封面圖為浙江舟山跨海大橋，全長46公里並於2010年2月6日通車，
連接寧波和舟山及中間的島嶼。
2020 年，舟山跨海大橋平均每日全程車流量為 XX 輛。
R
E
P
O
R
T
A
N
N
U
A
L
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
2
4
5
6
8
10
13
17
38
42
58
74
84
86
101
108
264
271
273
Associate
has the meaning ascribed to it under the Listing Rules
Audit Committee
the audit committee of the Company
Board
China Merchants
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
), a joint stock limited company established in the PRC on December 18, 1993, whose
份有限公司
shares are listed on the Shenzhen Stock Exchange
Company or Zhejiang
Expressway
Zhejiang Expressway Co., Ltd., a joint stock limited company incorporated in the PRC with limited
liability on March 1, 1997
Communications Group
Zhejiang Communications Investment Group Co., Ltd. (
), a wholly
state-owned enterprise established in the PRC, on December 29, 2001 and the controlling
shareholder of the Company
浙江省交通投資集團有限公司
Connected Person
has the meaning ascribed to it under the Listing Rules
Controlling Shareholder
has the meaning ascribed to it under the Listing Rules
De’an Co
Directors
GDP
Group
H Shares
Hanghui Co
HangNing Co
Huihang Co
Deqing County De’an Highway Construction Co., Ltd. (
), a 80.1%
owned subsidiary of the Company, which is established with Zhejiang Hongtu Transportation
Construction Company (
) for PPP Project in Deqing County
德清縣德安公路建設有限責任公司
浙江交工宏途交通建設有限公司
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. (
the Company
浙江杭徽高速公路有限公司
), a 88.674% owned subsidiary of
Zhejiang HangNing Expressway Co., Ltd. (
of the company, which is established in the PRC with limited liability
浙江杭寧高速公路有限責任公司
), a 30% owned associate
Huangshan Yangtze Huihang Expressway Co., Ltd (
wholly-owned subsidiary of the Company
黃山長江徽杭高速公路有限責任公司
), a
Hong Kong Stock
The Stock Exchange of Hong Kong Limited
Exchange
Independent third
party(ies)
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
Jiaogong Maintenance
Zhejiang Jiaogong High-grade Expressway Maintenance Co., Ltd. (
), an indirectly non-wholly owned subsidiary of Communications Group
浙江交工高等級公路養護有限公
司
Zhejiang Jiaxing Expressway Co., Ltd. (
subsidiary of the Company
浙江嘉興高速公路有限責任公司
), a 99.9995% owned
Zhejiang Jinhua Yongjin Expressway Co., Ltd. (
subsidiary of the Company
浙江金華甬金高速公路有限公司
), a wholly-owned
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
Zhejiang LongLiLiLong Expressway Co., Ltd. (
subsidiary of the Company
浙江龍麗麗龍高速公路有限公司
), a wholly-owned
Zhejiang Expressway Maintenance Co., Ltd. (
in the PRC and an indirect non-wholly owned subsidiary of Communications Group
浙江滬杭甬養護工程有限公司
), a company incorporated
Ningbo Expressway Co
Zhejiang Ningbo Yongtaiwen Expressway Co., Ltd. (
), a limited
liability company established in the PRC on April 26, 2004 and an approximately 80.45% owned
subsidiary of Communications Group
浙江寧波甬台温高速公路有限公司
the period from January 1, 2020 to December 31, 2020
the People’s Republic of China
Period
PRC
02
Jiaxing Co
Jinhua Co
Listing Rules
LongLiLiLong Co
Maintenance Co
Definition of Terms Rmb
SFO
Shangsan Co
Shareholders
Shengxin Co
Renminbi, the lawful currency of the PRC
Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong)
Zhejiang Shangsan Expressway Co., Ltd. (
), 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
浙江上三高速公路有限公司
the shareholders of the Company
Shengxin Expressway Co., Ltd. (
Company
浙江紹興嵊新高速公路有限公司
), a 50% owned joint venture of the
Shenjiahuhang Co
Zhejiang Shenjiahuhang Expressway Co., Ltd.(
subsidiary of the Company
浙江申嘉湖杭高速公路有限公司
SRCB
Shanghai Rural Commercial Bank Co., Ltd. (
associate of the Company
上海農村商業銀行股份有限公司
), a wholly-owned
) a 5.36% owned
Supervisory Committee
the supervisory committee of the Company
Yangtze Financial
Leasing
Yuhang Co
Yangtze United Financial Leasing Co., Ltd. (
of the Company
長江聯合金融租賃有限公司
), a 10.61% owned associate
Zhejiang Yuhang Expressway Co., Ltd. (
the Company
浙江余杭高速公路有限責任公司
), a 51% owned subsidiary of
Zhejiang Communications
Zhejiang Communications Investment Group Finance Co., Ltd. (
Finance
Zhejiang Grand Hotel
Zhejiang Hongtu
Zhejiang Information
Zhejiang International
Hong Kong
Zhejiang Oceanking
), a 20.08% owned associate of the Company
司
Zhejiang Grand Hotel Limited (
浙江大酒店有限公司
浙江省交通投資集團財務有限責任公
), a wholly-owned subsidiary of the Company
Zhejiang Hongtu Transportation Construction Company (
liability company incorporated in the PRC and non-wholly owned by Communications Group
浙江交工宏途交通建設有限公司
), a limited
Zhejiang Expressway Information Engineering Technology Co., Ltd* (
浙江高速信息工程技術有限公
), a limited company established in the PRC and a 65.85% owned subsidiary of Communications
司
Group as at the date hereof
Zhejiang Expressway International (Hong Kong) Co., Ltd. (
subsidiary of the Company
)
(
有限公司
香港
浙江滬杭甬國際
), a wholly-owned
Zhejiang Oceanking Development Co., Ltd (
), a limited liability company
established under the laws of the PRC and a 65.44% owned subsidiary of the Communications
Group
浙江鎮洋發展股份有限公司
Zhejiang Shunchang
Zhejiang Shunchang High-grade Expressway Maintenance Co., Ltd. (
), a non-wholly owned subsidiary of Communications Group
浙江順暢高等級公路養護有限公
司
Zheshang Securities Co., Ltd. (
Shangsan Co
浙商證券股份有限公司
), a 58.7936% owned subsidiary of the
Zheshang Securities
Zhoushan Co
Zhejiang Zhoushan Bay Bridge Co., Ltd.(
Shenjiahuhang Co
浙江舟山跨海大橋有限公司
), a 51% owned subsidiary of
03
ANNUAL REPORT 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, 2020, total assets of the Company and its subsidiaries amounted to
Rmb130,063.38 million.
On January 19, 2021, the Company completed the acquisition of 100% equity interest in
LongLiLiLong Co, which then became a wholly owned subsidiary of the Company. The total
length of expressways operated by the Group increased from 802km to 1,024km, further
strengthening the scale of the Group’s core business.
Incorporated on December 29, 2001, Communications Group, the controlling shareholder of
the Company, is a wholly state-owned communications company 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.
04
Company Profile 2
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05
ANNUAL REPORT
1.
On January 1, 2020, as directed by the Ministry of Transport of the PRC 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.
2.
In early 2020, due to the outbreak of the COVID-19 epidemic, the toll-free period for small
passenger vehicles during the Spring Festival holidays which was originally scheduled
from January 24 to January 30, 2020 was extended to February 8. Subsequently, as the
epidemic situation became more severe, an additional toll-free policy for all vehicles was
implemented during the period from February 17 to May 5, pursuant to the Ministry of
Transport of the PRC’s notification in relation to the toll-free policy for vehicles travelling
on toll roads during the period of prevention and control of the COVID-19 pandemic.
3.
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.
4.
On March 20, 2020, the Company announced its 2019 annual results.
5.
On April 20, 2020, the Board approved the Company to manage the Zhejiang Section of
HangNing Expressway and Jiaxing Section of No.320 National Highway as entrusted by
Communications Group.
6.
On April 21, 2020, at the option of the bondholders, the Company made early redemption
of part of the outstanding Euro365 million zero coupon convertible bonds due 2022 issued
by the Company on April 5, 2017, at the principal amount of Euro364.9 million.
7.
On April 29, 2020, the Company announced its 2020 first quarterly results.
06
Review of Major Corporate Events 8.
On May 15, 2020, the Company held its Annual General Meeting to approve, inter alia,
the payment of a dividend of Rmb35.5 cents per share, the reappointment of Deloitte
Touche Tohmatsu Certified Public Accountants as Hong Kong auditor of the Company, the
reappointment of Pan-China Certified Public Accountants LLP as the PRC auditor of the
Company, the elections of Mr. CHEN Ninghui as executive director and Mr. FAN Ye as
non-executive director, the grant of general mandate to the Board to issue, allot and deal
with additional H Shares of not more than 20% of the issued H Shares of the Company,
and the corresponding amendments to the articles of association of the Company as it
thinks fit.
9.
On August 26, 2020, the Company announced its 2020 interim results.
10. On October 30, 2020, the Company announced its 2020 third quarterly results.
11. On December 10, 2020, the Board approved the Company to manage the Huzhou
section of Hangzhou Ring Road West Parallel Expressway West line as entrusted by
Communications Group.
12. On December 23, 2020, the Company held its Extraordinary General Meeting to approve
the Share Transfer Agreement entered into between the Company and Communications
Group to conditionally acquire the 30% equity interests of HangNing Co. at the
consideration of Rmb2,685 million; to conditionally acquire the 100% equity interests of
LongLiLiLong Co. at the consideration of Rmb238.14 million.
13. On January 5, 2021, the Company successfully issued 5-year zero coupon convertible
bonds in an aggregate amount of Euro 230 million in Hong Kong market.
14. On January 20, 2021, the Company held its Extraordinary General Meeting to approve
the offer and issue of unsecured senior notes of not more than US$600 million or its
equivalent.
15. On February 11, 2021, the PPP project of Duihekou to Aibuli section of Zhenhai-Anji Road
in Deqing County, undertaken by the Company and Zhejiang Hongtu, was completed and
opened to traffic. The total length of this section of the project is approximately 14.62km.
07
ANNUAL REPORT Expressway
Percentage of
Ownership
Length in
Kilometers
Number of
Lanes
Number of
Toll Stations
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
Shangsan Expressway
Ningbo-Jinhua Expressway
– Jinhua Section
Hanghui Expressway
– Changyu Section
– Changhang Section
Huihang Expressway
Shenjiahuhang Expressway
– Huzhou Section
– Lianhang Section
Zhoushan Bay Bridge
LongLi Expressway
LiLong Expressway
– Liandu Section
– Other Sections
99.9995%
51%
100%
100%
100%
100%
73.625%
100%
88.674%
88.674%
100%
100%
100%
51%
100%
100%
100%
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
119.8
22.97
79.47
8
6
4
4
8
4
4
4
4
4
4
4
4
4
4
4
4
7
1
2
1
9
1
11
7
5
8
4
3
7
8
9
2
5
2
0
0
0
2
0
3
1
1
1
2
1
1
1
3
0
1
1998
1995-1998
1995
1992
1995
1996
2000
2005
2004
2006
2004
2008
2010
2009
2006
2007
2006
8
8
8
7
7
7
10
10
9
11
13
13
15
14
11
12
11
CURRENT TOLL RATES ON THE EXPRESSWAYS UNDER
THE GROUP
1. Passenger vehicle classification and toll rates
Toll for passenger vehicles = Entrance 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)
Entrance 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-Ningbo Expressway, the mileage fee for class 1 and class 2 passenger vehicles is
Rmb0.45/vehicle/km.
08
Particulars of Major Road Projects
2. 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
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)
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.
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.
09
ANNUAL REPORT
Results
Continuing operations:
Revenue
Profit Before Tax
Income Tax Expense
Profit for the year from
continuing operations
Discontinued operations:
Profit for the year from
2016
Rmb’000
(Restated)
Year ended December 31,
2017
Rmb’000
(Restated)
2018
Rmb’000
(Restated)
2019
Rmb’000
2020
Rmb’000
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)
11,942,775
5,114,710
(1,160,174)
3,322,314
3,780,271
3,994,513
4,414,899
3,954,536
discontinued operations
81,594
–
–
–
–
Profit for the year (from continuing
and discontinued operations)
attributable to:
Owners of the Company
Non-controlling interests
2,757,089
646,819
3,097,355
682,916
3,515,095
479,418
3,711,118
703,781
2,997,344
957,192
Basic Earnings Per Share
(EPS) (From continuing and
discontinued operations)
Diluted EPS (From continuing and
63.48 cents 71.32 cents
80.94 cents
85.45 cents 69.01 cents
discontinued operations)
63.48 cents 69.04 cents
76.27 cents
82.37 cents 68.32 cents
RETURN ON EQUITY (ROE)
ROE
Segmental Revenue / 2020
(continuing operations)
2016
15.0%
2017
14.6%
2018
15.0%
2019
17.2%
2020
12.4%
Segmental Net Profit / 2020
4.0%
Other Business
17.5%
Other Business
42.6%
Securities
Business
10
Toll Road
Business
53.4%
41.4%
Securities
Business
Toll Road
Business
41.1%
Financial and Operating Highlights
Revenue / Rmb Million (Continuing operations)
10,979
11,081
11,192
11,955
11,943
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2016
(Restated)
2017
(Restated)
2018
(Restated)
2019
2020
Net profit / Rmb Million (Continuing and discontinued operations)
3,404
3,780
3,995
4,415
3,955
5,000
4,000
3,000
2,000
1,000
0
2016
(Restated)
2017
(Restated)
2018
(Restated)
2019
2020
Basic EPS / Rmb Cents (Continuing and discontinued operations)
63.48
71.32
80.94
85.45
69.01
2016
(Restated)
2017
(Restated)
2018
(Restated)
2019
2020
15.0
14.6
15.0
17.2
12.4
100
80
60
40
20
0
ROE / %
20
15
10
5
0
2016
(Restated)
2017
(Restated)
2018
(Restated)
2019
2020
11
ANNUAL REPORT 12
YU ZhihongChairman Dear Shareholders,
On behalf of the Board of Directors, it is my pleasure to present the annual results of Zhejiang
Expressway Co., Ltd., and its subsidiaries (collectively referred to as “the Group”) for the year
2020.
In 2020, the global economy experienced a number of shocks as affected by the complicated
macro environment, especially the novel coronavirus (“Covid-19”) epidemic. Against this
backdrop, China’s GDP still achieved growth of 2.3%, of which, growth in the fourth quarter
rebounded to 6.5%, demonstrating the steady recovery of the economy as the epidemic was
effectively contained in China. GDP for Zhejiang Province, where the major business of the
Group is located, grew by 3.6%, which exceeded the national level. The Province’s economy
remained stable with steady progress as it benefited from a solid performance in foreign trade.
Confronting such shocks from the epidemic and downward pressure on the economy, the
Group effectively responded to the impacts brought about by the macro environment, and
pursued high-quality sustainable development steadily. While toll revenue of the Group’s toll
road operations business decreased significantly due to the epidemic and toll-free policy, the
securities business recorded significant revenue growth driven by the quickly-recovered capital
markets, which positively enhanced the Group’s overall performance. Revenue decreased by
0.1% year-on-year to Rmb11,942.78 million, and profit attributable to owners of the Company
decreased by 19.2% year-on-year to Rmb2,997.34 million, and ROE (return on equity) was
12.4%. The Directors recommended a dividend of Rmb35.5 cents per share, an indication of the
Group’s ability to provide stable shareholder returns.
The Group’s core toll road operations business recorded toll revenue of Rmb6,379.59
million during the Period, which contributed 53.4% of total revenue. Despite the negative
impact of Covid-19 on the expressway sector, the Group did not slow down the pace of
development, but actively enhanced its operational and innovation capabilities in order to
consolidate its core competitive advantages. The Group continued to build a renowned brand
for expressway operations and services. By promoting projects, including the construction
of intelligent expressways, improving operational and service quality, as well as enhancing
environmental-driven expressway management and maintenance, the Group achieved partial
success during the Period. In particular, the Group completed the first phase of construction of
13
ANNUAL REPORTChairman’s Statement intelligent Shanghai-Hangzhou-Ningbo Expressway in an orderly manner, and developed the
first big data cloud platform and supporting algorithms for intelligent expressways in Zhejiang
Province. Furthermore, the Group continued to refine service processes and optimize resource
allocation, with an aim to effectively improve service quality and operational efficiency.
While the Group continued to focus on strengthening its core toll road operations business, it
also proactively pursued the investment and M&A projects at home and abroad to steadily pave
the way for its overseas development. During the Period, the investment in Turkey’s ICA Project
Company, which the Group participated in, progressed smoothly with approvals underway.
In addition, the Group held an extraordinary general meeting in December 2020, which
approved and confirmed the acquisitions of a 30% equity interest in HangNing Co and 100%
equity interest in LongLiLiLong Co. HangNing Co is principally engaged in the operation and
management of toll collection business of the Zhejiang Section of the HangNing Expressway,
and LongLiLiLong Co is principally engaged in the operation and management of toll collection
business of the LongLiLiLong Expressways located in Zhejiang Province. The acquisition of
LongLiLiLong Co increased the total length of expressways operated by the Group from 802km
to 1,024km, further strengthening the scale of the Group’s core toll road operation business.
The acquisition of HangNing Co which has sound operating results, is expected to improve the
Group’s sustainable profitability over the long term.
During the Period, the domestic capital markets experienced short-term volatility at the
beginning of the year due to the Covid-19 epidemic. However, as the epidemic in China
stabilized, supported by several favorable policies, trading volumes on the overall capital
markets were high. The Group’s securities business recorded strong results, which helped to
offset pressure on the toll road operations business. Revenue increased by 54.1% year-on-year
to Rmb5,087.34 million. During the Period, the key businesses of Zheshang Securities, including
brokerage, wealth management, investment banking and asset management, showed favorable
momentum and achieved high-quality development. In addition, Zheshang Securities completed
the strategic acquisition of 9 securities business branches of China Development Bank
Securities, further optimizing its service network. With the continuous optimization of Zheshang
Securities’ service, business, management and control, as well as governance capabilities, the
Group further enhanced its competitive advantages in the securities industry and bolstered its
economies of scale.
14
Chairman’s Statement Looking ahead, uncertainties remain in the global epidemic and macro environment,
China’s economy continues to face risks and challenges. However, under the guidance and
implementation of the 14th Five-Year Plan, China will accelerate positive interplay between
domestic circulation and international circulation, promote its “dual-cycle” development plan that
covers domestic and overseas markets, and fully open up a new chapter of high-quality and
sustainable development. The Group will actively take advantage of the opportunities brought
by the 14th Five-Year Plan, solidly strive for the project goals of all businesses, explore new
business and profit growth drivers, and accelerate its pace towards “striving for excellence”.
Meanwhile, the Group will continue to improve safety and risk control standards, as well as
implement regular epidemic containment, which should help to enhance the Group’s overall
emergency response capability.
For the core toll road operations business, the Group will continue to build a renowned brand
for expressway operations and services, increase its commitment to intelligent expressways,
scientific management and maintenance, and brand promotion, in order to drive optimization and
upgrades across toll road operations and services. Meanwhile, the Group will proactively explore
investment and M&A opportunities at home and abroad to accelerate overseas development.
For the securities business, the Group will continue to optimize its business and strive to build
a comprehensive financial platform that covers securities, insurance, futures, financial leasing,
fintech and others, which should help the Group steadily pave the way to becoming a top-tier
securities company in China.
On behalf of the Board, I would like to thank our investors, shareholders, business partners,
customers, management team and employees for your support. 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 23, 2021
15
ANNUAL REPORT 16
Chairman’s StatementSteadily Pursuing High-quality Sustainable Development and Providing Stable Returns to ShareholdersThe Group effectively responded to the impacts brought about by the macro environment, and steadily pursued high-quality sustainable development. The Group's overall annual results remained stable with a ROE (return on equity) of 12.4%. The Directors recommended a dividend of Rmb35.5 cents per share, an indication of the Group's ability to provide stable shareholder returns. BUSINESS REVIEW
In 2020, the global economy experienced a downturn and the development of the Chinese
economy also faced tremendous pressure and challenges, due to the sudden outbreak of
novel coronavirus (“Covid-19”) epidemic. In the face of the complicated environment at home
and abroad, particularly the shock brought about by the epidemic, the Chinese government
organized and supported containment of the epidemic as well as economic and social
development activities. As a result, the epidemic was effectively controlled in China, and both
work and production resumed at an orderly pace. China’s GDP growth rate started to recover
and turned positive in the second quarter, and recorded consecutive increases in the following
quarters. For the full year 2020, GDP rose 2.3% year-on-year, indicating a steady recovery
of the Chinese economy. GDP for Zhejiang Province increased 3.6% year-on-year in 2020,
which was 1.3 percentage points higher than the national average, as it benefited from a rapid
recovery in the Province’s industrial production, service industry, online retailing and foreign
trade.
During the Period, toll revenue of the Group’s expressways decreased significantly as affected
by the epidemic and subsequent implementation of a toll-free policy. Nevertheless, revenue from
the Group’s securities business recorded substantial growth, as the Chinese capital markets
quickly recovered, and bolstered the Group’s overall revenue. During the Period, total revenue
of the Group was Rmb11,942.78 million, representing a decrease of 0.1% year-over-year, of
which Rmb6,379.59 million was generated by the seven major expressways operated by the
Group (2019: total revenue of Rmb8,061.01 million), representing 53.4% of the total revenue.
Revenue generated by the securities business was Rmb5,087.34 million (2019: total revenue of
Rmb3,300.78 million), representing 42.6% of the total revenue.
17
ANNUAL REPORTManagement Discussion and Analysis LUO Jianhu
Executive Director and
General Manager
18
Management Discussion and Analysis A breakdown of the Group’s revenue for the Period is set out below:
Toll road operation 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 and catering
Construction
Total revenue
2020
Rmb’000
2019
Rmb’000
% change
3,216,475
960,320
380,889
450,251
100,792
555,322
715,537
3,266,806
1,820,534
125,336
350,513
4,142,879
1,187,813
437,095
579,551
138,506
694,497
880,666
1,727,942
1,572,835
169,576
423,906
11,942,775
11,955,266
–22.4%
–19.2%
–12.9%
–22.3%
–27.2%
–20.0%
–18.8%
89.1%
15.7%
–26.1%
–17.3%
–0.1%
Toll Road Operations
At the start of 2020, as the Covid-19 epidemic broke out in China, Zhejiang Province activated
first-level public health emergency response between January 23, 2020 and March 2, 2020
that reduced vehicle traffic and passenger flow significantly. In order to effectively control the
epidemic, the Ministry of Transport of the People’s Republic of China extended the Spring
Festival toll-free period for small passenger vehicles travelling on the nation’s toll roads to
February 8, 2020, which was originally set from January 24, 2020 to January 30, 2020. It also
announced an additional toll-free policy for all vehicles travelling on the nation’s toll roads from
February 17, 2020 to May 5, 2020. The epidemic and toll-free policy significantly impacted the
Group’s toll revenue during the Period.
19
ANNUAL REPORT
20
Management Discussion and AnalysisStriving to Strengthen the Core Toll Road Operations Business and Proactively Pursuing Investment and M&A The Group continued to build a renowned brand for expressway operations and services, and achieved partial successes during the Period, including the construction of intelligent expressways. Moreover, the Group proactively pursued investment and M&A projects at home and abroad to steadily pave the way for its overseas development. In January 2021, the Group completed the acquisitions of a 30% equity interest in HangNing Co and 100% equity interest in LongLiLiLong Co, further strengthening the scale of the Group's core toll road operations business. To encourage the resumption of work and production for enterprises, from February 12, 2020
to August 5, 2020, Zhejiang Province expanded the scope of a 15% discount on state-owned
expressway tolls from all qualified trucks in Zhejiang Province with ETC registration to all
qualified trucks in China that have ETC registration. It also increased the discount from 5%
to 15% for Class-3 and Class-4 passenger vehicles with ETC registrations travelling on all
toll roads in Zhejiang Province. In addition, from February 12, 2020, expressways in Zhejiang
Province started offering a 35% discount on tolls for all container trucks of international
standards, and stopped charging entrance fees. The above-mentioned increases in discounts
also negatively impacted the Group’s toll revenue during the Period.
After toll collection resumed on May 6, 2020, traffic volume on the Group’s expressways
recovered to pre-epidemic levels and maintained steady growth. This was mainly because:
(1) China effectively contained the epidemic and fully activated the resumption of work and
production, driving a rapid recovery of road transportation demand; (2) The severe epidemic
overseas affected manufacturing capacity, leading to an increase in demand for exports from
China and a large number of overseas manufacturing orders were transferred to China, which
resulted in an increase in demand for domestic freight; (3) The toll-free policy and the discount
policies for trucks with ETC registration had positively induced traffic volume. Consequently,
toll revenue from the Group’s expressways recorded positive year-on-year growth after the
resumption of toll collections. However, toll revenue trailed the growth in traffic volume, mainly
due to the implementation of the ETC registration discount policy.
Furthermore, traffic volume on certain sections of the Group’s expressways in different regions
was variously impacted by changes in local government policies in the regions, changes in
the neighboring competitive or synergistic road networks, the development of other modes of
transportation and other factors. As a result, traffic volume on the Group’s expressways varied
during the Period.
21
ANNUAL REPORT 22
Management Discussion and AnalysisZheshang Securities Recorded Strong Results and Further Enhancing its Core Competitive Advantages The Group's securities business showed favorable momentum. With the continuous optimization of Zheshang Securities' service, business, management and control, as well as governance capabilities, the Group further enhanced its competitive advantages in the securities industry and bolstered its economies of scale. From September 1, 2020 to December 31, 2021, the Jiaxing Municipal Government will pay
the tolls for all Class-1 passenger vehicles with local license plates and ETC registration
travelling on the Jiaxing Urban Section of Shanghai-Hangzhou Expressway. From November
10, 2020 to November 9, 2021, the Jiashan County Government will pay the tolls for all Class-1
passenger vehicles with local license plates and ETC registration travelling on the Jiashan
Section of Shanghai-Hangzhou Expressway. The passenger vehicle traffic volume on the
Shanghai-Hangzhou Expressway has benefited from the government support.
Since May 10, 2020, the road from Desheng to Hongken of the Hangzhou Urban
Section has been closed for construction, which negatively affected traffic volume on the
Shanghai-Hangzhou-Ningbo Expressway. Subway Line 16 in Hangzhou opened on April 23,
2020 and the slow recovery of cross-province tourism adversely impacted traffic volume on the
Hanghui Expressway and Huihang Expressway, respectively. The opening of a north connection
road for the Hangzhou Bay Bridge on January 1, 2020 negatively impacted traffic volume on the
Shenjiahuhang Expressway. The opening of the Fuchimen Bridge on September 29, 2019 also
adversely impacted traffic volume on the Zhoushan Bay Bridge.
Looking back at 2020, even though the epidemic and toll-free policy caused relatively significant
short-term shocks to the Group’s toll road operations business, the Group adhered to the
government’s epidemic prevention and control plans, implemented the toll-free policy without
sacrificing service, comprehensively elevated toll collection service quality, made all efforts
to ensure safe and smooth traffic flow, and significantly improved traffic efficiency of different
road sections. At the same time, the Group enhanced its communication and cooperation with
culture and tourism parties, fully leveraging the benefits of “expressway + tourism”. Since the
resumption of toll collection, the Group’s toll road operations business has gradually stabilized,
with toll revenue and traffic volume both maintaining steady growth.
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 Rmb6,379.59 million.
23
ANNUAL REPORT 24
Management Discussion and AnalysisContinuously Strengthening Operational Capabilities and Accelerating High-quality Sustainable DevelopmentThe Group will leverage its competitive advantages, keep on enhancing its core toll road operations business, and optimize its securities business, amid the complex and rapidly-changing economic situation at home and abroad. The management will constantly monitor changes in government policies and the external environment to appropriately adjust the Company's operating strategy according to its development needs, constantly strengthen its operating capabilities, and also consistently expand the scale of its core toll road business through investment and M&A with manageable risk to accelerate high-quality sustainable development for the Company. During the Period, the daily average traffic volume in full-trip equivalents, toll revenue and the
corresponding year-on-year growth rates on the Group’s expressways are listed below:
2020
Traffic Volume
Toll Revenue
The Group’s expressways
Shanghai-Hangzhou-Ningbo
Expressway
Average
Traffic
Volume
(in Full-Trip
Equivalents)
Year-on-year
Change
Toll
Revenue
Year-on-year
Change
(RMB million)
72,158
12.52%
3,216.48
–22.4%
– Shanghai-Hangzhou Section
72,089
11.78%
– Hangzhou-Ningbo Section
72,209
13.06%
Shangsan Expressway
37,045
22.07%
960.32
–19.2%
Jinhua Section, Ningbo-Jinhua
Expressway
Hanghui Expressway
Huihang Expressway
Shenjiahuhang Expressway
28,989
19.14%
380.89
–12.9%
23,233
8,430
32,950
8.41%
5.87%
7.77%
450.25
–22.3%
100.79
–27.2%
555.32
–20.0%
Zhoushan Bay Bridge
20,891
–4.32%
715.54
–18.8%
Securities Business
The domestic capital markets experienced certain volatility at the beginning of 2020 due to the
Covid-19 epidemic. However, trading volumes on the domestic capital markets remained high
as benefited from the effective epidemic containment in China, steady economic recovery, as
well as policy reforms such as the registration-based IPO system. Zheshang Securities achieved
strong results during the Period as it fully took advantage of market opportunities, strengthened
its risk management capabilities, optimized and adjusted its business structure, as well as
enhanced its core business competitiveness. In particular, investment banking, securities margin
trading and brokerage were the major growth drivers.
25
ANNUAL REPORT
During the Period, Zheshang Securities recorded total revenue of Rmb5,087.34 million, an
increase of 54.1% year-on-year, of which, commission and fee income increased 89.1%
year-on-year to Rmb3,266.81 million, and interest income from the securities business was
Rmb1,820.53 million, an increase of 15.7% 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 Rmb1,483.02 million (2019: securities investment
gains of Rmb1,343.47 million).
Other Business Operations
During the Period, other business revenue was mainly derived from hotel operations and road
construction. Hotel operations, in particular, recorded a significant decrease in revenue due to
the adverse impact of the Covid-19 epidemic.
Zhejiang Grand Hotel, owned by Zhejiang Grand Hotel Limited (a 100% owned subsidiary of the
Company), recorded revenue of Rmb51.45 million for the Period (2019: revenue of Rmb71.24
million). Grand New Century Hotel, owned by Zhejiang Yuhang Expressway Co., Ltd. (a 51%
owned subsidiary of the Company), recorded revenue of Rmb73.89 million for the Period (2019:
revenue of Rmb98.34 million).
Deqing County De’an Highway Construction Co., Ltd. (an 80.1% owned subsidiary of the
Company), recorded road construction revenue of Rmb350.51 million for the Period (2019:
revenue of Rmb423.91 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 26,728, representing
an increase of 14.53% year-on-year. Toll revenue of Rmb378.18 million (2019: toll revenue
of Rmb426.73 million) was adversely affected by the epidemic and toll-free policy. During the
Period, the joint venture recorded a net profit of Rmb32.56 million (2019: net profit of Rmb69.88
million).
26
Management Discussion and Analysis Zhejiang Communications Investment Group Finance Co., Ltd. (an associate of the Company,
the equity stake of which was diluted from 35% to 20.08% in April 2020) derives income mainly
from interest, fees and commissions for providing financial services, including arranging loans
and receiving deposits, for Zhejiang Communications Investment Group Co., Ltd., the controlling
shareholder of the Company, and its subsidiaries. During the Period, the associate company
recorded a net profit of Rmb636.83 million (2019: net profit of Rmb400.77 million).
Yangtze United Financial Leasing Co., Ltd. (a 10.61% owned associate of the Company) is
primarily engaged in the finance leasing business, which includes the transferring and receiving
of financial leasing assets, fixed-income securities investments, and other businesses approved
by the China Banking and Insurance Regulatory Commission. During the Period, the associate
company recorded a net profit of Rmb330.90 million (2019: net profit of Rmb155.76 million).
Shanghai Rural Commercial Bank Co., Ltd. (a 5.36% owned associate of the Company) is
primarily engaged in the 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. As at the date of this results
announcement, this associate has not announced its 2020 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 Rmb2,997.34
million, representing a decline of 19.2% year-on-year, basic earnings per share for the Company
was Rmb69.01 cents, representing a decline of 19.2%, diluted earnings per share for the
Company was Rmb68.32 cents, representing a decline of 17.1%, and return on owners’ equity
was 12.4%, representing a decline of 27.9% year-on-year.
27
ANNUAL REPORT Liquidity and financial resources
As at December 31, 2020, current assets of the Group amounted to Rmb91,602.22 million
in aggregate (December 31, 2019: Rmb68,703.77 million), of which bank balances, clearing
settlement fund, deposits and cash accounted for 9.8% (December 31, 2019: 12.2%), bank
balances and clearing settlement fund held on behalf of customers accounted for 29.6%
(December 31, 2019: 29.3%), financial assets at FVTPL accounted for 31.8% (December 31,
2019: 32.4%), and loans to customers arising from margin financing business accounted for
16.4% (December 31, 2019: 12.7%). The current ratio (current assets over current liabilities)
of the Group as at December 31, 2020 was 1.30 (December 31, 2019: 1.40). 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 1.50 (December 31, 2019: 1.60).
The amount of financial assets at FVTPL included in current assets of the Group as at
December 31, 2020 was Rmb29,158.09 million (December 31, 2019: Rmb22,235.48 million), of
which 74.3% was invested in bonds, 5.7% was invested in stocks, 14.4% 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 Rmb210.48
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.
As at December 31,
2020
Rmb’000
8,609,049
23,986
313,600
29,158,094
2019
Rmb’000
8,076,598
–
302,726
22,235,480
38,104,729
30,614,804
Cash and cash equivalents
Restricted bank balances and cash
Time deposits
Financial assets at fair value through profit or loss
Total
28
Management Discussion and Analysis
Borrowings and solvency
As at December 31, 2020, total liabilities of the Group amounted to Rmb92,611.17 million
(December 31, 2019: Rmb72,594.84 million), of which 15.4% was bank and other borrowings,
6.8% was short-term financing note, 21.7% was bonds payable, 12.4% was financial assets
sold under repurchase agreements and 29.2% was accounts payable to customers arising from
securities business.
As at December 31, 2020, total interest-bearing borrowings of the Group amounted to
Rmb40,644.20 million, representing an increase of 6.4% compared to that as at December 31,
2019. The borrowings comprised outstanding balances of domestic commercial bank loans of
Rmb6,667.48 million, balances of an international commercial bank loan, denominated in Euro
that equivalents to Rmb2,933.47 million, borrowings from a domestic financial institution of
Rmb4,617.58 million, borrowings from a domestic institution of Rmb50.04 million, short-term
financing notes of Rmb4,518.47 million, beneficial certificates of Rmb1,788.25 million. mid-term
notes of Rmb3,062.37 million, subordinated bonds of Rmb12,632.85 million, corporate bonds
of Rmb3,510.34 million, asset backed securities of Rmb862.58 million, and convertible bonds
denominated in Euro that equivalents to Rmb0.77 million. Of the interest-bearing borrowings,
53.2% was not payable within one year.
29
ANNUAL REPORT As at December 31, 2020, the Group’s borrowings from domestic commercial banks bore
an annual floating interest of 4.21% and 4.7%, and annual fixed interest rates ranged from
2.05% to 5.3%, borrowings from an international bank bore an annual floating interest of
0.8%, borrowings from a domestic financial institution bore an annual floating interest rate of
4.21%, and annual fixed interest rates ranged from 3.6% to 4.21%, borrowings from a domestic
institutions bore annual fixed interest rate of 2.5%. As at December 31, 2020, the annual fixed
interest rates of beneficial certificates ranged from 2.9% to 3.45%, the annual floating interest of
beneficial certificates ranged from 3.0% to 10.65%, the annual fixed interest rates of short-term
financing notes ranged from 3.01% to 3.18%, 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
3.5% and 5.28%. The annual fixed interest rates for corporate bonds were 3.48% and 3.85%.
The annual fixed interest rate for asset backed securities was 3.7%. The annual coupon rate
for convertible bond denominated in Euro was nil, while the annual interest rate for accounts
payable to customers arising from the securities business was fixed at 0.35%.
30
Management Discussion and Analysis Floating rates
Borrowings from domestic
commercial banks
Borrowings from an international
commercial bank
Borrowings from a domestic
financial institution
Beneficial Certificates
Fixed rates
Borrowings from domestic
commercial banks
Borrowings from a domestic
financial institution
Borrowings from a domestic
institution
Beneficial Certificates
Short-term financing notes
Subordinated bonds
Corporate bonds
Mid-term notes
Asset backed securities
Convertible bonds
Gross
amount
Rmb’000
Maturity Profile
Within
1 year
Rmb’000
2-5 years
inclusive
Rmb’000
Beyond
5 years
Rmb’000
6,492,283
864,483
2,903,400
2,724,400
2,933,477
2,933,477
–
1,986,552
448,118
2,552
448,118
1,984,000
–
175,196
175,196
–
2,631,026
2,323,026
308,000
50,038
1,340,128
4,518,470
12,632,847
3,510,345
3,062,374
862,581
766
50,038
1,340,128
4,518,470
4,732,847
1,510,345
62,374
56,198
–
–
–
–
7,900,000
2,000,000
3,000,000
208,933
766
–
–
–
–
–
–
–
–
–
–
–
597,450
–
Total as at December 31, 2020
40,644,201
19,017,252
18,305,099
3,321,850
Total as at December 31, 2019
38,206,725
16,205,855
15,812,078
6,188,792
Total interest expenses and profit before interest and tax for the Period amounted to
Rmb1,745.39 million and Rmb6,860.10 million, respectively. The interest cover ratio (profit
before interest and tax over interest expenses) stood at 3.9 (2019: 4.5) times.
Profit before tax and interest
Interest expenses
Interest cover ratio
2020
Rmb’000
6,860,099
1,745,389
3.9
2019
Rmb’000
7,393,403
1,626,809
4.5
As at December 31, 2020, the asset-liability ratio (total liabilities over total assets) of the Group
was 71.2% (December 31, 2019: 69.4%). 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 63.7% (December 31,
2019: 62.3%).
31
ANNUAL REPORT
Capital structure
As at December 31, 2020, the Group had Rmb37,452.21 million in total equity, Rmb67,261.14
million in fixed-rate liabilities, Rmb12,752.44 million in floating-rate liabilities, and Rmb12,597.59
million in interest-free liabilities, representing 28.8%, 51.7%, 9.8% and 9.7% 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 175.0%
as at December 31, 2020 (December 31, 2019: 164.4%).
Total equity
Fixed rate liabilities
Floating rate liabilities
Interest-free liabilities
As at December 31, 2020
As at December 31, 2019
Rmb’000
%
Rmb’000
%
37,452,212
67,261,140
12,752,440
12,597,592
28.8%
51.7%
9.8%
9.7%
31,982,111
59,376,440
8,401,670
4,816,733
30.6%
56.8%
8.0%
4.6%
Total
130,063,384
100.0%
104,576,954
100.0%
Long-term interest-bearing liabilities
21,925,843
16.9%
22,189,642
21.2%
Gearing ratio 1 (note)
Gearing ratio 2 (note)
Asset-liabilities ratio 1 (note)
Asset-liabilities ratio 2 (note)
175.0%
58.5%
71.2%
63.7%
164.4%
69.4%
69.4%
62.3%
Note:
Gearing ratio 1 represents the total liabilities less balance of accounts payable to customers arising from securities
business to the total equity; Gearing ratio 2 represents the total amount of the long-term interest-bearing liabilities to
the total equity; Asset-liabilities ratio 1 represents total liabilities to total assets; Asset-liabilities ratio 2 represents total
liabilities less balance of accounts payable to customers arising from securities business to total assets less bank
balances and clearing settlement fund held on behalf of customers.
32
Management Discussion and Analysis
Capital expenditure commitments and utilization
During the Period, capital expenditure of the Group totaled Rmb3,557.08 million. Amongst the
total capital expenditure, Rmb3,119.40 million was incurred for acquiring equity investments,
Rmb152.73 million was incurred for acquisition and construction of properties, and Rmb284.95
million was incurred for purchase and construction of equipment and facilities.
As at December 31, 2020, the capital expenditure committed by the Group totaled Rmb3,011.36
million. Amongst the total capital expenditures committed by the Group, Rmb1,245.00 million
will be used for acquiring equity investments, Rmb370.44 million will be used for acquisition and
construction of properties and Rmb1,395.92 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, Rmb202.00 million of the bank loans had been repaid. As at December 31,
2020, the remaining bank loan balance was Rmb1,083.00 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, 2020, the remaining bank balance was Rmb1,276.24 million and Rmb4,724.45
million respectively.
33
ANNUAL REPORT 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, 2020, the remaining bank balance
was Rmb491.60 million.
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, 2020, the remaining balance was Rmb1,237.81 million.
For the Rmb2,013.00 million asset backed securities issued on September 23, 2019. During
the Period, Rmb45.99 million of the senior class securities had been repaid, the remaining
Rmb854.01 million will be secured by the Company.
Except for the above, as at December 31, 2020, 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, (iii) issuance of the zero coupon convertible bond
with remaining balance of Euro 0.10 million in Hong Kong capital market in April 2017, which
will be due in April 2022; and (iv) the short term international commercial bank borrowing in April
2020 amounted to Euro364.90 million, 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.
34
Management Discussion and Analysis The amount of the Net Proceeds brought forward to the twelve months ended December
31, 2020 was approximately Euro13.21 million (including the unutilized Net Proceeds as at
December 31, 2019 of approximately Euro6.17 million and the deposit interest thereon accrued
of approximately Euro7.04 million). Detailed breakdown and description of the Net Proceeds
utilized during the twelve months ended December 31, 2020 are set out below:
Amount
of the Net
Proceeds
utilized
for the twelve
months ended
December 31,
2020
(Euro)
(million)
Deposit
interest of
the Net
Proceeds
for the
twelve months
ended
December 31,
2020
(Euro)
(million)
Unutilized
Net
Proceeds as at
December 31,
2020
(Euro)
(million)
Actual Net
Proceeds as
at January 1,
2020
(Euro)
(million)
Usages of the Net Proceeds
Daily operating expenses
13.21
(13.37)
0.16
–
The Net Proceeds were used in line with the use of the Net Proceeds as disclosed previously.
OUTLOOK
Looking forward to 2021, with the continuous advancements of Covid-19 vaccine R&D and
manufacturing around the world, the adverse impact of the epidemic on the global economy may
gradually reduce. But at the same time, uncertainty about virus mutations and imbalances in
the vaccine rollout could cause an unstable and unbalanced global economic recovery. Facing
such a complicated external environment, the Chinese government will accelerate its new
development pattern that “takes the domestic circulation as the mainstay, while the domestic
and international circulations complement and reinforce each other”, with an aim to continuously
stimulate and expand domestic demand, and to optimize the business environment for core
markets. As a result, the Chinese economy is expected to maintain steady recovery. The overall
traffic volume on the Group’s expressways is expected to see stable growth in 2021, while toll
revenue will hopefully achieve higher growth given the low base of comparison.
35
ANNUAL REPORT
Given that the implementation of the toll-free policy has caused a relatively significant impact
on the performance of toll road operators, the Ministry of Transport of the People’s Republic
of China indicated that concessions for toll roads will be extended, where appropriate, as
compensation to operators. In 2021, the Group will continue to coordinate with the relevant
authorities of Zhejiang Province to seek compensation by way of concession extension.
On January 19, 2021, the Company completed the acquisition of 100% equity interest in
LongLiLiLong Co, which then became a wholly owned subsidiary of the Company. The total
length of expressways operated by the Group increased from 802km to 1,024km, further
strengthening the scale of the Group’s core business. On January 27, 2021, the Company
completed the acquisition of 30% equity interest in HangNing Co, which then became an
associate of the Company. The strong operating results of HangNing Co will reinforce the
Group’s profitability.
The Group will develop expressways which demonstrate the “Five Objectives”, namely, intelligent,
friendly, comfortable, safe and market-oriented, and for this purpose it will constantly accelerate
intelligent upgrades and renovations on the Shanghai-Hangzhou-Ningbo Expressway to realize
intelligent operations on all sections of the road, deepen its initiatives that attract traffic, such as
“expressway + tourism”, innovate differentiated toll collection solutions, and continue to expand
opportunities for revenue generation. In addition, the Group will further strengthen its intelligent
management capabilities, comprehensively advance road maintenance quality, continuously
optimize the environment of toll stations, and remain focused on establishing its brand
characteristics and elevating its brand identity and reputation. The Group will also constantly
enhance its ability to ensure safe and smooth traffic flow, improve operation and service level,
and strive to build a renowned brand for expressway operations and services in China.
36
Management Discussion and Analysis The Chinese government will progressively deepen capital market reforms and open-up, steadily
pursue the reform towards the registration-based IPO system, and adopt effective measures to
maintain normal level of IPO and refinancing activities, and steadily develop the bond market.
The Chinese government will also optimize the capital markets’ internal stability mechanism to
maintain the solid development momentum of the capital markets in a complicated environment.
Zheshang Securities will strengthen its ability to monitor and study the market situation, fully
take advantage of market opportunities, optimize and adjust its business structure, improve its
comprehensive service capabilities, coordinate resource allocation and continuously strengthen
its risk management, with the aim to fully improve its business scale and competitiveness, and
elevate its brand influence.
The Group will leverage its competitive advantages, keep on enhancing its core toll
road operations business, and optimize its securities business, amid the complex and
rapidly-changing economic situation at home and abroad. The management will constantly
monitor changes in government policies and the external environment to appropriately adjust
the Company’s operating strategy according to its development needs, constantly strengthen
its operating capabilities, and also consistently expand the scale of its core toll road business
through investment and M&A with manageable risk to accelerate high-quality sustainable
development for the Company.
HUMAN RESOURCES
During the Period, the Company actively revamped its human resource management, enhanced
its remuneration and performance systems, and linked the increase in employees’ remuneration
with the operating performance of the Company and the individual performance of employees.
As at December 31, 2020, there were 8,055 employees within the Group, amongst whom 4,449
mainly worked in the related positions of the toll road operation business and 3,606 worked in
the related positions of the securities business.
37
ANNUAL REPORT TOLL ROAD BUSINESS RISKS
Economic Environment
In view of the current spread of COVID-19 epidemic and the uncertainty brought by the volatility
of financial markets, China’s economy will still face a complex and harsh external environment.
As the expressway toll road business is closely related to the macroeconomy and the
unpredictable nature of the epidemic evolution will still bring some uncertainty to the recovery
and development of China’s economy, there is no assurance that the growth of the traffic volume
and toll revenue of the Group’s expressways will not be negatively affected in the future.
Roads Competition
Affected by the surrounding newly built roads as well as road construction and traffic control
along the expressways, the Group is faced with a more complicated roads competition. It is
expected that the closure of Qiantang River Second Bridge for construction work before the end
of June 2021 and the prohibition of entry of semi-trailers on the East-West Line of the Hangzhou
City Highway from February 2021 to before the opening of the North Link Expressway of
Qiantang River Tunnel will significantly reduce the traffic volume of semi-trailers on the relevant
section of the Group’s Shanghai-Hangzhou-Ningbo Expressway. The opening of Hangzhou
Ring Road Western Parallel Line in December 2020 is expected to cause certain traffic volume
diversion to the Group’s parallel Lianhang section of the Shenjiahuhang Expressway and
Wukang to Nanzhuangdou Hub section of the Nanjing-Hangzhou Expressway, in which the
Group has equity interests. The opening of Jiangsu section of the Changyi Expressway in early
2021 is expected to significantly divert the traffic volume of the parallel Nanjing-Hangzhou
Expressway. In addition, the Hangzhou–Shaoxing–Taizhou Expressway is planned to open
in October, 2021, which is expected to cause certain traffic volume diversion to the Group’s
adjacent Shaoxing section of the Hangzhou-Ningbo Expressway and the parallel Shangsan
Expressway. Accordingly, there is no assurance that the operating results of the Group will not
be negatively affected in the future.
38
Principal Risks and Uncertainties Toll Policy
The Zhejiang Provincial Government decided to extend the 15% discount on tolls for all qualified
trucks with ETC in-vehicle device issued by the Zhejiang Province to December 31, 2021.
The provincial government will extend the toll subsidy for ETC small passenger vehicles on
the Group’s Yuhang, Jiaxing and Jiashan sections of the Shanghai-Hangzhou Expressway,
Yiwu section of the Ningbo-Jinhua Expressway, Yuhang and Linan sections of the Hanghui
Expressway, Huzhou section of the Shenjiahuhang Expressway as well as Yuhang section of the
Hangzhou-Ningbo Expressway to December 31, 2022. The preferential policy for international
standard container trucks on the Group’s Zhoushan Bay Bridge will also be extended to
December 31, 2022. Currently, we expect the possibility of further significant changes in the
policies of the expressway industry in the near term is minimal, however we cannot be assured
that the toll revenue of the expressways under the Group will not be adversely affected in the
future.
39
ANNUAL REPORT SECURITIES BUSINESS RISKS
Market Fluctuations
The securities business is highly susceptible to market fluctuations and may experience periods
of high volatility accompanied by reduced liquidity. It may be materially affected by economic
and other factors such as the global market conditions; the availability and cost of capital; the
liquidity of the global markets; the level and volatility of stock prices, commodity prices and
interest rates; currency values and other market indices; inflation; natural disasters; acts of war
or terrorism; as well as investor sentiment and confidence in the financial markets. There is no
assurance as to whether our securities business will be adversely affected by fluctuations in the
market, or whether our securities business will continue to contribute to our overall profit margin.
Regulation of the Securities Business
We are subject to extensive regulations in the PRC that govern how we conduct our securities
business, and we are subject to risks of intervention by the PRC regulatory authorities. We could
be fined, prohibited from engaging in some of our business activities or subject to limitations
or conditions on our business activities, among other things. Significant regulatory actions
against us could have material adverse impacts on our financial position, cause us significant
reputational harm, or harm our business prospects. New laws, regulations or changes in the
enforcement of existing laws or regulations applicable to our clients may also adversely affect
our business.
FINANCIAL RISKS
For financial risks and uncertainties of the Group, please see notes 5, 51 and 52 to the
Consolidated Financial Statements.
40
Principal Risks and Uncertainties STATEMENT OF RESPONSIBILITY FROM THE
DIRECTORS WITH RESPECT TO THE ANNUAL REPORT
AND THE COMPANY’S ACCOUNTS
The Directors of the Company, whose names and functions are listed on pages 58 to 63, 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 2020 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 23, 2021
41
ANNUAL REPORT 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, except for the Code E.1.3 the Company has complied with all the other
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. CHEN Ninghui
(Appointed, with effect from May 15, 2020)
Mr. CHENG Tao
(Resigned, with effect from May 15, 2020)
Ms. LUO Jianhu
(General Manager)
42
Corporate Governance Report The 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. FAN Ye
Mr. YU Ji
(Appointed, with effect from May 15, 2020)
(Resigned, with effect from May 15, 2020)
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 their respective terms of office, the Board held a total of ten meetings. Individual
attendances by the directors (as indicated by the numbers of meetings attended/numbers of
relevant meetings held) are as follows:
Attendance in
person
Attendance
by proxy
Attendance
through
communication
Mr. YU Zhihong (Chairman)
Mr. CHEN Ninghui
Mr. CHENG Tao (Resigned)
Ms. LUO Jianhu (General Manager)
Mr. DAI Benmeng
Mr. YUAN Yingjie
Mr. YU Qunli (Resigned)
Mr. FAN Ye
Mr. YU Ji (Resigned)
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang, Rosa
Mr. CHEN Bin
4/10
3/6
6/10
4/10
5/10
2/6
2/4
6/10
6/10
4/10
2/10
3/4
2/10
1/10
1/6
1/4
2/10
4/10
3/6
1/4
4/10
4/10
4/10
3/6
1/4
4/10
4/10
4/10
43
ANNUAL REPORT
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.
According to the “Reply of the State Council on the Adjustment of the Provisions Applicable
to the Notice Period for the Holding Shareholders’ General Meetings for Overseas Listed
Companies” (Guo Han[2019] No. 97), it was agreed that the requirements on the notice period
of the general meetings, shareholders’ proposal rights and convening procedures for joint
stock companies incorporated in China and listed overseas shall be uniformly governed by the
relevant provisions under the Company Law instead of the Special Regulations on the Overseas
Offering and Listing of Shares by Joint Stock Limited Companies issued by the State Council of
the PRC. Pursuant to this, the Company made the corresponding amendments to the Articles of
Association, which were considered and approved at the 2019 Annual General Meeting held on
May 15,2020. In the revised Articles of Association of the Company, the following amendments
were made in respect of the forty-five days advance notice period for convening shareholders’
general meetings: “When the Company convenes an annual general meeting, a notice shall be
given to all shareholders twenty days prior to the date of the meeting; and when the Company
convenes an extraordinary general meeting, a notice shall be given to all shareholders fifteen
days prior to the date of the meeting.” As such, the Company’s notice period for convening
a shareholders’ meeting is not in compliance with the provision E.1.3 as stipulated in the
Corporate Governance Code.
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.
44
Corporate Governance Report 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
and the number of independent non-executive Directors (three) appointed represents at least
one-third of Board members of the Company (a total of nine).
Pursuant to Rule 3.13 of the Listing Rules, the Company had specifically inquired with all
three independent non-executive directors and received their respective and immediate family
members confirmation of independence during the Period. The three independent non-executive
directors have all confirmed their compliance with requirements regarding independence under
Rule 3.13 of the Listing Rules. The Company still considers the independent non-executive
directors to be independent.
There were no financial, business, family or other material or relevant relationships between
members of the Board, including that between the Chairman and the General Manager of the
Company.
Each newly appointed director receives induction on the first occasion of his or her appointment,
so as to ensure that he or she has appropriate understanding of the business and operations of
the Company and that he or she is fully aware of his or her responsibilities and obligations under
the Listing Rules and relevant regulatory requirements. Directors are also regularly updated
on the Group’s business and industry environments where appropriate in the management’s
monthly reports to the Board as well as briefings and materials circulated to the Board before
board meetings.
45
ANNUAL REPORT 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.
46
Corporate Governance Report SPECIAL COMMITTEES UNDER THE BOARD
The Board has set up the Audit Committee, the Nomination Committee, the Remuneration
Committee, and the Strategic Committee. During the period, the Company has made the
corresponding amendments to the Audit Committee Terms of Reference in accordance with
relevant provisions as set out in the latest Corporate Governance Code and the Listing Rules.
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.
During the Period, Mr. YU Qunli resigned from the positions as a non-executive Director, a
member of the Audit Committee and a member of the Remuneration Committee of the Company
on February 3, 2020, and Mr. YUAN Yingjie was appointed to take up such positions on
February 3, 2020.
Mr. YU Ji resigned from the positions as a non-executive Director and a member of the audit
committee of the Company on May 15, 2020, and Mr. FAN Ye was appointed to take up such
positions on May 15, 2020.
Mr. CHENG Tao resigned from the positions as an executive Director and a member of the
Strategy Committee of the Company on May 15, 2020, and Mr. CHEN Ninghui was appointed to
take up such positions on May 15, 2020.
After the above adjustments, the composition of each of the special committees of the Board are
as follows:
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. YUAN Yingjie and Mr. FAN Ye, 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.
47
ANNUAL REPORT The Remuneration Committee comprised of the three independent non-executive directors and
two non-executive directors, namely, Mr. PEI Ker-Wei, Ms. LEE Wai Tsang, Rosa, Mr. CHEN Bin,
Mr. DAI Benmeng and Mr. YUAN Yingjie, 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. CHEN Ninghui and Ms. LUO Jianhu as well as
Mr. ZHANG Jingzhong, Mr. Tony ZHENG, Ms. RUAN Liya and several outside experts and
advisors, of whom Mr. YU Zhihong served as Chairman of the Strategic Committee.
During their respective terms of office, 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. YUAN Yingjie
Mr. YU Qunli (Resigned)
Mr. FAN Ye
Mr. YU Ji (Resigned)
Attendance
in person
Attendance
by proxy
4/4
4/4
3/4
4/4
2/2
1/2
1/4
1/2
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.
48
Corporate Governance Report
During their respective terms of office, 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 in
person
Attendance
by proxy
Attendance
through
communication
2/2
2/2
2/2
2/2
2/2
During the Period, the Nomination Committee discussed and considered the nomination of the
proposed candidates of Executive Directors, Non-executive Directors, Deputy General Manager
and Chief Financial Officer of the Company by way of telecommunication. The proposed
candidates for Executive Directors and Non-executive Directors of the Company were later
approved by the Board of Directors and the shareholders’ general meeting, while the proposed
candidates for Deputy General Manager and Chief Financial Officer of the Company were later
approved by the Board of Directors.
During the Period, the Remuneration Committee did not hold any meeting.
During the Period, the Strategic Committee did not hold any meeting.
The Board is responsible for developing and reviewing the Company’s corporate governance
policies and practices, monitoring the Company’s compliance with the 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.
49
ANNUAL REPORT
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 39 and 64. The different age group
of the Board members can provide diversified sight of views and opinion.
50
Corporate Governance Report NOMINATION 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 Rmb3.74 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 2020. Besides, the Company had paid Rmb0.56 million to Pan-China Certified Public
Accountants LLP (the PRC auditors) for other assurance service provided.
SECRETARY TO THE BOARD
During the Period, the Secretary to the Board 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.
51
ANNUAL REPORT DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE’S
INTERESTS IN SHARES AND UNDERLYING SHARES OF THE
COMPANY
As at December 31, 2020, 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.
INTERESTS AND SHORT POSITIONS OF OTHER PERSONS
IN SHARES AND UNDERLYING SHARES
As at December 31, 2020, 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
Total interests
in number
of ordinary
shares of
the Company
Percentage
of the
issued share
capital of
the Company
(Domestic
Shares)
Communications Group
Beneficial Owner
2,909,260,000
100%
52
Corporate Governance Report
Substantial Shareholders
Capacity
BlackRock, Inc.
Interest of controlled corporations
Citigroup Inc.
Interest of controlled corporations/
approved lending agent
Total interests
in number
of ordinary
shares of
the Company
113,392,569 (L)
310,000 (S)
100,048,237 (L)
66,000 (S)
99,120,332 (P)
JP Morgan Chase & Co.
Beneficial owner/investment manager/
custodian corporation/approved
lending agent
85,530,536 (L)
7,009,144 (S)
57,632,016 (P)
Percentage
of the
issued share
capital of
the Company
(H Shares)
7.91%
0.02%
6.97%
0.00%
6.91%
5.96%
0.48%
4.01%
The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P”
denotes interest in a lending pool.
Save as disclosed above, as at December 31, 2020, 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
Resolution for the amendments to the Articles of Association of the Company was considered
and approved at the 2019 annual general meeting of the Company held on 15 May 2020.
According to the latest amended Articles of Association of the Company, the shareholders, alone
or in aggregate, holding more than 3% of the shares of the Company can make a temporary
proposal and submit in writing to the Board of Directors ten days prior to the date of the general
meeting. The Board shall notify the other shareholders within two days upon the receipt of the
proposal, and submit such temporary proposal to the general meeting for consideration. The
contents of the temporary proposal shall be within the scope of power of general meeting,
include a clear subject and specific matters to be resolved.
Written requests, proposals and enquiries may be sent to the Company through contact details
listed on page 271 of this report.
53
ANNUAL 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.
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
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 Wednesday, December 23, 2020 at the headquarters of the Company. Details of this
extraordinary general meeting of the shareholders were set out in the announcement dated
December 23, 2020 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 April 2021
with exact date and resolutions for review to be specified in notice of shareholders’ general
meeting when it is published.
54
Corporate Governance Report 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. To the best of the Directors’
knowledge as at the date of this report, other than Universal Cosmos Limited, an associate of
Zhejiang Communications Investment Group Co., Ltd., which holds 3.04% of the H shares of the
Company, the remaining 96.96% of the H Shares of the Company are held by the public.
DIVIDEND POLICY
The Company attaches great importance to the return for shareholders who long term support
the company’s development, shares the company’s development results, maintains a stable
dividend payout level, and tries to keep the absolute dividend payout relatively steady. During
the period, dividend payout ratio was 51.4%. Details of the dividend payout will be announced
after the 2020 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.
55
ANNUAL REPORT 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 road
damage compensation and 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.
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.
56
Corporate Governance Report 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
Since the end of the reporting period, there has not been any significant event that would have a
material impact on the normal operation of the Company.
57
ANNUAL REPORT B o r n i n 1 9 6 4 , i s a g r a d u a t e f r o m t h e D e p a r t m e n t o f
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.
Mr. YU Zhihong
Chairman
58
Directors, Supervisors and Senior Management Profiles
Mr. CHEN Ninghui
Executive Director
Ms. LUO Jianhu
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 an Executive Director and Party Secretary of the
Company.
Born in 1971, graduated from Zhejiang University with a Bachelor’s
Degree in Law and graduated from the National Accounting
Institute in 2016 with an EMBA Degree, majoring in Financial
Accounting. She is a lawyer and Senior Economist.
Since she started her career in August 1994, Ms. Luo had held
such positions as the Board Secretary of Zhejiang Transportation
Engineering Construction Group Co., Ltd., the Deputy Director,
Director of the Legal Affairs Department, the Deputy Director,
Director of the Secretarial Office to the Board, Board Secretary and
the Manager of the Investment and Development Department of
Zhejiang Communications Investment Group Co., Ltd.
Ms. Luo has been appointed as an Executive Director and General
Manager, Deputy Party Committee Secretary of the Company.
59
ANNUAL REPORT
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
C o . , L t d . (浙江申蘇浙皖高速公路有限公司) , a n d t h e G e n e r a l
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 Communications Investment Group Co.,
Ltd..
Mr. Dai is currently the Party Committee Member and Director of
the Secretariat Office of the Zhejiang Communications Investment
Group Co., Ltd..
60
Directors, Supervisors and Senior Management Profiles
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.
S i n c e 2004, M r. Yu a n h a s w o r k e d i n Z h e j i a n g H i g h w a y
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 Zhejiang
Communications Investment Group Co., Ltd. From 2018, he was
deputy general manager of expressway construction department
and deputy general manager of expressway management
department of Zhejiang Communications Investment Group Co., Ltd..
He is currently general manager of expressway management
department of Zhejiang Communications Investment Group Co., Ltd..
Mr. FAN Ye
Non-Executive Director
Born in 1982, an economist, graduated from Zhejiang University
with a Doctorate in Economy.
Since 2010, Mr. Fan served at the Investment Development
Department of Zhejiang Economy Construction Investment Co.,
Ltd. (浙江省經濟建設投資有限公司). Since 2013, Mr. Fan served
at the Railway Transportation Department of Zhejiang Economy
Construction Investment Co., Ltd., and served as Assistant General
Manager, General Manager of the New Industry Department of
CSR Hangzhou Rail Transit Co., Ltd. (杭州南車城市軌道交通車
輛有限公司). Since 2014, Mr. Fan served as Deputy General
Manager of Zhejiang Economy Construction Investment Co., Ltd.,
and since 2018 he was Deputy General Manager of Zhejiang
Communications Investment Property Group Co., Ltd. (浙江省交投
地產集團有限公司).
Mr. Fan is currently General Manager of the Industrial Investment
Management Department (I) of Zhejiang Communications
Investment Group Co., Ltd.
61
ANNUAL REPORT
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).
Ms. LEE Wai Tsang, Rosa
Independent Non-Executive Director
Born in 1977, Ms. Lee has over 17 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.
62
Directors, Supervisors and Senior Management Profiles
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.
63
ANNUAL REPORT
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.
64
Directors, Supervisors and Senior Management Profiles
Mr. ZHAN Huagang
Supervisor Representing Employees
Born in 1961, graduated from Zhejiang University with a Bachelor’s
Degree of Engineering in Internal Combustion Engine from the
Department of Thermophysical Engineering. He is a professor-level
Senior Engineer.
Since Mr. Zhan started his career in 1982, he had worked at
Zhejiang Province Vehicular Transport Company (浙江省汽車運輸公
司), Zhejiang Office of Motor Vehicles (浙江省車輛監理所), Zhejiang
Highway Management Bureau (浙江省公路管理局) and Zhejiang
Road and Bridge Engineering Office (浙江省路橋工程處). He also
worked at the Operation Division and Maintenance Division of the
Zhejiang Provincial Expressway Executive Commission as Senior
Engineer.
He has been working at Zhejiang Expressway Co., Ltd. as Deputy
Manager and Manager of the Operations Management Department,
Director of the monitoring center, Manager of the Investment
Development Division, Manager of the Equipment Management
Department, Manager of the Engineering Management Department
and Head of the Maintenance Management Office, Director of the
testing center. He is concurrently the Deputy General Manager
of Zhejiang Expressway Investment Development Co., Ltd.
and Chairman and General Manager of Zhejiang Expressway
Advertising Co., Ltd.
Mr. Zhan is currently the Supervisor Representing Employees of
the Company.
65
ANNUAL REPORT
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, Supervisor Representing Employees.
66
Directors, Supervisors and Senior Management Profiles
Ms. HE Meiyun
Independent Supervisor
Born in 1964, is a Senior Economist. She graduated from the
Zhejiang University in 1986 and later received an Executive Master
of Business Admiration (EMBA) in Cheung Kong Graduate School
of Business (長江商學院).
Ms. He had served as the Secretary of Youth League Committee at
the Hangzhou Business School (杭州商業學校) and as a Secretary
to the Board, Deputy General Manager, General Manager and
Vice Chairman at Baida Group Co., Ltd. (百大集團股份有限公
司), a company listed on the Shanghai Stock Exchange (stock
code: 600865). Ms. He also serves as a General Manager of Ping
An Securities Company Limited, Zhejiang Branch (平安證券浙江
分公司), Executive Deputy Director of the Board of Directors of
Zhejiang Provincial Listed Company Association (浙江省上市公司協
會), Deputy Secretary General of Hangzhou Joint Stock Promotion
Association (杭州股份制促進會), Independent Director of Lanzhou
Minbai Co., Ltd. (蘭州民百股份有限公司), Independent Director of
Xilinmen Co., Ltd. (喜臨門股份有限公司) Ms. He currently serves as
Vice Chairman of Zhejiang Shiqiang Group Co., Ltd. (浙江施強集團
有限公司), Member of the Equity Investment and M&A Committee
of Zhejiang Merchants Association (浙商總會股權投資與併購委員
會委員), Supervisor of Zhejiang M&A Federation (浙江併購聯合會
監事), Independent Director of Guangyu Co., Ltd. (廣宇股份有限公
司), Independent Director of Fuchun Environmental Protection Co.,
Ltd. (富春環保股份有限公司), Independent Director of Gujia Home
Furnishing Co., Ltd. (顧家家居股份有限公司).
67
ANNUAL REPORT
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 also serves as an Independent Director of Hangzhou CNCR
Information Technology Co., Ltd.(Stock Code : 300250).
68
Directors, Supervisors and Senior Management Profiles
Other Members of Senior Management
Mr. Tony H. ZHENG
Mr. LI Wei
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 currently the Deputy General Manager and Company
Secretary of the Company. He also serves as Director of Taiping Science
and Technology Insurance Co., and Zhejiang International Hong Kong.
Born in 1969, a senior engineer, graduated from Lanzhou Jiaotong
University with a Bachelor Degree in engineering. Mr. Li studied logistics
management at Dresden University of Technology from 2004 to 2005.
Mr. Li started his career in July 1991, and served as Deputy Director
of Jinhua Administrative Branch, Office Director and Vice Chairman of
Labor Union of Zhejiang JinLiWen Expressway Co., Ltd. He also worked
as Deputy General Manager in Zhejiang ShenSuZheWan Expressway
Co., Ltd., Zhejiang ShenJiaHuHang Expressway Co., Ltd., Zhejiang
Expressway Logistics Co., Ltd., Zhejiang Ningbo YongTaiWen Expressway
Co., Ltd., Zhejiang Taizhou YongTaiWen Expressway Co., Ltd., Zhejiang
Zhoushan Bay Bridge Co., Ltd., Zhejiang Zhoushan Northbound
Expressway Co., Ltd., and Zhejiang JinLiWen Expressway Co., Ltd.
Mr. Li is currently the Deputy General Manager and Party Committee
Member of the Company.
69
ANNUAL REPORT
Ms. ZHANG Xiuhua
Mr. WANG Bingjiong
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 Division
of the Zhejiang Provincial Expressway Executive Commission. She joined
the Company since March 1997, and had served as Assistant manager,
Deputy Manager, Manager of the Operation Department and Assistant to
General Manager.
Ms. Zhang is currently the Deputy General Manager and Party Committee
Member of the Company.
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 the Deputy General Manager and Party Committee
Member of the Company.
70
Directors, Supervisors and Senior Management Profiles
Mr. WU Xiangyang
Mr. ZHU Yimin
Born in 1972, a professor-level senior engineer, having a Master Degree
in engineering from Chang’an University and a Bachelor Degree in
engineering from Harbin University of Civil Engineering and Architecture.
Mr. Wu started his career in 1996, and served as Assistant Manager of the
Project Maintenance Department and Assistant General Manager of the
Traffic Operation Management Department of Zhejiang Communications
Investment Group Co., Ltd., Deputy Chief Commissioner of Hangzhou
Regional Construction Commission of Zhejiang Communications
Investment Group Co., Ltd., Hangzhou-Shaoxing Sectional Construction
Commission for West Parallel Expressway of Hangzhou Ring Road,
Lin’an-Jiande Sectional Construction Commission of Lin’an-Jinhua
Expressway and Construction Commission of Zhejiang Jiande-Jinhua
Expressway. He also worked as Deputy General Manager in Hangzhou
City Expressway Co., Ltd., Zhejiang LinJin Expressway Co., Ltd., and
Zhejiang HangXuan Expressway Co., Ltd.
Mr. Wu is currently the Deputy General Manager and Party Committee
Member of the Company.
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., Deputy General Manager of Zhejiang
Hanghui Expressway Co. Ltd., and Deputy General Manager and Party
Committee Member of the Company since July 1, 2015.
He left the position of Deputy General Manager and Party Committee
Member of the Company on November 20, 2020 to take up another
position within Communications Group.
71
ANNUAL REPORT
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. Since March 2014, he has been appointed as
the Chief Financial Officer of the Company.
Mr. Wang left the position of Chief Financial Officer of the Company on
November 20, 2020 to take up another position within Communications
Group.
Born in 1983, an economist, graduated from Zhejiang University with a
Master Degree in Science.
Ms. Ruan started her career in 2007, and served as Investment Director
of Zhejiang Jinji Real Estate Co., Ltd. She also worked in Zhejiang
Communications Investment Group Co., Ltd., as Director and Assistant
Manager of Investment Development Department, as well as Assistant
General Manager and Deputy General Manager of Strategic Development
and Legal Affairs Department.
Ms. Ruan is currently the Chief Financial Officer and Party Committee
Member of the Company.
Mr. WANG Dehua
Ms. RUAN Liya
72
Directors, Supervisors and Senior Management Profiles
Mr. XU Xiaoyan
Chairman of Labor Union
Born in 1974, a senior engineer, graduated from Wuhan University of
Technology.
Mr. Xu started his career in 1997, and served as Deputy General Manager
and Chief Engineer of the Eighth Contract Sectional Project of Hubei
Xiangyang-Shiyan Expressway constructed by the subsidiary of Zhejiang
Communications Investment Group Co., Ltd. He also served as Chief
Economist, Office Director and Board Secretary of Zhejiang Jiaogong Road
& Bridge Construction Co., Ltd., Vice Chairman of Labor Union, Director
of Discipline Inspection and Supervision Department and HR Manager
of Zhejiang Jiaogong Group Co., Ltd. He worked in Zhejiang JinLiWen
Expressway Co., Ltd., as Chairman of Labor Union.
Mr. Xu is currently the Chairman of Labor Union, Discipline Inspection
Commission Secretary and Party Committee Member of the Company.
73
ANNUAL REPORT
The Directors of the Company hereby present their report and the audited financial statements
of the Group for the year ended December 31, 2020.
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 2020 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, 2020 is set out in note 7 to the financial
statements.
RESULTS AND DIVIDENDS
The Group’s profit for the year ended December 31, 2020 and the state of financial position at
that date are set out in the financial statements on pages 108 to 263.
The Directors have recommended the payment of a dividend of Rmb0.355 (approximately
HK$0.422) per share in the year of 2020. The final dividend is subject to shareholders’ approval
at the 2020 annual general meeting of the Company and is expected to be paid by no later
than June 30, 2021. 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 51.4% during the Period.
Further details of the dividends are set out in note 16 to the financial statements.
74
Report of the Directors FIVE YEAR SUMMARY FINANCIAL INFORMATION
The following is a summary of the published consolidated results, and of the assets, liabilities
and non-controlling interests of the Group prepared on the basis set out in the notes below.
Results
Continuing operations
Revenue
Operating costs
Gross profit
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 operations
Discontinued operations
Profit for the year from
discontinued operations
Profit for the year
Profit for the year attributable
to owners of the Company
– Continuing operations
– Discontinued operations
Profit for the year attributable
to non-controlling interests
– Continuing operations
– Discontinued operations
Year ended December 31,
2020
Rmb’000
2019
Rmb’000
2018
Rmb’000
(Restated)
2017
Rmb’000
(Restated)
2016
Rmb’000
(Restated)
11,942,775
(7,303,651)
4,639,124
1,611,873
11,955,266
(6,680,965)
5,274,301
1,402,684
11,192,199
(5,806,810)
5,385,389
512,449
11,080,513
(5,823,370)
5,257,143
774,885
10,978,928
(5,693,253)
5,285,675
223,573
410,198
(140,342)
(365,065)
688,029
260,267
(136,356)
404,128
(123,391)
(95,258)
652,824
(54,417)
350,578
143,739
(124,115)
(147,138)
161,502
345,670
(106,864)
(100,569)
64,699
16,282
(1,745,389)
5,114,710
(1,160,174)
34,941
(1,626,809)
5,766,594
(1,351,695)
30,037
(1,396,806)
5,107,967
(1,113,454)
17,668
(1,137,472)
4,946,212
(1,165,941)
9,797
(1,287,601)
4,434,380
(1,112,066)
3,954,536
4,414,899
3,994,513
3,780,271
3,322,314
–
3,954,536
–
4,414,899
–
3,994,513
–
3,780,271
81,594
3,403,908
2,997,344
–
3,711,118
–
3,515,095
–
3,097,355
–
2,676,975
80,114
957,192
–
703,781
–
479,418
–
682,916
–
645,339
1,480
75
ANNUAL REPORT Results
Earnings per share
From continuing and
discontinued operations
Basic (Rmb cents)
Diluted (Rmb cents)
From continuing operations
Basic (Rmb cents)
Diluted (Rmb cents)
Year ended December 31,
2020
Rmb’000
2019
Rmb’000
2018
Rmb’000
(Restated)
2017
Rmb’000
(Restated)
2016
Rmb’000
(Restated)
69.01
68.32
69.01
68.32
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
As at December 31,
Assets and liabilities
2020
Rmb’000
2019
Rmb’000
Total assets
Total liabilities
Net Assets
Notes:
130,063,384
92,611,172
37,452,212
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)
88,634,404
58,213,218
30,421,186
2016
Rmb’000
(Restated)
89,437,399
64,437,333
25,000,066
1.
The consolidated results of the Group for the four years ended December 31, 2019 have been abstracted from
the Company’s annual report on March 20, 2019, while those for the year ended December 31, 2020 were
prepared based on the consolidated statement of profit or loss and other comprehensive income as set out on
page 108 of the financial report.
2.
The 2020 basic earnings per share is based on the profit attributable to owners of the Company for the year
ended December 31, 2020 of Rmb2,997,344,000 (2019: Rmb3,711,118,000) and the 4,343,114,500 (2019:
4,343,114,500) ordinary shares in issue during the year.
The 2020 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, 2020 of Rmb3,022,625,000 (2019:
Rmb3,792,057,000) and the 4,424,084,000 (2019 restated: 4,603,501,000) weighted average number of ordinary
shares for the purpose of diluted earnings per share during the year.
76
Report of the Directors
3.
Differences in financial statements prepared under PRC GAAP and HKFRSs
As reported in the statutory financial
statements of the Group prepared in
accordance with PRC GAAP
HK GAAP adjustments:
(a) Goodwill
(b) Amortization provided, net of deferred
(c)
tax
Assessment on impact of appreciation,
net of deferred tax
(d) Others
(e) Non-controlling interests
As restated in the financial statements
Profit for the year
ended December 31,
Net assets as
at December 31,
2020
Rmb’000
2019
Rmb’000
2020
Rmb’000
2019
Rmb’000
3,940,493
4,424,083
37,771,039
32,291,077
–
–
(199,769)
(199,769)
(1,952)
(1,952)
(176,909)
(174,957)
(3,496)
23,904
(4,413)
3,954,536
(3,292)
(385)
(3,555)
4,414,899
35,578
7,666
14,607
37,452,212
39,074
7,666
19,020
31,982,111
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.
DONATION
During the year, the total amount of donation made by the group is Rmb11,404,000 for charitable
or other purposes.
PROPERTY, PLANT AND EQUIPMENT
Details of movements in property, plant and equipment of the Group during the year are set out
in note 18 to the financial statements.
77
ANNUAL REPORT
CAPITAL COMMITMENTS
Details of the capital commitments of the Group as at December 31, 2020 are set out in note 50
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 113 to the financial statements.
DISTRIBUTABLE RESERVES
As at December 31, 2020, 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 Rmb 5,972,619,000. 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, 2020, other than the deposits placed with a non-bank financial institution of
Rmb1,791,157,000, 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.
78
Report of the Directors 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. CHEN Ninghui (Appointed, with effect from May 15, 2020)
Mr. CHENG Tao (Resigned, with effect from May 15, 2020)
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. FAN Ye (Appointed, with effect from May 15, 2020)
Mr. YU Ji (Resigned, with effect from May 15, 2020)
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 58 to 73 in the Company’s annual report.
79
ANNUAL REPORT DIRECTORS’ 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. CHENG Tao and Mr. YU Ji have entered into service agreements with the Company, which
effect from July 1, 2018 to June 30, 2021. The contracts were terminated on May 15, 2020.
Mr. YUAN Yingjie has entered into a service agreement with the Company, which effect from
February 3, 2020 to June 30, 2021.
Mr. CHEN Ninghui and Mr. FAN Ye have entered into service agreements with the Company,
which effect from Mar 15, 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, 2020 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.
80
Report of the Directors SHARE CAPITAL
There were no movements in the Company’s issued share capital during the year.
PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights in the Company’s Articles of Association or the laws
of the PRC which would require the Company to offer new shares on a pro rata basis to existing
shareholders.
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.
81
ANNUAL REPORT Dividends payable to the Shareholders who are mainland individual investors or corporate
investors investing in the H Shares via the Shanghai-Hong Kong Stock Connect or the
Shenzhen- Hong Kong Stock Connect will be paid in Rmb by China Securities Depository and
Clearing Corporation Limited Shanghai Branch (“CSDC Shanghai Branch”) or Shenzhen Branch
(“CSDC Shenzhen Branch”) as entrusted by the Company.
According to the requirements of the “Notice on Taxation Policies Concerning the
Shanghai-Hong Kong Stock Connect Pilot Program (Finance Tax[2014] No. 81《(關於滬港股票市
場交易互聯互通機制試點有關稅收政策的通知》(財稅[2014]81號)) and “Notice on Taxation Policies
Concerning the Shenzhen-Hong Kong Stock Connect Pilot Program (Finance Tax[2016] No.
127)及《關於深港股票市場交易互聯互通機制試點有關稅收政策的通知》(財稅[2016]127號) jointly
published by the Ministry of Finance, State Administration of Taxation and China Securities
Regulatory Commission, the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong
Stock Connect tax arrangements are as follows: (i) for Chinese Mainland individual investors
who invest in the H Shares via the Shanghai-Hong Kong Stock Connect or the Shenzhen-Hong
Kong Stock Connect, the Company will withhold individual income tax at the rate of 20% in the
distribution of final dividend. Individual investors may, by producing valid tax payment proofs,
apply to the competent tax authority of China Securities Depository and Clearing Company
Limited for tax credit relating to the withholding tax already paid abroad; and (ii) for Chinese
Mainland securities investment funds that invest in the H Shares via the Shanghai-Hong Kong
Stock Connect or the Shenzhen-Hong Kong Stock Connect, the Company will withhold individual
income tax in the distribution of final dividend pursuant to the foregoing provisions.
For Chinese mainland corporate investors that invest in the H Shares via the Shanghai-Hong
Kong Stock Connect or the Shenzhen-Hong Kong Stock Connect, the Company will not withhold
the income tax in the distribution of final dividend and such investors shall file the tax returns on
their own.
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.
82
Report of the Directors 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 2020
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 23, 2021
83
ANNUAL REPORT During 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 supervisory meetings,
and attended six Board meetings and three general meetings, and had no objection to the
contents of the reports and proposals submitted by the Board of the Company to the general
meeting of shareholders for consideration. 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, that all decision-making procedures were
legitimate, and that the Company had sound internal control functions and personnel and all
operating activities were regulated in an orderly manner. The Supervisory Committee of the
Company supervised the decisions of the general meetings of shareholders, and believed that
the Board of Directors of the Company was able to conscientiously implement the relevant
decisions of the general meetings. The management of the Company has earnestly executed
the relevant decisions and plans of the Board, achieving remarkable results in key tasks such as
brand building and upgrade, smart expressway construction and securities business.
The Supervisory Committee has reviewed the financial statements of the Company for 2020
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 2020,
and complied with the relevant laws, regulations and the Company’s Articles of Association.
Despite the significant drop in toll revenue due to the COVID-19 pandemic, the Company
maintained a relatively stable dividend payout, providing satisfactory returns to its shareholders.
84
Report of Supervisory Committee 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.
By the order of the Supervisory Committee
ZHENG Ruchun
Chairman of the Supervisory Committee
Hangzhou, Zhejiang Province, the PRC
March 23, 2021
85
ANNUAL REPORT During the year ended December 31, 2020, the Company had the following non-exempt
connected transactions and continuing connected transactions.
CONNECTED TRANSACTIONS
1. Algorithm Refinement Service Agreement
On March 16, 2020, the Company entered into an agreement (the “Algorithm Refinement
Service Agreement”) with Zhejiang Information, pursuant to which the Company agreed
to purchase and Zhejiang Information agreed to provide various services including
algorithm development, system installation, testing, support and defect repair services
during the defect liability period with respect to algorithm refinement of the Company’s
intelligent expressway system at the consideration of Rmb1,314,000. Please refer to the
announcement of the Company dated March 16, 2020 for details.
Communications Group, which holds approximately 67% of the issued share capital of
the Company, is a controlling shareholder of the Company. As such, Zhejiang Information,
as a wholly-owned subsidiary of Communications Group as at the date of the Algorithm
Refinement Agreement, is a connected person of the Company and the transactions
contemplated under the Algorithm Refinement Service Agreement constituted 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 Algorithm Refinement Service Agreement and the Previous
Transactions I (Note 1) with parties who were connected with one another were entered
into or completed within a 12-month period, the transactions contemplated under the
Algorithm Refinement Service Agreement and the Previous Transactions I were required
to be aggregated for the calculation of the relevant percentage ratios to determine the
classification of the transactions contemplated under the Algorithm Refinement Service
Agreement.
As the applicable percentage ratios (other than the profits ratio) in respect of the
transactions contemplated under the Algorithm Refinement Service Agreement, after
aggregating with the Previous Transactions I, were more than 0.1% but less than 5%,
the transactions contemplated under the Algorithm Refinement Service Agreement 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.
86
Connected Transactions 2. Sponsorship Agreement and Underwriting Agreement
On July 31, 2020, Zheshang Securities, a non-wholly owned subsidiary of the Company,
entered into a sponsorship agreement (the “Sponsorship Agreement”) and an
underwriting agreement (the “Underwriting Agreement”) with, among others, Zhejiang
Oceanking, pursuant to which Zheshang Securities was engaged by Zhejiang Oceanking
as a sponsor and a lead underwriter to provide securities sponsorship and underwriting
services in respect of the proposed listing of Zhejiang Oceanking on the Shanghai Stock
Exchange. According to the Sponsorship Agreement, the total amount of sponsorship
fees payable by Zhejiang Oceanking to the sponsors is Rmb500,000. According to the
Underwriting Agreement, the aggregate underwriting fees that Zhejiang Oceanking agreed
to pay to the lead underwriters are 4% of the actual amount of capital raised from the
proposed listing of Zhejiang Oceanking with a minimum amount of Rmb22,000,000.
Please refer to the announcement of the Company dated July 31, 2020 for details.
Zhejiang Oceanking, as an approximately 65.44% owned subsidiary of Communications
Group, is a connected person of the Company. As a result, the transactions contemplated
under the Sponsorship Agreement and the Underwriting Agreement constituted connected
transactions of the Company under Chapter 14A of the Listing Rules.
As one or more of the applicable percentage ratios (other than the profits ratio)
as calculated with reference to the minimum underwriting fees payable under the
Underwriting Agreement in accordance with the Listing Rules were more than 0.1%
but all of them are less than 5%, the transactions contemplated under the Sponsorship
Agreement and the Underwriting Agreement were therefore subject to the reporting and
announcement requirements but exempt from the independent Shareholders’ approval
requirements under Chapter 14A of the Listing Rules.
87
ANNUAL REPORT 3. Mechanical and Electrical System Improvement Service Agreement
On October 14, 2020, the Company and its subsidiaries entered into an agreement (the
“Mechanical and Electrical System Improvement Service Agreement”) with Zhejiang
Information, pursuant to which the Company and its relevant subsidiaries agreed to
purchase and Zhejiang Information agreed to provide various services including equipment
procurement, installation, testing, support and defect repair services during defect liability
period as part of the centralised service procurement of the Company for the year of
2020 with respect to certain improvement projects in connection with the mechanical and
electrical systems of the Company’s expressways, which mainly include the installation
of fire detection and alarm system of Maaoling Tunnel, the restoration of lighting system
of Yuhang Expressway, upgrade of tunnel fire protection and power supply, maintenance
and rectification of engine room, upgrade of the LED lighting system of Panlongling
Tunnel and upgrade of uninterruptible power supply system at the consideration of
Rmb21,284,613.12. Please refer to the announcement of the Company dated October 14,
2020 for details.
Zhejiang Information, as a 65.85% owned subsidiary of Communications Group, is
connected person of the Company. As a result, the transactions contemplated under the
Mechanical and Electrical System Improvement Service Agreement constituted 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 Mechanical and Electrical System Improvement Service
Agreement and the Previous Transactions II (Note 2) with parties who were connected
with one another were entered into or completed within a 12-month period, the
transactions contemplated under the Mechanical and Electrical System Improvement
Service Agreement and the Previous Transactions II were required to be aggregated for
the calculation of the relevant percentage ratios to determine the classification of the
transactions contemplated under the Mechanical and Electrical System Improvement
Service Agreement.
As the applicable percentage ratios (other than the profits ratio) in respect of the
transactions contemplated under the Mechanical and Electrical System Improvement
Service Agreement, after aggregating with the Previous Transactions II, were more than
0.1% but less than 5%, the Mechanical and Electrical System Improvement Service
Agreement was subject to the reporting, announcement and annual review requirements
but exempt from the independent Shareholders’ approval requirement under Chapter 14A
of the Listing Rules.
88
Connected Transactions 4. HangNing Acquisition
On November 10, 2020, the Company and Communications Group entered into an equity
purchase agreement, pursuant to which Communications Group conditionally agreed to
sell and the Company conditionally agreed to acquire 30% equity interest in HangNing Co
at the consideration of Rmb2,685,000,000 (the “HangNing Acquisition”). Please refer to
the announcements of the Company dated November 11, 2020, November 12, 2020 and
December 1, 2020 and circular dated December 7, 2020 for details.
Communications Group is a controlling shareholder of the Company and thus a connected
person of the Company. As a result, the HangNing Acquisition constituted a connected
transaction for the Company. As one or more of the applicable percentage ratios in respect
of the HangNing Acquisition was over 5%, the HangNing Acquisition was subject to the
reporting, announcement and independent Shareholders’ approval requirements under
Chapter 14A of the Listing Rules.
5.
LongLiLiLong Acquisition
On November 10, 2020, the Company and Communications Group entered into an
equity purchase agreement, pursuant to which Communications Group conditionally
agreed to sell and the Company conditionally agreed to acquire the entire equity interest
in LongLiLiLong Co at the consideration of Rmb238,140,000 (the “LongLiLiLong
Acquisition”). Please refer to the announcements of the Company dated November 11,
2020, November 12, 2020 and December 1, 2020 and circular dated December 7, 2020
for details.
Communications Group is a controlling shareholder of the Company and thus a connected
person of the Company. As a result, the LongLiLiLong Acquisition constituted a connected
transaction for the Company. As one or more of the applicable percentage ratios in respect
of the LongLiLiLong Acquisition was over 5%, the LongLiLiLong Acquisition was subject to
the reporting, announcement and independent Shareholders’ approval requirements under
Chapter 14A of the Listing Rules.
89
ANNUAL REPORT 6. Supplemental Agreement and Video Cloud Platform Services
Agreement
On December 16, 2020, the Company and its relevant subsidiaries entered into a
supplemental agreement (the “Supplemental Agreement”) with Zhejiang Information
to vary the terms of the agreement (the “Agreement for Removal of Expressway Toll
Stations at Provincial Borders”) dated September 12, 2019 entered into between the
Company and its relevant subsidiaries and Zhejiang Information in relation to provision
of toll station construction, improvement and network security services for the certain
additional works at an additional service fees of Rmb7,029,287.29. The service fees
payable by the Company and its relevant subsidiaries to Zhejiang Information under the
Agreement for Removal of Expressway Toll Stations at Provincial Borders, as amended by
the Supplemental Agreement, would be increased to Rmb305,802,322.27.
On the same day, the Company and its relevant subsidiaries also entered into an
agreement (the “Video Cloud Platform Services Agreement”) with Zhejiang Information,
pursuant to which the Company and its relevant subsidiaries agreed to purchase and
Zhejiang Information agreed to provide video cloud platform’s equipment installation
services, internet security equipment installation services, software development, testing
and support services and defect repair services during the defect liability period in respect
of relevant expressways operated by the Group at the consideration of Rmb6,533,800.
Please refer to announcements of the Company dated September 12, 2019 and December
16, 2020 for details.
Zhejiang Information, as a 65.85% owned subsidiary of Communications Group, is a
connected person of the Company. As a result, the transactions contemplated under
the Supplemental Agreement and Video Cloud Platform Services Agreement constituted
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 Supplemental Agreement and Video Cloud Platform Services
Agreement and the Previous Transactions III (Note 3) were entered into or completed
within a 12-month period with Zhejiang Information, the transactions contemplated under
the Supplemental Agreement and Video Cloud Platform Services Agreement and the
Previous Transactions III were required to be aggregated for the calculation of the relevant
percentage ratios to determine the classification of the transactions contemplated under
the Supplemental Agreement and Video Cloud Platform Services Agreement.
90
Connected Transactions As the applicable percentage ratios (other than the profits ratio) in respect of the
transactions contemplated under the Supplemental Agreement and Video Cloud Platform
Services Agreement, after aggregating with the Previous Transactions III, were more
than 0.1% but less than 5%, the transactions contemplated under the Supplemental
Agreement and Video Cloud Platform Services Agreement 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.
CONTINUING 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 “Financial Services
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 remained 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 as at the date of the New Financial Services Agreement, 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 constituted a continuing connected transaction for the
Company.
91
ANNUAL REPORT 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.
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 Financial Services Supplemental Agreement during the
term of the New Financial Services Agreement.
As the applicable percentage ratios (other than the profits ratio) in respect of the Deposit
Services under the New Financial Services Agreement are more than 0.1% but less than
5%, the Deposit Services constituted 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 were exempt from the
independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules.
As the relevant applicable percentage ratios (other than the profits ratio) in respect of the
revised annual caps for the Deposit Services under the Financial Services Supplemental
Agreement was more than 5% but less than 25%, such transactions were 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.
92
Connected Transactions During the Period, the maximum amount of the daily deposit balance (including any
interest accrued thereon) for the deposits of the Company and its subsidiaries with
Zhejiang Communications Finance under the New Financial Services Agreement together
with the Financial Services Supplemental Agreement amounted to Rmb2,481,689,000.
2. 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
“Total Consideration”). 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.
On March 27, 2020, the Company entered into a supplemental agreement to revise
the Annual Caps for the Continuing Connected Transactions at the amount of
Rmb380,000,000 for the two years ending 31 December 2021 (the “Revised Annual
Caps”) whilst the Total Consideration remained unchanged. In determining the Revised
Annual Caps, the Company has considered the Exceeded Amount, the actual construction
progress, the estimated costs and the expected completion of PPP Project construction in
2021. Please refer to the announcement dated March 27, 2020 for details.
Zhejiang Hongtu is an indirect non-wholly owned subsidiary of Communications Group.
As such, Zhejiang Hongtu is a connected person of the Company and, as a result, the
transactions under the Construction Service Agreement constituted continuing connected
transactions for the Company under Chapter 14A of the Listing Rules.
As the applicable percentage ratios (other than the profits ratio) in respect of the
transactions contemplated under the Construction Service Agreement was more than
0.1% but less than 5%, the Construction Service Agreement was subject to the reporting,
announcement and annual review requirements but exempt from the independent
Shareholders’ approval requirement under Chapter 14A of the Listing Rules.
93
ANNUAL REPORT 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 Rmb215,456,000.
3. Road Maintenance Agreements
(i) 2019 Daily Road Maintenance Agreements
a.
Daily Road Maintenance (First Contract Section) Agreements 2019
On December 27, 2019, various management offices of the Company,
Jiaxing Co, Hanghui Co, and Huihang Co separately entered into a series
of agreements with Maintenance Co (the “Daily Road Maintenance (First
Contract Section) Agreements 2019”), 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 2019 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.
Please refer to the announcement of the Company dated December 27, 2019
for details.
During the Period, the total service fees paid by the Group to the Maintenance
Co in respect of the Maintenance Services under the Daily Road Maintenance
(First Contract Section) Agreements 2019 amounted to Rmb58,186,000.
94
Connected Transactions b.
Daily Road Maintenance (Second Contract Section) Agreements 2019
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 2019”), 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. Please refer to the announcement of the
Company dated December 27, 2019 for details.
During the Period, the total service fees paid by the Group to the Jiaogong
Maintenance in respect of the Maintenance Services under the Daily Road
Maintenance (Second Contract Section) Agreements 2019 amounted to
Rmb22,734,000.
c.
Daily Road Maintenance (Third Contract Section) Agreements 2019
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. Please refer to the announcement of the Company dated
December 27, 2019 for details.
95
ANNUAL REPORT During the Period, the total service fees paid by the Group to Zhejiang
Shunchang in respect of the Maintenance Services under the Daily Road
Maintenance (Third Contract Section) Agreements 2019 amounted to
Rmb17,313,000.
(ii) 2020 Dedicated Road Maintenance Agreements
a.
Dedicated Road Maintenance (First Contract Section) Agreements 2020
On April 20, 2020, the Company, Jiaxing Co, Shangsan Co, Hanghui Co
and Huihang Co respectively entered into a series of agreements with
Maintenance Co (the “Dedicated Road Maintenance (First Contract
Section) Agreements 2020”), pursuant to which Maintenance Co agreed to
undertake certain dedicated road maintenance projects including pavement
diseases treatment, bridgeheads overlays, sloping maintenance, bridge
decks repair, signs, markings, guardrail upgrades and tunnel maintenance
(the “Maintenance Projects”) to four expressways operated by the Group,
namely the Shanghai-Hangzhou-Ningbo Expressway, Shangshen Section
of the Shangsan Expressway, the Hanghui Expressway and the Huihang
Expressway. The term of the Dedicated Road Maintenance (First Contract
Section) Agreements 2020 is from April 20, 2020 to November 30, 2020.
The total service fees payable by the Group to Maintenance Co shall be
Rmb211,648,650. Please refer to the announcement dated 20 April 2020 for
details.
During the Period, the total service fees paid by the Group to the Maintenance
Co in respect of the transactions under the Dedicated Road Maintenance
(First Contract Section) Agreements 2020 amounted to Rmb179,976,000.
96
Connected Transactions b.
Dedicated Road Maintenance (Second Contract Section) Agreements 2020
On April 20, 2020, Shenjiahuhang Co and Zhoushan Co respectively entered
into a series of agreements with Jiaogong Maintenance (the “Dedicated Road
Maintenance (Second Contract Section) Agreements 2020”), pursuant to
which Jiaogong Maintenance agreed to undertake the Maintenance Projects
to two expressways operated by the Group, namely the Shenjiahuhang
Expressway and the Zhoushan Bay Bridge. The term of the Dedicated Road
Maintenance (Second Contract Section) Agreements 2020 is from April 20,
2020 to November 30, 2020. The total service fees payable by the Group
to Jiaogong Maintenance shall be Rmb70,496,666. Please refer to the
announcement dated 20 April 2020 for details.
During the Period, the total service fees paid by the Group to Jiaogong
Maintenance in respect of the Maintenance Services under the Dedicated
Road Maintenance (Second Contract Section) Agreements 2020 amounted to
Rmb68,273,000.
c.
Dedicated Road Maintenance (Third Contract Section) Agreements 2020
On April 20, 2020, Jiaxing Co, Shangsan Co, Jinhua Co and Hanghui Co
respectively entered into a series of agreements with Zhejiang Shunchang
(the “Dedicated Road Maintenance (Third Contract Section) Agreements
2020”), pursuant to which Zhejiang Shunchang agreed to undertake (i)
the Maintenance Projects to two expressways operated by the Group,
namely Xintian Section of the Shangsan Expressway and Jinhua Section
of the Yongjin Expressway, and (ii) Pavement Maintenance Projects to
two expressways operated by the Group, namely Jiaxing Section of the
Shanghai-Hangzhou-Ningbo Expressway and the Hanghui Expressway. The
term of the Dedicated Road Maintenance (Third Contract Section) Agreements
2020 is from April 20, 2020 to November 30, 2020. The total service fees
payable by the Group to Zhejiang Shunchang shall be RMB81,302,944.
Please refer to the announcement dated 20 April 2020 for details.
97
ANNUAL REPORT During the Period, the total service fees paid by the Group to the Zhejiang
Shunchang in respect of the transactions under the Dedicated Road
Maintenance (Third Contract Section) Agreements 2020 amounted to
Rmb63,799,000.
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 was
a connected person of the Company and the respective transactions
contemplated under the Daily Road Maintenance (First Contract Section)
Agreements 2019, the Daily Road Maintenance (Second Contract Section)
Agreements 2019 and the Daily Road Maintenance (Third Contract
Section) Agreements 2019 (collectively the “2019 Daily Road Maintenance
Agreements”) and the Dedicated Road Maintenance (First Contract Section)
Agreements 2020, the Dedicated Road Maintenance (Second Contract
Section) Agreements 2020 and the Dedicated Road Maintenance (Third
Contract Section) Agreements 2020 (collectively the “2020 Dedicated Road
Maintenance Agreements”) constituted continuing connected transactions for
the Company under Chapter 14A of the Listing Rules.
As the applicable percentage ratios (other than the profits ratio) in respect
of the respective transactions contemplated under the 2019 Daily Road
Maintenance Agreements were more than 0.1% but less than 5%, the
2019 Daily Road Maintenance 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.
98
Connected Transactions Pursuant to Rule 14A.81 to Rule 14A.83 of the Listing Rules, the transactions
contemplated under the 2020 Dedicated Road Maintenance Agreements
and the transactions contemplated under the 2019 Daily Road Maintenance
Agreements, which were continuing connected transactions entered into
with the same connected persons of a similar nature, were required to be
aggregated. As the applicable percentage ratios (other than the profits ratio)
in respect of the aggregated annual cap for transactions contemplated under
the 2020 Dedicated Road Maintenance Agreements and the 2019 Daily Road
Maintenance Agreements for the Period are more than 0.1% but less than 5%,
the transactions contemplated under the 2020 Dedicated Road Maintenance
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.
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.
99
ANNUAL REPORT 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.
During the year, details of the related party transactions and continuing related
party transactions under the accounting standards for this report that the
Company and its subsidiaries have entered into with Communications Group
and its subsidiaries that constitute connected transactions and continuing
connected transactions to be disclosed under the Listing Rules are set out in
note 56 to the consolidated financial statements. The Company has complied
with the disclosure requirements in respect of such connected transactions
and continuing connected transactions in accordance with Chapter 14A of the
Listing Rules.
Notes:
1. Previous Transactions I
2. Previous Transactions II
3. Previous Transactions III
100
the agreements entered into or completed within a 12-month period prior to the date
of the Algorithm Refinement Service Agreement between or among the Group and
Communications Group’s associates in relation to information technology services
and mechanical and electrical engineering services. For details, please refer to the
announcements issued by the Company dated September 12, 2019 and November 29,
2019 respectively.
the agreements entered into or completed within a 12-month period prior to the date of
the Mechanical and Electrical System Improvement Service Agreement between or among
the Group and Communications Group’s associates in relation to information technology
services and mechanical and electrical engineering services. For details, please refer to
the announcements issued by the Company dated March 16, 2020, September 12, 2019
and November 29, 2019 respectively.
the agreements entered into or completed within a 12-month period prior to the date of
the Supplemental Agreement and Video Cloud Platform Services Agreements between or
among the Company and its relevant subsidiaries and Zhejiang Information in relation to
information technology services and mechanical and electrical engineering services. For
details, please refer to the announcements issued by the Company dated September 12,
2019, November 29, 2019, March 16, 2020 and October 14, 2020 respectively.
Connected Transactions 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 108 to
263, which comprise the consolidated statement of financial position as at December 31, 2020,
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, 2020, 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.
101
ANNUAL REPORTIndependent Auditor’s Report Key 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
f i n a n c i a l s t a t e m e n t s , s i g n i f i c a n t
management judgement and estimation
r e q u i r e d i n t h e m e a s u r e m e n t o f E C L
includes assessing whether the credit risk
of an asset has significantly increased
and whether an asset is credit impaired,
using appropriate models and assumptions,
d e t e r m i n i n g t h e k e y i n p u t s i n c l u d i n g
probability of default (“PD”), loss given
d e f a u l t ( “ L G D ” ) a n d f o r w a r d - l o o k i n g
information.
As at December 31, 2020, the Group held
loans to customers arising from margin
financing business of Rmb15,013,472
thousands, less impairment allowance of
Rmb43 thousands as disclosed in Note 29
to the consolidated financial statements
and financial assets held under resale
agreements of Rmb7,314,130 thousands,
less impairment allowance of Rmb191,659
thousands as disclosed in Note 31 to the
consolidated financial statements.
Our procedures in relation to management’s
measurement of ECL for loans to customers
arising from margin financing business and
financial assets held under resale agreements
included:
• Testing and evaluating key controls of the
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”)
and credit impaired by management and, on
sample basis, testing its application;
• On a sample basis, examining the major data
input into the ECL model, including PD and
LGD;
• For 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.
102
Independent Auditor’s Report 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
d e t e r m i n a t i o n o f c o n s o l i d a t i o n s c o p e o f
structured entities included:
• Testing and evaluating key controls of the
management in determining the consolidation
scope of structured entities;
• Examining, on a sample basis, the documents
and information used by the management
i n a s s e s s i n g t h e c o n s o l i d a t i o n c r i t e r i a
of structured entities against the related
a g r e e m e n t s a n d o t h e r r e l a t e d s e r v i c e
agreements of structured entities newly
e s t a b l i s h e d , i n v e s t e d o r w i t h c h a n g e s
in proportion of ownership interests or
contractual terms during the year;
• A s s e s s i n g m a n a g e m e n t j u d g e m e n t i n
determining the scope for consolidation and,
on a sample basis, assessing the conclusion
about whether a structured entity should be
consolidated or not.
W e i d e n t i f i e d t h e d e t e r m i n a t i o n o f
consolidation scope of structured entities
as a key audit 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 fi na ncia l
statements as a whole.
The Group held interests as investor or
acted as investment manager in various
structured entities including collective
asset management schemes, investment
funds and limited partnership enterprises.
As disclosed in Note 5 to the consolidated
f i n a n c i a l s t a t e m e n t s , t o d e t e r m i n e
whether a structured entity should be
consolidated, the management applied
s i g n i f i c a n t j u d g e m e n t i n d e t e r m i n i n g
whether the Group has power over the
structured entities, and assess whether
the combination of investments it held
t o g e t h e r w i t h i t s r e m u n e r a t i o n a n d
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 44 and 58 to the
consolidated financial statements, as at
December 31, 2020, the total assets of the
consolidated structured entities amounted
to Rmb5,485,843 thousands and the total
assets of the unconsolidated structured
entities managed by the Group amounted to
Rmb140,322,176 thousands, respectively.
103
ANNUAL REPORT Other Information
The directors of the Company are responsible for the other information. The other information
comprises the information included in the annual report, but does not include the consolidated
financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and
we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Responsibilities of Directors and Those Charged with Governance for the
Consolidated Financial Statements
The directors of the Company are responsible for the preparation of the consolidated financial
statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA
and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal
control as the directors of the Company determine is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, the directors of the Company are responsible
for assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
directors of the Company either intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting
process.
104
Independent Auditor’s Report Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion solely to you, as a body, in accordance
with our agreed terms of engagement, and for no other purpose. We do not assume
responsibility towards or accept liability to any other person for the contents of this report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with HKSAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain
professional scepticism 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.
105
ANNUAL REPORT •
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair
presentation.
•
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance of
the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
106
Independent Auditor’s Report 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, actions taken to eliminate threats or safeguards applied.
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 23, 2021
107
ANNUAL REPORT NOTES
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
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
Share of other comprehensive loss of an associate,
net of related income tax
Other comprehensive (loss) income for the year, net of income tax
11,942,775
1,820,534
11,955,266
1,572,835
(7,303,651)
(6,680,965)
4,639,124
1,611,873
410,198
(140,342)
(181,499)
(183,566)
688,029
16,282
(1,745,389)
5,114,710
(1,160,174)
5,274,301
1,402,684
260,267
(136,356)
(127,135)
31,877
652,824
34,941
(1,626,809)
5,766,594
(1,351,695)
3,954,536
4,414,899
(2,349)
(24,160)
(26,509)
922
–
922
Total comprehensive income for the year
3,928,027
4,415,821
108
Consolidated Statement of Profit or Loss and Other Comprehensive IncomeFor the year ended December 31, 2020
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)
NOTES
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
2,997,344
957,192
3,711,118
703,781
3,954,536
4,414,899
2,972,041
955,986
3,711,551
704,270
3,928,027
4,415,821
69.01
68.32
85.45
82.37
17
109
ANNUAL REPORT
NOTES
12/31/2020
Rmb’000
12/31/2019
Rmb’000
NON-CURRENT ASSETS
Property, plant and equipment
Right-of-use assets
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
Other receivables and prepayments
Financial assets held under resale agreements
Deferred tax assets
CURRENT ASSETS
Inventories
Trade receivables
Loans to customers arising from margin financing business
Other receivables and prepayments
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
Bank balances, clearing settlement fund,deposits and cash
– Restricted bank balances and cash
– Time deposits with original maturity over three months
– Cash and cash equivalents
18
19
20
21
22
24
25
26
27
30
31
46
28
29
30
38
26
31
32
33
33
33
4,175,373
562,535
20,931,505
86,867
207,068
6,560,343
384,325
244,123
1,007,618
2,923,140
120,000
1,258,270
4,280,735
379,031
22,867,446
86,867
182,851
6,080,155
368,043
16,898
686,557
–
–
924,602
38,461,167
35,873,185
370,533
361,974
15,013,429
3,129,801
2,835
525,629
29,158,094
7,002,471
27,090,816
23,986
313,600
8,609,049
333,261
319,339
8,751,643
424,182
2,005
6,250
22,235,480
8,110,354
20,141,931
–
302,726
8,076,598
91,602,217
68,703,769
110
Consolidated Statement of Financial PositionAt December 31, 2020
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
12/31/2020
Rmb’000
12/31/2019
Rmb’000
34
35
36
37
38
39
40
41
42
43
44
45
39
41
42
46
45
400,000
27,054,052
974,743
1,202,136
441,007
6,105,775
79,231
50
497,427
6,348,772
6,306,716
6,361,764
–
11,525,087
2,910,725
91,346
270,000
20,024,356
1,387,856
537,868
149,735
2,049,479
15,674
1,342
5,565
4,598,533
6,532,990
2,281,229
2,793,103
9,017,680
321,883
70,577
70,298,831
50,057,870
21,303,386
18,645,899
59,764,553
54,519,084
7,919,800
13,706,383
766
386,498
298,894
6,421,600
12,892,042
2,687,228
347,331
188,772
22,312,341
22,536,973
37,452,212
31,982,111
111
ANNUAL REPORTAt December 31, 2020
CAPITAL AND RESERVES
Share capital
Reserves
Equity attributable to owners of the Company
Non-controlling interests
NOTES
12/31/2020
Rmb’000
12/31/2019
Rmb’000
47
48
4,343,115
19,773,344
24,116,459
13,335,753
4,343,115
17,250,900
21,594,015
10,388,096
37,452,212
31,982,111
The consolidated financial statements on pages 108 to 263 were approved and authorised for issue by the board
of directors on March 23, 2021 and are signed on its behalf by:
DIRECTOR
CHEN Ninghui
DIRECTOR
LUO Jianhu
112
Consolidated Statement of Financial PositionAt December 31, 2020
Attributable to owners of the Company
Investment
revaluation
reserve
Rmb’000
Capital
reserve
Rmb’000
Share of
differences
arising on
translation
Rmb’000
Share
capital
Rmb’000
Share
premium
Rmb’000
Statutory
reserve
Rmb’000
(Note i)
Retained
profits
Rmb’000
Sub-total
Rmb’000
Non-
controlling
interests
Rmb’000
Total
Rmb’000
Dividend
reserve
Rmb’000
Special
reserves
Rmb’000
(Note ii)
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
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Consideration adjustment for acquisition of
subsidiaries-under common control (Note 57)
Recognition of the Company’s share of the equity
change of the investee
Changes due to partial disposal-of convertible bond
issued by a subsidiary
Conversion of Convertible Bond 2019 of a subsidiary
(Note 42)
Redemption of Convertible Bond 2019 of a subsidiary
(Note 42)
Deemed partial disposal of interest in a subsidiary
upon conversion of Convertible Bond 2019
(Note 42)
Dividend declared to non-controlling interests
Contribution from non-controlling interests
2019 dividend (Note 16)
Proposed 2020 dividend
Transfer to reserves
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
53,155
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(24,160)
–
(1,143)
(24,160)
(1,143)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
76,662
(12,107)
–
–
–
2,997,344
–
2,997,344
(25,303)
957,192
(1,206)
3,954,536
(26,509)
2,997,344
2,972,041
955,986
3,928,027
–
–
–
–
–
76,662
(12,107)
–
–
76,662
(12,107)
–
–
–
64,214
64,214
(464,244)
(464,244)
(3,676)
(3,676)
–
–
–
(1,541,806)
1,541,806
–
1,027,654
–
–
–
–
–
–
–
–
–
(1,541,806)
(53,155)
1,027,654
–
–
(1,541,806)
–
–
2,608,993
(217,944)
4,328
–
–
–
3,636,647
(217,944)
4,328
(1,541,806)
–
–
At December 31, 2020
4,343,115
3,355,621
5,392,584
1,712
(24,160)
509
1,541,806
284,982
9,220,290
24,116,459
13,335,753
37,452,212
113
ANNUAL REPORTConsolidated Statement of Changes in EquityFor the year ended December 31, 2020
Attributable to owners of the Company
Share
capital
Rmb’000
Share
premium
Rmb’000
Capital
reserve
Rmb’000
Statutory
reserve
Rmb’000
(Note i)
Share of
differences
arising on
translation
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
At January 1, 2019
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
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 (Note 57)
Issuance of Convertible Bond 2019 by a subsidiary
Conversion of Convertible Bond 2019 of a subsidiary
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
118,772
–
–
–
–
–
–
–
–
–
–
–
–
–
–
433
433
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,711,118
–
3,711,118
433
703,781
489
4,414,899
922
3,711,118
3,711,551
704,270
4,415,821
(3,953,145)
–
–
–
–
–
(3,953,145)
–
–
–
–
–
–
(1,628,668)
1,541,806
–
51
–
–
–
–
–
–
–
–
–
–
–
(1,541,806)
(118,772)
51
–
–
–
(1,628,668)
–
–
–
403,728
(22)
115
(8)
(200,103)
21,144
–
–
–
(3,953,145)
403,728
(22)
166
(8)
(200,103)
21,144
(1,628,668)
–
–
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
114
Consolidated Statement of Changes in EquityFor the year ended December 31, 2020
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 change of interests in subsidiaries. Amount
represented the difference between the carrying value of net assets attributable to the Group acquired
and the payment consideration arising from acquisition, or the dilute gain on loss of interests in
subsidiaries.
(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)
Other reserve which was arising from the Group’s change of interest in an associate. Amount represented
the difference between the carrying value of net assets attributable to the Group arising from the
associate’s ownership interest change in its subsidiaries other than those recognized in profit or loss or
other comprehensive income.
(d)
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.
115
ANNUAL REPORT Profit before tax
Adjustments for:
Finance costs
Interest income
Foreign exchange loss (gain)
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
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 resale agreements
– contract asset
Other impairment loss
– property, plant and equipment
– allowance for write-down of inventories
(Gain)/loss on disposal of property, plant and equipment
Loss on disposal of an associate
Gain on decrease in fair value in respect of
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
5,114,710
5,766,594
1,745,389
(55,186)
82,903
(688,029)
(16,282)
427,670
1,915,809
89,640
49,787
12,741
(972)
171,315
482
12,688
15,673
(23,725)
–
1,626,809
(34,369)
(10,817)
(652,824)
(34,941)
379,380
1,915,967
68,133
40,457
2,050
(3,177)
(31,402)
652
–
–
13,200
77
derivative component of Convertible Bond 2017 (Note 42)
(200,178)
(17,547)
116
Consolidated Statement of Cash FlowsFor the year ended December 31, 2020
Operating cash flows before movements in working capital
Increase in inventories
Increase in trade receivables
Increase in contract asset
Increase in loans to customers arising from margin financing business
(Increase)/decrease in other receivables and prepayments
Increase in financial assets at FVTPL
Decrease in financial assets held under resale agreements
Increase in restricted bank balance
Increase in bank balances and clearing settlement fund
held on behalf of customers
Increase in net derivative financial assets
Increase/(decrease) in placements from other financial institutions
Increase in accounts payable to customers arising from securities business
(Decrease)/increase in trade payables
Increase in other taxes payable
Increase in contract liabilities
Withdraw of pledged bank deposit
Increase in other payables and accruals
Increase/(decrease) in financial liabilities at FVTPL
Increase/(decrease) in financial assets sold under
repurchase agreements
Cash generated from operations
Income taxes paid
Interest paid
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
8,654,435
(52,945)
(44,935)
(321,543)
(6,260,814)
(2,728,225)
(7,149,839)
816,568
(23,986)
(6,948,885)
(27,517)
130,000
7,029,696
(395,978)
291,272
63,557
–
4,238,388
2,588,842
2,507,407
2,365,498
(802,971)
(1,352,049)
9,028,242
(173,922)
(75,358)
(434,341)
(2,898,382)
25,250
(676,572)
127,230
–
(5,399,770)
(334)
(130,679)
5,370,943
118,321
45,519
8,102
10,000
239,147
(42,831)
(2,069,030)
3,071,535
(1,261,577)
(1,427,204)
NET CASH FROM OPERATING ACTIVITIES
210,478
382,754
117
ANNUAL REPORT
INVESTING ACTIVITIES
Interest received
Investment in associates
Prepayment for investment in an associate (Note 56)
Dividends received from associates
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
Purchases of other intangible assets
Placement of time deposits
Withdrawal of time deposits
Withdrawal of investment in associates
Proceed from disposal of an associate
NOTES
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
57,421
(196,259)
(2,685,000)
370,424
59,190
(783,342)
(64,187)
–
2,726
16,813
–
35,496
(350,000)
–
120,520
12,247
(982,049)
(48,794)
(102,726)
80,913
–
12,233
NET CASH USED IN INVESTING ACTIVITIES
(3,222,214)
(1,222,160)
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
New issue of bonds payable, including assets-backed bonds
Repayment of bonds payable
Proceed from issuance of Convertible Bond 2019 (Note 42)
Issue costs of Convertible Bond 2019 (Note 42)
Issue of short-term financing note payable
Repayment of short-term financing note payable
Repayments of lease liabilities
Disposal of Convertible bonds
Repayment of Convertible bonds
Capital deduction by non-controlling interests in
respect of a subsidiary
Capital injection by non-controlling interests in
respect of a subsidiary
Acquisition of subsidiaries under common control (Note 57)
Prepayment for acquisition of a subsidiary under common
control (Note 56)
NET CASH FROM FINANCING ACTIVITIES
(1,539,772)
(219,235)
11,295,398
(8,031,102)
50,000
(195,000)
6,909,772
(2,045,990)
–
–
28,108,020
(28,336,400)
(78,846)
616,884
(2,830,043)
–
4,328
76,662
(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)
(238,140)
–
3,546,536
2,313,298
NET INCREASE IN CASH AND CASH EQUIVALENTS
534,800
1,473,892
CASH AND CASH EQUIVALENTS AT JANUARY 1
8,076,598
6,601,784
Effect of foreign exchange rate changes
CASH AND CASH EQUIVALENTS AT DECEMBER 31
33
(2,349)
8,609,049
922
8,076,598
118
Consolidated Statement of Cash FlowsFor the year ended December 31, 2020
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.
119
ANNUAL REPORTFor the year ended December 31, 2020Notes to the Consolidated Financial Statements 2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG
FINANCIAL REPORTING STANDARDS ("HKFRSs")
New and amendments to HKFRSs that are mandatorily effective for the current
year
The Group has applied the Amendments to References to the Conceptual Framework in HKFRSs Standards
and the following amendments to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants
("HKICPA") for the first time in the current year, which are mandatorily effective for the annual period beginning
on or after January 1, 2020 for the preparation of the consolidated financial statements:
Amendments to HKAS 1 and HKAS 8
Definition of Material
Amendments to HKFRS 3
Amendments to HKFRS 9,
HKAS 39 and HKFRS 7
Definition of a Business
Interest Rate Benchmark Reform
The application of the Amendments to References to the Conceptual Framework in HKFRS Standards and the
amendments to HKFRSs in the current year has had no material impact on the Group’s financial positions and
performance for the current and prior years and/or on the disclosures set out in these consolidated financial
statements.
120
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 2. 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 16
Amendments to HKFRS 3
Amendments to HKFRS 9, HKAS 39,
HKFRS 7, HKFRS 4 and HKFRS 16
Amendments to HKFRS 10 and HKAS 28
Amendments to HKAS 1
Insurance Contracts and the related Amendments1
Covid-19-Related Rent Concession4
Reference to the Conceptual Framework2
Interest Rate Benchmark Reform – Phase 25
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture3
Classification of Liabilities as Current or Non-current and
related amendments to Hong Kong Interpretation 5 (2020)1
Amendments to HKAS 16
Property, Plant and Equipment – Proceeds
Amendments to HKAS 37
Amendments to HKFRSs
before Intended Use2
Onerous Contracts – Cost of Fulfilling a Contract2
Annual Improvements to HKFRSs 2018-20202
1
2
3
4
5
Effective for annual periods beginning on or after January 1, 2023.
Effective for annual periods beginning on or after January 1, 2022.
Effective for annual periods beginning on or after a date to be determined.
Effective for annual periods beginning on or after June 1, 2020.
Effective for annual periods beginning on or after January 1, 2021.
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.
121
ANNUAL REPORT 3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL
STATEMENTS
The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA.
For the purpose of preparation of the consolidated financial statements, information is considered material if such
information is reasonably expected to influence decisions made by primary users. 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, and measurements that have 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.
122
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL
STATEMENTS (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.
4. SIGNIFICANT ACCOUNTING POLICIES
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.
123
ANNUAL REPORT 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.
When the Group is an investor of a fund in which the Group also acts as a fund manager, the Group will
determine whether it is a principal or an agent for the purpose of assessing whether the Group controls the
relevant fund.
An agent is a party primarily engaged to act on behalf and for the benefit of another party or parties (the
principal(s)) and therefore does not control the investee when it exercises its decision-making authority. In
determining whether the Group is an agent to the fund, the Group would assess:
the scope of its decision-making authority over the investee;
the rights held by other parties;
the remuneration to which it is entitled in accordance with the remuneration agreements; and
the decision maker’s exposure to variability of returns from other interests that it holds in the investee.
•
•
•
•
124
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of consolidation (Continued)
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the
Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated statement of profit or loss and other comprehensive income from
the date the Group gains control until the date when the Group ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and
to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the
Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit
balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies in line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein, which
represent present ownership interests entitling their holders to a proportionate share of net assets of the relevant
subsidiaries upon liquidation.
Change in the Group’s interests in existing subsidiaries
Changes in the Group’s interests in subsidiaries that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s relevant components
of equity and the non-controlling interests are adjusted to reflect the changes in their relative interests in the
subsidiaries, including re-attribution of relevant reserves between the Group and the non-controlling interests
according to the Group’s and the non-controlling interests' proportionate interests.
Any difference between the amount by which the non-controlling interests are adjusted, and the fair value of the
consideration paid or received is recognised directly in equity and attributed to owners of the Company.
125
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of consolidation (Continued)
Change in the Group’s interests in existing subsidiaries (Continued)
When the Group loses control of a subsidiary, the assets and liabilities of that subsidiary and non-controlling
interests (if any) are derecognised. A gain or loss is recognised in the profit or loss and is calculated as the
difference between (i) the aggregate of the fair value of the consideration received and the fair value of any
retained interest and (ii) the carrying amount of the assets (including goodwill), and liabilities of the subsidiary
attributable to the owners of the Company. All amounts previously recognised in other comprehensive income in
related to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities
of the subsidiary (i.e., reclassified to profit or loss or transferred to another category of equity as specified/
permitted by applicable HKFRSs).
Business combinations
Acquisitions of businesses, 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.
Except for certain recognition exemptions, the identifiable assets acquired and liabilities assumed must meet the
definitions of an asset and a liability in the Conceptual Framework for Financial Reporting issued in September
2010.
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);
126
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Business combinations (Continued)
•
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; and
•
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.
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.
127
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Merger accounting for business combination involving businesses under
common control (Continued)
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.
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.
128
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. 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.
129
ANNUAL REPORT 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 the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use
the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously
been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss
would be reclassified to profit or loss on the disposal of the related assets or liabilities.
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.
130
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. 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 or 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.
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.
131
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from contracts with customers (Continued)
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.
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.
132
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from contracts with customers (Continued)
Existence of significant financing component (Continued)
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.
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.
133
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, plant and equipment (Continued)
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
Estimated
useful life
Annual
depreciation
rate
20 - 50 years
30 years
10 - 30 years
5 years
5 - 8 years
5 - 8 years
1.9% - 4.9%
3.2%
3.2% - 9%
19.4%
12.1% - 19.4%
12.1% - 19.4%
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement
of an item of property, plant and equipment is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit or loss.
Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is
recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period, with the effect of any changes in estimate being
accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately
are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of
impairment losses on tangible and intangible assets below).
134
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible assets (Continued)
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are recognised separately from goodwill are initially
recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination with finite useful lives are
reported at cost less accumulated amortisation and any accumulated impairment losses, on the same basis as
intangible assets that are acquired separately. Intangible assets with indefinite useful lives are carried at cost
less any subsequent accumulated impairment losses (see accounting policy in respect of impairment losses on
tangible and intangible assets below).
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use
or disposal. Gains and losses arising from derecognition of an intangible assets are measured at the difference
between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss in
the period when the asset is derecognised.
Expressway operating rights under service concession arrangements
When the Group has a right to charge for usage of concession infrastructure, it recognises concession intangible
assets based on fair value of the consideration paid upon initial recognition. Subsequent costs incurred on
expressway widening projects and upgrading services are recognised as additional costs of the expressway
operating rights. The concession intangible assets representing expressway operating rights are carried at cost
less accumulated amortisation and any accumulated impairment losses.
The concession intangible assets are amortised to write-off their cost over their expected useful lives in the
remaining concession period on a straight-line basis.
Costs in relation to the day-to-day servicing, repairs and maintenance of the expressway infrastructures are
recognised as expenses in the periods in which they are incurred.
135
ANNUAL REPORT 4. 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)
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 testing a cash-generating unit for impairment, corporate assets are allocated to the relevant cash-generating
unit when a reasonable and consistent basis of allocation can be established, or otherwise they are allocated
to the smallest group of cash generating units for which a reasonable and consistent allocation basis can be
established. The recoverable amount is determined for the cash-generating unit or group of cash-generating units
to which the corporate asset belongs, and is compared with the carrying amount of the relevant cash-generating
unit or group of cash-generating units.
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.
136
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. 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)
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.
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 or arising from business combinations, 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.
137
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Lease (Continued)
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.
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.
138
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 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.
139
ANNUAL REPORT 4. 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.
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.
140
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Lease (Continued)
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.
Leases for which the Group is a lessor are all classified as operating leases for the reporting periods.
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. 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.
Allocation of consideration to components of a contract
When a contract includes both leases and non-lease components, the Group applies HKFRS 15 Revenue
from Contracts with Customers ("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
Changes in considerations of lease contracts that were not part of the original terms and conditions are
accounted for as lease modifications, including lease incentives provided through forgiveness or reduction of
rentals.
141
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Lease (Continued)
The Group as a lessor (Continued)
Lease modification (Continued)
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.
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.
142
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the
conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group
recognises as expenses the related costs for which the grants are intended to compensate. Specifically,
government grants whose primary condition is that the Group should purchase, construct or otherwise acquire
non-current assets are recognised as deferred income in the consolidated statement of financial position and
transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
Government grants related to income 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. Such grants are presented under other
income.
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.
Termination benefits
A liability for a termination benefit is recognised at the earlier of when the Group entity can no longer withdraw the
offer of the termination benefit and when it recognises any related restructuring costs.
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.
143
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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.
144
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Taxation (Continued)
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.
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.
145
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
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 fair value through profit or loss ("FVTPL")) are added to or deducted from the fair
value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in
profit or loss.
The effective interest method is a method of calculating the amortised cost of a financial asset or financial
liability and of allocating interest income and interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees and points
paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or
discounts) through the expected life of the financial asset or financial liability, or, where appropriate, a shorter
period, to the net carrying amount on initial recognition.
Interest income which are derived from the Group’s ordinary course of business are presented as revenue.
Financial assets
Classification and subsequent measurement of financial assets
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.
The Group doesn't hold any financial assets which are classified as FVTOCI.
All other financial assets are subsequently measured at FVTPL, except that at the date of 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.
146
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Classification and subsequent measurement of financial assets (Continued)
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 as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
(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 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.
147
ANNUAL REPORT 4. 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, in which case 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.
148
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 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:
•
an actual or expected significant deterioration in the financial instrument’s external (if available) or internal
credit rating;
•
•
•
•
significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit
spread, the credit default swap prices for the debtor;
existing or forecast adverse changes in business, financial or economic conditions that are expected to
cause a significant decrease in the debtor’s ability to meet its debt obligations;
an actual or expected significant deterioration in the operating results of the debtor;
an actual or expected significant adverse change in the regulatory, economic, or technological
environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt
obligations.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased
significantly since initial recognition when contractual payments are more than 30 days past due, unless the
Group has reasonable and supportable information that demonstrates otherwise.
Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has not increased
significantly since initial recognition if the debt instrument is determined to have low credit risk at the reporting
date. A debt instrument is determined to have low credit risk if i) it has a low risk of default, ii) the borrower
has a strong capacity to meet its contractual cash flow obligations in the near term and iii) adverse changes
in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the
borrower to fulfil its contractual cash flow obligations. The Group considers a debt instrument to have low credit
risk when it has an internal or external credit rating of ‘investment grade’ as per globally understood definitions.
149
ANNUAL REPORT 4. 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; or
(f)
the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
150
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 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. 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 and 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. The
Group uses a practical expedient in estimating ECL on trade receivables and contract assets using a provision
matrix taking into consideration historical credit loss experience, adjusted for forward looking information that is
available without undue cost or effort.
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.
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 ECL is the present
value of the expected payments to reimburse the holder for a credit loss that it incurs less any amounts that the
Group expects to receive from the holder, the debtor or any other party.
For ECL on financial guarantee contracts 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.
151
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)
(v)
Measurement and recognition of ECL (Continued)
Lifetime ECL for trade receivables, contract assets and other receivables are considered on a collective
basis taking into consideration past due information and relevant credit information such as forward looking
macroeconomic information.
For collective assessment, the Group takes into consideration the following characteristics when formulating the
grouping:
•
•
•
Past-due status;
Nature, size and industry of debtors; and
External credit ratings where available.
The grouping is regularly reviewed by management to ensure the constituents of each group continue to share
similar credit risk characteristics.
Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset
is credit impaired, in which case interest income is calculated based on amortised cost of the financial asset.
For financial guarantee contracts, the loss allowances are recognised at the higher of the amount of the loss
allowance determined in accordance with HKFRS 9; and the amount initially recognised less, where appropriate,
cumulative amount of income recognised over the guarantee period.
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.
152
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)
(v)
Measurement and recognition of ECL (Continued)
The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their
carrying amounts, including 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/modification 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.
A modification of a financial asset occurs if the contractual cash flows are renegotiated or otherwise modified.
When the contractual terms of a financial asset are modified, the Group assesses whether the revised terms
result in a substantial modification from original terms taking into account all relevant facts and circumstances
including qualitative factors. If qualitative assessment is not conclusive, the Group considers 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 asset, after
reducing gross carrying amount that has been written off.
For non-substantial modifications of financial assets that do not result in derecognition, the carrying amount of the
relevant financial assets will be calculated at the present value of the modified contractual cash flows discounted
at the financial assets' original effective interest rate. Transaction costs or fees incurred are adjusted to the
carrying amount of the modified financial assets and are amortised over the remaining term. Any adjustment to
the carrying amount of the financial asset is recognised in profit or loss at the date of modification.
153
ANNUAL REPORT 4. 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, except for a derivative that is a financial guarantee contract or a designated and effective
hedging instrument.
154
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 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.
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.
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 assets sold under repurchase agreements, bonds payable and
convertible bond) are subsequently measured at amortised cost, using the effective interest method.
155
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial liabilities and equity (Continued)
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.
Convertible bond contains equity component
The component parts of the convertible bond 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 bond, 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.
156
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial liabilities and equity (Continued)
Convertible bond contains equity component (Continued)
Transaction costs that relate to the issue of the convertible bonds 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 bonds using the effective
interest method.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date derivative contracts are entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss
is recognised in profit or loss immediately, unless the derivative is designated and effective as a hedging
instruments, in which event the timing of recognition in profit or loss depends on the nature of the hedge
relationship.
Embedded derivatives
Derivatives embedded in hybrid contracts that contain financial asset hosts within the scope of HKFRS 9 are not
separated. The entire hybrid contract is classified and subsequently measured in its entirety as either amortised
cost or fair value as appropriate.
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.
Generally, multiple embedded derivatives in a single instrument that are separated from the host contracts are
treated as a single compound embedded derivative unless those derivatives relate to different risk exposures and
are readily separable and independent of each other.
157
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets held under resale agreements
Financial assets held under resale agreements where the Group acquires financial assets which will be resold at
a predetermined price at a future date under resale agreements, the cash advanced by the Group is recognised
as secured loans and receivables and presented as amounts held under resale agreements in the consolidated
statement of financial position. The difference between the purchase and resale consideration is amortised over
the period of the respective agreements using the effective interest method and is included in interest income.
Financial assets sold subject to agreements with a commitment to repurchase at a specific future date and
price are not derecognised in the consolidated statement of financial position. The proceeds from selling such
assets are presented under "financial assets sold under repurchase agreements" in the consolidated statement
of financial position. The difference between the selling price and repurchasing price is recognised as interest
expense during the term of the agreement using the effective interest method.
Securities lending arrangement
The Group lends investment securities to clients and requires cash and/or equity securities from customers held
as collaterals under such securities lending agreements. The cash collaterals arisen from these are included in
"accounts payable to customers arising from securities business". For those securities held by the Group and lent
to client that do not result in the derecognition of financial assets, they are included in financial assets at FVTPL.
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.
158
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial guarantee contracts (Continued)
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.
When the contractual terms of a financial liability are modified, the Group assess whether the revised terms
result in a substantial modification from original terms taking into account all relevant facts and circumstances
including qualitative factors. If qualitative assessment is not conclusive, 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.
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 consolidate statement
of financial position when, and only when, the Group currently has a legally enforceable right to set off the
recognized amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
159
ANNUAL REPORT 4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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 of structured entities
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
and/or an investor, 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.
160
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 5. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF
ESTIMATION UNCERTAINTY (Continued)
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.
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 or upward revision of discount rate, an impairment loss may arise. Furthermore, the estimated cash flows
and discount rate are subject to higher degree of estimation uncertainties in the current year due to uncertainty
on how the Covid-19 pandemic may progress and evolve and volatility in financial markets, including potential
disruptions of the Group’s expressway toll operations.
As at December 31, 2020, the carrying amount of goodwill is Rmb86,867,000 (without accumulated impairment
loss) (2019: Rmb86,867,000 (without accumulated impairment loss)). Details of the impairment testing are
disclosed in Note 23.
Measurement of ECL for 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.
161
ANNUAL REPORT 5. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF
ESTIMATION UNCERTAINTY (Continued)
Key sources of estimation uncertainty (Continued)
Measurement of ECL for loans to customers arising from margin financing
business and financial assets held under resale agreements (Continued)
The following significant judgements and estimations are required in applying the accounting requirements for
measuring the ECL:
Significant increase of credit risk
ECL are measured as an allowance equal to 12-month ECL for stage 1 assets, or lifetime ECL assets for stage
2 or stage 3 assets. An asset moves to stage 2 when its credit risk has increased significantly since initial
recognition. In assessing whether the credit risk of an asset has significantly increased, the Group takes into
account qualitative and quantitative reasonable and supportable forward-looking information. Refer to Note 52 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 52 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 52(b) for more details on ECL and Note 52(c) for more details on ECL 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 52(b) for more details.
162
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 5. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF
ESTIMATION UNCERTAINTY (Continued)
Key sources of estimation uncertainty (Continued)
Measurement of ECL for 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.
Measurement 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 52(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.
163
ANNUAL REPORT 6. REVENUE
(i) Disaggregation of revenue from contracts with customers
Segments
Types of goods or services
Toll operation
Securities operation
Asset management services
Securities and futures
commission
Investment banking services
Others
Hotel operating and catering
services
Construction service
Year ended 12/31/2020
Year ended 12/31/2019
Toll
operation
Rmb’000
Securities
operation
Rmb’000
Others
Rmb’000
Toll
operation
Rmb’000
Securities
operation
Rmb’000
Others
Rmb’000
6,379,586
–
8,061,007
–
–
–
–
–
–
336,237
1,906,241
1,024,328
3,266,806
–
–
–
–
–
–
–
267,826
1,138,565
321,551
1,727,942
–
–
–
–
–
–
–
–
–
–
125,336
350,513
475,849
–
–
–
169,576
423,906
593,482
–
–
–
–
–
Total
6,379,586
3,266,806
475,849
8,061,007
1,727,942
593,482
Timing of revenue recognition
A point in time
Over time
6,379,586
–
3,266,806
–
125,336
350,513
8,061,007
–
1,727,942
–
169,576
423,906
Total
6,379,586
3,266,806
475,849
8,061,007
1,727,942
593,482
164
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
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
Total revenue
Year ended
12/31/2020
Rmb’000
6,379,586
3,266,806
475,849
Year ended
12/31/2019
Rmb’000
8,061,007
1,727,942
593,482
10,122,241
1,820,534
10,382,431
1,572,835
11,942,775
11,955,266
(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.
In response to the epidemic, the Ministry of Transport of the People’s Republic of China announced a toll-free
policy that would extend the Spring Festival toll-free period for small passenger vehicles to February 8, 2020
(originally from January 24, 2020 to January 30, 2020), and for all vehicles from February 17, 2020 to May 5,
2020. The epidemic and toll-free policy have significantly impacted the Group’s toll revenue for the year ended
December 31, 2020.
165
ANNUAL REPORT
6. REVENUE (Continued)
(ii) Performance obligations for contracts with customers (Continued)
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.
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.
166
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 6. 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, 2020 amounting to Rmb361,266,000
(2019: Rmb711,779,000), which are expected to be recognised as revenue over the construction period till July,
2021 (2019: 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, 2020
and 2019.
167
ANNUAL REPORT 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, 2020
Toll
operation
Rmb’000
Securities
operation
Rmb’000
Others
Rmb’000
Total
Rmb’000
Revenue – external customers
6,379,586
5,087,340
475,849
11,942,775
Segment profit
1,625,681
1,636,161
692,694
3,954,536
168
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
7. OPERATING SEGMENTS (Continued)
Segment revenue and results (Continued)
For the year ended December 31, 2019
Toll
operation
Rmb’000
Securities
operation
Rmb’000
Others
Rmb’000
Total
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
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:
Toll operation
Securities operation
Others
Segment assets
Segment liabilities
12/31/2020
Rmb’000
12/31/2019
Rmb’000
12/31/2020
Rmb’000
12/31/2019
Rmb’000
29,830,932
91,994,730
8,150,855
28,943,860
67,965,409
7,580,818
(19,765,284)
(72,133,714)
(712,174)
(19,575,212)
(52,390,763)
(628,868)
Total segment assets (liabilities)
Goodwill
129,976,517
86,867
104,490,087
86,867
(92,611,172)
–
(72,594,843)
–
Consolidated assets (liabilities)
130,063,384
104,576,954
(92,611,172)
(72,594,843)
Segment assets and segment liabilities represent the assets and liabilities of the subsidiaries operating in the
respective reportable and operating segment.
169
ANNUAL REPORT
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, 2020
Income tax expense
Interest income on bank balances
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
Net gains arising from financial
assets at FVTPL
Gain on changes in fair value in respect
of the derivative component of
convertible bond
Additions to non-current assets (Note)
Depreciation and amortisation
Toll
operation
Rmb’000
606,915
54,563
866,882
–
15
–
–
384,325
–
16,282
Securities
operation
Rmb’000
536,250
–
855,550
(972)
2,271
–
549,645
–
46,363
–
Others
Rmb’000
17,009
623
22,957
–
14
482
6,010,698
–
641,666
–
Total
Rmb’000
1,160,174
55,186
1,745,389
(972)
2,300
482
6,560,343
384,325
688,029
16,282
128,853
1,573,746
–
1,702,599
200,178
395,788
2,204,561
–
457,706
240,791
–
398,779
37,554
200,178
1,252,273
2,482,906
170
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
7. OPERATING SEGMENTS (Continued)
Other segment information (Continued)
For the year ended December 31, 2019
Income tax expense
Interest income on bank balances
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
Net gains arising from financial assets
at FVTPL
Gain on changes in fair value in
respect of the derivative component
of convertible bond
Additions to non-current assets (Note)
Depreciation and amortisation
Toll
operation
Rmb’000
1,024,200
33,859
763,965
–
97
–
–
368,043
–
34,941
Securities
operation
Rmb’000
318,907
–
844,931
3,177
(1,218)
–
303,643
–
18,922
–
Others
Rmb’000
8,588
510
17,913
–
–
(652)
5,776,512
–
633,902
–
Total
Rmb’000
1,351,695
34,369
1,626,809
3,177
(1,121)
(652)
6,080,155
368,043
652,824
34,941
59,216
1,425,925
–
1,485,141
17,547
900,131
2,180,526
–
98,072
184,747
–
351,865
38,664
17,547
1,350,068
2,403,937
Note:
Non-current assets excluded financial instruments and deferred tax assets.
171
ANNUAL REPORT
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
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
6,379,586
3,266,806
1,820,534
125,336
350,513
8,061,007
1,727,942
1,572,835
169,576
423,906
11,942,775
11,955,266
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, 2020 and 2019, there was no individual customer with sales over 10% of
the total revenue of the Group.
172
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
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
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 (loss)/gain, net
(Loss) gain on commodity trading, net (Note ii)
Management fee income
Government subsidy
Gain arising from deemed disposal of associates
Gain on disposal of assets
Others
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
1,702,599
166,538
(257,264)
1,485,141
7,028
(89,485)
1,611,873
1,402,684
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
55,186
66,183
–
4,303
200,178
(85,609)
(63,430)
36,747
55,246
23,904
30,290
87,200
34,369
68,532
278
6,368
17,547
14,269
6,443
34,313
20,788
–
4,553
52,807
410,198
260,267
Notes:
(i)
Rental income included contingent rent of Rmb1,961,000 (2019: Rmb2,158,000) recognised during the year.
(ii)
The income on commodity trading amounted to Rmb5,292,848,000 (2019: Rmb2,289,986,000) with the cost
of Rmb5,356,278,000(2019: 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 Rmb
368,020,000(2019: Rmb329,704,000) as of December 31, 2020.
173
ANNUAL REPORT
10.
IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS MODEL,
NET OF REVERSAL
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
11. FINANCE COSTS
Bank and other borrowings
Short-term financing note payable
Bonds payable
Convertible Bonds
Lease liabilities
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
2,300
10,441
(972)
171,315
482
1,121
929
(3,177)
(31,402)
652
183,566
(31,877)
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
489,820
196,712
691,486
350,863
16,508
605,241
98,561
715,438
193,878
13,691
1,745,389
1,626,809
174
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
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
Amortisation of expressway operating rights (included in operating costs)
Amortisation of other intangible assets
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
427,670
89,640
1,915,809
379,380
68,133
1,915,967
(included in operating costs and administrative expenses)
49,787
40,457
Total depreciation and amortisation
2,482,906
2,403,937
Staff costs (including directors and supervisors):
– Wages, salaries and bonuses
– Pension scheme contributions
Auditors' remuneration
(Gain)/Losses on disposal of property, plant and equipment
13.
INCOME TAX EXPENSE
Current tax:
PRC Enterprise Income Tax ("EIT")
Deferred tax (Note 46)
2,109,738
84,881
1,541,415
137,945
2,194,619
1,679,360
11,039
(23,725)
8,544
13,200
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
1,454,675
(294,501)
1,317,018
34,677
1,160,174
1,351,695
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.
175
ANNUAL REPORT
INCOME TAX EXPENSE (Continued)
13.
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% (2019: 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
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
5,114,710
5,766,594
1,278,678
(172,007)
(4,071)
52,411
–
59,377
(54,214)
1,441,649
(163,206)
(8,735)
37,164
(5,630)
58,128
(7,675)
Income tax expense for the year
1,160,174
1,351,695
176
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
14. DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENTS'
EMOLUMENTS
The emoluments paid or payable to each of the 12 (2019: 9) directors and 6 (2019: 5) supervisors are as follows:
Yu
Chen
Zhihong@
Ninghui@
Cheng
Tao@
Luo
Yuan
Dai
Jianhu@
Yingjie^
Benmeng^
Yu
Qunli^
Yu
Ji^
Fan
Ye^
Pei
Lee
Ker-wei*
Wai Tsang*
Chen
Bin*
Yao
Zheng
He
Zhan
Wu
Huiliang#
Ruchun#
Meiyun#
Huagang#
Qingwang#
Wang
Yubing#
Total
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
(Note i)
(Note iii)
(Note vi)
(Note v)
(Note iv)
(Note iii)
(Note ii)
(Note iv)
(Note v)
2020
Fees
Salaries, allowances and benefits in kind
Bonuses paid and payable
Pension scheme contributions
Directors' fee
Total emoluments
2019
Fees
Salaries, allowances and benefits in kind
Bonuses paid and payable
Pension scheme contributions
Directors' fee
Total emoluments
–
–
–
–
–
–
–
–
–
–
351
–
17
–
368
–
–
–
–
–
–
–
–
–
–
600
63
26
–
689
600
462
30
–
1,092
600
373
26
–
999
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
209
209
–
–
–
220
220
–
–
–
209
209
–
–
–
223
223
–
–
–
83
83
–
–
–
85
85
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
–
–
–
6
12
–
–
–
12
–
–
–
–
–
–
–
–
–
–
4
–
–
–
4
8
–
–
–
8
–
–
–
–
–
–
–
–
–
–
961
462
47
501
1,971
1,220
436
52
528
2,236
@
^
*
#
Executive directors. The emoluments shown above were for their services in connection with the management of
the affairs of the Company and the Group.
Non-executive directors. The emoluments shown above were for their services as directors of the Company or its
subsidiaries.
Independent non-executive directors. The emoluments shown above were for their services as directors of the
Company.
Supervisors. The emoluments shown above were for their services as supervisors of the Company.
177
ANNUAL REPORT
14. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’
EMOLUMENTS (Continued)
Notes:
(i)
Appointed on May 15, 2020. Mr. Chen Ninghui is also the senior management of the Company and his
emoluments disclosed above include those services rendered by him as senior management from May 15, 2020
to December 31, 2020
(ii)
Appointed on May 15, 2020.
(iii)
Resigned on May 15, 2020.
(iv)
Resigned on February 3, 2020.
(v)
Appointed on February 3, 2020.
(vi)
Ms. Luo Jianhu is also the senior management of the Company and her emoluments disclosed above include
those services rendered by her as senior management.
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.
178
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 14. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’
EMOLUMENTS (Continued)
The emoluments paid or payable to each of the other 10 (2019: 6) senior managements are as follows:
Chen
Ninghui
Rmb’000
(Note i)
Zhu
Yimin
Rmb’000
(Note ii)
Wang
Dehua
Rmb’000
(Note ii)
Zhan
Huagang
Rmb’000
(Note ii)
Zheng
Hui
Rmb’000
Zhang
Xiuhua
Rmb’000
Wang
Bingjiong
Rmb’000
Li
Wei
Rmb’000
(Note iii)
Wu
Xiangyang
Rmb’000
(Note iii)
Ruan
Liya
Rmb’000
(Note iv)
250
–
13
263
–
–
–
–
425
406
25
856
510
337
26
873
383
388
23
794
510
337
26
873
425
381
25
831
510
359
26
895
510
382
30
922
510
315
26
851
510
407
30
947
510
337
26
873
510
84
30
624
128
–
6
134
85
–
5
90
–
–
–
–
85
–
5
90
–
–
–
–
85
–
5
90
–
–
–
–
Total
3,268
2,048
191
5,507
2,678
1,685
136
4,499
Year ended December 31, 2020
Salaries, allowances and benefits in kind
Bonuses paid and payable
Pension scheme contributions
Total emoluments
Year ended December 31, 2019
Salaries, allowances and benefits in kind
Bonuses paid and payable
Pension scheme contributions
Total emoluments
Note:
(i)
Appointed on January 1, 2020 as Party Secretary of the Company. The emoluments disclosed above include
those services rendered by Mr. Chen Ninghui as senior management from January 1, 2020 to May 15, 2020.
(ii)
Resigned on November 20, 2020.
(iii)
Appointed on November 20, 2020 as Deputy General Manager of the Company.
(iv)
Appointed on November 20, 2020 as Financial Director of the Company.
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.
179
ANNUAL REPORT
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
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
8,929
46,831
326
56,086
3,703
35,854
180
39,737
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, 2020 and 2019.
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 (2019: 5) non-director
employees.
180
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
15. EMPLOYEES’ EMOLUMENTS (Continued)
Their emoluments are within the following bands:
HK$7,500,001 to HK$8,000,000 (equivalent to Rmb6,312,001
(2019: Rmb6,725,855) to Rmb6,732,800 (2019: Rmb7,174,244))
HK$8,000,001 to HK$8,500,000 (equivalent to Rmb6,732,801
(2019: Rmb7,174,245) to Rmb7,153,600 (2019: Rmb7,622,635))
HK$8,500,001 to HK$9,000,000 (equivalent to Rmb7,153,601
(2019: Rmb7,622,636) to Rmb7,574,400 (2019: Rmb8,071,025))
HK$9,000,001 to HK$9,500,000 (equivalent to Rmb7,574,401
(2019: Rmb8,071,025) to Rmb7,995,200 (2019: Rmb8,519,416))
HK$10,500,001 to HK$11,000,000 (equivalent to Rmb8,836,801
(2019: Rmb9,416,197) to Rmb9,257,600 (2019: Rmb9,864,586))
HK$13,000,001 to HK$13,500,000 (equivalent to Rmb10,940,801
(2019: Rmb11,658,148) to Rmb11,361,600 (2019: Rmb12,106,538)
HK$13,500,001 to HK$14,000,000 (equivalent to Rmb11,361,601
(2019: Rmb12,106,539) to Rmb11,782,400 (2019: Rmb12,554,928)
HK$17,500,001 to HK$18,000,000 (equivalent to Rmb14,728,001
(2019: Rmb15,693,661) to Rmb15,148,800 (2019: Rmb16,142,050)
16. DIVIDENDS
Dividends recognised as distribution during the year:
2019 – Rmb35.5 cents
(2019: 2018 – Rmb37.5 cents)
No. of individuals
Year ended
12/31/2020
Year ended
12/31/2019
–
1
–
–
–
2
1
1
1
1
1
1
1
–
–
–
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
1,541,806
1,628,668
Dividend of Rmb35.5 cents per share in respect of the year ended December 31, 2020 (2019: dividend
of Rmb35.5 cents per share in respect of the year ended December 31, 2019) in the total amount of
Rmb1,541,806,000 (2019: Rmb1,541,806,000) has been proposed by the Directors and is subject to approval by
the shareholders in the annual general meeting.
181
ANNUAL REPORT
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:
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
Profit for the year attributable to owners of the Company
2,997,344
3,711,118
Earnings for the purpose of basic earnings per share
2,997,344
3,711,118
Effect of dilutive potential ordinary shares arising from convertible bond:
Interest expense
Exchange gain (net of income tax)
Gain on changes in fair value on derivative component
256,084
(30,625)
(200,178)
105,589
(7,103)
(17,547)
Earnings for the purpose of diluted earnings per share
3,022,625
3,792,057
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
4,343,115
80,969
4,343,115
260,386
Weighted average number of ordinary shares for the purpose
of diluted earnings per share
4,424,084
4,603,501
Year ended
12/31/2020
’000
Year ended
12/31/2019
’000
182
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
18. PROPERTY, PLANT AND EQUIPMENT
Leasehold
land and
buildings
Rmb’000
Hotel
Rmb’000
Communication
and signaling
equipment
Rmb’000
Ancillary
facilities
Rmb’000
Machinery
and
equipment
Rmb’000
Motor
vehicles
Rmb’000
Construction
in progress
Rmb’000
Total
Rmb’000
2,219,534
860,520
1,206,417
1,459,324
162,314
583,437
92,618
6,584,164
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)
COST
At January 1, 2019
Additions
Transfer
Disposals
At December 31, 2019
2,208,039
858,153
1,216,704
1,913,793
156,666
615,042
438,974
7,407,371
Additions
Transfer
Disposals
50,617
95,281
(32,291)
–
–
–
98
–
(6,862)
50,054
95,225
(125,620)
14,284
–
(15,656)
111,241
50,512
(130,496)
170,846
(257,465)
–
397,140
(16,447)
(310,925)
At December 31, 2020
2,321,646
858,153
1,209,940
1,933,452
155,294
646,299
352,355
7,477,139
DEPRECIATION AND IMPAIRMENT
At January 1, 2019
Provided for the year
Disposals
673,738
100,304
(19,294)
143,024
30,631
(2,915)
486,865
49,060
(4,014)
1,001,094
139,096
(35,753)
112,132
11,561
(18,282)
434,110
48,728
(23,449)
At December 31, 2019
754,748
170,740
531,911
1,104,437
105,411
459,389
Provided for the year
Impairment loss recognised in profit or loss
Disposals
112,346
–
(19,770)
28,841
–
–
44,442
12,688
(5,605)
159,759
–
(100,222)
13,920
–
(15,240)
68,362
–
(124,391)
847,324
199,581
583,436
1,163,974
104,091
403,360
–
–
–
–
–
–
–
–
2,850,963
379,380
(103,707)
3,126,636
427,670
12,688
(265,228)
3,301,766
1,474,322
1,453,291
658,572
687,413
626,504
684,793
769,478
809,356
51,203
51,255
242,939
155,653
352,355
4,175,373
438,974
4,280,735
At December 31, 2020
CARRYING VALUES
At December 31, 2020
At December 31, 2019
The property, plant and equipment are located in the PRC.
183
ANNUAL REPORT
19. RIGHT-OF-USE ASSETS
COST
At January 1, 2020
Addition
At December 31, 2020
DEPRECIATION
At January 1, 2020
Addition
At December 31, 2020
CARRYING VALUES
At December 31, 2020
At January 1, 2020
Expense relating to short-term leases
Total cash outflow for leases
Leasehold
lands
Rmb’000
Leased
properties
Rmb’000
Total
Rmb’000
119,450
76,291
327,714
196,853
447,164
273,144
195,741
524,567
720,308
4,822
6,196
63,311
83,444
68,133
89,640
11,018
146,755
157,773
184,723
377,812
562,535
114,628
264,403
379,031
12/31/2020
Rmb’000
12/31/2019
Rmb’000
23,515
105,464
32,539
99,911
Total cash outflow for leases includes payments of principle and interest portion of lease liabilities and short-term
leases.
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.
The amounts of the Group’s lease liabilities and interest expense of lease liabilities are disclosed in Note 45
and Note 11, respectively. For the year ended December 31, 2020, 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, 2020, the Group did not enter into any lease that is not yet commenced.
184
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
20. EXPRESSWAY OPERATING RIGHTS
COST
At January 1, 2019
Additions
At December 31, 2019
Transfer
Disposals
At December 31, 2020
AMORTISATION
At January 1, 2019
Charge for the year
At December 31, 2019
Charge for the year
At December 31, 2020
CARRYING VALUES
At December 31, 2020
At December 31, 2019
Rmb’000
46,147,065
–
46,147,065
6,630
(26,762)
46,126,933
21,363,652
1,915,967
23,279,619
1,915,809
25,195,428
20,931,505
22,867,446
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.
185
ANNUAL REPORT
21. GOODWILL
COST AND CARRYING VALUES
At January 1, 2019, December 31, 2019 and December 31, 2020
Particulars regarding impairment testing on goodwill are disclosed in Note 23.
22. OTHER INTANGIBLE ASSETS
Rmb’000
86,867
Customer
bases
Rmb’000
Securities/
futures
firm licenses
Rmb’000
Trading
seats
Rmb’000
101,147
–
–
101,147
–
–
63,083
–
–
63,083
–
–
3,480
–
–
3,480
–
–
Software
Rmb’000
Total
Rmb’000
228,554
49,402
226
396,264
49,402
226
278,182
445,892
64,187
9,817
64,187
9,817
COST
At January 1, 2019
Additions
Transfer
At December 31, 2019
Additions
Transfer
At December 31, 2020
101,147
63,083
3,480
352,186
519,896
AMORTISATION
At January 1, 2019
Charge for the year
At December 31, 2019
Charge for the year
At December 31, 2020
CARRYING VALUES
At December 31, 2020
At December 31, 2019
85,477
6,266
91,743
6,266
98,009
3,138
9,404
–
–
–
–
–
–
–
–
–
–
137,107
222,584
34,191
40,457
171,298
263,041
43,521
49,787
214,819
312,828
63,083
63,083
3,480
3,480
137,367
207,068
106,884
182,851
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.
186
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
22. OTHER INTANGIBLE ASSETS (Continued)
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.
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 23.
23.
IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS
WITH INDEFINITE USEFUL LIVES
For the purposes of impairment testing, goodwill and other intangible assets with indefinite useful lives set
out in Notes 21 and 22 have been allocated to four individual cash generating units ("CGUs"), comprising two
subsidiaries in toll operation segment and two subsidiaries in securities operation segment. The carrying amounts
of goodwill and other intangible assets as at December 31, 2020 and 2019 allocated to these units are as follows:
Goodwill
Securities/futures
firm licenses
Trading seats
12/31/2020
Rmb’000
12/31/2019
Rmb’000
12/31/2020
Rmb’000
12/31/2019
Rmb’000
12/31/2020
Rmb’000
12/31/2019
Rmb’000
Toll operation
– Zhejiang Jiaxing
Expressway Co., Ltd.
("Jiaxing Co")
– Zhejiang Shangsan
Expressway Co., Ltd.
("Shangsan Co")
Securities operation
– Zheshang Securities
– Zheshang Futures
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
187
ANNUAL REPORT
23.
IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS
WITH INDEFINITE USEFUL LIVES (Continued)
The basis of the recoverable amounts of the above CGUs and their major underlying assumptions are
summarised below:
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 8 years (2019: 9 years) and 10 years (2019: 11 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% (2019: 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, 2020 and 2019, 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.
188
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 24.
INTERESTS IN ASSOCIATES
Unlisted investments in associates at cost
Share of post-acquisition profit and other comprehensive income,
net of dividends received
12/31/2020
Rmb’000
12/31/2019
Rmb’000
5,077,941
4,902,995
1,482,402
1,177,160
6,560,343
6,080,155
At December 31, 2020 and 2019, 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
12/31/2020
%
12/31/2019
%
Principal activities
Zhejiang Concord Property Investment
Corporate
The PRC
Co., Ltd. ("Zhejiang Concord
Property") (Note ix)
Zheshang Fund Management Co., Ltd.
Corporate
The PRC
45
25
Corporate
The PRC
20.08
45
Investment and real
estate development
25
Asset fund
management
35
Finance and
investment
("Zheshang Fund") (Note i)
Zhejiang Communications Investment
Group Finance Co., Ltd. ("Zhejiang
Communications Finance") (Note ii)
Yangtze United Financial Leasing Co.,
Ltd. (“Yangtze United Financial
Leasing”) (Note iii)
Zhejiang Zheshang Innovation Capital
Management Co., Ltd. ("Zheshang
Innovation Capital Management")
Taiping Science and Technology
Insurance Co., Ltd. (“Taiping
Insurance”) (Note v)
Pujiang JuJinFengAn Investment
Management LP ("FengAn
Investment") (Note vi)
Corporate
The PRC
10.61
10.61
Provision of financial
leasing services
Corporate
The PRC
40
40
Investment
management and
consulting
19.8
15
19.8
Big data asset
transaction
15
Science and
technology related
insurance
Zhejiang Big Data Exchange Center Co.,
Ltd. (‘’Zhejiang Big Data’’) (Note iv)
Corporate
The PRC
Corporate
The PRC
Partnership
The PRC
17.86
17.86
Investment
management
Zheshang FoF for Industry
Partnership
The PRC
35.71
24.99
Investment
Transformation and Upgrading LP
(“Zheshang FoF”) (Note vii)
management and
consulting
189
ANNUAL REPORT
24.
INTERESTS IN ASSOCIATES (Continued)
Name of entity
Shaoxing Shangyu Industry M&A leading
LP ("Shaoxing Shangyu") (Note vi)
Form of
business
structure
Place of
registration and
operation
Percentage of equity
interest attributable to
the Group
12/31/2020
%
12/31/2019
%
Principal activities
Partnership
The PRC
0.005
0.005
Investment
management and
consulting
Shanghai Rural Commercial Bank Co.,
Corporate
The PRC
5.36
5.36
Commercial banking
Ltd ("SRCB") (Note viii)
All of the above associates are accounted for using the equity method in these consolidated financial statements.
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, 2020, the disposal transaction has not been completed and the refundable deposit of
Rmb165,600,000 (2019: Rmb165,600,000) in respect of such transfer reversed by Zheshang Securities was
included in other payables in Note 37.
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)
Communications Group made capital injection to Zhejiang Communications Finance at the amount of
Rmb2,230,000,000 (during the year), thus caused the Group’s entity interest of Zhejiang Communications
Finance decreased from 35% to 20.08%.
190
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
INTERESTS IN ASSOCIATES (Continued)
24.
Notes: (Continued)
(iii)
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.
(iv)
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.
(v)
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.
(vi)
As general partner and the executive partner of FengAn Investment and Shaoxing Shangyu, the management
considers the Group has significant influence over the investees.
(vii)
The Group’s entity interest of Zheshang FoF increased from 24.99% to 35.71% due to the net impact of (a)
capital injection of Rmb196,259,176 and (b) return of investment of Rmb1,062,945 during the year ended
December 31,2020.
(viii)
The Group is able to exercise significant influence over SRCB because it has the power to appoint one out of 19
directors of SRCB under the provisions stated in the Articles of Association of that company.
(ix)
The first general meeting of Zhejiang Concord Property held on June 1, 2020 approved the reduction of
share capital from Rmb50,000,000 to Rmb5,000,000 while each shareholder remained the shareholding ratio
unchanged.
191
ANNUAL REPORT INTERESTS IN ASSOCIATES (Continued)
24.
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
12/31/2020
Rmb’000
12/31/2019
Rmb’000
1,145,985,112
1,014,855,697
1,052,825,952
930,911,786
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
45,112,901
40,342,396
9,446,741
9,355,485
8,996,234
9,355,485
Dividends received from associates during the year
370,424
120,520
192
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
25.
INTEREST IN A JOINT VENTURE
Unlisted investment in a joint venture, at cost less impairment
Share of post-acquisition gain/(losses)
12/31/2020
Rmb’000
12/31/2019
Rmb’000
373,470
10,855
373,470
(5,427)
384,325
368,043
At December 31, 2020 and 2019, the Group had interest in the following joint venture:
Name of entity
Zhejiang Shaoxing Shengxin
Expressway Co., Ltd.
(“Shengxin Co”)
Form of
business
structure
Place of
registration and
operation
Percentage of equity
interest attributable to
the Group
12/31/2020
%
12/31/2019
%
Corporate
The PRC
50
50
Principal activities
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
12/31/2020
Rmb’000
12/31/2019
Rmb’000
135,378
123,472
1,823,733
2,003,016
62,823
56,299
1,127,639
1,334,103
The above amounts of assets and liabilities include the following:
Cash and cash equivalents
128,395
64,156
Non-current financial liabilities
(excluding trade and other payables and provisions)
1,083,000
1,285,000
193
ANNUAL REPORT
INTEREST IN A JOINT VENTURE (Continued)
25.
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
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
378,177
426,733
32,563
69,882
–
–
(179,928)
(179,825)
2,017
1,427
(54,340)
(62,250)
(10,854)
(12,710)
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
12/31/2020
Rmb’000
12/31/2019
Rmb’000
768,649
50%
736,086
50%
Carrying amount of the Group’s interest in Shengxin Co
384,325
368,043
194
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
26. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial assets mandatorily measured at FVTPL:
– Debt securities
– Equity securities (Note i, ii)
– Funds
– Other investments (Note iii)
Analysed as:
– Listed (Note iv)
– Unlisted
Analysed for reporting purposes as:
Current assets
Non-current assets
Notes:
12/31/2020
Rmb’000
12/31/2019
Rmb’000
21,651,430
1,861,597
4,193,745
1,695,445
17,389,486
849,642
2,352,974
1,660,276
29,402,217
22,252,378
7,187,310
22,214,907
5,066,640
17,185,738
29,402,217
22,252,378
29,158,094
244,123
22,235,480
16,898
29,402,217
22,252,378
(i)
The restricted shares with a legally enforceable restriction that prevents the Group to dispose of within a
specified period amounted to approximately RMB120,389,000 as at December 31, 2020 (2019: nil). The fair
values of these securities have taken into account the relevant features including the restrictions.
(ii)
As at December 31, 2020, the Group has entered into securities lending arrangement with clients that resulted
in the transfer of financial assets at fair value through profit or loss with a total fair value of RMB27,363,000
(2019: RMB11,754,000) to external clients. Since the arrangement will be settled by the securities with the same
quantity lent, the economic risks and benefits of those securities are not transferred and it does not result in
derecognition of the financial assets.
(iii)
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.
(iv)
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.
195
ANNUAL REPORT
27. CONTRACT ASSETS
High grade road construction contract
Less: Allowance for contract asset
12/31/2020
Rmb’000
12/31/2019
Rmb’000
1,009,132
(1,514)
687,589
(1,032)
1,007,618
686,557
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.
28. TRADE RECEIVABLES
Trade receivables
– contracts with customers
Less: Allowance for credit losses
Trade receivables (before allowance for credit losses) comprise:
Fellow subsidiaries
Third parties
12/31/2020
Rmb’000
12/31/2019
Rmb’000
368,702
(6,728)
323,767
(4,428)
361,974
319,339
12,563
356,139
9,245
314,522
368,702
323,767
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.
196
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
28. TRADE RECEIVABLES (Continued)
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
12/31/2020
Rmb’000
12/31/2019
Rmb’000
309,639
44,044
2,972
5,319
361,974
291,295
17,905
6,430
3,709
319,339
12/31/2020
Rmb’000
12/31/2019
Rmb’000
4,428
2,350
(50)
6,728
3,307
1,243
(122)
4,428
197
ANNUAL REPORT
29. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING
BUSINESS
Loans to margin clients
Less: Impairment allowance
12/31/2020
Rmb’000
12/31/2019
Rmb’000
15,013,472
(43)
8,752,658
(1,015)
15,013,429
8,751,643
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, 2020, 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 43,022,132,000 (2019: Rmb27,246,376,000). Cash
collateral of Rmb1,920,073,000 (2019: Rmb1,030,089,000) received from clients was included in accounts
payable to customers arising from securities business in Note 35.
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.
198
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
29. 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, 2019
– Transfer to 12m ECL
– Write off
– Charged to profit or loss
As at December 31, 2019
– Transfer to 12m ECL
– Impairment loss reversed
– Charged to profit or loss
As at December 31, 2020
Lifetime ECL
(not credit-
impaired)
Rmb’000
Lifetime ECL
(credit-impaired)
Rmb’000
12m ECL
Rmb’000
6
1
–
1
8
2
–
23
33
759
(1)
–
(756)
2
(2)
–
10
10
4,064
–
(637)
(2,422)
1,005
–
(1,005)
–
–
Total
Rmb’000
4,829
–
(637)
(3,177)
1,015
–
(1,005)
33
43
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, 2020
Gross carrying amount
As at December 31, 2019
Gross carrying amount
Lifetime ECL
(not credit-
impaired)
Rmb’000
Lifetime ECL
(credit-impaired)
Rmb’000
12m ECL
Rmb’000
Total
Rmb’000
14,174,263
839,209
–
15,013,472
8,714,110
37,543
1,005
8,752,658
199
ANNUAL REPORT
30. OTHER RECEIVABLES AND PREPAYMENTS
Non-Current
Prepayments (Note i)
Current
Prepayments
Trading deposits (Note ii)
Settlement receivables
Others
Notes:
12/31/2020
Rmb’000
12/31/2019
Rmb’000
2,923,140
–
12/31/2020
Rmb’000
12/31/2019
Rmb’000
296,462
2,597,662
66,139
169,538
3,129,801
143,552
157,383
1,055
122,192
424,182
(i)
Prepayment of RMB2,923,140,000 was transferred to Communications Group for the acquisitions of Zhejiang
HangNing Expressway Co., Ltd. ("HangNing") and Zhejiang LongLiLiLong Expressway Co., Ltd. ("LongLiLiLong")
(collectively referred to as the "Acquirees"). Refer to Note 56(i) Prepayments of acquisition consideration for
more details.
(ii)
Trading deposits mainly represent over-the-counter option deposit and equity swap deposit.
200
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
31. 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
Analysed for reporting purposes as:
Current assets
Non-current assets
12/31/2020
Rmb’000
12/31/2019
Rmb’000
3,638,156
3,675,974
7,314,130
(191,659)
3,215,869
4,914,829
8,130,698
(20,344)
7,122,471
8,110,354
323,537
6,990,593
7,314,130
(191,659)
115,038
8,015,660
8,130,698
(20,344)
7,122,471
8,110,354
7,002,471
120,000
8,110,354
–
7,122,471
8,110,354
The collaterals include both equity and debt securities listed in the PRC. As at December 31, 2020, the fair value
of equity securities and debt securities held as collaterals was Rmb 12,736,012,000 (2019: Rmb18,278,480,000)
and Rmb3,819,482,000 (2019: Rmb3,288,684,000), respectively.
201
ANNUAL REPORT
31. 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, 2019
– Transfer to credit-impaired
– Transfer to 12m ECL
– Charged to profit or loss
As at December 31, 2019
– Transfer to lifetime ECL
– Transfer to 12m ECL
– Charged to profit or loss
As at December 31, 2020
Lifetime ECL
(not credit-
impaired)
Rmb’000
Lifetime ECL
(credit-impaired)
Rmb’000
32,688
344
(24,758)
(6,822)
1,452
202
(140)
(1,037)
477
4,000
(344)
–
4,656
8,312
–
–
171,688
180,000
12m ECL
Rmb’000
15,058
–
24,758
(29,236)
10,580
(202)
140
664
11,182
Total
Rmb’000
51,746
–
–
(31,402)
20,344
–
–
171,315
191,659
The tables below detail the credit risk exposures of the Group’s financial assets held under resale agreements,
which are subject to ECL assessment.
Lifetime ECL
(not credit-
impaired)
Rmb’000
Lifetime ECL
(credit-impaired)
Rmb’000
12m ECL
Rmb’000
Total
Rmb’000
6,866,057
268,073
180,000
7,314,130
7,744,728
205,970
180,000
8,130,698
As at December 31, 2020
Gross carrying amount
As at December 31, 2019
Gross carrying amount
202
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
32. 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 3.35% (2019: 0.3% to 3.7%) 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, 2020
As at December 31, 2019
HKD
Rmb’000
69,082
35,570
USD
Rmb’000
135,129
176,870
203
ANNUAL REPORT
33. BANK BALANCES, CLEARING SETTLEMENT FUND, DEPOSITS
AND CASH
Time deposits with original maturity over three months
Restricted bank balances and cash (Note)
Unrestricted bank balances and cash
Time deposits with original maturity of less than three months
Cash and cash equivalents
12/31/2020
Rmb’000
12/31/2019
Rmb’000
313,600
23,986
8,609,049
–
302,726
–
8,057,777
18,821
8,609,049
8,076,598
8,946,635
8,379,324
Note: The restricted bank deposits amounted to RMB23,986,000 are fund management risk reserve and margin
deposits.
Bank balances carry interest at the average market rate is 0.35% (2019: 0.35%) per annum. Time deposits carry
interest at fixed rates ranging from 2.25% to 4.125% (2019: 1.66% to 4.125%) per annum.
Bank balances, clearing settlement fund, deposits and cash that are denominated in currencies other than the
functional currency of the respective group entities are set out below:
As at December 31, 2020
As at December 31, 2019
HKD
Rmb’000
24,389
23,213
USD
Rmb’000
39,498
51,972
204
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
34. 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
Chengdu Rural Commercial Bank Co., Ltd.
Shaoxing Bank Company Limited
12/31/2020
Rmb’000
12/31/2019
Rmb’000
200,000
–
–
100,000
100,000
200,000
50,000
20,000
–
–
400,000
270,000
As at December 31, 2020, the placements from (i) Ningbo Yinzhou Rural Commercial Bank Co., Ltd. carried
interest at a fixed rate of 3.10% per annum are repayable within 1 months from the end of the reporting period,
(ii) the placements from Chengdu Rural Commercial Bank Co., Ltd. carried interest at a fixed rate of 2.60% per
annum are repayable within 1 months from the end of the reporting period and (iii) the placements from Shaoxing
Bank Company Limited carried interest at a fixed rate of 2.40% per annum are repayable within 1 months from
the end of the reporting period.
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.
205
ANNUAL REPORT
35. 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, 2020, Rmb1,920,073,000 (2019: Rmb534,415,000) 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, 2020
As at December 31, 2019
HKD
Rmb’000
68,660
35,570
USD
Rmb’000
132,616
176,870
206
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
36. 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
37. OTHER PAYABLES AND ACCRUALS
Accrued payroll and welfare
Advances
Advance payments for settlement from securities business
Advance payment of futures insurance
Trading deposit and settlement (Note)
Deposit received for disposal of an associate (Note 24(i))
Retention payable
Pledge deposit for futures
Compensations for highway crossing
Payables to be settled for fund redemption
Toll collected on behalf of other toll roads
Futures risk reserve
Government subsidies from removal of expressway
toll station on provincial borders
Deferred income
Others
Note:
12/31/2020
Rmb’000
12/31/2019
Rmb’000
428,273
104,616
126,998
41,221
273,635
906,748
83,490
81,291
31,842
284,485
974,743
1,387,856
12/31/2020
Rmb’000
12/31/2019
Rmb’000
1,181,575
29,951
4,812
15,903
3,833,730
165,600
88,431
119,614
62,617
85,998
6,113
124,717
98,615
96,828
191,271
972,891
41,698
50,153
–
199,700
165,600
113,018
94,612
96,269
45,577
7,532
111,553
–
60,950
89,926
6,105,775
2,049,479
Trading deposits mainly represent over-the-counter option deposit and equity swap deposit.
207
ANNUAL REPORT
38. DERIVATIVE FINANCIAL ASSETS/LIABILITIES
Equity swap
Others (Note)
Others (Note)
Note:
12/31/2020
Nominal
Amount
Rmb’000
9,068,830
40,884,898
Assets
Rmb’000
419,849
105,780
Liabilities
Rmb’000
389,055
108,372
49,953,728
525,629
497,427
12/31/2019
Nominal
Amount
Rmb’000
5,313,584
5,313,584
Assets
Rmb’000
Liabilities
Rmb’000
6,250
6,250
5,565
5,565
Others include stock index futures, treasury futures, commodity futures, interest rate swap ("IRS") and other options.
Under the daily mark-to-market and settlement arrangement, any gains or losses of the Group’s position in stock index
futures, treasury futures and commodity futures were settled daily. Accordingly, the net position of them in derivative
instruments were nil at December 31, 2020 and 2019.
Under the daily mark-to-market and settlement arrangement, any gains or losses of the Group’s position in IRS were
settled daily in the corresponding payments or receipts were included in “clearing settlement funds” as at December 31,
2020 (2019, nil). Accordingly, the net position of the IRS contracts in derivative instruments were nil at December 31,
2020.
For IRS contracts in mainland China not under the daily mark-to-market and settlement arrangement are presented
gross at the end of reporting period.
208
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
39. BANK AND OTHER BORROWINGS
Loans from banks, secured (Note i)
Loans from banks, unsecured
Loans from related parties, unsecured (Notes 56(i), 56(ii))
Loans from third parties, guaranteed
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
12/31/2020
Rmb’000
12/31/2019
Rmb’000
6,492,284
3,108,672
4,667,616
–
4,185,262
386,967
4,444,153
2,003,751
14,268,572
11,020,133
6,348,772
960,000
4,235,400
2,724,400
4,598,533
836,200
2,736,400
2,849,000
14,268,572
(6,348,772)
11,020,133
(4,598,533)
Amounts shown under non-current liabilities
7,919,800
6,421,600
The bank and other borrowings comprise:
Fixed-rate borrowings
Variable-rate borrowings
2,856,260
11,412,312
2,618,463
8,401,670
14,268,572
11,020,133
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
Variable-rate borrowings
12/31/2020
12/31/2019
3.0%-6.223%
2.05%-5.30%
0.80%-4.70% 3.915%-4.41%
Notes:
i.
As at December 31, 2020, the Group pledged the following assets for these secured bank loans: (i) trade
receivables with an aggregate carrying value of Rmb1,007,618,000 (2019: Rmb686,567,000) and (ii) expressway
operating rights of Zhoushan Bay Bridge, Shenjiahuhang Lianhang part and Huzhou part (2019: expressway
operating rights of Ningbo Jiaochuan K20+135 to Zhoushan Cezi K56+175, Shenjiahuhang part and Huzhou part.
209
ANNUAL REPORT
40. SHORT-TERM FINANCING NOTE PAYABLE
Unsecured:
Short-term financing bonds
Beneficial certificates
Total
12/31/2020
12/31/2019
4,518,470
1,788,246
6,532,990
–
6,306,716
6,532,990
As at December 31, 2020, the short-term financing bonds bears an interest rate at 3.01% to 3.18% (2019:
short-term financing bonds: 2.99% to 3.19%), the yields of all the outstanding beneficial certificates were between
2.90% to 10.65%.
41. BONDS PAYABLE
Corporate and subordinated bonds without redemption option (Note i)
Medium-term notes (Note ii)
Asset-backed securities (Note iii)
Less: Bonds due within 1 year
12/31/2020
Rmb’000
12/31/2019
Rmb’000
16,143,192
3,062,374
862,581
11,202,173
3,062,066
909,032
20,068,147
15,173,271
(6,361,764)
(2,281,229)
Amounts shown under non-current liabilities
13,706,383
12,892,042
This balance represented 2 corporate bonds and 10 subordinated bonds (2019: 2 corporate bonds and 4
subordinated bonds) due by year 2021 to 2025 (2019: 2020 to 2024) issued by Zheshang Securities, without
redemption option, with fixed interest rates ranging from 3.48% to 5.28% (2019: 3.48% to 5.3%) per annum.
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.
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.
Notes:
(i)
(ii)
(iii)
210
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
42. 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 is listed on the Stock Exchange (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. The latest Conversion Price 2017 was HK$10.54 per H share.
(2) Redemption
(i) Redemption at maturity
Unless previously redeemed, converted or purchased and cancelled as provided herein, the Company will
redeem each Convertible Bond 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:
211
ANNUAL REPORT 42. CONVERTIBLE BONDS (Continued)
Convertible Bond 2017 (Continued)
(2) Redemption (Continued)
(ii)
Redemption at the option of the Company (Continued)
(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.
(iii)
Redemption at the option of the bondholders
The Company will, at the option of the Bondholders, redeem whole or some of that holder’s bond on April 21,
2020 (the “Put Option Date”) at 100 percent of their outstanding principal amount on that Date.
The Convertible Bond 2017 comprises two components:
(a)
Debt component was initially measured at fair value amounted to Euro297,801,000 (equivalent to
Rmb2,190,578,000). It is subsequently measured at amortised cost by applying effective interest rate
method after considering the effect of the transaction costs. The effective interest rate used is 4.28%.
(b)
Derivative component comprises conversion right of the bondholders, redemption option of the Company,
and redemption option of the bondholders.
Transaction costs totalling Rmb16,725,000 that relate to the issue of the Convertible Bond 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 ender 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.
212
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 42. CONVERTIBLE BONDS (Continued)
Convertible Bond 2017 (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, 2019 and 2020 is set out as below:
As at January 1, 2019
Exchange realignment
Interest charge
Gain on changes in fair value
As at December 31, 2019
Redemption
Exchange realignment
Interest charge
Gain on changes in fair value
Debt component
at amortised cost
Euro’000
Rmb’000
317,553
–
13,591
–
2,491,934
(9,470)
105,589
–
331,144
(364,900)
–
33,852
–
2,588,053
(2,802,541)
(40,834)
256,084
–
Derivative components at
FVTPL
Total
Euro’000
Rmb’000
Euro’000
Rmb’000
27,746
–
–
(2,132)
25,614
(25,611)
–
–
(2)
217,729
–
–
(17,547)
200,182
(200,165)
–
–
(13)
345,299
–
13,591
(2,132)
356,758
(390,511)
–
33,852
(2)
2,709,663
(9,470)
105,589
(17,547)
2,788,235
(3,002,706)
(40,834)
256,084
(13)
As at December 31, 2020
96
762
1
4
97
766
As at December 31, 2020, the Bondholders 2017 had exercised the redemption rights and Convertible Bond 2017
with a principal amount of Euro 364,900,000 has been redeemed.
The detailed key inputs the valuer uses to calculate the fair value of the derivative component refer to Note 52(c).
213
ANNUAL REPORT
42. 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 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”, the holding company of Zheshang Securities), 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 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 conversion price, and submits it to the shareholder’s meeting of Zheshang Securities for approval.
214
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 42. 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;
(b) When the aggregate principal amount of the outstanding Convertible Bond 2019 is less than
Rmb30,000,000.
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, 2020 are set out as below:
215
ANNUAL REPORT 42. CONVERTIBLE BONDS (Continued)
Convertible Bond 2019 (Continued)
Issuance on March 12, 2019
Issue cost
Interest charge
Addition (Note i)
Conversion into shares (Note ii)
At December 31, 2019
Interest charge
Interest paid
Addition (Note i)
Conversion into shares (Note ii)
Redemption (Note iii)
At December 31, 2020
Notes:
Liability
Component
Rmb’000
Equity
Component
Rmb’000
2,272,833
(10,408)
88,289
341,526
(144)
352,167
(1,613)
–
53,174
(22)
2,692,096
403,706
94,779
(6,669)
416,086
(3,172,403)
(23,889)
–
–
64,214
(464,244)
(3,676)
–
–
(i)
During the year ended December 31, 2020, Shangsan Co disposed of the Convertible Bond 2019 held on hand
with the principal amount of Rmb480,300,000 (2019: 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, 2020, the bondholders converted part of the Convertible Bond 2019 with
a principal amount of Rmb3,472,335,000 (2019: Rmb13,000) to the shares of Zheshang Securities. The Group’s
equity interest of Zheshang Securities was diluted due to the conversion of shares and Group recognised
deemed partial disposal gain amounting to Rmb1,027,654,000 in special reserve.
(iii)
As at December 31, 2020, Zheshang Securities had exercised the redemption rights and Convertible Bond 2019
with a principal amount of Rmb27,502,000 has been redeemed.
216
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
43. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS
Analysed as collateral type:
Bonds
Analysed by market:
Shanghai/Shenzhen Stock Exchange
Inter-bank market
12/31/2020
Rmb’000
12/31/2019
Rmb’000
11,525,087
9,017,680
4,717,363
6,807,724
5,062,725
3,954,955
11,525,087
9,017,680
As at December 31, 2020 and 2019, 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, 2020 and 2019, 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.
217
ANNUAL REPORT
43. 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, 2020 and
December 31, 2019.
As at December 31, 2020
Carrying amount of transferred assets
Carrying amount of associated liabilities
Net position
As at December 31, 2019
Carrying amount of transferred assets
Carrying amount of associated liabilities
Net position
Financial
assets at
FVTPL
Rmb’000
9,237,292
(8,465,134)
772,158
7,130,620
(6,439,271)
691,349
44. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR
LOSS
Financial liabilities held for trading:
– Securities
Financial liabilities designated at FVTPL:
– Financial liabilities arising from consolidation
of structured entities (Note)
12/31/2020
Rmb’000
12/31/2019
Rmb’000
392,573
1,389
2,518,152
320,494
2,910,725
321,883
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 Rmb2,532,341,000 and Rmb3,480,229,000 at
December 31, 2020 and 2019, respectively. The total assets of the consolidated structured entities amounted to
Rmb5,485,843,000 and Rmb3,800,723,000 at December 31, 2020 and 2019, respectively.
218
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
44. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR
LOSS (Continued)
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.
45. 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
31/12/2020
Rmb’000
12/31/2019
Rmb’000
91,346
69,920
149,055
79,919
70,577
51,789
92,349
44,634
390,240
259,349
(91,346)
(70,577)
298,894
188,772
46. DEFERRED TAXATION
For the purpose of presentation in the consolidated statement of financial position, certain deferred tax assets
and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting
purposes:
Deferred tax assets
Deferred tax liabilities
12/31/2020
Rmb’000
12/31/2019
Rmb’000
1,258,270
(386,498)
924,602
(347,331)
871,772
577,271
219
ANNUAL REPORT
46. DEFERRED TAXATION (Continued)
The following are the major deferred tax liabilities and assets recognised and movements thereon during the
current and prior years:
Difference
in
tax and
accounting
depreciation
of property
plant and
equipment
and
expressway
operating
rights
Rmb’000
Temporary
differences of
accrued
expenses
and
impairment
losses and
tax losses
Rmb’000
Fair value
adjustment of
long term
assets arising
from business
combination
Rmb’000
655,816
(12,727)
643,089
(1,421)
(182,265)
7,475
(174,790)
14,756
188,936
25,631
214,567
227,038
Changes in
fair value of
investments
carried
at fair value
Rmb’000
(50,539)
(55,056)
(105,595)
54,128
Total
Rmb’000
611,948
(34,677)
577,271
294,501
At January 1, 2019
Charge (credit) to profit or loss
At December 31, 2019
Charge (credit) to profit or loss
At December 31, 2020
(51,467)
641,668
(160,034)
441,605
871,772
As at December 31, 2020, the Group had unused tax losses of approximately Rmb 579,428,000 (2019:
Rmb803,074,000) for which deferred tax was not recognized due to uncertainty of future taxable incomes. The
expiry dates of the unrecognised tax losses are listed as below.
12/31/2020
Rmb’000
12/31/2019
Rmb’000
–
137,525
120,985
39,725
73,702
207,491
431,137
137,525
120,985
39,725
73,702
–
579,428
803,074
2020
2021
2022
2023
2024
2025
220
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
47. SHARE CAPITAL
Registered, issued and fully paid:
Domestic shares of Rmb1 each
H Shares of Rmb1 each
Number of
shares
12/31/2019
and 2020
Rmb’000
Share capital
12/31/2019
and 2020
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.
48. 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 57) at the end of the
reporting period are set out below. The summarised financial information below represents amounts before
intragroup elimination.
Shangsan Co and its subsidiaries
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity attributable to owners of the Company
Non-controlling interests
12/31/2020
Rmb’000
12/31/2019
Rmb’000
91,945,513
67,887,662
4,006,952
3,398,548
62,077,238
40,645,384
10,384,191
12,036,217
11,405,255
9,533,525
12,085,781
9,071,084
221
ANNUAL REPORT
48. NON-CONTROLLING INTERESTS (Continued)
Shangsan Co and its subsidiaries (Continued)
Revenue
Expenses
Profit for the year
Other comprehensive (expense) 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
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
6,047,660
4,489,561
(3,911,060)
(2,842,488)
2,136,600
(2,349)
1,647,073
922
2,134,251
1,647,995
1,119,114
1,017,486
952,418
694,655
2,136,600
1,647,073
1,118,097
1,016,154
952,851
695,144
2,134,251
1,647,995
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
Dividends paid to non-controlling shareholders
(206,882)
(189,040)
Net cash used in operating activities
Net cash used in investing activities
Net cash from financing activities
Net cash inflow
(3,956,768)
(2,667,973)
477,457
(28,661)
4,047,442
4,267,289
568,131
1,570,655
222
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
48. 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
12/31/2020
Rmb’000
12/31/2019
Rmb’000
496,619
412,538
678,686
725,397
101,687
6,255
95,525
6,611
544,355
528,257
523,008
507,542
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
174,239
270,330
(120,108)
(171,451)
54,131
98,879
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
27,607
26,524
54,131
50,428
48,451
98,879
(11,058)
(10,818)
102,723
187,652
(3,105)
(98,575)
(23,863)
(22,077)
75,755
67,000
223
ANNUAL REPORT
49. 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.
50. COMMITMENTS
Authorised but not contracted for:
– Purchase of machinery and equipment
– Acquisition and construction of properties
Contracted for but not provided:
– Equity investments
Total
12/31/2020
Rmb’000
12/31/2019
Rmb’000
1,395,921
370,441
611,813
322,558
1,245,000
1,106,906
3,011,362
2,041,277
51. 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 39, 40,
41, 42 and 43, 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.
224
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
52. 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
Financial liabilities at amortised cost
12/31/2020
Rmb’000
12/31/2019
Rmb’000
29,402,217
525,629
61,323,246
22,252,378
6,250
45,983,221
497,427
2,910,725
5,565
321,883
4
80,878,040
200,182
69,216,953
(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 other price risk), credit risk and impairment assessment,
and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and
monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.
225
ANNUAL REPORT
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk
(i)
Interest rate risk
The Group is exposed to fair value interest rate risk in relation to loans to customers arising from margin
financing business, fixed-rate entrusted loans, financial assets held under resale agreements, fixed-rate time
deposits, 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 29,31,33,34,39,40,41,42,43 and 44 for details).
The Group is also exposed to cash flow interest rate risk in relation to variable-rate bank balances and clearing
settlement fund held on behalf of customers, bank balances, clearing settlement fund, deposits and bank and
other borrowings (see Notes 32, 33 and 39 for details).
The Group currently does not have an interest rate risk hedging policy as the management considers the Group is
not exposed to significant interest rate risk. The management will continue to monitor interest rate risk exposure
and consider hedging against it should the need arise.
The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management
section of this note.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative
instruments, comprising variable-rate bank balances and clearing settlement fund held on behalf of customers,
bank balances, clearing settlement fund, deposits and bank and other borrowings at the end of the reporting
period.
The analysis is prepared assuming the balances outstanding at the end of the reporting period were outstanding
for the whole year. A 50 basis points (2019: 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 (2019: 50 basis points) higher/lower and all other variables were held
constant, the Group’s post-tax profit for the year ended December 31, 2020 would have increased/decreased by
Rmb64,590,000 (2019: Rmb73,562,000). This was mainly attributable to the Group’s exposure to interest rates on
its variable-rate bank balances and clearing settlement fund.
226
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
Currency risk
(ii)
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:
Assets
Liabilities
12/31/2020
Rmb’000
12/31/2019
Rmb’000
12/31/2020
Rmb’000
12/31/2019
Rmb’000
Hong Kong dollar ("HKD")
United States dollar ("USD")
Euro dollar ("EUR") (Note)
93,471
174,627
–
59,184
228,843
–
68,660
132,616
2,808,462
35,570
176,870
2,788,235
Note: Amount represented both the debt and derivative component of the Convertible Bond 2017 and bank borrowings.
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% (2019: 10%) increase and decrease in Rmb against the relevant foreign currencies. 10% (2019: 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% (2019: 10%) change in foreign currency rates. A positive
number below indicates an increase in post-tax profit where Rmb strengthen 10% (2019: 10%) against the
relevant currency. For a 10% (2019: 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.
227
ANNUAL REPORT
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
Currency risk (Continued)
(ii)
Sensitivity analysis (Continued)
USD impact
EUR impact
12/31/2020
Rmb’000
12/31/2019
Rmb’000
12/31/2020
Rmb’000
12/31/2019
Rmb’000
Profit or loss
(3,151)
(3,898)
210,635
209,118
In the management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as
the year end exposure does not reflect the exposure during the year.
(iii)
Other price risk
The Group is exposed to equity and debt security price risk in relation to its financial assets at FVTPL, 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% (2019: 5%) higher/lower,
•
post-tax profit for the year ended December 31, 2020 would have increased/decreased by
Rmb1,102,583,000 as a result of the changes in fair value of financial assets at FVTPL.
•
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.
228
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
52. 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 price risk in 2019 came from the derivative component of Convertible Bond 2017. There is no price risk as at
December 31, 2020 due to the redemption of Convertible Bond 2017.
The exposure to foreign currency exchange rate of the Convertible Bond 2017 had been covered in Note 52(b)(ii)
already.
1)
Changes in share price
If the share price of the Company had been 10% (2019:10%) 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
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
–
–
(6,989)
2,712
If the volatility to the valuation model had been 10% (2019:10%) 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
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
–
–
(4,033)
2,712
229
ANNUAL REPORT
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment
As at December 31, 2020, the Group’s maximum exposure to credit risk which will cause a financial loss to the
Group due to failure to discharge an obligation by the counterparties provided by the Group is arising from the
carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial
position and the amount of contingent liability in relation to financial guarantee issued by the Group as disclosed
in Note 55.
The credit risk on liquid funds, representing bank balance, 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, 2020 and 2019.
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.
230
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)
Securities operation (Continued)
i)
Credit risk management
Credit risk from loans to customers arising from margin financing business and financial assets held under
resales agreements mainly including the debtor falsifying the application, failing to repay debts, violating the
agreement, violating regulatory discipline of trading behaviour, and providing collateral that involves law dispute,
etc. The Group management authorises professional personnel to examine and approve the credit limit of
these businesses, as well as adjust such credit limit in accordance with the regular assessment of the debtor’s
repayment capacity. Risk management division oversights the collaterals and usage of related credit limit, and
initiates margin call if necessary. Once the debtor fail to enhance the collateral to the account, the credit risk will
be controlled by liquidating the pledged securities.
ii)
Measurement of ECL
Since January 1, 2018, The Group has applied the ECL model to measure the expected credit losses for
applicable financial assets mainly including loans to customers arising from margin financing business and
financial assets held under resale agreements.
The group has used the "3 stage" ECL model to assess the credit losses when its credit risk has increased
significantly since initial recognition:
(i)
An asset moves to stage 1 where there has low risk of default or has not been a significant increase in
credit risk and that are not credit impaired. The Group will continuously monitor its credit risk;
(ii)
An asset moves to stage 2 where there has been a significant increase in credit risk since initial
recognition but that are not credit impaired. The Group does not see it as an impairment loss occurred
instrument;
(iii)
An asset moves to stage 3 when impairment losses occurred; and
(iv)
The loss impairment for financial instruments in stage 1 is anticipated credit losses for the next 12 months,
which correspond to the amount of anticipated credit losses for the entire life time resulting from possible
defaults within the next 12 months. In the second or third stage, the expected credit losses of financial
instruments are measured for the entire life time and the expected credit losses are recorded.
231
ANNUAL REPORT 52. 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 5. 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, 2020 and 2019, no significant changes were made in the estimated
technology or key assumptions.
The assessment of significant increase in credit risk and the measurement of ECL 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 ECL 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"), Shanghai-Shenzhen 300 Index("CSI 300"), Business Climate Index,
Unemployment Rate, RMB to USD Exchange Rate, Total Investment in Fixed Assets, Completed Investment in
Fixed Assets, Social Financing Scale, etc.
232
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 52. 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)
In 2020, the Group has considered the impact of COVID-19 when evaluating the forward-looking information used
in the ECL model. The key assumptions which contribute most to looking-forward information used by the Group
to estimate ECL in different macro-economic scenarios are CSI 300, CPI and PPI.:
The predictive value of CSI 300 at the end of 2021 ranges between 4,738 points to 5,790 points; the predictive
value of CPI at the end of 2021 ranges between 1.09 to 1.33; and the predictive value of PPI at the end of 2021
ranges between 1.60 to 1.84.
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.
233
ANNUAL REPORT 52. 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
Trade receivables/
contract asset
Other financial
assets/other items (Note)
Low risk (stage 1)
Doubtful (stage 2)
Loss (stage 3)
Write-off
The counterparty has a low
risk of default and does
not have any past-due
amounts
There have been significant
increases in credit risk
since initial recognition
through information
developed internally or
external resources
Lifetime ECL – not
credit-impaired
12-month ECL
Lifetime ECL – not
credit-impaired
Lifetime ECL –not
credit-impaired
There is evidence indicating
the asset is credit-impaired
Lifetime ECL –
credit-impaired
Lifetime ECL –
credit-impaired
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.
234
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)
Other operations (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:
External
credit
rating
Internal
credit
rating
12-months
or lifetime ECL
12/31/2020
Gross
carrying
amount
Rmb’000
12/31/2019
Gross
carrying
amount
Rmb’000
Notes
Financial assets at
amortised cost
Trade receivables (Note i)
28
– toll operation
– securities operation
– others
Loans to customers
arising from margin
financing business
– securities operation
Bank balances, clearing
settlement fund,
deposit and cash
N/A
N/A
N/A
Low risk
Low risk
Low risk
Lifetime ECL
Lifetime ECL
Lifetime ECL
131,896
207,808
28,998
186,396
111,731
25,640
29
N/A
Low risk
Doubtful
Loss
12-month ECL
Lifetime ECL -
not credit-impaired
Lifetime ECL -
credit-impaired
14,174,263
8,714,108
839,209
37,543
–
1,005
33
AA to AAA
Low risk
12-month ECL
8,992,053
8,379,324
235
ANNUAL REPORT
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)
Other operations (Continued)
The following 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: (Continued)
External
credit
rating
Internal
credit
rating
12-months
or lifetime ECL
Notes
12/31/2020
Gross
carrying
amount
Rmb’000
12/31/2019
Gross
carrying
amount
Rmb’000
Financial assets at
amortised cost
(Continued)
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
Notes:
32
31
30
27
55
AA
Low risk
12-month ECL
27,045,398
20,141,931
N/A
Low risk
Doubtful
Loss
N/A
Low risk
12-month ECL
Lifetime ECL-
not credit-impaired
Lifetime ECL-
credit-impaired
12-month ECL
6,866,057
7,746,527
268,073
205,970
180,000
2,859,161
178,201
295,172
N/A
Low risk
Lifetime ECL
1,009,132
687,589
N/A
Low risk
12-month ECL
542,269
643,366
i.
During the year ended December 31, 2020, the Group provided ECL on trade receivables and contract asset by
Rmb6,728,000 (2019: Rmb4,428,000) and Rmb1,514,000 (2019: Rmb1,032,000), respectively.
ii.
For financial guarantee contracts, the gross carrying amount represents the maximum amount the Group has
guaranteed under the respective contracts.
236
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk and impairment assessment (Continued)
Concentration of credit risk
As at December 31, 2020, other than the concentration of credit risk on trade receivables and financial
guarantee contract amounting to Rmb428,113,000 (2019: Rmb319,339,000), and Rmb542,269,000 (2019:
Rmb643,366,000), 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, 2020 and 2019 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, 2020
and 2019 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.
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.
237
ANNUAL REPORT 52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Liquidity risk (Continued)
Liquidity tables
Weighted
average
interest rate
%
On demand
or
less than
3 months
Rmb’000
3 months -
1 year
Rmb’000
1 - 3
years
Rmb’000
3 - 5 years
Rmb’000
+5 years
Rmb’000
Total
undiscounted
cash
flows
Rmb’000
Carrying
amount
at
year end
Rmb’000
–
–
2.05%-5.30%
0.80%-4.70%
3.17%
27,054,052
974,743
279,961
1,766,460
150,133
5,923,943
–
–
–
–
–
–
–
–
–
–
–
–
863,941
3,870,668
409,734
326,615
2,311,977
–
–
3,563,741
–
–
3,256,331
–
27,054,052
974,743
279,961
2,957,016
13,152,850
6,333,677
27,054,052
974,743
279,961
2,856,260
11,412,312
6,306,716
3.31%
11,567,320
–
–
–
–
7,119,623
–
11,017,499
–
3,266,760
–
–
–
11,567,320
11,525,087
400,291
21,403,882
400,000
20,068,147
–
95,114
–
762
147,438
–
–
107,920
–
–
109,778
–
762
460,250
542,269
762
390,240
–
1,962
2,908,763
–
–
–
2,910,725
2,910,725
48,661,134
15,267,843
13,804,291
6,938,421
3,366,109
88,037,798
84,179,005
2.80%
4.24%
4.60%
3.61%-5.12%
400,291
–
–
–
542,269
2020
Non-derivative financial liabilities
Accounts payable to customers arising
from securities business
Trade payables
Other payables
Bank and other borrowings
– fixed rate
– variable rate
Short-term financing note payable
Financial assets sold under repurchase
agreements
Placements from banks and other
financial institutions
Bonds payable
Convertible Bonds
– debt component
Lease liabilities
Financial guarantee
Financial liabilities at fair value
through profit or loss
238
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
52. 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
Rmb’000
3 - 5 years
Rmb’000
+5 years
Rmb’000
Total
undiscounted
cash
flows
Rmb’000
Carrying
amount
at
year end
Rmb’000
–
–
–
3.0%-6.22%
3.915%-4.41%
3.08%
20,024,356
1,387,856
251,169
144,754
243,018
6,700,400
–
–
–
–
–
–
–
–
–
–
–
–
2,096,935
2,494,824
–
20,619
2,287,073
–
20,619
2,090,140
–
279,097
2,698,469
–
20,024,356
1,387,856
251,169
2,562,024
9,813,524
6,700,400
20,024,356
1,387,856
251,169
2,418,237
8,601,896
6,532,990
3.31%
8,938,090
83,280
–
–
–
9,021,370
9,017,680
2.88%
4.39%
4.60%
4.4032%-4.6804%
–
270,130
–
6,039
–
643,366
–
2,701,769
–
10,951,827
–
2,312,516
–
792,582
270,130
16,758,694
270,000
15,173,271
2,852,657
74,033
–
45,295
102,417
–
99,649
65,903
–
–
3,170,662
62,261
–
6,174,302
304,614
643,366
5,280,149
259,349
–
–
321,883
321,883
–
1,389
320,494
–
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
Short-term financing note payable
Financial assets sold under repurchase
agreements
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
38,610,567
10,623,992
13,407,231
4,588,827
7,003,071
74,233,688
69,538,836
239
ANNUAL REPORT
52. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Liquidity risk (Continued)
Liquidity tables (Continued)
The amounts included above for financial guarantee contracts are the maximum amounts the Group could
be required to settle under the arrangement for the full guaranteed amount if that amount is claimed by the
counterparty to the guarantee. Based on expectations at the end of the reporting period, the Group considers that
it is more likely than not that no amount will be payable under the arrangement. However, this estimate is subject
to change depending on the probability of the counterparty claiming under the guarantee which is a function of
the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.
The amounts included above for variable interest rate instruments for non-derivative financial liabilities are
subject to change if changes in variable interest rates differ to those estimates of the interest rates determined at
the end of the reporting period.
As at December 31, 2020 and 2019, 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.
240
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 52. FINANCIAL INSTRUMENTS (Continued)
(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).
For the year ended December 31, 2020
Financial Assets
Classified as
1)
Equity investments listed
in exchange
Financial assets
at FVTPL
Financial assets
at FVTPL
2) Equity securities traded in
inactive market
Financial assets
at FVTPL
3) Unlisted equity investment
Financial assets
at FVTPL
Fair value
as at
31/12/2020
Rmb’000
Fair value
as at
31/12/2019
Rmb’000
Fair value
hierarchy
1,550,297
722,589
Level 1
Basis of fair value
measurement/
valuation technique(s)
and key input(s)
Quoted bid prices in
an active market.
120,389
–
Level 3
The fair value is
determined with
reference to the quoted
market prices with an
adjustment of discount
for lack of marketability.
Significant
unobservable
input(s)
Relationship of
unobservable
inputs to
fair value
N/A
N/A
Discount for lack
of marketability
The higher the
discount, the
lower the fair
value.
110,588
110,155
Level 2
Recent transaction prices.
N/A
N/A
80,323
16,898
Level 3
Calculated based on
pricing/yield such as
price-to-earning (P/E) of
comparable companies
with an adjustment of
discount for lack of
marketability
4)
Investment funds
Financial assets
at FVTPL
Financial assets
at FVTPL
273,630
352,753
Level 1
Quoted bid prices in an
3,920,115
2,000,221
Level 2
active market.
Based on the net asset
values of the equity
investment, with
reference to observable
market price.
P/E multiples
P/B multiples
P/S multiples
Discounted for lack
of marketability
N/A
N/A
The higher the
discount, the
lower the fair
value.
The higher the
multiples, the
higher the fair
value.
N/A
N/A
241
ANNUAL REPORT
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
For the year ended December 31, 2020 (Continued)
Financial Assets
Classified as
5)
Debt investments listed
in exchange and debt
investment in interbank
market
Financial assets
at FVTPL
Fair value
as at
31/12/2020
Rmb’000
Fair value
as at
31/12/2019
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
4,937,141
3,881,143
Level 1
Quoted bid prices in an
N/A
active market.
16,700,789
13,508,343
Level 2
Discounted cash flow.
N/A
N/A
N/A
Future cash flows are
estimated based on
applying the interest
yield curves of different
types of bonds as the
key parameter.
Discounted cash flow. The
fair value is determined
with reference to the
quoted market prices
with an adjustment of
discount for lack of
marketability
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
Discounted cash flow.
The future cash flows
are estimated based
on exchange rates
from observable yield
carves at the end of
the reporting period
discounted at a rate that
reflects the credit risk of
various counterparties
Discount for lack
of marketability
The higher the
Discount, the
lower the fair
value.
N/A
N/A
N/A
N/A
13,500
–
Level 3
6)
Investments in structured
products
Financial assets
at FVTPL
1,179,028
957,305
Level 2
7)
Structured deposits
Financial assets
at FVTPL
160,000
–
Level 2
242
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
For the year ended December 31, 2020 (Continued)
Financial Assets
Classified as
Fair value
as at
31/12/2020
Rmb’000
Fair value
as at
31/12/2019
Rmb’000
Fair value
hierarchy
Basis of fair value
measurement/
valuation technique(s)
and key input(s)
8)
Investments in trust
products
Financial assets
at FVTPL
356,417
702,971
Level 3
The fair value was based
on 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.
Significant
unobservable
input(s)
Future cash flows
and discount
rate
Relationship of
unobservable
inputs to
fair value
The higher the
future cash
flows, the higher
the fair value.
The higher the
discounted rate,
the lower the fair
value.
9)
Derivative instruments
Derivative
financial
assets
525,629
6,250
Level 2
The fair value was
N/A
N/A
determined based on
option pricing model
with market observable
inputs, such as quoted
market price, dividend
yield, volatility as key
parameters.
243
ANNUAL REPORT
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
For the year ended December 31, 2020 (Continued)
Financial Liabilities
Classified as
Fair value
as at
31/12/2020
Rmb’000
Fair value
as at
31/12/2019
Rmb’000
Fair value
hierarchy
Basis of fair value
measurement/
valuation technique(s)
and key input(s)
Significant
unobservable
input(s)
Relationship of
unobservable
inputs to
fair value
1)
Securities
Financial
liabilities at
FVTPL
Financial
liabilities at
FVTPL
390,611
–
Level 1
Quoted bid prices in an
N/A
active market.
1,962
1,389
Level 2
Discounted cash flow.
N/A
N/A
N/A
Future cash flows are
estimated based on
applying the interest
yield curves of different
types of bonds as the
key parameter.
Shares of the net assets of
the products, determined
with reference to the
net asset value of the
products, calculated
by observable (quoted)
prices of underlying
investment portfolio and
adjustments of related
expenses.
Shares of the net value
of the structured
entities, determined
with reference to the
net asset value of the
structured entities,
calculated based
on pricing/yield of
comparable companies
with an adjustment
of discount for lack
of marketability of
underlying investment
portfolio and adjustments
of related expenses.
N/A
N/A
P/E multiples
Discount for lack
of marketability
The higher the
multiples the
higher the fair
value.
The higher the
discount, the
lower the fair
value.
2)
Other investor’s interest in
consolidation of
structured entities.
Financial
liabilities at
FVTPL
2,463,779
320,494
Level 2
Financial
liabilities at
FVTPL
54,373
–
Level 3
244
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
For the year ended December 31, 2020 (Continued)
Financial Liabilities
Classified as
3)
Derivative component of
Convertible Bond
Derivative
component of
Convertible
Bond
Fair value
as at
31/12/2020
Rmb’000
Fair value
as at
31/12/2019
Rmb’000
Fair value
hierarchy
Basis of fair value
measurement/
valuation technique(s)
and key input(s)
4
200,182
Level 3
Binomial option pricing
model
Expected volatility: 30.48%
(2019: 28.21%)
Dividend yield: nil (2019:
nil)
Risk-free rate: 0.08%
(2019: 1.71%)
Share price: HK$6.55
(equivalent to Rmb5.51)
(2019: HK$7.1
(equivalent to Rmb6.36))
Exercise price:
HK$10.54 (equivalent
to Rmb8.87) (2019:
HK$11.35 (equivalent to
Rmb10.17))
Relationship of
unobservable
inputs to
fair value
The higher the
expected
volatility, the
higher the fair
value.
Significant
unobservable
input(s)
2020：Expected
volatility of
30.48% (2019:
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
4)
Derivative instruments
Derivative
financial
liabilities
497,427
5,565
Level 2
The fair value was
N/A
N/A
determined based on
option pricing model
with market observable
inputs, such as quoted
market price, dividend
yield, volatility as key
parameters.
There were no transfer between Level 1 and Level 2 during the year.
245
ANNUAL REPORT
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
As at December 31, 2020
Financial assets at FVTPL
– Equity securities
– Funds
– Debt investments
– Asset management schemes and
structured deposits
– Trust products
– Unlisted equity investments
Sub-total
Derivative assets
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
1,550,297
273,630
4,937,141
–
–
–
110,588
3,920,115
16,700,789
1,339,028
–
–
120,389
–
13,500
–
356,417
80,323
1,781,274
4,193,745
21,651,430
1,339,028
356,417
80,323
6,761,068
22,070,520
570,629
29,402,217
–
525,629
–
525,629
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
Financial liabilities at FVTPL
– Securities
– Structured entities
390,611
–
1,962
2,463,779
–
54,373
392,573
2,518,152
Sub-total
390,611
2,465,741
54,373
2,910,725
Derivative component of
Convertible Bond 2017
Derivative liabilities
–
–
–
497,427
4
–
4
497,427
246
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
As at December 31, 2019
Financial assets at FVTPL
– Equity securities
– Funds
– Debt investments
– Asset management plans
– Trust products
– Unlisted equity investments
Sub-total
Derivative assets
Financial liabilities at FVTPL
– Bonds
– Asset management scheme
Sub-total
Derivative component of
Convertible Bond 2017
Derivative liabilities
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
722,589
352,753
3,881,143
–
–
–
110,155
2,000,221
13,508,343
957,305
–
–
–
–
–
–
702,971
16,898
832,744
2,352,974
17,389,486
957,305
702,971
16,898
4,956,485
16,576,024
719,869
22,252,378
–
6,250
–
6,250
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
–
–
–
–
–
1,389
320,494
321,883
–
–
–
1,389
320,494
321,883
–
200,182
200,182
5,565
–
5,565
The following tables represent the changes in Level 3 financial assets at FVTPL during the years ended
December 31, 2020 and 2019, respectively. For the changes in Level 3 derivative component of Convertible Bond
2017 during the year ended December 31, 2020 and 2019, please refer to Note 42.
247
ANNUAL REPORT
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
For the year ended December 31, 2020
Financial assets at FVTPL:
At beginning of the year
Transfer in
Additions
Disposal
Changes in fair value
changes
Trust
products
Rmb’000
702,971
–
542,147
(888,701)
–
Restricted
shares
Rmb’000
Unlisted
equity
investments
Rmb’000
Debts
Rmb’000
–
21,076
–
–
Total
Rmb’000
719,869
21,076
686,369
(894,399)
16,898
–
69,123
(5,698)
–
(7,576)
37,714
–
–
75,099
–
45,290
At end of the year
356,417
120,389
80,323
13,500
570,629
For the year ended December 31, 2019
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
Trust
products
Rmb’000
153,332
818,454
(268,815)
–
–
702,971
Restricted
shares
Rmb’000
Unlisted
equity
investments
Rmb’000
47,570
–
–
–
(47,570)
–
17,200
–
–
(302)
–
16,898
Total
Rmb’000
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.
Except as detailed in the following table, the Directors consider that the carrying amounts of financial assets and
financial liabilities at amortised costs recognised in the consolidated statement of financial position approximate
their fair values.
As at 31/12/2020
Carrying
amount
Rmb’000
Fair
value
Rmb’000
As at 31/12/2019
Carrying
amount
Rmb’000
Fair
value
Rmb’000
762
–
766
–
2,588,054
2,625,435
2,692,096
2,745,101
Debt component of Convertible
Bond 2017
Debt component of Convertible
Bond 2019
248
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
52. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value measurements of financial instruments (Continued)
The fair value of the debt component of Convertible Bond 2017 as at December 31, 2020 and 2019 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.
53. 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.
Dividends
payable
Rmb’000
Bank and
other
borrowings
Rmb’000
Bonds Convertible
Bonds
Rmb’000
payable
Rmb’000
Lease
Liabilities
Rmb’000
Short-term
financing
note
payable
Rmb’000
Total
Rmb’000
847
(1,826,929)
–
12,442,993
(1,420,580)
(607,521)
15,216,458
(12,000)
(746,625)
2,709,663
2,666,720
–
270,155
(64,060)
(3,312)
1,551
6,498,450
(65,572)
30,641,667
5,841,601
(1,423,030)
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
–
–
(1,347)
1,828,771
–
–
–
–
–
–
–
605,241
–
–
–
–
–
–
715,438
–
–
–
(17,547)
(9,470)
–
193,878
(144)
(62,769)
42,875
–
–
–
13,691
–
–
–
–
–
–
98,561
42,875
(17,547)
(10,817)
1,828,771
1,626,809
–
–
(144)
(62,769)
At December 31, 2019
1,342
11,020,133
15,173,271
5,480,331
259,349
6,532,990
38,467,416
At January 1, 2020
Financing cash flows
Operating cash flows
Non-cash changes
New lease entered
Fair value adjustment
Exchange realignment
Accrued dividend
Interest expenses
Conversion into
shares
1,342
(1,759,007)
–
11,020,133
3,119,296
(486,447)
15,173,271
4,863,782
(660,392)
5,480,331
(2,410,344)
(6,669)
259,349
(78,846)
(3,103)
6,532,990
(228,380)
(194,606)
38,467,416
3,506,501
(1,351,217)
–
–
(2,033)
1,759,748
–
–
–
125,770
–
489,820
–
–
–
–
691,486
–
(200,178)
(40,834)
–
350,863
196,332
–
–
–
16,508
–
–
–
–
196,712
196,332
(200,178)
82,903
1,759,748
1,745,389
–
–
–
(3,172,403)
–
–
(3,172,403)
At December 31, 2020
50
14,268,572
20,068,147
766
390,240
6,306,716
41,034,491
249
ANNUAL REPORT
54. OPERATING LEASES
The Group as lessor
The Group leased their service areas and communication ducts and part of spare office premises under operating
lease arrangements. Leases are negotiated for terms ranging from 1 to 25 years and rentals are fixed annually.
At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease
payments:
Within one year
In the second to fifth year inclusive
After five years
12/31/2020
Rmb’000
12/31/2019
Rmb’000
65,855
151,147
136,165
52,399
155,388
167,298
353,167
375,085
For certain of the Group’s service areas, the rental income are variable and being calculated at the higher of
a pre-agreed percentage of revenue of the relevant service areas made by the lessees or the minimum lease
payments. The commitment above represented the minimum lease payments from lessees only and do not
include any contingent rent elements.
55. CONTINGENT LIABILITIES
12/31/2020
Rmb’000
12/31/2019
Rmb’000
Guarantees given to bank, in respect of a joint venture
542,269
643,366
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, 2020, the bank borrowings
of Shengxin Co and accrued interest amounted to Rmb 1,084,538,000 (2019: Rmb1,286,732,000). 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 December 31, 2020 and 2019.
250
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
56. RELATED PARTY TRANSACTIONS AND BALANCES
Other than disclosed elsewhere in the consolidated financial statements, during the year, the Group also entered
into the following significant transactions with related parties:
(i) Transactions and balances with Communications Group and government
related parties
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. The loan was repaid on September 28, 2020.
Pursuant to the entrusted loan contract entered into between Zhejiang Expressway Co., Ltd. and Communications
Group on July 1, 2020, Communications group agreed to provide Zhejiang Shenjiahuhang Expressway Co., Ltd.
(Shenjiahuhang Co) borrowings amounting to Rmb 50,000,000 at a fixed interest rate of 2.5% per annum, with
maturity date of June 29, 2021.
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 fixed interest rate is 3.915% per annum. The loan was repaid on March 6, 2020.
Interest expenses incurred
For the year
ended
12/31/2020
Rmb’000
For the year
ended
12/31/2019
Rmb’000
2,771
8,228
251
ANNUAL REPORT
56. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(i) Transactions and balances with Communications Group and government
related parties (Continued)
Management and Administrative services
The Company has entered into agreements with the Communications Group and its subsidiaries, pursuant to
which, the Company would provide the management and administrative services for six toll roads, including
Shensuzhewan Expressway, South Line of Qianjiang Channel, Ningbo Yongtaiwen Expressway, Taizhou
Yongtaiwen Expressway, Yueqingwan Bay 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 Rmb8,381,000 (2019: Rmb9,772,000) has been charged.
Prepayments of acquisition consideration
The extraordinary general meeting of the Company held on December 23, 2020 approved the agreements
dated November 10, 2020 entered into between the Company and Communications Group in relation to the
acquisition of 30% equity interest in HangNing at the consideration of RMB2,685,000,000 and entire equity
interest in LongLiLiLong at the consideration of RMB238,140,000. The Company transferred such consideration
on December 31, 2020 and December 25, 2020 respectively and recognized as prepayments as no effective
influence or control was to exercise as at December 31, 2020.
Other transactions
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
11,342
3,200
805
403,689
319,523
39,895
8,033
972
2,693
11,353
3,075
143
429,338
522,719
427,618
7,229
1,123
–
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
Financial advisory service income earned
Underwriting and sponsor service income earned
252
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
56. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(i) Transactions and balances with Communications Group and government
related parties (Continued)
Other transactions (Continued)
Notes:
(a)
(b)
Pursuant to the leasing and operation agreement entered into between Jinhua Co (as defined in Note 57),
Zhejiang Hanghui Expressway Co., Ltd. (“Hanghui Co”, a non-wholly-owned subsidiary of the Company),
Shenjiahuhang Co, Zhejiang Zhoushan Bay Bridge Co., Ltd. (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.
In 2018, Deqing County De’an Highway Construction Co., Ltd. (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.
Other transaction balances
In addition to the transaction balances already disclosed in the report, the other material transaction balances in
relation to the transactions disclosed above with related parties are listed below.
Other receivables
Trade payables
Other payables
12/31/2020
Rmb’000
12/31/2019
Rmb’000
20,651
248,904
136,627
52,814
533,172
228,254
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.
253
ANNUAL REPORT
56. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other related parties
Financial service provided by Zhejiang Communications Finance
The Group entered into a financial services agreement with Zhejiang Communications Finance. Pursuant to the
agreement, Zhejiang Communications Finance agreed to provide the Group with the deposit services, the loan
and financial leasing services, the clearing services and other financial services.
Loan advanced from Zhejiang Communications Finance
During the year, Zhejiang Communications Finance Co., Ltd provided the Company with short-term loans with
a total principal amount of Rmb2,760,000,000 (2019: Rmb2,530,000,000) at fixed interest rates of 3.600% per
annum. During the year, a total amount of Rmb1,800,000,000 were repaid (2019: Rmb1,990,000,000).
During the year, Zhejiang Communications Finance provided Hanghui Co with short-term loan with aggregated
principal amount of Rmb560,000,000 (2019: Rmb730,000,000) and fixed interest rate of 3.85% per annum (2019:
floating interest rate of 3.915% per annum). The principal amount of short-term loans Rmb670,000,000 were
repaid during the year (2019: Rmb320,000,000).
During the year, Zhejiang Communications Finance Co., Ltd provided Zhoushan Bay Bridge with short-term loans
with a aggregated principal amount of Rmb320,000,000 (2019: Rmb868,000,000) and fixed rate of 3.8200%
and 4.1325% per annum (2019: 4.1325% and 4.35%). During the year, principal amount of short-term loans
Rmb688,000,000 were repaid (2019: Rmb777,000,000).
During the year, Zhejiang Communications Finance Co., Ltd offered Zhoushan Bay Bridge long-term loans with
aggregated principal amount of Rmb2,088,000,000 (2019: nil) and fixed interest rate of 4.2100% per annum.
Zhoushan Bay Bridge has repaid long-term loans with aggregated principal amount of Rmb1,781,000,000 during
the year.
During the year, principal amount of a long-term loan Rmb420,000,000 provided by Zhejiang Communications
Finance to Shenjiahuhang was repaid (2019: Rmb100,000,000). In 2019, Shenjiahuhang Expressway Co., Ltd.
also 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.
254
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 56. 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)
Outstanding loan payable balances:
repayable within one year
1 to 5 years
over 5 years
Interest expenses incurred
Deposits to Zhejiang Communications Finance
Bank balances and cash
– Cash and cash equivalents
Interest income earned
12/31/2020
Rmb’000
12/31/2019
Rmb’000
2,325,578
2,292,000
–
1,843,515
–
2,405,000
4,617,578
4,248,515
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
190,218
218,420
12/31/2020
Rmb’000
12/31/2019
Rmb’000
1,791,157
1,742,825
Year ended
12/31/2020
Rmb’000
Year ended
12/31/2019
Rmb’000
30,399
21,512
255
ANNUAL REPORT
56. 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 1,265,000,000 units (2019:568,711,000 units) (equivalent to Rmb1,265,000,000 (2019:
Rmb568,711,000)) of the asset management schemes to Zhejiang Communications Finance and Zhejiang
Zheshang Financial Holdings, Co., Ltd. (A subsidiary of Communications Group). Management fee income of
Rmb2,426,686 was earned.
During the Period, Asset Management sold 345,000,000 units (2019: nil) (equivalent to Rmb345,000,000 (2019:
nil)) of the asset management schemes to Zhejiang Zheshang Financial Holdings, Co., Ltd. Management fee
income of Rmb320,471 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 a entrusted loan of Rmb25,000,000 with a floating annual interest rate of 4.1325%.
The loan was repaid on March 29, 2020. Interest expense incurred during the period was Rmb220,974.
Purchase/Sales of inventory from/to Zheshang Development Group Co., Ltd.
and its subsidiaries (collectively referred to as "Zheshang Development Group")
During the year, Zhejiang Zheqi Co., Ltd. ("Zhejiang Zheqi", an indirect subsidiary of the Company) purchased
and sold commodities of Rmb82,057,085 (2019: nil) and Rmb31,564,016 (2019: nil) respectively from and to
Zheshang Development Group, to operate commodity trading business.
As at December 31, 2020, Zhejiang Zheqi received deposits of Rmb49,278,424 (2019: nil) from Zheshang
Development Group.
Derivatives contract business with ZheShang Development Group
During the year, Zhejiang Zheqi carried out derivatives contract business with Zheshang Development Group,
and the investment loss was Rmb75,414,317 (2019: nil) in total. The nominal principal amount of the derivative
contracts was Rmb1,608,777,070 (2019: nil).
(iii) Key management emoluments
The remuneration of the directors, supervisors and key management personnel during the year was
Rmb7,478,000 (2019: Rmb6,738,000) including retirement benefit scheme contribution of Rmb238,000 (2019:
Rmb186,000) which is determined by the performance of the individuals and the market trends.
256
For the year ended December 31, 2020Notes to the Consolidated Financial Statements 57. PARTICULARS OF SUBSIDIARIES OF THE COMPANY
Date and
place of
registration
Registered
and paid-in
capital/
share capital
Rmb
Percentage of equity interest
attributable to the Company
Direct
Indirect
12/31/2020
%
12/31/2019
%
12/31/2020
%
12/31/2019
%
Principal activities
Note 1
75,223,000
51
51
Name of subsidiary
Zhejiang Yuhang
Expressway Co., Ltd.
(“Yuhang Co”)
Jiaxing Co
Note 2
359,200,000
99.9995
99.9995
Shangsan Co
Note 3
5,380,000,000
73.625
73.625
Note 4
8,000,000
100
100
Zhejiang Expressway
Vehicle Towing and
Rescue Services Co., Ltd.
(“Towing Co”)
–
–
–
–
–
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
3,614,044,514
Zheshang Futures
Zheshang Capital
Management
Asset Management
Note 6
1,000,000,000
Note 7
500,000,000
Note 8
1,200,000,000
Ningbo Dongfang Jujin
Note 9
1,000,000
Investment Management
Co., Ltd (“Dongfang Jujin”)
Ningbo Dongfang Jujin Jiahua
Investment Management
Center (Limited Partnership)
(“Dongfang Jujin Jiahua”)
Note 10
–
–
–
–
–
–
–
–
–
–
–
–
–
*43.2868
*46.9319
Operation of securities business
**43.2868
**46.9319
Operation of securities business
**43.2868
**46.9319
Operation of securities business
**43.2868
**46.9319
Provision of asset .
management service
**43.2868
**46.9319
Provision of investment
–
**14.7317
management and advisory
services
Provision of investment
management and
advisory and private
equity investments
Zhejiang Zheqi Co., Ltd.
Note 11
1,000,000,000
Zhejiang Jinhua Yongjin
Expressway Co., Ltd.
(“Jinhua Co”)
Note 12
1,350,000,000
–
100
–
100
**43.2868
**46.9319
Trading of future
–
–
Management of the Jinhua
Section of the Ningbo-
Jinhua Expressway
257
ANNUAL REPORT
57. PARTICULARS OF SUBSIDIARIES OF THE COMPANY (Continued)
Name of subsidiary
Date and
place of
registration
Registered
and paid-in
capital/
share capital
Rmb
Percentage of equity interest
attributable to the Company
Direct
Indirect
12/31/2020
%
12/31/2019
%
12/31/2020
%
12/31/2019
%
Principal activities
Hanghui Co
Note 13
3,101,853,000
88.674
88.674
–
–
Management of the
Hangzhou Jujin Jiawei
Note 14
206,103,000
Investment Management
(Limited Partnership)
(“Jujin Jiawei”)
Zheshang International
Financial Holding
Co., Limited
Note 15
41,591,000
Zhejiang Section of the
Hangzhou-Ruili
Expressway
–
–
–
–
**19.4912
**21.13229
Provision of investment
management and advisory
and private equity
investments
**43.2868
**46.9319
Trading of future
Huihang Co
Note 16
580,000,000
100
100
–
–
–
51
–
80.1
100
–
100
–
**43.2868
–
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
Provision of investment
management and advisory
and private equity
investments
Deqing Co
Note 17
320,000,000
Shenjiahuhang Expressway
Note 18
1,720,000,000
Zhoushan Co
Note 19
4,114,690,000
Zhejiang Grand Hotel
Note 20
306,662,167
Zheshang Securities
Investment Co., Ltd.***
Note 21
1,000,000,000
80.1
100
–
100
–
258
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
57. 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 March 12, 2019, Zheshang Securities issued
a convertible bond and the conversion of shares during the year ended December 31, 2020 resulted 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.
***
The English translated name is for identification only.
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. The Group’s
equity interest of Zheshang Securities was diluted resulting from the conversion of shares by outside
shareholders. See Note 42 for more details.
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 and pursuant to
the board resolution, Dongfang Jujin Jiahua was dissolved on December 16, 2020.
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.
259
ANNUAL REPORT 57. 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. The registered
capital of Deqing Co has been increased from Rmb100,000,000 to Rmb320,000,000 during the year
ended December 31, 2020, of which Rmb17,421,750 was contributed by the Company, Rmb4,328,250 was
contributed by Zhejiang Hongtu and the rest were converted from capital reserve.
Note 18: Shenjiahuhang Expressway was established on July 13, 2018 in the PRC as a limited liability company and
was acquired from Communications Group.
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. 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 at a cash consideration of Rmb1,010,144,600. The consideration was adjusted in the
current year, and the Group received an amount of Rmb76,662,000 from Communications Group.
Note 21: Zheshang Securities Investment Co., Ltd. was established on November 26, 2019 in the PRC as a limited
liability company.
Except that Zheshang International Financial Holding Co., Limited is operating in Hong Kong, all of the
Company’s other subsidiaries are operating in Mainland China. As at December 31, 2020, Zheshang Securities
has issued subordinated bonds, corporate bonds, convertible bonds, short-term financing bonds and beneficial
certificates at the total principal amount of Rmb 12,459,771,800, 2,000,000,000, nil, 4,500,000,000 and
1,771,620,000 (2019: Rmb7,550,000,000, 3,488,000,000.00, 3,019,537,000, 6,500,000,000 and nil), respectively.
260
For the year ended December 31, 2020Notes to the Consolidated Financial Statements INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES
58.
The Group held interests as investor or acted as investment manager of structured entities (including collective
asset management schemes and investment funds), therefore had power over them during the years ended
December 31, 2020 and 2019. Except for the structured entities the Group has consolidated as disclosed in
Note 44, in the opinion of the Directors, the variable returns the Group exposed to over these collective asset
management schemes and investment funds in which the Group has interests or acted as investment manager
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
Rmb140,322,176,000 and Rmb146,673,182,000 as at December 31, 2020 and 2019, respectively.
The Group classified the investments in unconsolidated funds and asset management schemes as financial
assets at FVTPL. As at December 31, 2020 and 2019, the carrying amounts of the Group’s interests in
unconsolidated funds and asset management schemes are Rmb5,809,513,000 and Rmb4,013,250,000,
respectively.
59. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
NON-CURRENT ASSETS
Property, plant and equipment
Right-of-use assets
Expressway operating rights
Other receivables and prepayments
Other intangible assets
Interests in subsidiaries
Interests in associates
Interest in a joint venture
CURRENT ASSETS
Trade receivables
Other receivables and prepayments
Amount due from subsidiaries
Dividends receivable
Bank balances and cash
– Cash and cash equivalents
12/31/2020
Rmb’000
12/31/2019
Rmb’000
679,244
14,545
2,156,204
2,923,140
12,973
13,000,212
4,931,954
373,470
710,114
15,136
2,501,437
–
6,956
12,906,128
4,769,371
373,470
24,091,742
21,282,612
27,947
88,350
3,098,317
1,673,070
49,222
93,611
4,188,180
856,393
1,316,079
1,639,855
6,203,763
6,827,261
261
ANNUAL REPORT
59. 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
12/31/2020
Rmb’000
12/31/2019
Rmb’000
104,208
231,672
24,568
223,850
5,516,082
62,374
–
4,585,267
237,786
196,997
12,949
185,044
5,007,555
62,066
2,788,235
826,379
10,748,021
9,317,011
(4,544,258)
(2,489,750)
TOTAL ASSETS LESS CURRENT LIABILITIES
19,547,484
18,792,862
3,000,000
766
70,867
3,000,000
–
74,794
3,071,633
3,074,794
16,475,851
15,718,068
4,343,115
12,132,736
4,343,115
11,374,953
16,475,851
15,718,068
NON-CURRENT LIABILITIES
Bonds payable
Convertible Bond
Deferred tax liabilities
CAPITAL AND RESERVES
Share capital
Reserves
262
For the year ended December 31, 2020Notes to the Consolidated Financial Statements
59. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
(Continued)
Movement of share capital and reserve of the Company was set out below.
Share
capital
Rmb’000
Share
premium
Rmb’000
Statutory
reserves
Rmb’000
4,343,115
3,645,726
2,364,430
–
–
–
–
–
–
–
–
–
At January 1, 2019
Total comprehensive income
for the year
2018 dividend
Proposed dividend
At December 31, 2019
4,343,115
3,645,726
2,364,430
Profit for the year
Other comprehensive expense
for the year
Total comprehensive (expense)
income for the year
Consideration paid for acquisition
of subsidiaries-under common
control
Recognition of the Company’s
share of the equity change of
the investee
2019 dividend
Proposed dividend
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Investment
revaluation
reserve
Rmb’000
–
–
–
–
–
–
(24,160)
(24,160)
–
–
–
–
Dividend
reserve
Rmb’000
Special
reserves
Rmb’000
Retained
profits
Rmb’000
Total
Rmb’000
1,628,668
18,666
2,952,835
14,953,440
–
(1,628,668)
1,541,806
–
–
–
2,393,296
–
(1,541,806)
2,393,296
(1,628,668)
–
1,541,806
18,666
3,804,325
15,718,068
–
–
–
–
–
–
–
2,259,194
2,259,194
–
(24,160)
2,259,194
2,235,034
76,662
–
76,662
–
(1,541,806)
1,541,806
(12,107)
–
–
–
–
(1,541,806)
(12,107)
(1,541,806)
–
At December 31, 2020
4,343,115
3,645,726
2,364,430
(24,160)
1,541,806
83,221
4,521,713
16,475,851
60. EVENTS AFTER THE REPORTING PERIOD
Aside from the disclosure in Note 56, as at reporting date, upon the revision of Articles of Association and
modification of business registration of the Acquirees, HangNing became an associate of the Company and
LongLiLiLong became a subsidiary of the Company under common control.
263
ANNUAL REPORT
(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 108 to
263, which comprise the consolidated statement of financial position as at December 31, 2020,
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, 2020, 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.
264
Independent Auditor’s Report Key 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
f i n a n c i a l s t a t e m e n t s , s i g n i f i c a n t
management judgement and estimation
r e q u i r e d i n t h e m e a s u r e m e n t o f E C L
includes assessing whether the credit risk
of an asset has significantly increased
and whether an asset is credit impaired,
using appropriate models and assumptions,
d e t e r m i n i n g t h e k e y i n p u t s i n c l u d i n g
probability of default (“PD”), loss given
d e f a u l t ( “ L G D ” ) a n d f o r w a r d - l o o k i n g
information.
As at December 31, 2020, the Group held
loans to customers arising from margin
financing business of Rmb 15,013,472
thousands, less impairment allowance of
Rmb 43 thousands as disclosed in Note
29 to the consolidated financial statements
and financial assets held under resale
agreements of Rmb 7,314,130 thousands,
less impairment allowance of Rmb 191,659
thousands as disclosed in Note 31 to the
consolidated financial statements.
Our procedures in relation to management’s
measurement of ECL for loans to customers
arising from margin financing business and
financial assets held under resale agreements
included:
• Testing and evaluating key controls of the
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”)
and credit impaired by management and, on
sample basis, testing its application;
• On a sample basis, examining the major data
input into the ECL model, including PD and
LGD;
• For 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.
265
ANNUAL REPORT 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
d e t e r m i n a t i o n o f c o n s o l i d a t i o n s c o p e o f
structured entities included:
• Testing and evaluating key controls of the
management in determining the consolidation
scope of structured entities;
• Examining, on a sample basis, the documents
and information used by the management
i n a s s e s s i n g t h e c o n s o l i d a t i o n c r i t e r i a
of structured entities against the related
a g r e e m e n t s a n d o t h e r r e l a t e d s e r v i c e
agreements of structured entities newly
e s t a b l i s h e d , i n v e s t e d o r w i t h c h a n g e s
in proportion of ownership interests or
contractual terms during the year;
• A s s e s s i n g m a n a g e m e n t j u d g e m e n t i n
determining the scope for consolidation and,
on a sample basis, assessing the conclusion
about whether a structured entity should be
consolidated or not.
W e i d e n t i f i e d t h e d e t e r m i n a t i o n o f
consolidation scope of structured entities
as a key audit 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 fi na ncia l
statements as a whole.
The Group held interests as investor or
acted as investment manager in various
structured entities including collective
asset management schemes, investment
funds and limited partnership enterprises.
As disclosed in Note 5 to the consolidated
f i n a n c i a l s t a t e m e n t s , t o d e t e r m i n e
whether a structured entity should be
consolidated, the management applied
s i g n i f i c a n t j u d g e m e n t i n d e t e r m i n i n g
whether the Group has power over the
structured entities, and assess whether
the combination of investments it held
t o g e t h e r w i t h i t s r e m u n e r a t i o n a n d
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 44 and 58 to the
consolidated financial statements, as at
December 31, 2020, the total assets of the
consolidated structured entities amounted
to Rmb 5,485,843 thousands and the total
assets of the unconsolidated structured
entities managed by the Group amounted to
Rmb 140,322,176 thousands, respectively.
266
Independent Auditor’s Report Other Information
The directors of the Company are responsible for the other information. The other information
comprises the information included in the annual report, but does not include the consolidated
financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and
we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Responsibilities of Directors and Those Charged with Governance for the
Consolidated Financial Statements
The directors of the Company are responsible for the preparation of the consolidated financial
statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA
and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal
control as the directors of the Company determine is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, the directors of the Company are responsible
for assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
directors of the Company either intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting
process.
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ANNUAL REPORT Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion solely to you, as a body, in accordance
with our agreed terms of engagement, and for no other purpose. We do not assume
responsibility towards or accept liability to any other person for the contents of this report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with HKSAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain
professional scepticism 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.
268
Independent Auditor’s Report •
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
•
•
Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair
presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance of
the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
269
ANNUAL REPORT 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, actions taken to eliminate threats or safeguards applied.
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 Accounts LLP
Certified Public Accountants
(Registered as a Third Country Auditor with The UK Financial Reporting Council)
Shanghai, China
March 23, 2021
270
Independent Auditor’s Report CHAIRMAN
YU Zhihong
EXECUTIVE DIRECTORS
CHEN Ninghui (Appointed on May 15, 2020)
CHENG Tao
LUO Jianhu
(Resigned on May 15, 2020)
(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)
(Resigned on February 3, 2020)
YU Qunli
(Appointed on May 15, 2020)
FAN Ye
(Resigned on May 15, 2020)
YU Ji
INDEPENDENT
NON-EXECUTIVE DIRECTORS
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
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
AUTHORIZED REPRESENTATIVES
YU Zhihong
LUO Jianhu
271
ANNUAL REPORTCorporate Information As to PRC law:
T & C Law Firm
11/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
PRC 310007
AUDITORS
Deloitte Touche Tohmatsu
35/F, One Pacific Place
88 Queensway
Hong Kong
INVESTOR RELATIONS
CONSULTANT
Christensen China Limited
16/F, Methodist House
36 Hennessy Road, Wanchai
Hong Kong
Tel : 852-2117 0861
Fax: 852-2117 0869
PRINCIPAL BANKERS
Industrial and Commercial Bank of China,
Jiefang Road Branch
Shanghai Pudong Development Bank,
Hangzhou Branch
H SHARE REGISTRAR AND
TRANSFER OFFICE
Hong Kong Registrars Limited
Room 1712-1716, 17/F, Hopewell Centre
183 Queen’s Road East
Hong Kong
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 1710B
Office Tower
Convention Plaza
1 Harbour Road
Wan Chai, Hong Kong
Tel : 852-2537 4295
Fax: 852-2537 4293
WEBSITE
www.zjec.com.cn
272
Corporate Information Location Map of Expressways in Zhejiang Province