ZHEJIANG EXPRESSWAY CO., LTD.
ZHEJIANG EXPRESSWAY CO., LTD.
(Stock Code: 0576)
2015 Annual Report
Work relentlessly to reform and innovate
2015 is the final year of comprehensive reforms in the Company's three-year
development plan. Amid a complex economic environment, under the leadership of
the Communications Group, the Company achieved re- cord high operating results
by focusing on reform and innovation as main themes, and striving to enhance
its competitiveness in the expressway business.
Content
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
Continuing 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
Definition of Terms
ADR(s) American Depositary Receipt(s)
ADS(s) American Depositary Share(s)
Advertising Co Zhejiang Expressway Advertising Co., Ltd., a 70% owned subsidiary of
Development Co
Audit Committee the audit committee of the Company
Board the board of directors of the Company
Company or Zhejiang Expressway Zhejiang Expressway Co., Ltd., a joint stock limited company incorporated in
the PRC with limited liability on March 1, 1997
Communications Group Zhejiang Communications Investment Group Co., Ltd., a wholly State-
owned enterprise established on December 29, 2001
Development Co Zhejiang Expressway Investment Development Co., Ltd., a 100% owned subsidiary
of the Company
Directors the directors of the Company
GDP gross domestic product
Group the Company and its subsidiaries
H Shares 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
Hanghui Co Zhejiang Hanghui Expressway Co., Ltd., a 88.674% owned subsidiary of the
Company
Hong Kong Stock Exchange The Stock Exchange of Hong Kong Limited
Jiaxing Co Zhejiang Jiaxing Expressway Co., Ltd., a 99.9995% owned subsidiary of the
Company
Jinhua Co Zhejiang Jinhua Yongjin Expressway Co., Ltd., a 100% owned subsidiary of the
Company
Listing Rules the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited
Maintenance Co Zhejiang Expressway Maintenance Co., Ltd., a 100% owned subsidiary of the
Company
Period the period from January 1, 2015 to December 31, 2015
Petroleum Co Zhejiang Expressway Petroleum Development Co., Ltd., a 50% owned associate of
the Company
PRC the People's Republic of China
Rmb Renminbi, the lawful currency of the PRC
SFO Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong)
Shangsan Co Zhejiang Shangsan Expressway Co., Ltd., a 73.625% owned subsidiary of the
Company
Shareholders the shareholders of the Company
Shengxin Co Shengxin Expressway Co., Ltd., a 50% owned joint venture of the Company
Supervisory Committee the supervisory committee of the Company
Towing Co Zhejiang Expressway Vehicle Towing and Rescue Services Co., Ltd., a 100% owned
subsidiary of the Company
Yuhang Co Zhejiang Yuhang Expressway Co., Ltd., a 51% owned subsidiary of the Company
Zheshang Securities Zheshang Securities Co., Ltd., a 70.83% owned subsidiary of the Shangsan Co
Zhejiang Communications Finance Zhejiang Communications Investment Group Finance Co., Ltd., a 35% owned
associate of the Company
Company Profile
Zhejiang Expressway is an infrastructure company principally engaged in
investing in, developing and operating of high-grade roads. The Company and its
subsidiaries also carry out certain ancillary businesses such as automobile
servicing, operation of gas stations and billboard advertising along
expressways, as well as securities business.
Major assets under management of the Group include the 248km
Shanghai-Hangzhou-Ningbo Expressway, the 142 km Shangsan Expressway, the 70 km
Jinhua section of Ningbo-Jinhua Expressway and the 122 km Hanghui Expressway,
ancillary facilities along the four expressways, and Zheshang Securities. All
of the four expressways are situated within Zhejiang Province in the PRC. As at
December 31, 2015, total assets of the Company and its subsidiaries amounted to
Rmb73,891.76 million.
The Company was incorporated on March 1, 1997 as the main vehicle of the
Zhejiang Provincial Government for investing in, developing and operating
expressways and Class 1 roads in Zhejiang Province.
Incorporated on December 29, 2001, Communications Group, the controlling
shareholder of the Company, is a provincial-level communications company which
is wholly-owned by the State and established by the Zhejiang Provincial
Government. It mainly operates a diversity of businesses, such as investment,
operations, maintenance, toll collection and ancillary services of expressways;
construction and building of transportation project, ocean and coastal
transport; as well as real estates. As at December 31, 2015, consolidated
assets of Communications Group totaled Rmb188,227.57 million.
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.
On February 14, 2002, a Level I American Depositary Receipt program sponsored
by the Company in respect of its H Shares, with the Bank of New York as the
depositary, was established in the United States and became effective.
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. In addition, the Company will seize investment
opportunities to acquire new projects, and strive to develop the Company into a
first- tier conglomerate with strong competitiveness, profitability and growth
potential.
For the corporate and business structure of the Group as at December 31, 2015,
please visit:
http://photos.prnasia.com/prnk/20160329/8521601980-a
Review of Major Corporate Events
1. On March 19, 2015, the Company announced its 2014 annual results in Hong
Kong and thereafter conducted its annual results presentations in Hong Kong and
Japan.
2. On March 23, 2015, Yangtze United Financial Leasing Co., Ltd. was approved
by China Banking Regulatory Commission and commenced official operation on 18
June. Financial Leasing Co is held by the Company as to 9.0% after a capital
contribution of Rmb90 million is made by the Company.
3. On April 1, 2015, the first meeting of the labour union member
representative and employee representative meeting for the fifth session of the
Company was held at which members of the union committee for the next session,
members of the funding review committee and employee supervisors were elected.
4. On April 21, 2015, the office headquarters of the Company was relocated to 5
/F, No. 2 Mingzhu International Business Center, 199 Wuxing Road, Hangzhou.
5. On May 18, 2015, the Company announced its 2015 first quarterly results.
6. On June 18, 2015, the Company held its Annual General Meeting, among others,
to approve the payment of a final dividend of Rmb0.25 per share, the
re-appointment of Deloitte Touche Tohmatsu Certified Public Accountants Hong
Kong as the international auditors of the Company, the re-appointment of
Pan-China Certified Public Accountants Ltd. as the PRC auditors of the Company,
and the election of members of the Board and the Supervisory Committee for the
seventh session.
7. On July 1, 2015, the first meeting of the Board for the seventh session of
the Company was held at which chairman of the Board, chairman of each of the
committees, senior management and authorised representative were elected.
On the same date, the Company agreed to manage the 88 km section of the
Shen-Su-Zhe-Wan Expressway and 93 km section of the Shen-Jia-Hu-Hang Expressway
on behalf of the Communications Group.
8. On August 23, 2015, the Company announced its 2015 interim results in Hong
Kong and thereafter conducted its interim results presentations in Hong Kong
and the US.
9. On August 3 1, 2015, the Company entered into an agreement with Zhejiang
Communications Resources Investment Co., Ltd. for the disposal of 100% equity
interest in Maintenance Co, an associate of the Company at a consideration of
Rmb41.08 million.
10. On October 12, 2015, the Company entered into an agreement with Zhejiang
Communications Investment Group Industrial Development Co., Ltd. for the
disposal of 50% equity interest in Petroleum Co, an associate of the Company at
a consideration of Rmb142 million.
11. On October 15, 2015, the Company held an Extraordinary General Meeting at
which the payment of an interim dividend of Rmb0.06 per share was approved.
12. On November 12, 2015, the Company announced its 2015 third quarterly
results.
On the same date, the Company completed the acquisition of 80.614% equity
interest in Hanghui Expressway upon approval by the independent shareholders at
the general meeting in order to further improve the existing expressway
network.
13. On November 26, 2015, Zhejiang Zheshang Transformation Upgrade Parent Fund
(Limited Partnership), a company owned as to 24.994% equity interest by the
Company was officially established.
Particulars of Major Road Projects
Expressway Percentage Length in Number Number Number Start of Remaining
of Kilometers of of Toll of Operation Years of
Ownership Lanes Stations Service Operation
Areas
Shanghai-Hangzhou Expressway
- Jiaxing Section 99.9995% 88.1 8 7 2 1998 13
- Yuhang Section 51% 11.1 6 1 0 1995-1998 13
- Hangzhou Section 100% 3.4 4 2 0 1995 13
Hangzhou-Ningbo Expressway
- Hangzhou to Hongken section 100% 16.0 4 1 0 1992 12
- Hongken to Duantang section 100% 124.0 8 9 2 1995 12
- Duantang to Dazhujia section 100% 5.0 4 1 0 1996 12
Shangsan Expressway 73.625% 142.0 4 11 3 2000 15
Ningbo-Jinhua Expressway
- Jinhua Section 100% 69.7 4 7 1 2005 15
Hanghui Expressway
- Changyu Section 88.674% 36.68 4 5 1 2004 14
- Changhang Section 88.674% 85.606 4 8 1 2006 16
Current Toll rates on the Shanghai-Hangzhou-Ningbo Expressway
1. Passenger vehicle classification and toll rates
Vehicle Class Classification Standard Entrance Fee Mileage Fee
(Rmb/vehicle) (Rmb/vehicle/km)
1 Passenger vehicle with up to 7 seats 5 0.45
Truck with tonnage of 2 tons or below 5 0.45
2 Passenger vehicle with seats 8 to 19 5 0.45
Truck with tonnage of above 2 tons and up to 5 tons 10 0.80
3 Passenger vehicle with seats 20 to 39 10 0.80
Truck with tonnage of above 5 tons and up to 10 tons 15 1.20
4 Passenger vehicle with seats above 40 15 1.20
Truck with tonnage above 10 tons and up to 15 tons 15 1.40
5 Truck with tonnage above 15 tons 20 1.60
2. Toll rates on goods vehicles
Load Toll
standards
Legally Up to 5 tons Rmb0.09/ton per km
loaded
Above 5 tons Rmb0.09/ton per km x 1.5 is reduced in a linear manner
and up to 15 to Rmb0.09/ton per km
tons
Above 15 tons Rmb0.09/ton per km is reduced in a linear manner to
and up to 30 Rmb0.06/ton per km
tons
Over 30 tons Based on 30 tons calculation
Overloaded Overloaded Calculation based on the basic fee standard for
vehicle below 10% legally loaded
Overloaded up The overloaded portion over 10% is calculated based on
to 30% Rmb0.09/ton per km x 1.2; the remaining portion is
calculated based on the fee standard of "Overloaded
below 10%"
Overloaded The legally loaded portion and the overloaded portion
above 30% and up to 30% is calculated based on the fee standard of
up to 50% "Overloaded up to 30%"; the remaining portion is
calculated based on Rmb0.09/ton per km x 2
Overloaded The legally loaded portion and the overloaded portion
above 50% and up to 30% is calculated based on the fee standard of
up to 100% "Overloaded up to 30%"; the remaining portion is
calculated based on Rmb0.09/ton per km x 3
Overloaded The legally loaded portion and the overloaded portion
over 100% up to 30% is calculated based on the fee standard of
"Overloaded up to 30%"; the remaining portion is
calculated based on Rmb0.09/ton per km x 4
* The mileage fee for Class 1 vehicle on the Shangsan Expressway, Jinhua
section of Ningbo-Jinhua Expressway and Hanghui Expressway is Rmb0.40/vehicle/
km. The toll rates for other passenger vehicles and trucks are the same as
those for the Shanghai-Hangzhou-Ningbo Expressway.
Financial and Operating Highlights
Results
Year ended December 31,
2011 2012 2013 2014 2015
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated) (Restated)
Revenue 7,280,061 7,238,675 8,210,666 9,460,308 12,507,394
Profit Before Tax 2,503,552 2,263,721 2,826,319 3,651,440 5,446,652
Income Tax Expense (687,067) (618,751) (742,563) (905,468) (1,416,872)
Profit for the year 1,816,485 1,644,970 2,083,756 2,745,972 4,029,780
Attributable to:
Owners of the Company 1,601,188 1,503,048 1,801,687 2,264,994 2,989,680
Non-controlling 215,297 141,922 282,069 480,978 1,040,100
interests
Earnings Per Share 36.87 34.61 41.48 52.15 68.84 cents
(EPS) cents cents cents cents
Return on Equity (ROE)
2011 2012 2013 2014 2015
(Restated) (Restated) (Restated) (Restated)
ROE 9.89% 9.26% 11.22% 13.32% 17.86%
For Segmental Revenue (Year 2015), Segmental Net Profit (Year 2015) and other
Financial and
Operating Highlights graphs, please visit: http://photos.prnasia.com/prnk/
20160329/8521601980-b
Chairman's Statement
Dear Shareholders,
It is my pleasure to present the annual results of Zhejiang Expressway ("ZJE"
or "the Company", collectively referred to as "the Group" with subsidiaries)
for the year 2015 on behalf of the Board of Directors.
In 2015, amid the complex and volatile economic conditions at home and abroad,
China's GDP grew 6.9% year-over-year, a 25-year low. Despite this, China's
economy made steady progress as economic growth continued to maintain within a
reasonable range, economic structure was further optimized, and ongoing
transformation and upgrading were accelerated. In 2015, Zhejiang's economy saw
high and stable growth. GDP growth reached 8% and ranked fourth among all
provinces in China. In face of slower economic growth, our Company focused on
reform and innovation. We constantly looked to enhance our competitiveness in
the expressway business and sought to mitigate some of the risks brought on by
turmoil in the capital markets. All in all, we successfully accomplished the
goals set out in the three-year development plan that we published in 2013, and
we were able to achieve record-high operating results.
In 2015, with strong support from our shareholders, we completed the 80.614%
equity stake acquisition in Zhejiang Hanghui Expressway Co., Ltd. in November
and successfully increased our shareholding to 88.674% in December. As a
result, the total length of the expressways that we own and operate increased
from 460km to 582km. Together with the Shanghai-Jiaxing-Huzhou-Hangzhou
Expressway and the Shen-Su-Zhe-Wan Expressway that the Company was entrusted to
manage, the total length of expressways managed by our company is further
extended to 763km. Over the course of the year, we strengthened our efforts to
enhance the operation of our expressways, increased toll income by plugging
loopholes, reduced costs, and enhanced road safety and road quality. Our
securities business posted solid results as we took advantage of the market
volatility, strengthened our compliance and risk management practices, and
effectively mitigated risks. In terms of transformation, we capitalized on our
financial strength and utilized our resources to explore and nurture new
business opportunities. One of the companies that we have a minority stake in,
Yangtze United Financial Leasing Co., Ltd., has already turned profitable. In
addition, Zhejiang Zheshang Transformation Upgrade Parent Fund, a fund of
funds, as well as Taiping Science and Technology Insurance Co., Ltd., both of
which the Company holds minority stakes, are in the process of being
established and becoming operational. During the period, we sold 100% of the
equity interest that we held in Maintenance Co. and 50% of the equity interest
that we held in Petroleum Co. to Zhejiang Communications Investment, our
controlling shareholder. Our strong operating results and successful execution
of our strategic plan have helped us focus on our two core businesses in
expressways and financial securities, and have laid a solid foundation for
future sustainable development.
Looking ahead to 2016, despite the forecast for greater downward pressure on
China's economy, we feel that the economic fundamentals remain promising, and
that opportunities and challenges coexist. We will continue to strengthen our
expressway business, develop our financial and securities business, and
actively nurture other new businesses. Within our expressway business, to
ensure our position as the industry leader, we will focus on improving our
management and operations by streamlining and standardizing our processes,
enhancing technological deployment, and reinforcing cost controls. Meanwhile,
we will also actively seek opportunities to expand within and outside the
province, aiming to acquire new expressway assets. Within our financial and
securities business, we will closely monitor new opportunities for Zheshang
Securities that will arise from the ongoing establishment of a multi-level
capital market system. We will also look to actively expand into other areas
within the financial industry to complement Zheshang Securities and push
forward its IPO process.
On behalf of the Board, I would like to express my gratitude to all of our
shareholders and stakeholders for their continuous confidence and support. I
would also like to thank our management team and all of our staff for their
relentless dedication and remarkable achievements. Looking to the future, we
will continue to work hard in the next year and maximize value for all of our
shareholders.
ZHAN Xiaozhang
Chairman
March 17, 2016
Guided by the 13th five-year plan, the Company will closely adhere to the
themes of "Reform and Innovation". The Company looks to build an industry
structure, in which the expressway business remains our foundation and the
financial and securities business to be our competitive strength, with a focus
on nurturing new businesses.
Director and General Manager
LUO Jianhu
Management Discussion and Analysis
BUSINESS REVIEW
In 2015, China's economy grew at a slower pace with a 6.9% increase in GDP
compared with last year due to downward pressure caused by a combination of
complex domestic and overseas factors. However, Zhejiang Province's economy
benefited from a stable increase in fixed assets investment and consumption, as
well as from a solid increase in exports against the market trend. In 2015,
Zhejiang Province's GDP increased 8.0% year-on-year and demonstrated a healthy
growth trend.
As Zhejiang Province's economy steadily improved and foreign exports increased
during the Period, traffic volume on the Group's expressways continued to
maintain solid organic growth. In terms of the Group's securities business, in
2015, trading in the domestic stock market was active despite the high
volatility. As a result, income from the Group's overall operations increased
33.1% year-on-year. Total income reached Rmb13,001.10 million, of which
Rmb5,133.38 million was generated from the four major expressways operated by
the Group, representing an increase of 6.4% year-on-year and 39.5% of the total
income; Rmb1,854.39 million was from the Group's toll road-related businesses,
representing a decrease of 22.5% year-on-year and 14.3% of the total income;
and Rmb5,968.41 million was from the securities business, representing an
increase of 134.2% year-on-year and 45.9% of the total income.
45.9%
Securities Business Income
39.5%
Toll Road Operations Income
14.3%
Toll Road-Related Business Operations Income
0.3%
Other Operation Income
A breakdown of the Group's income for the Period is set out below:
2015 2014 % Change
Rmb'000 Rmb'000
(Restated)
Toll income
Shanghai-Hangzhou-Ningbo Expressway 3,257,257 3,111,048 4.7%
Shangsan Expressway 1,055,023 987,429 6.8%
Jinhua section, Ningbo-Jinhua Expressway 356,994 309,222 15.4%
Hanghui Expressway 464,104 417,683 11.1%
Toll road-related business
Service areas 1,749,857 2,222,332 - 21.3%
Advertising 42,882 85,362 - 49.8%
External road maintenance 61,648 86,257 - 28.5%
Securities business income
Commission 4,168,427 1,808,953 130.4%
Interest income 1,799,980 739,116 143.5%
Other operation income
Hotel operation 44,931 - N/A
Subtotal 13,001,103 9,767,402 33.1%
Less: Revenue taxes (493,709) (307,094) 60.8%
Revenue 12,507,394 9,460,308 32.2%
Expand expressway business scale
Enhance operational management capabilities
The company completed the 80.614% equity stake acquisition in Huanghui Co in
November 2015 and successfully increased its shareholding to 88.674% in
December. As a result, the total length of the expressways that the Company
owns and operates increased to 582km. Concurrently, the Company strengthened
its efforts to enhance the operation of its expressways, increased toll income
by plugging loopholes, reduced costs, and enhanced road safety and road
quality.
Toll Road Operations
Driven by Zhejiang Province's steady economic development, during the Period,
traffic volume on the Group's expressways registered solid organic growth.
During the Period, the organic traffic volume growth rates for the Group's four
expressways, namely the Shanghai-Hangzhou-Ningbo Expressway, the Shangsan
Expressway, the Jinhua Section of the Ningbo-Jinhua Expressway and the Hanghui
Expressway, were 6.3%, 8.0%, 9.5% and 8.3%, respectively, with the varied rates
of growth due to the different regions where the four expressways are located.
Construction on the Hangzhou Airport Road started on April 15, 2014, resulting
in a truck traffic restriction for the 23.7 km section of the Group's
neighboring Shanghai-Hangzhou-Ningbo Expressway. To reduce the negative impact
from this traffic restriction, the Group made an effort to reduce the
restriction time by 2 hours per day in late August, 2015, leading to a recovery
in truck traffic volume.
During the Period, the Huangtuling Tunnel on the Ningbo-Taizhou-Wenzhou
Expressway was closed due to construction in August, 2015, causing a slightly
adverse impact on traffic volume on the Shangsan Expressway in the second half
of the year. Despite this, overall traffic volume on the Shangsan Expressway
during the Period still recorded steady growth.
The Jinhua Section of the Ningbo-Jinhua Expressway continued to record decent
growth in traffic volume, thanks to strong economic growth in regions such as
Yiwu, as well as the booming development of e-commerce, foreign trade and
exports in the surrounding areas. Despite a slight diversion impact on traffic
volume from the Dongyang-Yongkang Expressway that was opened to traffic since
July, 2015, there was a substantial increase in the overall traffic volume on
the Jinhua Section of the Ningbo-Jinhua Expressway during the Period as the
neighboring Hangzhou-Jinhua-Quzhou Expressway was closed from June 6, 2015 to
the end of September, 2015 due to construction.
Due to the factors above, during the Period, the average daily traffic volume
in full-trip equivalents along the Group's Shanghai-Hangzhou-Ningbo Expressway
was 47,862, representing an increase of 5.9% year-on-year. In particular, the
average daily traffic volume in full-trip equivalents along the
Shanghai-Hangzhou section of the Shanghai-Hangzhou-Ningbo Expressway was
46,264, representing an increase of 6.2% year-on-year, and that along the
Hangzhou-Ningbo Section was 49,004, representing an increase of 5.7%
year-on-year. Average daily traffic volume in full-trip equivalents along the
Shangsan Expressway was 24,949, representing an increase of 9.0% year-on-year.
Average daily traffic volume in full-trip equivalents along the Jinhua Section
of the Ningbo-Jinhua Expressway was 18,801, representing an increase of 18.2%
year-on-year. Average daily traffic volume in full-trip equivalents along the
Hanghui Expressway was 15,391, representing an increase of 12.7% year-on-year.
During the Period, total toll income from the 248km Shanghai-Hangzhou-Ningbo
Expressway, the 142km Shangsan Expressway, the 70km Jinhua Section of the
Ningbo-Jinhua Expressway and the 122km Hanghui Expressway was Rmb5,133.38
million, representing an increase of 6.4% year-on-year. Toll income from the
Shanghai-Hangzhou-Ningbo Expressway was Rmb3,257.26 million, representing an
increase of 4.7% year-on-year; toll income from the Shangsan Expressway was
Rmb1,055.02 million, representing an increase of 6.8% year-on-year. Toll income
from the Jinhua Section of the Ningbo-Jinhua Expressway was Rmb356.99 million,
representing an increase of 15.4% year-on-year. Toll income from the Hanghui
Expressway was Rmb464.11 million, representing an increase of 11.1%
year-on-year.
For the bar charts of the Traffic Volume (Full-trip equivalents/day) and Toll
Income (RMB million), please visit: http://photos.prnasia.com/prnk/20160329/
8521601980-c
Toll Road-Related Business Operations
The Company also operates certain toll road-related businesses along its
expressways through its subsidiaries and associated companies, including gas
stations, restaurants and shops in service areas, as well as expressway
advertisements and external road maintenance.
Zhejiang Province took action in 2014 to remove billboards from along sides of
the expressways, which gradually narrowed most of the advertising business of
the Group's subsidiary to expressway service areas. As a result, advertising
income was substantially reduced within the Period. Moreover, during the
Period, the overall income of the toll road-related business operations was
adversely affected due to several reductions in retail prices of domestics
refined oil products. During the Period, income from toll road-related
operations was Rmb1,854.39 million, representing a decrease of 22.5%
year-on-year.
Securities Business
During the Period, despite the mass turbulence in the Shanghai and Shenzhen
stock markets since mid-June last year, trading remained relatively active in
these two markets and their trading volume increased 218.0% year-on-year in
total. As a result, the brokerage business of Zheshang Securities recorded
substantial growth in trading volume amid a continued decline in average
brokerage commission rate. During the Period, the brokerage commission income
of Zheshang Securities increased 154.5% year-on-year.
Additionally, Zheshang Securities actively expanded into innovative businesses
while pushing forward the comprehensive development of each business to improve
its income and profit structure on an ongoing basis. During the Period, income
from Zheshang Securities' investment banking business, interest income from
margin financing and securities lending, as well as income from asset
management businesses all recorded substantial year-on-year growth of 25.8%,
198.9% and 108.8% respectively.
Zheshang securities has significantly improved its market position and made
steady progress in transformational development
On the securities business side, the Company took advantage of market
volatility, strengthened its compliance and risk management practices, and
effectively mitigated risks. In terms of transformation, the Company
capitalized on its financial strength and utilized its resources to explore and
nurture new business opportunities.
Meanwhile, the China Securities Regulatory Commission (the "CSRC") has allowed
IPOs to resume since November 2015. The IPO application of Zheshang Securities
was submitted to the Shanghai Stock Exchange in May 2013 and is currently
waiting for the CSRC's review and approval.
During the Period, Zheshang Securities recorded total operating income of
Rmb5,968.41 million, an increase of 134.2% year-on-year. Of which, commission
income rose 130.4% year-on-year to Rmb4,168.43 million, and interest income
from the securities business was Rmb1,799.98 million, representing an increase
of 143.5% year-on-year. Moreover, during the Period, securities investment
gains of Zheshang Securities included in the consolidated statement of profit
or loss and other comprehensive income of the Group was Rmb571.50 million
(2014: gains of Rmb262.39 million).
Hotel Operation
Grand New Century Hotel, owned by Zhejiang Yuhang Expressway Co., Ltd. (a 51%
owned subsidiary of the Company), began trial operation on April 28, 2015, and
realized income (before sales tax and additional tax) of Rmb44.93 million for
the Period.
Long-Term Investments
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate
company of the Company), was affected by a series of reductions in retail
prices of domestic refined oil products, and recorded income of Rmb5,043.67
million, representing a decrease of 20.8% year-on-year. During the Period, net
profit of this associate company was Rmb22.47 million (2014: net profit of
Rmb26.83 million). The Company completed the disposal of this associate company
on January 4, 2016.
Zhejiang Shaoxing Shengxin Expressway Co., Ltd. ("Shengxin Co", a 50% owned
joint venture of the Company) operates the 73.4 km-long Shaoxing Section of the
Ningbo-Jinhua Expressway. During the Period, the average daily traffic volume
in full-trip equivalents was 15,029, representing an increase of 7.4%
year-on-year. Toll income during the Period was Rmb331.21 million. However, due
to increased road maintenance expenses and its relatively heavy financial
burden, the joint venture reported a loss of Rmb50.14 million during the Period
(2014: loss of Rmb66.55 million).
During the Period, Zhejiang Communications Investment Group Finance Co., Ltd.
(a 35% owned associate company of the Company), derived income mainly from
interest, fees and commission for providing financial services, including
arranging loans and receiving deposits, to subsidiaries of Zhejiang
Communications Investment Group Co., Ltd., the controlling shareholder of the
Company. During the Period, this associate company realized a net profit of
Rmb139.61 million (2014: net profit of Rmb153.20 million).
FINANCIAL ANALYSIS
The Group adopts a prudent financial policy with an aim to provide shareholders
of the Company with sound returns over the long term.
Continuously strengthen core businesses Actively nurture new businesses
The Company will continue to strengthen its expressway business, develop its
financial and securities business, and nurture other new businesses. The
management will continue to work hard in the next year and maximize value for
all of our shareholders.
During the Period, profit attributable to owners of the Company was
approximately Rmb2,989.68 million, representing an increase of 32.0%
year-on-year, return on owners' equity was 17.9%, representing an increase of
34.1% year-on-year, while earnings per share for the Company was Rmb68.84
cents.
Liquidity and financial resources
As at December 31, 2015, current assets of the Group amounted to Rmb54,359.48
million in aggregate (December 31, 2014 (restated): Rmb35,826.44 million), of
which bank balances and cash accounted for 9.7% (December 31, 2014 (restated):
11.5%), bank balances held on behalf of customers accounted for 49.8% (December
31, 2014 (restated): 46.3%) held for trading investments accounted for 6.9%
(December 31, 2014 (restated): 5.9%) and loans to customers arising from margin
financing business accounted for 19.4% (December 31, 2014 (restated): 23.9%).
The current ratio (current assets over current liabilities) of the Group as at
December 31, 2015 was 1.3 (December 31, 2014 (restated): 1.2). Excluding the
effect of the customer deposits arising from the securities business, the
resultant current ratio of the Group (current assets less bank balances held on
behalf of customers over current liabilities less balance of accounts payable
to customers arising from securities business) was 1.8 (December 31, 2014
(restated): 1.4).
The amount of held for trading investments of the Group as at December 31, 2015
was Rmb3,761.22 million (December 31, 2014: Rmb2,124.74 million), of which
89.0% was invested in bonds, 5.9% was invested in stocks, and the rest was
invested in open-end equity funds.
During the Period, net cash used in the Group's operating activities amounted
to Rmb2,676.33 million, net cash generated from the Company's operating
activities amounted to Rmb1,553.03 million.
The Directors of the Company do not expect the Company to experience any
problems with liquidity and financial resources in the foreseeable future.
As at December 31,
2015 2014
Rmb'000 Rmb'000
(Restated)
Cash and cash equivalents
Rmb 4,935,103 3,321,633
US$ in Rmb equivalent 33,386 28,832
HK$ in Rmb equivalent 14,562 6,098
Time deposits - Rmb 270,000 761,320
Held for trading investments - Rmb 3,761,224 2,124,740
Available-for-sale investments - Rmb 1,032,750 570,021
Total 10,047,025 6,812,644
Rmb 9,999,077 6,777,714
US$ in Rmb equivalent 33,386 28,832
HK$ in Rmb equivalent 14,562 6,098
Borrowings and solvency
As at December 31, 2015, total liabilities of the Group amounted to
Rmb51,893.11 million (December 31, 2014 (restated): Rmb33,858.59 million), of
which 6.5% was bank and other borrowings, 20.4% was bonds payable, 10.4% was
financial assets sold under repurchase agreements and 52.0% was accounts
payable to customers arising from securities business.
As at December 31, 2015, total interest-bearing borrowings of the Group
amounted to Rmb14,584.05 million, representing an increase of 154.4% compared
to that as at December 31, 2014. The borrowings comprised outstanding balances
of domestic commercial bank loans of Rmb2,297.95 million, borrowings from other
domestic financial institution of Rmb500.00 million, entrusted loans from
Communication Group of Rmb570.00 million, subordinated bonds of Rmb7.20
billion, corporate bonds of Rmb1.50 billion, short-term financing note of
Rmb600.00 million and beneficial certificates of Rmb1,916.10 million. Of the
interest-bearing borrowings, 63.0% was not payable within one year.
As at December 31, 2015, the Group's loans from domestic commercial banks
include short-term and long-term loans (of which long-term loans due in one
year amounted to Rmb300.00 million), with annual fixed interest rates ranging
from 4.1325% to 4.6% and floating interest rates ranging from 4.41% to 5.9% per
annum. The annual fixed interest rate and floating interest rates for
borrowings from other domestic financial institutions was 5.1% and ranged from
4.275% to 4.513%, respectively. The annual interest rates for entrusted loans
from Communication Group were fixed at 4.55%. The annual coupon rates for
short-term financing note ranged from 2.93% to 3.2%. The annual coupon rate for
beneficial certificates ranged from 0.7% to 7.0%. The annual interest rates for
subordinated bonds were fixed at rates between 5.69% and 6.3%. The annual
interest rates for corporate bonds were fixed at 4.9%, while the annual
interest rate for accounts payable to customers arising from the securities
business was fixed at 0.35%.
Maturity Profile
Gross Within 2-5 years Beyond
amount 1 year inclusive 5 years
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Floating rates
Domestic commercial bank loans 870,000 100,000 440,000 330,000
Borrowings from other domestic financial institution 450,000 200,000 250,000 -
Fixed rates
Domestic commercial bank loans 1,427,951 1,427,951 - -
Borrowings from other domestic financial institution 50,000 50,000 - -
Entrusted loans from Communication Group 570,000 - 570,000 -
Short-term loan notes 600,000 600,000 - -
Beneficial certificates 1,916,100 16,100 1,900,000 -
Subordinated bonds 7,200,000 3,000,000 4,200,000 -
Corporate bonds 1,500,000 - 1,500,000 -
Total as at December 31,2015 14,584,051 5,394,051 8,860,000 330,000
Total as at December 31,2014 (Restated) 5,733,570 2,573,570 2,460,000 700,000
Total interest expenses for the Period amounted to Rmb635.75 million, of which
capitalized interest amounted to Rmb3.25 million, while profit before interest
and tax amounted to Rmb6,079.15 million. The interest cover ratio (profit
before interest and tax over interest expenses) stood at 9.6 (2014 (restated):
14.0) times.
2015 2014
Rmb'000 Rmb'000
(Restated)
Profit before tax and interest 6,079,147 3,924,340
Interest expenses 635,748 280,268
Interest cover ratio 9.6 14.0
As at December 31, 2015, the asset-liability ratio (total liabilities over
total assets) of the Group was 70.2% (December 31, 2014 (restated): 61.6%).
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 held on behalf of customers) of the Group was 53.2% (December 31,
2014 (restated): 45.1%).
Capital structure
As at December 31, 2015, the Group had Rmb21,998.65 million in total equity,
Rmb45,859.07 million in fixed-rate liabilities, Rmb1,320.00 million in
floating-rate liabilities, and Rmb4,714.04 million in interest-free
liabilities, representing 29.8%, 62.1%, 1.8% and 6.3% of the Group's total
capital, respectively. The gearing ratio, which is computed by dividing the
total liabilities less accounts payable to customers arising from the
securities business by total equity, was 113.1% as at December 31, 2015
(December 31, 2014 (restated): 89.1%).
As at As at
December December
31, 2015 31, 2014
Rmb'000 % Rmb'000 %
(Restated) (Restated)
Total equity 21,998,649 29.8% 21,128,470 38.4%
Fixed rate liabilities 45,859,072 62.1% 27,037,773 49.2%
Floating rate liabilities 1,320,000 1.8% 3,030,000 5.5%
Interest-free liabilities 4,714,042 6.3% 3,790,813 6.9%
Total 73,891,763 100.0% 54,987,056 100.0%
Long-term interest-bearing liabilities 9,190,000 12.4% 3,160,000 5.7%
Gearing ratio 1 (note) 113.1% 81.9%
Gearing ratio 2 (note) 41.8% 15.0%
Asset-liabilities ratio1 (note) 70.2% 61.6%
Asset-liabilities ratio 2 (note) 53.2% 45.1%
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 held on behalf of
customers.
Capital expenditure commitments and utilization
During the Period, capital expenditure of the Group totaled Rmb2,222.94
million. Amongst the total capital expenditure, Rmb1,699.35 million was
incurred for acquiring 80.614% equity interest in Hanghui Co, Rmb102.10 million
was incurred for other equity investments, Rmb199.57 million was incurred for
acquisition and construction of properties, Rmb184.44 million was incurred for
purchase and construction of equipment and facilities, and Rmb37.48 million was
incurred for service area renovation and expansion.
As at December 31, 2015, the capital expenditure committed by the Group totaled
Rmb661.19 million. Amongst the total capital expenditures committed by the
Group, Rmb317.63 million will be used for acquisition and construction of
properties, Rmb312.22 million for acquisition and construction of equipment and
facilities, and Rmb31.34 million for service area renovation and expansion.
The Group will consider financing the above-mentioned capital expenditure
commitments with internally generated cash flow first and then will
comprehensively consider using debt financing and equity financing to meet any
shortfalls.
Contingent liabilities and pledge of assets
Pursuant to the board resolution of the Company dated November 16, 2012, the
Company and Shaoxing Communications Investment Group Co., Ltd. (the other joint
venture partner that holds 50% equity interest in Shengxin Co) provided
Shengxin Co with joint guarantee for its bank loans of Rmb2.20 billion, in
accordance with their proportionate equity interest in Shengxin Co. During the
Period, Rmb110.00 million of the bank loans had been repaid.
Pursuant to the board resolution dated June 24, 2008 of Zhejiang Jinhua Yongjin
Expressway Co., Ltd. ("Jinhua Co", a 100% owned subsidiary of the Company),
Jinhua Co provided the operating right of the expressway operated by it as
pledged asset for its domestic commercial bank loans. The outstanding balance
of such commercial loan was Rmb100.00 million. As at December 31, 2015, the
carrying amount of the pledged asset was Rmb1,666.19 million. The commercial
bank loan was fully repaid on January 29, 2016 before it was due.
Pursuant to a pledge agreement, Hanghui Co provided operating right of certain
parts of the expressway operated by it as pledged asset for its domestic
commercial bank loans. The outstanding balance of such commercial loan was
Rmb620.00 million. As at December 31, 2015, the carrying amount of the pledged
asset was Rmb2,420.32 million.
Except for the above, as at December 31, 2015, 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 and (ii) setting up Zheshang Futures (Hong Kong) Co., Limited
with HK$10.00 million contributed capital by Zheshang Futures Co., Ltd., a
wholly owned subsidiary of Zheshang Securities, the Group's principal
operations were transacted and booked in Renminbi. Therefore, the Group's
exposure to exchange fluctuation is limited. During the Period, the Group has
not used any financial instruments for hedging purpose.
Although the Directors do not foresee any material foreign exchange risks for
the Group, there is no assurance that foreign exchange risks will not affect
the operating results of the Group in the future.
Human Resources
During the Period, the Company actively revamped its human resource management,
enhanced its remuneration and performance policy, and prompted the increase in
overall payment of remuneration to be linked to the operating performance of
Company and the productivity of employees. As at December 31, 2015, there were
7,271 employees within the Group, amongst whom 1,714 worked in the managerial,
administrative and technical positions, while 5,457 worked in fields such as
toll collection, maintenance, service areas, securities and futures business
outlets.
OUTLOOK
The pace of global economic recovery has been slower than expected while
China's economy is in a key phase of structural adjustment and transformation,
and still faces certain downward pressure. Looking into 2016, given varied
regional economic development and traffic demand, the toll performance of each
expressway operated by the Group is expected to vary. We expect overall traffic
volume in 2016 will continue to grow at a steady pace, albeit slower than that
in 2015.
Additionally, the Dongyang-Yongkang Expressway, which opened to traffic in July
2015, is expected to continue to have a slight diversion impact on traffic for
the Jinhua Section of the Ningbo-Jinhua Expressway. Therefore, the Group will
endeavor to not only enhance the quality of its expressway operations and
services and adopt measures to ensure smooth and safe travel, but will also
strengthen the analysis of these newly opened networks and intensify
promotional and marketing efforts to direct and attract more vehicles to use
the expressways operated by the Group and minimize the diversion impact.
Although the Shenzhen and Shanghai stock markets experienced significant
turbulences in 2015, we believe the Group's securities business is still facing
new opportunities as the Chinese government continues to actively promote the
healthy development of capital markets and deepen the establishment of a
multi-level capital market. Meanwhile, it is expected that Zheshang Securities'
A-Share listing application on the Shanghai Stock Exchange may progress further
as the CSRC has allowed A-Share IPOs to resume. Zheshang Securities will
strengthen its cost and risk control and ensure its businesses maintain their
healthy growth path, while deploying strategic measures to be more resilient to
challenges from the current market environment and intense industry competition
through expanding its efforts in developing innovative businesses.
Facing a complicated new environment, the Company's management will strongly
unite all of our employees to develop our core expressway business, and further
enhance our core competencies. The Company will also strengthen its securities
business and seek new drivers for profit growth. Under the premise of
controlling risks, the Company will continue to search for suitable investments
and development projects, while also cultivating management's capabilities to
handle diversified operations in order to enlarge the potential of its future
development and profitability to deliver solid results for shareholders.
Principal Risks and Uncertainties
TOLL ROAD BUSINESS RISKS
Economic Environment
As the global economy continues to struggle for recovery, China's economy is
moving into a "new normal" as it downshifts from rapid growth to more moderate
levels of growth. The overall economy is still subject to downside pressure to
a certain extent. As the expressway toll road business is closely related to
the macroeconomy, it is subject to the macroeconomic performance. Growth in the
traffic volume and toll revenue of the Group's expressways is expected to
remain uncertain, creating uncertainties for the operations, financial
conditions and operating results of the Group.
Roads Competition
The slight diversion impact on traffic from the Jinhua section of the
Ningbo-Jinhua Expressway caused by the Dongyang-Yongkang Expressway, which
commenced service in July 2015. Accordingly, we cannot be assured as to whether
traffic volume to be generated on the Group's expressways will be maintained at
the same levels as before or will increase in the future, or whether or not the
operating results of the Group will be negatively affected.
Toll Policy
With the implementation of the toll waiver policy on small passenger vehicles
on key festivals and holidays by the PRC government on September 30, 2012, the
expressway operators who charge for toll are negatively affected. In addition,
due to the introduction of a special project by five ministries and commissions
for the rectification of the toll road policy in Zhejiang province, a number of
new policies focusing on adjusting the toll policy of expressways within the
province were successively issued. At the same time, as the consultation paper
"Regulation on Administration of Toll Roads" 2015 has not been officially
promulgated at present, despite that we expect the possibility of further
significant changes in the policies of the expressway industry in the near term
is minimal, we cannot be assured that they will not have any adverse effects on
the toll revenue of the Group.
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, 6 and 7
to the Consolidated Financial Statements.
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 42
to 47, 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 2015 up to now, there has been no occurrence of
significant events that would have a material impact on the normal operation of
the Group.
By Order of the Board
Tony ZHENG
Company Secretary
Hangzhou, Zhejiang Province, the PRC
March 17, 2016
Corporate Governance 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 governance in Appendix 14 of the Listing Rules
(available at www.hkex.com.hk) ("CG Code").
During the Period, the Company has complied with all code provisions in the CG
Code and adopted the recommended best practices in the CG Code as and when
applicable.
DIRECTORS' SECURITIES TRANSACTIONS
The Company has adopted the Rules on Securities Dealings ("Rules on Securities
Dealings") for the Directors, supervisors, senior management personnel and
other employees of the Company on terms no less exacting than the required
standard set out in the Model Code for Securities Transactions by Directors of
Listed Issuers (the "Model Code") set out in Appendix 10 of the Listing Rules.
Upon specific inquiries to all the Directors, the Directors have confirmed
their respective compliance with the required standards for securities
transactions by Directors as set out in the Model Code and the Rules on
Securities Dealings during the Period.
BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD")
The executive directors of the Company during the Period were:
Mr. ZHAN Xiaozhang
(Chairman)
Mr. CHENG Tao (Appointed on July 1, 2015)
Ms. LUO Jianhu (General Manager)
Mr. DING Huikang (Ended of Appointment Term on July 1, 2015)
The non-executive directors of the Company during the Period were:
Mr. WANG Dongjie
Mr. DAI Benmeng
Mr. ZHOU Jianping
The independent non-executive directors of the Company during the Period were:
Mr. ZHOU Jun
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang Rosa
During the Period, 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 Attendance
in person by proxy
Mr. ZHAN Xiaozhang (Chairman) 9/10 1/10
Mr. CHENG Tao (Appointed on July 1, 2015) 6/6
Ms. LUO Jianhu (General Manager) 10/10
Mr. DING Huikang (Ended of Appointment Term on July 1, 2015) 4/4
Mr. WANG Dongjie 8/10 2/10
Mr. DAI Benmeng 7/10 3/10
Mr. ZHOU Jianping 8/10 2/10
Mr. ZHOU Jun 9/10 1/10
Mr. PEI Ker-Wei 9/10 1/10
Ms. LEE Wai Tsang Rosa 10/10
During the Period, the Company held three general meetings of the shareholders.
The meetings were chaired by Chairman, and all executive directors were present
at the meetings.
The Board is charged with duties as well as given powers that are expressly
specified in the articles of association of the Company, the scope of which
includes, amongst others: to determine the business plans and investment
proposals of the Company; to prepare the financial budget and final accounts of
the Company; to determine the dividend policy of the Company; to appoint or
dismiss senior managerial officers of the Company as well as to determine their
remuneration; and to draw up proposals for any material acquisition or sale by
the Company.
To assist the Board to effectively discharge its duties, the Board has set up
the Audit Committee, the Nomination Committee, the Remuneration Committee, and
the Strategic Committee.
While the Board fully retains its power to decide on matters within its scope
of duties and powers, relevant preparation and drawing up of plans or proposals
were usually delegated to the management.
The Company has complied with the requirements under Rules 3.10(1) and (2) of
the Listing Rules regarding the appointment of independent non-executive
directors, with three independent non-executive directors appointed, at least
one of whom possessing the appropriate professional qualification or accounting
or related financial management expertise.
Pursuant to Rule 3.13 of the Listing Rules, the Company had specifically
inquired with all three independent non-executive directors and received their
respective confirmation of independence during the Period. The three
independent non-executive directors have all confirmed their compliance with
requirements regarding independence under Rule 3.13 of the Listing Rules. The
Company still considers the independent non-executive directors to be
independent.
There were no financial, business, family or other material or relevant
relationships between members of the Board, including that between the Chairman
and the General Manager of the Company.
Each newly appointed director receives induction on the first occasion of his
or her appointment, so as to ensure that he or she has appropriate
understanding of the business and operations of the Company and that he or she
is fully aware of his or her responsibilities and obligations under the Listing
Rules and relevant regulatory requirements. Directors are also regularly
updated on the Group's business and industry environments where appropriate in
the management's monthly reports to the Board as well as briefings and
materials circulated to the Board before board meetings.
In addition, during the Period, the Company has arranged for all its executive
and non-executive directors to undergo continuous trainings designed to develop
and refresh their knowledge and skills so as to ensure that their contribution
to the Board remains informed and relevant. However, as the management
considers that the independent non-executive directors of the Company are very
experienced, knowledgeable and resourceful, the Company did not arrange any
professional briefings or training programs for its independent non-executive
directors and has decided to leave it to the independent non-executive
directors to undergo appropriate training as they see fit.
CHAIRMAN AND GENERAL MANAGER
During the Period, Mr. ZHAN Xiaozhang 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, 2015 and will expire on June 30, 2018.
SPECIAL COMMITTEES UNDER THE BOARD
The Board has set up the Audit Committee, the Nomination Committee, the
Remuneration Committee, and the Strategic Committee. Roles and responsibilities
for each committee are specified in its terms of reference, details of which
can be found under the "Corporate Governance" section in the Company's website.
The Audit Committee comprised of the three independent non-executive directors
and two non-executive directors, namely Mr. ZHOU Jun, Mr. PEI Ker-Wei, Ms. LEE
Wai Tsang Rosa, Mr. WANG Dongjie and Mr. ZHOU Jianping, of whom Mr. ZHOU Jun
serves as the Chairman of the Audit Committee.
The Nomination Committee comprised of the three independent non-executive
directors, one executive director and one non-executive director, namely Mr.
ZHAN Xiaozhang, Mr. ZHOU Jun, Mr. PEI Ker-Wei, Ms. LEE Wai Tsang Rosa and Mr.
DAI Benmeng, of whom Mr. ZHAN Xiaozhang serves as Chairman of the Nomination
Committee.
The Company believes that diversification of board members is a key element to
maintain the Company's competitive advantage, improve business performances,
and promoting the Company's continued development. When setting up the board
member composition, the Company takes into consideration a number of aspects
that determine board member diversification, including but not limited to
gender, age, culture, education background, professional experience, work and
living background, knowledge and skill, etc. The Company's Nomination Committee
is responsible for assessing the board's structure, number of members, as well
as a diversified composition, providing recommendation or suggestion on
candidates to serve as new directors of the Company to the board when needed.
The assessment as well as recommendation or suggestion above would have fully
taken into consideration any pros and cons to the diversification of board
members.
The Remuneration Committee comprised of the three independent non-executive
directors and two non-executive directors, namely, Mr. PEI Ker-Wei, Mr. ZHOU
Jun, Ms. LEE Wai Tsang Rosa, Mr. DAI Benmeng and Mr. ZHOU Jianping, of whom Mr.
PEI Ker-Wei, serves as Chairman of the Remuneration Committee.
The Strategic Committee comprised of the three executive directors, namely Mr.
ZHAN Xiaozhang, Mr. CHENG Tao and Ms. LUO Jianhu as well as Mr. ZHANG
Jingzhong, Mr. WANG Dehua, Mr. Tony ZHENG and several outside experts and
advisors, of whom Mr. ZHAN Xiaozhang serves as Chairman of the Strategic
Committee.
During the Period, the Audit Committee held a total of five 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:
Attendance Attendance Attendance
in person by proxy through
communication
Mr. ZHOU Jun 4/5
Mr. PEI Ker-Wei 4/5 1/5
Ms. LEE Wai Tsang Rosa 4/5 1/5
Mr. WANG Dongjie 4/5 1/5
Mr. ZHOU Jianping 3/5 1/5 1/5
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 risk management of the Company, as well as recommendation on the
re-appointment of external auditors.
During the Period, the Nomination Committee held a total of one meeting.
Individual attendances by the members of the Nomination Committee (as indicated
by the numbers of meetings attended/numbers of meetings held) are as follows:
Attendance
through
communication
Mr. ZHAN Xiaozhang 1/1
Mr. ZHOU Jun 1/1
Mr. PEI Ker-Wei 1/1
Ms. LEE Wai Tsang Rosa 1/1
Mr. DAI Benmeng 1/1
During the Period, the Nomination Committee mainly discussed the candidates for
senior
management of the Company. Proposed candidates for senior management of the
Company that were reviewed by the Nomination Committee were later reviewed and
approved by the Board.
During the Period, the Remuneration Committee held a total of one meeting.
Individual
attendances by the members of the Nomination Committee (as indicated by the
numbers of meetings attended/numbers of meetings held) are as follows:
Attendance
through
communication
Mr. PEI Ker-Wei 1/1
Mr. ZHOU Jun 1/1
Ms. LEE Wai Tsang Rosa 1/1
Mr. DAI Benmeng 1/1
Mr. ZHOU Jianping 1/1
During the Period, the Remuneration Committee mainly discussed the remuneration
and allowance packages for directors of the Board, supervisors of the
Supervisory Committee and senior management of the Company. Proposed
remuneration and allowance packages for directors of the Board, supervisors of
the Supervisory Committee and senior management of the Company that were
reviewed by the Remuneration Committee were later reviewed and approved by the
Board.
During the Period, the Strategic Committee did not hold any meeting.
The Board is responsible for developing and reviewing the Company's corporate
governance policies and practices, monitoring the Company's compliance with the
Code and its disclosure within this report; the Board reviews and monitors the
training and continuous professional development of Directors and senior
management through the works of human resources department, and review and
monitor the Company's policies and practices on compliance with legal and
regulatory requirements through the works of legal and internal audit
department.
During the Period, the Directors have all confirmed their responsibility for
preparing the accounts, and that there were no events or conditions which would
have a material impact on the Company's ability to continue to operate as a
going concern basis.
AUDITORS' REMUNERATION
During the Period, the Company had paid Rmb approximately 3.28 million and
Rmb1.45 million to Deloitte Touche Tohmatsu Certified Public Accountants (the
Hong Kong auditors) and Pan-China Certified Public Accountants Ltd. (the PRC
auditors), respectively, for audit services conducted in 2014. Besides, the
Company had paid Rmb890,000 to Deloitte Touche Tohmatsu Certified Public
Accountants (the Hong Kong auditors) for other assurance service provided.
SECRETARY TO THE BOARD
During the Period, the Secretary to the Board had complied with Rule 3.29 of
the Listing Rules regarding undergoing relevant professional trainings.
DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE'S INTERESTS IN SHARES AND UNDERLYING
SHARES OF THE COMPANY
As at December 31, 2015, 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, 2015, 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 Capacity Total interests in Percentage of
shareholders number of the issued
ordinary shares share capital
of
of the Company the Company
(domestic
shares)
Communications Group Beneficial owner 2,909,260,000 100%
Substantial Capacity Total interests Percentage of
shareholders in number of the issued
ordinary shares share capital
of the Company of the Company
(H shares)
JP Morgan Chase & Co. Beneficial owner, 186,356,024(L) 12.99% (L)
investment manager and 1,582,000(S) 0.11%(S)
custodian corporation/
approved 74,335,779(P) 5.18%(P)
lending agent
BlackRock, Inc. Interest of controlled 169,469,960(L) 11.82%(L)
corporations
The Bank of New York Investment manager/ 72,365,466(L) 5.05%(L)
Mellon Corporation approved lending agent 70,150,710(P) 4.89%(P)
The letter "L" denotes a long position. The letter "S" denotes a short
position. The letter "P" denotes interest in a lending pool.
Save as disclosed above, as at December 31, 2015, no other persons had any
interests or short positions in the shares or underlying shares of the Company
that was required to be recorded pursuant to Section 336 of the SFO, or as
otherwise notified to the Company and the Hong Kong Stock Exchange.
SHAREHOLDERS' RIGHTS
Pursuant to the Articles of Association of the Company, two or more
Shareholders who in aggregate hold 10% or more of the voting rights of all the
shares of the Company having the right to vote may write to the Board to
request the convening of an extraordinary general meeting and specifying the
agenda of the meeting. Upon receipt of the request in writing, the Board shall
convene the extraordinary general meeting as soon as possible. Shareholders who
hold in aggregate 5% or more of the voting rights of all the shares of the
Company having the right to vote are entitled to propose additional motions in
annual general meeting, provided that such motions are served on the Company
within 30 days after the issue of the notice of annual general meeting.
Written requests, proposals and enquiries may be sent to the Company through
contact details listed on page 179 of this report.
INVESTOR RELATIONS
The Board is committed to ensuring that all shareholders and the investment
community have equal and timely access to information about the Company so as
to enable their accurate assessment of the Company's fair value. Such
information is available through channels including financial reports,
shareholder meetings, statutory announcements, the Hong Kong Stock Exchange
website (www.hkexnews.hk) and the Company's own website (www.zjec.com.cn).
Activities such as investor and analyst briefings, one-on-one meetings,
conference calls, roadshows, and press conferences are held regularly by senior
management of the Company, particularly after results announcements.
Great importance is also attached to maintaining clear and effective
communications channels with investors as part of the Company's bid to enhance
its transparency and to promote the understanding of its business in the
investment community. Any parties who wish to learn more about the Company may
do so via the contact details listed below:
Mr. Tony ZHENG
Company Secretary
5/F, #2 Mingzhu International Business Center,
199 Wuxing Road, Hangzhou, Zhejiang 310020 China
Tel: 86-571-87987700
Fax: 86-571-87950329
E-mail: zhenghui@zjec.com.cn
During the Period, the last shareholders' meeting of the Company took place at
10:00 a.m. on Tuesday, December 22, 2015 at the headquarters of the Company.
Details of this extraordinary general meeting of the shareholders were set out
in the announcement dated December 22, 2015 on resolutions passed at the
extraordinary general meeting of the shareholders.
The next annual general meeting of the Company is expected to be held in May,
2016 with exact date and resolutions for review to be specified in notice of
annual general meeting when it is published.
The Company has an issued share capital of 4,343,114,500 shares comprised of
domestic shares and H shares. The domestic shares are held by Zhejiang
Communications Investment Group Co., Ltd. as to 2,909,260,000 shares,
representing approximately 67% of the total issued capital of the Company. The
remaining 1,433,854,500 shares are H shares, representing approximately 33% of
the total issued capital of the Company. As at the date of this report, and to
the best of the Directors' knowledge, 100% of the H shares of the Company are
held by the public.
There were no changes made to the articles of association of the Company during
the Period.
INTERNAL CONTROLS AND RISK MANAGEMENT
The Company has set up an internal monitoring system that aims to protect
assets, preserve accounting and financial information, as well as to ensure the
accuracy of financial statements, including the establishment of departments
and units, setting out responsibilities, execution of management systems and
quality control mechanisms, and the management system on environment,
occupational health and safety. The system is capable of taking necessary steps
to react to possible changes in our businesses as well as external operating
environments. Throughout the operating process, the Company's various internal
control measures are being continuously enhanced, fulfilled and are deemed
effective.
The Company attaches great importance to risk management. As of the end of
2015, the Company established its risk management mechanism and relevant
regulations, established risk management strategy and took risk control
measures in response to major risks faced by the Company.
The Company's Audit Committee is charged with the duties of reviewing internal
controls, directing monitoring activities. Aside from reviewing the annual
reporting by external auditors, the committee also reviews the effectiveness of
internal control system and risk management mechanism through reviewing the
internal special audit report on the Company's various core businesses prepared
by internal audit department on a regular basis. During the Period, the Audit
Committee focused on management of various projects, as well as compliance and
risk control of margin financing and securities lending businesses. The
internal audit department carried out specific audit into these compliance
issues and monitored relevant rectifications, ensuring the effectiveness of the
Company's management systems.
During the Period, the Directors of the Company had carried out a review 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.
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.
Directors, Supervisors and Senior Management Profiles
DIRECTORS
Executive Directors
Mr. ZHAN Xiaozhang, born in 1964, is a Senior Economist. Mr. Zhan holds a
bachelor's degree in law. He further obtained a master's degree in public
administration from the Business Institute of Zhejiang University in 2005. He
has been appointed as the Chairman of the Company since June 2012.
From 1985 to 1991, Mr. Zhan worked as an officer at Transport Administrative
Division under Waterway Transport Authority of Zhejiang Provincial Bureau of
Construction. From 1991 to 1998, he served as Deputy Secretary and Secretary of
the Communist Youth League Commission at Zhejiang Provincial Bureau of
Communications. From 1998 to 2002, he was Deputy Director of Waterway Transport
Authority under Zhejiang Provincial Bureau of Communications. From 2002 to
2003, he was Deputy Director of Human Resources Department at Zhejiang
Provincial Bureau of Communications. From 2003 to 2006, Mr. Zhan was Chairman
of Zhejiang Wenzhou Yongtaiwen Expressway Co., Ltd. From 2006 to 2008, he
became Chairman of Zhejiang Jinji Property Co., Ltd. Mr. Zhan has been
Assistant to General Manager and Manager of Research and Development Department
at Zhejiang Communications Investment Group Co., Ltd from 2006 to 2009.
He served as an Executive Director and the General Manager of the Company from
March 2009 to June 2012. Mr. ZHAN currently also serves as Deputy General
Manager of Zhejiang Communications Investment Group Co., Ltd.
Mr. CHENG Tao, born in 1964, is the party committee secretary of the Company.
Mr. Cheng graduated from Changsha University of Science & Technology with a
bachelor's degree in transportation engineering. He is a Senior Administration
Engineer and Senior Economist. Mr. Cheng has been appointed as an Executive
Director of the Company since July 2015.
Mr. Cheng began his career in September 1983 and held the positions of
Secretary of CYL Committee at Zhejiang Shipping and Technical School; Secretary
of CYL Committee at Zhejiang Road and Bridge Engineering Office; Secretary of
Party General branch at No.3 Company of Zhejiang Provincial Transportation
Engineering & Construction Group Co., Ltd.; Party Committee Deputy Secretary of
Zhejiang Provincial Transportation Engineering & Construction Group Co., Ltd.;
Vice Chairman, Party Committee Secretary and Chairman of Zhejiang Provincial
Transportation Engineering & Construction Group Co., Ltd.
Ms. LUO Jianhu, born in 1971, graduated from the Department of Law at Hangzhou
University with a bachelor's degree in law, majoring in Economic Law. She is a
lawyer and Senior Economist. Ms. Luo has been appointed as an Executive
Director and the General Manager of the Company since June 2012.
Since she started her career in August 1994, Ms. Luo had held such positions as
the board secretary of Zhejiang Transportation Engineering Construction Group
Co., Ltd., the Deputy Director, Director of the Legal Affairs Department, the
Deputy Director, Director of the Secretarial Office to the Board, Board
Secretary and the Manager of the Investment and Development Department of
Zhejiang Communications Investment Group Co., Ltd.
Non-Executive Directors
Mr. WANG Dongjie, born in 1977, graduated from Southeast University majoring in
Highway and Railway Engineering with a master's degree in engineering. He is a
Senior Engineer.
Since he started his career in March 2002, Mr. Wang had served as an Engineer
of the Executive Commission of Hangzhou Ring Road North Line Project, the
Deputy Executive Chief of the Executive Commission for the interflow renovation
of Hangzhou airport road, the Engineering Division Chief of Management Office
of Chun'an section of Hangqian Expressway and the Director and Deputy General
Manager of Hangzhou Transportation Road and Bridge Construction Company.
He joined Zhejiang Communications Investment Group Co., Ltd. in January 2007
and is currently the General Manager of the Strategic Development and Legal
Affairs Department.
Mr. DAI Benmeng, born in 1965, graduated from the Party School of the Zhejiang
Committee of the Communist Party of China with a bachelor's degree specialising
in economics and management and is a Senior Economist. He began working in
February 1987 and has been a director and the Deputy General Manager of Wenzhou
Shipping Co., Ltd. , a Director and the General Manager of Zhejiang Wenzhou
Yongtaiwen Expressway Co., Ltd. , a Director and the General Manager of
Zhejiang Jinji Property Co., Ltd. , the person in charge of Zhejiang Province
North Zhejiang Expressway Management Co., Ltd. , the Chairman of Zhejiang
ShenSuZheWan Expressway Co., Ltd. , and the General Manager of the
Shanghai-Jiaxing-Huzhou-Hangzhou branch of the Communications Group . Mr. Dai
is currently the Department Head of Organization Department of the
Communications Group.
Mr. ZHOU Jianping, born in 1957, graduated from Xi'an Highway College with a
bachelor's degree specialising in vehicular transport and is a Senior Engineer
at professor level. He began working in September 1975 and has been the Deputy
Supervisor of the Business Management Office, Supervisor of the office,
Assistant of the General Manager, and Deputy General Manager of Zhejiang
Province Vehicular Transport General Company , the Deputy Head of Quzhou
Municipal Communications Bureau, Zhejiang Province, the manager of the Asset
Management Department of the Communications Group, and the person in charge of
the Hangjinqu Branch of the Communications Group . Mr. Zhou is currently the
Deputy Chief Economist and the Manager of the Operations Department of the
Communications Group.
Independent Non-Executive Directors
Mr. ZHOU Jun, born in 1969, is the Executive Director and Vice President of
Shanghai Industrial Investment (Holdings) Co. Ltd. ("SIIC"). Mr. Zhou graduated
from Nanjing University and Fudan University with a bachelor's degree of arts
and a master's degree of economics in international finance. He also serves as
the Chairman of S.I. Infrastructure Holdings Ltd. and seven other companies,
the Chairman of SIIC Environment Holdings Ltd. in Singapore (SGX: 5GB),
Executive Director and Deputy CEO of Shanghai Industrial Holdings Ltd. (HK:
0363), Executive Director of Shanghai Industrial Urban Development Group Ltd.
(HK: 0563). He worked for Guotai Securities Co., Ltd. (now Guotai Junan
Securities Co). Before joining SIIC in April 1996, the management positions he
had held within the SIIC group of companies were Deputy General Manager of SIIC
Real Estate Holdings (Shanghai) Co., Ltd., Deputy General Manager of Shanghai
United Holdings Co., Ltd. (SH: 600607), Managing Director of Shanghai Cyber
Galaxy Investment Co., Ltd. and General Manager of the Strategic Investment
Department of SIIC. Mr. Zhou has about 20 years' professional experience in
general management, financial investment, real estate and project planning.
Mr. Zhou is a member of the Standing Committee of the CPC Shanghai Municipal
Committee and is currently the Chairman of Shanghai Lantai Investment
Management Co., Ltd. of Shanghai Charity Foundation.
Mr. PEI Ker-Wei, born in 1957, is a Professor of Accountancy and Executive Dean
for China Region at 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 is currently the director of W.P. Carey EMBA programs in China. 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 serves as an External Director of Baosteel Group and China
Merchant Group, and Independent Director of Want Want China Holdings
(00151.hk), Zhong An Real Estate (00672.hk) and MMG Limited (01208.hk).
Ms. LEE Wai Tsang, Rosa, born in 1977, is the chairman and an executive
director of Grand Investment International Ltd. (a company listed on the Main
Board of the Stock Exchange, Stock Code: 1160) and oversees its day-to-day
investment, operation and administration. Ms. Lee holds a bachelor degree from
the University of Southern California, a Master of Science in Finance from
Boston College and a MBA from the University of Chicago. Ms. Lee is a licensed
person for the regulated activities of dealing in securities and futures under
the SFO. Ms. Lee is a director of Grand Finance Group Company Ltd. and Tianjin
Yishang Friendship Holdings Co., Ltd. Ms. Lee has extensive experience in
management, investment, securities and auditing.
SUPERVISOR
Supervisor Representing Shareholders
Mr. YAO Huiliang born in 1972, graduated from the Zhejiang University and is a
senior accountant.
Since he started his career in August 1990, Mr. YAO had served as Project
Management Manager at Zhejiang Zhetong Road Operation Co., Ltd., Finance
Manager of the Management Committee of the Ningbo Second Phase of Yongtaiwen
Expressway, Assistant to the General Manager and Finance Manager of the Ningbo
Expressway Co., and Deputy Manager of the Finance Management Department, and
Vice Manager of the Finance Center of the Communications Group.
Mr. YAO currently serves as Manager of the Finance Management Department of the
Communications Group.
Independent Supervisors
Mr. WU Yongmin, born in 1963, is an Assistant Professor. Mr. Wu graduated from
China University of Political Science and Law with a master's degree.
He was the Deputy Dean of the Department of Law at Hangzhou University, Deputy
Dean of the Department of Law at Zhejiang University's Law School, and Director
of Zheda Law Firm. Mr. Wu studied at the Christian-Albrechts-Universitat zu
Kiel in 1996 as a visiting scholar. He is currently the Dean of the Department
of Law at the Law School of Zhejiang University, a Supervisor for master's
degree candidates in Business Law, a member of China Business Law Research
Council, Deputy Director of Zhejiang Tax Law Research Council, an Arbitrator of
Hangzhou Arbitration Committee, and a Lawyer at Zhejiang Zeda Law Firm.
Mr. ZHANG Guohua, born in 1963, obtained a doctorate degree in human resources
management. He is a Senior Economist and the President of China Everbright
Bank, Hangzhou Branch. Mr. Zhang graduated from Hangzhou University in 1985
with a bachelor's degree in education and then received a master's degree in
educational psychology in 1988. In 2000, he was granted the Graduate
Certificate of Completion in finance by the School of Economics of Zhejiang
University, and then obtained a doctorate degree in psychology from the College
of Science of Zhejiang University in 2007.
Since 1988, Mr. Zhang had successively worked in the headquarters of Industrial
and Commercial Bank of China, Hangzhou Institute of Financial Managers,
Hangzhou Financial Urban Credit Cooperative and China Everbright Bank, Hangzhou
Branch and Wuxi Branch, and Ping An Bank, Hangzhou Branch. He had held the
positions of Deputy Director of the Office, Supervisor of the Credit Union,
Vice President and President, respectively.
Mr. Zhang resigned from his position as an Independent Supervisor of the
Company, with effect from March 17, 2016.
Mr. SHI Ximin, born in 1960, obtained a doctorate degree in Accounting from the
Central University of Finance and Economics, and holds a doctorate degree in
Management.
Since he started his career in July 1983, Mr. Shi had served as Deputy Dean of
the Accounting Department, and Director of Graduate School of the Zhejiang
University of Finance & Economics, as well as Dean of the Zhejiang Business
College. Mr. Shi currently serves as a professor in the Accounting Department
of the Zhejiang University of Finance & Economics, Deputy Chairman of the
Zhejiang Association of CFO, and independent director of Wolong Real Group
Estate Co., Ltd. (SH: 600173) and Zhejiang Jianfeng Group Co.,Ltd. (SH: 600668)
(both companies listed on the Shanghai Stock Exchange).
Supervisor Representing Employees
Mr. LU Xinghai, born in 1967, graduated from the Department of Psychology of
the Hangzhou University with a doctorate degree in Management Psychology and is
a Senior Economist, the Supervisor Representing Employees of the Company.
Mr. Lu had served as Manager of the Human Resources Department of Hangzhou BC
Foods Co., Ltd., Deputy Manager of the Human Resources Department of the
Company. He currently also serves as the Head of the Party-Staff Work
Department and Director of Labour Union Office of the Company.
Mr. ZHAN Huagang, born in 1961, is the party committee member and labour union
chairman of the Company. He is a professor-level Senior Engineer. Mr. Zhan
graduated from Zhejiang University with a bachelor's degree of engineering in
internal combustion engine from the department of thermophysical engineering.
From July 1982 to June 1991, he worked at Zhejiang Province Vehicular Transport
Company , Zhejiang Office of Motor Vehicles and Zhejiang Highway Management
Bureau . From June 1991 to January 1996, he worked at Zhejiang Road and Bridge
Engineering Office . From January 1996 to March 1997, he worked at the
Operation Division and Maintenance Division of the Zhejiang Provincial
Expressway Executive Commission as Senior Engineer.
Since March 1997, he has been working at Zhejiang Expressway Co., Ltd. as
Deputy Manager and Manager of the Operations Management Department, Manager of
the Investment Development Division, Manager of the Equipment Management
Department, Manager of the Engineering Management Department and Head of the
Maintenance Management Office. He is concurrently the Deputy General Manager of
Zhejiang Expressway Investment Development Co., Ltd. and Chairman and General
Manager of Zhejiang Expressway Advertising Co., Ltd.
OTHER MEMBERS OF SENIOR MANAGEMENT
Mr. FANG Zhexing, born in 1965, is a Senior Engineer, the Deputy General
Manager of the Company. Mr. Fang graduated from Zhejiang University where he
received a master's degree in engineering in 1991.
From 1986 to 1988 he was the Assistant Engineer in the Project Management
Office of the Electric Power and Water Conservancy Bureau in Taizhou, Zhejiang
Province. From 1991 until 1997, he was the Engineer in the Project Management
Office of Zhejiang Provincial Expressway Executive Commission, where he
participated in the project management of Shanghai-Hangzhou-Ningbo Expressway.
Since March 1997, he has served as the Deputy Manager and the Manager of the
Planning and Development Department, the Manager of the Project Development
Department, the Director of Quality Management Office, the Director of Internal
Audit Department of the Company, the Manager of the Human Resources Department
and the Secretary of Disciplinary Committee. Mr. Fang is currently the Chairman
of Development Co. and Jiaxing Co.
Mr. ZHU Yimin, born in 1961, is an Engineer, Mr. Zhu graduated from Chang'an
University with professional programme in Roads and Transportation Engineering
in July 2007. He joined the People's Liberation Army garrison 83026 from
December 1978 to January 1982. From January 1982 to December 1998, he worked in
Anji County Water Traffic Control Department, Huzhou Port and Water Traffic
Administration Department and Huzhou City Water Traffic Administration
Department. From June 1994 to December 1998, he was the Director of Huzhou City
Traffic Engineering Department. From December 1998 to September 2000, he served
as the Assistant to Director of Huzhou City Water Traffic Control and
Administration Department. From January 2003 to August 2004, he was the
Assistant Manager of Huzhou City Transportation Investment and Development
Corporation. From August 2004 to May 2015, Mr. Zhu has served in different
positions including the Deputy General Manager of Zhejiang Shenjiahuhang
Expressway Co., Ltd, the Deputy General Manager of Zhejiang Province North
Zhejiang Expressway Management Co., Ltd., the Deputy General Manager of
Zhejiang Shensuzhewan Expressway Co. Ltd., the Deputy General Manager of
Zhejiang Province West Zhejiang Expressway Co., Ltd., and Deputy General
Manager of Zhejiang Hanghui Expressway Co. Ltd.
He has been the Deputy General Manager and party committee member of the
Company since July 1, 2015.
Mr. WANG Dehua, born in 1974, graduated with an undergraduate degree in
Accounting from Hangzhou Institute of Electronics Engineering in 1996. He
worked in the Foreign Funds Utilization Audit Department of Zhejiang Provincial
Audit Office from 1996 to 2003. Mr. Wang worked at the Corporation Division of
the Administrative and Finance Department of Liaison Office of the Central
Government in the Hong Kong S.A.R. from 2003 to 2011, serving as its Deputy
Director upon departure. Mr. Wang studied at School of Economics and Finance of
the Faculty of Business and Economics of the University of Hong Kong from 2005
to 2007, and graduated in 2007 with a master's degree in Economics. Mr. Wang
has professional accounting qualifications, including CPA, HKICPA, ACCA, etc.
He worked at Zhejiang Communications Investment Group Co., Ltd. from 2011 to
2014, serving as its Deputy General Manager upon departure. Mr. Wang Dehua has
been appointed as the Chief Financial Officer of the Company with effect from
March 17, 2014.
Mr. Tony ZHENG, born in 1969, is the Deputy General Manager and Company
Secretary of the Company. Mr. Zheng graduated from University of California at
Berkeley in 1995 with a BS degree in Civil Engineering. He joined the Company
in June 1997, and has served as Deputy Director of the Secretarial Office to
the Board and Assistant Company Secretary. Mr. Zheng continues to serve as
Director of the Secretarial Office to the Board, and Director of Hong Kong
Representative Office of the Company.
Ms. ZHANG Xiuhua, born in 1969, is a Senior Economist. 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 currently serves as the Deputy General Manager. She is also the
Chairman and General Manager of Jinhua Co., the Director of Yuhang Co, and
Jiaxing Co,.
Report of the Directors
The Directors of the Company hereby present their report and the audited
financial statements of the Group for the year ended December 31, 2015.
PRINCIPAL ACTIVITIES
The principal activities of the Group comprise the operation, maintenance and
management of high grade roads, development and operation of certain ancillary
services, such as advertising and fuel facilities, as well as provision of
security broking service and proprietary securities trading.
SEGMENT INFORMATION
During the year, 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, 2015 is set out in note 8 to the financial
statements.
RESULTS AND DIVIDENDS
The Group's profit for the year ended December 31, 2015 and the state of
financial position at that date are set out in the financial statements on
pages 70 to 176.
An interim dividend of Rmb 0.06 per share (approximately HK$0.073) was paid on
November 12, 2015. The Directors have recommended the payment of a final
dividend of Rmb 0.28 (approximately HK$ 0.334) per share in respect of the
year. The final dividend is subject to shareholders' approval at the 2015
annual general meeting of the Company. 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 49.4% during the Period.
Further details of the dividends are set out in note 17 to the financial
statements.
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.
Year ended December 31,
Results 2015 2014 2013 2012 2011
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated) (Restated)
Revenue 12,507,394 9,460,308 8,210,666 7,238,675 7,280,061
Operating costs (7,060,298) (5,898,198) (5,256,706) (4,874,283) (4,578,440)
Gross profit 5,447,096 3,562,110 2,953,960 2,364,392 2,701,621
Security investment gains 584,114 278,252 99,663 99,783 7,925
Other income 295,918 262,244 255,315 318,532 303,553
Administrative expenses (108,627) (105,703) (100,741) (100,934) (105,447)
Other expenses (162,576) (104,306) (71,944) (59,241) (44,691)
Finance costs (632,495) (272,900) (295,461) (350,782) (368,343)
Share of profit(loss) 48,289 65,020 21,537 (4,513) 8,934
of associates
Share of loss of (25,067) (33,277) (36,010) (3,516) -
a joint venture
Profit before tax 5,446,652 3,651,440 2,826,319 2,263,721 2,503,552
Income tax expense (1,416,872) (905,468) (742,563) (618,751) (687,067)
Profit for the year 4,029,780 2,745,972 2,083,756 1,644,970 1,816,485
Attributable to:
Owners of the Company 2,989,680 2,264,994 1,801,687 1,503,048 1,601,188
Non-controlling interests 1,040,100 480,978 282,069 141,922 215,297
Earnings per share- 68.84 cents 52.15 cents 41.48 cents 34.61 cents 36.87 cents
Basic and diluted
As at December 31,
Assets and liabilities 2015 2014 2013 2012 2011
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated) (Restated)
Total assets 73,891,763 54,987,056 35,947,318 35,532,636 35,679,240
Total liabilities 51,893,114 33,858,586 16,175,239 15,676,614 15,864,176
Net assets 21,998,649 21,128,470 19,772,079 19,856,022 19,815,064
Notes:
1. The consolidated results of the Group for the four years
ended December 31, 2014 have been restated in accordance with Accounting
Guideline 5 "Merger Accounting for Common Control Combinations" issued by Hong
Kong Institute of Certified Public Accountants, while those for the year ended
December 31, 2015 were prepared based on the consolidated statement of profit
or loss and other comprehensive income as set out on page 70 of the financial
report.
2. The 2015 earnings per share is based on the profit
attributable to owners of the Company for the year ended December 31, 2015 of
Rmb2,989,680,000 (2014 (Restated): Rmb 2,264,994,000) and the 4,343,114,500
(2014:4,343,114,500) Ordinary shares in issue during the year.
3. Differences in Financial Statements prepared under PRC
GAAP and HKFRSs
Profit for the year Net assets as
ended December 31, at December 31,
2015 2014 2015 2014
Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
As reported in the statutory 4,038,913 2,755,166 22,272,330 21,393,908
financial statements of the
Group prepared in
accordance with PRC GAAP
HK GAAP adjustments:
(a) Goodwill - - (199,769) (199,769)
(b) Amortization provided, net of (1,952) (1,952) (167,060) (165,108)
deferred tax
(c) Assessment on impact of (3,658) (3,656) 52,791 56,449
appreciation, net of deferred tax
(d) Others (334) (399) 7,666 7,110
(e) Non-controlling interests (3,189) (3,187) 32,691 35,880
As restated in the financial statements 4,029,780 2,745,972 21,998,649 21,128,470
MAJOR CUSTOMERS AND SUPPLIERS
In the year under review, the five largest customers and suppliers of the Group
accounted for less than 30% of the total turnover and purchases, respectively.
None of the directors of the Company or any of their associates or any
shareholders (which, to the best knowledge of the directors, own more than 5%
of the Company's issued share capital) had any beneficial interest in the
Group's five largest customers.
RELATED PARTY TRANSACTIONS
During the year, details of the related party transactions that the Company has
entered into with its subsidiary and fellow subsidiary are set out in note to
the financial statements. The deposit services provided by Zhejiang
Communications Finance constitute non-exempt continuing connected transactions
as defined in Chapter 14A of the Listing Rules. Please refer to the section
headed "Connected Transactions" below for further details about such connected
transactions. The Company has complied with the disclosure requirements in
respect of such connected transactions in accordance with Chapter 14A of the
Listing Rules.
DONATION
During the year, the total amount of donation made by the group is Rmb
3,202,000 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 19 to the financial statements.
CAPITAL COMMITMENTS
Details of the capital commitments of the Group as at December 31, 2015 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 73 to the financial
statements.
DISTRIBUTABLE RESERVES
As at December 31, 2015, 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 2,743,963,000. In addition,
in accordance with the Company Law of the PRC, the amount of approximately Rmb
3,645,726,000 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, 2015, other than the deposits placed with a non-bank
financial institution of Rmb 545,471,000, 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.
DIRECTORS
The Directors of the Company during the year and as at the date of this report
are:
EXECUTIVE DIRECTORS
Mr. ZHAN Xiaozhang (Chairman)
Mr. CHENG Tao (Appointed on July 1, 2015)
Ms. LUO Jianhu (General Manager)
Mr. DING Huikang (Ended of Appointment Term on July 1, 2015)
NON-EXECUTIVE DIRECTORS
Mr. WANG Dongjie
Mr. DAI Benmeng
Mr. ZHOU Jianping
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. ZHOU Jun
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang Rosa
DIRECTORS' AND SENIOR MANAGEMENT'S BIOGRAPHIES
Biographical details of the Directors of the Company and the senior management
of the Group are set out on pages 42 to 55 in the Company's annual report.
DIRECTORS' SERVICE CONTRACTS
Each of the Directors of the Company has entered into a service agreement with
the Company, which effect from July 1, 2015 to June 30, 2018.
Save as disclosed above, none of the Directors and Supervisors has entered into
any service contract with the Company which is not terminable by the Company
within one year without payment of compensation, other than statutory
compensation.
DIRECTORS' AND SUPERVISORS' INTERESTS IN CONTRACTS
As at December 31, 2015 or during the year, none of the Directors or
Supervisors had a material interest, either directly or indirectly, in any
contract of significance to the business of the Group to which the Company, its
holding company, or any of its subsidiaries or fellow subsidiaries was a party.
DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE'S RIGHTS TO SUBSCRIBE FOR SHARES OR
DEBENTURES
At no time during the year were there rights to acquire benefits by means of
the acquisition of shares in or debentures of the Company granted to any
Director, Supervisor and chief executive or their respective spouse or minor
children, or were any such rights exercised by them; or was the Company, its
holding company, or any of its subsidiaries or fellow subsidiaries a party to
any arrangement to enable any such persons to acquire such rights in any other
body corporate.
SHARE CAPITAL
There were no movements in the Company's issued share capital during the year.
PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights in the Company's Articles of
Association or the laws of the PRC which would require the Company to offer new
shares on a pro rata basis to existing shareholders.
TAXATION AND TAX RELIEF
According to a Notice issued jointly by PRC Ministry of Finance and State
Administration of Taxation regarding individual income tax policies (Caishuizi
[1994] No.020), the dividend incomes received by foreign individuals from a
foreign-invested enterprise are exempt from individual income tax.
As stipulated by a Notice issued by the PRC State Administration of Taxation in
relation to the withholding and payment of enterprise income tax by Chinese
resident enterprises for payment of dividend to H shareholders Who are overseas
non-resident enterprises (Guoshuihan [2008] No.897), the Company as a Chinese
resident enterprises is required to withhold 10% enterprise income tax when it
distributes dividends for the year 2008 and thereafter to all non-resident
enterprise holders of H shares of the Company (including HKSCC Nominees
Limited, other nominees, trustees or other entities and organizations, who will
be deemed as non-resident enterprise holders of H shares) whose names appear on
the H share register of members of the Company on the record date.
Dividends payable to the Shareholders who are mainland individual investors or
corporate investors investing in the H Shares via the Shanghai-Hong Kong Stock
Connect will be paid in Rmb by China Securities Depository and Clearing
Corporation Limited Shanghai Branch ("CSDC Shanghai 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)
jointly published by the Ministry of Finance, State Administration of Taxation
and China Securities Regulatory Commission, the Shanghai-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,
the Company will withhold individual income tax at the rate of 20% in the
distribution of dividends. 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, the Company will withhold individual income tax in the distribution of
dividends pursuant to the foregoing provisions.
For Chinese mainland corporate investors that invest in the H Shares via the
Shanghai-Hong Kong Stock Connect, the Company will not withhold the income tax
in the distribution of interim dividend and such investors shall file the tax
returns on their own.
Under current practice of the Hong Kong Inland Revenue Department, no tax is
payable in Hong Kong in respect of dividends paid by the Company.
Shareholders of the Company are taxed and/or enjoy tax relief in accordance
with the aforementioned regulations.
SUFFICIENCY OF PUBLIC FLOAT
Based on the information that is publicly available to the Company and within
the knowledge of the Directors, as at the latest practicable date prior to the
issue of this annual report, the Company has maintained sufficient amount of
public float as required under the Listing Rules.
AUDITORS
Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong, who had served
as the Company's Hong Kong auditors since 2005, will retire and a resolution
for their re-appointment as Hong Kong auditors of the Company will be proposed
at the forth coming Annual General Meeting of the shareholders.
By Order of the Board
ZHAN Xiaozhang
Chairman
Hangzhou, Zhejiang Province, the PRC
March 17, 2016
Report of the Supervisory Committee
During the Period, the Supervisory Committee duly performed its supervisory
responsibilities, and safe guarded the legitimate interests of the shareholders
and the Company in accordance with relevant rules and regulations under the
Company Law of the PRC, the Company's Articles of Association and the Rules of
the Supervisory Committee.
Main tasks undertaken by the Supervisory Committee during the Period were to
assess and supervise lawfulness and appropriateness of the activities of the
Directors, General Manager and other senior management of the Company in their
business decision-making and daily management processes, through a combination
of activities including holding meetings of the Supervisory Committee and
attending general meetings of shareholders and meetings of the Board. The
Supervisory Committee has carefully examined the operating results and the
financial standing of the Company, discussed and reviewed the financial
statements to be submitted by the Board to the general meeting of shareholders.
During the Period, the Supervisory Committee held a total of three meetings of
its own, and attended ten meetings held by the Board and three general meetings
of shareholders. The Supervisory Committee considered that the Company took
active efforts and fully accomplished the targets set at the beginning of the
year by adhering to its strategic positioning and focusing on reform and
innovation. The operating results of the Company set a record high alongside
with accelerating transformation development and strengthening management
capabilities of toll road operations. The effective implementation of reform
measures in the areas of asset injection, business consolidation, cost control
and IT development generated fruitful results.
The Supervisory Committee has reviewed the financial statements of the Company
for 2015 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 2015, and complied with the relevant
laws, regulations and the Company's Articles of Association. The Company
maintained a relatively stable dividend in recent years, providing satisfactory
return to its shareholders.
During the Period, the members of the Board, General Manager and other senior
management of the Company have complied with their fiduciary duties and have
acted in good faith and diligently while carrying out their responsibilities.
There was no incident of abuse of power or infringement of the interests of
shareholders or employees.
The Supervisory Committee is satisfied with the performances across various
lines of business achieved by the Board and the management of the Company.
By the order of the Supervisory Committee
YAO Huiliang
Chairman of the Supervisory Committee
Hangzhou, Zhejiang Province, the PRC
March 17, 2016
Continuing Connected Transactions
During the year ended 31 December, 2015, the Company had the following
non-exempt continuing connected transactions.
Deposit services with Zhejiang Communications Finance
Pursuant to a financial services agreement (the "Financial Services Agreement")
dated July 18, 2013 entered into between the Company and Zhejiang
Communications Finance, Zhejiang Communications Finance agreed to provide the
Company 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. And on March 28, 2014, the Company and Zhejiang Communications Finance
entered into a supplemental agreement (the "Supplemental Agreement") to
supplement the Financial Services Agreement with retrospective effect from July
18, 2013, so as to make clear that the definition of "the Company" used in the
Financial Services Agreement as the proposed recipient of the financial
services under the agreement, was intended to refer to the Group. As the
Company, Communications Group (a substantial shareholder of the Company),
Zhejiang Ningbo Yongtaiwen Expressway Co., Ltd and Zhejiang Taizhou Yongtaiwen
Expressway Co., Ltd beneficially own 35%, 40%, 15.625% and 9.375% of the issued
share capital of Zhejiang Communications Finance, respectively, Zhejiang
Communications Finance is a connected person of the Company and as a result,
the Deposit Services constitute continuing connected transactions for the
Company under Chapter 14A of the Listing Rules.
Under the Financial Services Agreement (as supplemented by the Supplemental
Agreement), Zhejiang Communications Finance may provide Deposit Services
including current deposit, time deposit, call depositor agreement deposit
services to the Group. The Deposit Services will be provided under the
Financial Services Agreement on a non-exclusive basis and the Group is 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 Group is not obliged to accept any Deposit Services
provided by Zhejiang Communications Finance under the Financial Services
Agreement (as supplemented by the Supplemental Agreement).
The interest rate to be paid by Zhejiang Communications Finance for the Group's
deposits 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 Group's deposits with Zhejiang Communications Finance shall
not be more than Rmb700,000,000 during the term of the Financial Services
Agreement.
During the year under review, the maximum amount of the daily deposit balance
(including any interest accrued thereon) for the Group's deposits with Zhejiang
Communications Finance under the Financial Services Agreement (as supplemented
by the Supplemental Agreement) was Rmb662,017,000.
The independent non-executive Directors have reviewed the continuing connected
transactions described above and confirmed that the continuing connected
transactions have been entered into:
(a) In the ordinary and usual course of business of the Company;
(b) On normal commercial terms or on terms no less favorable to the
Company than terms available to or from independent third parties; and
(c) In accordance with the relevant agreement governing them on terms
that are fair and reasonable and in the interests of the shareholders of the
Company as a whole.
The Company's auditor was engaged to report on the Group's continuing connected
transactions in accordance with Hong Kong Standard on Assurance Engagements
HKSAE3000 "Assurance Engagements Other Than Audits or Reviews of Historical
Financial Information" and with reference to Practice Note 740 "Auditor's
Letter on Continuing Connected Transactions under the Hong Kong Listing Rules"
issued by the Hong Kong Institute of Certified Public Accountants. The auditors
have issued their unqualified letter containing their findings and conclusions
in respect of the continuing connected transactions in accordance with the Rule
14A.56 of the Listing Rules. A copy of the auditor's letter has been provided
to the Hong Kong Stock Exchange.
Independent Auditor's Report
TO THE MEMBERS OF ZHEJIANG EXPRESSWAY CO., LTD.
(Incorporated in the People's Republic of China with limited liability)
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 70 to 176, which comprise the consolidated statement
of financial position as at December 31, 2015, 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 a summary of significant accounting policies and other explanatory
information.
Directors' Responsibility for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of
consolidated financial statements that give a true and fair view in accordance
with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute
of Certified Public Accountants and the disclosure requirements of the Hong
Kong Companies Ordinance, and for such internal control as the directors
determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit and to report 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. We conducted our audit in
accordance with Hong Kong Standards on Auditing issued by the Hong Kong
Institute of Certified Public Accountants. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation of consolidated
financial statements that give a true and fair view 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 entity's internal control.
An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view
of the financial position of the Group as at December 31, 2015, and of its
financial performance and cash flows for the year then ended in accordance with
Hong Kong Financial Reporting Standards and have been properly prepared in
compliance with the disclosure requirements of the Hong Kong Companies
Ordinance.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
17 March 2016
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended December 31, 2015
Year ended Year ended
NOTES 12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Revenue 8 12,507,394 9,460,308
Operating costs (7,060,298) (5,898,198)
Gross profit 5,447,096 3,562,110
Securities investment gains 9 584,114 278,252
Other income 10 295,918 262,244
Administrative expenses (108,627) (105,703)
Other expenses (162,576) (104,306)
Share of profit of associates 48,289 65,020
Share of loss of a joint venture (25,067) (33,277)
Finance costs 11 (632,495) (272,900)
Profit before tax 12 5,446,652 3,651,440
Income tax expense 13 (1,416,872) (905,468)
Profit for the year 4,029,780 2,745,972
Other comprehensive income 14
Items that may be reclassified subsequently to
profit or loss:
Available-for-sale financial assets:
- Fair value gain during the year 137,431 68,301
- Reclassification adjustments for cumulative (65,826) -
gain included in
profit or loss upon disposal
Share of differences arising on translation 367 -
Income tax relating to items that may be (17,901) (17,075)
reclassified subsequently
Other comprehensive income for the year, net of 54,071 51,226
income tax
Total comprehensive income for the year 4,083,851 2,797,198
Profit for the year attributable to:
Owners of the Company 2,989,680 2,264,994
Non-controlling interests 1,040,100 480,978
4,029,780 2,745,972
Total comprehensive income attributable to:
Owners of the Company 3,017,800 2,291,596
Non-controlling interests 1,066,051 505,602
4,083,851 2,797,198
EARNINGS PER SHARE - Basic and diluted 18 Rmb68.84 Rmb52.15
cents cents
Consolidated Statement of Financial Position
At December 31, 2015
NOTES 12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
NON-CURRENT ASSETS
Property, plant and equipment 19 3,178,494 3,289,047 2,058,513
Prepaid lease payments 20 57,745 66,001 68,156
Expressway operating rights 21 13,229,442 14,265,387 15,250,850
Goodwill 22 86,867 86,867 86,867
Other intangible assets 23 155,219 155,590 154,564
Interests in associates 25 583,537 627,866 574,733
Interest in a joint venture 26 275,600 300,667 333,944
Available-for-sale investments 27 1,635,858 221,232 143,514
Other receivables 31 - 50,828 401,400
Deferred tax assets 45 329,526 97,135 84,655
19,532,288 19,160,620 19,157,196
CURRENT ASSETS
Inventories 28 316,528 170,654 73,576
Trade receivables 29 151,083 136,158 104,498
Loans to customers arising from margin 30 10,550,590 8,545,913 2,946,911
financing business
Other receivables and prepayments 31 1,231,799 857,563 477,901
Prepaid lease payments 20 1,939 2,155 2,155
Dividend receivable 20,494 - -
Derivative financial assets 44 2,288 - -
Available-for-sale investments 27 1,032,750 570,021 281,924
Held for trading investments 32 3,761,224 2,124,740 1,181,025
Financial assets held under resale 33 4,959,155 2,724,598 874,254
agreements
Bank balances held on behalf of 34 27,078,574 16,576,751 8,228,160
customers
Bank balances and cash
- Time deposits with original maturity 35 270,000 761,320 704,459
over three months
- Cash and cash equivalents 35 4,983,051 3,356,563 1,915,259
54,359,475 35,826,436 16,790,122
CURRENT LIABILITIES
Placements from other financial 36 200,000 1,940,000 310,000
institutions
Accounts payable to customers arising 37 27,009,641 16,545,146 8,167,103
from securities business
Trade payables 38 908,616 996,651 754,953
Tax liabilities 641,606 463,648 331,611
Other taxes payable 88,022 71,021 54,942
Other payables and accruals 39 2,809,079 1,588,312 1,026,016
Dividends payable 333 76,139 94,976
Derivative financial liabilities 44 4,258 - -
Bank and other borrowings 40 1,777,951 1,690,000 980,000
Short-term financing note payable 41 616,100 883,570 1,000,000
Bonds payable 43 3,000,000 - -
Financial assets sold under repurchase 42 5,385,380 6,299,057 -
agreements
42,440,986 30,553,544 12,719,601
NET CURRENT ASSETS 11,918,489 5,272,892 4,070,521
TOTAL ASSETS LESS CURRENT LIABILITIES 31,450,777 24,433,512 23,227,717
NON-CURRENT LIABILITIES
Bank and other borrowings 40 1,590,000 1,960,000 3,250,000
Bonds payable 43 7,600,000 1,200,000 -
Deferred tax liabilities 45 262,128 145,042 205,638
9,452,128 3,305,042 3,455,638
21,998,649 21,128,470 19,772,079
CAPITAL AND RESERVES
Share capital 46 4,343,115 4,343,115 4,343,115
Reserves 12,393,543 12,657,782 11,712,552
Equity attributable to owners of the 16,736,658 17,000,897 16,055,667
Company
Non-controlling interests 47 5,261,991 4,127,573 3,716,412
21,998,649 21,128,470 19,772,079
The consolidated financial statements on pages 70 to 176 were approved and
authorised for issue by the board of directors on 17
March 2016 and are signed on its behalf by:
ZHAN Xiaozhang
DIRECTOR
LUO Jianhu
DIRECTOR
Consolidated Statement of Changes in Equity
For the year ended December 31, 2015
Attributable to owners of the Company
Share Share Statutory Capital Investment Share of Dividend Special Retained Total Non- Total
capital premium reserve reserve revaluation differences reserve reserves profits controlling
reserve arising on interests
translation
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Note i) (Note ii)
At January 1, 2014
(Originally stated) 4,343,115 3,645,726 3,545,859 1,712 1,801 - 1,085,779 138,132 3,210,414 15,972,538 3,696,421 19,668,959
Merger accounting - - - - - - - 1,460,956 (1,377,827) 83,129 19,991 103,120
restatement
At January 1, 2014 4,343,115 3,645,726 3,545,859 1,712 1,801 - 1,085,779 1,599,088 1,832,587 16,055,667 3,716,412 19,772,079
(Restated)
Profit for the year - - - - - - - - 2,264,994 2,264,994 480,978 2,745,972
Other comprehensive income - - - - 26,602 - - - - 26,602 24,624 51,226
for the year
Total comprehensive income - - - - 26,602 - - - 2,264,994 2,291,596 505,602 2,797,198
for the year
Deregistration of a - - - - - - - - - - (1,420) (1,420)
subsidiary
Dividend paid to - - - - - - - - - - (93,021) (93,021)
non-controlling-interests
Interim dividend - - - - - - - - (260,587) (260,587) - (260,587)
Final dividend - - - - - - (1,085,779) - - (1,085,779) - (1,085,779)
Proposed final dividend - - - - - - 1,150,925 - (1,150,925) - - -
Transfer to reserves - - 361,196 - - - - - (361,196) - - -
At December 31, 2014 4,343,115 3,645,726 3,907,055 1,712 28,403 - 1,150,925 1,599,088 2,324,873 17,000,897 4,127,573 21,128,470
(Restated)
Profit for the year - - - - - - - - 2,989,680 2,989,680 1,040,100 4,029,780
Other comprehensive income - - - - 27,929 191 - - - 28,120 25,951 54,071
for the year
Total comprehensive income - - - - 27,929 191 - - 2,989,680 3,017,800 1,066,051 4,083,851
for the year
Dividend paid to - - - - - - - - - - (107,812) (107,812)
non-controlling-interests
Arising from the - (118,926) - - - - - (1,580,422) - (1,699,348) - (1,699,348)
acquisition of
a subsidiary under common
control
Contribution by
non-controlling-interests - - - - - - - - - - 5,000 5,000
Acquisition of additional - (171,179) - - - - - - - (171,179) 171,179 -
interest of a non-
wholly owned subsidiary
(note iii)
Interim dividend - - - - - - - - (260,587) (260,587) - (260,587)
Final dividend - - - - - - (1,150,925) - - (1,150,925) - (1,150,925)
Proposed final dividend - - - - - - 1,216,072 - (1,216,072) - - -
Transfer to reserves - - 598,718 - - - - - (598,718) - - -
At December 31, 2015 4,343,115 3,355,621 4,505,773 1,712 56,332 191 1,216,072 18,666 3,239,176 16,736,658 5,261,991 21,998,649
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 acquisition of additional
interest in a subsidiary and the difference between the carrying value of net
assets attributable to the Group acquired and the payment consideration arising
from acquisition; and
(b) Merger reserve which was arising from the acquisition of subsidiaries
under common control using the merger accounting method. This includes the
capital of the combining entities at their existing book values since the first
date they were under common control and were reduced by the Group's payment of
cash consideration to the controlling party and the excess in payment for the
acquisition of additional interest to non-controlling interest of its carrying
amount to the controlling party.
(iii) It represented the effect in relation to an additional capital
contribution of Rmb1,500,000,000 unilaterally made by the Group to Zhejiang
Hanghui Expressway Co., Ltd., ("Hanghui Co") a subsidiary of the Group, in
December 2015, which resulted in a debt of share premium amounting to
Rmb171,179,000.
Consolidated Statement of Cash Flows
For the year ended December 31, 2015
Year ended Year ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Profit before tax 5,446,652 3,651,440
Adjustments for:
Finance costs 632,495 272,900
Interest income (62,193) (59,924)
Share of profit of associates (48,289) (65,020)
Share of loss of a joint venture 25,067 33,277
Depreciation of property, plant and equipment 243,599 222,154
Amortisation of expressway operating rights 991,800 988,148
Release of prepaid lease payments 2,004 2,155
Amortisation of other intangible assets 23,632 20,293
(Reversal of) impairment loss on (58) 6,554
available-for-sale investments
Cumulative gain relcassified from equity on (65,826) -
disposal of available-for-sale investments
Interest income from available-for-sale (69,419) -
investments
Gain on disposal of part of expressway operating (52,500) -
rights
Loss on disposal of property, plant and 6,746 13,416
equipment
Loss on write-down of inventories - 830
Loss on disposal of prepaid lease payment 1,850 -
(Reversal of) allowance for trade receivables 531 (1,156)
and other receivables
Allowance for advance to customers arising from 36,182 10,911
margin financing business
Allowance for financial assets held on the 44,836 -
resale agreement
Gain on disposal of a subsidiary (879) -
Gain on disposal of an associate (916) (29,890)
Operating cash flows before movements in working 7,155,314 5,066,088
capital
Decrease (increase) in inventories 91,612 (97,908)
Increase in trade receivables (62,698) (31,940)
Increase in loans to customers arising from (2,040,859) (5,609,913)
margin financing business
Increase in other receivables and prepayments (204,687) (83,495)
Increase in held for trading investments (1,636,484) (943,715)
Increase in financial assets held under resale (2,279,393) (1,850,344)
agreements
Increase in bank balances held on behalf of (10,501,823) (8,348,591)
customers
Decrease in derivative financial instrument 1,970 -
(Decrease) increase in placements from other (1,740,000) 1,630,000
financial institutions
Increase in accounts payable to customers 10,464,495 8,378,043
arising from securities business
(Decrease) increase in trade payables (86,008) 55,800
Increase in other taxes payable 17,001 16,079
Increase in other payables and accruals 753,661 425,126
(Decrease) increase in financial assets sold (913,677) 6,299,057
under repurchase agreement
Cash (used in) generated from operations (981,576) 4,904,287
Income taxes paid (1,372,120) (863,582)
Interest paid (322,638) (283,366)
NET CASH (USED IN) FROM OPERATING ACTIVITIES (2,676,334) 3,757,339
Year ended Year ended
NOTES 12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
INVESTING ACTIVITIES
Interest received 70,522 22,725
Investment in associates (102,100) -
Proceeds from disposal of an associate 100,000 29,234
Proceeds from disposal of a subsidiary 49 18,741 -
Proceeds from disposal of part of expressway 53,891 -
operating rights
Proceeds from disposal of prepaid lease payment 4,618 -
Refundable deposit received for the disposal an 62,100 103,500
associate
Dividends received from an associate 33,122 9,701
Proceeds on disposal of property, plant and 2,313 13,757
equipment
Entrusted loans to a related party (550,000) (100,000)
Purchases of financial products investment - (89,000)
Settlement of financial products investment 17,000 240,000
Purchases of property, plant and equipment (326,517) (1,270,485)
Purchases of intangible assets (23,261) (21,319)
Purchase of available-for-sale investments (2,901,830) (508,490)
Proceeds on disposal of available-for-sale 1,231,383 204,422
investments
Decrease (increase) in time deposits 491,320 (56,861)
Repayment of entrusted loans from a related 450,000 50,000
party
NET CASH USED IN INVESTING ACTIVITIES (1,368,698) (1,372,816)
FINANCING ACTIVITIES
Dividends paid (1,411,512) (1,346,366)
Dividends paid to non-controlling shareholders (183,618) (111,858)
Payment for the acquisition of a subsidiary 2 (1,699,348) -
under common control
New bank and other borrowings raised 2,597,951 912,500
Repayment of bank and other borrowings (2,880,000) (1,492,500)
New issue of bonds payable 9,400,000 1,200,000
Issue of short-term financing note payable 3,833,560 4,033,570
Repayment of short-term financing note payable (4,101,030) (4,150,000)
Interest paid (3,253) (7,145)
Capital contribution by non-controlling 5,000 -
interests
Contribution from limited partnership in a 113,403 20,000
subsidiary
Distribution made to the non-controlling - (1,420)
shareholders for
the deregistration of a subsidiary
NET CASH FROM (USED IN) FINANCING ACTIVITIES 5,671,153 (943,219)
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,626,121 1,441,304
CASH AND CASH EQUIVALENTS AT JANUARY 1 3,356,563 1,915,259
Effect of foreign exchange rate changes 367 -
CASH AND CASH EQUIVALENTS AT DECEMBER 31 35 4,983,051 3,356,563
Notes to the Consolidated Financial Statements
For the year ended December 31, 2015
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.
On February 14, 2002, the United States Securities and Exchange Commission,
following the approval by the Board of Directors and the China Securities
Regulatory Commission, declared the registration statement in respect of the
American Depositary Shares ("ADSs") evidenced by the American Depositary
Receipts ("ADRs") representing the deposited H Shares of the Company effective.
In the opinion of the directors, the immediate and ultimate holding company of
the Company is Zhejiang Communications Investment Group Co., Ltd. (the
"Communications Group"), a state-owned enterprise established in the PRC.
The addresses of the registered office and principal place of business of the
Company are disclosed in the corporate information section of the annual
report.
The consolidated financial statements are presented in Renminbi ("Rmb"), which
is also the functional currency of the Company.
The Company is an investment holding company. The Company and its subsidiaries
(collectively referred to as the "Group") are involved in the following
principal activities:
(a) the operation, maintenance and management of high grade roads;
(b) the development and provision of certain ancillary services such as
advertising, and fuel facilities;
(c) the provision of the toll road maintenance service, automobile servicing
and others;
(d) the provision of securities broking services, margin financing and
securities lending services, securities underwriting and sponsorship services,
asset management, advisory services and proprietary trading;
(e) the operation of hotel, the provision of catering service and sales of
properties.
2. MERGER ACCOUNTING RESTATEMENT
On August 5, 2015, the Group entered into a share transfer agreement with
Communications Group to acquire 80.614% equity interest in Zhejiang Hanghui
Expressway Co., Ltd. ("Hanghui Co") from Communications Group for a cash
consideration of Rmb1,699,348,000. Hanghui Co is principally engaged in the
operation and management of the Hanghui Expressway, which is the Zhejiang
section of Hangzhou-Ruili Expressway (G56) within the national expressway
network. Before the above acquisition, Hanghui Co was 80.614% owned by
Communications Group and 19.386% owned by non-controlling shareholders. The
acquisition has been approved by independent shareholders on October 15, 2015
and subsequently completed on November 10, 2015. After the completion of the
acquisition, Hanghui Co then became a 80.614% owned subsidiary of the Group. In
December 2015, the equity interest held by the Group was increased to 88.674%
after the Company made an additional capital contribution to Hanghui Co. Since
Communications Group is the parent company of the Company, the Group's
acquisition of the 80.614% equity interest from Communications Group was
regarded as a business combination involving entities under common control and
was accounted for using merger accounting method, in accordance with the
guidance set out in Accounting Guideline 5 "Merger Accounting for Common
Control Combinations" ("AG5") issued by the Hong Kong Institute of Certified
Public Accountants (the "HKICPA").
As a result, the comparative consolidated statement of profit or loss and other
comprehensive income and consolidated statement of cash flows for the year
ended December 31, 2014 and the consolidated statement of financial position as
at December 31, 2014 have therefore been restated, in order to include the
losses, assets and liabilities of the combining entities since the date on
which they first come under common control.
The adopting of merger accounting method in respect of the Group's acquisition
of 80.614% equity interest in Hanghui Co has resulted in a decrease in total
comprehensive income attributable to owners of the Company and a decrease in
profit attributable to owners of the Company for the year ended December 31,
2014 by Rmb84,058,000 and Rmb84,058,000, respectively.
The effect of the merger accounting restatement in respect of the Group's
acquisition of 80.614% equity interest in Hanghui Co described above on the
consolidated statement of profit or loss and other comprehensive income for the
year ended December 31, 2014 by line items is as follows:
Year ended Merger Year ended
12/31/2014 accounting 12/31/2014
restatement
Rmb'000 Rmb'000 Rmb'000
(Originally (Restated)
stated)
Revenue 9,051,123 409,185 9,460,308
Operating costs (5,576,211) (321,987) (5,898,198)
Gross profit 3,474,912 87,198 3,562,110
Securities investment gains 278,252 - 278,252
Other income 250,492 11,752 262,244
Administrative expenses (85,533) (20,170) (105,703)
Other expenses (103,443) (863) (104,306)
Share of profit of associates 65,020 - 65,020
Share of loss of a joint venture (33,277) - (33,277)
Finance costs (78,231) (194,669) (272,900)
Profit before tax 3,768,192 (116,752) 3,651,440
Income tax expense (917,948) 12,480 (905,468)
Profit for the year 2,850,244 (104,272) 2,745,972
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss:
Available-for-sale financial assets:
- Fair value gain during the year 68,301 - 68,301
Income tax relating to items that may be
reclassified subsequently (17,075) - (17,075)
Other comprehensive income for the year, 51,226 - 51,226
net of income tax
Total comprehensive income for the year 2,901,470 (104,272) 2,797,198
Profit for the year attributable to:
Owners of the Company 2,349,052 (84,058) 2,264,994
Non-controlling interests 501,192 (20,214) 480,978
2,850,244 (104,272) 2,745,972
Total comprehensive income attributable
to:
Owners of the Company 2,375,654 (84,058) 2,291,596
Non-controlling interests 525,816 (20,214) 505,602
2,901,470 (104,272) 2,797,198
EARNINGS PER SHARE
- Basic and diluted Rmb54.09 Rmb(1.94) Rmb52.15
cents cents cents
The effects of the merger accounting restatement in respect of the Group's
acquisition of 80.614% equity interest in Hanghui Co described above on the
consolidated statements of financial position as at January 1, 2014 and
December 31, 2014 by line items are as follows:
January 1, Merger January 1, December Merger December
31, 31,
2014 accounting 2014 2014 accounting 2014
restatement restatement
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Originally (Restated) (Originally (Restated)
stated) stated)
NON-CURRENT ASSETS
Property, plant 1,762,042 296,471 2,058,513 2,987,465 301,582 3,289,047
and equipment
Prepaid lease 68,156 - 68,156 66,001 - 66,001
payments
Expressway 11,911,133 3,339,717 15,250,850 11,112,507 3,152,880 14,265,387
operating rights
Goodwill 86,867 - 86,867 86,867 - 86,867
Other intangible 154,564 - 154,564 155,590 - 155,590
assets
Interests in 574,733 - 574,733 627,866 - 627,866
associates
Interest in a 333,944 - 333,944 300,667 - 300,667
joint venture
Available-for-sale 143,514 - 143,514 221,232 - 221,232
investments
Other receivables 401,400 - 401,400 50,828 - 50,828
Deferred tax - 84,655 84,655 - 97,135 97,135
assets
15,436,353 3,720,843 19,157,196 15,609,023 3,551,597 19,160,620
CURRENT ASSETS
Inventories 73,576 - 73,576 170,654 - 170,654
Trade receivables 101,428 3,070 104,498 135,609 549 136,158
Loans to customers 2,946,911 - 2,946,911 8,545,913 - 8,545,913
arising from
margin financing
business
Other receivables 451,968 25,933 477,901 832,238 25,325 857,563
and prepayments
Prepaid lease 2,155 - 2,155 2,155 - 2,155
payments
Available-for-sale 281,924 - 281,924 570,021 - 570,021
investments
Held for trading 1,181,025 - 1,181,025 2,124,740 - 2,124,740
investments
Financial assets 874,254 - 874,254 2,724,598 - 2,724,598
held under
resale agreements
Bank balances held 8,228,160 - 8,228,160 16,576,751 - 16,576,751
on behalf of
customers
Bank balances and
cash
- Time deposits 704,459 - 704,459 761,320 - 761,320
with original
maturity
over three months
- Cash and cash 1,806,981 108,278 1,915,259 3,301,722 54,841 3,356,563
equivalents
16,652,841 137,281 16,790,122 35,745,721 80,715 35,826,436
The effects of the merger accounting restatement in respect of the Group's
acquisition of 80.614% equity interest in Hanghui Co described above on the
consolidated statements of financial position as at January 1, 2014 and
December 31, 2014 by line items are as follows: (Continued)
January 1, Merger January 1, December Merger December
31, 31,
2014 accounting 2014 2014 accounting 2014
restatement restatement
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Originally (Restated) (Originally (Restated)
stated) stated)
CURRENT
LIABILITIES
Placements from 310,000 - 310,000 1,940,000 - 1,940,000
other financial
institutions
Accounts payable 8,167,103 - 8,167,103 16,545,146 - 16,545,146
to customers
arising
from securities
business
Trade payables 421,994 332,959 754,953 693,604 303,047 996,651
Tax liabilities 331,611 - 331,611 463,648 - 463,648
Other taxes 53,417 1,525 54,942 67,642 3,379 71,021
payable
Other payables and 995,496 30,520 1,026,016 1,561,274 27,038 1,588,312
accruals
Dividends payable 94,976 - 94,976 76,139 - 76,139
Bank and other 540,000 440,000 980,000 150,000 1,540,000 1,690,000
borrowings
Short-term 1,000,000 - 1,000,000 883,570 - 883,570
financing note
payable
Financial assets - - - 6,299,057 - 6,299,057
sold under
repurchase
agreements
11,914,597 805,004 12,719,601 28,680,080 1,873,464 30,553,544
NET CURRENT ASSETS 4,738,244 (667,723) 4,070,521 7,065,641 (1,792,749) 5,272,892
TOTAL ASSETS LESS 20,174,597 3,053,120 23,227,717 22,674,664 1,758,848 24,433,512
CURRENT
LIABILITIES
The effects of the merger accounting restatement in respect of the Group's
acquisition of 80.614% equity interest in Hanghui Co described above on the
consolidated statements of financial position as at January 1, 2014 and
December 31, 2014 by line items are as follows: (Continued)
January 1, Merger January 1, December Merger December
31, 31,
2014 accounting 2014 2014 accounting 2014
restatement restatement
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Originally (Restated) (Originally (Restated)
stated) stated)
NON-CURRENT
LIABILITIES
Bank and other 300,000 2,950,000 3,250,000 200,000 1,760,000 1,960,000
borrowings
Bonds payable - - - 1,200,000 - 1,200,000
Deferred tax 205,638 - 205,638 145,042 - 145,042
liabilities
505,638 2,950,000 3,455,638 1,545,042 1,760,000 3,305,042
19,668,959 103,120 19,772,079 21,129,622 (1,152) 21,128,470
CAPITAL AND
RESERVES
Share capital 4,343,115 - 4,343,115 4,343,115 - 4,343,115
Reserves 11,629,423 83,129 11,712,552 12,658,711 (929) 12,657,782
Equity 15,972,538 83,129 16,055,667 17,001,826 (929) 17,000,897
attributable to
owners
of the Company
Non-controlling 3,696,421 19,991 3,716,412 4,127,796 (223) 4,127,573
interests
19,668,959 103,120 19,772,079 21,129,622 (1,152) 21,128,470
The effects of merger accounting restatement in respect of the Group's
acquisition of 80.614% equity interest in Hanghui Co described above on the
Group's equity as at January 1, 2014 and December 31, 2014 are as follows:
January 1, Merger January 1, December Merger December
31, 31,
2014 accounting 2014 2014 accounting 2014
restatement restatement
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Originally (Restated) (Originally (Restated)
stated) stated)
Share capital 4,343,115 - 4,343,115 4,343,115 - 4,343,115
Share premium 3,645,726 - 3,645,726 3,645,726 - 3,645,726
Statutory reserve 3,545,859 - 3,545,859 3,907,055 - 3,907,055
Capital reserve 1,712 - 1,712 1,712 - 1,712
Investment 1,801 - 1,801 28,403 - 28,403
revaluation
reserve
Dividend reserve 1,085,779 - 1,085,779 1,150,925 - 1,150,925
Special reserve 138,132 1,460,956 1,599,088 138,132 1,460,956 1,599,088
Retained profits 3,210,414 (1,377,827) 1,832,587 3,786,758 (1,461,885) 2,324,873
Non-controlling 3,696,421 19,991 3,716,412 4,127,796 (223) 4,127,573
interests
19,668,959 103,120 19,772,079 21,129,622 (1,152) 21,128,470
3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
("HKFRSs")
Application of new and revised HKFRSs
The Group has applied the following amendments to HKFRSs issued by the HKICPA
for the first time in the current year.
Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions
Amendments to HKFRSs Annual Improvements to HKFRSs 2010 - 2012 Cycle
Amendments to HKFRSs Annual Improvements to HKFRSs 2011 - 2013 Cycle
The application of the amendments to HKFRSs in the current year has had no
material impact on the Group's financial performance and positions for the
current and prior years and/or on the disclosures set out in these consolidated
financial statements.
New and revised HKFRSs in issue but not yet effective
The Group has not early applied the following new and revised HKFRSs that have
been issued but are not yet effective:
HKFRS 9 Financial Instruments1
HKFRS 15 Revenue from Contracts with Customers1
HKFRS 16 Lease2
Amendments to HKFRS 11 Accounting for Acquisitions of Interests in Joint
Operations3
Amendments to HKAS 1 Disclosure Initiative3
Amendments to HKAS 16 and Clarification of Acceptable Methods of Depreciation
HKAS 38 and Amortisation3
Amendments to HKFRSs Annual Improvements to HKFRSs 2012-2014 Cycle3
Amendments to HKAS 16 and Agriculture: Bearer Plants3
HKAS 41
Amendments to HKFRS 10 and Sale or Contribution of Assets between an Investor
HKAS 28 and its Associate or Joint Venture4
Amendments to HKFRS 10, Investment Entities: Applying the Consolidation
HKFRS 12 and HKAS 28 Exception3
1 Effective for annual periods beginning on or after January 1, 2018.
2 Effective for annual periods beginning on or after January 1, 2019.
3 Effective for annual periods beginning on or after January 1, 2016, with
earlier application permitted.
4 Effective for annual periods beginning on or after a date to be determined.
HKFRS 9 Financial Instruments
HKFRS 9 issued in 2009 introduced new requirements for the classification and
measurement of financial assets. HKFRS 9 was subsequently amended in 2010 to
include requirements for the classification and measurement of financial
liabilities and for derecognition, and further amended in 2013 to include the
new requirements for general hedge accounting. Another revised version of HKFRS
9 was issued in 2014 mainly to include a) impairment requirements for financial
assets and b) limited amendments to the classification and measurement
requirements by introducing a 'fair value through other comprehensive income'
("FVTOCI") measurement category for certain simple debt instruments.
Key requirements of HKFRS 9:
* All recognised financial assets that are within the scope of HKAS 39
Financial Instruments: Recognition and Measurement are subsequently
measured at amortised cost or fair value. Specifically, debt investments
that are held within a business model whose objective is to collect the
contractual cash flows, and that have contractual cash flows that are
solely payments of principal and interest on the principal outstanding are
generally measured at amortised cost at the end of subsequent accounting
periods. Debt instruments that are held within a business model whose
objective is achieved both by collecting contractual cash flows and selling
financial assets, and that have contractual terms of the financial asset
give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding, are measured at
FVTOCI. All other debt investments and equity investments are measured at
their fair value at the end of subsequent accounting periods. In addition,
under HKFRS 9, entities may make an irrevocable election to present
subsequent changes in the fair value of an equity investment (that is not
held for trading) in other comprehensive income, with only dividend income
generally recognised in profit or loss.
* With regard to the measurement of financial liabilities designated as at
fair value through profit or loss, HKFRS 9 requires that 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 presented 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. Changes in fair value of
financial liabilities attributable to changes in the financial liabilities'
credit risk are not subsequently reclassified to profit or loss. Under HKAS
39, the entire amount of the change in the fair value of the financial
liability designated as fair value through profit or loss was presented in
profit or loss.
* In relation to the impairment of financial assets, HKFRS 9 requires an
expected credit loss model, as opposed to an incurred credit loss model
under HKAS 39. The expected credit loss model requires an entity to account
for expected credit losses and changes in those expected credit losses at
each reporting date to reflect changes in credit risk since initial
recognition. In other words, it is no longer necessary for a credit event
to have occurred before credit losses are recognised.
The directors of the Company anticipate that the application of HKFRS 9 in the
future may have a material impact on amounts reported in respect of the Group's
financial assets and financial liabilities (e.g. the Group's investments in
unlisted equity securities currently classified as available-for-sale
investments may have to be measured at fair value at the end of subsequent
reporting periods, with changes in the fair value being recognised in profit or
loss). Regarding the Group's financial assets, it is not practicable to provide
a reasonable estimate of that effect until a detailed review has been
completed.
HKFRS 15 Revenue from Contracts with Customers
In July 2014, HKFRS 15 was issued which establishes a single comprehensive
model for entities to use in accounting for revenue arising from contracts with
customers. HKFRS 15 will supersede the current revenue recognition guidance
including HKAS 18 Revenue, HKAS 11 Construction Contracts and the related
Interpretations when it becomes effective.
The core principle of HKFRS 15 is that an entity should recognise revenue to
depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. Specifically, the Standard introduces a
5-step approach to revenue recognition:
* Step 1: Identify the contract(s) with a customer
* Step 2: Identify the performance obligations in the contract
* Step 3: Determine the transaction price
* Step 4: Allocate the transaction price to the performance obligations in
the contract
* Step 5: Recognise revenue when (or as) the entity satisfies a performance
obligation
Under HKFRS 15, an entity recognises revenue when (or as) a performance
obligation is satisfied, i.e. when 'control' of the goods or services
underlying the particular performance obligation is transferred to the
customer. Far more prescriptive guidance has been added in HKFRS 15 to deal
with specific scenarios. Furthermore, extensive disclosures are required by
HKFRS 15.
The directors of the Company anticipate that the application of HKFRS 15 in the
future may have an impact on the amounts reported and disclosures made in the
Group's consolidated financial statements. However, it is not practicable to
provide a reasonable estimate of the effect of HKFRS 15 until the Group
performs a detailed review.
HKFRS 16 Leases
HKFRS 16, which upon the effective date will supersede HKAS 17 Leases,
introduces a single lessee accounting model and requires a lessee to recognise
assets and liabilities for all leases with a term of more than 12 months,
unless the underlying asset is of low value. Specifically, under HKFRS 16, a
lessee is required to recognise a right-of-use asset representing its right to
use the underlying leased asset and a lease liability representing its
obligation to make lease payments. Accordingly, a lessee should recognise
depreciation of the right-of-use asset and interest on the lease liability, and
also classifies cash repayments of the lease liability into a principal portion
and an interest portion and presents them in the statement of cash flows. Also,
the right-of-use asset and the lease liability are initially measured on a
present value basis. The measurement includes non-cancellable lease payments
and also includes payments to be made in optional periods if the lessee is
reasonably certain to exercise an option to extend the lease, or not to
exercise an option to terminate the lease. This accounting treatment is
significantly different from the lessee accounting for leases that are
classified as operating leases under the predecessor standard, HKAS 17.
In respect of the lessor accounting, HKFRS 16 substantially carries forward the
lessor accounting requirements in HKAS 17. Accordingly, a lessor continues to
classify its leases as operating leases or finance leases, and to account for
those two types of leases differently.
The Directors of the Company will assess the impact of the application of HKFRS
16. For the moment, it is not practicable to provide a reasonable estimate of
the effect of the application of HKFRS 16 until the Group performs a detailed
review.
Amendments to HKAS 16 and HKAS 38 Clarification of Acceptable Methods of
Depreciation and Amortisation
The amendments to HKAS 16 prohibit entities from using a revenue-based
depreciation method for items of property, plant and equipment. The amendments
to HKAS 38 introduce a rebuttable presumption that revenue is not an
appropriate basis for amortisation of an intangible asset. This presumption can
only be rebutted in the following two limited circumstances:
a) when the intangible asset is expressed as a measure of revenue; or
b) when it can be demonstrated that revenue and consumption of the economic
benefits of the intangible asset are highly correlated.
The amendments apply prospectively for annual periods beginning on or after
January 1, 2016. Currently, the Group uses the straight-line method for
depreciation and amortisation for its property, plant and equipment, expressway
operating rights and other intangible assets respectively. The directors of the
Company believe that the straight-line method is the most appropriate method to
reflect the consumption of economic benefits inherent in the respective assets
and accordingly, the directors of the Company do not anticipate that the
application of these amendments to HKAS 16 and HKAS 38 will have a material
impact on the Group's consolidated financial statements.
Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture
The amendments to HKFRS 10 Consolidated Financial Statements and HKAS 28
Investments in Associates and Joint Ventures deal with situations where there
is a sale or contribution of assets between an investor and its associates or
joint venture. Specifically, the amendments state that gains or losses
resulting from the loss of control of a subsidiary that does not contain a
business in a transaction with an associate or a joint venture that is
accounted for using the equity method, are recognised in the parent's profit or
loss only to the extent of the unrelated investors' interests in that associate
or joint venture. Similarly, gains and losses resulting from the remeasurement
of investments retained in any former subsidiary (that has become an associate
or a joint venture that is accounted for using the equity method) are
recognised in the former parent's profit or loss only to the extent of the
unrelated investors' interests in the new associate or joint venture.
The amendments should be applied prospectively to transactions occurring in
annual periods beginning on or after a date to be determined. The directors of
the Company do not anticipate that the application of these amendments to HKFRS
10 and HKAS 28 will have a material impact on the Group's consolidated
financial statements.
Annual Improvements to HKFRSs 2012-2014 Cycle
The Annual Improvements to HKFRSs 2012-2014 Cycle include a number of
amendments to various HKFRSs, which are summarised below.
The amendments to HKFRS 5 introduce specific guidance in HKFRS 5 for when an
entity reclassifies an asset (or a disposal group) from held for sale to held
for distribution to owners (or vice versa). The amendments clarify that such a
change should be considered as a continuation of the original plan of disposal
and hence requirements set out in HKFRS 5 regarding the change of sale plan do
not apply. The amendments also clarifies the guidance for when
held-for-distribution accounting is discontinued.
The amendments to HKFRS 7 provide additional guidance to clarify whether a
servicing contract is continuing involvement in a transferred asset for the
purpose of the disclosures required in relation to transferred assets.
The directors of the Company do not anticipate that the application of these
amendments will have a material effect on the amounts recognised in the Group's
consolidated financial statements.
4. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with
Hong Kong Financial Reporting Standards issued by the HKICPA. In addition, the
consolidated financial statements include applicable disclosures required by
the Rules Governing the Listing of Securities on the Stock Exchange of Hong
Kong Limited ("Listing Rules") and by the Hong Kong Companies Ordinance ("CO").
The provision of the new Hong Kong Companies Ordinance (Cap 622) regarding
preparation of accounts and directors' reports and audits became effective for
the Company for the financial year ended 31 December 2015. Further, the
disclosure requirements set out in the Listing Rules regarding annual accounts
have been amended with reference to the new CO and to streamline with HKFRSs.
Accordingly the presentation and disclosure of information in the consolidated
financial statements for the financial year ended 31 December 2015 have been
changed to comply with these new requirements. Comparative information in
respect of the financial year ended 31 December 2014 are presented or disclosed
in the consolidated financial statements based on the new requirements.
Information previously required to be disclosed under the predecessor CO or
Listing Rules but not under the new CO or amended Listing Rules are not
disclosed in these consolidated financial statements.
The consolidated financial statements have been prepared on the historical cost
basis except for certain financial instruments that are measured at fair values
at the end of each reporting period, as explained in the accounting policies
below.
Historical cost is generally based on the fair value of the consideration given
in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date, regardless of whether that price is directly observable
or estimated using another valuation technique. In estimating the fair value of
an asset or a liability, the Group takes into account the characteristics of
the asset or liability if market participants would take those characteristics
into account when pricing the asset or liability at the measurement date. Fair
value for measurement and/or disclosure purposes in these consolidated
financial statements is determined on such a basis, except leasing transactions
that are within the scope of HKAS 17, and measurements that have some
similarities to fair value but are not fair value, such as net realisable value
in HKAS 2 or value in use in HKAS 36.
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.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and 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.
Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary.
Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated statement of profit or loss
and other comprehensive income from the date the Group gains control until the
date when the Group ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to
the owners of the Company and to the non-controlling interests. Total
comprehensive income of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies in line with the Group`s
accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are eliminated in full on
consolidation.
Change in the Group's ownership interests in existing subsidiaries
Changes in the Group's ownership interests in existing subsidiaries that do not
result in the Group losing control over the subsidiaries are accounted for as
equity transactions. The carrying amounts of the Group's interests and the
non-controlling interests are adjusted to reflect the changes in their relative
interests in the subsidiaries. Any difference between the amount by which the
non-controlling interests are adjusted and the fair value of the consideration
paid or received is recognised directly in equity and attributed to owners of
the Company.
When the Group loses control of a subsidiary, a gain or loss is recognised in
the profit or loss and is calculated as the difference between (i) the
aggregate fair value of the consideration received and the fair value of any
retained interest and (ii) the previous carrying amount of assets (including
goodwill), and liabilities of the subsidiary and any non-controlling interests.
All amounts previously recognised in other comprehensive income in related to
that subsidiary are accounted for as if the Group had directly disposed of the
related assets or liabilities of the subsidiary (i.e., reclassified to profit
or loss or transferred to another category of equity as specified/permitted by
applicable HKFRSs). The fair value of any investment retained in the former
subsidiary at the date when the control is lost is regarded as the fair value
on initial recognition for subsequent accounting under HKAS 39, when
applicable, the cost on initial recognition of an investment in an associate of
a joint venture.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The
consideration transferred in a business combination is measured at fair value,
which is calculated as the sum of the acquisition-date fair values of the
assets transferred by the Group, liabilities incurred by the Group to the
former owners of the acquiree and the equity interests issued by the Group in
exchange for control of the acquiree. Acquisition-related costs are generally
recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities
assumed are recognised at their fair value, except that:
* deferred tax assets or liabilities, and assets or liabilities related to
employee benefit arrangements are recognised and measured in accordance
with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively;
* liabilities or equity instruments related to share-based payment
arrangements of the acquiree or share-based payment arrangements of the
Group entered into to replace share-based payment arrangements of the
acquiree are measured in accordance with HKFRS 2 Share-based Payment at the
acquisition date (see the accounting policy below); and
* assets (or disposal groups) that are classified as held for sale in
accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued
Operations are measured in accordance with that standard.
Goodwill is measured as the excess of the sum of the consideration transferred,
the amount of any non-controlling interests in the acquiree, and the fair value
of the acquirer's previously held equity interest in the acquiree (if any) over
the net of the acquisition-date amounts of the identifiable assets acquired and
the liabilities assumed.
Allocation of total comprehensive income to non-controlling interests
Total comprehensive income and expense of a subsidiary 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.
Merger accounting for business combination involving entities under common
control
The consolidated financial statements incorporate the financial statements
items of the combining entities or businesses in which the common control
combination occurs as if they had been combined from the date when the
combining entities or businesses first came under the control of the
controlling party.
The net assets of the combining entities or businesses are consolidated using
the existing book values from the controlling party's perspective. No amount is
recognised in respect of goodwill or excess of acquirer's interest in the net
fair value of acquiree's identifiable assets, liabilities and contingent
liabilities over cost at the time of common control combination, to the extent
of the continuation of the controlling party's interest.
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 entities or
businesses first came under the common control, where this is a shorter period,
regardless of the date of the common control combination.
The comparative amounts in the consolidated financial statements are presented
as if the entities or businesses had been combined at the end 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 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.
A cash-generating unit to which goodwill has been allocated is tested for
impairment annually, or more frequently when there is indication that the unit
may be impaired. If the recoverable amount of the cash-generating unit is less
than its carrying amount, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then to the other
assets of the unit on a pro-rata basis based on the carrying amount of each
asset in the unit. Any impairment loss for goodwill is recognised directly in
profit or loss. An impairment loss recognised for goodwill is not reversed in
subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of
goodwill is included in the determination of the profit or loss on disposal.
The Group's policy for goodwill arising on the acquisition of associates and
joint venture is described below.
Interests 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 or a joint venture are
incorporated in these consolidated financial statements using the equity method
of accounting. Under the equity method, an investment in an associate or a
joint venture is initially recognised in the consolidated statement of
financial position at cost and adjusted thereafter to recognise the Group's
share of the profit or loss and other comprehensive income of the associate or
joint venture. When the Group's share of losses of an associate or a joint
venture exceeds the Group's interest in that associate or joint venture (which
includes any long-term interests that, in substance, form part of the Group's
net investment in the associate or joint venture), the Group discontinues
recognising its share of further losses. Additional losses are recognised only
to the extent that the Group has incurred legal or constructive obligations or
made payments on behalf of the associate or joint venture.
An investment in an associate or a joint venture is accounted for using the
equity method from the date on which the investee becomes an associate or a
joint venture. On acquisition of the investment in an associate or a joint
venture, any excess of the cost of the investment over the Group's share of the
net fair value of the identifiable assets and liabilities of the investee is
recognised as goodwill, which is included within the carrying amount of the
investment. Any excess of the Group's share of the net fair value of the
identifiable assets and liabilities over the cost of the investment, after
reassessment, is recognised immediately in profit or loss in the period in
which the investment is acquired.
The requirements of HKAS 39 are applied to determine whether it is necessary to
recognise any impairment loss with respect to the Group's investment in an
associate or a joint venture. When necessary, the entire carrying amount of the
investment (including goodwill) is tested for impairment in accordance with
HKAS 36 Impairment of Assets as a single asset by comparing its recoverable
amount (higher of value in use and fair value less costs to sell) with its
carrying amount, Any impairment loss recognised forms part of the carrying
amount of the investment. Any reversal of that impairment loss is recognised in
accordance with HKAS 36 to the extent that the recoverable amount of the
investment subsequently increases.
The Group discontinues the use of the equity method from the date when the
investment ceases to be an associate or a joint venture, or when the investment
(or a portion thereof) is classified as held for sale. When the Group retains
an interest in the former associate or joint venture and the retained interest
is a financial asset, the Group measures the retained interest at fair value at
that date and the fair value is regarded as its fair value on initial
recognition in accordance with HKAS 39. The difference between the carrying
amount of the associate or joint venture at the date the equity method was
discontinued, and the fair value of any retained interest and any proceeds from
disposing of a part interest in the associate or joint venture is included in
the determination of the gain or loss on disposal of the associate or joint
venture. In addition, the Group accounts for all amounts previously recognised
in other comprehensive income in relation to that associate or joint venture on
the same basis as would be required if that associate or joint venture had
directly disposed of the related assets or liabilities. Therefore, if a gain or
loss previously recognised in other comprehensive income by that associate or
joint venture would be reclassified to profit or loss on the disposal of the
related assets or liabilities, the Group reclassifies the gain or loss from
equity to profit or loss (as a reclassification adjustment) when the equity
method is discontinued.
The Group continues to use the equity method when an investment in an associate
becomes an investment in a joint venture or an investment in a joint venture
becomes an investment in an associate. There is no remeasurement to fair value
upon such changes in ownership interests.
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
(such as a sale or contribution of assets), 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 recognition
Revenue is measured at the fair value of the consideration received or
receivable. Revenue is reduced for estimated customer returns and other similar
allowances.
Toll income from the operation of tolled roads is recognised when the tolls are
received or become receivable.
Revenue from the sale of goods is recognised when the goods are delivered and
titles have passed, at which time all the following conditions are satisfied:
* the Group has transferred to the buyer the significant risks and rewards of
ownership of the goods;
* the Group retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods
sold;
* the amount of revenue can be measured reliably;
* it is probable that the economic benefits associated with the transaction
will flow to the Group; and
* the costs incurred or to be incurred in respect of the transaction can be
measured reliably.
Service income, including advertising income, is recognised when services are
provided.
Revenue from room rental, food and beverage sales and other ancillary service
in the hotel are recognised when the relevant service have been rendered.
Commission income from securities broking business is recognised on a trade
date basis.
Advisory and handling fee income are recognised when the relevant transactions
have been provided or the relevant services have been rendered.
Underwriting and sponsors fees are recognised as income in accordance with the
terms of the underwriting agreement or deal mandate when the relevant
significant acts have been completed.
Asset management fee income is recognised when management services are provided
in accordance with the management contracts.
Dividend income from investments is recognised when the shareholders' rights to
receive payment have been established (provided that it is probable that the
economic benefits will flow to the Group and the amount of revenue can be
measured reliably).
Interest income from a financial asset is recognised when it is probable that
the economic benefits will flow to the Group and the amount of income can be
measured reliably. Interest income is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate applicable, which
is the rate that exactly discounts the estimated future cash receipts through
the expected life of the financial asset to that asset's net carrying amount on
initial recognition.
The Group's accounting policy for recognition of revenue from operating leases
is described in the accounting policy for leasing below.
Property, plant and equipment
Property, plant and equipment including buildings and leasehold land
(classified as finance leases) held for use in the production or supply of
goods or services, or for administrative purposes (other than properties under
construction as described below), are stated in the consolidated statement of
financial position at cost, less subsequent accumulated depreciation and
subsequent accumulated impairment losses, if any.
Properties in the course of construction for production, supply or
administrative purposes are carried at cost, less any recognised impairment
loss. Cost includes professional fees and, for qualifying assets, borrowing
costs capitalised in accordance with the Group's accounting policy. Such
properties are classified to the appropriate categories of property, plant and
equipment when completed and ready for intended use. Depreciation of these
assets, on the same basis as other property assets, commences when the assets
are ready for their intended use.
Depreciation is recognised so as to write off the cost of assets (other than
properties under construction) less their residual values over their useful
lives, using the straight-line method. The estimated useful lives, residual
values and depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on a
prospective basis.
Estimated Annual
useful life depreciation rate
Hotel buildings 30 years 3.2%
Leasehold land and buildings 20 - 50 years 1.9% - 4.9%
Ancillary facilities 10 - 30 years 3.2% - 9%
Communication and signaling equipment 5 years 19.4%
Motor vehicles 5 - 8 years 12.1% - 19.4%
Machinery and equipment 5 - 8 years 12.1% - 19.4%
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of the
asset. Any gain or loss arising on the disposal or retirement of an item of
property, plant and equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in profit or
loss.
Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are
carried at cost less accumulated amortisation and 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 accumulated impairment losses
(see the accounting policy in respect of impairment losses on tangible and
intangible assets below).
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are recognised separately
from goodwill are initially recognised at their fair value at the acquisition
date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business
combination with finite useful lives are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible
assets that are acquired separately.
Alternatively, intangible assets with indefinite useful lives are carried at
cost less subsequent accumulated impairment losses (see accounting policy in
respect of impairment losses on tangible and intangible assets below).
An intangible asset is derecognised on disposal, or when no future economic
benefits are expected from use or disposal. Gains or losses arising from
derecognition of an intangible assets are measured at the difference between
the net disposal proceeds and the carrying amount of the asset and are
recognised in profit or loss in the period when the asset is derecognised.
Expressway operating rights under service concession arrangements
When the Group has a right to charge for usage of concession infrastructure, it
recognises concession intangible assets based on fair value of the
consideration paid upon initial recognition. Subsequent costs incurred on
expressway widening projects and upgrading services are recognised as
additional costs of the expressway operating rights. The concession intangible
assets representing expressway operating rights are carried at cost less
accumulated amortisation and any accumulated impairment losses.
The concession intangible assets are amortised to write-off their cost over
their expected useful lives in the remaining concession period on a
straight-line basis.
Costs in relation to the day-to-day servicing, repairs and maintenance of the
expressway infrastructures are recognised as expenses in the periods in which
they are incurred.
Impairment losses on tangible and intangible assets other than goodwill (see
the accounting policy in respect of goodwill above)
At the end of each reporting period, the Group reviews the carrying amounts of
its tangible and intangible assets with finite useful lives to determine
whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if any).
When it is not possible to estimate the recoverable amount of an individual
asset, the Group estimates the recoverable amount of the cash-generating unit
to which the asset belongs. When a reasonable and consistent basis of
allocation can be identified, corporate assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent allocation basis
can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet
available for use are tested for impairment at least annually, and whenever
there is an indication that the asset may be impaired.
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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or the
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been
recognised for the asset (or a cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in profit or loss.
Inventories
Inventories include properties held for sale, consumables and parts for toll
road operation, maintenance and hotel service and those commodities held for
sale arising from the securities business.
Inventories are stated at the lower of cost and net realisable value. Cost of
properties held for sale includes the costs of land, development expenditure
incurred and, where appropriate, borrowing costs capitalised. Costs of other
inventories are calculated using the weighted average method. Net realisable
value represents the estimated selling price for inventories less all estimated
costs of completion and costs necessary to make the sale.
Leasing
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised in profit or loss on a
straight-line basis over the term of the relevant lease.
The Group as lessee
Operating lease payments are recognised as an expense on a straight-line basis
over the lease term, except where another systematic basis is more
representative of the time pattern in which economic benefits from the leased
asset are consumed. Contingent rentals arising under operating leases are
recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases,
such incentives are recognised as a liability. The aggregate benefit of
incentives is recognised as a reduction of rental expense on a straight-line
basis, except where another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset are consumed.
Leasehold land and building
When a lease includes both land and building elements, the Group assesses the
classification of each element as a finance or an operating lease separately
based on the assessment as to whether substantially all the risks and rewards
incidental to ownership of each element have been transferred to the Group,
unless it is clear that both elements are operating leases in which case the
entire lease is classified as an operating lease. Specifically, the minimum
lease payments (including any lumpsum upfront payments) are allocated between
the land and the building elements in proportion to the relative fair values of
the leasehold interests in the land element and building element of the lease
at the inception of the lease.
To the extent the allocation of the lease payments can be made reliably,
interest in leasehold land that is accounted for as an operating lease is
presented as 'prepaid lease payments' in the consolidated statement of
financial position and is amortised over the lease term on a straight-line
basis. When the lease payments cannot be allocated reliably between the land
and building elements, the entire lease is generally classified as a finance
lease and accounted for as property, plant and equipment.
Foreign currencies
In preparing the financial statements of each individual group entity,
transactions in currencies other than the entity's functional currency (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. Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated.
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 they arise.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted from the borrowing
costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
Government grants
Government grants are not recognised until there is reasonable assurance that
the Group will comply with the conditions attaching to them and that the grants
will be received.
Government grants are recognised in profit or loss on a systematic basis over
the periods in which the Group recognises as expenses the related costs for
which the grants are intended to compensate. Government grants that are
receivable as compensation for expenses or losses already incurred or for the
purpose of giving immediate financial support to the Group with no future
related costs are recognised in profit or loss in the period in which they
become receivable.
Retirement benefit costs
Payments to defined contribution retirement benefit plans are recognised as an
expense when employees have rendered services entitling them to the
contributions.
Short-term employee benefits
A liability is recognised for benefits accruing to employees in respect of
wages and salaries, annual leave and sick leave in the period the related
service is rendered at the undiscounted amount of the amount of benefits
expected to be paid in exchange for that service.
Liabilities recognised in respect of short-term employee benefits are measured
at the undiscounted amount of the benefits expected to be paid in exchange for
the related service.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from 'profit before tax' as reported in the consolidated
statement of profit or loss and other comprehensive income because of items of
income or expense that are taxable or deductible in other years and items that
are never taxable or deductible. The Group's liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by
the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying
amounts of assets and liabilities in the consolidated financial statements and
the corresponding tax bases used in the computation of taxable profit. Deferred
tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilised.
Such deferred tax assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in
a business combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
associated with investments in subsidiaries and interests in associates and a
joint venture, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests are only
recognised to the extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of the temporary
differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of the
reporting period and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the period in which the liability is settled or the asset
is realised, based on tax rate (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects, at
the end of the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
Current and deferred tax are recognised in profit or loss, except when they
relate to items that are recognised in other comprehensive income or directly
in equity, in which case, the current and deferred tax are also recognised in
other comprehensive income or directly in equity respectively.
Financial instruments
Financial assets and financial liabilities are recognised when a group entity
becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other than financial
assets or financial liabilities at fair value through profit or loss) are added
to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at
fair value through profit or loss are recognised immediately in profit or loss.
Financial assets
Financial assets are classified into the following specified categories:
financial assets at fair value through profit or loss ("FVTPL"),
available-for-sale ("AFS") financial assets and loans and receivables. The
classification depends on the nature and purpose of the financial assets and is
determined at the time of initial recognition. All regular way purchases or
sales of financial assets are recognised and derecognised on a trade date
basis. Regular way purchases or sales are purchases or sales of financial
assets that require delivery of assets within the time frame established by
regulation or convention in the marketplace.
Effective interest method
The effective interest method is a method of calculating the amortised cost of
a debt instrument and of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and other
premiums or discounts) through the expected life of the debt instrument, or,
where appropriate, a shorter period, to the net carrying amount on initial
recognition.
Interest income is recognised on an effective interest basis for debt
instruments other than those financial assets classified as at FVTPL, of which
interest income is included in net gains or losses.
Financial assets at FVTPL
Financial assets are classified as at FVTPL include financial asset held for
trading.
A financial asset is classified as held for trading if:
* it has been acquired principally for the purpose of selling it in the near
term; or
* on initial recognition it is part of a portfolio of identified financial
instruments that the Group manages together and has a recent actual pattern
of short-term profit-taking; or
* it is a derivative that is not designated and effective as a hedging
instrument.
Financial assets at FVTPL are stated at fair value, with any gains or losses
arising on remeasurement recognised in profit or loss. The net gain or loss
recognised in profit or loss excludes any dividend or interest earned on the
financial asset and is included in the 'securities investment gains' line item.
Fair value is determined in the manner described in Note 6(c).
AFS financial assets
AFS financial assets are non-derivatives that are not either designated or
classified as (a) loans and receivables, (b) held-to-maturity investments or
(c) financial assets at FVTPL.
Equity and debt securities held by the Group that are classified as AFS
financial assets and are traded in an active market are measured at fair value
at the end of each reporting period. Changes in the carrying amount of AFS
monetary financial assets relating to interest income calculated using the
effective interest method and dividends on AFS equity investments are
recognised in profit or loss. Other changes in the carrying amount of AFS
financial assets are recognised in other comprehensive income and accumulated
under the heading of investments revaluation reserve. When the investment is
disposed of or is determined to be impaired, the cumulative gain or loss
previously accumulated in the investments revaluation reserve is reclassified
to profit or loss (see the accounting policy in respect of impairment loss on
financial assets below).
Dividends on AFS equity instruments are recognised in profit or loss when the
Group's right to receive the dividends is established.
AFS equity investments that do not have a quoted market price in an active
market and whose fair value cannot be reliably measured and derivatives that
are linked to and must be settled by delivery of such unquoted equity
investments are measured at cost less any identified impairment losses at the
end of each reporting period (see the accounting policy in respect of
impairment loss on financial assets below).
Loan and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Loans and
receivables (including trade receivables, loans to customers arising from
margin financing business, other receivables, financial assets held under
resale agreements, bank balances held on behalf of customers and bank balances
and cash) are measured at amortised cost using the effective interest method,
less any identified impairment losses (see accounting policy on impairment
losses on financial assets below).
Impairment loss on financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of
impairment at the end of each reporting period. Financial assets are considered
to be impaired when there is objective evidence that, as a result of one or
more events that occurred after the initial recognition of the financial asset,
the estimated future cash flows of the financial assets have been affected.
For an AFS equity investment, a significant or prolonged decline in the fair
value of the security below its cost is considered to be objective evidence of
impairment.
For all other financial assets, objective evidence of impairment could include:
* significant financial difficulty of the issuer or counterparty; or
* breach of contract, such as default or delinquency in interest or principal
payments; or
* it becoming probable that the borrower will enter bankruptcy or financial
re-organisation; or
* the disappearance of an active market for that financial asset because of
financial difficulties.
For financial assets carried at amortised cost, the amount of the impairment
loss recognised is the difference between the asset's carrying amount and the
present value of the estimated future cash flows, discounted at the financial
asset's original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is
measured as the difference between the asset's carrying amount and the present
value of the estimated future cash flows discounted at the current market rate
of return for a similar financial asset. Such impairment loss will not be
reversed in subsequent periods (see the accounting policy below).
The carrying amount of the financial asset is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables and
loans to customers arising from margin financing business, where the carrying
amount is reduced through the use of an allowance account.
When trade receivables are considered uncollectible, they are written off
against the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in the carrying
amount of the allowance account are recognised in profit or loss.
For the loans to customers arising from margin financing business, the Group
reviews its advances to customers to assess impairment on a periodic basis. In
determining whether an impairment loss should be recognised in profit or loss,
the Group reviews the value of the securities collateral received from the
customers firstly on individual basis, then on collective basis in determining
the impairment. The methodology and assumptions used for estimating both the
amount and timing of future cash flows are reviewed regularly to reduce any
differences between loss estimates and actual loss experience.
When an AFS financial asset is considered to be impaired, cumulative gains or
losses previously recognised in other comprehensive income are reclassified to
profit or loss in the period.
For financial assets measured at amortised cost, if, in a subsequent period,
the amount of impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment losses was recognised,
the previously recognised impairment loss is reversed through profit or loss to
the extent that the carrying amount of the investment at the date the
impairment is reversed does not exceed what the amortised cost would have been
had the impairment not been recognised.
In respect of AFS equity investments, impairment losses previously recognised
in profit or loss are not reversed through profit or loss. Any increase in fair
value subsequent to an impairment loss is recognised in other comprehensive
income and accumulated under the heading of investments revaluation reserve. In
respect of AFS debt investments, impairment losses are subsequently reversed
through profit or loss if an increase in the fair value of the investment can
be objectively related to an event occurring after the recognition of the
impairment loss.
Financial liabilities and equity instruments
Financial liabilities and equity
Financial liabilities and equity instruments issued by a group entity are
classified according to the substance of the contractual arrangements entered
into and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities. Equity instruments
issued by the Group are recognised at the proceeds received, net of direct
issue costs.
Other financial liabilities
Other 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 and bonds payable) are subsequently measured at amortised cost using
the effective interest method.
Effective interest method
The effective interest method is a method of calculating the amortised cost of
a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments (including all fee and points paid or received
that form an integral part of the effective interest rate, transaction costs
and other premium or discounts) through the expected life of the financial
liability, or, where appropriate, a shorter period, to the net carrying amount
on initial recognition.
Interest expense is recognised on an effective interest basis other than
financial liabilities classified as at FVTPL.
Derivative financial instruments
Derivatives are initially recognized 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 recognized
in profit or loss immediately, unless the derivative is designated and
effective as a hedging instruments, in which event the timing of recognition in
profit or loss depends on the nature of the hedge relationship.
Embedded derivatives
Derivatives embedded in non-derivative host contracts are treated as separate
derivatives when they meet the definition of a derivative, their risks and
characteristics are not closely related to those of the host contracts and the
host contracts are not measured at fair value through profit or loss.
Financial assets held under resale agreements
Financial assets held under resale agreements where the Group acquires
financial assets which will be resold at a predetermined price at a future date
under resale agreements, the cash advanced by the Group is recognised as
secured loans and receivables and presented as amounts held under resale
agreements in the consolidated statement of financial position. The difference
between the purchase and resale consideration is amortised over the period of
the respective agreements using the effective interest method and is included
in interest income.
Financial assets sold under repurchase agreements
Financial assets sold subject to agreements with a commitment to repurchase at
a specific future date and price are not derecognised in the consolidated
statement of financial position. The proceeds from selling such assets are
presented under "financial assets sold under repurchase agreements" in the
consolidated statement of financial position. The difference between the
selling price and repurchasing price is recognised as interest expense during
the term of the agreement using the effective interest method.
Securities lending arrangement
The Group lends investment securities to clients and requires cash and/or
equity securities from customers held as collaterals under such securities
lending agreements. The cash collaterals arisen from these are included in
"accounts payable to customers arising from securities business". For those
securities held by the Group and lent to client that do not result in the
derecognition of financial assets, they are included in AFS investments.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make
specified payments to reimburse the holder for a loss it incurs because a
specified debtor fails to make payment when due in accordance with the terms of
a debt instrument. Financial guarantee contracts issued by the Group are
initially measured at their fair values and are subsequently measured at the
higher of:
(i) the amount of obligation under the contract, as determined in
accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent
Assets; and
(ii) the amount initially recognised less, where appropriate,
cumulative amortisation recognised in accordance with the revenue recognition
policies.
Derecognition
The Group derecognises a financial asset only when the contractual rights to
the cash flows from the asset expire, or when it transfers the financial asset
and substantially all the risks and rewards of ownership of the asset to
another entity. If the Group neither transfers nor retains substantially all
the risks and rewards of ownership and continues to control the transferred
asset, the Group continues to recognise the asset to the extent of its
continuing involvement and recognises an associated liability. 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 in its entirety, the difference between
the asset's carrying amount and the sum of the consideration received and
receivable and the cumulative gain or loss that had been recognised in other
comprehensive income and accumulated in equity is recognised in profit or loss.
The Group derecognises financial liabilities when, and only when, the Group's
obligations are discharged, cancelled or expire. The difference between the
carrying amount of the financial liability derecognised and the consideration
paid and payable is recognised in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the end of the reporting period,
taking into account the risks and uncertainties surrounding the obligation.
When a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash
flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are
expected to be recovered from a third party, a receivable is recognised as an
asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
5. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Critical judgements in applying accounting policies
The following is the critical judgement, apart from those involving estimations
(see below), that management has made in the process of applying the Group's
accounting policies and that have the most significant effect on the amounts
recognised in the consolidated financial statements.
Determination of consolidation scope
All facts and circumstances must be taken into consideration in the assessment
of whether the Group, as an investor, controls the investee. The principle of
control sets out the following three elements of control: (a) power over the
investee; (b) exposure, or rights, to variable returns from involvement with
the investee; and (c) the ability to use power over the investee to affect the
amount of the investor's returns.
An investor's initial assessment of control or its status as a principal or an
agent would not change simply because of a change in market conditions (e.g. a
change in the investee's returns driven by market conditions), unless the
change in market conditions changes one or more of the three elements of
control listed above or changes the overall relationship between a principal
and an agent. At the end of each reporting period, the Group assesses the
variable returns arising from other equities and uses plenty of judgments, in
combination with historical exposure to variable returns, to determine the
consolidation scope.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key
sources of estimation uncertainty at the end of the reporting period, that have
a significant risk of causing a material adjustment to the carrying amounts of
assets within the next financial year.
Estimated impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in
use of the cash-generating units to which goodwill has been allocated. The
value in use calculation requires the Group to estimate the future cash flows
expected to arise from the cash-generating unit and a suitable discount rate in
order to calculate the present value. Where the actual future cash flows are
less than expected, a material impairment loss may arise. As at December 31,
2015, the carrying amount of goodwill is Rmb86,867,000 (without accumulated
impairment loss) (2014: Rmb86,867,000 (without accumulated impairment loss)).
Details of the impairment testing are disclosed in Note 24.
Estimated impairment of intangible assets with indefinite useful lives
Determining whether intangible assets with indefinite useful lives are impaired
requires an estimation of the value in use of themselves or the cash-generating
unit to which they belong. The value in use calculation requires the Group to
estimate the future cash flows expected to arise from themselves or the
cash-generating unit to which they belong and a suitable discount rate in order
to calculate the present value. Where the actual future cash flows are less
than expected, a material impairment loss may arise. As at December 31, 2015,
the carrying amounts of intangible assets with indefinite useful lives were
Rmb66,563,000 (without accumulated impairment loss) (2014: Rmb66,563,000
(without accumulated impairment loss)). Details of the impairment testing are
disclosed in Note 24.
Impairment of loans to customers arising from margin financing business and
financial assets held under resale agreements
The Group reviews its loans to customers arising from margin financing business
and financial assets held under resale agreements to assess impairment on a
periodic basis. When there is objective evidence of impairment loss for loans
to customers arising from margin financing business and financial assets held
under resale agreements, the Group takes into consideration the estimation of
future cash flows. Specifically, the Group reviews the value of the cash and
securities collateral received from the customers firstly on an individual
basis, then on a collective basis in determining the impairment.
The policy for collective impairment allowances for loans to customers arising
from margin financing business and financial assets held under resale
agreements of the Group is based on the evaluation of probability of default,
loss given default and exposure at default of accounts and on management's
judgement. A considerable amount of judgement is required in assessing the
ultimate realisation of these loans to customers arising from margin financing
business and financial assets held under resale agreements, including the
current creditworthiness, and the past collection history. Details are set out
in Note 30 and 33.
Estimated impairment of interest in a joint venture and associates
The Group regularly reviews whether there are any indications of impairment and
recognises an impairment loss if the carrying amount of the Group's interest in
a joint venture or associates are lower than their respective recoverable
amount. The Group tests for impairment for the interest in a joint venture and
associate whenever there is an indication that the asset may be impaired. The
recoverable amounts have been determined based on the higher of the fair value
less costs of disposal and value in use calculations. These calculations
require the use of estimates, such as discount rates, future profitability and
growth rates. Where the actual future cash flows are less than expected, a
material impairment loss may arise. As at December 31, 2015, the carrying
amount of interest in a joint venture was Rmb275,600,000 (without accumulated
impairment loss) (2014: Rmb300,667,000 (without accumulated impairment loss)),
and the carrying amount of interest in associates was Rmb583,537,000 (without
accumulated impairment loss) (2014: Rmb627,866,000 (without accumulated
impairment loss)).
Provision for financial guarantee contract
The directors of the Company based on its best estimate of the financial
position and credit rating of the guarantee to determine the probability of
incurring a claim by the counterparty to the Company to estimate fair value or
the respective obligation under the financial guarantee contract. Based on
expectations at the end of the reporting period, the Group considers that it is
more likely than not that no amount will be payable under the arrangement.
However, this estimate is subject to change depending on the probability of the
counterparty claiming under the guarantee which is a function of the likelihood
that the financial receivables held by the counterparty which are guaranteed
suffer credit losses. As at December 31, 2015, in respect of the financial
guarantee contract provided to a joint venture of the Group in the amount of
Rmb1,021,374,000 (2014: Rmb1,076,910,000), the directors of the Company
considered that the fair value of the financial guarantee obligation was
insignificant in both years.
Fair value measurements and valuation processes
Some of the Group's assets and liabilities are measured at fair value for
financial reporting purposes. The board of directors of the Group has set up a
valuation team, which is headed up by the Chief Financial Officer ("CFO") of
the Group, to determine the appropriate valuation techniques and inputs for
fair value measurements.
In estimating the fair value of an asset or a liability, the Group uses
market-observable data to the extent it is available, Where Level 1 inputs are
not available, the Group engages third party qualified valuers to perform the
valuation.
The CFO works closely with the qualified external valuers to establish the
appropriate valuation techniques and inputs to the model. The CFO reports the
valuation committee's findings to the board of directors of the Group at the
end of each reporting period to explain the cause of fluctuations in the fair
value of the assets and liabilities.
As at 31 December 2015, the fair value of the held-for-trading investment,
available-for-sale investments (excluding those unlisted equity securities
investments measured at cost), derivative financial assets and derivative
financial liabilities,was estimated at an asset of Rmb3,761,224,000 (2014:
Rmb2,124,740,000), Rmb2,624,011,000 (2014: Rmb752,753,000), Rmb2,288,000 (2014:
nil) and Rmb4,258,000 (2014: nil), respectively.
6. FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Financial assets
AFS investments
- at cost 44,597 38,500 11,000
- at fair value 2,624,011 752,753 414,438
Fair value through profit or loss
Held for trading investments 3,761,224 2,124,740 1,181,025
Derivative financial assets 2,288 - -
Loans and receivables (including cash and cash 49,182,275 32,922,414 15,621,927
equivalents)
Financial liabilities
Fair value through profit or loss
Derivative financial liabilities 4,258 - -
Amortised cost 48,314,488 31,648,954 14,541,943
(b) Financial risk management objectives and policies
The Group's major financial instruments include AFS investments, held for
trading investments, trade and other receivables, loans to customers arising
from margin financing business, financial assets held under resale agreements,
bank balances and cash, bank balances held on behalf of customers, trade and
other payables, placements from other financial institutions, accounts payable
to customers arising from securities business, derivative financial assets,
derivative financial liabilities, bank and other borrowings, short-term
financing note payable, financial assets sold under repurchase agreements,
bonds payable and financial guarantee. Details of the financial instruments are
disclosed in respective notes. The risks associated with these financial
instruments include market risk (interest rate risk, currency risk and other
price risk), credit risk and liquidity risk. The policies on how to mitigate
these risks are set out below. The management manages and monitors these
exposures to ensure appropriate measures are implemented on a timely and
effective manner.
Market risk
(i) Interest rate risk
The Group is exposed to fair value interest rate risk in relation to loans to
customers arising from margin financing business, fixed-rate entrusted loans,
financial assets held under resale agreements, fixed-rate time deposits,
placement from other financial institutions, fixed-rate bank and other
borrowings, short-term financing note payable, financial assets sold under
repurchase agreements and bonds payable (see Notes 30, 31, 33, 35, 36, 40, 41,
42 and 43 for details).
The Group is also exposed to cash flow interest rate risk in relation to
variable-rate bank balances held on behalf of customers, bank balances and bank
and other borrowings (see Notes 34, 35 and 40 for details).
The Group currently does not have an interest rate risk hedging policy as the
management considers the Group is not exposed to significant interest rate
risk. The management will continue to monitor interest rate risk exposure and
consider hedging against it should the need arise.
The Group's exposures to interest rates on financial liabilities are detailed
in the liquidity risk management section of this note.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to
interest rates for non-derivative instruments, comprising variable-rate bank
balances held on behalf of customers, bank balances and bank and other
borrowings at the end of the reporting period.
The analysis is prepared assuming the balances outstanding at the end of the
reporting period were outstanding for the whole year. A 30 basis points (2014:
30 basis points) increase or decrease represents management's assessment of the
reasonably possible change in interest rates.
If interest rates had been 30 basis points (2014: 30 basis points) higher/lower
and all other variables were held constant, the Group's post-tax profit for the
year ended December 31, 2015 would have increased/decreased by Rmb69,169,000
(2014 (restated): Rmb38,370,000). This was mainly attributable to the Group's
exposure to interest rates on its variable-rate bank balances.
(ii) Currency risk
Several subsidiaries of the Group have foreign currency denominated monetary
assets and liabilities, which expose the Group to foreign currency risk. The
Group is mainly exposed to HKD and USD relative to Rmb.
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
12/31/2015 12/31/2014 12/31/2015 12/31/2014
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Hong Kong dollar ("HKD") 36,788 18,352 22,226 12,490
United States dollar ("USD") 158,445 71,693 120,058 42,862
Sensitivity analysis
The Group did not maintain significant assets and liabilities denominated in
the currency other than the Group's functional currencies, the impact of the
change in foreign exchange rate would not have significant impact to the Group
and the sensitivity analysis on the increase and decease of the foreign
exchange rate is not presented, accordingly.
(iii) Other price risk
The Group is exposed to equity and debt security price risk in relation to its
held for trading and AFS listed investments.
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
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% (2014:
5%) higher/lower,
* post-tax profit for the year ended December 31, 2015 would have increased/
decreased by Rmb141,046,000 (2014: Rmb79,678,000) as a result of the
changes in fair value of held for trading investments; and
* investment valuation reserve would have increased by Rmb98,400,000 (2014:
Rmb28,228,000) for the Group as a result of the changes in fair value of
AFS listed investments, or the investment revaluation reserve would
decrease by the same amount and the Group would consider any potential
impairment effect, if necessary.
* post-tax profit for the year ended December 31, 2015 would have net
decreased/increased by Rmb74,000 (2014: nil) as a result of the changes in
fair value of derivative financial assets and liabilities.
Credit risk
As at December 31, 2015, 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 53.
The Group reviews the recoverable amount of each individual trade debt and
entrusted loan receivables at the end of the reporting period to ensure that
adequate impairment losses are made for irrecoverable amounts. In this regard,
the directors of the Company consider that the Group's credit risk is
significantly reduced.
The Group has no credit period granted to its trade customers of toll operation
businesses. All the Group's trade receivable balance for toll operation
business are toll receivables from the government-operated organisation.
The Group also provides clients with margin financing business, and have
financial assets held under resale agreements which are secured by clients'
securities or deposits held as collateral.
In respect of the margin financing and securities lending business of the
Group's securities operation, which was carried out by Zheshang Securities Co.,
Ltd. ("Zheshang Securities"), Zheshang Securities has appointed a group of
authorised persons who are charged with the responsibility of determination of
credit limits, credit approvals and other monitoring procedures to ensure that
follow-up action is taken to recover overdue debts. Each client has a maximum
credit limit based on the quality of collateral held and the financial
background of the client. In addition, Zheshang Securities reviews the
recoverable amount of each individual loan at the end of the reporting period
to ensure that adequate impairment losses are made for irrecoverable amounts.
Margin calls are made when the trades of margin clients exceed their respective
limits. Any such excess is required to be made good within the next trading
day. Failure to meet margin calls will result in the liquidation of the
customers' position. Zheshang Securities seeks to maintain strict control over
its outstanding receivables. It will also adhere to the Group's policies and
procedures to conduct periodic credit assessment and manage any concentration
in the following exposures and perform regular reporting to the management:
(i) exposures to a particular client/counterparty or group of related clients/
counterparties; and
(ii) exposures to a particular investment product.
The Investment Committee of Zheshang Securities is also responsible to the
credit risk arising from its proprietary trading operation, including the
investments in AFS investments and held for trading investments. The Investment
Committee assesses the financial performance of the issuers to ensure that the
issuers can satisfy the repayment of the principal and interest as they fall
due. It has set portfolio size limits and single issuer limits to limit
Zheshang Securities' exposure to the credit risk. Zheshang Securities also
monitors the credit rating and market news of the issuers for any indication of
potential credit deterioration.
The credit risk on liquid funds is limited because the counterparties are
state-owned banks or banks with high credit ratings assigned by international
credit-rating agencies.
As at December 31, 2015, other than the concentration of credit risk on trade
receivables, entrusted loan receivables and financial guarantee contract
amounting to Rmb151,083,000 (2014 (restated): Rmb136,158,000), Rmb634,436,000
(2014: Rmb542,739,000), and Rmb1,021,374,000 (2014: Rmb1,076,910,000) as
disclosed in Notes 29, 31 and 53, respectively, of which these balances were
only limited and concentrated to a few counterparties, the Group does not have
any other significant concentration 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, 2015 and
December 31 2014 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 and cash at December 31, 2015 and 2014 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. The table has been drawn up based on the
undiscounted cash flows of financial liabilities based on the earliest date on
which the Group can be required to pay. The table includes both interest and
principal cash flows.
Liquidity tables
Weighted On demand 3 months- 1-3 years 3-5 years +5 Total Carrying
years
average or Less 1 year undiscounted amount at
than
interest 3 months cash flows 31/12/2015
rate
% Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
2015
Non-derivative
financial
Liabilities
Placements 6.30 200,414 - - - - 200,414 200,000
from other
financial
institutions
Accounts - 27,009,641 - - - - 27,009,641 27,009,641
payable to
customers
arising from
securities
business
Trade payables - 908,616 - - - - 908,616 908,616
Other payables - 176,800 50,000 - - - 226,800 226,800
Bank and other
borrowings
- fixed rate 4.40 21,664 1,537,881 611,780 - - 2,171,325 2,047,951
- variable 4.86 115,321 240,893 509,255 296,738 344,905 1,507,112 1,320,000
rate
Short-term 3.13 620,739 - - - - 620,739 616,100
financing note
payable
Financial 4.11 4,421,097 510,106 536,649 - - 5,467,852 5,385,380
assets sold
under
repurchase
agreements
Bonds payable 5.51 145,500 3,399,945 5,229,723 3,098,022 - 11,873,190 10,600,000
Financial - 1,021,374 - - - - 1,021,374 -
guarantee
34,641,166 5,738,825 6,887,407 3,394,760 344,905 51,007,063 48,314,488
2014
(Restated)
Non-derivative
financial
Liabilities
Placements 6.40 1,830,181 154,423 - - - 1,984,604 1,940,000
from other
financial
institutions
Accounts - 16,545,146 - - - - 16,545,146 16,545,146
payable to
customers
arising from
securities
business
Trade payables - 996,651 - - - - 996,651 996,651
Other payables - 134,530 - - - - 134,530 134,530
Bank and other
borrowings
- fixed rate 5.25 8,030 631,342 - - - 639,372 620,000
- variable 5.80 152,623 1,081,714 1,120,719 398,704 753,557 3,507,317 3,030,000
rate
Short-term 6.14 891,566 - - - - 891,566 883,570
financing note
payable
Financial 6.27 6,331,969 - - - - 6,331,969 6,299,057
assets sold
under
repurchase
agreements
Bonds payable 6.13 18,400 55,200 1,287,704 - - 1,361,304 1,200,000
Financial - 1,076,910 - - - - 1,076,910 -
guarantee
27,986,006 1,922,679 2,408,423 398,704 753,557 33,469,369 31,648,954
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, 2015 and 2014, the Group has not entered into any master
netting arrangements with counterparties. The collaterals of which, such as
financial assets held under resale agreement, held-for-trading investments,
loans to customers arising from margin financing business, placements from
other financial institutions and financial assets sold under repurchase
agreements, 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 or the company.
(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).
Financial Classified as Fair value as at Fair Fair Basis of fair Significant Relationship
Assets value as value value of
at measurement/
31/12/2015 31/12/ hierarchy valuation unobservable unobservable
2014 technique(s)
and key input
(s)
input(s) inputs to
fair value
Rmb'000 Rmb'000
1) Equity Held for trading Assets - 221,699 Assets - Level 1 Quoted bid N/A N/A
investments investments 89,877 prices in an
listed in active market.
exchange
2) Equity Available-for-sale Assets - 237,260 Assets - Level 2 Recent N/A N/A
securities investments 8,761 transaction
listed in prices..
exchange Assets - 202,441 N/A Level 3 Discounted Discounted for The higher
(inactive cash flow. The lack of the
due to low fair value is marketability. discount,
transaction determined the lower
volume) with reference the fair
to the quoted value.
market prices
with an
adjustment of
discount for
lack of
marketability.
3) Listed Held for trading Assets - 191,967 Assets - Level 1 Quoted bid N/A N/A
open-ended investments 97,718 prices in an
equity active market.
funds
4) Fund Available-for-sale Assets - 55,982 Assets - Level 1 Quoted bid N/A N/A
listed in investments 35,233 prices in an
exchange active market.
5) Debt Held for trading Assets - Assets - Level 1 Quoted bid N/A N/A
investments investments 1,170,952 621,813 prices in an
listed in active market.
exchange Available-for-sale N/A Assets -
and debt investments 122,000
investment
in Held for trading Assets - Assets - Level 2 Discounted N/A N/A
interbank investments 2,176,606 1,315,332 cash flow.
market Future cash
flows are
estimated
based on
applying the
interest yield
curves of
different
types of bonds
as the key
parameter.
Available-for-sale Assets - 50,000 N/A Level 2 Discounted N/A N/A
investments cash flow.
Future cash
flows are
estimated
based on
applying the
interest yield
curves of
different
types of bonds
as the key
parameter.
6) Available-for-sale Assets- 544,597 Assets - Level 2 Shares of the N/A N/A
Investments investments 246,053 net assets of
in the products,
structured determined
products with reference
to the net
asset value of
the products,
calculated by
observable
(quoted)
prices of
underlying
investment
portfolio and
adjustments of
related
expenses.
Assets-141,418 Assets - Level 3 Discounted Actual yield The higher
251,191 cash flow. of the the actual
Future cash underlying yield, the
flows are investment higher the
estimated portfolio and fair value
based on the discount
expected rate
applicable
yield of the
underlying
investment
portfolio and
adjustments of
related
expenses.
7) Available-for-sale Assets - 10,000 Assets - Level 3 Discounted Actual yield The higher
Investments investments 89,515 cash flow. of the the actual
in trust Future cash underlying yield, the
products flows are investment higher the
estimated portfolio and fair value
based on the discount
expected rate
applicable
yield of the
underlying
investment
portfolio and
adjustments of
related
expenses.
8) Unlisted Available-for-sale Assets-1,382,313 N/A Level 2 Calculated N/A N/A
equity investments based on the
investment fair value of
at fair the underlying
value investments
which are
listed equity
securities,
after making
adjustments of
related
expenses.
As at December 31, 2015
Level 1 Level 2 Level 3 Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Held for trading investments
- Equity securities
a. Manufacturing 99,732 - - 99,732
b. Financial services 45,814 - - 45,814
c. information technology service 21,284 - - 21,284
d. Transportation, storage and portal 54,869 - - 54,869
service
221,699 - - 221,699
- Open-ended fund 191,967 - - 191,967
- Bonds 1,170,952 2,176,606 - 3,347,558
Sub-total 1,584,618 2,176,606 - 3,761,224
Available-for-sale investments
- Equity
a. Manufacturing - 104,309 - 104,309
b. Information technology service - 58,688 202,441 261,129
c. Financial services - 3,919 - 3,919
d. Transportation, storage and postal - 2,305 - 2,305
service
e. Construction - 18,837 - 18,837
f. Energy service - 3,108 - 3,108
g. Wholesaling - 9,210 - 9,210
h. Agriculture, forestry, fishing and - 6,706 - 6,706
Animal husbandry
i. Others - 1,412,491 - 1,412,491
- 1,619,573 202,441 1,822,014
- Fund 55,982 - - 55,982
- Debt investments - 50,000 - 50,000
- Structured products - 544,597 141,418 686,015
- Trust products - - 10,000 10,000
Sub-total 55,982 2,214,170 353,859 2,624,011
As at December 31, 2014
Level 1 Level 2 Level 3 Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Held for trading investments
- Equity securities
a. Manufacturing 14,915 - - 14,915
b. Financial services 73,395 - - 73,395
c. Energy and water services 1,543 - - 1,543
d. Mining 24 - - 24
89,877 - - 89,877
- Open-ended fund 97,718 - - 97,718
- Bonds 621,813 1,315,332 - 1,937,145
Sub-total 809,408 1,315,332 - 2,124,740
Available-for-sale investments
- Equity
a. Manufacturing - 1,763 - 1,763
b. Information technology service - 6,998 - 6,998
- 8,761 - 8,761
- Fund 35,233 - - 35,233
- Corporate bonds 122,000 - - 122,000
- Structured products - 246,053 251,191 497,244
- Trust products - - 89,515 89,515
Sub-total 157,233 254,814 340,706 752,753
The following table represents the
changes in Level 3 available-for-sale
investments during the year ended
December 31, 2015 and 2014.
For the year ended December 31, 2015
Structured Trust Restricted Total
products products shares
Rmb'000 Rmb'000 Rmb'000 Rmb'000
At beginning of the year 251,191 89,515 - 340,706
Addition 20,080 20,000 200,000 240,080
Disposal (20,000) (93,000) - (113,000)
Total loss recognised in other (21,337) (6,515) 2,441 (25,411)
comprehensive income
Transfer out of Level 3 (88,516) - - (88,516)
At end of the year 141,418 10,000 202,441 353,859
For the year ended December 31, 2014
Structured Trust Total
products products
Rmb'000 Rmb'000 Rmb'000
At beginning of the year 74,402 41,514 115,916
Addition 154,870 42,000 196,870
Total gain recognised in other 21,919 6,001 27,920
comprehensive income
At end of the year 251,191 89,515 340,706
7. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able
to continue as a going concern while maximising the return to shareholders
through the optimisation of the debt and equity balance. The Group's overall
strategy remains unchanged from prior year.
The capital structure of the Group consists of net debt, which includes the
borrowings disclosed in Notes 40, 41, 42 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 of the Company 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.
8. SEGMENT INFORMATION
Information reported to the Chief Executive Officer 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) Toll related operation - (1) service area and advertising businesses,
including the sale of food, restaurant operation, automobile servicing,
operation of petrol stations, design and rental of advertising billboards at
toll plazas, and (2) the toll road maintenance service and others.
(iii) Securities operation - the securities broking, margin financing and
securities lending, securities underwriting and sponsorship, asset management,
advisory services and proprietary trading.
(iv) Other operation - properties development, hotel operation and other
ancillary services.
Segment revenue and results
The following is an analysis of the Group's revenue and results by reportable
and operating segment.
For the year ended December 31, 2015
For the year
ended
December 31,
2015
Toll Toll Securities Others Total Elimination Total
related
operation operation operation Segment
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Revenue
External 4,961,928 1,842,417 5,660,628 42,421 12,507,394 - 12,507,394
sales
Inter-segment - 4,674 - - 4,674 (4,674) -
sales
Total 4,961,928 1,847,091 5,660,628 42,421 12,512,068 (4,674) 12,507,394
Segment 2,105,911 99,512 1,851,706 (27,349) 4,029,780 4,029,780
profit
For the year
ended
December 31,
2014
(Restated)
Toll Toll Securities Others Total Elimination Total
related
operation operation operation Segment
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Revenue
External 4,662,897 2,379,051 2,418,360 - 9,460,308 - 9,460,308
sales
Inter-segment - 4,631 - - 4,631 (4,631) -
sales
Total 4,662,897 2,383,682 2,418,360 - 9,464,939 (4,631) 9,460,308
Segment 1,833,289 153,607 753,028 6,048 2,745,972 2,745,972
profit
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.
Inter-segment sales are charged at prevailing market rates.
Segment assets and liabilities
The following is an analysis of the Group's assets and liabilities by
reportable and operating segment:
Segment Segment
assets liabilities
12/31/2015 12/31/2014 01/01/2014 12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated) (Restated)
Toll 16,112,291 17,632,061 18,233,801 (4,806,764) (5,188,933) (5,767,114)
operation
Toll related 1,069,499 1,291,913 1,172,423 (164,374) (253,992) (234,708)
operation
Securities 55,593,321 35,163,763 15,980,470 (46,729,548) (28,187,371) (10,102,539)
operation
Others 1,029,785 812,452 473,757 (192,428) (228,290) (70,878)
Total segment 73,804,896 54,900,189 35,860,451 (51,893,114) (33,858,586) (16,175,239)
assets
(liabilities)
Goodwill 86,867 86,867 86,867 - - -
Consolidated 73,891,763 54,987,056 35,947,318 (51,893,114) (33,858,586) (16,175,239)
assets
(liabilities)
Segment assets and segment liabilities represent the assets and liabilities of
the subsidiaries operating in the respective reportable and operating segment.
Other segment information
Amounts included in the measure of segment profit or segment assets:
For the year ended December 31, 2015
For the year ended December
31, 2015
Toll Toll Securities Others Total
related
operation operation operation
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Income tax expense 699,845 28,622 688,405 - 1,416,872
Interest income 53,529 6,830 1,813 21 62,193
Interest expense 182,406 - 448,621 1,468 632,495
Interests in associates - 400,180 42,309 141,048 583,537
Interest in a joint venture 275,600 - - - 275,600
Share of profit (loss) of - 60,006 (1,609) (10,108) 48,289
associates
Share of loss of a joint (25,067) - - - (25,067)
venture
Gain on fair value changes on 6,732 - 413,554 - 420,286
held for trading investments
Additions to non-current 158,218 47,367 127,686 190,319 523,590
assets (Note)
Depreciation and amortisation 1,128,185 41,460 77,517 13,873 1,261,035
Loss on disposal of property, 2,371 4,124 251 - 6,746
plant and equipment
For the year ended December
31, 2014 (Restated)
Toll Toll Securities Others Total
related
operation operation operation
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Income tax expense 623,740 23,420 258,308 - 905,468
Interest income 49,375 8,002 2,547 - 59,924
Interest expense 212,706 - 60,194 - 272,900
Interests in associates - 534,893 31,818 61,155 627,866
Interest in a joint venture 300,667 - - - 300,667
Share of profit (loss) of - 67,035 (8,063) 6,048 65,020
associates
Share of loss of a joint (33,277) - - - (33,277)
venture
Gain on fair value changes on 15,864 - 262,388 - 278,252
held for trading investments
Additions to non-current 480,216 25,341 746,439 260,495 1,512,491
assets (Note)
Depreciation and amortisation 1,109,593 45,753 77,404 - 1,232,750
Loss on disposal of property, 3,499 9,459 458 - 13,416
plant and equipment
Note: Non-current assets
excluded financial
instruments.
Revenue from major services
An analysis of the Group's revenue, net of discounts and taxes, for the year is
as follows:
Year ended Year ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Toll operation revenue 4,961,928 4,662,897
Service area businesses revenue (mainly sales of goods) 1,741,134 2,213,770
Advertising business revenue 41,478 83,297
Toll road maintenance service 59,805 81,984
Commission and fee income from securities operation 3,932,791 1,679,244
Interest income from securities operation 1,727,837 739,116
Hotel and catering revenue 42,421 -
12,507,394 9,460,308
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, 2015 and 2014, there are no individual
customer with sales over 10% of the total sales of the Group.
9. SECURITIES INVESTMENT GAINS
Year Year ended
ended
12/31/ 12/31/2014
2015
Rmb'000 Rmb'000
Gain on fair value changes on held for trading investments 420,286 278,252
Cumulative gain reclassified from equity on disposal of 65,826 -
AFS investments
Interest income from AFS investments 69,419 -
Gain on fair value changes on derivatives financial 28,583 -
instruments
584,114 278,252
10. OTHER INCOME
Year Year ended
ended
12/31/ 12/31/2014
2015
Rmb'000 Rmb'000
(Restated)
Interest income on bank balances, entrusted loan 62,193 59,924
receivables and
financial products investment
Rental income (Note) 123,734 122,265
Handling fee income 2,398 2,142
Towing income 8,321 9,372
Gain on disposal of an associate 916 29,890
Gain on disposal of a subsidiary 879 -
Exchange (loss) gain, net (3,330) 1,173
Loss on commodity trading, net (17,973) (20,785)
Gain on disposal of part of expressway operating rights 52,500 -
Others 66,280 58,263
295,918 262,244
Note: Rental income included contingent rent of approximately Rmb30,475,000
(2014: Rmb44,552,000) during the year.
11. FINANCE COSTS
Year Year ended
ended
12/31/ 12/31/2014
2015
Rmb'000 Rmb'000
(Restated)
Bank and other borrowings 187,127 221,300
Short-term loan note 64,390 43,543
Bonds payable 384,231 15,425
Total borrowing costs 635,748 280,268
Less: Amount capitalised in the cost of qualifying assets (3,253) (7,368)
(Note)
632,495 272,900
Note: Borrowing costs capitalised during the year ended 31 December 2015
includes all the interest expenses, net of interest income, arising from the
specific borrowings to the expenditure on qualifying assets.
12. PROFIT BEFORE TAX
The Group's profit before tax has been arrived at after
charging (crediting):
Year Year ended
ended
12/31/ 12/31/2014
2015
Rmb'000 Rmb'000
(Restated)
Depreciation of property, plant and equipment 243,599 222,154
Release of prepaid lease payments 2,004 2,155
Amortisation of expressway operating rights (included in 991,800 988,148
operating costs)
Amortisation of other intangible assets (included in 23,632 20,293
operating costs)
Total depreciation and amortisation 1,261,035 1,232,750
Staff costs (including directors and supervisors):
- Wages, salaries and bonuses 1,804,299 1,045,597
- Pension scheme contributions 99,226 81,161
1,903,525 1,126,758
Auditors' remuneration 7,810 6,933
Allowance for loans to customers arising
from margin financing business 36,182 10,911
Allowance for trade receivables 340 280
Allowance (reversal of) for other receivables 191 (1,436)
Allowance for financial assets held under resale 44,836 -
agreements
Loss on disposal of property, plant and equipment 6,746 13,416
Loss on disposal of prepaid lease payment 1,850 -
Gain on disposal of part of expressway operating rights (52,500) -
Cost of inventories recognised as an expense 1,547,565 2,037,575
(Reversal of) impairment loss on available-for-sale (58) 6,554
investments
Allowance for write-down of inventories - 830
13. INCOME TAX EXPENSE
Year Year ended
ended
12/31/ 12/31/2014
2015
Rmb'000 Rmb'000
(Restated)
Current tax:
PRC Enterprise Income Tax 1,550,078 995,619
Deferred tax (Note 45) (133,206) (90,151)
1,416,872 905,468
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and
Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries
is 25%.
Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable
profit. No Hong Kong Profits Tax has been provided as the Group has no
estimated assessable profit for both years.
The tax charge 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:
Year Year ended
ended
12/31/ 12/31/2014
2015
Rmb'000 Rmb'000
(Restated)
Profit before tax 5,446,652 3,651,440
Tax at the PRC enterprise income tax rate of 25% (2014: 1,361,663 912,860
25%)
Tax effect of share of profit of associates (12,072) (16,255)
Tax effect of share of loss of a joint venture 6,267 8,319
Utilisation of unused tax loss previously not recognised (15,135) (22,201)
Tax effect of expenses not deductible for tax purposes 65,322 22,745
Tax effect of realised gain on disposal of an associate 10,827 -
and a subsidiary
Tax charge for the year 1,416,872 905,468
14. OTHER COMPREHENSIVE INCOME
Tax effect relating to other comprehensive income as follows:
Year ended Year ended
12/31/2015 12/31/2014
Before- Tax Net-of- Before- Tax Net-of-
tax impact income- tax impact income-
amount tax amount tax
amount amount
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Fair value gain on AFS 137,431 (34,358) 103,073 68,301 (17,075) 51,226
financial assets
arising
during the year
Reclassification (65,826) 16,457 (49,369) - - -
adjustments for the
cumulative
gain included in
profit or loss upon
disposal of AFS
financial assets
Share of exchange 367 - 367 - - -
differences of a
subsidiary
Total 71,972 (17,901) 54,071 68,301 (17,075) 51,226
15. DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENTS' EMOLUMENTS
The emoluments paid or payable to each of the 10 (2014: 12) directors and 7
(2014: 5) supervisors are as follows:
Zhan Luo Cheng Ding Wang Dai Zhou Wang Li Zhou Pei Lee Zhang Liu Yao Wu Zhang Shi Lu Fu Zhang
Xiaozhang@ Jianhu@ Tao@ Huikang@ Dongjie Benmeng Jianping Weili^ Zongsheng Jun* Ker-wei Wai Junsheng Haisheng Huiliang Yongming Guohua# Ximin# Xinghai Zhexiang Xiuhua# Total
^ ^ ^ ^ * Tsang* * # # # # #
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 Rmb'000 Rmb'000 Rmb'000
(note (note (note (note (note (note (note iv) (note (note (note v) (note i) (note (note
vi) i) ii) iii) iii) iv) iii) iv) i) i)
2015
Salaries,allowances 197 478 474 227 7 6 7 - - 3 201 6 - - 5 6 5 5 5 5 5 1,642
and
benefits in kind
Bonuses paid and 711 326 54 - - - - - - - - - - - - - - - - - - 1,091
payable
Pension scheme 20 20 20 10 - - - - - - - - - - - - - - - - - 70
contributions
Total emoluments 928 824 548 237 7 6 7 - - 3 201 6 - - 5 6 5 5 5 5 5 2,803
2014
Salaries, 293 460 - 460 2 - - 4 5 - 200 - 54 1 - 4 3 - - 6 6 1,498
allowances and
benefits in kind
Bonuses paid and 480 296 - 182 - - - - - - - - - - - - - - - - - 958
payable
Pension scheme 19 19 - 19 - - - - - - - - - - - - - - - - - 57
contributions
Total emoluments 792 775 - 661 2 - - 4 5 - 200 - 54 1 - 4 3 - - 6 6 2,513
@ Executive directors. The emoluments shown above were mainly 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 mainly for their
services as directors of the Company or its subsidiaries.
* Independent non-executive directors. The emoluments shown above were mainly
for their services as directors of the Company.
# Supervisors. The emoluments shown above were mainly for their services as
supervisors of the Company.
Notes:
(i) Appointed on July 1, 2015.
(ii) Retired on June 30, 2015.
(iii) Appointed on December 29, 2014.
(iv) Resigned on December 29, 2014.
(v) Resigned on April 8, 2014.
(vi) Ms. Luo Jianhu is also the Chief Executive of the Company and her
emoluments disclosed above include those services rendered by her as the Chief
Executive.
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.
The emoluments paid or payable to each of the 8 (2014: 8) senior managements
are as follows:
Ding Zhang Fang Zhu Wang Zhan Zheng Zhang Cheng Wu Total
Huikang Jingzhong Zhexing Yimin Dehua Huagang Hui Xiuhua Tao Junyi
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(note (note (note (note
i) i) ii iii)
and iv)
2015
Salaries, 223 445 445 223 445 445 445 445 - - 3,116
allowances
and benefits
in kind
Bonuses paid 218 218 218 - 188 218 215 58 - - 1,333
and payable
Pension 10 20 20 10 20 20 20 20 - - 140
scheme
contributions
Total 451 683 683 233 653 683 680 523 - - 4,589
emoluments
2014
Salaries, - 456 456 - 345 456 439 439 78 - 2,669
allowances
and benefits
in kind
Bonuses paid - 182 182 - - 182 54 54 - 230 884
and payable
Pension - 19 19 - 14 19 19 19 3 - 112
scheme
contributions
Total - 657 657 - 359 657 512 512 81 230 3,665
emoluments
Notes:
(i) Appointed on July 1, 2015.
(ii) Appointed on October 28, 2014.
(iii) Resigned on March 17, 2014.
(iv) Mr. Cheng Tao is appointed executive director of the Company on July 1,
2015. As such, his emoluments for those services rendered by him as the senior
management in 2015 was included in the director's and supervisor's emoluments.
The emoluments of each of the senior managements were below HK$1,000,000
(equivalent to Rmb837,800 (2014: Rmb788,900)) in both years. Bonuses paid to
senior managements are performance-rated and are determined by the board of
directors of the Company.
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.
16. EMPLOYEES' EMOLUMENTS
The emoluments of the five highest paid individuals in the Group are as
follows:
Year ended Year ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Salaries, allowances and benefits in kind 3,040 5,539
Bonuses paid and payable (Note) 14,815 10,875
Pension scheme contributions 116 101
17,971 16,515
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, 2015 and 2014.
No emoluments nor incentive was waived as an inducement to join the Company and
no compensation for loss of office was paid to any five highest paid
individuals in the Group during both years. Bonuses are determined by reference
to the individual performance of the five highest paid individuals in the
Group.
The five individuals with the highest emoluments in the Group during the year
included five (2014: five) non-director employees.
Their emoluments are within the following bands:
No. of
individuals
Year ended Year
ended
12/31/2015 12/31/
2014
HK$3,000,001 to HK$3,500,000 (equivalent to 1 -
Rmb2,513,401
(2014: Rmb2,366,701) to Rmb2,932,300 (2014:
Rmb2,761,150))
HK$3,500,001 to HK$4,000,000 (equivalent to Rmb 2 4
2,932,301
(2014: Rmb2,761,001) to Rmb3,351,200 (2014:
Rmb3,156,000))
HK$4,500,001 to HK$5,000,000 (equivalent to 1 -
Rmb3,770,101
(2014: Rmb3,550,001) to Rmb4,189,000 (2014:
Rmb3,945,000))
HK$5,500,001 to HK$6,000,000 (equivalent to 1 1
Rmb4,607,901
(2014: Rmb4,339,001) to Rmb5,026,800 (2014:
Rmb4,733,000))
17. DIVIDENDS
Year Year ended
ended
12/31/ 12/31/2014
2015
Rmb'000 Rmb'000
(Restated)
Dividends recognised as distribution during the year:
2015 Interim - Rmb6 cents (2014: 2014 interim Rmb6 cents) 260,587 260,587
per share
2014 Final - Rmb26.5 cents (2014: 2013 Final Rmb25 cents) 1,150,925 1,085,779
per share
1,411,512 1,346,366
The final dividend of Rmb28 cents per share in respect of the year ended
December 31, 2015 (2014: final dividend of Rmb26.5 cents per share in respect
of the year ended December 31, 2014) in the total amount of Rmb1,216,072,000
(2014: Rmb1,150,925,000) has been proposed by the directors and is subject to
approval by the shareholders in the annual general meeting.
18. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on profit for the year
attributable to owners of the Company of Rmb2,989,680,000(2014 (Restated):
Rmb2,264,994,000) and the 4,343,114,500 (2014: 4,343,114,500) ordinary shares
in issue during the year.
Diluted earnings per share presented is the same as basic earnings per share as
there were no potential ordinary shares outstanding for the years ended
December 31, 2015 and 2014.
19. PROPERTY, PLANT AND EQUIPMENT
Leasehold Hotel Ancillary Communication Motor Machinery Construction Total
and
land and facilities and signaling vehicles equipment in progress
buildings equipment
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
COST
At January 638,239 - 819,311 470,202 220,002 546,426 385,790 3,079,970
1, 2014
(Originally
Stated)
Merger - - 268,546 - 35,871 193,613 36,740 534,770
accounting
restatement
At January 638,239 - 1,087,857 470,202 255,873 740,039 422,530 3,614,740
1, 2014
(Restated)
Additions 244,574 - 14,823 15,703 19,951 52,601 1,140,835 1,488,487
Transfer 10,145 - 14,616 3,025 - 1,296 (29,082) -
Disposals - - (9,005) (95,980) (22,753) (47,573) - (175,311)
At December 892,958 - 1,108,291 392,950 253,071 746,363 1,534,283 4,927,916
31, 2014
(Restated)
Additions 17,125 - 35,629 29,952 22,502 42,914 250,107 398,229
Transfer 681,227 549,543 89,901 40,603 - 78,798 (1,440,072) -
Transfer to - - - - - - (242,149) (242,149)
inventory
Disposals - - (1,729) (49,971) (44,927) (37,086) - (133,713)
Disposal of - - - (94) (3,517) (12,431) - (16,042)
a subsidiary
(Note 49)
At December 1,591,310 549,543 1,232,092 413,440 227,129 818,558 102,169 4,934,241
31, 2015
DEPRECIATION
At January 203,781 - 247,967 323,124 146,790 396,266 - 1,317,928
1, 2014
(Originally
Stated)
Merger - - 60,357 - 33,272 144,670 - 238,299
accounting
restatement
At January 203,781 - 308,324 323,124 180,062 540,936 - 1,556,227
1, 2014
(Restated)
Provided for 40,660 - 54,769 46,680 16,656 63,389 - 222,154
the year
Disposals 1,637 - (6,255) (84,587) (14,093) (36,214) - (139,512)
At December 246,078 - 356,838 285,217 182,625 568,111 - 1,638,869
31, 2014
(Restated)
Provided for 62,541 10,365 70,460 36,384 15,783 48,066 - 243,599
the year
Disposals (115) - (1,657) (45,008) (42,854) (35,020) - (124,654)
Disposal of - - - (39) (573) (1,455) - (2,067)
a subsidiary
(Note 49)
At December 308,504 10,365 425,641 276,554 154,981 579,702 - 1,755,747
31, 2015
CARRYING
VALUES
At December 1,282,806 539,178 806,451 136,886 72,148 238,856 102,169 3,178,494
31, 2015
At December 646,880 - 751,453 107,733 70,446 178,252 1,534,283 3,289,047
31, 2014
(Restated)
At January 434,458 - 779,533 147,078 75,811 199,103 422,530 2,058,513
1, 2014
(Restated)
The property, plant and equipment are located in the PRC.
As at December 31, 2014, certain property, plant and equipment have been
pledged as collaterals to secure general banking facilities granted to the
Group. Details of which were set out in Note 52.
During the year ended December 31, 2014, the Group acquired several units of a
building, a whole block of building under renovation and a number of car
parking spaces located in Hangzhou from a related party, Hangzhou Jinji Real
Estate Co., Ltd. ("Jinji Co"), a subsidiary of Communications Group, for a cash
consideration totalling Rmb899,334,000, of which was fully paid during the same
year. The whole block of building was included in construction in progress
since the building was under renovation and has not reached the usable
condition as at December 31, 2014 and was transferred to leasehold land and
buildings during the year ended December 31, 2015.
20. PREPAID LEASE PAYMENTS
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Analysed for reporting purposes as:
Current assets 1,939 2,155
Non-current assets 57,745 66,001
59,684 68,156
The amount represents prepayment of rentals under operating leases for "land
use rights" of land situated in the PRC.
As at December 31, 2015, certain prepaid lease payments have been pledged as
collaterals to secure general banking facilities granted to the Group. Details
of which were set out in Note 52.
21. EXPRESSWAY OPERATING RIGHTS
Rmb'000
COST
At January 1, 2014 (Originally stated) 19,508,332
Merger accounting restatement 4,498,452
At January 1, 2014 (Restated) 24,006,784
Additions 2,685
At December 31, 2014 (Restated) 24,009,469
Disposal (3,653)
Adjustment due to completion of settlement (42,754)
At December 31, 2015 23,963,062
AMORTISATION
At January 1, 2014 (Originally stated) 7,597,199
Merger accounting restatement 1,158,735
At January 1, 2014 (Restated) 8,755,934
Charge for the year 988,148
At December 31, 2014 (Restated) 9,744,082
Charge for the year 991,800
Disposal (2,262)
At December 31, 2015 10,733,620
CARRYING VALUES
At December 31, 2015 13,229,442
At December 31, 2014(Restated) 14,265,387
At January 1, 2014(Restated) 15,250,850
The above expressway operating rights were granted by the Zhejiang 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 and Hanghui Expressway and the toll-collection rights
thereof. The Group is required to manage and operate the expressways in
accordance with the regulations promulgated by the Ministry of Communication
and relevant government authorities. Upon the end of the respective concession
service periods, the toll expressways and their toll station facilities without
residual value, will be returned to the grantors at nil consideration.
As at December 31, 2015 and 2014, the expressway operating rights in respect of
Jinhua Section of the Ningbo-Jinhua Expressway and Hanghui Expressway has been
pledged as collaterals to secure general banking facilities granted to the
Group. Details of which were set out in Note 52.
During the year ended December 31, 2015, a portion of land where the Yuhang
section of Shanghai-Hangzhou expressway occupied was requisitioned by the
government, with the consideration of Rmb53,891,000, leading to the decrease in
expressway operating right with carrying amount of Rmb1,391,000 and recognition
of a gain in other income with amount of Rmb52,500,000.
22. GOODWILL
Rmb'000
COST AND CARRYING VALUES
At January 1 2014 December 31, 2014 and December 31, 2015 86,867
Particulars regarding impairment testing on goodwill are disclosed in Note 24.
23. OTHER INTANGIBLE ASSETS
Customer Securities/ Trading Software Total
bases futures firm seats
licenses
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
COST
At January 1, 2014 101,147 63,083 3,480 81,111 248,821
Additions - - - 21,319 21,319
At December 31, 2014 101,147 63,083 3,480 102,430 270,140
Additions - - - 23,261 23,261
At December 31, 2015 101,147 63,083 3,480 125,691 293,401
AMORTISATION
At January 1, 2014 54,147 - - 40,110 94,257
Charge for the year 6,266 - - 14,027 20,293
At December 31, 2014 60,413 - - 54,137 114,550
Charge for the year 6,266 - - 17,366 23,632
At December 31, 2015 66,679 - - 71,503 138,182
CARRYING VALUES
At December 31, 2015 34,468 63,083 3,480 54,188 155,219
At December 31, 2014 40,734 63,083 3,480 48,293 155,590
The customer bases of Zheshang Securities and Zheshang Futures Broker Co., Ltd.
("Zheshang Futures") are amortised on a straight-line basis over fifteen years
and three years, respectively.
The securities/futures firm licenses of the securities operation are considered
by the management of the Group to have indefinite useful lives because they can
be renewed at minimal cost even though the current licenses are effective for
three years.
The trading seats of the securities operation is considered by the management
of the Group to have an indefinite useful life because there is no economic or
regulatory limit to their useful life.
Software are amortised on a straight-line basis over three to five years.
Particulars of the impairment testing on intangible assets with indefinite
useful lives are disclosed in Note 24.
24. IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH
INDEFINITE USEFUL LIVES
For the purposes of impairment testing, goodwill and other intangible assets
with indefinite useful lives set out in Notes 22 and 23 have been allocated to
four individual cash generating units ("CGUs"), comprising two subsidiaries in
toll operation segment and two subsidiaries in securities operation segment.
The carrying amounts of goodwill and other intangible assets (net of
accumulated impairment losses) as at December 31, 2015 and 2014 allocated to
these units are as follows:
Goodwill Securities/ Trading
futures seats
firm
licenses
12/31/ 12/31/ 12/31/2015 12/31/ 12/31/ 12/31/
2015 2014 2014 2015 2014
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Toll operation
- Zhejiang Jiaxing 75,137 75,137 - - - -
Expressway Co., Ltd.
("Jiaxing Co")
- Zhejiang Shangsan 10,335 10,335 - - - -
Expressway Co., Ltd.
("Shangsan Co")
Securities operation
- Zheshang Securities - - 51,783 51,783 2,080 2,080
- Zheshang Futures 1,395 1,395 11,300 11,300 1,400 1,400
86,867 86,867 63,083 63,083 3,480 3,480
During the years ended December 31, 2015 and 2014, management of the Group
determines that there are no impairment of any of its CGUs containing goodwill
and other intangible assets with indefinite useful lives.
The basis of the recoverable amounts of the above CGUs and their major
underlying assumptions are summarised below:
Jiaxing Co and Shangsan Co
The recoverable amounts of Jiaxing Co and Shangsan Co are determined based on
value in use calculations. The key assumptions for the value in use
calculations relate to discount rates, growth rates, and expected changes in
toll revenue and direct costs during the forecast period. Those calculations
use cash flow projections based on financial budgets approved by management
covering a five-year period and a discount rate the management considered
appropriate. No growth rate has been assumed beyond the five-year period up to
the remaining toll road operating rights which are 13 years (2014: 14 years)
and 15 years (2014: 16 years) for Jiaxing Co. and Shangsan Co., respectively.
Management believes that any reasonably possible change in any of these
assumptions would not cause the aggregate carrying amount of Jiaxing Co's and
Shangsan Co's goodwill to exceed their aggregate recoverable amounts.
Zheshang Securities & Zheshang Futures
The recoverable amounts of Zheshang Securities & Zheshang Futures are
determined based on value in use calculations. The key assumptions for the
value in use calculations relate to the discount rate, growth rates and profit
margin during the forecast period. Those calculations use cash flow projections
based on financial budgets approved by management covering a five-year period
with discount rates management believe appropriate. Growth rate beyond the
five-year period is assumed to be zero. Management believes that any reasonably
possible change in any of these assumptions would not cause the carrying amount
of Zheshang Securities & Zheshang Futures' other intangible assets to exceed
its aggregate recoverable amounts.
25. INTERESTS IN ASSOCIATES
12/31/ 12/31/2014
2015
Rmb'000 Rmb'000
Unlisted 482,749 488,542
investments in
associates, at
cost less
impairment
Share of 100,788 139,324
post-acquisition
profit, net of
dividends
received
583,537 627,866
At December 31,
2015 and 2014,
the Group had
interests in the
following
associates:
Name of entity Form of Place of Percentage of equity interest Principal
activities
business registration and attributable to the Group
structure operation
12/31/2015 12/
31/
2014
% %
Zhejiang Corporate The PRC - 50 Operation
Expressway of petrol
Petroleum stations
Development and
Co., Ltd. sale of
("Petroleum Co") petroleum
(Note i) products
Zhejiang Concord Corporate The PRC 45 45 Investment
Property and real
Investment
Co., Ltd. estate
("Zhejiang development
Concord
Property")
Zhejiang Corporate The PRC 35 35 Finance and
Communications investment
Investment Group
Finance Co.,
Ltd. ("Zhejiang
Communications
Finance")
Zheshang Fund Corporate The PRC 25 25 Asset fund
Management Co., management
Ltd.
("Zheshang
Fund") (Note ii)
Yangtze United Corporate The PRC 9 - Provision
Financial of printing
Leasing Co., services
Ltd. and
("Yangtze United property
Financial leasing
Leasing") (Note
iii)
Zhejiang Corporate The PRC 40 - Investment
Zheshang management
Innovation
Capital
Management Co., and
Ltd. ("Zheshang consulting
Innovation
All of the above associates are accounted for using the equity method in these
consolidated financial statements.
Notes:
(i) On 12 October 2015, the Company entered into an agreement with Zhejiang
Communications Investment Group Industrial Development Co., Ltd. ("Zhejiang
Communications Investment"), a wholly owned subsidiary of Communications Group,
pursuant to which the Company sold the 50% equity interest in Petroleum Co to
Zhejiang Communications Investment at a cash consideration of Rmb142,018,000.
The disposal has been substantially completed when the necessary approvals and
consents obtained by the end of 2015. Subsequently, the change of registration
process has been completed on 4 January 2016. Disposal gain of Rmb916,000 was
made through the transaction.
(ii) 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 2015, the disposal transaction has not been completed and
Zheshang Securities received a refundable deposit of Rmb165,600,000 in respect
of such transfer, of which was included in other payables in Note 39.
The directors of the Company 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.
(iii) When established, 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) Zheshang Innovation Capital Management was established on May 29, 2015.
Zheshang Capital Management Co., Ltd. ("Zheshang Capital Management"), the
subsidiary of the group contributed capital of RMB 12,000, 000 for 40%
shareholding. The Group is able to exercise significant influence over Zheshang
Innovation Capital Management.
The summarised financial information in respect of the Group's material
associates at the end of the reporting period is set out below. This represents
amounts shown in the associate's financial statements prepared in accordance
with HKFRSs:
Zhejiang Communications Finance
12/31/2014 12/31/
2015
Rmb'000 Rmb'000
Current assets 3,168,911 2,849,318
Non-current assets 3,101,430 3,331,312
Current liabilities 5,126,968 5,139,374
For the For the
yearended year
ended
12/31/2015 12/31/
2014
Rmb'000 Rmb'000
Revenue 258,851 293,370
Profit for the year 139,608 153,204
Dividends received from the associate during the year 13,121 -
Reconciliation of the above summarised financial information to the carrying
amount of the interest in Zhejiang Communications Finance recognised in the
consolidated financial statements:
12/31/2015 12/31/
2014
Rmb'000 Rmb'000
Net asset of the associate 1,143,373 1,041,256
Proportion of the Group's ownership interest in Zhejiang 35% 35%
Communications Finance
Carrying amount of the Group's interest in Zhejiang 400,181 364,440
Communications Finance
Yangtze United Financial Leasing
12/31/2015
Rmb'000
Current assets 63,564
Non-current assets 5,826,108
Current liabilities 4,884,944
Yangtze United Financial Leasing
For the
date of
acquisition
to
12/31/2015
Rmb'000
Revenue 84,461
Profit for the period 4,728
Dividends received from the associate during the period -
Reconciliation of the above summarised financial information to the
carrying amount of the interest in Yangtze United Financial Leasing
recognised in the consolidated financial statements:
12/31/2015
Rmb'000
Net asset of the associate 1,004,728
Proportion of the Group's ownership interest in Yangtze 9%
United Financial Leasing
Carrying amount of the Group's interest in Yangtze United 90,426
Financial Leasing
Aggregate information of associates that are not
individually material
12/31/2015 12/31/
2014
Rmb'000 Rmb'000
The Group's share of loss (profit) (999) 11,399
Aggregate carrying amount of the Group's interests in 92,930 263,426
these associates
26. INTEREST IN A JOINT VENTURE
12/31/2015 12/31/
2014
Rmb'000 Rmb'000
Unlisted investment in a joint venture, at cost less 373,470 373,470
impairment
Share of post-acquisition loss (97,870) (72,803)
275,600 300,667
At December 31, 2015 and 2014, the Group had interest in the following joint
venture:
Name of entity Form of Place of Percentage of Principal
equity activities
business registration interest
attributable
to
structure and the Group
operation
12/31/2015 12/31/
2014
% %
Zhejiang Corporate The PRC 50 50 Management of the
Shaoxing Shaoxing
Shengxin
Expressway Co., section of the
Ltd. Ningbo-Jinhua
("Shengxin Co") 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
12/31/ 12/31/
2015 2014
Rmb'000 Rmb'000
Current assets 41,371 41,410
Non-current assets 2,672,775 2,831,259
Current liabilities 55,988 49,912
Non-current liabilities 2,106,959 2,221,423
The above amounts of assets and liabilities include the
following:
Cash and cash equivalents 37,152 37,139
Non-current financial liabilities (excluding trade and 2,040,000 2,150,000
other payables and provisions)
The summarised financial information in respect of the
Group's interest in Shengxin Co which is accounted for
using the equity method at the end of the reporting period
is set out below. This represents amounts shown in the
joint venture's financial statements prepared in accordance
with HKFRSs: (Continued)
For the For the
year year
ended ended
12/31/ 12/31/
2015 2014
Rmb'000 Rmb'000
Revenue 319,882 306,827
Loss for the year (50,135) (66,553)
Dividend received from the joint venture - -
The above loss for the year includes the following:
Depreciation and amortisation (175,837) (172,559)
Interest income 838 996
Interest expense (111,978) (129,244)
Income tax expense (4,464) (4,464)
Reconciliation of the above summarised financial information to the carrying
amount of the interest in Shengxin Co recognised in the consolidated financial
statements:
12/31/ 12/31/
2015 2014
Rmb'000 Rmb'000
Net asset of the joint venture 551,199 601,334
Proportion of the Group's ownership interest in the joint 50% 50%
venture
Carrying amount of the Group's interest in Shengxin Co 275,600 300,667
27. AVAILABLE-FOR-SALE INVESTMENTS
AFS investments comprise:
12/31/ 12/31/
2015 2014
Rmb'000 Rmb'000
Non-current assets:
Unlisted equity securities investments, at cost (Note i) 44,597 38,500
Listed equity securities investments, at fair value (Note 202,441 -
ii)
Corporate bonds listed in the PRC (Note iii) - 122,000
Trust products - 32,131
Financial products (Note iv) 6,507 28,601
Unlisted equity investment at fair value (Note v) 1,382,313 -
1,635,858 221,232
Current assets:
Equity securities 237,260 8,761
Funds 55,982 35,233
Trust products 10,000 57,384
Corporate bonds 50,000 -
Financial products (Note iv) 679,508 468,643
1,032,750 570,021
2,668,608 791,253
As at December 31, 2015, the Group has entered into securities lending
arrangement with clients that resulted in the transfer of listed AFS
investments with total fair value of Rmb173,000 (2014: Rmb29,922,000) to
external clients, which did not result in derecognition of the financial
assets. Details of the collaterals were set out in Note 33.
Notes:
(i) Unlisted equity securities investments represent investments in unlisted
equity securities issued by private entities established in the PRC. They are
measured at cost less impairment at the end of the reporting period because the
range of reasonable fair value estimated is so significant that the directors
of the Company are of the opinion that their fair values cannot be measured
reliably.
(ii) Listed equity securities investments represent stocks listed in PRC with
lock-up period for 3 years since the subscription. The financial instrument was
measured at fair value based on a valuation taking into account the quote stock
prices with adjustment of restriction factors.
(iii) The corporate bonds carried fixed interest of 9.6% per annum with
maturity date on May 31, 2017, and were early redeemed during the year ended
December 31, 2015.
(iv) The financial products comprise products offered by fund or asset
management companies where funds are mainly invested in listed securities,
open-ended funds or asset management plan and the Group's return of investment
is tied to the result of such investments.
(v) Unlisted equity investment mainly includes investment in a special account
managed by China Securities Finance Corporation Limited (the "CSFCL"). Pursuant
to the agreement the Company entered into with the CSFCL, the Company
contributed to a special account managed by the CSFCL in 2015. The Company is
entitled to the profit or loss derived from the special account in proportion
to the funding portion contributed. As at December 31, 2015, the Company
determined the total fair value of the investment according to the Evaluation
Report provided by the CSFCL.
28. INVENTORIES
As at December 31, 2015, the inventories of the Group includes residential
properties held for sales with carrying amount of Rmb272,933,000, which has
been transferred from construction in progress when the management of the Group
decided to sell and obtained the property sales permit.
29. TRADE RECEIVABLES
12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Trade receivables comprise:
Fellow subsidiaries 10,331 3,212 3,077
Third parties 142,044 133,898 102,093
Total trade receivables 152,375 137,110 105,170
Less: Allowance for doubtful debts (1,292) (952) (672)
151,083 136,158 104,498
The Group has no credit period granted to its trade customers of toll operation
and service area businesses. The Group's trade receivable balance for toll
operation is toll receivables from the Expressway Fee Settlement Centre of the
Highway Administration Bureau of Zhejiang Province, which are normally settled
within 3 months. All of these trade receivables were neither past due nor
impaired in both years.
In respect of the Group's asset management service, security commission and
financial advisory service operated by Zheshang Securities Co., Ltd. ("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 management.
The following is an aged analysis of trade receivables net of allowance for
doubtful debts presented based on the invoice date at the end of the reporting
period, which approximated the respective revenue recognition dates:
12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Within 3 months 80,949 117,022 93,882
3 months to 1 year 64,493 18,111 10,453
1 to 2 years 4,679 971 -
Over 2 years 962 54 163
151,083 136,158 104,498
Movement of allowance for doubtful debts
12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
At the beginning of the year 952 672 956
Impairment recognised for the year 340 280 7
Amount reversed during the year - - (291)
At the end of the year 1,292 952 672
The Group determines the allowance for impaired debts based on the evaluation
of collectability and aged analysis of accounts and on management's judgement
including the assessment of change in credit quality and the past collection
history of each client. The directors consider the credit risk of the balance
to be minimal.
30. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING BUSINESS
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Loans to margin clients 10,606,160 8,565,301
Less: Allowance for doubtful debts (55,570) (19,388)
10,550,590 8,545,913
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 collateral.
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, 2015, 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 Rmb31,224,317,000 (2014:
Rmb24,411,134,000). Cash collateral of Rmb1,061,658,000 (2014: Rmb975,337,000)
received from clients was included in accounts payable to customers arising
from securities business in Note 37. As of 31 December 2015 and 2014, no
individual customer with fair value of pledged securities fell below the carry
amount of margin loan.
No aged analysis is disclosed as in the opinion of the directors, the aged
analysis does not give additional value in view of the nature of business of
securities margin financing.
Movement in the allowance for doubtful debts
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Allowance for doubtful debts at the beginning of the year 19,388 8,477
Impairment recognised for the year 36,182 10,911
At end of the year 55,570 19,388
The Group determines the allowance for impaired debts based on the evaluation
of collectability and aged analysis of accounts and on management's judgement
including the assessment of change in credit quality, collateral and the past
collection history of each client. As at December 31, 2015, the balance of
allowance for doubtful debts include individual assessment of Rmb2,552,000
(2014: Rmb2,263,000) and collective assessment of Rmb53,018,000 (2014:
Rmb17,125,000) The concentration of credit risk is limited due to the customer
base being large and unrelated.
31. OTHER RECEIVABLES AND PREPAYMENTS
12/31/ 12/31/2014 01/01/2014
2015
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Current
Entrusted loan and interest receivable
from a related party (Note 54(ii)) 634,436 491,911 54,000
Interest receivables 269,080 163,609 122,392
Financial products investment receivables - 17,000 168,000
(Note)
Prepayments 41,977 87,280 30,915
Bond and listed equity subscription deposit 176,377 - -
Consideration receivable in relation to the 44,759 - -
disposal to
Communications Group of an associate (Note 25)
and a subsidiary (Note 49)
Others 65,170 97,763 102,594
1,231,799 857,563 477,901
Non-Current
Entrusted loans and interest receivables from - 50,828 401,400
a related party (Note 54(ii))
1,231,799 908,391 879,301
Note: The amount represents short-term fixed-yield and principal protected bank
financial products, which have been matured and fully redeemed during the year
ended December 31, 2015.
32. HELD FOR TRADING INVESTMENTS
12/31/ 12/31/2014
2015
Rmb'000 Rmb'000
Held for trading investments include:
Listed securities in the PRC, at fair value:
Equity securities 221,699 89,877
Open-end equity funds 191,967 97,718
Bonds in the PRC, at fair value:
Listed in Shanghai/Shenzhen Stock Exchange with 1,170,952 621,813
fixed interest ranging from 0.2% to 8.5%
(2014: 4.36% to 8.5%) per annum
Unlisted with fixed interest ranging from 3.18% 2,176,606 1,315,332
to 8.70%
(2014: 4.33% to 8.70%) per annum
3,761,224 2,124,740
33. FINANCIAL ASSETS HELD UNDER RESALE
AGREEMENTS
12/31/ 12/31/2014
2015
Rmb'000 Rmb'000
Analysed by collateral type:
Bonds 1,921,876 1,316,942
Stock securities 3,037,279 1,407,656
4,959,155 2,724,598
Analysed by market:
Inter bank market 1,521,876 1,316,942
Shanghai/Shenzhen Stock Exchange 3,437,279 1,407,656
4,959,155 2,724,598
The collaterals include both equity and debt securities listed in the PRC. As
at December 31, 2015, the fair value of equity securities and debt securities
held as collaterals was Rmb6,394,246,000 (2014: Rmb4,762,681,000) and
Rmb1,947,197,000 (2014: Rmb1,320,746,000), respectively.
34. BANK BALANCES 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
institution). 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 institution.
Bank balances held on behalf of customers carry interest at market rates which
range from 1.62% to 2.12% (2014: 1.62% to 1.98%) per annum.
Bank balances held on behalf of customers that are denominated in currencies
other than the functional currency of the respective group entities are set out
below:
HKD USD
Rmb'000 Rmb'000
As at December 31, 2015 22,226 125,058
As at December 31, 2014 12,490 42,862
35. BANK BALANCES AND CASH
12/31/ 12/31/2014 01/01/2014
2015
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Time deposits with original maturity over three 270,000 761,320 704,459
months
Unrestricted bank balances and cash 4,207,862 2,744,222 1,239,037
Time deposits with original maturity of less 775,189 612,341 676,222
than three months
Cash and cash equivalents 4,983,051 3,356,563 1,915,259
5,253,051 4,117,883 2,619,718
Bank balances carry interest at the average market rate of 0.35% (2014: 0.35%)
per annum. Time deposits carry interest at fixed rates ranging from 1.35% to
6.50% (2014: 1.35% to 3.30%) per annum.
Bank balances and cash that are denominated in currencies other than the
functional currency of the respective group entities are set out below:
HKD USD
Rmb'000 Rmb'000
As atDecember 31, 2015 14,562 33,387
As at December 31, 2014 6,098 28,832
36. PLACEMENTS FROM OTHER FINANCIAL INSTITUTIONS
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Placements from - 500,000
Industrial Bank Co., Ltd (unsecured)
CSFCL (secured) 200,000 1,440,000
200,000 1,940,000
These placements with interest rate of 6.30% (2014: 5.8% to 7.5%) per annum are
repayable within 1 year from the end of the reporting period.
The placements from CSFCL were secured by a cash deposit of Rmb86,704,000
(2014: Rmb168,161,000) and debt and equity securities with total fair value of
Rmb184,400,000 (2014: Rmb178,608,000) as at December 31, 2015.
37. ACCOUNTS PAYABLE TO CUSTOMERS ARISING FROM SECURITIES BUSINESS
The amounts mainly represent money held on behalf of clients at the banks and
at the clearing houses by the Group.
The amounts also include payables for securities/futures business as well as
cash collateral 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, 2015, Rmb1,971,098,000 (2014: Rmb975,337,000) cash
collateral 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:
HKD USD
Rmb'000 Rmb'000
As at December 31, 2015 22,226 125,058
As at December 31, 2014 12,490 42,862
38. TRADE PAYABLES
Trade payables mainly represent the construction payables for the improvement
projects of toll expressways. The following is an aged analysis of trade
payables presented based on the invoice date:
12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Within 3 months 422,424 464,221 235,778
3 months to 1 year 230,650 127,906 86,391
1 to 2 years 117,341 76,657 37,974
2 to 3 years 35,425 11,889 13,641
Over 3 years 102,776 315,978 381,169
908,616 996,651 754,953
39. OTHER PAYABLES AND ACCRUALS
12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Other liabilities:
Accrued payroll and welfare 1,609,626 855,620 559,204
Advance from rental and advertising 62,151 96,763 94,124
customers
Toll collected on behalf of other toll 2,758 2,759 5,057
roads
Retention payable 123,917 181,242 148,050
Deposit received for disposal of an 165,600 103,500 -
associate (Note 25(ii))
Deposits of equity return swaps (Note) 77,000 - -
Payables to limited partnership in 133,088 19,737 -
subsidiaries
Others 287,673 245,684 197,940
2,461,813 1,505,305 1,004,375
Other accruals 347,266 83,007 21,641
2,809,079 1,588,312 1,026,016
Note: Equity return swaps contain non-closely related embedded derivatives as
their returns are linked to the fluctuation of specific stock price. The
embedded derivatives are accounted for under note 44 after being bifurcated
from their respective host contracts.
40. BANK AND OTHER BORROWINGS
12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Bank loans 2,297,951 2,580,000 3,120,000
Loan from related parties (See Note54(i) 1,070,000 1,070,000 1,110,000
(a), 54(ii))
3,367,951 3,650,000 4,230,000
Secured (Note) 630,000 2,480,000 2,920,000
Unsecured 2,737,951 1,170,000 1,310,000
3,367,951 3,650,000 4,230,000
Carrying amount repayable:
Within one year 1,777,951 1,690,000 980,000
More than one year, but not exceeding two 400,000 550,000 1,640,000
years
More than two years but not more than five 860,000 710,000 760,000
years
More than five years 330,000 700,000 850,000
3,367,951 3,650,000 4,230,000
Less: Amounts due within one year (1,777,951) (1,690,000) (980,000)
Amounts shown under non-current liabilities 1,590,000 1,960,000 3,250,000
12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
The bank and other borrowings comprise:
Fixed-rate borrowings 2,047,951 620,000 1,110,000
Variable-rate borrowings 1,320,000 3,030,000 3,120,000
3,367,951 3,650,000 4,230,000
The range of effective interest rates
(which are also agreed to contracted
interest rates) on the Group's borrowings
are as follows:
12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Effective interest rate:
Fixed-rate borrowings 4.13%-5.10% 5.24% - 5.04% -
5.40% 5.40%
Variable-rate borrowings 4.275%-5.90% 5.40% - 5.54% -
6.60% 6.77%
Note: Details of the securities pledged for
the grant of borrowings to the Group were
set out in Note 52.
The Group's borrowings were all dominated
in the functional currency of the group
entities as at December 31, 2015 and 2014.
41. SHORT-TERM FINANCING NOTE PAYABLE
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Unsecured
Short-term loan note (Note i) 600,000 -
Beneficial certificates (Note ii) 16,100 883,570
616,100 883,570
Notes:
(i) During the year ended December 31, 2015, Zheshang Securities issued a
short-term loan note at the principal amount of Rmb11,000,000,000, which was
interest bearing at of from 2.93% to 3.20% per annum, out of which
Rmb500,000,000 was matured and repaid. As at December 31, 2015,the remaining
Rmb600,000,000 was repayable upon maturity.
(ii) As at December 31, 2014, there was Rmb883,570,000 principals received
from investors for subscription of beneficial certificates issued by Zheshang
Securities, which bear fixed rate interest ranging from 5.1% to 7.0% per annum.
The amount was matured in 2015 and had been repaid in full on the maturity
date.
During the year ended December 31, 2015, there were Rmb2,733,560,000 principals
received from investors for subscription of beneficial certificates issued by
Zheshang Securities, which bear interest rates ranging from 0.7% to 6.47% per
annum, out of which Rmb2,717,460,000 was matured and repaid. As at December 31,
2015, the remaining beneficial certificates of the remaining Rmb16,100,000 and
its interests are repayable upon maturity.
42. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Analysed as collateral type:
Bonds 3,485,380 2,400,257
Other rights and interests in debt instruments 1,900,000 3,898,800
5,385,380 6,299,057
Analysed by market:
Shanghai Stock Exchange 350,000 70,000
Inter-bank market 3,135,380 2,330,257
Other financial institutions 1,900,000 3,898,800
5,385,380 6,299,057
As of 31 December 2015, the above financial assets sold under repurchase
agreements include those repurchase agreements entered into with qualified
investors, which amounted to Rmb5,385,380,000 (31 December 2014:
6,299,057,000), 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 31 December 2015, the Group enters into repurchase agreements with
certain counterparties. The proceeds from selling such securities are presented
as financial assets sold under repurchase agreements. Because the Group sells
the contractual rights to the cash flows of the securities, it does not have
the ability to use the transferred securities during the term of the
arrangement.
The following tables provides a summary of carrying amounts and fair values
related to transferred financial assets that are not derecognised in their
entirety and the associated liabilities as at December 31, 2015:
Held for Financial Loans to Others Total
trading assets held customers
investments under arising
resale
agreements from margin
financing
business
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Carrying amount of 1,466,278 1,521,876 2,052,846 718,769 5,759,769
transferred assets
Carrying amount of (1,301,409) (1,513,971) (1,900,000) (670,000) (5,385,380)
associated
liabilities
Net position 164,869 7,905 152,846 48,769 374,389
43. BONDS PAYABLE
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Subordinated bonds (Note) 8,700,000 1,200,000
Long term beneficial certificates 1,900,000 -
10,600,000 1,200,000
Less: subordinated bonds due within 1year 3,000,000 -
Amounts shown under non-current liabilities 7,600,000 1,200,000
Notes:
On September 22, 2014, Zheshang Securities issued a four-year subordinated bond
in the principal amount of Rmb1,000,000,000, with a redemption option
exercisable at par value plus the unpaid interests at the second anniversary
since the date of issue, out of which a principal amount of Rmb300,000,000 was
subscribed by the Company. The annual interest rate in first two years is
6.30%, and which will be 9.30% for the remaining two years if the issuer does
not exercise the option of redemption.
On March 17, 2015, Zheshang Securities issued a four-year subordinated bond in
the principal amount of Rmb1,500,000,000, with a redemption option exercisable
at par value plus the unpaid interests at the second anniversary since the date
of issue. The annual interest rate in first two years is 5.80%, and which will
be 8.80% for the remaining two years if the issuer does not exercise the option
of redemption.
On February 3, 2015, Zheshang Securities issued a five-year unsecured corporate
bond at the principal amount of Rmb1,500,000,000, with the redemption option
exercisable by the bondholders at the third anniversary of the date of issue.
The corporate bond bears fixed interest rate of 4.9% per annum with interest to
be paid annually in arrears for the first three years. At the third anniversary
of the date of issue, the bondholders has the right to require Zheshang
Securities to redeem the outstanding corporate bond at an amount equals to its
principal amount. If the redemption option is not exercised, the interest rate
would be re-priced for the remaining period of two years till maturity at that
time.
Other subordinated bonds without redemption option bear fixed interest rates.
44. DERIVATIVE FINANCIAL ASSETS/LIABILITIES
The Group entered into numbers of equity return swaps contracts with its
customers of securities business. The notional principal amounts of the Group's
equity return swaps contracts as at December 31, 2015 in relation to equity
return swaps contracts were Rmb205,000,000 (December 31, 2014: Rmb nil).
Derivative financial assets of Rmb2,288,000 and derivative financial
liabilities of Rmb4,258,000 has been recognized for the fair values of those
embedded derivatives as at December 31, 2015.
45. 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:
12/31/2015 12/31/2014 01/01/2014
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Deferred tax assets 329,526 97,135 84,655
Deferred tax liabilities (262,128) (145,042) (205,638)
67,398 (47,907) (120,983)
The following are the major deferred tax liabilities and assets recognised and
movements thereon during the current and prior years:
Changes in Difference Fair value Temporary Total
fair value in tax and adjustment differences
of
held for accounting of long of accrued
trading
and depreciation term expenses
available- of assets and
for-sale property impairment
plant
investments and losses
equipment
and
expressway
operating
rights
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At January 01, 2014 27,276 147,536 113,327 (82,501) 205,638
(Originally stated)
Merger accounting - (84,655) - - (84,655)
restatement
At January 01, 2014 27,276 62,881 113,327 (82,501) 120,983
(Restated)
Charge (credit) to 10,079 (24,123) (8,866) (67,241) (90,151)
profit or loss
Charge to other 17,075 - - - 17,075
comprehensive income
At December 31, 2014 54,430 38,758 104,461 (149,742) 47,907
(Restated)
Charge (credit) to 11,219 (15,408) (8,866) (120,151) (133,206)
profit or loss
Charge to other 17,901 - - - 17,901
comprehensive income
At December 31, 2015 83,550 23,350 95,595 (269,893) (67,398)
As at December 31, 2015, the Group had unused tax losses of approximately
Rmb430,964,000 (2014 (Restated): Rmb600,877,000). No deferred taxation asset
has been recognised due to the unpredictability of future profit streams. Such
unrecognised tax losses will expire within 2019.
46. SHARE CAPITAL
Number of shares Share capital
12/31/2015 12/31/2015
and 2014 and 2014
Rmb'000 Rmb'000
Registered, issued and fully paid:
Domestic shares of Rmb1 each 2,909,260 2,909,260
H Shares of Rmb1 each 1,433,855 1,433,855
4,343,115 4,343,115
The domestic shares are not currently listed on any stock exchange.
The H Shares have been listed on the Stock Exchange since May 15, 1997. The H
Shares were admitted to the Official List on May 5, 2000 and their dealings on
the London Stock Exchange commenced on the same day.
On February 14, 2002, the United States Securities and Exchange Commission,
following the approval by the Board of Directors and the China Securities
Regulatory Commission, declared the registration statement in respect of the
ADSs evidenced by ADRs representing the deposited H Shares of the Company
effective.
All the domestic shares and H Shares rank pari passu with each other as to
dividends and voting rights.
47. NON-CONTROLLING INTERESTS
At January 1, 2014 (Originally stated) 3,696,421
Merger accounting restatement 19,991
Balance at January 1, 2014 (Restated) 3,716,412
Share of total comprehensive income 505,602
Deregistration of a subsidiary (Note i) (1,420)
Dividend paid to non-controlling interests (93,021)
At December 31, 2014 (Restated) 4,127,573
Share of total comprehensive income 1,066,051
Contribution by non-controlling-interests 5,000
Acquisition of additional interest of a non-wholly owned subsidiary 171,179
(Note ii)
Dividend paid to non-controlling interests (107,812)
At December 31, 2015 5,261,991
Notes:
(i) During the year ended December 31, 2014, the Group has deregistered
Hangzhou Roadtone Advertising Co., Ltd., a 51% owned subsidiary, resulting in
the reduction of non-controlling interest of Rmb1,420,000.
(ii) As detailed in Note 2, in December 2015, the equity interest held by the
group increased from 80.614% to 88.674% as the company has made an additional
capital contribution to Hangui Co. The acquisition of additional interest in
the subsidiary resulted in an increase of non-controlling interest by
Rmb171,179,000.
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 55) 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
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Current assets 52,844,339 34,149,648
Non-current assets 5,272,372 3,633,244
Current liabilities 39,320,773 27,550,416
Non-current liabilities 8,000,644 1,474,595
Equity attributable to owners of the Company 6,106,965 5,014,542
Non-controlling interests 4,688,329 3,743,339
For the For the
year year
ended ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Revenue 6,680,544 3,392,626
Expenses (4,342,360) (2,172,342)
Profit for the year 2,338,184 1,220,284
Other comprehensive income 54,229 51,458
Total comprehensive income 2,392,413 1,271,742
Profit attributable to owner of the Company 1,329,195 738,815
Profit attributable to non-controlling interests 1,008,989 481,469
2,338,184 1,220,284
Total comprehensive income attributable to owner of the 1,357,473 765,649
Company
Total comprehensive income attributable to 1,034,940 506,093
non-controlling interests
2,392,413 1,271,742
For the For the
year year
ended ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Dividends paid to non-controlling shareholders (94,950) (75,960)
Net cash (outflow) inflow from operating activities (5,201,354) 1,443,261
Net cash outflow used in investing activities (1,235,019) (1,113,220)
Net cash inflow from financing activities 8,602,933 983,570
Net cash inflow 2,166,560 1,313,611
Yuhang Co
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Current assets 345,139 70,876
Non-current assets 881,847 1,068,890
Current liabilities 310,993 311,917
Non-current liabilities 158,035 108,391
Equity attributable to owners of the Company 386,558 366,924
Non-controlling interests 371,400 352,534
For the For the
year year
ended ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Revenue 133,966 92,944
Expenses (72,899) (61,015)
Profit for the year 61,067 31,929
For the For the
year year
ended ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Profit and total comprehensive income
- attributable to owner of the Company 31,143 16,284
- attributable to non-controlling interests 29,924 15,645
61,067 31,929
Dividends paid to non-controlling shareholders (11,058) (11,058)
Net cash inflow from operating activities 30,456 50,048
Net cash outflow used in investing activities (101,279) (119,571)
Net cash inflow from financing activities 52,281 20,279
Net cash outflow (18,542) (49,244)
48. 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.
49. DISPOSAL OF A SUBSIDIARY
On August 31, 2015, the Company entered into an agreement with Zhejiang
Communications Resources Investment Co., Ltd. ("Zhejiang Communications
Resources"), a fellow subsidiary of the Communications Group, pursuant to which
the Company sold the 100% equity interest in Zhejiang Expressway Maintenance
Co., Ltd. ("Maintenance Co") to Zhejiang Communications Resources at a cash
consideration of Rmb41,084,000. The disposal was completed on September 14,
2015.
Rmb'000
Consideration received:
Cash received 38,343
Deferred cash consideration 2,741
Total consideration 41,084
9/14/2015
Rmb'000
Analysis of assets and liabilities over which control was lost:
Property, plant and equipment 13,975
Inventories 4,663
Trade receivables 47,433
Other receivables and prepayments 544
Bank balances and cash 19,602
Trade payables (27,646)
Other payables and accruals (18,366)
Net assets disposed of 40,205
Gain on disposal of a subsidiary:
Consideration received and receivable 41,084
Net assets disposed of 40,205
Gain on disposal 879
Net cash inflow arising on disposal:
Cash received 38,343
Less: bank balances and cash disposed of (19,602)
18,741
50. COMMITMENTS
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Authorised but not contracted for:
- Purchase of machinery and equipment 312,220 431,405
- Renovation of service areas 31,340 67,700
- Acquisition and construction of properties 317,630 308,049
- Equity investments - 213,000
661,190 1,020,154
51. OPERATING LEASES
The Group as lessee
Year ended Year ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Minimum lease payments 84,973 76,766
Contingent rental expenses 183 1,721
85,156 78,487
At the end of the reporting period, the Group had commitments for future
minimum lease payments under non-cancellable operating leases which fall due as
follows:
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Within one year 73,567 50,789
In the second to fifth years inclusive 81,930 85,594
Over five years 502 725
155,999 137,108
Operating lease payments represent rentals payable by the Group for certain
service areas along expressways located in Zhejiang, Tianjin, Shandong and
Henan and the operating branches of Zheshang Securities and Zheshang Futures.
They are negotiated for an average term of three to ten years and some of the
rentals contain both a fixed element and a contingent element linked to sales.
The above commitment represented the minimum lease payments payable to lessors
only and do not include any contingent rent elements.
The Group as lessor
The Group leased their service areas and communication ducts and part of spare
office premises under operating lease arrangements. Leases are negotiated for
terms ranging from 1 to 25 years and rentals are fixed annually.
At the end of the reporting period, the Group had contracted with tenants for
the following future minimum lease payments:
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Within one year 114,063 102,743
In the second to fifth years inclusive 141,642 102,860
After five years 43,711 29,708
299,416 235,311
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
above commitment represented the minimum lease payments from lessees only and
do not include any contingent rent elements.
52. PLEDGE OF ASSETS
At the end of reporting period, the Group had pledged the following assets to
banks as securities against general banking facilities granted to the Group:
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Property, plant and equipment - 747,456
Expressway operating rights 4,086,513 4,930,148
Prepaid lease payments - 39,251
4,086,513 5,716,855
53. CONTINGENT LIABILITIES
12/31/ 12/31/
2015 2014
Rmb'000 Rmb'000
Guarantees given to bank, in respect of a joint venture 1,021,374 1,076,910
(Note)
Note: The Group provided a financial guarantee to Shengxin Co, a 50% owned
joint venture of the Group, in favour of a bank for 50% of its outstanding bank
borrowings and interest. As at December 31, 2015, the bank borrowings of
Shengxin Co and accrued interest amounted to Rmb2,040,000,000 (2014:
Rmb2,150,000,000) and Rmb2,749,000 (2014: 3,820,000), respectively. The
directors of the Company consider that the fair value of the guarantee is
insignificant at initial recognition and default by the guaranteed party is not
probable as at December 31, 2015 and 2014.
54. RELATED PARTY TRANSACTIONS AND BALANCES
Other than disclosed elsewhere in the consolidated financial statements, during
the year, the Group also entered into the following significant transactions
with related parties:
(i) Transactions and balances with government related parties
The Group operates in an economic environment currently predominated by
entities directly or indirectly owned or controlled by the PRC government
("government-related entities"). In addition, the Group itself is part of a
larger group of companies under the Communications Group which is controlled by
the PRC government. However, due to the business nature, in respect of the
Group's toll road and securities business, the directors are of the opinion
that it is impracticable to ascertain the identity of counterparties and
accordingly whether the transactions are with other government-related entities
in the PRC. Details of other significant transactions with government related
parties are summarised below:
(a) Communications Group
Equity transactions
As disclosed in Note 2, on August 5, 2015, the Company entered into an
agreement with Communications Group pursuant to which the Company purchased
from Communications Group a 80.614% equity interest in the Hanghui Co held by
Communications Group at a cash consideration of Rmb1,699,348,000.
As disclosed in Note 25, on October 12, 2015, the Company entered into an
agreement with Zhejiang Communications Investment, pursuant to which the
Company sold the 50% equity interest in an associate, Petroleum Co to Zhejiang
Communications Investment at a cash consideration of Rmb142,018,000. As at
December 31, 2015, Rmb100,000,000 has been paid by Zhejiang Communications
Investment. Rmb35,676,000 out of the remaining Rmb42,018,000 has been paid in
January 2016.
As disclosed in Note 49, on August 31, 2015, the Company entered into an
agreement with Zhejiang Communications Resources, pursuant to which the Company
sold the 100% equity interest in Maintenance Co to Zhejiang Communications
Resources at a cash consideration of Rmb41,084,000.
Entrusted loans
Pursuant to the entrusted loan contracts entered into between Hanghui Co and
Communications Group on March 12, 2013, Communications Group agreed to provide
Hanghui Co with entrusted loans amounting to Rmb570,000,000 at a fixed interest
rate of 5.24% per annum, which have been renewed for another three years on
August 10, 2015, at a fixed interest rate of 4.55% per annum, with maturity
date of August 10, 2018.
For the year For the year
ended ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Interest expenses incurred 26,982 30,227
Management and Administrative services
In July 1, 2015, the Company entered into agreements with the Communications
Group, pursuant to which, the Company would provide management and
administrative services to two toll roads of the Communications Group,
including Shenjiahuhang Expressway and Shensuzhewan Expressway. According to
the agreements, the Company would charge the Communications Group management
fee based on actual cost basis. During this year, a total management fee of
Rmb397,000 has been charged to the Communications Group.
Other transactions
For the year For the year
ended ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Toll road service area leasing income earned (Note i) 9,736 9,162
Toll road service area management fee paid (Note i) 2,600 2,300
Property leasing income earned 4,202 3,552
Road maintenance service expenses incurred (Note ii) 115,953 61,451
Toll road related inspection services income earned - 6,517
Toll road related inspection services expense 6,788 -
incurred
Notes:
(i) Pursuant to the leasing and operation agreement entered into between
Jinhua Co (as defined in Note 55) and Zhejiang Communications Investment,
Jinhua Co leased the toll road service area to Zhejiang Communications
Investment and Zhejiang Communications Investment managed the operation of the
service area and the advertising business in respect of the toll road service
area. Such business began from January 1, 2011 and will be expired at the same
time with the operating right in 2030.
Pursuant to the leasing and operation agreements entered into between Hanghui
Co and Zhejiang Communications Investment, Hanghui Co leased the toll road
service area to Zhejiang Communications Investment and Zhejiang Communications
Investment managed the operation of the service. Such business began from
January 1, 2011 and will be expired at the same time with the operating right
for respective expressway sections in 2029 to 2031.
(ii) Among the road maintenance service expenses charged by Communications
Group, Rmb56,208,000 and Rmb46,048,000 have been incurred by Hanghui Co, during
the period from January 1, 2015 till November 9, 2015 and the year ended
December 31, 2014 respectively, which is prior to the date when Hanghui Co, has
been merged into the Group.
(b) Transactions with other government related parties
Petroleum Co
For the year For the year
ended ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Purchase of petroleum products 1,445,196 1,931,466
Pursuant to the operation management agreement entered into between Zhejiang
Expressway Investment Development Co., Ltd. ("Development Co"), a wholly owned
subsidiary of the Company, and Petroleum Co in respect of the petrol stations
in the service areas along the Shanghai-Hangzhou-Ningbo and Shangsan
Expressways, Petroleum Co assist Development Co in running their petrol
stations along these roads. Petroleum Co is a government related entity.
Others
The Group has entered into various significant transactions, including deposit
placements, borrowings and other general banking facilities, with certain banks
and financial institution which are government-related entities in its ordinary
course of business. In view of the nature of those banking transactions, the
directors are of the opinion that separate disclosure would not be meaningful.
(ii) Transactions and balances with associates and other non-government
related parties
Financial service provided by Zhejiang Communications Finance
The Group entered into a financial services agreement with Zhejiang
Communications Finance. Pursuant to the agreement, Zhejiang Communications
Finance agreed to provide the Group with the deposit services, the loan and
financial leasing services, the clearing services and other financial services.
Loan advanced from Zhejiang Communications Finance
Zhejiang Communications Finance provided Hanghui Co with several long-term
loans with aggregated amount of Rmb450,000,000 at variable interest rates
ranging from 4.275% to 4.513% per annum, with maturities in 2016 and 2017.
Also, Zhejiang Communications Finance provided Hanghui Co with short-term loans
amounted to Rmb50,000,000 and Rmb50,000,000, at fixed interest rates of 5.40%
and 5.10% per annum, in 2014 and 2015 respectively. The short-term loan of
Rmb50,000,000 due in 2015 was fully repaid during the year.
During the year, the Group had obtained advance of Rmb350,000,000 from Zhejiang
Communications Finance which carried interest at a fixed interest rate of 4.46%
per annum. The loan was fully repaid during the same year.
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Outstanding loan payable balances:
repayable within one year 250,000 50,000
repayable over one year 250,000 450,000
For the For the
year year
ended ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Interest expenses incurred 26,290 27,189
Deposits to Zhejiang Communications Finance
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Bank balances and cash
- Time deposits with original maturity over three 65,000 20,000
months
- Cash and cash equivalents 480,471 575,929
545,471 595,929
For the For the
year year
ended ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
(Restated)
Interest income earned 3,295 2,321
Short-term loan advanced to Zhejiang Concord Property
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Outstanding loan receivable balances 600,000 500,000
Interest receivables 34,436 42,739
634,436 542,739
Analysed for reporting purpose as:
Current assets (Note 31) 634,436 491,911
Non-current assets (Note 31) - 50,828
634,436 542,739
For the year For the year
ended ended
12/31/2015 12/31/2014
Rmb'000 Rmb'000
Interest income earned 44,912 43,024
During the year, the Group advanced additional entrusted loans to Zhejiang
Concord Property totalling Rmb100,000,000 (2014: Rmb100,000,000) and received
settlement of loan principals and interests amounting to Rmb450,000,000 (2014:
Rmb50,000,000) and Rmb53,215,000 (2014: Rmb5,686,000), respectively. The
amounts were unsecured and repayable in accordance with the terms of entrusted
loan agreements entered into between the Group and Hangzhou Concord Group. The
amounts carried interests at an effective interest rate of 8% (2014: 10%) per
annum. All entrusted loans in both years were guaranteed by Zhejiang World
Trade Property Development Co., Ltd., which is the controlling shareholder of
Zhejiang Concord Property, an independent third party of the Group, in full.
(iii) Key management emoluments
The remuneration of the directors, supervisors and key management personnel
during the year was Rmb7,392,000 (2014 (Restated): Rmb6,178,000) including
retirement benefit scheme contribution of Rmb210,000 (2014 (Restated):
Rmb169,000) which is determined by the performance of the individuals and the
market trends.
55. PARTICULARS OF SUBSIDIARIES OF THE COMPANY
Name of Date and place Registered and Percentage of equity
subsidiary interest
of paid-in attributable to the Company
registration capital
Rmb Direct Indirect Principal
activities
12/31/2015 12/31/2014 12/31/ 12/31/2014
2015
% % % %
(Restated) (Restated)
Zhejiang Note 1 75,223,000 51 51 - - Management of the
Yuhang Yuhang Section of
Expressway
Co., Ltd.
("Yuhang Co") the
Shanghai-Hangzhou
Expressway
Jiaxing Co Note 2 1,859,200,000 99.999454 99.999454 - - Management of the
Jiaxing Section
of
the
Shanghai-Hangzhou
Expressway
Shangsan Co Note 3 2,400,000,000 73.625 73.625 - - Management of the
Shangsan
Expressway
Development Note 4 120,000,000 100 100 - - Operation of
Co service areas as
well as
roadside
advertising along
the
expressways
operated by the
Group
Zhejiang Note 5 16,000,000 - - *70 *70 Provision of
Expressway advertising
Advertising Services
Co., Ltd.
("Advertising
Co")
Zhejiang Note 6 8,000,000 100 100 - - Provision of
Expressway vehicle towing,
Vehicle repair
Towing and
Rescue and emergency
Services Co., rescue services
Ltd. ("Towing
Co")
Zheshang Note 7 3,000,000,000 - - **52.15 **52.15 Operation of
Securities securities
business
Zheshang Note 8 500,000,000 - - ***52.15 ***52.15 Operation of
Futures securities
business
Zheshang Note 9 100,000,000 - - ***52.15 ***52.15 Operation of
Capital securities
Management business
Zheshang Note 10 500,000,000 - - ***52.15 ***52.15 Provision of
Securities asset management
Co., Ltd. service
Asset
Management
("Asset
Management")
Ningbo Note 11 1,000,000 - - ***52.15 ***52.15 Provision of
Dongfang investment
Jujin management
Investment
Management
Co., Ltd and advisory
("Dongfang services
Jujin")
Ningbo Note 12 29,150,000 - - ***16.37 ***16.37 Provision of
Dongfang investment
Jujin Jiahua management and
Investment
Management advisory and
Center private equity
(Limited investments
Partnership)
("Dongfang
Jujin
Jiahua")
Zhejiang Note 13 200,000,000 - - ***52.15 ***52.15 Trading of future
Zheqi Co.,
Ltd.
("Zhejiang
Zheqi")
Zhejiang Note 14 1,900,000,000 100 100 - - Management of the
Jinhua Jinhua Section
Yongjin
Expressway
Co., Ltd.
("Jinhua Co") of the
Ningbo-Jinhua
Expressway
Hanghui Co Note 15 1,812,280,000 88.674 80.614 - - Management of the
Zhejiang Section
of the
Hangzhou-Ruili
Expressway
Hangzhou Note 16 206,103,000 - - ***23.48 - Provision of
Jujin Jiawei investment
Investment management and
Mangement
(Limited advisory and
Partnership) private equity
("Jujin investments
Jiawei")
Zheshang Note 17 8,011,000 - - ***52.15 - Trading of future
Futures (Hong
Kong) Co.,
Limited
Maintenance Note 18 30,000,000 - 100 - - Management of
Co toll road
* The company is a subsidiary of Development Co, a wholly-owned
subsidiary of the Company, and, accordingly, are accounted for as subsidiaries
by virtue of the Group's control over them.
** 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.
*** 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 it.
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: Development Co was established on May 28, 2003 in the PRC as a limited
liability company.
Note 5: Advertising Co was established on June 1, 1998 in the PRC as a limited
liability company.
Note 6: Towing Co was established on July 31, 2003 in the PRC as a limited
liability company.
Note 7: Zheshang Securities was established on May 9, 2002 in the PRC as a
limited liability company. On November 16, 2013, the board of directors of the
Company announced that Zheshang Securities proposed to seek a separate listing
of its shares as A shares on the Shanghai Stock Exchange. This proposed
spin-off for separate listing has not yet been completed at the end of the
reporting period.
Note 8: Zheshang Futures was established on September 7, 1995 in the PRC as a
limited liability company.
Note 9: 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 reduced from Rmb300,000,000 to Rmb100,000,000 during the
year ended December 31, 2014.
Note 10: Asset Management was established on July 22, 2013 in the PRC as a
limited liability Company.
Note 11: Dongfang Jujin was established on March 25, 2014 in the PRC as a
limited liability company.
Note 12: Dongfang Jujin Jiahua was established on April 11, 2014 in the PRC as
a limited partnership. Pursuant to the partnership agreement, Dongfang Jujin is
a general partner, while Zheshang Capital Management and other two individuals
are limited partners of the partnership. The directors of the Company consider
that the Group has the practical ability to direct the relevant activities of
Dongfang Jujin Jiahua unilaterally, and it is therefore classified as a
subsidiary of the Group.
Note 13: Zhejiang Zheqi was established on April 9, 2013 in in the PRC as a
limited liability Company, and its paid-in share capital was increased by
Rmb100,000,000 to Rmb200,000,000 during the year ended December 31, 2014.
Note 14: 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 15: 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 16: 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 of the Company 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 17: Zheshang Futures (Hong Kong) Co., Limited was established on April
23, 2015 in Hong Kong as a limited liability Company.
Note 18: Maintenance Co was established on January 28, 2014 in the PRC as a
limited liability company. As disclosed in Note 49, Maintenance Co was disposed
during the year ended December 31, 2015.
Except that Zheshang Futures (Hong Kong) Co., Limited is operating in Hong
Kong, all of the Company's other subsidiaries are operating in Mainland China.
As at December 31, 2015, Zheshang Securities has issued subordinated bonds,
corporate bonds, short-term loan note and beneficial certificates at the total
principal amount of Rmb7,200,000,000, Rmb1,500,000,000, Rmb600,000,000 and
Rmb1,916,100,000, respectively. As at December 31, 2014, Zheshang Securities
has issued long-term subordinated bonds to the public and beneficial
certificates at the total principal amount of Rmb1,200,000,000 and
Rmb883,570,000, respectively. Except for Zheshang Securities, none of the other
subsidiaries had any debt securities in issue at any time during the year.
56. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
12/31/2015 12/31/2014
Rmb'000 Rmb'000
NON-CURRENT ASSETS
Property, plant and equipment 502,595 478,498
Prepaid lease payments 1,500 1,594
Expressway operating rights 3,882,369 4,227,602
Other intangible assets 1,760 2,552
Investments in subsidiaries 9,809,369 6,640,021
Investments in associates 377,484 395,484
Investment in a joint venture 373,470 373,470
Bonds receivables 305,230 300,000
Available-for-sale investments - 101,554
Other receivables - 50,828
15,253,777 12,571,603
CURRENT ASSETS
Inventories 1,597 3,064
Trade receivables 20,275 17,867
Other receivables 662,059 481,536
Prepaid lease payments 95 95
Available-for-sale investments 19,994 10,650
Held for trading investment 80,000 80,000
Amount due from subsidiaries 9,419 230,619
Dividend receivable 20,494 -
Bank balances and cash
- Time deposits with original maturity over three months 10,000 50,000
- Cash and cash equivalents 131,338 581,014
955,271 1,454,845
CURRENT LIABILITIES
Trade payables 91,662 99,989
Tax liabilities 119,337 106,092
Other taxes payable 7,715 9,164
Other payables and accruals 284,758 267,028
Amount due to subsidiaries 1,011,286 891,630
Bank borrowings 1,350,000 -
2,864,758 1,373,903
NET CURRENT (LIABILITIES) ASSETS (1,909,487) 80,942
TOTAL ASSETS LESS CURRENT LIABILITIES 13,344,290 12,652,545
12/31/2015 12/31/2014
Rmb'000 Rmb'000
NON-CURRENT LIABILITIES
Deferred tax liabilities 90,498 94,478
90,498 94,478
13,253,792 12,558,067
CAPITAL AND RESERVES
Share capital 4,343,115 4,343,115
Reserves 8,910,677 8,214,952
13,253,792 12,558,067
Share Share Statutory Investment Dividend Special Retained Total
capital premium reserves valuation reserves reserves profits
reserve
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At December 4,343,115 3,645,726 2,160,070 153 1,150,925 18,666 1,239,412 12,558,067
31, 2014
Total - - - (158) - - 2,107,395 2,107,237
comprehensive
income
for the year
Interim - - - - - - (260,587) (260,587)
dividend
Final - - - - (1,150,925) - - (1,150,925)
dividend
Proposed - - - - 1,216,072 - (1,216,072) -
final
dividend
Transfer to - - 205,788 - - - (205,788) -
reserves
At December 4,343,115 3,645,726 2,365,858 (5) 1,216,072 18,666 1,664,360 13,253,792
31, 2015
Independent Auditor's Report
(Issued by a Third Country Auditor registered with The UK Financial Reporting
Council)
TO THE MEMBERS OF ZHEJIANG EXPRESSWAY CO., LTD.
(Incorporated in the People's Republic of China with limited liability)
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 70 to 176, which comprise the consolidated statement
of financial position as at December 31, 2015, 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 a summary of significant accounting policies and other explanatory
information.
Directors' Responsibility for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of
consolidated financial statements that give a true and fair view in accordance
with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute
of Certified Public Accountants and the disclosure requirements of the Hong
Kong Companies Ordinance, and for such internal control as the directors
determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit and to report 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. We conducted our audit in
accordance with Hong Kong Standards on Auditing issued by the Hong Kong
Institute of Certified Public Accountants. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation of consolidated
financial statements that give a true and fair view 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 entity's internal control.
An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view
of the financial position of the Group as at December 31, 2015, and of its
financial performance and cash flows for the year then ended in accordance with
Hong Kong Financial Reporting Standards and have been properly prepared in
compliance with the disclosure requirements of the Hong Kong Companies
Ordinance.
Deloitte Touche Tohmatsu Certified Public Accountants LLP
Certified Public Accountants
(Registered as a Third Country Auditor with the UK Financial Reporting Council)
Shanghai, China
March 17, 2016
Corporate Information
EXECUTIVE DIRECTORS STATUTORY ADDRESS
ZHAN Xiaozhang (Chairman) 12/F, Block A, Dragon Century Plaza 1
Hangda Road
CHENG Tao (Appointed on July 1, 2015) Hangzhou City, Zhejiang Province PRC
310007
LUO Jianhu (General Manager) Tel : 86-571-8798 5588
DING Huikang ( Ended of Appointment Fax: 86-571-8798 5599
Term on July 1, 2015)
NON-EXECUTIVE DIRECTORS PRINCIPAL PLACE OF BUSINESS
WANG Dongjie 5/F., No. 2, Mingzhu International
Business Center 199 Wuxing Road
DAI Benmeng Hangzhou City, Zhejiang Province PRC
310020
ZHOU Jianping Tel: 86-571-8798 5588
Fax: 86-571-8798 5599
INDEPENDENT
NON-EXECUTIVE DIRECTORS LEGAL ADVISERS
ZHOU Jun As to Hong Kong and US law:
PEI Ker-Wei Herbert Smith Freehills
LEE Wai Tsang Rosa 23rd Floor, Gloucester Tower 15 Queen's
Road Central Hong Kong
SUPERVISORS As to English law:
WU Yongmin Herbert Smith Freehills LLP Exchange
House
ZHANG Guohua (Resigned , with effect Primrose Street London EC2A 2HS United
from March 17, 2016) Kingdom
YAO Huiliang (Appointed on July 1,
2015)
SHI Ximin (Appointed on July 1, 2015) As to PRC law:
LU Xinghai (Appointed on July 1, T & C Law Firm
2015)
FU Zhexiang (Ended of Appointment 11/F, Block A, Dragon Century Plaza 1
Term on July 1, 2015) Hangda Road
ZHANG Xiuhua (Ended of Appointment Hangzhou City, Zhejiang Province PRC
Term on July 1, 2015) 310007
COMPANY SECRETARY H SHARES LISTING INFORMATION
Tony ZHENG The Stock Exchange of Hong Kong Limited
Code: 0576
AUTHORIZED REPRESENTATIVES LONDON STOCK EXCHANGE PLC
ZHAN Xiaozhang Code: ZHEH
LUO Jianhu (Appointed on July 1,
2015)
ZHANG Jingzhong (Ended of Appointment
Term on July 1, 2015)
ADRS INFORMATION
AUDITORS US Exchange: OTC
Deloitte Touche Tohmatsu 35/F, One Symbol: ZHEXY
Pacific Place 88 Queensway
Hong Kong CUSIP: 98951A100
ADR: H Shares 1:10
INVESTOR RELATIONS CONSULTANT
PR Concepts Asia Limited 16/F., REPRESENTATIVE OFFICE IN HONG KONG
Methodist House
36 Hennessy Road, Wanchai Hong Kong Suite 2910
Tel : 852-2117 0861 29/F, Bank of America Tower 12 Harcourt
Road
Fax: 852-2117 0869 Hong Kong
Tel : 852-2537 4295
PRINCIPAL BANKERS Fax: 852-2537 4293
Industrial and Commercial Bank of
China, Zhejiang Branch
Shanghai Pudong Development Bank, WEBSITE
Hangzhou Branch
www.zjec.com.cn
H SHARE REGISTRAR AND TRANSFER OFFICE
Hong Kong Registrars Limited
Room 1712-1716, 17/F, Hopewell Centre
183 Queen's Road East
Hong Kong
For the Location Map of Expressways in Zhejiang Province, please visit:
http://photos.prnasia.com/prnk/20160331/8521601980-d
NOTE : To view the full set of the Company's 2015 Annual Report. Please visit
http://www.zjec.com.cn/ZHEJIANG EXPRESSWAY : LD - 2015 Annual Report / Financial Statements
March 31, 2016 at 01:56 pm
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