Date.
The Convertible Bond comprises two components:
(a)
Debt component was initially measured at fair value amounted to approximately Euro297,801,000
(equivalent to Rmb2,190,578,000). It is subsequently measured at amortised cost by applying effective
interest rate method after considering the effect of the transaction costs. The effective interest rate used is
4.28%.
(b)
Derivative component comprises conversion right of the Bondholders, redemption option of the Company,
and redemption option of the Bondholders.
Transaction costs totalling Rmb16,725,000 that relate to the issue of the Convertible Bond are allocated to the
(including conversion right and redemption options) components in proportion to their respective fair values.
Transaction costs amounting to approximately Euro419,000 (equivalent to Rmb3,079,000) relating to the
derivative component were charged to profit or loss immediately. Transaction costs amounting to approximately
Euro1,855,000 (equivalent to Rmb13,646,000) relating to the debt component are included in the carrying amount
of the debt portion and amortised over the period of the Convertible Bond using the effective interest method.
The derivative component was measured at fair value with reference to valuation carried out by a firm of
independent professional valuers.
165
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
42. CONVERTIBLE BOND (Continued)
The movement of the debt and derivative components of the Convertible Bond for the year is set out as below:
Convertible Bond issued on
April 21, 2017
Issue cost
Exchange realignment
Interest charge
Debt component
Derivative Components
Total
Euro’000
Rmb’000
Euro’000
Rmb’000
Euro’000
Rmb’000
297,801
2,190,578
67,199
494,302
365,000
2,684,880
(1,855)
(13,646)
–
132,958
8,558
65,941
–
–
–
–
–
–
(1,855)
(13,646)
–
132,958
8,558
65,941
Gain on decrease in fair value
–
–
(23,004)
(149,479)
(23,004)
(149,479)
Total
304,504
2,375,831
44,195
344,823
348,699
2,720,654
No conversion or redemption of the Convertible Bond has occurred up to December 31, 2017. The detailed key
inputs the valuer uses to calculate the fair value of the derivative component refer to Note 52(c).
43. DEFERRED TAXATION
For the purpose of presentation in the consolidated statement of financial position, certain deferred tax assets
and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting
purposes:
Deferred tax assets
Deferred tax liabilities
12/31/2017
12/31/2016
rmb’000
355,803
(394,434)
Rmb’000
362,681
(378,147)
(38,631)
(15,466)
166
43. DEFERRED TAXATION (Continued)
The following are the major deferred tax liabilities and assets recognised and movements thereon during the
current and prior years:
Difference in tax
Changes
and accounting
in fair
depreciation of
value of held
property plant
Fair value
for trading and
and equipment
adjustment
Temporary
differences
of accrued
expenses
available-for-sale
and expressway
of long
and impairment
investments
operating rights
term assets
losses
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
At January 1, 2016
83,550
23,350
Acquired on acquisition of a subsidiary
Credit to profit or loss
Charge to other comprehensive income
Disposal of a subsidiary
At December 31, 2016
–
(3,846)
12,523
–
92,227
95,595
125,258
(269,893)
(67,398)
–
125,258
–
(18,744)
(9,784)
(23,867)
(56,241)
–
–
–
–
–
1,324
4,606
211,069
(292,436)
12,523
1,324
15,466
(Credit) charge to profit or loss
(27,729)
(24,155)
(14,402)
46,629
(19,657)
Charge to other comprehensive income
42,822
–
–
–
At December 31, 2017
107,320
(19,549)
196,667
(245,807)
42,822
38,631
As at December 31, 2017, the Group had unused tax losses of approximately Rmb227,964,000 (2016:
Rmb388,004,000). No deferred taxation asset has been recognised due to the unpredictability of future profit
streams. Such unrecognised tax losses will expire within 2021.
167
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
44. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial liabilities held for trading:
– Bonds borrowing
Financial liabilities designated at fair value through profit or loss:
– Financial liabilities arising from consolidation of
structured entities (Note)
12/31/2017
12/31/2016
rmb’000
Rmb’000
223,234
196,363
150,193
373,427
97,295
293,658
Note:
Financial liabilities arising from consolidation of structured entities represents the third party unit holders’ interests in the
consolidated structure schemes and funds which are reflected as a liability since they can be put back to the Group for
cash. Interests in all consolidated structured entities directly held by the Group amounted to fair value of Rmb115,627,000
and Rmb36,661,000 at December 31, 2017 and 2016, respectively.
The Group has designated these liabilities as FVTPL, as in the opinion of the management, such designation eliminates or
significantly reduces a measurement or recognition inconsistency that would otherwise arise.
168
45. SHARE CAPITAL
Registered, issued and fully paid:
Domestic shares of Rmb1 each
H Shares of Rmb1 each
Number of
shares
12/31/2016
and 2017
Share capital
12/31/2016
and 2017
’000
Rmb’000
2,909,260
2,909,260
1,433,855
1,433,855
4,343,115
4,343,115
The domestic shares are not currently listed on any stock exchange.
The H Shares have been listed on the Stock Exchange since May 15, 1997. The H shares were admitted to the
Official List on May 5, 2000 and their dealings on the London Stock Exchange commenced on the same day.
All the domestic shares and H Shares rank pari passu with each other as to dividends and voting rights.
46. NON-CONTROLLING INTERESTS
Balance at January 1, 2016
Share of total comprehensive income
Disposal of a subsidiary
Capital reduction by non-controlling interests
Dividend declared to non-controlling interests
At December 31, 2016
Share of total comprehensive income
Increase due to Spin-off and Offering
Dividend declared to non-controlling interests
At December 31, 2017
Rmb’000
5,261,991
789,326
(8,731)
(5,000)
(178,816)
5,858,770
856,875
1,943,382
(109,176)
8,549,851
169
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
46. NON-CONTROLLING INTERESTS (Continued)
The summarised financial information in respect of the Group’s subsidiary that has material non-controlling
interests, namely Shangsan Co and its subsidiaries and Yuhang Co (as defined in Note 57) at the end of the
reporting period are set out below. The summarised financial information below represents amounts before
intragroup elimination.
Shangsan Co and its subsidiaries
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity attributable to owners of the Company
Non-controlling interests
Revenue
Expenses
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Profit attributable to owner of the Company
Profit attributable to non-controlling interests
12/31/2017
12/31/2016
rmb’000
Rmb’000
51,893,532
51,271,695
4,146,760
5,387,726
30,683,157
36,070,840
9,000,315
8,304,014
8,410,241
6,967,869
7,946,579
5,316,698
For the
year ended
For the
year ended
12/31/2017
12/31/2016
rmb’000
4,735,530
Rmb’000
5,287,538
(2,982,545)
(3,425,204)
1,752,985
1,862,334
128,083
37,870
1,881,068
1,900,204
1,036,344
1,106,203
716,641
756,131
1,752,985
1,862,334
Total comprehensive income attributable to owner of the Company
1,096,455
1,125,951
Total comprehensive income attributable to non-controlling interests
784,613
774,253
1,881,068
1,900,204
170
46. NON-CONTROLLING INTERESTS (Continued)
Shangsan Co and its subsidiaries (Continued)
Dividends paid to non-controlling shareholders
Net cash used in operating activities
Net cash from (used in) investing activities
Net cash from financing activities
Net cash (outflow) inflow
Yuhang Co
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity attributable to owners of the Company
Non-controlling interests
Revenue
Expenses
Profit for the year
For the
year ended
For the
year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
(98,115)
(45,947)
(4,606,648)
(1,238,549)
920,489
(901,876)
75,645
4,016,689
(3,610,514)
1,876,264
12/31/2017
12/31/2016
rmb’000
114,948
819,186
72,119
7,323
435,894
418,798
Rmb’000
147,804
853,514
242,973
7,679
382,840
367,826
For the
year ended
For the
year ended
12/31/2017
12/31/2016
rmb’000
305,606
Rmb’000
383,760
(179,014)
(372,246)
126,592
11,514
171
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
46. NON-CONTROLLING INTERESTS (Continued)
Yuhang Co (Continued)
Profit and total comprehensive income
– attributable to owner of the Company
– attributable to non-controlling interests
Dividends paid to non-controlling shareholders
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net cash inflow
For the
year ended
For the
year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
64,562
62,030
126,592
(11,058)
5,872
5,642
11,514
(9,215)
214,436
234,319
(77,903)
(47,629)
(92,620)
(180,434)
43,913
6,256
47. RETIREMENT BENEFITS SCHEMES
The employees of the Group are members of the state-managed retirement benefits scheme operated by the
PRC government. To supplement this existing retirement benefits scheme, the Group adopted a corporate annuity
scheme in accordance with relevant rules and regulations. The Group is required to contribute a certain percentage
of payroll costs to these retirement benefits schemes to fund the benefits. The only obligation of the Group with
respect to these retirement benefits schemes is to make the specified contributions.
No forfeited contributions are available to reduce the contribution payable in future years.
172
48. ACQUISITION OF A SUBSIDIARY
For the year ended December 31, 2016
On September 14, 2016, the Group acquired 100% equity interest in Huangshan Yangtse Huihang Expressway
Co., Ltd. (” Huihang Co”) for cash consideration of Rmb570,000,000, among which Rmb541,500,000 and
Rmb28,500,000 were paid in 2016 and 2017, respectively. This acquisition had been accounted for using
acquisition method. No goodwill was recognised as a result of the acquisition, as consideration transferred equals
to the fair value of net assets acquired. Huihang Co was engaged in toll operation business. Huihang Co was
acquired so as to continue the expansion of the Group’s toll operations.
Acquisition-related costs amounting to Rmb584,000 had been excluded from the consideration transferred and
have been recognised as an expense for the year ended December 31, 2016, within the administrative expenses
line item in the consolidated statement of profit or loss and other comprehensive income.
Assets acquired and liabilities recognised at date of acquisition were as follows:
Property, plant and equipment
Expressway operating rights
Inventories
Trade receivables
Other receivables and prepayments
Bank balances and cash
– Cash and cash equivalents
Trade payables
Other taxes payable
Other payables and accruals
Bank borrowings
Deferred tax liabilities
Rmb’000
33,832
2,303,560
31
2,516
2,087
236
(10,756)
(644)
(490,604)
(1,145,000)
(125,258)
570,000
The fair value of trade receivables and other receivables and the gross contractual amounts of those trade
receivables and other receivables acquired at the date of acquisition amounted to Rmb4,024,000. The best
estimate at acquisition date of the contractual cash flows not expected to be collected was nil.
173
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
48. ACQUISITION OF A SUBSIDIARY (Continued)
Net cash outflow arising on acquisition
Consideration paid in cash
Less: Cash and cash equivalents acquired
Rmb’000
(541,500)
236
(541,264)
Included in the profit for the year ended December 31, 2016 was loss of Rmb29,189,000 attributable to the
additional business generated by Huihang Co. Revenue for the year 2016 included Rmb42,992,000 generated from
Huihang Co.
Had the acquisition been completed on January 1, 2016, total group revenue for the year ended December 31,
2016 would have been Rmb9,829,566,000, and the amount of the profit for the year 2016 would have been
Rmb3,765,880,000. The pro-forma information was for illustrative purposes only and was not necessarily an
indication of revenue and results of operations of the Group that actually would have been achieved had the
acquisition been completed on January 1, 2016, nor was it intended to be a projection of future results.
In determining the “pro-forma” revenue and profit of the Group had Huihang Co been acquired at the beginning
of the year 2016, the Directors had calculated amortisation of expressway operating rights acquired on the basis
of the fair values arising in the initial accounting for the business combination rather than the carrying amounts
recognised in the pre-acquisition financial statements.
174
49. DISPOSAL OF A SUBSIDIARY
For the year ended December 31, 2016
On October 17, 2016, the Company entered into an agreement with Zhejiang Communications Investment Co.,
Ltd. (“Zhejiang Communications Investment”), a fellow subsidiary of the Communications Group, pursuant to which
the Company sold 100% equity interest in Development Co to Zhejiang Communications Investment at a cash
consideration of Rmb249,660,000. The disposal was completed on December 29, 2016.
Consideration received:
Cash received
analysis of assets and liabilities over which control was lost:
Property, plant and equipment
Prepaid lease payments
Other intangible assets
Deferred tax assets
Inventories
Trade receivables
Other receivables and prepayments
Bank balances and cash
– Cash and cash equivalents
Trade payables
Tax liabilities
Other taxes payables
Other payables and accruals
Other payables and accruals
(133,133)
Net assets disposed of
gain on disposal of a subsidiary:
Consideration received
Less: Net assets disposed of
Add: Non-controlling interest
Gain on disposal
net cash inflow arising on disposal:
Cash received
Less: bank balances and cash disposed of
Rmb’000
249,660
29/12/2016
Rmb’000
184,269
3,584
107
1,324
4,216
3,805
17,245
141,028
(14,522)
(3,353)
(3,172)
(133,133)
201,398
249,660
(201,398)
8,731
56,993
249,660
(141,028)
108,632
175
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
50. COMMITMENTS
Authorised but not contracted for:
– Purchase of machinery and equipment
– Acquisition and construction of properties
– Equity investments
51. CAPITAL RISK MANAGEMENT
12/31/2017
12/31/2016
rmb’000
Rmb’000
290,121
162,019
360,000
812,140
312,150
242,400
–
554,550
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern
while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s
overall strategy remains unchanged from prior year.
The capital structure of the Group consists of net debt, which includes the borrowings disclosed in Notes 37, 38,
39, 40 and 42, net of cash and cash equivalents and equity attributable to owners of the Company, comprising
issued share capital, reserves and retained profits.
The Directors review the capital structure on a regular basis. As part of this review, the Directors consider the cost
of capital and the risks associated with each class of capital. Based on recommendations of the Directors, the
Group will balance its overall capital structure through the payment of dividends and new share issues as well as
the issue of new debt or the redemption of existing debt.
176
52. FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
Financial assets
AFS investments
– at cost
– at fair value
Fair value through profit or loss
Held for trading investments
Derivative financial assets
12/31/2017
12/31/2016
rmb’000
Rmb’000
17,297
44,597
2,495,253
3,089,301
12,568,694
8,144,132
4,587
10,931
Loans and receivables (including cash and cash equivalents)
39,371,562
42,374,225
Financial liabilities
Fair value through profit or loss
Derivative financial liabilities
Financial liabilities at fair value through profit or loss
Convertible Bond – derivative component
Amortised cost
3,941
373,427
344,823
413
293,658
–
40,491,420
45,984,544
(b) Financial risk management objectives and policies
The Group’s major financial instruments include AFS investments, held for trading investments, trade receivables,
other receivables, loans to customers arising from margin financing business, financial assets held under resale
agreements, bank balances, clearing settlement fund, deposits and cash, bank balances and clearing settlement
fund held on behalf of customers, trade payables, other payables, placements from other financial institutions,
accounts payable to customers arising from securities business, derivative financial assets, derivative financial
liabilities, bank and other borrowings, short-term financing note payable, financial assets sold under repurchase
agreements, financial liabilities at fair value through profit or loss, bonds payable, convertible bond and financial
guarantee. Details of the financial instruments are disclosed in respective notes. The risks associated with
these financial instruments include market risk (interest rate risk, currency risk and other price risk), credit risk
and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and
monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.
177
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk
(i)
Interest rate risk
The Group is exposed to fair value interest rate risk in relation to loans to customers arising from margin financing
business, fixed-rate entrusted loans, financial assets held under resale agreements, fixed-rate time deposits,
placement from other financial institutions, fixed-rate bank and other borrowings, fixed rate short-term financing
note payable, financial assets sold under repurchase agreements, bonds payable, debt component of convertible
bond and financial liabilities at fair value through profit or loss (see notes 27, 28, 30, 32, 33, 37, 38, 39, 40, 42 and
44 for details).
The Group is also exposed to cash flow interest rate risk in relation to variable-rate bank balances and clearing
settlement fund held on behalf of customers, bank balances, clearing settlement fund, deposits and bank and other
borrowings (see Notes 31, 32 and 37 for details).
The Group currently does not have an interest rate risk hedging policy as the management considers the Group is
not exposed to significant interest rate risk. The management will continue to monitor interest rate risk exposure
and consider hedging against it should the need arise.
The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section
of this note.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative
instruments, comprising variable-rate bank balances and clearing settlement fund held on behalf of customers,
bank balances, clearing settlement fund, deposits and bank and other borrowings at the end of the reporting
period.
The analysis is prepared assuming the balances outstanding at the end of the reporting period were outstanding
for the whole year. A 30 basis points (2016: 30 basis points) increase or decrease represents the management’s
assessment of the reasonably possible change in interest rates.
If interest rates had been 30 basis points (2016: 30 basis points) higher/lower and all other variables were held
constant, the Group’s post-tax profit for the year ended December 31, 2017 would have increased/decreased by
Rmb45,459,000 (2016: Rmb60,478,000). This was mainly attributable to the Group’s exposure to interest rates on
its variable-rate bank balances.
178
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(ii)
currency risk
Several subsidiaries of the Group have foreign currency denominated monetary assets and liabilities, which
expose the Group to foreign currency risk.
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the end of the
reporting date are as follows:
Hong Kong dollar (” HKD”)
United States dollar (” USD”)
Euro dollar (” EUR”) (Note)
Assets
Liabilities
12/31/2017
12/31/2016
12/31/2017
12/31/2016
rmb’000
Rmb’000
rmb’000
Rmb’000
64,189
1,657,870
–
34,361
145,266
18,093
97,593
–
2,720,654
407,564
108,693
–
Note: Amount represented both the debt and derivative component of the Convertible Bond issued by the Company.
Sensitivity analysis
The Group is mainly exposed to USD and EUR relative to Rmb. The following table details the Group’s sensitivity
to a 10% (2016: 5%) increase and decrease in Rmb against the relevant foreign currencies. 10% (2016: 5%) is the
sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents
the management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity
analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at
the end of the reporting period for a 10% (2016: 5%) change in foreign currency rates. A positive number below
indicates an increase in post-tax profit where Rmb strengthen 10% (2016: 5%) against the relevant currency. For a
10% (2016: 5%) weakening of Rmb against the relevant currency, there would be an equal and opposite impact on
the profit and other equity and the balances below would be negative. The impact of HKD is not presented, since
the outstanding monetary items denominated in HKD is not significant and their impact is immaterial.
179
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(ii)
currency risk (Continued)
Sensitivity analysis (Continued)
Profit or loss
USD impact
EUR impact
12/31/2017
12/31/2016
12/31/2017
12/31/2016
rmb’000
(117,021)
Rmb’000
(1,372)
rmb’000
204,049
Rmb’000
–
In the management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as
the year end exposure does not reflect the exposure during the year.
(iii)
Other price risk
The Group is exposed to equity and debt security price risk in relation to its held for trading, AFS listed
investments, derivative financial assets and liabilities and financial liabilities at fair value through profit or loss.
The Group currently does not have a price risk hedging policy and the management will continue to monitor price
risk exposure and consider hedging against it should the need arise.
Sensitivity analysis
For financial instruments other than derivative component of Convertible Bond
The sensitivity analyses below have been determined based on the exposure to equity and debt security price risks
at the reporting date.
180
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(iii)
Other price risk (Continued)
Sensitivity analysis (Continued)
If the prices of the respective equity and debt instruments had been 5% (2016: 5%) higher/lower,
•
post-tax profit for the year ended December 31, 2017 would have increased/decreased by Rmb471,326,000
(2016: Rmb305,405,000) as a result of the changes in fair value of held for trading investments.
•
investment valuation reserve would have increased/decreased by Rmb93,572,000 (2016: Rmb115,849,000)
for the Group as a result of the changes in fair value of AFS listed investments, or the investment
revaluation reserve would decrease by the same amount and the Group would consider any potential
impairment effect, if necessary.
For derivative component of Convertible Bond
The Group are required to estimate the fair values of the derivative component of Convertible Bond issued by the
Company at the end of each reporting period, which therefore exposed the Group to equity price risk. The fair
value adjustment will be affected either positively or negatively, amongst others, by the changes in risk-free rate,
the Company’s share price, share price volatility and foreign currency exchange rate. Details of the Convertible
Bond issued by the Company are set out in Note 42.
The sensitivity analyses below have been determined based on the exposure to the Company’s share price,
volatility and foreign currency exchange rate at the reporting date only as the Directors consider that the change
in risk-free rate may not have significant financial impact on the fair values of derivative component of Convertible
Bond. The exposure to foreign currency exchange rate of the Convertible Bond had been covered in Note 52(b)(ii)
already.
181
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(iii)
Other price risk (Continued)
Conversion option derivatives of Convertible Bond.
1)
Changes in share price
If the share price of the Company had been 10% higher/lower while all other input variables of the valuation
models were held constant, the Group’s profit for the year would have (decreased)/increased as follows:
Higher by 10%
Lower by 10%
2)
Changes in volatility
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
(61,770)
51,085
NA
NA
If the volatility to the valuation model had been 10% higher/lower while all other variables were held constant, the
Group’s profit for the year would have (decreased)/increased as follows:
Higher by 10%
Lower by 10%
Credit risk
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
(35,954)
37,153
NA
NA
As at December 31, 2017, the Group’s maximum exposure to credit risk which will cause a financial loss to the
Group due to failure to discharge an obligation by the counterparties provided by the Group is arising from the
carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial
position and the amount of contingent liability in relation to financial guarantee issued by the Group as disclosed in
Note 55.
The Group reviews the recoverable amount of each individual trade debt and entrusted loan receivables at the
end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this
regard, the Directors consider that the Group’s credit risk is significantly reduced.
182
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk (Continued)
The Group has no credit period granted to its trade customers of toll operation businesses. All the Group’s trade
receivable balance for toll operation business are toll receivables from the government-operated organisation.
The Group also provides clients with margin financing business, and have financial assets held under resale
agreements which are secured by clients’ securities or deposits held as collateral.
In respect of the margin financing and securities lending business of the Group’s securities operation, which was
carried out by Zheshang Securities, Zheshang Securities has appointed a group of authorised persons who are
charged with the responsibility of determination of credit limits, credit approvals and other monitoring procedures
to ensure that follow-up action is taken to recover overdue debts. Each client has a maximum credit limit based on
the quality of collateral held and the financial background of the client. In addition, Zheshang Securities reviews the
recoverable amount of each individual loan at the end of the reporting period to ensure that adequate impairment
losses are made for irrecoverable amounts. Margin calls are made when the trades of margin clients exceed their
respective limits. Any such excess is required to be made good within the next trading day. Failure to meet margin
calls will result in the liquidation of the customers’ position. Zheshang Securities seeks to maintain strict control
over its outstanding receivables. It will also adhere to the Group’s policies and procedures to conduct periodic
credit assessment and manage any concentration in the following exposures and perform regular reporting to the
management:
(i)
exposures to a particular client/counterparty or group of related clients/counterparties; and
(ii)
exposures to a particular investment product.
The Investment Committee of Zheshang Securities is also responsible for the credit risk arising from its proprietary
trading operation, including the investments in AFS investments and held for trading investments. The Investment
Committee assesses the financial performance of the issuers to ensure that the issuers can satisfy the repayment
of the principal and interest as they fall due. It has set portfolio size limits and single issuer limits to limit Zheshang
Securities’ exposure to the credit risk. Zheshang Securities also monitors the credit rating and market news of the
issuers for any indication of potential credit deterioration.
The credit risk on liquid funds is limited because the counterparties are state-owned banks or banks with high
credit ratings assigned by international credit-rating agencies.
183
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk (Continued)
As at December 31, 2017, other than the concentration of credit risk on trade receivables, entrusted loan
receivables and financial guarantee contract amounting to Rmb244,587,000 (2016: Rmb275,318,000),
Rmb78,300,000 (2016: Rmb423,613,000), and Rmb842,643,000 (2016: Rmb947,275,000), respectively, of which
these balances were only limited and concentrated to a few counterparties, the Group does not have any other
significant concentrations of credit risk.
There are also no concentration risks on its margin financing business and financial assets held under resale
agreements as at December 31, 2017 and 2016 respectively as the Group has a large number of clients who are
dispersed.
The Group’s concentration of credit risk by geographical location is mainly in the PRC.
Liquidity risk
Most of the bank balances, clearing settlement fund, deposits and cash at December 31, 2017 and 2016 were
denominated in Rmb which is not a freely convertible currency in the international market. The exchange rate of
Rmb is regulated by the PRC government and the remittance of these Rmb funds out of the PRC is subject to
foreign exchange controls imposed by the PRC government.
The Group closely monitors its cash position resulting from its operations and maintains a level of cash and cash
equivalents deemed adequate by the management to enable the Group to meet in full its financial obligations as
they fall due for the foreseeable future.
184
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Liquidity risk (Continued)
The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities.
Liquidity risk analysis below excludes derivative component of Convertible Bond as the settlement of which does
not involve cash settlement. The table has been drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest
and principal cash flows.
Liquidity tables
2017
non-derivative financial liabilities
Accounts payable to customers arising from securities business
Trade payables
Other payables
Bank and other borrowings
– fixed rate
– variable rate
Short-term financing note payable
Financial assets sold under repurchase agreements
Bonds payable
Convertible Bond
– debt component
Financial guarantee
Financial liabilities at fair value through profit or loss
2016
non-derivative financial liabilities
Placements from other financial institutions
Accounts payable to customers arising from securities business
Trade payables
Other payables
Bank and other borrowings
– fixed rate
– variable rate
Short-term financing note payable
Financial assets sold under repurchase agreements
Bonds payable
Financial guarantee
Financial liabilities at fair value through profit or loss
3.00
4.22
5.01
4.25
4.60
4.28
–
–
3.93
2.29
4.51
3.97
4.61
–
–
Weighted
average
interest rate
On demand or
Less than
3 months
3 months–
1 year
1–3years
3–5 years
%
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Total
undiscounted
cash flows
Carrying
amount at
31/12/2017
Rmb’000
Rmb’000
+5 years
Rmb’000
–
–
–
14,933,719
628,592
637,064
–
–
–
–
–
–
–
4,370
101,182
1,800
433,206
676,842
63,600
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,933,719
14,933,719
628,592
637,064
65,400
437,576
778,024
628,592
637,064
60,000
420,000
762,800
8,494,317
1,899,899
86,001
90,239
36,521
10,606,977
10,523,414
1,133,566
650,371
5,615,440
3,986,620
–
842,643
223,234
–
–
150,193
–
–
–
2,847,840
–
–
–
–
–
–
11,385,997
10,150,000
2,847,840
2,375,831
842,643
373,427
–
373,427
26,998,687
3,812,311
5,765,041
6,924,699
36,521
43,537,259
40,864,847
3.00
710,675
–
–
–
20,073,435
784,300
295,331
–
–
–
–
16,856
2,304
1,740,727
404,438
1,390,932
3,572,430
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,388,337
1,889,902
529,515
1,779,000
1,718,520
1,569,728
5,992,040
947,275
206,387
–
87,271
–
–
–
–
31,594,832
9,413,288
2,099,243
5,992,040
–
–
–
–
–
–
–
–
–
–
–
–
710,675
700,000
20,073,435
20,073,435
784,300
295,331
784,300
295,331
1,757,583
1,714,500
406,742
401,895
4,963,362
4,828,340
7,807,754
7,486,743
11,059,288
9,700,000
947,275
293,658
–
293,658
49,099,403
46,278,202
185
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Liquidity risk (Continued)
Liquidity tables (Continued)
The amounts included above for financial guarantee contracts are the maximum amounts the Group could
be required to settle under the arrangement for the full guaranteed amount if that amount is claimed by the
counterparty to the guarantee. Based on expectations at the end of the reporting period, the Group considers that
it is more likely than not that no amount will be payable under the arrangement. However, this estimate is subject
to change depending on the probability of the counterparty claiming under the guarantee which is a function of the
likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.
The amounts included above for variable interest rate instruments for non-derivative financial liabilities are subject
to change if changes in variable interest rates differ to those estimates of the interest rates determined at the end
of the reporting period.
As at December 31, 2017 and 2016, the Group has not entered into any master netting arrangements with
counterparties. The collaterals of which, such as financial assets held under resale agreement, held-for-trading
investments, loans to customers arising from margin financing business, placements from other financial
institutions and financial assets sold under repurchase agreements, financial liabilities at fair value through profit or
loss, etc., are disclosed in the corresponding notes, which are generally not on the net basis in financial position.
However, the risk exposure associated with favourable contracts is significantly reduced by the collaterals received
by the Group which could be recovered to the extent if a default occurs, in respect of the outstanding receivable
amounts from the counterparty.
The analysis above does not include the cash flow of derivatives, which do not have material impact on the cash
flow of the Group.
(c) Fair value measurements of financial instruments
This note provides information about how the Group determines fair values of various financial assets and financial
liabilities.
Fair value measurements recognised in the statement of financial position that are measured at fair value
on a recurring basis
Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting
period. The following table gives information about how the fair values of these financial assets and financial
liabilities are determined (in particular, the valuation technique(s) and inputs used).
186
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
Fair value as
at 31/12/2017
Rmb’000
Fair value as
at 31/12/2016
Rmb’000
Fair value
hierarchy
Basis of fair value
measurement/valuation
technique(s) and key
input(s)
Significant
unobservable
input(s)
Relationship of
unobservable
inputs to
fair value
76,734
68,996
Level 1
Quoted bid prices in an
active market.
Financial Assets
1)
2)
Equity investments listed in
exchange
Equity securities traded in
inactive market
Classified as
Held for trading
investments
AFS investments
179,274
272,392
Level 2
Recent transaction
751,530
315,878
Level 3
prices.
Discounted cash flow.
The fair value is
determined with
reference to the
quoted market prices
with an adjustment of
discount for lack of
marketability.
3)
Listed funds
Held for trading
investments
300,502
1,279,339
Level 1
Quoted bid prices in an
active market.
AFS investments
63,881
89,993
Level 1
Quoted bid prices in an
4)
Unlisted fund investments
AFS investments
59,970
271,579
–
–
active market.
Level 2
Based on the net
asset values of the
equity investment,
with reference to
observable market
price.
N/A
N/A
N/A
N/A
Discounted
for lack of
marketability.
The higher the
discount, the
lower the fair
value.
N/A
N/A
N/A
N/A
N/A
N/A
5)
Debt investments listed in
exchange and debt investment
in interbank market
Held for trading
investments
5,569,010
4,597,320
Level 1
Quoted bid prices in an
Held for trading
investments
6,622,448
2,198,477
Level 2
AFS investments
–
30,000
Level 2
6)
Investments in structured
products
AFS investments
868,579
857,148
Level 2
The fair value was based
N/A
N/A
Level 3
Net asset of the fund
which is determined
by the fair value
of underlying
investments.
The fair value
of underlying
investments
The higher
the fair value
of underlying
investments, the
higher the fair
value.
N/A
N/A
N/A
N/A
N/A
N/A
active market.
Discounted cash flow.
Future cash flows
are estimated based
on applying the
interest yield curves
of different types of
bonds as the key
parameter.
Discounted cash flow.
Future cash flows
are estimated based
on applying the
interest yield curves
of different types of
bonds as the key
parameter.
on the net value
of the underlying
assets. The net asset
value of the products
was calculated by
observable (quoted)
prices of underlying
investment portfolio
and adjustments of
related expenses.
Discounted cash flows.
Future cash flows are
estimated based on
expected applicable
yield of the underlying
investment portfolio
and adjustment of
related expenses.
Discounted cash flows.
Future cash flows are
estimated based on
expected applicable
yield of the underlying
investment portfolio
and adjustment of
related expenses.
Future cash
flows and
discount rate
Future cash
flows and
discount rate
The higher the
future cash
flows, the higher
the fair value.
The higher the
discounted rate,
the lower the
fair value
The higher the
future cash
flows, the higher
the fair value.
The higher the
discounted rate,
the lower the
fair value.
187
46,214
133,387
Level 3
7)
Investments in trust products
AFS investments
254,226
10,000
Level 3
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
Financial Assets
8)
Unlisted equity investment at fair
value
Classified as
AFS investments
Fair value as
at 31/12/2017
Rmb’000
Fair value as
at 31/12/2016
Rmb’000
Fair value
hierarchy
Basis of fair value
measurement/valuation
technique(s) and key
input(s)
Significant
unobservable
input(s)
Relationship of
unobservable
inputs to
fair value
–
1,380,503
Level 2
Calculated based on
N/A
N/A
Financial Liabilities
Classified as
Fair value as
at 31/12/2017
Rmb’000
Fair value as
at 31/12/2016
Rmb’000
Fair value
hierarchy
1)
Investments in interbank market
Fair value through profit or
223,234
196,363
Level 2
loss
2)
Investments in asset
management scheme
loss
Fair value through profit or
150,193
97,295
Level 2
Shares of the net assets
N/A
N/A
the fair value of the
underlying investments
which are listed
equity securities, after
making adjustments of
related expenses.
Basis of fair value
measurement/valuation
technique(s) and key
input(s)
Discounted cash flow.
Future cash flows
are estimated based
on applying the
interest yield curves
of different types of
bonds as the key
parameter.
Significant
unobservable
input(s)
Relationship of
unobservable
inputs to fair
value
N/A
N/A
of the products,
determined with
reference to the net
asset value of the
products, calculated
by observable (quoted)
prices of underlying
investment portfolio
and adjustments of
related expenses.
Binomial option pricing
model Expected
volatility: 31.82%
Dividend yield:
nil Risk-free rate:
1.54% Share price:
HK$8.59 (equivalent
to Rmb7.18) Exercise
price: HK$12.54
(equivalent to
Rmb10.48)
The higher
the expected
volatility, the
higher the fair
value
Expected
volatility of
31.82%, taking
into account the
actual historical
share price of
the Company
over the same
time period as
the Convertible
Bond’s
remaining time
to maturity
3)
Derivative component of
Convertible Bond
Derivative component of
344,823
–
Level 3
Convertible Bond
There were no transfer between Level 1 and Level 2 during the year.
188
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
As at December 31, 2017
held for trading investments
– Equity securities
a. Manufacturing
b. Financial services
c.
information technology service
d. Transportation, storage and portal
service
e. Energy and water services
f. Real Estate
g. Water conservancy, environment and
public facilities management
h. Culture, sports and entertainment
i. Wholesaling
j. Others
– Open-ended fund
– Bonds
Sub-total
level 1
level 2
level 3
total
rmb’000
rmb’000
rmb’000
rmb’000
48,500
4,039
9,101
1,223
793
7,061
790
–
1,512
3,715
76,734
300,502
–
–
–
–
–
–
–
–
–
–
–
–
5,569,010
6,622,448
5,946,246
6,622,448
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48,500
4,039
9,101
1,223
793
7,061
790
–
1,512
3,715
76,734
300,502
12,191,458
12,568,694
189
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
As at December 31, 2017 (Continued)
level 1
level 2
level 3
total
rmb’000
rmb’000
rmb’000
rmb’000
aFs investments
– Equity
a. Manufacturing
b.
Information technology service
c. Financial services
d. Transportation, storage and postal
service
e. Construction
f. Energy service
g. Wholesaling
h. Agriculture, forestry, fishing and
Animal husbandry
i. Others
– Fund
– Debt investments
– Structured products
– Trust products
Sub-total
Financial liabilities at fair value
through profit or loss
– Bonds
– Asset management scheme
Sub-total
derivative component of
Convertible Bond
–
–
–
–
–
–
–
–
–
–
63,881
–
–
–
71,612
38,144
7,067
3,221
4,137
–
15,326
–
39,767
179,274
59,970
–
868,579
–
57,112
694,418
–
–
–
–
–
–
–
751,530
271,579
–
46,214
254,226
128,724
732,562
7,067
3,221
4,137
–
15,326
–
39,767
930,804
395,430
–
914,793
254,226
63,881
1,107,823
1,323,549
2,495,253
–
–
–
–
223,234
150,193
373,427
–
–
–
223,234
150,193
373,427
–
344,823
344,823
190
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
As at December 31, 2016
held for trading investments
– Equity securities
a. Manufacturing
b. Financial services
c.
Information technology service
d. Transportation, storage and portal
service
e. Energy and water services
f. Real Estate
g. Water conservancy, environment
and public facilities management
h. Culture, sports and entertainment
i. Wholesaling
j. Others
40,680
8,991
4,718
2,227
7,075
108
59
58
5,076
4
68,996
–
–
–
–
–
–
–
–
–
–
–
–
– Open-ended fund
1,279,339
– Bonds
Sub-total
4,597,320
2,198,477
5,945,655
2,198,477
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40,680
8,991
4,718
2,227
7,075
108
59
58
5,076
4
68,996
1,279,339
6,795,797
8,144,132
191
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
As at December 31, 2016 (Continued)
aFs investments
– Equity
a. Manufacturing
b.
Information technology service
c. Financial services
d. Transportation, storage and
postal service
e. Construction
f. Energy service
g. Wholesaling
h. Agriculture, forestry, fishing and
Animal husbandry
i. Others
– Fund
– Debt investments
– Structured products
– Trust products
Sub-total
Financial liabilities at fair value
through profit or loss
– Bonds
– Asset management scheme
Sub-total
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
–
–
–
–
–
–
–
–
–
–
118,619
79,133
7,134
8,170
8,693
2,554
20,428
2,603
1,405,561
–
315,878
–
–
–
–
–
–
–
118,619
395,011
7,134
8,170
8,693
2,554
20,428
2,603
1,405,561
1,652,895
315,878
1,968,773
89,993
–
–
–
–
30,000
857,148
–
–
–
133,387
10,000
89,993
30,000
990,535
10,000
89,993
2,540,043
459,265
3,089,301
–
–
–
196,363
97,295
293,658
–
–
–
196,363
97,295
293,658
192
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
The following table represents the changes in Level 3 AFS investments during the years ended December 31, 2017
and 2016. For the changes in Level 3 derivative component of Convertible Bond during the year ended December
31, 2017, please refer to Note 42.
For the year ended December 31, 2017
At beginning of the year
Addition
Disposal
Total gain recognised in other
comprehensive income
Recognised in other fair value
changes
structured
trust
restricted
products
products
shares
Funds
total
rmb’000
rmb’000
rmb’000
rmb’000
rmb’000
133,387
45,100
10,000
250,000
(132,580)
(10,000)
315,878
27,500
–
–
258,881
459,265
581,481
–
(142,580)
307
–
4,226
134,807
12,698
152,038
–
273,345
–
273,345
At end of the year
46,214
254,226
751,530
271,579
1,323,549
For the year ended December 31, 2016
Structured
products
Trust
products
Restricted
shares
Funds
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
At beginning of the year
Addition
Disposal
Total (loss) gain recognised in other
comprehensive (expense) income
Recognised in other fair value
changes
141,418
27,500
(34,000)
(1,531)
–
10,000
202,441
–
–
–
–
–
–
37,301
76,136
At end of the year
133,387
10,000
315,878
–
–
–
–
–
–
353,859
27,500
(34,000)
35,770
76,136
459,265
193
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
Except as detailed in the following table, the Directors consider that the carrying amounts of financial assets and
financial liabilities at amortised costs recognised in the consolidated statement of financial position approximate
their fair values.
as at 31/12/2017
As at 31/12/2016
Debt component of Convertible Bond
2,375,831
2,402,383
Carrying
amount
Fair
value
rmb’000
rmb’000
Carrying
amount
Rmb’000
NA
Fair
value
Rmb’000
NA
The fair value of the debt component of Convertible Bond as at December 31, 2017 is under level 3 category and
was determined by the Directors with reference to the valuation performed by a frim of independent professional
valuers. The fair value of the debt component of Convertible Bond is determined by discounted cash flow using
the inputs including estimated cash flows over the remaining terms of the Convertible Bond and discount rate that
reflected the credit risk of the Company.
53. R E C O N C I L I AT I O N O F L I A B I L I T I E S A R I S I N G F R O M F I N A N C I N G
ACTIVITIES
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and
non-cash liabilities arising financing activities are those for which cash flows were or future cash flows will be,
classified in the Group’s consolidated statement of cash flows as cash flows from financing activities.
194
53. R E C O N C I L I AT I O N O F L I A B I L I T I E S A R I S I N G F R O M F I N A N C I N G
ACTIVITIES (Continued)
Accrued issue
cost for
Convertible
Bond
Note 42
Rmb’000
–
(16,725)
Short-term
financing
note
payable
Note 38
Rmb’0000
4,828,340
(4,065,540)
Accrued share
issue cost in
respect of Spin-off
and Offering
Rmb’000
–
(59,866)
Dividends
payable
Note 15
Rmb’000
261,046
(1,646,610)
–
(4,179)
–
1,650,982
–
–
Bank and
other borrowings
Note 37
Rmb’000
2,116,395
(1,627,269)
–
(9,126)
–
–
–
–
Bonds
payable
Note 40
Rmb’000
9,700,000
450,000
–
–
–
–
–
–
Convertible
Bond
Note 42
Rmb’000
–
2,684,880
(149,479)
132,958
65,941
–
–
–
At January 1, 2017
Financing cash flows
Non-cash changes
Fair value
adjustment
Exchange
realignment
Interest expense
Dividends
declared to
owners of the
Company and
non-controlling
interests
Upon completion
of Spin-off and
Offering
Issue cost relating
to derivative
component of
Convertible Bond
At December 31, 2017
261,239
480,000
10,150,000
2,734,300
–
–
–
–
–
3,079
(13,646)
–
–
–
–
–
–
762,800
Total
Rmb’000
16,905,781
(4,281,130)
(149,479)
119,653
65,941
1,650,982
–
–
–
–
59,866
59,866
–
–
3,079
14,374,693
195
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
54. OPERATING LEASES
The Group as lessee
Minimum lease payments
Contingent rental expenses
year ended
Year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
70,917
–
70,917
93,725
323
94,048
At the end of the reporting period, the Group had commitments for future minimum lease payments under
non-cancellable operating leases which fall due as follows:
Within one year
In the second to fifth year inclusive
Over five years
12/31/2017
12/31/2016
rmb’000
Rmb’000
42,266
58,657
745
51,256
53,749
–
101,668
105,005
Operating lease payments mainly represent rentals payable by the Group for the operating branches of Zheshang
Securities and Zheshang Futures. They are negotiated for an average term of three to ten years. The above
commitment represented the minimum lease payments payable to lessors only and do not include any contingent
rent elements.
The Group as lessor
The Group leased their service areas and communication ducts and part of spare office premises under operating
lease arrangements. Leases are negotiated for terms ranging from 1 to 25 years and rentals are fixed annually.
196
54. OPERATING LEASES (Continued)
The Group as lessor (Continued)
At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease
payments:
Within one year
In the second to fifth year inclusive
After five years
12/31/2017
12/31/2016
rmb’000
Rmb’000
26,849
58,815
20,661
30,247
50,651
19,766
106,325
100,664
For certain of the Group’s service areas, the rental income are variable and being calculated at the higher of
a pre-agreed percentage of revenue of the relevant service areas made by the lessees or the minimum lease
payments. The commitment above represented the minimum lease payments from lessees only and do not include
any contingent rent elements.
55. CONTINGENT LIABILITIES
Guarantees given to bank, in respect of a joint venture (Note)
12/31/2017
12/31/2016
rmb’000
842,643
Rmb’000
947,275
Note: The Group provided a financial guarantee to Shengxin Co, a 50% owned joint venture of the Group, in favour of a
bank for 50% of its outstanding bank borrowings and interest. As at December 31, 2017, the bank borrowings of
Shengxin Co and accrued interest amounted to Rmb1,683,000,000 (2016: Rmb1,892,000,000) and Rmb2,287,000
(2016: Rmb2,549,000), respectively. The Directors consider that the fair value of the guarantee is insignificant at
initial recognition and default by the guaranteed party is not probable as at December 31, 2017 and 2016.
197
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
56. RELATED PARTY TRANSACTIONS AND BALANCES
Other than disclosed elsewhere in the consolidated financial statements, during the year, the Group also entered
into the following significant transactions with related parties:
(i) Transactions and balances with government related parties
The Group operates in an economic environment currently predominated by entities directly or indirectly owned or
controlled by the PRC government (” government-related entities”). In addition, the Group itself is part of a larger
group of companies under the Communications Group which is controlled by the PRC government. However, due
to the business nature, in respect of the Group’s toll road and securities business, the Directors are of the opinion
that it is impracticable to ascertain the identity of counterparties and accordingly whether the transactions are with
other government-related entities in the PRC. Details of other significant transactions with Communications Group
are summarised below:
Entrusted loans
Pursuant to the entrusted loan contracts entered into between Hanghui Expressway Co., Ltd (” Hanghui Co”) and
Communications Group on August 10, 2015, Communications Group agreed to provide Hanghui Co with entrusted
loans amounting to Rmb570,000,000 at a fixed interest rate of 4.55% per annum, with maturity date of August 10,
2018. The entrusted loan had been early repaid in full in 2016.
Pursuant to the entrusted loan contracts entered into between the Company and Zhejiang Highway Logistic
Company Limited (” Logistic Co”) on September 28, 2017, Logistic Co agreed to provide the Company with
entrusted loans amounting to Rmb60,000,000 at a fixed interest rate of 3.00% per annum, with maturity date of
September 28, 2020.
Interest expenses incurred
For the
year ended
For the
year ended
12/31/2017
12/31/2016
rmb’000
475
Rmb’000
16,353
198
56. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(i) Transactions and balances with government related parties (Continued)
Management and Administrative services
The Company has entered into agreements with the Communications Group and its subsidiary, Hangzhou
Santongdao South Line Engineering Co., Ltd (” Santongdao Co”), pursuant to which, the Company would
provide the management and administrative services for three toll roads, including Shenjiahuhang Expressway,
Shensuzhewan Expressway and South Line of Qianjiang Channel. According to the agreements, the Company
would charge the Communications Group and Santongdao Co management fee on actual cost basis. During this
year, a total management fee of Rmb1,199,000 (2016: Rmb1,130,000) has been charged.
Other transactions
Toll road service area leasing income earned (Note a)
Toll road service area management fee paid (Note a)
Property leasing income earned
For the
year ended
For the
year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
9,876
2,809
5,614
9,564
3,100
5,280
Road maintenance service expenses incurred
343,527
303,513
Gain from disposal of maintenance equipment (Note b)
Information system related development expenses incurred
Operation information services expenses incurred
Toll road related inspection services expense incurred
Purchase of petroleum products (Note c)
Petrol stations leasing income earned (Note c)
Financial advisory service income earned
–
38,608
9,267
9,478
–
–
12,075
8,090
18,537
9,267
10,561
401,203
33,357
–
199
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
56. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(i) Transactions and balances with government related parties (Continued)
Other transactions (Continued)
Notes:
(a)
Pursuant to the leasing and operation agreement entered into between Jinhua Co (as defined in Note 57) and
Zhejiang Communications Investment, Jinhua Co leased the toll road service area to Zhejiang Communications
Investment and Zhejiang Communications Investment managed the operation of the service area and the
advertising business in respect of the toll road service area. Such business began from January 1, 2011 and will
be expired at the same time with the operating right in 2030.
Pursuant to the leasing and operation agreements entered into between Hanghui Co and Zhejiang
Communications Investment, Hanghui Co leased the toll road service area to Zhejiang Communications
Investment and Zhejiang Communications Investment managed the operation of the service area. Such
business began from January 1, 2011 and will be expired at the same time with the operating right for respective
expressway sections in 2029 to 2031.
(b)
Pursuant to the disposal agreements entered into between the Company and Maintenance Co, the Group disposed
certain maintenance equipment with net book value of approximately Rmb26,537,000 to Maintenance Co at a cash
consideration of Rmb35,533,000 in 2016. Disposal gain of Rmb8,090,000 was recorded after deduction of relevant
transaction costs and expenses for the year ended December 31, 2016.
(c)
These transactions were entered into between Development Co. and Zhejiang Expressway Petroleum
Development Co., Ltd. As the Company had sold the 100% equity interest in Development Co to Zhejiang
Communications Investment on December 29, 2016, no amount is recorded for the year ended December 31,
2017, accordingly.
Others
The Group has entered into various significant transactions, including deposit placements, borrowings and other
general banking facilities, with certain banks and financial institution which are government-related entities in its
ordinary course of business. In view of the nature of those banking transactions, the Directors are of the opinion
that separate disclosure would not be meaningful.
(ii) Transactions and balances with associates and other non-government
related parties
Financial service provided by Zhejiang Communications Finance
The Group entered into a financial services agreement with Zhejiang Communications Finance. Pursuant to the
agreement, Zhejiang Communications Finance agreed to provide the Group with the deposit services, the loan and
financial leasing services, the clearing services and other financial services.
200
56. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other non-government
related parties (Continued)
Loan advanced from Zhejiang Communications Finance
In prior years, Zhejiang Communications Finance provided Huihang Co with several short-term loans with
aggregated amount of Rmb15,000,000 at fixed interest rates of 3.915% per annum, with maturities in 2017. All
these loans were repaid in the current year.
During the year, Zhejiang Communications Finance provided Hanghui Co with short-term loan which bears variable
interest rates of 3.915% to 4.2195% with aggregated amount of Rmb1,580,000,000. The short-term loans totalling
Rmb1,160,000,000 had been repaid during the current year and the outstanding loan balance was amounted to
Rmb420,000,000 as at December 31, 2017.
Outstanding loan payable balances:
repayable within one year
Interest expenses incurred
Deposits to Zhejiang Communications Finance
Bank balances and cash
– Cash and cash equivalents
Interest income earned
12/31/2017
12/31/2016
rmb’000
Rmb’000
420,000
15,000
For the
year ended
For the
year ended
12/31/2017
12/31/2016
rmb’000
18,529
Rmb’000
12,463
12/31/2017
12/31/2016
rmb’000
Rmb’000
1,301,639
867,892
For the
year ended
For the
year ended
12/31/2017
12/31/2016
rmb’000
Rmb’000
6,612
8,149
201
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
56. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other non-government
related parties (Continued)
Sales of asset management schemes to Zhejiang Communication Finance
Zheshang Securities Asset Management Co., Ltd (” Asset Management”), an indirect subsidiary of the Company,
had entered into certain asset management agreements which Zhejiang Communications Finance in 2016 and
2017. The Group did not consolidate these asset management schemes. During the year ended December
31, 2017, the management fee and performance fee income earned by the Group from managing these asset
management schemes amounted to Rmb4,401,000 and Rmb3,848,000 (2016: Rmb6,807,000 and Rmb582,000).
Short-term loan advanced to Zhejiang Canal Concord Property Co., Ltd. (” Zhejiang Canal Concord”)
Outstanding loan receivable balances
Interest receivables
Analysed for reporting purpose as:
Current assets (Note 28)
Interest income earned
12/31/2017
12/31/2016
rmb’000
77,650
650
78,300
Rmb’000
420,000
3,613
423,613
78,300
423,613
For the
year ended
For the
year ended
12/31/2017
12/31/2016
rmb’000
11,125
Rmb’000
20,911
During the year, the Group advanced additional entrusted loans to Zhejiang Canal Concord, a subsidiary of
Zhejiang Concord Property, totalling Rmb210,000,000 (2016: Rmb540,000,000) and received settlement of loan
principals and interests amounting to Rmb552,350,000 (2016: Rmb720,000,000) and Rmb14,754,000 (2016:
Rmb54,317,000), respectively. The amounts were unsecured and repayable in accordance with the terms of
entrusted loan agreements entered into between the Group and Zhejiang Canal Concord. The amounts carried
interests at an effective interest rate of 3.915% (2016: ranging from 3.915% to 8.00%) per annum. All entrusted
loans in both years were guaranteed by Zhejiang World Trade Property Development Co., Ltd., which is the
controlling shareholder of Zhejiang Concord Property, an independent third party of the Group, in full.
(iii) Key management emoluments
The remuneration of the directors, supervisors and key management personnel during the year was Rmb7,454,000
(2016: Rmb8,691,000) including retirement benefit scheme contribution of Rmb216,000 (2016: Rmb201,000) which
is determined by the performance of the individuals and the market trends.
202
57. PARTICULARS OF SUBSIDIARIES OF THE COMPANY
Name of subsidiary
Date and
place of
registration
Registered and
paid-in capital/
share capital
Percentage of equity interest
attributable to the Company
Rmb
Direct
Indirect
Principal activities
12/31/2017
12/31/2016
12/31/2017
12/31/2016
Zhejiang Yuhang Expressway Co., Ltd.
Note 1
75,223,000
(“Yuhang Co”)
%
51
%
51
Jiaxing Co
Note 2
1,859,200,000
99.9995
99.9995
Shangsan Co
Note 3
2,400,000,000
73.625
73.625
Note 4
8,000,000
100
100
%
–
–
–
–
%
–
Management of the
Yuhang Section of the
Shanghai-Hangzhou
Expressway
–
Management of the Jiaxing
Section of the
Shanghai-Hangzhou
Expressway
–
–
Management of the Shangsan
Expressway
Provision of vehicle towing,
repair and emergency
rescue services
Zhejiang Expressway Vehicle Towing
and Rescue Services Co., Ltd.
(“Towing Co”)
Zheshang Securities
Zheshang Futures
Zheshang Capital Management
Asset Management
Note 5
Note 6
Note 7
Note 8
3,333,333,400
500,000,000
170,000,000
500,000,000
Ningbo Dongfang Jujin Investment
Note 9
1,000,000
Management Co., Ltd
(“Dongfang Jujin”)
Ningbo Dongfang Jujin Jiahua Investment
Note 10
29,150,000
Management Center
(Limited Partnership)
(“Dongfang Jujin Jiahua”)
Zhejiang Zheqi Co., Ltd.
(“Zhejiang Zheqi”)
Note 11
200,000,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
*46.9321
*52.1467
Operation of securities business
**46.9321
**52.1467
Operation of securities business
**46.9321
**52.1467
Operation of securities business
**46.9321
**52.1467
Provision of asset management
service
**46.9321
**52.1467
Provision of investment
management and advisory
services
**14.7317
**16.3688
Provision of investment
management and advisory
and private equity investments
**46.9321
**52.1467
Trading of future
Zhejiang Jinhua Yongjin Expressway Co.,
Note 12
1,900,000,000
100
100
–
–
Management of the Jinhua
Ltd. (“Jinhua Co”)
Section of the Ningbo-Jinhua
Expressway
203
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
57. PARTICULARS OF SUBSIDIARIES OF THE COMPANY (Continued)
Name of subsidiary
Date and
place of
registration
Registered and
paid-in capital/
share capital
Percentage of equity interest
attributable to the Company
Rmb
Direct
Indirect
Principal activities
Hanghui Co
Note 13
1,812,280,000
12/31/2017
12/31/2016
12/31/2017
12/31/2016
%
88.674
%
88.674
%
–
%
–
Management of the Zhejiang
Section of the Hangzhou-Ruili
Expressway
Hangzhou Jujin Jiawei Investment
Note 14
206,103,000
Management (Limited Partnership) (“Jujin
Jiawei”)
Zheshang International Financial Holding
Note 15
8,011,000
–
–
–
–
**21.1323
**23.4817
Provision of investment
management and advisory
and private equity investments
**46.9321
**52.1467
Trading of future
Co., Limited
Huihang Co
Note 16
1,950,000,000
100
100
–
–
Management of the Anhui
Section of the Hangzhou-Ruili
Expressway
*
The company is a subsidiary of Shangsan Co, a non-wholly-owned subsidiary of the Company, and, accordingly,
is accounted for as a subsidiary by virtue of the Group’s control over it. On June 26, 2017, Zheshang Securities
has completed the Spin-off and Offering on the Shanghai Stock Exchange, resulting in the dilution of the equity
interest attributed to the Company. Details please refer to Note iii to the consolidated statement of changes in
equity.
**
These companies and partnership entities are subsidiaries of Zheshang Securities, a non-wholly-owned
subsidiary of Shangsan Co, and accordingly, are accounted for as subsidiaries by virtue of the Group’s control
over them.
Note 1: Yuhang Co was established on June 7, 1994 in the PRC as a joint stock limited company and was subsequently
restructured into a limited liability company under its current name on November 28, 1996. The Company is able
to control over Yuhang Co because it has the power to appoint five out of nine directors of that company and
under the provisions stated in the Articles of Association of that company, the passing of ordinary resolutions at
the board meetings required one-half of the directors attending the meetings.
Note 2: Jiaxing Co was established on June 30, 1994 in the PRC as a joint stock limited company and was subsequently
restructured into a limited liability company under its current name on November 29, 1996.
Note 3: Shangsan Co was established on January 1, 1998 in the PRC as a limited liability company.
Note 4: Towing Co was established on July 31, 2003 in the PRC as a limited liability company.
Note 5: Zheshang Securities was established on May 9, 2002 in the PRC as a limited liability company.
Note 6: Zheshang Futures was established on September 7, 1995 in the PRC as a limited liability company.
204
57. PARTICULARS OF SUBSIDIARIES OF THE COMPANY (Continued)
Note 7: Zheshang Capital Management was established on February 9, 2012 in the PRC as a limited liability company.
The registered capital of Zheshang Capital Management has been increased from Rmb100,000,000 to
Rmb170,000,000 during the year ended December 31, 2016.
Note 8: Asset Management was established on July 22, 2013 in the PRC as a limited liability company.
Note 9: Dongfang Jujin was established on March 25, 2014 in the PRC as a limited liability company.
Note 10: Dongfang Jujin Jiahua was established on April 11, 2014 in the PRC as a limited partnership. Pursuant to the
partnership agreement, Dongfang Jujin is a general partner, while Zheshang Capital Management and other two
individuals are limited partners of the partnership. The Directors consider that the Group has the practical ability
to direct the relevant activities of Dongfang Jujin Jiahua unilaterally, and it is therefore classified as a subsidiary
of the Group.
Note 11: Zhejiang Zheqi was established on April 9, 2013 in the PRC as a limited liability company, and its paid-in share
capital was increased by Rmb100,000,000 to Rmb200,000,000 during the year ended December 31, 2014.
Note 12: Jinhua Co was established in February 2002 in the PRC as a limited liability company. Jinhua Co became a
wholly owned subsidiary and directly held by the Company during the year ended December 31, 2013.
Note 13: Hanghui Co was established in December 2008 in the PRC as a limited liability company. During the year ended
December 31, 2015, the Company acquired the 80.614% equity interests in Hanghui Co from Communications
Group, and Hanghui Co then became a subsidiary and directly held by the Company as at December 31, 2015.
In December 2015, the equity interest held by the Group increased to 88.674% as the Company has made a
capital contribution to Hanghui Co.
Note 14: Jujin Jiawei was established on April 15, 2015 in the PRC as a limited partnership. Pursuant to the partnership
agreement, Dongfang Jujin is a general partner, while Zheshang Capital Management and other three individuals
are limited partners of the partnership. The Directors consider that the Group has the practical ability to direct the
relevant activities of Jujin Jiawei unilaterally, and it is therefore classified as a subsidiary of the Group.
Note 15: Zheshang International Financial Holding Co., Limited (previously known as Zheshang Futures (Hong Kong) Co.,
Limited) was established on April 23, 2015 in Hong Kong as a limited liability company.
Note 16: Huihang Co was established in September 2000 in the PRC as a limited liability company. During the year ended
December 31, 2016, the Company acquired the 100% equity interests in Huihang Co from an independent third
party, and Hanghui Co then became a subsidiary and directly held by the Company as at December 31, 2016.
Except that Zheshang International Financial Holding Co., Limited is operating in Hong Kong, all of the Company’s
other subsidiaries are operating in Mainland China. As at December 31, 2017, Zheshang Securities has issued
subordinated bonds, corporate bonds and beneficial certificates at the total principal amount of Rmb3,500,000,000,
nil and Rmb762,800,000 (2016: Rmb5,500,000,000, Rmb3,400,000,000 and Rmb4,128,340,000), respectively.
205
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
58.
INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES
The Group served as the investment manager of structured entities (including collective asset management
schemes and investment funds), therefore had power over them during the years ended December 31, 2017 and
2016. Except for the structured entities the Group has consolidated as disclosed in Note 44, in the opinion of
the Directors, the variable returns the Group exposed to over these collective asset management schemes and
investment funds in which the Group has interests are not significant. The Group therefore did not consolidate
these structured entities.
The total assets of unconsolidated funds and asset management schemes managed by the Group amounted to
Rmb171,366,885,000 and Rmb138,379,856,000 as at December 31, 2017 and 2016, respectively. The Group
classified the investments in unconsolidated funds and asset management schemes as AFS financial investments
and held for trading as appropriate. As at December 31, 2017 and 2016, the carrying amounts of the Group’s
interests in unconsolidated funds and asset management schemes are Rmb1,744,411,000 and Rmb2,597,101,000,
respectively.
59. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
12/31/2017
12/31/2016
rmb’000
Rmb’000
489,863
15,728
532,374
1,405
3,191,903
3,537,136
10,386
663
11,271,077
11,821,077
1,195,221
1,000,776
373,470
373,470
16,547,648
17,266,901
NON-CURRENT ASSETS
Property, plant and equipment
Prepaid lease payments
Expressway operating rights
Other intangible assets
Interests in subsidiaries
Interests in associates
Interest in a joint venture
206
59. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY (Continued)
CURRENT ASSETS
Inventories
Trade receivables
Other receivables
Prepaid lease payments
Held for trading investment
Amount due from subsidiaries
Dividend receivable
Derivative financial asset
Bank balances and cash
– Cash and cash equivalents
CURRENT LIABILITIES
Trade payables
Tax liabilities
Other taxes payable
Other payables and accruals
Amount due to subsidiaries
Bank borrowings
Dividend payable
Short-term financing note payable
NET CURRENT ASSETS (LIABILITIES)
TOTAL ASSETS LESS CURRENT LIABILITIES
12/31/2017
12/31/2016
rmb’000
Rmb’000
–
42,651
161,783
592
–
750
34,024
500,077
95
80,000
1,234,205
1,524,639
–
–
217,625
10,562
2,345,458
746,679
3,784,689
3,114,451
88,181
188,317
8,529
199,783
2,859,792
–
260,587
72,253
122,437
7,797
246,488
2,524,533
2,031,895
260,587
–
1,500,000
3,605,189
6,765,990
179,500
(3,651,539)
16,727,148
13,615,362
207
Notes to the Consolidated Financial Statements
For the year ended December 31, 2017
59. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY (Continued)
NON-CURRENT LIABILITIES
Bank and other borrowings
Convertible Bond
Deferred tax liabilities
CAPITAL AND RESERVES
Share capital
Reserves
12/31/2017
12/31/2016
rmb’000
Rmb’000
60,000
2,720,654
82,647
2,863,301
–
–
89,214
89,214
13,863,847
13,526,148
4,343,115
9,520,732
4,343,115
9,183,033
13,863,847
13,526,148
Movement of share capital and reserve of the Company was set out below.
Share
capital
Share
premium
Statutory
reserves
Investment
valuation
reserve
Dividend
reserve
Special
reserves
Retained
profits
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
At December 31, 2015
4,343,115
3,645,726
2,364,430
(5)
1,216,072
18,666
1,651,508
13,239,512
Total comprehensive income for the year
Interim dividend
Final dividend
Proposed final dividend
At December 31, 2016
Total comprehensive income for the year
Interim dividend
Final dividend
Proposed final dividend
–
–
–
–
–
–
–
–
–
–
–
–
4,343,115
3,645,726
2,364,430
–
–
–
–
–
–
–
–
–
–
–
–
at december 31, 2017
4,343,115
3,645,726
2,364,430
5
–
–
–
–
–
–
–
–
–
–
–
(1,216,072)
1,281,219
–
–
–
–
1,763,290
1,763,295
(260,587)
(260,587)
–
(1,216,072)
(1,281,219)
–
1,281,219
18,666
1,872,992
13,526,148
–
–
(1,281,219)
1,302,934
–
–
–
–
1,879,505
1,879,505
(260,587)
(260,587)
–
(1,281,219)
(1,302,934)
–
1,302,934
18,666
2,188,976
13,863,847
208
(Issued by a Third Country Auditor registered with The UK Financial Reporting Council)
to the MeMBers oF ZheJiang expressway Co., ltd.
浙江滬杭甬高速公路股份有限公司
(Incorporated in the People’s Republic of China with limited liability)
Opinion
We have audited the consolidated financial statements of Zhejiang Expressway Co., Ltd. (the “Company”) and its
subsidiaries (collectively referred to as the “Group”) set out on pages 83 to 208, which comprise the consolidated
statement of financial position as at December 31, 2017, and the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows
for the year then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies.
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position
of the Group as at December 31, 2017, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued
by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in
compliance with the disclosure requirements of the Hong Kong Companies Ordinance.
Basis for Opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA.
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with
the HKICPA’s Code of Ethics for Professional Accountants (“the Code”), and we have fulfilled our other ethical
responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
209
Independent Auditor’s Report(Issued by a Third Country Auditor registered with The UK Financial Reporting Council) Independent Auditor’s Report
(Issued by a Third Country Auditor registered with The UK Financial Reporting Council)
Key audit matter
how our audit addressed the key audit matter
Impairment of AFS equity instruments measured at fair value
We identified the impairment of AFS equity
instruments measured at fair value, which included
equity securities, funds, and other investments, as
a key audit matter as the Group applied significant
judgement in determining the impairment of AFS
equity instruments measured at fair value of
Rmb2,495,253,000 as at December 31, 2017.
Our procedures in relation to the impairment
assessment of AFS equity instruments measured at
fair value included:
• Understanding the processes and controls in
determining impairment of AFS equity instruments
measured at fair value;
For those AFS equity instruments measured at
fair value, the Group applied significant judgement
in assessing whether there is objective evidence
of impairment. As disclosed in note 4, for listed
AFS equity investments and other equity related
investments measured at fair value, a significant
or prolonged decline in fair value below cost is
considered to be the objective evidence of impairment.
The cumulative amount of impairment recognised
up to December 31, 2017 was Rmb34,865,000 as
disclosed in Note 25.
• Challenging and assessing the management
judgement in determining the criteria of
impairment;
• Checking, on a sample basis, the data used by the
management, including quoted market prices and
the duration for the continued decline of the fair
value below the cost, against market data; and
• Checking the management’s calculations of the
impairment allowance for AFS equity instruments
measured at fair value.
210
Key audit matter
how our audit addressed the key audit matter
Our procedures in relation to the management’s
determination of consolidation scope included:
• Understanding the process and controls of the
management in determining the consolidation
scope as set out in HKFRS10 of interests in
structured entities;
• Checking the information used by the management
in accessing the consolidation criteria of significant
structured entities against the related supporting,
including sales and purchase agreements and
other related service agreements of investments in
structured entities newly acquired or with changes
in investment holdings or terms during the year;
and
• Challenging and assessing the management
judgement in applying HKFRS 10 to each of the
significant structured entities and the conclusion
about whether or not the consolidation criteria are
met.
Determination of consolidation scope
We identified the determination of consolidation scope
as a key audit matter as the Group held a number
of interests in structured entities including collective
asset management schemes and investment funds
where the Group was involved as an investment
manager. The Group applied significant judgement in
determining whether such investments fall within the
consolidation scope under HKFRS 10 “Consolidated
Financial Statements”. The effect of consolidation or
not of these structured entities would have significant
impact on the consolidated financial statements of the
Group.
As disclosed in note 4, for collective asset
management schemes and investment funds where
the Group involved as a manager, the Group assessed
whether the combination of investments it was
together with its remuneration and credit enhancement
creates exposure to variability of returns from the
activities of the collective asset management schemes
and investment funds that was of such significance
that it indicated that the Group is a principal. The
collective asset management schemes and investment
funds were consolidated if the Group acted in the role
of principal.
Details of consolidated structured entities and
unconsolidated structured entities were set out
in notes 44 and 58 to the consolidated financial
statements, respectively.
211
Independent Auditor’s Report
(Issued by a Third Country Auditor registered with The UK Financial Reporting Council)
Other Information
The directors of the Company are responsible for the other information. The other information comprises the
information included in the annual report, but does not include the consolidated financial statements and our
auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Directors and Those Charged with Governance for the
Consolidated Financial Statements
The directors of the Company are responsible for the preparation of the consolidated financial statements that give
a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the
Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or
have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no
other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of
this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these consolidated financial statements.
212
As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
o
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
o
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Group’s internal control.
o
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
o
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
o
Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
o
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsible
for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
213
Independent Auditor’s Report
(Issued by a Third Country Auditor registered with The UK Financial Reporting Council)
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in the independent auditor’s report is Tse Ming Fai.
deloitte touche tohmatsu Certified public accountants llp
Certified Public Accountants
(Registered as a Third Country Auditor with the UK Financial Reporting Council)
Shanghai, China
March 16, 2018
214
ChairMan
statutory address
YU Zhihong (Appointed on April 2, 2018)
12/F, Block A, Dragon Century Plaza
ZHAN Xiaozhang (Resigned on April 2, 2018)
1 Hangda Road
exeCutiVe direCtors
CHENG Tao
LUO Jianhu (General Manager)
non-exeCutiVe direCtors
DAI Benmeng
YU Qunli (Appointed on April 2, 2018)
WANG Dongjie (Resigned on April 2, 2018)
YU Ji (Appointed on April 2, 2018)
ZHOU Jianping (Resigned on December 22, 2017)
independent
non-exeCutiVe direCtors
PEI Ker-Wei
LEE Wai Tsang, Rosa
Hangzhou City, Zhejiang Province
PRC 310007
Tel : 86-571-8798 5588
Fax: 86-571-8798 5599
prinCipal plaCe oF Business
5/F., No. 2, Mingzhu International Business Center
199 Wuxing Road
Hangzhou City
Zhejiang Province
PRC 310020
Tel : 86-571-8798 5588
Fax: 86-571-8798 5599
legal adVisers
As to Hong Kong law:
Davis Polk & Wardwell
CHEN Bin (Appointed on April 2, 2018)
ZHOU Jun (Resigned on April 2, 2018)
18/F, The Hong Kong Club Building,
3A Chater Road, Central, Hong Kong
superVisors
YAO Huiliang
HE Meiyun
WU Qingwang (Appointed on May 18, 2017)
ZHAN Huagang
LU Xinghai
CoMpany seCretary
Tony ZHENG
As to English law:
Davis Polk & Wardwell London LLP
5 Aldermanbury Square
London EC2V 7HR
United Kingdom
As to PRC law:
T & C Law Firm
11/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
authoriZed representatiVes
PRC 310007
YU Zhihong (Appointed on April 2, 2018)
ZHAN Xiaozhang (Resigned on April 2, 2018)
LUO Jianhu
215
Corporate Information auditors
h shares listing inForMation
Deloitte Touche Tohmatsu
35/F, One Pacific Place
88 Queensway
Hong Kong
inVestor relations
Consultant
Christensen China Limited
16/F, Methodist House
36 Hennessy Road, Wanchai
Hong Kong
Tel : 852-2117 0861
Fax: 852-2117 0869
prinCipal BanKers
The Stock Exchange of Hong Kong Limited
Code: 0576
london stoCK exChange plC
Code: ZHEH
representatiVe oFFiCe in
hong Kong
Room 2910
29/F, Bank of America Tower
12 Harcourt Road
Hong Kong
Tel : 852-2537 4295
Fax: 852-2537 4293
Industrial and Commercial Bank of China,
weBsite
www.zjec.com.cn
Jiefang Road Branch
Shanghai Pudong Development Bank,
Hangzhou Branch
h share registrar and
transFer oFFiCe
Hong Kong Registrars Limited
Room 1712-1716, 17/F, Hopewell Centre
183 Queen’s Road East
Hong Kong
216
Corporate Information Location Map of Expressways in Zhejiang Province