Building a renowned brand for expressway operations
and service in China
CONTENTS
2 Definition of Terms
4 Company Profile
5 Corporate Structure of the Group
6 Review of Major Corporate Events
8 Particulars of Major Road Projects
10 Financial and Operating Highlights
13 Chairman’s Statement
17 Management Discussion and Analysis
32 Principal Risks and Uncertainties
35 Corporate Governance Report
49 Directors, Supervisors and Senior
Management Profiles
65 Report of the Directors
75 Report of the Supervisory Committee
77 Connected Transactions
86 Independent Auditor’s Report
92 Consolidated Financial
Statements & Notes
245 Independent Auditor’s Report
(Issued by a third country auditor registered with
the UK Financial Reporting Council)
251 Corporate Information
253 Location Map of Expressways in
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 in the PRC, on
December 29, 2001 and the controlling shareholder of the Company
Connected Person
has the meaning ascribed to it under the Listing Rules
Controlling Shareholder
has the meaning ascribed to it under the Listing Rules
Directors
the directors of the Company
Expressway Mechanical
and Electrical
Engineering Agreements
Expressway Monitoring
System Software
Maintenance
Agreements
GDP
Group
H Shares
Hanghui Co
Huihang Co
the various expressway mechanical and electrical engineering agreements
dated August 7, 2018 entered into between Zhejiang Information (Zhejiang
Expressway Information Engineering Technology Co., Ltd.) on the one
hand and the Company and relevant subsidiaries of the Company (namely
Shangsan Co, Hanghui Co, Jiaxing Co, Jinhua Co and Huihang Co) on the
other hand, pursuant to which the Company and certain of its subsidiaries
agreed to purchase expressway mechanical and electrical engineering
services from Zhejiang Information
the various expressway monitoring system software maintenance agreements
dated August 7, 2018 entered into between Zhejiang Information on the one
hand and the Company and relevant subsidiaries of the Company (namely
Shangsan Co, Hanghui Co, Jiaxing Co and Jinhua Co) on the other hand,
pursuant to which the Company and certain of its subsidiaries agreed to
purchase expressway monitoring system software maintenance services from
Zhejiang Information
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
The Stock Exchange of Hong Kong Limited
Exchange
Jiaxing Co
Jinhua Co
Listing Rules
Period
PRC
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
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
the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited
the period from January 1, 2018 to December 31, 2018
the People’s Republic of China
2
Definition of Terms Previous Transactions I
Previous Transactions II
Previous Transactions III
Previous Transactions IV
Rmb
SFO
Shangsan Co
Shareholders
Shengxin Co
the agreements entered into within a 12-month period prior to the date of
the Expressway Services Agreements between or among the Group and
Communications Group’s associates in relation to various information
technology services, mechanical and electrical engineering services. For
details, please refer to the announcements issued by the Company dated
December 22, 2017, January 4, 2018, April 17, 2018 and August 7, 2018,
respectively
t h e a g r e e m e n t s e n t e r e d i n t o b e t w e e n o r a m o n g t h e G r o u p a n d
Communications Group’s associates within a 12-month period prior to the date
of the Dedicated Road Maintenance Agreement between or among the Group
and Communications Group’s associates in relation to highway operations and
maintenance services. For details, please refer to the announcements issued
by the Company dated April 8, 2016 and June 23, 2017 respectively
the agreements entered into within a 12-month period prior to the date of
Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for
the year of 2018 between or among the Group and Communications Group’s
associates in relation to highway operations and maintenance services. For
details, please refer to the announcements issued by the Company dated April
8, 2016, June 23 and 26, 2017 and May 28, 2018 respectively
the agreements entered into within a 12-month period prior to the date of
the Expressway Monitoring System Software Maintenance Agreements and
the Expressway Mechanical and Electrical Engineering Agreements between
or among the Group and Communications Group’s associates in relation to
information technology service and mechanical and electrical engineering
services. For details, please refer to the announcements issued by the Company
dated December 22, 2017, January 4 and April 17, 2018, respectively
Renminbi, the lawful currency of the PRC
Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong)
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
the shareholders of the Company
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
Shenjiahuhang Co
Zhejiang Shenjiahuhang Expressway Co., Ltd.(浙江申嘉湖杭高速公路有限公
司), a wholly-owned subsidiary of the Company
SRCB
Shanghai Rural Commercial Bank Co., Ltd. (上海農村商業銀行股份有限公司) a
5.36% owned associate of the Company
Supervisory Committee
the supervisory committee of the Company
Yangtze Financial
Leasing
Yuhang Co
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
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
Zhoushan Co
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
Zhejiang Zhoushan Bay Bridge Co., Ltd.(浙江舟山跨海大橋有限公司), a 51%
owned subsidiary of Shenjiahuhang Co
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 248 km Shanghai-Hangzhou-Ningbo
Expressway, the 141 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 which was listed on Shanghai
Stock Exchange(Stock Code: 601878). 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, 2018, total assets of the Company and its
subsidiaries amounted to Rmb79,513.15 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 Party Committee and Zhejiang
Provincial Government carried out a merger and restructuring of Communications Group and
Zhejiang Railroad Investment Group Co., Ltd. In July 2018, Zhejiang Provincial Party Committee
and Zhejiang Provincial Government carried out a merger and restructuring of Communication
Group and Zhejiang Commercial 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 sound investment opportunities to acquire new projects, and strive to develop
the Company into an international investment holdings company with a primary focus on
transportation infrastructure investment and operation.
4
Company Profile 8
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1.
On February 8, 2018, the Company and Zhejiang Hongtu Transportation Construction
Company* (浙 江 交 工 宏 途 交 通 建 設 有 限 公 司) received the notification of award regarding
a tender by Deqing County Department of Transportation to engage in the PPP Project of
Zhenhai-Anji Highway (Duihekou-Aibuli section) in Deqing County.
2.
On March 19, 2018, the Company announced its 2017 annual results in Hong Kong and
thereafter conducted its annual results presentation in Hong Kong, Australia and the United
States.
3.
On April 2, 2018, the Company held its Extraordinary General Meeting to elect Mr. YU
Zhihong, Mr. YU Qunli and Mr. YU Ji as non-executive Directors and Mr. CHEN Bin as
independent non-executive Director.
4.
On April 12, 2018, the Company held the first meeting of the union member representatives
and employee representatives of the sixth session to elect Mr. ZHAN Huagang and Mr.
WANG Yubing as the Supervisors representing the employees.
5.
On April 27, 2018, the Company published its 2018 first quarterly results.
6.
On May 2, 2018, the Company and Rizhao Steel Holdings Group Company Ltd. (日照鋼鐵
控股集團有限公司) entered into the Share Transfer Agreement to acquire 4.9% shares of
Shanghai Rural Commercial Bank Co., Ltd. at the consideration of approximately Rmb2,712
million.
7.
At midnight on June 27, 2018, the nation’s first weight-based tolling ETC lane for goods
vehicles commenced trial operation at Jiufeng toll station on Hanghui Expressway which
allows goods vehicles installed with the electronic tag to go through the toll station without
stopping.
8.
On June 29, 2018, the Company held its 2017 Annual General Meeting to elect members
of the Board and Supervisory Committee of the eighth session and to approve, inter alia,
the resolutions regarding the payment of a final dividend of Rmb0.300 per share, the
reappointment of Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong as
the international 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
Review of Major Corporate Events On the same date, the Company held the first meeting of the Board of the eighth session
to elect the chairman of the Board of the eighth session, appoint the chairman for each
of the committees, senior management officers and authorized representatives; approve
the engagement of the Company by Communications Group to manage 46 km of Zhejiang
Zhoushan Bay Bridge, 71 km of Ningbo Section of Zhejiang Ningbo-Taizhou-Wenzhou
Expressway, 43 km of Taizhou Section of Zhejiang Ningbo-Taizhou-Wenzhou Expressway
and 158 km of Taijin Expressway.
9.
On July 18, 2018, the Company and Shanghai Rural Commercial Bank Co., Ltd. entered into
the Capital Increase Agreement and made capital contributions amounting to approximately
Rmb512 million to Shanghai Rural Commercial Bank Co., Ltd. on December 12, 2018
to acquire 73.50 million additional shares. Upon completion of the capital increase, the
shareholding percentage of the Company in Shanghai Rural Commercial Bank Co., Ltd. was
5.36%.
10. On August 24, 2018, the Company published its 2018 interim results and thereafter
conducted its interim results presentation in Hong Kong.
11. On October 31, 2018, the Company announced its 2018 third quarterly results.
On the same date, the Board approved the engagement of the Company by Communications
Group to manage 38 km section of Leqingwan Expressway.
12. On December 13, 2018, the Board approved the Share Transfer Agreement entered into
between the Company and Communications Group to conditionally acquire the 100% equity
interests of Shenjiahuhang Co. at the consideration of RMB2,943 million; approved the
issuance of medium-term notes of no more than RMB3,000 million with a term not exceeding
five years. These two resolutions were resolved at the Extraordinary General Meeting held
on March 4, 2019.
13. On December 28, 2018, the Company and Hangzhou Municipal Bureau of Transportation
(杭州市交通局) entered into a toll adjustment compensation agreement, pursuant to which
the Company will not collect tolls on the Hangzhou urban section of Shanghai-Hangzhou
and Hangzhou-Ningbo Expressway tentatively starting from the second half of 2019 until
the expiration of the Company’s toll collection right on respective sections and Hangzhou
Municipal Bureau of Transportation will compensate for such toll adjustment on an annual
basis. At the same time, Hangzhou Municipal Bureau of Transportation shall be responsible
for the roadbed lifting upgrading construction, as well as the subsequent maintenance,
operation and management of the Hangzhou Section.
7
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%
Ningbo-Jinhua Expressway
– Jinhua Section
Hanghui Expressway
– Changyu Section
– Changhang Section
Huihang Expressway
Shenjiahuhang Expressway
– Huzhou Section
– Lianhang Section
Zhoushan Bay Bridge
100%
88.674%
88.674%
100%
100%
100%
51%
Length
in Kilometers
Number
of Lanes
Number of
Toll Roads
Number of
Service Areas
Start of
Operation
Remaining
Years of
Operation
88.1
11.1
3.4
15.7
123.4
6.2
141.4
69.7
36.7
85.6
81.6
42.0
50.9
46.3
8
6
4
4
8
4
4
4
4
4
4
4
4
4
7
1
2
1
9
1
11
7
5
8
5
3
7
8
2
0
0
0
2
0
3
1
1
1
2
1
1
1
1998
1995-1998
1995
1992
1995
1996
2000
2005
2004
2006
2004
2008
2010
2009
10
10
10
9
9
9
12
12
11
13
15
15
17
16
Current Toll rates on the Expressways under the Group
1. Passenger vehicle classification and toll rates
Vehicle
Class
Classification Standard
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
8
Shanghai-Hangzhou-Ningbo
Expressway
Entrance Fee
(Rmb/vehicle)
Mileage Fee
(Rmb/vehicle/km)
Huihang
Expressway
Mileage Fee
(No entrance fee)
(Rmb/vehicle/km)
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
Particulars of Major Road Projects 2. Toll by weight on goods vehicles
Load
Toll standards
Legally loaded
Up to 5 tons
Rmb0.09/ton per km
Above 5 tons and up to 15 tons
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
Rmb0.06/ton per km, 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 per
km x 1.2; the remaining portion is calculated based on the fee standard of
“Overloaded below 10%”
Overloaded vehicle
Overloaded above 30% and up
to 50%
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
Overloaded above 50% and up
to 100%
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
Overloaded over 100%
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
* The mileage fee for Class 1 vehicle on the Shangsan Expressway, Ningbo-Jinhua Expressway, Hanghui Expressway
and Shenjiahuhang Expressway is Rmb0.40/vehicle per km. The toll rates for other passenger vehicles and trucks are
the same as those for the Shanghai-Hangzhou-Ningbo Expressway.
* The passenger vehicles and trucks on Zhoushan Bay Bridge Expressway are charged by vehicle class. The mileage fee
for Class 1 vehicle 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. In addition, a bridge overlapping fee is charged on the Zhoushan
Bay Bridge section by vehicle class: Rmb1.82 per km, Rmb3.64 per km, Rmb5.46, Rmb6.37 and Rmb7.28 for vehicle
classes 1 to 5, respectively.
3. Toll by weight 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
Rmb0.09/ton per km is reduced in a linear manner to
Rmb0.05/ton per km
Over 40 tons
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 up to
100%
Calculation based on the fee standard X 3 is increased
in a linear manner to fee standard X 6
Overloaded over 100%
Calculation based on the fee standard X 6
* The basic toll rate for goods vehicles on Huihang Expressway is Rmb0.09/ton per km.
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,
2014
Rmb’000
(Restated)
2015
Rmb’000
(Restated)
2016
Rmb’000
2017
Rmb’000
2018
Rmb’000
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
9,568,321
5,135,331
(1,142,988)
3,992,343
64,087
60,830
81,594
–
–
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
3,480,537
511,806
80.14 cents
Diluted EPS(From continuing and
52.15 cents
68.84 cents
69.94 cents
71.36 cents
75.52 cents
discontinued operations)
RETURN ON EQUITY (ROE)
ROE
2014
13.3%
2015
17.9%
2016
16.6%
2017
15.5%
2018
15.2%
SEGMENTAL REVENUE / 2018
(continuing operations)
SEGMENTAL NET PROFIT / 2018
3.6%
Other Business
9.4%
Other Business
11.7%
Securities
Business
30.5%
Securities
Business
Toll Road
Business
65.9%
Toll Road
Business
78.9%
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
9,568
7,172
2014
(Restated)
2015
(Restated)
2016
2017
2018
Net profit / Rmb Million (Continuing and discontinued operations)
4,030
3,809
3,991
3,992
2,746
2014
2015
2016
2017
2018
Basic EPS / Rmb Cents (Continuing and discontinued operations)
68.84
69.94
73.73
80.14
52.15
2014
2015
2016
2017
2018
17.9
ROE / %
16.6
13.3
15.5
15.2
2014
2015
2016
2017
2018
11
YU Zhihong
Chairman
12
Dear Shareholders,
On behalf of the Board of Directors, it is my pleasure to present the annual results of Zhejiang
Expressway (“ZJE” or “the Company”), and its subsidiaries (collectively referred to as “the Group”)
for the year 2018.
In 2018, China’s GDP grew 6.6% and the structure of the economy continued to evolve. GDP for
Zhejiang Province, which continues to be the highest disposable income per capita in the nation
and is where the major business of the Group is located, rose 7.1%. During the year, e-commerce
became a major driver of economic growth in Zhejiang Province. Online retail sales soared 25.4%
year-over-year within the province.
Although China kept its economic growth within a reasonable range, the country faced downside
pressure from a complicated and challenging external environment. During the period, the
Group’s traffic volume fluctuated, and the growth rate declined over the course of the year.
As the securities business also faced pressure, the Group’s overall growth slowed. Revenue
was Rmb9,568.32 million, largely flat year-on-year, and the profit attributable to owners of the
Company increased 8.7% year-on-year to Rmb3,480.54 million. The ROE (return on equity) for
the year was 15.2%, remaining at a relatively high level. The Company previously announced
an adjustment to the dividend policy to consolidate the interim and final dividend payments.
The dividend for the year recommended by the directors was Rmb37.5 cents per share, which
represents a record high and demonstrates our goal of providing a stable return to shareholders.
13
Chairman’s Statement Chairman’s Statement
For the Group’s core toll road operations business, it recorded toll revenue of Rmb6,302.37 million
during the period, which contributed 65.9% of total revenue. During the period, the Group worked
to enhance its service quality by implementing a number of industry-leading innovations related
to “intelligent expressways”. Through the extensive implementation of modern technology such
as ETC (Electronic Toll Collection) payments, mobile payments and self-service toll stations, the
Group was able to increase the “zero waiting time” rate for toll collection to an industry-leading
94%, which significantly reduced waiting times and improved service quality for vehicles. In
addition, the Group also proactively upgraded many of its internal IT systems and implemented
new big data technology to improve operational efficiency. As the Group continue to install new
innovative intelligent equipment at scale, it will continue to be able to gradually evolve its business
by turning ideas to reality, lead the modernization of our industry, and build a renowned brand for
operational quality and customer service in China.
As part of the efforts to strengthen our core toll road operations business, the Group proactively
took advantage of asset injections from Zhejiang Communications Investment Group Co., Ltd,
which is the controlling shareholder of our Company, as well as exploring external merger and
acquisition opportunities, including premium overseas projects. In December 2018, the Group
entered into an equity purchase agreement to acquire the Zhejiang Shenjiahuhang Expressway
Co., Ltd., which holds two assets of Shenjiahuhang Expressway and Zhoushan Bay Bridge. The
acquisition served to increase the total length of the expressways operated by our Group from
approximately 663 km to approximately 802 km. The Shenjiahuhang Expressway is one of the
five major routes connecting Zhejiang Province and Shanghai, while the Zhoushan Bay Bridge
acts as an important economic link between the Zhoushan Islands and the mainland. Both are
expected to turn a profit in 2019. At the same time, the Group proposed the issuance of mid-term
notes of no more than RMB3,000 million. The proceeds will be partially used for this acquisition,
and demonstrate how we are using the capital markets as an important channel to optimize our
financial position and reduce financing costs.
14
The domestic stock and bond markets remained lackluster during the period, which proved
to be particularly challenging for Zheshang Securities as various business segments did not
perform well. Despite of the unfavorable market conditions, Zheshang Securities maintained its
scale and market position in the industry. It also expanded its operations by obtaining three new
certifications, including Trial Market Maker in the Interbank Bond Market, and developed new
business leveraging the “Phoenix Action” plan of Zhejiang Province, which aims to encourage
listings, mergers and acquisitions, and corporate restructurings. Beyond that, the Group continued
to broaden its scope in the financial services sector by making various minority investments
in other financial institutions. During the year the Group acquired stakes in Shanghai Rural
Commercial Bank and later increased it to 5.36%.
As we look out to the future, our aim is to “Strive for Excellence” as we look to become a leading
enterprise in China. For the Group’s core toll road operations businesses, we will continue to try
to build a renowned brand for expressway operations and service in China, and drive our industry
forward with intelligent solutions. For the securities business, we aim to build a unique brand and
become a top-tier player in the country. We are setting up a number of systems and procedures to
help us achieve these ambitious long-term goals.
On behalf of the Board, I would like to thank everyone who has supported our company, including
our shareholders, business partners, customers, management team and employees. As we look
ahead, we will work hard to safeguard the overall interests of the Company and add value for
shareholders.
YU Zhihong
Chairman
March 18, 2019
15
15
16
Providing a stable return to shareholdersThe Group’s return on equity for the year was 15.2%, remaining at a relatively high level. The Company previously announced an adjustment to the dividend policy to consolidate the interim and final dividend payments. The dividend for the year recommended by the directors was Rmb37.5 cents per share, which represents a record high and demonstrates our goal of providing a stable return to shareholders. BUSINESS REVIEW
The global economy maintained its growth momentum in 2018, though the overall rate had fallen
back somewhat. International financial markets were volatile and international trade also slowed.
Meanwhile, the Chinese economy maintained a steady level of growth with positive trends, posting
a 6.6% increase in GDP during the Period. Zhejiang Province’s GDP grew by 7.1% year-on-year,
which was 0.5 percentage points higher than the national rate, mainly due to ongoing increases in
services, international trade and consumer demand.
Traffic volume on the Group’s expressways continued to maintain decent growth, benefiting
from the stable and rapid growth of Zhejiang Province’s economy during the Period. However,
revenue from Zheshang Securities fell due to the pull-back in the equity markets in China,
which caused a year-on-year decrease of 0.6% in the Group’s revenue. Total revenue of the
Group was Rmb9,568.32 million, of which Rmb6,302.37 million was generated by the five major
expressways operated by the Group, representing an increase of 5.3% year-on-year and 65.9%
of the total revenue. The revenue generated by the securities business was Rmb2,921.27 million,
representing a decrease of 16.3% year-on-year and 30.5% of the total revenue. A breakdown of
the Group’s revenue for the Period is set out below:
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
Construction revenue
Total revenue
17
2018
2017
Rmb’000
Rmb’000
% Change
4,018,598
1,232,410
386,722
527,181
137,459
3,772,880
1,244,280
362,345
477,656
129,088
1,462,798
1,458,476
2,088,310
1,402,940
–
106,097
238,580
47,865
100,976
–
9,568,321
9,626,340
6.5%
-1.0%
6.7%
10.4%
6.5%
-30.0%
4.0%
-100.0%
5.1%
N/A
-0.6%
Management Discussion and Analysis
18
LUO JianhuExecutive Director and General Manager Toll Road Operations
During the Period, traffic volume on the Group’s expressways maintained solid organic growth,
benefitting from Zhejiang Province’s favorable economic development. The varied rates of growth
reflect the different regions in which the five expressways are located. The organic traffic volume
growth rates for the Group’s expressways during the Period are listed in the table below:
The Group’s Expressways
Shanghai-Hangzhou-Ningbo Expressway
Shangsan Expressway
Jinhua Section, Ningbo-Jinhua Expressway
Hanghui Expressway
Huihang Expressway
Organic Traffic
Volume Growth Rate
(year-on-year)
9.1%
7.3%
7.7%
8.8%
8.1%
During the Period, traffic volume on the Group’s expressways registered steady growth due to
a number of positive factors. Zhejiang Province’s service industry maintained stable growth and
domestic demand also rose. The growth rates for total retail sales of consumer goods, imports, and
exports reached 9.0%, 19.0% and 9.0% respectively, which helped the Group to achieve varied
levels of growth in both traffic volume and toll revenue on different expressways. On August 11,
2017, the Zhejiang Provincial government converted the county-level city of Lin’an into a district
of Hangzhou. As a result, the economy of the region around Lin’an, which is located along the
Hanghui Expressway, experienced rapid development, which was beneficial for the growth in the
traffic volume along the Hangzhou-Lin’an section of the Hanghui Expressway. In addition, the
restriction of truck traffic in the urban area of Dongyang City since December 1, 2017 has driven
trucks to the Ningbo-Jinhua Expressway. Moreover, the Yiwu City government reset toll collection
rules for vehicles travelling on expressways within the border of Yiwu. Under the new rules, for
a two-year period from September 15, 2018 on which the new rules became into effect, the Yiwu
government will pay the toll for all passenger vehicles that have ETC registration. Both local
policies have boosted traffic volume along the Yiwu Section of the Ningbo-Jinhua Expressway.
During the Period, the following factors had negative impact on the traffic volume and toll revenue
on the Group’s expressways: the Ningbo-Taizhou-Wenzhou Expressway which connected to the
Shangsan Expressway had intermittent cut-off constructions and the Zhangzhen toll station on
National Highway G104 parallel to the Shangsan Expressway suspended toll collection on June 1,
2018, both of which negatively affected traffic volume on the Shangsan Expressway. In addition,
the Dongyang-Yiwu Provincial Highway opened on June 30, 2017, which led to a decline in short-
distance traffic on the Jinhua Section of the Ningbo-Jinhua Expressway.
19
20
Industry-leading innovations to build “intelligent expressways”The Group worked to enhance its service quality by implementing a number of industry-leading innovations related to “intelligent expressways”. Through the extensive implementation of modern technology such as ETC payments, mobile payments and self-service toll stations, the Group was able to increase the “zero waiting time” rate for toll collection to an industry-leading 94%, which significantly reduced waiting times and improved service quality for vehicles. During the Period, total toll revenue from the 248km Shanghai-Hangzhou-Ningbo Expressway, the
141km Shangsan Expressway, the 70km Jinhua Section of the Ningbo-Jinhua Expressway, the
122km Hanghui Expressway and the 82km Huihang Expressway was Rmb6,302.37 million.
During the Period, the daily average traffic volume in full-trip equivalents, toll revenue and the
corresponding year-on-year growth rates on the Group’s expressways are listed in the table below:
The Group’s Expressways
Traffic Volume
Toll Revenue
Average
Traffic Volume
in Full-Trip
Equivalents
61,898
65,500
59,324
30,769
21,116
19,320
7,788
Year-on-year
Growth
Toll Revenue
8.1%
Rmb4,018.60 million
Year-on-year
Growth
6.5%
9.5%
7.0%
1.8%
Rmb1,232.41 million
7.1%
Rmb386.72 million
10.4%
Rmb527.18 million
7.6%
Rmb137.46 million
-1.0%
6.7%
10.4%
6.5%
Shanghai-Hangzhou-Ningbo Expressway
– Shanghai-Hangzhou Section
– Hangzhou-Ningbo Section
Shangsan Expressway
Jinhua Section, Ningbo-Jinhua Expressway
Hanghui Expressway
Huihang Expressway
Securities Business
During the Period, conditions in the domestic equity markets remained lackluster. Trading volumes
on the Shanghai and Shenzhen stock markets decreased 17.5% year-on-year in aggregate. As
a result, revenue from various business segments of Zheshang Securities experienced varied
levels of declines on a year-on-year basis, including securities brokerage, margin financing and
securities lending, investment banking and asset management.
21
22
Zheshang Securities aims to become a top-tier player in the securities industry in ChinaZheshang Securities Co., Ltd., a subsidiary of the Group, was successfully listed on Shanghai Stock Exchange in 2017. In the next step, it aims to build a unique brand and become a top-tier player in the securities industry in China. During the Period, Zheshang Securities recorded total revenue of Rmb2,921.27 million, a
decrease of 16.3% year-on-year, of which, commission and fee income declined 30.0% year-
on-year to Rmb1,462.80 million, and interest income was Rmb1,458.48 million, representing
an increase of 4.0% 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 Rmb512.45 million (2017: securities investment gains of
Rmb778.80 million).
Overall, Zheshang Securities experienced a severe market test due to multiple unfavorable
factors, such as domestic financial deleveraging and increased trade frictions in the global
markets. To overcome the adverse impact of these market conditions, Zheshang Securities refined
its risk management system, continuously optimized its business structure, enhanced its business
development, expanded its project portfolio, and constantly improved its operations.
Other Business Operations
During the Period, other business revenue was mainly derived from hotel and construction
operations. Grand New Century Hotel, owned by Zhejiang Yuhang Expressway Co., Ltd. (a 51%
owned subsidiary of the Company), recorded revenue of Rmb106.10 million for the Period. Deqing
County De’an Highway Construction Co., Ltd. (an 80.1% owned subsidiary of the Company)
recorded revenue of Rmb238.58 million for the Period.
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 20,678, representing an
increase of 7.64% year-on-year. Toll revenue during the Period was Rmb417.38 million. During the
Period, the joint venture reported a net profit of Rmb60.07 million. (2017: net profit of Rmb35.34
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 recorded a net profit of Rmb409.80 million
(2017: net profit of Rmb321.40 million).
23
During the Period, Yangtze United Financial Leasing Co., Ltd. (a 13% owned associate of the
Company), was primarily engaged in the financial leasing business, which includes the transferring
and receiving of financial leasing assets, fixed-income securities investment businesses, and
other businesses approved by the China Banking and Insurance Regulatory Commission. During
the Period, the associate company recorded a net profit of Rmb271.92 million (2017: net profit of
Rmb265.25 million).
During the Period, Shanghai Rural Commercial Bank Co., Ltd. (a 5.36% owned associate of the
Company), was primarily engaged in commercial banking business, including deposits, short-,
medium-, and long-term loans, domestic and overseas settlements and other businesses that are
approved by the China Banking and Insurance Regulatory Commission.
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 Rmb3,480.54
million, representing an increase of 8.7% year-on-year, basic earnings per share for the Company
was Rmb80.14 cents, representing an increase of 8.7%, diluted earnings per share for the
Company was Rmb75.52 cents, representing an increase of 5.8%, and return on owners’ equity
was 15.2%, representing a decline of 1.9% year-on-year.
Liquidity and financial resources
As at December 31, 2018, current assets of the Group amounted to Rmb57,913.31 million
in aggregate (December 31, 2017: Rmb53,952.25 million), of which bank balances, clearing
settlement fund, deposits and cash accounted for 11.7% (December 31, 2017: 10.4%), bank
balances and clearing settlement fund held on behalf of customers accounted for 25.5%
(December 31, 2017: 27.9%), financial assets at FVTPL accounted for 37.2% (on the same basis
as at December 31, 2017: 26.6%) and loans to customers arising from margin financing business
accounted for 10.1% (December 31, 2017: 14.6%). The current ratio (current assets over current
liabilities) of the Group as at December 31, 2018 was 1.6 (December 31, 2017: 1.7). 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 2.1 (December 31, 2017: 2.2).
24
Management Discussion and Analysis The amount of financial assets at FVTPL of the Group as at December 31, 2018 was
Rmb21,558.61 million (on the same basis as at December 31, 2017: Rmb14,369.53 million), of
which 88.8% was invested in bonds, 3.1% was invested in stocks, 3.2% was invested in structured
products, and the rest were invested in equity funds and trust products.
During the Period, net cash from the Group’s operating activities amounted to Rmb 2,412.06
million. The currency mix in which cash and cash equivalents are held has not substantially
changed as compared to last year.
The Directors do not expect the Company to experience any problems with liquidity and financial
resources in the foreseeable future.
Cash and cash equivalents
Time deposits
Financial assets at fair value through profit or loss
Held for trading investments
Available-for-sale investments
Total
Borrowings and solvency
As at December 31,
2018
2017
Rmb’000
Rmb’000
6,477,724
5,588,814
280,913
21,558,606
20,000
–
–
–
12,568,694
1,800,835
28,317,243
19,978,343
As at December 31, 2018, total liabilities of the Group amounted to Rmb47,808.96 million
(December 31, 2017: Rmb44,446.17 million), of which 0.5% was bank and other borrowings,
31.8% was bonds payable, 5.7% was Convertible Bond, 23.2% was financial assets sold under
repurchase agreements and 30.6% was accounts payable to customers arising from securities
business.
As at December 31, 2018, total interest-bearing borrowings of the Group amounted to
Rmb18,188.41 million, representing an increase of 28.9% compared to that as at December 31,
2017. The borrowings comprised borrowings from a domestic financial institution of Rmb200.27
million, borrowings from a domestic institution of Rmb60.47 million, subordinated bonds of
Rmb13.30 billion, corporate bond of Rmb1.92 billion, beneficial certificates of Rmb1.55 million,
and convertible bond denominated in Euro and equivalents to Rmb2,709.66 million. Of the
interest-bearing borrowings, 67.2% was not payable within one year.
25
As at December 31, 2018, the annual floating interest rate of the Group’s borrowings from a
domestic financial institution was 4.35%, the annual fixed interest rate from a domestic institution
was 3.0%. The annual floating interest rates of beneficial certificates was 8.0%. The annual
interest rates for subordinated bonds were fixed at rates between 3.63% and 5.93%. The annual
fixed interest rate for corporate bond was 3.08%. 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%.
Maturity Profile
Gross
amount
Within
1 year
Rmb’000
Rmb’000
2-5 years
inclusive
Rmb’000
Beyond
5 years
Rmb’000
Floating rates
Borrowings from a domestic financial
institution
Beneficial certificates
Fixed rates
Borrowings from a domestic
200,266
200,266
1,551
1,551
–
–
institution
Subordinated bonds
Corporate bond
Convertible bond
60,475
475
60,000
13,300,425
5,750,425
7,550,000
1,916,033
2,709,663
16,033
1,900,000
–
2,709,663
Total as at December 31,2018
18,188,413
5,968,750
12,219,663
Total as at December 31,2017
14,113,454
2,482,800
11,630,654
–
–
–
–
–
–
–
–
Total interest expenses and profit before interest and tax for the Period amounted to Rmb866.32
million and Rmb6,001.65 million, respectively. The interest cover ratio (profit before interest and
tax over interest expenses) stood at 6.9 (2017: 9.5) times.
Profit before tax and interest
Interest expenses
Interest cover ratio
2018
2017
Rmb’000
Rmb’000
6,001,648
866,317
6.9
5,795,048
611,747
9.5
26
Management Discussion and Analysis
As at December 31, 2018, the asset-liability ratio (total liabilities over total assets) of the Group
was 60.1% (December 31, 2017: 60.3%). 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 51.2% (December 31,
2017: 50.3%).
Capital structure
As at December 31, 2018, the Group had Rmb31,704.19 million in total equity, Rmb44,127.40
million in fixed-rate liabilities, Rmb201.82 million in floating-rate liabilities, and Rmb3,479.74
million in interest-free liabilities, representing 39.9%, 55.5%, 0.3% and 4.3% 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 104.6% as
at December 31, 2018 (December 31, 2017:101.1%).
As at December 31, 2018 As at December 31, 2017
%
Rmb’000
Rmb’000
%
Total equity
Fixed rate liabilities
Floating rate liabilities
Interest-free liabilities
Total
Long-term interest-bearing liabilities
Gearing ratio 1 (note)
Gearing ratio 2 (note)
Asset-liabilities ratio 1 (note)
Asset-liabilities ratio 2 (note)
31,704,193
44,127,398
201,817
3,479,746
79,513,154
12,219,663
39.9% 29,204,351
55.5% 39,148,787
421,800
0.3%
4.3%
4,875,582
100.0% 73,650,520
15.4% 11,630,654
104.6%
38.5%
60.1%
51.2%
39.7%
53.2%
0.6%
6.5%
100.0%
15.8%
101.1%
39.8%
60.3%
50.3%
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 Rmb3,471.11 million. Amongst the total
capital expenditure, Rmb3,224.54 million was incurred for acquiring equity investments, Rmb66.55
million was incurred for acquisition and construction of properties, and Rmb180.02 million was
incurred for purchase and construction of equipments and facilities.
As at December 31, 2018, the capital expenditure committed by the Group totaled Rmb4,251.41
million. Amongst the total capital expenditures committed by the Group, Rmb2,943.00 million will
be used for the acquisitions of 100% equity interest in Zhejiang Shenjiahuhang Expressway Co.,
Ltd., Rmb400.00 million will be used for acquiring other equity investments, Rmb433.86 million will
be used for acquisition and construction of properties and Rmb474.55 million for acquisition and
construction of equipments 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 Rmb2.20 billion, in accordance with their proportionate equity interest in Shengxin Co. During
the Period, Rmb210.00 million of the bank loans had been repaid. As at December 31, 2018, the
remaining bank loan principle balance is Rmb1,473.00 million.
Except for the above, as at December 31, 2018, the Group did not have any other contingent
liabilities, pledge of assets or guarantees.
Foreign exchange exposure
During the Period, save for (i) dividend payments to the holders of H shares in Hong Kong dollars,
(ii) Zheshang International Financial Holding Co., Limited. (a wholly owned subsidiary of Zheshang
Securities) operating in Hong Kong, and (iii) issuance of the zero coupon convertible bond in an
aggregate principal amount of Euro365.00 million in Hong Kong capital market in 2017, which will
be due in April 2022, the Group’s principal operations were transacted and booked in Renminbi.
During the Period, the Group has not used any financial instruments for hedging purpose.
28
Management Discussion and Analysis OUTLOOK
Looking ahead to 2019, global economic growth is expected to slow down amid intensified trade
tensions and volatility in the international financial markets. Under the Chinese government’s
prudent macroeconomic policy, the domestic economy is expected to maintain stable growth as it
transitions from high-speed to high-quality development. Zhejiang Province will strive to achieve
high-quality development and increase its competitiveness by promoting technical innovation,
as part of the efforts to accelerate economic restructuring and transform the real economy.
The performance of the overall economy is expected to remain positive, which will provide a
stable external environment for the Company’s development. The overall traffic volume on the
expressways operated by the Group is expected to maintain steady growth in 2019.
The Company will continue to accelerate the implementation of new software and hardware for its
toll collection systems to improve efficiencies. The Company will accelerate the establishment of
a transportation data platform, improve the application of big data technology and the Company’s
data analytics capabilities, and also speed up the implementation of intelligent applications
to the Shanghai-Hangzhou-Ningbo Expressway in order to improve the Company’s operating
capabilities and assure safe and smooth traffic flow. The Company will improve its overall service
and comprehensively enhance the Company’s public image. The Company will also proactively
work to improve its overall branding across all the expressway sections and leverage branding
opportunities to implement management reforms, with the aim of building a renowned brand for
expressway operations and service in China.
On December 28, 2018, the Company signed an agreement for toll compensation with the
Hangzhou Transportation Bureau. It is expected that the Company will suspend toll collection on
the section of the Shanghai-Hangzhou-Ningbo Expressway in the urban area of Hangzhou City in
the second half of 2019 until the expiration of the toll period for the road section. The Hangzhou
Transportation Bureau will compensate the Company accordingly on an annual basis.
With the Chinese government proactively promoting the healthy development of a multi-tiered
capital market, the China Securities Regulatory Commission will promote the establishment of a
new innovation-focused science and technology stock market, and launch a registration-based
IPO process. It will also improve both the regulatory and settlement system of the securities
industry, and accelerate the opening of the capital markets, all of which will bring new opportunities
and challenges to the securities business of the Group. Zheshang Securities will actively respond
to market demands, comply with regulatory changes and industry trends, fully leverage market
opportunities, optimize and adjust its business structure, improve its service capabilities in
investment and financing, and continuously improve its profitability and competitiveness in an
effort to address new challenges from the market and industry, and facilitate the sustainable and
healthy development of its business.
29
In order to adapt to new economic developments in 2019, the Company will leverage its
competitive advantages, continue to expand and enhance its core toll road operation business,
and strengthen and optimize its securities business. Management will continue to monitor
government policies and the external environment to appropriately adjust the Company’s operating
strategy in a timely manner, take advantage of merger and acquisition opportunities to strengthen
the Company’s operating capabilities, and proactively yet prudently explore suitable investment
projects. The Company will also stay focused on maintaining effective risk controls in order to
promote 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
employee. As at December 31, 2018, there were 6,723 employees within the Group, amongst
whom 1,396 worked in the managerial, administrative and technical positions related with
expressway and 2,665 worked in fields such as toll collection, maintenance, service areas, while
2,662 worked in securities and futures business outlets.
30
Management Discussion and Analysis Promoting high-quality and sustainable developmentThe Group will leverage its competitive advantages, continue to expand and enhance its core toll road operation business, and strengthen and optimize its securities business. Management will continue to monitor government policies and the external environment to appropriately adjust the Group’s operating strategy in a timely manner, take advantage of merger and acquisition opportunities to strengthen the Group’s operating capabilities, and proactively yet prudently explore suitable investment projects. The Group will also stay focused on maintaining effective risk controls in order to promote high-quality and sustainable development. TOLL ROAD BUSINESS RISKS
Economic Environment
Affected by unfavorable factors including intensifying international tension and international
financial market volatilities, China’s economy faces a complicated and severe external
environment and pressure of economic downturn. As the expressway toll road business is closely
related to the macroeconomy, it is expected that there will also be certain uncertainties in the traffic
volume and toll revenue of the Group’s expressways in the future.
Roads Competition
Hangzhou-Shaoxing-Taizhou Expressway, which is parallel to the Group’s Shangsan Expressway,
is planned to complete construction and open at the end of 2021. It is expected that Hangzhou-
Shaoxing-Taizhou Expressway, upon opening, will have certain diversion effect on the traffic
volume of Shangsan Expressway. In addition, Hangzhou Ring Road is planned to open by the
end of 2020 and is expected to have certain diversion effect on the traffic volume of Lianhang
section of Shenjiahuhang Expressway. Hangzhou-Ningbo Expressway Alternative Line, which
is in line with the Group’s Hangzhou-Ningbo Expressway, is expected to complete construction
and open in 2022. However, since the Hangzhou-Ningbo Expressway Alternative Line is long and
more expensive, it is expected that diversion is minimal. Accordingly, we cannot be assured as to
whether traffic volume to be generated on the Group’s expressways will be maintained at the same
level as before or will increase in the future, or whether or not the operating results of the Group
will be negatively affected.
Toll Policy
Since January 1, 2019, a 15% trial discount on the toll rate of expressways in Zhejiang Province
has been introduced for legal cargo trucks using non-cash payment cards and truck ETC cards in
Zhejiang Province. A press conference on the amendment to the “Regulation on Administration
of Toll Roads” (《收費公路管理條例》) was held by the Ministry of Transport on January 24, 2019.
Although the administrative regulation has not been officially promulgated at present, 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 expressways under 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, 52 and 53 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 49 to 56, 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 2018 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 18, 2019
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 Corporate Governance Code (“CG Code”) in Appendix 14 of the Listing Rules (available at
www.hkex.com.hk).
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. The Directors
of the Company have been informed that the latest amendment of Listing Rules and CG Code will
be adopted and applied for the daily operation of the Company.
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.
BOARD OF DIRECTORS OF THE COMPANY (THE “BOARD”)
The Chairman of the Company during the Period were:
Mr. YU Zhihong (Appointed, with effect from April 3, 2018)
Mr. ZHAN Xiaozhang (Resigned, with effect from April 2, 2018)
The executive directors of the Company during the Period were:
Mr. ZHAN Xiaozhang (Resigned, with effect from April 2, 2018)
Mr. CHENG Tao
Ms. LUO Jianhu (General Manager)
35
Corporate Governance Report The non-executive directors of the Company during the Period were:
Mr. DAI Benmeng
Mr. YU Qunli (Appointed, with effect from April 2, 2018)
Mr. WANG Dongjie (Resigned, with effect from April 2, 2018)
Mr. YU Ji (Appointment, with effect from April 2, 2018)
The independent non-executive directors of the Company during the Period were:
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang, Rosa
Mr. CHEN Bin (Appointed, with effect from April 2, 2018)
Mr. ZHOU Jun (Resigned, with effect from April 2, 2018)
During the Period, the Board held a total of nine meetings. Individual attendances by the directors
(as indicated by the numbers of meetings attended/numbers of relevant meetings held) are as
follows:
Attendance
in person
Attendance
by proxy
Attendance
through
communication
Mr. YU Zhihong (Chairman)
Mr. ZHAN Xiaozhang (Chairman, Resigned)
Mr. CHENG Tao
Ms. LUO Jianhu (General Manager)
Mr. DAI Benmeng
Mr. WANG Dongjie (Resigned)
Mr. YU Qunli
Mr. YU Ji
Mr. ZHOU Jun (Resigned)
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang, Rosa
Mr. CHEN Bin
6/7
1/2
6/9
7/9
5/9
4/7
4/7
6/9
7/9
4/7
1/9
1/9
1/2
2/7
2/7
1/2
1/9
2/7
1/7
1/2
2/9
2/9
2/9
1/2
1/7
1/7
1/2
2/9
2/9
1/7
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.
36
Corporate Governance Report 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, at least one of whom possessing the appropriate professional
qualification or accounting or related financial management expertise.
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 and immediate family members
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.
37
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. YU Zhihong and Mr. ZHAN Xiaozhang (Resigned) served as Chairman and
Ms. LUO Jianhu served as 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, 2018 and
will expire on June 30, 2021.
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. PEI Ker-Wei, Ms. LEE Wai Tsang, Rosa, Mr. CHEN Bin, Mr. YU
Qunli and Mr. YU Ji, of whom Mr. PEI Ker-Wei served as the Chairman of the Audit Committee.
The Nomination Committee comprised of the Chairman of the Company, the three independent
non-executive directors and one non-executive director, namely Mr. YU Zhihong, Mr. PEI Ker-Wei,
Ms. LEE Wai Tsang, Rosa, Mr. CHEN Bin and Mr. DAI Benmeng, of whom Mr. YU Zhihong served
as Chairman of the Nomination Committee.
38
Corporate Governance Report The Remuneration Committee comprised of the three independent non-executive directors and
two non-executive directors, namely, Mr. PEI Ker-Wei, Ms. LEE Wai Tsang Rosa, Mr. CHEN
Bin, Mr. DAI Benmeng and Mr. YU Qunli, of whom Mr. PEI Ker-Wei, served as Chairman of the
Remuneration Committee.
The Strategic Committee comprised of the Chairman of the Company and the two executive
directors, namely Mr. YU Zhihong, 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. YU Zhihong served as chairman of the Strategic Committee.
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 (Resigned)
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang, Rosa
Mr. CHEN Bin
Mr. WANG Dongjie(Resigned)
Mr. YU Qunli
Mr. YU Ji
Attendance
Attendance
in person
by proxy
3/4
4/4
1/3
2/3
1/3
1/1
1/4
2/3
1/1
1/3
2/3
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, due to taking other works assignment, Mr. ZHAN Xiaozhang resigned the
position of Executive Director, Chairman of the Company, Chairman of Nomination and Strategic
Committee with effect from April 2, 2018.
Mr. YU Zhihong was appointed as authorized representative and Non-executive Director of
the Company with effect from April 2 2018. Mr. YU was also appointed as the Chairman of the
Company, Chairman of Nomination and Strategic Committee on April 3, 2018.
39
Mr. ZHOU Jun resigned the positions of Independent Non-executive Director, Chairman of Audit
committee, Member of Nomination and Remuneration Committee with effect from April 2, 2018
due to taking other works assignment.
Mr. WANG Dongjie resigned the positions of Non-executive Director and Member of audit
committee with effect from April 2, 2018 due to other works assignment.
Mr. YU Qunli was appointed as Non-executive Director of the Company with effect from April 2,
2018. Mr. YU was also appointed as a member of audit and remuneration committee on April 3,
2018.
Mr. YU Ji was appointed as Non-executive Director of the Company with effect from April 2, 2018.
He was also appointed as a member of audit committee on April 3, 2018.
Mr. CHEN Bin was appointed as Independent Non-executive Director with effect from April 2,
2018. He was also appointed as a member of Audit, Nomination and Remuneration Committee.
Mr. ZHAN Huagang and Mr. WANG Yubing were appointed as supervisors representing
employees in the sixth session of employee representatives of the Company on April 12, 2018. Mr.
LU Xinghai was no longer the supervisor representing employees due to the expiration of session.
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 Nomination Committee held a meeting on February 14, 2018. Individual
attendances by the members (as indicated by the numbers of meetings attended/numbers of
relevant meetings held) are as follows:
Attendance
Attendance
Attendance
through
in person
by proxy
communication
Mr. ZHAN Xiaozhang (Resigned)
Mr. ZHOU Jun (Resigned)
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang, Rosa
Mr. DAI Benmeng
40
1/1
1/1
1/1
1/1
1/1
Corporate Governance Report During the Period, the Nomination Committee discussed the proposed candidates of Non-
executive Directors and Independent Non-executive Directors of Company by way of through
communication. The Proposed candidates for Non-executive Directors and Independent Non-
executive Directors of the Company that were nominated by the Nomination Committee were later
approved by the Shareholders Meeting.
During the Period, the Remuneration Committee held a meeting on May 10, 2018. Individual
attendances by the members (as indicated by the numbers of meetings attended/numbers of
relevant meetings held) are as follows:
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang, Rosa
Mr. CHEN Bin
Mr. DAI Benmeng
Mr. YU Qunli
Attendance
Attendance
in person
by proxy
1/1
1/1
1/1
1/1
1/1
During the Period, the Remuneration Committee discussed the proposed remuneration and
allowance packages for directors of the Board, supervisors of the Supervisory Committee and
senior management of the Company. The proposed remuneration and allowance package for
directors of the Board, Supervisors of the Supervisory Committee and senior management of the
Company were reviewed by the Remuneration Committee were later reviewed and approved by
the Board.
During the Period, 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.
41
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 during the period.
DIVERSIFICATION OF BOARD MEMBERS
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 Board of the Company attaches great importance to female member of Directors, gender ratio
of male and female members is 78% and 22% respectively.
The Board members of the Company have skills in multiple professional field, such as Legal,
Accounting, Finance, Management, Computer Science, Construction Engineering, with related
experience in different professional aspect. The diversification background of the Board is
beneficial to the corporate governance, and related experiences satisfy the development needs of
the Company.
The age distribution of the Board of the Company is between 41 and 61. The different age group
of the Board members can provide diversified sight of views and opinion.
NOMINATION POLICY
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. (Please refer to “working rules for Nomination
Committee” under Corporation Governance Column on the Company’s website)
42
Corporate Governance Report AUDITORS’ REMUNERATION
During the Period, the Company had paid approximately Rmb3.80 million and Rmb0.91 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
2018. Besides, the Company had paid Rmb2.09 million and Rmb0.32 million to Deloitte Touche
Tohmatsu Certified Public Accountants (the Hong Kong auditors) and Pan-China Certified Public
Accountants Ltd. (the PRC auditors), respectively, for other assurance service provided.
SECRETARY TO THE BOARD
During the Period, the Secretary to the Board help the company maintain a sound and effective
corporate governance framework, review risk management and internal control systems to ensure
regulatory compliance; provide compliance advice to the Board and senior management in the
decision making process. The Secretary to the Board had also 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, 2018, 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.
43
INTERESTS AND SHORT POSITIONS OF OTHER PERSONS IN SHARES AND
UNDERLYING SHARES
As at December 31, 2018, 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:
Substantial Shareholders
Capacity
Communications Group
Beneficial owner
Substantial Shareholders
Capacity
JP Morgan Chase & Co.
Beneficial owner,
investment manager and
custodian corporation/
approved lending agent
Total interests
in number
of ordinary
shares of
the Company
2,909,260,000
Total interests
in number
of ordinary
shares of
the Company
133,145,060 (L)
3,881,146 (S)
81,458,054 (P)
BlackRock, Inc.
Interest of controlled corporations
140,420,186 (L)
Citigroup Inc.
Interest of controlled corporations
The Bank of New York Mellon
Interest of controlled corporations
Corporation
116,819,836 (L)
65,800 (S)
116,550,648 (P)
73,173,838 (L)
65,891,506 (P)
Percentage
of the
issued share
capital of
the Company
(Domestic
Shares)
100%
Percentage
of the
issued share
capital of
the Company
(H Shares)
9.28%
0.27%
5.68%
9.79%
8.14%
0.00%
8.12%
5.10%
4.60%
The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes interest in a lending
pool.
44
Corporate Governance Report Save as disclosed above, as at December 31, 2018, 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.
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 251 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, regular and irregular 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.
45
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
Email: zhenghui@zjec.com.cn
During the Period, the last shareholders’ meeting of the Company took place at 10:00 a.m. on
Friday, June 29, 2018 at the headquarters of the Company. Details of this 2017 annual general
meeting of the shareholders were set out in the announcement dated June 29, 2018 on resolutions
passed at the annual general meeting of the shareholders.
The next annual general meeting of the Company is expected to be held in May, 2019 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.
46
Corporate Governance Report DIVIDEND POLICY
The Company attaches great importance to the return for shareholders who long term support the
company’s development, shares the company’s development results, maintains a stable dividend
payout level, and tries to keep the absolute dividend payout relatively steady. During the period,
dividend payout ratio was 46.8%. Due to the change of National Foreign Exchange Management
Policy, the Board did not recommend the payment of an interim dividend for the six months ended
June 30, 2018, therefore adjusted dividend policy and consolidated the interim into the final
dividend payment. Details of the dividend payout will be announced after the 2018 annual general
meeting of the Company.
RISK MANAGEMENT AND INTERNAL CONTROLS
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.
47
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 discipline inspection audit department on a regular basis. During the
Period, the Audit Committee focused on a special audit of road maintenance projects of the
Company, as well as implementation of state-owned assets supervision policy at Zheshang
Securities. The discipline inspection audit department carried out specific audit into these
compliance issues and monitored relevant rectifications, ensuring the effectiveness of the
Company’s management systems.
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.
48
Corporate Governance Report Mr. YU Zhihong
Chairman
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
Xiucheng District of Jiaxing City as Deputy Manager of Township
Industrial Company and Deputy Head of Township, from 1987
successively served as Secretary to Xiucheng District Office,
Secretary of the Xiucheng District Youth League, Deputy Party
Secretary and Party Secretary of Tanghui Township in Xiucheng
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, and he became the Deputy Party Secretary and then
Mayor of Shaoxing City since 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.
49
Directors, Supervisors and Senior Management Profiles Mr. CHENG Tao
Executive Director
Ms. LUO Jianhu
Executive Director
Born in 1964, graduated from Changsha University of Science &
Technology with a Bachelor’s Degree in Transportation Engineering.
He is a Senior Adminstration Engineer and Senior Economist.
Mr. Cheng joined the work in 1983. He served as Secretary of the
Youth League Committee of Zhejiang Shipping Technical School
(浙 江 省 航 運 技 工 學 校), Secretary of the Youth League Committee
of Zhejiang Road and Bridge Engineering Office (浙 江 省 路 橋 工
程 處), Secretary of the 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.
Mr. Cheng has been appointed as an Executive Director and Party
Committee Secretary of the Company.
Born in 1971, graduated from Zhejiang University with a Bachelor’s
Degree in Law and graduated from the National Accounting Institute
in 2016 with an EMBA Degree, majoring in Financial Accounting.
She is a lawyer and Senior Economist.
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.
Ms. Luo has been appointed as an Executive Director and General
Manager, Deputy Party Committee Secretary of the Company.
50
Directors, Supervisors and Senior Management Profiles Mr. DAI Benmeng
Non-Executive Director
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 of 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)
the Manager of Human Resources Department and the Minister of
Organization Department of Zhejiang Transportation Group.
Mr. Dai is currently the Party Committee Member and Director of the
Secretariat Office of the Communications Group.
51
Mr. YU Qunli
Non-Executive Director
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
E n g i n e e r i n g G r o u p C o . , L t d . i n 2 0 0 0 , a n d t o Z h e j i a n g
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 Department and Manager of Safety
Monitoring Management 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 Expressway Management
Department since 2018.
52
Directors, Supervisors and Senior Management Profiles Mr. YU Ji
Non-Executive Director
Born in 1975, is a Senior 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
D e v e l o p m e n t a n d L e g a l A f f a i r s D e p a r t m e n t o f Z h e j i a n g
Communications Investment Group Co., Ltd.
53
Mr. PEI Ker-Wei
Independent Non-Executive Director
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).
54
Directors, Supervisors and Senior Management Profiles Ms. LEE Wai Tsang, Rosa
Independent Non-Executive Director
Born in 1977, Ms. Lee has over 15 years of experience in the
financial sector. She holds a Master of Science in Finance from
Boston College and MBA from University of Chicago.
Ms. Lee is a licensed person for asset management under the
Securities and Futures Ordinance (“SFO”). Ms. Lee is a Director of
Grand Investment (Bullion) Limited and Tianjin Yishang Friendship
Holdings Company Ltd.
Ms. Lee was an Executive Director of Grand Investment International
Ltd (Stock code: 1160) from 2005 to 2018 and was appointed as its
Chairman from 2013 to 2017. Ms. Lee also served as Director for
Grand Finance Group Company Ltd from 2005 to 2019.
55
Mr. CHEN Bin
Independent Non-Executive Director
Born in 1967, graduated 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).
56
Directors, Supervisors and Senior Management Profiles Mr. YAO Huiliang
Supervisor Representing Shareholders
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 General Manager of the
Finance Management Center of the Communications Group.
Mr. YAO currently serves as General Manager of the Industrial
Investment Management Division One of the Communications
Group.
57
Mr. ZHAN Huagang
Supervisor Representing Employees
Born in 1961, graduated from Zhejiang University with a Bachelor’s
Degree of Engineering in Internal Combustion Engine from the
Department of Thermophysical Engineering. He is a professor-level
Senior Engineer.
Since Mr. Zhan started his career in 1982, he had 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), Zhejiang
Highway Management Bureau (浙 江 省 公 路 管 理 局) and Zhejiang
Road and Bridge Engineering Office (浙 江 省 路 橋 工 程 處). He also
worked at the Operation Division and Maintenance Division of the
Zhejiang Provincial Expressway Executive Commission as Senior
Engineer.
He has been working at Zhejiang Expressway Co., Ltd. as Deputy
Manager and Manager of the Operations Management Department,
Director of the monitoring center, 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, Director of the
testing center. 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. Zhan is currently the Chairman of the Union and the Party
Committee Member of the Company.
58
Directors, Supervisors and Senior Management Profiles Mr. WANG Yubing
Supervisor Representing Employees
Born in 1969, graduated from Shanghai University of Finance and
Economics with a Bachelor’s Degree. He is a senior accountant.
He started his career in 1991 and worked at the audit office of East
China Investigation and Design Institute (華東勘測設計研究院). He
had served as Head of Finance Department of Hangzhou KFC Ltd
(杭州肯德基有限公司), Principal Accountant of Finance Department
of Zhejiang Liantong Leasing Co., Ltd (浙江聯通租賃有限公司). Then
he had served as Supervisor in the Financial Planning Department,
Supervisor in the Internal Audit Department, Assistant Manager and
Deputy Manager of the Legal Audit Department in the Company.
He serves as Manager of Discipline inspection and supervision
department.
59
Ms. HE Meiyun
Independent Supervisor
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 Secretary
to the Board, 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 also serves as a General Manager of Ping An
Securities Company Limited, Zhejiang Branch (平 安 證 券 浙 江 分 公
司), Executive Deputy Director of the Board of Directors of Zhejiang
Provincial Listed Company Association (浙 江 省 上 市 公 司 協 會 ),
Deputy Secretary General of Hangzhou Joint Stock Promotion
Association (杭 州 股 份 制 促 進 會), Independent Director of Lanzhou
Minbai Co., Ltd. (蘭 州 民 百 股 份 有 限 公 司), Independent Director of
Xilinmen Co., Ltd. (喜臨門股份有限公司) Ms. He currently serves as
Vice Chairman of Zhejiang Shiqiang Group Co., Ltd. (浙江施強集團
有 限 公 司), Member of the Equity Investment and M&A Committee
of Zhejiang Merchants Association (浙 商 總 會 股 權 投 資 與 併 購 委 員
會 委 員), Supervisor of Zhejiang M&A Federation (浙 江 併 購 聯 合 會
監事), Independent Director of Guangyu Co., Ltd. (廣宇股份有限公
司), Independent Director of Fuchun Environmental Protection Co.,
Ltd. (富 春 環 保 股 份 有 限 公 司), Independent Director of Gujia Home
Furnishing Co., Ltd. (顧家家居股份有限公司).
60
Directors, Supervisors and Senior Management Profiles Mr. WU Qingwang
Independent Supervisor
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 Stock Exchange, and serves as an
Independent Director of Zhejiang Yankon Group Co.,Ltd.(浙 江 陽 光
電 器 股 份 有 限 公 司)(stock code: 600261), a company listed on the
Shanghai Stock Exchange.
61
Other Members of Senior Management
Mr. ZHU Yimin
Born in 1961, graduated from Chang’an University with professional
programme in Roads and Transportation Engineering. He is an
Engineer.
Mr. Zhu joined the People’s Liberation Army Garrison 83026 from
December 1978 to January 1982. He had worked as Director in the
Transportation Administration Department of Huzhou City, Assistant
Manager of Water Traffic Control and Administration Department,
Deputy General Manager of Transportation Investment and
Development Corporation of Huzhou City, Deputy General Manager
of Zhejiang Shenjiahuhang Expressway Co., Ltd., Deputy General
Manager of Zhejiang Zhebei Expressway Co., Ltd., Deputy General
Manager of Zhejiang Shensuzhewan Expressway Co. Ltd., Deputy
General Manager of Zhejiang Zhexi Expressway Co. Ltd., and
Deputy General Manager of Zhejiang Hanghui Expressway Co. Ltd.
Mr. Zhu has been the Deputy General Manager and Party Committee
Member of the Company since July 1, 2015. He has also served as
Chairman of Hanghui Co., and Huihang Co.
62
Directors, Supervisors and Senior Management Profiles Mr. WANG Dehua
Mr. Tony H. ZHENG
Born in 1974, graduated with a Bachelor’s Degree in Accounting
from Hangzhou Dianzi University in 1996. 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,
graduated with a master’s degree in Economics. Mr. Wang has
professional accounting qualifications, including CPA, HKICPA,
FCCA etc.
Mr. Wang 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 Administraive 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. He
worked at Zhejiang Communications Investment Group Co., Ltd.
from 2011 to 2014, serving as its Deputy General Manager.
Mr. Wang Dehua has been appointed as the Chief Financial Officer
of the Company with effect from March 17, 2014.
Born in 1969, Mr. Zheng graduated from University of California at
Berkeley with a BS Degree in Civil Engineering in 1995.
Mr. Zheng joined the Company in June 1997, and had served as
Deputy Director of the Secretarial Office to the Board, Assistant
Company Secretary, Director of the Secretarial Office to the Board
and Director of Hong Kong Representative Office of the Company.
Mr. Zheng is the Deputy General Manager and Company Secretary
of the Company .
63
Ms. ZHANG Xiuhua
Born in 1969, Ms. Zhang is a Senior Economist, the Deputy General
Managerof 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
D i v i s i o n o f t h e Z h e j i a n g P r o v i n c i a l E x p r e s s w a y E x e c u t i v e
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.
Ms. Zhang is the Deputy General Manager and Party Committee
Member of the Company. She also serves as Director of Zhejiang
S h a o x i n g S h e n g x i n E x p r e s s w a y C o . , L t d . a n d a l s o s e r v e s
as Chairman and General Manager of Zhejiang Yueqing Bay
Expressway Co., Ltd.
64
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, 2018.
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 2018 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, 2018 is set out in note 6 to the financial
statements.
RESULTS AND DIVIDENDS
The Group’s profit for the year ended December 31, 2018 and the state of financial position at that
date are set out in the financial statements on pages 92 to 244.
The Directors have recommended the payment of a dividend of Rmb0.375 (approximately
HK$0.428) per share in the year of 2018. The dividend is subject to shareholders’ approval at the
2018 annual general meeting of the Company and is expected to be paid by no later than July 5,
2019. 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 46.8% during the Period. Further details of
the dividends are set out in note 16 to the financial statements.
65
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
Including: interest income
Operating costs
Gross profit
Securities investment gains
Other income and gains and losses
Administrative expenses
Other expenses
Reversal (recognition) of impairment
losses, net
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
Year ended December 31,
2018
Rmb’000
2017
Rmb’000
2016
Rmb’000
2015
Rmb’000
(Restated)
2014
Rmb’000
(Restated)
9,568,321
1,458,476
(4,684,509)
4,883,812
512,449
363,508
(99,844)
(86,160)
47,268
350,578
30,037
(866,317)
5,135,331
(1,142,988)
9,626,340
1,402,940
(4,656,163)
4,970,177
774,885
103,639
(98,496)
(75,218)
(59,109)
161,502
17,668
(611,747)
5,183,301
(1,192,269)
9,735,347
1,510,281
(4,596,048)
5,139,299
223,573
289,390
(81,687)
(74,727)
(10,372)
64,699
9,797
(671,387)
4,888,585
(1,161,570)
10,724,781
1,727,837
(5,278,650)
5,446,131
584,114
191,887
(88,421)
(77,401)
(81,313)
48,289
(25,067)
(632,495)
5,365,724
(1,396,774)
7,171,810
739,116
(3,617,851)
3,553,959
278,252
144,016
(87,462)
(64,560)
(18,538)
65,020
(33,277)
(272,900)
3,564,510
(882,625)
operations
3,992,343
3,991,032
3,727,015
3,968,950
2,681,885
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
–
3,992,343
–
3,991,032
81,594
3,808,609
60,830
4,029,780
64,087
2,745,972
3,480,537
–
3,202,130
–
2,957,291
80,114
2,932,903
56,777
2,204,982
60,012
511,806
–
788,902
–
769,724
1,480
1,036,047
4,053
476,903
4,075
66
Report of the Directors Results
Earnings per share
From continuing and discontinued
operations
Basic (Rmb cents)
Diluted (Rmb cents)
From continuing operations
Basic (Rmb cents)
Diluted (Rmb cents)
Year ended December 31,
2018
Rmb’000
2017
Rmb’000
2016
Rmb’000
2015
Rmb’000
(Restated)
2014
Rmb’000
(Restated)
80.14
75.52
80.14
75.52
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
As at December 31,
Assets and liabilities
2018
2017
2016
2015
2014
Total assets
Total liabilities
Net assets
Notes:
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
79,513,154
47,808,961
31,704,193
0 0 0
73,650,520
73,761,432
73,891,763
54,987,056
44,446,169
49,585,505
51,893,114
33,858,586
29,204,351
24,175,927
21,998,649
21,128,470
1.
The consolidated results of the Group for the four years ended December 31, 2017 have been extracted from
the Company’s 2017 annual report dated March 16, 2018, while as at the year ended December 31, 2018 was
prepared based on the consolidated statement of profit or loss and other comprehensive income as set out on page
92 of the financial report.
2.
The 2018 basic earnings per share is based on the profit attributable to owners of the Company for the year
ended December 31, 2018 of Rmb3,480,537,000 (2017: Rmb3,202,130,000) and the 4,343,114,500 (2017:
4,343,114,500) ordinary shares in issue during the year.
The 2018 diluted earnings per share 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, 2018 of Rmb3,466,196,000 (2017: Rmb3,218,310,000)
and the 4,589,747,000 (2017: 4,509,861,000) weighted average number of ordinary shares for the purpose of
diluted earnings per share during the year.
67
3.
Differences in financial statements prepared under PRC GAAP and HKFRSs
Profit for the year
ended December 31,
Net assets as
at December 31,
2018
2017
2018
2017
Rmb’000
Rmb’000
Rmb’000
Rmb’000
As reported in the statutory financial
statements of the Group prepared in
accordance with PRC GAAP
4,001,142
3,999,920
32,004,360
29,495,719
HK GAAP adjustments:
(a) Goodwill
–
–
(b) Amortization provided, net of deferred tax
(1,952)
(2,041)
(c)
Assessment on impact of appreciation,
(199,769)
(173,005)
(199,769)
(171,053)
net of deferred tax
(d) Others
(e) Non-controlling interests
(3,292)
(3,475)
–
–
(3,555)
(3,372)
42,366
7,666
22,575
45,658
7,666
26,130
As restated in the financial statements
3,992,343
3,991,032
31,704,193
29,204,351
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 the section
of “connected transactions” and note 57 to the consolidated financial statements. 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 Rmb3,465,000 for charitable or
other purposes.
68
Report of the Directors PROPERTY, PLANT AND EQUIPMENT
Details of movements in property, plant and equipment of the Group during the year are set out in
note 18 to the financial statements.
CAPITAL COMMITMENTS
Details of the capital commitments of the Group as at December 31, 2018 are set out in note 51 to
the financial statements.
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 pages 96 to 98 to the financial statements.
DISTRIBUTABLE RESERVES
As at December 31, 2018, 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 Rmb4,581,503,000. 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, 2018, other than the deposits placed with a non-bank financial institution of
Rmb311,133,000, 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.
69
DIRECTORS
The Directors of the Company during the year and as at the date of this report are:
CHAIRMAN
Mr. YU Zhihong (Appointed, with effect from April 3, 2018)
Mr. ZHAN Xiaozhang (Resigned, with effect from April 2, 2018)
EXECUTIVE DIRECTORS
Mr. ZHAN Xiaozhang (Resigned, with effect from April 2, 2018)
Mr. CHENG Tao
Ms. LUO Jianhu (General Manager)
NON-EXECUTIVE DIRECTORS
Mr. DAI Benmeng
Mr. YU Qunli (Appointed, with effect from April 2, 2018)
Mr. WANG Dongjie (Resigned, with effect from April 2, 2018)
Mr. YU Ji (Appointed, with effect from April 2, 2018)
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang, Rosa
Mr. CHEN Bin (Appointed, with effect from April 2, 2018)
Mr. ZHOU Jun (Resigned, with effect from April 2, 2018)
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 49 to 64 in the Company’s annual report.
70
Report of the Directors DIRECTORS’ SERVICE CONTRACTS
Each of the Directors of the Company has entered into a service agreement with the Company,
which effect from July 1, 2018 to June 30, 2021.
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.
DIRECTORS’ AND SUPERVISORS’ INTERESTS IN CONTRACTS
As at December 31, 2018 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.
DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE’S RIGHTS TO
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.
71
DIRECTORS’ AND CONTROLLING SHAREHOLDERS’ INTERESTS IN
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.
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.
72
Report of the Directors 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.
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.
73
DIRECTORS’ PERMITTED INDEMNITY PROVISION
The Company purchased appropriate liability insurance coverage for the directors, supervisors
and senior management members of the Group during the year ended December 31, 2018 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.
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
YU Zhihong
Chairman
Hangzhou, Zhejiang Province, the PRC
March 18, 2019
74
Report of the Directors 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
seven 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 hit a new high in recent years 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 2018
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 2018,
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.
75
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 18, 2019
76
Report of the Supervisory Committee During the year ended December 31, 2018, the Company had the following non-exempt connected
transactions and continuing connected transactions.
Connected Transaction
1.
Joint Venture agreement
On February 8, 2018, the Company entered into a joint venture agreement with Zhejiang
Hongtu Transportation Construction Company* (浙江交工宏途交通建設有限公司) (“Zhejiang
Hongtu”) (the “Joint Venture Agreement”), pursuant to which the Company and Zhejiang
Hongtu agreed to establish a joint venture company in the PRC (the “Joint Venture”)
for the purpose of engaging in the construction of bridges, tunnels and public service
station in Deqing County. The registered capital of the Joint Venture shall not be less than
Rmb100,000,000. The project capital of the Joint Venture is Rmb320,000,000, of which not
less than Rmb100,000,000 shall be the registered capital and shall be contributed by the
parties with Rmb256,320,000, representing 80.1% of the total equity interest of the Joint
Venture from the Company and Rmb63,680,000, representing 19.9% of the total equity
interest of the Joint Venture from Zhejiang Hongtu. Please refer to the announcement of the
Company dated February 8, 2018 for details.
Communications Group, which holds approximately 67% of the issued share capital of
the Company, is a controlling shareholder of the Company. Zhejiang Hongtu is an indirect
non-wholly owned subsidiary of Communications Group. As such, Zhejiang Hongtu is a
connected person of the Company and as a result, the transaction under the Joint Venture
Agreement constitutes a connected transaction under Chapter 14A of the Listing Rules.
D u r i n g t h e P e r i o d , t h e t o t a l c a p i t a l i n j e c t e d b y Z h e j i a n g H o n g t u a m o u n t e d t o
Rmb38,208,000.
2.
LED Lights Retrofit Agreement
On April 17 2018, Zhejiang Jinhua Yongjin Expressway Co., Ltd (“Jinhua Co”) and Zhejiang
Expressway Information Engineering Technology Co., Ltd (“Zhejiang Information”).
entered into a LED lights retrofit agreement (the “LED Lights Retrofit Agreement”),
pursuant to which the Company agreed to purchase LED lights retrofit services
from Zhejiang Information at the consideration of Rmb6,935,280. Please refer to the
announcement dated April 17, 2018 for details.
77
Connected Transactions Zhejiang Information is a wholly owned subsidiary of Communications Group. As such,
Zhejiang Information is a connected person of the Company. Jinhua Co is a wholly-
owned subsidiary of the Company. As such, the transaction under the LED Lights Retrofit
Agreement constitutes a connected transaction under Chapter 14A of the Listing Rules.
During the Period, the total services fee paid by Jinhua Co to Zhejiang Information amounted
to Rmb6,769,000.
3. Expressway Services Agreements
On November 20, 2018, the Company and certain of its subsidiaries entered into three
agreements (“Expressway Services Agreements”) with Zhejiang Information, pursuant
to which the Company and certain of its subsidiaries agreed to purchase and Zhejiang
Information agreed to provide various expressway monitoring and warning system
development services and expressway mechanical and electrical engineering services at the
consideration of Rmb237,000, Rmb10,676,250 and Rmb6,936,244.73 respectively.
Zhejiang Information is a wholly owned subsidiary of Communications Group. As such,
Zhejiang Information is a connected person of the Company. As such, the transactions
contemplated under the Expressway Services Agreements constitute 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 transactions contemplated thereunder and
the Previous Transactions I were entered into with parties who are connected with one
another and within a 12-month period, the transactions contemplated under the Expressway
Services Agreements and the Previous Transactions I are required to be aggregated for
the calculation of the relevant percentage ratios to determine the classification of the
transactions contemplated under the Expressway Services Agreements.
During the Period, the total services fee paid by the Company and its subsidiaries to
Zhejiang Information amounted to Rmb2,729,000.
78
Connected Transactions 4. Equity Purchase Agreement
On December 13, 2018, the Company and Communications Group entered into an
equity purchase agreement (the “Equity Purchase Agreement”), pursuant to which
Communications Group conditionally agreed to sell and the Company conditionally agreed
to acquire the entire interest in Zhejiang Shenjiahuhang Expressway Co., Ltd.* (浙江申嘉
湖杭高速公路有限公司) at a cash consideration of Rmb2,943,000,000. Please refer to the
announcement dated December 13, 2018 for details.
Communications Group is a connected person of the Company. As one or more of the
applicable percentage ratios in respect of the transaction contemplated under the Equity
Purchase Agreement are over 5% but less than 25%, the transaction contemplated under
the Equity Purchase Agreement constitutes a connected transaction for the Company
and is subject to the reporting, announcement and independent shareholders’ approval
requirements 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 (the “Road Maintenance Agreements”) with
Zhejiang Expressway Maintenance Co., Ltd.* (浙江滬杭甬養護工程有限公司) (“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 Rmb85,000,000. Please refer to the announcement of the Company dated April
8, 2016 for details.
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 under the Road Maintenance Agreements constitutes a continuing
connected transaction for the Company.
79
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 under the Road
Maintenance Agreements amounted to Rmb68,332,000.
2. 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 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 (“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 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 under the New Financial Services
Agreement 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.
80
Connected Transactions 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.
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
Rmb1,485,380,000.
3. Electronic Toll Collection (“ETC”) Construction Project
On December 15, 2017, the Company and certain of its subsidiaries entered into an
agreement on ETC construction project with Zhejiang Information (the “ETC Construction
Project Agreement”), 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 for details.
Zhejiang Information is a wholly-owned subsidiary of Communications Group. As such,
Zhejiang Information is a connected person of the Company. Accordingly, under the Chapter
14A of the Listing Rules, the transaction under the ETC Construction Project Agreement
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 ETC Construction Project
Agreement to Zhejiang Information amounted to Rmb2,232,000.
81
4. Dedicated Road Maintenance Agreement
On May 28, 2018, the Company entered into a dedicated road maintenance agreement
(the “Dedicated Road Maintenance Agreement”) with Maintenance Co, pursuant to
which Maintenance Co agreed to provide dedicated maintenance services (the “Dedicated
Maintenance Services”), including (i) road work such as pavement diseases treatment,
bridge deck overlay, pavement overlay; (ii) roadbed work such as slope treatment; (iii) bridge
work such as bridge fault maintenance and reinforcement and deck system maintenance;
(iv) road safety work such as signs, road markings and fence maintenance and (v) specific
maintenance services such as tunnelling and greening in respect of Shanghai-Hangzhou-
Ningbo Expressway, the Shangsan Expressway, Jinhua section of the Ningbo-Jinhua
Expressway and the Hanghui Expressway at the consideration of Rmb199,877,381. The
term of the Dedicated Road Maintenance Agreement is from May 28, 2018 to November 30,
2018. Please refer to the announcement of the Company dated May 28, 2018 for details.
Maintenance Co is a non-wholly owned subsidiary of Communications Group. As such,
Maintenance Co is a connected person of the Company and as a result, the transactions
under the Dedicated Road Maintenance Agreement constitute continuing connected
transactions for the Company under Chapter 14A of the Listing Rules.
According to Rules 14A.81 and 14A.82 of the Listing Rules, as the transactions under the
Dedicated Road Maintenance Agreement and the Previous Transactions II were entered into
with parties who are connected with one another and within a 12-month period and are in
similar nature, the Dedicated Road Maintenance Agreement and the Previous Transactions
II will be treated as if they were one transaction and the continuing connected transactions
II contemplated under the Dedicated Road Maintenance Agreement and the Previous
Transactions should be aggregated.
During the Period, the total service fees in respect of the Dedicated Maintenance Services
paid by the Company to Maintenance Co amounted to Rmb192,138,000.
82
Connected Transactions 5. A s p h a l t P a v e m e n t O n - s i t e T h e r m a l R e g e n e r a t i o n E n g i n e e r i n g
Agreement
On August 7, 2018, the Company entered into an asphalt pavement on-site thermal
regeneration engineering agreement (the “Asphalt Pavement On-site Thermal
Regeneration Engineering Agreement”) for the year of 2018 to November 20, 2018
with Zhejiang Shunchang High-grade Expressway Maintenance Co., Ltd (“Zhejiang
Shunchang”), pursuant to which Zhejiang Shunchang agreed to provide engineering
services of the following works, including (i) asphalt pavement on-site thermal regeneration
work; (ii) roadbed work such as slope treatment; (iii) bridge work such as bridge fault
maintenance and reinforcement; (iv) toll road station expansion work and (v) road safety
work (the “Engineering Services”) to the Shanghai-Hangzhou-Ningbo Expressway, Jinhua
Expressway and the Huihang Expressway at the consideration of Rmb76,564,938. Please
see the announcement of the Company dated August 7, 2018 for details.
Zhejiang Shunchang is a non-wholly owned subsidiary of Communications Group. As such,
Zhejiang Shunchang is a connected person of the Company and as a result, the transactions
under the Asphalt Pavement On-site Thermal Regeneration Engineering Agreement
constitute continuing connected transactions for the Company under Chapter 14A of the
Listing Rules.
As the Asphalt Pavement On-site Thermal Regeneration Engineering Agreement and
the Previous Transactions III were entered into with parties who are connected with one
another and within a 12-month period, Asphalt Pavement On-site Thermal Regeneration
Engineering Agreement and the Previous Transactions III are required to be aggregated
for the calculation of the relevant percentage ratios to determine the classification of the
transactions pursuant to Rules 14A.81 and 14A.82 of the Listing Rules.
During the Period, the total service fees in respect of the Engineering Services paid by the
Company pursuant to the Asphalt Pavement On-site Thermal Regeneration Engineering
Agreement to Zhejiang Shunchang amounted to Rmb70,649,000.
83
6. Expressway Monitoring System Software Maintenance Agreements and
Expressway Mechanical And Electrical Engineering Agreements
On August 7, 2018, the Company and certain of its subsidiaries entered into (i) Expressway
Monitoring System Software Maintenance Agreements and (ii) the Expressway Mechanical
and Electrical Engineering Agreements with Zhejiang Expressway Information Engineering
Technology Co., Ltd (“Zhejiang Information”), pursuant to which the Company and
certain of its subsidiaries agreed to purchase, and Zhejiang Information agreed to provide,
expressway monitoring system software maintenance services at the consideration
of Rmb792,000 and expressway mechanical and electrical engineering services at
the consideration of Rmb24,910,570.36 for the year ended 2018. Please refer to the
announcement of the Company dated August 7, 2018.
Zhejiang Information is a wholly-owned subsidiary of Communications Group. As such,
Zhejiang Information is a connected person of the Company. Accordingly, under the Chapter
14A of the Listing Rules, the transactions under (i) the Expressway Monitoring System
Software Maintenance Agreements and (ii) the Expressway Mechanical and Electrical
Engineering Agreements constitute continuing connected transactions for the Company.
Pursuant to Rules 14A.81 and 14A.82 of the Listing Rules, as the transactions contemplated
under the Expressway Monitoring System Software Maintenance Agreements, the
Expressway Mechanical and Electrical Engineering Agreements and the Previous
Transactions IV were entered into with parties who are connected with one another and
within a 12-month period, the Expressway Monitoring System Software Maintenance
Agreements, the Expressway Mechanical and Electrical Engineering Agreements and the
Previous Transactions IV are required to be aggregated for the calculation of the relevant
percentage ratios to determine the classification of the above transactions.
During the Period, the total service fees paid by the Company and certain subsidiaries to
Zhejiang Information pursuant to the Expressway Monitoring System Software Maintenance
Agreements and the Expressway Mechanical and Electrical Engineering Agreements
amounted to Rmb792,000 and Rmb24,777,000, respectively.
84
Connected Transactions The independent non-executive Directors have reviewed the continuing connected
transactions described above and confirmed that such continuing connected transactions
have been entered into:
(a)
in the ordinary and usual course of business of the Group;
(b)
on normal commercial terms or on terms no less favourable to the Group 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.
85
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 92 to 244, which comprise the consolidated
statement of financial position as at December 31, 2018, 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, 2018, 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 (the “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.
86
Independent Auditor’s Report Key audit matter
How our audit addressed the key audit matter
Impairment of loans to customers arising from margin financing business and financial assets held under
resale agreements
Our procedures in relation to management’s
impairment assessment of loans to customers
arising from margin financing business and financial
assets held under resale agreements included:
•
•
•
•
U n d e r s t a n d i n g a n d e v a l u a t i n g d e s i g n
and implementation of key controls of
management over the measurement of ECL
allowances;
Understanding the ECL model used by the
Group, utilising internal expert on evaluating
the appropriateness of the ECL model and
the critical assumptions and parameters
used in the model;
Selecting samples on the credit review
performed by the Group and reviewing the
parameters and judgement made by the
management including the stages of the
financial instruments, PD and LGD, the
expected future cash flow, counterparties
and guarantors, and the realisation of
collateral held; and
Recalculating the provision and comparing
the results with those estimated by the
Group.
As disclosed in Note 2, the Group has applied
HKFRS 9 Financial Instruments since January
1, 2018 and the impairment of financial assets is
assessed with expected credit loss (“ECL”) model
instead of incurred loss model. 12-month ECL and
lifetime ECL are recognised respectively based on
whether there has been a significant increase in
credit risk since initial recognition. The application of
ECL model mainly affects loans to customers arising
from margin financing business and financial assets
held under resale agreements. As at December 31,
2018, the Group held loans to customers arising
from margin financing business and financial assets
held under resale agreements with gross amount
o f R m b5,854,913,000 a n d R m b8,257,928,000,
respectively, which the Group had recognised a
cumulative amount of impairment allowance of
Rmb4,829,000 and Rmb51,746,000, respectively, as
disclosed in Notes 30 and 34.
As disclosed in Note 4, the application of ECL
model involves significant accounting estimation and
judgement in determining the models, assumptions
and key inputs used for measuring ECL, including
probability of default (“PD”), loss given default
(“LGD”), and whether there has been a significant
increase in credit risk or whether credit loss has
occurred.
We identified the impairment of loans to customers
arising from margin financing business and financial
assets held under resale agreements as a key
audit matter due to the significant judgement and
estimation applied by the management in assessing
impairment.
87
How our audit addressed the key audit matter
Our procedures in relation to the management’s
determination of consolidation scope included:
•
•
•
U n d e r s t a n d i n g a n d e v a l u a t i n g d e s i g n
and implementation of key controls of
t h e m a n a g e m e n t i n d e t e r m i n i n g t h e
consolidation scope as set out in HKFRS10
of interests in structured entities;
Checking the information used by the
management in assessing the consolidation
criteria of significant structured entities
against the related supporting, including
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.
Key audit matter
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
c o l l e c t i v e a s s e t m a n a g e m e n t s c h e m e s a n d
investment funds where the Group was involved
as an investment manager and/or an investor.
T h e G r o u p a p p l i e d s i g n i f i c a n t j u d g e m e n t i n
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.
A s d i s c l o s e d i n N o t e 4, f o r c o l l e c t i v e a s s e t
m a n a g e m e n t s c h e m e s a n d i n v e s t m e n t f u n d s
where the Group involved as a manager and/
or an investor, the Group assessed whether the
combination of investments it held 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 39, 47 and 59 to the consolidated financial
statements, respectively.
88
Independent Auditor’s Report
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 of the Company
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.
89
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.
•
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.
90
Independent Auditor’s Report •
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 18, 2019
91
Revenue
Including: interest income
Operating costs
Gross profit
Securities investment gains
Other income and gains and losses
Administrative expenses
Other expenses
Reversal (recognition) of impairment losses, net
Share of profit of associates
Share of profit of a joint venture
Finance costs
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income (expense)
Items that may be reclassified subsequently
to profit or loss:
Available-for-sale (“AFS”) financial assets:
– Fair value gain during the year
– Reclassification adjustments for cumulative
gain upon disposal
Share of other comprehensive expense of associates
Exchange differences on translation of financial
statements of foreign operations
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
NOTES
5
7
8
10
9
11
12
13
Year ended
12/31/2018
Rmb’000
9,568,321
1,458,476
Year ended
12/31/2017
Rmb’000
9,626,340
1,402,940
(4,684,509)
(4,656,163)
4,883,812
4,970,177
512,449
363,508
(99,844)
(86,160)
47,268
350,578
30,037
774,885
103,639
(98,496)
(75,218)
(59,109)
161,502
17,668
(866,317)
(611,747)
5,135,331
(1,142,988)
5,183,301
(1,192,269)
3,992,343
3,991,032
–
–
–
276,849
(105,560)
(2,672)
2,253
(605)
–
(42,822)
2,253
3,994,596
125,190
4,116,222
92
For the year ended December 31, 2018Consolidated Statement of Profit or Loss and Other Comprehensive Income
NOTES
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
Profit for the year attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
Earnings per share
Basic (Rmb cents)
Diluted (Rmb cents)
17
3,480,537
511,806
3,992,343
3,481,594
513,002
3,994,596
80.14
75.52
3,202,130
788,902
3,991,032
3,259,347
856,875
4,116,222
73.73
71.36
93
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
AFS investments
Financial assets at fair value through
profit or loss (“FVTPL”)
Contract asset
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
AFS investments
Held for trading investments
Financial assets at FVTPL
Financial assets held under resale agreements
Bank balances and clearing settlement fund
held on behalf of customers
Pledged bank deposit
Bank balances, clearing settlement fund, deposits and cash
– Time deposits with original maturity over three months
– Cash and cash equivalents
NOTES
18
19
20
21
22
24
25
26
27
29
46
28
30
31
19
44
26
32
27
34
35
36
36
Year ended
12/31/2018
Rmb’000
2,882,791
63,163
12,260,548
86,867
173,658
5,211,412
333,102
–
17,200
252,868
318,236
Year ended
12/31/2017
Rmb’000
2,948,134
65,300
13,379,674
86,867
161,486
1,686,227
303,065
711,715
–
–
355,803
21,599,845
19,698,271
157,416
216,233
5,850,084
407,684
2,137
4,169
–
–
21,558,606
8,206,182
14,742,161
10,000
280,913
6,477,724
131,261
244,587
7,851,609
911,226
2,137
4,587
1,800,835
12,568,694
–
9,793,492
15,035,007
–
20,000
5,588,814
57,913,309
53,952,249
94
At December 31, 2018Consolidated Statement of Financial Position
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
Contract liabilities
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 FVTPL
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
NOTES
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
33
37
38
39
44
40
41
43
42
47
40
43
45
46
48
49
400,679
–
14,653,413
575,465
478,183
96,931
1,630,327
7,572
847
3,818
200,741
1,551
5,766,458
11,086,710
364,714
35,267,409
22,645,900
44,245,745
60,000
9,450,000
2,709,663
321,889
12,541,552
31,704,193
4,343,115
18,490,045
22,833,160
8,871,033
31,704,193
14,933,719
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
32,421,081
21,531,168
41,229,439
60,000
8,850,000
2,720,654
394,434
12,025,088
29,204,351
4,343,115
16,311,385
20,654,500
8,549,851
29,204,351
The consolidated financial statements on pages 92 to 244 were approved and authorised for issue by the board
of directors on March 18, 2019 and are signed on its behalf by:
DIRECTOR
CHENG Tao
DIRECTOR
LUO Jianhu
95
Share
capital
Rmb’000
Share
premium
Rmb’000
Statutory
reserve
Rmb’000
(Note i)
Investment
revaluation
reserve
Rmb’000
Capital
reserve
Rmb’000
4,343,115
3,355,621
4,767,824
1,712
75,818
Retained
profits
Rmb’000
Sub-
total
Rmb’000
Non-
controlling
interests
Rmb’000
Total
Rmb’000
Dividend
reserve
Rmb’000
Special
reserves
Rmb’000
(Note ii)
1,281,219
18,666
4,472,724
18,317,157
5,858,770
24,175,927
Attributable to owners of the Company
Share of
differences
arising on
translation
Rmb’000
458
–
57,513
(296)
57,513
(296)
At January 1, 2017
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 (Note 16)
2016 final dividend
Proposed 2017 final dividend
Transfer to reserves
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
267,192
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At December 31, 2017
4,343,115
3,355,621
5,035,016
1,712
133,331
Adjustments (see Note 2)
–
–
–
–
(133,331)
At January 1, 2018 (restated)
4,343,115
3,355,621
5,035,016
1,712
Profit for the year
Other comprehensive income
for the year
Total comprehensive income
for the year
Dividend declared to
non-controlling-interests
Contribution from non-controlling
shareholders
2017 final dividend (Note 16)
Proposed 2018 dividend
Transfer to reserves
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
185,262
–
–
–
–
–
–
–
–
At December 31, 2018
4,343,115
3,355,621
5,220,278
1,712
–
–
–
–
–
–
–
–
–
–
96
–
–
–
–
–
–
–
–
(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)
–
–
–
–
(260,587)
(142,551)
(260,587)
–
(1,281,219)
(1,302,934)
(267,192)
–
–
(51,067)
–
–
–
–
(193,618)
(260,587)
(1,281,219)
–
–
1,302,934
638,468
5,844,141
20,654,500
8,549,851
29,204,351
–
–
133,331
–
–
–
1,302,934
638,468
5,977,472
20,654,500
8,549,851
29,204,351
–
–
–
–
–
(1,302,934)
1,628,668
–
–
–
–
–
–
–
–
–
3,480,537
3,480,537
511,806
3,992,343
–
1,057
1,196
2,253
3,480,537
3,481,594
513,002
3,994,596
–
–
–
(1,628,668)
(185,262)
–
–
(1,302,934)
–
–
(230,028)
(230,028)
38,208
38,208
–
–
–
(1,302,934)
–
–
–
–
–
–
–
–
–
–
162
–
162
–
1,057
1,057
–
–
–
–
–
1,219
1,628,668
638,468
7,644,079
22,833,160
8,871,033
31,704,193
For the year ended December 31, 2018Consolidated Statement of Changes in Equity
Notes:
(i)
Statutory reserves comprise:
(a)
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.
(b)
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.
(c)
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)
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
(b)
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.
97
Notes: (Continued)
(iii)
On June 26, 2017, an indirect non-wholly-owned subsidiary of the Company, Zheshang Securities Co., Ltd.
(“Zheshang Securities”), which was held by Zhejiang Shangsan Expressway Co., Ltd (“Shangsan Co”), had
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 had been diluted from
approximately 52.15% to approximately 46.93%, but the Group still has control over Zheshang Securities
indirectly. 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.
98
For the year ended December 31, 2018Consolidated Statement of Changes in Equity Profit before tax
Adjustments for:
Finance costs
Interest income
Foreign exchange loss
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
(Reversal) recognition of impairment loss, net
– AFS investments
– other items subject to ECL
– allowance for trade receivables and other receivables
– reversal of allowance for advance to customers
arising from margin financing business
– (reversal) recognition of allowance for financial
assets held under the resale agreement
Cumulative gain reclassified from equity on
disposal of AFS investments
Interest income and dividend from AFS investments
Loss on disposal of property, plant and equipment
Allowance for write-down of inventories
Gain on disposal of an associate
Gain on decrease in fair value in respect of derivative
component of Convertible Bond (as defined in Note 45)
Issue cost relating to derivative component of Convertible Bond
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
5,135,331
5,183,301
866,317
(59,780)
33,395
(350,578)
(30,037)
260,097
611,747
(26,017)
119,653
(161,502)
(17,668)
266,217
1,119,126
1,119,126
2,137
33,900
–
380
5,841
1,639
26,101
11,621
–
1,713
(37,190)
(294)
(18,999)
40,076
–
–
783
2,700
(6,645)
(127,094)
–
(105,560)
(21,223)
3,565
5,993
–
(149,479)
3,079
99
For the year ended December 31, 2018Consolidated Statement of Cash Flows
Operating cash flows before movements in working capital
6,829,684
6,912,088
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
(Increase) decrease in inventories
Decrease in trade receivables
Increase in contract asset
Decrease in loans to customers arising from margin
financing business
Decrease in other receivables and prepayments
Increase in held for trading investments
Increase in financial assets at FVTPL
Decrease (increase) in financial assets held under
resale agreements
Decrease in bank balances and clearing settlement
fund held on behalf of customers
Decrease in net derivative financial assets
Increase (decrease) in placements from other financial institutions
Decrease in accounts payable to customers arising
from securities business
Decrease in trade payables
Increase in other taxes payable
Decrease in contract liabilities
(Decrease) increase in other payables and accruals
(Decrease) increase in financial liabilities at FVTPL
Increase in financial assets sold under repurchase agreements
Placement of pledged bank deposit
Cash generated from operations
Income taxes paid
Interest paid
(28,855)
27,357
(253,248)
2,038,715
373,682
–
(6,494,562)
21,383
29,909
–
58,717
1,572,255
(4,424,562)
–
1,606,309
(5,868,239)
292,846
295
400,679
(280,306)
(53,127)
6,665
(12,042)
(629,649)
(8,713)
563,296
(10,000)
4,369,026
(1,267,343)
(689,623)
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)
NET CASH FROM (USED IN) OPERATING ACTIVITIES
2,412,060
(829,667)
100
For the year ended December 31, 2018Consolidated Statement of Cash Flows
INVESTING ACTIVITIES
Interest received
Investment in associates
Net cash outflows arising from acquisition of Huangshan
Yangtse Huihang Expressway Co., Ltd (“Huihang Co”)
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 AFS investments
Proceeds from disposal of AFS investments
Placement of time deposits
Withdrawal of time deposits
Proceed from disposal of an associate
NOTES
Year ended
12/31/2018
Rmb’000
58,222
(3,224,535)
–
35,565
11,895
–
77,650
(241,427)
(47,390)
–
–
–
(280,000)
20,000
21,008
NET CASH (USED IN) FROM INVESTING ACTIVITIES
(3,569,012)
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
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
Capital injection by non-controlling interests in
respect of a new subsidiary
NET CASH FROM (USED IN) FINANCING ACTIVITIES
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT JANUARY 1
Effect of foreign exchange rate changes
CASH AND CASH EQUIVALENTS AT DECEMBER 31
36
101
Year ended
12/31/2017
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
–
878,421
(1,537,627)
(108,983)
2,684,880
(16,725)
2,490,000
(4,117,269)
3,450,000
(3,000,000)
762,800
(4,828,340)
2,816,668
(59,866)
(1,583,516)
(229,833)
–
–
3,230,000
(3,450,000)
7,600,000
(2,800,000)
9,473,360
(10,234,610)
–
–
–
(193,618)
38,208
–
2,043,609
(1,658,080)
886,657
5,588,814
2,253
6,477,724
(1,609,326)
7,198,745
(605)
5,588,814
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 of the Company (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. During the year ended December 31, 2018, the Group
commenced the high grade road construction service. In addition, along with the completion of sales of all
properties in 2017, the Group ceased to engage in properties development during the year ended December
31, 2018. The Company and its subsidiaries (collectively referred to as the “Group”) during the current year are
involved in the following principal activities:
(a)
the operation, maintenance and management of high grade roads;
(b)
the provision of securities and future broking services, margin financing and securities lending services,
securities underwriting and sponsorship services, asset management, advisory services and proprietary
trading;
(c)
the hotel operation, construction service of a high grade road, investment in other financial institutions and
other ancillary services.
102
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG
FINANCIAL REPORTING STANDARDS (“HKFRSs”)
New and amendments to HKFRSs that are mandatorily effective for the current
year
The Group has applied the following new and amendments to HKFRSs issued by the Hong Kong Institute of
Certified Public Accountants (the “HKICPA”) for the first time in the current year.
HKFRS 9
HKFRS 15
HK(IFRIC)-Int 22
Amendments to HKFRS 2
Amendments to HKFRS 4
Amendments to HKAS 28
Amendments to HKAS 40
Financial Instruments
Revenue from Contracts with Customers and the related Amendments
Foreign Currency Transactions and Advance Consideration
Classification and Measurement of Share-based Payment Transactions
Applying HKFRS 9 Financial Instruments with HKFRS 4 Insurance
Contracts
As part of the Annual Improvements to HKFRSs 2014-2016 Cycle
Transfers of Investment Property
Except as described below, the new and 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.
HKFRS 15 Revenue from Contracts with Customers
The Group has applied HKFRS 15 for the first time in the current year. HKFRS 15 superseded HKAS 18
Revenue, HKAS 11 Construction Contracts and the related interpretations.
The Group has applied HKFRS 15 retrospectively with the cumulative effect of initially applying this Standard
recognised at the date of initial application, January 1, 2018. Except for the reclassification of the certain items
in other payables and accrual to contract liabilities, there is no difference at the date of initial application and
the comparative information has not been restated. Furthermore, in accordance with the transition provisions in
HKFRS 15, the Group has elected to apply the standard retrospectively only to contracts that are not completed
at January 1, 2018. Accordingly, certain comparative information may not be comparable as comparative
information was prepared under HKAS 18 Revenue and HKAS 11 Construction Contracts and the related
interpretations.
The major sources of revenue recognised by the Group which arise from contracts with customers are described
in Note 5. Interest income is not under the scope of HKFRS 15.
103
2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 15 Revenue from Contracts with Customers (Continued)
Information about the Group’s performance obligations and the accounting policies resulting from application of
HKFRS 15 are disclosed in Notes 5 and 3, respectively.
Summary of effects arising from initial application of HKFRS 15
There is no significant impacts of transition to HKFRS 15 on retained profits at January 1, 2018.
The following adjustment was made to the amounts recognised in the consolidated statement of financial position
at January 1, 2018. Line items that were not affected by the changes have not been included.
Carrying
amounts
previously
reported
at December
31, 2017 Reclassification
Carrying
amounts
under
HKFRS 15
at January 1,
2018*
Rmb’000
Rmb’000
Rmb’000
2,515,399
–
(19,614)
19,614
2,495,785
19,614
Current liabilities
Other payables and accruals
Contract liabilities
*
The amounts in this column are before the adjustments from the application of HKFRS 9.
As at January 1, 2018, advances from customers of Rmb19,614,000 in respect of sponsoring contracts previously
included in other payables and accruals were reclassified to contract liabilities.
The following tables summarise the impacts of applying HKFRS 15 on the Group’s consolidated statement of
financial position as at December 31, 2018 and its consolidated statement of cash flows for the current year for
each of the line items affected. Line items that were not affected by the changes have not been included.
104
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 15 Revenue from Contracts with Customers (Continued)
Impact on the consolidated statement of financial position
Amounts
without
application
Notes
As reported
Adjustments
of HKFRS 15
Rmb’000
Rmb’000
Rmb’000
29
28
39
252,868
–
(252,868)
252,868
–
252,868
7,572
1,630,327
(7,572)
7,572
–
1,637,899
Non-current Assets
Contract asset
Trade receivables
Current Liabilities
Contract liabilities
Other payables and accruals
Impact on the consolidated statement of cash flows
OPERATING ACTIVITIES
Increase in contract asset
Decrease (increase) trade receivables
Decrease in contract liabilities
Decrease in other payables and accruals
Amounts
without
application
As reported
Adjustments
of HKFRS 15
Rmb’000
Rmb’000
Rmb’000
(253,248)
27,357
(12,042)
(629,649)
253,248
(253,248)
12,042
(12,042)
–
(225,891)
–
(641,691)
105
2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 9 Financial Instruments and the related amendments
In the current year, the Group has applied HKFRS 9 Financial Instruments and the related consequential
amendments to other HKFRSs. HKFRS 9 introduces new requirements for 1) the classification and measurement
of financial assets and financial liabilities, 2) expected credit losses (“ECL”) for financial assets, contract assets,
loan commitment and financial guarantee contracts, and (3) general hedge accounting.
The Group has applied HKFRS 9 in accordance with the transition provisions set out in HKFRS 9, i.e. applied
the classification and measurement requirements (including impairment under ECL model) retrospectively to
instruments that have not been derecognised as at January 1, 2018 (date of initial application) and has not
applied the requirements to instruments that have already been derecognised as at January 1, 2018. The
difference between carrying amounts as at December 31, 2017 and the carrying amounts as at January 1, 2018
is recognised in the opening retained profits and other components of equity, without restating comparative
information.
Accordingly, certain comparative information may not be comparable as comparative information was prepared
under HKAS 39 Financial Instruments: Recognition and Measurement.
Accounting policies resulting from application of HKFRS 9 are disclosed in Note 3.
106
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)
Summary of effects arising from initial application of HKFRS 9
The table below illustrates the classification and measurement of financial assets and financial liabilities and
other items subject to ECL under HKFRS 9 and HKAS 39 at the date of initial application, January 1, 2018.
Financial
assets at
Available-
Held for
FVTPL
Investment
for-sale-
trading
required by
revaluation
Retained
Notes
investment
investments
Rmb’000
Rmb’000
HKFRS 9
Rmb’000
reserve
Rmb’000
profits
Rmb’000
Closing balance at December 31, 2017
– HKAS 39
Effect arising from initial
application of HKFRS 9:
Reclassification
From AFS investments
From held for trading investments
Cumulative fair value losses
attributable from AFS investment
held by the Group’s associates
Remeasurement
Impairment under ECL model
Opening balance at January 1, 2018
(a)
(a)
(b)
(c)
2,512,550
12,568,694
–
133,331
5,844,141
(2,512,550)
–
2,512,550
(136,227)
136,227
–
(12,568,694)
12,568,694
–
–
–
–
–
–
–
–
–
–
15,081,244
2,896
(2,896)
–
–
–
5,977,472
(a)
AFS investments and held for trading investments
From AFS investments and held for trading investments to financial assets at FVTPL
At the date of initial application of HKFRS 9, the Group’s equity investments and other investments of
Rmb2,512,550,000 and Rmb12,568,694,000 were reclassified from AFS investments and held for trading
investments, respectively to financial assets at FVTPL. The fair value gains net of deferred taxation,
totalling Rmb136,227,000 relating to those investments previously carried at fair value were transferred
from investment revaluation reserve to retained profits.
107
2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)
Summary of effects arising from initial application of HKFRS 9 (Continued)
(b)
Impact on HKFRS 9 attributable to AFS investments held by the Group’s associates
The net effects arising from the initial application of HKFRS 9 resulted in a reclassification of the Group’s
respective cumulative fair value losses net of deferred taxation, totalling Rmb2,896,000 arising from the
AFS investments held by the Group’s associates from investment revaluation reserve to retained profits.
(c)
Impairment under ECL model
The Group applies the HKFRS 9 simplified approach to measure ECL which uses a lifetime ECL for all
trade receivables and contract assets. Except for those which had been determined as credit impaired
under HKAS 39, the remaining balance are grouped based on shared credit risk characteristics. The
contract assets relate to unbilled work in progress and have substantially the same risk characteristics as
the trade receivables for the same types of contracts. The Group has therefore estimated the expected
loss rates for the trade receivables and the contract assets on the same basis.
Except for those which had been determined as credit impaired under HKAS 39, ECL for other financial
assets at amortised cost, including loans to customers arising from margin financing business, other
receivables, financial assets held under resale agreements, pledged bank deposits, bank balances and
clearing settlement fund held on behalf of customers, and bank balances, clearing settlement fund,
deposits and cash, are measured on 12m or lifetime ECL basis, depending on whether there had been
significant increase in credit risk since initial recognition.
Upon the initial adoption of HKFRS 9 on January 1, 2018, the management of the Group has assessed
that the amount of allowance on the financial assets, which was subject to impairment assessment, as
estimated under the ECL under HKFRS 9 was not materially different from such under the “incurred loss
model” under HKAS 39, and therefore, the opening balances of these financial assets as of January 1,
2018 had not been adjusted, accordingly.
108
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 2. APPLICATION OF NEW AND AMENDMENTS TO 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 16
HKFRS 17
Leases1
Insurance Contracts2
HK(IFRIC)-Int 23
Amendments to HKFRS 3
Amendments to HKFRS 9
Uncertainty over Income Tax Treatments1
Definition of a Business4
Prepayment Features with Negative Compensation2
Amendments to HKFRS 10
Sale or Contribution of Assets between an Investor and its Associate
and HKAS 28
Amendments to HKAS 19
Amendments to HKAS 28
Amendments to HKFRSs
or Joint Venture3
Plan Amendment, Curtailment or Settlement1
Long-term Interests in Associates and Joint Ventures1
Annual Improvements to HKFRSs 2015-2017 Cycle1
1
2
3
4
Effective for annual periods beginning on or after January 1, 2019
Effective for annual periods beginning on or after January 1, 2021
Effective for annual periods beginning on or after a date to be determined
Effective for business combinations and asset acquisitions for which the acquisition date is on or after the
beginning of the first annual period beginning on or after January 1, 2020
Except for the new and amendments to 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.
109
2. APPLICATION OF NEW AND AMENDMENTS TO 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. In addition, HKFRS 16 requires sales and leaseback transactions to be determined based on
the requirements of HKFRS 15 as to whether the transfer of the relevant asset should be accounted as a sale.
HKFRS 16 also includes requirements relating to subleases and lease modifications.
Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by a
model where a right-of-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.
Other than certain requirements which are also applicable to lessor, 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.
110
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 16 Leases (Continued)
Furthermore, extensive disclosures are required by HKFRS 16.
As at December 31, 2018, the Group has non-cancellable operating lease commitments of Rmb338,383,000 as
disclosed in Note 55. 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.
The application of new requirements may result changes in measurement, presentation and disclosure as
indicated above. The Group intends to elect the practical expedient to apply HKFRS 16 to contracts that were
previously identified as leases applying HKAS 17 and HK(IFRIC)-Int 4 Determining whether an Arrangement
contains a Lease and not apply this standard to contracts that were not previously identified as containing a
lease applying HKAS 17 and HK(IFRIC)-Int 4. Therefore, the Group will not reassess whether the contracts are,
or contain a lease which already existed prior to the date of initial application. Furthermore, the Group intends
to elect the modified retrospective approach for the application of HKFRS 16 as lessee and will recognise the
cumulative effect of initial application to opening retained profits without restating comparative information.
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with HKFRSs 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.
111
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 transacted 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.
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.
112
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
113
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.
Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein, which
represent present ownership interests entitling their holders to a proportionate share of net assets of the relevant
subsidiaries upon liquidation.
Change in the Group’s interests in existing subsidiaries
Changes in the Group’s interests in 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.
114
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of consolidation (Continued)
Change in the Group’s interests in existing subsidiaries (Continued)
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).
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.
115
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Business combinations (Continued)
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.
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).
116
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill (Continued)
On disposal of the relevant cash-generating unit or any of the cash-generating unit within the group of cash
generating units, the attributable amount of goodwill is included in the determination of the amount of profit or
loss on disposal. When the Group disposes of an operation within the cash-generating unit (or a cash generating
unit within a group of cash-generating units), the amount of goodwill disposed of is measured on the basis of the
relative values of the operation (or the cash-generating unit) disposed of and the portion of the cash-generating
unit (or the group of cash-generating units) retained.
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.
The results and assets and liabilities of associates and joint ventures are incorporated in these consolidated
financial statements using the equity method of accounting. The financial statements of associates and joint
ventures used for equity accounting purposes are prepared using uniform accounting policies as those of the
Group for like transactions and events in similar circumstances. 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.
117
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments in associates and a joint venture (Continued)
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 Group assesses whether there is an objective evidence that the interest in an associate or a joint venture
may be impaired. When any objective evidence exists, 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.
118
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from contracts with customers (upon application of HKFRS 15 in
accordance with transitions in Note 2)
Under HKFRS 15, the Group 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.
A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a
series of distinct goods or services that are substantially the same.
Control is transferred over time and revenue is recognised over time by reference to the progress towards
complete satisfaction of the relevant performance obligation if one of the following criteria is met:
•
the customer simultaneously receives and consumes the benefits provided by the Group’s performance as
the Group performs;
•
the Group’s performance creates and enhances an asset that the customer controls as the Group
performs; or
•
the Group’s performance does not create an asset with an alternative use to the Group and the Group has
an enforceable right to payment for performance completed to date.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or
service.
A contract asset represents the Group’s right to consideration in exchange for goods or services that the Group
has transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with
HKFRS 9. In contrast, a receivable represents the Group’s unconditional right to consideration, i.e. only the
passage of time is required before payment of that consideration is due.
A contract liability represents the Group’s obligation to transfer goods or services to a customer for which the
Group has received consideration (or an amount of consideration is due) from the customer.
A contract asset and a contract liability relating to a contract are accounted for and presented on a net basis.
119
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from contracts with customers (upon application of HKFRS 15 in
accordance with transitions in Note 2) (Continued)
Over time revenue recognition: measurement of progress towards complete
satisfaction of a performance obligation
Input method
The progress towards complete satisfaction of a performance obligation is measured based on input method,
which is to recognise revenue on the basis of the Group’s efforts or inputs to the satisfaction of a performance
obligation relative to the total expected inputs to the satisfaction of that performance obligation, that best depict
the Group’s performance in transferring control of goods or services.
Variable consideration
For contracts that contain variable consideration, the Group estimates the amount of consideration to which it will
be entitled using either (a) the expected value method or (b) the most likely amount, depending on which method
better predicts the amount of consideration to which the Group will be entitled.
The estimated amount of variable consideration is included in the transaction price only to the extent that it is
highly probable that such an inclusion will not result in a significant revenue reversal in the future when the
uncertainty associated with the variable consideration is subsequently resolved.
At the end of each reporting period, the Group updates the estimated transaction price (including updating
its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the
circumstances present at the end of the reporting period and the changes in circumstances during the reporting
period.
120
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from contracts with customers (upon application of HKFRS 15 in
accordance with transitions in Note 2) (Continued)
Existence of significant financing component
In determining the transaction price, the Group adjusts the promised amount of consideration for the effects of
the time value of money if the timing of payments agreed (either explicitly or implicitly) provides the customer
or the Group with a significant benefit of financing the transfer of goods or services to the customer. In those
circumstances, the contract contains a significant financing component. A significant financing component may
exist regardless of whether the promise of financing is explicitly stated in the contract or implied by the payment
terms agreed to by the parties to the contract.
For contracts where the period between payment and transfer of the associated goods or services is less than
one year, the Group applies the practical expedient of not adjusting the transaction price for any significant
financing component.
For advance payments received from customers before the transfer of the associated goods or services in which
the Group adjusts for the promised amount of consideration for a significant financing component, the Group
applies a discount rate that would be reflected in a separate financing transaction between the Group and the
customer at contract inception. The relevant interest expenses during the period between the advance payments
were received and the transfer of the associated goods and services are accounted for on the same basis as
other borrowing costs.
For contracts where the Group transferred the associated goods or services before payments from customers
in which the Group adjusts for the promised amount of consideration for significant financing components, the
Group applies a discount rate that would be reflected in a separate financing transaction between the Group and
the customer at contract inception. The Group recognises interest income during the period between the payment
from customers and the transfer of the associated goods or services.
121
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from contracts with customers (upon application of HKFRS 15 in
accordance with transitions in Note 2) (Continued)
Principal versus agent
When another party is involved in providing goods or services to a customer, the Group determines whether the
nature of its promise is a performance obligation to provide the specified goods or services itself (i.e. the Group
is a principal) or to arrange for those goods or services to be provided by the other party (i.e. the Group is an
agent).
The Group is a principal if it controls the specified good or service before that good or service is transferred to
a customer. The Group is an agent if its performance obligation is to arrange for the provision of the specified
good or service by another party. In this case, the Group does not control the specified good or service provided
by another party before that good or service is transferred to the customer. When the Group acts as an agent,
it recognises revenue in the amount of any fee or commission to which it expects to be entitled in exchange for
arranging for the specified goods or services to be provided by the other party.
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.
122
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 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
Annual
Estimated
depreciation
useful life
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).
123
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible assets (Continued)
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.
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.
124
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
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).
The recoverable amount of tangible and intangible assets are estimated individually, 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.
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.
125
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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.
126
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Leasing (Continued)
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.
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).
127
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
128
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 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.
129
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Taxation (Continued)
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.
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.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
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.
130
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual
provisions of the instrument. All regular way purchases or sales of financial assets are recognised and
derecognised on a trade date. 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 market place.
Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising
from contracts with customers which are initially measured in accordance with HKFRS 15 since January 1, 2018.
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 FVTPL) 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 FVTPL are recognised immediately in profit or loss.
The effective interest method is a method of calculating the amortised cost of a financial asset or financial
liability and of allocating interest income and interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash receipts and 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 asset or financial liability, or, where appropriate, a shorter
period, to the net carrying amount on initial recognition.
Interest income which are derived from the Group’s ordinary course of business are presented as revenue.
Financial assets
Classification and subsequent measurement of financial assets (upon application of HKFRS 9 in accordance with
transitions in Note 2)
Financial assets that meet the following conditions are subsequently measured at amortised cost:
•
•
the financial asset is held within a business model whose objective is to collect contractual cash flows; and
the contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
131
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Classification and subsequent measurement of financial assets (upon application of HKFRS 9 in accordance with
transitions in Note 2) (Continued)
Financial assets that meet the following conditions are subsequently measured at fair value through other
comprehensive income (“FVTOCI”):
•
the financial asset is held within a business model whose objective is achieved by both collecting
contractual cash flows and selling; and
•
the contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
All other financial assets are subsequently measured at FVTPL, except that at the date of initial application/
initial recognition of a financial asset the Group may irrevocably elect to present subsequent changes in fair
value of an equity investment in other comprehensive income if that equity investment is neither held for trading
nor contingent consideration recognised by an acquirer in a business combination to which HKFRS 3 Business
Combinations applies.
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 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.
In addition, the Group may irrevocably designate a financial asset that are required to be measured at the
amortised cost or FVTOCI as measured at FVTPL if doing so eliminates or significantly reduces an accounting
mismatch.
132
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Classification and subsequent measurement of financial assets (upon application of HKFRS 9 in accordance with
transitions in Note 2) (Continued)
(i)
Amortised cost and interest income
Interest income is recognised using the effective interest method for financial assets measured subsequently
at amortised cost. For financial instruments other than purchased or originated credit-impaired financial assets,
interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial
asset, except for financial assets that have subsequently become credit-impaired (see below). For financial
assets that have subsequently become credit-impaired, interest income is recognised by applying the effective
interest rate to the amortised cost of the financial asset from the next reporting period. If the credit risk on the
credit impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest
income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset
from the beginning of the reporting period following the determination that the asset is no longer credit impaired.
(ii)
Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as
FVTOCI are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value
gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss includes any dividend
or interest earned on the financial asset and is included in the “securities investment gains” line item.
Impairment of financial assets
The Group recognises a loss allowance for ECL on financial and other assets which are subject to impairment
under HKFRS 9 (including trade receivables, contract asset, loans to customers arising from margin financing
business, other receivables, financial assets held under resale agreements, pledged bank deposit, bank balances
and clearing settlement fund held on behalf of customers, and bank balances, clearing settlement fund, deposits
and cash, loan commitment and financial guarantee contracts). The amount of ECL is updated at each reporting
date to reflect changes in credit risk since initial recognition.
133
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)
Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the
relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL that is
expected to result from default events that are possible within 12 months after the reporting date. Assessment are
done based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current conditions at the reporting date as well as
the forecast of future conditions.
The Group always recognises lifetime ECL for trade receivables and contract assets. The ECL on these assets
are assessed collectively using a provision matrix with appropriate groupings.
For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been
a significant increase in credit risk since initial recognition, the Group recognises lifetime ECL. The assessment of
whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default
occurring since initial recognition.
(i)
Significant increase in credit risk
In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the
risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring
on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers
both quantitative and qualitative information that is reasonable and supportable, including historical experience
and forward-looking information that is available without undue cost or effort.
In particular, the following information is taken into account when assessing whether credit risk has increased
significantly:
•
The significant adverse changes in the industry or policy environment, geographical environment of
debtors, or deterioration of the debtor’s own business operations;
•
•
The significant adverse changes in main operations or financial indicators as reflected in the financial
informations of the debtor;.
The significant adverse changes (if any) in the effectiveness of credit enhancement measures;
134
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)
(i)
•
Significant increase in credit risk (Continued)
The debtor is listed as credit disciplinary target such as defaulters and discredit units in the field of
environmental protection or safety production, or other important situations that may affect debt repayment
ability have occurred; the debtor has delayed and refused to bear the liability for credit enhancement in
other debts;
•
Other important events identified by the Group.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased
significantly since initial recognition when contractual payments are more than 30 days past due, unless the
Group has reasonable and supportable information that demonstrates otherwise.
Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has not increased
significantly since initial recognition if the debt instrument is determined to have low credit risk at the reporting
date. A debt instrument is determined to have low credit risk if i) it has a low risk of default, ii) the borrower
has a strong capacity to meet its contractual cash flow obligations in the near term and iii) adverse changes
in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the
borrower to fulfil its contractual cash flow obligations. The Group considers a debt instrument to have low credit
risk when it has an internal or external credit rating of ‘investment grade’ as per globally understood definitions.
For loan commitments and financial guarantee contracts, the date that the Group becomes a party to the
irrevocable commitment is considered to be the date of initial recognition for the purposes of assessing the
financial instrument for impairment. In assessing whether there has been a significant increase in the credit risk
since initial recognition of a loan commitment, the Group considers changes in the risk of a default occurring on
the loan to which a loan commitment relates; for financial guarantee contracts, the Group considers the changes
in the risk that the specified debtor will default on the contract.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant
increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying
significant increase in credit risk before the amount becomes past due.
135
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)
(ii)
Definition of default
For internal credit risk management, the Group considers an event of default occurs when information developed
internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the
Group, in full (without taking into account any collaterals held by the Group).
Irrespective of the above, the Group considers that default has occurred when a financial asset is more than 90
days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging
default criterion is more appropriate.
(iii)
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events of default that have a detrimental impact on the
estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit
impaired includes observable data about the following events:
(a)
significant financial difficulty of the issuer or the borrower;
(b)
a breach of contract, such as a default or past due event;
(c)
the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial
difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;
(d)
it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
(e)
the disappearance of an active market for that financial asset because of financial difficulties.
136
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)
(iv) Write-off policy
The Group writes off a financial asset when there is information indicating that the counterparty is in severe
financial difficulty and there is no realistic prospect of recovery, for example, when the counterparty has been
placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when
the amounts are over two years past due, whichever occurs sooner. Financial assets written off may still be
subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where
appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or
loss.
(v)
Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default (“PD”), loss given default (“LGD”) (i.e. the
magnitude of the loss if there is a default) and the exposure at default (“EAD”). The assessment of the PD and
LGD is based on historical data adjusted by forward-looking information. Estimation of ECL reflects an unbiased
and probability-weighted amount that is determined with the respective risks of default occurring as the weights.
Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance
with the contract and the cash flows that the Group expects to receive, discounted at the effective interest rate
determined at initial recognition. For a lease receivable, the cash flows used for determining the ECL is consistent
with the cash flows used in measuring the lease receivable in accordance with HKAS 17 Leases.
For a financial guarantee contract, the Group is required to make payments only in the event of a default by the
debtor in accordance with the terms of the instrument that is guaranteed. Accordingly, the expected losses is the
present value of the expected payments to reimburse the holder for a credit loss that it incurs less any amounts
that the Group expects to receive from the holder, the debtor or any other party.
For undrawn loan commitments, the ECL is the present value of the difference between the contractual cash
flows that are due to the Group if the holder of the loan commitments draws down the loan, and the cash flows
that the Group expects to receive if the loan is drawn down.
137
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)
(v)
Measurement and recognition of ECL (Continued)
For ECL on financial guarantee contracts or on loan commitments for which the effective interest rate cannot be
determined, the Group will apply a discount rate that reflects the current market assessment of the time value of
money and the risks that are specific to the cash flows but only if, and to the extent that, the risks are taken into
account by adjusting the discount rate instead of adjusting the cash shortfalls being discounted.
Where ECL is measured on a collective basis or cater for cases where evidence at the individual instrument level
may not yet be available, the financial instruments are grouped on the shared credit risk characteristics basis:
•
•
•
•
Nature of financial instruments;
Past-due status;
Nature, size and industry of debtors; and
External credit ratings where available.
The grouping is regularly reviewed by management to ensure the constituents of each group continue to share
similar credit risk characteristics.
Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset
is credit impaired, in which case interest income is calculated based on amortised cost of the financial asset.
For financial guarantee contracts, the loss allowances are recognised at the higher of the amount of the loss
allowance determined in accordance with HKFRS 9; and the amount initially recognised less, where appropriate,
cumulative amount of income recognised over the guarantee period.
138
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)
(v)
Measurement and recognition of ECL (Continued)
For undrawn loan commitments, the loss allowances are the present value of the difference between:
(a)
the contractual cash flows that are due to the Group if the holder of the loan commitment draws down the
loan: and
(b)
the cash flows that the Group expects to receive if the loan is drawn down.
Except for loan commitments and financial guarantee contracts, the Group recognises an impairment gain or
loss in profit or loss for all financial instruments by adjusting their carrying amounts, with the exception of trade
receivables, loans to customers arising from margin financing business, other receivables, financial assets held
under resale agreements, contract asset, pledged bank deposit, bank balances and clearing settlement fund held
on behalf of customers, and bank balances, clearing settlement fund, deposits and cash where the corresponding
adjustment is recognised through a loss allowance account.
Derecognition of financial assets
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 measured at amortised cost, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable is recognised in profit or loss.
139
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangements 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.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at
FVTPL.
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.
140
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial liabilities and equity (Continued)
Financial liabilities at FVTPL (Continued)
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 HKFRS 9 permits the entire
combined contract (asset or liability) to be designated as at FVTPL.
Upon application of HKFRS 9, for financial liabilities that are designated as at FVTPL, the amount of change in
the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised
in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in
other comprehensive income would create or enlarge an accounting mismatch in profit or loss. For financial
liabilities that contain embedded derivatives, such as convertible bond, the changes in fair value of the embedded
derivatives are excluded in determining the amount to be presented in other comprehensive income. Changes in
fair value attributable to a financial liability’s credit risk that are recognised in other comprehensive income are
not subsequently reclassified to profit or loss; instead, they are transferred to retained profits upon derecognition
of the financial liability.
141
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial liabilities and equity (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 contains debt and derivative components
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.
142
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
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 that are not financial assets within the scope of HKFRS 9
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.
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 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 financial assets at FVTPL.
143
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
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 HKFRS 9 (since January 1,
2018); and
(ii)
the amount initially recognised less, where appropriate, cumulative amortisation recognised over the
guarantee period.
Derecognition/modification of financial liabilities
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.
The Group accounts for an exchange with a lender of a financial liability with substantially different terms as
an extinguishment of the original financial liability and the recognition of a new financial liability. A substantial
modification of the terms of an existing financial liability or a part of it (whether or not attributable to the financial
difficulty of the Group) is accounted for as an extinguishment of the original financial liability and the recognition
of a new financial liability.
The Group considers that the terms are substantially different if the discounted present value of the cash flows
under the new terms, including any fees paid net of any fees received and discounted using the original effective
interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the
original financial liability. Accordingly, such exchange of debt instruments or modification of terms is accounted for
as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment.
The exchange or modification is considered as non-substantial modification when such difference is less than 10
per cent.
144
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Derecognition/modification of financial liabilities (Continued)
For non-substantial modifications of financial liabilities that do not result in derecognition, the carrying amount
of the relevant financial liabilities will be calculated at the present value of the modified contractual cash flows
discounted at the financial liabilities’ original effective interest rate. Transaction costs or fees incurred are
adjusted to the carrying amount of the modified financial liabilities and are amortised over the remaining term.
Any adjustment to the carrying amount of the financial liability is recognised in profit or loss at the date of
modification.
Offsetting a financial asset and a financial liability
A financial asset and a financial liability are offset and the net amount presented in the statement of financial
position when, and only when, the Group currently has a legally enforceable right to set off the recognised
amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
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.
145
4. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF
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.
Determination of consolidation scope
All facts and circumstances must be taken into consideration in the assessment of whether the Group, as a fund
manager and/or an investor, controls a structured entity. The principle of control sets out the following three
elements of control: (a) power over these entities; (b) exposure, or rights, to variable returns from involvement
with these entities; and (c) the ability to use power over these entities to affect the amount of the investor’s
returns. The Group reassesses whether or not it controls a structured entity if facts and circumstances indicate
that there are changes to one or more of the three elements of control listed above.
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.
146
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 4. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF
ESTIMATION UNCERTAINTY (Continued)
Key sources of estimation uncertainty (Continued)
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 cost of disposal. The value in use calculation requires the Group to estimate the future cash flows expected
to arise from the cash-generating unit and an appropriate discount rate in order to calculate the present value.
Where the actual future cash flows are less than expected, an impairment loss may arise. As at December
31, 2018, the carrying amount of goodwill is Rmb86,867,000 (without accumulated impairment loss) (2017:
Rmb86,867,000 (without accumulated impairment loss)). Details of the impairment testing are disclosed in Note
23.
Impairment of loans to customers arising from margin financing business and
financial assets held under resale agreements
The Group estimates the amount of loss allowance for ECL on its loans to customers arising from margin
financing business and financial assets held under resale agreements. Asset’s carrying amount and the present
value of estimated future cash flows with the consideration of expected future credit loss are taken into account
for determining the loss allowance amount. The assessment of the credit risk of loans to customers arising from
margin financing business and financial assets held under resale agreements involves high degree of estimation
and uncertainty. When the actual future cash flows are less than expected or more than expected, a material
impairment loss or a material reversal of impairment loss may arise, accordingly.
The following significant judgements and estimations are required in applying the accounting requirements for
measuring the ECL:
Significant increase of credit risk
ECL are measured as an allowance equal to 12-month ECL for stage 1 assets, or lifetime ECL assets for stage
2 or stage 3 assets. An asset moves to stage 2 when its credit risk has increased significantly since initial
recognition. In assessing whether the credit risk of an asset has significantly increased, the Group takes into
account qualitative and quantitative reasonable and supportable forward-looking information. Refer to Note 53 for
more details.
147
4. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF
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 (Continued)
Establishing groups of assets with similar credit risk characteristics
When ECLs are measured on a collective basis, the financial instruments are grouped on the basis of shared
risk characteristics. Refer to Note 53 for details of the characteristics considered in this judgement. The Group
monitors the appropriateness of the credit risk characteristics on an ongoing basis to assess whether they
continue to be similar. This is required in order to ensure that should credit risk characteristics change there is
appropriate re-segmentation of the assets. This may result in new portfolios being created or assets moving to
an existing portfolio that better reflects the similar credit risk characteristics of that group of assets. Assets move
from 12-month to lifetime ECLs when there is a significant increase in credit risk, but it can also occur within
portfolios that continue to be measured on the same basis of 12-month or lifetime ECLs but the amount of ECL
changes because the credit risk of the portfolios differ.
Models and assumptions used
The Group uses various models and assumptions in measuring fair value of financial assets as well as in
estimating ECL. Judgement is applied in identifying the most appropriate model for each type of assets,
as well as for determining the assumptions used in these models, including assumptions that relate to key
drivers of credit risk. Refer to Note 53(b) for more details on ECL and Note 53(c) for more details on fair value
measurement.
Forward-looking information
When measuring ECL the Group uses reasonable and supportable forward-looking information, which is based on
assumptions for the future movement of different economic drivers and how these drivers will affect each other.
Refer to Note 53(b) for more details.
PD
PD constitutes a key input in measuring ECL. PD is an estimate of the likelihood of default over a given time
horizon, the calculation of which includes historical data, assumptions and expectations of future conditions.
LGD
LGD is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows
due and those that the lender would expect to receive, taking into account cash flows from collateral and integral
credit enhancements.
148
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 4. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF
ESTIMATION UNCERTAINTY (Continued)
Key sources of estimation uncertainty (Continued)
Provision of ECL for trade receivables and contract asset
The Group uses provision matrix to calculate ECL for the trade receivables and contract asset. The provision
rates are based on internal credit ratings as groupings of various debtors that have similar loss patterns.
The provision matrix is based on the Group’s historical default rates taking into consideration forward-looking
information that is reasonable and supportable available without undue costs or effort. At every reporting date, the
historical observed default rates are reassessed and changes in the forward-looking information are considered.
The provision of ECL is sensitive to changes in estimates. The information about the ECL, the Group’s trade
receivables and contract asset are disclosed in Notes 53(b), 28, 29, respectively.
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 interests in a joint venture and 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 impairment loss may arise. As at December 31, 2018, the carrying amount of interest in
a joint venture was Rmb333,102,000 (without accumulated impairment loss) (2017: Rmb303,065,000 (without
accumulated impairment loss)), and the carrying amount of interests in associates was Rmb5,211,412,000
(without accumulated impairment loss) (2017: Rmb1,686,227,000 (without accumulated impairment loss)).
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.
The Group uses various valuation techniques to determine the fair value of financial instruments which are not
quoted in an active market. Valuation techniques include the use of discounted cash flows analysis, models
or other valuation methods as appropriate. To the extent practical, models use only observable data; however
areas such as credit risk of the Group and the counterparty, volatilities and correlations require management to
make estimates. Changes in assumptions about these factors could affect the estimated fair value of financial
instruments.
149
5. REVENUE
For the year ended December 31, 2018
(i)
Disaggregation of revenue from contracts with customers
Segments
Types of goods or services
Toll operation
Securities operation
Asset management services
Securities and futures commission
Investment banking services
Others
Hotel operating and catering services
Construction service
Total
Timing of revenue recognition
A point in time
Over time
Total
For the year ended December 31, 2018
Toll
Securities
operation
Rmb’000
operation
Rmb’000
Others
Rmb’000
6,302,370
–
–
–
–
–
–
–
–
243,972
919,992
298,834
1,462,798
–
–
–
6,302,370
1,462,798
6,302,370
1,462,798
–
–
6,302,370
1,462,798
–
–
–
–
–
106,097
238,580
344,677
344,677
106,097
238,580
344,677
Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the
segment information.
150
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
5. REVENUE (Continued)
For the year ended December 31, 2018 (Continued)
(i)
Disaggregation of revenue from contracts with customers (Continued)
Toll operation
Securities operation
Others
Revenue from contracts with customers
Interest income
(ii)
Performance obligations for contracts with customers
Year ended
12/31/2018
Rmb’000
6,302,370
1,462,798
344,677
8,109,845
1,458,476
9,568,321
Toll operation
Revenue arising from toll operation is recognised at a point in time when the vehicles exit the toll
expressway, of which the Group operates part or all of it.
The revenue from toll operation is based on the toll rates determined by government authorities. It is
settled by government agencies on a monthly basis.
Hotel operation and catering services
In respect of hotel operation and catering services, the Group recognises the revenue at a point in time
when the services are provided.
151
5. REVENUE (Continued)
For the year ended December 31, 2018 (Continued)
(ii)
Performance obligations for contracts with customers (Continued)
High grade road construction service
The Group provides high grade road construction service to a customer. Such service is recognised as a
performance obligation satisfied over time as the Group creates or enhances an asset that the customer
controls as the asset is created or enhanced. Revenue is recognised for the construction service based on
the stage of completion of the contract using input method.
The Group’s construction contract includes payment schedules which require stage payments over the
operation period of 10 years after the construction is completed.
A contract asset is recognised over the period in which the construction service is performed representing
the Group’s right to consideration for the services performed because the right is conditioned on the
Group’s future performance in completing the construction. The contract asset is transferred to trade
receivables when the rights become unconditional. The Group typically transfers contract asset to trade
receivables when the construction is completed because only at that time, the Group satisfied the right to
consideration pursuant to the terms and conditions of the relevant construction contract.
Asset management services
The Group provides asset management services in respect of wealth management products, and is
entitled to management fees of these products for its services rendered to customers. Performance
obligation is satisfied over the term of respective wealth management products. Management fees of
wealth management products are recognised to the extent that it is highly probable that such recognition
will not result in a significant revenue reversal in the future when the uncertainty associated with the
quantum of management fees is subsequently resolved. Therefore, in practice the variable management
fees can only be recognised upon dividend distribution, withdrawal of investors or liquidation of products.
152
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 5. REVENUE (Continued)
For the year ended December 31, 2018 (Continued)
(ii)
Performance obligations for contracts with customers (Continued)
Securities brokerage services
Commission and fee income arising from securities brokerage services is recognised at a point in time
when the service is provided and performance obligation is satisfied when the brokerage of customers’
securities, futures or options contracts dealing is completed. Fees are usually received shortly after the
service is provided.
Investment banking services
The Group provides financial advisory services to its customers. The Group recognises the revenue at
a point in time when the services are provided. They are usually collected within one month when they
become due.
The Group provides sponsoring and underwriting services to its customers for issue of equity or debt
instruments to investors. Performance obligation is satisfied when the issue of these equity or debt
instruments are completed. Sponsoring and underwriting fees became due when certain milestones are
met during the issue process and at completion of the issues. They are usually collected within one month
when they become due.
(iii)
Transaction price allocated to the remaining performance obligation for contracts with Customers
The transaction price allocated to the remaining performance obligations in respect of the high grade
road construction service (unsatisfied or partially unsatisfied) as at December 31, 2018 amounting to
approximately Rmb1,216,120,000, which are expected to be recognised as revenue over the construction
period till July, 2021 by reference to the progress towards the satisfaction of stage of the completion using
the input method.
The transaction price allocated to the remaining performance obligation for sponsorship contracts with
customers is not material. Besides, most other contracts with customers have original expected duration of
less than one year. Therefore information about the remaining performance obligations is not disclosed.
There is no other unsatisfied or partially unsatisfied remaining performance obligations as at December
31, 2018.
153
6. OPERATING SEGMENTS
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 and future broking, margin financing and securities lending, securities
underwriting and sponsorship, asset management, advisory services and proprietary trading.
(iii)
Others – hotel operation, high grade road construction, investment in other financial institutions 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, 2018
Toll
Securities
operation
operation
Others
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Revenue – external customers
6,302,370
2,921,274
344,677
9,568,321
Segment profit
3,150,796
468,665
372,882
3,992,343
154
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
6. OPERATING SEGMENTS (Continued)
Segment revenue and results (Continued)
For the year ended December 31, 2017
Toll
Securities
operation
Rmb’000
operation
Rmb’000
Others
Total
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
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.
Segment assets and liabilities
The following is an analysis of the Group’s assets and liabilities by reportable and operating segment:
Toll operation
Securities operation
Others
Segment assets
Segment liabilities
12/31/2018
12/31/2017
12/31/2018
12/31/2017
Rmb’000
Rmb’000
Rmb’000
Rmb’000
16,570,495
18,261,586
(4,459,382)
(4,995,482)
57,254,963
53,215,230
(43,326,330)
(39,424,352)
5,600,829
2,086,837
(23,249)
(26,335)
Total segment assets (liabilities)
79,426,287
73,563,653
(47,808,961)
(44,446,169)
Goodwill
86,867
86,867
–
–
Consolidated assets (liabilities)
79,513,154
73,650,520
(47,808,961)
(44,446,169)
Segment assets and segment liabilities represent the assets and liabilities of the subsidiaries operating in the
respective reportable and operating segment.
155
6. OPERATING SEGMENTS (Continued)
Other segment information
Amounts included in the measure of segment profit (loss) or segment assets:
For the year ended December 31, 2018
Income tax expense
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 arising from financial
assets at FVTPL
Gain on decrease in fair value in respect
of the derivative component of
Convertible Bond (as defined in Note 45)
Additions to non-current assets (Note)
Depreciation and amortisation
Loss on disposal of property,
plant and equipment
Toll
Securities
operation
operation
Others
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
975,296
161,225
6,467
1,142,988
59,594
171,863
–
333,102
–
694,454
297,896
–
30,037
–
–
526,479
–
(2,904)
353,482
186
–
59,780
866,317
4,913,516
5,211,412
–
–
–
–
333,102
350,578
30,037
526,479
127,094
127,094
146,844
–
98,975
3,225,286
3,471,105
1,283,486
113,943
17,831
1,415,260
465
318
–
783
156
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
6. OPERATING SEGMENTS (Continued)
Other segment information (Continued)
For the year ended December 31, 2017
Income tax expense
845,248
339,462
7,559
1,192,269
Toll
Securities
operation
Rmb’000
operation
Rmb’000
Others
Total
Rmb’000
Rmb’000
Interest income on bank balances
and entrusted loan receivables
Interest expense
Interests in associates
Interest in a joint venture
25,945
135,275
–
303,065
–
476,472
317,163
–
72
–
26,017
611,747
1,369,064
1,686,227
–
Share of (loss) profit of associates
–
(7,466)
168,968
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
Additions to non-current assets (Note)
Depreciation and amortisation
Loss on disposal of property,
plant and equipment
17,668
–
174
525,491
149,479
106,652
1,283,545
–
306,397
110,401
–
–
–
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
Note: Non-current assets excluded financial instruments and deferred tax assets.
157
6. OPERATING SEGMENTS (Continued)
Revenue from major services
An analysis of the Group’s revenue, 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
Revenue from construction
Year ended
12/31/2018
Rmb’000
6,302,370
1,462,798
1,458,476
–
106,097
238,580
Year ended
12/31/2017
Rmb’000
5,986,249
2,088,310
1,402,940
47,865
100,976
–
9,568,321
9,626,340
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, 2018 and 2017, there are no individual customer with sales over 10% of
the total revenue of the Group.
158
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
7. SECURITIES INVESTMENT GAINS
Gain on held for trading investments
Cumulative gain reclassified from equity on disposal of
AFS investments
Interest income and dividends from AFS investments
Gains arising from financial assets at FVTPL
Gains arising from derivative financial instruments
Losses arising from financial liabilities at FVTPL
8. OTHER INCOME AND GAINS AND LOSSES
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 gain (loss), net
(Loss) gain on commodity trading, net
Others
Year ended
12/31/2018
Rmb’000
–
–
–
526,479
17,605
(31,635)
512,449
Year ended
12/31/2017
Rmb’000
525,665
105,560
21,223
–
122,437
–
774,885
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
59,780
39,737
3,188
6,572
127,094
55,637
(17,893)
89,393
363,508
26,017
42,498
2,818
7,128
149,479
(212,146)
21,125
66,720
103,639
Note: Rental income included contingent rent of approximately Rmb3,895,000 (2017: Rmb3,817,000) recognised
during the year.
159
9. FINANCE COSTS
Bank and other borrowings
Short-term financing note
Bonds payable
Convertible Bond
Total finance costs
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
69,160
131,459
562,995
102,703
866,317
61,626
121,289
362,891
65,941
611,747
10. REVERSAL (RECOGNITION) OF IMPAIRMENT LOSSES, NET
Impairment losses on financial assets and
contract asset (recognised) reversed:
Trade receivables – goods and services
Other receivables
Loans to customers arising from margin financing business
Financial assets held under resale agreements
AFS investments
Contract asset
Others
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
(997)
(4,844)
37,190
18,999
–
(380)
(2,700)
47,268
(822)
(891)
294
(40,076)
(11,621)
–
(5,993)
(59,109)
160
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
11. PROFIT BEFORE TAX
The Group’s profit before tax has been arrived at after charging:
Depreciation of property, plant and equipment
(included in operating costs and administrative expenses)
Release of prepaid lease payments
Amortisation of expressway operating rights
(included in operating costs)
Amortisation of other intangible assets
(included in operating costs and administrative expenses)
Total depreciation and amortisation
Staff costs (including directors and supervisors):
– Wages, salaries and bonuses
– Pension scheme contributions
Auditors’ remuneration
Loss on disposal of property, plant and equipment
12.
INCOME TAX EXPENSE
Current tax:
PRC Enterprise Income Tax (“EIT”)
Deferred tax (Note 46)
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
260,097
2,137
266,217
1,639
1,119,126
1,119,126
33,900
26,101
1,415,260
1,413,083
1,058,303
129,831
1,183,475
127,207
1,188,134
1,310,682
9,523
783
8,374
3,565
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
1,177,966
(34,978)
1,211,926
(19,657)
1,142,988
1,192,269
Under the Law of the PRC on EIT and Implementation Regulation of the EIT Law, the tax rate of the PRC
subsidiaries is 25%.
No Hong Kong Profits Tax has been provided as the Group has no estimated assessable profit in Hong Kong for
both years.
161
INCOME TAX EXPENSE (Continued)
12.
The income tax expense for the year can be reconciled to the profit before tax per the consolidated statement of
profit or loss and other comprehensive income as follows:
Profit before tax
Tax at the PRC EIT rate of 25% (2017:25%)
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
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
5,135,331
5,183,301
1,283,833
1,295,825
(87,645)
(7,509)
(45,869)
38,078
(37,900)
(40,376)
(4,417)
(35,505)
25,126
(48,384)
Income tax expense for the year
1,142,988
1,192,269
13. OTHER COMPREHENSIVE INCOME (EXPENSE)
Tax effect relating to other comprehensive income is as follows:
Year ended 12/31/2018
Year ended 12/31/2017
Net-of-
Net-of-
Before-tax
Tax
income-tax
Before-tax
Tax
income-tax
amount
impact
amount
amount
impact
amount
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Fair value gain on AFS investments arising
during the year
Reclassification adjustments for the cumulative
gain included upon disposal of AFS investments
Other comprehensive expense arising
from associates
Exchange differences on translation of
financial statements of foreign operations
Total
–
–
–
2,253
2,253
–
–
–
–
–
–
–
–
2,253
2,253
276,849
(69,212)
207,637
(105,560)
26,390
(79,170)
(2,672)
(605)
–
–
(2,672)
(605)
168,012
(42,822)
125,190
162
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
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163
14. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’
EMOLUMENTS (Continued)
Notes:
(i)
Resigned on December 22, 2017.
(ii)
Resigned on April 2, 2018.
(iii)
Appointed on April 2, 2018.
(iv)
Mr. Cheng Tao and Ms. Luo Jianhu are also the senior management of the Company and their emoluments
disclosed above include those services rendered by them as senior management.
(v)
Resigned on April 12, 2018.
(vi)
Elected on April 12, 2018.
Bonuses paid to directors and supervisors are performance-rated and are determined by the Remuneration
Committee of the Company, which comprises three independent non-executive directors. No directors or
supervisors waived any emoluments and no incentive was paid to any directors or supervisors as an inducement
to join the Company and no compensation for loss of office was paid to any directors, supervisors, past directors
or past supervisors during both years.
164
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 14. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’
EMOLUMENTS (Continued)
The emoluments paid or payable to each of the other 5 (2017: 6) senior managements are as follows:
Fang
Zhu
Wang
Zhan
Zheng
Zhang
Zhexing
Yimin
Dehua Huagang
Hui
Xiuhua
Total
Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000
2018
Salaries, allowances and
benefits in kind
Bonuses paid and payable
Pension scheme contributions
Total emoluments
2017
Salaries, allowances and
benefits in kind
Bonuses paid and payable
Pension scheme contributions
Total emoluments
Note
–
–
–
–
335
367
24
726
Note: Resigned on December 18, 2017.
255
517
24
796
335
367
24
726
255
467
24
746
335
367
24
726
255
517
24
796
335
367
24
726
255
472
24
751
335
367
24
726
255
517
24
796
335
367
24
726
1,275
2,490
120
3,885
2,010
2,202
144
4,356
The emoluments of each of the senior managements were below HK$1,000,000 (equivalent to Rmb876,200
(2017: Rmb835,900)) 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.
165
15. 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
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
4,906
31,886
305
37,097
4,912
32,023
220
37,155
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, 2018 and 2017.
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 (2017: five)
non-director employees.
166
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
15. EMPLOYEES’ EMOLUMENTS (Continued)
Their emoluments are within the following bands:
HK$5,000,001 to HK$5,500,000 (equivalent to Rmb4,381,001
(2017: Rmb4,179,501) to Rmb4,819,100 (2017: Rmb5,597,450))
HK$6,000,001 to HK$6,500,000 (equivalent to Rmb5,257,201
(2017: Rmb5,015,401) to Rmb5,695,300 (2017: Rmb5,433,350))
HK$6,500,001 to HK$7,000,000 (equivalent to Rmb5,695,301
(2017: Rmb5,433,351) to Rmb6,133,400(2017: Rmb5,851,330))
HK$7,000,001 to HK$7,500,000 (equivalent to Rmb6,133,401
(2017: Rmb5,851,301) to Rmb6,571,500 (2017: Rmb6,269,250))
HK$8,000,001 to HK$8,500,000 (equivalent to Rmb7,009,601
(2017: Rmb6,687,201) to Rmb7,447,700 (2017: Rmb7,105,150))
HK$8,500,001 to HK$9,000,000 (equivalent to Rmb7,447,701
(2017: Rmb7,105,151) to Rmb7,885,800 (2017: Rmb7,523,100))
HK$10,500,001 to HK$11,000,000 (equivalent to Rmb9,200,101
(2017: Rmb8,776,951) to Rmb9,638,200 (2017: Rmb9,194,900))
HK$11,500,001 to HK$12,000,000 (equivalent to Rmb10,076,301
(2017: Rmb9,612,851) to Rmb10,514,400 (2017: Rmb10,030,800))
HK$13,000,001 to HK$13,500,000 (equivalent to Rmb11,390,601
(2017: Rmb10,866,701) to Rmb11,838,700 (2017: Rmb11,284,650))
No. of individuals
Year ended
12/31/2018
Year ended
12/31/2017
1
1
1
–
–
–
1
–
1
–
–
–
1
1
2
–
1
–
167
16. DIVIDENDS
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
Dividends recognised as distribution during the year:
2018 Interim – no distribution (2017: 2017 interim Rmb6 cents per share)
–
2017 Final – Rmb30.0 cents (2017: 2016 Final Rmb29.5 cents per share)
1,302,934
260,587
1,281,219
1,302,934
1,541,806
Dividend of Rmb37.5 cents per share in respect of the year ended December 31, 2018 (2017: final dividend
of Rmb30.0 cents per share in respect of the year ended December 31, 2017) in the total amount of
Rmb1,628,668,000 (2017: Rmb1,302,934,000) has been proposed by the Directors and is subject to approval by
the shareholders in the annual general meeting.
17. EARNINGS PER SHARE
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
Earnings for the purpose of basic earnings per share
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
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
3,480,537
3,202,130
3,480,537
3,202,130
102,703
10,050
65,941
99,718
(127,094)
(149,479)
3,466,196
3,218,310
168
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
17. EARNINGS PER SHARE (Continued)
Number of shares
Number of ordinary shares for the purpose of basic earnings per share
Effect of dilutive potential ordinary shares arising from Convertible Bond
Weighted average number of ordinary shares for
the purpose of diluted earnings per share
Year ended
12/31/2018
’000
4,343,115
246,632
Year ended
12/31/2017
’000
4,343,115
166,746
4,589,747
4,509,861
18. PROPERTY, PLANT AND EQUIPMENT
Leasehold
land and
buildings
Rmb’000
Communication
and signaling
equipment
Rmb’000
Ancillary
facilities
Rmb’000
Hotel
Rmb’000
Machinery
Motor
vehicles
Rmb’000
and Construction
in progress
Rmb’000
equipment
Rmb’000
Total
Rmb’000
Cost
At January 1, 2017
Additions
Transfer
Disposals
1,612,613
566
35,951
(11)
549,543
27,218
15,469
–
997,245
5,625
16,971
(5,782)
724,175
20,602
43,904
(4,534)
184,087
12,998
–
(13,496)
509,032
48,759
142
(77,856)
86,986
55,130
(112,437)
–
4,663,681
170,898
–
(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
Additions
Transfer
Disposals
17,952
22,549
–
–
–
–
–
681
(6)
27,090
22,336
(13,209)
3,232
–
(38,862)
40,727
6,769
(26,327)
109,825
(52,335)
(514)
198,826
–
(78,918)
At December 31, 2018
1,689,620
592,230
1,014,734
820,364
147,959
501,246
86,655
4,852,808
DEPRECIATION
At January 1, 2017
Provided for the year
Disposals
At December 31, 2017
Provided for the year
Disposals
At December 31, 2018
CARRYING VALUES
At December 31, 2018
At December 31, 2017
365,979
55,917
(11)
421,885
62,127
–
484,012
28,134
19,060
–
47,194
16,477
–
63,671
331,201
45,607
(2,506)
374,302
52,184
(5)
426,481
404,275
73,388
(4,341)
473,322
69,494
(12,949)
128,191
11,690
(12,683)
127,198
11,741
(38,502)
339,330
60,555
(59,020)
340,865
48,074
(23,390)
529,867
100,437
365,549
–
–
–
–
–
–
–
1,597,110
266,217
(78,561)
1,784,766
260,097
(74,846)
1,970,017
1,205,608
1,227,234
528,559
545,036
588,253
639,757
290,497
310,825
47,522
56,391
135,697
139,212
86,655
2,882,791
29,679
2,948,134
The property, plant and equipment are located in the PRC.
169
19. PREPAID LEASE PAYMENTS
Analysed for reporting purposes as:
Current assets
Non-current assets
12/31/2018
12/31/2017
Rmb’000
Rmb’000
2,137
63,163
65,300
2,137
65,300
67,437
The amount represents prepayment of rentals under operating leases for “land use rights” of land situated in the
PRC.
20. EXPRESSWAY OPERATING RIGHTS
COST
At December 31, 2017 and 2018
AMORTISATION
At January 1, 2017
Charge for the year
At December 31, 2017
Charge for the year
At December 31, 2018
Carrying values
At December 31, 2018
At December 31, 2017
Rmb’000
26,266,622
11,767,822
1,119,126
12,886,948
1,119,126
14,006,074
12,260,548
13,379,674
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. The expressway operating
rights were amortised using the straight-line basis over the useful life attributable to the Group.
170
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
21. GOODWILL
COST AND CARRYING VALUES
At January 1, 2017, December 31, 2017 and December 31, 2018
Particulars regarding impairment testing on goodwill are disclosed in Note 23.
22. OTHER INTANGIBLE ASSETS
Rmb’000
86,867
Securities/
Customer
futures
bases
firm licenses
Trading
seats
Rmb’000
Rmb’000
Rmb’000
Software
Rmb’000
Total
Rmb’000
COST
At January 1, 2017
Additions
101,147
63,083
–
–
At December 31, 2017
101,147
63,083
Additions
Disposal
–
–
–
–
3,480
1,672
5,152
–
(1,672)
143,426
37,009
180,435
47,744
–
311,136
38,681
349,817
47,744
(1,672)
At December 31, 2018
101,147
63,083
3,480
228,179
395,889
AMORTISATION
At January 1, 2017
Charge for the year
At December 31, 2017
Charge for the year
At December 31, 2018
CARRYING VALUES
At December 31, 2018
At December 31, 2017
72,945
6,266
79,211
6,266
85,477
15,670
21,936
–
–
–
–
–
–
–
–
–
–
89,285
19,835
109,120
27,634
162,230
26,101
188,331
33,900
136,754
222,231
63,083
63,083
3,480
5,152
91,425
71,315
173,658
161,486
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.
171
22. 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 23.
23.
IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH
INDEFINITE USEFUL LIVES
For the purposes of impairment testing, goodwill and other intangible assets with indefinite useful lives set
out in Notes 21 and 22 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 as at December 31, 2018 and 2017 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
12/31/2018
12/31/2017
12/31/2018
12/31/2017
12/31/2018
12/31/2017
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
1,400
3,480
–
–
2,080
3,072
5,152
The basis of the recoverable amounts of the above CGUs and their major underlying assumptions are
summarised below:
172
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
23.
IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH
INDEFINITE USEFUL LIVES (Continued)
Jiaxing Co and Shangsan Co
The recoverable amounts of CGUs 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 the discount
rates 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 10 years (2017: 11 years) and 12 years (2017: 13 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 and Zheshang Futures
The recoverable amounts of CGUs of Zheshang Securities and 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% (2017:1%). Management believes that
any reasonably possible change in any of these assumptions would not cause the carrying amount of Zheshang
Securities and Zheshang Futures’ goodwill and other intangible assets to exceed their aggregate recoverable
amounts.
During the years ended December 31, 2018 and 2017, 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.
24.
INTERESTS IN ASSOCIATES
Unlisted investments in associates, at cost less impairment
4,563,095
1,358,560
Share of post-acquisition profit and other comprehensive
expense, net of dividends received
648,317
327,667
5,211,412
1,686,227
12/31/2018
12/31/2017
Rmb’000
Rmb’000
173
INTERESTS IN ASSOCIATES (Continued)
24.
At December 31, 2018 and 2017, the Group had interests in the following associates:
Name of entity
Form of
business
structure
Place of and
registration
operation
Percentage of equity
interest attributable to
the Group
12/31/2018
%
12/31/2017
%
Principal activities
Zhejiang Concord Property Investment Co., Ltd.
Corporate
The PRC
(“Zhejiang Concord Property”)
Zhejiang Communications Investment Group Finance
Co., Ltd. (“Zhejiang Communications Finance”)
Corporate
The PRC
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 Management
Corporate
The PRC
Co., Ltd. (“Zheshang Innovation
Capital Management”)
45
35
25
13
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
Zhejiang Big Data Exchange Center Co., Ltd.
Corporate
The PRC
19.8
19.8
Big data asset transaction
(‘’Zhejiang Big Data”) (Note iii)
Ningbo Equity Exchange Co., Ltd.
(‘’Ningbo Equity Exchange”) (Note vii)
Corporate
The PRC
Taiping Science and Technology Insurance
Co., Ltd. (“Taiping Insurance”) (Note iv)
Corporate
The PRC
–
15
40
Listing, registration, custody,
settlement service for equity
product
15
Science and technology related
insurance
Hangzhou XingYuanJuJin Investment
Management LP (‘’XingYuan Investment’)
(Note v)
Partnership
The PRC
5.05
5.05
Investment management
Pujiang JuJinFengAn Investment Management LP
Partnership
The PRC
(“FengAn Investment”) (Note v)
Zheshang FoF for Industry Transformation and
Partnership
The PRC
Upgrading LP (“Zheshang FoF”)
Shanghai Rural Commercial Bank
Co., Ltd (“SRCB”) (Note vi)
Corporate
The PRC
17.86
24.99
5.36
17.86
Investment management
24.99
Investment management and
consulting
–
Commercial banking
All of the above associates are accounted for using the equity method in these consolidated financial statements.
174
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
INTERESTS IN ASSOCIATES (Continued)
24.
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, 2018, the disposal transaction has not been completed and the refundable deposit of
Rmb165,600,000 (2017: Rmb165,600,000) in respect of such transfer reversed by Zheshang Securities was
included in other payables in Note 39.
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.
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.
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.
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.
Dongfang Jujin (as defined in Note 58) 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.
On May 31, 2018, the Company acquired 4.9% equity interest of SRCB at a consideration of Rmb2,712,240,000
and subsequently additional Rmb512,295,000 was injected to SRCB and the percentage of equity interest
increased to 5.36%. The Group is able to exercise significant influence over SRCB because it has the power to
appoint one out of 18 directors of SRCB under the provisions stated in the Articles of Association of SRCB.
(ii)
(iii)
(iv)
(v)
(vi)
(vii) On July 19, 2018, Zheshang Capital Management entered into a contract with Ningbo Finance Holding Co., Ltd.,
an independent third party, to dispose 40% of equity interest in Ningbo Equity Exchange at a consideration of
Rmb21,008,000. The transaction was completed on August 14, 2018 with a disposal gain of Rmb6,645,000.
175
INTERESTS IN ASSOCIATES (Continued)
24.
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
12/31/2018
12/31/2017
Rmb’000
Rmb’000
15,323,779
19,575,483
19,996,453
11,250,792
32,421,821
28,241,765
Year ended
12/31/2018
Rmb’000
1,352,920
409,801
–
409,801
33,565
Year ended
12/31/2017
Rmb’000
817,525
321,398
(2,826)
318,572
–
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
12/31/2018
12/31/2017
Rmb’000
Rmb’000
2,898,411
2,584,510
35%
35%
1,014,444
904,579
176
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
INTERESTS IN ASSOCIATES (Continued)
24.
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
12/31/2018
12/31/2017
Rmb’000
2,236,266
Rmb’000
846,378
21,034,713
21,926,541
19,994,933
19,868,790
600,000
500,000
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
1,606,656
1,389,035
271,917
265,253
–
–
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
Carrying amount of the Group’s interest in
Yangtze United Financial Leasing
12/31/2018
12/31/2017
Rmb’000
Rmb’000
2,676,046
2,404,129
13%
13%
347,886
312,537
177
INTERESTS IN ASSOCIATES (Continued)
24.
Aggregate information of associates that are not individually disclosed above
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
25.
INTEREST IN A JOINT VENTURE
Unlisted investment in a joint venture, at cost less impairment
Share of post-acquisition loss
12/31/2018
12/31/2017
Rmb’000
171,799
–
171,799
3,849,082
Rmb’000
12,530
(1,683)
10,847
469,111
12/31/2018
12/31/2017
Rmb’000
Rmb’000
373,470
(40,368)
333,102
373,470
(70,405)
303,065
At December 31, 2018 and 2017, the Group had interest in the following joint venture:
Name of entity
Form of
business
structure
Place of
registration and
operation
Zhejiang Shaoxing Shengxin Expressway Co., Ltd.
Corporate
The PRC
(“Shengxin Co”)
Percentage of equity
interest attributable to
the Group
12/31/2018
%
12/31/2017
%
50
50
Principal activities
Management of the Shaoxing
section of the Ningbo-Jinhua
Expressway
178
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
INTEREST IN A JOINT VENTURE (Continued)
25.
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
12/31/2018
12/31/2017
Rmb’000
Rmb’000
99,311
64,152
2,146,533
2,326,551
53,072
43,541
1,526,567
1,741,031
The above amounts of assets and liabilities include the following:
Cash and cash equivalents
91,741
55,679
Non-current financial liabilities (excluding trade and
other payables and provisions)
1,473,000
1,683,000
179
INTEREST IN A JOINT VENTURE (Continued)
25.
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)
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
Year ended
12/31/2018
Rmb’000
417,382
60,074
–
Year ended
12/31/2017
Rmb’000
399,335
35,337
–
(182,169)
(180,867)
1,290
(69,580)
(4,464)
663
(79,240)
(4,464)
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
Carrying amount of the Group’s interest in Shengxin Co
12/31/2018
12/31/2017
Rmb’000
Rmb’000
666,205
50%
333,102
606,131
50%
303,065
180
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
26. 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)
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
Rmb’000
21,294
694,418
(3,997)
711,715
264,537
402,144
6,500
1,169,019
(41,365)
1,800,835
2,512,550
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 to external clients, which did not
result in derecognition of the financial assets. Details of the collaterals were set out in Note 34. Upon the initial
application of HKFRS 9 on January 1, 2018, the carrying amount of AFS investments have been all recognised to
financial assets at FVTPL in Note 27.
181
26. 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 prior 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. Upon application of HKFRS 9, the management considers the
fair value of these investments is not materially different from their cost.
(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)
Other investments 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.
(iv)
Included in the balance as at December 31, 2017, Rmb34,865,000 is the cumulative amount of impairment
recognised in relation to AFS equity instruments measured at fair value.
27. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial assets mandatorily measured at FVTPL:
Mandatorily measured at FVTPL
– Debt securities
– Equity securities
– Funds
– Other investments (Note i)
Analysed as:
– Listed (Note ii)
– Unlisted
Analysed for reporting purposes as:
Current assets
Non-current assets
182
12/31/2018
Rmb’000
19,143,054
683,284
908,111
841,357
21,575,806
10,618,484
10,957,322
21,575,806
21,558,606
17,200
21,575,806
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
27. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
(Continued)
Notes:
(i)
Other investments mainly represent investments in collective asset management schemes issued and managed
by the Group, wealth management products issued by banks and targeted asset management schemes (or
trust investments) managed by non-bank financial institutions, which mainly invest in debt securities, publicly
traded equity securities listed in the PRC. The Group has committed to hold its investments in collective asset
management schemes that managed by the Group till the end of the investment period.
(ii)
Securities and funds traded on the Shanghai Stock Exchange, the Shenzhen Stock Exchange, the Hong Kong
Stock Exchange and other stock exchanges are included in the “Listed” category.
28. TRADE RECEIVABLES
Trade receivables
– goods and services
Less: Allowance for credit losses
Trade receivables (before allowance for credit losses) comprise:
Fellow subsidiaries
Third parties
Total trade receivables
12/31/2018
12/31/2017
Rmb’000
Rmb’000
219,458
(3,225)
216,233
10,578
208,880
219,458
246,815
(2,228)
244,587
10,207
236,608
246,815
183
28. 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, Transportation Bureau of Yuhang County of Hangzhou, Transportation
Bureau of Yiwu, 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 credit losses presented based on the
invoice date at the end of the reporting period, which approximated the respective revenue recognition dates:
12/31/2018
12/31/2017
Rmb’000
Rmb’000
180,292
29,793
4,074
2,074
216,233
2018
Under
HKFRS 9
Rmb’000
2,228
997
–
3,225
222,020
20,468
2,010
89
244,587
2017
Under
HKAS 39
Rmb’000
1,406
947
(125)
2,228
Within 3 months
3 months to 1 year
1 to 2 years
Over 2 years
Movement of allowance for credit losses
At the beginning of the year
Impairment recognised for the year
Amount reversed during the year
At the end of the year
184
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
29. CONTRACT ASSET
High grade road construction contract
Less: Allowance for contract asset
12/31/2018
Rmb’000
1/1/2018
Rmb’000
253,248
(380)
252,868
–
–
–
Contract asset, that is not expected to be settled within the Group’s normal operating cycle, is classified as
current and non-current based on expected settlement dates.
Details of contract asset and the typical payment terms which impact on the amount of contract asset recognised
are disclosed in Note 5.
30. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING
BUSINESS
Loans to margin clients
Less: Impairment allowance
12/31/2018
12/31/2017
Rmb’000
Rmb’000
5,854,913
7,893,616
(4,829)
(42,007)
5,850,084
7,851,609
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, 2018, 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 Rmb14,260,228,000 (2017: Rmb22,140,435,000). Cash
collateral of Rmb392,345,000 (2017: Rmb491,032,000) received from clients was included in accounts payable to
customers arising from securities business in Note 37.
185
30. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING
BUSINESS (Continued)
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.
The following table shows reconciliation of loss allowances that has been recognised for loans to customers
arising from margin financing business.
As at January 1, 2018
– Transfer to lifetime
– Transfer to 12m ECL
– Impairment losses recognised
– Impairment losses reversed (Note)
As at December 31, 2018
Lifetime ECL
(not credit-
Lifetime ECL
impaired)
(credit-impaired)
Rmb’000
Rmb’000
2
1
(1)
757
–
759
4,188
–
–
–
(124)
4,064
12m ECL
Rmb’000
37,817
(1)
1
–
(37,811)
6
Total
Rmb’000
42,007
–
–
757
(37,935)
4,829
Note: Reversal of loss allowance is due to the Group’s recovery of the related financial assets during the year.
The tables below detail the credit risk exposures of the Group’s loans to customers arising from margin financing
business, which are subject to ECL assessment.
As at December 31, 2018
Gross carrying amount
Lifetime ECL
(not credit-
impaired)
Rmb’000
419,316
12m ECL
Rmb’000
5,431,533
Lifetime ECL
(credit-impaired)
Rmb’000
Total
Rmb’000
4,064
5,854,913
186
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
31. OTHER RECEIVABLES AND PREPAYMENTS
Entrusted loan and interest receivable from a related party (Note 57(ii))
Interest receivables (Note)
Prepayments
Advances in relation to asset management plans
Receivables from Zhejiang Expressway Maintenance Co., Ltd.
(“Maintenance Co”) in relation to disposal of maintenance equipment
Settlement receivables
Others
12/31/2018
12/31/2017
Rmb’000
Rmb’000
–
–
118,126
–
11,082
198,090
80,386
407,684
78,300
449,848
73,173
229,070
24,021
–
56,814
911,226
Note: As at December 31, 2018, the interests accrued on financial instruments of the Group are included in the
carrying amount of corresponding financial assets.
32. HELD FOR TRADING INVESTMENTS
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% per annum
Unlisted with fixed interest ranging from 2.7% to 8.6% per annum
12/31/2017
Rmb’000
76,734
300,502
5,569,010
6,622,448
12,568,694
Note: As at December 31, 2018, held for trading investments are all presented as financial assets at FVTPL as
disclosed in Note 27.
187
33. PLACEMENTS FROM OTHER FINANCIAL INSTITUTIONS
China Securities Finance Corporation Limited (secured)
12/31/2018
12/31/2017
Rmb’000
400,679
Rmb’000
–
As at December 31, 2018, the placements carried interest at a fixed rate of 4.70% per annum are repayable
within 3 months from the end of the reporting period. The placements were secured by debt securities with total
fair value of Rmb93,963,000 and a cash deposit of Rmb13,481,000 as at December 31, 2018.
34. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS
Analysed by collateral type:
Bonds
Stock securities
Less: Impairment allowance
Analysed by market:
Inter bank market
Shanghai/Shenzhen Stock Exchange
Less: Impairment allowance
12/31/2018
12/31/2017
Rmb’000
Rmb’000
3,091,042
5,166,886
(51,746)
5,147,924
4,716,313
(70,745)
8,206,182
9,793,492
267,237
7,990,691
(51,746)
2,687,848
7,176,389
(70,745)
8,206,182
9,793,492
The collaterals include both equity and debt securities listed in the PRC. As at December 31, 2018, the fair value
of equity securities and debt securities held as collaterals was Rmb12,464,582,000 (2017: Rmb11,098,959,000)
and Rmb3,176,921,000 (2017: Rmb4,523,618,000), respectively.
188
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
34. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS (Continued)
The following table shows reconciliation of loss allowances that has been recognised for financial assets held
under resale agreements.
As at January 1, 2018
– Transfer to credit-impaired
– Transfer to lifetime
– Transfer to 12m ECL
– Impairment losses recognised
– Impairment losses reversed (Note)
As at December 31, 2018
Lifetime ECL
(not credit-
impaired)
Lifetime
ECL (credit-
impaired)
Total
Rmb’000
Rmb’000
Rmb’000
23,185
–
1,397
(6,420)
14,526
–
32,688
–
304
–
–
3,696
–
4,000
70,745
–
–
–
18,222
(37,221)
51,746
12m ECL
Rmb’000
47,560
(304)
(1,397)
6,420
–
(37,221)
15,058
Note: Reversal of loss allowance is due to the Group’s recovery of the related financial assets during the year.
The tables below detail the credit risk exposures of the Group’s financial assets held under resale agreements,
which are subject to ECL assessment.
As at December 31, 2018
Lifetime ECL
(not credit-
impaired)
Lifetime
ECL (credit-
impaired)
Total
Rmb’000
Rmb’000
Rmb’000
12m ECL
Rmb’000
Gross carrying amount
6,268,174
1,916,065
73,689
8,257,928
35. 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 0.8% to 6% (2017: 0.35% to 6%) per annum.
189
35. BANK BALANCES AND CLEARING SETTLEMENT FUND HELD ON
BEHALF OF CUSTOMERS (Continued)
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, 2018
As at December 31, 2017
HKD
Rmb’000
17,714
18,093
USD
Rmb’000
89,770
97,592
36. 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
12/31/2018
12/31/2017
Rmb’000
280,913
Rmb’000
20,000
6,453,245
5,583,691
24,479
5,123
6,477,724
5,588,814
6,758,637
5,608,814
Bank balances carry interest at the average market rate is 0.35%(2017: 0.35%) per annum. Time deposits carry
interest at fixed rates ranging from 0.67% to 3.45%(2017: 0.80% to 2.06%) 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, 2018
As at December 31, 2017
HKD
Rmb’000
44,204
46,096
USD
Rmb’000
511,481
1,560,278
190
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
37. 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, 2018, Rmb392,345,000 (2017: Rmb491,032,000) 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, 2018
As at December 31, 2017
HKD
Rmb’000
17,714
18,093
USD
Rmb’000
89,770
97,592
191
38. TRADE PAYABLES
Trade payables mainly represent the payables for the expressway improvement projects and construction of high
grade road. 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
39. OTHER PAYABLES AND ACCRUALS
Other liabilities:
Accrued payroll and welfare
Advances
Toll collected on behalf of other toll roads
Retention payable
Deposit received for disposal of an associate (Note 24(i))
Other investors’ interests in consolidated limited partnership designated at
FVTPL (Note i)
Payables to fund management companies for clients
Others
Other accruals (Note ii)
12/31/2018
12/31/2017
Rmb’000
329,157
36,175
52,643
60,196
97,294
575,465
Rmb’000
267,464
73,433
112,374
70,812
104,509
628,592
12/31/2018
12/31/2017
Rmb’000
Rmb’000
875,651
1,190,986
17,353
9,672
75,116
165,600
205,903
15,351
265,681
44,879
9,543
98,713
165,600
421,782
130,731
219,270
1,630,327
–
2,281,504
233,895
1,630,327
2,515,399
Notes:
(i)
Other investors’ interests in consolidated limited partnership designated at FVTPL represents the third party
unit holders’ interests in the consolidated limited partnership which are reflected as a liability. Interests in these
consolidated structured entities directly held by the Group amounted to fair value of Rmb172,957,000 and
Rmb339,742,000 at December 31, 2018 and 2017, respectively. As in the opinion of the management, such
designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise
arise.
(ii)
Other accruals as at December 31, 2017 are mainly interest payables and are included in the carrying amount of
the respective liabilities upon initial application of HKFRS 9.
192
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
40. BANK AND OTHER BORROWINGS
Loan from related parties, unsecured (Note 57(i), 57(ii))
Carrying amount repayable:
Within one year
More than one year but not exceeding two years
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
12/31/2018
12/31/2017
Rmb’000
Rmb’000
260,741
260,741
200,741
60,000
–
260,741
(200,741)
60,000
60,475
200,266
260,741
480,000
480,000
420,000
–
60,000
480,000
(420,000)
60,000
60,000
420,000
480,000
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
12/31/2018
12/31/2017
3.00%
4.35%
3.00%
4.22%
The Group’s bank and other borrowings were all dominated in the functional currency of the group entities as at
December 31, 2018 and 2017.
193
41. SHORT-TERM FINANCING NOTE PAYABLE
Unsecured:
Beneficial certificates (Note)
Note:
12/31/2018
12/31/2017
1,551
762,800
As at December 31, 2018, the beneficial certificate bears an interest rate at 8% (2017: 2.0% to 5.3%) per annum paid at
maturity.
42. 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
12/31/2018
12/31/2017
Rmb’000
Rmb’000
11,086,710
–
8,263,414
2,260,000
11,086,710
10,523,414
6,396,287
4,690,423
–
4,018,588
4,244,826
2,260,000
11,086,710
10,523,414
As of December 31, 2018, the above financial assets sold under repurchase agreements include those
repurchase agreements entered into with qualified investors, with maturities within 1 year.
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, 2018, 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.
194
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
42. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS
(Continued)
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, 2018 and
December 31, 2017.
Held for
trading
investments
Financial
assets held
under resale
agreements
Loans to
customers
arising
from margin
financing
business
Financial
assets at
FVTPL
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
–
–
–
–
–
–
–
–
–
9,245,868
9,245,868
(8,689,133)
(8,689,133)
556,735
556,735
–
–
–
11,498,459
(10,523,414)
975,045
As at December 31, 2018
Carrying amount of
transferred assets
Carrying amount of
associated liabilities
Net position
As at December 31, 2017
Carrying amount of
transferred assets
Carrying amount of
7,228,533
1,887,301
2,382,625
associated liabilities
(6,429,268)
(1,834,146)
(2,260,000)
Net position
799,265
53,155
122,625
195
43. BONDS PAYABLE
Corporate and 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:
12/31/2018
12/31/2017
Rmb’000
Rmb’000
1,006,166
14,210,292
–
2,500,000
6,850,000
800,000
15,216,458
10,150,000
(5,766,458)
–
(500,000)
(800,000)
(5,766,458)
(1,300,000)
9,450,000
8,850,000
(i)
This balance represented a subordinated bond (2017: a subordinated bond and a corporate bond) due by year
2021 (2017:2020 to 2021) issued by Zheshang Securities carried fixed interest rate at 3.63% (2017: 3.63% to
4.90%) 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% (2017: 6.63%) per annum for the remaining period till maturity.
As at December 31, 2018, the subordinated bond carried at fixed interest rates at 3.63% (2017: 3.63% to 4.9%)
per annum.
(ii)
This balance represented 7 (2017: 5) subordinated bonds due by year 2019 to 2021 (2017: 2018 to 2021) issued
by Zheshang Securities, without redemption option, with fixed interest rates ranging from 3.08% to 5.93% (2017:
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.
44. DERIVATIVE FINANCIAL ASSETS/LIABILITIES
Derivative financial assets of Rmb4,169,000 (2017: Rmb4,587,000) and derivative financial liabilities of
Rmb3,818,000 (2017: Rmb3,941,000) has been recognised for the fair values of commodity options as at
December 31, 2018.
196
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
45. 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$12.00 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.
197
45. 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.
198
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 45. CONVERTIBLE BOND (Continued)
The movement of the debt and derivative components of the Convertible Bond for the year ended December 31,
2017 and 2018 is set out as below:
Convertible Bond issued on
April 21, 2017
Issue cost
Exchange realignment
Interest charge
Gain on decrease in fair value
Debt component
at amortised cost
Derivative components at
FVTPL
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)
–
8,558
–
132,958
65,941
–
–
–
–
–
–
(1,855)
(13,646)
–
8,558
132,958
65,941
–
(23,004)
(149,479)
(23,004)
(149,479)
As at December 31, 2017
304,504
2,375,831
44,195
344,823
348,699
2,720,654
Exchange realignment
Interest charge
Gain on decrease in fair value
–
13,049
–
13,400
102,703
–
–
–
–
–
13,049
13,400
102,703
–
(16,449)
(127,094)
(16,449)
(127,094)
As at December 31, 2018
317,553
2,491,934
27,746
217,729
345,299
2,709,663
No conversion or redemption of the Convertible Bond has occurred up to December 31, 2018.
The detailed key inputs the valuer uses to calculate the fair value of the derivative component refer to Note 53(c).
46. 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
12/31/2018
12/31/2017
Rmb’000
318,236
(321,889)
(3,653)
Rmb’000
355,803
(394,434)
(38,631)
199
46. 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 and
accounting
depreciation
of property
plant and
equipment and
expressway
operating rights
Changes in
fair value of
investments
carried at
fair value
Fair value
adjustment of
long term
assets arising
from business
combination
Temporary
differences
of accrued
expenses and
impairment
losses
Rmb’000
Rmb’000
Rmb’000
92,227
(27,729)
42,822
107,320
(56,781)
50,539
4,606
(24,155)
–
(19,549)
(20,665)
(40,214)
211,069
(14,402)
–
196,667
(14,402)
182,265
Rmb’000
(292,436)
46,629
–
(245,807)
56,870
(188,937)
Total
Rmb’000
15,466
(19,657)
42,822
38,631
(34,978)
3,653
At January 1, 2017
(Credit) charge to profit or loss
Charge to other comprehensive income
At December 31, 2017
(Credit) charge to profit or loss
At December 31, 2018
As at December 31, 2018, the Group had unused tax losses of approximately Rmb44,488,000 (2017:
Rmb227,964,000). No deferred taxation asset has been recognised due to the unpredictability of future profit
streams. Such unrecognised tax losses will expire within 2021.
47. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial liabilities held for trading:
– Bonds borrowing
Financial liabilities designated at FVTPL:
– Financial liabilities arising from consolidation of
structured entities (Note)
12/31/2018
12/31/2017
Rmb’000
Rmb’000
211,091
223,234
153,623
364,714
150,193
373,427
200
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
47. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
(Continued)
Note:
Financial liabilities designated at FVTPL arising from consolidation of structured entities represent the third party unit
holders’ interests in the consolidated structure schemes and funds. Interests in these consolidated structured entities
directly held by the Group amounted to fair value of Rmb3,115,749,000 and Rmb115,627,000 at December 31, 2018 and
2017, 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.
48. SHARE CAPITAL
Registered, issued and fully paid:
Domestic shares of Rmb1 each
H Shares of Rmb1 each
Number of
shares
12/31/2017
and 2018
Share capital
12/31/2017
and 2018
’000
Rmb’000
2,909,260
1,433,855
2,909,260
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.
201
49. NON-CONTROLLING INTERESTS
Balance at January 1, 2017
Share of total comprehensive income
Increase due to Spin-off and Offering
Dividend declared to non-controlling interests
At December 31, 2017
Share of total comprehensive income
Capital injection from non-controlling interests
Dividend declared to non-controlling interests
At December 31, 2018
Rmb’000
5,858,770
856,875
1,943,382
(109,176)
8,549,851
513,002
38,208
(230,028)
8,871,033
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 58) 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
12/31/2018
12/31/2017
Rmb’000
Rmb’000
57,357,269
51,893,532
3,244,437
4,146,760
34,017,723
30,683,157
9,550,645
9,000,315
8,872,168
8,410,241
8,161,170
7,946,579
202
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
49. NON-CONTROLLING INTERESTS (Continued)
Shangsan Co and its subsidiaries (Continued)
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
Total comprehensive income attributable to owner of the Company
Total comprehensive income attributable to non-controlling interests
Dividends paid to non-controlling shareholders
Net cash used in operating activities
Net cash (used in) from investing activities
Net cash from financing activities
Net cash inflow (outflow)
For the
year ended
12/31/2018
For the
year ended
12/31/2017
Rmb’000
Rmb’000
4,153,684
4,735,530
(2,986,567)
(2,982,545)
1,167,117
2,253
1,752,985
128,083
1,169,370
1,881,068
734,755
432,362
1,036,344
716,641
1,167,117
1,752,985
735,813
433,557
1,096,455
784,613
1,169,370
1,881,068
For the
year ended
12/31/2018
For the
year ended
12/31/2017
Rmb’000
Rmb’000
(218,966)
(98,115)
(1,585,868)
(4,606,648)
(172,052)
3,603,850
920,489
75,645
1,845,930
(3,610,514)
203
49. NON-CONTROLLING INTERESTS (Continued)
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
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 (outflow) inflow
204
12/31/2018
12/31/2017
Rmb’000
Rmb’000
248,820
771,615
53,982
6,967
489,338
470,148
114,948
819,186
72,119
7,323
435,894
418,798
For the
year ended
12/31/2018
Rmb’000
312,038
For the
year ended
12/31/2017
Rmb’000
305,606
(184,676)
(179,014)
127,362
126,592
For the
year ended
12/31/2018
For the
year ended
12/31/2017
Rmb’000
Rmb’000
64,955
62,407
127,362
(11,057)
160,756
(200,860)
(22,377)
(62,481)
64,562
62,030
126,592
(11,058)
214,436
(77,903)
(92,620)
43,913
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
50. 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.
51. COMMITMENTS
Authorised but not contracted for:
– Purchase of machinery and equipment
– Acquisition and construction of properties
– Equity investments
Contracted for but not provided:
– Equity investments
12/31/2018
12/31/2017
Rmb’000
Rmb’000
474,547
433,858
–
3,343,000
4,251,405
290,121
162,019
360,000
–
812,140
52. CAPITAL RISK MANAGEMENT
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 40, 41,
42, 43 and 45, 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.
205
53. FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
Financial assets
Financial assets at FVTPL
Held for trading investments
Derivative financial assets
AFS investments
At cost
At fair value
Loans and receivables (including cash and cash equivalents)
Financial assets at amortised cost
Financial liabilities
Derivative financial liabilities
Financial liabilities at FVTPL
Convertible Bond - derivative component
Other payables measured at fair value
Amortised cost
12/31/2018
12/31/2017
Rmb’000
Rmb’000
21,575,806
–
–
12,568,694
4,169
4,587
–
–
–
36,072,854
3,818
364,714
217,729
205,903
17,297
2,495,253
39,371,562
–
3,941
373,427
344,823
421,782
44,817,493
40,069,638
(b) Financial risk management objectives and policies
The Group’s major financial instruments include financial assets at FVTPL, trade receivables, other receivables,
loans to customers arising from margin financing business, financial assets held under resale agreements,
pledged bank deposit, 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 FVTPL, 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 impairment
assessment 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.
206
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
53. 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, placements 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 FVTPL (see Notes 30, 31, 34, 36, 33, 40, 41, 42, 43, 45 and 47 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 35, 36 and 40 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 50 basis points (2017: 30 basis points) increase or decrease represents the management’s
assessment of the reasonably possible change in interest rates.
If interest rates had been 50 basis points (2017: 30 basis points) higher/lower and all other variables were held
constant, the Group’s post-tax profit for the year ended December 31, 2018 would have increased/decreased by
Rmb78,861,000 (2017: Rmb45,459,000). This was mainly attributable to the Group’s exposure to interest rates on
its variable-rate bank balances and clearing settlement fund.
207
53. 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
12/31/2018
12/31/2017
12/31/2018
12/31/2017
Rmb’000
Rmb’000
Rmb’000
Rmb’000
61,919
601,251
–
64,189
1,657,870
17,714
89,770
18,093
97,593
–
2,709,663
2,720,654
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% (2017: 10%) increase and decrease in Rmb against the relevant foreign currencies. 10% (2017: 10%)
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% (2017: 10%) change in foreign currency rates. A positive
number below indicates an increase in post-tax profit where Rmb strengthen 10% (2017: 10%) against the
relevant currency. For a 10% (2017: 10%) 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.
208
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
53. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(ii)
Currency risk (Continued)
Sensitivity analysis (Continued)
Profit or loss
(38,361)
(117,021)
203,225
Rmb’000
Rmb’000
Rmb’000
Rmb’000
204,049
USD impact
EUR impact
12/31/2018
12/31/2017
12/31/2018
12/31/2017
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 financial assets at FVTPL (2017:
held-for-trading investments and AFS investments), derivative financial assets and liabilities and financial
liabilities at FVTPL.
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.
209
53. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(iii)
Other price risk (Continued)
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.
If the prices of the respective equity and debt instruments had been 5% (2017: 5%) higher/lower,
•
•
•
post-tax profit for the year ended December 31, 2018 would have increased/decreased by
Rmb809,903,000as a result of the changes in fair value of financial assets at FVTPL.
post-tax profit for the year ended December 31, 2017 would have increased/decreased by
Rmb471,326,000 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 for the year ended
December 31, 2017 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 45.
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
53(b)(ii) already.
210
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 53. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(iii)
Other price risk (Continued)
Sensitivity analysis (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
12/31/2018
Rmb’000
(20,356)
12,409
Year ended
12/31/2017
Rmb’000
(61,770)
51,085
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%
Year ended
12/31/2018
Rmb’000
(13,160)
10,397
Year ended
12/31/2017
Rmb’000
(35,954)
37,153
211
53. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment
As at December 31, 2018, 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 56.
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.
Other items under the Group’s different operations with credit risk and corresponding impairment assessment are
set out below:
Toll operation and high grade road construction service
The Group performs impairment assessment under ECL model upon application of HKFRS 9 (2017: incurred loss
model) on trade balances arising from toll operation on collective basis and contract asset on individual basis,
using life-time ECL under the simplified approach.
The Group has no credit period granted to its trade customers of toll operation. All the Group’s trade
receivable balances for toll operation and contract asset, upon the conditions satisfied, are receivable from the
government-operated organisations. In this regard, the directors of the Company consider that the credit risk is
low as the Group has no history of loss experience with the government-operated organisations in the past. No
significant ECL was recognised as at December 31, 2018.
Securities operation
The Group’s securities operation currently faces credit risk primarily from loans to customers arising from margin
financing business, and financial assets held under resale agreements which are secured by clients’ securities
or deposits held as collateral. It refers to the risk of loss arising from the debtor’s failure to meet its contractual
obligations in a timely manner.
212
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 53. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)
Securities operation (Continued)
i)
Credit risk management
Credit risk from loans to customers arising from margin financing business and financial assets held under
resales agreements mainly including the debtor falsifying the application, failing to repay debts, violating the
agreement, violating regulatory discipline of trading behaviour, and providing collateral that involves law dispute,
etc. The Group management authorises professional personnel to examine and approve the credit limit of
these businesses, as well as adjust such credit limit in accordance with the regular assessment of the debtor’s
repayment capacity. Risk management division oversights the collaterals and usage of related credit limit, and
initiates margin call if necessary. Once the debtor fail to enhance the collateral to the account, the credit risk will
be controlled by liquidating the pledged securities.
ii)
Measurement of ECL
Since January 1, 2018, The Group has applied the ECL model to measure the expected credit losses for
applicable financial assets mainly including loans to customers arising from margin financing business and
financial assets held under resale agreements.
The group has used the “3 stage” ECL model to assess the credit losses when its credit risk has increased
significantly since initial recognition:
(i)
An asset moves to stage 1 where there has low risk of default or has not been a significant increase in
credit risk and that are not credit impaired. The Group will continuously monitor its credit risk;
(ii)
An asset moves to stage 2 where there has been a significant increase in credit risk since initial
recognition but that are not credit impaired. The Group does not see it as an impairment loss occurred
instrument;
(iii)
An asset moves to stage 3 when impairment losses occurred; and
(iv)
The loss impairment for financial instruments in stage 1 is anticipated credit losses for the next 12 months,
which correspond to the amount of anticipated credit losses for the entire life time resulting from possible
defaults within the next 12 months. In the second or third stage, the expected credit losses of financial
instruments are measured for the entire life time and the expected credit losses are recorded.
213
53. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)
Securities operation (Continued)
The factors the Group considers whether credit risk increases significantly refer to Note 3. In particular, for loans
to customers arising from margin financing business and financial assets held under resale agreement, the Group
generally believes that when the loan to collateral ratio determined by fair value reaches the warning line, the
credit risk increases significantly and needs to be transferred to “stage 2”, and when the loan to collateral ratio
determined by fair value reaches the liquidation line or expect there would be loss after closing the position
mandatorily, it will be transferred to “stage 3”.
The Group uses PD, EAD and LGD to measure credit risks:
(i)
PD is an estimate of the likelihood of default over a given time horizon, the calculation of which includes
historical data, assumptions and expectations of future conditions;
(ii)
EAD is the amount that the Group should be repaid at the time of default in the next 12 months or
throughout the remaining life; and
(iii)
LGD is an estimate of the loss arising on default. The Group estimates LGD based on the history of
recovery rates and considers the recovery of any collateral that is integral to the financial asset, taking into
account forward-looking economic assumptions where relevant.
The expected credit losses are measured based on the probability weighted results of PD, EAD and LGD.
During the year ended December 31, 2018, no significant changes were made in the estimated technology or key
assumptions.
The assessment of significant increase in credit risk and the measurement of expected credit losses all involve
forward-looking information. Through the analysis of historical data, the Group identifies the key economic
indicators affecting the credit risk and expected credit losses of each asset portfolio. Key economic indicators
include macroeconomic indicators and indicators that can reflect market volatility, including but not limited to
Total Loan Growth Rate (Nationwide), Gross Domestic Product (“GDP”), Industrial Product Price Index (“PPI”),
M2, Consumers Price Index (“CPI”), Stock Index, Business Climate Index, Unemployment Rate, RMB to USD
Exchange Rate, Total Investment in Fixed Assets, Completed Investment in Fixed Assets, Social Financing Scale,
etc.
214
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 53. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)
Securities operation (Continued)
The Group regularly forecasts the economic condition by selecting various indicators within the macroeconomic
indicator pool to make a sound estimation of the ECL.
In order to determine the relationship between these economic indicators and the default probability as well as
the default loss rate, the Group constructs an econometric model to determine the impact of historical changes in
these indicators on the PD and LGD.
The Group makes forward-looking estimation of the ECL based on the scenario reflecting key economic indicators
above. The Group accrues the credit loss provisions for the next 12 months for financial assets in Stage 1, and
accrues the credit loss provisions for the whole life for those financial assets in Stage 2 and Stage 3. The Group
has classified exposures with similar risk characteristics when calculating anticipated credit loss impairment in a
portfolio. During the classification, the Group obtained sufficient information to ensure its statistical reliability.
Other operations
In respect of the Group’s other operations, the management of the Group has delegated a team responsible
for determination of credit limits and credit approvals. Other monitoring procedures are in place to ensure that
follow-up action is taken to recover overdue debts. The Group did not experience significant credit loss on its
other operations, and performs impairment assessment under ECL model upon application of HKFRS 9 (2017:
incurred loss model) on trade balances based on provision matrix. In this regard, the directors of the Company
consider that the Group’s credit risk is significantly reduced.
215
53. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)
The Group’s internal credit risk grading assessment comprises the following categories:
Internal credit rating
Description
Low risk (stage 1)
Doubtful (stage 2)
The counterparty has a low risk
of default and does not have any
past-due amounts
There have been significant
increases in credit risk since initial
recognition through information
developed internally or external
resources
Trade receivables/
contract asset
Lifetime ECL – not
credit-impaired
Other financial
assets/other items
(Note)
12-month ECL
Lifetime ECL – not
credit-impaired
Lifetime ECL –not
credit-impaired
Loss (stage 3)
There is evidence indicating the
asset is credit-impaired
Lifetime ECL –
credit-impaired
Lifetime ECL –
credit-impaired
Write-off
There is evidence indicating that
the debtor is in severe financial
difficulty and the Group has no
realistic prospect of recovery
Amount is written off
Amount is written off
Note: Other financial assets include loans to customers arising from margin financing business, bank balances,
clearing settlement fund, deposits and cash, pledged bank deposit, bank balances and clearing settlement fund
held on behalf customers, financial assets held under agreements and other receivables.
216
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
53. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)
The table below details the credit risk exposures of the Group’s financial assets, contract asset and financial
guarantee contracts, which are subject to ECL assessment:
2018
Notes
Financial assets at amortised cost
Trade receivables (Note i)
28
– toll operation
– securities operation
– others
Loans to customers arising from
margin financing business
– securities operation
30
External
credit
rating
Internal
credit
rating
12-months or
lifetime ECL
Gross
carrying
amount
Rmb’000
N/A
N/A
N/A
N/A
Low risk
Low risk
Low risk
Lifetime ECL
Lifetime ECL
Lifetime ECL
100,270
97,084
22,104
Low risk
Doubtful
Loss
12-month ECL
Lifetime ECL - not
credit-impaired
Lifetime ECL -
credit-impaired
5,431,533
419,316
4,064
Bank balances, clearing
settlement fund, deposits and
cash
36
AA to AAA
Low risk
12-month ECL
6,758,637
Pledged bank deposit – others
AAA
Low risk
12-month ECL
10,000
Bank balances and clearing
settlement fund held on behalf
customers – securities operation
Financial assets held under resale
agreements
– securities operation
Other receivables
Other items
Contract asset (Note i)
– high grade road construction
service
Financial guarantee contracts
(Note ii)
– toll operation
35
34
31
29
56
AA
Low risk
12-month ECL
14,742,161
N/A
Low risk
Doubtful
12-month ECL
Lifetime ECL- not
credit-impaired
Loss
Lifetime ECL-
credit-impaired
N/A
Low risk
12-month ECL
6,268,174
1,916,065
73,689
301,553
N/A
Low risk
Lifetime ECL
253,248
N/A
Low risk
12-month ECL
737,493
217
53. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)
Notes:
i.
The Group has applied the simplified approach in HKFRS 9 to measure the credit loss allowance at their lifetime
ECL for trade receivables and contract asset.
During the year ended December 31, 2018, the Group provided ECL on trade receivables and contract asset by
Rmb997,000 and Rmb380,000, respectively.
ii.
For financial guarantee contracts, the gross carrying amount represents the maximum amount the Group has
guaranteed under the respective contracts.
Concentration of credit risk
As at December 31, 2018, other than the concentration of credit risk on trade receivables, entrusted loan
receivables and financial guarantee contract amounting to Rmb216,233,000 (2017: Rmb244,587,000), nil
(2017: Rmb78,300,000), and Rmb737,493,000 (2017: Rmb842,643,000), 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, 2018 and 2017 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, pledged bank deposits and cash at December 31, 2018
and 2017 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.
218
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 53. 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
2018
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
Placements from banks and
other financial institutions
Bonds payable
Convertible Bond
– debt component
Financial guarantee
Financial liabilities at fair value
through profit or loss
Weighted
average
interest rate
On demand
or
less than
3 months
3 months -
1 year
1 - 3
years
3 - 5 years
%
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Total
undiscounted
cash
flows
Carrying
amount
at
31/12/2018
Rmb’000
Rmb’000
+5 years
Rmb’000
–
–
–
–
–
–
–
–
–
–
–
–
–
14,653,413
14,653,413
575,465
336,445
63,600
203,093
1,581
575,465
336,445
60,475
200,266
1,551
11,159,606
11,086,710
401,442
400,679
16,455,900
15,216,458
2,864,264
2,491,934
737,493
–
364,714
364,714
47,817,016
45,388,110
3.00
4.35
8.00
4.70
4.99
4.28
–
–
–
–
–
14,653,413
575,465
336,445
–
–
–
–
–
–
–
1,800
61,800
2,175
200,918
–
1,581
2.31
11,159,606
401,442
–
–
2,118,600
4,127,900
10,209,400
–
–
–
–
–
–
–
–
–
–
–
–
–
–
737,493
–
–
211,091
153,623
–
–
–
2,864,264
–
–
30,195,730
4,485,822
10,271,200
2,864,264
219
53. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Liquidity risk (Continued)
Liquidity tables (Continued)
Weighted
average
interest rate
On demand
or
less than
3 months
3 months -
1 year
1 - 3
years
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
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
–
–
–
–
–
–
–
–
–
–
–
–
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
10,606,977
10,523,414
11,385,997
10,150,000
2,847,840
2,375,831
842,643
–
373,427
373,427
43,537,259
40,864,847
3.00
4.22
5.01
4.25
4.60
4.28
–
–
–
–
–
14,933,719
628,592
637,064
–
–
–
–
4,370
101,182
1,800
433,206
676,842
8,560,153
2,046,824
–
–
–
63,600
–
–
–
–
–
–
–
–
–
–
1,133,566
650,371
5,615,440
3,986,620
–
842,643
–
–
223,234
150,193
–
–
–
2,847,840
–
–
27,064,523
3,959,236
5,679,040
6,834,460
220
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
53. 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, 2018 and 2017, the Group has not entered into any master netting arrangements with
counterparties. The collaterals of which, such as financial assets held under resale agreement, financial assets
at FVTPL (2017: 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 FVTPL, 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).
221
53. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
For the year ended December 31, 2018
Financial Assets
Classified as
Fair value
as at
31/12/2018
Rmb’000
Fair value
hierarchy
Basis of fair value measurement/valuation
technique(s) and key input(s)
Significant
unobservable input(s)
1)
Equity investments listed in
Financial assets at
499,356
Level 1
Quoted bid prices in an active market.
exchange
FVTPL
2)
Equity securities traded in
Financial assets at
119,158
Level 2
Recent transaction prices.
inactive market
FVTPL
N/A
N/A
Relationship of
unobservable inputs
to fair value
N/A
N/A
47,570
Level 3
Discounted cash flow. The fair value is determined
with reference to the quoted market prices with an
adjustment of discount for lack of marketability.
Discounted for lack of
marketability.
The higher the discount,
the lower the fair value.
3)
Listed funds
Financial assets at
316,786
Level 1
Quoted bid prices in an active market.
FVTPL
4)
Unlisted fund investments
Financial assets at
591,325
Level 2
Based on the net asset values of the equity
FVTPL
investment, with reference to observable market
price.
5)
Debt investments listed
in exchange and debt
investment in interbank
market
Financial assets at
4,092,848
Level 1
Quoted bid prices in an active market.
FVTPL
15,050,206
Level 2
Discounted cash flow. Future cash flows are
6)
Investments in structured
Financial assets at
688,025
Level 2
products
FVTPL
7)
Investments in trust products
Financial assets at
153,332
Level 3
FVTPL
estimated based on applying the interest yield
curves of different types of bonds as the key
parameter.
The fair value was based 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..
The fair value was based 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.
8)
Private equity investments
Financial assets at
17,200
Level 3
Calculated based on pricing/yield such as
FVTPL
price-to-earnings (P/E) of comparable companies
with an adjustment of discount for lack of
marketability
222
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Future cash flows and
discount rate
P/E multiples P/
B multiples P/
S multiples
Discounted for lack
of marketability
The higher the future cash
flows, the higher the
fair value. The higher
the discounted rate, the
lower the fair value.
The higher the discount,
the lower the fair value.
The higher the multiples,
the higher the fair value
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
53. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
For the year ended December 31, 2017
Financial Assets
1)
Equity investments listed in
exchange
Classified as
Held for trading
investments
Fair value
as at
31/12/2017
Rmb’000
Fair value
hierarchy
Basis of fair value measurement/valuation
technique(s) and key input(s)
Significant
unobservable input(s)
76,734
Level 1
Quoted bid prices in an active market.
Relationship of
unobservable inputs
to fair value
N/A
N/A
N/A
N/A
2)
Equity securities traded in
AFS investments
179,274
Level 2
Recent transaction prices.
inactive market
751,530
Level 3
Discounted cash flow. The fair value is determined
with reference to the quoted market prices with an
adjustment of discount for lack of marketability.
Discounted for lack of
marketability.
The higher the discount,
the lower the fair value.
3)
Listed funds
Held for trading
investments
AFS investments
300,502
Level 1
Quoted bid prices in an active market.
63,881
Level 1
Quoted bid prices in an active market.
4)
Unlisted fund investments
AFS investments
59,970
Level 2
Based on the net asset values of the equity
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
Held for trading
investments
6)
Investments in structured
AFS investments
868,579
Level 2
products
investment, with reference to observable market
price.
271,579
Level 3
Net asset of the fund which is determined by the fair
value of underlying investments.
5,569,010
Level 1
Quoted bid prices in an active market.
6,622,448
Level 2
Discounted cash flow. Future cash flows are
estimated based on applying the interest yield
curves of different types of bonds as the key
parameter.
The fair value was based 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.
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
46,214
Level 3
Discounted cash flows. Future cash flows are
Future cash flows and
estimated based on expected applicable yield of
the underlying investment portfolio and adjustment
of related expenses.
discount rate
7)
Investments in trust products
AFS investments
254,226
Level 3
Discounted cash flows. Future cash flows are
Future cash flows and
estimated based on expected applicable yield of
the underlying investment portfolio and adjustment
of related expenses.
discount rate
223
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.
53. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
Financial Liabilities
Classified as
Fair value
as at
31/12/2018
Rmb’000
Fair value
as at
31/12/2017
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)
Investments in interbank
Financial liabilities
211,091
223,234
Level 2
market
at FVTPL
2)
Investments in asset
Financial liabilities at
153,623
150,193
Level 2
management scheme
FVTPL
Other payables and
205,903
421,782
Level 2
accruals
3) Other investors’ interests
in consolidated limited
partnership designated
as FVTPL
4)
Derivative component of
Convertible Bond
N/A
N/A
N/A
N/A
N/A
N/A
Discounted cash flow. Future cash flows are
estimated based on applying the interest
yield curves of different types of bonds as
the key parameter.
Shares of the net assets 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.
Shares of the net assets 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.
Derivative
217,729
344,823
Level 3
Binomial option pricing model Expected
component of
Convertible Bond
volatility: 29.29% (2017:31.82%) Dividend
yield: nil Risk-free rate: 1.77% (2017:1.54%)
Share price: HK$6.79 (equivalent to
Rmb5.95) (2017: HK$8.59 (equivalent
to Rmb7.18)) Exercise price: HK$12.00
(equivalent to Rmb10.51) (2017: HK$12.54
(equivalent to Rmb10.48))
The higher the
expected volatility,
the higher the fair
value
Expected volatility of
29.29%, 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
There were no transfer between Level 1 and Level 2 during the year.
224
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
53. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
As at December 31, 2018
Financial assets at FVTPL
– Equity securities
– Fund
– Debt investments
– Asset management plans
– Trust products
– Private equity Investment
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
499,356
316,786
119,158
591,325
4,092,848
15,050,206
–
–
–
688,025
–
–
47,570
–
–
–
153,332
17,200
666,084
908,111
19,143,054
688,025
153,332
17,200
Sub-total
4,908,990
16,448,714
218,102
21,575,806
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
Financial liabilities at FVTPL
– Bonds
– Asset management scheme
Sub-total
Other investors’ interests in
consolidated limited partnership
designated as FVTPL
Derivative component of Convertible
Bond
211,091
153,623
364,714
205,903
–
–
–
–
211,091
153,623
364,714
205,903
–
217,729
217,729
–
–
–
–
–
225
53. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
As at December 31, 2017
Held for trading investments
– Equity securities
– Open-ended fund
– Bonds
Sub-total
AFS investments
– Equity
– Fund
– Structured products
– Trust products
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
76,734
300,502
–
–
5,569,010
6,622,448
5,946,246
6,622,448
–
–
–
–
76,734
300,502
12,191,458
12,568,694
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
–
63,881
–
–
179,274
59,970
868,579
–
751,530
271,579
46,214
254,226
930,804
395,430
914,793
254,226
Sub-total
63,881
1,107,823
1,323,549
2,495,253
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
Financial liabilities at FVTPL
– Bonds
– Asset management scheme
Sub-total
Other investors’ interest in
consolidated limited partnership
designated as FVTPL
Derivative component of Convertible
Bond
223,234
150,193
373,427
421,782
–
–
–
–
223,234
150,193
373,427
421,782
–
344,823
344,823
–
–
–
–
–
226
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
53. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
The following tables represent the changes in Level 3 financial assets at FVTPL during the years ended
December 31, 2018 and AFS during the years ended December 31, 2017, respectively. For the changes in Level
3 derivative component of Convertible Bond during the year ended December 31, 2018 and 2017, please refer to
Note 45.
For the year ended December 31, 2018
Financial assets at FVTPL:
Structured
Trust
Restricted
Equity
At beginning of the year
Additions
Disposal
Changes in fair value changes
Transfer out of level 3 (Note)
At end of the year
products
Rmb’000
46,214
–
products
Rmb’000
254,226
10,000
(46,214)
(110,894)
shares
investments
Funds
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
751,530
47,570
–
(385,814)
(365,716)
–
–
17,297
271,579
1,340,846
–
(97)
–
–
–
57,570
(271,579)
(428,784)
–
–
–
(385,814)
(365,716)
218,102
153,332
47,570
17,200
–
–
–
Note: For the year ended December 31, 2018, the Group reclassified the restricted shares previously classified as
Level 3 to Level 2 with fair value of Rmb365,716,000 as these shares became tradable in exchange market in the
current year.
For the year ended December 31, 2017
AFS investments
At beginning of the year
Addition
Disposal
Total gain recognised in other
comprehensive income
Recognised in other fair value
changes
Trust
Restricted
Structured
products
Rmb’000
133,387
45,100
products
Rmb’000
10,000
250,000
(132,580)
(10,000)
shares
Funds
Total
Rmb’000
Rmb’000
Rmb’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
227
53. 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 31/12/2018
As at 31/12/2017
Carrying
amount
Rmb’000
Fair
value
Rmb’000
Carrying
amount
Rmb’000
Fair
value
Rmb’000
Debt component of Convertible Bond
2,491,934
2,530,656
2,375,831
2,402,383
The fair value of the debt component of Convertible Bond as at December 31, 2018 is under level 3 category and
was determined by the Directors with reference to the valuation performed by a firm 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.
228
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
54. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING
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.
Accrued share
issue cost in
respect of
Spin-off
and Offering
Capital
injection by
non-controlling
interest
Total
Rmb’000
Rmb’000
Rmb’000
Dividends
payable
Note 16
Rmb’000
Bank and
other
borrowings
Note 40
Rmb’000
Bonds
payable
Note 43
Rmb’000
Convertible
Bond
Note 45
Rmb’000
Accrued issue
cost for
Convertible
Bond
Note 45
Rmb’000
At January 1, 2018
261,239
480,000
10,150,000
2,734,300
(13,646)
Financing cash flows
(1,813,349)
(220,000)
4,800,000
–
Non-cash changes
Fair value adjustment
Exchange realignment
Accrued interest
Dividends declared
to owners of the
Company and
non-controlling
interests
–
19,995
–
–
–
741
–
–
266,458
(127,094)
13,400
102,703
1,532,962
–
–
–
–
–
–
–
–
Short-term
financing
note
payable
Note 41
Rmb’0000
762,800
(761,250)
–
–
1
–
At December 31, 2018
847
260,741
15,216,458
2,723,309
(13,646)
1,551
At January 1, 2017
261,046
2,116,395
Financing cash flows
(1,646,610)
(1,627,269)
9,700,000
450,000
–
–
4,828,340
2,684,880
(16,725)
(4,065,540)
(59,866)
Non-cash changes
Fair value adjustment
Exchange realignment
Accrued interest
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
–
(4,179)
–
1,650,982
–
–
–
(9,126)
–
–
–
–
–
–
–
–
–
–
(149,479)
132,958
65,941
–
–
–
–
–
–
–
–
3,079
–
–
–
–
–
–
At December 31, 2017
261,239
480,000
10,150,000
2,734,300
(13,646)
762,800
–
–
–
–
59,866
–
–
229
–
–
–
–
–
–
–
–
–
14,374,693
38,208
2,043,609
–
–
–
–
(127,094)
33,395
369,903
1,532,962
38,208
18,227,468
–
–
–
–
–
–
–
–
–
16,905,781
(4,281,130)
(149,479)
119,653
65,941
1,650,982
59,866
3,079
14,374,693
55. OPERATING LEASES
The Group as lessee
Minimum lease payments
Year ended
12/31/2018
Rmb’000
Year ended
12/31/2017
Rmb’000
82,678
70,917
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
12/31/2018
12/31/2017
Rmb’000
Rmb’000
77,037
184,918
76,428
338,383
42,266
58,657
745
101,668
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.
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
12/31/2018
12/31/2017
Rmb’000
Rmb’000
28,090
61,797
16,997
26,849
58,815
20,661
106,884
106,325
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.
230
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
56. CONTINGENT LIABILITIES
Guarantees given to bank, in respect of a joint venture (Note)
12/31/2018
12/31/2017
Rmb’000
737,493
Rmb’000
842,643
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, 2018, the bank borrowings
of Shengxin Co and accrued interest amounted to Rmb1,474,985,000 (2017: principal of Rmb1,683,000,000 and
accrual interest of 2,287,000). The Directors consider that the fair value of the guarantee is insignificant at initial
recognition and default by the guaranteed party is not probable, therefore no provision for financial guarantee
contract had been made as at 31 December 2018 and 2017.
57. 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 Communications Group and government
related parties
Details of significant transactions with Communications Group are summarised below:
Entrusted loans
Pursuant to the entrusted loan contracts entered into between the Company and Zhejiang Highway Logistic
Company Limited (“Logistic Co”), a wholly-owned subsidiary of the Communications Group, 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
12/31/2018
For the
year ended
12/31/2017
Rmb’000
Rmb’000
1,825
475
231
57. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(i) Transactions and balances with Communications Group and government
related parties (Continued)
Management and Administrative services
The Company has entered into agreements with the Communications Group and its subsidiaries, pursuant to
which, the Company would provide the management and administrative services for six toll roads, including
Shenjiahuhang Expressway, Shensuzhewan Expressway, South Line of Qianjiang Channel, Ningbo Yongtaiwen
Expressway, Taizhou Yongtaiwen Expressway and Zhoushan Bay Bridge. According to the agreements, the
Company would charge the Communications Group and its subsidiaries management fee on actual cost basis.
During this year, a total management fee of Rmb5,956,000 (2017: Rmb1,199,000) 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
Road maintenance service expenses incurred
Construction cost incurred (Note b)
System development and maintenance, expressway mechanical and
electrical engineering services expenses incurred
Operation information services expenses incurred
Toll road related inspection services expense incurred
Interest expenses in respect of beneficial certificates incurred
Financial advisory service income earned
Notes:
For the
year ended
12/31/2018
For the
year ended
12/31/2017
Rmb’000
Rmb’000
9,955
2,967
2,019
345,916
73,952
37,872
–
7,006
5,348
8,064
9,876
2,809
5,614
343,527
–
38,608
9,267
9,478
–
12,075
(a)
Pursuant to the leasing and operation agreement entered into between Jinhua Co (as defined in Note 58) and
Zhejiang Communications Investment Group Industrial Development Co., Ltd. (“Zhejiang Communications
Investment “), an indirect subsidiary of the Communications Group, 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.
232
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
57. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(i) Transactions and balances with Communications Group and government
related parties (Continued)
Other transactions (Continued)
Notes (Continued):
(a)
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)
On June 7, 2018, Deqing County De’an Highway Construction Co., Ltd.. (“Deqing Co”), a non-wholly owned
subsidiary of the Company, entered into a construction agreement with Zhejiang Hongtu Transportation
Construction Co., Ltd. (“Zhejiang Hongtu”), pursuant to which Zhejiang Hongtu would act as a subcontractor and
provide expressway construction service to Deqing Co. Zhejiang Hongtu is the non-controlling shareholder of
Deqing Co and is also an indirect non-wholly owned subsidiary of Communications Group.
Others
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.
In addition, the Group has entered into other banking 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.
233
57. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other 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.
Loan advanced from Zhejiang Communications Finance
In prior years, Zhejiang Communications Finance provided Huihang Co with several short-term loans with
aggregated principal amount of Rmb15,000,000 at fixed interest rates of 3.915% per annum, with maturities in
2017. All these loans were repaid in 2017.
During the year, Zhejiang Communications Finance provided Hanghui Co with short-term loan which bears
variable interest rates of 4.2195% to 4.35% (2017: 3.915% to 4.2195%) with aggregated principal amount of
Rmb610,000,000 (2017: Rmb1,580,000,000). The short-term loans totalling Rmb863,858,000 (2017: principal of
Rmb1,160,000,000 and interest of Rmb12,036,000) had been repaid during the current year.
Outstanding loan payable balances:
repayable within one year
interest payable (Note)
Interest expenses incurred
12/31/2018
12/31/2017
Rmb’000
Rmb’000
200,741
–
200,741
420,000
148
420,148
For the
year ended
12/31/2018
For the
year ended
12/31/2017
Rmb’000
Rmb’000
41,558
18,529
Note:
Interest payable as at December 31, 2017 was included in “Other payable and accruals” in Note 39.
234
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
57. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other related parties
(Continued)
Financial service provided by Zhejiang Communications Finance (Continued)
Deposits to Zhejiang Communications Finance
Bank balances and cash
– Cash and cash equivalents
Interest income earned
12/31/2018
12/31/2017
Rmb’000
Rmb’000
311,133
1,301,639
For the
year ended
12/31/2018
For the
year ended
12/31/2017
Rmb’000
Rmb’000
15,322
6,612
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 31)
Interest income earned
12/31/2018
12/31/2017
Rmb’000
Rmb’000
–
–
–
–
77,650
650
78,300
78,300
For the
year ended
12/31/2018
For the
year ended
12/31/2017
Rmb’000
Rmb’000
438
11,125
235
57. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other related parties
(Continued)
Short-term loan advanced to Zhejiang Canal Concord Property Co., Ltd.
(“Zhejiang Canal Concord”) (Continued)
During the year, the Group did not advance any additional entrusted loans to Zhejiang Canal Concord, a
subsidiary of Zhejiang Concord Property (2017: Rmb210,000,000) and received settlement of loan principals and
interests amounting to Rmb77,650,000 (2017: Rmb552,350,000) and Rmb1,115,000 (2017: Rmb14,754,000),
respectively. All these loans were repaid in the current year. The amounts were unsecured and repayable in
accordance with the terms of entrusted loan agreements entered into between the Group and Zhejiang Canal
Concord. 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.
Sales of asset management schemes and beneficial certificates to Zhejiang
Communications Finance
During the current year, Zheshang Securities Asset Management Co., Ltd. (“Asset Management”, an indirect
subsidiary of the Company) sold 400,000,000 units (equivalent to Rmb400,000,000) of asset management
schemes to Zhejiang Communications Finance, which were all early terminated in the same year. In 2016, Asset
Management sold 69,000,000 units (equivalent to Rmb69,000,000) of asset management schemes to Zhejiang
Communications Finance and all of them were terminated subsequently in March 2017. Management fee and
performance fee income of Rmb4,401,000 and Rmb3,848,000 respectively were earned by the Group from
managing these asset management schemes in 2017.
During the current year, Zheshang Securities also sold beneficial certificates amounting Rmb800,000,000 to
Zhejiang Communications Finance, which were all due in the current year and related interest expense amounting
Rmb7,841,000 was fully paid.
(iii) Key management emoluments
The remuneration of the directors, supervisors and key management personnel during the year was
Rmb6,799,000 (2017: Rmb7,454,000) including retirement benefit scheme contribution of Rmb172,000 (2017:
Rmb216,000) which is determined by the performance of the individuals and the market trends.
236
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 58. 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
Principal activities
Rmb
Direct
Indirect
12/31/2018
12/31/2017
12/31/2018
12/31/2017
Zhejiang Yuhang Expressway
Co., Ltd. (“Yuhang Co”)
Note 1
75,223,000
%
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
Zhejiang Expressway Vehicle
Towing and Rescue Services
Co., Ltd. (“Towing Co”)
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
Zheshang Securities
Note 5
3,333,333,400
Zheshang Futures
Note 6
500,000,000
Zheshang Capital Management
Note 7
170,000,000
Asset Management
Note 8
500,000,000
Ningbo Dongfang Jujin Investment
Note 9
1,000,000
Management Co., Ltd
(“Dongfang Jujin”)
Ningbo Dongfang Jujin Jiahua
Note 10
29,150,000
Investment Management Center
(Limited Partnership)
(“Dongfang Jujin Jiahua”)
Zhejiang Zheqi Co., Ltd.
(“Zhejiang Zheqi”)
Note 11
200,000,000
–
–
–
–
–
–
*46.9321
*46.9321
Operation of securities business
**46.9321
**46.9321
Operation of securities business
**46.9321
**46.9321
Operation of securities business
**46.9321
**46.9321
Provision of asset management service
**46.9321
**46.9321
Provision of investment management
and advisory services
**14.7317
**14.7317
Provision of investment management
and advisory and private equity
investments
–
**46.9321
**46.9321
Trading of future
–
–
–
–
–
–
–
237
58. 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
Principal activities
Rmb
Direct
Indirect
12/31/2018
12/31/2017
12/31/2018
12/31/2017
Zhejiang Jinhua Yongjin Expressway
Note 12
1,900,000,000
Co., Ltd. (“Jinhua Co”)
%
100
%
100
Hanghui Co
Note 13
1,812,280,000
88.674
88.674
Hangzhou Jujin Jiawei Investment
Note 14
206,103,000
Management (Limited Partnership)
(“Jujin Jiawei”)
Zheshang International Financial
Note 15
8,011,000
Holding Co., Limited
–
–
–
–
Huihang Co
Note 16
1,950,000,000
100
100
%
–
–
%
–
–
**21.1323
**21.1323
Management of the Jinhua Section of
the Ningbo-Jinhua Expressway
Management of the Zhejiang Section of
the Hangzhou-Ruili Expressway
Provision of investment management
and advisory and private equity
investments
**46.9321
**46.9321
Trading of future
–
–
Management of the Anhui Section of
the Hangzhou-Ruili Expressway
Expressway
Construction and management
Deqing Co
Note 17
100,000,000
80.1
–
–
*
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.
238
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 58. PARTICULARS OF SUBSIDIARIES OF THE COMPANY (Continued)
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.
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.
239
58. PARTICULARS OF SUBSIDIARIES OF THE COMPANY (Continued)
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 Huihang Co then became a subsidiary and directly held by the Company as at
December 31, 2016.
Note 17: Deqing Co was established on April 12, 2018 in the PRC as a limited liability company.
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, 2018, Zheshang Securities
has issued subordinated bonds, corporate bonds and beneficial certificates at the total principal amount
of Rmb7,600,000,000, nil and Rmb9,473,360,000 (2017: Rmb3,500,000,000, nil and Rmb762,800,000),
respectively.
INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES
59.
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, 2018 and
2017. Except for the structured entities the Group has consolidated as disclosed in Note 47, 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
Rmb153,292,980,000 and Rmb171,366,885,000 as at December 31, 2018 and 2017, respectively. The Group
classified the investments in unconsolidated funds and asset management schemes as financial assets at FVTPL
(2017: available for sale investments and held for trading as appropriate). As at December 31, 2018 and 2017,
the carrying amounts of the Group’s interests in unconsolidated funds and asset management schemes are
Rmb1,749,468,000 and Rmb1,744,411,000, respectively.
240
For the year ended December 31, 2018Notes to the Consolidated Financial Statements 60. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
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
CURRENT ASSETS
Trade receivables
Other receivables
Prepaid lease payments
Amount due from subsidiaries
Dividend receivable
Bank balances and cash
– Cash and cash equivalents
12/31/2018
12/31/2017
Rmb’000
Rmb’000
483,279
15,136
489,863
15,728
2,846,670
3,191,903
9,145
11,424,869
4,419,756
373,470
10,386
11,271,077
1,195,221
373,470
19,572,325
16,547,648
38,133
80,480
592
706,994
97,731
42,651
161,783
592
1,234,205
–
1,908,124
2,345,458
2,832,054
3,784,689
241
60. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
(Continued)
CURRENT LIABILITIES
Trade payables
Tax liabilities
Other taxes payable
Other payables and accruals
Amount due to subsidiaries
Dividend payable
Bank and other borrowings
NET CURRENT (LIABILITIES) ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Bank and other borrowings
Convertible Bond
Deferred tax liabilities
CAPITAL AND RESERVES
Share capital
Reserves
12/31/2018
12/31/2017
Rmb’000
Rmb’000
67,376
195,041
12,227
194,995
4,132,442
–
475
88,181
188,317
8,529
199,783
2,859,792
260,587
–
4,602,556
3,605,189
(1,770,502)
179,500
17,801,823
16,727,148
60,000
60,000
2,709,663
2,720,654
78,720
82,647
2,848,383
2,863,301
14,953,440
13,863,847
4,343,115
10,610,325
4,343,115
9,520,732
14,953,440
13,863,847
242
For the year ended December 31, 2018Notes to the Consolidated Financial Statements
60. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
(Continued)
Movement of share capital and reserve of the Company was set out below.
Investment
Share
capital
Share
Statutory
valuation
Dividend
Special
Retained
premium
reserves
reserve
reserve
reserves
profits
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
At December 31, 2016
4,343,115
3,645,726
2,364,430
Total comprehensive income
for the year
Interim dividend
Final dividend
Proposed final dividend
–
–
–
–
–
–
–
–
–
–
–
–
At December 31, 2017
4,343,115
3,645,726
2,364,430
Total comprehensive income
for the year
2017 dividend
Proposed dividend
–
–
–
–
–
–
–
–
–
At December 31, 2018
4,343,115
3,645,726
2,364,430
–
–
–
–
–
–
–
–
–
–
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
–
(1,302,934)
1,628,668
–
–
–
2,392,527
2,392,527
–
(1,302,934)
(1,628,668)
–
1,628,668
18,666
2,952,835
14,953,440
243
61. EVENTS AFTER THE REPORTING PERIOD
On December 13, 2018, the Company and Communications Group entered into equity purchase agreement (the
“Equity Purchase Agreement”), pursuant to which Communications Group conditionally agreed to sell and the
Company conditionally agreed to acquire the entire equity interest in Zhejiang Shenjiahuhang Expressway Co.,
Ltd. (“Zhejiang Shenjiahuhang”) at a cash consideration of Rmb2,943,000,000. On the same day, the board of
directors of the Company also approved and resolved to submit to the shareholders of the Company to consider,
and if thought fit, to approve the offer and issuance of the mid-term notes (the “Proposed Mid-term Notes Issue”)
of no more than Rmb3,000,000,000 for a term of no more than five years.
The Equity Purchase Agreement and the Proposed Mid-term Notes Issue were approved by the extraordinary
general meeting subsequently on March 4, 2019.
The acquisition of Zhejiang Shenjiahuhang upon completion will be accounted for as business combination
under common control using the merger accounting method. The financial impact of this acquisition is still under
assessment by the Group.
244
For the year ended December 31, 2018Notes to the Consolidated Financial Statements (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 6 to 132, which comprise the consolidated
statement of financial position as at December 31, 2018, 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, 2018, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards
(the “HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “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.
245
Independent Auditor’s Report Key audit matter
How our audit addressed the key audit matter
Impairment of loans to customers arising from margin financing business and financial assets held under
resale agreements
As disclosed in Note 2, the Group has applied
HKFRS 9 Financial Instruments since January
1, 2018 and the impairment of financial assets is
assessed with expected credit loss (“ECL”) model
instead of incurred loss model. 12-month ECL and
lifetime ECL are recognised respectively based on
whether there has been a significant increase in
credit risk since initial recognition. The application of
ECL model mainly affects loans to customers arising
from margin financing business and financial assets
held under resale agreements. As at December 31,
2018, the Group held loans to customers arising
from margin financing business and financial assets
held under resale agreements with gross amount
o f R m b5,854,913,000 a n d R m b8,257,928,000,
respectively, which the Group had recognised a
cumulative amount of impairment allowance of
Rmb4,829,000 and Rmb51,746,000, respectively, as
disclosed in Notes 30 and 34.
As disclosed in Note 4, the application of ECL
model involves significant accounting estimation and
judgement in determining the models, assumptions
and key inputs used for measuring ECL, including
probability of default (“PD”), loss given default
(“LGD”), and whether there has been a significant
increase in credit risk or whether credit loss has
occurred.
We identified the impairment of loans to customers
arising from margin financing business and financial
assets held under resale agreements as a key
audit matter due to the significant judgement and
estimation applied by the management in assessing
impairment.
Our procedures in relation to management’s
impairment assessment of loans to customers
arising from margin financing business and financial
assets held under resale agreements included:
•
U n d e r s t a n d i n g a n d e v a l u a t i n g d e s i g n
and implementation of key controls of
management over the measurement of ECL
allowances;
•
Understanding the ECL model used by the
Group, utilising internal expert on evaluating
the appropriateness of the ECL model and
the critical assumptions and parameters
used in the model;
•
Selecting samples on the credit review
performed by the Group and reviewing the
parameters and judgement made by the
management including the stages of the
financial instruments, PD and LGD, the
expected future cash flow, counterparties
and guarantors, and the realisation of
collateral held; and
•
Recalculating the provision and comparing
the results with those estimated by the
Group.
246
Independent Auditor’s Report
Key audit matter
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
c o l l e c t i v e a s s e t m a n a g e m e n t s c h e m e s a n d
investment funds where the Group was involved
as an investment manager and/or an investor.
T h e G r o u p a p p l i e d s i g n i f i c a n t j u d g e m e n t i n
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.
A s d i s c l o s e d i n N o t e 4, f o r c o l l e c t i v e a s s e t
m a n a g e m e n t s c h e m e s a n d i n v e s t m e n t f u n d s
where the Group involved as a manager and/
or an investor, the Group assessed whether the
combination of investments it held 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 39, 47 and 59 to the consolidated financial
statements, respectively.
How our audit addressed the key audit matter
Our procedures in relation to the management’s
determination of consolidation scope included:
•
U n d e r s t a n d i n g a n d e v a l u a t i n g d e s i g n
and implementation of key controls of
t h e m a n a g e m e n t i n d e t e r m i n i n g t h e
consolidation scope as set out in HKFRS10
of interests in structured entities;
•
Checking the information used by the
management in assessing the consolidation
criteria of significant structured entities
against the related supporting, including
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.
247
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 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.
248
Independent Auditor’s Report 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.
•
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.
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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.
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 18, 2019
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Independent Auditor’s Report CHAIRMAN
YU Zhihong
EXECUTIVE DIRECTORS
CHENG Tao
LUO Jianhu (General Manager)
STATUTORY ADDRESS
12/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
PRC 310007
Tel : 86-571-8798 5588
Fax: 86-571-8798 5599
NON-EXECUTIVE DIRECTORS
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:
Ashurst Hong Kong
11/F, Jardine House
1 Connaught Place
Central, Hong Kong
As to English law:
Ashurst LLP
Broadwalk House
5 Appold Street
London EC2A 2AG
United Kingdom
DAI Benmeng
YU Qunli
YU Ji
INDEPENDENT
NON-EXECUTIVE DIRECTORS
PEI Ker-Wei
LEE Wai Tsang, Rosa
CHEN Bin
SUPERVISORS
YAO Huiliang
HE Meiyun
WU Qingwang
ZHAN Huagang
WANG Yubing
COMPANY SECRETARY
Tony ZHENG
AUTHORIZED REPRESENTATIVES
YU Zhihong
LUO Jianhu
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Corporate Information As to PRC law:
T & C Law Firm
11/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
PRC 310007
AUDITORS
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
H SHARE REGISTRAR AND
TRANSFER OFFICE
Hong Kong Registrars Limited
Room 1712-1716, 17/F, Hopewell Centre
183 Queen’s Road East
Hong Kong
H SHARES LISTING INFORMATION
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
Jiefang Road Branch
Shanghai Pudong Development Bank,
Hangzhou Branch
www.zjec.com.cn
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Corporate Information Location Map of Expressways in Zhejiang Province 浙江滬杭甬高速公路股份有限公司年度報告