Zhejiang Expressway Co., Ltd Annual Report 2019

FY2019 Annual Report · Zhejiang Expressway Co., Ltd
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2019 Annual Report

Striving For Excellence

The  image  on  the  cover  is  Xihoumen  Bridge,  which  is  an 
important  section  of  Zhoushan  Bay  Bridge  and  was  awarded 
the  Outstanding  Project  Award  of  the  year  2015  by  FIDIC 
(International Federation of Consulting Engineers).

2019
ANNUAL REPORT

CONTENTS
CONTENTS

 Definition of Terms

 Company Profile

 Corporate Structure of the Group

Review of Major Corporate Events

Particulars of Major Road Projects

Financial and Operating Highlights

Chairman’s Statement

  Management Discussion and Analysis

Principal Risks and Uncertainties

Corporate Governance Report

 Directors, Supervisors and Senior Management Profiles

 Report of the Directors

Report of the Supervisory Committee

 Connected Transactions

 Independent Auditor’s Report

Consolidated Financial Statements & Notes

Independent Auditor’s Report
(Issued by a third country auditor registered with 

the UK Financial Reporting Council)
Corporate Information

Location Map of Expressways in 

Zhejiang Province

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4
5
6
8
10

13
17
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38
51

71
81
83
96
102

281

287
289

Associate

has the meaning ascribed to it under the Listing Rules

Audit Committee

the audit committee of the Company

Board

China Merchants

Company or Zhejiang 

Expressway

Communications Group

the board of directors of the Company
China  Merchants  Expressway  Network  &  Technology  Holdings  Co  Ltd.  (招商局公路網絡科技控股股
份有限公司),  a  joint  stock  limited  company  established  in  the  PRC  on  December  18,  1993,  whose 
shares are listed on the Shenzhen Stock Exchange

Zhejiang  Expressway  Co.,  Ltd.,  a  joint  stock  limited  company  incorporated  in  the  PRC  with  limited 
liability on March 1, 1997
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

De’an Co

Directors

GDP

Group

H Shares

Hanghui Co

Huihang Co

has the meaning ascribed to it under the Listing Rules
Deqing  County  De’an  Highway  Construction  Co.,  Ltd.  (德清縣德安公路建設有限責任公司),  a  80.1% 
owned  subsidiary  of  the  Company,  which  is  established  with  Zhejiang  Hongtu  Transportation 
Construction Company (浙江交工宏途交通建設有限公司) for PPP Project in Deqing County

the directors of the Company

gross domestic product

the Company and its subsidiaries

the  overseas  listed  foreign  shares  of  Rmb1.00  each  in  the  share  capital  of  the  Company  which  are 
primarily  listed  on  the  Hong  Kong  Stock  Exchange  and  traded  in  Hong  Kong  dollars  since  May  15, 
1997
Zhejiang Hanghui Expressway Co., Ltd. (浙江杭徽高速公路有限公司), a 88.674% owned subsidiary of 
the Company
Huangshan  Yangtze  Huihang  Expressway  Co.,  Ltd  (黃山長江徽杭高速公路有限責任公司),  a 
wholly-owned subsidiary of the Company

Hong Kong Stock 

The Stock Exchange of Hong Kong Limited

Exchange

Independent third 

party(ies)

Jiaogong Maintenance

Jiaxing Co

Jinhua Co

Listing Rules

Maintenance Co

Ningbo Expressway Co

any  person(s)  or  company(ies)  and  their  respective  ultimate  beneficial  owner(s),  to  the  best  of  the 
Directors’ knowledge, information and belief having made all reasonable enquiries, are third parties 
independent of the Group and its connected persons in accordance with the Listing Rules
Zhejiang  Jiaogong  High-grade  Expressway  Maintenance  Co.,  Ltd.  (浙江交工高等級公路養護有限公
司), an indirectly non-wholly owned subsidiary of Communications Group
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
Zhejiang Expressway Maintenance Co., Ltd. (浙江滬杭甬養護工程有限公司), a company incorporated 
in the PRC and an indirect non-wholly owned subsidiary of Communications Group
Zhejiang  Ningbo  Yongtaiwen  Expressway  Co.,  Ltd.  (浙江寧波甬台温高速公路有限公司),  a  limited 
liability  company  established  in  the  PRC  on  April  26,  2004  and  an  approximately  80.45%  owned 
subsidiary of Communications Group

Period

PRC

the period from January 1, 2019 to December 31, 2019

the People’s Republic of China

Previous Transactions I

Previous Transactions II

the  agreements  entered  into  or  completed  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  information  technology  service  and  mechanical  and  electrical  engineering 
services.  For  details,  please  refer  to  the  announcements  issued  by  the  Company  dated  August  7, 
2018 and November 20, 2018 respectively

the  agreements  entered  into  or  completed  within  a  12-month  period  prior  to  the  date  of  the 
Supporting  Services  Agreement  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  August  7, 
2018, November 20, 2018 and September 12, 2019 respectively

2

Definition of Terms2019ANNUAL REPORTPrevious Transactions III

Rmb

SFO

Shangsan Co

Shareholders

Shengxin Co

Shenjiahuhang Co

SRCB

Supervisory Committee

Yangtze Financial 

Leasing

Yuhang Co

Zhejiang Communications 

Finance

Zhejiang Grand Hotel

Zhejiang Hongtu

Zhejiang International 

Hong Kong

Zhejiang Shipping

Zhejiang Shunchang

Zheshang Securities

Zhoushan Co

(i)  a  number  of  road  maintenance  agreements  entered  into  between  the  Company  (or  the  relevant 
subsidiaries of the Company) and Maintenance Co on April 8, 2016 pursuant to which Maintenance 
Co  agreed  to  provide  the  maintenance  services  to  the  Jinhua  Section,  Ningbo-Jinhua  Expressway, 
the  Hanghui  Expressway,  Shanghai-Hangzhou-Ningbo  Expressway  and  the  Shangsan  Expressway; 
(ii) the dedicated road maintenance agreement entered into between the Company and Maintenance 
Co  on  May  28,  2018,  pursuant  to  which  Maintenance  Co  agreed  to  provide  dedicated  maintenance 
services  in  respect  of  Shanghai-Hangzhou-Ningbo  Expressway,  the  Shangsan  Expressway,  Jinhua 
Section  of  the  Ningbo-Jinhua  Expressway  and  the  Hanghui  Expressway;  and  (iii)  the  asphalt 
pavement  on-site  thermal  regeneration  engineering  agreement  entered  into  between  the  Company 
and  Zhejiang  Shunchang  on  August  7,  2018,  pursuant  to  which  Zhejiang  Shunchang  agreed  to 
provide  engineering  services  to  the  Shanghai-Hangzhou-Ningbo  Expressway,  Jinhua  Section  of  the 
Ningbo-Jinhua Expressway and the Huihang Expressway

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 joint stock limited company 
established  in  the  PRC  on  January  1,  1998  which  is  owned  as  to  73.625%  by  the  Company  and 
18.375% by China Merchants, respectively

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
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
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

the supervisory committee of the Company
Yangtze United Financial Leasing Co., Ltd. (長江聯合金融租賃有限公司), a 10.612% 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
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 Grand Hotel Limited (浙江大酒店有限公司), a wholly-owned subsidiary of the Company
Zhejiang  Hongtu  Transportation  Construction  Company  (浙江交工宏途交通建設有限公司),  a  limited 
liability company incorporated in the PRC and non-wholly owned by Communications Group
Zhejiang Expressway International (Hong Kong) Co., Ltd. (浙江滬杭甬國際(香港)有限公司), a wholly-owned 
subsidiary of the Company 
Zhejiang Shipping Group Co., Ltd. (浙江省海運集團有限公司), a limited liability company established 
in the PRC on February 1, 1981, a wholly owned subsidiary of Communications Group
Zhejiang Shunchang High-grade Expressway Maintenance Co., Ltd. (浙江順暢高等級公路養護有限公
司), a non-wholly owned subsidiary of Communications Group
Zheshang  Securities  Co.,  Ltd.  (浙商證券股份有限公司),  a  63.7445%  owned  subsidiary  of  the 
Shangsan Co
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  a  listed  company  principally  engaging  in  investing  in,  developing  and 
operating  of  high-grade  roads  as  well  as  securities  business.  The  Company  was  incorporated 
on  March  1,  1997  as  an  infrastructure  company  of  the  Zhejiang  Provincial  Government  for 
investing  in,  developing  and  operating  expressways  and  Class  1  roads  in  Zhejiang  Province. 
The securities business is carried out by its subsidiary Zheshang Securities, which was listed on 
the Shanghai Stock Exchange (SH Stock Code: 601878) in June 2017.

Major  assets  operated  by  the  Group  include  seven  expressways  namely  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,  the  82  km  Huihang 
Expressway,  the  93  km  Shenjiahuhang  Expressway  and  the  46  km  Zhoushan  Bay  Bridge. 
Among  which,  apart  from  Huihang  Expressway  which  is  situated  within  Anhui  Province  in 
the  PRC,  the  rest  of  the  six  expressways  are  situated  within  Zhejiang  Province  in  the  PRC. 
As  at  December  31,  2019,  total  assets  of  the  Company  and  its  subsidiaries  amounted  to 
Rmb104,576.95 million.

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

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5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1. 

On  March  4,  2019,  the  Company  held  its  Extraordinary  General  Meeting  to  approve  the 
Equity  Transfer  Agreement  entered  into  between  the  Company  and  Communications 
Group to conditionally acquire 100% equity interest in Shenjiahuhang at a consideration of 
Rmb2,943 million, and approve the issue of the mid-term notes of not more than Rmb3,000 
million with term not more than five years.

2. 

On March 18, 2019, the Company announced its 2018 annual results in Hong Kong.

3. 

On May 5, 2019, the Company announced its 2019 first quarterly results.

4. 

5. 

6. 

On May 31, 2019, the Company held its Annual General Meeting to approve, inter alia, the 
payment  of  a  dividend  of  Rmb37.5  cents  per  share,  the  reappointment  of  Deloitte  Touche 
Tohmatsu  Certified  Public  Accountants  Hong  Kong  as  the  international  auditors  of  the 
Company,  the  reappointment  of  Pan-China  Certified  Public  Accountants  LLP  as  the  PRC 
auditors of the Company, the increase in annual caps for Deposit Services under the New 
Financial  Services  Agreement  with  Zhejiang  Communications  Finance,  and  the  grant  of 
general mandate to the Board to issue, allot and deal in new H shares of not more than 20% 
of the issued H shares of the Company.

On  June  5,  2019,  the  Company  and  Zhejiang  Shipping  entered  into  the  Equity  Transfer 
Agreement  to  acquire  the  entire  equity  interest  in  Zhejiang  Grand  Hotel  (浙江大酒店)  at  a 
consideration of approximately Rmb1,010 million.

On  August  9,  2019,  the  Company  entered  into  the  Capital  Contribution  Agreement  with 
Zhejiang Communications Finance and the Existing Shareholders to contribute an amount of 
Rmb350 million into the equity capital of Zhejiang Communications Finance.

7. 

On August 23, 2019, the Company announced its 2019 interim results.

8. 

On  September  23,  2019,  the  Company  successfully  issued  the  asset-backed  securities 
under  GSUM  Fund  –  Zheshang  Management  –  Huihang  Expressway  Asset-backed 
Securities Plan (中聯基金－浙商資管－滬杭甬徽杭高速資產支持專項計劃) in the amount of 
Rmb2,013 million, which were listed for trading on Shanghai Stock Exchange on October 18, 
2019 as the first infrastructure REIT (real estate investment trust) in the domestic market.

9. 

On October 31, 2019, the Company announced its 2019 third quarterly results.

6

Review of Major Corporate Events2019ANNUAL REPORT10.  On October 31, 2019, the Board approved the Company’s management of the 2km Fuchi-
Cengang section of Ningbo-Zhoushan Port main corridor as entrusted by Communications 
Group.

11.  On  December  23,  2019,  the  Company  held  its  Extraordinary  General  Meeting  to  approve 
the issue of H share convertible bonds with an aggregate principal amount up to Euro400 
million.

On the same date, the Company formed a consortium company with five other enterprises, 
namely  China  Merchants  Expressway  Network  &  Technology  Holdings  Co.,  Ltd.,  China 
Merchants United Development Co., Ltd., Jiangsu Expressway Company Limited, Sichuan 
Expressway  Company  Limited  and  Anhui  Expressway  Company  Limited,  to  enter  into  the 
Acquisition Agreement with the Turkish company IC Ictas, in which the Chinese consortium 
contemplated to acquire 51% equity interest in the project company for the Third Bridge in 
Istanbul and the Northern Marmara Expressway and the related shareholder loan and 51% 
equity interest in its maintenance company at a consideration of USD688.5 million (among 
which USD120.5 million were funded by the Company).

12.  On January 1, 2020, as demanded by the China Ministry of Transport to remove expressway 
toll  stations  at  provincial  borders,  the  Company  removed  its  5  expressway  toll  stations  at 
provincial borders to fully implement nationwide grid connection of non-stop electronic toll 
collection.

13.  On  February  3,  2020,  the  Company  held  its  Extraordinary  General  Meeting  to  elect 
Mr.  YUAN  Yingjie  as  non-executive  Director  and  Mr.  ZHENG  Ruchun  as  supervisor  
representing shareholders.

7

Expressway

Percentage of 
Ownership

Length in 
Kilometers

Number of 
Lanes

Number of 
Toll Roads

Number of 
Service Areas

Start of 
Operation

Remaining 
Years of 
Operation

Shanghai-Hangzhou Expressway

– Jiaxing Section

– Yuhang Section

– Hangzhou Section

Hangzhou-Ningbo Expressway

– Hangzhou to Hongken section

– Hongken to Duantang section

– Duantang to Dazhujia section

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%

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

9

9

9

8

8

8

11

11

10

12

14

14

16

15

Current Toll Rates on the Expressways under the Group
1.  Passenger vehicle classification and toll rates

Toll for passenger vehicles = Trip fee + Mileage fee x Actual mileage traveled + Tunnel (bridge) superimposed toll

Vehicle Class

Classification standard

Toll rates of expressways in Zhejiang 
Province for passenger vehicles

Mileage fee 
(Rmb/vehicle/km)

Trip fee 
(Rmb/trip)

Toll rates of Huihang 
Expressway for 
passenger vehicles
Mileage fee 
(Rmb/vehicle/km)

1 Passenger vehicle

2 Passenger vehicle

3 Passenger vehicle

4 Passenger vehicle

≤ 9 seats 
(with a length less than 6m)

10-19 seats 
(with a length less than 6m) 
Passenger car trailer

≤39 seats 
(with a length no less than 6m)

≥40 seats 
(with a length no less than 6m)

0.40

0.40

0.80

1.20

5

5

10

15

0.45

0.8

1.1

1.3

Note:  For Shanghai-Hangzhou Expressway, the mileage fee for class 1 and class 2 passenger vehicles is Rmb0.45/vehicle/km.

8

Particulars of Major Road Projects2019ANNUAL REPORT2.  Truck and special motor vehicle classification and toll rates

Toll for trucks and special motor vehicles = Mileage fee x Actual mileage traveled + Tunnel (bridge) superimposed toll

Class

Classification standard

Class 1

Class 2

Class 3

Class 4

Class 5

2 axles (with a length less than 
6m and maximum authorized total 
weight less than 4,500kg)

2 axles (with a length no less than 
6m and maximum authorized total 
weight no less than 4,500kg)

3 axles

4 axles

5 axles

Class 6

6 axles or above (inclusive)

Notes:

1.  Total number of axles includes floating axles.

Toll rates of expressways in 
Zhejiang Province for trucks 
and special motor vehicles
(Rmb/vehicle/km)

Toll rates of Huihang 
Expressway for trucks 
and special motor vehicles
(Rmb/vehicle/km)

0.45

0.841

1.321

1.639

1.675

1.747

0.45

0.9

1.35

1.7

1.85

2.2

2.  For trucks with 6 axles above running on Huihang Expressway, toll rates of trucks with each additional axle shall be 
calculated at 1.1 times of the standard rate for Class 6 trucks; whereas toll rates of trucks with 10 axles or above shall 
be calculated at the standard rate for trucks with 10 axles.

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:

2015
Rmb’000
(Restated)

Year ended December 31,
2016
Rmb’000
(Restated)

2017
Rmb’000
(Restated)

2018
Rmb’000
(Restated)

2019
Rmb’000

11,874,006
4,612,024
(1,336,120)

10,978,928
4,434,380
(1,112,066)

11,080,513
4,946,212
(1,165,941)

11,192,199
5,107,967
(1,113,454)

11,955,266
5,766,594
(1,351,695)

3,275,904

3,322,314

3,780,271

3,994,513

4,414,899

60,830

81,594

–

–

–

Owners of the Company
Non-controlling interests

2,483,154
853,580

2,757,089
646,819

3,097,355
682,916

3,515,095
479,418

3,711,118
703,781

Basic Earnings Per Share 

(EPS)（From continuing and 
discontinued operations）

Diluted EPS（From continuing and 

discontinued operations）

57.17 cents

63.48 cents

71.32 cents

80.94 cents 85.45 cents

57.17 cents

63.48 cents

69.04 cents

76.27 cents 82.37 cents

RETURN ON EQUITY (ROE)

ROE

Segmental Revenue / 2019
(continuing operations)

2015
14.6%

2016
15.0%

2017
14.6%

2018
15.0%

2019
17.2%

Segmental Net Profit / 2019

5.0%

Other Business

14.9%

Other Business

27.6%

Securities
Business

Toll Road
Business

67.4%

10

22.5%

Securities
Business

Toll Road
Business

62.6%

Financial and Operating Highlights2019ANNUAL REPORT 
 
 
 
 
 
 
 
 
 
 
 
14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

5,000

4,000

3,000

2,000

1,000

0

100

80

60

40

20

0

20

15

10

5

0

Revenue / Rmb Million (Continuing operations)

11,874

10,979

11,081

11,192

11,955

2015
(Restated)

2016
(Restated)

2017
(Restated)

2018
(Restated)

2019

Net profit / Rmb Million (Continuing and discontinued operations)

3,337

3,404

3,780

3,995

4,415

2015
(Restated)

2016
(Restated)

2017
(Restated)

2018
(Restated)

2019

Basic EPS / Rmb Cents (Continuing and discontinued operations)

57.17

63.48

71.32

80.94

85.45

2015
(Restated)

2016
(Restated)

2017
(Restated)

2018
(Restated)

ROE / %

14.6

15.0

14.6

15.0

2019

17.2

2015
(Restated)

2016
(Restated)

2017
(Restated)

2018
(Restated)

2019

11

YU Zhihong

Chairman

12

Chairman’s Statement2019ANNUAL REPORTDear 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 2019.

In 2019, China’s GDP grew by 6.1% and the overall economy grew at a steady pace despite facing 
downward  pressure.  GDP  for  Zhejiang  Province  surpassed  Rmb6  trillion  for  the  first  time  with 
a  growth  rate  of  6.8%,  exceeding  both  the  expected  and  national  level.  During  the  year,  robust 
development  of  the  digital  economy  within  the  province  served  as  a  major  engine  for  growth, 
with  value  added  from  the  digital  economy’s  core  industries  rising  by  15%.  Digital  economy 
development also served as a catalyst for developing 5G commercial network.

2019  was  a  year  marked  by  both  opportunities  and  challenges.  The  Chinese  economy  faced 
a  complex  mix  of  headwinds  resulting  from  domestic  and  overseas  factors,  but  development 
remained  stable  with  steady  progress.  However,  in  light  of  a  slowing  global  economy  and 
increasing  risks,  downward  pressure  remained  relatively  high.  During  the  period,  the  Group 
adhered  to  the  strategic  positioning  of  the  “three  platforms”  (the  expressway  operation 
management  platform,  the  marketized  transportation  infrastructure  project  investment  and 
financing platform, and the asset-backed securities platform). The Group also continued to reform 
and  innovate  in  order  to  further  strengthen  its  competitive  advantages,  ability  to  innovate,  risk 
resistance capability and sustainability. During the year, while traffic volume growth slowed under 
the  Group,  the  securities  business  recorded  steady  growth  as  it  benefited  from  a  recovery  in 
overall capital market activity. Revenue increased by 6.8% year-on-year to Rmb11,955.27 million, 
and profit attributable to owners of the Company increased by 5.6% year-on-year to Rmb3,711.12 
million. ROE (return on equity) for the year remained relatively high at 17.2%. Dividend for the year 
recommended by the directors was Rmb35.5 cents per share, an indication of our ability to provide 
stable shareholder returns.

The  Group’s  core  toll  road  operations  business  recorded  toll  revenue  of  Rmb8,061.01  million 
during  the  period,  which  contributed  67.4%  of  total  revenue.  During  the  period,  the  Group 
continued  to  actively  build  a  renowned  brand  for  expressway  operations  and  services,  with 
an  aim  to  improve  service  quality  and  strengthen  its  reputation.  During  the  period,  the  Group 
accomplished its annual objectives, remained highly innovative and achieved several milestones, 
especially  in  terms  of  developing  intelligent  expressways,  which  in  turn  enhanced  its  industry-
leading  position.  The  Group  actively  implemented  the  intelligent  upgrade  program  of  the 
Shanghai-Hangzhou-Ningbo  Expressway,  accelerated  research  and  development  of  intelligent 
software,  application  of  informatization  technology  and  construction  of  digitalized  facilities.  The 
Group  also  completed  the  construction  of  expressway  big  data  platform  and  actively  built  a 
digitalized infrastructure management platform. In addition to those accomplishments, the Group 
effectively  completed  the  removal  of  expressway  toll  stations  on  provincial  borders  and  actively 
promoted  ETC  (Electronic  Toll  Collection)  payments,  with  an  aim  to  build  an  interconnected 
operating system across the nation. The Group strived to offer safe, smooth, convenient, efficient, 
intelligent and green transportation infrastructure services, in order to improve service quality and 
operational  efficiency.  With  the  continuous  development  and  application  of  technology,  we  see 
high growth potential in the market of intelligent expressway management systems.

13

Chairman’s StatementWhile  the  Group  continued  to  focus  on  strengthening  its  core  toll  road  operations  business,  it 
also proactively promoted the expansion of market-oriented and internationalization projects, and 
explored  acquisition  opportunities  for  toll  road  projects  overseas.  During  the  period,  the  Group, 
along  with  six  companies  including  China  Merchants,  China  Merchants  United  and  Jiangsu 
Expressway, jointly set up a consortium and entered an agreement in December 2019 to acquire 
equity stake in Turkey’s ICA Project Company, which represented the first international acquisition 
project  for  our  core  business.  The  successful  acquisition  was  a  significant  breakthrough  for 
domestic  expressway  companies  in  terms  of  collaboration  for  overseas  business  development. 
The  primary  project  of  the  Turkey’s  ICA  Project  Company  connects  key  cities  of  the  “Belt  and 
Road” network, including Istanbul and other adjacent cities. It is the only thoroughfare for freight 
vehicle transit over the Bosphorus Strait, connecting Asia and Europe.

During  the  period,  performance  of  the  Group’s  securities  business  remained  stable  and  made 
progress, as benefited from a rebounding domestic capital market. Revenue increased by 13.0% 
to Rmb3,300.78 million. The Group strived to support and implement the “Phoenix Action” plan of 
Zhejiang  Province.  Zheshang  Securities’  competitive  positioning  improved  as  it  recorded  a  new 
historical high in terms of number of IPO projects. The business also achieved top bond issuance 
rankings  in  terms  of  both  number  and  volume  of  bonds  issued  across  the  province.  During  the 
period,  Zheshang  Securities  steadily  expanded  its  diversified  financial  services  by  setting  up 
alternative investment subsidiaries, which were granted two new licenses for dealing in Hong Kong 
securities.

The  Group  has  also  been  exploring  new  opportunities  to  reinforce  profit  growth  in  recent  years. 
During the period, the Group acquired Zhejiang Grand Hotel in June 2019 and has fully completed 
injection  of  capital  assets.  Zhejiang  Grand  Hotel,  in  leveraging  its  prime  location,  enhanced  its 
service  portfolio  and  expanded  its  marketing  channels  to  improve  both  quality  and  efficiency  of 
service  delivery.  In  addition,  the  Group  actively  participated  in  the  governance  and  operation  of 
its  joint-stock  companies,  including  Yangtze  Financial  Leasing  and  Shanghai  Rural  Commercial 
Bank, in order to support their business development. The profit contribution from these joint-stock 
financial institutions to the Group continued to improve.

14

Chairman’s Statement2019ANNUAL REPORTAt  the  start  of  2020,  the  outbreak  of  the  novel  coronavirus  (Covid-19)  negatively  impacted 
financial markets, the economy and people’s livelihoods around the world, including China, raising 
significant  global  concerns.  The  Group  will  face  near-term  challenges,  but  with  its  solid  core 
competence, the Group is confident that it will effectively manage and mitigate the negative impact 
that the outbreak may have on the business. Looking ahead, the Group will adhere to our objective 
of “striving for excellence” and we will continue to promote high-quality sustainable development. 
The Group will seek to seize opportunities amid the challenging market conditions and earnestly 
promote  key  projects  to  new  levels.  In  leveraging  its  extensive  experience  in  transportation 
infrastructure operations, competitive advantages in investment and financing, as well as financial 
services, the Group will adhere to its strategic guidance, drive innovation and improve efficiency. 
In doing so, the Group will steadily target new infrastructure investments and M&A projects, and 
generate new industrial and profit growth channels.

The Group will continue to build a brand for expressway operations and services for the core toll 
road  operations  business.  In  achieving  that,  the  Group  will  draw  on  experience  from  the  Turkey 
project  in  order  to  accelerate  the  implementation  of  an  international  development  strategy  and 
management mechanism. In addition, the Group will increase investment in expressway resources 
within Zhejiang Province and proactively promote the construction of intelligent expressways. For 
the securities business, the Group will drive innovation of financial services, with an aim to improve 
its core competitiveness and become a top-tier securities company in China.

On behalf of the Board, I would like to thank everyone who has supported our company, including 
our investors, shareholders, business partners, customers, management team and employees. As 
we look ahead, we will work diligently together and harness the strength of our collaborative spirit 
to  achieve  efficient  management,  safeguard  the  overall  interests  of  the  Company  and  generate 
greater value for shareholders.

YU Zhihong
Chairman

March 20, 2020

15

Striving to Efficiently Achieve 
Targets and Provide Stable 
Returns to Shareholders

The Group continued to reform and innovate in order to further strengthen 

its competitive advantages, ability to innovate, risk resistance capability and 

sustainability. The return on equity for the year was 17.2%, remaining at a 

relatively high level. The dividend for the year recommended by the board of 

directors was Rmb35.5 cents per share, providing shareholders with stable 

returns.

16

2019ANNUAL REPORTBUSINESS REVIEW

Global economic growth slowed down in 2019, as international financial markets were volatile and 

international trade slowed. Domestic economic activity remained stable, posting a 6.1% increase 

in  GDP  during  the  Period.  Zhejiang  Province’s  GDP  grew  by  6.8%  year-on-year,  which  was  0.7 

percentage points higher than the national rate, as it benefited from a moderate increase in the 

province’s international trade, consumer demand and fixed assets investment.

During  the  Period,  the  growth  rate  of  traffic  volume  and  toll  revenue  of  the  Group  slowed  down 

due  to  the  adverse  impact  of  the  Sino-U.S.  trade  war.  Revenue  from  Zheshang  Securities 

recorded  significant  growth  as  supported  by  the  pick-up  of  Chinese  capital  markets,  which 

resulted a year-on-year increase of 6.8% in the Group’s total revenue. Total revenue of the Group 

was  Rmb11,955.27  million,  of  which  Rmb8,061.01  million  was  generated  by  the  seven  major 

expressways  operated  by  the  Group  (2018  (Restated):  total  revenue  of  Rmb7,854.48  million), 

representing 67.4% of the total revenue. The revenue generated by the securities business was 

Rmb3,300.78 million (2018: total revenue of Rmb2,921.27 million), representing 27.6% 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

Shenjiahuhang Expressway

Zhoushan Bay Bridge

Securities business revenue

Commission and fee income

Interest income

Other operation revenue

Hotel operations

Construction revenue

女

Total revenue

17

2019
Rmb’000

2018
Rmb’000

% change

4,142,879

1,187,813
437,095

579,551

138,506

694,497

880,666

4,018,598

1,232,410
386,722

527,181

137,459

696,791

855,323

1,727,942

1,572,835

1,462,798

1,458,476

169,576

423,906

177,861

238,580

11,955,266

11,192,199

3.1%

–3.6%
13.0%

9.9%

0.8%

–0.3%

3.0%

18.1%

7.8%

–4.7%

77.7%

6.8%

Management Discussion and Analysis 
 
 
 
 
 
 
LUO Jianhu

Executive Director and 
General Manager

18

2019ANNUAL REPORTManagement Discussion and AnalysisToll Road Operations

During  the  Period,  traffic  volume  and  toll  revenue  on  the  Group’s  expressways  recorded  mixed 

performance with varied growth rates.

During  the  Period,  the  Yuhang  District  Government  and  the  Lin’an  District  Government  of 

Hangzhou  City,  the  Yiwu  Municipal  Government  and  the  Huzhou  Municipal  Government  offered 

to  pay  the  toll  for  all  passenger  vehicles  that  have  ETC  registration  and  are  travelling  on  the 

expressways  within  their  jurisdictions,  which  benefited  the  traffic  volume  growth  on  the  Yuhang 

Section  of  the  Shanghai-Hangzhou-Ningbo  Expressway,  the  Lin’an  Section  of  the  Hanghui 

Expressway, the Jinhua Section of the Ningbo-Jinhua Expressway and the Huzhou Section of the 

Shenjiahuhang Expressway, respectively.

However, during the Period, the toll discount policies for vehicles that have ETC registration had 

negative impact on toll revenue of the Group’s expressways in varied degrees. From January 1, 

2019, all  trucks  that have ETC  registration enjoyed a 15% discount  on  tolls. From July 1,  2019, 

all  vehicles  that  have  ETC  registration  enjoyed  a  5%  discount  on  tolls  when  travelling  on  the 

expressways of Zhejiang Province.

In addition, certain sections of expressways operated by the Group encountered traffic diversions 

caused  by  neighboring  roadways.  The  traffic  volume  on  the  Shanghai-Hangzhou-Ningbo 

Expressway  was  negatively  impacted  by  the  opening  of  the  Yuhang  section  of  the  Hangzhou 

Urban Elevated Highway and the completion of construction of the National Highway G320. The 

Ningbo-Taizhou-Wenzhou  Expressway,  which  is  connected  to  the  Shangsan  Expressway,  had 
construction  works  that  closed  off  traffic,  and  the  Zhangzhen  toll  station  on  National  Highway 

G104 parallel to the Shangsan Expressway ceased toll collection on June 1, 2018. Both factors 

have negatively affected traffic volume on the Shangsan Expressway. The opening of North Qiushi 

Road in December 2018, which is parallel to the Lianshi-Hangzhou Section of the Shenjiahuhang 

Expressway,  caused  significant  traffic  volume  diversion  and  a  decrease  in  toll  revenue  for  the 

section. The opening of Zhoushan Fuchimen Bridge on September 29, 2019 also caused certain 

traffic volume diversion to the Zhoushan Bay Bridge.

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,  the  82km  Huihang  Expressway,  the  93km  Shenjiahuhang 

Expressway and the 46km Zhoushan Bay Bridge was Rmb8,061.01 million.

19

Proactively Expanding the Core 
Toll Road Operations Business and 
Participating in Overseas M&A Projects

The Group accomplished its annual objectives, promoted innovation-

driven development strategy and developed intelligent expressways 

steadily, which in turn enhanced its service quality and brand image. 

In addition, the Group proactively promoted the expansion of market-

oriented and  internationalization  projects, and explored acquisition 

opportunities  for  toll  road  projects  overseas.  In  2019,  the  Group 

successfully participated in the acquisition of equity stake in Turkey’s 

ICA  Project  Company,  which  represented  the  first  international 

acquisition project for our core business.

20

2019ANNUAL REPORTDuring  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:

2019

Traffic Volume

Toll Revenue

Average 

Traffic Volume 

The Group’s expressways

in Full-Trip 

Year-on-year 

Toll 

Year-on-year 

Equivalents
(Vehicle)

Growth

Revenue
(Rmb)

Growth

Shanghai-Hangzhou-Ningbo Expressway

64,127

4.03%

4,142.88 million

3.1%

– Shanghai-Hangzhou Section

64,490

-1.54%

– Hangzhou-Ningbo Section

63,867

7.66%

Shangsan Expressway

30,347

-0.56%

1,187.81 million

Jinhua Section, Ningbo-Jinhua Expressway

24,332

15.56%

437.09 million

Hanghui Expressway

21,430

11.42%

579.55 million

Huihang Expressway

7,962

2.03%

138.51 million

Shenjiahuhang Expressway

Zhoushan Bay Bridge

Securities Business

30,575

21,834

7.77%

694.50 million

5.28%

880.67 million

–3.6%

13.0%

9.9%

0.8%

–0.3%

3.0%

During the Period, accumulated trading volumes of A-shares and funds in Shanghai and Shenzhen 

Stock  markets  increased  by  37.1%  year-on-year  as  it  benefited  from  the  recovery  of  domestic 

capital markets and active trading. With the exception of investment consulting business, all other 

business  segments  including  securities  brokerage,  future  brokerage,  investment  banking,  asset 

management, as well as margin financing and securities lending recorded varied levels of growth 

in revenue.

21

 
 
 
 
 
Performance of Zheshang Securities 
Remained Stable and Made Progress, 
with the Aim to Become a Top-tier Player 
in the Securities Industry in China

The competitive advantages of the Group’s securities business continued to improve, paving the way 

towards its goal of becoming “a top-tier player in the securities industry in China”. In 2019, Zheshang 

Securities recorded a new historical high in terms of the number of reserved IPO projects, and achieved 

top rankings in bond issuance in terms of both number and volume of bonds issued across Zhejiang 

Province.

22

2019ANNUAL REPORTDuring  the  Period,  Zheshang  Securities  recorded  total  revenue  of  Rmb3,300.76  million,  an 

increase of 13.0% year-on-year, of which, commission and fee income increased 18.1% year-on-

year to Rmb1,727.94 million, and interest income from the securities business was Rmb1,572.82 

million,  an  increase  of  7.8%  year-on-year.  In  addition,  securities  investment  gains  of  Zheshang 

Securities included in the consolidated statement of profit or loss and other comprehensive income 

of the Group was Rmb1,343.47 million (2018: securities investment gains of Rmb512.45 million).

During  the  Period,  Zheshang  Securities  refined  its  risk  management  system,  seized  market 

opportunities to expand its service scope and project portfolio, continuously optimized its business 

structure, and steadily enhanced competitiveness of its various business lines.

Other Business Operations

Other  business  revenue  was  mainly  derived  from  hotel  operations  and  road  construction. 

Zhejiang  Grand  Hotel,  operated  by  Zhejiang  Grand  Hotel  Limited  (a  100%  owned  subsidiary  of 

the Company), recorded revenue of Rmb71.24 million for the Period (2018: revenue of Rmb71.76 

million).  Grand  New  Century  Hotel,  owned  by  Zhejiang  Yuhang  Expressway  Co.,  Ltd.  (a  51% 

owned subsidiary of the Company), recorded revenue of Rmb98.34 million for the Period (2018: 

revenue of Rmb106.10 million).

Long-Term Investments

Zhejiang  Shaoxing  Shengxin  Expressway  Co.,  Ltd.  (“Shengxin  Co”,  a  50%  owned  joint  venture 

of  the  Company)  operates  the  73.4km  Shaoxing  Section  of  Ningbo-Jinhua  Expressway.  During 

the  Period,  the  average  daily  traffic  volume  in  full-trip  equivalents  was  21,655,  representing  an 

increase  of  4.72%  year-on-year.  Toll  revenue  was  Rmb426.73  million  (2018:  toll  revenue  of 

Rmb417.38 million). The joint venture reported a net profit of Rmb69.88 million (2018: net profit of 

Rmb60.07 million).

Zhejiang  Communications  Investment  Group  Finance  Co.,  Ltd.  (a  35%  owned  associate  of  the 

Company)  derives  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 Rmb400.77 million (2018: net profit of 

Rmb409.80 million).

23

Yangtze  United  Financial  Leasing  Co.,  Ltd.  (an  associate  of  the  Company,  the  equity  stake  of 

which was diluted to 10.612% in December 2019 from 13% at beginning of the Period) is primarily 

engaged in the finance leasing business, which includes the transferring and receiving of financial 

leasing assets, fixed-income securities investment, and other businesses approved by the China 

Banking  and  Insurance  Regulatory  Commission.  During  the  Period,  the  associate  company 

recorded a net profit of Rmb155.76 million (2018: net profit of Rmb271.92 million).

Shanghai  Rural  Commercial  Bank  Co.,  Ltd.  (a  5.36%  owned  associate  of  the  Company)  is 

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. The associate company has not disclosed 

2019 annual results.

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 Rmb3,711.12 

million, representing an increase of 5.6% year-on-year, basic earnings per share for the Company 

was  Rmb85.45  cents,  representing  an  increase  of  5.6%,  diluted  earnings  per  share  for  the 

Company was Rmb82.37 cents, representing an increase of 8.0%, and return on owners’ equity 

was 17.2%, representing an increase of 14.7% year-on-year.

24

2019ANNUAL REPORTManagement Discussion and AnalysisLiquidity and financial resources

As  at  December  31,  2019,  current  assets  of  the  Group  amounted  to  Rmb68,703.77  million  in 

aggregate  (December  31,  2018  (Restated):  Rmb58,116.66  million),  of  which  bank  balances, 

clearing settlement fund, deposits and cash accounted for 12.2% (December 31, 2018 (Restated): 

11.8%),  bank  balances  and  clearing  settlement  fund  held  on  behalf  of  customers  accounted  for 

29.3% (December 31, 2018 (Restated): 25.4%), financial assets at FVTPL accounted for 32.4% 

(December  31,  2018  (Restated):  37.1%),  and  loans  to  customers  arising  from  margin  financing 

business accounted for 12.7% (December 31, 2018 (Restated): 10.1%). The current ratio (current 

assets  over  current  liabilities)  of  the  Group  as  at  December  31,  2019  was  1.40  (December  31, 

2018 (Restated): 1.50). 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 1.60 (December 31, 2018 (Restated): 

1.80).

The amount of financial assets at FVTPL included in current assets of the Group as at December 

31, 2019 was Rmb22,235.48 million (December 31, 2018: Rmb21,558.61 million), of which 78.2% 

was invested in bonds, 3.7% was invested in stocks, 10.6% was invested in equity funds, and the 

rest were invested in structured products and trust products.

During the Period, net cash from the Group’s operating activities amounted to Rmb382.75 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

As at December 31,

2019

Rmb’000

8,076,598

302,726

2018

Rmb’000

(Restated)

6,601,784

280,913

Financial assets at fair value through profit or loss

22,235,480

21,558,606

Total

30,614,804

28,441,303

25

 
 
 
 
 
 
Borrowings and solvency

As  at  December  31,  2019,  total  liabilities  of  the  Group  amounted  to  Rmb72,594.84  million 
(December  31,  2018  (Restated):  Rmb60,833.67  million),  of  which  15.2%  was  bank  and  other 
borrowings, 9.0% was short-term financing note, 20.9% was bonds payable, 7.5% was Convertible 

Bonds, 12.4% was financial assets sold under repurchase agreements and 27.6% was accounts 

payable to customers arising from securities business.

As  at  December  31,  2019,  total  interest-bearing  borrowings  of  the  Group  amounted  to 

Rmb38,206.73 million, representing an increase of 25.8% compared to that as at December 31, 

2018.  The  borrowings  comprised  outstanding  balances  of  domestic  commercial  bank  loans  of 

Rmb4,572.23  million,  borrowings  from  a  domestic  financial  institution  of  Rmb4,248.52  million, 

borrowings  from  domestic  institutions  of  Rmb2,199.39  million,  short-term  financing  notes  of 

Rmb6,532.99 million, mid-term notes of Rmb3,062.06 million, subordinated bonds of Rmb7,692.18 

million,  corporate  bonds  of  Rmb3,509.99  million,  asset  backed  securities  of  Rmb909.03 

million,  convertible  bonds  denominated  in  Rmb  of  Rmb2,692.10  million,  and  convertible  bonds 

denominated in Euro that equivalents to Rmb2,788.24 million. Of the interest-bearing borrowings, 

57.6% was not payable within one year.

As  at  December  31,  2019,  the  Group’s  borrowings  from  domestic  commercial  banks  bore  an 
annual floating interest of 4.41%, and annual fixed interest rates ranged from 3.6975% to 5.22%, 
borrowings  from  a  domestic  financial  institution  bore  annual  floating  interest  rates  ranged  from 

3.915%  to  4.41%,  borrowings  from  the  domestic  institutions  bore  annual  fixed  interest  rates 

ranged from 3.0% to 6.22% and an annual floating interest rate of 4.1325%. As at December 31, 
2019, the annual fixed interest rates of short-term financing notes ranged from 2.99% to 3.19%, 

the annual fixed interest rates of mid-term notes were 3.64% and 3.86%. The annual fixed interest 

rates  for  subordinated  bonds  were  between  4.4%  and  5.3%.  The  annual  fixed  interest  rates  for 

corporate bonds were 3.48% and 3.85%. The annual fixed interest rate for asset backed securities 

was  3.70%.  The  annual  coupon  rate  for  convertible  bond  denominated  in  Euro  was  nil,  and  the 

annual  coupon  rate  for  convertible  bonds  denominated  in  Rmb  was  0.2%.  While  the  annual 

interest rate for accounts payable to customers arising from the securities business was fixed at 

0.35%.

26

2019ANNUAL REPORTManagement Discussion and AnalysisMaturity Profile

Gross 

amount

Rmb’000

Within 

1 year

Rmb’000

2-5 years 

Beyond 5

inclusive

Rmb’000

 years

Rmb’000

Floating rates

Borrowings from domestic 

commercial banks

4,128,123

348,523

3,572,600

207,000

Borrowings from a domestic 

financial institution

4,248,515

1,843,515

Borrowings from domestic 

institutions

Fixed rates

Borrowings from domestic 

25,032

25,032

commercial banks

444,106

207,106

Borrowings from domestic 

institutions

Short-term financing notes

Subordinated bonds

Corporate bonds

Mid-term notes

Asset backed securities

Convertible bonds

2,174,357

6,532,990

7,692,180

3,509,993

3,062,066

909,032

2,174,357

6,532,990

2,142,180

21,993

62,066

54,990

–

–

–

–

–

5,550,000

3,488,000

3,000,000

201,478

2,405,000

–

237,000

–

–

–

–

–

652,564

5,480,331

2,793,103

–

2,687,228

Total as at December 31, 2019

38,206,725

16,205,855

15,812,078

6,188,792

Total as at December 31, 2018 

(Restated)

30,370,665

8,393,402

18,424,263

3,553,000

Total interest expenses and profit before interest and tax for the Period amounted to Rmb1,626.81 

million and Rmb7,393.40 million, respectively. The interest cover ratio (profit before interest and 

tax over interest expenses) stood at 4.5 (2018 (Restated): 4.7) times.

Profit before tax and interest

Interest expenses

Interest cover ratio

27

2019

Rmb’000

7,393,403

1,626,809

4.5

2018

Rmb’000

(Restated)

6,504,773

1,396,806

4.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As at December 31, 2019, the asset-liability ratio (total liabilities over total assets) of the Group 

was  69.4%  (December  31,  2018  (Restated):  64.9%).  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  62.3% 

(December 31, 2018 (Restated): 58.4%).

Capital structure

As  at  December  31,  2019,  the  Group  had  Rmb31,982.11  million  in  total  equity,  Rmb59,376.44 

million  in  fixed-rate  liabilities,  Rmb8,401.67  million  in  floating-rate  liabilities,  and  Rmb4,816.73 
million in interest-free liabilities, representing 30.6%, 56.8%, 8.0% and 4.6% 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 164.4% as 

at December 31, 2019 (December 31, 2018 (Restated): 140.3%).

As at December 31, 2019

As at December 31, 2018

Rmb’000

%

Rmb’000

%

(Restated)

(Restated)

Total equity

Fixed rate liabilities

Floating rate liabilities

Interest-free liabilities

31,982,111

59,376,440

8,401,670

4,816,733

Total
Long-term interest-bearing liabilities

104,576,954
22,189,642

Gearing ratio 1 (note)

Gearing ratio 2 (note)

Asset-liabilities ratio 1 (note)

Asset-liabilities ratio 2 (note)

30.6% 32,923,198
56.8% 46,185,807
8.0% 10,325,660
4,322,198
4.6%
100.0% 93,756,863
21.2% 21,977,263

164.4%

69.4%

69.4%

62.3%

35.1%

49.3%

11.0%

4.6%

100.0%
23.4%

140.3%

66.8%

64.9%

58.4%

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.

28

2019ANNUAL REPORTManagement Discussion and Analysis 
 
 
 
 
Capital expenditure commitments and utilization

During  the  Period,  capital  expenditure  of  the  Group  totalled  Rmb5,303.22  million.  Amongst  the 

total  capital  expenditure,  Rmb4,303.15  million  was  incurred  for  acquiring  equity  investments, 

Rmb252.31  million  was  incurred  for  acquisition  and  construction  of  properties,  and  Rmb747.76 

million was incurred for purchase and construction of equipment and facilities.

As at December 31, 2019, the capital expenditure committed by the Group totalled Rmb2,041.28 

million.  Amongst  the  total  capital  expenditures  committed  by  the  Group,  Rmb1,106.91  million 

will be used for acquiring equity investments, Rmb322.56 million will be used for acquisition and 

construction  of  properties  and  Rmb611.81  million  for  acquisition  and  construction  of  equipment 

and facilities.

The  Group  will  consider  financing  the  above-mentioned  capital  expenditure  commitments  with 

internally  generated  cash  flow  first  and  then  will  comprehensively  consider  using  debt  financing 

and equity financing to meet any shortfalls.

Contingent liabilities and pledge of assets

Pursuant  to  the  board  resolution  of  the  Company  dated  November  16,  2012,  the  Company  and 

Shaoxing Communications Investment Group Co., Ltd. (the other joint venture partner that holds 

50% equity interest in Shengxin Co) provided Shengxin Co with joint guarantee for its bank loans 

of  Rmb2.2  billion,  in  accordance  with  their  proportionate  equity  interest  in  Shengxin  Co.  During 

the Period, Rmb188.00 million of the bank loans had been repaid. As at December 31, 2019, the 

remaining bank loan balance was Rmb1,285.00 million.

Shenjiahuhang Co and Zhejiang Zhoushan Bay Bridge Co., Ltd. (Zhoushan Co), the subsidiaries of 

the Company, pledged their rights of toll on expressway for their bank borrowing, as at December 

31,  2019,  the  remaining  bank  loan  balance  was  Rmb1,379.46  million  and  Rmb2,568.46  million 

respectively.

Deqing  County  De’an  Highway  Construction  Co.,  Ltd.  a  subsidiary  of  the  Company,  pledged 

its  trade  receivables  for  its  bank  borrowing,  as  at  December  31,  2019,  the  remaining  bank  loan 

balance was Rmb237.35 million.

29

Huangshan  Yangtze  Huihang  Expressway  Co.,  Ltd.,  a  subsidiary  of  the  Company,  pledged  its 

right of toll on expressway and advertisement operation right for its borrowing, as at December 31, 

2019, the remaining balance was Rmb1,300.09 million.

Among  the  Rmb2,013.00  million  asset  backed  securities  issued  on  September  23,  2019,  the 

senior class securities of Rmb900.00 million will be secured by the Company.

Except  for  the  above,  as  at  December  31,  2019,  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 April 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.

Use of Proceeds from Convertible Bond

The Company issued a zero coupon convertible bond due 2022 in an aggregate principal amount 

of  Euro365.00  million  on  April  21,  2017.  After  deducting  cost  of  issue  of  approximately  Euro2.1 

million,  the  net  proceeds  from  the  issuance  of  the  Convertible  Bond  (the  “Net  Proceeds”)  were 

approximately Euro362.90 million.

30

2019ANNUAL REPORTManagement Discussion and AnalysisThe amount of the Net Proceeds brought forward to the twelve months ended December 31, 2019 

was  approximately  Euro222.00  million  (including  the  unutilized  Net  Proceeds  as  at  December 

31,  2018  of  approximately  Euro216.37  million  and  the  deposit  interest  thereon  accrued  of 

approximately Euro5.63 million). Detailed breakdown and description of the Net Proceeds utilized 

during the twelve months ended December 31, 2019 are set out below:

Amount 
of the Net 
Proceeds 
utilized 
for the twelve 
months ended
December 31, 
2019
(Euro)
(million)

Deposit 
interest of 
the Net 
Proceeds 
for the twelve
months ended
December 31, 
2019
(Euro)
(million)

Unutilized 
Net 
Proceeds as at 
December 31, 
2019
(Euro)
(million)

Actual Net 
Proceeds as 
at January 1, 
2019
(Euro)
(million)

Usages of the Net Proceeds

Daily operating expenses and repayment  

of bank loans

222.00

(210.20)

1.41

13.21

For  the  twelve  months  ended  December  31,  2019,  the  Company  received  a  deposit  interest  of 

approximately Euro1.41 million on the Net Proceeds. The remaining unutilized Net Proceeds and 

the  interest  thereon  accrued  amounted  to  approximately  Euro13.21  million,  which  is  expected 

to be utilized for daily operating expenses by 2020. Such expected usages of the remaining Net 

Proceeds are also in line with the use of the Net Proceeds as disclosed previously. Details of the 

unutilized Net Proceeds are set out below:

Usages of the Net Proceeds

Excepted timeline for utilizing
the unutilized Net Proceeds

Percentage of 
the expected 
usages

Daily operating expenses

From January, 1 2020 to December 31, 2020

100%

Note:  The expected timeline for utilizing the unutilized Net Proceeds is based on the best estimation of the future market 

conditions made by the Group. It will be subject to change based on the current and future development of market 

conditions.

31

OUTLOOK

At the start of 2020, the novel coronavirus (“Covid-19”) epidemic occurred in China. The Chinese 

government attachs great importance to containing the epidemic. The government at all levels and 

relevant departments cooperatively conducted comprehensive and strict measures to ensure the 

smooth implementation of the containment plans.

Upon  the  consent  of  the  State  Council,  Ministry  of  Transport  of  the  People’s  Republic  of  China 

issued  the  Notice  on  Toll  Waiver  for  Toll  Roads  during  the  Containment  Period  of  the  Novel 
Coronavirus (Jiao Gong Lu Ming Dian 【2020】 No.62) (《交通運輸部關於新冠肺炎疫情防控期間免
收收費公路車輛通行費的通知》(交公路明電【2020】62號) to waive the tolls for all vehicles on all toll 
roads from 00:00, February 17, 2020 until the end of the epidemic containment. The Company will 

abide to the abovementioned notice until further notice from the Chinese government.

Since the epidemic outbreak, the Company’s management has enforced strict implementation of 
the  government’s  deployment  and  requirements  regarding  epidemic  containment.  Management 
came  to  the  forefront  of  the  battle  against  epidemic  containment  to  organize  and  coordinate 
resources, in assuring smooth traffic flow on the Group’s expressways and smooth transportation 
of  epidemic  containment  materials.  Management  also  promoted  work  resumption  in  an  orderly 
pace  and  proactively  promoted  business  development,  ensuring  normal  operation  of  the  toll 
road business and other businesses. The company will make full utilization of tax reduction and 
exemption policies and preferential financing policies to minimize the negative financial impact of 
the coronavirus outbreak.

The  Company  will  continue  to  promote  the  implementation  of  intelligent  renovation  of  the 
Shanghai-Hangzhou-Ningbo  Expressway  to  ensure  intelligent  operations  along  the  entire 
expressway.  The  Company  will  accelerate  the  establishment  of  a  transportation  data  platform, 
increase  the  application  of  big  data  technology  to  strengthen  operating  capabilities  and  ensure 
safe  and  smooth  traffic  flow.  The  Company  will  improve  its  overall  services  and  optimize  its 
expressway  operating  service  system.  The  Company  will  also  strengthen  its  brand  image  and 
comprehensively  leverage  branding  opportunities  to  enhance  operational  management  in  all 
business lines of its expressways with the aim of building a brand for expressway operations and 
services in China.

32

2019ANNUAL REPORTManagement Discussion and AnalysisThe Chinese government continues to proactively implement financial markets development and 
has enacted the newly amended Securities Law from March 1, 2020. It will also further improve 
the  regulatory  and  settlement  systems  of  the  securities  industry,  promote  the  upgrading  of 
capital  market  services  and  accelerate  the  opening  of  the  capital  markets.  These  changes  will 
create both new opportunities and challenges for 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.

In  order  to  adapt  to  the  transformation  of  economic  development  in  2020,  the  Company  will 
leverage its competitive advantages, continue to enhance and expand its core toll road business, 
and  optimize  and  strengthen  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  execute  the  equity  transfer  of  Turkey’s  ICA  project 
company in a timely manner. The Company will also focus on maintaining effective risk controls to 
proactively  conduct  market-oriented  merger  and  acquisition  investments,  extend  the  Company’s 
international footprint steadily, and 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,  2019,  there  were  7,740  employees  within  the  Group,  amongst 
whom  1,620  worked  in  the  managerial,  administrative  and  technical  positions  related  with 
expressways  and  securities  and  3,510  worked  in  fields  such  as  toll  collection,  maintenance, 
service areas, while 2,610 worked in securities and futures business outlets.

33

Continuously Optimizing 
Operational Development Strategy, 
Promoting High-quality and 
Sustainable Development

In the face of transformation of economic developments, the Group will leverage its competitive 

advantages, continue to enhance and expand its core toll road business, and optimize and strengthen 

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 in order to strengthen the Company’s operating 

capabilities and execute the equity transfer of Turkey’s ICA Project Company in a timely manner. The 

Company will also focus on maintaining effective risk controls to proactively conduct market-oriented 

merger and acquisition investments, extend the Company’s international footprint steadily and promote 

high-quality and sustainable development.

34

2019ANNUAL REPORTTOLL ROAD BUSINESS RISKS

Economic Environment

It  is  expected  that  the  COVID-19  epidemic  will  have  adverse  impacts  on  China’s  consumption, 

investments,  imports  and  exports  to  varying  extents,  which  then  cast  considerable  negative 

impacts  on  China’s  macroeconomy.  As  the  epidemic  continues  to  spread  around  the  world, 

the  global  capital  markets  have  plummeted  and  the  global  economic  landscape  has  become 

increasingly complicated, China’s economy is still facing continuous downward pressure. As the 

expressway toll road business is closely related to the macroeconomy, it is expected that the traffic 

volume and toll revenue of the Group’s expressways will be more negatively affected.

Roads Competition

Phase  I  (Taijin  section  of  Shaoxing-Zhuji  Expressway)  of  Hangzhou-Shaoxing-Taizhou 

Expressway,  which  is  parallel  to  the  Group’s  Shangsan  Expressway,  is  planned  to  complete 

construction and open at the end of 2020, and Hangzhou Ring Road is planned to open by the end 

of  2020,  which  are  expected  to  cause  certain  traffic  volume  diversion  to  Shangsan  Expressway 

and  Lianhang  section  of  Shenjiahuhang  Expressway,  respectively.  Accordingly,  we  cannot  be 

assured as to whether or not the operating results of the Group will be negatively affected.

Toll Policy

The  Ministry  of  Transport  of  the  PRC  announced  to  waive  the  tolls  for  all  vehicles  on  all  toll 

roads from 00:00, February 17, 2020 until the end of the epidemic containment. In addition, from 

February  12,  2020,  the  tolls  for  all  container  trucks  are  reduced  by  35%  and  trip  fee  is  waived. 

From February 12, 2020 to May 11, 2020, the tolls for legally loaded ETC trucks, as well as Class 

3 and Class 4 ETC passenger vehicles are reduced by 15%. We expect that the toll waiver policy 

during the period of epidemic containment will have a greater impact on the toll road business of 

the  Company.  The  PRC  government  may  compensate  the  expressway  operators  subsequently 

through different means, such as extension of franchise period or provision of financial subsidies.

35

Principal Risks and UncertaintiesSECURITIES 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  5,  52  and  53  to  the 

Consolidated Financial Statements.

36

Principal Risks and Uncertainties2019ANNUAL REPORTSTATEMENT 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  51  to  60,  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 2019 up to now, except for the Covid-19 outbreak, 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 20, 2020

37

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 was:

Mr. YU Zhihong

The executive directors of the Company during the Period were:

Mr. CHENG Tao

Ms. LUO Jianhu (General Manager)

38

Corporate Governance Report2019ANNUAL REPORTThe non-executive directors of the Company during the Period were:

Mr. DAI Benmeng

Mr. YUAN Yingjie (Appointed, with effect from February 3, 2020)

Mr. YU Qunli (Resigned, with effect from February 3, 2020)

Mr. YU Ji

The independent non-executive directors of the Company during the Period were:

Mr. PEI Ker-Wei

Ms. LEE Wai Tsang, Rosa

Mr. CHEN Bin

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:

Mr. YU Zhihong (Chairman)

Mr. CHENG Tao

Ms. LUO Jianhu (General Manager)

Mr. DAI Benmeng

Mr. YU Qunli (Resigned)

Mr. YU Ji
Mr. PEI Ker-Wei

Ms. LEE Wai Tsang, Rosa

Mr. CHEN Bin

Attendance

Attendance

through 

in person

by proxy

communication

Attendance 

5/9

7/9

6/9

6/9

5/9

6/9
7/9

7/9

5/9

2/9

1/9

1/9

2/9

1/9

2/9

2/9

2/9

2/9

2/9

2/9

2/9
2/9

2/9

2/9

During the Period, the Company held three shareholders’ general meetings. The meetings were 

chaired  by  Chairman,  and  all  executive  directors  were  present  at  the  meetings,  meanwhile, 

the  Company  actively  encouraged  independent  non-executive  directors  to  attend  shareholder 

meetings.

39

 
 
 
 
 
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.

Under the Corporate Governance, the Board plays a key role in all aspects and works closely with 

the  management.  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),  (2)  and  3.10A  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.

40

Corporate Governance Report2019ANNUAL REPORTEach newly appointed director receives induction on the first occasion of his or her appointment, 

so as to ensure that he or she has appropriate understanding of the business and operations of 

the Company and that he or she is fully aware of his or her responsibilities and obligations under 

the  Listing  Rules  and  relevant  regulatory  requirements.  Directors  are  also  regularly  updated  on 

the Group’s business and industry environments where appropriate in the management’s monthly 

reports  to  the  Board  as  well  as  briefings  and  materials  circulated  to  the  Board  before  board 

meetings.

In addition, during the Period, the Company has arranged for all its executive and non-executive 

directors  to  undergo  continuous  trainings  designed  to  develop  and  refresh  their  knowledge  and 

skills so as to ensure that their contribution to the Board remains informed and relevant. However, 

as the management considers that the independent non-executive directors of the Company are 

very experienced, knowledgeable and resourceful, the Company did not arrange any professional 

briefings or training programs for its independent non-executive directors and has decided to leave 

it to the independent non-executive directors to undergo appropriate training as they see fit.

CHAIRMAN AND GENERAL MANAGER

During the Period, Mr. YU Zhihong 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.

41

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.

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  mainly  comprised  of  the  Chairman  of  the  Company,  Mr.  YU  Zhihong,  

and  the  two  executive  directors,  namely  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. PEI Ker-Wei

Ms. LEE Wai Tsang, Rosa

Mr. CHEN Bin

Mr. YU Qunli

Mr. YU Ji

Attendance

Attendance

in person

by proxy

4/4

4/4

3/4

3/4

4/4

1/4

1/4

In the meetings held during the Period, the Audit Committee conducted, amongst others, review 

of financial statements for the quarterly, interim and annual results, discussed the internal audit, 

the effectiveness of internal control system, and total risk management of the Company, as well as 

recommendation on the re-appointment of external auditors.

42

Corporate Governance Report2019ANNUAL REPORT 
 
 
Mr.  YUAN  Yingjie  was  appointed  as  Non-executive  Director,  and  Mr.  YU  Qunli  resigned  the 

position of Non-executive Director of the Company with effect from February 3, 2020.

Mr.  ZHENG  Ruchun  was  appointed  as  Supervisor  Representing  Shareholders,  and  Mr.  YAO 

Huiliang  resigned  the  position  of  Supervisor  Representing  Shareholders  of  the  Company  with 

effect from February 3, 2020.

Other than the above, there were no other changes to members of the Board of Directors of the 

Company.

During the Period, the Nomination Committee held a total of two meetings. Individual attendances 

by the members (as indicated by the numbers of meetings attended/numbers of relevant meetings 

held) are as follows:

Mr. YU Zhihong

Mr. PEI Ker-Wei

Ms. LEE Wai Tsang, Rosa

Mr. CHEN Bin

Mr. DAI Benmeng

Attendance

Attendance

through 

in person

by proxy

communication

Attendance 

2/2

2/2

2/2

2/2

2/2

During  the  Period,  the  Nomination  Committee  discussed  the  proposed  candidates  of  Non-

executive  Directors  and  Supervisor  Representing  Shareholders  of  Company  by  way  of 

through  communication.  The  Proposed  candidates  for  Non-executive  Directors  and  Supervisor 

Representing  Shareholders  of  the  Company  that  were  nominated  by  the  Nomination  Committee 

were later approved by the Board Meeting and Shareholders’ Meeting.

During the Period, the Remuneration Committee did not hold any meeting.

During the Period, the Strategic Committee did not hold any meeting.

43

 
 
 
 
The  Board  is  responsible  for  developing  and  reviewing  the  Company’s  corporate  governance 

policies and practices, monitoring the Company’s compliance with the CG 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.

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,  related  experiences  satisfy  the  development  needs  and 

help to make important decisions of the Company.

The age distribution of the Board of the Company is between 43 and 63. The different age group 

of the Board members can provide diversified sight of views and opinion.

44

Corporate Governance Report2019ANNUAL REPORTNOMINATION POLICY

The Company’s Nomination Committee is responsible for assessing the board’s structure, number 

of members, as well as a diversified composition, introducing right talent at the right time to enrich 

the Board, 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  and  bringing  new  perspectives,  skills,  expertise  and  experience  to  the  Board.  (Please 

refer to “working rules for Nomination Committee” under Corporation Governance Column on the 

Company’s website)

AUDITORS’ REMUNERATION

During  the  Period,  the  Company  had  paid  approximately  Rmb3.71  million  and  Rmb0.93  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 

2019. Besides, the Company had paid Rmb0.36 million and Rmb0.05 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,  2019,  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.

45

INTERESTS AND SHORT POSITIONS OF OTHER PERSONS IN SHARES AND 
UNDERLYING SHARES

As  at  December  31,  2019,  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

Total interests
 in number
of ordinary
shares of
the Company

2,909,260,000

Total interests
in number
of ordinary
shares of
the Company

BlackRock, Inc.

Interest of controlled corporations

118,491,645 (L) 

Citigroup Inc.

Interest of controlled corporations

117,513,209 (L)

42,000 (S)

117,050,736 (P)

JP Morgan Chase & Co.

Beneficial owner, investment manager 

98,786,655 (L)

and custodian corporation/approved 

lending agent

12,995,279 (S)

67,805,506 (P)

Percentage
of the
issued share
capital of 
the Company 
(Domestic 
Shares)

100%

Percentage
of the
issued share
capital of
the Company 
(H Shares)

8.26%

8.19%

0.00%

8.16%

6.88%

0.90%

4.72%

The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes 
interest in a lending pool.

46

Corporate Governance Report2019ANNUAL REPORT 
 
 
 
 
 
 
 
Save as disclosed above, as at December 31, 2019, 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 287 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.

47

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 

Monday,  December  23,  2019  at  the  headquarters  of  the  Company.  Details  of  this  extraordinary 

general meeting of the shareholders were set out in the announcement dated December 23, 2019 

on resolutions passed at the extraordinary general meeting of the shareholders.

The next shareholders’ general meeting of the Company is expected to be held in May 2020 with 

exact  date  and  resolutions  for  review  to  be  specified  in  notice  of  shareholders’  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.

48

Corporate Governance Report2019ANNUAL REPORTDIVIDEND 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 41.5%. Details of the dividend payout will be announced after the 2019 

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, improved risk reporting mechanism, developed 

risk management manual, implemented risk management responsibilities of various branches and 

departments, conducted risk investigation and assessment, established risk management strategy 

and took risk control measures in response to major risks faced by the Company.

The  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  the  implementation  of  the  annual  budget  and  the  use 

of  security  costs  of  subordinate  units.  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.

49

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.

IMPORTANT EVENTS OCCURRED SINCE THE END OF THE PERIOD

Except for the Covid-19 outbreak, there has been no other important events affecting the Group 

since the end of the Period.

50

Corporate Governance Report2019ANNUAL REPORTMr. 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  Zhejiang  Provincial 

Party Committee since June 2017.

51

Directors, Supervisors and Senior Management ProfilesMr. CHEN Ninghui

Mr. CHENG Tao

Executive Director

Born in 1963, a postgraduate at the Party School of the Communist 
Party of China, graduated from Arizona State University, the United 
States  with  a  Master’s  Degree  in  Business  Administration  and  a 
Senior Economist.

Mr. Chen had worked since 1981. He had served at Zhejiang Urban 
and  Rural  Construction  Material  Equipment  Co.,  Ltd.  (originally 
known  as  the  Material  Equipment  Division  of  the  Department  of 
Development of Zhejiang Province) as General Manager, Chairman 
and Party Secretary; Zhejiang Communications Investment Industrial 
Development  Corporation  as  Chairman  and  Party  Secretary; 
Zhejiang  Communications  Investment  Group  Co.,  Ltd.  as  Assistant 
General  Manager;  Zhejiang  Communications  Investment  Property 
Group Co., Ltd. as Chairman and Party Secretary, and etc.

Mr. Chen is currently Party Secretary of the Company.

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  is  currently 
the Chairman of Zhejiang Commercial Group Co., Ltd.

Mr. Cheng is Executive Director of the Company.

52

2019ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesMs. LUO Jianhu

Executive Director

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.

53

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.

54

2019ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesMr. 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.

Mr.  Yu  resigned  the  position  of  Non-Executive  Director  of  the 

Company on February 3, 2020.

55

Mr. YUAN Yingjie

Non-Executive Director

Born in 1976, is a senior engineer. He obtained a Bachelor’s degree 

of Engineering in Highways and Urban Roads from Xi’an University 

of  Highway  Traffics,  and  both  Master  and  doctorate  degrees  of 

Engineering  in  Roads  and  Railways  Engineering  from  Chang’an 

University.

Since 2004, Mr. Yuan has worked in Zhejiang Highway Management 

Bureau and Zhejiang Department of Transportation. Since 2014, he 

was deputy director of Construction Management Office of Zhejiang 

Department of Transportation. From 2017, he was deputy director of 

chief engineer office of Communications Group. From 2018, he was 

deputy general manager of expressway construction department and 

deputy general manager of expressway management department of 

Communications Group.

He  is  currently  general  manager  of  expressway  management 

department of Communications Group.

56

2019ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesMr. 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 Comprehensive 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.

Mr.  Yu  is  currently  the  General  Manager  of  Hangzhou  Wenzhou 

Railway Co., Ltd.

57

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  Group 

Limited (HK Stock Code: 00672) and MMG Limited (HK Stock Code: 

01208).

58

2019ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesMs. LEE Wai Tsang, Rosa

Independent Non-Executive Director

Born  in  1977,  Ms.  Lee  has  over  16  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  is  a  Chief  Investment  Officer  of 

Grand Finance Group 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.

59

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).

60

2019ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesMr. 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.  And 

General Manager of the Industrial Investment Management Division 

One of the Communications Group.

M r .   Y a o   r e s i g n e d   t h e   p o s i t i o n   o f   S u p e r v i s o r   R e p r e s e n t i n g 

Shareholders on February 3, 2020.

61

Mr. ZHENG Ruchun

Supervisor Representing Shareholders

Born  in  1962,  is  a  senior  accountant.  He  graduated  from  Jiangxi 

College  of  Finance  and  Economics  with  a  Bachelor’s  degree  in 

Accounting  in  1985,  and  obtained  an  EMBA  degree  from  Arizona 

State University in 2012.

From 1985 to 1988, Mr. Zheng worked as a teacher in the accounting 

department  of  Jiangxi  College  of  Finance  and  Economics.  From 

1988 to 2002, he successively worked as deputy section chief of the 

finance  department  and  section  chief  of  the  collection  department 

of  Zhejiang  Highway  Management  Bureau.  From  1998  to  2005,  he 

successively  worked  as  director  of  the  comprehensive  accounting 

department and assistant to the general commander in the highway 

construction  headquarters  of  Jinliwen  Expressway.  From  2005 

to  2019,  he  successively  worked  as  deputy  general  manager, 

general manager, chairman of the board and secretary of the party 

committee of Zhejiang Jinliwen Expressway Co., Ltd.

He  is  currently  deputy  chief  accountant  and  general  manager  of 

the  financial  management  department  of  Zhejiang  Communications 

Investment Group Co., Ltd.

62

2019ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesMr. 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.

63

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 is currently the Manager of Discipline inspection and supervision 

department.

64

2019ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesMs. 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).

65

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.

66

2019ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesOther 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.

67

Mr. WANG Dehua

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 Administrative and Finance 

Department of Liaison Office of the Central Government in the Hong 

Kong S.A.R. from 2003 to 2011, serving as its Deputy Director. 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.

68

2019ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesMr. Tony H. ZHENG

Ms. ZHANG Xiuhua

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. He also serves as Director of Yuhang Co., Taiping 

Science  and  Technology  Insurance  Co.,  and  Zhejiang  International 

Hong Kong.

Born in 1969, Ms. Zhang is a Senior Economist, the Deputy General 

Manager  of  the  Company.  Ms.  Zhang  graduated  from  Chongqing 

Jiaotong  University  majoring  in  transportation  management  with  a 

bachelor’s  degree  in  science,  and  obtained  a  master’s  degree  in 

business administration from Zhejiang University in 2006.

From  July  1991  to  February  1997,  she  worked  in  the  Operation 

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.

69

Mr. WANG Bingjiong

Born  in  1967,  graduated  from  the  Party  School  of  the  Communist 

Party of China majoring in business administration, an Engineer.

Mr. Wang had worked since 1989. He had served as Deputy General 

Manager at the Expressway Administration Department of Zhejiang 

Communications Investment Group Co., Ltd.

Mr. Wang is currently Deputy General Manager and Party Committee 

Member of the Company.

70

2019ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesThe Directors of the Company hereby present their report and the audited financial statements of 
the Group for the year ended December 31, 2019.

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 2019 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, 2019 is set out in note 7 to the financial 
statements.

RESULTS AND DIVIDENDS

The Group’s profit for the year ended December 31, 2019 and the state of financial position at that 
date are set out in the financial statements on pages 102 to 280.

The  Directors  have  recommended  the  payment  of  a  dividend  of  Rmb0.355  (approximately 
HK$0.398) per share in the year of 2019. The final dividend is subject to shareholders’ approval at 
the 2019 annual general meeting of the Company and is expected to be paid by no later than July 
15, 2020. 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 41.5% during the Period. Further details of 
the dividends are set out in note 16 to the financial statements.

71

Report of the DirectorsFIVE 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

2019
Rmb’000

Year ended December 31,
2018
Rmb’000
(Restated)

2017
Rmb’000
(Restated)

2016
Rmb’000
(Restated)

Continuing operations
Revenue
Operating costs
Gross profit
Securities investment gains
Other income and gains and losses
Administrative expenses
Other expenses and impairment losses
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 

11,955,266
(6,680,965)
5,274,301
1,402,684
260,267
(136,356)
(95,258)
652,824
34,941
(1,626,809)
5,766,594
(1,351,695)

11,192,199
(5,806,810)
5,385,389
512,449
404,128
(123,391)
(54,417)
350,578
30,037
(1,396,806)
5,107,967
(1,113,454)

11,080,513
(5,823,370)
5,257,143
774,885
143,739
(124,115)
(147,138)
161,502
17,668
(1,137,472)
4,946,212
(1,165,941)

10,978,928
(5,693,253)
5,285,675
223,573
345,670
(106,864)
(100,569)
64,699
9,797
(1,287,601)
4,434,380
(1,112,066)

2015
Rmb’000
(Restated)

11,874,006
(6,414,879)
5,459,127
584,114
256,350
(122,933)
(181,631)
48,289
(25,067)
(1,406,225)
4,612,024
(1,336,120)

operations

4,414,899

3,994,513

3,780,271

3,322,314

3,275,904

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

–
4,414,899

–
3,994,513

–
3,780,271

81,594
3,403,908

60,830
3,336,734

3,711,118
–

3,515,095
–

3,097,355
–

2,676,975
80,114

2,426,377
56,777

703,781
–

479,418
–

682,916
–

645,339
1,480

849,527
4,053

72

Report of the Directors2019ANNUAL REPORTResults

2019
Rmb’000

Year ended December 31,
2018
Rmb’000
(Restated)

2017
Rmb’000
(Restated)

2016
Rmb’000
(Restated)

2015
Rmb’000
(Restated)

Earnings per share
From continuing and discontinued 

operations
Basic (Rmb cents)
Diluted (Rmb cents)

From continuing operations

Basic (Rmb cents)
Diluted (Rmb cents)

Assets and liabilities

Total assets
Total liabilities
Net Assets

Notes:

85.45
82.37

85.45
82.37

80.94
76.27

80.94
76.27

71.32
69.04

71.32
69.04

63.48
63.48

61.64
61.64

57.17
57.17

55.87
55.87

As at December 31,

2019
Rmb’000

104,576,954
72,594,843
31,982,111

2018
Rmb’000
(Restated)

93,756,863
60,833,665
32,923,198

2017
Rmb’000
(Restated)

88,634,402
58,213,216
30,421,186

2016
Rmb’000
(Restated)

89,437,399
64,437,333
25,000,066

2015
Rmb’000
(Restated)

90,305,810
67,169,709
23,136,101

1. 

The  consolidated  results  of  the  Group  for  the  four  years  ended  December  31,  2018  have  been  restated  in 

accordance with Accounting Guideline 5 “Merger Accounting for Common Control Combinations” issued by Hong 

Kong Institute of Certified Public Accountants, while those for the year ended December 31, 2019 were prepared 

based on the consolidated statement of profit or loss and other comprehensive income as set out on page 102 of 

the financial report.

2. 

The 2019 basic earnings per share is based on the profit attributable to owners of the Company for the year ended 

December  31,  2019  of  Rmb3,711,118,000  (2018  (restated):  Rmb3,515,095,000)  and  the  4,343,114,500  (2018: 

4,343,114,500) ordinary shares in issue during the year.

The 2019 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,  2019  of  Rmb3,792,057,000  (2018  (restated): 

Rmb3,500,754,000) and the 4,603,501,000 (2018 restated: 4,589,747,000) weighted average number of ordinary 

shares for the purpose of diluted earnings per share during the year.

73

 
 
 
 
 
 
 
 
 
 
 
 
 
3. 

Differences in financial statements prepared under PRC GAAP and HKFRSs

Profit for the year 

Net assets as

ended December 31,

at December 31,

2019

Rmb’000

2018

Rmb’000

(Restated)

2019

Rmb’000

2018

Rmb’000

(Restated)

As reported in the statutory financial  

statements of the Group prepared in  

accordance with PRC GAAP

4,424,083

4,003,312

32,291,077

33,223,365

HK GAAP adjustments:

(a)  Goodwill

–

–

(b)  Amortization provided, net of deferred tax

(1,952)

(1,952)

(c) 

Assessment on impact of appreciation,  

(199,769)

(174,957)

(199,769)

(173,005)

net of deferred tax

(d)  Others

(e)  Non-controlling interests

(3,292)

(385)

(3,555)

(3,292)

–

(3,555)

39,074

7,666

19,020

42,366

7,666

22,575

As restated in the financial statements

4,414,899

3,994,513

31,982,111

32,923,198

MAJOR CUSTOMERS AND SUPPLIERS

In the year under review, the five largest customers and suppliers of the Group accounted for less 

than 30% of the total turnover and purchases, respectively.

None of the directors of the Company or any of their associates or any shareholders (which, to the 

best knowledge of the directors, own more than 5% of the Company’s issued share capital) had 

any beneficial interest in the Group’s five largest customers.

RELATED PARTY TRANSACTIONS

During  the  year,  details  of  the  related  party  transactions  that  the  Company  and  its  subsidiaries 

have entered into with Communications Group and its subsidiaries of are set out in note 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 Rmb9,214,000 for charitable or 

other purposes.

74

Report of the Directors2019ANNUAL REPORT 
 
 
 
 
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, 2019 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 page 107 to the financial statements.

DISTRIBUTABLE RESERVES

As at December 31, 2019, 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  Rmb4,869,200,000.  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, 2019, other than the deposits placed with a non-bank financial institution of 

Rmb1,742,825,000, 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.

75

DIRECTORS

The Directors of the Company during the year and as at the date of this report are:

CHAIRMAN

Mr. YU Zhihong

EXECUTIVE DIRECTORS

Mr. CHENG Tao

Ms. LUO Jianhu (General Manager)

NON-EXECUTIVE DIRECTORS

Mr. DAI Benmeng

Mr. YUAN Yingjie (Appointed, with effect from February 3, 2020)

Mr. YU Qunli (Resigned, with effect from February 3, 2020)

Mr. YU Ji

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. PEI Ker-Wei

Ms. LEE Wai Tsang, Rosa

Mr. CHEN Bin

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 51 to 70 in the Company’s annual report.

76

Report of the Directors2019ANNUAL REPORTDIRECTORS’ SERVICE CONTRACTS

Mr. YU Qunli has entered into a service agreement with the Company, which effect from July 1, 

2018 to June 30, 2021. The contract was terminated on February 3, 2020.

Mr.  YUAN  Yingjie  has  entered  into  a  service  agreement  with  the  Company,  which  effect  from 

February 3, 2020 to June 30, 2021.

Other Directors have entered into service agreements 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, 2019 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.

77

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.

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.

78

Report of the Directors2019ANNUAL REPORTDividends  payable  to  the  Shareholders  who  are  mainland  individual  investors  or  corporate 

investors investing in the H Shares via the Shanghai-Hong Kong Stock Connect or the Shenzhen-

Hong  Kong  Stock  Connect  will  be  paid  in  Rmb  by  China  Securities  Depository  and  Clearing 

Corporation  Limited  Shanghai  Branch  (“CSDC  Shanghai  Branch”)  or  Shenzhen  Branch  (“CSDC 

Shenzhen Branch”) as entrusted by the Company.

According to the requirements of the “Notice on Taxation Policies Concerning the Shanghai-Hong 
Kong Stock Connect Pilot Program (Finance Tax 【2014】 No. 81《(關於滬港股票市場交易互聯互通
機制試點有關稅收政策的通知》(財稅【2014】  81號))  and  “Notice  on  Taxation  Policies  Concerning 
the  Shenzhen-Hong  Kong  Stock  Connect  Pilot  Program  (Finance  Tax 【2016】  No.  127)及《關 於
深港股票市場交易互聯互通機制試點有關稅收政策的通知》(財稅【2016】  127號)  jointly  published 
by  the  Ministry  of  Finance,  State  Administration  of  Taxation  and  China  Securities  Regulatory 

Commission,  the  Shanghai-Hong  Kong  Stock  Connect  and  the  Shenzhen-Hong  Kong  Stock 

Connect tax arrangements are as follows: (i) for Chinese Mainland individual investors who invest 

in the H Shares via the Shanghai-Hong Kong Stock Connect or the Shenzhen-Hong Kong Stock 

Connect,  the  Company  will  withhold  individual  income  tax  at  the  rate  of  20%  in  the  distribution 

of  final  dividend.  Individual  investors  may,  by  producing  valid  tax  payment  proofs,  apply  to  the 

competent  tax  authority  of  China  Securities  Depository  and  Clearing  Company  Limited  for  tax 

credit relating to the withholding tax already paid abroad; and (ii) for Chinese Mainland securities 

investment funds that invest in the H Shares via the Shanghai-Hong Kong Stock Connect or the 

Shenzhen-Hong  Kong  Stock  Connect,  the  Company  will  withhold  individual  income  tax  in  the 

distribution of final dividend pursuant to the foregoing provisions.

For Chinese mainland corporate investors that invest in the H Shares via the Shanghai-Hong Kong 

Stock  Connect  or  the  Shenzhen-Hong  Kong  Stock  Connect,  the  Company  will  not  withhold  the 

income tax in the distribution of final dividend and such investors shall file the tax returns on their 

own.

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.

79

SUFFICIENCY OF PUBLIC FLOAT

Based on the information that is publicly available to the Company and within the knowledge of the 

Directors, as at the latest practicable date prior to the issue of this annual report, the Company has 

maintained sufficient amount of public float as required under the Listing Rules.

DIRECTORS’ PERMITTED INDEMNITY PROVISION

The  Company  purchased  appropriate  liability  insurance  coverage  for  the  directors,  supervisors 

and senior management members of the Group during the year ended 31 December 2019 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 20, 2020

80

Report of the Directors2019ANNUAL REPORTDuring the Period, the Supervisory Committee duly performed its supervisory responsibilities, and 

safeguarded  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 Procedure 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  sitting  in  on  general  meetings  of  shareholders  and  meetings  of 

the  Board.  The  Supervisory  Committee  discussed  and  reviewed  the  financial  statements  to  be 

submitted  by  the  Board  to  the  general  meeting  of  shareholders  after  carefully  examining  the 

operating results and the financial position of the Company.

During  the  Period,  the  Supervisory  Committee  held  a  total  of  two  meetings  of  its  own,  and  sat 

in on nine meetings held by the Board and three general meetings. The Supervisory Committee 

considered that the Company’s operations were in strict compliance with the Company Law, the 

Company’s  Articles  of  Association  and  the  relevant  national  provisions,  and  all  decision-making 

procedures  were  legitimate.  Through  optimising  the  internal  control  system,  the  Company  had 

sound  internal  control  functions  and  personnel  and  all  operating  activities  were  regulated  in  an 

orderly manner.

During  the  Period,  the  Company  operated  in  accordance  with  the  laws  and  regulated  the 

management. Accordingly, the operating results were true and objective. The management of the 

Company seriously executed the decision-making and deployment of the Board with focus on work 

objectives by taking a practical and proactive approach, thus smoothly accomplishing the business 

objectives for the year. The Company also made significant progress in key work areas including 

brand building, smart expressway construction, securities business and overseas M&A.

The  Supervisory  Committee  has  reviewed  the  financial  statements  of  the  Company  for  2019 

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  2019, 

and complied with the relevant laws, regulations and the Company’s Articles of Association. The 

Company  maintained  a  relatively  stable  dividend  payout,  providing  satisfactory  returns  to  its 

shareholders.

81

Report of Supervisory CommitteeThe  members  of  the  Supervisory  Committee  sat  in  on  the  meetings  of  the  Board  and  general 

meetings of shareholders of the Company and had no objection against the reports and proposals 

submitted  by  the  Board  of  the  Company  to  the  general  meetings  of  shareholders  for  their 

consideration. The Supervisory Committee of the Company supervised the implementation of the 

resolutions proposed at the general meetings of shareholders and considered that the Board was 

able to seriously execute the resolutions proposed at the general meetings of shareholders.

During the Period, the Supervisory Committee considered that the connected transactions of the 

Company were fair and reasonable without prejudice to the interests of the shareholders and the 

Company.

During  the  Period,  the  members  of  the  Board,  General  Manager  and  other  senior  management 

of  the  Company  complied  with  their  fiduciary  duties  and  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  performance  across  various  lines  of  business 

achieved by the Board and the management of the Company during the Period.

The Company’s targets and objectives for 2020 are clearly defined. The Supervisory Committee 

will  work  with  the  Board  and  the  management  consistently  to  carry  out  work  in  accordance  with 

the laws while fully executing its supervision functions to maintain stability. While safeguarding the 

shareholders’ interests in good faith, the Supervisory Committee will work diligently to accomplish 

the  work  objectives  and  targets  of  the  Company  for  2020  so  as  to  facilitate  the  significant 

development of the Company.

By the order of the Supervisory Committee

ZHENG Ruchun
Chairman of the Supervisory Committee

Hangzhou, Zhejiang Province, the PRC

March 20, 2020

82

2019ANNUAL REPORTReport of Supervisory CommitteeDuring the year ended December 31, 2019, the Company had the following non-exempt connected 

transactions and continuing connected transactions.

Connected Transaction

1.  Equity Transfer Agreement

On  June  5,  2019,  the  Company  and  Zhejiang  Shipping  entered  into  an  equity  transfer 
agreement  (the  “Equity  Transfer  Agreement”),  pursuant  to  which  Zhejiang  Shipping 
conditionally  agreed  to  sell  and  the  Company  conditionally  agreed  to  acquire  the  entire 
equity interest in Zhejiang Grand Hotel Limited (浙江大酒店有限公司) at a cash consideration 
of Rmb1,010,144,600. Please refer to the announcement and supplemental announcement 

of the Company dated June 5, 2019 and June 11, 2019 respectively for details.

Communications Group, which holds approximately 67% of the issued share capital of the 

Company, is a controlling shareholder of the Company. Zhejiang Shipping is a wholly-owned 

subsidiary of the Communications Group. As such, Zhejiang Shipping is a connected person 

of  the  Company  and  the  transaction  contemplated  under  the  Equity  Transfer  Agreement 

constitutes  a  connected  transaction  for  the  Company  under  Chapter  14A  of  the  Listing 

Rules.

As  one  or  more  of  the  applicable  percentage  ratios  in  respect  of  the  transaction 

contemplated  under  the  Equity  Transfer  Agreement  are  over  0.1%  but  less  than  5%,  the 

transaction  contemplated  under  the  Equity  Transfer  Agreement  is  subject  to  the  reporting 

and announcement requirements but exempt from the independent Shareholders’ approval 

requirement under Chapter 14A of the Listing Rules.

2.  Capital Contribution Agreement

On  August  9,  2019,  the  Company  as  a  shareholder  of  Zhejiang  Communications  Finance 
entered  into  a  capital  contribution  agreement  (the  “Capital  Contribution  Agreement”) 
with Ningbo Expressway Co and Zhejiang Communications Finance, pursuant to which the 

Company agreed to contribute an amount of Rmb350,000,000 by way of cash into the equity 

capital of Zhejiang Communications Finance, an associate of the Company. Please refer to 

the announcement of the Company dated August 9, 2019 for details.

83

Connected TransactionsZhejiang  Communications  Finance  is  a  subsidiary  of  Communications  Group,  which 

directly  and  indirectly  through  Ningbo  Expressway  Co,  holds  in  aggregate  approximately 

65%  of  the  issued  share  capital  of  Zhejiang  Communications  Finance.  As  such,  Zhejiang 

Communications  Finance  is  a  connected  person  of  the  Company  and  the  transaction 

contemplated under the Capital Contribution Agreement constitutes a connected transaction 

of the Company under Chapter 14A of the Listing Rules.

As the highest applicable percentage ratios in respect of the transaction contemplated under 

the  Capital  Contribution  Agreement  is  higher  than  0.1%  but  less  than  5%,  the  transaction 

contemplated  under  the  Capital  Contribution  Agreement  is  subject  to  the  reporting  and 

announcement  requirements  but  exempt  from  the  independent  Shareholders’  approval 

requirement under Chapter 14A of the Listing Rules.

3.  Expressway Services Agreements

On  September  12,  2019,  the  Company  and  its  relevant  subsidiaries  entered  into  a 
series  of  expressway  services  agreements  (the  “Expressway  Services  Agreements”) 
with  Zhejiang  Information,  a  wholly-owned  subsidiary  of  a  controlling  shareholder  of  the 

Company, pursuant to which the Company and its relevant subsidiaries agreed to purchase, 

and  Zhejiang  Information  agreed  to  provide,  various  services  in  respect  of  expressway 

mechanical and electrical engineering, construction, repair and technical support at the total 

consideration  of  Rmb419,646,407.19.  Please  refer  to  the  announcement  of  the  Company 

dated September 12, 2019 for details.

Zhejiang  Information,  as  a  wholly-owned  subsidiary  of  Communications  Group,  is  a 

connected person of the Company and 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 

under  the  Expressway  Services  Agreements  and  the  Previous  Transactions  I  with  parties 

who  are  connected  with  one  another  were  entered  into  or  completed  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.

84

2019ANNUAL REPORTConnected TransactionsAs the applicable percentage ratios in respect of the transactions contemplated under the 

Expressway Services Agreements, after aggregating with the Previous Transactions I, are 

more  than  0.1%  but  less  than  5%,  the  transactions  contemplated  under  the  Expressway 

Services  Agreements  are  subject  to  the  reporting,  announcement  and  annual  review 

requirements but exempt from the independent Shareholders’ approval requirement under 

Chapter 14A of the Listing Rules.

4.  Supporting Services Agreement

On  November  29,  2019,  the  Company  entered  into  a  supporting  services  agreement 
(the  “Supporting  Services  Agreement”)  with  Zhejiang  Information,  pursuant  to  which 
the  Company  agreed  to  purchase,  and  Zhejiang  Information  agreed  to  provide,  software 

development,  system  installation,  testing  and  support  services  and  defect  repair  services 

during  the  defect  liability  period  in  respect  of  the  Company’s  cloud  control  platform 

application system of intelligent expressway at the consideration of Rmb5,489,500. Please 

refer to the announcement of the Company dated November 29, 2019 for details.

Zhejiang  Information  is  a  wholly-owned  subsidiary  of  Communications  Group.  As  such, 

Zhejiang Information is a connected person of the Company and as a result, the transactions 

contemplated under the Supporting Services Agreement 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 

under the Supporting Services Agreement and the Previous Transactions II with parties who 
are connected with one another were entered into or completed within a 12-month period, 

the transactions contemplated under the Supporting Services Agreement and the Previous 

Transactions II are required to be aggregated for the calculation of the relevant percentage 

ratios to determine the classification of the transactions.

As the applicable percentage ratios in respect of the transactions contemplated under the 

Supporting  Services  Agreement,  after  aggregating  with  the  Previous  Transactions  II,  are 

more than 0.1% but less than 5%, the Supporting Services Agreement will be subject to the 

reporting, announcement and annual review requirements but exempt from the independent 

Shareholders’ approval requirement under Chapter 14A of the Listing Rules.

85

5.  Acquisition of a Majority Stake in an Expressway Project Company via 

a Consortium Company

On  December  23,  2019,  the  Company,  China  Merchants  and  four  other  independent  third 

parties,  through  a  consortium  company  established  for  the  purpose  of  this  transaction  to 
act  as  the  acquiring  entity  (the  “Consortium  Company”),  entered  into  (i)  an  agreement 
with  IC  İÇTAŞ  İnşaat  Sanayi  ve  Ticaret  A.Ş.  (“IC  Ictas”)  in  relation  to  the  acquisition  of 
51% equity stake in a Turkey project company (the “ICA Project Company”) and 51% of a 
related shareholder loan of ICA Project Company; and (ii) an agreement with IC Ictas and 
Pacific Motorway Operations Holding Limited (“IC Ictas (HK)”) in relation to the acquisition 
of  51%  equity  stake  in  a  maintenance  company  (“IC  Maintenance”),  respectively  (the 
“Acquisition”).  In  the  Acquisition,  China  Merchants,  which  has  31%  equity  stake  in  the 
Consortium Company, will indirectly acquire 15.81% equity stake in ICA Project Company, 

15.81% of the related shareholder loan of ICA Project Company, and 15.81% equity stake 

in  IC  Maintenance,  respectively.  The  Company,  which  has  17.5%  equity  stake  in  the 

Consortium Company, will indirectly acquire 8.925% equity stake in ICA Project Company, 

8.925% of the related shareholder loan of ICA Project Company and 8.925% equity stake in 

IC Maintenance, respectively.

The  shareholders  of  the  Consortium  Company  expect  to  invest  up  to  USD688,500,000  to 

settle the consideration payable in the Acquisition, which is subject to completion adjustment 

according  to  a  locked  box  interest  rate.  The  Company  will  make  a  contribution  to  the 

Consortium Company in proportion to its 17.5% shareholding in the Consortium Company, 

which was not paid by the Company during the Period. Please refer to the announcement of 
the Company dated December 23, 2019 for details.

China  Merchants  is  a  substantial  shareholder  of  Shangsan  Co  which  is  a  subsidiary  of 

the Company and accordingly China Merchants is a connected person of the Company at 

subsidiary level. The Acquisition constitutes a connected transaction of the Company under 

Chapter  14A  of  the  Listing  Rules.  As  the  applicable  percentage  ratios  exceed  1%  but  are 

less  than  5%,  the  Acquisition  is  subject  to  the  reporting  and  announcement  requirements 

but exempt from independent Shareholders’ approval requirement under Chapter 14A of the 

Listing Rules.

86

2019ANNUAL REPORTConnected TransactionsContinuing Connected Transactions

1.  Deposit Services with Zhejiang Communications Finance

Pursuant  to  the  financial  services  agreement  dated  March  30,  2016  (the  “Financial 
Services Agreement”) entered into between the Company and Zhejiang Communications 
Finance,  Zhejiang  Communications  Finance  agreed  to  provide  the  Company  and  its 

subsidiaries  with  a  range  of  financial  services  including  certain  deposit  services  (the 

“Deposit  Services”)  for  a  term  of  three  years  from  the  date  of  the  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.

Since the Financial Services Agreement expired on March 30, 2019, on March 18, 2019, the 
Company  entered  to  the  new  financial  services  agreement  (the  “New  Financial  Services 
Agreement”),  together  with  a  supplemental  agreement,  among  others,  to  increase  the 
existing annual caps for the Deposit Services from Rmb1,400,000,000 to Rmb2,500,000,000 
(including  any  interest  accrued  thereon)  (the  “Supplemental  Agreement”),  with  Zhejiang 
Communications Finance for renewal of the terms of the Financial Services Agreement with 

effect from March 30, 2019 for a term of three years. Save as otherwise provided, all terms 

and  conditions  under  the  Financial  Services  Agreement  remain  substantially  unchanged. 

Please refer to the announcement of the Company dated March 18, 2019 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  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  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.

87

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 Rmb1,400,000,000 under the New Financial Services Agreement and 

Rmb2,500,000,000 under the Supplemental Agreement during the term of the New Financial 

Services Agreement.

As  the  applicable  percentage  ratios  in  respect  of  the  Deposit  Services  under  the  New 

Financial Services Agreement are more than 0.1% but less than 5%, the Deposit Services 

will  constitute  continuing  connected  transactions  of  the  Company  under  Chapter  14A  of 

the  Listing  Rules  subject  to  the  reporting,  announcement  and  annual  review  requirements 

under Chapter 14A of the Listing Rules, but are exempt from the independent Shareholders’ 

approval requirement under Chapter 14A of the Listing Rules.

As  the  relevant  applicable  percentage  ratios  in  respect  of  the  revised  annual  caps  for 

the  Deposit  Services  under  the  Supplemental  Agreement  is  more  than  5%  but  less  than 

25%,  such  transactions  are  subject  to  the  reporting,  announcement,  annual  review  and 

independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. 

Pursuant  to  Rule  14A.54  of  the  Listing  Rules,  the  Company  should  re-comply  with  the 

applicable requirements under Chapter 14A of the Listing Rules before the existing annual 

caps for the Deposit Services under the New Financial Services Agreement are exceeded.

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  together  with  the 

Supplemental Agreement amounted to Rmb2,488,973,000.

88

2019ANNUAL REPORTConnected Transactions2.  Daily  Road  Maintenance  Services  Agreements,  Shenjiahuhang 
Daily  Road  Maintenance  Agreements,  Dedicated  Road  Maintenance 
Agreements and Road Naming and Numbering Adjustment Agreements

(i)  Daily Road Maintenance Services Agreements

On May 14, 2019, the Company and the relevant subsidiaries of the Company entered 
into  a  number  of  daily  road  maintenance  services  agreements  (the  “Daily  Road 
Maintenance  Services  Agreements”)  with  the  Maintenance  Co,  pursuant  to  which 
Maintenance  Co  agreed  to  provide  day-to-day  maintenance  services  including  road 

patrol,  inspection  of  the  maintenance  status  of  pavements,  roadbeds,  greening  and 

sloping in respect of the Group’s four expressways, namely the Shanghai-Hangzhou-

Ningbo Expressway, the Shangsan Expressway, Jinhua Section of the Ningbo-Jinhua 

Expressway  and  the  Hanghui  Expressway.  Each  of  the  Daily  Road  Maintenance 

Services  Agreements  has  a  term  of  one  year  with  effect  from  January  1,  2019  to 

December  31,  2019.  The  total  service  fees  in  respect  of  the  daily  maintenance 

services shall be Rmb66,823,926. Please refer to the announcement of the Company 

dated May 14, 2019 for details.

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  Daily 

Road Maintenance Agreements amounted to Rmb64,338,000.

(ii)  Shenjiahuhang Daily Road Maintenance Agreements

On  May  14,  2019,  each  of  Shenjiahuhang  Co  and  Zhoushan  Co  entered  into  a 
daily  road  maintenance  agreement  (the  “Shenjiahuhang  Daily  Road  Maintenance 
Agreements”) with Jiaogong Maintenance, pursuant to which Jiaogong Maintenance 
agreed  to  provide  daily  maintenance  services  including  road  patrol,  inspection  of 

the maintenance status of pavements, roadbeds, greening and sloping in respect of 

the Shenjiahuhang Expressway and the Zhejiang Zhoushan Bay Bridge. The term of 

the Shenjiahuhang Daily Road  Maintenance Agreement is one year with effect from 

January 1, 2019 to December 31, 2019. The total service fees in respect of the daily 

maintenance services shall be Rmb19,991,811. Please refer to the announcement of 

the Company dated May 14, 2019 for details.

89

During  the  Period,  the  total  service  fees  paid  by  Shenjiahuhang  Co  and  Zhoushan 

Co to Jiaogong Maintenance in respect of the daily maintenance services under the 

Shenjiahuhang Daily Road Maintenance Agreements amounted to Rmb19,983,000.

(iii)  Dedicated Road Maintenance Agreements

On  May  14,  2019,  the  Company  and  the  relevant  subsidiaries  of  the  Company 
entered  into  dedicated  road  maintenance  agreements  (the  “Dedicated  Road 
Maintenance  Agreements”)  with  Maintenance  Co,  Jiaogong  Maintenance  and 
Zhejiang  Shunchang,  respectively,  pursuant  to  which  Maintenance  Co  Jiaogong 

Maintenance  and  Zhejiang  Shunchang  agreed  to  provide  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  to  the  Group’s 

seven  expressways,  namely:  the  Shanghai-Hangzhou-Ningbo  Expressway,  the 

Shangsan  Expressway,  Jinhua  Section  of  the  Ningbo-Jinhua  Expressway,  the 

Hanghui Expressway, the Huihang Expressway, the Shenjiahuhang Expressway and 

the Zhejiang Zhoushan Bay Bridge, Jinhua section of the Ningbo-Jinhua Expressway 

and the Hanghui Expressway. The term of each of the Dedicated Road Maintenance 

Agreements is eight months from April 1, 2019 to November 30, 2019. Please refer to 

the announcement of the Company dated May 14, 2019 for details.

On  June  5,  2019,  each  of  Shenjiahuhang  Co  and  Zhoushan  Co  entered  into  a 

termination  agreement  with  Jiaogong  Maintenance  respectively,  pursuant  to  which 

Shenjiahuhang Co and Jiaogong Maintenance agreed to terminate the agreement in 

respect  of  provision  of  the  Dedicated  Road  Maintenance  Agreements.  Please  refer 

to the announcement of the Company dated June 5, 2019 for details. As a result, the 

total  service  fees  in  respect  of  the  dedicated  road  maintenance  services  has  been 

reduced to Rmb346,246,536.

During the Period, the total service fees paid by the Company and its subsidiaries to 

Maintenance  Co  and  Zhejiang  Shunchang  in  respect  of  the  dedicated  maintenance 

services  under  the  Dedicated  Road  Maintenance  Agreements  amounted  to 

Rmb197,988,000 and Rmb97,034,000, respectively

90

2019ANNUAL REPORTConnected Transactions(iv)  Road Naming and Numbering Adjustment Agreements

On  May  14,  2019,  the  Company  and  the  relevant  subsidiaries  of  the  Company 

entered  into  a  number  of  road  naming  and  numbering  adjustment  agreements  (the 
“Road  Naming  and  Numbering  Adjustment  Agreements”)  with  the  Maintenance 
Co  and  Jiaogong  Maintenance,  pursuant  to  which  Maintenance  Co  and  Jiaogong 

Maintenance  agreed  to  provide  the  naming  and  numbering  adjustment  services 

including  replacing  signage  and  adding  road  signs,  guardrails,  crash  pads  and 

markings  to  the  Group’s  six  expressways,  namely,  the  Shanghai-Hangzhou-Ningbo 

Expressway,  the  Shangsan  Expressway,  Jinhua  Section  of  the  Ningbo-Jinhua 

Expressway,  the  Hanghui  Expressway,  the  Shenjiahuhang  Expressway  and  the 

Zhejiang Zhoushan Bay Bridge. Each of the Road Naming and Numbering Adjustment 

Agreements has a term of two months with effect from May 14, 2019. The total service 

fees  in  respect  of  the  daily  maintenance  services  shall  be  Rmb36,946,349.  Please 

refer to the announcement of the Company dated May 14, 2016 for details.

During the Period, the total service fees paid by the Company and its subsidiaries to 

Maintenance Co and Jiaogong Maintenance in respect of the naming and numbering 

adjustment services under the Road Naming and Numbering Adjustment Agreements 

amounted to Rmb26,722,000 and Rmb5,935,000, respectively.

Each  of  Maintenance  Co,  Zhejiang  Shunchang  and  Jiaogong  Maintenance  is  a 

subsidiary of Communications Group. Therefore, each of Maintenance Co, Zhejiang 

Shunchang and Jiaogong Maintenance is a connected person of the Company and as 
a result, the respective transactions contemplated under the Daily Road Maintenance 

Agreements, the Shenjiahuhang Daily Road Maintenance Agreements, the Dedicated 

Road  Maintenance  Agreements  and  the  Road  Naming  and  Numbering  Adjustment 

Agreements  constitute  continuing  connected  transactions  for  the  Company  under 

Chapter 14A of the Listing Rules.

91

Pursuant  to  Rules  14A.81  and  14A.82  of  the  Listing  Rules,  as  the  transactions 

contemplated  under  the  Daily  Road  Maintenance  Agreements,  the  Shenjiahuhang 

Daily Road Maintenance Agreements, the Dedicated Road Maintenance Agreements, 

the Road Naming and Numbering Adjustment Agreements and Previous Transactions 

III  were  entered  into  with  parties  who  are  connected  with  one  another  and  within  a 

12-month period, the Daily Road Maintenance Agreements, the Shenjiahuhang Daily 

Road  Maintenance  Agreements,  the  Dedicated  Road  Maintenance  Agreements,  the 

Road Naming and Numbering Adjustment Agreements 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.

As  the  applicable  percentage  ratios  in  respect  of  the  respective  transactions 

contemplated  under  the  Daily  Road  Maintenance  Agreements,  the  Shenjiahuhang 

Daily Road Maintenance Agreements, the Dedicated Road Maintenance Agreements 

and  the  Road  Naming  and  Numbering  Adjustment  Agreements,  after  aggregating 

the Previous Transactions III, are more than 0.1% but less than 5%, the Daily Road 

Maintenance Agreements, the Shenjiahuhang Daily Road Maintenance Agreements, 

the Dedicated Road Maintenance Agreements and the Road Naming and Numbering 

Adjustment  Agreements  were  subject  to  the  reporting,  announcement  and  annual 

review  requirements  but  exempt  from  the  independent  Shareholders’  approval 

requirement under Chapter 14A of the Listing Rules.

3.  Construction Service Agreements

On  June  21,  2019,  De’an  Construction  as  employer  entered  into  a  construction  service 
agreement and its supplemental agreement (the “Construction Service Agreements”) with 
Zhejiang  Hongtu  as  contractor  in  relation  to  the  provision  of  construction  services  for  the 

Public-Private-Partnership (PPP) projects in respect of the construction of bridges, tunnels 

and public service station from Deqing County to the juncture between Deqing County and 

Anji  County  for  a  total  consideration  of  Rmb809,315,640.  The  term  of  the  Construction 

Service  Agreement,  which  is  the  construction  period,  is  36  months.  Please  refer  to  the 

announcement and the supplemental announcement of the Company dated June 21, 2019 

and July 2, 2019 respectively for details.

92

2019ANNUAL REPORTConnected TransactionsZhejiang  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 

transactions  under  the  Construction  Service  Agreement  constitutes  continuing  connected 

transactions for the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios in respect of the transactions contemplated under the 

Construction  Service  Agreement  is  more  than  0.1%  but  less  than  5%,  the  Construction 

Service  Agreement  is  subject  to  the  reporting,  announcement  and  annual  review 

requirements but exempt from the independent Shareholders’ approval requirement under 

Chapter 14A of the Listing Rules.

During the Period, the total service fees paid by the De’an Construction to Zhejiang Hongtu 

in respect of the construction services under the Construction Service Agreement amounted 

to Rmb361,256,000.

4.  Daily Road Maintenance Agreements

(i)  Daily Road Maintenance (First Contract Section) Agreements

On  December  27,  2019,  Jiaxing  Co,  Hangzhou  Management  Office,  Shaoxing 

Management  Office,  Ningbo  Management  Office,  Shangshen  Management  Office, 

Hanghui  Co,  and  Huihang  Co  separately  entered  into  a  series  of  agreements 
with  Maintenance  Co  (the  “Daily  Road  Maintenance  (First  Contract  Section) 
Agreements”),  pursuant  to  which  Maintenance  Co  agreed  to  provide  day-to-day 
maintenance  services  including  road  patrol,  inspection  of  the  maintenance  status 

of  pavements  and  roadbeds,  pavement  diseases  treatment,  greening  and  sloping, 
maintenance  of  safety  facilities,  and  bridge  maintenance  (“Maintenance  Services”) 
to four expressways operated by the Group, namely the Shanghai-Hangzhou-Ningbo 

Expressway,  the  Shangsan  Expressway,  the  Hanghui  Expressway  and  the  Huihang 

Expressway.  The  term  of  the  Daily  Road  Maintenance  (First  Contract  Section) 

Agreements is three years from January 1, 2020 to December 31, 2022. The annual 

service fees payable by the Group to Maintenance Co shall be Rmb68,111,019, which 

amount to Rmb204,333,057 in total from 2020 to 2022.

93

(ii)  Daily Road Maintenance (Second Contract Section) Agreements

On  December  27,  2019,  each  of  Shenjiahuhang  Co  and  Zhoushan  Co  entered  into 
an  agreement  with  Jiaogong  Maintenance  (the  “Daily  Road  Maintenance  (Second 
Contract  Section) Agreements”),  pursuant  to  which  Jiaogong Maintenance agreed 
to  provide  Maintenance  Services  to  two  expressways  operated  by  the  Group, 

namely  the  Shenjiahuhang  Expressway  and  the  Zhoushan  Bay  Bridge.  The  term  of 

the  Daily  Road  Maintenance  (Second  Contract  Section)  Agreements  is  three  years 

from  January  1,  2020  to  December  31,  2022.  The  annual  service  fees  payable  by 

the  Group  to  Jiaogong  Maintenance  in  2020  shall  be  Rmb27,158,624.  The  annual 

service fees payable by the Group to Jiaogong Maintenance in 2021 and 2022 shall be 

Rmb26,334,280 respectively.

(iii)  Daily Road Maintenance (Third Contract Section) Agreements

On December 27, 2019, each of Jinhua Co and Xintian Management Office entered 
into  an  agreement  with  Zhejiang  Shunchang  (the  “Daily  Road  Maintenance  (Third 
Contract Section) Agreements”), pursuant to which Zhejiang Shunchang agreed to 
provide Maintenance Services to three expressways operated by the Group, namely 

Xintian  Section  of  the  Shangsan  Expressway,  Jinhua  Section  of  the  Ningbo-Jinhua 

Expressway  and  Yiwu  Section  of  the  Yidong  Expressway.  The  term  of  the  Daily 

Road Maintenance (Third Contract Section) Agreements is three years from January 

1,  2020  to  December  31,  2022.  The  annual  service  fees  payable  by  the  Group  to 

Zhejiang Shunchang shall be Rmb22,076,202 in 2020, 2021 and 2022 respectively.

Each  of  Maintenance  Co,  Jiaogong  Maintenance  and  Zhejiang  Shunchang  is  an 

indirect  subsidiary  of  Communications  Group.  As  such,  each  of  Maintenance  Co, 

Jiaogong  Maintenance  and  Zhejiang  Shunchang  is  a  connected  person  of  the 

Company  and  the  respective  transactions  contemplated  under  the  Daily  Road 

Maintenance  (First  Contract  Section)  Agreements,  the  Daily  Road  Maintenance 

(Second  Contract  Section)  Agreements  and  the  Daily  Road  Maintenance  (Third 

Contract  Section)  Agreements  constitute  continuing  connected  transactions  for  the 

Company under Chapter 14A of the Listing Rules.

94

2019ANNUAL REPORTConnected TransactionsAs  the  applicable  percentage  ratios  in  respect  of  the  respective  transactions 

contemplated under the Daily Road Maintenance (First Contract Section) Agreements, 

the  Daily  Road  Maintenance  (Second  Contract  Section)  Agreements  and  the  Daily 

Road  Maintenance  (Third  Contract  Section)  Agreements  are  more  than  0.1%  but 

less than 5%, the Daily Road Maintenance (First Contract Section) Agreements, the 

Daily Road Maintenance (Second Contract Section) Agreements and the Daily Road 

Maintenance  (Third  Contract  Section)  Agreements  will  be  subject  to  the  reporting, 

announcement  and  annual  review  requirements  but  exempt  from  the  independent 

Shareholders’ approval requirement under Chapter 14A of the Listing Rules.

During  the  Period,  there  was  no  service  fee  incurred  payable  by  the  Group  under 

the  Daily  Road  Maintenance  (First  Contract  Section)  Agreements,  the  Daily  Road 

Maintenance (Second Contract Section) Agreements and the Daily Road Maintenance 

(Third Contract Section) Agreements.

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 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.

95

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  102  to  280,  which  comprise  the 

consolidated statement of financial position as at December 31, 2019, 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,  2019,  and  of  its  consolidated  financial  performance  and  its 

consolidated  cash  flows  for  the  year  then  ended  in  accordance  with  Hong  Kong  Financial  Reporting  Standards 

(“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly 

prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

Basis for Opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. 

Our  responsibilities  under  those  standards  are  further  described  in  the Auditor’s  Responsibilities  for  the Audit  of 

the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with 

the  HKICPA’s  Code  of  Ethics  for  Professional Accountants  (the  “Code”),  and  we  have  fulfilled  our  other  ethical 

responsibilities  in  accordance  with  the  Code.  We  believe  that  the  audit  evidence  we  have  obtained  is  sufficient 

and appropriate to provide a basis for our opinion.

Key Audit Matters
Key  audit  matters  are  those  matters  that,  in  our  professional  judgment,  were  of  most  significance  in  our  audit 

of  the  consolidated  financial  statements  of  the  current  period.  These  matters  were  addressed  in  the  context  of 

our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not 

provide a separate opinion on these matters.

96

2019ANNUAL REPORT Independent Auditor’s ReportKey audit matter

How our audit addressed the key audit matter

Measurement of expected credit losses (“ECL”) for loans to customers arising from margin financing business 

and financial assets held under resale agreements

We  identified  the  measurement  of  ECL  for  the 
Group’s  loan  to  customers  arising  from  margin 
financing  business  and  financial  assets  held  under 
resale  agreements  as  a  key  audit  matter  due  to 
the  significance  of  these  assets  to  the  Group’s 
consolidated financial statements and the significant 
management  judgement  and  estimation  required  in 
the measurement.

As  disclosed  in  Note  5  to  the  consolidated  financial 
statements,  significant  management  judgement  and 
estimation  required  in  the  measurement  of  ECL 
includes  assessing  whether  the  credit  risk  of  an 
asset  has  significantly  increased  and  whether  an 
asset  is  credit  impaired,  using  appropriate  models 
and  assumptions,  determining  the  key  inputs 
including  probability  of  default  (“PD”),  loss  given 
default (“LGD”)and forward-looking information.

As  at  31  December,  2019,  the  Group  held  loans 
t o  c u s t o m e r s  a r i s i n g  f r o m  m a r g i n  f i n a n c i n g 
business  of  Rmb8,752,658,000,  less  impairment 
allowance  of  Rmb1,015,000  as  disclosed  in  Note 
30  to  the  consolidated  financial  statements  and 
financial  assets  held  under  resale  agreements  of 
Rmb8,130,698,000,  less  impairment  allowance 
of  Rmb20,344,000  as  disclosed  in  Note  32  to  the 
consolidated financial statements.

O u r   p r o c e d u r e s   i n   r e l a t i o n   t o   m a n a g e m e n t ’ s 
measurement of ECL for loans to customers arising from 
margin  financing  business  and  financial  assets  held 
under resale agreements included:

•  Te s t i n g   a n d   e v a l u a t i n g   k e y   c o n t r o l s   o f   t h e 

management over the measurement of ECL;

•  Evaluating  the  appropriateness  of  the  ECL  model, 
and the critical assumptions and parameters used in 
the model, in particular PD, LGD and forward-looking 
information;

•  Evaluating  the  determination  of  the  criteria  for 
significant  increase  in  credit  risk  (“SICR”)  by 
management  and,  on  a  sample  basis,  testing  its 
application;

•  On  a  sample  basis,  examining  the  major  data  input 

into the ECL model, including PD and LGD;

•  For  a  sample  of  credit  impaired  assets,  assessing 
the  impairment  allowances  made  by  management 
based  on  the  expected  future  cash  flow  with 
reference  to  financial  information  of  borrowers  and 
guarantors,  and  the  latest  collateral  valuations,  as 
appropriate;

•  Checking the calculation process of the ECL.

97

Key audit matter

How our audit addressed the key audit matter

Determination of consolidation scope of structured entities

Our  procedures  in  relation  to  the  management’s 
determination  of  consolidation  scope  of  structured 
entities included: 

•  Te s t i n g   a n d   e v a l u a t i n g   k e y   c o n t r o l s   o f   t h e 
management  in  determining  the  consolidation  scope 
of structured entities;

•  Examining,  on  a  sample  basis,  the  documents  and 
information  used  by  the  management  in  assessing 
the  consolidation  criteria  of  structured  entities 
against  the  related  agreements  and  other  related 
service  agreements  of  structured  entities  newly 
established,  invested  or  with  changes  in  proportion 
of ownership interests or contractual terms during the 
year;

•  Assessing  management  judgement  in  determining 
the  scope  for  consolidation  and,  on  a  sample  basis, 
assessing the conclusion about whether a structured 
entity should be consolidated or not.

We  identified  the  determination  of  consolidation 
s c o p e  o f  s t r u c t u r e d  e n t i t i e s  a s  a  k e y  a u d i t 
matter  due  to  significant  judgement  applied  by 
management  in  determining  whether  a  structured 
entity  is  required  to  be  consolidated  by  the  Group 
and  the  significance  of  these  balances  to  the 
Group’s  consolidated  financial  statements  as  a 
whole.

The  Group  held  interests  as  investor  or  acted  as 
investment  manager  in  various  structured  entities 
including  collective  asset  management  schemes 
and  investment  funds.  As  disclosed  in  Note  5  to 
the  consolidated  financial  statements,  to  determine 
whether  a  structured  entity  should  be  consolidated, 
the  management  applied  significant  judgement  in 
determining  whether  the  Group  has  power  over 
the  structured  entities,  and  assess  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  is  of  such  significance  that 
it  indicates  the  Group  controlled  the  structured 
entities.

As disclosed in Notes 45 and 59 to the consolidated 
financial  statements,  as  at  31  December  2019,  the 
total  assets  of  the  consolidated  structured  entities 
amounted to Rmb3,800,723,000 and the total assets 
of  the  unconsolidated  structured  entities  managed 
by  the  Group  amounted  to  Rmb146,673,182,000, 
respectively.

98

2019ANNUAL REPORT Independent Auditor’s ReportOther 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.

99

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.

100

2019ANNUAL REPORT 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 Ma Hing Fai.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

March 20, 2020

101

Year ended

Year ended

NOTES

12/31/2019

12/31/2018

6

8

9

10

11

12

13

Revenue

Including: interest income under effective interest method

Operating costs

Gross profit

Securities investment gains

Other income and gains and losses

Administrative expenses

Other expenses

Impairment losses under expected credit loss model,  

net of reversal

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

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translation of financial statements of 

foreign operations

Other comprehensive income for the year, net of income tax

Rmb’000

Rmb’000

(Restated)

11,955,266

11,192,199

1,572,835

1,458,476

(6,680,965)

(5,806,810)

5,274,301

5,385,389

1,402,684

260,267

(136,356)

(127,135)

 31,877

652,824

34,941

512,449

404,128

(123,391)

(100,204)

 45,787

350,578

30,037

(1,626,809)

(1,396,806)

5,766,594

5,107,967

(1,351,695)

(1,113,454)

4,414,899

3,994,513

922

922

2,253

2,253

Total comprehensive income for the year

4,415,821

3,996,766

102

2019ANNUAL REPORT For the year ended December 31, 2019Consolidated Statement of Profit or Loss and Other Comprehensive Income 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended

Year ended

NOTES

12/31/2019

12/31/2018

Rmb’000

Rmb’000

(Restated)

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

3,711,118

3,515,095

703,781

479,418

4,414,899

3,994,513

3,711,551

3,516,152

704,270

480,614

4,415,821

3,996,766

85.45

82.37

80.94

76.27

103

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOTES

12/31/2019

12/31/2018

01/01/2018

As at

As at

As at

Rmb’000

Rmb’000

Rmb’000

(Restated)

(Restated)

NON-CURRENT ASSETS

Property, plant and equipment

Right-of-use assets

Prepaid lease payments

Expressway operating rights

Goodwill

Other intangible assets

Interests in associates

Interest in a joint venture

Financial assets at fair value through  

profit or loss (“FVTPL”)

Contract assets

Deferred tax assets

CURRENT ASSETS

Inventories

Trade receivables

Loans to customers arising from margin 

financing business

Other receivables and prepayments

Prepaid lease payments

Dividends receivable

Derivative financial assets

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

18

19

20

21

22

23

25

26

27

28

47

29

30

31

20

39

27

32

33

34

34

104

4,280,735

379,031

3,733,201

3,839,727

–

–

–

114,628

119,450

22,867,446

24,783,413

26,650,674

86,867

182,851

6,080,155

368,043

16,898

686,557

924,602

86,867

173,680

5,211,412

333,102

17,200

252,868

933,837

86,867

161,532

1,686,227

303,065

711,715

–

940,584

35,873,185

35,640,208

34,499,841

333,261

319,339

8,751,643

424,182

–

2,005

6,250

159,339

245,102

133,428

276,127

5,850,084

7,967,473

453,493

4,822

–

4,169

497,063

4,822

–

4,587

22,235,480

8,110,354

21,558,606

14,671,864

8,206,182

9,805,161

20,141,931

14,742,161

15,035,007

–

10,000

–

302,726

8,076,598

280,913

20,000

6,601,784

5,719,029

68,703,769

58,116,655

54,134,561

2019ANNUAL REPORTAt December 31, 2019Consolidated 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

Convertible bonds

Financial assets sold under  
repurchase agreements

Financial liabilities at FVTPL

Lease liabilities

NET CURRENT ASSETS

TOTAL ASSETS LESS CURRENT LIABILITIES

NON-CURRENT LIABILITIES

Bank and other borrowings

Bonds payable

Convertible bonds

Deferred tax liabilities

Lease liabilities

NOTES

12/31/2019

12/31/2018

01/01/2018

As at

As at

As at

Rmb’000

Rmb’000

Rmb’000

(Restated)

(Restated)

270,000

400,679

–

20,024,356

1,387,856

537,868

149,735

14,653,413

14,933,719

1,299,098

1,761,166

479,469

104,216

608,284

97,080

2,049,479

1,740,575

5,083,150

15,674

1,342

5,565

4,598,533

6,532,990

2,281,229

2,793,103

7,572

847

3,818

19,614

261,239

3,941

2,625,393

1,193,928

1,551

765,089

5,766,458

1,488,098

–

–

9,017,680

11,086,710

10,566,693

321,883

70,577

364,714

373,427

–

–

50,057,870

38,534,513

37,155,428

18,645,899

19,582,142

16,979,133

54,519,084

55,222,350

51,478,974

6,421,600

12,892,042

2,687,228

347,331

188,772

9,817,600

9,450,000

2,709,663

321,889

–

9,092,700

8,850,000

2,720,654

394,434

–

22,536,973

22,299,152

21,057,788

31,982,111

32,923,198

30,421,186

35

36

37

38

39

40

41

42

43

44

45

46

40

42

43

47

46

105

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CAPITAL AND RESERVES

Share capital

Reserves

Equity attributable to owners of the Company

Non-controlling interests

NOTES

12/31/2019

12/31/2018

01/01/2018

As at

As at

As at

Rmb’000

Rmb’000

Rmb’000

(Restated)

(Restated)

48

49

4,343,115

17,250,900

21,594,015

10,388,096

4,343,115

4,343,115

19,121,111

16,907,893

23,464,226

21,251,008

9,458,972

9,170,178

31,982,111

32,923,198

30,421,186

Note:  Notes  to  the  consolidated  statement  of  financial  position  are  presented  for  January  1,  2018  as  well  if  there  is 

merger accounting effect.

The consolidated financial statements on pages 102 to 280 were approved and authorised for issue by the board 

of directors on March 20, 2020 and are signed on its behalf by:

DIRECTOR

CHENG Tao

DIRECTOR

LUO Jianhu

106

2019ANNUAL REPORTAt December 31, 2019Consolidated Statement of Financial Position 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share
capital
Rmb’000

Share
premium
Rmb’000

Statutory
reserve
Rmb’000
(Note i)

4,343,115
–

3,355,621
–

5,035,016
–

4,343,115

3,355,621

5,035,016

–

–

–

–

–

–
–
–

–

–

–

–

–

–
–
–

–

–

–

–

–

–
–
185,641

Attributable to owners of the Company

Share of
differences
arising on
translation
Rmb’000

Capital
reserve
Rmb’000

Dividend
reserve
Rmb’000

Special
reserves
Rmb’000
(Note ii)

Retained
profits
Rmb’000

Sub-
total
Rmb’000

Non-
controlling
interests
Rmb’000

Total
Rmb’000

1,712
–

1,712

–

–

–

–

–

–
–
–

162
–

1,302,934
–

638,468
2,507,399

5,977,472
(1,910,891)

20,654,500
596,508

8,549,851
620,327

29,204,351
1,216,835

162

1,302,934

3,145,867

4,066,581

21,251,008

9,170,178

30,421,186

–

1,057

1,057

–

–

–
–
–

–

–

–

–

–

(1,302,934)
1,628,668
–

–

–

–

–

–

–
–
–

3,515,095

3,515,095

479,418

3,994,513

–

1,057

1,196

2,253

3,515,095

3,516,152

480,614

3,996,766

–

–

–

–

(230,028)

(230,028)

38,208

38,208

–
(1,628,668)
(185,641)

(1,302,934)
–
–

–
–
–

(1,302,934)
–
–

4,343,115

3,355,621

5,220,657

1,712

1,219

1,628,668

3,145,867

5,767,367

23,464,226

9,458,972

32,923,198

–

–

–

–

–

–

–

–

–

–
–
–
–

–

–

–

–

–

–

–

–

–

–
–
–
–

–

–

–

–

–

–

–

–

–

–
–
–
118,772

–

–

–

–

–

–

–

–

–

–
–
–
–

–

433

433

–

–

–

–

–

–

–
–
–
–

–

–

–

–

–

–

–

–

–

–
(1,628,668)
1,541,806
–

–

–

–

3,711,118

3,711,118

703,781

4,414,899

–

433

489

922

3,711,118

3,711,551

704,270

4,415,821

(3,953,145)

–

–

51

–

–

–
–
–
–

–

–

–

–

–

–

(3,953,145)

–

(3,953,145)

–

–

51

–

–

403,728

403,728

(22)

(22)

115

(8)

166

(8)

(200,103)

(200,103)

–
–
(1,541,806)
(118,772)

–
(1,628,668)
–
–

21,144
–
–
–

21,144
(1,628,668)
–
–

At January 1, 2018  
(originally stated)
Adjustments (Note 2)

At January 1, 2018  

(restated)

Profit for the year  

(restated)

Other comprehensive  
income for the year

Total comprehensive  
income for the year

Dividend declared to 

non-controlling interests

Contribution from 

non-controlling interests

2017 final dividend  

(Note 16)

Proposed 2018 dividend
Transfer to reserves

At December 31, 2018 

(restated)

Profit for the year
Other comprehensive  
income for the year

Total comprehensive  
income for the year

Consideration paid for  

acquisition of subsidiaries  
under common control  
(Note2)

Issuance of Convertible  

Bond 2019 by a subsidiary  
(Note 43)

Conversion of Convertible  

Bond 2019 of a subsidiary  
(Note 43)

Deemed partial disposal of  
interest in a subsidiary  
upon conversion of  
Convertible Bond 2019

Capital reduction by  

non-controlling interests

Dividend declared to  

non-controlling interests

Contribution from  

non-controlling interests

2018 dividend (Note 16)
Proposed 2019 dividend
Transfer to reserves

At December 31, 2019

4,343,115

3,355,621

5,339,429

1,712

1,652

1,541,806

(807,227)

7,817,907

21,594,015

10,388,096

31,982,111

107

For the year ended December 31, 2019Consolidated 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) 

Special reserves mainly comprise:

(a) 

Other reserve which was arising from the Group’s charge of interest in a subsidiary. Amount represented 

the  difference  between  the  carrying  value  of  net  assets  attributable  to  the  Group  acquired  and  the 

payment consideration arising from acquisition;

(b) 

Other reserve which was arising from the spin-off and offering of shares by Zheshang Securities Co., Ltd 

(“Zheshang Securities”) in prior years. 

(c) 

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.

108

2019ANNUAL REPORTFor the year ended December 31, 2019Consolidated Statement of Changes in EquityProfit before tax

Adjustments for:

Finance costs

Interest income

Foreign exchange (gain) loss

Share of profit of associates

Share of profit of a joint venture

Depreciation of property, plant and equipment

Amortisation of expressway operating rights

Depreciation of right-of-use assets

Release of prepaid lease payments

Amortisation of other intangible assets

Impairment losses under expected credit loss model, net of reversal

– trade receivables and other receivables

– advance to customers arising from margin financing business

– financial assets held under the resale agreement

– Contract asset

Allowance for write-down of inventories

Loss on disposal of property, plant and equipment

Loss (gain) on disposal of an associate

Year ended

Year ended

12/31/2019

12/31/2018

Rmb’000

Rmb’000

(Restated)

5,766,594

5,107,967

1,626,809

1,396,806

(34,369)

(10,817)

(61,788)

33,395

(652,824)

(350,578)

(34,941)

379,380

(30,037)

319,244

1,915,967

1,919,487

68,133

–

40,457

2,050

(3,177)

(31,402)

652

–

13,200

77

–

4,822

33,925

7,322

(37,190)

(18,999)

380

2,700

1,236

(6,645)

Gain on decrease in fair value in respect of derivative component  

of convertible bond (Note 43)

(17,547)

(127,094)

109

For the year ended December 31, 2019Consolidated Statement of Cash Flows 
 
 
Year ended

Year ended

12/31/2019

12/31/2018

Rmb’000

Rmb’000

(Restated)

Operating cash flows before movements in working capital

9,028,242

8,194,953

Increase in inventories

(Increase) decrease in trade receivables

Increase in contract asset

(Increase) decrease in loans to customers arising from  

margin financing business

Decrease in other receivables and prepayments

Increase in financial assets at FVTPL

Decrease in financial assets held under resale agreements

(Increase) decrease in bank balances and clearing settlement  

fund held on behalf of customers

(Increase) decrease in net derivative financial assets

(173,922)

(75,358)

(28,611)

30,004

(434,341)

(253,248)

(2,898,382)

2,038,715

25,250

337,950

(676,572)

(6,494,562)

127,230

1,606,309

(5,399,770)

292,846

(334)

295

(Decrease) increase in placements from other financial institutions

(130,679)

400,679

Increase (decrease) in accounts payable to customers arising from 

securities business

Increase (decrease) in trade payables

Increase in other taxes payable

Increase (decrease) in contract liabilities

Withdraw (placement) of pledged bank deposit

Increase (decrease) in other payables and accruals

Decrease in financial liabilities at FVTPL

5,370,943

(280,306)

118,321

45,519

8,102

10,000

239,147

(42,831)

(71,378)

7,137

(12,042)

(10,000)

(594,649)

(8,713)

(Decrease) increase in financial assets sold under repurchase agreements

(2,069,030)

563,296

Cash generated from operations

Income taxes paid

Interest paid

3,071,535

5,718,675

(1,261,577)

(1,267,343)

(1,427,204)

(1,235,035)

NET CASH FROM OPERATING ACTIVITIES

382,754

3,216,297

110

2019ANNUAL REPORTFor the year ended December 31, 2019Consolidated Statement of Cash Flows 
 
 
 
 
 
 
 
 
 
 
 
INVESTING ACTIVITIES
Interest received
Investment in associates
Dividends received from associates
Proceeds on disposal of property, plant and equipment
Repayment of entrusted loans from a related party
Purchases of property, plant and equipment
Purchases of other intangible assets
Purchases of expressway operating rights
Placement of time deposits
Withdrawal of time deposits
Proceed from disposal of an associate

NOTE

Year ended
12/31/2019
Rmb’000

35,496
(350,000)
120,520
12,247
–
(982,049)
(48,794)
–
(102,726)
80,913
12,233

Year ended
12/31/2018
Rmb’000
(Restated)

60,230
(3,224,535)
35,565
11,920
77,650
(280,473)
(47,390)
(401,816)
(280,000)
20,000
21,008

NET CASH USED IN INVESTING ACTIVITIES

(1,222,160)

(4,007,841)

FINANCING ACTIVITIES
Dividends paid
Dividends paid to non-controlling shareholders
New bank and other borrowings raised
Repayment of bank and other borrowings
New entrusted loans raised
Repayment of entrusted loans
Repayment of borrowings from Communications Group
New issue of bonds payable, including Assets-backed bonds
Repayment of bonds payable
Proceed from issuance of Convertible Bond 2019 (Note 43)
Issue costs of Convertible Bond 2019(Note 43)
Issue of short-term financing note payable
Repayment of short-term financing note payable
Repayments of lease liabilities
Capital deduction by non-controlling interests in respect of a subsidiary
Capital injection by non-controlling interests in respect of  

a subsidiary

Capital received from Communications Group
Acquisition of subsidiaries under common control

NET CASH FROM FINANCING ACTIVITIES

NET INCREASE 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

34

111

(1,627,321)
(199,608)
6,285,780
(7,731,360)
135,000
(110,000)
–
6,900,000
(6,912,000)
3,072,469
(2,043)
15,819,810
(9,321,360)
(64,060)
(8)

21,144
–
(3,953,145)

2,313,298

1,473,892

6,601,784

922
8,076,598

(1,583,516)
(229,833)
7,522,000
(4,099,600)
–
(1,270,000)
(2,746,100)
7,600,000
(2,800,000)
–
–
9,473,360
(10,234,610)
–
–

38,208
1,720,000
(1,717,863)

1,672,046

880,502

5,719,029

2,253
6,601,784

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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.  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.

112

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20192.  MERGER ACCOUNTING RESTATEMENT
The Group accounts for all its business combinations involving entities under common control using the principles 

of  merger  accounting  in  accordance  with  Accounting  Guideline  5  “Merger  Accounting  for  Common  Control 

Combinations” (“AG 5”) issued by the HKICPA.

(i) 

On  December  13,  2018,  the  Company  entered  into  an  equity  purchase  agreement  with  Communications 

Group  to  acquire  100%  equity  interest  in  Zhejiang  Shenjiahuhang  Expressway  Co.,  Ltd.  (“Shenjiahuhang 

Co”)  at  a  cash  consideration  of  Rmb2,943,000,000.  Shenjiahuhang  Co  and  its  subsidiary  are 

principally  engaged  in  the  operation  and  management  of  Huzhou  (S12)  and  Lianhang  (S13)  sections  of 

Shenjiahuhang  Expressway  and  Zhoushan  Bay  Bridge  (G9211)  within  National  Expressway  Network. 

The  acquisition  has  been  approved  on  March  4,  2019  and  subsequently  completed  on April  9,  2019  and 

Shenjiahuhang Co then became a wholly owned subsidiary of the Company.

(ii) 

On June 5, 2019, the Company entered into an equity transfer agreement with a wholly-owned subsidiary 

of  Communications  Group  to  acquire  100%  equity  interest  in  Zhejiang  Grand  Hotel  Limited  (“Zhejiang 

Grand Hotel”) at a cash consideration of Rmb1,010,144,600. Zhejiang Grand Hotel is principally engaged 

in the operation of hotel, retail, rental and food and beverages businesses. The acquisition was completed 

on June 14, 2019 and Zhejiang Grand Hotel then became a wholly owned subsidiary of the Company.

Since  Communications  Group  is  the  immediate  and  ultimate  holding  company  of  the  Company,  the  above 

acquisitions  were  regarded  as  business  combinations  involving  entities  under  common  control  and  were 

accounted  for  using  AG  5.  As  a  result,  the  comparative  consolidated  statement  of  profit  or  loss  and  other 

comprehensive  income,  consolidated  statement  of  cash  flows  and  consolidated  statement  of  changes  in  equity 

for  the  year  ended  December  31,  2018  and  the  consolidated  statement  of  financial  position  as  at  December  31, 

2018 and January 1, 2018 have therefore been restated in order to include the financial performance, assets and 

liabilities of the combining entities since the date on which they first come under common control.

113

2.  MERGER ACCOUNTING RESTATEMENT (Continued)
The  effects  of  the  merger  accounting  restatement  in  respect  of  the  acquisition  of  100%  equity  interests 

in  Shenjiahuhang  Co  and  Zhejiang  Grand  Hotel  on  the  consolidated  statement  of  profit  or  loss  and  other 

comprehensive income for the year ended December 31, 2018 are as follows:

Merger

Year ended

accounting

Year ended

12/31/2018

restatement

12/31/2018

Rmb’000

Rmb’000

Rmb’000

(Originally 

stated)

(Restated)

Revenue

9,568,321

1,623,878

11,192,199

including: interest income under  

effective interest method

Operating costs

Gross profit

Securities investment gains

Other income and gains and losses

Administrative expenses

Other expenses

Impairment losses under expected credit loss model,  

net of reversal

Share of profit of associates

Share of profit of a joint venture

Finance costs

Profit before tax

1,458,476

–

1,458,476

(4,684,509)

(1,122,301)

(5,806,810)

4,883,812

501,577

5,385,389

512,449

363,508

(99,844)

(86,160)

47,268

350,578

30,037

–

40,620

(23,547)

(14,044)

(1,481)

–

–

512,449

404,128

(123,391)

(100,204)

45,787

350,578

30,037

(866,317)

(530,489)

(1,396,806)

5,135,331

(27,364)

5,107,967

Income tax expense, credit

(1,142,988)

29,534

(1,113,454)

Profit for the year

Other comprehensive income

Items that may be reclassified subsequently to  

profit or loss:

Exchange differences on translation of financial 

statements of foreign operations

Other comprehensive income for the year,  

net of income tax

3,992,343

2,170

3,994,513

2,253

2,253

–

–

2,253

2,253

Total comprehensive income for the year

3,994,596

2,170

3,996,766

114

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.  MERGER ACCOUNTING RESTATEMENT (Continued)

Merger

Year ended

accounting

Year ended

12/31/2018

restatement

12/31/2018

Rmb’000

Rmb’000

Rmb’000

(Originally 

stated)

3,480,537

511,806

3,992,343

3,481,594

513,002

3,994,596

(Restated)

34,558

3,515,095

(32,388)

479,418

2,170

3,994,513

34,558

3,516,152

(32,388)

480,614

2,170

3,996,766

80.14

75.52

0.80

0.75

80.94

76.27

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)

115

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.  MERGER ACCOUNTING RESTATEMENT (Continued)
The  effects  of  the  merger  accounting  restatement  in  respect  of  the  acquisition  of  100%  equity  interest  in 

Shenjiahuhang Co and Zhejiang Grand Hotel on the consolidated statements of financial positions as at January 

1, 2018 and December 31, 2018 are as follows:

Year

Merger

Ended

accounting

Year

Ended

Year

Merger

Ended

accounting

Year

Ended

1/1/2018

restatement

1/1/2018

12/31/2018

restatement

12/31/2018

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

(Originally

stated) 

(Restated) 

(Originally

(Restated)

stated)

NON-CURRENT ASSETS

Property, plant and 

equipment

2,948,134

891,593

3,839,727

2,882,791

850,410

3,733,201

Prepaid lease payments

65,300

54,150

119,450

63,163

51,465

114,628

Expressway operating 

rights

Goodwill

86,867

Other intangible assets

161,486

Interests in associates

1,686,227

Interest in a joint venture

303,065

Financial assets at FVTPL

711,715

Contract asset

–

13,379,674

13,271,000

26,650,674

12,260,548

12,522,865

24,783,413

–

46

–

–

–

–

86,867

86,867

161,532

173,658

1,686,227

5,211,412

303,065

333,102

711,715

17,200

–

252,868

–

22

–

–

–

–

86,867

173,680

5,211,412

333,102

17,200

252,868

Deferred tax assets

355,803

584,781

940,584

318,236

615,601

933,837

19,698,271

14,801,570

34,499,841

21,599,845

14,040,363

35,640,208

116

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.  MERGER ACCOUNTING RESTATEMENT (Continued)

Year

Merger

Ended

accounting

Year

Ended

Year

Merger

Ended

accounting

Year

Ended

1/1/2018

restatement

1/1/2018

12/31/2018

restatement

12/31/2018

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

(Originally

stated) 

(Restated) 

(Originally

(Restated)

stated)

CURRENT ASSETS

Inventories

131,261

2,167

133,428

157,416

1,923

159,339

Trade receivables

244,587

31,540

276,127

216,233

28,869

245,102

Loans to customers  

arising from margin  

financing business

7,967,473

–

7,967,473

5,850,084

–

5,850,084

Other receivables  

and prepayments

481,358

15,705

497,063

407,684

45,809

453,493

Prepaid lease payments

Derivative financial assets

2,137

4,587

Financial assets at FVTPL

14,671,864

Financial assets held 

under resale agreements

9,805,161

Bank balances and 

clearing settlement 

fund held on behalf of 

customers

15,035,007

Pledged bank deposit

–

2,685

–

–

–

–

–

4,822

4,587

2,137

4,169

14,671,864

21,558,606

9,805,161

8,206,182

15,035,007

14,742,161

–

10,000

2,685

–

–

–

–

–

4,822

4,169

21,558,606

8,206,182

14,742,161

10,000

Bank balances, clearing  

settlement fund,  

deposits and cash:

– Time deposits with  

original maturity  

over three months

20,000

–

20,000

280,913

–

280,913

– Cash and cash  

equivalents

5,588,814

130,215

5,719,029

6,477,724

124,060

6,601,784

53,952,249

182,312

54,134,561

57,913,309

203,346

58,116,655

117

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.  MERGER ACCOUNTING RESTATEMENT (Continued)

Year

Merger

Ended

accounting

Year

Ended

Year

Merger

Ended

accounting

Year

Ended

1/1/2018

restatement

1/1/2018

12/31/2018

restatement

12/31/2018

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

(Originally

stated)

(Restated)

(Originally

(Restated)

stated)

CURRENT LIABILITIES

Placements from other 

financial institutions

–

–

–

400,679

–

400,679

Accounts payable to 

customers arising from 

securities business

14,933,719

–

14,933,719

14,653,413

–

14,653,413

Trade payables

Tax liabilities

Other taxes payable

Other payables and 

628,592

1,132,574

1,761,166

575,465

723,633

1,299,098

608,284

90,266

–

608,284

478,183

6,814

97,080

96,931

1,286

7,285

479,469

104,216

accruals

2,261,971

2,821,179

5,083,150

1,630,327

110,248

1,740,575

Contract liabilities

Dividends payable

Derivative financial 

19,614

261,239

liabilities

3,941

–

–

–

19,614

261,239

7,572

847

3,941

3,818

–

–

–

7,572

847

3,818

Bank and other borrowings

420,148

773,780

1,193,928

200,741

2,424,652

2,625,393

Short-term financing note 

payable

Bonds payable

765,089

1,488,098

–

–

765,089

1,551

1,488,098

5,766,458

Financial assets sold under 

repurchase agreements

10,566,693

–

10,566,693

11,086,710

Financial liabilities at 

FVTPL

373,427

–

373,427

364,714

–

–

–

–

1,551

5,766,458

11,086,710

364,714

32,421,081

4,734,347

37,155,428

35,267,409

3,267,104

38,534,513

NET CURRENT ASSETS 

(LIABILITIES)

21,531,168

(4,552,035) 16,979,133

22,645,900

(3,063,758) 19,582,142

TOTAL ASSETS LESS 

CURRENT LIABILITIES 41,229,439

10,249,535

51,478,974

44,245,745

10,976,605

55,222,350

118

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.  MERGER ACCOUNTING RESTATEMENT (Continued)

Year

Merger

Ended

accounting

Year

Ended

Year

Merger

Ended

accounting

Year

Ended

1/1/2018

restatement

1/1/2018

12/31/2018

restatement

12/31/2018

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

(Originally

stated)

(Restated)

(Originally

(Restated)

stated)

NON-CURRENT 

LIABILITIES

Bank and other borrowings

60,000

9,032,700

9,092,700

60,000

9,757,600

9,817,600

Bonds payable

Convertible Bonds

8,850,000

2,720,654

Deferred tax liabilities

394,434

–

–

–

8,850,000

9,450,000

2,720,654

2,709,663

394,434

321,889

–

–

–

9,450,000

2,709,663

321,889

12,025,088

9,032,700

21,057,788

12,541,552

9,757,600

22,299,152

29,204,351

1,216,835

30,421,186

31,704,193

1,219,005

32,923,198

CAPITAL AND RESERVES

Share capital

Reserves

Equity attributable to 

4,343,115

–

4,343,115

4,343,115

–

4,343,115

16,311,385

596,508

16,907,893

18,490,045

631,066

19,121,111

owners of the Company

20,654,500

596,508

21,251,008

22,833,160

631,066

23,464,226

Non-controlling interests

8,549,851

620,327

9,170,178

8,871,033

587,939

9,458,972

29,204,351

1,216,835

30,421,186

31,704,193

1,219,005

32,923,198

119

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.  MERGER ACCOUNTING RESTATEMENT (Continued)
The  effects  of  merger  accounting  restatement  in  respect  of  the  acquisition  of  100%  equity  interest  in 

Shenjiahuhang Co and Zhejiang Grand Hotel on the consolidated statements of equity as at January 1, 2018 and 

December 31, 2018 are as follows:

Year

Merger

Ended

accounting

Year

Ended

Year

Merger

Ended

accounting

Year

Ended

1/1/2018

restatement

1/1/2018

12/31/2018

restatement

12/31/2018

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Share capital

Share premium

Statutory reserve

Capital reserve

(Originally

stated)

4,343,115

3,355,621

5,035,016

1,712

Share of differences  

arising on translation

162

Dividend reserve

1,302,934

(Restated)

(Originally

(Restated)

stated)

4,343,115

4,343,115

3,355,621

3,355,621

–

–

4,343,115

3,355,621

5,035,016

5,220,278

379

5,220,657

1,712

1,712

162

1,219

1,302,934

1,628,668

–

–

–

1,712

1,219

1,628,668

–

–

–

–

–

–

Special reserves

638,468

2,507,399

3,145,867

638,468

2,507,399

3,145,867

Retained profits

5,977,472

(1,910,891)

4,066,581

7,644,079

(1,876,712)

5,767,367

Non-controlling interests

8,549,851

620,327

9,170,178

8,871,033

587,939

9,458,972

Total

29,204,351

1,216,835

30,421,186

31,704,193

1,219,005

32,923,198

120

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.  MERGER ACCOUNTING RESTATEMENT (Continued)
The  effects  of  merger  accounting  restatement  in  respect  of  the  acquisition  of  100%  equity  interest  in 

Shenjiahuhang  Co  and  Zhejiang  Grand  Hotel  on  the  consolidated  cash  flows  for  the  year  ended  December  31, 

2018 are as follows:

Merger

Year ended

accounting

Year ended

12/31/2018

restatement

12/31/2018

Rmb’000

Rmb’000

Rmb’000

(Originally 

stated)

(Restated)

5,135,331

(27,364)

5,107,967

866,317

(59,780)

260,097

530,489

1,396,806

(2,008)

59,147

(61,788)

319,244

Profit before tax

Adjustments for:

Finance costs

Interest income

Depreciation of property, plant and equipment

Amortisation of expressway operating rights

1,119,126

800,361

1,919,487

Release of prepaid lease payments

Amortisation of other intangible assets

Impairment losses, net of reversal

Loss on disposal of property, plant and equipment

2,137

33,900

5,841

783

Other operating cash flow adjustments

(534,068)

2,685

25

1,481

453

–

4,822

33,925

7,322

1,236

(534,068)

121

 
 
 
 
 
2.  MERGER ACCOUNTING RESTATEMENT (Continued)
The  effects  of  merger  accounting  restatement  in  respect  of  the  acquisition  of  100%  equity  interest  in 

Shenjiahuhang  Co  and  Zhejiang  Grand  Hotel  on  the  consolidated  cash  flows  for  the  year  ended  December  31, 

2018 are as follows (Continued):

Merger

Year ended

accounting

Year ended

12/31/2018

restatement

12/31/2018

Rmb’000

Rmb’000

Rmb’000

(Originally 

stated)

(Restated)

 6,829,684

 1,365,269

 8,194,953

(28,855)

27,357

373,682

(53,127)

6,665

(629,649)

(2,156,731)

244

2,647

(35,732)

(18,251)

472

35,000

(28,611)

30,004

337,950

(71,378)

7,137

(594,649)

–

(2,156,731)

4,369,026

1,349,649

5,718,675

(1,267,343)

–

(1,267,343)

(689,623)

(545,412)

(1,235,035)

Operating cash flows before movements  

in working capital

(Increase) decrease in inventories

Decrease in trade receivables

Decrease (increase) in other receivables and 

prepayments

Decrease in trade payables

Increase in other taxes payable

(Decrease) increase in other payables and accruals

Other working capital adjustments

Cash generated from operations

Income taxes paid

Interest paid

NET CASH FROM OPERATING ACTIVITIES

2,412,060

804,237

3,216,297

INVESTING ACTIVITIES

Interest received

Proceeds on disposal of property, plant and equipment

Purchases of property, plant and equipment

Purchases of expressway operating rights

58,222

11,895

(241,427)

–

2,008

25

(39,046)

(401,816)

60,230

11,920

(280,473)

(401,816)

Other investing cash flows

(3,397,702)

–

(3,397,702)

NET CASH USED IN INVESTING ACTIVITIES

(3,569,012)

(438,829)

(4,007,841)

122

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.  MERGER ACCOUNTING RESTATEMENT (Continued)

Merger

Year ended

accounting

Year ended

12/31/2018

restatement

12/31/2018

Rmb’000

Rmb’000

Rmb’000

(Originally 

stated)

(Restated)

FINANCING ACTIVITIES

New bank and other borrowings raised

3,230,000

4,292,000

7,522,000

Repayment of bank and other borrowings

(3,450,000)

(649,600)

(4,099,600)

Repayment of borrowings from Communications Group

Repayment of entrusted loans

Capital received from Communications Group

Acquisition of subsidiaries under common control

–

–

–

–

(2,746,100)

(2,746,100)

(1,270,000)

(1,270,000)

1,720,000

1,720,000

(1,717,863)

(1,717,863)

Other financing cash flows

2,263,609

–

2,263,609

NET CASH FROM (USED IN) FINANCING ACTIVITIES

2,043,609

(371,563)

1,672,046

NET INCREASE (DECREASE) IN CASH AND CASH 

EQUIVALENTS

886,657

(6,155)

880,502

CASH AND CASH EQUIVALENTS AT JANUARY 1

5,588,814

130,215

5,719,029

Effect of foreign exchange rate changes

2,253

–

2,253

CASH AND CASH EQUIVALENTS AT DECEMBER 31

6,477,724

124,060

6,601,784

123

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.  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 HKICPA for the first time in 

the current year:

HKFRS 16

HK(IFRIC)-Int 23

Amendments to HKFRS 9

Amendments to HKAS 19

Amendments to HKAS 28

Amendments to HKFRSs

Leases

Uncertainty over Income Tax Treatments

Prepayment Features with Negative Compensation

Plan Amendment, Curtailment or Settlement

Long-term Interests in Associates and Joint Ventures

Annual Improvements to HKFRSs 2015-2017 Cycle

Except as described below, the application of the new and amendments to HKFRSs in the current year has had 

no  material  impact  on  the  Group’s  positions  and  financial  performance  for  the  current  and  prior  years  and/or  on 

the disclosures set out in these consolidated financial statements.

3.1  HKFRS 16 Leases
The Group has applied HKFRS 16 for the first time in the current year. HKFRS 16 superseded HKAS 17 Leases 

(“HKAS 17”), and the related interpretations.

Definition of a lease

The Group has elected 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.  Therefore,  the  Group 

has not reassessed contracts which already existed prior to the date of initial application.

For contracts entered into or modified on or after January 1, 2019, the Group applies the definition of a lease in 

accordance with the requirements set out in HKFRS 16 in assessing whether a contract contains a lease.

124

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20193.  APPLICATION OF NEW AND AMENDMENTS TO HONG KONG 
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)

3.1  HKFRS 16 Leases (Continued)
As a lessee

The  Group  has  applied  HKFRS  16  retrospectively  with  the  cumulative  effect  recognised  at  the  date  of  initial 

application, January 1, 2019.

As at January 1, 2019, the Group recognised additional lease liabilities and right-of-use assets at amounts equal 

to the related lease liabilities adjusted by any prepaid or accrued lease payments by applying HKFRS 16.C8(b)(ii) 

transition.  Any  difference  at  the  date  of  initial  application  is  recognised  in  the  opening  retained  profits  and 

comparative information has not been restated.

When  applying  the  modified  retrospective  approach  under  HKFRS  16  at  transition,  the  Group  applied 

the  following  practical  expedients  to  leases  previously  classified  as  operating  leases  under  HKAS  17,  on 

lease-by-lease basis, to the extent relevant to the respective lease contracts:

i. 

relied  on  the  assessment  of  whether  leases  are  onerous  by  applying  HKAS  37  Provisions,  Contingent 

Liabilities and Contingent Assets as an alternative of impairment review;

ii. 

elected not to recognise right-of-use assets and lease liabilities for leases with lease term ends within 12 

months of the date of initial application;

iii. 

excluded initial direct costs from measuring the right-of-use assets at the date of initial application;

iv. 

applied  a  single  discount  rate  to  a  portfolio  of  leases  with  a  similar  remaining  terms  for  similar  class  of 

underlying assets in similar economic environment;

v. 

used hindsight based on facts and circumstances as at date of initial application in determining the lease 

term for the Group’s leases with extension and termination options.

125

3.  APPLICATION OF NEW AND AMENDMENTS TO HONG KONG 
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)

3.1  HKFRS 16 Leases (Continued)
As a lessee (Continued)

When recognising the lease liabilities for leases previously classified as operating leases, the Group has applied 

incremental borrowing rates of the relevant group entities at the date of initial application. The weighted average 

incremental borrowing rates applied by relevant group entities range from 4.7512% to 5.0284%.

Operating lease commitments disclosed as at December 31, 2018

Lease liabilities discounted at relevant incremental borrowing rates

Less: recognition exemption – short-term leases

Lease liabilities relating to operating leases recognised upon  

application of HKFRS 16 as at January 1, 2019

Analysed as

Current

Non-current

The carrying amount of right-of-use assets for own use as at January 1, 2019 comprises the following:

Right-of-use assets relating to operating leases recognised upon  

application of HKFRS 16

Reclassified from prepaid lease payments (Note)

1/1/2019

Rmb’000

338,383

276,537

(6,382)

270,155

67,865

202,290

270,155

1/1/2019

Rmb’000

270,155

119,450

389,605

Note:  Upfront  payments  for  leasehold  lands  in  the  PRC  for  own  used  properties  were  classified  as  prepaid  lease 

payments  as  at  December  31,  2018.  Upon  application  of  HKFRS  16,  the  current  and  non-current  portion  of 

prepaid  lease  payments  amounting  to  Rmb4,822,000  and  Rmb114,628,000,  respectively  were  reclassified  to 

right-of-use assets.

126

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.  APPLICATION OF NEW AND AMENDMENTS TO HONG KONG 
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)

3.1  HKFRS 16 Leases (Continued)
As a lessor

In accordance with the transitional provisions in HKFRS 16, the Group is not required to make any adjustment on 

transition  for  leases  in  which  the  Group  is  a  lessor  but  account  for  these  leases  in  accordance  with  HKFRS  16 

from the date of initial application and comparative information has not been restated.

Upon  application  of  HKFRS  16,  new  lease  contracts  entered  into  but  commence  after  the  date  of  initial 

application relating to the same underlying assets under existing lease contracts are accounted as if the existing 

leases  are  modified  as  at  January  1,  2019.  The  application  has  had  no  impact  on  the  Group’s  consolidated 

statement of financial position at January 1, 2019.

Before  application  of  HKFRS  16,  refundable  rental  deposits  received  were  considered  as  rights  and  obligations 

under  leases  to  which  HKAS  17  applied  under  trade  and  other  payables.  Based  on  the  definition  of  lease 

payments under HKFRS 16, such deposits are not payments relating to the right-of-use assets and were adjusted 

to  reflect  the  discounting  effect  at  transition.  However,  the  management  considered  that  the  impact  on  the 

Group’s consolidated statement of financial position at January 1, 2019 is insignificant.

127

3.  APPLICATION OF NEW AND AMENDMENTS TO HONG KONG 
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)
Impacts on each financial statement line item arising from the application of 
all new standards

3.2 

The  following  adjustments  were  made  to  the  amounts  recognised  in  the  consolidated  statement  of  financial 

position at January 1, 2019. Line items that were not affected by the changes have not been included.

Carrying 

amounts

previously 

reported

Carrying 

amounts under 

HKFRS 16

at 12/31/2018

Adjustments

at 1/1/2019

Notes

Rmb’000

Rmb’000

Rmb’000

20

19

20

46

46

114,628

–

(114,628)

389,605

–

389,605

4,822

(4,822)

–

–

–

67,865

67,865

202,290

202,290

Non-current Assets

Prepaid lease payments

Right-of-use assets

Current Assets

Prepaid lease payments

Current Liabilities

Lease liabilities

Non-current liabilities

Lease liabilities

Note:  For  the  purpose  of  reporting  cash  flows  from  operating  activities  under  indirect  method  for  the  year  ended 

December  31,  2019,  movements  in  working  capital  have  been  computed  based  on  opening  consolidated 

statement of financial position as at January 1, 2019 as disclosed above.

128

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
3.  APPLICATION OF NEW AND AMENDMENTS TO HONG KONG 
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)

New and amendments to 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 17

Amendments to HKFRS 3

Insurance Contracts1

Definition of a Business2

Amendments to HKFRS 10 and HKAS 28

Sale or Contribution of Assets between an Investor  

and its Associate or Joint Venture3

Amendments to HKAS 1 and HKAS 8

Definition of Material4

Amendments to HKAS 9, HKAS 39 and HKFRS 7

Interest Rate Benchmark Reform4

1 
2 

3 
4 

Effective for annual periods beginning on or after January 1, 2021

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

Effective for annual periods beginning on or after a date to be determined

Effective for annual periods beginning on or after January 1, 2020.

In  addition  to  the  above  new  and  amendments  to  HKFRSs,  a  revised  Conceptual  Framework  for  Financial 

Reporting was issued in 2018. Its consequential amendments, the Amendments to References to the Conceptual 

Framework in HKFRS Standards, will be effective for annual periods beginning on or after January 1, 2020.

Except  as  described  below,  the  directors  of  the  Company  anticipate  that  the  application  of  all  new  and 

amendments to HKFRSs will have no material impact on the consolidated financial statements in the foreseeable 

future.

129

3.  APPLICATION OF NEW AND AMENDMENTS TO HONG KONG 
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)

Amendments to HKAS 1 and HKAS 8 Definition of Material
The  amendments  provide  refinements  to  the  definition  of  material  by  including  additional  guidance  and 

explanations in making materiality judgments. In particular, the amendments:

• 

include  the  concept  of  “obscuring”  material  information  in  which  the  effect  is  similar  to  omitting  or 

misstating the information;

• 

• 

replace threshold for materiality influencing users from “could influence” to “could reasonably be expected 

to influence”; and

include the use of the phrase “primary users” rather than simply referring to “users” which was considered 

too broad when deciding what information to disclose in the financial statements.

The  amendments  also  align  the  definition  across  all  HKFRSs  and  will  be  mandatorily  effective  for  the 

Group’sannual period beginning on 1 January 2020. The application of the amendments is not expected to have 

significant  impact  on  the  financial  position  and  performance  of  the  Group  but  may  affect  the  presentation  and 

disclosures in the consolidated financial statements.

Conceptual  Framework  for  Financial  Reporting  2018  (the  “New  Framework”) 
and  the  Amendments  to  References  to  the  Conceptual  Framework  in  HKFRS 
Standards
The New Framework:

• 

• 

reintroduces the terms stewardship and prudence;

introduces  a  new  asset  definition  that  focuses  on  rights  and  a  new  liability  definition  that  is  likely  to  be 

broader than the definition it replaces, but does not change the distinction between a liability and an equity 

instrument;

130

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20193.  APPLICATION OF NEW AND AMENDMENTS TO HONG KONG 
FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)

Conceptual  Framework  for  Financial  Reporting  2018  (the  “New  Framework”) 
and  the  Amendments  to  References  to  the  Conceptual  Framework  in  HKFRS 
Standards (Continued)
• 

discusses historical cost and current value measures, and provides additional guidance on how to select a 

measurement basis for a particular asset or liability;

• 

states  that  the  primary  measure  of  financial  performance  is  profit  or  loss,  and  that  only  in  exceptional 

circumstances other comprehensive income will be used and only for income or expenses that arise from 

a change in the current value of an asset or liability; and

• 

discusses  uncertainty,  derecognition,  unit  of  account,  the  reporting  entity  and  combined  financial 

statements.

Consequential  amendments  have  been  made  so  that  references  in  certain  HKFRSs  have  been  updated  to 

the  New  Framework,  whilst  some  HKFRSs  are  still  referred  to  the  previous  versions  of  the  framework.  These 

amendments  are  effective  for  annual  periods  beginning  on  or  after  January  1,  2020,  with  earlier  application 

permitted. Other than specific standards which still refer to the previous versions of the framework, the Group will 

rely on the New Framework on its effective date in determining the accounting policies especially for transactions, 

events or conditions that are not otherwise dealt with under the accounting standards.

131

4.  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.

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  for  share-based 

payment transactions that are within the scope of HKFRS 2 Share-based Payment, leasing transactions that are 

accounted for in accordance with HKFRS 16 (since January 1, 2019) or HKAS 17 (before application of HKFRS 

16),  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.

132

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based 

on  the  degree  to  which  the  inputs  to  the  fair  value  measurements  are  observable  and  the  significance  of  the 

inputs to the fair value measurement in its entirety, which are described as follows:

• 

• 

• 

Level  1  inputs  are  quoted  prices  (unadjusted)  in  active  markets  for  identical  assets  or  liabilities  that  the 

entity can access at the measurement date;

Level  2  inputs  are  inputs,  other  than  quoted  prices  included  within  Level  1,  that  are  observable  for  the 

asset or liability, either directly or indirectly; and

Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including 

structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:

• 

• 

• 

has power over the investee;

is exposed, or has rights, to variable returns from its involvement with the investee; and

has the ability to use its power to affect its returns.

The  Group  reassesses  whether  or  not  it  controls  an  investee  if  facts  and  circumstances  indicate  that  there  are 

changes to one or more of the three elements of control listed above.

133

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of consolidation (Continued)

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.

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.

134

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of consolidation (Continued)

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.

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).

135

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Business combinations

Acquisitions of businesses, other than business combination under common control, 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.

lease  liabilities  are  recognised  and  measured  at  the  present  value  of  the  remaining  lease  payments  (as 

defined in HKFRS 16) as if the acquired leases were new leases at the acquisition date, except for leases 

for  which  (a)  the  lease  term  ends  within  12  months  of  the  acquisition  date;  or  (b)  the  underlying  asset  is 

of low value. Right-of-use assets are recognised and measured at the same amount as the relevant lease 

liabilities,  adjusted  to  reflect  favourable  or  unfavourable  terms  of  the  lease  when  compared  with  market 

terms.

136

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  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.

Merger  accounting  for  business  combination  involving  businesses  under 
common control

The consolidated financial statements incorporate the financial statements items of the combining businesses in 

which the common control combination occurs as if they had been combined from the date when the combining or 

businesses first came under the control of the controlling party.

The  net  assets  of  the  combining  or  businesses  are  consolidated  using  the  existing  book  values  from  the 

controlling  party’s  perspective.  No  amount  is  recognised  in  respect  of  goodwill  or  bargain  purchase  gain  at  the 

time of common control combination.

The  consolidated  statement  of  profit  or  loss  and  other  comprehensive  income  includes  the  results  of  each  of 

the  combining  entities  or  businesses  from  the  earliest  date  presented  or  since  the  date  when  the  combining  or 

businesses first came under the common control, where this is a shorter period.

The  comparative  amounts  in  the  consolidated  financial  statements  are  presented  as  if  the  businesses  had  been 

combined  at  the  beginning  of  the  previous  reporting  period  or  when  they  first  came  under  common  control, 

whichever is shorter.

137

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the 

business (see the accounting policy above) less accumulated impairment losses, if any.

For  the  purposes  of  impairment  testing,  goodwill  is  allocated  to  each  of  the  Group’s  cash-generating  units 

(or  groups  of  cash-generating  units)  that  is  expected  to  benefit  from  the  synergies  of  the  combination,  which 

represent the lowest level at which the goodwill is monitored for internal management purpose and not larger than 

an operating segment.

A  cash-generating  unit  (or  group  of  cash-generating  units)  to  which  goodwill  has  been  allocated  is  tested  for 

impairment  annually  or  more  frequently  when  there  is  indication  that  the  unit  may  be  impaired.  For  goodwill 

arising  on  an  acquisition  in  a  reporting  period,  the  cash-generating  unit  (or  group  of  cash-generating  units) 

to  which  goodwill  has  been  allocated  is  tested  for  impairment  before  the  end  of  that  reporting  period.  If  the 

recoverable amount is less than its carrying amount, the impairment loss is allocated first to reduce the carrying 

amount  of  any  goodwill  and  then  to  the  other  assets  on  a  pro-rata  basis  based  on  the  carrying  amount  of  each 

asset in the unit (or group of cash-generating units).

On  disposal  of  the  relevant  cash-generating  unit  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.

138

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.

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.

139

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments in associates and a joint venture (Continued)

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  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  is  not  allocated  to  any  asset,  including  goodwill,  that  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.

Revenue from contracts with customers

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.

140

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from contracts with customers (Continued)

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  the  same  contract  are  accounted  for  and  presented  on  a  net 

basis.

141

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from contracts with customers (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.

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.

142

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from contracts with customers (Continued)

Existence of significant financing component (Continued)
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.

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.

143

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, plant and equipment

Property,  plant  and  equipment  including  buildings  are  tangible  assets  that  are  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  any  costs  directly  attributable  to  bringing  the  asset  to  the 

location  and  condition  necessary  for  it  to  be  capable  of  operating  in  the  manner  intended  by  management  and, 

for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. 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 estimated 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.

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%

144

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, plant and equipment (Continued)

An  item  of  property,  plant  and  equipment  is  derecognised  upon  disposal  or  when  no  future  economic  benefits 

are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement 

of an item of property, plant and equipment is determined as the difference between the sales proceeds and the 

carrying amount of the asset and is recognised in profit or loss.

Intangible assets

Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less

accumulated  amortisation  and  any  accumulated  impairment  losses. Amortisation  for  intangible  assets  with  finite 

useful lives is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and 

amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate 

being  accounted  for  on  a  prospective  basis.  Intangible  assets  with  indefinite  useful  lives  that  are  acquired 

separately are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in 

respect of impairment losses on tangible and intangible assets below).

Intangible assets acquired in a business combination
Intangible  assets  acquired  in  a  business  combination  are  recognised  separately  from  goodwill  are  initially 

recognised at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination with finite useful lives are 

reported  at  cost  less  accumulated  amortisation  and  any  accumulated  impairment  losses,  on  the  same  basis  as 

intangible assets that are acquired separately.

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.

145

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Expressway operating rights under service concession arrangements

When the Group has a right to charge for usage of concession infrastructure, it recognises concession intangible 

assets  based  on  fair  value  of  the  consideration  paid  upon  initial  recognition.  Subsequent  costs  incurred  on 

expressway  widening  projects  and  upgrading  services  are  recognised  as  additional  costs  of  the  expressway 

operating  rights.  The  concession  intangible  assets  representing  expressway  operating  rights  are  carried  at  cost 

less accumulated amortisation and any accumulated impairment losses.

The  concession  intangible  assets  are  amortised  to  write-off  their  cost  over  their  expected  useful  lives  in  the 

remaining concession period on a straight-line basis.

Costs  in  relation  to  the  day-to-day  servicing,  repairs  and  maintenance  of  the  expressway  infrastructures  are 

recognised as expenses in the periods in which they are incurred.

Impairment on property, plant and equipment, right-of-use assets 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 property, plant and equipment, 

right-of-use assets, 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  property,  plant  and  equipment,  right-of-use  assets,  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.

In  addition,  the  Group  assesses  whether  there  is  indication  that  corporate  assets  may  be  impaired.  If  such 

indication  exists,  corporate  assets  are  also  allocated  to  individual  cash-generating  units,  when  a  reasonable 

and  consistent  basis  of  allocation  can  be  identified,  or  otherwise  they  are  allocated  to  the  smallest  group  of 

cash-generating units for which a reasonable and consistent allocation basis can be identified.

146

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment on property, plant and equipment, right-of-use assets and intangible 
assets  other  than  goodwill  (see  the  accounting  policy  in  respect  of  goodwill 
above) (Continued)

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, 

the  estimated  future  cash  flows  are  discounted  to  their  present  value  using  a  pre-tax  discount  rate  that  reflects 

current market assessments of the time value of money and the risks specific to the asset (or a cash-generating 

unit) for which the estimates of future cash flows have not been adjusted.

If  the  recoverable  amount  of  an  asset  (or  a  cash-generating  unit)  is  estimated  to  be  less  than  its  carrying 

amount,  the  carrying  amount  of  the  asset  (or  the  cash-generating  unit)  is  reduced  to  its  recoverable  amount. 

For  corporate  assets  or  portion  of  corporate  assets  which  cannot  be  allocated  on  a  reasonable  and  consistent 

basis  to  a  cash-generating  unit,  the  Group  compares  the  carrying  amount  of  a  group  of  cash-generating  units, 

including  the  carrying  amounts  of  the  corporate  assets  or  portion  of  corporate  assets  allocated  to  that  group 

of  cash-generating  units,  with  the  recoverable  amount  of  the  group  of  cash-generating  units.  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  or  the 

group of cash-generating units. 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 or 

the group of cash-generating units. 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 

or  a  group  of  cash-generating  units)  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 or a group of cash-generating units) in 

prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

147

4.  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.

Lease

Definition of a lease
A  contract  is,  or  contains,  a  lease  if  the  contract  conveys  the  right  to  control  the  use  of  an  identified  asset  for  a 

period of time in exchange for consideration.

For  contracts  entered  into  or  modified  or  arising  from  business  combinations  on  or  after  the  date  of  initial 

application, the Group assesses whether a contract is or contains a lease based on the definition under HKFRS 

16 at inception, modification date or acquisition date, as appropriate. Such contract will not be reassessed unless 

the terms and conditions of the contract are subsequently changed.

The Group as lessee
Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to leases of properties that have a lease term of 12 

months or less from the commencement date and do not contain a purchase option. It also applies the recognition 

exemption  for  lease  of  low-value  assets.  Lease  payments  on  short-term  leases  and  leases  of  low-value  assets 

are recognised as expense on a straight-line basis over the lease term.

148

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Lease (Continued)

The Group as lessee (Continued)
Right-of-use assets

The cost of right-of-use asset includes:

• 

• 

• 

• 

the amount of the initial measurement of the lease liability;

any lease payments made at or before the commencement date, less any lease incentives received;

any initial direct costs incurred by the Group; and

an  estimate  of  costs  to  be  incurred  by  the  Group  in  dismantling  and  removing  the  underlying  assets, 

restoring  the  site  on  which  it  is  located  or  restoring  the  underlying  asset  to  the  condition  required  by  the 

terms and conditions of the lease, unless those costs are incurred to produce inventories.

Right-of-use  assets  are  measured  at  cost,  less  any  accumulated  depreciation  and  impairment  losses,  and 

adjusted for any remeasurement of lease liabilities.

Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying leased assets 

at  the  end  of  the  lease  term  are  depreciated  from  commencement  date  to  the  end  of  the  useful  life.  Otherwise, 

right-of-use  assets  are  depreciated  on  a  straight-line  basis  over  the  shorter  of  its  estimated  useful  life  and  the 

lease term.

The  Group  presents  right-of-use  assets  as  a  separate  line  item  on  the  consolidated  statement  of  financial 

position.

149

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Lease (Continued)

The Group as lessee (Continued)
Refundable rental deposits

Refundable  rental  deposits  paid  are  accounted  under  HKFRS  9  Financial  Instruments  and  initially  measured 

at  fair  value.  Adjustments  to  fair  value  at  initial  recognition  are  considered  as  additional  lease  payments  and 

included in the cost of right-of-use assets.

Lease liabilities

At the commencement date of a lease, the Group recognises and measures the lease liability at the present value 

of  lease  payments  that  are  unpaid  at  that  date.  In  calculating  the  present  value  of  lease  payments,  the  Group 

uses  the  incremental  borrowing  rate  at  the  lease  commencement  date  if  the  interest  rate  implicit  in  the  lease  is 

not readily determinable.

The lease payments include:

• 

• 

• 

• 

• 

fixed payments (including in-substance fixed payments) less any lease incentives receivable;

variable lease payments that depend on an index or a rate, initially measured using the index or rate as at 

the commencement date;

amounts expected to be payable by the Group under residual value guarantees;

the exercise price of a purchase option if the Group is reasonably certain to exercise the option; and

payments of penalties for terminating a lease, if the lease term reflects the Group exercising an option to 

terminate the lease.

Variable lease payments that reflect changes in market rental rates are initially measured using the market rental 

rates  as  at  the  commencement  date.  Variable  lease  payments  that  do  not  depend  on  an  index  or  a  rate  are  not 

included  in  the  measurement  of  lease  liabilities  and  right-of-use  assets,  and  are  recognised  as  expense  in  the 

period on which the event or condition that triggers the payment occurs.

After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.

150

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Lease (Continued)

The Group as lessee (Continued)
Lease liabilities (Continued)

The Group remeasures lease liabilities (and makes a corresponding adjustment to the related right-of-use assets) 

whenever:

• 

the  lease  term  has  changed  or  there  is  a  change  in  the  assessment  of  exercise  of  a  purchase  option,  in 

which  case  the  related  lease  liability  is  remeasured  by  discounting  the  revised  lease  payments  using  a 

revised discount rate at the date of reassessment.

• 

the lease payments change due to changes in market rental rates following a market rent review, in which 

cases the related lease liability is remeasured by discounting the revised lease payments using the initial 

discount rate.

The Group presents lease liabilities as a separate line item on the consolidated statement of financial position.

Lease modifications

The Group accounts for a lease modification as a separate lease if:

• 

• 

the  modification  increases  the  scope  of  the  lease  by  adding  the  right  to  use  one  or  more  underlying 

assets; and

the consideration for the leases increases by an amount commensurate with the stand-alone price for the 

increase  in  scope  and  any  appropriate  adjustments  to  that  stand-alone  price  to  reflect  the  circumstances 

of the particular contract.

For  a  lease  modification  that  is  not  accounted  for  as  a  separate  lease,  the  Group  remeasures  the  lease  liability 

based  on  the  lease  term  of  the  modified  lease  by  discounting  the  revised  lease  payments  using  a  revised 

discount rate at the effective date of the modification.

151

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Lease (Continued)

The Group as lessee (Continued)
Lease modifications (Continued)

The  Group  accounts  for  the  remeasurement  of  lease  liabilities  by  making  corresponding  adjustments  to  the 

relevant  right-of-use  asset.  When  the  modified  contract  contains  a  lease  component  and  one  or  more  additional 

lease  or  non-lease  components,  the  Group  allocates  the  consideration  in  the  modified  contract  to  each  lease 

component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone 

price of the non-lease components.

The Group as a lessor
Classification and measurement of leases

Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the 

lease transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee, 

the contract is classified as a finance lease. All other leases are classified as operating leases.

Amounts  due  from  lessees  under  finance  leases  are  recognised  as  receivables  at  commencement  date  at 

amounts  equal  to  net  investments  in  the  leases,  measured  using  the  interest  rate  implicit  in  the  respective 

leases. Initial direct costs (other than those incurred by manufacturer or dealer lessors) are included in the initial 

measurement  of  the  net  investments  in  the  leases.  Interest  income  is  allocated  to  accounting  periods  so  as  to 

reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

Rental  income  from  operating  leases  is  recognised  in  profit  or  loss  on  a  straight-line  basis  over  the  term  of  the 

relevant  lease.  Initial  direct  costs  incurred  in  negotiating  and  arranging  an  operating  lease  are  added  to  the 

carrying amount of the leased asset, and such costs are recognised as an expense on a straight-line basis over 

the  lease  term  except  for  investment  properties  measured  under  fair  value  model.  Variable  lease  payments  for 

operating leases that depend on an index or a rate are estimated and included in the total lease payments to be 

recognised on a straight-line basis over the lease term. Variable lease payments that do not depend on an index 

or a rate are recognised as income when they arise.

Interest  and  rental  income  which  are  derived  from  the  Group’s  ordinary  course  of  business  are  presented  as 

revenue.

152

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Lease (Continued)

The Group as a lessor (Continued)
Allocation of consideration to components of a contract

When  a  contract  includes  both  leases  and  non-lease  components,  the  Group  applies  HKFRS  15  to  allocate 

consideration in a contract to lease and non-lease components. Non-lease components are separated from lease 

component on the basis of their relative stand-alone selling prices.

Refundable rental deposits

Refundable  rental  deposits  received  are  accounted  for  under  HKFRS  9  and  initially  measured  at  fair  value. 

Adjustments to fair value at initial recognition are considered as additional lease payments from lessees.

Sublease

When  the  Group  is  an  intermediate  lessor,  it  accounts  for  the  head  lease  and  the  sublease  as  two  separate 

contracts. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising 

from the head lease, not with reference to the underlying asset.

Lease modification

The  Group  accounts  for  a  modification  to  an  operating  lease  as  a  new  lease  from  the  effective  date  of  the 

modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease 

payments for the new 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.

153

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign currencies (Continued)

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, unless exchange  rates fluctuate significantly during the period, in which case the exchange rates 

at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive 

income  and  accumulated  in  equity  under  the  heading  of  share  of  differences  arising  on  translation  (attributed  to 

non-controlling interests as appropriate).

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are 

assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to 

the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Any  specific  borrowing  that  remain  outstanding  after  the  related  asset  is  ready  for  its  intended  use  or  sale  is 

included  in  the  general  borrowing  pool  for  calculation  of  capitalisation  rate  on  general  borrowings.  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.

154

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Government grants (Continued)

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.

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 

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.

155

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Taxation (Continued)

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  or  from  the  initial  recognition  (other  than  in 

a  business  combination)  of  assets  and  liabilities  in  a  transaction  that  affects  neither  the  taxable  profit  nor  the 

accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the 

initial recognition of goodwill.

Deferred  tax  liabilities  are  recognised  for  taxable  temporary  differences  associated  with  investments  in 

subsidiaries and interests in associates and a joint venture, except where the Group is able to control the reversal 

of  the  temporary  difference  and  it  is  probable  that  the  temporary  difference  will  not  reverse  in  the  foreseeable 

future.  Deferred  tax  assets  arising  from  deductible  temporary  differences  associated  with  such  investments  and 

interests  are  only  recognised  to  the  extent  that  it  is  probable  that  there  will  be  sufficient  taxable  profits  against 

which  to  utilise  the  benefits  of  the  temporary  differences  and  they  are  expected  to  reverse  in  the  foreseeable 

future.

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.

156

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Taxation (Continued)

For  the  purposes  of  measuring  deferred  tax  for  leasing  transactions  in  which  the  Group  recognises  the 

right-of-use  assets  and  the  related  lease  liabilities,  the  Group  first  determines  whether  the  tax  deductions  are 

attributable to the right-of-use assets or the lease liabilities.

For  leasing  transactions  in  which  the  tax  deductions  are  attributable  to  the  lease  liabilities,  the  Group  applies 

HKAS 12 Income Taxes requirements to right-of-use assets and lease liabilities separately. Temporary differences 

on initial recognition of the relevant right-of-use assets and lease liabilities are not recognised due to application 

of  the  initial  recognition  exemption.  Temporary  differences  arising  from  subsequent  revision  to  the  carrying 

amounts  of  right-of-use  assets  and  lease  liabilities,  resulting  from  remeasurement  of  lease  liabilities  and  lease 

modifications, that are  not subject to initial recognition exemption are recognised on the date of remeasurement 

or modification.

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 to the same taxation authority.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in 

other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised 

in other comprehensive income or directly in equity respectively.

Financial instruments

Financial  assets  and  financial  liabilities  are  recognised  when  a  group  entity  becomes  a  party  to  the  contractual 

provisions  of  the  instrument.  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. 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.

157

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)

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

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.

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.

158

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)

Financial assets (Continued)
Classification and subsequent measurement of financial assets (Continued)

All  other  financial  assets  are  subsequently  measured  at  FVTPL,  except  that  at  the  date  of  initial  application  of 

HKFRS  9/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 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.

159

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)

Financial assets (Continued)
Classification and subsequent measurement of financial assets (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.

160

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)

Financial assets (Continued)
Impairment of financial assets

The  Group  performs  impairment  assessment  under  expected  credit  loss  (“ECL”)  model  on  financial  assets 

(including  trade  receivables,  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  of  customers,  financial  assets  held  under  agreements  and  other  receivables),  and  other  items 

(lease  receivables,  contract  assets,  loan  commitments  and  financial  guarantee  contracts)  which  are  subject  to 

impairment under HKFRS 9. The amount of ECL is updated at each reporting date to reflect changes in credit risk 

since initial recognition.

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.

161

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)

Financial assets (Continued)
Impairment of financial assets (Continued)

(i) 

Significant increase in credit risk (Continued)

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;

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 foregoing, 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.

162

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)

Financial assets (Continued)
Impairment of financial assets (Continued)

(i) 

Significant increase in credit risk (Continued)

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.

(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.

163

4.  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 HKFRS 16 (since 1 January 2019) 

or HKAS 17 (prior to 1 January 2019)..

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.

164

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  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  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.

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.

165

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)

Financial assets (Continued)
Impairment of financial assets (Continued)

(v) 

Measurement and recognition of ECL (Continued)

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.

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  assets,  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.

166

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  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 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.

167

4.  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.

168

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  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  2017  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.

169

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)

Financial liabilities and equity (Continued)
Convertible bond contains equity component

The  component  parts  of  the  convertible  loan  notes  are  classified  separately  as  financial  liability  and  equity  in 

accordance  with  the  substance  of  the  contractual  arrangements  and  the  definitions  of  a  financial  liability  and  an 

equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another 

financial asset for a fixed number of the Company’s own equity instruments is an equity instrument.

At  the  date  of  issue,  the  fair  value  of  the  liability  component  (including  any  embedded  non-equity  derivatives 

features)  is  estimated  by  measuring  the  fair  value  of  similar  liability  that  does  not  have  an  associated  equity 

component.

A conversion option classified as equity is determined by deducting the amount of the liability component from the 

fair  value  of  the  compound  instrument  as  a  whole.  This  is  recognised  and  included  in  equity,  net  of  income  tax 

effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in 

equity until the conversion option is exercised, in which case, the balance recognised in equity will be transferred 

to share premium. In case of convertible bond issued by a subsidiary, the equity component of the subsidiary is 

classified as and grouped under non-controlling interests by the Group on consolidation.

Where  the  conversion  option  remains  unexercised  at  the  maturity  date  of  the  convertible  note,  the  balance 

recognised in equity will be transferred to reserve. No gain or loss is recognised in profit or loss upon conversion 

or expiration of the conversion option.

Transaction  costs  that  relate  to  the  issue  of  the  convertible  loan  notes  are  allocated  to  the  liability  and  equity 

components  in  proportion  to  the  allocation  of  the  gross  proceeds.  Transaction  costs  relating  to  the  equity 

component  are  charged  directly  to  equity.  Transaction  costs  relating  to  the  liability  component  are  included  in 

the  carrying amount of the  liability  portion and amortised over the period of the convertible loan notes using the 

effective interest method.

170

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  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.

171

4.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)

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.

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; 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.

172

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20194.  SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)

Financial guarantee contracts (Continued)
Non-substantial modifications of financial liabilities

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.

173

5.  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 the directors 

of  the  company  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.

174

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20195.  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  (or  group  of  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  (or  a  group  of  cash-generating 

units) and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are 

less than expected, or change in facts and circumstances which results in downward revision of future cash flows, 

an  impairment  loss  may  arise.  As  at  December  31,  2019,  the  carrying  amount  of  goodwill  is  Rmb86,867,000 

(without accumulated impairment loss) (2018: Rmb86,867,000 (without accumulated impairment loss)). Details of 

the impairment testing are disclosed in Note 24.

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:

175

5.  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)
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.

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.

176

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20195.  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)
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.

Provision of ECL for trade receivables and contract assets
The  Group  uses  provision  matrix  to  calculate  ECL  for  the  trade  receivables  and  contract  assets.  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 assets are disclosed in note 53(b).

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  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.

177

6.  REVENUE
(i)  Disaggregation of revenue from contracts with customers

Year ended 12/31/2019

Toll

Securities

Year ended 12/31/2018

Toll

Securities

Segments

operation

operation

Others

operation

operation

Others

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

(Restated)

(Restated)

Types of goods or services

Toll operation

8,061,007

–

7,854,484

–

267,826

1,138,565

321,551

1,727,942

Securities operation

Asset management services

Securities and futures commission

Investment banking services

Others

Hotel operating and catering services

Construction service

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

243,972

919,992

298,834

1,462,798

–

–

–

–

–

–

–

–

–

169,576

423,906

593,482

–

–

–

177,861

238,580

416,441

Total

8,061,007

1,727,942

593,482

7,854,484

1,462,798

416,441

Timing of revenue recognition

A point in time

Over time

8,061,007

1,727,942

–

–

169,576

423,906

7,854,484

1,462,798

–

–

177,861

238,580

Total

8,061,007

1,727,942

593,482

7,854,484

1,462,798

416,441

178

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.  REVENUE (Continued)
(i)  Disaggregation of revenue from contracts with customers (Continued)
Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the 

segment information.

Toll operation

Securities operation

Others

Revenue from contracts with customers

Interest under effective interest method

Year ended

12/31/2019

Rmb’000

8,061,007

1,727,942

593,482

Year ended

12/31/2018

Rmb’000

(Restated)

7,854,484

1,462,798

416,441

10,382,431

1,572,835

9,733,723

1,458,476

Total revenue

11,955,266

11,192,199

(ii)  Performance obligations for contracts with customers
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.

179

 
 
 
 
 
 
 
 
 
 
6.  REVENUE (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.

180

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20196.  REVENUE (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, 2019 amounting to Rmb711,779,000 

(2018: Rmb1,216,120,000), which are expected to be recognised as revenue over the construction period till July, 

2021 (2018: 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, 2019 

and 2018.

181

7.  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, 2019

Toll

Securities

operation

operation

Others

Total

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Revenue – external customers

8,061,007

3,300,777

593,482

11,955,266

Segment profit

2,763,986

991,246

659,667

4,414,899

182

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
 
 
 
 
 
 
 
 
 
7.  OPERATING SEGMENTS (Continued)
Segment revenue and results (Continued)
For the year ended December 31, 2018 (Restated)

Toll

Securities

operation

Rmb’000

operation

Rmb’000

Others

Total

Rmb’000

Rmb’000

Revenue – external customers

7,854,484

2,921,274

416,441

11,192,199

Segment profit

3,147,606

468,665

378,242

3,994,513

The accounting policies of the operating segments are the same as the Group’s accounting policies described in 

Note 4. 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:

Segment assets

Segment liabilities

12/31/2019

12/31/2018

01/01/2018

12/31/2019

12/31/2018

01/01/2018

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

(Restated)

(Restated)

(Restated)

(Restated)

28,943,860

30,090,897

32,789,270

(19,575,212)

(17,159,312)

(18,510,053)

67,965,409

57,254,963

53,215,230

(52,390,763)

(43,326,330)

(39,424,352)

7,580,818

6,324,136

2,543,035

(628,868)

(348,023)

(278,811)

Toll operation

Securities operation

Others

Total segment assets (liabilities)

104,490,087

93,669,996

88,547,535

(72,594,843)

(60,833,665)

(58,213,216)

Goodwill

86,867

86,867

86,867

–

–

–

Consolidated assets (liabilities)

104,576,954

93,756,863

88,634,402

(72,594,843)

(60,833,665)

(58,213,216)

Segment  assets  and  segment  liabilities  represent  the  assets  and  liabilities  of  the  subsidiaries  operating  in  the 

respective reportable and operating segment.

183

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7.  OPERATING SEGMENTS (Continued)
Other segment information
Amounts included in the measure of segment profit/(loss) or segment assets:

For the year ended December 31, 2019

Toll

Securities

operation

operation

Others

Total

Rmb’000

Rmb’000

Rmb’000

Rmb’000

1,024,200

318,907

8,588

1,351,695

33,859

763,965

–

510

34,369

844,931

17,913

1,626,809

–

97

–

–

3,177

(1,218)

–

–

3,177

(1,121)

–

(652)

(652)

303,643

5,776,512

6,080,155

368,043

–

–

–

18,922

633,902

368,043

652,824

34,941

1,485,141

17,547

–

–

–

351,865

1,350,068

38,664

2,403,937

Income tax expense

Interest income on bank balances  
and entrusted loan receivables

Interest expenses

Impairment losses on loan to customers  
arising from margin financing business, 
reversed in profit

Impairment losses on trade receivables,  

net of reversal

Impairment losses on contract asset  

recognised in profit

Interests in associates

Interest in a joint venture

Share of profit of associates

Share of profit of a joint venture

34,941

–

Net gains arising from financial assets at  

FVTPL

59,216

1,425,925

Gain on changes in fair value in respect of the 
derivative component of convertible bond

Additions to non-current assets (Note)

Depreciation and amortisation

17,547

900,131

2,180,526

–

98,072

184,747

184

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
 
 
 
 
7.  OPERATING SEGMENTS (Continued)
Other segment information (Continued)
For the year ended December 31, 2018 (Restated)

Toll

Securities

operation

Rmb’000

operation

Rmb’000

Others

Total

Rmb’000

Rmb’000

Income tax expense

943,976

161,225

8,253

1,113,454

Interest income on bank balances  
and entrusted loan receivables

Interest expenses

Impairment losses on loan to customers  
arising from margin financing business, 
reversed in profit

Impairment losses on trade receivables  

61,483

690,837

–

305

61,788

694,454

11,515

1,396,806

–

37,190

–

37,190

net of reversal

(352)

(711)

(11)

(1,074)

Impairment losses on contract asset  

recognised in profit

Interests in associates

Interest in a joint venture

Share of (loss) profit of associates

Share of profit of a joint venture

Net gains arising from financial assets at  

FVTPL

–

–

–

(380)

(380)

297,896

4,913,516

5,211,412

333,102

–

–

–

(2,904)

353,482

30,037

–

–

526,479

333,102

350,578

30,037

526,479

127,094

–

–

–

Gain on changes in fair value in respect of the 
derivative component of convertible bond

Additions to non-current assets (Note)

127,094

216,514

–

98,976

3,226,013

3,541,503

Depreciation and amortisation

2,125,937

113,943

37,598

2,277,478

Note:  Non-current assets excluded financial instruments and deferred tax assets.

185

 
 
 
 
 
 
 
 
7.  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

Hotel and catering revenue

Revenue from construction

Year ended

12/31/2019

Rmb’000

8,061,007

1,727,942

1,572,835

169,576

423,906

Year ended

12/31/2018

Rmb’000

(Restated)

7,854,484

1,462,798

1,458,476

177,861

238,580

11,955,266

11,192,199

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, 2019 and 2018, there was no individual customer with sales over 10% of 

the total revenue of the Group.

186

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
 
 
 
8.  SECURITIES INVESTMENT GAINS

Net gains arising from financial assets at FVTPL

Net gains arising from derivative financial instruments

Net losses arising from financial liabilities at FVTPL

9.  OTHER INCOME AND GAINS AND LOSSES

Interest income on bank balances and entrusted loan receivables

Rental income (Note i)

Handling fee income

Towing income

Gain on changes in fair value in respect of the derivative  

component of convertible bond

Exchange gain, net

Gain (loss) on commodity trading, net (Note ii)

Management fee income

Others

Year ended

12/31/2019

Rmb’000

1,485,141

7,028

(89,485)

Year ended

12/31/2018

Rmb’000

526,479

17,605

(31,635)

1,402,684

512,449

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

(Restated)

34,369

68,532

278

6,368

17,547

14,269

6,443

34,313

78,148

61,788

74,364

3,188

6,572

127,094

55,637

(17,893)

26,949

66,429

260,267

404,128

Notes:

(i) 

Rental income included contingent rent of Rmb2,158,000 (2018: Rmb3,895,000) recognised during the year.

(ii) 

The  income  on  commodity  trading  amounted  to  Rmb2,289,986,000  with  the  cost  of  Rmb2,283,543,000.  The 

net  gain  or  loss  on  commodity  trading  is  presented  as  other  income  and  gains  and  losses. And  the  balance  of 

inventories on commodity trading amounted to Rmb329,704,000 as of December 31, 2019.

187

 
 
 
 
 
 
 
 
 
 
 
 
 
 
10. 

IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS MODEL, NET 
OF REVERSAL

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

(Restated)

(1,121)

(929)

3,177

31,402

(652)

–

(1,074)

(6,248)

37,190

18,999

(380)

(2,700)

31,877

45,787

Year ended

12/31/2019

Rmb’000

605,241

98,561

715,438

193,878

13,691

Year ended

12/31/2018

Rmb’000

(Restated)

599,649

131,459

562,995

102,703

–

1,626,809

1,396,806

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

Contract asset

Others

11.  FINANCE COSTS

Bank and other borrowings

Short-term financing note payable

Bonds payable

Convertible Bonds

Lease liabilities

188

2019ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2019 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12.  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)

Depreciation of right-of-use assets

Release of prepaid lease payments

Year ended

12/31/2019

Rmb’000

379,380

68,133

–

Year ended

12/31/2018

Rmb’000

(Restated)

319,244

–

4,822

Amortisation of expressway operating rights (included in operating costs)

1,915,967

1,919,487

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

40,457

33,925

2,403,937

2,277,478

1,541,415

137,945

1,121,823

131,585

1,679,360

1,253,408

8,544

13,200

9,951

1,236

189

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13. 

INCOME TAX EXPENSE

Current tax:

PRC Enterprise Income Tax (“EIT”)

Deferred tax (Note 47)

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

(Restated)

1,317,018

1,179,252

34,677

(65,798)

1,351,695

1,113,454

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.

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% (2018: 25%)

Tax effect of share of profit of associates

Tax effect of share of profit of a joint venture

Tax effect of tax losses not recognised

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

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

(Restated)

5,766,594

5,107,967

1,441,649

(163,206)

(8,735)

37,164

(5,630)

58,128

(7,675)

1,276,992

(87,645)

(7,509)

9,931

(53,377)

12,962

(37,900)

Income tax expense for the year

1,351,695

1,113,454

190

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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#

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14.  DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’ 

EMOLUMENTS (Continued)

Notes:

(i) 

Resigned on April 2, 2018.

(ii) 

Appointed on April 2, 2018.

(iii) 

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.

(iv) 

Resigned on April 12, 2018.

(v) 

Appointed 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.

192

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements14.  DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’ 

EMOLUMENTS (Continued)

The emoluments paid or payable to each of the other 6 (2018: 5) senior managements are as follows:

Zhu

Wang

Zhan

Zheng

Zhang

Wang

Yimin

Dehua Huagang

Hui

Xiuhua Bingjiong

Total

Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000

Year ended December  

31, 2019

Salaries, allowances and 

benefits in kind

Bonuses paid and payable

Pension scheme contributions

Total emoluments

Year ended December  

31, 2018

Salaries, allowances and 

benefits in kind

Bonuses paid and payable

Pension scheme contributions

Total emoluments

510

337

26

873

255

517

24

796

510

337

26

873

255

467

24

746

510

359

26

895

255

517

24

796

510

315

26

851

255

472

24

751

510

337

26

873

255

517

24

796

(Note)

128

–

6

134

–

–

–

–

2,678

1,685

136

4,499

1,275

2,490

120

3,885

Note:  Appointed on September 5, 2019 as Deputy General Manager of the company.

The  emoluments  of  each  of  the  senior  managements  were  below  HK$1,000,000  (equivalent  to  Rmb895,800 

(2018:  Rmb876,200)  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.

193

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

3,703

35,854

180

39,737

4,906

31,886

305

37,097

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, 2019 and 2018.

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  5  (2018:  5)  non-director 

employees.

194

2019ANNUAL REPORTFor the year ended December 31, 2019Notes 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 Rmb4,483,904  

(2018: Rmb4,381,001) to Rmb4,932,293 (2018: Rmb4,819,100))

HK$6,000,001 to HK$6,500,000 (equivalent to Rmb5,380,684  

(2018: Rmb5,257,201) to Rmb5,829,074 (2018: Rmb5,695,300))

HK$6,500,001 to HK$7,000,000 (equivalent to Rmb5,829,075  

(2018: Rmb5,695,301) to Rmb6,277,464 (2018: Rmb6,133,400))

HK$7,500,001 to HK$8,000,000 (equivalent to Rmb6,725,855  

(2018: Rmb6,571,501) to Rmb7,174,244 (2018: Rmb7,009,600))

HK$8,000,001 to HK$8,500,000 (equivalent to Rmb7,174,245  

(2018: Rmb7,009,601) to Rmb7,622,635 (2018: Rmb7,447,700))

HK$8,500,001 to HK$9,000,000 (equivalent to Rmb7,622,636  

(2018: Rmb7,447,701) to Rmb8,071,025 (2018: Rmb7,885,800))

HK$9,000,001 to HK$9,500,000 (equivalent to Rmb8,071,025  

(2018: Rmb7,885,800) to Rmb8,519,416 (2018: Rmb8,323,901))

HK$10,500,001 to HK$11,000,000 (equivalent to Rmb9,416,197  

(2018: Rmb9,200,101) to Rmb9,864,586 (2018: Rmb9,638,200))

HK$13,000,001 to HK$13,500,000 (equivalent to Rmb11,658,148  

(2018: Rmb11,390,601) to Rmb12,106,538 (2018: Rmb11,838,700))

16.  DIVIDENDS

No. of individuals

Year ended

12/31/2019

Year ended

12/31/2018

–

–

–

1

1

1

1

1

–

1

1

1

–

–

–

–

1

1

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

Dividends recognised as distribution during the year:

2018 – Rmb37.5 cents (2018: 2017 Final Rmb30.0 cents per share)

1,628,668

1,302,934

Dividend  of  Rmb35.5  cents  per  share  in  respect  of  the  year  ended  December  31,  2019  (2018:  dividend 

of  Rmb37.5  cents  per  share  in  respect  of  the  year  ended  December  31,  2018)  in  the  total  amount  of 

Rmb1,541,806,000 (2018: Rmb1,628,668,000) has been proposed by the Directors and is subject to approval by 

the shareholders in the annual general meeting.

195

 
 
 
 
 
 
 
 
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 (gain) loss (net of income tax)

Gain on changes in fair value on derivative component

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

(Restated)

3,711,118

3,515,095

3,711,118

3,515,095

105,589

(7,103)

(17,547)

102,703

10,050

(127,094)

Earnings for the purpose of diluted earnings per share

3,792,057

3,500,754

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

12/31/2019

’000

4,343,115

260,386

Year ended

12/31/2018

’000

4,343,115

246,632

4,603,501

4,589,747

For  the  year  ended  December  31,  2019,  the  computation  of  diluted  earnings  per  share  does  not  assume  the 

conversion of outstanding Convertible Bond 2019 issued by Zheshang Securities since their exercise would result 

in an increase in earnings per share.

196

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2018  
(originally stated)

Merger accounting restatement

At January 1, 2018 (Restated)
Additions
Transfer
Disposals

1,649,119
529,255

2,178,374
18,081
23,079
–

592,230
268,290

860,520
–
–
–

1,014,059
191,683

1,205,742
–
681
(6)

784,147
636,493

1,420,640
28,643
31,024
(20,983)

183,589
17,514

201,103
4,347
–
(43,136)

480,077
84,940

565,017
41,673
6,951
(30,204)

29,679
541

30,220
176,714
(114,316)
–

4,732,900
1,728,716

6,461,616
269,458
(52,581)
(94,329)

At December 31, 2018 (Restated)

2,219,534

860,520

1,206,417

1,459,324

162,314

583,437

92,618

6,584,164

Additions
Transfer
Disposals

12,933
826
(25,254)

564
–
(2,931)

404
15,742
(5,859)

23,566
475,242
(44,339)

16,686
–
(22,334)

43,509
14,612
(26,516)

853,004
(506,648)
–

950,666
(226)
(127,233)

At December 31, 2019

2,208,039

858,153

1,216,704

1,913,793

156,666

615,042

438,974

7,407,371

DEPRECIATION
At January 1, 2018  
(Originally Stated)

Merger accounting restatement

At January 1, 2018 (Restated)
Provided for the year
Disposals

At December 31, 2018 (Restated)
Provided for the year
Disposals

421,885
164,813

586,698
87,040
–

673,738
100,304
(19,294)

47,194
68,737

115,931
27,093
–

143,024
30,631
(2,915)

374,302
52,691

426,993
59,877
(5)

486,865
49,060
(4,014)

473,322
466,320

939,642
81,995
(20,543)

1,001,094
139,096
(35,753)

127,198
14,940

142,138
12,558
(42,564)

112,132
11,561
(18,282)

340,865
69,622

410,487
50,681
(27,058)

434,110
48,728
(23,449)

At December 31, 2019

754,748

170,740

531,911

1,104,437

105,411

459,389

–
–

–
–
–

–
–
–

–

1,784,766
837,123

2,621,889
319,244
(90,170)

2,850,963
379,380
(103,707)

3,126,636

CARRYING VALUES
At December 31, 2019

1,453,291

At December 31, 2018 (Restated)

1,545,796

At January 1, 2018 (Restated)

1,591,676

687,413

717,496

744,589

684,793

719,552

778,749

809,356

458,230

480,998

51,255

50,182

58,965

155,653

149,327

154,530

438,974

4,280,735

92,618

3,733,201

30,220

3,839,727

The property, plant and equipment are located in the PRC.

197

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19.  RIGHT-OF-USE ASSETS

COST

At January 1, 2019:

Addition

At December 31 2019

DEPRECIATION

At January 1, 2019:

Addition

At December 31 2019

CARRYING VALUES

At January 1, 2019

At December 31, 2019

Leasehold

lands

Rmb’000

Leased

properties

Rmb’000

119,450

–

119,450

–

4,822

4,822

119,450

114,628

270,155

57,559

327,714

–

63,311

63,311

270,155

264,403

Total

Rmb’000

389,605

57,559

447,164

–

68,133

68,133

389,605

379,031

The  Group  leases  various  offices  for  its  operations.  Lease  contracts  are  entered  into  for  term  of  12  months  to 

10  years.  Lease  terms  are  negotiated  on  an  individual  basis  and  contain  a  wide  range  of  different  terms  and 

conditions.  In  determining  the  lease  term  and  assessing  the  length  of  the  non-cancellable  period,  the  Group 

applies the definition of a contract and determines the period for which the contract is enforceable.

For the year ended December 31, 2019, total cash outflow for leases amounted to Rmb99,911,000.

Expense relating to short-term leases and other leases with lease terms end within 12 months of the date of initial 

application of IFRS 16 amounted to Rmb32,539,000.

The  amounts  of  the  Group’s  lease  liabilities  and  interest  expense  of  lease  liabilities  are  disclosed  in  Note  46 

and  Note  11,  respectively.  For  the  year  ended  December  31,  2019,  the  lease  agreements  do  not  impose  any 

covenants  other  than  the  security  interests  in  the  leased  assets  that  are  held  by  the  lessor.  Leased  assets  may 

not be used as security for borrowing purposes.

As at December 31, 2019, the Group did not enter into any lease that is not yet commenced.

198

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20.  PREPAID LEASE PAYMENTS

Analysed for reporting purposes as:

Current assets

Non-current assets

12/31/2018

01/01/2018

Rmb’000

(Restated)

Rmb’000

(Restated)

4,822

114,628

119,450

4,822

119,450

124,272

The amount represents prepayment of rentals under operating leases for “land use rights” of land situated in the 

PRC.

21.  EXPRESSWAY OPERATING RIGHTS

COST

At January 1, 2018 (originally stated)

Merger accounting restatement

At January 1, 2018 (restated)

Additions (restated)

At December 31, 2018 (restated) and 2019

AMORTISATION

At January 1, 2018 (originally stated)

Merger accounting restatement

At January 1, 2018 (restated)

Charge for the year (restated)

At December 31, 2018 (restated)

Charge for the year

At December 31, 2019

CARRYING VALUES

At December 31, 2019

At December 31, 2018 (restated)

At January 1, 2018 (restated)

199

Rmb’000

26,266,622

19,828,217

46,094,839

52,226

46,147,065

12,886,948

6,557,217

19,444,165

1,919,487

21,363,652

1,915,967

23,279,619

22,867,446

24,783,413

26,650,674

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21.  EXPRESSWAY OPERATING RIGHTS (Continued)
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,  Huihang  Expressway, 

Shenjiahuhang Expressway and Zhoushan Bay Bridge 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.

22.  GOODWILL

COST AND CARRYING VALUES

At January 1, 2018, December 31, 2018 and December 31, 2019

Particulars regarding impairment testing on goodwill are disclosed in Note 24.

Rmb’000

86,867

200

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
23.  OTHER INTANGIBLE ASSETS

Securities/

Customer

futures

bases

firm licenses

Trading

seats

Rmb’000

Rmb’000

Rmb’000

Software

Rmb’000

Total

Rmb’000

101,147

63,083

5,152

180,435

349,817

COST

At January 1, 2018  
(originally stated)

Merger accounting restatement

–

–

–

374

374

At January 1, 2018 (restated)

101,147

63,083

5,152

Additions

Transfer

Disposal

–

–

–

–

–

–

At December 31, 2018 (restated)

101,147

63,083

Additions

Transfer

–

–

–

–

–

–

(1,672)

3,480

–

–

180,809

47,390

355

–

228,554

49,402

226

350,191

47,390

355

(1,672)

396,264

49,402

226

At December 31, 2019

101,147

63,083

3,480

278,182

445,892

AMORTISATION

At January 1, 2018(originally stated)

79,211

Merger accounting restatement

At January 1, 2018 (restated)

Charge for the year

At December 31, 2018 (restated)

Charge for the year

At December 31, 2019

CARRYING VALUES

At December 31, 2019

At December 31, 2018 (restated)

At January 1, 2018 (restated)

–

79,211

6,266

85,477

6,266

91,743

9,404

15,670

21,936

–

–

–

–

–

–

–

–

–

–

–

–

–

–

109,120

188,331

328

328

109,448

27,659

137,107

34,191

188,659

33,925

222,584

40,457

171,298

263,041

63,083

63,083

63,083

3,480

3,480

5,152

106,884

182,851

91,447

71,361

173,680

161,532

The  customer  bases  of  Zheshang  Securities  Co.,  Ltd.  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.

201

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23.  OTHER INTANGIBLE ASSETS (Continued)
The  trading  seats  of  the  securities  operation  are  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 24.

24. 

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  22  and  23  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, 2019 and 2018 allocated to these units are as follows:

Toll operation

– Zhejiang Jiaxing Expressway Co., Ltd.  

(“Jiaxing Co”)

– Zhejiang Shangsan Expressway Co.,  

Ltd.(“Shangsan Co”)

Securities operation

– Zheshang Securities

– Zheshang Futures

Goodwill

Securities/futures
firm licenses

Trading
seats

12/31/2019

12/31/2018

12/31/2019

12/31/2018

12/31/2019

12/31/2018

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

75,137

75,137

10,335

10,335

–

–

–

–

–

1,395

–

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

1,400

3,480

The  basis  of  the  recoverable  amounts  of  the  above  CGUs  and  their  major  underlying  assumptions  are 

summarised below:

202

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24. 

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 9 years (2018: 10 years) and 11 years (2018: 12 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  rates, 

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 

believes  appropriate.  Growth  rates  beyond  the  five-year  period  is  assumed  to  be  1%  (2018:  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,  2019  and  2018,  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.

25. 

INTERESTS IN ASSOCIATES

Unlisted investments in associates, at cost less impairment

4,902,995

4,563,095

Share of post-acquisition profit and other comprehensive income,  

net of dividends received

1,177,160

648,317

6,080,155

5,211,412

12/31/2019

12/31/2018

Rmb’000

Rmb’000

203

 
 
 
 
 
 
INTERESTS IN ASSOCIATES (Continued)

25. 
At December 31, 2019 and 2018, the Group had interests in the following associates:

Name of entity

Form of
business
structure

Place of
registration and
operation

Percentage of equity
interest attributable to
the Group

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. (“Zheshang Fund”)  

Corporate

The PRC

(Note i)

12/31/2019
%

12/31/2018
%

45

35

25

45

Investment and real estate 

development

35

Finance and investment

25

Asset fund management

Yangtze United Financial Leasing Co., Ltd.  

(“Yangtze United Financial Leasing”) (Note ii)

Corporate

The PRC

10.612

13

Provision of financial leasing 

Zhejiang Zheshang Innovation Capital Management  

Corporate

The PRC

Co., Ltd. (“Zheshang Innovation Capital Management”)

Zhejiang Big Data Exchange Center Co., Ltd.  

Corporate

The PRC

(‘’Zhejiang Big Data”) (Note iii)

Taiping Science and Technology Insurance Co., Ltd.  

Corporate

The PRC

(“Taiping Insurance”) (Note iv)

Hangzhou XingYuanJuJin Investment Management  

Partnership

The PRC

LP (‘’XingYuan Investment’) (Note v)

Pujiang JuJinFengAn Investment Management LP  

Partnership

The PRC

(“FengAn Investment”)

Zheshang FoF for Industry Transformation and  

Partnership

The PRC

Upgrading LP (“Zheshang FoF”)

Shaoxing Shangyu Industry M&A leading LP  

Partnership

The PRC

(“Shaoxing Shangyu”)

40

19.8

15

–

17.86

24.99

0.005

services

40

Investment management and 

consulting

19.8

Big data asset transaction

15

Science and technology related 

insurance

5.05

Investment management

17.86

Investment management

24.99

Investment management and 

consulting

0.005

Investment management and 

consulting

Shanghai Rural Commercial Bank Co., Ltd  

Corporate

The PRC

5.36

5.36

Commercial banking

(“SRCB”) (Note vi)

All of the above associates are accounted for using the equity method in these consolidated financial statements.

204

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
INTERESTS IN ASSOCIATES (Continued)

25. 
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,  2019,  the  disposal  transaction  has  not  been  completed  and  the  refundable  deposit  of 

Rmb165,600,000  (2018:  Rmb165,600,000)  in  respect  of  such  transfer  reversed  by  Zheshang  Securities  was 

included in other payables in Note 38.

The  Directors  consider  the  disposal  required  approval  by  China  Securities  Regulatory  Commission  and  equity 

transfer registration, which was a lengthy process and they are not able to estimate the timing when and whether 

such approval would be granted. The amount of deposit received would be refundable to Tonglian Capital if the 

transfer eventually cannot be completed.

(ii) 

The  Group  is  able  to  exercise  significant  influence  over  Yangtze  United  Financial  Leasing  because  it  has 

the  power  to  appoint  one  out  of  eight  directors  of  that  company  under  the  provisions  stated  in  the  Articles  of 

Association of that company. In December 2019, due to not increasing its investment as other shareholders did, 

the shares of its interest in Yangtze United Financial Leasing is changed to 10.612%.

(iii) 

The  Group  is  able  to  exercise  significant  influence  over  Zhejiang  Big  Data  because  it  has  the  power  to  appoint 

one  out  of  five  directors  of  that  company  under  the  provisions  stated  in  the  Articles  of  Association  of  that 

company.

(iv) 

The  Group  is  able  to  exercise  significant  influence  over  Taiping  Insurance  because  it  has  the  power  to  appoint 

one  out  of  eleven  directors  of  that  company  under  the  provisions  stated  in  the  Articles  of  Association  of  that 

company.

(v) 

On  July  15,  2019,  the  Group  and  Xingyuan  Environment  Technology  Co.,  Ltd.  jointly  signed  an  agreement 

that  the  Group,  as  transferors,  disposed  of  the  5.05%  equity  of  Xingyuan  Investment  for  at  an  aggregate 

consideration of Rmb12,233,000. The transaction was completed on August 5, 2019.

(vi) 

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 that company.

205

INTERESTS IN ASSOCIATES (Continued)

25. 
The  summarised  financial  information  in  respect  of  the  Group’s  associates  at  the  end  of  the  reporting  period 

in  aggregate  is  set  out  below.  This  represents  the  aggregation  of  amounts  shown  in  the  associate’s  financial 

statements prepared in accordance with HKFRSs:

Total assets

Total liabilities

Revenue

Profit for the year

Total comprehensive income for the year

Dividends received from associates during the year

26. 

INTEREST IN A JOINT VENTURE

Unlisted investment in a joint venture at cost less impairment

Share of post-acquisition losses

12/31/2019

12/31/2018

Rmb’000

Rmb’000

1,014,855,697

894,337,121

930,911,786

822,602,557

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

40,342,396

25,324,110

9,355,485

4,151,938

9,355,485

4,151,938

120,520

33,565

12/31/2019

12/31/2018

Rmb’000

Rmb’000

373,470

(5,427)

368,043

373,470

(40,368)

333,102

206

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26. 

INTEREST IN A JOINT VENTURE (Continued)

At December 31, 2019 and 2018, the Group had interest in the following joint venture:

Name of entity

Form of
business
structure

Place of
registration and
operation

Percentage of equity
interest attributable to
the Group

Principal activities

Zhejiang Shaoxing Shengxin Expressway Co., Ltd.  

Corporate

The PRC

(“Shengxin Co”)

12/31/2019
%

50

12/31/2018
%

50

Management of the Shaoxing 
section of the Ningbo-Jinhua 
Expressway

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

12/31/2019

12/31/2018

Rmb’000

123,472

Rmb’000

99,311

2,003,016

2,146,533

56,299

53,072

1,334,103

1,526,567

The above amounts of assets and liabilities include the following:

Cash and cash equivalents

64,156

91,741

Non-current financial liabilities (excluding trade and  

other payables and provisions)

1,285,000

1,473,000

207

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INTEREST IN A JOINT VENTURE (Continued)

26. 
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

12/31/2019

Rmb’000

426,733

69,882

–

Year ended

12/31/2018

Rmb’000

417,382

60,074

–

(179,825)

(182,169)

1,427

(62,250)

(12,710)

1,290

(69,580)

(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 Shengxin Co

Carrying amount of the Group’s interest in Shengxin Co

12/31/2019

12/31/2018

Rmb’000

Rmb’000

736,086

50%

368,043

666,205

50%

333,102

208

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27.  FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets 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

Notes:

12/31/2019

12/31/2018

Rmb’000

Rmb’000

17,389,486

19,143,054

849,642

2,352,974

1,660,276

683,284

908,111

841,357

22,252,378

21,575,806

5,066,640

17,185,738

10,618,484

10,957,322

22,252,378

21,575,806

22,235,480

21,558,606

16,898

17,200

22,252,378

21,575,806

(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.

209

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28.  CONTRACT ASSET

High grade road construction contract

Less: Allowance for contract asset

12/31/2019

12/31/2018

Rmb’000

687,589

(1,032)

686,557

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 which impact on the amount of contract asset recognised are disclosed in Note 6.

29.  TRADE RECEIVABLES

Trade receivables

– contracts with customers

Less: Allowance for credit losses

Trade receivables (before allowance for  

credit losses) comprise:

Fellow subsidiaries

Third parties

12/31/2019

Rmb’000

12/31/2018

01/01/2018

Rmb’000

Rmb’000

(Restated)

(Restated)

323,767

(4,428)

319,339

9,245

314,522

323,767

248,409

(3,307)

245,102

14,005

234,404

248,409

278,360

(2,233)

276,127

13,741

264,619

278,360

210

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
29.  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  respective  expressway  fee  settlement  centre  of 

Zhejiang  Province  and  Anhui  Province,  Transportation  Bureau  of  Yuhang  County  of  Hangzhou,  Transportation 

Bureau  of  Yiwu,  Transportation  Bureau  of  Linan  of  Hangzhou,  Transportation  Bureau  of  Huzhou,  which  are 

normally settled within 3 months. All of these trade receivables were not past due in both periods.

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:

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

12/31/2019

Rmb’000

12/31/2018

01/01/2018

Rmb’000

Rmb’000

(Restated)

(Restated)

291,295

17,905

6,430

3,709

319,339

208,011

30,578

4,437

2,076

252,550

21,449

2,039

89

245,102

276,127

12/31/2019

12/31/2018

Rmb’000

Rmb’000

(Restated)

3,307

1,243

(122)

4,428

2,233

1,074

–

3,307

211

 
 
 
 
 
 
 
 
 
 
 
 
 
 
30.  LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING 

BUSINESS

Loans to margin clients

Less: Impairment allowance

12/31/2019

12/31/2018

Rmb’000

Rmb’000

8,752,658

5,854,913

(1,015)

(4,829)

8,751,643

5,850,084

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, 2019, 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  Rmb  27,246,376,000  (2018:  Rmb14,260,228,000).  Cash 

collateral of Rmb1,030,089,000 (2018: Rmb 392,345,000) received from clients was included in accounts payable 

to customers arising from securities business in Note 36.

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.

212

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
30.  LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING 

BUSINESS (Continued)

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

– Charged to profit or loss

As at December 31, 2018

– Transfer to 12m ECL

– Write off

– Charged to profit or loss

As at December 31, 2019

Lifetime ECL

(not credit-

Lifetime ECL

impaired)

(credit-impaired)

Rmb’000

Rmb’000

2

1

(1)

757

759

(1)

–

(756)

2

4,188

–

–

(124)

4,064

–

(637)

(2,422)

1,005

12m ECL

Rmb’000

37,817

(1)

1

(37,811)

6

1

–

1

8

Total

Rmb’000

42,007

–

–

(37,178)

4,829

–

(637)

(3,177)

1,015

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, 2019

Gross carrying amount

As at December 31, 2018

Gross carrying amount

Lifetime ECL

(not credit

Lifetime ECL

–impaired)

(credit-impaired)

Rmb’000

Rmb’000

12m ECL

Rmb’000

Total

Rmb’000

8,714,110

37,543

1,005

8,752,658

5,431,533

419,316

4,064

5,854,913

213

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31.  OTHER RECEIVABLES AND PREPAYMENTS

Prepayments

Trading deposits

Settlement receivables

Entrusted loan and interest receivable from  

a related party

Advances in relation to asset management plans

Receivables from Zhejiang Expressway Maintenance Co., 

Ltd. (“Maintenance Co”) in relation to  
disposal of maintenance equipment

Others

12/31/2019

Rmb’000

143,552

157,383

1,055

–

–

–

122,192

424,182

12/31/2018

01/01/2018

Rmb’000

Rmb’000

(Restated)

(Restated)

119,911

9,056

198,090

–

–

11,082

115,354

453,493

73,728

–

–

78,300

229,070

24,021

91,944

497,063

32.  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

12/31/2019

12/31/2018

Rmb’000

Rmb’000

3,215,869

4,914,829

3,091,042

5,166,886

8,130,698

8,257,928

(20,344)

(51,746)

8,110,354

8,206,182

115,038

8,015,660

267,237

7,990,691

8,130,698

8,257,928

(20,344)

(51,746)

8,110,354

8,206,182

The collaterals include both equity and debt securities listed in the PRC. As at December 31, 2019, the fair value 

of equity securities and debt securities held as collaterals was Rmb 18,278,480,000 (2018: Rmb12,464,582,000) 

and Rmb 3,288,684,000 (2018: Rmb3,176,921,000), respectively.

214

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32.  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

– Charged to profit or loss

As at December 31, 2018

– Transfer to credit-impaired

– Transfer to 12m ECL

– Charged to profit or loss

As at December 31, 2019

Lifetime ECL

(not credit-

Lifetime ECL

impaired)

(credit-impaired)

Rmb’000

Rmb’000

23,185

–

1,397

(6,420)

14,526

32,688

344

(24,758)

(6,822)

1,452

–

304

–

–

3,696

4,000

(344)

–

4,656

8,312

12m ECL

Rmb’000

47,560

(304)

(1,397)

6,420

(37,221)

15,058

–

24,758

(29,236)

10,580

Total

Rmb’000

70,745

–

–

–

(18,999)

51,746

–

–

(31,402)

20,344

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, 2019

Gross carrying amount

As at December 31, 2018

Gross carrying amount

Lifetime ECL

(not credit-

Lifetime ECL

impaired)

(credit-impaired)

Rmb’000

Rmb’000

12m ECL

Rmb’000

Total

Rmb’000

7,744,728

205,970

180,000

8,130,698

6,268,174

1,916,065

73,689

8,257,928

215

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33.  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 0.3% to 3.7% (2018: 0.8% to 6%) per annum.

Bank balances and clearing settlement fund held on behalf of customers that are denominated in currencies other 

than the functional currency of the respective group entities are set out below:

As at December 31, 2019

As at December 31, 2018

HKD

Rmb’000

35,570

17,714

USD

Rmb’000

176,870

89,770

34.  BANK BALANCES, CLEARING SETTLEMENT FUND, DEPOSITS AND 

CASH

12/31/2019

Rmb’000

12/31/2018

01/01/2018

Rmb’000

Rmb’000

(Restated)

(Restated)

Time deposits with original maturity over three months

302,726

280,913

20,000

Unrestricted bank balances and cash

8,057,777

6,577,305

5,713,906

Time deposits with original maturity of less  

than three months

Cash and cash equivalents

18,821

8,076,598

8,379,324

24,479

5,123

6,601,784

5,719,029

6,882,697

5,739,029

Bank balances carry interest at the average market rate is 0.35% (2018: 0.35%) per annum. Time deposits carry 

interest at fixed rates ranging from 1.66% to 4.125% (2018: 0.67% to 3.45%) per annum.

216

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34.  BANK BALANCES, CLEARING SETTLEMENT FUND, DEPOSITS AND 

CASH (Continued)

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, 2019

As at December 31, 2018

HKD

Rmb’000

23,213

44,204

USD

Rmb’000

51,972

511,481

35.  PLACEMENTS FROM OTHER FINANCIAL INSTITUTIONS

Ningbo Yinzhou Rural Commercial Bank Co., Ltd

Changsha Rural Commercial Bank Co., Ltd.

ZheJiang AnJi Rural Commercial Bank Company Limited

China Securities Finance Corporation Limited (secured)

12/31/2019

12/31/2018

Rmb’000

Rmb’000

200,000

50,000

20,000

–

270,000

–

–

–

400,679

400,679

As  at  December  31,  2019,  the  placements  from  (i)  Ningbo  Yinzhou  Rural  Commercial  Bank  Co.,  Ltd  carried 

interest  at  a  fixed  rate  of  2.87%  per  annum  are  repayable  within  1  months  from  the  end  of  the  reporting  period, 

(ii) the placements from Changsha Rural Commercial Bank Co., Ltd carried interest at a fixed rate of 3.00% per 

annum are repayable within 1 months from the end of the reporting period and (iii) the placements from ZheJiang 

AnJi Rural Commercial Bank Company Limited carried interest at a fixed rate of 2.67% per annum are repayable 

within 1 months from the end of the reporting period.

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.

217

 
 
 
 
 
 
 
 
 
36.  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,  2019,  Rmb534,415,000  (2018:  Rmb392,345,000)  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, 2019

As at December 31, 2018

HKD

Rmb’000

35,570

17,714

USD

Rmb’000

176,870

89,770

218

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
37.  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

38.  OTHER PAYABLES AND ACCRUALS

Accrued payroll and welfare

Advances

Advance payments for settlement from securities 

business

Trading deposit

Deposit received for disposal of an  

associate (Note 25(i))

Retention payable

Pledge deposit for futures

Compensations for highway crossing

Other investors’ interests in consolidated limited 

partnership designated at FVTPL (Note)

Payables to be settled for fund redemption

Toll collected on behalf of other toll roads

Amount due to Communications Group

Others

12/31/2019

Rmb’000

12/31/2018

01/01/2018

Rmb’000

Rmb’000

(Restated)

(Restated)

906,748

83,490

81,291

31,842

284,485

366,135

72,282

61,285

70,527

380,565

75,340

137,871

102,436

728,869

1,064,954

1,387,856

1,299,098

1,761,166

12/31/2019

Rmb’000

12/31/2018

01/01/2018

Rmb’000

Rmb’000

(Restated)

(Restated)

972,891

41,698

50,153

199,700

165,600

113,018

94,612

96,269

–

45,577

7,532

–

898,518

29,442

1,180

20,661

165,600

104,976

8,927

17,122

205,903

15,351

9,672

1,214,282

38,858

–

–

165,600

109,987

–

7,186

421,782

130,731

9,543

–

2,708,859

262,429

263,223

276,322

2,049,479

1,740,575

5,083,150

219

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
38.  OTHER PAYABLES AND ACCRUALS (Continued)
Note:  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  January  1,  2018,  respectively.  Third  party  unit  holders’  interests 

in  the  consolidated  limited  partnership  is  presented  as  financial  liabilities  at  FVTPL  amounted  to  fair  value  of 

Rmb  205,176,000  at  December  31,  2019. As  in  the  opinion  of  the  management,  such  designation  eliminates  or 

significantly reduces a measurement or recognition inconsistency that would otherwise arise.

39.  DERIVATIVE FINANCIAL ASSETS/LIABILITIES
Derivative  financial  assets  of  Rmb6,250,000  (2018:  Rmb4,169,000)  and  derivative  financial  liabilities  of 

Rmb5,565,000  (2018:  Rmb3,818,000)  has  been  recognised  for  the  fair  values  of  commodity  options  as  at 

December 31, 2019.

40.  BANK AND OTHER BORROWINGS

Loans from banks, secured (Note i)

Loans from banks, unsecured

Loans from related parties, unsecured  

(Notes 57(i), 57(ii))

Loans from third parties, guaranteed (Note 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

More than five years

Less: Amounts due within one year

12/31/2019

Rmb’000

4,185,262

386,967

4,444,153

2,003,751

12/31/2018

01/01/2018

Rmb’000

Rmb’000

(Restated)

(Restated)

5,774,271

5,923,952

–

–

4,668,722

2,000,000

2,362,676

2,000,000

11,020,133

12,442,993

10,286,628

4,598,533

836,200

2,736,400

2,849,000

2,625,393

2,643,600

3,621,000

3,553,000

2,463,928

1,394,570

3,953,130

2,475,000

11,020,133

(4,598,533)

12,442,993

10,286,628

(2,625,393)

(1,193,928)

Amounts shown under non-current liabilities

6,421,600

9,817,600

9,092,700

The bank and other borrowings comprise:

Fixed-rate borrowings

Variable-rate borrowings

2,618,463

8,401,670

2,170,733

10,272,260

3,441,844

6,844,784

11,020,133

12,442,993

10,286,628

220

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
40.  BANK AND OTHER BORROWINGS (Continued)
The range of effective interest rates (which are also agreed to contract interest rates) on the Group’s borrowings 

are as follows:

Effective interest rate:

Fixed-rate borrowings

12/31/2019

12/31/2018

01/01/2018

(Restated)

(Restated)

3.0%-6.223%

3%-7.66%

3.00%-7.66%

Variable-rate borrowings(Note iii)

3.915%-4.41% 4.263%-4.41%

4.22%-4.64%

Note:

i. 

As  at  December  31,  2019,  the  Group  pledged  the  following  assets  for  these  secured  bank  loans:  (i)  trade 

receivables  with  an  aggregate  carrying  value  of  Rmb686,567,000  (2018:  nil,  as  restated)  and  (ii)  expressway 

operating  rights  of  Ningbo  Jiaochuan  K20+135  to  Zhoushan  Cezi  K56+175,  Shenjiahuhang  Lianhang  part  and 

Huzhou part.

ii. 

As at December 31, 2019, loans from third party are guaranteed by Communications Group

iii. 

Variable-rate  borrowings  carry  interests  rates  equivalent  to  90%  of  the  bank  loan  benchmark  interest  rate 

published by the People’s Bank Of China.

41.  SHORT-TERM FINANCING NOTE PAYABLE

Unsecured:

Short-term financing bonds

Beneficial certificates

12/31/2019

12/31/2018

6,532,990

–

–

1,551

As  at  December  31,  2019,  the  short-term  financing  bonds  bears  an  interest  rate  at  2.99%  to  3.19%  (2018 

beneficial certificates: 8%) per annum paid at maturity.

221

 
 
 
 
 
 
 
 
 
 
 
 
42.  BONDS PAYABLE

Corporate and subordinated bonds with redemption option

12/31/2019

12/31/2018

Rmb’000

Rmb’000

–

1,006,166

Corporate and subordinated bonds without redemption option (Note i)

11,202,173

14,210,292

Asset-backed securities (Note iii)

Medium-term notes (Note ii)

Less: Bonds due within 1 year

Amounts shown under non-current liabilities

Notes:

909,032

3,062,066

–

–

15,173,271

15,216,458

(2,281,229)

(5,766,458)

12,892,042

9,450,000

(i) 

This  balance  represented  2  corporate  bonds  and  4  subordinated  bonds  (2018:  7  subordinated  bonds)  due  by 

year  2020  to  2024  (2018:  2019  to  2021)  issued  by  Zheshang  Securities,  without  redemption  option,  with  fixed 

interest rates ranging from 3.48% to 5.3% (2018: 3.08% to 5.93%) per annum.

(ii) 

This balance represented 2 medium-term notes due by year 2022 issued by the company with fixed interest rates 

3.64% and 3.86% per annum.

(iii) 

On  September  23,  2019,  the  Group  issued  asset-backed  securities  which  backed  by  expressway  operating 

rights  and  advertisement  rights  in  relation  to  the  Anhui  section  of  Huihang  expressway  (Anhui  section).  The 

asset-backed securities with a financing period of 15 years and carrying coupon rate of 3.7% per annum.

222

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
43.  CONVERTIBLE BONDS
Convertible Bond 2017
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  2017”).  The  Convertible  Bond  2017  is  listed  on  the  Stock 

Exchange of Hong Kong Limited (the “Stock Exchange”).

The principal terms of the Convertible Bond 2017 are set out below:

(1)  Conversion right

The  Convertible  Bond  2017  will,  at  the  option  of  the  holder  (the  “Bondholders  2017”),  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 

2017”)  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 2017 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. As at December 31, 2019, the Conversion Price 2017 was HK$11.35 per H share.

223

43.  CONVERTIBLE BONDS (Continued)
Convertible Bond 2017 (Continued)
(2)  Redemption

(i) 

Redemption at maturity

Unless  previously  redeemed,  converted  or  purchased  and  cancelled  as  provided  herein,  the  Company  will 

redeem  each  Convertible  Bond  2017  at  100  percent  of  its  outstanding  principal  amount  on  the  maturity  date  of 

April 21, 2022 (the “Maturity Date 2017”).

(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  2017  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  2017,  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 2017(translated into Euro at 

the Fixed Exchange Rate); or

(b) 

if  at  any  time  the  aggregate  principal  amount  of  the  Convertible  Bond  2017  outstanding  is  less  than  10 

percent of the aggregate principal amount originally issued.

224

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements43.  CONVERTIBLE BONDS (Continued)
Convertible Bond 2017 (Continued)
(2)  Redemption (Continued)

(iii) 

Redemption at the option of the Bondholders 2017

The  Company  will,  at  the  option  of  the  Bondholders  2017,  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 that date.

The Convertible Bond 2017 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  2017,  redemption  option  of  the 

Company, and redemption option of the Bondholders 2017.

Transaction  costs  totalling  Rmb16,725,000  that  relate  to  the  issue  of  the  Convertible  Bond  2017  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 during the year ended December 31, 2017. 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 2017 

using the effective interest method.

225

43.  CONVERTIBLE BONDS (Continued)
Convertible Bond 2017 (Continued)
(2)  Redemption (Continued)

(iii) 

Redemption at the option of the bondholders (Continued)

The  derivative  component  was  measured  at  fair  value  with  reference  to  valuation  carried  out  by  a  firm  of 

independent professional valuers.

The  movement  of  the  debt  and  derivative  components  of  the  Convertible  Bond  2017  for  the  years  ended 

December 31, 2018 and 2019 is set out as below:

As at January 1, 2018

Exchange realignment

Interest charge

Gain on changes in fair value

As at December 31, 2018

Exchange realignment

Interest charge

Gain on changes in fair value

As at December 31, 2019

Debt component
at amortised cost

Derivative components
at FVTPL

Total

Euro’000

Rmb’000

Euro’000

Rmb’000

Euro’000

Rmb’000

304,504

2,375,831

44,195

344,823

348,699

2,720,654

–

13,400

13,049

102,703

–

–

–

–

–

13,400

13,049

102,703

–

–

(16,449)

(127,094)

(16,449)

(127,094)

317,553

2,491,934

27,746

217,729

345,299

2,709,663

–

(9,470)

13,591

105,589

–

–

–

–

–

–

(2,132)

(17,547)

–

13,591

(2,132)

(9,470)

105,589

(17,547)

331,144

2,588,053

25,614

200,182

356,758

2,788,235

No conversion or redemption of the Convertible Bond 2017 has occurred up to December 31, 2019.

The detailed key inputs the valuer uses to calculate the fair value of the derivative component refer to Note 53(c).

226

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
43.  CONVERTIBLE BONDS (Continued)
Convertible Bond 2019
On  March  12,  2019,  Zheshang  Securities,  a  subsidiary  of  the  Company,  issued  a  convertible  bond  due  2025  in 

an aggregate principal amount of Rmb3,500,000,000 (the “Convertible Bond 2019”）. The Convertible Bond 2019 

is  listed  and  trading  on  Shanghai  Stock  Exchange.  The  coupon  rate  is  0.2%  per  annum  for  the  first  year,  0.5% 

per annum for the second year, 1.0% per annum for the third year, 1.5% per annum for the fourth year, 1.8% per 

annum for the fifth year, 2.0% per annum for the sixth year, and will be paid annually.

Out  of  the  principal  amount  of  Rmb3,500,000,000,  Rmb875,000,000  was  subscribed  by  Zhejiang  Shangsan 

Expressway Co., Ltd. (“Shangsan Co”), another subsidiary of the Group.

The principal terms of the Convertible Bond 2019 are set out below:

(1)  Conversion right

The  Convertible  Bond  2019  will,  at  the  option  of  the  holders  (the  “Bondholders  2019”),  be  convertible  (unless 

previously  redeemed,  converted  or  purchased  and  cancelled)  during  the  period  from  September  19,  2019  up  to 

March  11,  2025,  into  fully  paid  ordinary  shares  of  Zheshang  Securities  with  a  par  value  of  Rmb1.00  each  at  an 

initial conversion price (the “Conversion Price 2019”) of Rmb12.53 per share. The Conversion Price 2019 will be 

adjusted  when  Zheshang  Securities  distributes  stock  dividends,  capitalises  common  reserves  into  share  capital, 

issues new shares or places new shares, distributes cash dividend (excluding the increase in share capital due to 

the  conversion  of  the  Convertible  Bond  2019  issued).  When  the  share  price  of  Zheshang  Securities  is  less  than 

80% of the Conversion Price 2019 for any 15 business days within a period of 30 consecutive business days prior 

to the maturity date of the Convertible Bond 2019 (the “Maturity Date 2019”), the board of directors of Zheshang 

Securities  has  the  right  to  propose  a  downward  revision  resolution  on  the  Conversion  Price  2019,  and  submits 

it  to  the  shareholder’s  meeting  of  Zheshang  Securities  for  approval. As  at  December  31,  2019,  the  Conversion 

Price 2019 was Rmb12.46 per share.

227

43.  CONVERTIBLE BONDS (Continued)
Convertible Bond 2019 (Continued)
(2)  Redemption

(i) 

Redemption at maturity

Zheshang Securities will redeem all outstanding Convertible Bond 2019 at 105 percent of its outstanding principal 

amount (including the last instalment of interest payment) within five business days from the Maturity Date 2019.

(ii) 

Redemption on conditions

During  the  conversion  period  of  the  Convertible  Bond  2019,  upon  the  occurrence  of  any  of  the  following  two 

conditions, Zheshang Securities is entitled to redeem all or part of the outstanding Convertible Bond 2019 based 

on the par value and interest in arrears;

(a) 

During  the  conversion  period  of  the  Convertible  Bond  2019,  for  any  15  business  days  within  a  period  of 

30 consecutive business days, the closing share price of Zheshang Securities is not less than 130 percent 

(including 130 percent) of the Conversion Price 2019;

(b)  When  the  aggregate  principal  amount  of  the  outstanding  Convertible  Bond  2019  is  less  than 

Rmb30,000,000.

228

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements43.  CONVERTIBLE BONDS (Continued)
Convertible Bond 2019 (Continued)
(2)  Redemption (Continued)

Convertible  Bond  2019  contains  a  liability  component  and  an  equity  component. At  initial  recognition,  the  equity 

component  of  the  Convertible  Bond  2019  was  separated  from  the  liability  component. As  the  Convertible  Bond 

2019  was  issued  by  a  subsidiary  of  the  Company  and  is  convertible  into  that  subsidiary’s  own  shares,  the 

equity  element  is  considered  as  non-controlling  interests. The  effective  interest  rate  of  the  liability  component  is 

4.1431% per annum.

Changes  in  the  liability  and  equity  component  of  the  Convertible  Bond  2019  since  the  issuance  of  Convertible 

Bond 2019 to December 31, 2019 are set out as below:

Issuance on March 12, 2019

Issue cost

Interest charge

Addition (Note i)

Conversion into shares (Note ii)

At December 31, 2019

Notes:

Liability

Equity

Component

Component

Rmb’000

Rmb’000

2,272,833

(10,408)

88,289

341,526

(144)

352,167

(1,613)

–

53,174

(22)

2,692,096

403,706

(i) 

During the year ended December 31, 2019, Shangsan Co disposed of the Convertible Bond 2019 held on hand 

with  the  principal  amount  of  Rmb394,700,000  to  certain  independent  third  parties  through  the  open  market. 

Upon the disposal, this balance is no longer an intragroup assets and liabilities which were eliminated in full on 

consolidation, and is considered as an addition during the year.

(ii) 

During the year ended December 31, 2019, the Bondholders 2019 converted part of the Convertible Bond 2019 

with a principal amount of Rmb13,000 to the shares of Zheshang Securities.

As at December 31, 2019, Zheshang Securities had not exercised the redemption rights.

229

 
 
 
 
 
 
44.  FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS

Analysed as collateral type:

Bonds

Analysed by market:

Shanghai/Shenzhen Stock Exchange

Inter-bank market

12/31/2019

12/31/2018

Rmb’000

Rmb’000

9,017,680

11,086,710

5,062,725

3,954,955

6,396,287

4,690,423

9,017,680

11,086,710

As at December 31, 2019 and 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,  2019  and  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.

230

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
44.  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,  2019  and 

December 31, 2018.

As at December 31, 2019

Carrying amount of transferred assets

Carrying amount of associated liabilities

Net position

As at December 31, 2018

Carrying amount of transferred assets

Carrying amount of associated liabilities

Net position

Financial

assets at

FVTPL

Rmb’000

7,130,620

(6,439,271)

691,349

9,245,868

(8,689,133)

556,735

45.  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)

12/31/2019

12/31/2018

Rmb’000

Rmb’000

1,389

211,091

320,494

321,883

153,623

364,714

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  Rmb3,480,229,000  and  Rmb3,115,749,000  at 

December 31, 2019 and 2018, respectively. The total assets of the consolidated structured entities amounted to 

Rmb3,800,723,000 and Rmb3,475,275,000 at December 31, 2019 and 2018, 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.

231

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46.  LEASE LIABILITIES

Lease liabilities payables

Within one year

Within a period of more than one year but no more than two years

Within a period of more than two years but no more than five years

Within a period of more than five years

Less: Amounts due for settlement with 12 months shown under current liabilities

Amount due for settlement after 12 months shown under non-current liabilities

31/12/2019

Rmb’000

70,577

51,789

92,349

44,634

259,349

(70,577)

188,772

47.  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

12/31/2019

12/31/2018

01/01/2018

Rmb’000

Rmb’000

Rmb’000

(Restated)

(Restated)

924,602

(347,331)

933,837

(321,889)

940,584

(394,434)

577,271

611,948

546,150

232

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
47.  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

Rmb’000

(19,549)

(584,781)

(604,330)

(51,486)

(655,816)

12,727

(643,089)

Changes in
fair value of
investments 
carried
at fair value

Rmb’000

107,320

–

107,320

(56,781)

50,539

55,056

105,595

Fair value
adjustment of
long term
assets arising
from business
combination

Temporary
differences
of accrued
expenses and
impairment
losses

Rmb’000

196,667

–

196,667

(14,402)

182,265

(7,475)

174,790

Rmb’000

(245,807)

–

(245,807)

56,871

(188,936)

(25,631)

(214,567)

Total

Rmb’000

38,631

(584,781)

(546,150)

(65,798)

(611,948)

34,677

(577,271)

At January 1, 2018 (originally stated)

Merger accounting restatement

At January 1, 2018 (Restated)

(Credit) charge to profit or loss

At December 31, 2018 (Restated)

Charge (credit) to profit or loss

At December 31, 2019

As  at  December  31,  2019,  the  Group  had  unused  tax  losses  of  approximately  Rmb803,074,000  (2018: 

Rmb1,130,495,000,  as  restated).  No  deferred  taxation  asset  has  been  recognised  due  to  the  unpredictability  of 

future profit streams. Such unrecognised tax losses will expire within 2022.

233

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
48.  SHARE CAPITAL

Registered, issued and fully paid:

Domestic shares of Rmb1 each

H Shares of Rmb1 each

Number of 
shares

12/31/2018 
and 2019

Share 
capital

12/31/2018 
and 2019

’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.

49.  NON-CONTROLLING INTERESTS
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

234

12/31/2019

12/31/2018

Rmb’000

Rmb’000

67,887,662

57,357,269

3,398,548

3,244,437

40,645,384

34,017,723

12,036,217

9,550,645

9,533,525

8,872,168

9,071,084

8,161,170

2019ANNUAL REPORTFor the year ended December 31, 2019Notes 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 investing activities

Net cash from financing activities

Net cash inflow

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

4,489,561

4,153,684

(2,842,488)

(2,986,567)

1,647,073

1,167,117

922

2,253

1,647,995

1,169,370

952,418

694,655

734,755

432,362

1,647,073

1,167,117

952,851

695,144

735,813

433,557

1,647,995

1,169,370

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

(189,040)

(218,966)

(2,667,973)

(1,585,868)

(28,661)

(172,052)

4,267,289

3,603,850

1,570,655

1,845,930

235

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 inflow (outflow)

236

12/31/2019

12/31/2018

Rmb’000

Rmb’000

412,538

725,397

95,525

6,611

528,257

507,542

248,820

771,615

53,982

6,967

489,338

470,148

Year ended

12/31/2019

Rmb’000

270,330

Year ended

12/31/2018

Rmb’000

312,038

(171,451)

(184,676)

98,879

127,362

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

50,428

48,451

98,879

(10,818)

187,652

(98,575)

(22,077)

67,000

64,955

62,407

127,362

(11,057)

160,756

(200,860)

(22,377)

(62,481)

2019ANNUAL REPORTFor the year ended December 31, 2019Notes 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

Contracted for but not provided:

– Equity investments

12/31/2019

12/31/2018

Rmb’000

Rmb’000

611,813

322,558

474,547

433,858

1,106,906

3,343,000

2,041,277

4,251,405

237

 
 
 
 
 
 
 
 
 
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  44,  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.

53.  FINANCIAL INSTRUMENTS
(a)  Categories of financial instruments

Financial assets

Financial assets at FVTPL

Derivative financial assets

Financial assets at amortised cost

Financial liabilities

Derivative financial liabilities

Financial liabilities at FVTPL

Convertible Bonds

– derivative component

Other payables measured at fair value

Amortised cost

12/31/2019

12/31/2018

Rmb’000

Rmb’000

(Restated)

22,252,378

21,575,806

6,250

4,169

45,983,221

36,269,808

5,565

321,883

200,182

–

3,818

364,714

217,729

205,903

69,216,953

57,797,295

238

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies
The  Group’s  major  financial  instruments  include  trade  receivables,  loans  to  customers  arising  from  margin 

financing business, other receivables, derivative financial assets, financial assets at FVTPL, financial assets held 

under  resale  agreements,  bank  balances,  clearing  settlement  fund  held  on  behalf  of  customers,  pledged  bank 

deposits,  clearing  settlement  fund,  deposits  and  cash,  placements  from  other  financial  institutions,  accounts 

payable  to  customers  arising  from  securities  business,  trade  payables,  other  payables,  derivative  financial 

liabilities,  bank  and  other  borrowings,  short-term  financing  note  payable,  bonds  payable,  convertible  bond  and 

financial  guarantee,  financial  assets  sold  under  repurchase  agreements,  financial  liabilities  at  FVTPL.  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  impairment  assessment  and  other  price  risk),  credit  risk 

and  liquidity  risk. The  policies  on  how  to  mitigate  these  risks  are  set  out  below. The  management  manages  and 

monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

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  bonds  and  financial  liabilities  at  FVTPL  (see  notes  30,  31,  32,  34,  35,  40,  41,  42,  43,  44  and  45  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 33, 34 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.

239

53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Market risk (Continued)

(i) 

Interest rate risk (Continued)

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 (2018: 50 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  (2018:  50  basis  points)  higher/lower  and  all  other  variables  were  held 

constant, the Group’s post-tax profit for the year ended December 31, 2019 would have increased/decreased by 

Rmb73,562,000  (2018:  Rmb41,519,000,  as  restated).  This  was  mainly  attributable  to  the  Group’s  exposure  to 

interest rates on its variable-rate bank balances and clearing settlement fund.

240

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements53.  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

12/31/2019

12/31/2018

12/31/2019

12/31/2018

Rmb’000

Rmb’000

Rmb’000

Rmb’000

59,184

228,843

–

61,919

601,251

35,570

176,870

17,714

89,770

–

2,788,235

2,709,663

Note:  Amount  represented  both  the  debt  and  derivative  component  of  the  Convertible  Bond  2017  issued  by  the 

Company.

241

 
 
 
 
 
 
53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Market risk (Continued)

(ii) 

currency risk (Continued)

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%  (2018:  10%)  increase  and  decrease  in  Rmb  against  the  relevant  foreign  currencies.  10%  (2018:  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% (2018: 10%) change in foreign currency rates. A positive 

number  below  indicates  an  increase  in  post-tax  profit  where  Rmb  strengthen  10%  (2018:  10%)  against  the 

relevant  currency.  For  a  10%  (2018:  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.

USD impact

EUR impact

12/31/2019

12/31/2018

12/31/2019

12/31/2018

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Profit or loss

(3,898)

(38,361)

209,118

203,225

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.

242

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Market risk (Continued)

(iii) 

Other price risk

The Group is exposed to equity and debt security price risk in relation to its financial assets at FVTPL, 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.

Sensitivity analysis

For financial instruments other than derivative component of Convertible Bond 2017

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% (2018: 5%) higher/lower,

• 

post-tax  profit  for  the  year  ended  December  31,  2019  would  have  increased/decreased  by 

Rmb834,464,000 as a result of the changes in fair value of financial assets at FVTPL.

• 

post-tax  profit  for  the  year  ended  December  31,  2018  would  have  increased/decreased  by 

Rmb809,093,000 as a result of the changes in fair value of financial assets at FVTPL.

243

53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Market risk (Continued)

(iii) 

Other price risk (Continued)

Sensitivity analysis (Continued)

For derivative component of Convertible Bond 2017

The Group are required to estimate the fair values of the derivative component of Convertible Bond 2017 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 2017 issued by the Company are set out in Note 43.

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 2017. The exposure to foreign currency exchange rate of the Convertible Bond 2017 had been covered in 

Note 53(b)(ii) already.

244

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Market risk (Continued)

(iii) 

Other price risk (Continued)

Sensitivity analysis (Continued)

For derivative component of Convertible Bond 2017 (Continued)

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

12/31/2019

Rmb’000

(6,989)

2,712

Year ended

12/31/2018

Rmb’000

(20,356)

12,409

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

12/31/2019

Rmb’000

(4,033)

2,712

Year ended

12/31/2018

Rmb’000

(13,160)

10,397

245

 
 
 
 
 
 
 
 
 
 
 
 
 
 
53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment

As  at  December  31,  2019,  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, representing bank balance, bank balances, clearing settlement fund, deposits and 

cash  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  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, 2019 and 2018.

246

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)

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.

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.

247

53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)

Securities operation (Continued)

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.

248

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)

Securities operation (Continued)

ii) 

Measurement of ECL (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,  2019  and  2018,  no  significant  changes  were  made  in  the  estimated 

technology or key assumptions.

249

53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)

Securities operation (Continued)

ii) 

Measurement of ECL (Continued)

The  assessment  of  significant  increase  in  credit  risk  and  the  measurement  of  expected  credit  losses  all  involve 

forward-looking information. When considering macroeconomic forward-looking adjustments, the Group simulates 

optimistic,  extremely  optimistic,  pessimistic,  and  extremely  pessimistic  scenarios  by  adjusting  the  coefficients 

of  the  baseline  scenario,  and  assigns  corresponding  weights.  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.

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.

250

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)

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 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.

The Group’s internal credit risk grading assessment comprises the following categories:

Internal credit rating

Description

Low risk (stage 1)

The counterparty has a low risk 
of default and does not have 
any past-due amounts

Doubtful (stage 2)

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 

Lifetime ECL – 

Lifetime ECL – 

asset is credit-impaired

credit-impaired

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 of customers, financial assets held under agreements and other receivables.

251

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:

Financial assets at amortised cost

Trade receivables (Note i)

– toll operation
– securities operation
– others

Loans to customers arising from  
margin financing business
– securities operation

Notes

29

30

External
credit
rating

Internal
credit
rating

12/31/2019
12-months
or lifetime ECL

12/31/2018
Gross carrying
amount
Rmb’000

Gross 
carrying
amount
Rmb’000
(Restated)

N/A
N/A
N/A

N/A

Low risk
Low risk
Low risk

Low risk
Doubtful

Loss

Lifetime ECL
Lifetime ECL
Lifetime ECL

186,396
111,731
25,640

122,695
97,084
28,630

12-month ECL
Lifetime ECL - not  
credit-impaired
Lifetime ECL -  
credit-impaired

8,714,108

5,431,533

37,543

419,316

1,005

4,064

Bank balances, clearing settlement fund, 

deposit and cash

Pledged bank deposit

– others

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

34

AA to AAA

Low risk

12-month ECL

8,379,324

6,882,697

AAA

Low risk

12-month ECL

–

10,000

33

32

31

28

56

AA

Low risk

12-month ECL

20,141,931

14,742,161

N/A

Low risk
Doubtful

Loss

12-month ECL
Lifetime ECL- not 
credit-impaired

Lifetime ECL- 

credit-impaired

N/A

Low risk

12-month ECL

7,746,527

6,268,174

205,970

1,916,065

178,201

295,172

73,689

346,068

N/A

Low risk

Lifetime ECL

687,589

253,248

N/A

Low risk

12-month ECL

643,366

737,493

252

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
53.  FINANCIAL INSTRUMENTS (Continued)
(b)  Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)
Notes:

i. 

During the year ended December 31, 2019, the Group provided ECL on trade receivables and contract asset by 

Rmb4,428,000 (2018: 3,307,000, as restated) and Rmb1,032,000 (2018: 380,000,000), 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,  2019,  other  than  the  concentration  of  credit  risk  on  trade  receivables  and  financial 

guarantee  contract  amounting  to  Rmb319,339,000  (2018:  Rmb245,102,000,  as  restated),  and  Rmb643,366,000 

(2018:  Rmb737,493,000),  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, 2019 and 2018 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,  2019 

and  2018  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.

253

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 2017 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

Weighted
average
interest rate

On demand
or
less than
3 months

3 months -
1 year

1 - 3
years

3 - 5 
years

+5 
years

Total
undiscounted
cash
flows

Carrying
amount
at
31/12/2019

%

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

2019

Non-derivative financial liabilities

Accounts payable to customers arising  

from securities business

Trade payables

Other payables

Bank and other borrowings

– fixed rate

– variable rate

–

–

–

20,024,356

1,387,856

251,169

3.0%-6.22%

3.915%-4.41%

144,754

243,018

Short-term financing note payable

3.08%

6,700,400

Financial assets sold under repurchase 

–

–

–

2,096,935

2,494,824

–

agreements

3.31%

8,938,090

83,280

Placements from banks and other  

financial institutions

Bonds payable

Convertible Bonds

– debt component

Lease liabilities

Financial guarantee

Financial liabilities at fair value  

through profit or loss

2.88%

4.39%

4.60%

–

–

–

–

–

–

–

–

–

–

–

–

20,024,356

20,024,356

1,387,856

1,387,856

251,169

251,169

20,619

20,619

279,097

2,287,073

2,090,140

2,698,469

–

–

–

–

–

–

–

–

–

2,562,024

9,813,524

6,700,400

2,418,237

8,601,896

6,532,990

9,021,370

9,017,680

270,130

270,000

270,130

–

–

2,701,769

10,951,827

2,312,516

792,582

16,758,694

15,173,271

6,039

–

643,366

2,852,657

74,033

–

1,389

320,494

45,295

102,417

–

–

99,649

65,903

–

–

3,170,662

6,174,302

5,280,149

62,261

–

–

304,614

643,366

259,349

–

321,883

321,883

38,610,567

10,623,992

13,407,231

4,588,827

7,003,071

74,233,688

69,538,836

254

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

%

Rmb’000

3 months -
1 year

Rmb’000

1 - 3
years

3 - 5 
years

+5 
years

Total
undiscounted
cash
flows

Carrying
amount
at
31/12/2019

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

2018 (Restated)

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 

–

–

–

14,653,413

1,299,098

410,362

–

–

–

3%-7.66%

4.26%-4.41%

8.00%

143,207

513,134

–

95,100

2,398,789

1,581

agreements

2.31%

11,159,606

Placements from banks and other  

financial institutions

Bonds payable

Convertible Bonds

– debt component

Financial guarantee

Financial liabilities at fair value through 

profit or loss

4.70%

4.99%

4.28%

–

–

401,442

2,118,600

–

737,492

211,091

153,623

–

–

–

–

–

–

–

2,113,633

2,291,719

–

–

–

2,864,264

–

–

–

–

–

–

–

–

–

–

14,653,413

14,653,413

1,299,098

1,299,098

410,362

410,362

2,351,940

2,170,733

3,032,739

3,794,447

12,030,828

10,272,260

–

–

–

–

–

–

–

–

–

–

–

–

–

–

1,581

1,551

11,159,606

11,086,710

401,442

400,679

16,455,900

15,216,458

2,864,264

2,491,934

737,492

–

364,714

364,714

4,127,900

10,209,400

31,647,445

6,776,993

17,479,016

3,032,739

3,794,447

62,730,640

58,367,912

255

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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,  2019  and  2018,  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, 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).

256

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements53.  FINANCIAL INSTRUMENTS (Continued)
(c)  Fair value measurements of financial instruments (Continued)
For the year ended December 31, 2019

Fair value 
as at 
31/12/2019 
Rmb’000

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)

Relationship of 
unobservable 
inputs to 
fair value

Financial Assets

Classified as

1)  Equity investments listed  
in exchange

Financial assets  

722,589

499,357

Level 1

Quoted bid prices in an  

N/A

at FVTPL

active market.

2)  Equity securities traded  

Financial assets  

110,155

119,157

Level 2

Recent transaction prices.

N/A

in inactive market

at FVTPL

N/A

N/A

–

47,570

Level 3

Discounted for lack  
of marketability.

The higher the 

discount, the lower 
the fair value.

Discounted cash flow. The  
fair value is determined 
with reference to the quoted 
market prices with an 
adjustment of discount for 
lack of marketability.

3)  Listed funds

Financial assets  

352,753

316,785

Level 1

Quoted bid prices in an  

N/A

at FVTPL

active market.

4)  Unlisted fund investments

Financial assets  

2,000,221

591,325

Level 2

at FVTPL

N/A

Based on the net asset  
values of the equity 
investment, with reference  
to observable market price.

5)  Debt investments listed in 

Financial assets  

3,881,143

4,092,848

Level 1

Quoted bid prices in an  

N/A

at FVTPL

exchange and debt 
investment in interbank 
market

13,508,343

15,050,206

Level 2

active market.

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.

N/A

N/A

N/A

N/A

257

 
 
 
 
 
 
 
 
53.  FINANCIAL INSTRUMENTS (Continued)
(c)  Fair value measurements of financial instruments (Continued)
For the year ended December 31, 2019 (Continued)

Financial Assets

Classified as

Fair value 
as at 
31/12/2019 
Rmb’000

Fair value 
as at 
31/12/2018 
Rmb’000

Fair value 
hierarchy

6) 

Investments in structured 

Financial assets  

957,305

688,026

Level 2

products

at FVTPL

Significant 
unobservable 
input(s)

Relationship of 
unobservable 
inputs to 
fair value

N/A

N/A

Basis of 
fair value 
measurement/
valuation 
technique(s) 
and key 
input(s)

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..

7) 

Investments in trust products Financial assets  

702,971

153,332

Level 3

The fair value was based on  

at FVTPL

the net value of the 
underlying assets. The 
net asset value of the 
products may be based on 
unobservable inputs which 
may have significant impact 
on the valuation of these 
financial instruments.

8)  Private equity investments

Financial assets  

16,898

17,200

Level 3

Calculated based on 

at FVTPL

pricing/yield such as 
price-to-earnings (P/E) of 
comparable companies  
with an adjustment of 
discount for lack of 
marketability

Future cash flows  
and discount rate

The higher the future 
cash flows, the 
higher the fair value. 
The higher the 
discounted rate, the 
lower the fair value.

P/E multiples P/
B multiples P/
S multiples 
Discounted for lack 
of marketability

The higher the 

discount, the lower 
the fair value. The 
higher the multiples, 
the higher the fair 
value

258

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
53.  FINANCIAL INSTRUMENTS (Continued)
(c)  Fair value measurements of financial instruments (Continued)
For the year ended December 31, 2019 (Continued)

Fair value 
as at 
31/12/2019 
Rmb’000

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)

Relationship of 
unobservable 
inputs to 
fair value

Financial Assets

Classified as

9)  Derivative instruments

Derivative financial 

6,250

4,169

Level 2

The fair value calculation 

N/A

N/A

Assets

1)  Bonds borrowing

Financial liabilities  

1,389

211,091

Level 2

at FVTPL

2)  Other investor’s interest in 
consolidation of  
structured entities

Financial liabilities  

320,494

153,623

Level 2

at FVTPL

259

includes discounted cash  
flow method and 
Black-Scholes option pricing 
models. The main parameters 
used in the discounted cash 
flow model include recent 
transaction prices, related 
yield curves, and exchange 
rates. The main parameters 
used in the Black-Scholes 
option pricing model 
include related yield curves, 
exchange rates, and volatility 
levels.

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.

N/A

N/A

N/A

N/A

 
 
 
 
 
 
 
 
53.  FINANCIAL INSTRUMENTS (Continued)
(c)  Fair value measurements of financial instruments (Continued)
For the year ended December 31, 2019 (Continued)

Financial Assets

Classified as

Fair value 
as at 
31/12/2019 
Rmb’000

Fair value 
as at 
31/12/2018 
Rmb’000

Fair value 
hierarchy

3)  Other investors’ interests 
in consolidated limited 
partnership designated as 
FVTPL

Other payables and 

–

205,903

Level 2

accruals

4)  Derivative component of 

Derivative 

200,181

217,729

Level 3

Convertible Bond

component of 
Convertible Bond

5)  Derivative instruments

Derivative financial 

5,565

3,818

Level 2

liabilities

Significant 
unobservable 
input(s)

Relationship of 
unobservable 
inputs to 
fair value

N/A

N/A

The higher the 

expected volatility, 
the higher the fair 
value

Expected volatility 
of 28.21%, 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

N/A

N/A

Basis of 
fair value 
measurement/
valuation 
technique(s) 
and key 
input(s)

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.

Binomial option pricing model 
Expected volatility: 28.21% 
(2018: 29.29%) Dividend 
yield: nil Risk-free rate: 
1.71% (2018: 1.77%) Share 
price: HK$7.1 (equivalent to 
Rmb6.36) (2018: HK$6.79 
(equivalent to Rmb5.95)) 
Exercise price: HK$11.35 
(equivalent to Rmb10.17) 
(2018: HK$12.00 (equivalent 
to Rmb10.51))

The fair value was calculated by 
Black-Scholes option pricing 
models. The main parameters 
used in the Black-Scholes 
option pricing model include 
related yield curves, exchange 
rates, and volatility levels.

There were no transfer between Level 1 and Level 2 during the year.

260

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
53.  FINANCIAL INSTRUMENTS (Continued)
(c)  Fair value measurements of financial instruments (Continued)
As at December 31, 2019

Level 2

Rmb’000

Level 3

Rmb’000

Total

Rmb’000

Financial assets at FVTPL

– Equity securities

– Fund

– Debt investments

– Asset management plans

– Trust products

– Private equity Investment

Sub-total

Derivative assets

Financial liabilities at FVTPL

– Bonds

– Asset management scheme

Sub-total

Derivative component of Convertible Bond 2017

Derivative liabilities

–

–

–

–

702,971

16,898

719,869

–

Level 3

Rmb’000

–

–

–

200,182

–

832,744

2,352,974

17,389,486

957,305

702,971

16,898

22,252,378

6,250

Total

Rmb’000

1,389

320,494

321,883

200,182

5,565

Level 1

Rmb’000

722,589

352,753

3,881,143

–

–

–

110,155

2,000,221

13,508,343

957,305

–

–

4,956,485

16,576,024

–

6,250

Level 1

Rmb’000

–

–

–

–

–

Level 2

Rmb’000

1,389

320,494

321,883

–

5,565

261

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

Sub-total

Derivative assets

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 2017

Derivative liabilities

Level 1

Rmb’000

499,357

316,785

Level 2

Rmb’000

119,157

591,325

4,092,848

15,050,206

–

–

–

688,026

–

–

4,908,990

16,448,714

–

4,169

Level 1

Rmb’000

–

–

–

–

–

–

Level 2

Rmb’000

211,091

153,623

364,714

205,903

–

3,818

Level 3

Rmb’000

47,570

–

–

–

153,332

17,200

218,102

–

Level 3

Rmb’000

–

–

–

–

217,729

–

Total

Rmb’000

666,084

908,110

19,143,054

688,026

153,332

17,200

21,575,806

4,169

Total

Rmb’000

211,091

153,623

364,714

205,903

217,729

3,818

262

2019ANNUAL REPORTFor the year ended December 31, 2019Notes 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, 2019 and 2018, respectively. For the changes in Level 3 derivative component of Convertible Bond 

2017 during the year ended December 31, 2019 and 2018, please refer to Note 43.

For the year ended December 31, 2019
Financial assets at FVTPL:

Trust

Restricted

Equity

shares

investments

Funds

Total

Rmb’000

Rmb’000

Rmb’000

Rmb’000

At beginning of the year

Additions

Disposal

Changes in fair value changes

Transfer out of level 3 (Note)

At end of the year

Structured

products

Rmb’000

–

–

–

–

–

–

products

Rmb’000

153,332

818,454

(268,815)

–

–

47,570

17,200

–

–

–

(47,570)

–

–

(302)

–

702,971

–

16,898

–

–

–

–

–

–

218,102

818,454

(268,815)

(302)

(47,570)

719,869

Note:  For the year ended December 31, 2019, the Group reclassified restricted shares previously classified as Level 3 

to Level 1 with fair value of Rmb47,570,000 as these shares became tradable in exchange market in the current 

year.

For the year ended December 31, 2018
Financial assets at FVTPL:

At beginning of the year

Additions

Disposal

Changes in fair value changes

Transfer out of level 3 (Note)

At end of the year

Structured

products

Rmb’000

46,214

–

–

–

–

Trust

Restricted

Equity

products

Rmb’000

254,226

10,000

–

–

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)

–

–

–

(271,579)

–

–

–

57,570

(428,784)

(385,814)

(365,716)

218,102

153,332

47,570

17,200

(46,214)

(110,894)

Note:  For the year ended December 31, 2018, the Group reclassified restricted shares previously classified as Level 3 

to Level 1 with fair value of Rmb365,716,000 as these shares became tradable in exchange market in the current 

year.

263

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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.

Debt component of Convertible Bond 2017

Debt component of Convertible Bond 2019

As at 31/12/2019

As at 31/12/2018

Carrying

amount

Rmb’000

2,588,054

2,692,096

Fair

value

Rmb’000

2,625,435

2,745,101

Carrying

amount

Rmb’000

Fair

value

Rmb’000

2,491,934

2,530,656

–

–

The  fair  value  of  the  debt  component  of  Convertible  Bond  2017  as  at  December  31,  2019  and  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 2017 is determined 

by  discounted  cash  flow  using  the  inputs  including  estimated  cash  flows  over  the  remaining  terms  of  the 

Convertible Bond 2017 and discount rate that reflected the credit risk of the Company.

264

2019ANNUAL REPORTFor the year ended December 31, 2019Notes 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 from 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.

Short-term
financing
note
payable

Other
payable
and
accruals

Total

Rmb’000

Rmb’000

Rmb’000

765,089

2,746,100

27,117,808

(761,250)

(2,746,100)

1,631,701

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(127,094)

33,395

1,532,962

182,740

30,371,512

30,641,667

5,841,601

(1,423,030)

42,875

(17,547)

(10,817)

1,828,771

1,626,809

(144)

(62,769)

38,467,416

At January 1, 2018 (Restated)

261,239

10,286,628

10,338,098

2,720,654

(1,813,349)

2,152,400

4,800,000

–

Dividends
payable

Bank and
other 
borrowings

Bonds
payable

Convertible
Bonds

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Lease
Liabilities

Rmb’000

–

–

–

–

–

–

–

–

–

–

(2,288)

1,551

1,551

–

–

–

–

–

–

(127,094)

13,400

–

3,965

78,360

102,703

12,442,993

15,216,458

2,709,663

–

19,995

1,532,962

–

847

847

12,442,993

15,216,458

2,709,663

270,155

(1,826,929)

(1,420,580)

(12,000)

2,666,720

(64,060)

6,498,450

–

–

–

(1,347)

1,828,771

–

–

–

(607,521)

(746,625)

–

–

–

–

–

–

–

–

–

–

(17,547)

(9,470)

–

(3,312)

(65,572)

42,875

–

–

–

–

–

–

–

605,241

715,438

193,878

13,691

98,561

–

–

–

–

(144)

(62,769)

–

–

–

–

Financing cash flows

Non-cash changes

Fair value adjustment

Exchange realignment

Accrued dividend

Interest expenses

At December 31, 2018 (Restated)

At January 1, 2019

Financing cash flows

Operating cash flows

Non-cash changes

New lease entered

Fair value adjustment

Exchange realignment

Accrued dividend

Interest expenses

Conversion into shares

Investment income

At December 31, 2019

1,342

11,020,133

15,173,271

5,480,331

259,349

6,532,990

265

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55.  OPERATING LEASES
The Group as lessee

Minimum lease payments

Year ended

12/31/2018

Rmb’000

(Restated)

82,678

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

Rmb’000

(Restated)

77,037

184,918

76,428

338,383

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

266

12/31/2019

12/31/2018

Rmb’000

52,399

155,388

167,298

375,085

Rmb’000

(Restated)

63,697

167,015

193,332

424,044

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55.  OPERATING LEASES (Continued)
The Group as lessor (Continued)
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.

56.  CONTINGENT LIABILITIES

Guarantees given to bank, in respect of a joint venture

12/31/2019

12/31/2018

Rmb’000

643,366

Rmb’000

737,493

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, 2019, the bank borrowings 

of  Shengxin  Co  and  accrued  interest  amounted  to  Rmb1,286,732,000  (2018:  Rmb1,474,985,000). 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 the provision under ECL model for financial guarantee contract is not material as 

at 31 December 2019 and 2018.

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

Except  as  described  in  Note  2,  details  of  significant  transactions  with  Communications  Group  are  summarised 

below:

Borrowings
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.

267

 
 
 
 
57.  RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(i)  Transactions  and  balances  with  Communications  Group  and  government 

related parties (Continued)

Borrowings (Continued)
Pursuant  to  the  loan  contract  entered  into  between  Shenjiahuhang  Co  and  Communications  Group  on  July  31, 

2018, Communications group agreed to provide Shenjiahuhang Co borrowings amounting to Rmb 2,466,100,000 

at  a  fixed  interest  rate  of  4.0%  to  4.35%  per  annum.  The  loan  was  repaid  on  September  29  and  October  12, 

2018.

Pursuant  to  the  entrusted  loan  contracts  entered  into  between  the  Zhejiang  Zhoushan  Bay  Bridge  Co.,  Ltd. 

(“Zhoushan  Co”)  and  Communications  Group,  on  May  3,  2017,  Communications  Group  agreed  to  provide 

Zhoushan  Co  with  entrusted  loans  amounting  to  Rmb1,270,000,000  at  a  fixed  interest  rate  of  4.0%  per  annum, 

and the loans were repaid on September 30, 2018.

Pursuant  to  the  entrusted  loan  contract  entered  into  between  the  Zhejiang  Grand  Hotel  and  Zhejiang 

Communications  Group  Asset  Management  Company  Limited  (“Zhejiang  Communications  Asset  Co”,  a  wholly 

owned subsidiary of Communications Group), on March 10, 2017, Zhejiang Communications Asset Co agreed to 

provide Zhejiang Grand Hotel with an entrusted loan amounting to Rmb110,000,000, upon one extension and one 

renewal, the latest maturity date is March 6, 2020, and the fixed interest rate is 3.915% per annum.

Interest expenses incurred

For the year

For the year

ended

ended

12/31/2019

12/31/2018

Rmb’000

Rmb’000

(Restated)

8,228

65,240

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  seven  toll  roads,  including 

Shensuzhewan  Expressway,  South  Line  of  Qianjiang  Channel,  Ningbo  Yongtaiwen  Expressway,  Taizhou 

Yongtaiwen  Expressway,  Yueqingwan  Bay  Bridge,  Fuchimen  Bridge  and  Taijin  Expressway.  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 Rmb 9,772,000 (2018: Rmb3,781,000, as restated) 

has been charged.

268

2019ANNUAL REPORTFor the year ended December 31, 2019Notes 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

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

Toll road related inspection services expense incurred

Interest expenses in respect of beneficial certificates incurred

Financial advisory service income earned

Notes:

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

(Restated)

11,353

3,075

143

429,338

522,719

427,618

7,229

–

1,123

15,293

5,350

2,162

430,228

157,252

50,168

9,692

5,348

8,064

(a) 

Pursuant  to  the  leasing  and  operation  agreement  entered  into  between  Jinhua  Co  (as  defined  in  Note  58), 

Zhejiang  Hanghui  Expressway  Co.,  Ltd.  (“Hanghui  Co”,  a  non-wholly-owned  subsidiary  of  the  Company), 

Shenjiahuhang  Co,  Zhoushan  Co  and  Zhejiang  Commercial  Group  Co.,  Ltd.  (“Zhejiang  Commercial 

Group”,  a  fellow  subsidiary  of  Communications  Group),  the  toll  road  service  areas  were  leased  to  Zhejiang 
Communications  Group,  and  Zhejiang  Communications  Group  managed  the  operation  of  the  service  area  in 

respect  of  the  toll  road  service  area.  Such  businesses  began  from  January  1,  2011,  and  will  be  expired  at  the 

same time with the operating rights.

(b) 

In 2018, De’ an Co and Zhoushan Co, entered into construction agreements with Zhejiang Hongtu Transportation 

Construction Co., Ltd. (“Zhejiang Hongtu”) and Zhejiang Hangzhou-Ningbo Alternative Line Phase I Expressway 

Co.,  Ltd.  (“Zhejiang  HNAL  Co”),  respectively.  Pursuant  to  the  contracts,  high  grade  road  and  expressway 

construction  services  will  be  provided  to  De’an  Co  and  Zhoushan  Co.  Zhejiang  Hongtu  is  the  non-controlling 

shareholder  of  De’an  Co  and  is  also  a  non-wholly  owned  subsidiary  of  Communications  Group,  Zhejiang  HNAL 

Co is a non-wholly owned subsidiary of Communications Group.

269

 
 
 
 
57.  RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(i)  Transactions  and  balances  with  Communications  Group  and  government 

related parties (Continued)

Other transactions with government related parties
The Group operates in an economic environment currently predominated by entities directly or indirectly owned or 

controlled by the PRC government (“government-related entities”). In addition, the Group itself is part of a larger 

group of companies under the Communications Group which is controlled by the PRC government. However, due 

to the business nature, in respect of the Group’s toll road and securities business, the Directors are of the opinion 

that it is impracticable to ascertain the identity of counterparties and accordingly whether the transactions are with 

other government-related entities in the PRC.

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.

(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

During  the  year,  Zhejiang  Communications  Finance  Co.,  Ltd  provided  the  company  with  short-term  loans  with  a 

total principal amount of Rmb2,530,000,000 (2018: Nil) at variable interest rates ranging from 3.915% per annum. 

During the year, a total amount of Rmb1,990,000,000 were repaid (2018: Nil).

During  the  year,  Zhejiang  Communications  Finance  provided  Hanghui  Co  with  short-term  loan  with  aggregated 

principal  amount  of  Rmb730,000,000  (2018:  Rmb610,000,000)  and  floating  interest  rate  of  3.915%  per  annum 

(2018:  4.2195%  to  4.35%).  The  principal  amount  of  short-term  loans  Rmb320,000,000  were  repaid  during  the 

year (2018: Rmb863,858,000).

270

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements57.  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)
Loan advanced from Zhejiang Communications Finance (Continued)

During  the  year,  Zhejiang  Communications  Finance  Co.,  Ltd  provided  Zhoushan  Bay  Bridge  with  short-term 

loans  with  a  aggregated  principal  amount  of  Rmb868,000,000  (2018:  Rmb1,817,000,000)  and  floating  interest 

rate  of  4.1325%  and  4.35%  per  annum  (2018:4.35%  to  4.41%).  During  the  year,  principal  amount  of  short-term 

loans  Rmb777,000,000  were  repaid  (2018:  Rmb410,000,000).  In  2018,  Zhejiang  Communications  Finance  Co., 

Ltd  offered  Zhoushan  Bay  Bridge  a  long-term  loan  with  aggregated  principal  amount  of  Rmb1,220,000,000  and 

floating interest rate of 4.41% per annum.

During  the  year,  Shenjiahuhang  Expressway  Co.,  Ltd.  has  repaid  a  short-term  loan  with  aggregated 

principal  amount  of  Rmb1,120,000,000  and  floating  interest  rate  of  4.41%  to  4.263%  per  annum  to  Zhejiang 

Communications Finance.

In  2018,  Zhejiang  Communications  Finance  offered  Shenjiahuhang  a  long-term  loan  with  aggregated  amount  of 

Rmb1,285,000,000  and  floating  annual  interest  rate  of  4.263%  to  4.41%.  During  the  year,  principal  amount  of  a 

long-term loan Rmb100,000,000 provided by Zhejiang Communications Finance to Shenjiahuhang was repaid. 

Principal amount of a short-term loan Rmb70,000,000 provided by Zhejiang Communications Finance to Zhejiang 

Grand Hotel was repaid during the Year.

271

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)

12/31/2019

12/31/2018

Rmb’000

Rmb’000

(Restated)

1,843,515

2,405,000

1,993,464

2,505,000

4,248,515

4,498,464

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

(Restated)

218,420

109,915

12/31/2019

12/31/2018

Rmb’000

Rmb’000

(Restated)

1,742,825

430,993

Year ended

12/31/2019

Rmb’000

Year ended

12/31/2018

Rmb’000

(Restated)

21,512

16,887

Outstanding loan payable balances:

repayable within one year

over 5 years

Interest expenses incurred

Deposits to Zhejiang Communications Finance

Bank balances and cash

– Cash and cash equivalents

Interest income earned

272

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
57.  RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii)  Transactions  and  balances  with  associates  and  other  related  parties 

(Continued)

Sales  of  asset  management  schemes  and  beneficial  certificates  to  Zhejiang 
Communications Finance
During the Period, Zheshang Securities Asset Management Co., Ltd. (“Asset Management”, an indirect subsidiary 

of  the  Company)  sold  568,711,000  units  (equivalent  to  Rmb568,711,000)  of  the  asset  management  schemes  to 

Zhejiang Communications Finance, and management fee income of Rmb316,000 was earned.

Zhejiang  Shaoxing  Shengxin  Expressway  Co.,  Ltd.  (“Shengxin  Co”,  our  joint 
venture company) provides entrusted loan
According  to  the  entrusted  loan  contract  signed  between  the  company  and  Shengxin  on  March  29,  2019, 

Shengxin company provides an entrusted loan of Rmb25,000,000(2018: Nil) with a floating annual interest rate of 

4.1325% and maturity date of March 18, 2020. Interest expense incurred during the period was Rmb749,000.

(iii)  Key management emoluments
The  remuneration  of  the  directors,  supervisors  and  key  management  personnel  during  the  year  was 

Rmb6,738,000  (2018:  Rmb6,799,000)  including  retirement  benefit  scheme  contribution  of  Rmb186,000  (2018: 

Rmb172,000) which is determined by the performance of the individuals and the market trends.

273

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

12/31/2019

12/31/2018

12/31/2019

12/31/2018

Zhejiang Yuhang Expressway  

Note 1

75,223,000

Co., Ltd.  
(“Yuhang Co”)

%

51

%

(Restated)

51

Jiaxing Co

Note 2

359,200,000

99.9995

99.9995

Shangsan Co

Note 3

2,400,000,000

73.625

73.625

Zhejiang Expressway Vehicle  

Note 4

8,000,000

100

100

Towing and Rescue Services  
Co., Ltd. (“Towing Co”)

%

–

–

–

–

%

(Restated)

–

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”)

–

–

–

–

–

–

274

–

–

–

–

–

–

*46.9319

46.9321

Operation of securities business

**46.9319

**46.9321

Operation of securities business

**46.9319

**46.9321

Operation of securities business

**46.9319

**46.9321

Provision of asset management 

service

**46.9319

**46.9321

Provision of investment 

management and advisory 
services

**14.7317

**14.7317

Provision of investment 

management and advisory and 
private equity investments

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements58.  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

12/31/2019

12/31/2018

12/31/2019

12/31/2018

Note 11

200,000,000

%

–

%

(Restated)

%

%

(Restated)

–

**46.9319

**46.9321

Trading of future

Zhejiang Zheqi Co., Ltd.  
(“Zhejiang Zheqi”)

Zhejiang Jinhua Yongjin  
Expressway Co., Ltd.  
(“Jinhua Co”)

Note 12

1,350,000,000

100

100

Hanghui Co

Note 13

1,812,280,000

88.674

88.674

–

–

–

Management of the Jinhua 

Section of the Ningbo- Jinhua 
Expressway

–

Management of the Zhejiang 

Section of the Hangzhou-Ruili 
Expressway

Hangzhou Jujin Jiawei Investment 

Note 14

206,103,000

Management (Limited Partnership) 
(“Jujin Jiawei”)

Zheshang International Financial  

Note 15

8,011,000

Holding Co., Limited

–

–

–

–

**21.13229

**21.1323

Provision of investment 

management and advisory and 
private equity investments

**46.9319

**46.9321

Trading of future

Huihang Co

Note 16

580,000,000

100

100

Deqing Co

Note 17

100,000,000

Shenjiahuhang Expressway

Note 18

1,720,000,000

80.1

100

80.1

100

Zhoushan Co.

Note 19

4,114,690,000

–

–

Zhejiang Grand Hotel

Note 20

230,000,000

100

100

–

–

–

51

–

–

Management of the Anhui 

Section of the Hangzhou-Ruili 
Expressway

–

–

Construction and management

Management of the 

Huzhou Section of the 
Huzhou-Lianhang Expressway

51

Management of the Zhoushan 

Bay Bridge

–

Operation of hotel

275

58.  PARTICULARS OF SUBSIDIARIES OF THE COMPANY (Continued)
* 

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. On December 31, 2019, Zheshang Securities has 

issued convertible bonds, the conversion of shares resulting in the dilution of the equity interest attributed to 

the Company.

** 

These  companies  and  partnership  entities  are  subsidiaries  of  Zheshang  Securities,  a  non-wholly-owned 

subsidiary  of  Shangsan  Co,  and  accordingly,  are  accounted  for  as  subsidiaries  by  virtue  of  the  Group’s 

control over them.

Note 1: 

Yuhang  Co  was  established  on  June  7,  1994  in  the  PRC  as  a  joint  stock  limited  company  and  was 

subsequently restructured into a limited liability company under its current name on November 28, 1996. The 

Company is able to control over Yuhang Co because it has the power to appoint five out of nine directors of 

that  company  and  under  the  provisions  stated  in  the Articles  of Association  of  that  company,  the  passing  of 

ordinary resolutions at the board meetings required one-half of the directors attending the meetings.

Note 2: 

Jiaxing  Co  was  established  on  June  30,  1994  in  the  PRC  as  a  joint  stock  limited  company  and  was 

subsequently restructured into a limited liability company under its current name on November 29, 1996.

Note 3: 

Shangsan Co was established on January 1, 1998 in the PRC as a limited liability company.

Note 4: 

Towing Co was established on July 31, 2003 in the PRC as a limited liability company.

Note 5: 

Zheshang Securities was established on May 9, 2002 in the PRC as a limited liability company.

Note 6: 

Zheshang Futures was established on September 7, 1995 in the PRC as a limited liability company.

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.

276

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements58.  PARTICULARS OF SUBSIDIARIES OF THE COMPANY (Continued)
Note 12: 

Jinhua Co was established in February 2002 in the PRC as a limited liability company. Jinhua Co became a 

wholly owned subsidiary and directly held by the Company during the year ended December 31, 2013.

Note 13:  Hanghui  Co  was  established  in  December  2008  in  the  PRC  as  a  limited  liability  company.  During  the 

year  ended  December  31,  2015,  the  Company  acquired  the  80.614%  equity  interests  in  Hanghui  Co  from 

Communications Group, and Hanghui Co then became a subsidiary and directly held by the Company as at 

December  31,  2015.  In  December  2015,  the  equity  interest  held  by  the  Group  increased  to  88.674%  as  the 

Company has made a capital contribution to Hanghui Co.

Note 14: 

Jujin  Jiawei  was  established  on  April  15,  2015  in  the  PRC  as  a  limited  partnership.  Pursuant  to  the 

partnership agreement, Dongfang Jujin is a general partner, while Zheshang Capital Management and other 

three  individuals  are  limited  partners  of  the  partnership.  The  Directors  consider  that  the  Group  has  the 

practical  ability  to  direct  the  relevant  activities  of  Jujin  Jiawei  unilaterally,  and  it  is  therefore  classified  as  a 

subsidiary of the Group.

Note 15:  Zheshang International Financial Holding Co., Limited (previously known as Zheshang Futures (Hong Kong) 

Co., Limited) was established on April 23, 2015 in Hong Kong as a limited liability Company.

Note 16:  Huihang  Co  was  established  in  September  2000  in  the  PRC  as  a  limited  liability  company.  During  the 

year  ended  December  31,  2016,  the  Company  acquired  the  100%  equity  interests  in  Huihang  Co  from  an 

independent  third  party,  and  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.

Note 18:  Shenjiahuhang  Expressway  was  established  on  July  13,  2018  in  the  PRC  as  a  limited  liability  company  and 

was acquired from Communications Group as detailed in Note 2.

Note 19:  Zhoushan  Co  was  established  on  as  a  limited  liability  company.  On  July,  2018,  Shenjiahuhang  Expressway 

entered  into  an  equity  purchase  agreement  with  Zhejiang  Communications  Investment  Group  Co.,  Ltd.  to 

acquire 51% equity interest in Zhoushan Co.

Note 20:  Zhejiang Grand Hotel was established on January 6, 1998 in the PRC as a limited liability company and was 

acquired from Communications Group as detailed in Note 2.

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,  2019,  Zheshang  Securities 

has  issued  subordinated  bonds,  corporate  bonds  and  beneficial  certificates  at  the  total  principal  amount  of 

Rmb7,550,000,000,  3,488,000,000.00,  3,019,537,000,  6,500,000,000  and  nil  (2018:  Rmb7,600,000,000,  nil,  nil, 

nil and Rmb9,473,360,000), respectively.

277

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, 2019 and 

2018.  Except  for  the  structured  entities  the  Group  has  consolidated  as  disclosed  in  Note  45,  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 

Rmb146,673,182,000  and  Rmb153,292,980,000  as  at  December  31,  2019  and  2018,  respectively.  The  Group 

classified  the  investments  in  unconsolidated  funds  and  asset  management  schemes  as  financial  assets  at 

FVTPL.  As  at  December  31,  2019  and  2018,  the  carrying  amounts  of  the  Group’s  interests  in  unconsolidated 

funds and asset management schemes are Rmb4,013,250,000 and Rmb 1,749,468,000, respectively.

60.  SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY

NON-CURRENT ASSETS

Property, plant and equipment

Prepaid lease payments

Right-of-use assets (Note)

Expressway operating rights

Other intangible assets

Interests in subsidiaries

Interests in associates

Interest in a joint venture

CURRENT ASSETS

Trade receivables

Other receivables and prepayments

Prepaid lease payments

Amount due from subsidiaries

Dividends receivable

Bank balances and cash

– Cash and cash equivalents

278

12/31/2019

12/31/2018

Rmb’000

Rmb’000

710,114

–

15,136

483,279

15,136

–

2,501,437

2,846,670

6,956

12,906,128

4,769,371

373,470

9,145

11,424,869

4,419,756

373,470

21,282,612

19,572,325

49,222

93,611

–

4,188,180

856,393

38,133

80,480

592

706,994

97,731

1,639,855

1,908,124

6,827,261

2,832,054

2019ANNUAL REPORTFor the year ended December 31, 2019Notes to the Consolidated Financial Statements 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

Bonds payable

Convertible Bond

Bank and other borrowings

NET CURRENT LIABILITIES

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

12/31/2019

12/31/2018

Rmb’000

Rmb’000

237,786

196,997

12,949

185,044

67,376

195,041

12,227

194,995

5,007,555

4,132,442

62,066

2,788,235

826,379

–

–

475

9,317,011

4,602,556

(2,489,750)

(1,770,502)

18,792,862

17,801,823

–

3,000,000

60,000

–

–

2,709,663

74,794

78,720

3,074,794

2,848,383

15,718,068

14,953,440

4,343,115

11,374,953

4,343,115

10,610,325

15,718,068

14,953,440

Note:  The  Company  has  applied  HKFRS  16  since  1  January  2019.  Right-of-use  assets  amounted  to  Rmb15,728,000 

were recognised on initial application of HKFRS 16.

279

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
60.  SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY 

(Continued)

Movement of share capital and reserve of the Company was set out below.

Share

capital

Share

Statutory

Dividend

Special

Retained

premium

reserves

reserve

reserves

profits

Total

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

Rmb’000

At January 1, 2018 (restated)

4,343,115

3,645,726

2,364,430

1,302,934

18,666

2,188,976

13,863,847

Total comprehensive income  

for the year

2017 dividend

Proposed dividend

–

–

–

–

–

–

–

–

–

–

(1,302,934)

1,628,668

–

–

–

2,392,527

2,392,527

–

(1,302,934)

(1,628,668)

–

At December 31, 2018 (restated)

4,343,115

3,645,726

2,364,430

1,628,668

18,666

2,952,835

14,953,440

Total comprehensive income  

for the year

2018 dividend

Proposed dividend

–

–

–

–

–

–

–

–

–

–

(1,628,668)

1,541,806

–

–

–

2,393,296

2,393,296

–

(1,628,668)

(1,541,806)

–

At December 31, 2019

4,343,115

3,645,726

2,364,430

1,541,806

18,666

3,804,325

15,718,068

61.  EVENTS AFTER THE REPORTING PERIOD
The  outbreak  of  COVID-19  in  China  and  around  the  world,  the  subsequent  quarantine  measures  imposed  by 

the  mainland  Chinese  government  as  well  as  the  travel  restrictions  imposed  by  other  countries  from  early  2020 

have  had  a  negative  impact  on  the  operations  of  the  Group.  On  February  15,  2020,  the  Ministry  of Transport  of 

the People’s Republic of China, issued a notice on the waive of toll road fee on expressway during the period of 

the control of the spread of the epidemic with effect from February 17, 2020 until further notice. As toll operation 

is  one  of  the  major  revenue  stream  of  the  Group,  this  measure  is  expected  to  have  a  negative  impact  on  the 

Group’s 2020 financial performance.

As  the  situation  remains  fluid  as  at  the  date  these  financial  statements  are  authorised  for  issue,  the  directors 

of  the  Company  considered  that  the  financial  effects  of  the  COVID-19  on  the  Group’s  consolidated  financial 

statements  cannot  be  reasonably  estimated.  Nevertheless,  the  COVID-19  outbreak  is  expected  to  affect  the 

consolidated results of the Group for the first half year of 2020.

280

2019ANNUAL REPORTFor the year ended December 31, 2019Notes 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  102  to  280,  which  comprise  the 

consolidated statement of financial position as at December 31, 2019, 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,  2019,  and  of  its  consolidated  financial  performance  and  its 

consolidated  cash  flows  for  the  year  then  ended  in  accordance  with  Hong  Kong  Financial  Reporting  Standards 

(“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly 

prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

Basis for Opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. 

Our  responsibilities  under  those  standards  are  further  described  in  the Auditor’s  Responsibilities  for  the Audit  of 

the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with 

the  HKICPA’s  Code  of  Ethics  for  Professional Accountants  (the  “Code”),  and  we  have  fulfilled  our  other  ethical 

responsibilities  in  accordance  with  the  Code.  We  believe  that  the  audit  evidence  we  have  obtained  is  sufficient 

and appropriate to provide a basis for our opinion.

Key Audit Matters
Key  audit  matters  are  those  matters  that,  in  our  professional  judgment,  were  of  most  significance  in  our  audit 

of  the  consolidated  financial  statements  of  the  current  period.  These  matters  were  addressed  in  the  context  of 

our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not 

provide a separate opinion on these matters.

281

 Independent Auditor’s ReportKey audit matter

How our audit addressed the key audit matter

Measurement of expected credit losses (“ECL”) for loans to customers arising from margin financing business 

and financial assets held under resale agreements

We  identified  the  measurement  of  ECL  for  the 
Group’s  loan  to  customers  arising  from  margin 
financing  business  and  financial  assets  held  under 
resale  agreements  as  a  key  audit  matter  due  to 
the  significance  of  these  assets  to  the  Group’s 
consolidated financial statements and the significant 
management  judgement  and  estimation  required  in 
the measurement.

As  disclosed  in  Note  5  to  the  consolidated  financial 
statements,  significant  management  judgement  and 
estimation  required  in  the  measurement  of  ECL 
includes  assessing  whether  the  credit  risk  of  an 
asset  has  significantly  increased  and  whether  an 
asset  is  credit  impaired,  using  appropriate  models 
and  assumptions,  determining  the  key  inputs 
including  probability  of  default  (“PD”),  loss  given 
default (“LGD”)and forward-looking information.

As  at  31  December,  2019,  the  Group  held  loans 
t o  c u s t o m e r s  a r i s i n g  f r o m  m a r g i n  f i n a n c i n g 
business  of  Rmb8,752,658,000,  less  impairment 
allowance  of  Rmb1,015,000  as  disclosed  in  Note 
30  to  the  consolidated  financial  statements  and 
financial  assets  held  under  resale  agreements  of 
Rmb8,130,698,000,  less  impairment  allowance 
of  Rmb20,344,000  as  disclosed  in  Note  32  to  the 
consolidated financial statements.

O u r   p r o c e d u r e s   i n   r e l a t i o n   t o   m a n a g e m e n t ’ s 
measurement of ECL for loans to customers arising from 
margin  financing  business  and  financial  assets  held 
under resale agreements included:

•  Te s t i n g   a n d   e v a l u a t i n g   k e y   c o n t r o l s   o f   t h e 

management over the measurement of ECL;

•  Evaluating  the  appropriateness  of  the  ECL  model, 
and the critical assumptions and parameters used in 
the model, in particular PD, LGD and forward-looking 
information;

•  Evaluating  the  determination  of  the  criteria  for 
significant  increase  in  credit  risk  (“SICR”)  by 
management  and,  on  a  sample  basis,  testing  its 
application;

•  On  a  sample  basis,  examining  the  major  data  input 

into the ECL model, including PD and LGD;

•  For  a  sample  of  credit  impaired  assets,  assessing 
the  impairment  allowances  made  by  management 
based  on  the  expected  future  cash  flow  with 
reference  to  financial  information  of  borrowers  and 
guarantors,  and  the  latest  collateral  valuations,  as 
appropriate;

•  Checking the calculation process of the ECL.

282

2019ANNUAL REPORT Independent Auditor’s ReportKey audit matter

How our audit addressed the key audit matter

Determination of consolidation scope of structured entities

Our  procedures  in  relation  to  the  management’s 
determination  of  consolidation  scope  of  structured 
entities included: 

•  Te s t i n g   a n d   e v a l u a t i n g   k e y   c o n t r o l s   o f   t h e 
management  in  determining  the  consolidation  scope 
of structured entities;

•  Examining,  on  a  sample  basis,  the  documents  and 
information  used  by  the  management  in  assessing 
the  consolidation  criteria  of  structured  entities 
against  the  related  agreements  and  other  related 
service  agreements  of  structured  entities  newly 
established,  invested  or  with  changes  in  proportion 
of ownership interests or contractual terms during the 
year;

•  Assessing  management  judgement  in  determining 
the  scope  for  consolidation  and,  on  a  sample  basis, 
assessing the conclusion about whether a structured 
entity should be consolidated or not.

We  identified  the  determination  of  consolidation 
s c o p e  o f  s t r u c t u r e d  e n t i t i e s  a s  a  k e y  a u d i t 
matter  due  to  significant  judgement  applied  by 
management  in  determining  whether  a  structured 
entity  is  required  to  be  consolidated  by  the  Group 
and  the  significance  of  these  balances  to  the 
Group’s  consolidated  financial  statements  as  a 
whole.

The  Group  held  interests  as  investor  or  acted  as 
investment  manager  in  various  structured  entities 
including  collective  asset  management  schemes 
and  investment  funds.  As  disclosed  in  Note  5  to 
the  consolidated  financial  statements,  to  determine 
whether  a  structured  entity  should  be  consolidated, 
the  management  applied  significant  judgement  in 
determining  whether  the  Group  has  power  over 
the  structured  entities,  and  assess  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  is  of  such  significance  that 
it  indicates  the  Group  controlled  the  structured 
entities.

As disclosed in Notes 45 and 59 to the consolidated 
financial  statements,  as  at  31  December  2019,  the 
total  assets  of  the  consolidated  structured  entities 
amounted to Rmb3,800,723,000 and the total assets 
of  the  unconsolidated  structured  entities  managed 
by  the  Group  amounted  to  Rmb146,673,182,000, 
respectively.

283

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.

284

2019ANNUAL REPORT Independent Auditor’s ReportAuditor’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.

285

• 

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 Ma Hing 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 20, 2020

286

2019ANNUAL REPORT Independent Auditor’s ReportCHAIRMAN

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

DAI Benmeng

YUAN Yingjie (Appointed on February 3, 2020)

YU Qunli (Resigned on February 3, 2020)

YU Ji

INDEPENDENT 
NON-EXECUTIVE DIRECTORS

PEI Ker-Wei

LEE Wai Tsang, Rosa

CHEN Bin

SUPERVISORS

ZHENG Ruchun (Appointed on February 3, 2020)

YAO Huiliang (Resigned on February 3, 2020)

HE Meiyun

WU Qingwang

ZHAN Huagang 

WANG Yubing

COMPANY SECRETARY

Tony ZHENG

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

AUTHORIZED REPRESENTATIVES

YU Zhihong

LUO Jianhu

287

 Corporate InformationAs to PRC law:

T & C Law Firm

H SHARE REGISTRAR AND 

11/F, Block A, Dragon Century Plaza

TRANSFER OFFICE

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

Industrial and Commercial Bank of China,  

Jiefang Road Branch

Shanghai Pudong Development Bank, 

Hangzhou Branch

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

WEBSITE

www.zjec.com.cn

288

 Corporate Information2019ANNUAL REPORTLocation Map of Expressways in Zhejiang Province