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IMPORTANT NOTICE
NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE UNITED STATES. THIS OFFERING ISAVAILABLE ONLY TO INVESTORS WHO ARE ADDRESSEES OUTSIDE OF THE UNITED STATES.
IMPORTANT: You must read the following before continuing. The following applies to the offering circular following thispage (the ‘‘Offering Circular’’), and you are therefore advised to read this carefully before reading, accessing or makingany other use of the Offering Circular. In accessing the Offering Circular, you agree to be bound by the following termsand conditions, including any modifications to them any time you receive any information from us as a result of suchaccess.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THEUNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE NOTES HAVE NOTBEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, ASAMENDED (THE ‘‘SECURITIES ACT’’), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATESOR OTHER JURISDICTION AND THE NOTES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES,EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THEREGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIESLAWS. THIS OFFERING IS MADE SOLELY IN OFFSHORE TRANSACTIONS PURSUANT TO REGULATION SUNDER THE SECURITIES ACT.
THE OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON,ELECTRONICALLY OR OTHERWISE, AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER,AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. ADDRESS. ANY FORWARDING,DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED.FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT ORTHE APPLICABLE LAWS OF OTHER JURISDICTIONS.
Confirmation of your Representation: In order to be eligible to view the Offering Circular or make an investment decisionwith respect to the securities, investors must not be located in the United States. The Offering Circular is being sent atyour request and by accepting the e-mail and accessing the Offering Circular, you shall be deemed to have represented toZhongrong International Bond 2019 Limited (the ‘‘Issuer’’), Zhongrong International Holdings Limited (the‘‘Guarantor’’), Zhongrong International Trust Co., Ltd. (the ‘‘Company’’) and each of Haitong International SecuritiesCompany Limited, Zhongrong PT Securities Limited and Industrial Bank Co., Ltd. Hong Kong Branch (the ‘‘Joint LeadManagers’’, each a ‘‘Joint Lead Manager’’) that you and any customers you represent are not, and the electronic mailaddress that you gave the Joint Lead Managers to which this e-mail has been delivered is not, located in the United Statesand that you consent to delivery of such Offering Circular and any amendments or supplements thereto by electronictransmission.
The attached document is being furnished in connection with an offering in offshore transactions outside the United Statesin compliance with Regulation S under the Securities Act solely for the purpose of enabling a prospective investor toconsider the purchase of the securities described herein.
You are reminded that the Offering Circular has been delivered to you on the basis that you are a person into whosepossession the Offering Circular may be lawfully delivered in accordance with the laws of the jurisdiction in which you arelocated and you may not, nor are you authorised to, deliver the Offering Circular, electronically or otherwise, to any otherperson. If you have gained access to this transmission contrary to the foregoing restrictions, you are not allowed topurchase any of the securities described in the attached.
Nothing in this electronic transmission constitutes an offer or an invitation by or on behalf of any of the Issuer, theGuarantor, the Company, the Joint Lead Managers, the Trustee or the Agents (each as defined in the attached OfferingCircular) to subscribe for or purchase any of the securities described therein, and access has been limited so that it shallnot constitute in the United States or elsewhere a general solicitation or general advertising (as those terms are used inRegulation D under the Securities Act) or directed selling efforts (within the meaning of Regulation S under the SecuritiesAct). If a jurisdiction requires that the offering be made by a licensed broker or dealer and any of the Joint Lead Managersor any affiliate of them is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by suchJoint Lead Manager or such affiliate on behalf of the Issuer in such jurisdiction.
The Offering Circular has been sent to you in an electronic form. You are reminded that documents transmitted via thismedium may be altered or changed during the process of electronic transmission and consequently neither the Issuer, theGuarantor, the Company, the Joint Lead Managers, the Trustee, the Agents, nor any person who controls any of them, northeir respective directors, officers, employees, representatives nor agents, or affiliate of any such person accepts anyliability or responsibility whatsoever in respect of any difference between the Offering Circular distributed to you inelectronic format and the hard copy version available to you on request from the Joint Lead Managers.
You are responsible for protecting against viruses and other destructive items. Your use of this e-mail is at your ownrisk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructivenature.
Actions that you may not take: If you receive this document by e-mail, you should not reply by e-mail to thisannouncement, and you may not purchase any securities by doing so. Any reply e-mail communications, including thoseyou generate by using the ‘‘Reply’’ function on your e-mail software, will be ignored or rejected.
CONFIDENTIAL
ZHONGRONG INTERNATIONAL BOND 2019 LIMITED(incorporated in the British Virgin Islands with limited liability)
U.S.$65,710,000 7.60 PER CENT. GUARANTEED NOTES DUE 2022(to be consolidated into and form a single series with the U.S.$301,410,000 7.60 per cent.
Guaranteed Notes due 2022 issued on 20 May 2019)UNCONDITIONALLY AND IRREVOCABLY GUARANTEED BY
ZHONGRONG INTERNATIONAL HOLDINGS LIMITED(incorporated in the British Virgin Islands with limited liability)
WITH THE BENEFIT OF A KEEPWELL AND LIQUIDITY SUPPORT ANDA DEED OF EQUITY INTEREST PURCHASE UNDERTAKING BY
ZHONGRONG INTERNATIONAL TRUST CO., LTD.(incorporated in the People’s Republic of China with limited liability)
ISSUE PRICE: 100.0 per cent.(plus an amount corresponding to accrued interest from, and including, 20 November 2019 to, but excluding,
the New Issue Date)The 7.60 per cent. guaranteed notes due 2022 (the ‘‘Further Notes’’) will be issued in the aggregate principal amount of U.S.$65,710,000 by Zhongrong International Bond 2019 Limited (the‘‘Issuer’’) and are in registered form in the denomination of U.S.$200,000 each and integral multiples of U.S.$1,000 in excess thereof. The Further Notes will be unconditionally and irrevocablyguaranteed by Zhongrong International Holdings Limited (the ‘‘Guarantor’’) (the ‘‘Guarantee of the Further Notes’’, and together with the Guarantee of the Existing Notes (as defined below), the‘‘Guarantee of the Notes’’). The Issuer is a direct, wholly-owned subsidiary of the Guarantor and the Guarantor in turn is an indirect, wholly-owned subsidiary of Zhongrong International Trust Co.,Ltd. (the ‘‘Company’’). The Further Notes have the same terms and conditions (in all respects except for the principal amount, the issue date, the first payment of interest, the amount of the SpecifiedBalance, the timing to perform and complete the NDRC Post Issue Filing and the issue price of the Further Notes) as the U.S.$301,410,000 7.6 per cent. Guaranteed Notes due 2022 (the ‘‘ExistingNotes‘‘, together with the Further Notes, the ‘‘Notes‘‘)of the Issuer, which were issued on 20 May 2019 (the ‘‘Original Issue Date‘‘)and are constituted by, are subject to, and have the benefit of aTrust Deed dated 5 December 2019 (the ‘‘Supplemental Trust Deed’’), and together with the Existing Trust Deed (as defined below), the ‘‘Trust Deed’’), and are subject to, and have the benefit of,an agency agreement dated 5 December 2019 (the ‘‘Supplemental Agency Agreement’’, and together with the Existing Agency Agreement (as defined below), the ‘‘Agency Agreement’’). TheExisting Notes are unconditionally and irrevocably guaranteed by the Guarantor (the ‘‘Guarantee of the Existing Notes’’), are constituted by, are subject to, and have the benefit of a trust deed dated20 May 2019 (the ‘‘Existing Trust Deed’’) and are the subject of an agency agreement dated 20 May 2019 (the ‘‘Existing Agency Agreement’’). References in this Offering Circular to the ‘‘Notes’’shall be to the Existing Notes and the Further Notes collectively. The Further Notes will be consolidated into and form a single series with the Existing Notes and vote together as one series on allmatters with respect to the Notes on 5 December 2019 (the ‘‘New Issue Date’’). The Further Notes will be immediately fungible with the Existing Notes upon issue on the New Issue Date.
Pursuant to the Circular on Promoting the Reform of the Administrative System on the Issuance by Enterprises of Foreign Debt Filings and Registrations(國家發展改革委關於推進企業發行外債備案登記制管理改革的通知(發改外資[2015]2044號))(the ‘‘NDRC Circular’’) issued by the National Development and Reform Commission of the PRC (as defined below) (the ‘‘NDRC’’) on 14September 2015 which came into effect on the same day, the Company has registered the issuance of the Further Notes with the NDRC and obtained a certificate from the NDRC on 7 January 2019evidencing such registration which, at the date of this Offering Circular, remains valid and in full force and effect. The Company intends to provide the requisite information on the issuance of theFurther Notes to the NDRC within 10 PRC Business Days (as defined in the Terms and Conditions of the Notes (the ‘‘Terms and Conditions’’)) after the New Issue Date (as defined in the Terms andConditions).
The Issuer, the Guarantor and the Company will enter into a supplemental keepwell and liquidity support deed on or about 5 December 2019 (the ‘‘Supplemental Keepwell and Liquidity SupportDeed’’, and together with the Existing Keepwell and Liquidity Support Deed (as defined below), the ‘‘Keepwell and Liquidity Support Deed’’) with Bank of Communications Trustee Limited (the‘‘Trustee’’) as trustee of the Notes as further described in ‘‘Offer Structure – The Keepwell and Liquidity Support Deed’’ and ‘‘Description of the Keepwell and Liquidity Support Deed‘‘. Furthermore,the Issuer, the Guarantor and the Company will enter into a supplemental deed of equity interest purchase undertaking on or about 5 December 2019 (the ‘‘Supplemental Deed of Equity InterestPurchase Undertaking’’, and together with the Existing Deed of Equity Interest Purchase Undertaking (as defined below), the ‘‘Deed of Equity Interest Purchase Undertaking’’) with the Trustee asfurther described in ‘‘Offer Structure – The Deed of Equity Interest Purchase Undertaking‘‘ and ‘‘Description of the Deed of Equity Interest Purchase Undertaking’’. The Issuer, the Guarantor and theCompany had entered into a keepwell and liquidity support deed on 20 May 2019 (the ‘‘Existing Keepwell and Liquidity Support Deed’’) with the Trustee and had entered into a deed of equityinterest purchase undertaking on 20 May 2019 (the ‘‘Existing Deed of Equity Interest Purchase Undertaking’’) with the Trustee. None of the Keepwell and Liquidity Support Deed and the Deed ofEquity Interest Purchase Undertaking constitutes a direct or indirect guarantee of the Notes by the Company.
The Further Notes will bear interest from 20 November 2019 at the rate of 7.60 per cent. per annum. Interest on the Further Notes is payable semi-annually in arrear on 20 May and 20 November ineach year, commencing on 20 May 2020.
The Notes will constitute direct, general, unsubordinated and unconditional obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all otherpresent and future unsecured obligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application.
The Guarantee of the Notes will constitute direct, general and unconditional obligations of the Guarantor which will at all times rank at least pari passu with all other present and future unsecuredobligations of the Guarantor, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application.
Payments on the Notes will be made without withholding or deduction for taxes of the British Virgin Islands or the PRC (each as defined herein) to the extent described in ‘‘Terms and Conditions ofthe Notes – Taxation’’.
Pursuant to an account bank agreement dated on or about 20 May 2019 (the ‘‘Account Bank Agreement’’, as amended and supplemented by the supplemental account bank agreement dated on orabout 5 December 2019 (the ‘‘Supplemental Account Bank Agreement’’) entered into between the Issuer, the Guarantor, the Trustee and Bank of Communications Co., Ltd. Hong Kong Branch (the‘‘Account Bank’’), the Issuer will deposit an amount not less than the Specified Balance (as defined in the Terms and Conditions) into the Interest Reserve Account (as defined in the Terms andConditions) on the date on which the Notes are issued and will maintain an amount not less than the Specified Balance in the Interest Reserve Account at all times prior to the Maturity Date (asdefined herein). See ‘‘Terms and Conditions of the Notes – Covenants – Interest Reserve’’.
Unless previously redeemed, or purchased and cancelled as provided herein, the Issuer will redeem each Note at its principal amount in U.S. dollars on the Interest Payment Date falling on, 20 May2022 (the ‘‘Maturity Date’’). At any time, on giving not less than 30 nor more than 60 days’ notice to the Noteholders (as defined in the Terms and Conditions) (which notice shall be irrevocable),the Issuer may redeem the Notes in whole, but not in part, at their principal amount, together with interest accrued to the date fixed for redemption, if, immediately before giving such notice, theIssuer satisfies the Trustee that the Issuer or the Guarantor has or will become obliged to pay Additional Amounts (as defined in the Terms and Conditions) as a result of any change in, or amendmentto, the laws or regulations of the British Virgin Islands or the PRC (as the case may be) or any political subdivision or any authority thereof or therein having power to tax, and such obligation cannotbe avoided by the Issuer or the Guarantor taking reasonable measures available to it. At any time following the occurrence of a Change of Control (as defined in the Terms and Conditions), eachNoteholder will have the right, at such Noteholder’s option, to require the Issuer to redeem all but not some only of such Noteholder’s Notes on the Change of Control Put Settlement Date (as definedin the Terms and Conditions) at 101 per cent. of their principal amount together with accrued interest to such Change of Control Put Settlement Date. The Issuer shall, at the option of the Holder ofany Note, redeem all but not some only of that Noteholder’s Notes on the Put Settlement Date (as defined in the Terms and Conditions) at 100 per cent. of the principal amount together with accruedinterest to such Put Settlement Date. See ‘‘Terms and Conditions of the Notes – Redemption and Purchase’’.
The Existing Notes are listed on the SGX-ST. Approval in-principle has been received from the Singapore Exchange Securities Trading Limited (the ‘‘SGX-ST’’) for the listing and quotation of theFurther Notes on the Official List of the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained in this OfferingCircular. Admission to the Official List of the SGX-ST and quotation of the Notes is not to be taken as an indication of the merits of the Issuer, the Guarantor, the Company, their respectivesubsidiaries, their respective associated companies (if any), the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking or the Notes.
Investing in the Further Notes involves certain risks. See ‘‘Risk Factors’’ beginning on page 12 for a description of certain factors to be considered in connection with an investment in the FurtherNotes.
Singapore Securities and Futures Act Product Classification – In connection with Section 309B of the Securities and Futures Act (Chapter 289 of Singapore) (the ‘‘SFA’’) and the Securities andFutures (Capital Markets Products) Regulations 2018 of Singapore (the ‘‘CMP Regulations 2018’’), the Issuer has determined, and hereby notifies all relevant persons (as defined in 309A(1) of SFA),that the Notes are ‘‘prescribed capital markets products’’ (as defined in the CMP Regulations 2018).
The Further Notes and the Guarantee of the Further Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’), and, subject tocertain exceptions, may not be offered or sold within the United States and are only being offered and sold outside the United States in compliance with Regulation S under the Securities Act(‘‘Regulation S’’). For a description of these and certain restrictions on offers and sales of the Further Notes and the Guarantee of the Further Notes and the distribution of this Offering Circular, see‘‘Subscription and Sale’’.
The Notes are expected to be rated ‘‘BB-’’ by S&P Global Ratings, a division of S&P Global Inc. (‘‘S&P’’). The Guarantor has a credit rating of ‘‘BB-’’ from S&P and the Company has a credit ratingof ‘‘BB+’’ from S&P. A security or credit rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning ratingagency.
The Notes will be represented by beneficial interests in a global note certificate (the ‘‘Global Note Certificate’’) in registered form which will be registered in the name of a nominee of, and shall bedeposited on or about 5 December 2019 (the ‘‘New Issue Date’’) with a common depositary for, Euroclear Bank SA/NV (‘‘Euroclear’’) and Clearstream Banking S.A. (‘‘Clearstream’’, together withEuroclear, the ‘‘Clearing Systems’’). Beneficial interests in the Global Note Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear andClearstream. Except as described herein, individual certificates for Notes of will not be issued in exchange for interests in the Global Note Certificate.
Joint Global Coordinators and Joint Lead ManagersHaitong International Zhongrong PT Securities Limited Industrial Bank Co., Ltd.
Hong Kong Branch
Offering Circular dated 29 November 2019
IMPORTANT NOTICE
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL, OR ASOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION TO ANYPERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION IN SUCHJURISDICTION. NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR ANY SALEMADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEENNO CHANGE IN THE AFFAIRS OF THE ISSUER, THE GUARANTOR, THE COMPANY OR ANYOF THEIR RESPECTIVE SUBSIDIARIES OR THAT THE INFORMATION SET FORTH IN THISOFFERING CIRCULAR IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
Each of the Issuer, the Guarantor and the Company, having made all reasonable enquiries, confirms thatto the best of its knowledge and belief (i) this Offering Circular contains all information with respect tothe Issuer, the Guarantor, the Company and its subsidiaries taken as a whole (collectively, the‘‘Group’’), the Notes, the Guarantee of the Notes, the Keepwell and Liquidity Support Deed, the Deed ofEquity Interest Purchase Undertaking and the Account Bank Agreement which is material in the contextof the issue, offering, sale or distribution of the Notes (including all information which, according to theparticular nature of the Issuer, the Guarantor, the Company, the Group, the Notes, the Guarantee of theNotes, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking andthe Account Bank Agreement, is necessary to enable investors to make an informed assessment of theassets and liabilities, financial position, profits and losses and prospects of the Issuer, the Guarantor, theCompany, the Group and of the rights attaching to the Notes, the Guarantee of the Notes, the Keepwelland Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and the Account BankAgreement), (ii) the statements contained in this Offering Circular relating to the Issuer, the Guarantor,the Company, the Group, the Notes, the Guarantee of the Notes, the Keepwell and Liquidity SupportDeed, the Deed of Equity Interest Purchase Undertaking and the Account Bank Agreement are in allmaterial respects true and accurate and not misleading, (iii) the opinions and intentions relating to theIssuer, the Guarantor, the Company and the Group expressed in this Offering Circular are honestly held,have been reached after considering all relevant circumstances and are based on reasonable assumptions,and (iv) all reasonable enquiries have been made by the Issuer, the Guarantor and the Company toascertain such facts and to verify the accuracy of all such information and statements.
This Offering Circular has been prepared by the Issuer, the Guarantor and the Company solely for use inconnection with the proposed offering of the Further Notes described in this Offering Circular. Thedistribution of this Offering Circular and the offering of the Further Notes in certain jurisdictions maybe restricted by law. Persons into whose possession this Offering Circular comes are required by theIssuer, the Guarantor, the Company, Haitong International Securities Company Limited, Zhongrong PTSecurities Limited and Industrial Bank Co., Ltd. Hong Kong Branch (the ‘‘Joint Lead Managers’’, eacha ‘‘Joint Lead Manager’’), the Trustee and the Agents (as defined in the ‘‘Terms and Conditions of theNotes’’) to inform themselves about and to observe any such restrictions. None of the Issuer, theGuarantor, the Company, the Joint Lead Managers, the Trustee and the Agents represents that thisOffering Circular may be lawfully distributed, or that the Further Notes may be lawfully offered, incompliance with any applicable registration or other requirements in any such jurisdiction, or pursuantto an exemption available thereunder, or assume any responsibility for facilitating any such distributionor offering. No action is being taken to permit a public offering of the Further Notes or the possessionor distribution of this Offering Circular or any offering or publicity material relating to the FurtherNotes in any jurisdiction where action would be required for such purposes. There are restrictions on theoffer and sale of the Further Notes the circulation of documents relating thereto, in certain jurisdictionsand to persons connected therewith. For a description of certain further restrictions on offers, sales andresales of the Further Notes and the distribution of this Offering Circular, see ‘‘Subscription and Sale’’.This Offering Circular does not constitute an offer of, or an invitation to purchase, any of the FurtherNotes in any jurisdiction in which such offer or invitation would be unlawful. By purchasing the FurtherNotes, investors represent and agree to all of those provisions contained in that section of this OfferingCircular.
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No person has been or is authorised in connection with the issue, offer or sale of the Further Notes togive any information or to make any representation concerning the Issuer, the Guarantor, the Company,the Group, the Further Notes, the Guarantee of the Further Notes, the Keepwell and Liquidity SupportDeed, the Deed of Equity Interest Purchase Undertaking or the Account Bank Agreement other than ascontained herein and, if given or made, any such other information or representation should not be reliedupon as having been authorised by the Issuer, the Guarantor, the Company, the Group, the Joint LeadManagers, the Trustee or the Agents or any of their respective affiliates. Neither the delivery of thisOffering Circular nor any offering, sale or delivery made in connection with the issue of the FurtherNotes shall, under any circumstances, constitute a representation that there has been no change ordevelopment reasonably likely to involve a change in the affairs of the Issuer, the Guarantor, theCompany, the Group, or any of them since the date hereof or create any implication that the informationcontained herein is correct as at any date subsequent to the date hereof. This Offering Circular does notconstitute an offer of, or an invitation by or on behalf of the Issuer, the Guarantor, the Company, theJoint Lead Managers, the Trustee or the Agents or any of their respective affiliates to subscribe for orpurchase, any of the Further Notes and may not be used for the purpose of an offer to, or a solicitationby, anyone in any jurisdiction or in any circumstances in which such offer or solicitation is notauthorised or is unlawful.
This Offering Circular is being furnished by the Issuer, the Guarantor and the Company solely for use inconnection with the proposed offering of the Further Notes exempt from registration under the SecuritiesAct solely for the purpose of enabling a prospective investor to consider purchasing the Further Notes.Investors must not use this Offering Circular for any other purpose, make copies of any part of thisOffering Circular or give a copy of it to any other person, or disclose any information in this OfferingCircular to any other person. The information contained in this Offering Circular has been provided bythe Issuer, the Guarantor, the Company and other sources identified in this Offering Circular and noneof the Issuer, the Guarantor and the Company has authorised its use for any other purpose. Anyreproduction or distribution of this Offering Circular, in whole or in part, and any disclosure of itscontents or use of any information herein for any purpose other than considering an investment in theNotes offered by this Offering Circular is prohibited. Each person into whose possession this OfferingCircular comes, by accepting delivery of this Offering Circular, agrees to the foregoing.
No representation or warranty, express or implied, is made or given by the Joint Lead Managers, theTrustee or the Agents or any of their respective affiliates, directors, employees, representatives, agentsor advisers as to the accuracy, completeness or sufficiency of the information contained in this OfferingCircular or any other information supplied in connection with the Further Notes, the Guarantee of theFurther Notes, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest PurchaseUndertaking or the Account Bank Agreement and nothing contained in this Offering Circular is, or shallbe relied upon as, a promise, representation or warranty by the Joint Lead Managers, the Trustee or theAgents or any of their respective affiliates, directors, employees, representatives, agents or advisers. TheJoint Lead Managers, the Trustee and the Agents and their respective affiliates, directors, employees,representatives, agents or advisers have not independently verified any of the information contained inthis Offering Circular and can give no assurance that this information is accurate, truthful or complete.
To the fullest extent permitted by law, none of the Joint Lead Managers, the Trustee, the Agents or anyof their respective affiliates, directors, employees, representatives, agents or advisers accepts anyresponsibility for the contents of this Offering Circular or any statement made or purported to be madeby any such person or on its behalf in connection with the Issuer, the Guarantor, the Company, theGroup, the issue and offering of the Further Notes or the giving of the Guarantee of the Further Notes,the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking or theAccount Bank Agreement. Each of the Joint Lead Managers, the Trustee, the Agents and their respectiveaffiliates, directors, employees, representatives, agents or advisors accordingly disclaims all and anyliability whether arising in tort or contract or otherwise which it might otherwise have in respect of thisOffering Circular or any such statement. None of the Joint Lead Managers, the Trustee, the Agents orany of their respective affiliates, directors, employees, representatives, agents or advisors undertakes to
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review the financial condition or affairs of the Issuer, the Guarantor, the Company or the Group for solong as the Further Notes remain outstanding nor to advise any investor or potential investor of theFurther Notes of any information coming to the attention of any of the Joint Lead Managers, theTrustee, the Agents or their respective affiliates.
This Offering Circular is not intended to provide the basis of any credit or other evaluation, nor shouldit be considered as a recommendation by the Issuer, the Guarantor, the Company, the Joint LeadManagers, the Trustee or the Agents (or any of their respective affiliates, directors, officers, employees,representatives, agents, advisers and each person who controls any of them) that any recipient of thisOffering Circular should purchase the Further Notes. Each potential purchaser of the Further Notesshould determine for itself the relevance of the information contained in this Offering Circular and itspurchase of the Further Notes should be based upon such investigations with its own tax, legal andbusiness advisors as it deems necessary.
Any of the Joint Lead Managers and their respective affiliates may purchase the Further Notes for its ortheir own account and enter into transactions, including credit derivatives, such as asset swaps,repackaging and credit default swaps relating to the Further Notes and/or other securities of the Issuer,the Guarantor or the Company or their respective subsidiaries or associates at the same time as the offerand sale of the Further Notes or in secondary market transactions. Such transactions may be carried outas bilateral trades with selected counterparties and separately from any existing sale or resale of theFurther Notes to which this Offering Circular relates (notwithstanding that such selected counterpartiesmay also be purchasers of the Further Notes). Furthermore, investors in the Further Notes may includeentities affiliated with the Group.
Investors are advised to read and understand the contents of this Offering Circular before investing. If indoubt, investors should consult his or her adviser.
IN CONNECTION WITH THE ISSUE OF THE FURTHER NOTES, ANY OF THE JOINT LEADMANAGERS APPOINTED AND ACTING AS THE STABILISATION MANAGER (OR PERSONSACTING ON BEHALF OF THE STABILISATION MANAGER) MAY OVER-ALLOT FURTHERNOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE PRICE OF THEFURTHER NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISEPREVAIL. HOWEVER, THERE IS NO OBLIGATION ON SUCH STABILISATION MANAGER(OR PERSONS ACTING ON BEHALF OF THE STABILISATION MANAGER) TO DO THIS.SUCH STABILISATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME, ANDMUST BE BROUGHT TO AN END AFTER A LIMITED PERIOD. SUCH STABILISATIONSHALL BE IN COMPLIANCE WITH ALL APPLICABLE LAWS, REGULATIONS AND RULES.
Singapore Securities and Futures Act Product Classification – In connection with Section 309B ofthe Securities and Futures Act (Chapter 289 of Singapore) (the ‘‘SFA’’) and the Securities and Futures(Capital Markets Products) Regulations 2018 of Singapore (the ‘‘CMP Regulations 2018’’), the Issuerhas determined, and hereby notifies all relevant persons (as defined in 309A(1) of SFA), that the Notesare ‘‘prescribed capital markets products’’ (as defined in the CMP Regulations 2018).
Listing and quotation of the Further Notes on the Official List of the SGX-ST is not to be taken as anindication of the merits of the Issuer, the Guarantor, the Company, the Group, their respectivesubsidiaries, their respective associated companies (if any), the Keepwell and Liquidity Support Deed,the Deed of Equity Interest Purchase Undertaking or the Further Notes. In making an investmentdecision, investors must rely on their own examination of the Issuer, the Guarantor, the Company, theGroup and the terms of the offering of the Further Notes, including the merits and risks involved. See‘‘Risk Factors’’ for a discussion of certain factors to be considered in connection with an investment inthe Further Notes. The Issuer, the Guarantor, the Company, the Group, the Joint Lead Managers, theTrustee and the Agents and their respective affiliates are not making any representation to any purchaserof the Further Notes regarding the legality of any investment in the Further Notes by such purchaser
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under any legal investment or similar laws or regulations. The contents of this Offering Circular shouldnot be construed as providing legal, business, accounting or investment advice. Each person receivingthis Offering Circular acknowledges that such person has not relied on the Joint Lead Managers, theTrustee, the Agents or any of their respective affiliates in connection with its investigation of theaccuracy of such information or its investment decision.
Market data and certain industry forecasts and statistics in this Offering Circular have been obtainedfrom both public and private sources, including market research, publicly available information andindustry publications. Although the Issuer, the Guarantor and the Company believe this information tobe reliable, it has not been independently verified by the Issuer, the Guarantor, the Company, the JointLead Managers, the Trustee or the Agents or their respective directors, advisers, employees,representatives, agents and affiliates, and none of the Issuer, the Guarantor, the Company, the JointLead Managers, the Trustee or the Agents or their respective directors, affiliates, advisers, agents,representatives or employees makes any representation as to the accuracy or completeness of thatinformation. Such information may not be consistent with other information compiled within or outsidethe PRC. In addition, third party information providers may have obtained information from marketparticipants and such information may not have been independently verified. This Offering Circularsummarises certain documents and other information, and investors should refer to them for a morecomplete understanding of what is discussed in those documents.
The contents of this Offering Circular have not been reviewed by any regulatory authority in anyjurisdiction. Investors are advised to exercise caution in relation to the offer. If investors are in anydoubt about any of the contents of this Offering Circular, investors should obtain independentprofessional advice.
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PRESENTATION OF FINANCIAL INFORMATION
The audited consolidated financial statements of the Group as at and for the two years ended 31December 2017 and 2018 (the ‘‘Group’s Financial Statements’’) have been audited by WUYIGECertified Public Accountants LLP, as included elsewhere in this Offering Circular. The Group’sFinancial Statements have been prepared and presented in accordance with the Accounting Standards forBusiness Enterprises in China (‘‘PRC GAAP’’).
The audited consolidated financial statements of the Guarantor as at and for the two years ended 31December 2017 and 2018 (the ‘‘Guarantor’s Financial Statements’’) have been audited by PKF HongKong Limited and are included elsewhere in this Offering Circular. The Guarantor’s FinancialStatements have been prepared and presented in accordance with all applicable Hong Kong FinancialReporting Standards (‘‘HKFRS’’).
PRC GAAP differs in certain material respects from the International Financial Reporting Standards(‘‘IFRS’’). For a discussion of certain differences between PRC GAAP and IFRS, see ‘‘Summary ofSignificant Differences between PRC GAAP and IFRS’’.
CERTAIN DEFINITIONS AND CONVENTIONS
Unless the context otherwise requires, references in this Offering Circular to ‘‘Hong Kong dollars’’,‘‘HK dollars’’ or ‘‘HK$’’ are to the lawful currency of Hong Kong, ‘‘Renminbi’’ and ‘‘RMB’’ are to thelawful currency of the PRC, ‘‘Singapore dollars’’ or ‘‘S$’’ are to the lawful currency of the Republic ofSingapore, ‘‘U.S. dollars’’, ‘‘U.S.$’’ and ‘‘USD’’ are to the lawful currency of the United States ofAmerica (the ‘‘United States’’ or the ‘‘U.S.’’), ‘‘PRC’’ and ‘‘China’’ are to the People’s Republic ofChina which for the purpose of this Offering Circular excludes Hong Kong, Macau and Taiwan, ‘‘HongKong’’ are to the Hong Kong Special Administrative Region of the PRC, and ‘‘Macau’’ are to the MacauSpecial Administrative Region of the PRC.
This Offering Circular contains a translation of certain Renminbi amounts into U.S. dollars at specifiedrates solely for the convenience of the reader. Unless otherwise specified, where financial information inrelation to the Group and the Guarantor Group has been translated into U.S. dollars, it has been sotranslated, for convenience only, at the rate of RMB6.8755 to U.S.$1.00 (the noon buying rate in NewYork City on 31 December 2018 as set forth in the weekly H.10 statistical release of the FederalReserve Board of the Federal Reserve Bank of New York). Further information regarding exchange rateis set forth in ‘‘Exchange Rate’’ in this Offering Circular. No representation is made that the Renminbiamounts referred to in this Offering Circular could have been or could be converted into U.S. dollars atany particular rate or at all.
In this Offering Circular, certain amounts and percentages may have been rounded up or down,including but not limited to where information has been presented in thousands, millions, or billions ofunits. Accordingly, totals of columns or rows of numbers in tables may not be equal to the apparenttotal of the individual items and actual numbers may differ from those contained herein due to rounding.References to information in billions of units are to the equivalent of a thousand million units.
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FORWARD-LOOKING STATEMENTS
This Offering Circular includes ‘‘forward-looking statements’’. All statements other than statements ofhistorical fact contained in this Offering Circular, including, without limitation, those regarding theIssuer’s, the Guarantor’s, the Company’s and the Group’s future financial position and results ofoperations, strategy, plans, objectives, goals and targets, future developments in the markets where theIssuer, the Guarantor, the Company and the Group participate or are seeking to participate, and anystatements preceded by, followed by or that include the words ‘‘believe’’, ‘‘expect’’, ‘‘aim’’, ‘‘intend’’,‘‘will’’, ‘‘may’’, ‘‘anticipate’’, ‘‘seek’’, ‘‘should’’, ‘‘estimate’’ or similar expressions or the negativethereof, are forward-looking statements. These forward-looking statements involve known and unknownrisks, uncertainties and other factors, some of which are beyond the Issuer’s, the Guarantor’s, theCompany’s and the Group’s control, which may cause its actual results, performance or achievements, orindustry results to be materially different from any future results, performance or achievementsexpressed or implied by the forward-looking statements. These forward-looking statements are based onnumerous assumptions regarding the Issuer’s, the Guarantor’s, the Company’s and the Group’s presentand future business strategies and the environment in which the Issuer, the Guarantor, the Company andthe Group will operate in the future. Important factors that could cause the Issuer’s, the Guarantor’s, theCompany’s and the Group’s actual results, performance or achievements to differ materially from thosein the forward-looking statements include, among others, the following:
Additional factors that could cause actual results, performance or achievements to differ materiallyinclude, but are not limited to, those discussed in ‘‘Risk Factors’’ and elsewhere in this OfferingCircular. The Issuer, the Guarantor, the Company caution investors not to place undue reliance on theseforward-looking statements which reflect their managements’ view only as at the date of this OfferingCircular.
None of the Issuer, the Guarantor or the Company undertakes any obligation to update or revise anyforward-looking statements, whether as a result of new information, future events or otherwise. In lightof these risks, uncertainties and assumptions, the forward-looking events discussed in this OfferingCircular might not occur and the actual results of the Issuer, the Guarantor, the Company or the Groupcould differ materially from those anticipated in these forward-looking statements.
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TABLE OF CONTENTS
Page
IMPORTANT NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SUMMARY FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SUMMARY FINANCIAL INFORMATION OF THE GUARANTOR . . . . . . . . . . . . . . . . . . . . . . . . 10
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
TERMS AND CONDITIONS OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM . . . . . . . . . . . . 67
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
EXCHANGE RATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
CAPITALISATION AND INDEBTEDNESS OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
CAPITALISATION AND INDEBTEDNESS OF THE GUARANTOR GROUP . . . . . . . . . . . . . . . . 72
INDUSTRY AND REGULATORY OVERVIEW OF TRUST COMPANIES IN THE PRC . . . . . . 73
DESCRIPTION OF THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
DESCRIPTION OF THE GUARANTOR GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
DESCRIPTION OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
DIRECTORS AND SENIOR MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
DESCRIPTION OF THE KEEPWELL AND LIQUIDITY SUPPORT DEED . . . . . . . . . . . . . . . . . . 114
DESCRIPTION OF THE DEED OF EQUITY INTEREST PURCHASE UNDERTAKING . . . . . . . 117
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
PRC CURRENCY CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND IFRS . . . . . . . . . . 128
SUBSCRIPTION AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
vii
RECENT DEVELOPMENTS
On 29 July 2019, the Board of the Company approved the proposal to increase the registered capital ofZhongrong Dingxin (as defined below), the specialised private equity investment subsidiary of theCompany, from RMB 1.5 billion to RMB 2 billion. The additional RMB500 million of the registeredcapital were fully subscribed by the Company, to meet Zhongrong Dingxin’s business expansion needs.The registration of the aforesaid registered capital increase has been completed on 27 August 2019.
On 14 October 2019, the Board of the Company approved the proposal for the Guarantor to make acapital injection to Zhongrong PT Securities, a subsidiary of the Guarantor that primarily conductssecurities business. The value of the capital injection will not exceed HK$50 million, subject to finalevaluation. The capital injection is expected to be completed after the completion of the audit and assetevaluation of Zhongrong PT Securities. After the completion of the capital injection, the Guarantor’sequity interest in Zhongrong PT Securities will increase from 94.81 per cent. to 96.27 per cent.
On 21 May 2019, the U.S.$14,397,811 capital injection to the Guarantor by its shareholder, ShanghaiLongshan Investment Management Co., Ltd(上海隆山投資管理有限公司)(‘‘Shanghai Longshan’’),was completed. The capital injection was intended to serve the Group’s overseas business needs. On 21May 2019, Shanghai Longshan issued 14,397,811 shares pursuant to this capital injection, at a price ofU.S.$1 per share.
On 22 May 2019, Zhongrong Dingxin made a cash deposit in the amount of approximately RMB792million at KEB Hana Bank Harbin Branch (‘‘KEB Harbin Branch’’). After which, KEB Harbin Branchissued a financing letter of guarantee to KEB Hana Bank Hong Kong Branch (‘‘KEB Hong KongBranch’’). The KEB Hong Kong Branch then extended an overseas loan for the amount of U.S.$100million to the Guarantor.
The Company has obtained the license to underwrite non-financial enterprises debt financing instrumentsin November 2018 issued by the National Association of Financial Market Institutional Investors ofChina.
As at 30 June 2019, the Group’s total AUM (as defined below) for both trust and non-trust business hasincreased to RMB891.5 billion from RMB776.3 billion as at 31 December 2018. As at 30 June 2019,the numbers of the Group’s individual clients and institutional clients have increased to 30,000 and1,500 respectively in its trust business.
As at 30 June 2019, Zhongrong Wealth (as defined below), the Group’s main distribution platform forproducts and services to individual clients, has extended a network covering 36 core cities in four salesregions with a sales force of 1,522 people in total. For the six months ended 30 June 2019, the value ofproducts distributed by Zhongrong Wealth has amounted to RMB180 billion.
As at 30 June 2019, the Company had 2,301 employees, among them approximately 172 employeeswere in risk management functions.
For the nine months ended 30 September 2019, the Group’s net interest income, investment income,other business income, asset disposal income and other income decreased and the Group’s totaloperating expenses, business and management fees and other business costs increased as compared withthe same period in 2018. The decrease in net interest income was mainly attributable to the drop of themarket interest rate level and the Group having no interest income from proprietary loans. The decreasein investment income was mainly attributable to the decline in the return on investment in financialproducts and the decline in the profits of Harbin Rural Commercial Bank, an affiliate of the Company.The decrease in other business income and asset disposal income were mainly attributable to thedecrease of housing sublease income and the income from the disposal of the Group’s assets. The
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increase in total operating expenses, business and management fees and other business costs weremainly attributable to the change of the Group’s revenue structure and the increase of compensation paidto employees.
As at 30 September 2019, the Group’s monetary fund, settlement provisions, notes receivable andaccounts receivable, total assets had decreased and the Group’s prepayments, interest payable, long-termloans had increased as compared with 31 December 2018. The decrease in monetary fund, settlementprovisions, notes receivable and accounts receivable, total assets were mainly attributable to the fact thatthe Company has repaid the loan in the amount of RMB3.4 billion to the trust industry security fund.The changes in monetary fund, settlement provisions and accounts receivable are normal changes in theGroup’s business operations.
The increase in prepayments was mainly attributable to the prepayment of the profit tax for the year of2019 by the Guarantor, the Hong Kong subsidiary of the Company. The increase in interest payable wasmainly attributable to the accrual of the interest for the bonds issued. The increase in long-term loanswas mainly attributable to the U.S.$100 million loan from KEB Hong Kong Branch to the Guarantor.
For the nine months ended 30 September 2019, the Guarantor’s total profit and net profit increased ascompared with the same period in 2018. The increase in total profit and net profit were attributable tothe increase in the interest income and the decrease in finance cost.
As at 30 September 2019, the Guarantor’s net asset increased as compared with 31 December 2018. Theincrease in the net asset was attributable to the increase in net profit and decrease in bonds payable.
None of the Joint Lead Managers, the Trustee, any Agent (or any of their respective affiliates, directors,officers, employees, representatives, advisers and agents) makes any representation or warranty, expressor implied, regarding the accuracy of the above mentioned trends for the financial information of theGroup as at 30 September 2019 and for the nine months ended 30 September 2019 or its sufficiency foran assessment of, and potential investors must exercise caution when using such description to evaluatethe Group’s business, financial condition, results of operations and prospects.
None of the Joint Lead Managers, the Trustee, any Agent (or any of their respective affiliates, directors,officers, employees, representatives, advisers and agents) makes any representation or warranty, expressor implied, regarding the accuracy of the above mentioned trends for the financial information of theGuarantor as at 30 September 2019 and for the nine months ended 30 September 2019 or its sufficiencyfor an assessment of, and potential investors must exercise caution when using such description toevaluate the Group’s business, financial condition, results of operations and prospects.
2
THE OFFERING
The following summary contains some basic information about the Notes and is qualified in its entiretyby the remainder of this Offering Circular. Some of the terms described below are subject to importantlimitations and exceptions. Words and expressions defined in ‘‘Terms and Conditions of the Notes’’ shallhave the same meanings in this summary. For a complete description of the terms of the Notes, see‘‘Terms and Conditions of the Notes’’ in this Offering Circular. This summary is not intended to becomplete and does not contain all of the information that is important to an investor.
Issuer . . . . . . . . . . . . . . Zhongrong International Bond 2019 Limited.
The Legal Entity Identifier is 3003004B5ZS3Y4K7CS94.
Guarantor . . . . . . . . . . . Zhongrong International Holdings Limited.
Company . . . . . . . . . . . . Zhongrong International Trust Co., Ltd.
Further Notes . . . . . . . . U.S.$65,710,000 7.60 per cent. Guaranteed Notes due 2022 to beconsolidated into, and form a single series with the U.S.$301,410,0007.60 per cent. Guaranteed Notes due 2022 (the ‘‘Existing Notes‘‘, andtogether with the Further Notes, the ‘‘Notes’’) on the New Issue Date. TheFurther Notes will be immediately fungible with the Existing Notes uponissue on the New Issue Date.
Notes. . . . . . . . . . . . . . . U.S.$367,120,000 7.60 per cent. Guaranteed Notes due 2022.
Guarantee ofthe Further Notes . . . .
Payment of all sums from time to time payable by the Issuer in respect ofthe Notes is irrevocably and unconditionally guaranteed by the Guarantor.
Issue Price . . . . . . . . . . . 100.0 per cent, plus an amount corresponding to accrued interest from,and including, 20 November 2019 to, but excluding, the New Issue Date.
Form andDenomination . . . . . . .
The Further Notes will be issued in registered form in the denominationof U.S.$200,000 each and integral multiples of U.S.$1,000 in excessthereof.
Interest . . . . . . . . . . . . . The Further Notes will bear interest from and including 20 November2019 at the rate of 7.60 per cent. per annum, payable semi-annually inarrear on 20 May and 20 November in each year, commencing on 20 May2020.
Interest Reserve . . . . . . . On the New Issue Date, the Issuer shall deposit or procure that there shallbe deposited into the Interest Reserve Account U.S.$13,950,560, beingthe amount which is equal to the amount of interest due in respect of theFurther Notes for the first Interest Period after the New Issue Date, as theinitial Specified Balance. The Interest Reserve Account will beestablished with the Account Bank. Prior to the Maturity Date, the Issuershall, unless otherwise permitted under the Terms and Conditions,maintain the Specified Balance in the Interest Reserve Account.
Original Issue Date . . . . 20 May 2019
New Issue Date . . . . . . . 5 December 2019.
Maturity Date . . . . . . . . 20 May 2022.
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Status of the FurtherNotes . . . . . . . . . . . . .
The Further Notes constitute direct, general, unsubordinated andunconditional obligations of the Issuer which will at all times rank paripassu among themselves and at least pari passu with all other present andfuture unsecured obligations of the Issuer, save for such obligations asmay be preferred by provisions of law that are both mandatory and ofgeneral application.
Status of the Guaranteeof the Further Notes . .
The Guarantee of the Further Notes constitutes direct, general andunconditional obligations of the Guarantor which will at all times rank atleast pari passu with all other present and future unsecured obligations ofthe Guarantor, save for such obligations as may be preferred byprovisions of law that are both mandatory and of general application.
See ‘‘Risk Factors – Risks relating to the Notes and the Guarantee of theNotes’’.
Negative Pledge . . . . . . . The Further Notes will contain a negative pledge provision as furtherdescribed in Condition 3(a) of the Terms and Conditions.
Redemption at Maturity . Unless previously redeemed, or purchased and cancelled, the FurtherNotes will be redeemed at their principal amount in U.S. dollars on theMaturity Date.
Taxation . . . . . . . . . . . . All payments of principal and interest in respect of the Notes by or onbehalf of the Issuer or the Guarantor shall be made free and clear of, andwithout withholding or deduction for or on account of, any present orfuture taxes, duties, assessments or governmental charges of whatevernature imposed, levied, collected, withheld or assessed by or on behalf ofthe British Virgin Islands, the PRC or any political subdivision thereof orany authority therein or thereof having power to tax, unless thewithholding or deduction of such taxes, duties, assessments orgovernmental charges is required by law. Where such withholding ordeduction is made by the Issuer or the Guarantor in the PRC at the rateapplicable on 10 May 2019 (the ‘‘Applicable Rate’’), the Issuer or (as thecase may be) the Guarantor will pay such additional amounts as willresult in receipt by the Noteholders of such amounts after suchwithholding or deduction as would have been received by them had nosuch withholding or deduction been required.
In the event that the Issuer or (as the case may be) the Guarantor isrequired to make a deduction or withholding (i) by or within the PRC inexcess of the Applicable Rate; or (ii) by or within the British VirginIslands, the Issuer or the Guarantor, as the case may be, shall pay suchadditional amounts (the ‘‘Additional Amounts’’) as will result in receiptby the Noteholders of such amounts after such withholding or deductionas would have been received by them had no such withholding ordeduction been required, except that no such Additional Amounts shall bepayable in respect of any Note in the circumstances set out in Condition 7of the Terms and Conditions.
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Redemption forTax Reasons . . . . . . . .
The Notes may be redeemed at the option of the Issuer in whole, but notin part, at any time, on giving not less than 30 nor more than 60 days’notice to the Noteholders in accordance with the Terms and Conditions(which notice shall be irrevocable) at their principal amount, together withinterest accrued to the date fixed for redemption, if, immediately beforegiving such notice, the Issuer satisfies the Trustee that (A) the Issuer hasor will or, in the case of the Guarantor, has or (if a demand has madeunder the Guarantee of the Notes) would become obliged to payAdditional Amounts as a result of any change in, or amendment to, thelaws or regulations of the British Virgin Islands, the PRC or any politicalsubdivision or any authority thereof or therein having power to tax, or anychange in the application or official interpretation of such laws orregulations (including a holding by a court of competent jurisdiction),which change or amendment becomes effective on or after 10 May 2019and (B) such obligation cannot be avoided by the Issuer or the Guarantortaking reasonable measures available to it, provided, however, that nosuch notice of redemption shall be given earlier than 90 days prior to theearliest date on which the Issuer or the Guarantor would be obliged to paysuch Additional Amounts if a payment in respect of the Notes were thendue or (as the case may be) a demand under the Guarantee of the Noteswere then made.
Redemption for Changeof Control . . . . . . . . .
At any time following the occurrence of a Change of Control, eachNoteholder will have the right, at such Noteholder’s option, to require theIssuer to redeem all but not some only of that Noteholder’s Notes on theChange of Control Put Settlement Date (as defined in the Terms andConditions) at 101 per cent. of their principal amount, together withaccrued interest to such Change of Control Put Settlement Date.
A ‘‘Change of Control’’ occurs when:
(a) the Company ceases to have Control of the Guarantor;
(b) Jingwei Textile Machinery Co., Ltd. ceases to be the largest director indirect holder of the issued share capital of the Company;
(c) Substantial Shareholders cease to in aggregate have Control of theCompany; or
(d) SASAC ceases to legally or beneficially hold or own (directly orindirectly) in aggregate more than 25 per cent. of the issued sharecapital of the Company.
‘‘Control’’ means (where applicable), with respect to a person, either (i) or(ii) is satisfied: (i) the ownership, acquisition or control of the RelevantPercentage of the voting rights of the issued share capital of such person,whether obtained directly or indirectly or (ii) the right to appoint and/orremove the Relevant Percentage of the members of the person’s board ofdirectors or other governing body, whether obtained directly or indirectly,and whether obtained by ownership of share capital, the possession ofvoting rights, contract or otherwise;
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‘‘Relevant Percentage’’ means (a) in the case of Control of the Companyover the Guarantor, 100 per cent. and (b) in the case of Control ofSubstantial Shareholders over the Company, at least 51 per cent.;
‘‘SASAC’’ means the State-owned Assets Supervision and Administrationof the State Council of PRC or its successor, including any municipal orprovincial bureau of SASAC; and
‘‘Substantial Shareholder’’ means Jingwei Textile Machinery Co., Ltd.,Harbin Investment Group Co., Ltd. or any other state-owned enterprise orcompany more than 50 per cent. owned or controlled directly or indirectlyby SASAC that holds or owns any issued share capital of the Company.
Redemption at the Optionof Noteholders . . . . . .
The Issuer shall, at the option of the Holder of any Note, redeem all butnot some only of that Noteholder’s Notes on the Put Settlement Date (asdefined in the Terms and Conditions) at 100 per cent. of the principalamount together with accrued interest to such Put Settlement Date.
Events of Default . . . . . . Upon the occurrence of certain events as described in Condition 8 of theTerms and Conditions, the Trustee at its discretion may and, if sorequested in writing by holders of at least 25 percent of the aggregateprincipal amount of the outstanding Notes or if so directed by anExtraordinary Resolution, shall (subject to the Trustee having beenindemnified and/or provided with security and/or pre-funded to itssatisfaction) give written notice to the Issuer declaring the Notes to beimmediately due and payable, whereupon they shall become immediatelydue and payable at their principal amount together with accrued interestwithout further action or formality.
Cross-Acceleration . . . . . The Further Notes will contain a cross-acceleration provision as furtherdescribed in Condition 8(d) of the Terms and Conditions.
Clearing Systems . . . . . . The Notes will be represented by beneficial interests in the Global NoteCertificate in registered form, which will be registered in the name of anominee of, and deposited on or about the New Issue Date with acommon depositary for, Euroclear and Clearstream. Beneficial interests inthe Global Note Certificate will be shown on and transfers thereof will beeffected only through records maintained by Euroclear and Clearstream.Except as described herein, certificates for Notes will not be issued inexchange for beneficial interests in the Global Note Certificate.
Clearance and Settlement The Existing Notes have been accepted for clearance by Euroclear andClearstream. On the New Issue Date, the Further Notes will beconsolidated into and form a single series with the Existing Notes, andthe whole series of Notes will be cleared by Euroclear and Clearstreamunder the following codes:
ISIN: XS1982081835
Common Code: 198208183
Governing Law . . . . . . . English law.
Trustee . . . . . . . . . . . . . Bank of Communications Trustee Limited
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Principal Paying Agent . . Bank of Communications Co., Ltd. Hong Kong Branch
Registrar andTransfer Agent . . . . . . Bank of Communications Co., Ltd. Hong Kong Branch
Account Bank . . . . . . . . Bank of Communications Co., Ltd. Hong Kong Branch
Listing . . . . . . . . . . . . . The Existing Notes are currently listed on the SGX-ST, effective from 21May 2019 and represented by the stock code WPJB. Approval in-principlehas been received from the SGX-ST for the listing and quotation of theFurther Notes on the Official List of the SGX-ST. The SGX-ST assumesno responsibility for the correctness of any of the statements made oropinions expressed or reports contained in this Offering Circular.Admission to the Official List of the SGX-ST is not to be taken as anindication of the merits of the Issuer, the Guarantor, the Company, theirrespective subsidiaries, their respective associated companies (if any), theKeepwell and Liquidity Support Deed, the Deed of Equity InterestPurchase Undertaking or the Further Notes. The Notes will be traded onthe SGX-ST in a minimum board lot size of S$200,000 (or its equivalentin other currencies) for as long as any of the Notes are listed on the SGX-ST and the rules of the SGX-ST so require. Following the listing of theFurther Notes, the whole series of Notes will be represented by the stockcode WPJB.
Use of Proceeds . . . . . . . The proceeds from the offering of Further Notes will be used by theGuarantor, the Company or any member of the Group for generalcorporate purposes.
Keepwell and LiquiditySupport Deed . . . . . . .
The Issuer, the Guarantor and the Company will enter into theSupplemental Keepwell and Liquidity Support Deed with the Trustee asfurther described in ‘‘Offer Structure – The Keepwell and LiquiditySupport Deed’’ and ‘‘Description of the Keepwell and Liquidity SupportDeed’’.
Deed of Equity InterestPurchase Undertaking .
The Issuer, the Guarantor and the Company will enter into theSupplemental Deed of Equity Interest Purchase Undertaking with theTrustee as further described in ‘‘Offer Structure – The Deed of EquityInterest Purchase Undertaking’’ and ‘‘Description of the Deed of EquityInterest Purchase Undertaking’’.
Account Bank Agreement The Issuer and the Guarantor will enter into the Supplemental AccountBank Agreement with the Trustee and the Account Bank in respect of theInterest Reserve Account.
Rating . . . . . . . . . . . . . . The Notes are expected to be rated ‘‘BB-’’ by S&P. The Guarantor has acredit rating of ‘‘BB-’’ from S&P and the Company has a credit rating of‘‘BB+’’ from S&P.
Security or credit ratings are not recommendations to buy, sell or hold theFurther Notes. A rating is not a recommendation to buy, sell or hold theFurther Notes and may be subject to suspension, reduction or may bewithdrawn at any time.
7
SUMMARY FINANCIAL INFORMATION OF THE GROUP
The following tables set forth the summary consolidated financial information of the Group as at andfor the periods indicated.
The summary audited consolidated financial information as at and for the three years ended 31December 2016, 2017 and 2018 has been derived from the Group’s audited consolidated financialstatements for the two years ended 31 December 2017 and 2018, which have been audited by WUYIGECertified Public Accountants LLP, and included elsewhere in this Offering Circular. The information setout below should be read in conjunction with, and is qualified in its entirety by reference to, suchconsolidated financial statements of the Group and, including the notes thereto, included elsewhere inthis Offering Circular. Historical results of the Group are not necessarily indicative of results that maybe achieved for any future period.
The Group’s financial statements have been prepared and presented in accordance with PRC GAAP.PRC GAAP differs in certain material respects from IFRS. For a discussion of certain differencesbetween PRC GAAP and IFRS, see ‘‘Summary of Significant Differences between PRC GAAP andIFRS’’.
CONSOLIDATED BALANCE SHEET OF THE GROUP
As at 31 December
2018 2017 2016
(audited) (audited) (audited)(RMB)
AssetsCash and cash equivalent . . . . . . . . . . . . . . . . . . . . . . . 11,500,569,549.81 9,031,278,954.43 11,100,175,309.54Deposit Reservation for Balance . . . . . . . . . . . . . . . . . . 161,994.81 845,454.55 –
Financial assets measured at fair value throughprofit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,413,029,482.91 4,752,129,818.02 4,086,514,116.41
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,922,617.74 168,304,186.08 211,359,361.10Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,855,768.75 277,474.30 –
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,356,704.28 49,805,585.60 38,653,417.99Dividends receivable . . . . . . . . . . . . . . . . . . . . . . . . . . – – 55,161,595.19Other receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,738,513.74 173,951,902.68 580,723,657.90Buying back resale financial assets . . . . . . . . . . . . . . . . 100,000.00 38,000,000.00 10,000,000.00Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,238.99 34,039.85 –
Held-for-sale assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,021,093.59 – –
Loans and advances to customers. . . . . . . . . . . . . . . . . . 1,431,705,488.28 3,544,052,778.70 700,000,000.00Available-for-sale financial assets . . . . . . . . . . . . . . . . . 4,052,901,901.76 8,115,691,430.13 6,027,738,263.73Long-term equity investments . . . . . . . . . . . . . . . . . . . . 2,214,529,944.35 2,146,752,079.42 2,101,008,100.38Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,608,759.25 21,820,448.04 29,342,491.77Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,458,171.70 52,555,569.17 37,659,773.29Development expenditure . . . . . . . . . . . . . . . . . . . . . . . – 287,819.71 –
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,947,504.99 23,947,504.99 –
Long-term prepaid expenses . . . . . . . . . . . . . . . . . . . . . 81,645,628.86 23,946,211.63 38,713,670.31Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 620,555,550.16 632,615,941.08 634,195,455.49Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,289,265.04 11,997,830.36 –
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,727,432,179.01 28,788,295,028.74 25,651,245,213.10LiabilitiesShort-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 344,422,050.00Placements from banks and
other financial institutions. . . . . . . . . . . . . . . . . . . . . 3,400,000,000.00 2,000,000,000.00 1,300,000,000.00Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,020,805.94 62,893,808.85 11,983,193.75Advances from customers . . . . . . . . . . . . . . . . . . . . . . . 30,791,471.91 51,401,696.60 31,157,205.58Financial assets sold under repurchase agreements . . . . . . 5,300,000.00 – –
Payroll payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,383,481,550.07 2,484,098,786.97 2,322,024,819.33Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590,844,573.26 359,647,875.25 649,811,872.81Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,891,814.05 15,020,166.28 15,104,452.72Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 1,200,000,000.00Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,929,301.51 96,683,820.35 281,555,085.63Held-for-sale liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 913,860.79 – –
Long-term payroll payable . . . . . . . . . . . . . . . . . . . . . . 491,164,170.22 425,342,698.02 510,392,911.05Non-current liabilities due within one year . . . . . . . . . . . 2,848,409,858.81 1,467,943,494.48 –
Bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,366,970,186.20 3,255,369,704.68 4,990,614,182.88Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 24,771,340.83 29,746,250.00 –
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,321,488,933.59 10,248,148,301.48 11,657,065,773.75
8
As at 31 December
2018 2017 2016
(audited) (audited) (audited)(RMB)
Owners’ (Shareholders’)Equity:Paid-in capital (share capital) . . . . . . . . . . . . . . . . . . . . 12,000,000,000.00 12,000,000,000.00 6,000,000,000.00Capital Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,697,471.42 236,423,868.22 234,521,087.48Other comprehensive income. . . . . . . . . . . . . . . . . . . . . 41,591,568.33 167,940,680.43 100,003,674.58Incl: Foreign currency translation differences. . . . . . . . . . 19,163,280.39 7,169,637.11 18,416,998.72Surplus reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,696,566,327.07 1,521,491,740.03 1,304,531,098.36General risk reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,224,052,264.36 1,092,899,624.72 821,030,868.54Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,312,567,071.76 1,953,539,632.41 4,800,581,900.77Total Owners’ Equity Attributable To the Company . . 18,520,474,702.94 16,972,295,545.81 13,260,668,629.73Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885,468,542.48 1,567,851,181.45 733,510,809.62Total Owners’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . 19,405,943,245.42 18,540,146,727.26 13,994,179,439.35Total Liabilities and Owners’ Equity . . . . . . . . . . . . . . 30,727,432,179.01 28,788,295,028.74 25,651,245,213.10
CONSOLIDATED STATEMENT OF INCOME OF THE GROUP
Year ended 31 December
2018 2017 2016
(audited) (audited) (audited)(RMB)
I. Total operating income . . . . . . . . . . . . . . . . . . . . . . 5,888,845,749.21 6,534,604,295.49 6,796,554,337.08Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 315,104,034.43 376,592,076.56 153,808,410.93Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526,033,812.21 500,924,021.00 203,723,549.80Interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,929,777.78 124,331,944.44 49,915,138.87Net fee and commission income . . . . . . . . . . . . . . . . . . 2,365,755,590.06 3,074,460,289.86 3,958,391,779.71Fee and commission income . . . . . . . . . . . . . . . . . . . . . 2,365,755,590.06 3,074,460,289.86 3,958,391,779.71Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552,208,543.68 587,785,815.50 954,041,915.46Investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,147,817,782.29 1,380,008,447.58 533,575,306.16Gains from changes in fair values . . . . . . . . . . . . . . . . . 13,966,819.55 (1,973,390.31) 16,220,745.54Foreign exchange gains . . . . . . . . . . . . . . . . . . . . . . . . 215,351.07 (351,845.82) 474,350.27Other operating income . . . . . . . . . . . . . . . . . . . . . . . . 1,479,535,911.38 1,113,936,512.36 1,179,617,286.64Gains from disposal of assets . . . . . . . . . . . . . . . . . . . . 893,671.06 476,418.21 424,542.37Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,348,045.69 3,669,971.55 –
II. Total operating costs . . . . . . . . . . . . . . . . . . . . . . . 3,193,313,093.53 2,917,741,940.27 3,421,169,147.62Business tax and surcharges . . . . . . . . . . . . . . . . . . . . . 31,749,985.12 40,310,868.77 118,835,852.43Operation and administrative expenses . . . . . . . . . . . . . . 3,078,010,722.82 2,856,932,530.57 3,289,657,718.84Losses of assets impairment . . . . . . . . . . . . . . . . . . . . . 83,388,431.51 20,335,251.99 12,624,255.60Other operating Cost . . . . . . . . . . . . . . . . . . . . . . . . . . 163,954.08 163,288.94 51,320.75III. Operating profit. . . . . . . . . . . . . . . . . . . . . . . . . . 2,695,532,655.68 3,616,862,355.22 3,375,385,189.46Add: Non-operating income . . . . . . . . . . . . . . . . . . . . . 16,982,177.13 14,613,560.59 157,698,859.33Less: Non-operating expenses . . . . . . . . . . . . . . . . . . . . 6,407,097.71 10,724,540.77 8,418,043.23IV. Total profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,706,107,735.10 3,620,751,375.04 3,524,666,005.56Less: Income tax expenses . . . . . . . . . . . . . . . . . . . . . . 563,876,297.82 815,369,042.07 820,653,559.99V. Net profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,142,231,437.28 2,805,382,332.97 2,704,012,445.57Net profit attributable to owners of the Company . . . . . . . 2,065,654,242.05 2,747,369,279.87 2,631,390,374.46Profit or loss attributable to minority interests . . . . . . . . . 76,577,195.23 58,013,053.10 72,622,071.11VI. Other comprehensive income . . . . . . . . . . . . . . . . . (105,039,012.42) 68,555,358.48 58,570,745.29VII. Total comprehensive income . . . . . . . . . . . . . . . . 2,037,192,424.86 2,873,937,691.45 2,762,583,190.86Total comprehensive income attributable to
owners of the Company . . . . . . . . . . . . . . . . . . . . . . 1,939,305,129.95 2,815,306,285.72 2,687,614,923.05Total comprehensive income attributable to
minority interests. . . . . . . . . . . . . . . . . . . . . . . . . . . 97,887,294.91 58,631,405.73 74,968,267.81
9
SUMMARY FINANCIAL INFORMATION OF THE GUARANTOR
The following tables set forth the summary consolidated financial information of the Guarantor as atand for the years indicated.
The summary audited consolidated financial information as at 31 December 2016, 2017 and 2018 hasbeen derived from the Guarantor’s audited consolidated financial statements for the years ended 31December 2017 and 2018, which have been audited by PKF Hong Kong Limited, and includedelsewhere in this Offering Circular.
The information set out below should be read in conjunction with, and is qualified in its entirety byreference to, such consolidated financial statements of the Guarantor and, including the notes thereto,included elsewhere in this Offering Circular. Historical results of the Guarantor are not necessarilyindicative of results that may be achieved for any future period.
The Guarantor’s financial statements have been prepared and presented in accordance with Hong KongFinancial Reporting Standards.
Consolidated statement of profit or loss and other comprehensive income
Year ended 31December 2018
Year ended 31December 2017
Year ended 31December 2016
(audited) (audited) (audited)(RMB)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242,962,466 301,572,059 272,840,861Other income and other gain, net . . . . . . . . . . . . . . . . . . 180,824,090 183,084,786 13,561,561Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . (66,984,232) (63,956,768) (36,534,142)Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (333,407,529) (343,684,701) (226,944,131)
Profit before income tax . . . . . . . . . . . . . . . . . . . . . . . 23,394,795 77,015,376 22,924,149Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . (287,598) (7,067,688) (9,062,295)
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,107,197 69,947,688 13,861,854
Other comprehensive (loss)/income:Items that may be reclassified subsequently to
profit or loss:Exchange differences arising on translation of
foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 11,347,358 (12,266,471) 16,270,838Fair value loss on financial assets at fair value through
other comprehensive income . . . . . . . . . . . . . . . . . . . (10,113,558) – –
Surplus/(deficit) on revaluation of available-for-salefinancial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 60,054,430 (311,057)
Item that will not be reclassified subsequently toprofit or loss:
Fair value loss on financial assets designated at fair valuethrough other comprehensive income . . . . . . . . . . . . . (61,406,209) – –
Other comprehensive (loss)/income for the year . . . . . . . . (60,172,409) 47,787,959 15,959,781
Total comprehensive (loss)/income for the year . . . . . . (37,065,212) 117,735,647 29,821,635
Profit for the year attributable to:–Member of the Guarantor . . . . . . . . . . . . . . . . . . . . . 22,726,812 69,198,466 13,861,854Non-controlling interests . . . . . . . . . . . . . . . . . . . . . 380,385 749,222 –
23,107,197 69,947,688 13,861,854
Total comprehensive (loss)/income for the yearattributable to:–Member of the Guarantor . . . . . . . . . . . . . . . . . . . . . (37,669,422) 117,174,306 29,821,635Non-controlling interests . . . . . . . . . . . . . . . . . . . . . 604,210 561,341 –
(37,065,212) 117,735,647 29,821,635
10
Consolidated statement of financial position
As at 31 December
2018 2017 2016
(audited) (audited) (audited)(RMB)
Non-current assetsProperty, plant and equipment . . . . . . . . . . . . . . . . . . . . 1,853,214 2,835,394 936,582Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,974,118 27,974,118 –
Available-for-sale financial assets . . . . . . . . . . . . . . . . . – 215,354,661 2,305,322,866Financial assets at fair value through
other comprehensive income . . . . . . . . . . . . . . . . . . . 338,055,883 – –
Loan to third parties . . . . . . . . . . . . . . . . . . . . . . . . . . 459,833,528 199,302,962 –
827,716,743 445,467,135 2,306,259,448
Current assetsTrade and other receivables. . . . . . . . . . . . . . . . . . . . . . 58,640,533 38,357,979 33,232,021Available-for-sale financial assets . . . . . . . . . . . . . . . . . – 1,368,914,009 –
Financial assets at fair value throughother comprehensive income . . . . . . . . . . . . . . . . . . . 1,399,137,090 – –
Financial assets at fair value through profit or loss . . . . . . 485,932,829 186,896,844 350,960,988Loans to third parties . . . . . . . . . . . . . . . . . . . . . . . . . . 964,140,227 1,140,049,817 –
Amounts due from fellow subsidiaries . . . . . . . . . . . . . . 847,797 1,099,670 640,886,307Tax recoverable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,823,163 – –
Client trust bank balances . . . . . . . . . . . . . . . . . . . . . . . 36,172,068 48,781,369 –
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . 861,374,130 1,990,103,263 2,176,372,310
3,813,067,837 4,774,202,951 3,201,451,626
Current liabilitiesTrade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,977,132 53,985,965 –
Accrued expense and other payables . . . . . . . . . . . . . . . 33,539,415 36,335,628 238,457,540Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,848,409,859 1,467,943,494 –
Tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,264 16,165,358 9,531,238
2,921,009,670 1,574,430,445 247,988,778
Net current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 892,058,167 3,199,772,506 2,953,462,848
Total assets less current liabilities . . . . . . . . . . . . . . . . 1,719,774,910 3,645,239,641 5,259,722,296Non-current liabilityDebentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,366,970,186 3,255,369,705 4,990,614,183
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352,804,724 389,869,936 269,108,113
11
RISK FACTORS
Prior to making an investment decision, prospective investors should carefully consider the followingrisk factors, along with the other matters set out in this Offering Circular. PRC laws and regulationsmay differ from the laws and regulations in other countries. Additional risks not described below or notcurrently known to the Issuer, the Guarantor or the Company or that the Issuer, the Guarantor or theCompany currently deems immaterial may also adversely affect the value of the Notes. The Issuer, theGuarantor and the Company believe that the risk factors described below represent the principal risksinherent in investing in the Notes, but the Issuer, the Guarantor or the Company may not be able to payinterest, principal or other amounts on or in connection with any Notes or to satisfy their obligationsunder the Guarantee of the Notes, the Keepwell and Liquidity Support Deed, the Deed of Equity InterestPurchase Undertaking and the Account Bank Agreement for reasons which the Issuer, the Guarantor orthe Company may not consider as significant risks based on information currently available to them,which the Issuer, the Guarantor or the Company may not currently be able to anticipate or which theIssuer, the Guarantor or the Company may currently deem immaterial. All of these factors arecontingencies which may or may not occur and the Issuer, the Guarantor and the Company are not in aposition to express a view on the likelihood of any such contingency occurring.
None of the Issuer, the Guarantor or the Company represents that the statements below regarding therisk factors of holding any Notes are exhaustive. Prospective investors should also read the detailedinformation set out elsewhere in this Offering Circular and reach their own views prior to making anyinvestment decision.
RISKS RELATING TO THE GROUP’S BUSINESS AND THE GROUP
The Group’s exposures in certain industry sectors which could be adversely affected by downturnsin the economy and any failure to pay the principal and investment returns to the investors underany trust plans as scheduled may materially and adversely affect the Group’s reputation.
The Group’s business and results of operation is dependent on the economic and market conditions. TheGroup provides various trust plans for its institutional and retail clients to invest in various industrysectors, including real estate, public infrastructure, financial services and other commercial andindustrial enterprises. In the event of a downturn and slowdown in any of these industries, the Group’strust plans may not be able to collect the principal and/or expected investment returns on its trust plans.In addition, changes in the economic and market conditions may materially and adversely affect theGroup’s business, results of operations, financial conditions and prospects.
The real estate industry has experienced a downward cycle in recent times with the general slowdown ofthe PRC economy, rising financing costs and oversupply. As a result, real estate trusts are facing highercosts and increased difficulties in raising funds which has adversely impacted the growth in volume ofsuch trusts and may cause a decline in the growth of the Group’s trust business in real estate. Inaddition, the expansion of business by other financial institutions in the PRC such as insurance firmsand fund management companies in to real estate financing has intensified the competitive environment.This has put further pressure on the profit margin of the Group’s real estate trusts. The AUM of theGroup’s real estate financing business has increased from RMB456.83 million as at 31 December 2015to RMB719.20 million as at 31 December 2018, an increase of 36.48 per cent. As a result, the Group’sfee revenue relating to real estate business has increased. This reduction may materially and adverselyaffect the Group’s financial performance.
The Group also operates in other industry sectors that are susceptible to changes in economic andmarket conditions and the general slowdown of the economy, including public infrastructure, financialservices and other commercial and industrial enterprises.
12
In addition, the Group’s private financing business includes cooperation with local governments to offerinvestments in local projects. In September 2014, the State Council published the Opinions onStrengthening the Administration of Local Government Debts ([2014] No. 43) (the ‘‘Opinions’’) whichclarified the responsibilities of debtors and creditors in local government projects. One of theimplications of the Opinions is that because the current cooperative projects with local governments areundertaken pursuant to the public-private partnership model, after 31 December 2014, it would bedifficult for new indebtedness taken on by local governments to be counted as government debt whichwould be supported by the national budget. Based on the Opinions, the State Council also promulgatedthe Plan on Emergency Disposal of Risks associated with Local Government Debts (Guo Ban Han[2016] No. 88) later in October 2016 and the PRC Ministry of Finance accordingly promulgated theCircular on Further Regulating the Borrowing and Financing Behaviors of Local Government (Cai Yu[2017] No. 50) in April 2017 and the Circular on Improving the Administration of Local GovernmentDebts in 2018 (Cai Yu [2018] No. 34) in February 2018 and the Notice on Issues concerning Regulatingthe Investment and Financing Behaviors of Financial Enterprises for Local Governments and State-owned Enterprises (Cai Jin [2018] No. 23) in March 2018 and the Guiding Opinions of the GeneralOffice of the State Council on Maintaining Efforts on Remedy Shortcomings in Infrastructure Field inNovember 2018 respectively, which further strengthened the administration and regulation of localgovernment debts and the relationship between the local governments and state-owned enterprises. Thisin turn adversely impacts the confidence of investors in such projects and consequently the developmentof new government cooperation projects.
The Group’s trust business is susceptible to the credit risks associated with counterparties.Counterparties’ failure to make payments or perform their obligations could have a material adverseeffect on the trust plan’s ability to make payments when due to investors. While the Group has certainobligations to fulfil its duties of effective management as trustee of the trust plan, the Group does notpromise investors the profitability of its trust plans or guarantee against the loss of any principal amountinvested. Nonetheless, if the Group’s trust plans fail to pay the principal and expected investment returnsto investors when due, the reputation of the Group will be damaged and confidence as well as sentimentof investors towards the Group’s existing and future trust plans will be affected, which is likely toadversely affect the results of the Group’s prospects and financial conditions.
Volatility in the PRC securities markets, outlook for the world economy and the relatedGovernment policy or regulatory response may affect investor confidence, impose new regulatoryrequirements and adversely affect the Group’s financial performance and business.
Investor confidence in trust plans in the PRC is highly dependent on the market and economicconditions of the PRC. As the PRC capital markets continue to develop, market conditions haveexperienced and may continue to experience sudden and dramatic changes. Unfavourable globaleconomic and market conditions may also have an adverse effect on the PRC capital markets.Unfavourable or uncertain market and economic conditions could adversely affect investor confidence,resulting in a decline in investors who are willing to invest in trust plans, which could adversely affectthe Group’s business.
Adverse changes in the PRC’s market conditions could adversely affect the Group’s business, results ofoperations, financial condition and prospects. In July 2015, CSRC promulgated the Opinions onRectification of Illegal Securities Business Activities (CSRC Announcement No. 19 [2015]) whichclarified that so-called ‘‘umbrella investment trusts’’ are not allowed. This has led to a gradualdismantling of all ‘‘umbrella investment trusts’’ set up by PRC trust companies, including many set upby the Group, in the second half of 2015. Such dismantling would lead to a significant decrease inrevenue from the Group’s securities investment business.
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In May 2017, the CBRC (now China Banking and Insurance Regulatory Commission, the ‘‘CBIRC’’)promulgated the Various Provisions on Shareholders, Directors and Supervisors of Listed Companiesreducing Shareholdings (CSRC Announcement No. 9 [2017]) which placed further restrictions on capitalreductions or exit of shareholding. This has increased the time required for the Group to exit from itsinvestments.
In December 2017, the CBRC (now CBIRC) issued the ‘‘Notice on Regulating Bank and TrustBusinesses’’ (Yin Jian Fa (2017) No.55), which placed further restriction on bank and trust companies inconducting co-operations. The Group expects that revenue from its bank and trust co-operation may bereduced as a result.
In April 2018, the four ministries of the PRC government, including the People’s Bank of China(‘‘PBOC’’) and the CBIRC jointly issued the Guidelines on Regulating the Asset Management Businessof Financial Institutions (Yin Fa [2018] No.106) which placed further restrictions prohibiting any formof guarantee on investment returns and requires implementation of net-value management system. InJuly 2018, the General Office of the Peoples’ Bank of China issued the Notice on Further Clarifying theMatters Related to the Guiding Opinions for Regulating Asset Management Business of FinancialInstitution which placed further guidance on issues such as the investment of public offering products,investment in new assets for old products in transition period, valuation, bid back and rectification. InAugust 2018, the trust department of CBIRC issued the Notice on Strengthening the Regulation of AssetManagement Business during Transition Period which placed guidance on many aspects of the assetmanagement business including the macro risk, channel business, family trust business, asset-backedsecurities and stock product extension. The increased regulation may place further challenges on theGroup’s business.
The Group expects the market uncertainties in the PRC to remain. During periods of poor economic ormarket conditions, the Group may experience a decline in the value of its managed assets, reducedopportunities to exit and realise value from its private equity investments and increased clientredemptions, which could have an adverse effect on the fee income from the Group’s trust business andinvestment gains from its proprietary investments. In addition, the Group’s private financing businessmay not be able to identify and consummate suitable investments during periods of unfavourable oruncertain economic and market conditions, which could have an adverse effect on the Group’s ability toraise new funds. Any of the foregoing occurrences could adversely affect the Group’s business, resultsof operations, financial condition and prospects.
Further, the outlook for the world economy and financial markets also remains uncertain. In Asia andother emerging markets, some countries are expecting increasing inflationary pressure as a result ofliberal monetary policy or excessive foreign fund inflow, or both. The national referendum resultswhereby the United Kingdom voted to withdraw from the European Union has resulted in volatility inglobal financial markets, and it is expected to create mid- to long-term economic uncertainty to not onlythe economies of the United Kingdom and the European Union but also globally. In addition, the U.S.government’s policies may create uncertainty for the global economy and financial markets. The UnitedStates and the PRC have recently been involved in controversy over trade barriers that have threatened atrade war between the countries, and have implemented or proposed to implement tariffs on certainimported products. Sustained tension between the United States and the PRC over trade policies couldsignificantly undermine the stability of the global economies. The PRC economy is sensitive to globaleconomic conditions, and it is impossible to predict how the PRC economy will develop in the futureand whether it may slow down due to a global crisis or experience a financial crisis. There can be noassurance that changes in the economic, social and political conditions in the PRC or the globaleconomy would not have an adverse effect on the Group’s business, financial conditions, performance,profitability and prospects.
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Instability in the global economy may materially and adversely affect the markets in which the Groupoperates, which may lead to a decline in the general demand for the Group’s services and products. Inaddition, a reduction in liquidity in the global financial markets and in the PRC may negatively affectthe Group’s liquidity. Therefore, instability in the global economy may materially and adversely affectthe Group’s business, financial condition and results of operations.
Some trust companies in the PRC may have offered bail-outs for investors in their trust plans andthese actions may affect investors’ expectations generally.
In 2014, there have been reports that a trust company in the PRC may have been involved in bail-outsof investors in their trust plan. When the trust plan was facing difficulties repaying investors, anunidentified buyer offered holders of the trust plan the right to transfer their rights in the trust for anamount equal to the product’s face value. It has been reported that the trust company who sold the trustplan to investors may have been involved in the repayment of principal to investors. Even though trustcompanies in the PRC generally do not promise investors the profitability of its trust plans or guaranteeagainst the loss of any principal amount invested, reports of such bail-outs may alter investor’sperception of the industry practice. The Group has taken steps to clearly disclose in its contracts withinvestors that the Group does not promise investors the profitability of its trust plans or guaranteeagainst the loss of any principal amount invested. However, there is no assurance that the actions ofsome trust companies would not affect the expectations of the investors. If customers invest in theGroup’s trust plans with the expectation that the Group would also bailout its investors in similarsituations, and if the Group does not offer such bail-outs, then investor sentiments towards the Groupmay be adversely affected. Such events may materially and adversely affect the Group’s prospects,results of operations and financial condition.
In April 2018, the four ministries of the PRC government, including the PBOC and the CBIRC jointlyissued the Guidelines on Regulating the Asset Management Business of Financial Institutions (Yin Fa[2018] No. 106), which placed further restrictions prohibiting any form of guarantee on investmentreturns. Any form of guaranteed payments against investor losses will be investigated by regulators.Investor bail outs may slowly be phased-out amongst the PRC trust companies.
There is no assurance that there will be no change to the shareholding structure of the Company.
Since its establishment in 1987, there have been several changes to the Company’s shareholders andalthough the Company is currently indirectly majority-owned by the PRC government controlled state-owned enterprises, there is no assurance that this will continue. When the Company was incorporated in1987 as Harbin International Trust Investment Co., Ltd., its shareholders were State-owned AssetsSupervision and Administration Commission of Harbin province (‘‘SASAC of Harbin’’) and HaciCompany Limited. In 2004, the Company completed two equity transfer deals and the originalshareholders transferred their stakes to Harbin Economic Development and Investment Company andZhongzhi Enterprise Group Co., Ltd. Then in 2010, Jingwei Textile acquired 36 per cent. of theCompany from Zhongzhi Enterprise Group Co., Ltd. and became the Company’s largest shareholder.Since 2010, Jingwei Textile has injected RMB2,813 million into the Company.
On 12 March 2018, Jingwei Textile proposed to acquire approximately 33 per cent. of the shareholdingin the Company from Zhongzhi Group, the second-largest shareholder, in a stock plus cash fundedacquisition. The proposed transaction was terminated in November 2018 due to, amongst other things,fluctuations in the PRC capital markets. As at 31 December 2018, Jingwei Textile holds 37.47 per cent.of the Company’s equity.
The Company does not have control over its shareholders who may transfer their stake to another partyand cannot provide any guarantee or assurance that its current key shareholders will remain the same. Inaddition, the Company from time to time considers a range of available financing options, includingequity injections from third parties.
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The Group’s trust business in the PRC faces severe competition for investor funds and projectsfrom other players in the financial services industry in the PRC.
The Group’s trust business primarily operates in the PRC, where competition for investor funds andprojects is intense, not just from other trust companies but also from other players in the financialservices industry. In particular, banks, securities companies and funds companies have been increasingtheir wealth management capabilities and offering products similar to trust plans to investors. The highyield bond market was launched in 2012 on the Shanghai Stock Exchange with bonds offering ratescompetitive with that of trust plans.
The Group also competes with both local and international companies in respect of its trusts, securitiesinvestments, asset management, alternative asset management, private equity and wealth managementbusinesses. The Group competes with these competitors in terms of brand recognition, marketing anddistribution capability, service quality, financial strength, pricing and the range of products and servicesoffered. With the intensifying market competition, competitors may reduce their prices to improve theirmarket share, which may compel the Group to further reduce its fees and commission to remaincompetitive.
Some of the Group’s competitors may have certain competitive advantages over the Group which enablethem to have better access to potential clients and capital resources than the Group, including greaterfinancial resources, stronger brand recognition, a broader range of products and services, more extensiveoperating experience, higher market share and a more extensive distribution network, businessrelationships, and/or a longer operational track record in the relevant geographic markets. In addition, in2010, under the Measures for the Administration of Net Capital of Trust Companies, the CBRC (nowCBIRC) introduced capital requirements for trust companies stipulating that all trust companies mustmaintain a minimum net capital of RMB200 million and maintain a ratio of no less than 40 per cent. ofnet capital to net assets. This makes it harder for trust companies in the PRC to compete withcompetitors such as securities companies which have a lower cost of capital compared to trustcompanies and can pass on such discounts in their products and plans to clients.
There is no assurance that the Group can compete effectively against its current and future competitors,or that competitive forces in the market will not alter the industry landscape such that the Group’sbusiness objectives would become impractical or impossible.
A significant decline in the size of the assets under management or poor management performancemay materially and adversely affect the Group’s operations.
The Group receives fees based on the value of its customer portfolios or investments in funds and trustsmanaged by it. The Group’s ability to raise funds for its trust plans depends on a number of factors,many of which are beyond the Group’s control. Poor performance of the Group’s trust plans or assetmanagement plans could also make it more difficult for the Group to raise new capital. To the extentthat economic and market conditions deteriorate, the Group may be unable to raise sufficient funds tosupport the investment activities of its trust plans or asset management plans. If the Group fails to raisefunds, the financial condition and results of operations of its trust plans or asset management planscould be materially and adversely affected, which may, as a result, adversely affect the results of theGroup’s business operations.
In addition, investment performance affects the Group’s assets under management and is one of the mostimportant factors in retaining clients and competing for new business. Market volatility and limitationsin investment options and hedging strategies in the PRC could limit the Group’s ability to provide stablereturns for its clients and cause it to lose clients. Further market volatility, adverse economic conditionsor the failure to out-perform competitors or the market may reduce the size of the assets under theGroup’s management or affect the performance of the funds or trusts it manages. Upon occurrence ofany of the above circumstances, existing investors might divert their future investments away from theGroup in favour of better performing products provided by competitors; clients may request that theGroup lower its fees for asset management services in an intensely competitive industry; the Group’s
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incentive fees, which are based on the investment returns, could decline; and firms and financialinstitutions with which the Group has co-operations may terminate their relationships with the Group,and future strategic alliances may be unavailable. In addition, the Group may not be able to keep orincrease its assets under management. Any of the above circumstances may adversely affect the resultsof the Group’s business operations.
The Group may have limited control over the projects and companies in which its trust plansinvest.
The Group has set up specialised project management departments to monitor its investment projects aspart of its risk management measures. For example, the Company has five functional departments withrisk management responsibilities responsible for research, investigation, analysis and monitoring of therisk elements involved in its investment projects.
However, there is no assurance that the Group will have complete control over the companies andprojects in which its trust plans or asset management plans invest. The Group may not be able toinfluence the business, financial or management decisions of those companies or projects, which couldresult in the Group not being able to achieve the expected investment return. If the Group cannotachieve the expected investment return on its trust plans, the reputation of the Group will be damagedand confidence and sentiment of investors will be affected. As a result, the Group’s business, financialcondition and results of operations could be materially and adversely affected.
As the Group does not participate in the daily management of the companies and projects in which theGroup’s trust plans have investments, it may not be aware of issues arising from their daily operationsand legal compliance. Even if the Group is aware of such issues, it may not be able to cause suchenterprises to resolve the issues due to its limited influence on them. Therefore, certain issues arisingfrom the daily operations and legal compliance of these companies may materially and adversely affectthe Group’s business, financial condition and results of operations.
The Group’s proprietary investment operations are subject to market volatility and its investmentdecisions and the Group may adjust its portfolio position from time to time.
The Group, including the Guarantor, invests and trades in equity and fixed income securities both withinand outside the PRC, all of which are subject to market volatility. The performance of the Group’sproprietary investment and trading business is determined by its investment decisions and judgmentsbased on its assessment of existing and future market conditions. The Group’s investment decisions are amatter of judgment, which involves management discretion and assumptions, which may not be correctas market conditions change quickly, and its decision-making process may fail to effectively minimiselosses, capture gains, or conform to actual changes in market conditions. In addition, the value of certainassets of the Group, including those of the Guarantor, such as available-for-sale securities and financialassets, are subject to price fluctuations as a result of changes in the financial market’s assessment of therelevant issuer’s business prospects, credit worthiness and other factors. The decline in the value of suchassets can result in the recognition of impairment losses of the Group. In addition, in accordance with itsrisk management policies, the Group may adjust its portfolio position, including divestment and disposalof investment assets, as and when opportunities arise, which could result in investment losses.
Therefore, volatility in securities markets may have an adverse affect on the Group’s business, results ofoperation, financial condition and prospects, including those of the Guarantor Group.
The Group is exposed to liquidity risk.
The Group satisfies its liquidity requirements mainly through cash generated from operations and tradingin financial assets. The Group also receives cash from capital injection from its shareholders, and netproceeds from the issuance of the Notes will be re-invested in the Group. Any decline in the Group’sliquidity level may impair the confidence of its customers or counterparties, which may result in loss ofbusiness and/or customers.
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Factors which may adversely affect the Group’s liquidity level include unfavourable changes to themacroeconomic environment, policies or money markets, the Group’s failure to maintain current andfuture financing arrangements on commercially acceptable terms, decreases in recovery of cash fromdisposal of assets due to unfavourable changes of capital markets, failure to realise the value of investedfinancial assets at a reasonable price, concentrated holding of certain assets or asset categories,mismatching of assets and liabilities maturity, tightened regulatory requirement, other changes inregulations or weakened market and customer sentiments. If the Group is unable to generate sufficientcash from operating activities to meet its liquidity needs, the Group would be required to seek externalfinancing.
There is no assurance that any additional financing will be available to it on acceptable terms, if at all.This risk is exacerbated by the volatility that the global credit markets have experienced. To the extentthat additional financing is proved to be unavailable when needed for a particular investment oracquisition, the Group may be compelled to either restructure the transaction or abandon the investmentor acquisition plan. In addition, if the Group acquires or invests in another company, the company itacquires or invests in may require additional financing to fund continuing operations and/or growth.Furthermore, the Group’s subsidiaries or branches may request support from the Group to meet theirliquidity requirements during their ordinary course of business. There is no assurance that the Groupwill always be able to provide sufficient funds to its subsidiaries on a timely basis, if at all. Theoccurrence of any of the above-mentioned circumstances could materially and adversely affect theGroup’s financial condition and results of operations.
The complexity of its operations and products exposes the Group to operating, marketing andother risks, and the Group’s risk management and internal control systems may be ineffective orinadequate.
The Group has established risk management and internal control systems and procedures to managepotential risks associated with the broad range of financial services and products it offers. The riskmanagement and internal control systems may require constant monitoring, maintenance and continualimprovements by its senior management and staff. If the Group’s efforts to maintain these systems areineffective or inadequate, the Group may face operating, marketing and other risks. Deficiencies in theGroup’s risk management and internal control systems and procedures may affect its ability to record,process, summarise and report financial and other data in an accurate and timely manner, as well asaffect its ability to identify any reporting errors and non-compliance with rules and regulations.
The Group’s risk management and internal control systems and procedures may contain inherentlimitation caused by misjudgment, fault or the Group’s limited experience or resources in makingaccurate, complete, up-to-date or proper evaluations. In particular, the Group devises risk managingprocedures based on observed historical market behaviour and the Group’s experience. However, inmarkets that are rapidly developing, the information and experience data that the Group relies on for itsrisk management methods may become quickly outdated as markets and regulations continue to evolve.
Furthermore, the Group may not have sufficient access to resources and trading counterparties toimplement its trading and investment risk mitigation strategies and techniques effectively. If the Group’sdecision making process fails to effectively minimise losses while capturing gains, it may materially andadversely affect the Group’s financial performance.
In July 2015, the Shanghai Stock Exchange took disciplinary action against the Company by suspendingthe trading account of the Company from 31 July 2015 to 30 October 2015. The cause of thedisciplinary action was the failure of the Group’s quantitative hedging programme to execute sell ordersdue to the fall in price of a large number of stocks on the Shanghai Stock Exchange on 8 July 2015. Thesystem tried to execute sell orders on stocks in accordance with the investment advisor’s strategy butbecause the stock in question had reached the daily volatility limit imposed by the stock exchange, thesell orders could not be executed. The system repeatedly tried to execute sell orders by cancellingexisting orders and placing new orders. The frequent cancelling of orders was deemed by the Shanghai
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Stock Exchange as abnormal trading behaviour. Hence, the Shanghai Stock Exchange imposed thedisciplinary action against the Company. The particular investment product in question has beenredeemed, with money returned to investors. The Shanghai Stock Exchange also took disciplinary actionagainst the investment advisory firm. After the event, the Company has taken steps to mitigate the riskof similar errors with each of its investment advisors.
As a result, there is no assurance that the Group’s risk management and internal control systems areadequate or effective, and any failure to address any internal control matters and other deficiencies couldresult in investigations and disciplinary actions or even prosecution being taken against the Group or itsemployees, or disruption to its risk management systems, which may have a material and adverse effecton its financial condition and results of operations.
There can be no assurance that the Group’s due diligence investigations will identify every matterthat could have a material adverse effect on the Group.
The Group intends to conduct extensive business, financial and legal due diligence in connection withits operations, in particular, for potential acquisition and investment opportunities. However, there canbe no assurance that the Group’s due diligence investigations will identify every matter that could havea material adverse effect on the acquisition or investment targets. As a result, the Group may fail toidentify the existing risks in relation to the business and operations of investment targets through its duediligence. To the extent that any of the above mentioned issues arise, the business and operations of theinvestment target could be adversely affected, which in turn could have material and adverse effects onthe Group’s financial condition and results of operations.
The Group’s expansions or acquisitions may not be successful.
The Group may expand through acquisition of entities offering financial services or productscomplementing its own business operations. In addition, the Group has intentions to expand its businessoutside the PRC and Hong Kong if suitable investment opportunities arise. The Group may enter intojoint ventures with local business partners in these countries or the Group may identify and acquiresuitable targets in line with its development strategy. There is no assurance that the Group will be ableto identify suitable acquisition or expansion opportunities, negotiate acceptable terms or successfullyacquire identified targets or successfully complete joint venture projects. It is anticipated that theinvestigation of an acquisition or investment plan and the negotiation, drafting and execution of relevantagreements, disclosure documents and other instruments will require substantial time and attention frommanagement and substantial costs for accountants, attorneys and other advisers. If such expansion,acquisition or investment plan is not implemented, the costs incurred up to that point for the proposedtransaction may not be recoverable. Furthermore, even if an agreement is reached relating to a specificacquisition or investment target, the Group may not implement the investment or acquisition plan formany reasons beyond its control. For example, the process of integrating an acquired business mayinvolve unforeseen costs and delays or other operational, technical and financial difficulties that mayrequire a disproportionate amount of management attention and financial and other resources. Thefailure to achieve consolidation savings, realise the expected synergies, successfully incorporate theacquired businesses and assets into the Group’s existing operations or minimise any unforeseenoperational difficulties could have a material adverse effect on its financial condition and results ofoperations.
The Group is subject to extensive regulatory requirements, the non-compliance of which wouldmaterially and adversely affect the Group’s financial condition and results of operations.
The Group is subject to extensive laws, policy and regulatory requirements issued by the relevantgovernmental authorities in the PRC and overseas (including Hong Kong). In particular, as a non-bankfinancial institution in the PRC, the Company is subject to supervision of various authorities, includingthe CBIRC. These regulatory authorities promulgate requirements governing the Group’s business invarious aspects, such as capital adequacy, anti-money laundering, entry into certain markets, pre-filing
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of trust plans and requirements of other types. Compliance with applicable laws, rules and regulationsmay restrict the Group’s business activities and require it to incur increased expense, restate or writedown the value of its assets or liabilities, and to devote considerable time to such compliance efforts.
In addition to laws, rules and regulations, the regulatory authorities may also issue various policies andguidance from time to time. For example, the CBRC promulgated the Opinions on Further Strengtheningthe Risk Supervision of Trust Companies(關於進一步加強信託公司風險監管工作的意見)in 2016 andexpressed again on different occasions their determination to strengthen risk supervision of the trustindustry in 2017. PBOC, CBIRC, CSRC and the State Administration of Foreign Exchange of the PRC(‘‘SAFE’’) also jointly promulgated the Guiding Opinions to Standardize Assets Management Businessof Financial Institutions(關於規範金融機構資產管理業務的指導意見)at the end of April 2018,providing a uniform set of standards for regulating similar assets management products of differenttypes of financial institutions, effectively control financial risks and better serve the real economy. InJuly 2018, the General Office of the Peoples’ Bank of China issued the Notice on Further Clarifying theMatters Related to the Guiding Opinions for Regulating Asset Management Business of FinancialInstitution(關於進一步明確規範金融機構資產管理業務指導意見有關事項的通知)which placedfurther guidance on issues such as the investment of public offering products, investment in new assetsfor old products in transition period, valuation, bid back and rectification. In August 2018, the trustdepartment of CBIRC issued the Notice on Strengthening the Regulation of Asset Management Business
(關於加強規範資產管理業務過渡期內信託監管工作的通知)during Transition Period which placedguidance on many aspects of the asset management business including the macro risk, channel business,family trust business, asset-backed securities and stock product extension. The regulatory authoritiesencourage trust companies to actively reduce their trust business that serves merely as channels, shortenthe links between fund suppliers and users, and deleverage their business so as to ensure that thecomprehensive risk of the trust industry is under control. The regulatory authorities also encourage trustcompanies to maintain their fundamental role as a provider of trustee services, enhance their researchand innovation efforts with respect to their actively managed trust business, and provide more targetedand high value added financial services to the real economy. While these policies and guidance may nothave the force of law, the Group is expected to continue to follow them in its business operation andtherefore the Group’s business, financial condition and results of operations may be significantlyaffected by such policies and guidance.
In addition, pursuant to applicable laws and regulations in the PRC, the Group is required to obtain orrenew approvals, permits and licences with respect to its relevant operations. There is no assurance thatthe Group can obtain or renew all necessary approvals, permits and licences on a timely basis.Noncompliance with relevant laws and regulations or failure to obtain the relevant approvals couldsubject the Group to sanctions, fines, penalties, revocation of licence or other punitive actions, includingsuspension of the Group’s business operations or restriction or prohibition on certain business activities.Furthermore, relevant government authorities may adopt new laws and regulations, or amend theinterpretation or enforcement of existing laws and regulations, or promulgate stricter laws andregulations, all of which may materially and adversely affect the Group’s financial condition and resultsof operations.
As PRC did not have a trust registration system until recently, trust assets may not be sufficientlyprotected, which could reduce clients’ confidence in the trust arrangements.
PRC did not formally establish a system for trust registration until 2017. While PRC established a trustregistration system in September 2017 under the Measures for the Administration of Trust(信託登記管
理辦法)newly promulgated by CBRC, the trust plans that were established prior to the launch of suchsystem and the terms of which would expire before 30 June 2018 (inclusive) are not required to beregistered. As such, even though the PRC Trust Law has provided that the trust assets are separate fromtrustor’s own assets as well as trustee’s proprietary assets, and that trust assets will be treated separatelyin the event of a bankruptcy of or lawsuit against the trustor/trustee, there may not be adequate legalprotection for those trust assets which are not registered in the system. Disputes may arise as to thestatus of those assets, and courts could be unable to decide whether those assets have been entrusted
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into a trust as there is no public record for such entrustment. If those assets which the trustor believes tobe trust assets fail to be recognized as such by the court, these assets may not be able to enjoy thebenefits of being treated as separate assets, and could be accessed by the creditors or subject tocompulsory enforcement by the court. The ability to separate and shield trust assets from the trustorsand their creditors is one of the most significant advantages of trust arrangements. Any deficiency inlegal protection of trust assets may cause clients to lose confidence in the advantage of the trustarrangement. As a result, the Group’s trust business may experience less popularity and decrease inclient numbers, which would have an adverse effect on the Group’s operations and financial condition.
Significant interest rate fluctuations could affect the Group’s financial condition and results ofoperations.
The Group’s exposure to interest rate risk is primarily associated with its financial assets. The Groupearns income from financial assets such as bank deposits and money market funds held under resaleagreements and margin financing and securities lending business. Interest income from these sources isgenerally linked to the prevailing market interest rates. During periods of declining interest rates, theGroup’s interest income would generally decrease. Significant interest rate fluctuations could reduce theGroup’s interest income or returns on fixed income investments.
The Group is subject to restrictions on the remittance of Renminbi into and out of the PRC andgovernmental controls on currency conversion, and may be affected by the risks relating to fluctuationsin exchange rates in the future.
The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and theremittance of currency out of PRC. Substantially all of the Group’s operating income is denominated inRenminbi, a portion of which may need to be converted into other currencies in order to meet theGroup’s foreign currency obligations, such as payments of principal and interests under the Notes orother foreign currency denominated debt, if any.
Under the existing PRC laws and regulations on foreign exchange, payments of current account items,including profit distributions, interest payments and trade and service related foreign exchangetransactions, can be made in foreign currencies without prior approval from SAFE provided that certainprocedural requirements are complied with. Approval from or registration with competent governmentauthorities is required where Renminbi is to be converted into foreign currency and remitted out of thePRC to pay capital expenses such as the repayment of loans denominated in foreign currencies. ThePRC government may, at its discretion, take measures to restrict access to foreign currencies for currentaccount and capital account transactions under certain circumstances. If the foreign exchange controlsystem prevents the Group from obtaining sufficient foreign currencies to satisfy the Group’s foreigncurrency demands, the Group may not be able to pay interests and/or principal to holders of the Notes orother foreign currency denominated debt, if any. In addition, there can be no assurance that new laws orregulations will not be promulgated in the future that would have the effect of further restricting theremittance of Renminbi into or out of the PRC.
The proceeds from the offering of the Notes will be received in U.S. dollars. As a result, anyappreciation of Renminbi against U.S. dollar or any other foreign currencies may result in the decreasein the value of the Group’s foreign currency-denominated assets and the Group’s proceeds from theoffering of the Notes. Conversely, any depreciation of Renminbi may adversely affect the Group’sability to service the Notes.
The value of Renminbi against U.S. dollar and other foreign currencies is subject to changes in thePRC’s policies, as well as international economic and political developments. On 21 July 2005, the PRCgovernment adopted a more flexible managed floating exchange rate system to allow the value ofRenminbi to fluctuate within a regulated band that is based on market supply and demand with referenceto a basket of currencies. From 21 July 2005 to 17 March 2014, the floating band of interbank spotforeign exchange market trading price of Renminbi against U.S. dollar was gradually widened from 0.3
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per cent. to 2 per cent. On 11 August 2015, PBOC adjusted the mechanism for market makers to formthe central parity rate by requiring them to consider the closing exchange rate of the last trading date,the supply and demand of foreign exchange and the rate change at primary international currencies. On11 December 2015, the China Foreign Exchange Trade System, a sub-institutional organisation ofPBOC, published the China Foreign Exchange Trade System (CFETS) Renminbi exchange rate index forthe first time which weighs Renminbi based on 13 currencies, to guide the market in order to measurethe Renminbi exchange rate from a new perspective. Although starting from 1 October 2016, Renminbihas been added to the Special Drawing Rights basket created by the International Monetary Fund, therecan be no assurance that the PRC government will continue to gradually liberalise the control overcross-border Renminbi remittances in the future, that any pilot schemes for Renminbi cross-borderutilisation will not be discontinued or that new PRC regulations will not be promulgated in the futurewhich have the effect of restricting the remittance of Renminbi into or outside the PRC.
In addition, the value of Renminbi has depreciated significantly against U.S. dollar since the end of2015 and there can be no assurance that Renminbi will not experience significant depreciation orappreciation against U.S. dollar or against any other currency in the future. The exchange rate betweenRenminbi and U.S. dollar experienced further fluctuation between 1 January 2016 and the date of thisOffering Circular. On 5 August 2019, PBOC set the Renminbi’s daily reference rate above 7 per U.S.dollar for the first time in over a decade amidst an uncertain trade and global economic climate. Thereremains significant international pressure on the PRC government to adopt an even more flexiblecurrency policy, which could result in further and more significant appreciation of Renminbi againstU.S. dollar. If further reforms are implemented and result in devaluation of Renminbi against U.S.dollar, the Group’s business, financial condition, results of operations and prospects could be adverselyaffected because of the Group’s U.S. dollar denominated indebtedness and other obligations. Suchdevaluation could also adversely affect the value, translated or converted into U.S. dollars or otherwise,of the Group’s earnings and ability to satisfy its obligations under the Notes.
Furthermore, the Group is required to obtain SAFE’s approval before converting significant amounts offoreign currencies into Renminbi. As a result, any significant increase in the value of Renminbi againstforeign currencies could reduce the value of the Group’s foreign currency-denominated revenue andassets and could materially and adversely affect the Group’s business, financial condition, results ofoperations and prospects.
The Group faces risks associated with its business expansion and expanding its business intomarkets outside the PRC.
The Group is committed to providing new products and services to enhance its business competitivenessand will continue to expand the financial products and services it offers according to the relevant lawsand regulations, develop new customers and enter into new markets. At the same time, the Group is alsocommitted to adapt to any changes in the market, and if necessary, terminate or replace unprofitablebusiness lines or products.
These activities expose the Group to new and potentially increasingly challenging risks, including, butnot limited to:
• insufficient experience or expertise in offering new products and services and dealing with newcounterparties and customers;
• loss of existing customers;
• greater regulatory scrutiny, increased credit risks, market risks and operational risks including theimpact on the Group’s capital;
• potential impacts on the investment return of the Group’s services due to the overall economicconditions;
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• reputational concerns arising from dealing with less sophisticated counterparties and customers;
• inadequate levels of service for its new products and services;
• failure to hire additional qualified personnel to support the offering of a broader range of productsand services;
• failure to successfully integrate existing staff into new lines of business;
• unwillingness to accept the new products and services by the Group’s customers or failure to meetits profitability expectations;
• failure to obtain sufficient financing from internal and external sources to support its businessexpansion; and
• unsuccessful enhancement of its risk management capabilities and IT systems to identify andmitigate all the risks associated with these new products and services, new customers and newmarkets.
If the Group is unable to achieve the intended commercial results with respect to its offering of newproducts and services, its business, financial condition, results of operations and prospects could bematerially and adversely affected.
In addition, the Group intends to continue to expand its operations beyond the PRC. During the courseof this expansion, the Group plans to continue to explore markets where it has limited or no experience.The Group’s inexperience in such markets could affect its ability to attract clients. Additionally, it mayfail to address adequately competitive conditions in new markets that differ from those in the Group’sexisting markets. International expansion also exposes the Group to the risks inherent in conductingbusiness internationally, including but not limited to:
• economic instability and recession;
• political instability;
• failure to comply with approval or licence requirements;
• failure to comply with foreign laws and regulatory requirements;
• inability to effectively mitigate contractual or legal risk;
• adverse tax consequences;
• fluctuations in currency exchange rates;
• changes in tariffs;
• increased risk of exposure to terrorist activities;
• difficulties in providing products, services and support in these overseas markets;
• difficulties in managing its sales channels and overseas distribution network effectively;
• differences in accounting treatment in different jurisdictions;
• limited protection for intellectual property rights;
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• difficulties in recruiting, training and retaining qualified personnel; and
• general difficulties in administering foreign operations.
In particular, despite the Group’s efforts to comply with all applicable regulatory requirements, it mayfail to do so. In the event of non-compliance with the applicable local law and regulations, the Groupmay be subject to regulatory and administrative investigation or penalties, which will increase the costof compliance and integration of the Group’s internal control system to any business outside the PRC.
The Group relies heavily on information technology systems to process and record its transactionsand offer online products and services, the failure of which may adversely affect the Group’sreputation and business.
The Group’s business operation relies heavily on the ability of its information technology systems tostore and analyse a large amount of information, accurately process a vast number of transactions acrossnumerous and diverse markets and offer services and products in a timely manner. The Group is alsoreliant on third-party service providers to provide such information technology services that it needs tooperate its business from time to time. Disruption to any such information technology system couldharm the Group’s business and reputation.
Even though the Group has put in place disaster recovery plans for its information technology systems,its systems are still vulnerable to disruptions as a result of various factors, including, without limitation,natural disasters, power failures, computer viruses, spam attacks, human errors and unauthorised access.A prolonged disruption to or failure of the Group’s information technology systems would limit itsability to monitor and manage collections, maintain financial and operating controls, monitor andmanage its risk exposures across the Group, keep accurate records, provide high-quality customerservice and to develop and sell profitable products and services. There is no assurance that theoperations of the Group will not be materially disrupted if any of these systems fail.
The Group may not be able to fully detect money laundering and other illegal or improperactivities in its business operations on a timely basis.
The Group is required to comply with applicable anti-money laundering, anti-terrorism laws and otherregulations in the PRC and overseas. The PRC’s anti-money laundering law requires financialinstitutions to establish sound internal control policies and procedures with respect to anti-moneylaundering monitoring and reporting activities. Such policies and procedures require the Group to,among other things, establish a customer identification system in accordance with relevant rules, recordthe details of customer activities and report suspicious transactions to relevant authorities.
While the Group has adopted policies and procedures aimed at detecting and preventing the use of itsbusiness platforms to facilitate money laundering activities and terrorist acts, such policies andprocedures may not completely eliminate instances in which it may be used by other parties to engage inmoney laundering and other illegal activities. In the event that the Group fails to fully comply withapplicable laws and regulations, the relevant government agencies may freeze its assets or impose finesor other penalties on it. There can be no assurance that the Group will not fail to detect moneylaundering or other illegal or improper activities. Such failure of the Group may affect its businessreputation, financial condition and results of operations.
The Group’s businesses may be adversely affected if it is unable to hire and retain qualifiedemployees.
The success of the Group’s business is dependent to a large extent on its ability to attract and retain keypersonnel who possess in-depth knowledge and understanding of the financial services industry. Thesekey personnel include members of the Group’s senior management, experienced investment managers,product development personnel, research analysts, marketing and sales staff and information technologyand other operations personnel. Competition for attracting and retaining these individuals is intensive.
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Such competition may require the Group to offer higher compensation and other benefits in order toattract and retain qualified professionals, which could materially and adversely affect the Group’sfinancial condition and results of operations. As a result, the Group may be unable to attract or retainthese personnel to achieve its business objectives and the failure to do so could severely disrupt itsbusiness and prospects. For example, the Group may not be able to hire enough qualified personnel tosupport its new products and services to remain competitive. In addition, various businesses of theGroup are susceptible to operation errors if its employees are tired or incompetent, or make wrongjudgments. Furthermore, as the Group expands its business or hires new employees, the employees maytake time to get accustomed to any new standard procedures and consequently may not comply with thestandard procedures of any new business in an accurate and timely manner. The occurrence of any of theevents discussed above could lead to unexpected loss to the Group and affect its revenue and financialconditions. If any of the senior management or other key personnel of the Group joins or establishes acompeting business, the Group may lose some of its customers, which may have a material adverseeffect on its business.
The Group may not be able to detect and prevent fraud or other misconduct committed by itsemployees, representatives, agents, customers or other third parties.
The Group may be exposed to fraud or other misconduct committed by its employees, representatives,agents, customers or other third parties that could subject the Group to financial losses and sanctionsimposed by governmental authorities, as well as affect its reputation. These misconducts could include:
• hiding unauthorised or unsuccessful activities, resulting in unknown and unmanaged risks orlosses;
• intentionally concealing material facts, or failing to perform necessary due diligence proceduresdesigned to identify potential risks, which are material to the Group in deciding whether to makeinvestments or dispose of assets;
• improperly using or disclosing confidential information;
• recommending products, services or transactions that are not suitable for the Group’s customers;
• misappropriation of funds;
• conducting transactions that exceed authorised limits;
• engaging in misrepresentation or fraudulent, deceptive or otherwise improper activities whenmarketing or selling products;
• engaging in unauthorised or excessive transactions to the detriment of the Group’s customers; or
• otherwise not complying with applicable laws or the Group’s internal policies and procedures.
The Group’s internal control procedures are designed to monitor its operations and ensure overallcompliance. However, such internal control procedures may be unable to identify all incidents ofnoncompliance or suspicious transactions in a timely manner if at all. Furthermore, it is not alwayspossible to detect and prevent fraud and other misconduct, and the precautions the Group takes toprevent and detect such activities may not be effective.
There is no assurance that fraud or other misconduct will not occur in the future. If such fraud or othermisconduct does occur, it may cause negative publicity as a result.
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Conflicts of interest are increasing and a failure to appropriately identify and address conflicts ofinterest could adversely affect the Group’s business.
As the Group expands the scope of its business and client base, it is increasingly important for it toaddress potential conflicts of interest, including situations where its services to a particular client or itsown investments or other areas are at conflict, or are perceived to conflict, with the interests of anotherclient, as well as situations where one or more of its businesses have access to material non-publicinformation that may not be shared with another business within the firm and situations where the Groupmay be a counterparty of an entity with which the Group also has other relationships.
The Group has extensive procedures and controls that are designed to identify and address conflicts ofinterest, including those designed to prevent the improper sharing of information among its businesses.However, appropriately identifying and dealing with conflicts of interest is complex and difficult, andthe Group’s reputation could be damaged and the willingness of clients to enter into transactions withthe Group may be adversely affected if the Group fails, or appears to fail, to identify, disclose and dealappropriately with conflicts of interest. In addition, potential or perceived conflicts could give rise tolitigation or regulatory enforcement actions against the Group.
Litigation and regulatory investigations and the resulting sanctions or penalties may adverselyaffect the Group’s reputation, business, results of operations and financial condition.
The Group is exposed to risks associated with litigations relating to its operations, including the risk oflawsuits and other legal actions relating to information disclosure, financial products design, salespractices, fraud and misconduct, as well as protection of personal and confidential information ofcustomers. The Group may be subject to arbitration claims and lawsuits in the ordinary course of itsbusiness. The Group may also be subject to inquiries, investigations, and proceedings by regulatory andother governmental agencies actions brought against it, which may result in settlements, injunctions,fines, penalties or other results adverse to it that could harm its reputation. Even if the Group issuccessful in defending itself against these actions, the costs of such defence may be significant. Inaddition, the Group may be subject to regulatory actions from time to time. A substantial legal liabilityor a significant regulatory action could have a material and adverse effect on the Group’s operations,reputation and business prospects.
There is no assurance that the number of legal claims and amount of damages sought in litigation andregulatory proceedings may not increase in the future. A significant judgment or regulatory actionagainst the Group or a disruption in its business arising from adverse adjudications in proceedingsagainst its directors, officers or employees would have a material adverse effect on its liquidity,business, financial condition, results of operations and prospects.
Catastrophic events, which are unpredictable by nature, could materially and adversely affect theprofitability of the Group.
The Group’s businesses expose it to risks arising out of catastrophic events, which are unpredictable bynature. Catastrophes can be caused by various natural hazards, including hurricanes, typhoons, floods,earthquakes, severe weather, fires and explosions. Catastrophes can also be artificially induced, such asterrorist attacks, wars and industrial or engineering accidents. In addition, a health epidemic or pandemicsuch as severe acute respiratory syndrome (or SARS), the H5N1 strain of bird flu (or avian flu), theH1N1 strain of influenza A and Ebola virus outbreak can adversely affect the Group’s business. Theoccurrence of these events may increase the cost of doing business, adversely affect the Group’soperations or those of its clients, or result in losses in the Group’s investment portfolios, due to, amongother things, the failure of its counterparties to perform or significant volatility or disruption in financialmarkets, all of which may in turn adversely affect the Group’s business, financial condition, results ofoperations and prospects.
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The Group faces risks in relation to its operating licences.
The Company’s operating licences allow it to operate as a trust company. However, if regulatorypolicies are amended in the future, or the permitted business scope of financial institutions is amendedor expanded, the Company may not be able to obtain new operating licences in a timely manner, whichmay adversely affect its competitiveness. Furthermore, in order to obtain new operating licences, theGroup may need to increase investments in research and development, operation management andinfrastructures, which may in turn increase its operating costs.
The Group may from time to time experience high staff turnover, departures from its seniormanagement or have difficulties in retaining and recruiting personnel.
The success of the Group’s business is to a large extent dependent on its senior management and staff.For the year ended 31 December 2018, the Company experienced a turnover of 15 per cent. of its staffmembers. There are two main reasons for the turnover of staff. First, because the Group has decided tofocus on actively managed business, asset management and wealth management, some staff memberswho prefer to work within the transaction management business have decided to go to other trustcompanies, banks and asset management departments of securities brokers who have not yet transformedtheir business model. Second, the Group has a set of strict performance criteria for its product salesstaff, resulting in those not meeting the required performance criteria to leave the Group.
The Group may from time to time experience departures from staff members and senior management.The Group may also have difficulties in attracting and retaining key personnel who possess in-depthknowledge and understanding of the industry. These key personnel include members of the Group’ssenior management, experienced investment managers, product development personnel, researchanalysts, marketing and sales staff and information technology and other operations personnel.Competition for attracting and retaining these individuals is intensive. Such competition may require theGroup to offer higher compensation and other benefits in order to attract and retain qualifiedprofessionals, which could materially and adversely affect the Group’s financial condition and results ofoperations. Further, from time to time, certain key senior management members or board members mayfor personal or professional reasons notify and elect to depart from the Group. As a result, the Groupmay be unable to attract or retain these personnel to achieve its business objectives and the failure to doso could severely disrupt its business and prospects. For example, the Group may not be able to hireenough qualified personnel to support its new products and services to remain competitive.
In addition, various businesses of the Group are susceptible to operation errors if its employees are tiredor incompetent, or make wrong judgments. Furthermore, as the Group expands its business or hires newemployees, the employees may take time to get accustomed to any new standard procedures andconsequently may not comply with the standard procedures of any new business in an accurate andtimely manner. The occurrence of any of the events discussed above could lead to unexpected loss to theGroup and affect its revenue and financial conditions. If any of the senior management or other keypersonnel of the Group joins or establishes a competing business, the Group may lose some of itscustomers, which may have a material adverse effect on its business.
RISKS RELATING TO THE PRC
PRC economic, political and social conditions as well as government policies could adversely affectthe Group’s business.
The PRC economy differs from the economies of most developed countries in many respects, includingits structure, amount of government involvement, level of development, economic growth rate, controlof foreign exchange, policies and restrictions on capital reinvestment, rate of inflation, trade balanceposition and allocation of resources.
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The PRC economy has been transitioning from a planned economy to a more market-oriented economy.In recent years, the PRC government has implemented measures emphasising market forces foreconomic reform, the reduction of state ownership of productive assets and the establishment of soundcorporate governance in business enterprises. However, a substantial portion of productive assets in thePRC is still owned by the PRC government. The PRC government continues to play a significant role inregulating industrial development, the allocation of resources, production, pricing and management, andthere can be no assurance that the PRC government will continue to pursue a policy of economic reformor that any such reforms will not have an adverse effect on the Group’s business.
In addition, many of the economic reforms carried out by the PRC government are unprecedented orexperimental and are expected to be refined and improved over time. Other political, economic andsocial factors may also lead to further adjustments of the reform measures. This refining and adjustmentprocess may not necessarily have a positive effect on the Group’s operations and business development.For example, the PRC government has in the past implemented a number of measures intended to slowdown certain segments of the economy that the government believed to be overheating, including thereal estate industry. These measures have included restricting foreign investment in certain sectors of thereal estate industry, raising benchmark interest rates of commercial banks, reducing currency supply andplacing additional limitations on the ability of commercial banks to make loans by raising bank reservesagainst deposits and raising the thresholds and minimum loan interest rates for residential mortgages.These actions, as well as future actions and policies of the PRC government, could cause a decrease inthe overall level of economic activity, and in turn have a material and adverse impact on the Group’sbusiness and future prospects.
Under the new Enterprise Income Tax law (the ‘‘New EIT Law’’), the overseas entities of theCompany, such as the Issuer and the Guarantor, may be treated as a PRC resident enterprise forPRC tax purposes, which will subject it to PRC enterprise income tax on its worldwide income andthe Issuer or the Guarantor will be obliged to withhold taxes on the interest paid on the Notes.
Under the PRC Enterprise Income Tax Law and its Implementing Regulation which became effective on1 January 2008, enterprises organised under the laws of jurisdictions outside the PRC with their de factomanagement bodies located within the PRC is deemed to be a ‘‘resident enterprise’’, meaning that it canbe treated in a manner similar to a PRC enterprise for enterprise income tax purposes, and thereforesubject to PRC enterprise income tax at the rate of 25 per cent. on their worldwide income, althoughdividends paid from one resident to another may qualify as ‘‘tax-exempt income’’. The ImplementingRegulation defines the term ‘‘de facto management body’’ as a management body that exercisessubstantial and overall control and management over the production and operations, personnel,accounting and properties of an enterprise. A circular issued by the State Administration of Taxation on22 April 2009 provides that a foreign enterprise controlled by a PRC company or a PRC company groupwill be classified as a ‘‘resident enterprise’’ with a ‘‘de facto management body’’ located within the PRCif all of the following requirements are satisfied: (i) the senior management and core managementdepartments in charge of daily operations are located mainly within the PRC; (ii) financial and humanresources decision are subject to determination or approval by persons or bodies in the PRC; (iii) majorassets, accounting books, company seals and minutes and files of board and shareholders’ meeting arelocated or kept within the PRC; and (iv) at least half of the enterprise’s directors with voting rights orsenior management reside within the PRC. The State Administration of Taxation issued a circular, whichbecame effective on 1 September 2011, and which provides that a foreign enterprise controlled by aPRC company or a PRC company group shall be deemed a ‘‘resident enterprise’’ by the final decision ofthe State Administration of Taxation through the application of the foreign enterprise or theinvestigation of the relevant tax authorities.
As at 31 December 2018, both the Issuer and the Guarantor confirm that they have not been treated as aPRC resident enterprise by the PRC tax authorities. There is however no assurance that the Issuer, theGuarantor or other overseas entities of the Company will not be treated as ‘‘resident enterprises’’ underthe New EIT Law, any aforesaid circulars or any amended regulations in the future. If such entities aretreated as PRC resident enterprises for enterprise income tax purpose, among other things, they would
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be subject to the PRC enterprise income tax at the rate of 25 per cent. on its worldwide income.Furthermore, the Issuer or the Guarantor, being an overseas entity of the Company, would be obligatedto withhold PRC enterprise income tax at generally 10 per cent. on payment of interest on the Notes toforeign enterprise investors or withhold PRC individual income tax at generally 20 per cent. on paymentof interest on the Notes to foreign individual investors, unless any such foreign investor’s jurisdiction ofincorporation has a tax treaty with the PRC that provides for a preferential withholding tax treatment.Similarly, any gain realised on the transfer of the Notes by such foreign investors is also subject to (i) a10 per cent. (or lower treaty rate, if any) PRC enterprise income tax for foreign enterprise investors or(ii) a 20 per cent. (or lower treaty rate, if any) PRC individual income tax for foreign individualinvestors, if such gain is regarded as income derived from sources within the PRC.
Due to uncertainties in the interpretation of certain provisions of the new VAT regime, theissuance of the Notes may be treated as provision of loans within the PRC that is subject to VAT,and Issuer or the Guarantor may be required to withhold VAT and local levies from the paymentof interest income to Noteholders who are located outside of the PRC.
On 23 March 2016, the PRC Ministry of Finance and the PRC State Administration of Taxation jointlyissued the Circular of Full Implementation of Business Tax to Value-added Tax Reform (Cai Shui[2016] No. 36)(關於全面推開營業稅改徵增值稅試點的通知(財稅[2016]36號))(‘‘Circular 36’’) whichconfirms that business tax will be completely replaced by VAT from 1 May 2016. With effect from 1May 2016, the income derived from the provision of financial services which previously attractedbusiness tax will be entirely replaced by, and subject to, VAT.
According to Circular 36, the entities and individuals providing the services within the PRC shall besubject to VAT. The services are treated as being provided within the PRC where either the serviceprovider or the service recipient is located in the PRC. The services subject to VAT include theprovision of financial services such as the provision of loans. It is further clarified under Circular 36that the ‘‘loans’’ refers to the activity of lending capital for another’s use and receiving the interestincome thereon.
It is not clear from the interpretation of Circular 36, if the provision of loans to the Issuer or theGuarantor could be considered as financial services provided within the PRC, which thus could besubject to VAT. Furthermore, there is no assurance that the Issuer, the Guarantor or both will not betreated as PRC tax residents. The PRC tax authorities could take the view that the holders of the Notesare providing loans within the PRC because the Issuer or the Guarantor or both are treated as PRC taxresidents. In which case, the issuance of the Notes could be regarded as the provision of financialservices within the PRC that is subject to VAT.
If the Issuer, the Guarantor or both are treated as PRC tax residents and if the PRC tax authorities couldtake the view that the holders of the Notes are providing loans within the PRC, then the holders of theNotes could be regarded as providing financial services within the PRC and consequently, the holders ofthe Notes shall be subject to VAT at the rate of 6 per cent. when receiving the interest payments underthe Notes. In addition, the holders of the Notes shall be subject to the local levies at approximately 12per cent. of the VAT payment and consequently, the combined rate of VAT and local levies would bearound 6.7 per cent.. Given that the Issuer or the Guarantor pays interest income to Noteholders who arelocated outside of the PRC, the Issuer or the Guarantor, acting as the obligatory withholder inaccordance with applicable law, shall withhold VAT and local levies from the payment of interestincome to Noteholders who are located outside of the PRC.
Where a holder of the Notes who is an entity or individual located outside of the PRC resells the Notesto an entity or individual located outside of the PRC and derives any gain, since neither the serviceprovider nor the service recipient is located in the PRC, theoretically the Circular 36 does not apply andthe Issuer or the Guarantor does not have the obligation to withhold the VAT or the local levies.However, there is uncertainty as to the applicability of VAT if either the seller or buyer of Notes islocated within the PRC.
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The Circular 36 has been issued quite recently and the above disclosure may be subject to furtherchange upon the issuance of further clarification rules and/or different interpretation by the competenttax authority. There is uncertainty as to the application of the Circular 36.
As at the date of this Offering Circular, both the Issuer and the Guarantor confirm that they have notbeen treated as a PRC resident enterprise by the PRC tax authorities. As a result, it is expected that, inpractice they will not be required to withhold VAT or local levies from interest payments toNoteholders.
However, there is no assurance that the Issuer or the Guarantor will not be treated as a PRC tax residententerprise by the PRC tax authorities in the future. Pursuant to the EIT Law, Individual Income Tax Lawof the PRC, the Business Tax Laws and the VAT reform detailed above, the Issuer or the Guarantor mayneed to withhold EIT or individual income tax, (should such tax apply) from the payments of interest inrespect of the Notes for any non-PRC-resident Noteholder and the Issuer or the Guarantor may need towithhold business tax or VAT (should such tax apply) from the payments of interest in respect of theNotes for any Noteholders located outside of the PRC.
For more information, see ‘‘Terms and Conditions of the Notes – Condition 7 (Taxation)’’. No PRCstamp duty will be imposed on non-PRC Noteholders either upon issuance of the Notes or upon asubsequent transfer of Notes to the extent that the register of holders of the Notes is maintained outsidethe PRC and the issuance and the sale of the Notes is made outside of the PRC.
Members of the Group are subject to restrictions on the payment of dividends and the repaymentof intercompany loans or advances to the Company.
The ability of the Company’s subsidiaries to pay dividends and make payments on intercompany loansor advances to their shareholders is subject to, among other things, distributable earnings, cash flowconditions, restrictions contained in the articles of association of these companies, applicable laws andrestrictions contained in the debt instruments of such companies. The Group cannot assure that itssubsidiaries will have distributable earnings or will be permitted to distribute their distributable earningsto it as it anticipates, or at all. Further, if any of these companies raises capital by issuing equitysecurities to third parties, dividends declared and paid with respect to such shares would not be availableto the Company to make payments on the Notes. These factors could reduce the payments that theCompany receives from its subsidiaries, which would restrict its ability to meet its payment obligationsunder the Notes.
The uncertainties of the PRC legal system and its laws and regulations may have a negative impacton the Group’s operations.
The Group’s core business is conducted in the PRC and substantially all of its operations are located inthe PRC, hence its business operations are regulated primarily by PRC laws and regulations. The PRClegal system is a civil law system based on written statutes. Unlike the common law systems, past courtjudgments in the PRC have limited precedential value and may be cited only for reference. Furthermore,PRC written statutes often require detailed interpretations by courts and enforcement bodies for theirapplication and enforcement. Since 1979, the PRC government has been committed to developing andrefining its legal system and has achieved significant progress in the development of its laws andregulations governing business and commercial matters, such as in foreign investment, companyorganisation and management, commercial transactions, tax and trade. However, as these laws andregulations are still evolving, in view of how the PRC’s financial services industry is still developing,and because of the limited number and non-binding nature of published cases, there exist uncertaintiesabout their interpretation and enforcement, and such uncertainties may have a negative impact on theGroup’s business.
The Group’s operations and financial results could be materially and adversely affected by changes inpolitical, economic and social conditions or the relevant policies of the PRC government, such aschanges in laws and regulations (or the interpretation thereof). In 2015, after severe fluctuations in the
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PRC share market, the CSRC promulgated a series of regulatory policy adjustments affecting theGroup’s operation in the traditional securities investment business. In another example, the PRCgovernment issued State Council Document No. 43 of 2014 in September 2014 targeted at strengtheningthe management of local government debts obligations and, amongst other things, restricted the use oflocal government financing platforms. This signalled the decline of trust investment projects that involveco-operation with local government finance platforms. However, it also provided new opportunities forthe Group in terms of public private partnership (‘‘PPP’’) projects. Further, the NDRC issued the NDRCCircular on 14 September 2015, which came into effect on the same day. According to the NDRCCircular, domestic enterprises and their overseas controlled entities shall procure the registration of anydebt securities issues outside the PRC with the NDRC prior to the issue of the securities and notify theparticulars of the relevant issues within 10 working days after the completion of the issue of thesecurities. The NDRC Circular is silent on the legal consequences of non-compliance with the pre-issueregistration requirement. In the worst case scenario, it might become unlawful for the Company toperform or comply with any of its obligations under the Notes and the Notes might be subject toenforcement as provided in Condition 8 (Events of Default) of the Terms and Conditions. Potentialinvestors of the Notes are advised to exercise due caution when making their investment decisions.Similarly, there is no clarity on the legal consequences of noncompliance with the post-issue notificationrequirement under the NDRC Circular. The Company has undertaken to notify the NDRC of theparticulars of the issue of the Notes within the prescribed period under the NDRC Circular.
Furthermore, the administration of PRC laws and regulations may be subject to a certain degree ofdiscretion by the executive authorities. This has resulted in the outcome of dispute resolutions not beingas consistent or predictable compared to more developed jurisdictions. In addition, it may be difficult toobtain a swift and equitable enforcement of laws in the PRC, or the enforcement of judgments by acourt of another jurisdiction. These uncertainties relating to the interpretation and implementation ofPRC laws and regulations may adversely affect the legal protections and remedies that are available tothe Group in its operations and to holders of the Notes.
Certain PRC regulations governing PRC companies are less developed than those applicable tocompanies incorporated in more developed countries.
Some members of the Group are established in the PRC and are subject to PRC regulations governingPRC companies. These regulations contain certain provisions that are required to be included in the jointventure contracts, articles of association and other major operational agreements of these PRCcompanies and are intended to regulate the internal affairs of these companies. These regulations ingeneral, and the provisions for protection of shareholders’ rights and access to information in particular,are less developed than those applicable to companies incorporated in Hong Kong, the United States, theUnited Kingdom and other developed countries or regions.
There can be no assurance of the accuracy or comparability of facts, forecasts and statisticscontained in this Offering Circular with respect to the PRC and its economy.
Facts, forecasts and statistics in this Offering Circular relating to the PRC and the PRC’s economy,including market share information, are derived from various publicly available sources. However, therecan be no assurance as to the quality and reliability of such official source materials. In addition, thesefacts, forecasts and statistics have not been independently verified by the Issuer, the Guarantor, theCompany, the Joint Lead Managers, the Trustee, the Agents or their respective advisors and thereforenone of the Issuer, the Guarantor, the Company, the Joint Lead Managers, the Trustee, the Agents ortheir respective advisors makes any representation as to the accuracy or fairness of such facts, forecastsand statistics, which may not be consistent with other information compiled within or outside the PRCand may not be complete or up to date. Because of possibly flawed or ineffective methodologiesunderlying the published information or discrepancies between the published information and marketpractice and other problems, these facts, forecasts and other statistics may be inaccurate or may not becomparable from period to period or be comparable to facts, forecasts or statistics produced for othereconomies and should not be unduly relied upon.
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It may be difficult to effect service of process upon, or to enforce against, the Group or itsDirectors or senior management who reside in the PRC in connection with judgments obtained innon-PRC courts.
Substantially all of the Group’s Directors, Supervisors and executive officers reside within the PRC.Substantially all of its assets and substantially all of the assets of its Directors, Supervisors andexecutive officers are located within the PRC. The PRC does not have treaties providing for thereciprocal recognition and enforcement of judgments of courts with the United States, the UnitedKingdom, Japan and many other countries. Therefore, it may not be possible for investors to effectservice of process upon it or those persons in the PRC or to enforce against them or it in the PRC, anyjudgments obtained from non-PRC courts. In addition, recognition and enforcement in the PRC ofjudgments of a court of any other jurisdiction in relation to any matter not subject to a bindingarbitration provision may be difficult or impossible.
The outbreak, or threatened outbreak, of any severe communicable disease in the PRC couldmaterially and adversely affect the Group’s business, financial condition and results of operations.
The outbreak, or threatened outbreak, of any severe communicable disease (such as severe acuterespiratory syndrome or avian influenza) in the PRC could materially and adversely affect the overallbusiness sentiment and environment in the PRC, particularly if such outbreak is inadequately controlled.This could materially and adversely affect domestic consumption, labour supply and possibly the GDPgrowth of the PRC. The Group’s revenue is currently derived mainly from PRC operations and anylabour shortages, contraction or slowdown in the growth of domestic consumption in the PRC couldmaterially and adversely affect the Group’s business, financial condition and results of operations. Inaddition, if any of the Group’s employees are affected by any severe communicable disease, it couldadversely affect or disrupt production levels and operations at the relevant plants and materially andadversely affect the Group’s business, financial condition and results of operations, which may alsoinvolve a closure of the Group’s facilities to prevent the spread of the disease. The spread of any severecommunicable disease in the PRC may also affect the operations of the Group’s customers and suppliers,which could materially and adversely affect the Group’s business, financial condition and results ofoperations.
RISKS RELATING TO THE NOTES AND THE GUARANTEE OF THE NOTES
The Issuer has no material assets or business activities and its ability to make payments under theNotes will depend on timely payments under on lent loans of the proceeds from the issue of theNotes to the Company or other members of the Group.
The Issuer, a wholly-owned subsidiary of the Guarantor, was established specifically for the purpose ofissuing the Notes and will on-lend the net proceeds from the issue of the Notes to the Guarantor, theCompany or other members of the Group. The Issuer does not and will not have any material assetsother than amounts due to it from the Guarantor, the Company or other members of the Group in respectof such loan, and its ability to make payments under the Notes will depend on its receipt of timelyremittance of funds from the Guarantor, the Company or other members of the Group. In the event thatthe Guarantor, the Company and/or other members of the Group do not make such payments due tolimitation in such loans or other agreements, lack of available cash flow or other factors, the Issuer’sability to make payments under the Notes may be adversely affected.
The Guarantor’s ability to satisfy its obligations under the Guarantee of the Notes depends ontimely remittance of funds from the Company or other members of the Group.
The Guarantor is a wholly-owned offshore subsidiary of the Company, acting as a holding companywith no material operations. The Guarantor was incorporated on 12 May 2014. For the years ended 31December 2016, 2017 and 2018, the Guarantor Group incurred a net profit of RMB13.9 million,RMB69.9 million and RMB23.1 million, respectively. As at 31 December 2016, 2017 and 2018, theGuarantor Group had net assets of RMB269.1 million, RMB389.9 million and RMB352.8 million,respectively.
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The net asset position of the Guarantor Group would not be sufficient to meet the claims under theGuarantee of the Notes. Accordingly, the Guarantor’s ability to satisfy its obligations under theGuarantee of the Notes will depend upon its receipt of timely remittance of funds from the Companyand/or other members of the Group.
The Notes and the Guarantee of the Notes are unsecured obligations.
As the Notes and the Guarantee of the Notes are unsecured obligations of the Issuer and the Guarantorrespectively, the repayment of the Notes and payment under the Guarantee of the Notes may becompromised if:
• the Issuer or the Guarantor enters into bankruptcy, liquidation, reorganisation or other winding-upproceedings;
• there is a default in payment under the Issuer’s or the Guarantor’s secured indebtedness or otherunsecured indebtedness; or
• there is an acceleration of any of the Issuer’s or the Guarantor’s indebtedness.
If any of these events were to occur, the Issuer’s or the Guarantor’s assets (as the case may be) and anyamounts received from the sale of such assets may not be sufficient to pay amounts due on the Notes.
The Notes may not be a suitable investment for all investors.
The Notes are complex financial instruments and may be purchased as a way to reduce risk or enhanceyield with a measured appropriate addition of risk to the investor’s overall portfolios. A potentialinvestor should not invest in the Notes unless they have the expertise (either alone or with the help of afinancial advisor) to evaluate how the Notes will perform under changing conditions, the resultingeffects on the value of such Notes and the impact this investment will have on the potential investor’soverall investment portfolio.
Each potential investor in the Notes must determine the suitability of that investment in light of its owncircumstances. In particular, each potential investor should:
(i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the meritsand risks of investing in the Notes and the information contained or incorporated by reference inthis Offering Circular or any applicable supplement;
(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of itsparticular financial situation, an investment in the Notes and the impact such investment will haveon its overall investment portfolio;
(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in theNotes;
(iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevantindices and financial markets; and
(v) be able to evaluate (either alone or with the help of a financial advisor) possible economicscenarios, such as interest rate and other factors which may affect its investment and the ability tobear the applicable risks.
An active trading market for the Further Notes may not develop.
The Further Notes are a new issue of securities for which there is currently no trading market. TheExisting Notes are currently listed on the SGX-ST. No assurance can be given as to the ability ofholders to sell their Further Notes or the price at which holders will be able to sell their Further Notes
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or that a liquid market will develop. The liquidity of the Further Notes will be adversely affected if theFurther Notes are held or allocated to limited investors. None of the Joint Lead Managers and theFinancial Advisor is obligated to make a market in the Further Notes, and if the Joint Lead Managers doso, they may discontinue such market making activity at any time at their sole discretion. In addition,the Further Notes are being offered pursuant to exemptions from registration under the Securities Actand, as a result, holders will only be able to resell their Further Notes in transactions that have beenregistered under the Securities Act or in transactions not subject to or exempt from registration under theSecurities Act.
The liquidity and price of the Notes following the offering may be volatile.
The price and trading volume of the Notes may be highly volatile. Factors such as variations in theGroup’s turnover, earnings and cash flows, proposals for new investments, strategic alliances and/oracquisitions, changes in interest rates, fluctuations in price for comparable companies, changes ingovernment regulations and changes in general economic conditions nationally or internationally couldcause the price of the Notes to change. Any such developments may result in large and sudden changesin the trading volume and price of the Notes. There is no assurance that these developments will notoccur in the future.
Developments in other markets may adversely affect the market price of the Notes.
The market price of the Notes may be adversely affected by declines in the international financialmarkets and world economic conditions. The market for the Notes is, to varying degrees, influenced byeconomic and market conditions in other markets, especially those in Asia. Although economicconditions are different in each country, investors’ reactions to developments in one country can affectthe securities markets and the securities of issues in other countries, including the PRC. Since the globalfinancial crisis in 2008 and 2009, the international financial markets have experienced significantvolatility. If similar developments occur in the international financial markets in the future, the marketprice of the Notes could be adversely affected.
International financial markets and world economic conditions may adversely affect the marketprice of the Notes.
The market price of the Notes may be adversely affected by declines in the international financialmarkets and world economic conditions. The market for Chinese securities is, to varying degrees,influenced by economic and market conditions in other markets, especially those in Asia. Althougheconomic conditions are different in each country, investors’ reactions to developments in one countrycan affect the securities markets and the securities of issuers in other countries, including China. Sincethe sub-prime mortgage crisis in 2008, the international financial markets have experienced significantvolatility. If similar developments occur in the international financial markets in the future, the marketprice of the Notes could be adversely affected.
There is substantial uncertainty relating to the implementation of the United Kingdom’s exit from theEuropean Union or its impact on the economic conditions of other part of the world, such as the PRC,including but not limited to further decreases in global stock exchange indices, increased foreignexchange volatility (in particular a further weakening of the pound sterling and euro against otherleading currencies) and a possible economic recession involving more countries and areas. The outlookfor the world economy and financial markets in 2018 and 2019 remains uncertain. Some countries havestarted to withdraw the stimulus packages previously executed during the financial crisis and implementmore moderate monetary policies. The PRC withdrew its economic stimulus plan implemented duringthe financial crisis and returned to its general policy directions. Economic conditions in the PRC aresensitive to global economic conditions and it is impossible to predict how the PRC economy willdevelop in the future and whether it might slow down due to the global crisis or experience a financialcrisis in a manner and scale similar to that in the United States and European countries between 2008and 2011.
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At the same time, the trade disputes between the PRC and the United States and the increased tariff thatthe United States plans to impose on Chinese imports may have an adverse effect on the global and thePRC economies resulting in continuing uncertainty for the overall prospects for the global and the PRCeconomies this year and beyond. Starting in March 2018, the United States imposed tariffs on steel andaluminum imports from the PRC, and later on 6 July 2018, the United States imposed 25 per cent.tariffs on U.S.$34 billion worth of Chinese goods as part of its tariffs policy. In return, the PRCresponded with similarly sized tariffs on U.S. products. On 18 September 2018, the United Statesimposed 10 per cent. tariffs on approximately U.S.$200 billion worth of Chinese goods and announcedplans to further increase the rate to 25 per cent. in January 2019. In return, the PRC responded withtariffs on U.S.$60 billion worth of U.S. goods. In May 2019, the United States proposed to impose 25per cent. tariffs on an additional U.S.$300 billion worth of Chinese goods. The rhetoric surrounding thetrade war continues to escalate and no conclusive and meaningful resolutions have emerged from thesporadic trade negotiations. The amicable resolution of such trade war remains elusive, and the lastingimpacts any trade war may have on the PRC economy and the PRC trading industry remain uncertain.The reduced demand for exports produced in the PRC, reduced levels of foreign and domesticinvestment in the PRC and decreased consumer confidence may result in a slowdown in growth in themarkets of the PRC. In addition, the PRC government continues to play a significant role in regulatingthe development of industries in the PRC by imposing top-down policies. It also exercises significantcontrol over PRC economic growth through the allocation of resources, controlling the payment offoreign currency-denominated obligations, setting monetary policy and providing preferential treatmentto particular industries or companies. There can be no assurance that future changes in the PRC’spolitical, economic and social conditions, laws, regulations and policies will not have a material adverseeffect on the Group’s current or future business and financial condition.
Changes in interest rates may have an adverse effect on the price of the Notes.
The Noteholders may suffer unforeseen losses due to fluctuations in interest rates. Generally, a rise ininterest rates may cause a fall in the prices of the Notes, resulting in a capital loss for the Noteholders.However, the Noteholders may reinvest the interest payments at higher prevailing interest rates.Conversely, when interest rates fall, the prices of the Notes may rise. The Noteholders may enjoy acapital gain but interest payments received may be reinvested at lower prevailing interest rates.
As the Notes will carry a fixed interest rate, the trading price of the Notes will consequently vary withthe fluctuations in the U.S. dollar interest rates. If the Noteholders propose to sell their Notes beforetheir maturity, they may receive an offer lower than the amount they have invested.
The Issuer may be unable to redeem the Notes.
On certain dates, including but not limited to the occurrence of a Change of Control and at maturity ofthe Notes, the Issuer may or will be required to redeem all of the Notes. If such an event were to occur,the Issuer may not have sufficient cash in hand and may not be able to arrange financing to redeem theNotes in time, or on acceptable terms, or at all. The ability to redeem the Notes in such event may alsobe limited by the terms of other debt instruments. Failure to redeem the Notes by the Issuer, in suchcircumstances, would constitute an Event of Default under the Notes, which may also constitute adefault under the terms of other indebtedness of the Guarantor, the Company or their respectivesubsidiaries.
The Notes and the Guarantee of the Notes will be structurally subordinated to the existing andfuture indebtedness and other liabilities of the Issuer’s and the Guarantor’s existing and futuresubsidiaries, other than the Issuer, and effectively subordinated to the Issuer’s and the Guarantor’ssecured debt to the extent of the value of the collateral securing such indebtedness.
The Notes and the Guarantee of the Notes will be structurally subordinated to any debt and otherliabilities and commitments, including trade payables and lease obligations, of the Issuer’s and theGuarantor’s existing and future subsidiaries, other than the Issuer, whether or not secured. The Noteswill not be guaranteed by any of the Issuer’s and the Guarantor’s subsidiaries, and the Issuer and the
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Guarantor may not have direct access to the assets of such subsidiaries unless these assets aretransferred by dividend or otherwise to the Issuer or the Guarantor. The ability of such subsidiaries topay dividends or otherwise transfer assets to the Issuer and the Guarantor is subject to variousrestrictions under applicable laws. Each of the Issuer’s and the Guarantor’s subsidiaries are separate legalentities that have no obligation to pay any amounts due under the Notes or the Guarantee of the Notesor make any funds available therefore, whether by dividends, loans or other payments. The Issuer’s andthe Guarantor’s right to receive assets of any of the Issuer’s and the Guarantor’s subsidiaries,respectively, upon that subsidiary’s liquidation or reorganisation will be effectively subordinated to theclaim of that subsidiary’s creditors (except to the extent that the Issuer or the Guarantor are creditors ofthat subsidiary). Consequently, the Notes and the Guarantee of the Notes will be effectivelysubordinated to all liabilities, including trade payables and lease obligations, of any of the Issuer’s andthe Guarantor’s subsidiaries, other than the Issuer, and any subsidiaries that the Issuer or the Guarantormay in the future acquire or establish.
The Notes and the Guarantee of the Notes are the Issuer’s and the Guarantor’s unsecured obligations,respectively, and will (i) rank equally in right of payment with all the Issuer’s and the Guarantor’s otherpresent and future unsubordinated and unsecured indebtedness; (ii) be effectively subordinated to all ofthe Issuer’s and the Guarantor’s present and future secured indebtedness to the extent of the value of thecollateral securing such obligations; and (iii) be senior to all of the Issuer’s and the Guarantor’s presentand future subordinated obligations. As a result, claims of secured lenders, whether senior or junior,with respect to assets securing their loans will be prior with respect to those assets. In the event of theIssuer’s or the Guarantor’s bankruptcy, insolvency, liquidation, reorganisation, dissolution or otherwinding up, or upon any acceleration of the Notes, these assets will be available to pay obligations onthe Notes only after all other debt secured by these assets has been repaid in full. Any remaining assetswill be available to the Noteholders rateably with all of the Guarantor’s other unsecured andunsubordinated creditors, including trade creditors. If there are not sufficient assets remaining to pay allthese creditors, then all or a portion of the Notes then outstanding would remain unpaid.
The insolvency laws of the British Virgin Islands, the PRC and other local insolvency laws maydiffer from those of another jurisdiction with which the holders of the Notes are familiar.
Because the Issuer and the Guarantor are incorporated under the laws of the British Virgin Islands andthe Company is incorporated under the laws of the PRC, any insolvency proceedings relating to theIssuer, the Guarantor or the Company even if brought in other jurisdictions, would likely involve theBritish Virgin Islands or PRC insolvency laws, the procedural and substantive provisions of which maydiffer from comparable provisions of the local insolvency laws of jurisdictions with which the holders ofthe Notes are familiar.
If the Issuer, the Guarantor or the Company are unable to comply with the restrictions andcovenants in their respective debt agreements (if any), there could be a default under the terms ofthese agreements, which could cause repayment of their respective debt to be accelerated.
If the Issuer, the Guarantor or the Company are unable to comply with their respective current or futuredebt obligations and other agreements (if any), there could be a default under the terms of theseagreements. In the event of a default under these agreements, the holders of the debt could terminatetheir commitments to lend to the Issuer, the Guarantor or the Company, accelerate repayment of the debtand declare all outstanding amounts due and payable or terminate the agreements, as the case may be.Furthermore, some debt agreements of the Issuer, the Guarantor or the Company may contain cross-acceleration or cross-default provisions. As a result, default under one debt agreement of the Issuer, theGuarantor or the Company may cause the acceleration of repayment of not only such debt but also otherdebt, including the Notes, or result in a default under other debt agreements of the Issuer, the Guarantoror the Company. If any of these events occur, the Issuer, the Guarantor and the Company cannot assureholders that their respective assets and cash flows would be sufficient to repay in full all of their
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respective indebtedness, or that they would be able to find alternative financing. Even if they couldobtain alternative financing, there is no assurance that it would be on terms that are favourable oracceptable to them.
The ratings may be downgraded or withdrawn.
The Guarantor has a credit rating of ‘‘BB-’’ from S&P and the Company has a credit rating of ‘‘BB+’’from S&P. The Notes are expected to be rated ‘‘BB-’’ by S&P. The rating represents only the opinionsof the rating agency. Rating is not recommendations to buy, sell or hold the Notes and may be subjectto suspension, reduction or withdrawn at any time. None of the Issuer, the Guarantor and the Companyis obligated to inform Noteholders if the rating is lowered or withdrawn. Each rating should beevaluated independently of the other rating. A downgrade or withdrawal of the ratings may materiallyand adversely affect the market price of the Notes and the Issuer’s ability to access the debt capitalmarkets.
The Notes will be represented by a Global Note Certificate and holders of a beneficial interest in aGlobal Note Certificate must rely on the procedures of the Clearing Systems.
The Notes will be represented by beneficial interests in a Global Note Certificate. Such Global NoteCertificate will be deposited with a common depositary for Euroclear and Clearstream. Except in thecircumstances described in the Global Note Certificate, investors will not be entitled to receiveindividual Note certificates. The Clearing System will maintain records of the beneficial interests in theGlobal Note Certificate. While the Notes are represented by the Global Note Certificate, investors willbe able to trade their beneficial interests only through the Clearing Systems.
While the Notes are represented by the Global Note Certificate, the Issuer, or failing which, theGuarantor will discharge its payment obligations under the Notes by making payments to the relevantClearing System for distribution to their account holders.
A holder of a beneficial interest in a Global Note Certificate must rely on the procedures of the ClearingSystem to receive payments under the Notes. Neither the Issuer nor the Guarantor has any responsibilityor liability for the records relating to, or payments made in respect of, beneficial interests in the GlobalNote Certificate.
Holders of beneficial interests in the Global Note Certificate will not have a direct right to vote inrespect of the Notes. Instead, such holders will be permitted to act only to the extent that they areenabled by the Clearing System to appoint appropriate proxies.
The consolidated financial statements of the Group have been prepared and presented inaccordance with PRC GAAP, which are different from IFRS in certain respects.
The consolidated financial statements of the Group included in this Offering Circular have beenprepared and presented in accordance with PRC GAAP. PRC GAAP are substantially in line with IFRS,except for certain modifications which reflect the PRC’s unique circumstances and environment. See‘‘Summary of Significant Differences between PRC GAAP and IFRS’’ for details. Each investor shouldconsult its own professional advisors for an understanding of the differences between PRC GAAP andIFRS and/or between PRC GAAP and other generally accepted accounting principles, and how thosedifferences might affect the financial information contained herein.
The Trustee may request holders of the Notes to provide an indemnity and/or security and/or pre-funding to its satisfaction.
Where the Trustee is under the provisions of the Trust Deed, the Keepwell and Liquidity Support Deedand the Deed of Equity Interest Purchase Undertaking bound to act at the request or direction of theNoteholders, the Trustee shall nevertheless not be so bound unless first indemnified and/or providedwith security and/or pre-funded to its satisfaction against all actions, proceedings, claims and demandsto which it may render itself liable and all costs, charges, damages, expenses and liabilities which it may
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incur by so doing. Negotiating and agreeing to an indemnity and/or security and/or pre-funding can be alengthy process and may impact on when such actions can be taken. The Trustee may not be able to takeactions, notwithstanding the provision of an indemnity or security or pre-funding, in breach of the termsof the Trust Deed or the Terms and Conditions and in circumstances where there is uncertainty ordispute as to the applicable laws or regulations and, to the extent permitted by the agreements and theapplicable law, it will be for the holders of the Notes to take such actions directly.
Decisions that may be made on behalf of all holders of the Notes may be adverse to the interests ofindividual holders of the Notes. Modifications and waivers may be made in respect of the Termsand Conditions, the Account Bank Agreement, the Keepwell and Liquidity Support Deed, the Deedof Equity Interest Purchase Undertaking or the Trust Deed by the Trustee or less than all of theholders of the Notes.
The Terms and Conditions contain provisions for calling meetings of Noteholders to consider mattersaffecting their interests generally. These provisions permit defined majorities to bind all holders of theNotes including holders who did not attend and vote at the relevant meeting and holders who voted in amanner contrary to the majority. Furthermore, there is a risk that the decision of the majority of holdersof the Notes may be adverse to the interests of the individuals.
The Terms and Conditions provide that the Trustee may, without the consent of Noteholders, agree to (i)any modification of the Terms and Conditions, the Trust Deed, the Keepwell and Liquidity SupportDeed, the Deed of Equity Interest Purchase Undertaking or the Account Bank Agreement (except asmentioned in the Trust Deed) which is, in the opinion of the Trustee, proper to make if, in the opinionof the Trustee, such modification will not be materially prejudicial to the interests of Noteholders and(ii) any modification (except as mentioned in the Trust Deed) of the Notes, the Trust Deed, theKeepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking or the AccountBank Agreement which is of a formal, minor or technical nature or is to correct a manifest error and anyauthorisation or waiver of any proposed breach or breach (except as mentioned in the Trust Deed) of theNotes, the Trust Deed, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest PurchaseUndertaking or the Account Bank Agreement if, in the opinion of the Trustee, the interests of theNoteholders will not be materially prejudiced thereby.
The Guarantor’s subsidiaries, jointly controlled entities and associated companies are subject torestrictions on the payment of dividends and the repayment of intercompany loans or advances tothe Guarantor.
Following the issue of the Notes, some or all of the proceeds received by the Issuer may be on-lent tothe Guarantor to make equity investments in the PRC. As a holding company, the Guarantor will dependon the receipt of dividends and the interest and principal payments on intercompany loans or advancesfrom its subsidiaries, jointly controlled entities and associated companies to satisfy its obligations,including its obligations under the Notes and the Guarantee of the Notes. The ability of the Guarantor’ssubsidiaries, jointly controlled entities and associated companies to pay dividends and make paymentson intercompany loans or advances to their shareholders is subject to, among other things, distributableearnings, cash flow conditions, restrictions contained in the articles of association of these companies,applicable laws and restrictions contained in the debt instruments of such companies. The Guarantorcannot assure that its subsidiaries, jointly controlled entities and associated companies will havedistributable earnings or will be permitted to distribute their distributable earnings to it as it anticipates,or at all. In addition, dividends payable to it by these companies are limited by the percentage of itsequity ownership in these companies. In particular, the Guarantor does not maintain complete controlover its jointly controlled entities or associates in which it might hold a minority interest. Further, if anyof these companies raises capital by issuing equity securities to third parties, dividends declared andpaid with respect to such shares would not be available to the Guarantor to make payments on theNotes. These factors could reduce the payments that the Guarantor receives from its subsidiaries, jointlycontrolled entities and associated companies, which would restrict its ability to meet its paymentobligations under the Notes and the Guarantee of the Notes.
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Gains on the transfer of the Notes may be subject to tax under PRC tax laws.
Under the New Enterprise Income Tax Law and its implementation rules, any gains realised on thetransfer of the Notes by holders who are deemed under the New Enterprise Income Tax Law as non-resident enterprises may be subject to PRC enterprise income tax if such gains are regarded as incomederived from sources within the PRC. Under the New Enterprise Income Tax Law, a ‘‘non-residententerprise’’ means an enterprise established under the laws of a jurisdiction other than the PRC andwhose actual administrative organisation is not in the PRC, which has established offices or premises inthe PRC, or which has not established any offices or premises in the PRC but has obtained incomederived from sources within the PRC. In addition, there is uncertainty as to whether gains realised onthe transfer of the Notes by individual holders who are not PRC citizens or residents will be subject toPRC individual income tax. If such gains are subject to PRC income tax, the 10 per cent. enterpriseincome tax rate and 20 per cent. individual income tax rate will apply respectively unless there is anapplicable tax treaty or arrangement that reduces or exempts such income tax. The taxable income willbe the balance of the total income obtained from the transfer of the Notes minus all costs and expensesthat are permitted under PRC tax laws to be deducted from the income. According to an arrangementbetween Mainland China and Hong Kong for the avoidance of double taxation, Noteholders who areHong Kong residents, including both enterprise holders and individual holders, will be exempted fromPRC income tax on capital gains derived from a sale or exchange of the Notes.
According to Circular 36, with effect from 1 May 2016, VAT is applicable where the entities orindividuals provide services within the PRC. VAT is unlikely to be applicable to any transfer of Notesbetween entities or individuals located outside of the PRC and therefore unlikely to be applicable togains realised upon such transfers of Notes, but there is uncertainty as to the applicability of VAT ifeither the seller or buyer of Notes is located inside the PRC. Circular 36 and laws and regulationspertaining to VAT are relatively new, the interpretation and enforcement of such laws and regulationsinvolve uncertainties.
If a Noteholder, being a non-resident enterprise or non-resident individual, is required to pay any PRCincome tax or VAT on gains on the transfer of the Notes, the value of the relevant Noteholder’sinvestment in the Notes may be materially and adversely affected.
The Notes are redeemable in the event of certain withholding taxes being applicable.
No assurances are made by the Issuer or the Guarantor as to whether or not payments on the Notes maybe made without withholding taxes or deductions applying from the Issue Date on account of any taxes,duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld orassessed by or within the British Virgin Islands, the PRC or any subdivision or authority therein orthereof having power to tax. Although pursuant to the Terms and Conditions the Issuer or, as the casemay be, the Guarantor is required to gross up payments on account of any such withholding taxes ordeductions, the Issuer also has the right to redeem the Notes at any time in the event it has or willbecome obliged to pay additional amounts on account of any existing or future withholding or deductionfor any taxes, duties, assessments or governmental charges of whatever nature imposed, levied,collected, withheld or assessed by or within the British Virgin Islands or by or within the PRC in excessof the applicable rate on 10 May 2019, or any political subdivision or any authority therein or thereofhaving power to tax as a result of any change in, or amendment to, the laws or regulations of the BritishVirgin Islands or the PRC or any political subdivision or any authority therein or thereof having powerto tax, or any change in the application or official interpretation of such laws or regulations (including aholding by a court of competent jurisdiction), which change or amendment becomes effective on or after10 May 2019.
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The Issuer may issue additional Notes in the future.
Further to the issue of the Further Notes, the Issuer may, from time to time, and without priorconsultation of the Noteholders, create and issue further Notes (see ‘‘Terms and Conditions of the Notes– Further Issues’’) or otherwise raise additional capital through such means and in such manner as itmay consider necessary. There can be no assurance that such future issuance or capital raising activitywill not adversely affect the market price of the Notes.
A change in English law which governs the Notes may adversely affect the Noteholders.
The Terms and Conditions of the Notes are governed by English law. No assurance can be given as tothe impact of any possible judicial decision or change to English law or administrative practice after thedate of issue of the Notes.
Additional procedures may be required to be taken to bring English law-governed matters ordisputes to the Hong Kong courts, and the Noteholders would need to be subject to the exclusivejurisdiction of the Hong Kong courts. There is also no assurance that the PRC courts willrecognise and enforce judgments of the Hong Kong courts in respect of English law governedmatters or disputes.
The Terms and Conditions of the Notes and the transaction documents are governed by English law,whereas parties to these documents have submitted to the exclusive jurisdiction of the Hong Kongcourts. In order to hear English law-governed matters or disputes, Hong Kong courts may require certainadditional procedures to be taken. Under the Arrangement on Reciprocal Recognition and Enforcementof Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong KongSpecial Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned(關
於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判决的安排)( t h e‘‘Arrangement’’), judgments of Hong Kong courts are likely to be recognised and enforced by the PRCcourts where the contracting parties to the transactions pertaining to such judgments have agreed tosubmit to the exclusive jurisdiction of Hong Kong courts.
However, recognition and enforcement of a Hong Kong court judgment could be refused if the PRCcourts consider that the enforcement of such judgment is contrary to the social and public interest of thePRC or meets other circumstances specified by the Arrangement. While it is expected that the PRCcourts will recognise and enforce a judgment given by Hong Kong courts in respect of a disputegoverned by English law, there can be no assurance that the PRC courts will do so for all suchjudgments as there is no established practice in this area. Compared to other similar debt securitiesissuances in the international capital markets where the relevant holders of the debt securities would nottypically be required to submit to an exclusive jurisdiction, the holders of the Notes will be deemed tohave submitted to the exclusive jurisdiction of the Hong Kong courts, and thus the holder’s ability toinitiate a claim outside of Hong Kong will be limited.
RISKS RELATING TO THE KEEPWELL AND LIQUIDITY SUPPORT DEED AND THE DEEDOF EQUITY INTEREST PURCHASE UNDERTAKING
Neither the Keepwell and Liquidity Support Deed nor the Deed of Equity Interest PurchaseUndertaking from the Company is a guarantee of the payment obligations of the Issuer and theGuarantor under the Notes and the Guarantee of the Notes.
The Company will enter into the Keepwell and Liquidity Support Deed and the Deed of Equity InterestPurchase Undertaking in connection with the issuance of the Notes. See ‘‘Offer Structure – TheKeepwell and Liquidity Support Deed’’, ‘‘Description of the Keepwell and Liquidity Support Deed’’,‘‘Offering Structure – The Deed of Equity Interest Purchase Undertaking’’ and ‘‘Description of the Deedof Equity Interest Purchase Undertaking’’. Upon a breach of the Keepwell and Liquidity Support Deedor the Deed of Equity Interest Purchase Undertaking, the Trustee may take action against the Companyto enforce the provisions of the Keepwell and Liquidity Support Deed or the Deed of Equity InterestPurchase Undertaking. However, none of the Keepwell and Liquidity Support Deed, the Deed of Equity
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Interest Purchase Undertaking nor any actions taken by the Company under the Keepwell and LiquiditySupport Deed or the Deed of Equity Interest Purchase Undertaking can be deemed as a guarantee by theCompany for the payment obligations of the Issuer under the Notes or the Guarantor under theGuarantee of the Notes. Accordingly, pursuant to the terms of the Keepwell and Liquidity Support Deed,the Company will only be obliged to make sufficient funds available to the Issuer and the Guarantor, orin the case of the Deed of Equity Interest Purchase Undertaking, undertake certain specific actions ratherthan assume the payment obligation as in the case of a guarantee. Furthermore, even if the Companyintends to perform their respective obligations under the Keepwell and Liquidity Support Deed and theDeed of Equity Interest Purchase Undertaking, depending on the manner in which the Company arrangefor sufficient funds to meet the payment obligations of the Issuer under the Notes or the Guarantorunder the Guarantee of the Notes, such performance may be subject to obtaining prior consent orapprovals from relevant PRC governmental authorities, including PBOC, NDRC, the MOFCOM andSAFE. Although the Company is required to use all reasonable endeavours to obtain any requiredconsents and approvals in order to fulfil its respective obligations under the Keepwell and LiquiditySupport Deed, there is no assurance that such consents or approvals will be obtained in a timely manneror at all.
In addition, under the Keepwell and Liquidity Support Deed, the Company will undertake with theIssuer, the Guarantor and the Trustee, among other things, to cause the Issuer and the Guarantor to havesufficient liquidity to ensure timely payment of any amounts payable in respect of the Notes, theGuarantee of the Notes and/or the Trust Deed. However, any claim by the Issuer, the Guarantor and/orthe Trustee against the Company in relation to the Keepwell and Liquidity Support Deed or the Deed ofEquity Interest Purchase undertaking will be effectively subordinated to all existing and futureobligations of the subsidiaries of the Company (which do not provide a guarantee in respect of theNotes), particularly the PRC incorporated subsidiaries, and all claims by creditors of such PRCincorporated subsidiaries will have priority to the assets of such entities over the claims of the Issuer,the Guarantor and the Trustee under the Keepwell and Liquidity Support Deed and the Deed of EquityInterest Purchase Undertaking.
Performance by the Company of its undertaking under the Deed of Equity Interest PurchaseUndertaking is subject to approvals of the PRC governmental authorities and certain limitations.
The Company intends to assist the Issuer and the Guarantor to meet their respective obligations underthe Notes and the Guarantee of the Notes by entering into the Deed of Equity Interest PurchaseUndertaking. Under the Deed of Equity Interest Purchase Undertaking, the Company agrees to purchase,upon receipt of a written purchase notice provided by the Trustee following an Event of Default, fromany of the Issuer, the Guarantor and/or any other subsidiary of the Company incorporated outside thePRC as designated by the Company or in the absence of a designation, all the subsidiaries of theCompany incorporated outside the PRC (each, a ‘‘Relevant Transferor’’) the equity interest held by itof indirectly held subsidiaries of the Company (the ‘‘Purchase’’) at a purchase price not lower than theamount sufficient to enable the Issuer and the Guarantor to discharge in full their respective obligationsunder the Notes, the Guarantee of the Notes and/or the Trust Deed.
Performance by the Company of its undertaking under the Deed of Equity Interest Purchase Undertakingis subject to the approval of or registration with the following PRC governmental authorities or theirrespective local counterparts (as the case may be):
• PBOC;
• MOFCOM;
• NDRC;
• CBIRC;
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• the PRC State Administration for Market Regulation (which has absorbed the previous SAIC inApril 2018);
• SAT; and
• SAFE.
As the approval process is beyond the control of the Company (particularly in the situation where theDeed of Equity Interest Purchase Undertaking is triggered by the winding-up of the Company), there canbe no assurance that the Company will successfully obtain any of the requisite approvals or registrationsin time, or at all, or that the PRC government’s relevant policies or regulations will not change in thefuture. In the event that the Company fails to obtain the requisite approvals or registrations, the Issuerand the Guarantor may still have insufficient funds to discharge their outstanding payment obligations tothe Noteholders.
Further, in the event of an insolvency of a Relevant Transferor, any sale proceeds received by thatRelevant Transferor may be subject to the insolvency claims of third parties. Where a RelevantTransferor is the Guarantor, the Trustee’s claim against such sale proceeds will be an unsecured claimand may rank lower in priority to any claims by secured third-party creditors of such RelevantTransferor. Where a Relevant Transferor is not the Guarantor, the Trustee will not have a direct claimagainst the sale proceeds received by such Relevant Transferor.
Performance by the Company of its undertaking under the Deed of Equity Interest PurchaseUndertaking may be subject to consent from third party creditors and shareholders, and may alsobe restricted if any of the equity interests are secured in favour of third party creditors.
Under the terms of the Deed of Equity Interest Purchase Undertaking, the Company agrees to purchase,upon the occurrence of an Event of Default, from the Relevant Transferor the equity interest ofindirectly held subsidiaries of the Company held by it. The ability of the Company to perform thisundertaking may be affected by any present or future financing agreements of the Company and itssubsidiaries:
• in the event that such financial agreements contain non-disposal or other restrictive covenants thatwould prevent the sale of an equity interest by a Relevant Transferor, the Company and itssubsidiaries would need to obtain the consent from the third party creditor before the RelevantTransferor is able to proceed with the sale of such equity interest; and
• in the event that certain equity interests have been secured in favour of third party creditors, theCompany and its subsidiaries would need to arrange for these security interests to be releasedbefore the Relevant Transferor is able to proceed with the sale of such equity interests.
Under the Terms and Conditions, the Keepwell and Liquidity Support Deed or the Deed of EquityInterest Purchase Undertaking, there are no restrictions on the Company or its subsidiaries entering intofinancing agreements with such non-disposal or other restrictive covenants or securing the equityinterests of any member of the Group in favour of its creditors (not being holders of relevantindebtedness/debt securities issued outside the PRC by the Company or any of its subsidiaries).
In the event the obligation to purchase under the Deed of Equity Interest Purchase Undertaking becomeseffective, there is no assurance that the Relevant Transferor will be able to obtain any required consentsfrom its creditors or that it will be able to arrange for any existing security arrangement to be released inorder for the sale of the equity interest to proceed. If the Relevant Transferor is not able to do so, it mayneed to repay the indebtedness owed to its third party creditors in order to be able to sell the relevantequity interests to the Company. In the event that the required consents or waivers from third partycreditors are not able to be obtained and in the case of third party creditors, the relevant indebtedness
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cannot be repaid in a timely manner, the sale of the equity interest may not be able to proceed and theIssuer and the Guarantor may have insufficient funds to discharge their respective payment obligationsto the holders of the Notes.
In addition, the sale of the equity interests in certain non-wholly-owned companies may be subject topre-emptive rights or other restrictions in such company’s articles of association, shareholders’agreement or otherwise that would require the selling shareholder to obtain consent or waiver from otherthird party shareholders before any equity interest can be sold to the Company. In the event theobligation to purchase under the Deed of Equity Interest Purchase Undertaking becomes effective thereis no assurance that any required consents or waivers can be obtained from third party shareholders in atimely manner or at all.
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TERMS AND CONDITIONS OF THE NOTES
The following is the text of the Terms and Conditions of the Notes (the ‘‘Conditions’’) which (subject tomodification and except for the paragraphs in italics) will be endorsed on the Note Certificates (asdefined below) issued in respect of the Notes. Upon issue, the Further Notes will be consolidated intoand form a single series with the Existing Notes, in which event the aggregate principal amount of theNotes shall be US$367,120,000. The new aggregate principal amount of the Notes will be reflected inthe Global Note Certificate representing the Notes:
The U.S.$301,410,000 7.60 per cent. Guaranteed Notes due 2022 (the ‘‘Notes’’, which expressionincludes any further notes issued pursuant to Condition 14 (Further Issues) and forming a single seriestherewith) of Zhongrong International Bond 2019 Limited (the ‘‘Issuer’’) was authorised by a resolutionof the Board of Directors of the Issuer passed on 25 April 2019. The Notes are constituted by, aresubject to, and have the benefit of, a trust deed dated on or about 20 May 2019 (as amended, restated,replaced or supplemented from time to time, the ‘‘Trust Deed’’) between the Issuer, ZhongrongInternational Holdings Limited (the ‘‘Guarantor’’), Zhongrong International Trust Co., Ltd. (the‘‘Company’’) and Bank of Communications Trustee Limited as trustee (the ‘‘Trustee’’, whichexpression includes all persons for the time being trustee or trustees appointed under the Trust Deed)and are the subject of an agency agreement dated on or about 20 May 2019 (as amended, restated,replaced or supplemented from time to time, the ‘‘Agency Agreement’’) between the Issuer, theGuarantor, the Company, Bank of Communications Co., Ltd. Hong Kong Branch as registrar (the‘‘Registrar’’, which expression includes any successor registrar appointed from time to time inconnection with the Notes) and principal paying agent (the ‘‘Principal Paying Agent’’, whichexpression includes any successor principal paying agent appointed from time to time in connection withthe Notes), the paying agents named therein (together with the Principal Paying Agent, the ‘‘PayingAgents’’, which expression includes any successor or additional paying agents appointed from time totime in connection with the Notes), the transfer agents named therein (the ‘‘Transfer Agents’’, whichexpression includes any successor or additional transfer agents appointed from time to time inconnection with the Notes), the Account Bank (as defined below) and the Trustee. References herein tothe ‘‘Agents’’ are to the Registrar, the Principal Paying Agent, the Transfer Agents, the Paying Agentsand the Account Bank (as defined herein) and any reference to an ‘‘Agent’’ is to any one of them. TheGuarantee of the Notes was authorised by a resolution of the Board of Directors of the Guarantor passedon 25 April 2019. The Notes and the Guarantee of the Notes also have the benefit of (i) a keepwell andliquidity support deed dated on or about 20 May 2019 (as amended, restated, replaced or supplementedfrom time to time, the ‘‘Keepwell and Liquidity Support Deed’’) between the Issuer, the Guarantor, theCompany and the Trustee; (ii) a deed of equity interest purchase undertaking dated on or about 20 May2019 (as amended, restated, replaced or supplemented from time to time, the ‘‘Deed of Equity InterestPurchase Undertaking’’) between the Issuer, the Guarantor, the Company and the Trustee; and (iii) anaccount bank agreement dated on or about 20 May 2019 (as amended, restated, replaced orsupplemented from time to time, the ‘‘Account Bank Agreement’’) between the Issuer, the Guarantor,the Trustee and the account bank named therein (the ‘‘Account Bank’’). The entry into the Keepwelland Liquidity Support Deed, Deed of Equity Interest Purchase Undertaking and Account BankAgreement was authorised by a resolution of the Board of Directors of the Company passed on 18March 2019.
Certain provisions of these Conditions are summaries of the Trust Deed, the Agency Agreement, theKeepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and theAccount Bank Agreement and are subject to their detailed provisions. The Noteholders (as definedbelow) are bound by, and are deemed to have notice of, all the provisions of the Trust Deed, the AgencyAgreement, the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertakingand the Account Bank Agreement applicable to them. Copies of the Trust Deed, the Agency Agreement,the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and theAccount Bank Agreement are available for inspection upon prior written request and satisfactory proofof holding by Noteholders during normal business hours at the registered office for the time being of the
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Trustee, being at the date hereof 1/F, Far East Consortium Building, 121 Des Voeux Road Central,Hong Kong and at the Specified Offices (as defined in the Agency Agreement) of each of the Agents,the initial Specified Offices of which are set out below.
1. Form, Denomination, Status and Guarantee
(a) Form and denomination: The Notes are in registered form in the denominations ofU.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof (each, an ‘‘AuthorisedDenomination’’).
(b) Status of the Notes: The Notes constitute direct, general, unsubordinated and unconditionalobligations of the Issuer which will at all times rank pari passu among themselves and atleast pari passu with all other present and future unsecured obligations of the Issuer, save forsuch obligations as may be preferred by provisions of law that are both mandatory and ofgeneral application.
(c) Guarantee of the Notes: The Guarantor has in the Trust Deed unconditionally andirrevocably guaranteed the due and punctual payment of all sums from time to time payableby the Issuer in respect of the Notes. This guarantee (the ‘‘Guarantee of the Notes’’)constitutes direct, general and unconditional obligations of the Guarantor which will at alltimes rank at least pari passu with all other present and future unsecured obligations of theGuarantor, save for such obligations as may be preferred by provisions of law that are bothmandatory and of general application.
Upon issue, the Notes will be evidenced by a global note certificate (the ‘‘Global NoteCertificate’’) substantially in the form scheduled to the Trust Deed. The Global Note Certificatewill be registered in the name of a nominee for, and deposited with, a common depositary forEuroclear Bank SA/NV (‘‘Euroclear’’) and Clearstream Banking S.A. (‘‘Clearstream’’), and will beexchangeable for individual Note Certificates only in the circumstances set out therein.
2. Register, Title and Transfers
(a) Register: The Registrar will maintain a register (the ‘‘Register’’) in respect of the Notes inaccordance with the provisions of the Agency Agreement. In these Conditions, the ‘‘Holder’’of a Note means the person in whose name such Note is for the time being registered in theRegister (or, in the case of a joint holding, the first named thereof) and ‘‘Noteholder’’ shallbe construed accordingly. A certificate (each, a ‘‘Note Certificate’’) will be issued to eachNoteholder in respect of its registered holding. Each Note Certificate will be numberedserially with an identifying number which will be recorded in the Register.
(b) Title: The Holder of each Note shall (except as ordered by a court of competent jurisdictionotherwise required by law) be treated as the absolute owner of such Note for all purposes(whether or not it is overdue and regardless of any notice of ownership, trust or any otherinterest therein, any writing on the Note Certificate relating thereto (other than the endorsedform of transfer) or any notice of any previous loss or theft of such Note Certificate) and noperson shall be liable for so treating such Holder. No person shall have any right to enforceany term or condition of the Notes or the Trust Deed, the Keepwell and Liquidity SupportDeed, the Deed of Equity Interest Purchase Undertaking under the Contracts (Rights of ThirdParties) Act 1999.
(c) Transfers: Subject to paragraphs (f) (Closed periods) and (g) (Regulations concerningtransfers and registration) below, a Note may be transferred upon surrender of the relevantNote Certificate, with the endorsed form of transfer duly completed and executed, at theSpecified Office of the Registrar or any Transfer Agent, together with such evidence as theRegistrar or (as the case may be) such Transfer Agent may require to prove the title of the
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transferor and the authority of the individuals who have executed the form of transfer;provided, however, that a Note may not be transferred unless the principal amount of Notestransferred and (where not all of the Notes held by a Holder are being transferred) theprincipal amount of the balance of Notes not transferred are Authorised Denominations.Where not all the Notes represented by the surrendered Note Certificate are the subject of thetransfer, a new Note Certificate in respect of the balance of the Notes will be issued to thetransferor. No transfer of title to a Note will be valid unless and until registered on theRegister.
Transfers of interests in the Notes evidenced by the Global Note Certificate will be effectedin accordance with the rules of the relevant clearing systems.
(d) Registration and delivery of Note Certificates: Within five business days of receipt by theRegistrar or (as the case may be) any Transfer Agent of a duly completed and executed formof transfer and surrender of a Note Certificate in accordance with paragraph (c) (Transfers)above, the Registrar will register the transfer in question and deliver a new Note Certificateof a like principal amount to the Notes transferred to each relevant Holder at its SpecifiedOffice or (as the case may be) the Specified Office of any Transfer Agent or (at the requestand risk of any such relevant Holder) by uninsured first class mail (airmail if overseas) to theaddress specified for the purpose by such relevant Holder. In this paragraph, ‘‘business day’’means a day on which commercial banks are open for general business (including dealings inforeign currencies) in the city where the Registrar or (as the case may be) the relevantTransfer Agent has its Specified Office.
(e) No charge: The transfer of a Note will be effected without charge by or on behalf of theIssuer, the Registrar or any Transfer Agent but against such indemnity as the Registrar or (asthe case may be) such Transfer Agent may require in respect of any tax or other duty ofwhatsoever nature which may be levied or imposed in connection with such transfer.
(f) Closed periods: Noteholders may not require transfers to be registered:
(i) during the period of 15 days ending on (and including) the due date for any payment ofprincipal or interest in respect of the Notes;
(ii) during the period of 15 days ending on (and including) any date on which Notes maybe called for redemption by the Issuer at its option pursuant to Condition 5(b)(Redemption for tax reasons);
(iii) after a Change of Control Put Option Notice (as in Condition 5(c) (Redemption forChange of Control)) has been delivered in respect of the relevant Note(s) in accordancewith Condition 5(c) (Redemption for Change of Control); and
(iv) after a Put Option Notice (as in Condition 5(d) (Redemption at the option ofNoteholders)) has been delivered in respect of the relevant Note(s) in accordance withCondition 5(d) (Redemption at the option of Noteholders).
(g) Regulations concerning transfers and registration: All transfers of Notes and entries on theRegister are subject to the detailed regulations concerning the transfer of Notes scheduled tothe Agency Agreement. The regulations may be changed by the Issuer with the prior writtenapproval of the Trustee and the Registrar. A copy of the current regulations will be madeavailable for inspection by the Registrar to any Noteholder upon prior written request andsatisfactory proof of holding.
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3. Covenants
(a) Negative Pledge: So long as any Note remains outstanding (as defined in the Trust Deed),
(i) the Guarantor shall not, and the Guarantor shall procure that none of its Subsidiarieswill, create or permit to subsist any Security Interest upon the whole or any part of itspresent or future undertaking, assets or revenues (including uncalled capital) to secureany Relevant Indebtedness or Guarantee of Relevant Indebtedness without (A) at thesame time or prior thereto securing the Notes equally and rateably therewith or (B)providing such other security for the Notes as the Trustee may in its absolute discretionconsider to be not materially less beneficial to the interests of the Noteholders or asmay be approved by an Extraordinary Resolution (as defined in the Trust Deed) of theNoteholders; and
(ii) the Company has undertaken in the Keepwell and Liquidity Support Deed that:
(A) it shall not create or have outstanding any Relevant Indebtedness or Guarantee ofRelevant Indebtedness without at the same time or prior thereto (x) providing anunsubordinated guarantee or indemnity for all amounts payable in respect of theNotes or (y) offering to exchange the Notes for securities issued or guaranteed bythe Company with terms substantially identical to those of the Notes as certifiedby an Independent Investment Bank, provided that, if the provision of anunsubordinated guarantee or indemnity in (x) or the offer to exchange in (y), asthe case may be, requires any Regulatory Approval, the Company shall use allreasonable endeavours to obtain such Regulatory Approvals and if the Companyfails to obtain such Regulatory Approvals after using all reasonable endeavours,the Company shall not be required to comply with the requirements of thisCondition 3(a)(ii)(A); and
(B) it shall procure that none of the Subsidiaries of the Company will create or permitto subsist any Security Interest upon the whole or any part of its present or futureundertaking, assets or revenues (including uncalled capital) to secure any RelevantIndebtedness or Guarantee of Relevant Indebtedness without (x) at the same timeor prior thereto securing the Notes equally and rateably or (y) providing suchother security for the Notes as the Trustee may in its absolute discretion considerto be not materially less beneficial to the interests of the Noteholders or as may beapproved by an Extraordinary Resolution of Noteholders.
(b) Limitation on Activities: So long as any Note remains outstanding,
(i) the Issuer shall not, and the Guarantor and the Company have undertaken in theKeepwell and Liquidity Support Deed to procure that the Issuer shall not, carry on anybusiness activity whatsoever other than the activities in connection with the Notes (suchactivities in connection with the Notes shall, for the avoidance of doubt, include the on-lending of the proceeds of the issue of the Notes to only either the Company or any ofits Subsidiaries (each a ‘‘Group Borrower’’), and to cause such Group Borrower to paythe interest and principal in respect of such intercompany loan on time); and
(ii) the Issuer shall not issue any equity interest, capital stock or shares other than ordinaryshares to the Guarantor and the Guarantor shall at all times maintain ownership of 100per cent. of the equity interest in the Issuer.
(c) Financial Statements etc.: So long as any Note remains outstanding,
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(i) each of the Issuer and the Guarantor shall provide (A) a Compliance Certificate (onwhich the Trustee may rely as to such compliance) within 30 days of a request by theTrustee and 150 days of the end of each Relevant Period; (B) a copy of the GuarantorAudited Financial Reports within 150 days of the end of each Relevant Period preparedin accordance with HKFRS (audited by a nationally recognised firm of independentaccountants); and (C) a copy of the Guarantor Unaudited Financial Reports within 150days of the end of each Relevant Period prepared on a basis consistent with theGuarantor Audited Financial Reports; and
(ii) the Company has undertaken in the Trust Deed to provide (A) a Compliance Certificateof the Company (on which the Trustee may rely as to such compliance) within 30 daysof a request by the Trustee and 150 days of the end of each Relevant Period; (B) a copyof the relevant Company Audited Financial Reports within 150 days of the end of eachRelevant Period prepared in accordance with PRC GAAP (audited by a nationallyrecognised firm of independent accountants of good repute); and (C) a copy of theCompany Unaudited Financial Reports within 150 days of the end of each RelevantPeriod prepared on a basis consistent with the Company Audited Financial Reports,
and if such statements referred to in this Condition 3(c) (Financial Statements etc.) shall bein the Chinese language, together with an English translation of the same and translated by(x) a nationally recognised firm of independent accountants or (y) a professional translationservice provider and checked by a nationally recognised firm of independent accountants,together with a certificate signed by a director of the Company certifying that suchtranslation is complete and accurate.
(d) Equity attributable to owners of the Guarantor: So long as any Note remains outstanding,the Guarantor undertakes to ensure an aggregate Equity attributable to owners of theGuarantor of at least RMB10,000,000 at the end of any Relevant Period. The Equityattributable to owners of the Guarantor shall be tested by reference to the Guarantor AuditedFinancial Reports or, as the case may be, the Guarantor Unaudited Financial Reports,whichever is the latest available document. The Trustee is under no obligation or duty tomonitor compliance by the Guarantor with this Condition 3(d) (Equity attributable to ownersof the Guarantor) and shall not be responsible or liable to any Noteholder or any otherperson for not doing so.
(e) Liquidity Support and Parent Investment: the Trustee shall provide a written notice (the‘‘Trigger Notice’’) to the Company in accordance with the Trust Deed (i) if the Trustee doesnot receive the Liquidity Notice from the Issuer and the Guarantor at least 30 KWD BusinessDays (as defined in the Keepwell and Liquidity Support Deed) before each Interest PaymentDate (as defined herein) in accordance with the terms of the Keepwell and Liquidity SupportDeed, (ii) upon being notified in writing by the Issuer, the Guarantor and/or the Companythat a Triggering Event has occurred or (iii) if any Triggering Event has occurred and if sorequested in writing by Holders of at least 25 per cent. of the aggregate principal amount ofthe Notes then outstanding (subject to the Trustee having been indemnified and/or providedwith security and/or pre-funded to its satisfaction). Upon the receipt of the Trigger Notice,the Company has undertaken in the Keepwell and Liquidity Support Deed:
(i) to provide the liquidity support to the Issuer and/or the Guarantor (the ‘‘LiquiditySupport’’); and
(ii) to invest in the Guarantor and/or any Offshore Subsidiary(ies) (as defined in theKeepwell and Liquidity Support Deed) (the ‘‘Parent Investment’’),
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in each case, in accordance with the Keepwell and Liquidity Support Deed and subject to ithaving obtained all relevant Regulatory Approvals (as defined in the Keepwell and LiquiditySupport Deed) (which the Company has undertaken to use all reasonable endeavours toobtain).
A ‘‘Triggering Event’’ means the occurrence of any of the following events:
(A) the Consolidated Net Worth of the Issuer at any time falls below U.S.$1.00 or theEquity attributable to owners of the Guarantor at the end of the Relevant Period fallsbelow RMB10,000,000 (a ‘‘Financial Ratio Failure’’);
(B) the Issuer or the Guarantor fails to provide a Liquidity Notice (as defined in theKeepwell and Liquidity Support Deed) in accordance with and by the time and to thepersons as specified in the Keepwell and Liquidity Support Deed (the ‘‘LiquidityNotice Failure Event’’);
(C) an Event of Default; or
(D) the Issuer or the Guarantor determines that it will have insufficient liquidity or cashflowto meet its payment obligations under the Notes, the Guarantee of the Notes or theTrust Deed as they fall due (a ‘‘Shortfall Event’’).
The obligations of the Company in the Keepwell and Liquidity Support Deed shall besuspended if each of the Issuer, the Guarantor and the Company receives a notice inwriting from the Trustee stating that any of the following events has occurred:
(1) the Trustee (i) has received a notice in writing from the Principal Paying Agentthat all of the payment obligations of the Issuer in respect of any principal,premium, interest and default interest (if applicable) under the Notes have beensatisfied in full and (ii) is satisfied that all amounts due and payable to the Trusteeunder the Trust Deed have been satisfied in full;
(2) in the event of a Liquidity Notice Failure Event resulting in the service of aTrigger Notice, the Trustee (i) has received a notice in writing from the PrincipalPaying Agent that the payment obligations of the Issuer in respect of anyprincipal, premium and interest under the Notes due on the Interest Payment Dateimmediately following the date of the relevant Liquidity Notice, together with anydefault interest due (if applicable) as at the date of the notice from the PrincipalPaying Agent have been satisfied in full and (ii) is satisfied that all amounts dueand payable to the Trustee under the Trust Deed as at the date of the notice fromthe Principal Paying Agent have been satisfied in full;
(3) in the event of an Event of Default resulting in the service of a Trigger Notice,such Event of Default has been waived by the Trustee acting on the instructions ofthe Noteholders by an Extraordinary Resolution; or
(4) in the event of a Financial Ratio Failure or Shortfall Event resulting in the serviceof a Trigger Notice, the Trustee has received (i) a certificate from the Guarantorsigned by any one of its directors or authorised signatories on behalf of theGuarantor or the Issuer, as the case may be certifying that such Financial RatioFailure or Shortfall Event has been remedied in full and (ii) a report from theauditors of the Issuer or the Guarantor of recognised standing to the effect thatsuch Financial Ratio Failure or Shortfall Event has been remedied.
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(f) Deed of Equity Interest Purchase Undertaking: Upon the occurrence of an Event of Default,the Trustee shall provide to the Company (with a copy to the Issuer and the Guarantor) anotice in writing in accordance with the Trust Deed notifying the Company of its obligationsto carry out intra-group purchase(s) of certain equity interest held by any other offshoresubsidiary or subsidiaries of the Company pursuant to the Deed of Equity Interest PurchaseUndertaking. Upon the completion of any Purchase (as defined in the Deed of Equity InterestPurchase Undertaking), the Company has undertaken in the Deed of Equity Interest PurchaseUndertaking, in the event that a Relevant Transferor (as defined in the Deed of EquityInterest Purchase Undertaking) is not the Issuer or the Guarantor, to procure such RelevantTransferor to promptly on-lend or distribute in full the relevant portion of the Purchase Price(as defined in the Deed of Equity Interest Purchase Undertaking) received by such RelevantTransferor to the Issuer prior to any other use, disposal or transfer of the proceeds received.
(g) Use of Proceeds Received pursuant to the Keepwell and Liquidity Support Deed and Deedof Equity Interest Purchase Undertaking: Each of the Issuer and the Guarantor shall, andthe Company has undertaken in the Keepwell and Liquidity Support Deed to procure theIssuer and the Guarantor to, take all actions necessary for the proceeds received fromLiquidity Support and the Parent Investment to be applied in and towards (i) the payment infull of any outstanding amounts as they fall due under the Trust Deed, the Notes and theGuarantee of the Notes (including any interest accrued but unpaid on the Notes) if theTriggering Event is an Event of Default or (ii) the payment in full of any outstanding amountas they fall due on the immediately following Interest Payment Date under the Trust Deed,the Notes and the Guarantee of the Notes (including any interest accrued but unpaid on theNotes) if the Triggering Event is a Liquidity Notice Failure Event or (iii) the remedy of theFinancial Ratio Failure or the Shortfall Event if such Triggering Event has occurred, prior toany other use, disposal or transfer of the proceeds received. The Company has undertaken inthe Deed of Equity Interest Purchase Undertaking that upon the completion of any Purchase,it shall in the event that a relevant transferor is not the Issuer or the Guarantor, procure suchrelevant transferor to promptly on-lend or distribute in full the relevant portion of theproceeds received from the Purchase, being an amount no less than the Shortfall Amount (asdefined in the Deed of Equity Interest Purchase Undertaking), to the Issuer prior to any otheruse, disposal or transfer of the proceeds received and promptly do all such things (includingentering into and executing any agreements or arrangements required) and take all actionsnecessary for the proceeds received by the Issuer or the Guarantor from the Company orpursuant to any on-loan or distribution referred to above to be applied solely towards thepayment in full of the Issuer’s or the Guarantor’s obligations, as the case may be, under theNotes, the Guarantee of the Notes and the Trust Deed (including without limitation thepayment of the principal amount of the Notes then outstanding as at the date of the PurchaseNotice and any interest due and unpaid and/or accrued but unpaid on the Notes up to butexcluding the date of such Purchase Notice (as defined in the Deed of Equity InterestPurchase Undertaking)) prior to any other use, disposal or transfer of the proceeds received.
(h) Interest Reserve: Pursuant to the Account Bank Agreement:
(i) on the Issue Date, the Issuer has undertaken to deposit an amount not less than theSpecified Balance into the Interest Reserve Account;
(ii) unless the Notes have been redeemed or purchased and cancelled in full under theseConditions, the Issuer has undertaken to, subject to Condition 3(h)(iii), maintain at alltimes prior to the Maturity Date (as defined in Condition 5(a) (Scheduled redemption)),an amount not less than the Specified Balance in the Interest Reserve Account;
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(iii) the Issuer may, at any time in the period falling not more than 14 nor less than twobusiness days prior to an Interest Payment Date, by written notice to the Account Bank,direct the Account Bank to pay such amount of the Reserve Fund to the PrincipalPaying Agent in and towards payment of interest due and payable under the Notes onsuch Interest Payment Date but shall by no later than 30 days following the relevantInterest Payment Date, deposit in the Interest Reserve Account such amount asnecessary to maintain the Specified Balance;
(iv) the Issuer shall not withdraw any amount from the Interest Reserve Account other thanpursuant to these Conditions and the Account Bank Agreement;
(v) upon the occurrence of an Event of Default under the Notes, the Reserve Fund shall beheld solely to the order of the Trustee and the Account Bank shall release the ReserveFund in the Interest Reserve Account at the direction of the Trustee, which shall applysuch funds in accordance with the provisions of the Trust Deed in and towards paymentof the amounts due under the Notes and the Trust Deed; and
(vi) upon the redemption or purchase and cancellation of the Notes in full, the Issuer shalldirect the Account Bank to transfer the Reserve Fund to the Issuer in accordance withthe Account Bank Agreement and close the Interest Reserve Account at zero balance.
(i) Rating maintenance: So long as any Note remains outstanding, save with the approval of anExtraordinary Resolution of Noteholders, each of the Issuer and the Guarantor shall use itsbest endeavours to maintain a rating on the Notes by the Rating Agency.
(j) Notification to NDRC: The Company undertakes to file or cause to be filed with the NDRCthe requisite information and documents within the prescribed time frame after the Issue Date(as defined below) in accordance with the Circular on Promoting the Reform of theAdministrative System on the Issuance by Enterprises of Foreign Debt Filings andRegistrations(國家發展改革委關於推進企業發行外債備案登記制管理改革的通知(發改外
資 [2015] 2044 號))issued by the NDRC and which came into effect on 14 September 2015,and any applicable implementation rules, reports, certificates, approvals or guidelines asissued by the NDRC from time to time (the ‘‘NDRC Post-issue Filing’’).
The Company shall complete the NDRC Post-issue Filing and provide such document(s)evidencing due filing with the NDRC (if any) within the prescribed timeframe and, shallcomply with all applicable PRC laws and regulations in connection with the Notes. TheCompany shall within 15 PRC Business Days after submission of such NDRC Post-issueFiling provide the Trustee with a certificate signed by any director or duly authorised officerof the Company confirming the submission of the NDRC Post-issue Filing.
The Trustee shall have no obligation or duty to monitor or ensure the completion of theNDRC Post-issue Filing on or before the deadline referred to above or to verify the accuracy,validity and/or genuineness of any certificate, confirmation, or other documents in relation toor in connection with the NDRC Post-issue Filing or to give notice to the Noteholdersconfirming the completion of the NDRC Post-Issue Filing, and shall not be liable toNoteholders or any other person for not doing so.
(k) Definitions: In these Conditions:
‘‘Approval Authorities’’ means any supranational, national, state, municipal, provincial orlocal government (including any subdivision, court, administrative agency or commission orother authority thereof) or any quasi governmental or private body exercising any regulatory,taxing, importing or other governmental or quasi governmental authority whose licences,
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authorisations, registrations or other approvals are necessary for undertaking the transactionscontemplated by the Trust Deed, the Keepwell and Liquidity Support Deed, the Deed ofEquity Interest Purchase Undertaking and the Notes;
‘‘Company Audited Financial Reports’’ means the annual audited consolidated balancesheet, income statement, statement of cash flows of the Company and its Subsidiaries andstatements of changes in owners’ equity of the Company together with any statements,reports (including any directors’ and auditors’ reports) and notes attached to or intended to beread with any of them, if any;
‘‘Company Unaudited Financial Reports’’ means the semi-annual unaudited andunreviewed consolidated balance sheet, income statement, statement of cash flows of theCompany and its Subsidiaries and statements of changes in owners’ equity of the Companytogether with any statements, reports (including any directors’ review reports) and notesattached to or intended to be read with any of them, if any;
‘‘Compliance Certificate’’ means a certificate of each of the Issuer, the Guarantor and theCompany signed by any one of their respective directors or duly authorised officers certifyingthat, having made all reasonable enquiries, to the best of the knowledge, information andbelief of the Issuer, the Guarantor or the Company (as the case may be) as at a date (the‘‘Certification Date’’) not more than five days before the date of the certificate:
(a) no Event of Default or an event or circumstance which could, with the giving of notice,lapse of time, the issuing of a certificate and/or fulfilment of any other requirementprovided for in Condition 8 (Events of Default), become an Event of Default or otherTriggering Event had occurred since the Certification Date of the last such certificate or(if none) the date of the Trust Deed or, if such an event had occurred, giving details ofit; and
(b) each of the Issuer, the Guarantor and the Company has complied with all its respectiveobligations under the Trust Deed, the Notes, the Keepwell and Liquidity Support Deed,the Deed of Equity Interest Purchase Undertaking and the Account Bank Agreement or,if non-compliance had occurred, giving details of it;
‘‘Consolidated Net Worth’’ means the excess of the consolidated total assets of the Issuerover the consolidated total liabilities of the Issuer, each of ‘‘consolidated total assets’’ and‘‘consolidated total liabilities’’ to be determined in accordance with HKFRS consistentlyapplied;
‘‘Equity attributable to owners of the Guarantor’’ means the line item referenced as‘‘Total equity’’ with the corresponding caption in the consolidated statement of financialposition of the Guarantor Audited Financial Reports or the Guarantor Unaudited FinancialReports;
‘‘Guarantee’’ means, in relation to any indebtedness of any Person, any obligation of anotherPerson to pay such indebtedness including (without limitation):
(a) any obligation to purchase such indebtedness;
(b) any obligation to lend money, to purchase or subscribe shares or other securities or topurchase assets or services in order to provide funds for the payment of suchindebtedness;
(c) any indemnity against the consequences of a default in the payment of suchindebtedness; and
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(d) any other agreement to be responsible for such indebtedness;
‘‘Guarantor Audited Financial Reports’’ means the annual audited consolidated statementof balance sheet, income statement, statement of cash flows of the Guarantor and itsSubsidiaries and statements of changes in owners’ equity of the Guarantor together with anystatements, reports (including any directors’ and auditors’ reports) and notes attached to orintended to be read with any of them;
‘‘Guarantor Unaudited Financial Reports’’ means the semi-annual unaudited andunreviewed consolidated balance sheet, income statement, statement of cash flows of theGuarantor and its Subsidiaries and statements of changes in owners’ equity of the Guarantortogether with any statements, reports (including any directors’ review reports) and notesattached to or intended to be read with any of them, if any;
‘‘HKFRS’’ means the Hong Kong Financial Reporting Standards;
‘‘Hong Kong’’ means the Hong Kong Special Administrative Region of the People’sRepublic of China;
‘‘Independent Investment Bank’’ means an independent investment bank of internationalrepute (acting as an expert) selected by the Issuer (at the expense of the Issuer, failing whom,the Guarantor) and notified in writing to the Trustee;
‘‘Interest Period’’ means each period beginning on (and including) the Issue Date or anyInterest Payment Date and ending on (and excluding) the next Interest Payment Date;
‘‘Interest Reserve Account’’ means a U.S. dollar account established with the Account Bankin the name of Zhongrong International Bond 2019 Limited as specified in the Account BankAgreement;
‘‘NDRC’’ means the National Development and Reform Commission of the PRC or its localcounterparts;
‘‘Person’’ means any individual, company, corporation, firm, partnership, joint venture,association, organisation, state or agency of a state or other entity, whether or not havingseparate legal personality;
‘‘PRC’’ means the People’s Republic of China, which, for the purposes of these Conditions,shall not include Hong Kong, the Macau Special Administrative Region of the PRC andTaiwan;
‘‘PRC Business Day’’ means a day on which commercial banks are open for business in thePRC;
‘‘PRC GAAP’’ means the Accounting Standards for Business Enterprises in the PRC;
‘‘Rating Agency’’ means (1) S&P Global Ratings, a division of S&P Global Inc. and itssuccessor (‘‘Standard & Poor’s") or (2) if Standard & Poor’s could not make a rating of theNotes publicly available, then the Issuer will select and substitute Standard & Poor’s withMoody’s Investor Service, Inc. or Fitch Ratings Ltd. or their respective successors or anyother reputable credit rating agency of international standing;
‘‘Regulatory Approvals’’ means all necessary regulatory or governmental approvals,consents, licences, orders, permits, registrations, filings, clearances and any otherauthorisations from the relevant Approval Authorities;
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‘‘Relevant Indebtedness’’ means any present or future indebtedness incurred outside thePRC which is in the form of or represented by any bond, note, debenture, debenture stock,loan stock, certificate or other securities which is, or is capable of being, listed, quoted ortraded on any stock exchange or in any securities market (including, without limitation, anyover-the-counter market) (which, for the avoidance of doubt, does not include bilateral loans,syndicated loans or club deal loans);
‘‘Relevant Period’’ means (a) in relation to each of the Company Audited Financial Reportsand the Guarantor Audited Financial Reports, each period of twelve months ending on thelast day of their respective financial year (being 31 December of that financial year) and (b)in relation to each of the Company Unaudited Financial Reports and the Guarantor UnauditedFinancial Reports, each period of six months ending on the last day of its first half financialyear (being 30 June of that financial year);
‘‘Reserve Fund’’ means any amount standing to the credit of the Interest Reserve Account;
‘‘Security Interest’’ means any mortgage, charge, pledge, lien or other security interest;
‘‘Specified Balance’’ means the amount equal to the amount of interest due in respect of theNotes for one Interest Period, on the Issue Date being U.S.$11,453,580; and
Upon issue, the Further Notes will be consolidated into and form a single series with theExisting Notes, in which event the Specified Balance shall accordingly be US$13,950,560,being the amount equal to the amount of interest due in respect of the Notes for one InterestPeriod, on the Issue Date.
a ‘‘Subsidiary’’ means any company whose financial statements are required by law or inaccordance with the generally accepted accounting principles of the PRC or the BritishVirgin Islands to be fully consolidated with those of the Issuer, the Guarantor or theCompany.
4. Interest
The Notes bear interest from 20 May 2019 (the ‘‘Issue Date’’) at the rate of 7.60 per cent. perannum, (the ‘‘Rate of Interest’’) payable semi annually in arrear on 20 May and 20 November ineach year (each, an ‘‘Interest Payment Date’’), subject as provided in Condition 6 (Payments).
The Issue Date of the Further Notes is 5 December 2019. The Further Notes will bear interestfrom 20 November 2019.
Each Note will cease to bear interest from the due date for redemption unless, upon surrender ofthe Note Certificates representing the Notes, payment of principal is improperly withheld orrefused, in which case it will continue to bear interest at such rate (both before and after judgment)until whichever is the earlier of (a) the day on which all sums due in respect of such Note up tothat day are received by or on behalf of the relevant Noteholder and (b) the day which is sevendays after the Principal Paying Agent or the Trustee has notified the Noteholders that it hasreceived all sums due in respect of the Notes up to such seventh day (except to the extent thatthere is any subsequent default in payment).
The amount of interest payable on each Interest Payment Date shall be U.S.$38 in respect of eachU.S.$1,000 principal amount of the Notes. If interest is required to be paid in respect of a Note onany other date, it shall be calculated by applying the Rate of Interest to the Calculation Amount,multiplying the product by the relevant Day Count Fraction, rounding the resulting figure to thenearest cent (half a cent being rounded upwards) and multiplying such rounded figure by a fractionequal to the Authorised Denomination of such Note divided by the Calculation Amount, where:
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"Calculation Amount’’ means U.S.$1,000; and
"Day Count Fraction’’ means, in respect of any period, the number of days in the relevant perioddivided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months).
5. Redemption and Purchase
(a) Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Noteswill be redeemed at their principal amount on 20 May 2022 (the ‘‘Maturity Date’’), subjectas provided in Condition 6 (Payments).
(b) Redemption for tax reasons: The Notes may be redeemed at the option of the Issuer inwhole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ noticeto the Noteholders (which notice shall be irrevocable) at their principal amount, together withinterest accrued to the date fixed for redemption, if, immediately before giving such notice,the Issuer satisfies the Trustee that:
(i) (A) the Issuer has or will become obliged to pay Additional Amounts as provided orreferred to in Condition 7 (Taxation) as a result of any change in, or amendment to, thelaws or regulations of the British Virgin Islands, the PRC or any political subdivision orany authority thereof or therein having power to tax, or any change in the application orofficial interpretation of such laws or regulations (including a holding by a court ofcompetent jurisdiction), which change or amendment becomes effective on or after 10May 2019; and (B) such obligation cannot be avoided by the Issuer taking reasonablemeasures available to it; or
(ii) (A) the Guarantor has or (if a demand was made under the Guarantee of the Notes)would become obliged to pay Additional Amounts as provided or referred to inCondition 7 (Taxation) or the Guarantee of the Notes, as the case may be, as a result ofany change in, or amendment to, the laws or regulations of the British Virgin Islands,the PRC or any political subdivision or any authority thereof or therein having power totax, or any change in the application or official interpretation of such laws orregulations (including a holding by a court of competent jurisdiction), which change oramendment becomes effective on or after 10 May 2019; and (B) such obligation cannotbe avoided by the Guarantor taking reasonable measures available to it;
provided, however, that no such notice of redemption shall be given earlier than 90 daysprior to the earliest date on which the Issuer or the Guarantor would be obliged to pay suchAdditional Amounts if a payment in respect of the Notes were then due or (as the case maybe) a demand under the Guarantee of the Notes were then made.
Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuershall deliver or procure that there is delivered to the Trustee a certificate signed by anydirector or duly authorised officer of the Issuer stating that the circumstances referred to in(i)(A) and (i)(B) above prevail and setting out the details of such circumstances or (as thecase may be) a certificate signed by any director or duly authorised officer of the Guarantorstating that the circumstances referred to in (ii)(A) and (ii)(B) above prevail and setting outdetails of such circumstances.
The Trustee shall be entitled to accept and rely upon such certificate (without furtherinvestigation or enquiry) as sufficient evidence of the satisfaction of the circumstances set outin (i)(A) and (i)(B) or (as the case may be) (ii)(A) and (ii)(B) above, in which event theyshall be conclusive and binding on the Noteholders.
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Upon the expiry of any such notice period as is referred to in this Condition 5(b)(Redemption for tax reasons), the Issuer shall be bound to redeem the Notes in accordancewith this Condition 5(b) (Redemption for tax reasons).
(c) Redemption for Change of Control: At any time following the occurrence of a Change ofControl, each Noteholder will have the right, at such Noteholder’s option, to require theIssuer to redeem all but not some only of that Noteholder’s Notes on the Change of ControlPut Settlement Date at 101 per cent. of their principal amount, together with accrued interestto such Change of Control Put Settlement Date. To exercise such right, the Noteholder mustdeposit at the Specified Office of any Paying Agent a duly completed and signed notice ofredemption, in the form for the time being current, obtainable from the Specified Office ofany Paying Agent (a ‘‘Change of Control Put Option Notice’’), together with the NoteCertificates evidencing the Notes to be redeemed by not later than 30 days following aChange of Control, or, if later, 30 days following the date upon which notice thereof is givento Noteholders by the Issuer in accordance with Condition 15 (Notices). The ‘‘Change ofControl Put Settlement Date’’ shall be the 14th day after the expiry of such period of 30days as referred to above.
A Change of Control Put Option Notice, once delivered, shall be irrevocable and the Issuershall redeem the Notes subject to the Change of Control Put Option Notices delivered asaforesaid.
The Issuer or the Guarantor shall give notice to Noteholders in accordance with Condition 15(Notices) and to the Trustee in writing by not later than 14 days following the first day onwhich either of them becomes aware of the occurrence of a Change of Control, which noticeshall specify the procedure for exercise by Holders of their rights to require redemption ofthe Notes pursuant to this Condition 5(c) (Redemption for Change of Control).
In this Condition 5(c) (Redemption for Change of Control): a ‘‘Change of Control’’ occurswhen:
(i) the Company ceases to have Control of the Guarantor;
(ii) Jingwei Textile ceases to be the largest direct or indirect holder of the issued sharecapital of the Company;
(iii) the Substantial Shareholders cease to in aggregate have Control of the Company; or
(iv) SASAC ceases to legally or beneficially hold or own (directly or indirectly) inaggregate more than 25 per cent. of the issued share capital of the Company;
‘‘Control’’ means (where applicable), with respect to a Person, either (i) or (ii) is satisfied:(i) the ownership, acquisition or control of the Relevant Percentage of the voting rights of theissued share capital of such Person, whether obtained directly or indirectly or (ii) the right toappoint and/or remove the Relevant Percentage of the members of the Person’s board ofdirectors or other governing body, whether obtained directly or indirectly, and whetherobtained by ownership of share capital, the possession of voting rights, contract or otherwise;
‘‘Harbin Investment’’ means Harbin Investment Group Co., Ltd.(哈爾濱投資集團有限責任
公司);
‘‘Jingwei Textile’’ means Jingwei Textile Machinery Co., Ltd.(經緯紡織機械股份有限公
司);
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a ‘‘Person’’, as used in this Condition 5(c) (Redemption for Change of Control), includes anyindividual, company, corporation, firm, partnership, joint venture, undertaking, association,organisation, trust, state or agency of a state (in each case whether or not being a separatelegal entity);
‘‘Relevant Percentage’’ means (a) in the case of Control of the Company over theGuarantor, 100 per cent. and (b) in the case of Control of the Substantial Shareholders overthe Company, at least 51 per cent.;
‘‘SASAC’’ means the State-owned Assets Supervision and Administration of the StateCouncil of the PRC or its successor, including any municipal or provincial bureau ofSASAC; and
‘‘Substantial Shareholders’’ means Jingwei Textile, Harbin Investment or any other state-owned enterprise or company more than 50 per cent. owned or controlled directly orindirectly by SASAC that holds or owns any issued share capital of the Company.
(d) Redemption at the option of Noteholders: The Issuer shall, at the option of the Holder of anyNote, redeem all but not some only of that Noteholder’s Notes on 20 May 2021 (the ‘‘PutSettlement Date’’) at a price equal to 100 per cent. of its principal amount together with interestaccrued to such date. In order to exercise the option contained in this Condition 5(d), the Holder ofa Note must, not less than 30 nor more than 60 days before the Put Settlement Date, deposit theNote Certificate relating to such Note with any Paying Agent together with a duly completed putoption notice (a ‘‘Put Option Notice’’) in the form obtainable from any Paying Agent. No NoteCertificate, once deposited with a duly completed Put Option Notice in accordance with thisCondition 5(d), may be withdrawn; provided, however, that if, prior to the Put Settlement Date, theNotes evidenced by any Note Certificate so deposited become immediately due and payable or,upon due presentation of any Note Certificate on the Put Settlement Date, payment of theredemption moneys is improperly withheld or refused, such Note Certificate shall, withoutprejudice to the exercise of the Put Option, be returned to the Holder by uninsured first class mail(airmail if overseas) at the address specified by such Holder in the relevant Put Option Notice.
(e) No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than asprovided in (a) (Scheduled redemption) to (d) (Redemption at the option of Noteholders)above.
(f) Purchase: The Issuer, the Guarantor, the Company or any of their respective Subsidiariesmay at any time purchase Notes in the open market or otherwise and at any price. The Notesso purchased, while held by or on behalf of the Issuer, the Guarantor, the Company or any oftheir respective Subsidiaries, shall not entitle the Holder to vote at any meetings of theNoteholders and shall not be deemed to be outstanding for the purposes of calculatingquorums at meetings of the Noteholders or for the purposes of Conditions 8, 12(a) and 13.
(g) Cancellation: All Notes so redeemed or purchased by the Issuer, the Guarantor, the Companyor any of their respective Subsidiaries shall be cancelled and may not be reissued or resold.The obligations of the Issuer, the Guarantor and the Company in respect of any Notes socancelled in accordance with the Trust Deed shall be discharged.
(h) No Duty to Monitor: Neither the Trustee nor any of the Agents shall be obliged to take anysteps to ascertain whether a Change of Control or Event of Default has occurred or tomonitor the occurrence of any Change of Control or Event of Default, and shall not be liableto the Noteholders or any other person for not doing so.
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6. Payments
(a) Principal: Payments of principal shall be in U.S. dollars by transfer to a U.S. dollar accountmaintained by the payee with, a bank in New York City and (in the case of redemption) uponsurrender (or, in the case of part payment only, endorsement) of the relevant NoteCertificates at the Specified Office of any Paying Agent.
(b) Interest: Payments of interest shall be made by transfer to a U.S. dollar account maintainedby the payee with, a bank in New York City and (in the case of interest payable onredemption) upon surrender (or, in the case of part payment only, endorsement) of therelevant Note Certificates at the Specified Office of any Paying Agent.
Notwithstanding the foregoing, so long as the Global Note Certificate is held on behalf ofEuroclear, Clearstream or any other clearing system, each payment in respect of the GlobalNote Certificate will be made to the person shown as the holder in the Register at the closeof business of the relevant clearing system on the Clearing System Business Day before thedue date for such payments, where ‘‘Clearing System Business Day’’ means a weekday(Monday to Friday, inclusive) except 25 December and 1 January.
(c) Payments subject to fiscal laws: All payments in respect of the Notes are subject in all casesto (i) any applicable fiscal or other laws, regulations and directives in the place of payment,but without prejudice to the provisions of Condition 7 (Taxation) and (ii) any withholding ordeduction required pursuant to an agreement described in Section 1471(b) of the U.S. InternalRevenue Code of 1986 (the ‘‘Code’’) or otherwise imposed pursuant to Sections 1471through 1474 of the Code, any regulations or agreements thereunder, any officialinterpretations thereof, or (without prejudice to the provisions of Condition 7 (Taxation)) anylaw implementing an intergovernmental approach thereto. No commissions or expenses shallbe charged to the Noteholders in respect of such payments.
(d) Payments on business days: Payment instructions (for value the due date, or, if the due dateis not a business day, for value the next succeeding business day) will be initiated (i) (in thecase of payments of principal and interest payable on redemption) on the later of the due datefor payment and the day on which the relevant Note Certificate is surrendered (or, in the caseof part payment only, endorsed) at the Specified Office of a Paying Agent and (ii) (in thecase of payments of interest payable other than on redemption) on the due date for payment.A Noteholder shall not be entitled to any interest or other payment in respect of any delay inpayment resulting from (A) the due date for a payment not being a business day or (B) theNoteholder is late in surrendering or cannot surrender its Note Certificate (if required to doso). In this paragraph, ‘‘business day’’ means any day (other than a Saturday, Sunday orpublic holiday) on which banks and foreign exchange markets are open for general business(including dealings in foreign currencies) in Hong Kong and New York City and the place inwhich the specified office of the Principal Paying Agent is located and, in the case ofsurrender (or, in the case of part payment only, endorsement) of a Note Certificate, in theplace in which the Note Certificate is surrendered (or, as the case may be, endorsed).
(e) Partial payments: If a Paying Agent makes a partial payment in respect of any Note, theIssuer shall procure that the amount and date of such payment are noted on the Register and,in the case of partial payment upon presentation of a Note Certificate, that a statementindicating the amount and the date of such payment is endorsed on the relevant NoteCertificate.
(f) Record date: Each payment in respect of a Note will be made to the person shown as theHolder in the Register at the opening of business in the place of the Registrar’s SpecifiedOffice on the fifteenth business day before the due date for such payment (the ‘‘RecordDate’’).
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7. Taxation
All payments of principal and interest in respect of the Notes by or on behalf of the Issuer or theGuarantor shall be made free and clear of, and without withholding or deduction for or on accountof, any present or future taxes, duties, assessments or governmental charges of whatever natureimposed, levied, collected, withheld or assessed by or on behalf of the British Virgin Islands, thePRC or any political subdivision thereof or any authority therein or thereof having power to tax,unless the withholding or deduction of such taxes, duties, assessments or governmental charges isrequired by law. Where such withholding or deduction is made by the Issuer or the Guarantor inthe PRC at the rate applicable on 10 May 2019 (the ‘‘Applicable Rate’’), the Issuer or (as the casemay be) the Guarantor will pay such additional amounts as will result in receipt by theNoteholders of such amounts after such withholding or deduction as would have been received bythem had no such withholding or deduction been required.
In the event that the Issuer or (as the case may be) the Guarantor is required to make a deductionor withholding (i) by or within the PRC in excess of the Applicable Rate; or (ii) by or within theBritish Virgin Islands, the Issuer or the Guarantor, as the case may be, shall pay such additionalamounts (the ‘‘Additional Amounts’’) as will result in receipt by the Noteholders of such amountsafter such withholding or deduction as would have been received by them had no such withholdingor deduction been required, except that no such Additional Amounts shall be payable in respect ofany Note:
(a) held by a Holder which is liable to such taxes, duties, assessments or governmental chargesin respect of such Note by reason of its having some connection with the jurisdiction bywhich such taxes, duties, assessments or charges have been imposed, levied, collected,withheld or assessed other than the mere holding of the Note; or
(b) where (in the case of a payment of principal or interest on redemption) the relevant NoteCertificate is surrendered for payment more than 30 days after the Relevant Date except tothe extent that the relevant Holder would have been entitled to such Additional Amounts if ithad surrendered the relevant Note Certificate on the last day of such period of 30 days.
In these Conditions, ‘‘Relevant Date’’ means whichever is the later of (1) the date on which thepayment in question first becomes due and (2) if the full amount payable has not been received bythe Principal Paying Agent or the Trustee on or prior to such due date, the date on which (the fullamount having been so received) notice to that effect has been given to the Noteholders.
Any reference in these Conditions to principal or interest shall be deemed to include anyAdditional Amounts in respect of principal or interest (as the case may be) which may be payableunder this Condition 7 (Taxation) or any undertaking given in addition to or in substitution of thisCondition 7 (Taxation) pursuant to the Trust Deed.
If the Issuer or the Guarantor becomes subject at any time to any taxing jurisdiction other than theBritish Virgin Islands, references in these Conditions to the British Virgin Islands shall beconstrued as references to the British Virgin Islands and/or such other jurisdiction.
Neither the Trustee nor the Agents shall be responsible for paying any tax, duty, charge,withholding or other payment referred to in this Condition 7 (Taxation) or for determining whethersuch amounts are payable or the amount thereof, and shall not be responsible or liable for anyfailure by the Issuer, the Guarantor, the Company, the Noteholders or any other person to pay suchtax, duty, charge, withholding or other payment in any jurisdiction.
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8. Events of Default
If any of the following events (each, an ‘‘Event of Default’’) occurs, then the Trustee at itsdiscretion may and, if so requested in writing by Holders of at least 25 per cent. of the aggregateprincipal amount of the outstanding Notes or if so directed by an Extraordinary Resolution, shall(subject to the Trustee having been indemnified and/or provided with security and/or pre-funded toits satisfaction) give written notice to the Issuer declaring the Notes to be immediately due andpayable, whereupon they shall become immediately due and payable at their principal amounttogether with accrued interest without further action or formality:
(a) Non-payment: the Issuer fails to pay any amount of principal in respect of the Notes on thedue date for payment thereof or fails to pay any amount of interest in respect of the Noteswithin seven days of the due date for payment thereof; or
(b) Interest Reserve Account: there is a failure to maintain at least the Specified Balance in theInterest Reserve Account except to the extent permitted by Condition 3(h) (Interest Reserve);or
(c) Breach of other obligations: the Issuer, the Guarantor or the Company defaults in theperformance or observance of any of its other obligations under or in respect of the Notes,the Trust Deed, the Keepwell and Liquidity Support Deed (other than where it gives rise to aright of redemption pursuant to Condition 5(c) (Redemption for Change of Control)), theDeed of Equity Interest Purchase Undertaking and/or the Account Bank Agreement and suchdefault (i) is incapable of remedy or (ii) being a default which is capable of remedy butremains unremedied for 30 days or such longer period as the Trustee may agree after theTrustee has given written notice thereof to the Issuer, the Guarantor or (as the case may be)the Company; or
(d) Cross-acceleration of Issuer, Guarantor, Company or Subsidiary:
(i) any indebtedness for money borrowed or raised of the Issuer, the Guarantor, theCompany or any of their respective Subsidiaries is not paid when due;
(ii) any such indebtedness for money borrowed or raised becomes due and payable prior toits stated maturity otherwise than at the option of the Issuer, the Guarantor, theCompany or (as the case may be) the relevant Subsidiary or (provided that no event ofdefault, howsoever described, has occurred) any person entitled to such indebtedness formoney borrowed or raised; or
(iii) the Issuer, the Guarantor, the Company or any of their respective Subsidiaries fails topay when due any amount payable by it under any Guarantee of any indebtedness formoney borrowed or raised;
provided that the amount of indebtedness for money borrowed or raised referred to in sub-paragraph (i) and/or sub-paragraph (ii) above and/or the amount payable under any Guaranteereferred to in sub-paragraph (iii) above, individually or in the aggregate, exceedsRMB100,000,000 (or its equivalent in any other currency or currencies); or
(e) Unsatisfied judgment: one or more judgment(s) or order(s) for the payment of any amount isrendered against the Issuer, the Guarantor, the Company or any of their respectiveSubsidiaries in respect of all or a substantial part of their undertaking, assets and revenueand continue(s) unsatisfied and unstayed for a period of 30 days after the date(s) thereof or,if later, the date therein specified for payment; or
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(f) Security enforced: a secured party takes possession, or a receiver, manager or other similarofficer is appointed, of the whole or a substantial part of the undertaking, assets and revenuesof the Issuer, the Guarantor, the Company or any of their respective Subsidiaries; or
(g) Insolvency, etc.: (i) the Issuer, the Guarantor, the Company or any of their respectiveSubsidiaries becomes insolvent or is unable to pay its debts as they fall due, (ii) anadministrator or liquidator is appointed (or application for any such appointment is made) inrespect of the Issuer, the Guarantor, the Company or any of their respective Subsidiaries orthe whole or a substantial part of the undertaking, assets and revenues of the Issuer, theGuarantor, the Company or any of their respective Subsidiaries, (iii) the Issuer, theGuarantor, the Company or any of their respective Subsidiaries takes any action for areadjustment or deferment of all or any substantial part of its debts or makes a generalassignment or an arrangement or composition with or for the benefit of its creditors ordeclares a moratorium in respect of all or any substantial part of its indebtedness orGuarantee of any indebtedness given by it or (iv) the Issuer, the Guarantor, the Company orany of the Subsidiaries of the Guarantor or the Company ceases or threatens to cease to carryon all or any substantial part of its business except for (A) where the cessation is for thepurpose of a reconstruction, amalgamation, reorganisation, merger or consolidation (x) onterms approved by an Extraordinary Resolution of the Noteholders, or (y) in the case of aSubsidiary, whereby the undertaking and assets of such Subsidiary are transferred to orotherwise vested in the Company, the Guarantor or any of their respective Subsidiaries; or(B) in the case of a Subsidiary, where the cessation is as a result of a disposal on arm’slength terms; or
(h) Winding up, etc.: an order is made or an effective resolution is passed for the winding up,liquidation or dissolution of the Issuer, the Guarantor, the Company or any of their respectiveSubsidiaries except for (i) the purpose of and followed by a reconstruction, amalgamation,reorganisation, merger or consolidation on terms approved by the Trustee or by anExtraordinary Resolution of the Noteholders, (ii) in the case of a Subsidiary, whereby theundertaking and assets of such Subsidiary are transferred to or otherwise vested in the Issuer,the Guarantor, the Company or any of their respective Subsidiaries or (iii) a solvent windingup of any Subsidiary; or
(i) Analogous event: any event occurs which under the laws of the British Virgin Islands, HongKong or the PRC has an analogous effect to any of the events referred to in paragraphs (e)(Unsatisfied judgment) to (h) (Winding up etc.) above; or
(j) Failure to take action, etc.: any action, condition or thing (including the obtaining oreffecting of any necessary consent, approval, authorisation, exemption, filing, licence, order,recording or registration) at any time required to be taken, fulfilled or done in order (i) toenable the Issuer, the Guarantor or the Company lawfully to enter into, exercise theirrespective rights and perform and comply with their respective obligations under and inrespect of the Notes, the Trust Deed, the Keepwell and Liquidity Support Deed (other thanwith regard to the performance and compliance with the obligations thereunder), the Deed ofEquity Interest Purchase Undertaking (other than with regard to the performance andcompliance with the obligations thereunder) and the Account Bank Agreement, (ii) to ensurethat those obligations are legal, valid, binding and enforceable, and (iii) to make the NoteCertificates, the Trust Deed, the Keepwell and Liquidity Support Deed, the Deed of EquityInterest Purchase Undertaking and the Account Bank Agreement admissible in evidence inthe courts of the British Virgin Islands, Hong Kong and the PRC is not taken, fulfilled ordone; or
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(k) Unlawfulness: it is or will become unlawful for the Issuer, the Guarantor or the Company toperform or comply with any of their respective obligations under or in respect of the Notes,the Trust Deed, the Keepwell and Liquidity Support Deed, the Deed of Equity InterestPurchase Undertaking or the Account Bank Agreement; or
(l) Guarantee not in force: the Guarantee of the Notes is not (or is claimed by the Guarantornot to be) in full force and effect; or
(m) Government intervention: all or any substantial part of the undertaking, assets and revenuesof the Issuer, the Guarantor, the Company or any of their respective Subsidiaries iscondemned, seized or otherwise appropriated by any person acting under the authority of anynational, regional or local government; or the Issuer, the Guarantor, the Company or any ofthe Subsidiaries of the Guarantor or the Company is prevented by any such person fromexercising normal control over all or any substantial part of its undertaking, assets andrevenues; or
(n) Keepwell and Liquidity Support Deed and Deed of Equity Interest Purchase Undertaking:the Keepwell and Liquidity Support Deed or the Deed of Equity Interest PurchaseUndertaking is not (or is claimed by the Company to not be) in full force and effect, or anyof the Keepwell and Liquidity Support Deed or the Deed of Equity Interest PurchaseUndertaking is modified, amended or terminated other than strictly in accordance with itsterms or these Conditions.
9. Prescription
Claims for principal, premium (if any) and interest on redemption shall become void unless therelevant Note Certificates are surrendered for payment within ten years (in the case of principal orpremium (if any)) and five years (in the case of interest) of the appropriate Relevant Date.
10. Replacement of Note Certificates
If any Note Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced at theSpecified Office of the Registrar, subject to all applicable laws and stock exchange requirements,upon payment by the claimant of the expenses incurred in connection with such replacement andon such terms as to evidence, security, indemnity and otherwise as the Issuer or the Registrar mayreasonably require. Mutilated or defaced Note Certificates must be surrendered before replacementswill be issued.
11. Trustee and Agents
Under the Trust Deed, the Trustee is entitled to be indemnified and/or provided with security and/or pre-funded to its satisfaction and relieved from responsibility in certain circumstances and to bepaid its fees, costs and expenses and indemnity payments in priority to the claims of theNoteholders. In addition, the Trustee and Agents are entitled to enter into business transactionswith the Issuer, the Guarantor and any entity relating to the Issuer or the Guarantor withoutaccounting for any profit.
In the exercise of its powers and discretions under these Conditions and the Trust Deed, theTrustee will have regard to the interests of the Noteholders as a class and will not be responsiblefor any consequence for individual Noteholders as a result of any circumstances particular toindividual Holders of Notes, including but not limited to, such Noteholders being connected in anyway with a particular territory or taxing jurisdiction. The Trustee shall not be entitled to require onbehalf of any Noteholders, nor shall any Noteholder be entitled to claim, from the Issuer, theGuarantor, the Company or the Trustee any indemnification or payment in respect of any tax
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consequence of any such exercise upon individual Noteholders except to the extent alreadyprovided in Condition 7 (Taxation) and/or any undertaking given in addition to, or in substitutionfor, Condition 7 (Taxation) pursuant to the Trust Deed.
The Trustee shall not be under any obligation to monitor compliance with the provisions of theTrust Deed, the Agency Agreement, the Keepwell and Liquidity Support Deed, the Deed of EquityInterest Purchase Undertaking, the Account Bank Agreement of these Conditions. None of theTrustee or any of the Agents shall be responsible for the performance by the Issuer, the Guarantor,the Company and any other person appointed by the Issuer in relation to the notes of the dutiesand obligations on their part expressed in respect of the same and, unless it has express writtennotice from the Issuer, the Guarantor or the Company to the contrary, the Trustee and each Agentshall assume that the same are being duly performed.
In acting under the Agency Agreement and in connection with the Notes, the Agents act solely asagents of the Issuer, the Guarantor and (to the extent provided therein) the Trustee and do notassume any obligations towards or relationship of agency or trust for or with any of theNoteholders.
The initial Agents and their initial Specified Offices are listed below. The Issuer and the Guarantorreserve the right (with the prior approval of the Trustee) at any time to vary or terminate theappointment of any Agent and to appoint a successor registrar or principal paying agent andadditional or successor paying agents and transfer agents; provided, however, that the Issuer andthe Guarantor shall at all times maintain a principal paying agent and a registrar.
Notice of any change in any of the Agents or in their Specified Offices shall promptly be given tothe Noteholders.
12. Meetings of Noteholders, Modification and Waiver
(a) Meetings of Noteholders: The Trust Deed contains provisions for convening meetings ofNoteholders to consider matters relating to the Notes, including the modification of anyprovision of these Conditions, the Agency Agreement, the Keepwell and Liquidity SupportDeed, the Deed of Equity Interest Purchase Undertaking, the Account Bank Agreement or theTrust Deed. Any such modification may be made if sanctioned by an ExtraordinaryResolution. Such a meeting may be convened by the Issuer and the Guarantor (actingtogether) or by the Trustee and shall be convened by the Trustee upon the request in writingof Noteholders holding not less than one-tenth of the aggregate principal amount of theoutstanding Note and subject to the Trustee being indemnified and/or secured and/or pre-funded to its satisfaction against all costs and expenses by such Noteholders. The quorum atany meeting convened to vote on an Extraordinary Resolution will be two or more personsholding or representing one more than half of the aggregate principal amount of theoutstanding Notes or, at any adjourned meeting, two or more persons being or representingNoteholders whatever the principal amount of the Notes held or represented; provided,however, that certain proposals (including any proposal to change any date fixed forpayment of principal or interest in respect of the Notes, to reduce the amount of principal orinterest payable on any date in respect of the Notes, to alter the method of calculating theamount of any payment in respect of the Notes or the date for any such payment, to changethe currency of payments under the Notes, to amend the terms of the Guarantee of the Notes,the Keepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertakingor the Account Bank Agreement in each case otherwise than in accordance with Condition12(b) or to change the quorum requirements relating to meetings or the majority required topass an Extraordinary Resolution (each, a ‘‘Reserved Matter’’)) may only be sanctioned byan Extraordinary Resolution passed at a meeting of Noteholders at which two or morepersons holding or representing not less than three quarters or, at any adjourned meeting, 25
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per cent. of the aggregate principal amount of the outstanding Notes form a quorum. AnyExtraordinary Resolution duly passed at any such meeting shall be binding on all theNoteholders, whether present or not.
In addition, a resolution in writing signed by or on behalf of Noteholders holding not lessthan 90 per cent. of the aggregate principal amount of the Notes outstanding who for the timebeing are entitled to receive notice of a meeting of Noteholders under the Trust Deed willtake effect as if it were an Extraordinary Resolution. Such a resolution in writing may becontained in one document or several documents in the same form, each signed by or onbehalf of one or more Noteholders.
So long as the Notes are represented by the Global Note Certificate, ExtraordinaryResolution includes a consent given by way of electronic consents through the relevantclearing system(s) (in a form satisfactory to the Trustee) by or on behalf of all theNoteholders of not less than 90 per cent. in aggregate principal amount of the Notes for thetime being outstanding.
(b) Modification and waiver: The Trustee may, without the consent of the Noteholders, agree toany modification of these Conditions, the Trust Deed, the Keepwell and Liquidity SupportDeed, the Deed of Equity Interest Purchase Undertaking or the Account Bank Agreement(other than in respect of a Reserved Matter) which, in the opinion of the Trustee, will not bematerially prejudicial to the interests of Noteholders and to any modification of the Notes,the Trust Deed, the Keepwell and Liquidity Support Deed, the Deed of Equity InterestPurchase Undertaking or the Account Bank Agreement which is of a formal, minor ortechnical nature or is to correct a manifest error. In addition, the Trustee may, without theconsent of the Noteholders, authorise or waive any proposed breach or breach of the Notes,the Trust Deed, the Keepwell and Liquidity Support Deed, the Deed of Equity InterestPurchase Undertaking or the Account Bank Agreement (other than a proposed breach orbreach relating to the subject of a Reserved Matter) if, in the opinion of the Trustee, theinterests of the Noteholders will not be materially prejudiced thereby.
Any such authorisation, waiver or modification shall be binding on the Noteholders andunless the Trustee agrees otherwise, any such authorisation, waiver or modification shall benotified by the Issuer to the Noteholders as soon as practicable thereafter.
(c) Directions from Noteholders: Notwithstanding anything to the contrary, the Notes, theGuarantee of the Notes, the Trust Deed, the Agency Agreement, the Keepwell and LiquiditySupport Deed, the Deed of Equity Interest Purchase Undertaking and/or the Account BankAgreement, whenever the Trustee is required or entitled by the terms of contrary in theNotes, the Guarantee of the Notes, the Trust Deed, the Agency Agreement, the Keepwell andLiquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and/or theAccount Bank Agreement to exercise any discretion or power, take any action, make anydecision or give any direction or certification, the Trustee is entitled, prior to exercising anysuch discretion or power, taking any such action, making any such decision, or giving anysuch direction or certification, to seek directions or clarifications of directions from theNoteholders by way of an Extraordinary Resolution and shall have been indemnified and/orsecured and/or pre-funded to its satisfaction against all action, proceedings, claims anddemands to which it may be or become liable and all costs, charges, damages, expenses(including legal expenses) and liabilities which may be incurred by it in connectiontherewith, and the Trustee is not responsible for any loss or liability incurred by any personas a result of any delay in it exercising such discretion or power, taking such action, makingsuch decision, or giving such direction or certification where the Trustee is seeking suchdirections or clarification of any such directions, or in the event that the directions orclarifications sought are not provided by the Noteholders.
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(d) Certificates and Reports: The Trustee may rely without liability to Noteholders on a report,confirmation or certificate or any advice of any lawyers, accountants, financial advisers,financial institution or any other expert, whether or not addressed to it and whether theirliability in relation thereto is limited (by its terms or by any engagement letter relatingthereto or in any other manner) by reference to a monetary cap, methodology or otherwise.The Trustee may accept and shall be entitled to rely on any such report, confirmation orcertificate or advice and such report, confirmation or certificate or advice shall be binding (tothe extent applicable) on the Issuer, the Guarantor, the Company, the Trustee and theNoteholders.
13. Enforcement
The Trustee may at any time, at its discretion and without notice, institute such actions, steps andproceedings as it thinks fit to enforce its rights under the Trust Deed, the Keepwell and LiquiditySupport Deed, the Deed of Equity Interest Purchase Undertaking or the Account Bank Agreementin respect of the Notes, but it shall not be bound to do so unless:
(a) it has been so requested in writing by the Holders of at least 25 per cent. of the aggregateprincipal amount of the outstanding Notes or has been so directed by an ExtraordinaryResolution; and
(b) it has been indemnified and/or provided with security and/or pre-funded to its satisfaction.
No Noteholder may proceed directly against the Issuer or the Guarantor unless the Trustee, havingbecome bound to do so, fails to do so within a reasonable time and such failure is continuing.
14. Further Issues
The Issuer may from time to time, without the consent of the Noteholders and in accordance withthe Trust Deed, create and issue further Notes having the same terms and conditions as the Notesin all material respects (or in all material respects except for the issue date, first payment ofinterest and the timing to perform and complete the NDRC Post-issue Filing) so as to form a singleseries with the Notes or upon such terms as the Issuer may determine at the time of their issue.The Issuer may from time to time create and issue other series of notes having the benefit of theTrust Deed, provided that such supplemental documents are executed and further opinions areobtained as the Trustee may require, as further set out in the Trust Deed.
15. Notices
Notices to the Noteholders will be sent to them by first class mail (or its equivalent) or (if postedto an overseas address) by airmail at their respective addresses on the Register. Any such noticeshall be deemed to have been given on the fourth day after the date of mailing.
Until such time as any definitive certificates are issued and so long as the Global Note Certificateis held in its entirely on behalf of Euroclear and Clearstream any notice to the Noteholders shallbe validly given by the delivery of the relevant notice to Euroclear and Clearstream forcommunication by the relevant clearing system to entitled accountholders in substitution fornotification as required by the Conditions and shall be deemed to have been given on the date ofdelivery to such clearing system.
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16. Governing Law and Jurisdiction
(a) Governing law: The Notes, the Trust Deed, the Keepwell and Liquidity Support Deed, theDeed of Equity Interest Purchase Undertaking, the Agency Agreement, the Account BankAgreement and any non-contractual obligations arising out of or in connection therewith, aregoverned by English law.
(b) Jurisdiction: The parties have in the Trust Deed, the Keepwell and Liquidity Support Deedand the Deed of Equity Interest Purchase Undertaking and the Agency Agreement and theparties have in the Account Bank Agreement (i) agreed that the courts of Hong Kong shallhave exclusive jurisdiction to settle any dispute (a ‘‘Dispute’’) arising out of or in connectionwith the Notes or such documents (including any non-contractual obligation arising out of orin connection therewith); and (ii) agreed that those courts are the most appropriate andconvenient courts to settle any Dispute and, accordingly, that it will not argue that any othercourts are more appropriate or convenient; (iii) designated a person in Hong Kong to acceptservice of any process on its behalf; and (iv) consented to the enforcement of any judgment.
(c) Waiver of immunity: To the extent that each of the Issuer, the Guarantor and the Companymay in any jurisdiction claim for itself or its assets or revenues immunity from suit,execution, attachment (whether in aid of execution, before judgment or otherwise) or otherlegal process and to the extent that such immunity (whether or not claimed) may be attributedin any such jurisdiction to it or its assets or revenues, each of the Issuer, the Guarantor andthe Company agrees not to claim and irrevocably waives such immunity to the full extentpermitted by the laws of such jurisdiction.
17. Rights of Third Parties
A person who is not a party to this Agreement has no right under the Contracts (Rights of ThirdParties) Act 1999 to enforce any term of this Agreement.
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SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM
The Global Note Certificate contains provisions which apply to the Notes while they are in global form,some of which modify the effect of the Terms and Conditions set out in this Offering Circular. Thefollowing is a summary of certain of those provisions.
The Notes will be represented by a Global Note Certificate which will be registered in the name of anominee for, and deposited with, a common depositary for Euroclear and Clearstream.
Under the Global Note Certificate, the Issuer, for value received, will promise to pay the amountpayable upon redemption under the Terms and Conditions in respect of the Notes represented by theGlobal Note Certificate to the Noteholder in such circumstances as the same may become payable inaccordance with the Terms and Conditions.
The Global Note Certificate will become exchangeable in whole, but not in part, for Individual NoteCertificates if (a) Euroclear or Clearstream is closed for business for a continuous period of 14 days(other than by reason of legal holidays) or announces an intention permanently to cease business or (b)any of the circumstances described in Condition 8 (Events of Default) occurs.
Whenever the Global Note Certificate is to be exchanged for Individual Note Certificates, suchIndividual Note Certificates will be issued in an aggregate principal amount equal to the principalamount of the Global Note Certificate within five business days of the delivery, by or on behalf of theregistered Noteholder of the Global Note Certificate, Euroclear and/or Clearstream to the Registrar ofsuch information as is required to complete and deliver such Individual Note Certificates (including,without limitation, the names and addresses of the persons in whose names the Individual NoteCertificates are to be registered and the principal amount of each such person’s holding) against thesurrender of the Global Note Certificate at the Specified Office of the Registrar. Such exchange will beeffected in accordance with the provisions of the Trust Deed, the Agency Agreement and the regulationsconcerning the transfer and registration of Notes scheduled thereto and, in particular, shall be effectedwithout charge to any Noteholder or the Trustee, but against such indemnity as the Registrar mayrequire in respect of any tax or other duty of whatsoever nature which may be levied or imposed inconnection with such exchange.
In addition, the Global Note Certificate will contain provisions that modify the Terms and Conditions asthey apply to the Notes evidenced by the Global Note Certificate. The following is a summary of certainof those provisions:
Payment Record Date: Each payment in respect of a Global Note Certificate will be made to the personshown as the Noteholder in the Register at the close of business (in the relevant clearing system) on theClearing System Business Day before the due date for such payment (the ‘‘Record Date’’) where‘‘Clearing System Business Day’’ means a weekday (Monday to Friday, inclusive) except 25 Decemberand 1 January.
Exercise of put option: In order to exercise the option contained in Condition 5(c) (Redemption forChange of Control) (the ‘‘Put Option’’), the Noteholder must, within the period specified in the Termsand Conditions for the deposit of the relevant Global Note Certificate and put notice, give written noticeof such exercise to the Principal Paying Agent specifying the principal amount of Notes in respect ofwhich the Put Option is being exercised. Any such notice shall be irrevocable and may not bewithdrawn.
Notices: Notwithstanding Condition 15 (Notices), so long as the Global Note Certificate is held onbehalf of Euroclear, Clearstream or any other clearing system (an ‘‘Alternative Clearing System’’),notices to Noteholders represented by the Global Note Certificate may be given by delivery of therelevant notice to Euroclear, Clearstream or (as the case may be) such Alternative Clearing System.
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USE OF PROCEEDS
The gross proceeds from this offering will be U.S.$65.71 million, which, after deducting theunderwriting fees and commissions and other expenses in connection with this offering, will be used bythe Guarantor, the Company or any member of the Group for general corporate purposes.
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EXCHANGE RATE
The PBOC sets and publishes daily a base exchange rate with reference primarily to the supply anddemand of Renminbi with reference to a basket of currencies in the market during the prior day. ThePBOC also takes into account other factors such as general conditions existing in the internationalforeign exchange markets.
Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong dollars and U.S.dollars, has been based on rates set by the PBOC, which are set daily based on the previous day’sinterbank foreign exchange market rates and current exchange rates in the world financial markets. From1994 to July 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars wasgenerally stable. Although PRC governmental policies were introduced in 1996 to reduce restrictions onthe convertibility of Renminbi into foreign currency for current account items, conversion of Renminbiinto foreign exchange for capital items, such as foreign direct investment, loans or securities, requiresthe approval of the SAFE and other relevant authorities. On 21 July 2005, the PRC governmentintroduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuatewithin a regulated band based on market supply and demand and by reference to a basket of currencies.The PRC government has since made and in the future may make further adjustments to the exchangerate system. The PBOC authorised the China Foreign Exchange Trading Centre, effective since 4January 2006, to announce the central parity exchange rate of certain foreign currencies against theRenminbi at 9:15 AM each business day. This rate is set as the central parity for the trading against theRenminbi in the inter-bank foreign exchange spot market and the over the counter exchange rate for thatbusiness day. On 18 May 2007, the PBOC enlarged, effective on 21 May 2007, the floating band for thetrading prices in the inter-bank foreign exchange spot market of Renminbi against the U.S. dollar from0.3 per cent. to 0.5 per cent. around the central parity rate. This allows the Renminbi to fluctuate againstthe U.S. dollar by up to 0.5 per cent. above or below the central parity rate published by the PBOC. On20 June 2010, the PBOC announced that it intended to further reform the Renminbi exchange rateregime by allowing greater flexibility in the Renminbi exchange rate and on 16 April 2012, the bandwas expanded to 1.0 per cent. Such floating band was further enlarged from 1.0 per cent. to 2.0 percent., effective from 17 March 2014, as announced by the PBOC on 15 March 2014. On 11 August2015, the PBOC adjusted the mechanism for market makers to form the central parity rate by requiringthem to consider the closing exchange rate of the last trading date, the supply and demand of foreignexchange and the rate change at primary international currencies. On 11 December 2015, the ChinaForeign Exchange Trade System, a sub-institutional organization of the PBOC, published the CFETSRenminbi exchange rate index for the first time which weighs the Renminbi based on 13 currencies, toguide the market in order to measure the Renminbi exchange rate from a new perspective. The PRCgovernment may in the future make further adjustments to the exchange rate system.
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The following table sets forth the noon buying rates for U.S. dollars in New York City for cabletransfers payable in Renminbi as certified by the Federal Reserve Bank of New York for customspurposes for and as at the periods indicated as set forth in the H.10 statistical release of the FederalReserve Board.
Exchange Rate
Period Period End Average(1) High Low
(RMB per U.S.$1.00)2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.0537 6.1412 6.2438 6.05372014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2046 6.1740 6.2591 6.04022015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4778 6.2896 6.4896 6.18702016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9430 6.6400 6.9580 6.44802017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5063 6.7564 6.9575 6.47732018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8755 6.6079 6.9737 6.26492019
January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6958 6.7863 6.8708 6.6958February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6912 6.7367 6.7907 6.6822March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7112 6.7119 6.7381 6.6916April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7347 6.7161 6.7418 6.6870May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9027 6.8519 6.9182 6.7319June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8650 6.8977 6.9298 6.8510July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8833 6.8775 6.8927 6.8487August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1543 7.0629 7.1628 6.8972September . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1477 7.1137 7.1786 7.0659October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.0379 7.0961 7.1473 7.0379November (through 22 November) . . . . . . . . . . . . 7.0389 7.0168 7.0389 6.9766
Note:
(1) Averages are calculated by averaging the rates on the last business day of each month during the relevant year. Monthlyaverages are calculated by averaging the daily rates during the relevant monthly period.
On 31 December 2018, the noon buying rate for U.S. dollars in New York City for cable transfers inRenminbi was U.S.$1.00 to RMB6.8755 as set forth in the H.10 statistical release of the FederalReserve Board.
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CAPITALISATION AND INDEBTEDNESS OF THE GROUP
The following table sets forth the capitalisation and indebtedness of the Group as at 31 December 2018and as adjusted to give effect to the issue of the Existing Notes and the Further Notes. The followingtable should be read in conjunction with the Group’s financial statements and related notes included inthis Offering Circular.
As at 31 December 2018
Actual Actual As adjusted As adjusted
(RMB inmillions)
(U.S.$ inmillions)(2)
(RMB inmillions)
(U.S.$ inmillions)(2)
Short-term loansPlacements from banks and other financial institutions 3,400.00 494.51 3,400.00 494.51Non-current liabilities due within one year . . . . . . . . 2,848.41 414.28 2,848.41 414.28Long-term loansBonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,366.97 198.82 1,366.97 198.82Existing Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 2,072.34 301.41Further Notes to be issued . . . . . . . . . . . . . . . . . . . – – 451.79 65.71
Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 7,615.38 1,107.61 10,139.51 1,474.73
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000.00 1,745.33 12,000.00 1,745.33Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 3,312.57 481.79 3,312.57 481.79Minority Interests . . . . . . . . . . . . . . . . . . . . . . . . . 885.47 128.79 885.47 128.79Other owner’s equity items(1) . . . . . . . . . . . . . . . . . 3,207.90 466.57 3,207.91 466.57
Total owners’ equity . . . . . . . . . . . . . . . . . . . . . . 19,405.94 2,822.48 19,405.94 2,822.48
Total capitalisation(3) . . . . . . . . . . . . . . . . . . . . . . 27,021.32 3,930.09 29,545.45 4,297.21
Notes:
(1) Other owner’s equity items include capital reserve, other comprehensive income, surplus reserve, and general risk reserve.
(2) For convenience only, all translation from Renminbi into U.S. dollars are made at the rate of RMB6.8755 to U.S.$1.00,based on the noon buying rate as set forth in the H.10 statistical release of the Federal Reserve Bank of New York on 31December 2018. The exchange rate used in preparing the Company’s financial statements may differ from the above.
(3) Total capitalisation equals to the sum of total interest-bearing borrowings and total owner’s equity.
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CAPITALISATION AND INDEBTEDNESS OF THE GUARANTOR GROUP
The following table sets forth the capitalisation and indebtedness of the Guarantor Group as at 31December 2018 and as adjusted to give effect to the issue of the Existing Notes and Further Notes. Thefollowing table should be read in conjunction with the Guarantor Group’s financial statements andrelated notes included in this Offering Circular.
As at 31 December 2018
Actual Actual As adjusted As adjusted
(RMB inmillions)
(U.S.$ inmillions)(1)
(RMB inmillions)
(U.S.$ inmillions)(1)
Short-term borrowingsDebentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,848.41 414.28 2,848.41 414.28Long-term borrowingsDebentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,366.97 198.82 1,366.97 198.82Existing Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 2,072.34 301.41Further Notes to be issued . . . . . . . . . . . . . . . . . . . – – 451.79 65.71
Total borrowings(3) . . . . . . . . . . . . . . . . . . . . . . . 4,215.38 613.10 6,739.51 980.22
Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280.84 40.85 280.84 40.85Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66.86 9.72 66.86 9.72Non-controlling interests . . . . . . . . . . . . . . . . . . . . 5.10 0.74 5.10 0.74
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352.80 51.31 352.80 51.31
Total capitalisation(2) . . . . . . . . . . . . . . . . . . . . . . 4,568.18 664.41 7,092.31 1,031.53
Notes:
(1) For convenience only, all translation from Renminbi into U.S. dollars are made at the rate of RMB6.8755 to U.S.$1.00,based on the noon buying rate as set forth in the H.10 statistical release of the Federal Reserve Bank of New York on 31December 2018. The exchange rate used in preparing the Company’s financial statements may differ from the above.
(2) Total capitalisation equals the sum of total interest-bearing borrowings and total equity.
(3) In May 2019, the Guarantor entered into a loan agreement with KEB Hong Kong Branch in the amount of U.S.$100 million.
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INDUSTRY AND REGULATORY OVERVIEW OF TRUST COMPANIES IN THE PRC
Trust companies in the PRC are currently regulated by the China Banking and Insurance RegulatoryCommission (the ‘‘CBIRC’’). The CBIRC was officially launched and came into operation on 8 April2018 with the aim to deepen the reform and opening-up of the banking and insurance sectors and guidethe two sectors to enhance their efficiency in providing quality services to the real economy in PRC.CBIRC is the successor to the China Banking Regulatory Commission (the ‘‘CBRC’’), the bankingregulatory body in the PRC before the official launch of the CBIRC. Trust companies in the PRC wereapproved and licensed by the CBIRC and as at 31 December 2018, the CBIRC had issued licences to 68trust companies.
Trust companies, together with banks, security companies and insurance companies, are known in thePRC as the ‘‘four pillars’’ of the financial sector. Trust companies play an important part in the overalldevelopment and health of the financial sector in the PRC. According to data from the China TrusteeAssociation, as at 31 December 2018, the total assets under management (‘‘AUM’’) of PRC trustcompanies had exceeded RMB22.70 trillion, second only to wealth management products of banks,while the AUM of PRC trust companies was RMB7.47 trillion as at 30 December 2012. From December2012 to December 2018, the compound annual growth rate (‘‘CAGR’’) of the total AUM of PRC trustcompanies is approximately 20.35 per cent. As at 31 December 2018, the total net assets of trustcompanies in the PRC had reached RMB574.9 billion and the CAGR between December 2012 toDecember 2018 was 18.93 per cent. According to data from the China Trustee Association, as at 31December 2018, the total registered capital of the trust companies in the PRC had reached RMB265.4billion, and the CAGR between December 2012 to December 2018 was 18.06 per cent. From December2012 to December 2018, the proportion of funds trust asset of PRC trust companies allocated to thefundamental industries and real estate sectors decreased by 9.03 percentage points and increased by 4.33percentage points, respectively, while the proportion of funds trust asset of PRC trust companiesallocated to the securities and financial institutions sections increased by 0.04 percentage points and5.78 percentage points, respectively. The profitability of the PRC trust industry had kept increasing from2012 to 2018. From December 2012 to December 2018, the CAGRs of operating income and totalprofits of PRC trust companies were approximately 10.16 per cent. and 8.79 per cent., respectively, andreached RMB63.84 billion and RMB44.14 billion, respectively in December 2018. According to thereport jointly issued by China Construction Bank and Boston Consulting Group on 8 April 2019, thenumber of high net worth individuals, i.e. individuals with investable assets of over RMB6 million, inChina reached approximately 1.67 million in 2018, which had grown at CAGR of 18.00 per cent. since2013.
Business Model
The main business model of trust companies in the PRC is to manage assets as trustees on behalf oftheir clients. Under PRC accounting rules, the assets of trust plans are not on the balance sheet of therelevant trust company acting as the trustee of the trust plan. Compared with other industries in thefinancial sector, trust companies have more flexibility and can design more market-oriented productsthat better cater the needs of clients, including broadening the range of investments, configuring assetallocation and matching risks and rewards. Trust companies in the PRC can also provide estate planningservices for high net worth clients.
The rights of investors under the trust mechanism are also a differentiating factor of the trust companiesin the PRC when compared with other financial institutions. According to the Measures for theAdministration of Trust Companies’ Trust Plans of Assembled Funds (the ‘‘Trust Funds Measures’’)promulgated by the CBRC, trust companies in the PRC only represent their clients in managing theassets and do not have any creditor-debtor relationship with investors. Trust companies in the PRC areprohibited under the above mentioned rule from guaranteeing against any loss, or in anyway promising aminimum return to investors.
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Under the Trust Fund Measures, only qualified investors are allowed to invest in collective trust plans.Qualified investors include (i) individuals or entities that invest in a minimum of RMB1 million in asingle-investor trust plan, (ii) individuals whose family wealth is at least RMB1 million (with proof) atthe time of his or her investment, and (iii) individuals whose annual income is over RMB200,000 in themost recent three years (with proof), or the aggregate income of the individual and his or her spouse isover RMB300,000 in the most recent three years (with proof). In addition, the maximum number ofindividual investors in a collective trust plan cannot exceed 50, excluding those individuals that invest atleast RMB3 million.
Broadly speaking, trust companies in the PRC offer two types of trust plan, namely actively managedtrust plans and passively managed trust plans. The trust business for passively managed trust plans oftenform the transaction management business of trust companies. In the transaction management business,trust companies set up trust plans and take instructions from either financial institutions or corporations,which arrange the underlying investment projects and provide the funding for such projects. The trustcompanies earn a fixed fee to act as trustee and neither participate in the financial rewards nor bear therisks of such investment projects. The sale and marketing of these trust plans are organised by suchinstitutions who arrange the underlying investment and trust companies are not normally involved in thesale or marketing of these passively managed trust plans. Given such transaction management businessinvolves trust companies solely acting as a channel for investment and does not provide any significantvalued-added services, the fee rate trust companies can charge is relatively low. Therefore, thetransaction management business in the PRC has limited prospects and may not be a significantcontributor to the industry’s growth in the future. Trust companies in the PRC are encouraged by theregulators to shift their focus towards actively managed trust business.
In actively managed trust plans, trust companies are more involved in the setup of trust plans and thedesign and sale of investment products to investors. Trust companies are often more actively involved inthe supervision and management of such trust projects and actively monitor the risks associated withsuch investments. Nevertheless, they still do not bear the loss of the investors that invest into such trustprojects so long as they fulfil their duties under the trust agreement entered into between the trustcompanies and the investors. In such agreements, the investors will typically be informed of theinvestment projects and agree that they will bear the risks of making investments into such projects.Because of the opportunity in providing additional value-add services and the additional responsibilityof trust companies in actively managed trust plans, trust companies are often able to charge higher feeswhen compared with passively managed trust plans.
Legal Framework and Regulatory Background to PRC Trust Companies
Laws in the PRC stipulate clear operational qualifications and risk management criteria of trustcompanies. The Trust Law of the PRC was introduced in 2001 and it is supplemented by variousmeasures introduced by the CBRC, including Measures for the Administration of Trust Companies andMeasures for the Administration of Trust Companies’ Trust Plans of Assembled Funds both introducedin 2007, the Measures for the Administration of Net Capital Trust Companies introduced in 2010, theRegulatory Guidance on the Supervision of Rating and Classification of Trust Companies introduced in2010, the Measures for the Administration for Trust Industry Protection Fund introduced in 2014 theImplementation Measures on Administrative Licensing Items for Trust Companies introduced in 2015,the Interim Guidelines on the Ratings of Trust Companies in 2015 and Measures for the Administrationof Trust Registration and its detailed administrative rules, the Detailed Administrative Rules of TrustRegistration by China Trust Registration Co., Ltd. introduced in 2017 and 2018 respectively. Thecurrent regulatory scheme mainly focuses on the regulation of the trust relationship, amendment andtermination of trust plans, the qualification for the establishment of trust companies, the scope ofbusiness of trust companies, capital management, corporate governance, industry ratings and regulatoryratings. Other additional rules in the regime regulate activities in specialised fields, such as security, realestate and bank-trust cooperation.
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Legal Framework
The Trust Law of the PRC sets up the foundation of the trust system in the PRC. The law is aimed tofacilitate the trust industry’s development and protect investors’ interests. The Measures for theAdministration of Trust Companies (No. 2 [2007], CBRC) and the Measures for the Administration ofTrust Companies’ Trust Plans of Assembled Funds (No. 3 [2007], CBRC) were later promulgated on 23January 2007 and came into effect on 1 March 2007, which were later amended on 4 February 2009.The Measures for the Administration of Net Capital of Trust Companies (No. 5 [2010], CBRC) wereadopted by the CBRC in August 2010, requiring trust companies to maintain a minimum net capital ofRMB200 million and a ratio of no less than 40 per cent. of net capital to net assets, and to keepnecessary liquidity to protect them from unforeseen losses that may arise in their various businesses.These three administrative measures, as well as the Trust Law, form the legal cornerstones of the PRCtrust industry.
In December 2014, the CBRC and the Ministry of Finance jointly issued the Measures for theAdministration of Trust Industry Protection Fund (Yin Jian Fa [2014] No. 50), setting up China TrustIndustry Protection Fund Co., Ltd. for the purpose of mitigating and handling systematic risks in thetrust industry in the PRC. This measure is aimed at the long-term healthy development of the PRC trustindustry by establishing an industry-based non-governmental mutual protection fund for the purposes ofresolving and mitigating any potential market risks facing industry participants. According to themeasures, each member trust company is required to contribute based on certain matrices, includingamount of trust assets under management, to China Trust Industry Protection Fund Co., Ltd., which canbe used for the benefit of a member trust company or a particular trust project at the time of distress. Asat 31 December 2018, China Trust Industry Protection Fund Co., Ltd. had a registered capital ofRMB11.5 billion.
In June 2015, the Implementation Measures on Administrative Licensing Items for Trust Companies(No. 5 [2015], CBRC) were issued by the CBRC, which further delegated power to lower level approvalauthority and clarified the requirements for listing of trust companies, as well as issuance of bonds andsubordinated debt by trust companies.
On 16 December 2015, the China Trustee Association issued the Interim Guidelines on the Ratings ofTrust Companies, which assess trust companies based on 11 criteria ranging from their capital strength,risk management capability, value-add capability and social responsibility, to assess and rate trustcompanies’ industry position. Such rating results may affect the regulatory assessment and therefore mayaffect the categorised supervision of various trust companies.
In December 2016, the CBRC issued the Measures for the Supervision and Administration of ChinaTrust Registration Co., Ltd (Yin Jian Fa [2016] No. 54), and in August 2017, the CBRC also issued theMeasures for the Administration of Trust Registration (Yin Jian Fa [2017] No. 47), and in August 2018,the China Trust Registration Co., Ltd. issued the Detailed Administrative Rules of Trust Registration,which was approved by the CBIRC concurrently, and in July 2019, the China Trust Registration Co.,Ltd. issued the Detailed Administrative Rules of Trust Beneficiary Account, which was later approvedby the CBIRC (together the ‘‘Rules on Trust Registration’’). The Rules on Trust Registrationestablished a unified trust registration system in the PRC with the aim to better protect the legal rightsof investors in trust plans established by trust companies in the PRC. China Trust Registration Co., Ltdis tasked with the responsibility for handling the registration of trust plans with details of the relevanttrust company and beneficiaries. All trust plans that are subsisting after 1 July 2018 are required tocomplete the registration. The overall proposed impact of trust registration is to provide investors with ameans to authenticate trust products based on the unique registration number assigned to each trustproduct. In addition, in accordance with the development plan for the registration of trust plans in thePRC, there will be development of functions for the issuance of trust products and the ability to transfertrust beneficiary interests, enabling the issuance of trust products and enhancing the liquidity of trustproducts.
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Policies and Supervision
The CBIRC, previously CBRC, is the regulatory authority in the trust industry. In 2015, the trustsupervision department was separated from the non-banking department of the CBRC during thecommission’s reform, and is responsible for the supervision of trust companies in the PRC. Under thisregulatory regime, each trust company is supervised by the CBIRC’s local branches according to suchcompany’s place of registration.
At the policy level, the CBRC has issued several regulations targeting at businesses such as security,real estate, government-trust cooperation and bank-trust cooperation, with the purpose of introducingtrust funds into the sectors encouraged by the state for development, and increasing the entry barrier fortrust funds to invest in high-risk industries.
In 2014, the CBRC issued the Guiding Opinions of CBRC General Office for Trust Companies on RiskControl (Yin Jian Ban Fa [2014] No. 99). These guiding opinions call for, among other things: (i)cultivating a trust culture in which ‘‘the seller sells in a responsible manner and the buyer buys at his orher own risk’’; (ii) promoting the development of trust companies with business transformation; and (iii)improving the regulatory mechanism, including net capital management and regulatory ratings. Theseguiding opinions aim to reduce risks of trust companies, and facilitate the transformation anddevelopment of trust companies. The Opinions on Further Strengthening Risk Control of TrustCompanies (Yin Jian Ban Fa [2016] No. 58) issued by the CBRC in March 2016 specify the policiesand measures of strengthening the risk control in terms of asset quality management, risk control for keyareas, substantially solving risk related to trust projects, clearing of capital pool, control of leverageratio for structured margin financing and joint strengthening of supervision. Further, pursuant to theGuiding Opinions of the China Banking Regulatory Commission on Risk Prevention and Control of theBanking Industry (Yi Jian Fa [2017] No.6) issued in April 2017, the CBRC requests the bankingfinancial institutions hold firmly onto the bottom line of not triggering systemic risks and effectivelyprevent and resolve acute risks such as, credit risks, liquidity risks, risks relating to bond investmentbusiness, risks relating to interbank business, risks relating to the wealth management and agency salesbusiness, risks in the real estate sector, risks of local government debts and risks relating to Internetfinance.
In September 2014, the State Council published the Opinions on Strengthening the Administration ofLocal Government Debts (Guo Fa [2014] No. 43). These opinions created standard procedures for localgovernments’ debt financing, clarified the responsibilities of debtors and creditors, and encouraged theestablishment of public-private partnerships (‘‘PPP’’) to finance public infrastructure projects, includingrefinancing of current projects. The opinions provide a solid basis for the model of government-trustcooperation.
In order to regulate the activities of financial institutions (including trust companies) in industries withexcess capacity, in the Notice on Strengthening the Guard against Current Major Risks (Yin Jian Fa[2010] No. 98) as issued by the CBRC in November 2010, the CBRC prohibited trust companies fromgranting loans or credit line in any form to those projects with high energy consumption or highpollution, which do not comply with national policies on energy-saving and emission-reduction. Therelevant PRC authorities reiterated this policy in 2014.
The CBRC has issued a series of regulations in relation to the trust companies’ activities in the realestate industry. The Notice on the Relevant Issues concerning Strengthening the Supervision on the RealEstate and Securities Business of the Trust Companies (Yin Jian Ban Fa [2008] No. 265) and the Noticeon the Relevant Issues on Strengthening the Supervision of Trust Companies regarding Real EstateBusiness (Yin Jian Ban Fa [2010] No. 54) imposed limits on trust loans to real estate projects, where thedevelopers do not meet certain qualifications, are not investing sufficient proprietary funds or theprojects are not at the appropriate phase of development.
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The CBRC has also issued regulations to regulate trust companies’ other activities. The Notice on theRelevant Issues on Supporting the Innovation and Development of the Trust Companies (Yin Jian Fa[2009] No. 25) requires that trust assets in equity investments meet certain criteria in corporategovernance, internal controls, risk management, compliance and personnel qualification. The OperatingGuidelines for the Securities Investment Trust Business of Trust Companies (Yin Jian Fa [2009] No.11)issued by the CBRC in January 2009 and the Interim Measures for the Administration of TrustCompanies’ Overseas Financial Management Business (Yin Jian Fa [2007] No.27) issued jointly by theCBRC and the SAFE in March 2007 imposed regulations on the conducts of securities investment trustsand financial management trusts with assets outside the PRC to meet certain requirements in corporategovernance, internal controls, risk management, compliance and personnel qualification. The OperatingGuidelines for the Private Equity Investment Trust Business of Trust Companies (Yin Jian Fa [2008]No.45) require that private trusts that invest equity interest meet certain criteria in risk management,scope of investment, and post investment management.
In December 2017, the CBRC issued the ‘‘Notice on Regulating Bank and Trust Businesses’’ (Yin JianFa (2017) No.55), which placed further restriction on bank and trust companies in conducting co-operations.
In June 2019, the General Office of CBIRC issued the updated version of Notice on Matters related toInvestments made by Insurance Funds into Trust Plans of Assembled Funds (Yin Bao Jian Fa (2019)No.144), which further strengthened the administration on and risk control of investments made byinsurance group (holding) companies, insurance companies and insurance funds management companiesinto the trust plans of assembled funds.
In April 2018, the four ministries of the PRC government, including the PBOC and the CBIRC jointlyissued the ‘‘Guidelines on Regulating the Asset Management Business of Financial Institutions’’ (Yin Fa[2018] No. 106) (the ‘‘New Asset Management Guidelines’’). The aim of the New Asset ManagementGuidelines were to standardize the asset management business of financial institutions and unify thesupervision standards for similar asset management products to effectively prevent and control financialrisks. The New Asset Management Guidelines placed further restrictions prohibiting any form ofguarantee on investment returns and requires implementation of net-value management system.According to the New Asset Management Guidelines, investors of asset management products aredivided into two categories: unspecified public and qualified investors. Qualified investors are naturaland legal persons or other organizations that have the ability to identify risks and bear risks and investin a single asset management product that is not lower than a certain amount and meets the followingconditions: (1) having more than 2 years of investment experience, and meeting one of the followingconditions: home financial net assets of not less than RMB3 million, family financial assets of not lessthan RMB5 million, or the average annual income of not less than RMB400,000 in the past three years,or (2) a corporate entity with a net asset of no less than RMB10 million at the end of the year, or (3) thefinancial regulator otherwise deems as qualified investors. An investment in a single fixed incomeproduct should be not less than RMB300,000, an investment in a single hybrid product should be notless than RMB400,000, and an investment in a single equity product, a single commodity and financialderivatives products should be not less than RMB1 million. Investors may not use assets such as loansand bonds issued to invest in asset management products. In July 2018, the General Office of thePeople’s Bank of China issued the Notice on Further Clarifying the Matters Related to the GuidingOpinions for Regulating Asset Management Business of Financial Institution which placed furtherguidance on issues such as the investment of public offering products, investment in new assets for oldproducts in transition period, valuation, bid back and rectification. In August 2018, the trust departmentof CBIRC issued the Notice on Strengthening the Trust Supervision Works during Transition Period forRegulating the Asset Management Business which placed guidance on many aspects of the assetmanagement business including the macro risk, channel business, family trust business, asset-backedsecurities and stock product extension.
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DESCRIPTION OF THE ISSUER
Formation
Zhongrong International Bond 2019 Limited (the ‘‘Issuer’’) is a limited liability company. It wasincorporated in the British Virgin Islands as a BVI business company on 1st February 2019 inaccordance with the BVI Business Companies Act, 2004, with company number 2005834. Its registeredoffice is at Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, British VirginIslands. The Issuer is a wholly-owned subsidiary of the Guarantor.
Business activity
As of the date of this Offering Circular, the Issuer has not engaged, since its incorporation, in anymaterial activities other than those relating to the issue of the Existing Notes and the proposed issue ofthe Further Notes and the on-lending of the proceeds thereof to the Company and/or its subsidiaries oraffiliates, and the authorisation of documents and agreements referred to in this Offering Circular towhich it is or will be a party.
Directors and officers
The sole director of the Issuer is Xianghui Zhang.
Share capital
The Issuer is authorised to issue a maximum of 50,000 shares with a par value of U.S.$1.00 each of asingle class. As of the date of this Offering Circular, 100 ordinary shares have been issued by the Issuerto its sole shareholder, the Guarantor. No part of the equity securities of the Issuer is listed or dealt inon any stock exchange.
Financial information
Under the laws of the British Virgin Islands, the Issuer is not required to publish interim or annualfinancial statements. As of the date of this Offering Circular, save for the issue of the Existing Notesand the Further Notes and other activities reasonably incidental thereto, the Issuer had no business noassets and therefore, it has not published, and does not propose to publish, any financial statements.
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DESCRIPTION OF THE GUARANTOR GROUP
Overview
Zhongrong International Holdings Limited (the ‘‘Guarantor’’) is an overseas investment holdingplatform of the Company. The Guarantor was incorporated in the British Virgin Islands as a limitedliability company on 12 May 2014 with the company number 1823449. The Guarantor is a wholly-owned subsidiary of the Company. As at 31 December 2018, the issued share capital of the Guarantorwas RMB280.8 million, which has been fully paid up.
As the sole overseas investment platform of the Group, the Guarantor Group has received support fromits parent company in various forms such as capital injection, resource sharing etc.. The Guarantor alsobenefits from the business expansion activities of the Company, receiving client referral and crossselling opportunities. The Guarantor strives to serve as a bridge linking up the markets inside andoutside the PRC for the Group.
The Guarantor Group is principally engaged in investment holding, provision of consultancy andfinancing services, securities and futures trading business and asset management businesses. TheGuarantor Group’s principal businesses can be divided into the following segments:
• Asset management – the Guarantor Group provides a wide range of traditional and non-traditionalasset management products and services, including private funds investing in senior notes, highyield bonds, convertible bonds or private equities.
• Securities – the Guarantor Group provides retail and institutional brokerage, futures and foreignexchange services to investors.
• Bridge loans – the Guarantor Group primarily provides bridge loan services to enterprises inmainland China and outside of China looking to merge or acquire enterprises outside of China.
Its well-established platform provides asset management, securities and bridge loan services along with arange of financial products.
As at 31 December 2018, the Guarantor Group had total assets of RMB4,641 million and total equity ofRMB352.8 million. For the year ended 31 December 2018, the total amount of the Guarantor Group’srevenue, other income and other gain was RMB423.8 million. For details of the Guarantor’s financialinformation, see ‘‘Summary Financial Information of the Guarantor’’ and the Guarantor’s auditedconsolidated financial statements as at and for the year ended 31 December 2018, including the notesthereto, included elsewhere in this Offering Circular.
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Corporate Structure
The following chart sets forth a simplified corporate structure of the Guarantor Group and theGuarantor’s interests in its principal subsidiaries as at 31 December 20181:
Zhongrong International Wealth
Management Limited
Zhongrong International Capital
Management Limited
Zhongrong International Capital
Management (Cayman) Limited
Zhongrong PT Securities Limited
Zhongrong PT Finance Limited
Zhongrong PT Trading Limited
Zhongrong PT Capital Limited
Wealth Pointer Global
Limited (BVI)
Zhongrong International
Bond 2016 Limited
Zhongrong International
Bond 2018 Limited
Zhongrong International
Holdings Limited
Zhongrong International
Growth Fund SPC
Business and Operations
The Guarantor Group conducts its asset management business primarily through Zhongrong InternationalCapital Management Limited and Zhongrong International Capital Management (Cayman) Limited. Itprovides a wide range of traditional and non-traditional asset management products and services,including private funds investing in senior notes, high yield bonds, convertible bonds or private equities.As at 31 December 2018, total assets under management of the Guarantor Group was approximatelyU.S.$224.3 million.
1 The Guarantor Group is in the process of deregistering Zhongrong PT Trading Limited after full payment of the relevantbonds. The deregistration of Zhongrong International Bond 2015 Limited and Zhongrong International Bond 2016 Limitedhas been completed. Zhongrong International Bond 2019 Limited has been incorporated on 1st February 2019.
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As at 31 December 2018, the Guarantor Group manages four products:
• Zhongrong International Growth Fund SPC – Hangtang Wealth Race Fund SP
In December 2015, this fund invested approximately U.S.$100 million to acquire the non-listedequity shares (Preferred Shares) in China Internet Plus Group Holding Limited(新美大)(‘‘ChinaInternet Plus’’). China Internet Plus was listed on the Hong Kong Stock Exchange in September2018 (stock code being 3690.HK). This fund holds approximately 25 million shares of ChinaInternet Plus, which has a market value of approximately U.S.$140 million at the end of 2018.
• Zhongrong International Growth Fund SPC – Zhongrong Pictures Private Equity InvestmentFund SP
In May 2016, this fund invested approximately U.S.$7 million in the convertible bonds issued byJ.Q. Pictures Holdings Limited(嘉映影業).
• Zhongrong International Growth Fund SPC – ZRConcord Healthcare Investment Fund SP
In November 2016, this fund invested approximately U.S.$78 million in the Concord CancerMedical Project(泰和誠腫瘤醫療項目). By the end of 2017, this fund redeemed around U.S.$15million and the AUM of this fund was about U.S.$63 million at the end of 2018.
• Zhongrong International Growth Fund SPC – Zhongrong Auspicious Fund SP1
Phase I of the Zhongrong Auspicious Fund SP1 was set up in October 2017 and Phase II of thisfund was set up in December 2017. This fund raised approximately U.S.$11.11 million. Thesubscription of Phase III of this fund was completed in September 2018 raising around U.S.$3million from new investors. By the end of 2018, in addition to mainly invests in privately-placedfixed income products issued by companies outside the PRC (with particular focus on Hong Konglisted companies) and fixed income securities (such as bonds and preference shares), this fund alsoinvests in some public bond instruments to diversify the risk.
During 2018, despite the poor performance of the overall market, Zhongrong Auspicious Fund SP1 stillmanaged to raise a new phase due to its reputation amongst investors. The Guarantor Group has beencooperating with some funds platform companies which may provide more than 1000 funds to investors.Further, the Guarantor Group has expanded its investment strategy to cover not only private bondsproducts but also public bonds products during the year of 2018. The Guarantor Group will continue itscooperation with securities companies to form a solid base for public bond trading.
Securities
The Guarantor Group conducts its securities business primarily through Zhongrong PT SecuritiesLimited(平和證券). The Guarantor Group completed the acquisition of Peace Town Financial ServicesLimited in January 2017, which was renamed Zhongrong PT Securities Limited. In 2017 and 2018, theGuarantor made further capital injections of approximately HKD61.5 million in aggregate to ZhongrongPT Securities, increasing its equity interest from 90.00 per cent. to 94.81 per cent. as at the date of thisOffering Circular. Zhongrong PT Securities has steadily increased its brokerage business, including theaddition of Taiwan stock trading, third-party stock pledge or custody services.
Zhongrong PT Securities intends to focus on the simultaneous development of its brokerage and fundmanagement business and to promote capital investment projects such as mergers and acquisitionsfinancing, stock pledge financing, private placements for listed companies.
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Bridge Loan
The Guarantor Group conducts its bridge loan business primarily through Zhongrong PT FinanceLimited(中融平和財務有限公司)(‘‘PT Finance’’). It provides short-term financing to PRC companiesmaking investments outside the PRC in foreign currencies. These PRC companies are mainly othersubsidiaries of the Company or clients referred by the Company. Such short-term financing is normallyused to cover the timing and currency differences between the capital raising inside the PRC and thepayment of consideration outside the PRC.
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DESCRIPTION OF THE GROUP
OVERVIEW
The Company is one of the leading trust companies in the PRC. According to data from annual reportsof PRC trust companies, the Company ranked first in terms of operating income and sixth in terms ofnet profit for the year ended 31 December 2018.2
The Company was established in 1987 as Harbin International Trust Investment Co., Ltd. and was re-registered and re-named as Zhongrong International Trust Investment Co., Ltd. in May 2002. In July2007, as required by CBRC’s then newly enacted regulatory measures (CBRC was renamed as CBIRC in2018), the Company was re-registered again and granted a new financial licence and renamed asZhongrong International Trust Co., Ltd..
The Group’s principal business is its trust business which includes the design of asset-specific trustproducts and investment of trust assets in such products. In recent years the Group has expanded intonon-traditional business, including asset management and wealth management. The Group offers a broadrange of investments into diverse sectors and asset classes through innovative structures to a large clientbase. The Group’s client base includes financial institutions, corporations, governments and high-net-worth individuals in the PRC.
The Group’s business can be categorised into three main segments, namely private financing, assetmanagement and wealth management.
Private Financing – The Group’s private financing business primarily involves the investment of its trustassets into various credit-based products. It can be further divided into actively managed trust businessand transaction management business in which the Group plays a more passive role. In the transactionmanagement business, the Group simply acts as a channel for banks and other financial institutions toprovide funding for their intended customers or projects. In the actively managed trust business, theGroup plays an active role in identifying investment projects, designing trust products, and selling trustproducts to investors. The Group’s actively managed trust business includes industrial and commercialenterprise financing, financial products investment, real estate financing and government-trustcooperation.
• Industrial and Commercial Enterprise Financing – mainly provides financing services to industrialcommercial enterprises that either manufacture goods or provide services;
• Financial Products Investment – invests in securities, wealth management products and otherfinancial products issued by banks, insurance companies, securities companies, fund managementcompanies and other financial institutions;
• Real Estate Financing – invests in residential development projects which focus on first andsecond tier cities in the PRC and commercial properties with mature operations and high qualityurban mixed-development projects; and
• Government-Trust Cooperation – cooperates with local governments to invest in local investmentprojects, including local government infrastructure projects.
The Group also invests non-trust assets into credit-based products through its subsidiaries.
2 As at 9 May 2018, all 68 trust companies in the PRC have released their 2018 annual reports on their respective websites.Based on the available data and conventional industry practice, the Company has calculated these results.
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Asset Management – The Group’s asset management business was established in 2015, reflecting theGroup’s shift of focus from traditional private financing business into asset management. The assetmanagement business is mainly focused on investments of both trust assets and third-party non-trustassets in money market funds, equity securities, mergers and acquisitions, private placements and mutualfunds. The asset management business also includes the growing family assets management office.
• Private Equity – offers investments in private equity investment and mergers and acquisitionsopportunities;
• Securities Market Investments – offers a broad range of investment opportunities, includingprivately placed securities and investments through the Group’s QDII scheme;
• Mutual Funds – conducts through Zhongrong Fund Management Co., Ltd. (‘‘Zhongrong Fund’’),which offers mutual fund services approved by CSRC;
• Family Assets Management Office – entrusted by high-net-worth clients to manage family assets ontheir behalf and provide estate planning services; and
• Others –provides related services and offers investments in other diverse fields, including realestate investments and investments in the film production and media industry.
Wealth Management – The wealth management business provides a captive platform for the Group todirectly distribute and sell its financial products and services. This includes the Zhongrong WealthCentre business.
• Zhongrong Wealth Centre – Zhongrong Wealth Centre is a customer support and sourcing centre.Based on the Group’s professional product screening capability and investment advisoryprocedures, the Group is able to provide one-stop services for high-net-worth clients through itsprofessional advisory team.
For the years ended 31 December 2016, 2017 and 2018, the Group’s total operating income wasRMB6,796.6 million, RMB6,534.6 million and RMB5,888.8 million, and the Group’s net profit wasRMB2,704.0 million, RMB2,805.4 million and RMB2,142.2 million, respectively. As at 31 December2016, 2017 and 2018, total assets of the Group were RMB25,651.2 million, RMB28,788.3 million andRMB30,727.4 million, respectively, and the Group’s owners’ equity attributable to the parent companywas RMB13,260.7 million, RMB16,972.3 million and RMB18,520.5 million, respectively. As at 31December 2018, the Company had a registered capital of RMB12 billion. As at 31 December 2018, theGroup had RMB11,500.6 million in cash balance and RMB8,870.9 million invested in highly liquidmoney market funds.
Shareholders
The Company is majority-owned by PRC government-controlled enterprises, which in aggregate control59 per cent. of the Company’s equity interest and have the right to nominate five of the Company’sseven directors under the Company’s constitution.
Jingwei Textile Machinery Co., Ltd. (‘‘Jingwei Textile’’), the Company’s largest shareholder with 37.47per cent. equity interest as at 31 December 2018, is one of the leading textile machinery manufacturersin the PRC. Jingwei Textile is indirectly controlled and supervised by the State-owned AssetsSupervision and Administration Commission of the State Council of the PRC (‘‘SASAC’’), whichcontrols in aggregate 58.32 per cent. of equity interest in Jingwei Textile. Jingwei Textile has developedinto a large high-tech conglomerate, with over 507 patents in textile machinery technology, 8,684 staffand 30 subsidiaries. Jingwei Textile is a leading supplier of high-tech textile equipment and machinery
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in the PRC and its products are well received in the PRC and have been sold to many countries outsidethe PRC. Jingwei Textile also invests in commercial automobiles, medical equipment and agriculturalmachinery. Jingwei Textile is listed on the Shenzhen Stock Exchange (stock code: 000666).
Jingwei Textile acquired 36 per cent. of the Company’s equity in 2010, following which it has madeeight capital injections into the Company, with a total value of over RMB2,813 million. As at 31December 2018, Jingwei Textile holds 37.47 per cent. of the Company’s equity. These capital injectionsdemonstrated Jingwei Textile’s support for the Group.
In March 2018, Jingwei Textile announced its intention to acquire more of the Company’s equity in aproposed deal with Zhongzhi Group (as defined below), the second-largest shareholder of the Company.However, in November 2018, it was announced that the deal will be terminated due to, amongst otherthings, fluctuations in the PRC capital markets.
As its largest shareholder, Jingwei Textile conducts continual supervision of the Group. For example,the Group is required to provide monthly management reports to Jingwei Textile regarding its businessand financial status and to prepare business reviews and business plans on a semi-annual basis. JingweiTextile also sets the annual budgets of the Group on a three-year rolling basis. Jingwei Textile has theright to appoint four of the Company’s seven directors.
Harbin Investment Group Co., Ltd. (the ‘‘Harbin Investment’’), the Company’s third largest shareholderas at 31 December 2018, with 21.5 per cent. equity interest, is wholly owned and supervised by State-owned Assets Supervision and Administration Commission of Harbin (‘‘SASAC of Harbin’’). HarbinInvestment was established in 1988 and is the Harbin Municipal Government’s major project investmentand financing platform. It has the right to appoint one of the Company’s seven directors.
In addition to the Company’s major shareholders who are controlled by the PRC government, anothermajor shareholder of the Company is Zhongzhi Enterprise Group Co., Ltd. (‘‘Zhongzhi Group’’), aprivately-owned group established in 1995 and headquartered in Beijing. Since its establishment,Zhongzhi Group has grown into an integrated financial service provider and asset management companyin the PRC, focussing on investments, financing and fund management. As at 31 December 2018,Zhongzhi Group was the Company’s second largest shareholder with 33.0 per cent. of the Company’sequity interest.
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Organisation
The following chart sets forth a simplified corporate and shareholding structure of the Group and theCompany’s interests in its principal subsidiaries as at 31 December 2018.
100%
State-owned Assets Supervision and Administration Commission
State-owned Assets Supervision and Administration Commission of Harbin Province
Shenyang An Tai Da Commercial Trading Co. Ltd.
Harbin Investment Group Co., Ltd.
Zhongzhi Enterprise Group Co., Ltd.
China National Machinery Industry Corporation Ltd.
100%
China Hi-Tech Group Co., Ltd.
100%(1)
China Textile Machinery (Group) Co., Ltd.
87.57%
China Hi-Tech Holding Co., Ltd.
Jingwei Textile Machinery Co. Ltd.
100%
31.13% 24.49%
2.70%
100%
Zhongrong International Trust Co., Ltd.
(the “Company”)
Zhongrong International Holdings Limited (the “Guarantor”)
Zhongrong International Bond 2019 Limited
(the “Issuer”)
100%
32.99%37.47% 21.54% 8.00%
Onshore
Offshore
Note:
(1) According to the approval of the State-owned Assets Supervision and Administration Commission of the State Council inJune 2017, China Hi-Tech Group Co., Ltd. proposed to be merged into the China National Machinery Industry CorporationLtd. (the ‘‘Merger’’). The Merger is still yet to be completed as at the date of this Offering Circular. The actual controllingentity of the company will be China National Machinery Industry Corporation Ltd.
HISTORY AND DEVELOPMENT
The significant milestones of the Company are as follows:
1987 . . . . . . . . The Company was established as Harbin International Trust Investment Co., Ltd.
2002 . . . . . . . . The Company was re-registered and re-named as Zhongrong International TrustInvestment Co., Ltd.
2004 . . . . . . . . The Company completed two equity transfer deals in succession, upon which theoriginal shareholders, namely SASAC of Harbin and Haci Company Limited,transferred their stakes in the Company to Harbin Economic Development andInvestment Company and Zhongzhi Enterprise Group Co., Ltd.
2006 . . . . . . . . The Group initiated its partnerships with banks and financial institutions to invest ininitial public offering shares
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2007 . . . . . . . . The Company was re-registered and granted a new financial licence and renamed asZhongrong International Trust Co., Ltd.
2008 . . . . . . . . The Company’s headquarters were relocated from Harbin to Beijing. The Groupstarted to provide trust financing for local government projects.
2009 . . . . . . . . Trust assets under management first surpassed RMB100 billion.
2010 . . . . . . . . Jingwei Textile acquired 36 per cent. equity interest of the Company from ZhongzhiEnterprise Group Co., Ltd. and became the Company’s largest shareholder and theregistered capital of the Company also increased from RMB325 million to RMB580million. The Group started to provide trust financing for real estate projects.
2011 . . . . . . . . The Company’s registered capital increased from RMB580 million to RMB1,475million. The Company was approved by CBRC (renamed to CBIRC in 2018) toestablish a specialised private equity investment subsidiary.
2012 . . . . . . . . The Company received its stock index future trading business licence and thespecial-purpose trustee organisation licence in the PRC. The Company establishedBeijing Zhongrong Dingxin Investment Management Co., Ltd. (‘‘ZhongrongDingxin’’) as its specialised private equity investment subsidiary.
The Company’s registered capital increased from RMB1,475 million to RMB1.6billion pursuant to capital injection from its shareholders.
2013 . . . . . . . . The Company established Zhongrong Fund Management Co., Ltd (formerly namedDaofu Fund Management Co., Ltd).
2014 . . . . . . . . The Company’s registered capital increased to RMB6 billion by way of transfer ofretained earnings to share capital.
CBRC (renamed to CBIRC in 2018) approved the Company’s proposal to offerfinancial planning products investing in assets outside the PRC under the QDIIscheme.
The Company established the Guarantor. The Group started its asset managementbusiness.
The Company became a founding member of the China Trust Industry ProtectionFund Co., Ltd. which the CBRC (renamed to CBIRC in 2018) had given directionsto the China Trustee Association to establish with the aim to promote bettermanagement and detection of risks in the industry.
2015 . . . . . . . . China Trust Industry Protection Fund Co., Ltd. was formally established in early2015. The Company played an important role in its establishment and contributedshare capital of RMB1.5 billion, resulting in a 13.04 per cent. shareholding, plus theright to appoint one director to the board of the China Trust Industry Protection FundCo., Ltd.
Zhongrong International Capital Management Limited was granted type 4 and type 9licences by the Securities and Futures Commission in Hong Kong (SFC) to provideasset management and securities advisory services.
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In March and July of 2015, the Company provided two capital injections intoZhongrong Fund, valued at around RMB102 million and RMB128 millionrespectively.
2016 . . . . . . . . The Company invested RMB100 million in China Trust Registration Co., Ltd.,resulting in a 3.3 per cent shareholding.
The Company acquired a 9.9 per cent. shareholding in Harbin Rural CommercialBank Co., Ltd. through an investment of RMB277.2 million.
2017 . . . . . . . . The Company’s registered capital increased from RMB6 billion to RMB12 billionfollowing three capital injections from its shareholders.
2018 . . . . . . . . In March 2018, Jingwei Textile announced its intention to acquire more of theCompany’s equity in a proposed deal with Zhongzhi Enterprise Group Co., Ltd, thesecond-largest shareholder of the Company. However, in November 2018, it wasannounced that the deal will be terminated due to, amongst other things, fluctuationsin the PRC capital markets.
AWARDS AND HONOURS
In recognition of its achievements, the Company has received numerous awards and honours, includingthe following:
• Outstanding ABS Issuer and Outstanding Asset Management Agency at the 2018 ChinaOutstanding Bond Market Members and Outstanding Issuers Awards organised by Central ChinaTreasury Debt Settlement Co., Ltd.
• Brand Trust Agency of the Year at the 2018 Jinchan Brand Trust Company Awards by ChinaTimes
• Trustworthy Trust Agency at the 2018 Trustworthy Financial Agencies Awards by the EconomicObserver
• Pioneer Brand of the Financial Industry at the 2018 International Pioneer Financial InstitutionsSummit and Award Ceremony
• Outstanding Company at the 11th Chengxintuo Awards by Shanghai Securities News
• Best Risk Management Trust Company of the Year by Financial Times
• Outstanding ABS Issuer and Outstanding Asset Management Agency at the 2017 OutstandingMembers of China Bond organised by Central China Treasury Debt Settlement Co., Ltd.
• Best Wealth Management Company of the Year at the 2017 China Financial Institutions Gold ListAwards by Financial Times
• Excellent Asset Management Trust Company at the 8th Jinding Awards in 2017 by DailyEconomic News
• Best Wealth Management Trust Company at the 2016 China Financial Institutions Gold ListAwards by Financial Times
• Outstanding Issuer at the 2016 China Outstanding Bond Market Member Awards hosted by CentralChina Debt Registration & Settlement Co., Ltd.
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• Special Award in the Settlement – Trust Fund Institution category at the Selection of ClearingBusiness and Clearance Agency for Registered Trusteeship Settlement Business by the InterbankClearing House
STRENGTHS
The Group believes the following strengths have contributed to the development of the Group as aleader in the PRC trust industry, and is expected to continue to propel its future development:
A leading position in the fast growing PRC trust industry
The trust industry is a fast growing industry in the PRC and the Company has consistently ranked asone of the leading companies in the PRC trust industry. According to data from annual reports of PRCtrust companies, the Company ranked first in terms of operating income and sixth in terms of net profitfor the year ended 31 December 20183.
After experiencing a period of high growth in the last five years, the PRC trust industry has encountereda slow year in 2018. According to data released by China Trustee Association, as at 31th December2018, assets under management, operating income and total profit of the PRC trust industry decreased13.50 per cent., 4.20 per cent. and 11.20 per cent. year over year, respectively. The total assets undermanagement by the PRC trust industry had exceeded RMB22 trillion, second only to banks’ wealthmanagement products.
The trust industry is evolving towards the asset management and wealth management business to betteraddress the needs of institutions and high-net-worth individual investors, which, together with thereforms and regulations introduced by the PRC government, is likely to further drive development of thePRC trust industry. The PRC government has introduced supply-side reform measures which will giverise to business opportunities for trust companies in corporate re-organisations and participation in thecapital markets, mergers and acquisitions funds and industry-specific funds. There are also opportunitiesfor trust companies to participate in the reform of PRC state-owned enterprises, such as the introductionof mixed ownership. The Group, with a leading position in the trust industry, is well positioned tobenefit from the growth of the industry.
Diversified products with a focus on active management capabilities
The Group has a strong base of trust businesses with a diverse array of trust products, especially thosewhich require active investment and management.
As trust companies can only provide limited value-add and charge a low fee for transaction managementbusiness, the Group has been focusing on actively managed business, asset management as well aswealth management. The Group’s strong capability in active management businesses is evidenced by theGroup’s lower than industry average of single-investor trust plans, many of which are established fortransaction management business. For the years ended 2016 to 2018, the proportion of single-investortrust plans of the Group was approximately 19.06 per cent., as compared to the industry average ofapproximately 44.31 per cent. On the other hand, 69.15 per cent. of the Group’s trust plans arecollective trust plans, most of which are actively managed plans, as compared to the industry average ofapproximately 39.93 per cent. Particularly, the Group has been expanding its business in assetmanagement and wealth management, including the establishment of Beijing Zhongrong DingxinInvestment Management Co., Ltd. as a private equity fund company, the establishment of ZhongrongFund as a mutual fund company and the establishment of Zhongrong Wealth Centre as a wealthmanagement brand, which greatly diversified its product offerings and revenue sources. To supportbusiness development in these specialised areas, the Group has established specific divisions to developand monitor each of the new business segments and dedicated various teams to cater to its clients’ needs
3 As at 9 May 2018, all 68 trust companies in the PRC have released their 2018 annual reports on their respective websites.Based on the available data and conventional industry practice, the Company has calculated these results.
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across a wide range of financial services. The Group’s operating income from asset management andwealth management was RMB3,537.1 million in 2016, RMB3,513.5 million in 2017 and RMB3,030.65million in 2018, accounting for 52.04 per cent., 53.78 per cent. and 51.46 per cent, respectively, of theGroup’s total operating income in the corresponding periods.
The Group maintains a high level of professionalism in the selection and management of projects andthe structuring of the Group’s trust plans. For example, the Group has professional teams that utilisebonds, equity and mezzanine financing to tap the full potential of the market. The Group alsoestablished a special real estate business supervisory department that systematically organises on-sitesupervision for project progress and follow-ups, as well as monitors and controls the corresponding risksthrough measures such as on-site inspections, budget control supervision and comprehensive jointmanagement to ensure timely delivery of real estate projects and safe exit of real estate investments.
An expanding national network and diverse client base
The Group’s investment business covers a wide range of industries ranging from real estate, securities,consumption, health and information technology. The wide range of the Group’s investment businessesallows the Group to enjoy significant synergies and capture business opportunities in different businesssegments. For example, the Group’s various business segments share a large and diverse client base,which creates cross-selling opportunities amongst different business segments.
The Group has a captive wealth management sales network, covering over 30 major cities in the PRC.The Group’s sales force for wealth management products had increased from 915 people as at 31December 2016 to 1074 people as at 31 December 2017 and further to 1346 people as at 31 December2018. The Group’s sales team members are experienced and qualified to sell a variety of financialproducts. A majority of the Group’s sales personnel have sales experience from banks, insurancecompanies, securities and future firms, trust companies and other financial institutions. The Group hasalso established a subsidiary and made investments in Hong Kong.
The Group benefits from a large and diverse client base. As at 31 December 2018, the Group had over25,000 individual clients and around 1,300 institutional clients in its trust business spreading throughoutmajor cities and regions in the PRC. Large single investments, each with value over RMB30 million,accounted for about 3 per cent. of trust investments with the Group.
The Group is implementing further development of its distribution channels with a special focus ongrowing its direct sales channels. For the year ended 31 December 2018, approximately 99 per cent. ofthe Group’s products were sold through its direct sales channels. Apart from cooperation with otherfinancial institutions, the Group expects to increase the direct selling of its products to gain bettercontrol of its product distribution networks.
In September 2017, the Group opened a nationwide customer service line beginning with the numbers95 – 95037, becoming the first trust company in the PRC to receive this. From September 2017 to 31December 2018, this line receiving approximately 95037 customers calls on various customer supportqueries. The rate of connected calls was approximately 93.42 per cent., above the industry standard of85 per cent., Customer satisfaction rate was as high as 98.89 per cent.
The Zhongrong Client Wealth app was officially launched in January 2018 to provide customers withproduct screening, asset enquiries, remote video interviews and news alert facilities. At the same time,the app has additional features such as financial headlines, livestreams and activity hub to provideclients with added services.
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Strong support from the Company’s shareholders
The Company has received strong support from its major shareholders. Its largest shareholder, JingweiTextile, and third largest shareholder, Harbin Investment, are PRC government-controlled entities.Together they have the right to nominate five of the seven directors on the Company’s board of directors(the ‘‘Board’’), and they constantly monitor the Company’s operations and financials, enabling theCompany to avoid risks often associated with private enterprises. The Company’s second largestshareholder, Zhongzhi Group, is a privately-owned large-scale asset manager and financial servicesprovider. In addition, the Company’s shareholders have been a major source for its capital increasesthrough capital injections. The Company’s registered capital has increased from RMB6 billion as at 31December 2016 to RMB 12 billion as at 31 December 2018.
Market-oriented culture, partnership model and high degree of autonomy of the management
The Group has a market oriented corporate culture, and the Group’s management enjoys a high degreeof autonomy, which enables the Group to respond quickly to changing regulatory policies and marketconditions. This high level of flexibility and operational efficiency give the Group first-moveradvantages in many new market opportunities.
The Group has operated a partnership model for its business teams, which applies a market-orientedrisk- and reward-sharing mechanism in order to enhance the sense of responsibility, risk awareness andloyalty of its employees. The business departments of the Group are organised into teams led bypartners which enjoys operational and financial independence, except that the approval of any projectshas to follow the Group’s unified standards. Teams are rewarded based on the success of their businessprojects, which incentivises business teams to maximise business development opportunities. Toeffectively control aggressive risk taking by such business teams, the Company defers payment of asubstantial portion of their remuneration and compensation until the completion of their projects, therebyaligning personal interests of the business teams with successful completion of their projects. Inaddition, the Group established effective resource and risk sharing mechanisms where a portion of theoperating income is set aside as reserves to cover potential losses.
The Group has been able to adjust its businesses by closely following economic developments andopportunities in the market. The Company was one of the first trust companies in the PRC trust industryto diversify from its traditional core of private financing trust plans to provide a range of other financialand investment products and services such as asset management and private wealth management, whichenabled it to adapt to changes in the industry and diversify risks. The Company was also granted thespecial-purpose trustee organisation licence in 2012, which allows it to develop its securitisationbusiness. The Company has successfully established a number of asset securitisation programmes in co-operation with financial institutions such as China Huarong Asset Management Co., Ltd, Baoshang BankCo., Ltd., Jincheng Bank Co. Ltd., WeBank and China CITIC Bank. In November 2018, the Companyobtained the qualification for underwriting debt financing instruments of non-financial enterprises.
Sound risk management and strong liquid asset base
The Group has sound risk management systems and a strong liquid asset base. The Group’s capitaladequacy is strong, with its proprietary business assets mainly invested in highly liquid assets. As at 31December 2018, the Group had RMB11,500.6 million in cash balance and RMB8,870.9 million investedin highly liquid money market funds, together these highly liquid assets accounted for 66.3 per cent. oftotal proprietary assets of the Group. In addition, the Group has established reserve funds to cover forcontingent risks. These reserve funds include the trust compensation reserve fund, established inaccordance with the Measures for the Administration of Trust Companies.
The Group has established a sound risk management system and is dedicated to continued improvementof its risk management system. The Group enacted risk management policies and established differentcommittees within its organisational structure to manage risks. The Group limits its exposure to highrisk industries, such as those with overcapacity issues, and since the second half of 2014, has reduced its
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exposure to the real estate industry. At the level of the Board, the Company has established an audit andrisk management committee responsible for forecasting and monitoring risks in its business, supervisingthe effectiveness of internal and external audits and examining major compliance issues. On themanagement level, the Company has set up a trust business committee and a proprietary businesscommittee which are responsible for the collective review and approval of key investment and financingprojects in the trust and proprietary business based on prudent analysis and assessment of project risks.
The Company has five departments with risk management functions responsible for research,investigation, analysis and monitor of the risk elements involved in its investment projects. As at 31December 2018, approximately 182 employees of the Company were in risk management functions. TheCompany believes it has a leading status amongst the PRC trust companies in terms of the number ofrisk management staff.
In addition, in assessing the remuneration of senior management and some middle-level managers, theCompany takes into account of compliance and risk management indicators, and part of suchremuneration is paid on a deferred basis, which links remuneration with risk-management.
Experienced management team, supported by high quality and motivated employees
The Group’s senior management team is very experienced. On average, the Group’s senior managementteam has 15 years of experience in the finance industry. The appointments to the Group’s seniormanagement team need to be approved by CBIRC. The Group’s employees are professional and well-educated. As at 31 December 2018, the Group had 7 employees with doctorates, 559 with masters and1435 with bachelors, who in aggregate accounted for over 90.63 per cent. of its total employees. TheGroup hires graduates from top universities and also provides comprehensive and systematic training fornew hires and offers them a broad development platform.
The Group encourages the cooperation of frontline and back-office employees in developing newinvestment products with innovative product structural designs, so that they can capture new businessopportunities identified by the client-facing business units and at the same time address the practicalconcerns identified by supporting and risk management departments. The Group applies a market-oriented risk and reward-sharing mechanism, which further incentivises the innovation of its employeesin developing new business projects.
The Group intends to maintain effective incentive mechanism for employees to attract talentedemployees, and aims to create a team of people-oriented, diligent and creative employees.
STRATEGIES
The Group’s aim is to become a leading composite asset management group in the PRC with presence ininternational markets. While the Group is likely to remain in the transaction management business in theforeseeable future for the purposes of maintaining relationships, the Group intends to focus more togrowing its actively-managed trust business, asset management and wealth management businesses. TheGroup intends to achieve this by focusing on client services and capturing the right marketopportunities. Below are the specific strategies pertaining to each main business segment.
Private Financing Business
The Group intends to continue to develop its traditional trust business and explore opportunities fordevelopment in real estate financing, cooperation with local governments and stock-pledged financing.The Group intends to expand its high-value added businesses, including asset securitisation. The Groupalso plans to focus on its core and loyal customers and provide comprehensive and professionalfinancing solutions for them.
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The Group plans to fully establish its front office teams to be more influential in the market. The Groupaims to comprehensively strengthen its ability to source assets, serve institutional clients and managerisks. The Group expects the private financing team to work together with the asset management team tobetter serve clients. In the transaction management business, the Group expects to strictly comply withregulatory requirements. In asset securitisation, the Group intends to maintain strong workingrelationships with a number of prominent financial institutions and to expand its market share. Thefocus of the Group’s private financing business is to further cooperate with local government authorities,to participate in opportunities arising from the reform of state-owned enterprises, to explore investmentopportunities in the international markets based on clients’ demands and to advise on refinancing,mergers and acquisitions, and privatisation for listed companies.
Asset Management Business
The Group is focused on expanding its investment funds, offshore investment funds and hedge funds.The Group has established a number of alternative asset management companies to co-develop assetmanagement business with the Group. The Group fully seizes and plans to further explore opportunitiesin capital markets to offer its customers with a wider range of high quality investment products. TheGroup’s asset management business is also aiming to expand into managing private equity investmentand government-led funds. The Group aims to recruit highly talented people, build up its investmentcapabilities and improve its operational efficiency. The Group plans to invest in its brand and expandthe market influence and reputation of its asset management business. The Group aims to build up thecapabilities of its asset management business to provide more sophisticated services to its assetmanagement clients.
The Group is concurrently expanding overseas to improve its overseas asset selection capability andincrease cooperation of the Group’s subsidiaries both within and outside the PRC. The Group wants tosatisfy the needs of global asset allocation of its high-net-worth clients. To achieve this, the Groupintends to continue to invest in and expand its Hong Kong platform, and to expand its QDII scheme,which is an important entry point for the Group’s overseas expansion.
The Group aims to make Zhongrong Fund a leading PRC mutual fund company, by improving itsproduct mix, enhancing its sales network and investing in employees’ training program. The Groupplans to further improve Zhongrong Fund’s product portfolio to cover various types of mainstreammutual funds and advance its development of new products such as segregated accounts. The Group alsointends to deepen Zhongrong Fund’s cooperation with major banks and other financial institutions, andstrengthen its resale channels for mutual fund products.
Wealth Management Business
The Group plans to continue to develop its private wealth management business by investing in its staffand increasing the professional standards of its employees. The Group encourages staff members toactively explore opportunities in the market to create value for its customers, which is aligned with theGroup’s plan to provide one-stop services to its customers and provide the highest standards of customerservice. The Group also plans to invest in technology to enhance provision of services to its clients bybuilding internet and mobile tools to supplement its offline sales force to provide better service to itscustomers. The Group intends to build an open platform for investment products and to centrally procurefinancial products to be sold on such platform to enable the Group to have standardised risk control andpricing and to increase its bargaining power. In order to strengthen the Group’s sales capability and tooptimise the costs of its products, the Group will actively promote its direct sales channels, and havewealth management client relationship managers stationed across over 30 major cities in the PRC. TheGroup aims to centralise the customer relationship management, to improve its client communicationand to provide a better service experience for its clients in the wealth management business.
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BUSINESS OF THE GROUP
The Group’s trust business offers a wide range of high quality and innovative products and services thatenable investors to participate in integration and restructuring opportunities. As at 31 December 2018,the Group’s trust AUM was approximately RMB654.66 billion, which was managed through 708 trustprojects, and it had over 25,000 individual clients and approximately 1,300 institutional clients in itstrust business. In addition, the Group has expanded into non-trust businesses, including assetmanagement and wealth management.
Business Segments
The Group’s business can be divided into four main segments, namely private financing, assetmanagement, mutual funds and wealth management. In addition, the Group receives other operatingincome mainly from proprietary investment activities. The business of the Group encompasses a rangeof investment and financial management activities, including both trust and non-trust businesses. TheGroup’s non-trust business is conducted through its subsidiaries.
The tables below show the amount of assets under management and operating income of the Group bythe three main business segments. The assets under management indicated below include both trustassets and non-trust assets.
As at 31 December
Assets Under Management 2016 2017 2018
(RMB in millions)Private Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473,043.13 493,886.67 527,567.52Asset Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359,790.09 315,104.55 248,709.59
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 832,833.22 808,991.23 776,277.12
For the year ended 31 December
Operating Income 2016 2017 2018
(RMB in millions)Private Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,903.66 2,477.23 2,422.68Asset Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,401.83 2,406.95 1,558.42Wealth Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,135.32 1,106.52 1,472.23Others (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355.74 542.30 435.52
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,796.55 6,533.00 5,888.84
Note:
(1) The Group’s other business income mainly includes its own capital interest income and long-term equity investment income.
Private Financing Business
The private financing business focuses mainly on offering credit-based products to clients. Onlyqualified investors under Trust Funds Measures are allowed to invest in the Group’s collective trustplans. See the section headed ‘‘Industry and Regulatory Overview of Trust Companies in the PRC –
Business Model.’’ The Group also provides consultation services to its clients in relation to theirinvestments.
Investors in the Group’s private financing trust plans are generally provided information of the projectsthat the trust assets will be invested in, the duration of the trust plan and an estimated rate of return, butthe Group does not guarantee such rate of return, nor will the Group guarantee the safety of investedtrust assets. See the section headed ‘‘Industry and Regulatory Overview of Trust Companies in the PRC– Business Model.’’ If the invested projects fail to generate sufficient cash flow to satisfy the repaymentof the trust assets and the estimated return at the expiration of the original trust plan, it will often beextended, either automatically or upon meeting the stipulated conditions in the trust agreement, forexample, a resolution passed at the meeting of beneficial interest holders. During the extension period,
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the Group will work closely with the borrower to generate additional cash flow from the investedprojects, including the sale of such projects to third parties in order to return the trust assets plus theexpected return to the investors.
The Group’s private financing business can be further divided into transaction management, industrialand commercial enterprise financing, financial product investment, real estate financing, government-trust cooperation and consumer financing businesses.
The tables below show the amount of assets under management and the operating income of the privatefinancing business as at and for the years ended and as at 31 December 2016, 2017 and 2018,respectively.
As at 31 December
Assets Under Management Private Financing Business 2016 2017 2018
(RMB in millions)Transaction management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317,058.05 355,624.62 323,709.69Industrial and Commercial Enterprise Financing. . . . . . . . . . . . . . . . . . 113,023.06 107,440.80 147,051.68Financial Products Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,179.81 333.00 04
Real Estate Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,363.63 28,446.35 54,172.56Government-Trust Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,418.57 109.65 47.22Consumer Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 1,932.26 2,586.38
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473,043.13 493,886.67 527,567.52
For the year ended 31 December
Operating Income Private Financing Business 2016 2017 2018
(RMB in millions)Transaction management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579.96 379.84 353.15Industrial and Commercial Enterprise Financing. . . . . . . . . . . . . . . . . . 1,222.76 1,074.93 1,063.95Financial Products Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.88 0.68 –
Real Estate Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 973.97 951.67 980.77Government-Trust Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126.09 36.65 2.25Consumer Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 33.46 22.56
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,903.66 2,477.23 2,422.68
Transaction Management Business
In the transaction management business, the Group sets up trust plans and takes instructions frommainly banks and other financial institutions who arrange the underlying investment projects and alsoprovide funding for such projects. The Group plays a passive role in the management of the trust plans.The transaction management business is characterised by high-volume, low margins and low risks ascompared with other trust plans. The Group earns a relatively low commission as a percentage of thetotal assets under management.
Given the low value-add and low fees from the transaction management business, the transactionmanagement business may not be a significant contributor to the growth of the Group in the future.However, the Group will remain in the transaction management business for the purpose of maintaininggood working relationship with the banks and other financial institutions.
Industrial and Commercial Enterprise Financing
The industrial and commercial enterprise financing business mainly provides financing services to alarge number of industrial and commercial enterprises which manufacture goods and provide services.The Group lends funds raised from trust plans to such companies to support their business operations orcapital investments, and often takes assets with a much higher value owned by these companies or theirmajor shareholders as collateral or require such parties to provide guarantees. Common collateralpackages include mortgage, pledge and guarantees and a sufficient buffer relative to the project is
4 Due to classification adjustment, the previous investments made under the Financial Products Investment has been furtherdivided into other categories.
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usually applied. In many cases, the Group also takes equity interests in the project companies to provideadditional security for the trust money invested in such companies, where the original owner of theproject company has the right to purchase back such equity interest at an agreed price with the Groupafter certain conditions are met. An example of the Group’s financing to industrial and commercialenterprises is the Value Condensation No. 20 Fund established in October 2018 with an AUM ofRMB250 million. This fund issues trust loans to Shenzhen Qianhai Yu-commerce Co., Ltd. tosupplement its daily operating working capital. The fund provides financing for small to mediumenterprises relying on the profound industrial background and resources of its parent company, EternalAsia Supply Chain Management Ltd.
The Group also provides stock-pledged financing services, which establish trusts plans that invest inloans backed by stocks or other securities traded on the secondary market as collateral. The Group hasestablished risk management mechanisms including daily mark-to-market system, operational alerts andstop-loss mechanism. The Group will conduct the unwinding operation when the pledged shares fallbelow the stop-loss threshold. The Group can also require the borrower to top up funds or shares whenthe value of pledged shares falls below certain level.
The Group focuses on providing financing services to industrial and commercial enterprises with goodcredit history and a strong ability to repay its debts. The Group has established policies that clearly setout operating standards of providing financing services to industrial and commercial enterprises. TheGroup’s policy is against making investments in industries that involve high pollution, high energyconsumption and excess capacity, but encourage investments in energy saving, environmental protectionand clean energy industries.
At 31 December 2018, the Group remains invested in 139 industrial and commercial enterprise financingprojects. As at 31 December 2018, the AUM of industrial and commercial enterprise financing businessamounted to approximately RMB147.05 billion, around 18.94 per cent. of the Group’s total AUM. Theratio of the industrial and commercial enterprise financing business AUM, as a percentage of theGroup’s total AUM, decreased by 36.87 per cent. in 2018.
Financial Products Investment
The Group establishes trust plans to invest in income generating financial products, including trustplans, wealth management products and other financial products issued by banks, insurance companies,securities companies, fund management companies, trust companies and other financial institutions.
The Group has cooperated and maintained good working relationships with many key banks in the PRC,including major state-owned commercial banks, joint-stock banks, city commercial banks and ruralcommercial banks, as well as other financial institutions. The Group has benefited from theserelationships in terms of its increased access to businesses, widened investment scope and better riskmanagement.
Real Estate Financing
The Group establishes trust plans to invest in residential development projects focused on first andsecond tier cities in the PRC, commercial properties with mature operations, and high quality urbanmixed-development projects. As at 31 December 2018, the Group remains invested in 65 real estatefinancing projects. As at 31 December 2018, the AUM of real estate projects in first and second tiercities in the PRC amounted to 39.04 per cent. and 40.43 per cent. of the total real estate projects,respectively. At 31 December 2018, AUM of real estate financing business amounted to approximatelyRMB65.90 billion, around 8.49 per cent. of the Group’s total AUM.
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The Group officially launched its real estate trust business in 2010. Through investments in andmanagement of projects, the Group has accumulated significant experience in areas including selectinginvestment and financing projects, designing trust plans, managing projects and controlling risks. TheGroup established professional teams to explore and utilise the full potential of the real estate businesswith capital market tools such as bonds, equity and mezzanine financing.
As with industrial and commercial enterprises financing, the Group generally takes a number ofmeasures to safeguard the security of the trust assets invested in real estate projects, including obtainingownership interest of project companies while giving original owners the right to buy back such interestat agreed prices, taking security interest in the land and buildings under the project company, and/orrequiring original owners pledge their shares in the project company or guarantee the repayment of theinvestment in accordance to the agreed terms.
The Group has set up a real estate creditor department under the operation management centre and isresponsible for the supervision of real estate financing projects, which dispatches on-site supervisors tofollow up on the progress of the projects. The department is also responsible for monitoring andcontrolling the corresponding risks through measures such as on-site inspections, budget controlsupervision and comprehensive joint management to ensure repayment of trust assets from theseprojects.
The Group has started to tighten its screening of traditional real estate financing projects since thesecond half of 2014 by prioritising the projects in first tier cities in the PRC with good quality, adequatemargin of safety and sufficient profit headroom.
Government-Trust Cooperation
The Group cooperates with local governments to help them with financing and investment needs,including financing for local government infrastructure projects. In addition to cash flows generatedfrom the projects, repayments of the trust loans are usually guaranteed by the local governments. TheGroup’s government-trust cooperation projects have a relatively short maturity profile. At 31 December2018, AUM of government-trust cooperation business amounted to approximately RMB47.22 million,around 0.01 per cent. of the Group’s total AUM. In 2018, the ratio of government-trust cooperationbusiness AUM, as a percentage of the Group’s total AUM, experienced a reduction of 59.64 per cent. Asat 31 December 2018, the Group remains interested in one government-trust cooperation projects whichwill be completed by 2018. The government-trust cooperation projects of the Group are mainlyconducted through trust plans and provide trust funds for large scale infrastructure projects, includingmunicipal works, public facilities, water system, road and transportation system, to energy andtelecommunication. The Group has been continually improving its government-trust cooperationfranchise, both in terms of project structuring and later-phase operation management, and hasaccumulated substantial investment expertise in this segment.
Consumer Finance
The Group is working in partnership with several well-known e-commerce platforms, and through theconsumer finance business model, the Group is able to provide comprehensive financial services tosmall enterprises and online customers.
To meet business operations and compliance requirements, the Group implemented the development of aconsumer finance system known as the ‘‘Shepherd Dog’’. This system allows the storing and mining ofconsumer credit data, bulk lending and systemic risk control functions. Through the ‘‘Shepherd Dog’’system, the Group commenced a series of Dinggua Projects. The first phase of the Zhongrong-Dingguaseries of collection trust project was established on 28 April 2017. The total loan amount provided tosmall enterprises and online customers is no more than RMB10 billion on a non-commitment basis, for aterm of no more than 12 months. The funds are made available to Home Credit Group, with HomeCredit Group CFC subsequently providing loans to its borrowers throughout China. In return for the
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loans made to the borrowers, Home Credit Group CFC obtains security over these loans which is thenpledged to the Group. The Group receives interest payments from Home Credit Group CFC prior to therepayment of the full loan amount.
Asset Management Business
The Group’s asset management business is a relatively new business established in recent years,reflecting the Group’s effort to broadening its product offering from traditional private financingbusiness. The asset management business is mainly focused on investment in equity securities, mergersand acquisitions, private placements and mutual funds. The Group does not provide an estimated returnto its investors in its asset management business. The Group typically charges a fixed management feeas a percentage of the assets under management. Other than management fees, the Group also chargesperformance-based fees, which are linked to the investment return.
The tables below show assets under management and operating income of the asset managementbusiness as at and for the years ended 31 December 2016, 2017 and 2018, respectively.
As at 31 December
Assets Under Management Asset Management Business 2016 2017 2018
(RMB in millions)Private Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,598.28 60,966.44 62,225.76Securities Market Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,203.71 136,806.92 97,329.71Public Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,522.41 70,621.85 72,567.16Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,465.68 46,709.34 16,586.97
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359,790.09 315,104.55 248,709.59
For the year ended 31 December
Operating Income Asset Management Business 2016 2017 2018
(RMB in millions)Private Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540.69 1,103.22 258.02Securities Market Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658.06 377.00 544.51Public Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202.19 245.07 189.73Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000.88 681.65 566.17
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,401.83 2,406.95 1,558.42
Real Estate Urbanisation
The Group insists on providing reasonable and affordable financing plans on urban construction projectsthat meets housing policy requirements. The Group supports the development and construction of‘‘build-to-rent’’ and joint-name properties, and does not advocate the purchase of property by buyerssolely to make a profit. Further, the Group actively participates in urban renovation projects byinfluencing the importance of the property market, assisting in the transformation and upgrading of theurban area.
The Group establishes trust plans that offer equity investment opportunities in residential andcommercial properties in major cities in the PRC. The Group prefers to cooperate with leading realestate firms in the PRC in such investment projects. In selecting the investment projects, the Groupgenerally looks at the following criteria: (i) whether the project has a cost advantage, (ii) whether theexpected sales price is reasonable, and (iii) whether the project has a high gross profit and high safetymargin. These projects are mainly located in Tier 1 and Tier 2 cities in China, for example Beijing andShanghai.
Private Equity
The Group establishes trust plans that offer investment opportunities in private equity investment andmergers and acquisitions transactions. As at 31 December 2018, the Group is involved in 83 investmentopportunities. These investments amount to RMB62.23 billion.
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The Group has strict criteria for selecting private equity and mergers and acquisitions deals. The Groupwould normally participate in the due diligence process when selecting the target company, includingsite visits. All projects selected by the Group must have a clear and detailed exit plan and related riskcontrol measures. The exit plan prepared by the Group include details such as the exit timing andmethod, such as IPO, sale to third parties or, in the case of some equity investments, exercising theGroup’s put right to sell the shares back to the original shareholder.
Securities Market Investments
The Group establishes trust plans that offer a broad range of securities investment opportunities,including primary markets, secondary markets and private placement. The Group has built a strongsecurities-trading platform, established professional securities investment teams and formed partnershipswith commercial banks, securities companies, fund management companies and investment managementcompanies. The Group was granted its stock index futures trading business licence by the CBRC(renamed to CBIRC in 2018) in 2012, and introduced stock index futures securities investment products.
The Group establishes trust plans that offer investments opportunities in private placements of securitiesby companies listed domestically on either the Shanghai Stock Exchange or the Shenzhen StockExchange, or listed offshore on the Hong Kong Stock Exchange. As at 31 December 2018, the Grouphad invested RMB8.18 billion in 61 private placement projects. An example of the Group’s trustinvestment in A shares is the Wealth Steed Private Placement No.27 Plan, the initial AUM of which isRMB220 million and the current AUM is RMB198.88 million, in the private placement of Iflytek Co.,Ltd..
The Group has trust plans that provide investments opportunities in standardised investment projects. Asat 31 December 2018, the Group had invested RMB97.33 billion in 191 standardised investmentprojects.
The Group also establishes trust plans that offer investment opportunities in international securitiesmarkets. In November 2014, CBRC (renamed to CBIRC in 2018) approved the Group’s proposal to offerfinancial planning products investing in assets outside the PRC under the QDII scheme and SAFE alsoapproved an investment quota of U.S.$300 million for such businesses. In May 2015, the Zhongrong-Zhengying No.91 Collective Investment Trust Fund was established and this fund invested in the H-equity shares of Zhengrong Real Estate. As at 31 December 2018, the Group had invested U.S.$95.31million in seven private placements of HKSE listed companies in shares and convertible bonds throughthe QDII scheme.
Mutual Funds
The mutual fund business of the Group is operated through Zhongrong Fund Management Co., Ltd(‘‘Zhongrong Fund’’). The Company owns 51 per cent. of Zhongrong Fund, with the remaining 49 percent. owned by Shanghai Shengrong Investment Co., Ltd.
Zhongrong Fund was established in May 2013 as a company specialising in mutual fund businessapproved and supervised by the CSRC. Zhongrong Fund was established with RMB300 millionregistered capital. In 2017, Zhongrong Fund was injected with RMB400 million with the registeredcapital now at RMB1.15 billion.
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The AUM of mutual funds as at 31 December 2018 is RMB60.74 billion, with the AUM of specialisedproducts at RMB11.83 billion. Zhongrong Fund has established various mutual funds, with 77 existingfunds currently in the market, covering the major types of mutual funds in the market. Many of theproducts introduced by Zhongrong Fund have performed well in the market. For example, according toWind Information, since the establishment of Zhongrong Yingze Bonds Fund and until 31 December2017, its performance has remained among the top 20 per cent in the market of similar products.According to the data released by Haitong Securities, the annual return rate of Zhongrong Fund’s fixed-income products has reached approximately 6.41 per cent, which ranked 31st amongst 106 funds for theyear of 2018. In 2018, Zhongrong Fund has further improved its service allowing the payment time ofall-channel and all-product redemption funds to be increased from the original ‘‘T+N’’ day in theafternoon to ‘‘T+N’’ day before 9:00 a.m., which made Zhongrong Fund the only entity able to effectthe payment 0.5 trading days in advance in full channels and products.
Zhongrong (Beijing) Asset Management Co., Ltd. (‘‘Zhongrong Asset Management’’), a wholly-ownedsubsidiary of Zhongrong Fund, is an entity engaged in alternative asset management. It providesspecialised financial service to customers that strives for stable growth in their investment. ZhongrongAsset Management established a programme which involves asset securitisation, comprehensive servicesfor listed companies, debt financing investment etc. As at 31 December 2018, Zhongrong AssetManagement was involved in 19 projects, with a total AUM of RMB20.90 billion.
Product Distribution of Zhongrong Fund
Fund TypeNumber of
FundsProportion(1)
(%)
Currency Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6.52%Mixed Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 34.78%Indexed Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 8.70%Debt and Fixed Income Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 41.30%
Equity Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6.52%Fund of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.17%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 100%
Note:
(1) Based on the number of funds
As at 31 December 2018, Zhongrong Fund had total AUM of RMB72.57 billion, an increase fromRMB70.62 billion as at 31 December 2017. For the year ended 31 December 2018, Zhongrong Fund’soperating income (without accounting for its subsidiaries) was RMB282.24 million, a decrease fromRMB341.41 million for the year ended 31 December 2017.
Asset Securitisation
In 2012, the Group obtained the special-purpose trust organisation licence which allowed the Group toprovide a ‘‘one-stop’’ asset management services for banks and asset management companies torevitalise stock assets.
The Group decided to specialise in selected assets with steady cash flow such as automobileconsumption loans and housing mortgages. As at 31 December 2018, the Group is in co-operation withseveral commercial banks with respect to land-based assets securitisation, with an AUM of over RMB44billion.
Family Asset Management Office
To expand its asset management business, the Group established the Family Asset Management Officebusiness on 30 April 2014 to serve high-net-worth individual clients. The Family Asset ManagementOffice is designed to manage family assets on behalf of clients for the purpose of wealth planning and
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succession through family asset trusts. In a legacy trust arrangement, the testator would make a willentrusting his or her property to the Group for the establishment of a trust from which returns would beprovided to the designated beneficiaries. The Family Asset Management Office allows the Group toprovide one-stop services to meet the needs of high-net-worth individual clients.
Wealth Management Business
The wealth management business provides a platform for the Group to directly distribute and sellfinancial products and services to its clients. The Group is currently concentrating on distributing itsown financial products and services. However, the Group expects that it can be a distribution platformfor third party products in the future.
It also includes the growing family asset management office business in which the Group helps managefamily assets of its wealthy clients and provides estate planning services. As at 31 December 2018, thewealth management business has seen exponential growth in the management of assets for wealthyindividual clients and non-financial institutions.
The operating income of the Group’s wealth management business were RMB1.14 billion, RMB1.11billion and RMB1.47 billion for the years ended 31 December 2016, 2017 and 2018, respectively.
Zhongrong Wealth
The Group has established the Zhongrong Wealth Centre and Zhongrong Wealth Operational SupportCentre (‘‘Zhongrong Wealth’’). Zhongrong Wealth Centre is the main distribution platform for productsand services to individual clients. Zhongrong Wealth Centre has over 71 branches in the PRC dividedinto four sales regions. The main function of the Zhongrong Wealth Operational Support Centre is thesourcing and distribution of products, customer information management and trust contract management.
Zhongrong Wealth regularly holds client events and seminars on topics relevant to its wealth-management clients including financial management, family wealth succession and overseas investments.The Group has also established advanced technology platforms for servicing Zhongrong Wealthcustomers, including a dedicated customer support hotline, a comprehensive customer relationshipmanagement platform that manages customer appointments, sales, and information disclosures.Zhongrong Wealth has also developed applications that allow customers to make enquiries on theirmobile devices. As at 31 December 2018, the Group had a team of 1346 salespersons in its wealthmanagement business segment, covering over 25000 high-net-worth individual clients. Its sales team hadgrown significantly from 1078 salespersons as at 31 December 2017 and 951 salespersons as at 31December 2016. For the year ended 31 December 2018, the value of products distributed by ZhongrongWealth was RMB260 billion.
The Group has adopted a structured development and management flow for its wealth managementproducts, with comprehensive cooperation across its trust manager team, product manager team, productissuing and pricing committee and other back office departments. New trust projects are initiated in itsdevelopment stage by the trust manager team, and they will be passed on to the product managementteam and product issue and pricing committee for confirming their issue prices and allocation, followedby presentations by relationship managers to clients. Once the projects are formally established, the trustmanagement team starts to conduct post-investment management closely monitoring informationdisclosure, supplemented by investor relations management by the Group’s customer service officers.
At the end of 2015, the Group started an online video recognition system where the Group’s agents willauthenticate the identity of clients, promote products, run a risk adaptability test and have a two-wayvideo conference with clients. Further, this system allows the process of promoting products and videorecognition to be recorded on file, allowing promotional behaviour to be regulated and to improve oncustomer experience.
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In September 2017, the Group’s customer service hotline was officially upgraded to a special hotlinenumber (95037). Since this hotline was introduced, the Group has received customer enquiries from tensof thousands of customers, whilst maintaining customer satisfaction level at a relatively high standard.
Product development and management flow of the Group’s wealth management business
Trust Manager Team
Project flow Project Development
Product Manager Team Product
Issuer and Pricing Committee
Back Office Departments
Development of Trust Projects
Project Post-investment
Management Information Disclosure
Product Manager – Project Issue and
Pricing Committee: Confirm issue price and allocate issue
amount
Roadshow Presentations
Adjustment of Issue Amount Monitor of
Issue
Establishment of Projects
Customers Feedback: 95037 customer service
officers
Project Procurement and Pricing Project Presentation Post-investment
Management
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Management of Proprietary Assets
The Group manages its proprietary funds prudently, the majority of which is either deposited in banks orinvested in highly liquid assets, such as money market funds. As at 31 December 2018, the Group hadRMB11,500.6 million in cash balance. The Group also makes equity investments in listed as well asunlisted companies both within and outside the PRC. The Group manages its proprietary funds inaccordance to its own prudential and risk management policies. In light of the recent volatility in theglobal markets and in line with its prudential management policy, the Group intends to continually andactively evaluate its portfolio both onshore and offshore and may adjust its portfolio position, includingdivestment and disposal of investment assets, as and when opportunities arise. The table below showsthe allocation of its proprietary assets as at the dates indicated.
As at 31 December
Total Group’s Proprietary Assets 2016 2017 2018
(RMB in millions)– Cash and Cash Equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,100.18 9,031.28 11,500.57– Financial assets held for trading(1). . . . . . . . . . . . . . . . . . . . . . . . . . 4,086.51 4,752.13 10,413.03– Loan and advances to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . 700.00 3,544.05 1,431.71– Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . 6,027.74 8,115.69 4,052.90– Long-term equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,101.01 2,146.75 2,214.53– Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,635.81 1,198.40 1,114.69
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,651.25 28,788.30 30,727.43
Note:
(1) Financial assets held for trading include money market funds
Other long-term equity investments
The Company has long-term equity investments in a number of subsidiaries that complement theexisting business of the Group, including China Trust Protection Fund Co., Ltd.
In 2015, the Company became a founding member of the China Trust Protection Fund, which wasestablished by the China Trustee Association under the direction of CBRC (renamed to CBIRC in 2018)to promote better management and detection of risks in the trust industry. The Company played animportant role in its establishment and contributed share capital of RMB1.5 billion, resulting in a 13.04per cent. shareholding, plus the right to appoint one director to the board of the China Trust ProtectionFund Co., Ltd.
In 2016, the Company invested RMB100 million in establishing China Trust Registration Co., Ltd.,which it now holds 3.3 per cent. of the shares and has one board seat. In the same year, the Companyinvested RMB277.2 million in Harbin Rural Commercial Bank Co., Ltd., acquiring a 9.9 per cent. stakeand one director seat.
EMPLOYEES
As at 31 December 2018, the Group had a total of over 2208 employees, which are based in more than35 core cities in the PRC including Beijing, Shanghai, Shenzhen and Chengdu. The Group’s employeesare well-qualified in terms of educational qualifications, with 7 with doctorates, 559 with master’sdegrees and 1435 with bachelor’s degrees, accounting for over 90.63 per cent. of the total number ofemployees. The departmental distribution of the Group’s staff as at 31 December 2018 is as follows:
Employee Distribution NumberPercentageof total staff
Front-office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 536 24%Middle- and back-office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 14%Zhongrong Wealth Centre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,343 61%Senior Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 1%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,208 100%
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The Group values human resources highly and has implemented a ‘‘Talent Training Programme’’ since2010 to improve its human resource pool. Through this programme, the Group has recruited graduatesfrom prestigious institutes of higher education in the PRC over the past seven years and has providedcomprehensive and systematic training for the new hires.
The Group has operated a partnership model for its business teams, which applies a market-oriented riskand reward-sharing mechanism in order to enhance the sense of responsibility, risk awareness andloyalty of its teams and employees. The business departments of the Group are organised into teams ledby partners. Teams are rewarded based on the success of a business project, which incentivises businessteams to maximise business development opportunities.
In recent years, due to its increased market presence, the Group has recruited talent from a wide rangeof organisations including commercial banks, securities companies, insurance companies, accountingfirms, law firms, rating agencies, real estate developers, international investment banks and financialregulatory authorities, thus greatly improving the overall human resources competence. In 2018, theGroup recruited about 22 graduates from top universities in the PRC including Wuhan University,Central University of Finance and Economics, Shanghai University of Finance and Economics, andNortheastern University of Finance and Economics.
Based on the Group’s development strategy for 2019, the Group is actively recruiting talents for itsalternative asset management and wealth management businesses. The Group has engaged recruitmentservices to enable it to source from a wide pool of candidates with relevant experience and expertise.
RISK MANAGEMENT
The Group is committed to establishing a comprehensive risk management system that is integral to itsbusiness operations.
Risk Management Organisational Structure
The Group has established risk management systems commensurate with the size, types and complexityof its business operations. Risk management practices are implemented throughout the organisationalstructure of the Group from the Board to senior management and to project execution and businessteams.
At the top of the Group, the Board has established the Trust Committee and the Audit and RiskManagement Committee. The Trust Committee is mainly responsible for protecting the rights ofbeneficiaries and reviewing the significant transactions with connected or related parties. The Audit andRisk Management Committee is responsible for reviewing the risks of major investment and financingprojects.
At the senior management level of the Group, the Group has established a Trust Business Committeeand a Proprietary Business Committee. These two committees report directly to the President of theGroup and are responsible for collectively reviewing and deciding on major investment and/or financingproposals in relation to the Group’s trust business and proprietary business, respectively.
The Group also has five functional departments with risk management responsibilities at the projectexecution level. These departments include the Risk Management Department, the OperationManagement Center, the Legal, and Compliance Department, the Audit Department, Risk ControlDepartment and Asset Insurance Department. These departments are responsible for ex-ante research,project due diligence and approval, in-process analysis and control, funding allocation, ex-postmonitoring in relation to the various risk elements identified for a project, in accordance with theirrespective roles and duties. The Operation Management Department is mainly responsible for subsequent
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risk management for trust projects. As at 31 December 2018, the Group had approximately 182employees in the five functional risk management departments. The Group believes it has a leadingstatus amongst the PRC trust companies in terms of the ratio of risk management staff.
At the business levels, business teams are assigned to an independent approver before the establishmentof projects who is responsible for monitoring the risks and conducting due diligence for each project.The business teams are required to ensure the accuracy and completeness of the due diligenceinvestigation, and staff from the risk management departments will review the due diligenceinvestigation for a second time. In addition, the trust manager signs responsibility statements ensuringthe accuracy and completeness of the due diligence investigation.
With the combination of qualitative and quantitative approaches, the Group’s management mechanismsprovide full coverage to various risks to ensure that they are sufficiently and effectively controlled inaccordance with the appropriate rules and policies. In addition, the Group has introduced an externaladviser engagement policy to strengthen the cooperation with professional lawyers, research firms,consultants, rating agencies, accountants and assessors with the view to drawing on their expertise toensure comprehensive control of legal, compliance and commercial risks.
Risk management organisational structure of the Group
Trust Committee Audit and Risk Management Committee
Risk Management Legal and Compliance Operation Management center
Asset Preservation Internal Audit
Board of Directors Level
Trust Business Committee Proprietary Business Committee
Senior Management Level
Functional Departments Level
All Business Teams Level
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Risk Management Mechanisms
The Group believes it has implemented a six-dimensional risk management mechanism, including theproject risk reserve fund, the partnership model, the trust compensation reserve fund, independentapprover for projects, professional ex-post monitoring of projects and deferred compensationmechanism.
The Measures for the Administration of Trust Companies stipulate that all trust companies in the PRCshall establish a general risk reserve fund and also keep 5 per cent. of the profit after tax each year asthe trust compensation reserve fund. As at 31 December 2018, the accumulative risk compensationreserve fund of the Group amounted to RMB1,224.05 million.
The Group has established a deferred payment system as part of its risk management, which is aimed atguiding the business team’s risk awareness and protecting against possible losses in business projects.As at 31 December 2018, the balance of various deferred payments amounted to RMB1,767.82 million.
The payment of performance related remuneration of senior managers as well as certain mid-levelmanagement is also staggered as a risk management mechanism. Performance-related remuneration inany one year is paid over the following three years in the ratio of 50 per cent., 25 per cent. and 25 percent., respectively.
The Group has also established review and monitoring mechanisms for risk management. Since 2013,the Group began to recruit a number of senior professionals as independent approvers for trust projects.The Group currently has five independent approving teams, each team led by an experiencedindependent approver. The Group hires experienced and professional consultants from the banks, trustcompanies, real estate companies and professional valuation firms and put them into independentapproving teams of the Group. The five independent approving teams who will attend the TrustApproval Committee meeting on an ad hoc basis. After the project is delivered for approval, theindependent approving team will review the project first of its legal and commercial risks beforesubmitting the project to the Trust Approval Committee for further analysis and evaluation.
In addition, the operation management centre is responsible for the management of the Group’sinvestment projects and post-investment risk. Different management groups have been set up inaccordance with the types of business streams, namely the non-real estate creditor trusts, real estatecreditor trusts, equity trusts, benchmarks and other post-investment management work.
Risk Assessment and Approval Process
The project risk assessment and approval process of the Group is divided into four stages, includingpreliminary due diligence, project review, risk assessment and approval from the Trust BusinessCommittee.
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Risk assessment and approval process of the Group
Business Departments • Conduct due diligence
investigation on proposed projects, the assets and the counterparty involved
• Design project proposals
Risk ManagementDepartments • Project establishment
reviews conducted by independent approvers
• In-depth investigations and project proposal completion by business departments
Risk ManagementDepartments • Preliminary reviews
conducted by risk approvers
• Assessments on approved proposals by the Trust Business Committee
Trust BusinessDepartments • Decisions made project
proposals by 7 committee members
• Any project rejected by the Trust Business Committee can be re-submitted for the Review Committee’s further consideration
Approval from the Trust Business Committee
Preliminary Due Diligence
Project Establishment Review Risk Assessment
In the first preliminary due diligence stage, the business team conducts the due diligence investigationon the project, the assets and the counterparty. In the following stage, the independent approvers fromthe Risk Management Department carry out their review of the project, before the business teamsconduct in-depth investigation and complete the project proposal. In the risk assessment stage, the riskreviewer will conduct a preliminary review, followed by discussion at the Risk Management Departmentmeeting. If approved, it will be submitted to the Trust Business Committee of the Company. The TrusteeBusiness Committee acts as the final approver for new trust projects. There are at least five committeemembers including one chairman of the Trust Business Committee who is a standing member and isusually the president of the company or his or her authorised personnel and at least four non-standingmembers. At least four non-standing members are randomly selected from a pool of twelve membersfrom the senior management, the compliance department, the operation department, the risk managementdepartment and other middle-office departments. At least five committee members of the Trust BusinessCommittee will decide on the project proposal. Any projects rejected by the Trust Business Committeecan be submitted to the Reconsideration Committee of the Company for further consideration.
Operation flow of the Group’s trust projects
Operation Flow of Trust Projects Issue Management Termination and
Clearance Establishment
Liaison for Projects
Due Diligence
Risk Inspection
Deliberation
Inspection of Documents
Pre-issue Inspection
Issue
Confirm Payment from Investors
Quarterly Management Report
Allocation of Trust income
Seal of Documents
Financial Management
Clearance Report
Documents Printing
Documentation
Documentation
Issue Department
Business Department
Risk Management Department
Trust Committee
Administrative Management Department
FinancialControl
Department
Legal Compliance Department
Operation Management
Center
Transfer of Fund
Pressure Test, On-site Inspection of Property, Close Monitor of
Stock Market
Signing of Trust Agreement
Application for Regulatory Approval
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Post-Investment Management
The Group established an operation management centre to be the Group’s post-investment riskmanagement platform for corporate trust, providing a systematic and standardised management over theentire life cycle of these projects. Based on the classification of the Group’s trust business as shown inthe Group structure chart, the operation management centre consists of six sub-groups, namelyintegrated management, comprehensive debt, real estate debt, equity business, security products businessand data systems.
The integrated management team is responsible for coordinating the development of various operationswithin the operations management centre and to coordinate internal and external relationships. The datasystems team is responsible for the construction and maintenance of business-related systems, data entry,internal and external reporting. The other four groups correspond to the Group’s four core business,namely non-real estate creditor trusts, real estate creditor trusts, equity trusts, standardised securityproducts and other post-investment management work for the trust. The operation management centrehas started implementing the systematic and integrated management functions to effectively avoid themanagement vacuum and the duplication of efforts. The front, middle and back offices are jointly incollaboration to supervise the full life cycle of the projects.
Risk Management Policies
The Group has put in place policies and procedures in every stage of its business. As at 31 December2018, the Group had more than 250 policies in place, including more than 150 policies relating tobusiness management systems.
Examples of risk management policies in place for the Group
� Trust Business Management System � Trust Business Committee Work
Book � Measures for the Administration of
Trust Scheme Beneficiaries Assembly
� Measures for the Administration of Trust Managers
� Measures for the Administration of Real Estate Trust Managers
� Regulations on the Operation of Real Estate Investment and Financing Projects
� Regulations on the Operation of Infrastructure Investment and Financing Projects
� Measures for the Administration of Securities Investment Trust
� Regulations on the Operation of Stock Index Futures Trust
� Trial Guide for the Operation of Direct Investment of Hong Kong shares
� Regulations on the Operation of Stock Pledge by Listed Companies
� Guide for the Due Diligence of Trust Business
Business Access
Follow-up Management Clearance
� Measures for the Administration of Trust Project Operation and Clearance Period
� Measures for the Administration of Trust Scheme Regular Management Reporting
� Measures for the Administration of Trust Scheme Information Disclosure
� Guide for the Operation of Real Estate Trust Follow-up Management
� Measures for the Administration of Post-Completion Risk Investigation Reporting
� Measures for the Administration of Inquire, Freeze and Change Assistance
� Measures for the Administration of Early Warning Risks of Ongoing Projects
Review and Approval Product Release
� Regulations on the Operation of Trust Business Risk Review
� Guide for the Operation of Real Estate Trust Risk Review
� Interim Measures for the Administration of the Independent Approver
� Regulations on the Procedures for Trust Business Approval Authorization
� Trust Business Committee Work Book � Regulations on the Operation of TA System
Instruction and Approval Process
� Measures for the Administration of Issuing Trust Schemes
� Measures for the Administration of TrustProducts Marketing Organization
� Measures for the Administration of Marketing Insurance Agency Fund
� Rules of Procedures for Product Release and Pricing Committee
� Interim Measures for the Administration of Releasing Infrastructure Investment and Financing Products
� Measures for the Administration of Qualified Investors in Trust Schemes
� Measures for the Administration of Customer Complaints
� Measures for the Administration of Trust Scheme Clearance Report
� Measures for the Administration of Files � Measures for the Administration of Trust
Project Files
PPBasic System
Compliance management
By leveraging the banking industry’s best practices in compliance management, the Group hascontinuously improved its organisational framework, management scope, operating mechanism andstandard operating procedures regarding compliance management.
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The Group has established a compliance management system pursuant to the Guidelines on ComplianceRisk Management of Commercial Banks with additional elements incorporated into its compliance riskmanagement. The Compliance Management Department of the Group performs a number of functionswith a view to ensure an effective implementation of regulatory policies, such as providing expert-basedinterpretation of compliance policies, offering compliance risk alerts, checking the implementation ofcompliance proposals, reviewing the compliance of internal policies and rules, promoting thedissemination of regulatory policies and ensuring the identification and correction of institutionalcompliance risks.
The Group continues to revise and improve relevant rules and policies and establishes a soundcompliance management system that incorporates clearly-defined rule-making standards and processeswhich largely cover all management modules and business aspects.
Inspection and auditing
In addition to its stringent risk management and compliance management framework, the Group focusesits inspection and auditing efforts on ad-hoc audits in conjunction with routine audits. The Groupactively supports external audits conducted by its shareholders.
An independent Inspection & Audit Department of the Company is responsible for conducting internalfinancial audit, employee audit and business audit under the guidance of the Audit & InspectionCommittee of the Board.
As for external audits by Jingwei Textile Machinery Company Limited, the Company’s majorshareholder and China National Machinery Industry Corporation Ltd. have engaged WUYIGE CertifiedPublic Accountant LLP through public bidding to conduct annual audits and issue of audit reports.
Financial and account management
The financial functions of the Group are subject to continuous supervision throughout the various phasesof trust projects, from their creation, redemption, distribution to liquidation. Staff from the FinanceDepartment strictly execute various business orders as per agreements in the contract.
In terms of account management, the Group separates management and accounting in managing trustproperties and proprietary properties. Each trust plan’s assets and financial performance are accountedfor separately. The Group also uses separate personnel to manage the accounts of trust plans and itsproprietary accounts. In order to ensure one-to-one correspondence between dedicated trust accounts andtrust plans and the independence of trust assets, dedicated trust accounts will not be opened beforeproject approval.
Information management
The Group has consistently invested in the construction of information system to meet the growth of thebusiness and to improve the security network system. In terms of the hardware facilities, the Group’scentral server room, which has an area of more than 90 square meters, is managed by IDC. There aremore than 80 servers and network equipment to virtualise the business system. The capacity of theseservers is estimated to meet the demand of the Group over the next three years. In terms of thedevelopment of software system, an information management system covering the complete cycle of thetrust project was established in accordance with the requirements of the operation and risk managementpolicies of the trust to promote the trust business system, operation and maintenance platform systemand auxiliary office system. At the same time, in accordance with the regulatory requirements, theGroup’s trust business system is able to deal with data reporting, net capital monitoring, CBIRC EASTdata reporting, and voice and video double signing, as promoted by the People’s Bank of China.
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DIRECTORS AND SENIOR MANAGEMENT
Basic information about Directors
Table of basic information about Directors as at the date of this Offering Circular:
Name Position
Liu Yang(劉洋). . . . . . . . . . . . . . . Chairman of the BoardYao Yuming(姚育明). . . . . . . . . . . Deputy Chairman of the BoardZhang Xianghui(張向輝) . . . . . . . . Deputy Chairman of the BoardZhang Dong(張東). . . . . . . . . . . . . DirectorZhang Xianjun(張憲軍). . . . . . . . . DirectorLi Hui(李輝). . . . . . . . . . . . . . . . . Independent DirectorLi Huajie(李華傑). . . . . . . . . . . . . Independent Director
Biographies of Directors
LIU Yang(劉洋), Mr. Liu served as Company’s Chairman from 30 May 2009 to 25 May 2015, andresumed his current term as Chairman since March 2016. He previously held positions as a chief officerof Zhongzhi High-technology Investment Co., Ltd., and the Chief Financial Officer of ShanghaiZhongzhi Jinzhi Technology Investment Co., Ltd. Mr. Liu also previously held positions as the VicePresident, the Chief Executive Officer, the Chief Financial Officer and the Chairman of the Board ofZhongzhi Enterprise Group Co., Ltd.
YAO Yuming(姚育明), Mr. Yao has served the Company as the Deputy Chairman of the Board sinceJuly 2010. He concurrently holds positions as the General Manager of Jingwei Textile Machinery Co.,Ltd. and the member of CPC committee of China Hi-tech Group Corporation. Mr. Yao previously heldpositions as the Director Assistant and the Head of Finance Office at Jingwei Textile Plant, theChairman of the Board at CTMC Finance Co., Ltd., the Chairman of the Board at Inner Mongolia RisingSecurities Co., Ltd. and the Executive Deputy General Manager of Jingwei Textile Machinery Co., Ltd.
ZHANG Xianghui(張向輝), Ms. Zhang has served the Company as the Deputy Chairman of the Boardsince December 2015. She previously held positions as the Deputy Head of the Inter-bank BusinessDepartment at Industrial Bank Co., Ltd., Shanghai Branch. Ms. Zhang also previously held positions atIndustrial Bank Co., Ltd. as the Deputy Chief of its Wealth Management Division, Capital OperationCentre, the Chief of its Issuance and Underwriting Division, Investment Bank Department and theDeputy General Manager of its Investment Banking Department.
ZHANG Dong(張東), Mr. Zhang has been a Director of the Company and the President of theCompany since May 2015. He previously held positions as an engineer of Harbin RailwayAdministration, the General Manager of the IT Department at Tianyuan Securities Brokerage Co., Ltd.and the Deputy General Manager of the IT Department at Jianghai Securities Brokerage Co., Ltd. Healso successively served the Company as the General Manager of the IT Department of the Company,General Manager of the Human Resource Department (concurrently as the General Manager of theAdministration Department), the Chief Administrative Officer and the Vice President. Mr. Zhang holds abachelor’s degree in welding equipment and technology and has 20 years of work experience in thefinance industry.
ZHANG Xianjun(張憲軍), Mr. Zhang has been a Director of the Company since January 2015. Heconcurrently holds the position as Chief of the Finance Business Department of Harbin InvestmentGroup Co., Ltd. Mr. Zhang previously held positions at Harbin Investment Group Co., Ltd. as the Chiefof its Long-Term Development and Planning Division, the Secretary, the Deputy Director and thedepartment-equivalent Officer of its General Office, and the Director of its General Office of Board.
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LI Hui(李輝), Mr. Li has served the Company as an Independent Director since July 2010. Heconcurrently holds the position as the General Manager of Beijing Yingdong Investment Co., Ltd. Mr.Li previously held positions as the Senior Manager of the Investment Banking Department at UnitedSecurities Co., Ltd., the Deputy General Manager of the Investment Banking Department at HantangSecurities Co., Ltd., the Business Director of the Investment Banking Department at China GalaxySecurities Co., Ltd., the Business Director of the Investment Banking Department at Essence SecuritiesCo., Ltd. and the Executive Director of the Corporate Finance Department at Credit Suisse FounderSecurities Co., Ltd.
LI Huajie(李華傑), Mr. Li has served the Company as an Independent Director since August 2015. Heconcurrently holds the position as the Managing Partner of Beijing Yongtuo Accounting Firm. Mr. Lipreviously held positions as the Financial Controller of Harbin Valve Factory, the Department Managerof Heilongjiang Accounting Firm, the Department Manager of Heilongjiang Industrial Accounting Firm,the Deputy Chairman of BDO Reanda Accounting Firm, the Deputy-Head Accountant of BeijingYongtuo Accounting Firm.
Basic information about Senior Management
Table of basic information about Senior Management as at the date of this Offering Circular:
Name Position
Zhang Dong(張東). . . . . . . . . . . . . PresidentYou Yu(遊宇). . . . . . . . . . . . . . . . Executive Vice PresidentHu Meng(胡猛). . . . . . . . . . . . . . . Vice PresidentJin Qinghao(金慶浩). . . . . . . . . . . Vice PresidentGeng Lei(庚磊). . . . . . . . . . . . . . . Vice PresidentHe Zhiqiang(何誌強). . . . . . . . . . . Vice PresidentLiu Wei(劉煒). . . . . . . . . . . . . . . . Vice PresidentJie Hong(解弘). . . . . . . . . . . . . . . Vice PresidentGao Quan(高全). . . . . . . . . . . . . . Assistant PresidentYang Li(楊莉). . . . . . . . . . . . . . . . Assistant PresidentLian Jinhua(連晉華). . . . . . . . . . . . Chief Financial OfficerLiu Xiangyu(劉香玉). . . . . . . . . . . Chief Administrative OfficerWang Qiang(王強). . . . . . . . . . . . . Chief Compliance OfficerHou Chunlin(侯春琳). . . . . . . . . . . Audit Director
Biographies of Senior Management
The biography of Mr. Zhang Dong(張東)can be found in the Biographies of Directors.
YOU Yu(遊宇), Mr. You has served as the Executive Vice President of the Company since June 2013.He previously held positions as the Deputy Head of the Non-Bank Division at the People’s Bank ofChina, Tianjin Branch, the Deputy Head Officer of the Non-Bank Division at China Banking RegulatoryCommission, Tianjin Superintendence, and the Deputy Chief of the Non-Bank Financial InstitutionsSupervision Department at China Banking Regulatory Commission. Mr. You holds a master’s degree infinancial management and has over 20 years of work experience in the finance industry.
HU Meng(胡猛), Mr. Hu has served as a Vice President of the Company since May 2015. Hepreviously held positions as a Senior Auditor at Deloitte Touche Tohmatsu CPA LLP, the FinancialController at China Sinochem Finance Co., Ltd, the Deputy General Manager of the Company’s RiskManagement Department, the General Manager of the Company’s Direct Investment Department and theGeneral Manager of the Company’s Treasury and Capital Market Department. Mr. Hu holds a bachelor’sdegree in finance and has 10 years of work experience in the finance industry.
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JIN Qinghao(金慶浩), Mr. Jin has served as a Vice President of the Company since November 2016.He previously held positions as an officer of the Financial Research Office of People’s Bank of China,an officer of People’s Bank of China, Harbin’s City Centre Branch, the Deputy General Manager and anofficer of the Harbin’s Financial Supervision Office of People’s Bank of China. Mr. Jin also previouslyheld positions as the Deputy General Manager, the Deputy Director of the Policy and RegulationsDepartment, the Deputy Director of the Admissions Department and the Chief of the Non-BankFinancial Institutions Supervision Department at CBRC (renamed to CBIRC in 2018), HeilongjiangBranch. Mr. Jin holds a master’s degree in business administration and has 25 years of work experiencein the finance industry.
GENG Lei(庚磊), Mr. Geng has served as a Vice President of the Company since June 2016. Hepreviously held positions as a legal assistant at Lanpeng Law Firm and the Legal Director of China LifeInsurance Co., Ltd, Beijing Branch. Mr. Geng also previously held positions as an assistant to theGeneral Manager of the Compliance Management Department, the Deputy General Manager of theIndustrial Capital Department, the Deputy General Manager of the Trust Business Department I, theDeputy General Manager and subsequently, the General Manager of the Financial Capital Department ofthe Company. Mr. Geng holds a bachelor’s degree in law and has 10 years of work experience in thefinance industry.
HE Zhiqiang(何誌強), Mr. He has served as a Vice President of the Company since October 2011. Hepreviously held positions as the General Manager Assistant of the Engineering Department at BeijingMengke Properties Company Limited, the General Manager of the Financial Market Department of theCompany and the President Assistant of the Company. Mr. He holds a master’s degree in businessadministration and has 13 years of work experience in the finance industry.
LIU Wei(劉煒), Mr. Liu has served as a Vice President of the Company since February 2017. Hepreviously held positions as the Business Manager of the International Trade Department, the PlanningCredit Manager, the Branch Manager, the Deputy Chief of the Central Jurisdiction Office, the Head ofthe Investment Banking Division and the Chief of the Central Jurisdiction Office of Bank ofCommunications, Beijing Branch. Mr. Liu also previously held the position as the General Manager ofthe Trust Investment Department of the Company. Mr. Liu holds a bachelor’s degree in internationaleconomics and has 22 years of work experience in the finance industry.
JIE Hong(解弘), Mr. Jie has served as a Vice President of the Company since July 2018. Hepreviously held positions as the Project Manager of the Securities Investment Department of GuotaiJunan Securities, the Senior Manager of Beijing Shirui Assets Management Co. Ltd, the Deputy GeneralManager of the Marketing Department Sales Management Center of First State Cinda Fund, theResponsible Person and Director of the Channel and Annuity Business Department of Taikang AssetsManagement Co. Ltd. and the Director and General Manager of the Pension Business Department ofSouthern AMC. Mr. Jie has 20 years of work experience in the finance industry.
GAO Quan(高全), Mr. Gao has served as the Assistant President of the Company since April 2018.He previously held positions in Bank of China Beijing Branch, CITIC Trust and Minmetals InternationalTrust Co., Ltd. Mr. Gao has 13 years of work experience in the finance industry.
YANG Li(楊莉), Ms. Yang has served as the Assistant President of the Company since October 2019.She concurrently holds position as the General Manager of ZRT Wealth Operations Support Center andZRT Wealth Center. She previously held positions as the Deputy General Manager and AssistantGeneral Manager of the Direct Investment Business Department of the Company, the Deputy GeneralManager of the Funds & Capital Market Department of the Company and the Assistant General Managerof the Financial Management Department of the Company. Ms. Yang holds a master’s degree in businessadministration and has 15 years of work experience in the finance industry.
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LIAN Jinhua(連晉華), Mr. Lian has served as the Chief Financial Officer of the Company since June2010. He previously held the positions as the Director of the Audit Office at Jingwei Textile MachineryPlant, the Chief Accountant of Shanxi Textile Machinery Company Limited of Jingwei MachineryGroup and the Head of the Strategic Management Department at Jingwei Textile Machinery CompanyLimited. Mr. Lian holds a bachelor’s degree in accounting and has 9 years of working experience in thefinance industry.
LIU Xiangyu(劉香玉), Ms. Liu has served as the Chief Administrative Officer of the Company sinceMarch 2013. She also serves as the Chairman of the Labour Union of the Company since May 2016.She previously held positions as the Head of the Paging Console Department of Wanlitong NationalNetwork, a chief officer of Yu Wei Communication and the Customer Service Director of ChinaRailway Communications Network Technology Co., Ltd. Ms. Liu also previously held positions as theQuality Management Manager of the Information Processing Centre, an assistant to the GeneralManager, the Chairman of the Workers’ Congress and the Human Resources Manager at BeijingHonglian Jiuwu Information Industry Co., Ltd. She has also served as the General Manager of theHuman Resources Department and Human Administration Department of the Company. Ms. Liu holds amaster’s degree in business administration and has 7 years of work experience in the finance industry.
WANG Qiang(王強), Mr. Wang has served as the Chief Compliance Director of the Company sinceJune 2017. He previously held positions as a senior member, the Deputy Director and the Director of theChina Securities Regulatory Commission. Mr. Wang also previously held positions as a member of thestanding committee and the Deputy Mayor of Xigu District of Lanzhou City, and a Director of the ChiefExecutive Office at Ant Financial Services Group. Mr. Wang holds a doctor’s degree in economic lawand has 11 years of work experience in the finance industry.
HOU Chunlin(侯春琳), Ms. Hou has served as the Audit Director of the Company since November2018. She also holds the position as the General Manager of the Audit Department of the Company. Ms.Hou previously held positions as an account of the Finance Department of Ningxia Great Wall YusakiMachine Tool Casting Co. Ltd., the Manager of the Audit Department of Ningxia Tianhua AccountingFirm, the Senior Auditor of the Audit Department of Pan-China Certified Public Accountants and theAudit Manager of Deloitte Beijing Branch. Ms. Hou has 8 years of work experience in the financeindustry.
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DESCRIPTION OF THE KEEPWELL AND LIQUIDITY SUPPORT DEED
The following contains summaries of certain key provisions of the Keepwell and Liquidity Support Deed.Such statements do not purport to be complete and are qualified in their entirety by reference to theKeepwell and Liquidity Support Deed. Defined terms used in this section shall have the meanings givento them in the Keepwell and Liquidity Support Deed.
Ownership of the Issuer and the Guarantor
Pursuant to the Keepwell and Liquidity Support Deed, the Company will undertake:
• to Control each of the Issuer and the Guarantor and Control refers to either (i) the ownership,acquisition or control of 100 per cent. of the voting rights of the issued share capital of the Issueror the Guarantor, whether obtained directly or indirectly or (ii) the right to appoint and/or remove100 per cent. of the members of the Issuer’s or the Guarantor’s board of directors or othergoverning body, whether obtained directly or indirectly, and whether obtained by ownership ofshare capital, the possession of voting rights, contract or otherwise; and
• to procure that the title, rights and interests in the shares of the Issuer and the Guarantor are notpledged, charged or in any way encumbered.
Maintenance of Consolidated Net Worth, Shareholder Equity and Liquidity
Pursuant to the Keepwell and Liquidity Support Deed, the Company will undertake to procure:
• each of the Issuer and the Guarantor to have sufficient liquidity to make timely payment of anyamounts payable by it under or in respect of the Notes and the Guarantee of the Notes inaccordance with the Terms and Conditions of the Notes and/or the Trust Deed and that the Issuerhas sufficient funds to meet its obligations with respect to any and all fees, expenses and similarobligations of the Issuer, including but not limited to fees and expenses with respect to thecorporate formation and administration of the Issuer;
• the Issuer to have a Consolidated Net Worth of at least U.S.$1.00 at all times;
• the Guarantor to ensure an aggregate Equity attributable to owners of the Guarantor at the end ofany Relevant Period (as defined in the Trust Deed) of at least RMB10,000,000; and
• each of the Issuer and the Guarantor to remain solvent and a going concern at all times under thelaws of its respective jurisdiction of incorporation or applicable accounting standards.
Relevant Indebtedness
At all times during the term of the Keepwell and Liquidity Support Deed, the Company will undertake:
• not to create or to have outstanding any Relevant Indebtedness or Guarantee of RelevantIndebtedness without at the same time or prior thereto (i) providing an unsubordinated guarantee orindemnity for all amount payable in respect of the Notes or (ii) offering to exchange the Notes forsecurities issued or guaranteed by the Company with terms substantially identical to those of theNotes as certified by an Independent Investment Bank, provided that, if the provision of anunsubordinated guarantee or indemnity in (i) or the offer to exchange in (ii), as the case may be,requires any Regulatory Approval, the Company shall use all reasonable endeavours to obtain suchRegulatory Approvals and if the Company fails to obtain such Regulatory Approvals after using allreasonable endeavours, the Company shall not be required to comply with such requirements; and
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• not to, and to procure that none of the Subsidiaries of the Company will, create or permit tosubsist any Security Interest upon the whole or any part of its present or future undertaking, assetsor revenues (including uncalled capital) to secure any Relevant Indebtedness or Guarantee ofRelevant Indebtedness without (i) at the same time or prior thereto securing the Notes equally andrateably therewith to the satisfaction of the Trustee or (ii) providing such other security for theNotes as the Trustee may in its absolute discretion consider to be not materially less beneficial tothe interests of the Noteholders or as may be approved by an Extraordinary Resolution (as definedin the Trust Deed) of Noteholders.
Liquidity Support
Pursuant to the Keepwell and Liquidity Support Deed, upon the receipt of a Trigger Notice from theTrustee, the Company shall:
• provide liquidity support to the Issuer and the Guarantor in accordance with the Keepwell andLiquidity Support Deed; and
• invest in the Guarantor and/or any Offshore Subsidiary(ies) in accordance with the Keepwell andLiquidity Support Deed,
in each case, subject to it having obtained all Regulatory Approvals (which the Company shall use allreasonable endeavours to obtain), so as to enable the Guarantor or the Issuer to (i) make payment in fullof any outstanding amounts as they fall due under the Trust Deed, the Guarantee of the Notes and theNotes (including any interest accrued but unpaid on the Notes) if the Triggering Event is a LiquidityNotice Failure Event or an Event of Default or (ii) remedy the Financial Ratio Failure or the ShortfallEvent if such Triggering Event has occurred.
A Triggering Event occurs when:
• the Consolidated Net Worth of the Issuer at any time falls below U.S.$1.00 or Equity attributableto owners of the Guarantor at the end of the Relevant Period falls below RMB10,000,000 (a‘‘Financial Ratio Failure’’);
• the Issuer or the Guarantor fails to provide a Liquidity Notice in accordance with and by the timeand to the persons specified in the Keepwell and Liquidity Support Deed;
• an Event of Default; or
• the Issuer or the Guarantor determines that it will have insufficient liquidity or cash flow to meetits payment obligations under the Notes, the Guarantee of the Notes or the Trust Deed as they falldue (a ‘‘Shortfall Event’’).
Upon the (i) making of payment in full of all of the payment obligations of the Issuer in respect of anyprincipal, premium, interest and default interest (if applicable) under the Notes and the Trust Deed or(ii) in the event of a Liquidity Notice Failure Event resulting in the service of a Trigger Notice, makingof payment in full of all payment obligations of the Issuer in respect of any principal, premium andinterest under the Notes due on the Interest Payment Date immediately following the relevant LiquidityNotice Date, together with any default interest due (if applicable) and the Trust Deed or (iii) the waiverof such Event of Default by the Trustee acting on the instructions of the Noteholders by anExtraordinary Resolution if such Triggering Event is an Event of Default or (iv) remedy of the FinancialRatio Failure or the Shortfall Event if such Triggering Event has occurred, the Trustee shall serve aSuspension Notice to the Issuer, the Guarantor and the Company whereupon the obligations of theCompany triggered under the Keepwell and Liquidity Support Deed as a result of the occurrence of suchTriggering Event shall be suspended. Such Suspension Notice shall cease to be effective upon theoccurrence of a new Triggering Event after the date of such Suspension Notice.
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Other Undertakings
Pursuant to the Keepwell and Liquidity Support Deed, the Company will undertake:
• not to amend its articles of association in a manner that is, directly or indirectly, materially adverseto Noteholders;
• to procure that the articles of association of each of the Issuer and the Guarantor shall not beamended in a manner that is, directly or indirectly, materially adverse to Noteholders;
• to cause each of the Issuer and the Guarantor to remain in full compliance with the Conditions, theGuarantee of the Notes, the Trust Deed and all applicable rules and regulations in the BritishVirgin Islands;
• promptly to take any and all reasonable action necessary to comply with its obligations under theKeepwell and Liquidity Support Deed;
• to cause each of the Issuer and the Guarantor to take all reasonable action necessary in a timelymanner to comply with its obligations under the Keepwell and Liquidity Support Deed;
• to procure that the Issuer shall not issue any equity interest, capital stock or shares other thanordinary shares to the Guarantor and to procure that the Guarantor shall at all times maintainownership of 100 per cent. of the equity interest in the Issuer;
• to procure that none of the Issuer, the Guarantor or the Company shall commence any action forthe winding up, liquidation or dissolution of the Issuer;
• to procure that neither the Guarantor nor the Company shall commence any action for the windingup, liquidation or dissolution of the Guarantor; and
• to procure that the Issuer will not carry on any business activity whatsoever other than theactivities in connection with the Notes (such activities in connection with the Notes shall, for theavoidance of doubt, include the on-lending of the proceeds of the issue of the Notes (the‘‘Proceeds of the Notes’’) to only either the Company or any Subsidiary of the Company, and tocause such borrower to pay the interest and principal in respect of such intercompany loan on time.
The Keepwell and Liquidity Support Deed is not, and nothing therein contained and nothing donepursuant thereto by the Company shall be deemed to constitute, a guarantee by or any similar obligation,indebtedness or liability of the Company under the laws of any jurisdiction.
The parties to the Keepwell and Liquidity Support Deed acknowledge that in order for the Company tocomply with its obligations under the Keepwell and Liquidity Support Deed, the Company may requireRegulatory Approvals. The Company undertakes to use all reasonable endeavours to obtain suchRegulatory Approvals.
The Keepwell and Liquidity Support Deed as to which time shall be of the essence and any non-contractual obligations arising out of or in connection with it shall be governed by English law.
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DESCRIPTION OF THE DEED OF EQUITY INTEREST PURCHASE UNDERTAKING
The following contains summaries of certain key provisions of the Deed of Equity Interest PurchaseUndertaking. Such statements do not purport to be complete and are qualified in their entirety byreference to the Deed of Equity Interest Purchase Undertaking. Defined terms used in this section shallhave the meanings given to them in the Deed of Equity Interest Purchase Undertaking.
Obligation to Acquire Equity Interest
Upon the receipt of a written Purchase Notice provided by the Trustee in accordance with the TrustDeed following the occurrence of an Event of Default, the Company agrees to, subject to obtaining allRegulatory Approvals, purchase or procure an Onshore Subsidiary of the Company (the ‘‘Purchaser’’) topurchase (the ‘‘Purchase’’):
(i) the Equity Interest held directly by the Issuer, the Guarantor and/or any other Offshore Subsidiary,as designated by the Company and notified in writing to the Trustee within five Business Daysafter the date of the Purchase Notice; and
(ii) in the absence of such designation and notification to the Trustee within the timeframe set out inthe Deed of Equity Interest Purchase Undertaking, the Equity Interest held directly by all OffshoreSubsidiaries,
(each such Offshore Subsidiary, a ‘‘Relevant Transferor’’) at the Purchase Price on the relevantPurchase Closing Date pursuant to the terms set out in the Deed of Equity Interest Purchase Undertakingand the relevant Equity Interest Transfer Agreement(s).
‘‘Equity Interest’’ means the Capital Stock held by a Relevant Transferor and which is subject to thePurchase pursuant to an Equity Interest Transfer Agreement.
The Purchase obligation of the Company set out in the Deed of Equity Interest Purchase Undertakingshall be suspended if, prior to the relevant Purchase Closing Date, each of the Issuer, the Guarantor andthe Company receives a notice in writing from the Trustee stating that all of the payment obligations ofthe Issuer and the Guarantor in respect of any principal, premium, interest and default interest under theNotes, the Guarantee of the Notes and the Trust Deed have been satisfied in full as at the date of thatnotice, or that the Event of Default resulting in the service of the Purchase Notice has been waived bythe Trustee in accordance with the terms of Trust Deed (the ‘‘Suspension Notice’’).
The Suspension Notice shall be provided by the Trustee to the Issuer, the Guarantor and the Companywithin five Business Days after the date the Trustee is notified in writing by the Principal Paying Agentthat the payment obligations of the Issuer and the Guarantor under the Notes, the Guarantee of the Notesand the Trust Deed have been satisfied in full, or that the Event of Default resulting in the service of thePurchase Notice has been waived in accordance with the terms of the Trust Deed. Such SuspensionNotice shall cease to be effective upon the occurrence of a new Event of Default after the date of suchSuspension Notice.
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Determination of the Purchase Price
Within 10 Business Days after the date of the Purchase Notice, the Company shall determine (a) theaggregate purchase price of the Equity Interest(s) being the subject of the Purchase (the ‘‘PurchasePrice’’) in accordance with any applicable PRC laws and regulations effective at the time ofdetermination; and (b) the other applicable terms relating to the Purchase, provided that the PurchasePrice shall be no less than the aggregate of the following amounts (the ‘‘Shortfall Amount’’):
(i) the amount sufficient to enable the Issuer and the Guarantor to discharge in full their respectiveobligations under the Notes, the Guarantee of the Notes and the Trust Deed (including withoutlimitation the principal amount of the Notes then outstanding as at the date of such PurchaseNotice and any interest due and unpaid and/or accrued but unpaid on the Notes up to but excludingthe date of such Purchase Notice), plus
(ii) an amount equal to U.S.$11,453,580, being the interest payable in respect of one interest period onthe Notes, plus
(iii) all costs, fees and expenses (including without limitation, legal expenses) and other amountspayable to the Trustee and/or the Agents under or in connection with the Notes, the Guarantee ofthe Notes, the Trust Deed, the Agency Agreement, the Account Bank Agreement, the Keepwelland Liquidity Support Deed and/or the Deed of Equity Interest Purchase Undertaking as at the dateof such Purchase Notice plus provisions for costs, fees and expenses which may be incurred afterthe date of the Purchase Notice, as notified by the Trustee in the Purchase Notice.
Closing
In relation to the Purchase of any Equity Interest relating to a Target Subsidiary which is an OnshoreSubsidiary:
(i) within 40 Business Days after the date of the Purchase Notice, the Company shall, and shallprocure such Relevant Transferor to, obtain approval from the requisite number of shareholdersand/or directors (as the case may be) of such Target Subsidiary in relation to the Purchase, and toexecute, and the Company shall procure the relevant Purchaser to execute (where applicable), anEquity Interest Transfer Agreement and all other application documents (in such form andlanguage as required by applicable laws and regulations) required by applicable laws andregulations of the PRC and, shall file such agreements and/or documents with PBOC (ifapplicable), CBIRC (if applicable) and/or MOFCOM (if such Onshore Subsidiary is a foreign-invested enterprise) for approval of the transfer of the Equity Interest being the subject of thePurchase;
(ii) upon the receipt of approval from PBOC (if applicable), CBIRC (if applicable) and/or MOFCOM,the Company shall procure the Target Subsidiary to submit all application documents required byapplicable laws and regulations of the PRC to the competent AIC for the AIC registration of thetransfer of the Equity Interest of such Relevant Transferor within five Business Days after thereceipt of such approval;
(iii) the Company shall procure the Target Subsidiary to submit all application documents required byapplicable laws and regulations of the PRC to SAFE (A) to change the SAFE registration of suchTarget Subsidiary and (B) for the remittance of the relevant Purchase Price outside the PRC withinfive Business Days after completion of the change of AIC registration and the receipt of the taxclearance certificate; and
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(iv) the Company shall procure that remittance of the Purchase Price shall take place on or prior to thefifth Business Day after the date of receipt of the approvals from SAFE or, if no RegulatoryApproval from any Approval Authority is required, on or prior to the fifth Business Day after thedate of execution of the Equity Interest Transfer Agreement (the ‘‘Onshore Purchase ClosingDate’’), whereupon the Company shall pay to, or procure the relevant Purchaser to pay to, or to theorder of, such Relevant Transferor the Purchase Price in same day funds in U.S. dollars. Suchpayment shall be made by remittance of the Purchase Price to such account outside the PRC asmay be designated by such Relevant Transferor;
provided that the requirements and deadlines set out in the Deed of Equity Interest PurchaseUndertaking may be modified if the Trustee receives an opinion of a reputable PRC counsel ofrecognised national standing stating that under applicable PRC law as at the date of the opinion, (a) anyrequirement or deadline above is not reasonably achievable and (b) the new requirement (if applicable)and/or the commercially reasonable deadline that is required to complete such requirement. Such opinionshall be addressed and delivered to the Trustee by the Company within 20 Business Days after thereceipt of the Purchase Notice.
In relation to the Purchase of any Equity Interest relating to a Target Subsidiary which is an OffshoreSubsidiary:
(i) within 30 Business Days after the date of the Purchase Notice, the Company shall procure thePurchaser, the Relevant Transferor and/or the Target Subsidiary (as the case may be) to submit allrelevant application, report, filing and/or registration documents to the competent ApprovalAuthorities in PRC (including PBOC, NDRC, MOFCOM and SAFE, where applicable) for or inrelation to the overseas mergers and acquisitions;
(ii) within 20 Business Days after obtaining the confirmation of or completing the formality with eachof competent Approval Authorities in PRC (including PBOC, NDRC, MOFCOM and SAFE, whereapplicable) for or in relation to the application, report, filing and/or registration documents referredto in the Deed of Equity Purchase Undertaking, the Company shall, and shall procure suchRelevant Transferor to, obtain approval from the requisite number of shareholders of such TargetSubsidiary in relation to the Purchase, and to execute, and the Company shall procure the board ofdirectors of such Target Subsidiary to execute (where applicable), an Equity Interest TransferAgreement and all other application documents (in such form and language as required byapplicable laws and regulations) required by applicable laws and regulations and shall file suchagreements and/or documents with the competent Approval Authorities in PRC (including PBOC,NDRC, MOFCOM and SAFE, where applicable) and authorities of the other jurisdiction(s) inconnection with the Purchase (where applicable), for approval, filing or registration of the transferof the Equity Interest being the subject of the Purchase; and
(iii) the Company shall procure that the remittance of the Purchase Price shall take place on or prior tothe fifth Business Day after the date of receipt of the approvals or registrations or confirmations ofreporting or filing from each of competent Approval Authorities in PRC (including PBOC, NDRC,MOFCOM and SAFE, where applicable) and authorities of other jurisdictions in charge of thePurchase as referred to in the Deed of Equity Interest Purchase Undertaking or, if no suchRegulatory Approval from any Approval Authority is required, on or prior to the fifth BusinessDay after the date of execution of the Equity Interest Transfer Agreement (the ‘‘Offshore PurchaseClosing Date’’), whereupon the Company shall pay to, or procure the relevant Purchaser to pay to,or to the order of, such Relevant Transferor the Purchase Price in same day funds in U.S. dollars.Such payment shall be made by remittance of the Purchase Price to such account outside the PRCas may be designated by such Relevant Transferor,
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provided that the requirements and deadlines set out in the Deed of Equity Interest PurchaseUndertaking may be modified if the Trustee receives an opinion of a PRC counsel of recognisednational standing stating that under applicable PRC law as at the date of the opinion, (a) anyrequirement or deadline above is not reasonably achievable and (b) the new requirement (if applicable)and/or the commercially reasonable deadline that is required to complete such requirement. Such opinionshall be addressed and delivered to the Trustee by the Company within 20 Business Days after thereceipt of the Purchase Notice.
Upon the completion of any Purchase, the Company undertakes to:
(i) in the event that a Relevant Transferor is not the Issuer or the Guarantor, procure such RelevantTransferor to promptly on-lend or distribute in full the relevant portion of the Purchase Price,being an amount no less than the Shortfall Amount, to the Issuer prior to any other use, disposal ortransfer of the proceeds received; and
(ii) promptly do or procure all such things (including entering into and executing any agreements orarrangements required) to be done and take all actions necessary for the Purchase Price received bythe Issuer or the Guarantor from the Company or pursuant to any on-loan or distribution referredto in the Deed of Equity Interest Purchase Undertaking to be applied solely towards the payment infull of the Issuer’s or the Guarantor’s obligations, as the case may be, under the Notes, theGuarantee of the Notes and the Trust Deed (including without limitation the payment of theprincipal amount of the Notes then outstanding as at the date of the Purchase Notice and anyinterest due and unpaid and/or accrued but unpaid on the Notes up to but excluding the date ofpayment) prior to any other use, disposal or transfer of the proceeds received.
Reasonable Endeavours
The Company shall, and shall procure each Purchaser and Relevant Transferor to, each use allreasonable endeavours to do all such things and take all such actions as may be necessary or desirable toprocure the remittance of the Purchase Price to or to the order of the Relevant Transferor(s) inaccordance with the Deed of Equity Interest Purchase Undertaking.
Other Provisions
The Deed of Equity Interest Purchase Undertaking is not and nothing therein contained and nothingdone pursuant thereto by the Company shall be deemed to constitute, a guarantee by or any similarobligation, indebtedness or liability by the Company under the laws of any jurisdiction.
The Deed of Equity Interest Purchase Undertaking as to which time shall be of the essence and any non-contractual obligations arising out of or in connection with it shall be governed by English law.
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TAXATION
The following summary of certain tax consequences of the purchase, ownership and disposition of theNotes is based upon applicable laws, regulations, rulings and decisions in effect as at the date of thisOffering Circular, all of which are subject to change (possibly with retroactive effect). This summarydoes not purport to be a comprehensive description of all the tax considerations that may be relevant toa decision to purchase, own or dispose of the Notes and does not purport to deal with consequencesapplicable to all categories of investors, some of which may be subject to special rules. Neither thesestatements nor any other statements in this Offering Circular are to be regarded as advice on the taxposition of any holder of the Notes or any person acquiring, selling or otherwise dealing in the Notes oron any tax implications arising from the acquisition, sale or other dealings in respect of the Notes.
Persons considering the purchase of the Notes should consult their own tax advisors concerning the taxconsequences of the purchase, ownership and disposition of the Notes.
HONG KONG
Withholding Tax
No withholding tax is payable in Hong Kong in respect of payments of principal or interest on the Notesor in respect of any capital gains arising from the sale of the Notes.
Profits Tax
Hong Kong profits tax is chargeable on every person carrying on a trade, profession or business in HongKong in respect of profits arising in or derived from Hong Kong from such trade, profession or business(excluding profits arising from the sale of capital assets).
Interest on the Notes may be deemed to be profits arising in or derived from Hong Kong from a trade,profession or business carried on in Hong Kong in the following circumstances:
• interest on the Notes is derived from Hong Kong and is received by or accrues to a company(other than a financial institution) carrying on a trade, profession or business in Hong Kong;
• interest on the Notes is derived from Hong Kong and is received by or accrues to a person, otherthan a company (such as a partnership), carrying on a trade, profession or business in Hong Kongand is in respect of the funds of that trade, profession or business; or
• interest on the Notes is received by or accrues to a financial institution (as defined in the InlandRevenue Ordinance (Cap. 112) of Hong Kong) and arises through or from the carrying on by thefinancial institution of its business in Hong Kong.
Sums received by or accrued to a financial institution by way of gains or profits arising through or fromthe carrying on by the financial institution of its business in Hong Kong from the sale, disposal andredemption of the Notes will be subject to Hong Kong profits tax.
Sums derived from the sale, disposal or redemption of the Notes will be subject to Hong Kong profitstax where received by or accrued to a person, other than a financial institution, from the carrying on of atrade, profession or business in Hong Kong, the sum is revenue in nature and the sum has a Hong Kongsource. The source of such sums will generally be determined by having regard to the manner in whichthe Notes are acquired and disposed of.
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Stamp Duty
No Hong Kong stamp duty is payable on the issue of the Notes. Stamp duty may be payable on anytransfer of the Notes as the relevant transfer is required to be registered in Hong Kong, but stamp dutywill not be payable if the Notes constitute loan capital (as defined in the Stamp Duty Ordinance(Cap.117 of the Laws of Hong Kong)). The Notes, under the present terms and conditions, constituteloan capital (as defined in the Stamp Duty Ordinance) and accordingly no Hong Kong stamp duty willbe chargeable upon the issue, transfer or exchange of a Bond.
THE BRITISH VIRGIN ISLANDS
The following summary contains a description of the principal tax laws of the British Virgin Islands, asin effect on the date hereof, and is subject to any change in the tax laws of the British Virgin Islandsthat may come into effect after such date (which may have retroactive effect).
Income Tax
As of the date of this offering memorandum, the Issuer is exempt from all provisions of the Income TaxAct of the British Virgin Islands. No income, capital gain, estate, inheritance, succession or gift tax,rate, duty, levy or other charge is payable by persons who are not persons resident in the British VirginIslands with respect to any debt obligations or other securities of the Issuer.
Witholding Tax
There are currently no withholding taxes or exchange control regulations in the British Virgin Islandsapplicable to payments the Issuer may make under the transaction documents relating to the Notes orunder the Guarantee.
PRC
The following summary describes the principal PRC tax consequences of ownership of the Notes bybeneficial owners who, or which, are not residents of mainland China for PRC tax purposes. Thesebeneficial owners are referred to as non PRC Noteholders in this section. In considering whether toinvest in the Notes, investors should consult their individual tax advisors with regard to the applicationof PRC tax laws to their particular situations as well as any tax consequences arising under the laws ofany other tax jurisdiction. Reference is made to PRC taxes from the taxable year beginning on or after 1January 2008.
Pursuant to the New Enterprise Income Tax Law and its implementation regulations, enterprises that areestablished under laws of foreign countries and regions (including Hong Kong, Macau and Taiwan) butwhose ‘‘de facto management bodies’’ are within the territory of China shall be PRC tax residententerprises for the purpose of the New Enterprise Income Tax Law and they shall pay enterprise incometax at the rate of 25 per cent. in respect of their income sourced from both within and outside China. Ifrelevant PRC tax authorities decide, in accordance with applicable tax rules and regulations, that the ‘‘defacto management body’’ of the Issuer or the Guarantor is within the territory of the PRC, the Issuer orthe Guarantor may be held to be a PRC tax resident enterprise for the purpose of the New EnterpriseIncome Tax Law and be subject to enterprise income tax at the rate of 25 per cent. for its incomesourced from both within and outside PRC. As at the date of this Offering Circular, neither the Issuernor the Guarantor has been notified or informed by the PRC tax authorities that it is considered as aPRC tax resident enterprise for the purpose of the New Enterprise Income Tax Law. On that basis,unless the relevant income is considered by the PRC tax authorities as income sourced from within thePRC, holders of the Notes will not be subject to withholding tax, income tax or any other taxes or duties(including stamp duty) imposed by any governmental authority in the PRC in respect of the holding ofthe Notes or any repayment of principal and payment of interest made thereon.
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However, there is no assurance that neither the Issuer nor the Guarantor will be treated as a PRC taxresident enterprise under the New Enterprise Income Tax Law and related implementation regulations inthe future. Pursuant to the New Enterprise Income Tax Law and its implementation regulations, anynon-resident enterprise without establishment within the PRC or whose income has no actual connectionto its establishment inside the PRC shall pay enterprise income tax at the rate of 10 per cent. on theincome sourced inside the PRC, unless a preferential rate is provided by tax treaties or arrangementsentered into between the country or region where the non-resident is established and the PRC. Any non-resident individual shall be required to pay an individual income tax at the rate of 20 per cent. on theincome sourced inside the PRC, unless a preferential rate is provided by tax treaties or arrangementsentered into between the country or region where the non-resident individual is resided and the PRC,pursuant to the PRC individual income tax laws. Such income tax shall be withheld by sources with thePRC payer acting as the obligatory withholder, who shall withhold the tax amount from each payment orpayment due. Accordingly, in the event the Issuer or the Guarantor is deemed to be a PRC tax residententerprise by the PRC tax authorities in the future, the Issuer or the Guarantor shall withhold income taxfrom the payments of interest in respect of the Notes for any non PRC Noteholder. However, despite thepotential withholding of PRC tax by the Issuer or the Guarantor, the Issuer or the Guarantor has agreedto pay additional amounts to holders of the Notes, subject to certain exceptions, so that holders of theNotes would receive the full amount of the scheduled payment, as further set out in the Terms andConditions of the Notes.
In addition, in the event that the Guarantor is required to discharge its obligations under the Guaranteeof the Notes, the Guarantor will be obliged to withhold PRC enterprise income tax at the rate up to 10per cent. on the payments of interest made by it under the Guarantee of the Notes to non PRC enterpriseNoteholders, or withhold PRC individual income tax at the rate of 20 per cent. on the payments ofinterest made by it under the Guarantee of the Notes to non PRC individual Noteholders, as suchpayments of interest will be regarded as being derived from sources within the PRC. To the extent thatthe PRC has entered into arrangements relating to the avoidance of double taxation with anyjurisdiction, such as Hong Kong, that allow a lower rate of withholding tax, such lower rate may applyto qualified non PRC resident enterprise Noteholders. Repayment of the principal will not be subject toPRC withholding tax.
Non PRC Noteholders will not be subject to the PRC tax on any capital gains derived from a sale orexchange of Notes consummated outside mainland China between non PRC Noteholders, excepthowever, if the Issuer is treated as a PRC tax resident enterprise under the New Enterprise Income TaxLaw and related implementation regulations in the future, any gain realised by the non PRC enterpriseNoteholders from the transfer of the Notes may be regarded as being derived from sources within thePRC and accordingly would be subject to PRC withholding tax at a rate of 10 per cent. in the case ofnon PRC enterprise Noteholders pursuant to the New Enterprise Income Tax Law and relatedimplementation regulations, or PRC individual income tax at a rate of 20 per cent. in the case of nonPRC individual Noteholders pursuant to PRC individual income tax laws. To the extent that PRC hasentered into arrangements relating to the avoidance of double taxation with any jurisdiction, such asHong Kong, that allow a lower rate of withholding tax or individual income tax, such lower rate mayapply to qualified non PRC Noteholders.
On 23 March 2016, the PRC Ministry of Finance and the PRC State Administration of Taxation jointlyissued the Circular of Full Implementation of Business Tax to Value-added Tax Reform (Cai Shui[2016] No. 36)(關於全面推開營業稅改徵增值稅試點的通知(財稅[2016]36號))(‘‘Circular 36’’), whichconfirms that business tax will be completely replaced by VAT from 1 May 2016. VAT is applicablewhere the entities or individuals provide services within the PRC. VAT is unlikely to be applicable toany transfer of Notes between entities or individuals located outside of the PRC and therefore unlikelyto be applicable to gains realised upon such transfers of Notes, but there is uncertainty as to theapplicability of VAT if either the seller or buyer of Notes is located inside the PRC. Circular 36 andlaws and regulations pertaining to VAT are relatively new, the interpretation and enforcement of suchlaws and regulations involve uncertainties.
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No PRC stamp duty will be chargeable upon the issue or transfer (for so long as the register ofNoteholders is maintained outside the PRC, and all the relevant transaction documents are executedoutside the PRC) of a Note.
The proposed financial transactions tax (‘‘FTT’’)
On 14 February 2013, the European Commission published a proposal (the ‘‘Commission’s proposal’’)for a Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria,Portugal, Slovenia and Slovakia (the ‘‘participating Member States’’). However, Estonia has since statedthat it will not participate.
The Commission’s proposal has very broad scope and could, if introduced, apply to certain dealings inthe Notes (including secondary’ market transactions) in certain circumstances.
Under the Commission’s proposal, FTT could apply in certain circumstances to persons both within andoutside of the participating Member States. Generally, it would apply to certain dealings in the Noteswhere at least one party is a financial institution, and at least one party is established in a participatingMember State. A financial institution may be, or be deemed to be, ‘‘established’’ in a participatingMember State in a broad range of circumstances, including (a) by transacting with a person establishedin a participating Member State or (b) where the financial instrument which is subject to the dealings isissued in a participating Member State.
However, the FTT proposal remains subject to negotiation between participating Member States. It maytherefore be altered prior to any implementation, the timing of which remains unclear. Additional EUMember States may decide to participate.
Prospective holders of the Notes are advised to seek their own professional advice in relation to theFTT.
FATCA
Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA,a ‘‘foreign financial institution’’ may be required to withhold on certain payments it makes (‘‘foreignpassthru payments’’) to persons that fail to meet certain certification, reporting, or relatedrequirements. The Issuer may be a foreign financial institution for these purposes. A number ofjurisdictions (including Hong Kong and the PRC) have entered into, or have agreed in substance to,intergovernmental agreements with the United States to implement FATCA (‘‘IGAs’’), which modify theway in which FATCA applies in their jurisdictions. Certain aspects of the application of the FATCAprovisions and IGAs to instruments such as the Notes, including whether withholding would ever berequired pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes, areuncertain and may be subject to change. Even if withholding would be required pursuant to FATCA oran IGA with respect to payments on instruments such as the Notes, such withholding would not applyprior to the date that is two years after the publication of the final regulations defining ‘‘foreign passthrupayment’’. Holders should consult their own tax advisers regarding how these rules may apply to theirinvestment in the Notes. In the event any withholding would be required pursuant to FATCA or an IGAwith respect to payments on the Notes, no person will be required to pay additional amounts as a resultof the withholding.
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PRC CURRENCY CONTROL
Current Account Items
Under PRC foreign exchange control regulations, current account items refer to any transaction forinternational receipts and payments involving goods, services, earnings and other frequent transfers.
Prior to July 2009, all current account items were required to be settled in foreign currencies withlimited exceptions. Following progressive reforms, Renminbi settlement of imports and exports of goodsand of services and other current account items became permissible nationwide in 2012, except that thekey enterprises on a supervision list determined by the PBOC and five other relevant authorities in thePRC would be subject to enhanced scrutiny when banks process current account cross-borderrepatriations.
On 5 July 2013, the PBOC promulgated the Circular on Policies related to Simplifying and ImprovingCross-border Renminbi Business Procedures(關於簡化跨境人民幣業務流程和完善有關政策的通
知)(the ‘‘2013 PBOC Circular’’) which simplified the procedures for cross-border Renminbi tradesettlement under current account items. On 1 November 2014, PBOC introduced a cash poolingarrangement for qualified multinational enterprise group companies, under which a multinationalenterprise group can process cross-border Renminbi payments and receipts for current account items ona collective basis for eligible member companies in the group. On 5 September 2015, PBOCpromulgated the Circular on Further Facilitating the Cross-Border Bi-directional Renminbi Cash PoolingBusiness by Multinational Enterprise Groups(關於進一步便利跨國企業集團開展跨境雙向人民幣資金
池業務的通知)(the ‘‘2015 PBOC Circular’’), which, among others, have lowered the eligibilityrequirements for multinational enterprise groups and increased the cap for net cash inflow. The 2015PBOC Circular also provides that enterprises within a pilot free trade zone in the PRC, such as theChina (Shanghai) Pilot Free Trade Zone (‘‘Shanghai FTZ’’) may establish an additional cash pool in thelocal scheme in such pilot free trade zone, but each onshore company within the group may only elect toparticipate in one cash pool.
The regulations referred to above are subject to interpretation and application by the relevant PRCauthorities. Local authorities may adopt different practices in applying these regulations and imposeconditions for settlement of current account items.
Capital Account Items
Under PRC foreign exchange control regulations, capital account items include cross-border transfers ofcapital, direct investments, securities investments, derivative products and loans. Capital accountpayments are generally subject to approval of, and/or registration or filing with, the relevant PRCauthorities.
Until recently, settlement of capital account items, for example, the capital contribution of foreigninvestors to foreign invested enterprises in the PRC, were generally required to be made in foreigncurrencies. Under progressive reforms by PBOC, MOFCOM and SAFE, foreign investors are nowpermitted to make capital contribution, share transfer, profit allocation and liquidation and certain othertransactions in Renminbi for their foreign direct investment within the PRC. Cross-border Renminbipayment infrastructure and trading facilities are being improved. Approval, registration and filingrequirements for capital account payments in Renminbi are being removed gradually. The Circular onReforming the Administrative Approach of the Foreign Exchange Capital Settlement for ForeignInvested Enterprises(關於改革外商投資企業外匯資本金結匯管理方式的通知)became effective on 1June 2015 (the ‘‘2015 SAFE Circular’’). In addition to the option to settle foreign current capitalthrough payment-based foreign exchange settlement(支付結匯制), the 2015 SAFE Circular allowsforeign-invested enterprises to settle up to 100 per cent. (subject to future adjustment at discretion ofSAFE) of the foreign currency capital (which has been processed through the SAFE’s equity interestconfirmation procedure for capital contribution in cash or registered by a bank on the SAFE’s system foraccount-crediting for such capital contribution) into Renminbi according to their actual operational needs
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on a voluntary basis. In principle, the Renminbi proceeds through the aforementioned voluntarysettlement shall be deposited into designated bank account called capital account item – account forforeign currency settlement pending payment(資本項目-結匯待支付帳戶)(the ‘‘Account for ForeignCurrency Settlement Pending Payment’’) as opened by such foreign-invested enterprise, andaccordingly all future payments shall be processed from such Account for Foreign Currency SettlementPending Payment. A negative list with respect to the usage of the foreign currency capital and theRenminbi proceeds settled therefrom is set forth under the 2015 SAFE Circular. In particular, a foreign-invested enterprise with investment as its main business (including the foreign-invested investmentcompany(外商投資性公司), foreign-invested venture capital enterprise(外商投資創業投資企業)orforeign-invested private equity investment enterprise(外商投資股權投資企業)) is permitted to use theRenminbi proceeds settled from its foreign currency capital (whether directly settled, or from theRenminbi deposit in its Account for Foreign Currency Settlement Pending Payment as previously settledthrough voluntary settlement) to make equity contribution to its invested enterprises directly, withoutfurther filings with SAFE. Further, according to the Circular on Reforming and Standardising theAdministrative Policies of the Foreign Exchange Capital Settlement of Capital Account Items(關於改革
和規範資本項目結匯管理政策的通知)which became effective on 15 June 2016, the voluntary foreignexchange settlement(意願結匯制)has been expanded from the settlement of foreign currency capitalonly under the 2015 SAFE Circular to the settlement of the foreign debt funds(外債資金)and the in-bound funds from the offshore IPO(境外上市調回資金)as well.
On 19 May 2014, the SAFE promulgated the Cross-Border Security Provisions which took effect on 1June 2014 and superseded a series of regulations previously issued by the SAFE and brought substantialchanges to the current cross-border security regime. The Cross-Border Security Provisions require post-event registration of the cross-border security with a local SAFE branch, and subject to the exceptionsset out in its appendix 1, the enforcement of any properly registered cross-border security no longerrequires prior verification by the SAFE. Also, the registration of cross-border security with a local SAFEbranch is no longer a ‘‘perfection’’ requirement, i.e., the Cross-Border Security Provisions have clarifiedthat failure to carry out any approval, registration or filing will not impact the validity of the security.The Cross-Border Security Provisions also allow the cross-border security to be used for securing anoffshore bond issuance, provided that (a) the offshore issuer shall be directly or indirectly owned by theonshore security provider; (b) the proceeds obtained from the offshore bond issuance shall be used forcertain offshore projects which are related to the onshore security provider from a shareholdingperspective; and (c) the issuer and such offshore projects have been duly approved by, registered andfiled with, the relevant authorities in charge of outbound investment in PRC.
Although the approval/registration requirements relating to the cross-border security were largely relaxedunder such Cross-Border Security Provisions, restrictions on the repatriation of proceeds from anoffshore debt still applied, which provided that such proceeds may not be repatriated, whether directlyor indirectly, from offshore to onshore, whether by way of equity investment or lending (which includesdirect or indirect equity investment in an offshore company where 50 per cent. Or more of its assets arelocated in mainland China) without obtaining prior approval from the SAFE. However, according to theNotice on Further Promoting the Reform of Foreign Exchange Administration and ImprovingAuthenticity and Compliance Review(關於進一步推進外匯管理改革完善真實合規性審核的通知)newly promulgated by the SAFE on 26 January 2017, proceeds from offshore debt secured by cross-border security may be repatriated to the PRC for use directly or indirectly by way of loans, equityinvestment, etc.
PRC entities are also permitted to borrow Renminbi-denominated loans from foreign lenders (which arereferred to as ‘‘foreign debt’’) and lend Renminbi-denominated loans to foreign borrowers (which arereferred to as ‘‘outbound loans’’), as long as such PRC entities have the necessary quota, approval orregistration. PRC entities may also denominate security or guarantee arrangements in Renminbi andmake payments thereunder to parties in the PRC as well as other jurisdictions (which is referred to as‘‘cross-border security’’). Under current rules promulgated by SAFE, foreign debts borrowed, outboundloans extended, and the cross-border security provided by a PRC onshore entity (including a financial
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institution) in Renminbi shall, in principle, be regulated under the current PRC foreign debt, outboundloan and cross-border security regimes applicable to foreign currencies. However, there remainspotential inconsistencies between the provisions of the SAFE rules and the provisions of the 2013 PBOCCircular. It is not clear how regulators will deal with such inconsistencies in practice.
According to the 2015 PBOC Circular, qualified multinational enterprise groups can extend Renminbi-denominated loans to, or borrow Renminbi-denominated loans from, eligible offshore member entitieswithin the same group by leveraging the cash pooling arrangements. The Renminbi funds will be placedin a special deposit account and may not be used to invest in stocks, financial derivatives, or non-self-use real estate assets, or purchase wealth management products or extend loans to enterprises outside thegroup.
Enterprises within the Shanghai FTZ may establish another cash pool under the Shanghai FTZ rules toextend inter-company loans, although Renminbi funds obtained from financing activities may not bepooled under this arrangement. Enterprises within the Shanghai FTZ can borrow Renminbi fromoffshore lenders under a pilot account-based settlement scheme within the prescribed macro prudentialmanagement limit. In addition, non-financial enterprises in the Shanghai FTZ are allowed to settle theforeign debt denominated in foreign currency with Renminbi on a voluntary basis, provided that theRenminbi proceeds settled therefrom should not be used (whether directly or indirectly) beyond theirbusiness scope or in violation of relevant laws and regulations in the PRC.
Most recently, the SAFE has newly promulgated a Notice on Further Promoting the Facilitation ofCross-border Trade and Investment (Hui Fa [2019] No. 28)(關於進一步促進跨境貿易投資便利化的通
知(匯發[2019]28號))on 23 October 2019, which further expanded the pilot program for facilitation offoreign exchange receipt and payment in trade, cancelled the restriction on equity investment withinPRC made by those foreign-invested enterprises which are not foreign-invested investment company(外
商投資性公司), foreign-invested venture capital enterprise(外商投資創業投資企業)or foreign-investedprivate equity investment enterprise(外商投資股權投資企業)using their registered capital fund, furtherexpanded the pilot program for facilitation of the receipt and payment under capital account and relaxedthe restriction on settlement and use of foreign exchange funds under capital account.
Recent reforms introduced were aimed at controlling the remittance of Renminbi for payment oftransactions categorised as capital account items. There is no assurance that the PRC government willcontinue to gradually liberalise the control over Renminbi payments of capital account item transactionsin the future. The relevant regulations are relatively new and will be subject to interpretation andapplication by the relevant PRC authorities. Further, if any new PRC regulations are promulgated in thefuture which have the effect of permitting or restricting (as the case may be) the remittance of Renminbifor payment of transactions categorised as capital account items, then such remittances will need to bemade subject to the specific requirements or restrictions set out in such rules.
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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND IFRS
The consolidated financial statements of the Group included in this Offering Circular have beenprepared and presented in accordance with PRC GAAP. PRC GAAP are substantially in line with IFRS,except for certain modifications which reflect the PRC’s unique circumstances and environment. Thefollowing is a general summary of certain differences between PRC GAAP and IFRS on recognition andpresentation as applicable to the Group. The Group is responsible for preparing the summary below.Since the summary is not meant to be exhaustive, there is no assurance regarding the completeness ofthe financial information and related footnote disclosure between PRC GAAP and IFRS and no attempthas been made to quantify such differences. Had any such quantification or reconciliation beenundertaken by the Group, other potentially significant accounting and disclosure differences may havebeen required that are not identified below. Additionally, no attempt has been made to identify possiblefuture differences between PRC GAAP and IFRS as a result of prescribed changes in accountingstandards. Regulatory bodies that promulgate PRC GAAP and IFRS have significant ongoing projectsthat could affect future comparisons or events that may occur in the future.
Accordingly, no assurance is provided that the following summary of differences between PRC GAAPand IFRS is complete. In making an investment decision, each investor must rely upon its ownexamination of the Group, the terms of the offering and other disclosure contained herein. Each investorshould consult its own professional advisors for an understanding the differences between PRC GAAPand IFRS and/or between PRC GAAP and other generally accepted accounting principles, and how thosedifferences might affect the financial information contained herein.
REVERSAL OF AN IMPAIRMENT LOSS
Under PRC GAAP, once an impairment loss is recognised for a long term asset (including fixed assets,intangible assets and goodwill, etc.), it shall not be reversed in any subsequent period. Under IFRS, animpairment loss recognised in prior periods for an asset other than goodwill could be reversed if therehas been a change in the estimates used to determine the asset’s recoverable amount since the lastimpairment loss was recognised.
RELATED PARTY DISCLOSURES
Under PRC GAAP, government-related entities are not treated as related parties. Under IFRS,government-related entities are still treated as related parties.
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SUBSCRIPTION AND SALE
The Issuer, the Guarantor and the Company have entered into a subscription agreement with the JointLead Managers dated 29 November 2019 (the ‘‘Subscription Agreement’’), pursuant to which andsubject to certain conditions contained therein, the Issuer, the Guarantor and the Company haveundertaken, among other things, that the Further Notes will be issued on the New Issue Date, and theJoint Lead Managers have severally and not jointly agreed with the Issuer, the Guarantor and theCompany to subscribe and pay for, or procure subscribers to subscribe and pay for, the Further Notes atan issue price of 100.0 per cent. of their principal amount in the amounts set forth below:
PrincipalAmount of
Further Notes
(U.S.$)Haitong International Securities Company Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,710,000Zhongrong PT Securities Limited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,290,000Industrial Bank Co., Ltd. Hong Kong Branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,710,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,710,000
The Subscription Agreement provides that the Issuer (or, in default, the Guarantor) has agreed to, andthe Company has procured the Issuer and the Guarantor to, pay the Joint Lead Managers certain feesand underwriting commissions, to reimburse the Joint Lead Managers for certain of their expenses inconnection with the initial sale and distribution of the Further Notes, and the Issuer, the Guarantor andthe Company will jointly and severally indemnify the Joint Lead Managers against certain liabilities inconnection with the offer and sale of the Further Notes. The Subscription Agreement provides that theobligations of the Joint Lead Managers are subject to certain conditions precedent, and entitles the JointLead Managers to terminate it in certain circumstances prior to payment being made to the Issuer.
The Issuer (or in, default, the Guarantor) may agree to and the Company may agree to procure the Issuerand the Guarantor to pay, through the Joint Lead Managers, a commission to certain private banks basedon the principal amount of the Further Notes purchased by the clients of such private banks.
The Joint Lead Managers and their respective subsidiaries or affiliates are full service financialinstitutions engaged in various activities, which may include securities trading, commercial andinvestment banking, financial advisory, investment management, principal investment, hedging,financing and brokerage activities. The Joint Lead Managers and certain of their subsidiaries oraffiliates may have performed certain investment banking and advisory services for, and entered intocertain commercial banking transactions with the Issuer, the Guarantor, the Company or any member ofthe Group and/or their respective subsidiaries and affiliates, from time to time, for which they havereceived customary fees and expenses.
The Joint Lead Managers and their respective affiliates may purchase the Further Notes and be allocatedFurther Notes for asset management and/or proprietary purposes but not with a view to distribution.References herein to the Further Notes being offered should be read as including any offering of theFurther Notes to the Joint Lead Managers and/or their affiliates acting in such capacity. In the ordinarycourse of their various business activities, the Joint Lead Managers and their respective affiliates maymake or hold a broad array of investments and actively trade debt and equity securities (or relatedderivative securities) and financial instruments (including bank loans) for their own account and for theaccounts of their customers and may at any time hold long and short positions in such securities andinstruments. Such investment and securities activities may involve securities and instruments of theIssuer. Such persons do not intend to disclose the extent of any such investment or transactionsotherwise than in accordance with any legal or regulatory obligation to do so.
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No action has been or will be taken that would, or is intended to, permit a public offering of the FurtherNotes, or the possession or distribution of this Offering Circular or any amendment or supplementthereto or any offering or publicity material relating to the Further Notes, in any country or jurisdictionwhere action for that purpose is required.
GENERAL
The Notes are a new issue of securities with no established trading market. No assurance can be givenas to the liquidity of any trading market for the Further Notes. The distribution of this Offering Circularor any offering material and the offering, sale or delivery of the Further Notes is restricted by law incertain jurisdictions. Therefore, persons who may come into possession of this Offering Circular or anyoffering material are advised to consult with their own legal advisors as to what restrictions may beapplicable to them and to observe such restrictions. This Offering Circular may not be used for thepurpose of an offer or invitation in any circumstances in which such offer or invitation is not authorised.
Accordingly, the Further Notes should not be offered or sold, directly or indirectly, and neither thisOffering Circular nor any other offering material, circular, prospectus, form of application oradvertisement in connection with the Further Notes should be distributed or published in or from anyjurisdiction, except in circumstances which will result in compliance with any applicable laws andregulations and will not, save as disclosed in this Offering Circular, impose any obligations on theIssuer, the Guarantor, the Company or the Joint Lead Managers.
If a jurisdiction requires that the offering of the Further Notes be made by a licensed broker or dealerand a Joint Lead Manager or any affiliate of that Joint Lead Managers is a licensed broker or dealer inthat jurisdiction, the offering of the Further Notes shall be deemed to be made by that Joint LeadManager or its affiliate on behalf of the Issuer in such jurisdiction.
UNITED STATES
The Further Notes and the Guarantee of the Further Notes have not been and will not be registeredunder the Securities Act and are subject to U.S. tax law requirements. Subject to certain exceptions,Further Notes may not be offered or sold within the United States. Each of the Joint Lead Managers hasagreed that, except as permitted by the Subscription Agreement, it will not offer, sell or deliver theFurther Notes within the United States. In addition, until 40 days after commencement of the offering,an offer or sale of Further Notes within the United States by a dealer whether or not participating in theoffering may violate the registration requirements of the Securities Act.
UNITED KINGDOM
Each of the Joint Lead Managers has represented, warranted and undertaken that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to becommunicated any invitation or inducement to engage in investment activity (within the meaningof Section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) received by it inconnection with the issue or sale of any Further Notes in circumstances in which Section 21(1) ofthe FSMA does not apply to the Issuer, the Guarantor or the Company; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect toanything done by it in relation to the Further Notes in, from or otherwise involving the UnitedKingdom.
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HONG KONG
Each Joint Lead Managers has represented and agreed that:
(a) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, anyFurther Notes other than (i) to ‘‘professional investors’’ as defined in the Securities and FuturesOrdinance (Cap. 571) of Hong Kong (‘‘SFO’’) and any rules made under the SFO; or (ii) in othercircumstances which do not result in the document being a ‘‘prospectus’’ as defined in theCompanies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong (the‘‘C(WUMP)O’’) or which do not constitute an offer to the public within the meaning of theC(WUMP)O; and
(b) it has not issued or had in its possession for the purposes of issue, and will not issue or have in itspossession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement,invitation or document relating to the Further Notes, which is directed at, or the contents of whichare likely to be accessed or read by, the public of Hong Kong (except if permitted to do so underthe securities laws of Hong Kong) other than with respect to Further Notes which are or areintended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’as defined in the SFO and any rules made under the SFO.
PEOPLE’S REPUBLIC OF CHINA
Each of the Joint Lead Managers has represented, warranted and undertaken that the Further Notes arenot being offered or sold and may not be offered or sold, directly or indirectly, in the PRC (for suchpurposes, not including Hong Kong, Macau or Taiwan), except as permitted by the securities laws of thePRC.
SINGAPORE
Each of the Joint Lead Managers has acknowledged that this Offering Circular has not been registeredas a prospectus with the Monetary Authority of Singapore. Accordingly, each Joint Lead Manager hasrepresented, warranted and agreed that it has not offered or sold any Further Notes or caused the FurtherNotes to be made the subject of an invitation for subscription or purchase and will not offer or sell anyFurther Notes or cause the Further Notes to be made the subject of an invitation for subscription orpurchase, and has not circulated or distributed, nor will it circulate or distribute, this Offering Circularor any other document or material in connection with the offer or sale, or invitation for subscription orpurchase, of the Further Notes, whether directly or indirectly, to any person in Singapore other than (i)to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) ofSingapore, as modified or amended from time to time (the ‘‘SFA’’)) pursuant to Section 274 of the SFA,(ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of theSFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditionsspecified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with theconditions of, any other applicable provision of the SFA.
Where the Further Notes are subscribed or purchased under Section 275 of the SFA by a relevant personwhich is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the solebusiness of which is to hold investments and the entire share capital of which is owned by one ormore individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investmentsand each beneficiary of the trust is an individual who is an accredited investor,
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securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) ofthat corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not betransferred within six months after that corporation or that trust has acquired the Further Notes pursuantto an offer made under Section 275 of the SFA except:
(i) to an institutional investor or to a relevant person, or to any person arising from an offer referredto in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(ii) where no consideration is or will be given for the transfer;
(iii) where the transfer is by operation of law;
(iv) as specified in Section 276(7) of the SFA; or
(v) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securitiesand Securities-based Derivatives Contracts) Regulations 2018.
JAPAN
The Further Notes have not been and will not be registered under the Financial Instruments andExchange Act of Japan (Act No. 25 of 1948), as amended (the ‘‘FIEA’’). Accordingly, each Dealer hasrepresented and agreed, and each further Dealer appointed under the Programme will be required torepresent and agree, that it has not, directly or indirectly, offered or sold and will not, directly orindirectly, offer to sell any Further Notes in Japan or to, or for the benefit of, a resident of Japan (whichterm as used herein means any person resident in Japan, including any corporation or other entityorganised under the laws of Japan) or to others for re-offering or resale, directly or indirectly, in Japanor to, or for the benefit of, any resident in Japan, except pursuant to an exemption from the registrationrequirements of, and otherwise in compliance with, FIEA and other relevant laws and regulations ofJapan.
THE BRITISH VIRGIN ISLANDS
British Virgin Islands
No invitation has been or will be made directly or indirectly to the public in the British Virgin Islandsor any natural person resident or citizen in the British Virgin Islands to subscribe for any of the Notes.
This offering circular does not constitute, and will not be, an offering of the Notes to any person in theBritish Virgin Islands.
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GENERAL INFORMATION
1. Clearing Systems: The Existing Notes have been accepted for clearance through Euroclear andClearstream. On the New Issue Date, the Further Notes will be consolidated into and form a singleseries with the Existing Notes, and the whole series of Notes will be cleared by Euroclear andClearstream under Common Code number 198208183, the International Securities IdentificationNumber for the Notes is XS1982081835 and the Legal Entity Identifier number3003004B5ZS3Y4K7CS94. The Further Notes will be immediately fungible with the ExistingNotes upon issue on the New Issue Date.
2. Authorisations: The Issuer has obtained all necessary consents, approvals and authorisations inconnection with the issue of and performance of its obligations under the Further Notes, the TrustDeed, the Agency Agreement, the Account Bank Agreement and the Keepwell and LiquiditySupport Deed. The issue of the Further Notes was authorised by resolutions of the sole director ofthe Issuer passed on 28 November 2019. The Guarantor has obtained all consents, approvals andauthorisations in connection with the giving of the Guarantee of the Further Notes and theperformance of its obligations under the Trust Deed, the Guarantee of the Further Notes, theAgency Agreement, the Account Bank Agreement and the Keepwell and Liquidity Support Deed.The giving of the Guarantee of the Further Notes was authorised by resolutions of the board ofdirectors of the Guarantor passed on 28 November 2019. The Company has obtained all necessaryconsents, approvals and authorisations in connection with the entry into of the Keepwell andLiquidity Support Deed and the Deed of Equity Interest Purchase Undertaking and the performanceof its obligations under the Trust Deed, the Agency Agreement, the Keepwell and LiquiditySupport Deed and the Deed of Equity Interest Purchase Undertaking. The giving of the Keepwelland Liquidity Support Deed and the Deed of Equity Interest Purchase Undertaking was authorisedby resolutions of the board of directors of the Company passed on 18 March 2019.
3. No Material Adverse Change: Except as disclosed in this Offering Circular, there has been nomaterial adverse change since 31 December 2018 in the financial or trading position, prospects orresults of operations of the Issuer, the Guarantor, the Company or the Group.
4. Litigation: Except as disclosed in this Offering Circular, none of the Issuer, the Guarantor, theCompany or any member of the Group is involved in any litigation or arbitration proceedings,which the Issuer, the Guarantor, the Company or the Group, as the case may be, believes arematerial in the context of the Notes, the giving of the Guarantee of the Notes or entering into theKeepwell and Liquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and theAccount Bank Agreement and, so far as the Issuer, the Guarantor or the Company is aware, nosuch litigation or arbitration proceedings are pending or threatened which are material in thecontext of the Notes, the giving of the Guarantee of the Notes or entering into the Keepwell andLiquidity Support Deed, the Deed of Equity Interest Purchase Undertaking and the Account BankAgreement.
5. Listing of Notes: The Existing Notes are currently listed on the SGX-ST, effective from 21 May2019 and represented by the stock code WPJB. Approval in principle has been received from theSGX-ST for the listing and quotation of the Further Notes on the Official List of the SGX-ST. TheNotes will be traded on the SGX-ST in a minimum board lot size of S$200,000 (or is equivalent inother currencies) for as long as any of the Notes are listed on the SGX-ST and the rules of SGX-ST so require. For so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST sorequire, the Issuer will appoint and maintain a paying agent in Singapore, where the Notes may bepresented or surrendered for payment or redemption, in the event that the Global Note Certificateis exchanged for Notes in definitive form. In addition, in the event that the Global Note Certificateis exchanged for Notes in definitive form, an announcement of such exchange shall be made by oron behalf of us through the SGX-ST and such announcement will include all material information
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with respect to the delivery of the Notes in definitive form, including details of the paying agent inSingapore. Following the listing of the Further Notes, the whole series of Notes will be representedby the stock code WPJB.
6. Available Documents: As long as any Note is outstanding, copies of the following documents willbe available for inspection and, in the case of the documents referred to in paragraph (b) below,copies may be obtained during normal business hours at the specified office of the Company:
(a) articles of association (or equivalent) of the Issuer, the Guarantor and the Company;
(b) copies of the Group’s Financial Statements as at and for the two years ended 31 December2017 and 2018 and the Guarantor’s Financial Statements as at and for the two years ended 31December 2017 and 2018;
(c) the Agency Agreement;
(d) the Trust Deed;
(e) the Keepwell and Liquidity Support Deed;
(f) the Deed of Equity Interest Purchase Undertaking; and
(g) the Account Bank Agreement.
7. Independent Auditors: The Group’s Financial Statements as at and for the two years ended 31December 2017 and 2018, which are included elsewhere in this Offering Circular, have beenaudited by WUYIGE Certified Public Accountants LLP, the independent auditor of the Group.
The Guarantor’s Financial Statements as at and for the two years ended 31 December 2017 and2018, which are included elsewhere in this Offering Circular, have been audited by PKF HongKong Limited, the independent auditor of the Guarantor Group.
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INDEX TO FINANCIAL STATEMENTS
Page
The Group’s Financial Statements for the Year Ended 31 December 2018
Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17
The Group’s Financial Statements for the Year Ended 31 December 2017
Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-110
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-113
Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-117
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-119
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-121
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-125
The Guarantor’s Financial Statements for the Year Ended 31 December 2018
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-231
Consolidated Statement of Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . . . . F-234
Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-235
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-237
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-238
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-240
The Guarantor’s Financial Statements for the Year Ended 31 December 2017
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-281
Consolidated Statement of Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . . . . F-284
Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-285
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-287
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-288
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-290
F-1
F-2
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Auditor's Report
DAXIN SHEN ZI [2019] No. 1-01193
Zhongrong International Trust Co., Ltd:
L Opinion
We have audited the financial statements of Zhongrong International Trust Co., Ltd (hereafter
referred to as "the Company"), which comprise the consolidated and the Company's balance sheets
as at December 31, 2018, the consolidated and the Company's statements of income, the
consolidated and the Company's statements of cash flows and the consolidated and the Company's
statements of changes in equity for the year then ended, and notes to the financial statements.
In our opinion, the accompanying financial statements give a true and fair view of the financial
position of the Company as at December 31, 2018, and of its financial performance and cash flows
for the year then ended in accordance with Accounting Standards for Business Enterprises.
II.Basis for Opinion
We conducted our audit in accordance with Chinese Certified Public Accountants Auditing
Standards. Our responsibilities under those standards are further described in the Auditor's
Responsibilities for the Audit of the Financial Statements section of our report. We are independent
of the Company in accordance with the Code of Ethics for Chinese Certified Public Accountants and
have fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
III. Responsibilities of the Directors and Those Charged with Governance for the Financial
Statements
The directors of the Company are responsible for the preparation of financial statements that give a
true and fair view in accordance with Accounting Standards for Business Enterprises, and for such
internal control as the directors determine is necessary to enable the preparation of the financial
statements that are free from material misstatement, whether due to fraud or error.
- l -
F-3
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
In preparing the financial statements, the directors are responsible for assessing the Company's
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the
Company or to cease operations or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting
process.
IV. Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report
that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with auditing standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
A. Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perfonn audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
B. Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control.
C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
D. Conclude on the appropriateness of the directors' use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company's ability to continue as a going concern.
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F-4
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018 If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor's report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
E. Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
UNTANTS LLP.
19A004992
002..cnJ 65834275
- 3 -
(Engagement partner)
Certified Public Accountant of China
F-5
Consolidated Balance Sheet Prepared by, Zhongrong International Trust Co.,Ltd 31/Dec/18 Unit, RMB Yuan
Item Note As at 31/12/2018 As at 1/1/2018
Assets,
Cash at bank and on hand 8. I 11,500,569,549.81 9,031,278,954.13
Deposit Reservation for Balance 8.2 161,991.81 845,454.55
Withdrawal of funds
Financial assets measured at fair value through profit 8.3 10,413,029,482.91 ,1, 752, 129, 818. 02 or loss for the current neriod
Derivative financial assets
Notes receivable
Accounts receivable 8.4 125,922, 617.71 168,304, 186. ~
Prepa)'llents 8.5 7,855,768.75 277,174. 3C
Interest receivable 8.6 38,356,704.28 49, 805, 585. 6[
Dividends receivable
Other receivables B. 7 100,738,513. 71 173, 951, 902. 6E
Buying back resale financial assets 8.8 1_00, 000. 00 38,000,000.0C
Inventories 34,238.99 34,039.85
Held-for-sale assets 8.9 5, 02J.~3. 59
Loans and advances to customers 8. 10 • I, 131,1/-ef,~~ 3,544, 052,778.70
Available- for- sale financial assets 8. II 1,052,~~J I"'-. 8,115,691,130.13
Non-current assets due within one year v _ ~~ Held- to-maturity investments '#_:# ,..,
Long- term receivables ~rA Long-term equity investments 8. 12 2,214,529,944. 35 '\.~ ~ .... 079.4~
Investment property ' .. ,. ~ <,'/~ Fixed assets 8. 1:1 25, 608,759.25 21 -'ll'-~".,,. . - '
Construction in process 'X1 __..II
Construction materials
Disposal of property, plant and equip11ent
Intangible assets 8. M 67,158,171. 70 52, 555, 569. 17
Development expenditures 8. 15 287,819.71
Goodwi 11 B. 16 23,947,504.99 23,947,504.99
Long- term deferred expenses 8. 17 81,645,628. 86 23,946,211.63
Deferred tax assets 8. 18 620,555,550. 1€ 632,615,941. OS
Other assets 8. 19 17,289,265. 04 11,997, 830. 36
Total of assets 30. 727,432.179. 01 28, 78B 295 028. 71
Legal representative: Yang Liu r crson in charge of accounting function : Jinhua Lian Person 1n charge of accountins : Song Wang
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F-6
Consolidated Balance Sheet (Continued) Prepared by: Zhongrong International Trust Co • Ltd 31/Dcc/ l8 Unit: Hllll Yuan
I Le• Xotc As ot 31/12/2018 As al 1/1/2018
Liabilities:
Short-tor• loans
Plocc•ents for• banks and other financial onsl llut Ions 8.20 3, 100, 000, 000. 00 2, 000, 000, 000. 00
Financial liabl II tics •easured at fair value through profit or loss for the current ocriod
Derivativo financiPI l!abll ltics
Notes pay ab le
Accounts payable 8.21 45, 020, 805. 94 62, 893, 808. 8f
Adronccs froa custoacrs 8. 22 30, 79[, 471. 91 51, 40 I, 696. 6C
Financial nsscts sold under repurchtt~c ugrccacnts 5, 300, 000. 00
Fees ond coalsslons paynblc
E• ployce bcnefi ls payabl c 8. 23 2,383, 481, 550.07 2, 181, 098, 786. 97
Taxes and surcharges paynbl c 8. 21 590, 814, 573. 26 359,617,875. 2E
Interest payable 8. 25 20,891,814.06 15,020, 166. 28
Dividends payable
Other payables 8. 26 112,929,301.61
" 96, 683, 820. 3:
llcld-for-sole I !obi II tfes B. 27 I i'l?l. 913,86 . ~"'" ~on-currcnl liabl li tics due •ilhia one yca.r 8. 28 2,848, 409, 858.~ y ~ ~. \,, ~ .. ,,,,_ I, 467,943,191.11
Long-tcra loans '(~~, Bonds pnyoblc 8 29 I, 366,970, 186. 20 ~ )3~9. 701, fiE
Other long-lcra ll"Yablcs /,;~'-... Loni.tor• C9ploycc benefits payable 8. 30 191 , 164, 170. 22 ~,f4'.' -"· 0, •\2;\, • 42, 698,, 0
Speci fie payables j Provi s ions . ~ferrcd income
Deferred tax l1obilltics 8. 18 24, 771,310. 83 29, 746, 250. 0(
Other liabilities
Total of liabilities II, 321, -188, 933, 59 10,248,148,301. 4~
Equity:
Paid- in capital (or Share capilHI) 8. 3 1 12, 000,000,000 00 12,000, 000,000. OC
Other cqu1 ty 1nstruacnls
Capit.al r<.'scrvc 8. 32 245,697, 471 42 236, 123, 868. 22
Other co• prchcnsive incoae 8.6 11,591,568. 33 167, 940, 680. 43
Includlng:Porclgn currl'ncy translation dtfferonces 19, 163,280. 39 7, 169,637, 11
Surplus reserve 8. 33 1, 696, 566, 327. 07 I, 521,491,740.03
General risk reserve 8. 31 1, 224, 052, 261. 36 I , 092, 899, 624. 72
Retolncd earnings 8. 35 3,312,567, 071 76 I, 953, 539, 632. 4 I
Equity attributable to paront c011pany 18,520,171,702.94 16,972, 295,545.81
lllnorlty Interests 886, 468, 542. 48 I, 567, 851, 181. 4i
Total equity 19,405,943, 215. 42 18, 540, 116, 727. 2f.
Total liabilities and oqulty 30, 727, 432, 179. 0 I 28, 788, 295, 028. 7-1
Lega l ro-prC$<lntau,c. Yang l.iu Pc n on 1n chor1c of account ing funclion: Jlnhua l.ian Pc-rson tn chargo of accouru.ing : Sons •ang
- 5 -
F-7
Company Balance Sheet Prepared by, Zhongrong International Trust Co. ,Ltd 31/Dec/18 Unit: RMB Yuan
Item Note As at 31/12/2018 As at 1/1/2018
Assets, Cash at bank and on hand 10,122,381,489.80 6,106, 191,939.3S
Deposit Reservation for Balance Withdrawal of funds Financial assets measured at fair value 7,452,027,186. 17 2,923,057,651.21
throu.th orofit or loss for the current neriod
Derivative financial assets
Notes receivable
Accounts receivable 1,1. 1 69,167,119.63 49, 894, 20 l. 2(
Prepayments
Interest receivable 11, 052, 503. 12 28,340,087.25
Dividends receivable
Other receivables 11.2 55,721,983.19 111, 621, 125. OE
Financial assets purchased under resale
Inventories
Held- for-sale assets 1 -. Loans and advances to customers
"" '· I, 500, 000, 000. 00
Available- for-sale financial assets 955, 229,166.51 ~ 1,503,987,523. 31
Non-current assets due within one year -'
Held-to-naturity investments " " ,-:: ,,g. ',,
Long- tern receivables ~ . ✓ ( J ··, ;).
Long- term equity investments 11. 3 1, 553,681,518, 18 5, 0~; 959, 981'-27
Investment property /
' ·~
Fixed assets 16,387,013.28 1a, 129, ta{ ']
~ Construction in process ~
Disposal of property, plant and equip• ent
Intangible assets 52,629, 113. 71 41, 518, 194. 52
Development expenditures
Goodwill
Long- term deferred expenses 68,805,312.27 15,657, 111. 95
Deferred tax assets 569,726,742.58 603,824,789.37
Other assets 7,153, 888. 95
Total of assets 23,934,266,667.99 20,989,518,976.37
l.esal representative: Yang 1,[u Person in chargo of accounting function: J1nhua Lian Person in charge or accounting Song \lane
- 6 -
F-8
Company Balance Sheet(Continued) Prepared by, Zhongrong interna l Ion., I Trusl Co. , l, ld J l/lle~/1 8 Uni l : R\IH Y11nn
It em ~ 0 ( (.' ,Is al 31/ 12/20 \R As at 1/ 1/2018
Lla bll I ties:
Short- tor• loons
r1occ11cnts for11 banks and other r, nanc 101 i ns titutions 3, 400, 000, 000. 00 2, 000, 000, 000. oc Flnanclal liabiliucs measured at fair vnluc through pro f1l or loss for too current ncriod
Derivative financial liabillt1es
Notes payable
Accounts payabl c
Advances rr011 cust011crs 8, 868, 783. 51 12, 290, 122. 5!
Fi nnnclaJ assets sold under rcpurchas c ngrc-c• cnts
Fees and c011• tsslons payable
E1111loycc benefi t s payable 2, 216,732,921. 08 2, 315, 089, 391. 81
Taxes and surcharges payable 526, 172, 802. 89 307,836, 515. 6~
Interest payable 9, 589, 611. 11 5, 026, 666. 6E
Dividends payable
Other payables 170. 632, 12~ ,8~ 22, 216, 974. 2.!i
·.~ ,,.
lie Id- for-sole llabJ I[ lies ~-<[
:'(on-current l labll I tics due •I t hin one year 'I ,
' . Lone- te r• I oans ~
Bonds payable - ,.....
Ot her Jong-tor• payab Jes ' 'If.}{:' .
Long-t or• cmploycc benefits payable 191, 161, I 70. 22 12:i, :H2, 698 o:
~ Spec H I c pay ab I cs ' Provisions ~ Deferred ta, liabd i l1cs 2,7 12,026.98
Other liabilit ies
Total of liabili ties 6, 725, 872, 710. 71 5,11 7,832,369. 01
l!qulty:
Paid- In capi tal (or Share capi tal) 12, 000, 000, 000. 00 12, 000, 000, 000. 00
Other equi t y Jnstrumcnls
Cap1 ta! reser ve 238, 680, 195. 22 236,239,848. 81
Other c011prehcns n e inco•c - 3, 829, 976. 95 12, 619, 219.90
lncluding:Foreign currency trens la lion differences I Surplus reserve I , 696, 566, 327. 07 I, 521, 191,710.03
General risk reserve I, 224, 052, 264. 36 I, 092, 899, 624. 72
Retai ned carn(ngs 2. 052, 924,817. 58 I, 008, 406, 173. 90
Equi ty at tributable to parent c oapany 17, 208, 393, 927. 28 15, 871, 686, 607. 36
llinoritJ shareholders i nterests
Total equity 17, 208, 393,927. 28 15,871 , 686, 607. 3E
Tot a l liabilities and equi ty 23,931, 266, 667. 99 20,989, 518, 976. 31
l.ega l r epresentative, Yong Ltu Person In charge of accounl l ng function : J1nhua Lian Person in charge of account ing : Song l ang
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F-9
Consolidated Income Statement Prepared by: Zhongrong Intcrnat lonal Trust Co., Ltd For the year ended 31 December 2018 Unit: RIil Yuan
Ite11 Note Year ended 31/12/2018 Year ended 31/12/2017
I. Total operating income 5,888,845,749.21 6,534,604,295.4f
Net interest income 8.36 315,104,034.43 376, 592, 076. 5E
Interest income 526,033,812.21 500,924,021. oc Interest expenses 210,929,777.78 124,331,944. 44
Net fee and commission income 8.37 2,365,755, 590. 06 3,074,460,289.8€
Fee and commission income 2,365,755,590.06 3,074,460,289.8€
Fee and commission expenses
Operating income 8. 38 552,208,543. 68 587,785,815. SC
Investment inco11e(·-· for loss) 8. 39 1,147,817,782.29 1,380,008,447.58 Including: Investment income fro11 associates and 175, 850, 596. 11 171,698,636.69 ioint ventures Gain from fair val ue changes(•-• for loss) 8.40 13,966, 819.55 -1,973,390.31
Foreign exchange gains("-H for loss) 8. 41 215, 351. 07 -351, 845. s: Other operating income 8.38 1, 479,535,911. 38 1, 113, 936, 512. 3E
Gains from disposal of assets(•-• for loss) 8.45 893,671.06 476,418.21
Other income 8.46 13,348, 045. 69 3, 669, 971. 55
2.Total operating costs 3,193,313,093.53 2,917,741,940.27
Business tax and surcharge 8.42 31,749,985.12 40,310,868.77
Operation and administrative expenses 8.43 3,078,010, 722".°8!! 2,856,932,530.57
Losses of assets impairment 8.44 83,388,t.rf.M: ·,, 20,335,251. %
Other operating cost 8.38 163,9~.'.'ti'a ~ ;--.,. 163,288. 94
3. 0perating profits(·- · for loss) 2,695,532,655.M 17'_✓A 3,616,862,355.2~ Add : Non-operating income 8.47 16,982, 177. 13 ....;,.;.v._,a 14,613,560. 5S
Less:Non-operating expenses 8.48 6, 407,097. 71 '\:. Y" ;;__, ..... 10, 724, 540. n 4.Profit before tax("-" for loss) 2, 706, 107, 735. 10 "'i' ..3; ' 620, 751, 375. 04
Less:income tax expenses 8.49 563,876,297. 82 ' .• ,j,'~ is:~69,042.07 5.Net profit(w- ~ for net loss) 2,142,231,437. 28 cls,:~2. 332. 97 ' ·,2;-:B
Net profit attributable to parent COllpany 2, 065,654, 242. 05 2,747,369, 2Z9. 87
Profit/loss attributable to minority share-holders 76,577,195.23 58, 01-3~1 ~~ "' . .,, Profit or loss from continuin~ ooerations 2,142,231,437.28 2 805 38"'"' ,,,... 1lr.
Profit or loss from discontinued ooerations "V
6.0ther comprehensive income net of tax -105,039,012.42 68,555,358.48 (I) Comprehensive inco• c not to be reclasslried as profit or loss
!)Changes in re11easured defined benefit obligations or net assets 2)Portion or co•prehensive inco• e not to be reclassified as
'Droflt or loss under eoui tJ method (2) Comprehensive income to be reclass ified as profit or loss -126, 349, 112. 10 67,937,005.Sf
I) Port ton of comprehensive incOIIC to be reclassifi ed as orofi t or loss under eoui ty method 2)Ga{n or loss fro• fair value changes of available-for-sale
-138,342, 755.38 79, 184,367.4€ financial assets
3) Gain or loss from reclassification of held- to-ma tur fly investments as aval !able-for-sale financial assets 4) Gain or loss on effective cash flow hedging 5) Currency translation difference 11,993,643. 28 -11, 247, 361. 61
Other comprehcns i ve income attributable to minority shttrc- 21,310,099.68 618,352.63 holders. net of tax 7. Totlll COIIJ)rehonsive inco• e 2, 037,192,424.86 2,873,937,691.45
Total co•prehcnshe inc01tc attributable to parent company 1. 939,305 129. 95 2 815,306 285. 72 * Total co•prchensivc inco•c attributable to 111nonty 97,887,294. 91 58,631,405. 73
share-holders 8. Earnings per share
(I) Basic earnings per share
(2) Di luted earnings per share
Legal represcntat i ve: Yang Liu Per.son 1n charge of accountir1~ func tion: Jinhua I.um Person in charge of accounting : Song Wang
- 8 -
F-10
Company Income Statement Prepared by, Zhongrong International Trust Co., l,td For the year ended 31 Dece11ber 2018 Unh, RMB Yuan
Item Note Year ended 31/12/2018 Year ended 31/12/2017
l. Total operating income 4,654,070, 010. 39 4,868,874,956. 84
Net interest income 14. 1 126,233,299. 76 246,603,094. 71,
Interest income 337,163,077.54 370, 935, 039. 1l
Interest expenses 210,929, 777. 78 124,331,941. 4,
Net fee and commission income 11. 5 2,173,730,801.43 2,880, 122, 338. 2!
Fee and commission income 2,173,730,801.43 2,880, 122, 338. 2!
Fee and commission expenses
Operating income
Investment income(•-• for loss) 11. 7 871,113,587. 19 639,784,847.51
Gain from fair value changes(•-• for loss) 1,053,622.40
Foreign exchange gains(•-• for loss) 215,351.07 -351, 845. 81
Other operating income 11. 6 1,171,839,750.17 1,100, 790,533.9(
Gains from disposal of assets(•- • for loss) 897,797.18 476,118.21
Other income 8,985,800.89 I, 449, 569. 96
2. Total operating costs 2,421,733,561.32 2,050, 810,012.97
Business tax and surcharge 28, 199,371.41 35,170,575.02
Operation and administrative expenses 2,313,145,755.40 2,015, 639,467. 95
Losses of assets impairment 83, 388,,.43h 51
Other operating cost -'-f"'... 3.0perating profits(•-• for loss) 2,229,336. •i•f9~oi 2,818, 064,913. 87
Add: Non-operating income 580, 1s2J s , 2, 701, 300. 1€
Less:Non-operating expenses 6,211, 226. 42 ~ $ , 7,785,474. 08
4. Profit before tax(•-• for loss) 2,223,672,375.41 "'~: ~\,2,812,980, 739. 95
Less:income tax expenses 172,926,505.05 ,7 r _,,,)613. 311,323. 28
5. Net profit(*-* for net loss) 1,750, 745,870.36 '< J"ji':,{69, 606,116. 67
Net profit attributable to parent company 1,750,745, 870.36 ~ 169,606,416.67 'I,_
Profit/loss attributable to minority share-holders , Profit or loss from continuing operations I, 750,715, 870. 36 2, 169, 606,1116 . .'67
Profit or loss from discontinued operations V' 6. Other comprehensi vo ineOIJle net of tax -16,479, 196. 85 - 10, 297,821. 19 (I) Comprehensive income not to be rcclassi fied as profit or loss
[)Changes in remeasured defined benefit obi igations or net assets
2)Portion of comprehensive i ncome not to be reclassified as lnrof it or loss under equity method
(2) Comprehensive income to be reclassified as prorit or loss - 16,479, 196. 85 -10, 297,821. l! l) Port ion of comnrehens1vc inco11c to be reclassified as
profit or loss under cqui tv method 2) Gain or loss rron fair value changes of available-for-sale -16,479, 196. 85 -10,297,821. l!
financial assets 3) Gain or loss from reclassification of hold-10-maturi ty
investments as available-for-sale financial assets 4) Gain or loss on effective cash flow hedging
5) Currency translation difference
7. Total comprehensive inco• e 1,734,266,673.51 2, 159, 308, 595. 1!
Total comprehensive incooe attributable to parent company 1,734,266,673.51 2, 159, 308, 595. 4! * Total comprehensive income attributable to minority share-
holders
8. Earnings per share
(I) Basic earnings per share
(2) Diluted earnings per share
Legal representative, Yang Liu Person in charge or accounting function: Jinhua l.ian Person in charge of accounting Song Wang
- 9 -
F-11
Consolidated Cash Flows Statement Prepared by: Zhongrong Internal lonnl frust Co., Ltd For the year ended 31 December 2018 Unit: kVB Yuan
he• \'otc Year ended 31/12/2018 Year ended 31/12/2017 1. Cash flo,rs from oneratina: activities
Cash received from snles and services 560. 971, 159. 15 678,571 , 829 o I ..6.Net increase 1n custimcr dcposi ts and depos:its: and deposits
fro• banks and other finencinl ins ti Lutions Li.Net increase in loons fro11 the central bank Li.Net increase in placemenis from other financial ,, __ ,, .... , ___ 6.Cash received from premiums of original insurance contracts
Li.liet cash received fro• reinsurance business Li.~ct increase in dcnosits from nolicvholdcrs Li.Net increase in (disposal of) financial assets measured at
fair value throu•h arofi t and loss LlNct increase l n (disposal of) nvai1a.blc for sale financial 4, 705, 695, 26 I. 43
' -6 C~1..qh rcce i vcd I roa inLoro,a fl!ei nod couiissions 1. 554. 671 339 38 4. 789,979 229, fl1
~Not. i ncrease in placc.monls from bKnks and other f1nanciol I, 400, 000, 000. 00 700, 000, 000 0(
i nstitutions .6.Nct incr-easc 1n reDurchose business caDital 7. 308. 778. 30
Taxos and surchprgt!s refunds
Cash received related to other ooeratin• activities 2. 162. 077, 823. 77 2 257 7H 871. I' Total cash inflms fro• oneratin.: activities I 3, 390 727 362. 03 8 126 301 933. 27
Cash naid for 1roods and services IO 314. 40 127 956. 32 .l~.}fot increase in loans and advances to customers -2 193 109. 000. 03 2. 945. 238. 080. 91 Li.~et increase in deposits with central bank and other
financial institutions Li.Cash naid for ori•inal Insurance, contrac1. cla ims 6Nct increase in (disposal of) financial assets • casurcd at 5. 360. 096, 750. l 7 528,262,638.28
fnfr •n l ,N'! thrrn.,O"h - - fit nr:d In~~ ~Net increase in (disposal of) available for sale financial
I, 137,738,905. 31 assets ' A Cash oaid for inte!rest fees and co• missions 206. 366'. 831. 33 121 306 519. 61
Li.Cash aaid for nolicvholder dividend exnenses '-.. " >✓ Cash paid to and for c• oloyees 2 304, 853:"'"":" 8 I, 939,563.051. 21
Taxes and surcharges cash payments I,352,437,6~~ . 1,348, 871,703.1" ,
Cash naid related to other onoratinP activities L 814, 112. 079. 111 ' ,, l. ·lllii. 792. 894. 71
Total cash outflows f'l"OII oneratiha actiYities 8- SH 768. 156. 80 ' IO· 719 90 I 782. 4! Net cash flows fro• oneratin• actlvi ties 8. 51 4 515 959, 205. 23 / -'2- :{li.1 599, 819. 2:
2. Cash flo,rs froa in,estina activities: ·- I .... Cash received from wi thdrow of investments 53 785 307. 16 " ., .w,, R!i'I 371. 11
Cash received from invest.ment income 101 665, 339.11 '\. 1-!i9'il>8:)1;8. 69
~ct cash received fro• disposal of \properly, p)nnl and I, 126, 293. 27 y~t~~
Qauiooment intaniiriblc asst!ts and 01.hor loniz-t.crm assets ;, . ~ct c11sh received fro• disposa l of subsidiaries and other ·,~ business uni ts
1.086,565, . '.'J Cnsh r-ccctvcd related t.o 01.hcr invoslina activities 19. 603, 4,(3,,43
Total cash inflows fr<>11 investin• activities 159. 576. 940. 14 I 315 237 738. 72 Cash paid ror property, plant and cqu ipc• ent, intangible
36,642.216. 53 75, 194, 126. 8 assets and other lon111:-term assets
Cash payments for investments 2. 015, 003. 66 21,380,342. 3,
l!.~ct increase 1n pledge loans Net Cash paid for acquisition of subsidiaries and other
219,871, 5•2. 2! bus incss uni ts Cash naid related to other 1nvcstin~ activities 34 908 140. 9
Total cash outflows fron investina activities 38. 657, 220. 19 381 354 152. 4, Net cash flo,rs from investina activities 120 919 719. 95 930 883 586. 32
3. Cash flows fro• financino activities: Cash received fro• investmenls by others 60, 156,022. II 2, 451 , 805,879.63
lncluding:cash received by subsidiaries from • inor1ty 60,156,022. 11 451. 805, 879. 63 ·-· . -Cash rccc-i vcd fr<>11 borroYings
C,Cash received in the [ssuance of bonds I, 31 I, 380,000. 00
Cash received r elated to other financin • activit ies Total cash inflows from financin2 activities I 371 536 022. 11 2. 451. 805. 879. 63
Cash repay• ents for debts 2, 065, 4 l 8. 666. 80 342, 033, 885. 00
Cash payments ror distribution of dividends, profit and 736,854, 162. 20 2,646,558,666. 46
i ntcrcst cxncnscs Including:dividends or profit paid by subsidiaries to 26, 767,551.20 23,313,875. 2E
m"noritv ~ha.rr-holdt-t s Cash aaid related to other financin~ activ i ties 805 822 221. 75 I. 735 051. Bf
Total cash outflows from financin• activities . 3 608 095 050. 75 2, 990. 327 603. 31 Not cash flows fro• financin2 activities - 2 236 559. 028. 64 -538. 521 723. 61
4. Effoct of foreign exchange rate changes on <:ash and cash 38, 970, 698. 84 -97, 658, 368. 51
enuivalents 5_ Net increase in cash and ca.sh eouiYalents 2. 469 290 595. 38 -2 068 896 355. 11 Add:bcainnina balance of cash and cash enuivalents 9 031 278 954. 43 II 100 175 309. 54 6. EndinR balance of cash and cas h eoulvalents II 500. 569 519. 8 I 9 031 278.951. 13
(.~gal rcprcscntal1vci Yang l1 iu PDrson in charge of ac:coLtnting (unc lion: Jihhua Lian
- 10 -
Person an charge of accounting Song Wang
F-12
Company Cash Flows Statement Prepared by, 7.hongrong International Trust Co., Ltd For the ycnr ended 31 Occe•bcr 2018 Unit, RJID Yuan
ltt'lll Note Year ended 31/12/2018 Year ended 31/12/2017
1. Casb flows froa ooeratinll acthitie• Cash received from snlcs nnd scniccs D.Nct incrcaso in cust imcr deposits and deposits and deposits
from banks and other f1noncial inst I tutions 6Nct increase in loans from the central bank 6Net increase in placements from other financial
institutions C:i Cash received rroa pre11iums: of original insurance
contracts .6:\ct cash received rrom reinsurance business A~ct. increase in dcnosits from oolicvholdcrs 8Net increase in (disposal of) financial assets •casurcd at
fair value throuih orofit ond Joss fl.Net incre<1sc in (disposal of) available for sale financial
assets ll. Cash rccehed froa interest fees and COll• issions 4. 166. 274. 804. 25 4 550 670 057. 29
6Nct i ncrcnsc i n placc11ents froa banks and other financial I, 400, 000, 000. 00 700, 000, 000. 00
institutions 61ict 1ncre11sc In reourchasc business caoi tal Taxes and surchnr,.es refunds Cash received rol a lcd to ot.hcr oneralinR activities 931, 682 900. 34 231. 695, 611. 18
Total casb inflows fro• oocratilll acthities 6. 497 957 704. 59 5 482 365 668. 47
Cash naid for 2oods and services ~Net increase in loans and advances Lo custo11ors - 1. 500 ooo. Ooo. oo I 500. 000 000 OC .6.Not incrcftso in deposits with c:cnt.ral bank and other
financ la! inslilut.ions ~Cash nnid for oriA:inal insurance contract clai11s "' "' 6Nct lncre<1se in (disposa l of) financial assets • easurod al
4, 380, os(-ef )!~ ,, 191,138,528. 60 fair value throu•h nrofit and loss
6Not incroase in (disposal of) •••i lab lo for salo flnonclal - 3, 946, 030, ~ "c , ,.;·, .. 3, 767, 998, 148. 81
ftSSCLS
6Cash oaid ror interest fees and c0111isslons 206 366 833. T. '/ d;:- 122. 531 944 44 6Cash oaid for nolic,holder dividend oxnonses , ·;,v ~9"-
Cnsh paid to and for caployccs I, 921,222,057.26 '-"'" .;ft, 584,091,070.14
Taxes a nd s urcharges cash pay•cnts I, 144, 336,063. 78 "" ,,foo1~4.39.681.79 Cnsh r,aid ri?laLC!d to other l'VV'!t"fllihir: act ivit ios 633 13d 170, 77 ' 41'l 506 165. 6'
Total cash outflows rroa onerat!n• acthitie• 2 839 087 370. 65 lt,.,72J'7illl5a539. 43
Net cash flo•• froa nnnratinll activities 14. 8 3. 658. 8 70. 333. 94 -3 .!w, 339:.870. 9E
2. Caah flows froa iavcstin11 activities, ;,
Cash received frOII w1thdra1r of 1nvcst• ents I. 122 813,377.59 1. 595 01"1 ·ooo. oo Cash rece ived from invcsL•cnt inc011c, 163,950 238. 05 269. 668. 1'13. m ~et cash received fro• disposal of \property, plant ond y
eouinomont intnnrihlo assets and other lonR-tOl'III assets I. 068, 453. 00 550, 7~ ',
Not cash received from disposal of subs Id iarles and other business units Cash received related to other investin• activities
Total cash inflows fro• invostiu activities I. 287. 832. 068. 64 I 865 219 221. 02 Cash Pftid for property, plant anti cquirlL'fflCnl, intangible
16,731,203.24 60, 097, 113. 30 ftssots and other lona;i:-Lcr• assets Cash na,•cnts ror invest• ents 5 14 000 000. 00 594 000 000. 00
6Nct i ncrcase in pledge loans
Net Cash J>Aid for acq11isition of s ubs iJiaries and other business units Cash naid rclotcd to other invcstina nct!villes
Total casb outflows fl'OII lnvestiDa activities 530 n 1 203. 24 654. 097. 113. 3(
Net cash flows fro• inn•tio11 activities 757 100. 865. 4C 1, 211.122 107. 72 3,Cash flows froa fioancinK activities:
Cash rcccivod fr01:1 lnvcst.lacnLs bv o thers 2, 000, 000, 000. oi
lncluding ·cosh received by subsld!artes fro• • inori ty shareholders investments Cash received frOII borrowings
6Cash received in the issuance of bonds
Cash received related to other financln• actlv!tios Total cash inflows fro• financin• acthitles 2 000 000 000. oc
Cnsh rcpay•cnts for debts Cash payments for d1stribut1on of dividends, profit and
400, 000, 000. 00 2, 300, 000, 000. oc interest expenses
lncl uding :dividends or profit paid by subsidiaries to • inoritJ shorcho ld<>rs Cash oaid rolatcU to other finftnc inv ttctivillos
Total cash outflows fro• financiH activities 400 000 000. 00 2. 300. 000, 000. 00 Net cash flows fro• flnancin2 acthltics - 400 000 000. 00 - 300 000 000. 00
4. Effect of foreign exchange rate cbanges on cash and cash 215,351.07 -351, 845. 82
eouhalents 5. Net incrca5" in cash aod cash oauhalents 4. 016. 186. 550. 41 -2 333,569.609. '"
Add:be•innin• balance of cash and cash enuivalents 6. 106. 194 939. 39 8 439, 764 548. 45
Ii; lo'.n~ina balance of cash and cash AA"'v•lent~ 10 122 381 489. 80 6 106 194 939. 39
Logal roprcsontativo: Yang t 1u Person in charge or accounung funct 10n: J inhua Lian Person in charge or accounllt'8 : Song lanr
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F-17
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Zhongrong International Trust Co., Ltd Notes to financial statements
(All amounts are denominated in RMB unless otherwise stated)
1. Basic information about the company
Zhongrong International Trust Co., Ltd (hereinafter referred as "the Company") fonnerly known as
Harbin International Trust Investment Co., Ltd. established in 1987. In March 2002, the Company
was granted "The Approval of Capital Offering for Harbin International Trust Company" (Shen Yin
FuZi (2002] No.270) by Shenyang Branch of The People's Bank of China, and the investors of the
Company were Harbin State-owned Assets Supervision and Administration Commission, Zhongzhi
Enterprise Company Co., Ltd., Harbin Investment Company Limited, Harbin Hongda Construction
Co., Ltd., Heilongjiang Province Mudanjiang New Materials Technology Co., Ltd. and Haci
Company Limited. In April 2002, according to the requirement of "The Notice of the Scheme of
Reorganizing Trust and Investment Companies" issued by The People's Bank of China and
forwarded by General Office of the State Council (Guo Ban Fan [1999] No.12) and "The Scheme of
Further Improvement of Reorganizing Trust and Investment Companies" (Yin Fa (2000] No.389)
issued by The People's Bank of China, the Company was re-registered and renamed as Zhongrong
International Trust and Investment Co., Ltd. In June 2000, the Company obtained The License of the
Business Corporation issued by Harbin Administration of Industry and Commerce, with the
registered capital of RMB 325 million. In July 2007, the Company was renamed as Zhongrong
International Trust Co., Ltd, approved by China Banking Regulatory Commission (CBRC) with
"The Approval of Name and Business Scope Change of Zhongrong International Trustand
Investment Co., Ltd." (Yin Jian Fu [2007] No 295). In July 2010, the Company obtained "The
Approval of Change in Registered Capital and Articles of Incorporation of Zhongong International
Trust Co., Ltd" (Hei Yin Jian Fu [2010] No.339) from Heilongjiang Branch, CBRC, registered
capital has changed from RMB 325 million to RMB 580 million by transferring retained earnings
into Paid-in-capital.
- 16 -
F-18
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
In March 2011, the Company obtained "The Approval of Change in Registered Capital and
Company Articles of Incorporation of Zhongrong International Trust Co., Ltd" (Hei Yin Jian Fu
[201 I] No.75) from Heilongjiang Branch, CBRC. The registered capital increased by RMB 820
million, including the monetary capital increase of RMB 300 million from Jingwei Textile
Machinery Company Limited, Zhongzhi Enterprise Company Co., Ltd., Harbin Investment
Company Limited and Dalian Xinxing Real Estate Development Company Co., Ltd., and RMB 520
million transferred from retained earnings to Paid-in-capital according to the proportion of
shareholding. The new registered capital was RMB 1.4 billion
In October 20 I l, the Company obtained "The Approval of Change in Equity Stake and Registered
Capital, Adjustment of Equity Structure and Amendment of the Company Articles of Incorporation
of Zhongrong International Trust Co., Ltd" (Hei Yin Jian Fu [2011] No.447) from Heilongjiang
Branch, CBRC. The RMB107.68 million of the Company's equity held by Dalian Xinxing Real
Estate Development Company Co., Ltd. was transferred to Shengyang An Tai Da Commercial
Trading Ltd. Jingwei Textile Machinery Company Limited, Zhongzhi Enterprise Company Co., Ltd.,
Harbin Investment Company Company Limited and Shengyang An Tai Da Commercial Trading Ltd.
Increased the Company's registered capital by RMB 75 million as per their proportion of
shareholding, and the registered capital was 1.475 billion
In August 2012, the Company obtained "The Approval of Change in Equity Stake and Registered
Capital, Adjustment of Equity Structure and Amendment of the Company Articles of Incorporation
of Zhongrong International Trust Co., Ltd" (Hei Yin Jian Fu [2012] No.284) from Heilongjiang
Branch, CBRC. The Registered capital ofthe Company increased by RMB 12.5 million, including
the monetary capital increase of RMB 12.Smillion from Jingwei Textile Machinery Company
Limited, Zhongzhi Enterprise Company Co., Ltd. and Shengyang An Tai Da Commercial Trading
Ltd. who Paid-in RMB 59,697,537.50, RMB 52,550,412.50, and RMBl2,752,050.00, respectively.
The registered capital was RMB 1.6 billion.
In June 2014, the Company obtained "The Approval of Change in Registered Capital and Company
Articles of Incorporation of Zhongrgrong International Trust Co., Ltd" (Hei Yin Jian Fu [2014]
No.148) from Heilongjiang Branch,CBRC. The registered capital increased by RMB 4.4 bion,
including RMB 1.1737 billion transferred from additional paid-in capital and RMB 3.2263 billion
transferred from retained earnings by Jingwei Textile Machinery Company Limited, Zhongzhi
- 17 -
F-19
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Enterprise Company Co., Ltd., Harbin Investment Company Company Limited and Shengyang An
Tai Da Commercial Trading Ltd. according to the proportion of shareholding. Until this, the
Company's registered capital is RMB 6 billion.
In January 2017, the Company obtained "The Approval of Change in Equity Stake and Registered
Capital, Adjustment of Equity Structure and Amendment of the Company Articles of Incorporation
of Zhongrong International Trust Co., Ltd" (Hei Yin Jian Fu [2017] No.6 ) from Heilongjiang
Branch, CBRC. The registered capital of the Company increased by RMB 2million transferred from
retained earnings, including the capital increase by Jingwei Textile Machinery Company Limited,
Zhongzhi Enterprise Company Co. Ltd., Harbin Investment Comapany Limited and Shenyang An
Da Tai Commercial Trading Ltd. according to their proportion of shareholding. Until this, the
Company's registered capital is RMB 8 billion.
In October 2017, the Company obtained "The Approval of Change in Equity Stake and Registered
Capital, Adjustment of Equity Structure and Amendment of the Company Articles of Incorporation
of Zhongrong International Trust Co., Ltd" (Hei Yin Jian Fu [20 I 7] No.157) from Heilongjiang
Branch, CBRC. The registered capital of the Company increased by RMB 2million transferred from
retained earnings, including the capital increase by Jingwei Textile Machinery Company Limited,
Zhongzhi Enterprise Company Co. Ltd., Harbin Investment Comapany Limited and Shenyang An
Da Tai Commercial Trading Ltd. according to their proportion of shareholding. Until this, the
Company's registered capital is RMB IO billion.
In December 2017, the Company obtained "The Approval of Change in Equity Stake and Registered
Capital, Adjustment of Equity Structure and Amendment of the Company Articles of Incorporation
of Zhongrong International Trust Co., Ltd" (Hei Yin Jian Fu [2017] No.212) from Heilongjiang
Branch, CBRC. The registered capital of the Company increased by RMB 2 million, including the
monetary capital increase of RMB 2 million from Jingwei Textile Machinery Company Limited,
Zhongzhi Enterprise Company Co. Ltd., Harbin Investment Comapany Limited and Shenyang An
Da Tai Commercial Trading Ltd. Who paid in RMB749,395,046.88, RMB659,728,390.62,
RMB430,762,500.00, RMB160,114,062.50, respectively. Until this, the Company's registered
capital is RMB 12 billion.
- 18 -
F-20
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
The company's unified social credit code is: 912301991270443422; registered capital is 12 billion;
legal representative is Liu Yang; term of validity: from January 15, 1993 to long term; registered
location: No.33 Songshan Road, Nangang District, Harbin.
The Company's main business scope includes: money trust; moveable property trust; real estate trust;
Securities trust; other property or property rights trust; engaging in mutual fund investment
businesses serve as an initiator of the investment fund or fund management company; operating asset
restructuring, merger and acquisition, project financing, corporate finance, financial advisory and
othe related services; entrusted securities underwriting business that is approved by the relevant
departments of the State Council; dealing with intermediary,consulting and credit investigation
businesses; safe deposit box service; utilizing self-owned assets th rough placements from banks and
other financial institutions, loans to banks and other financial institutions, loan issuance, leasing and
investing; providing guarantee for other parties using self-owned capital; engaging in issuing loans
to banks and other financial institutions; as well as other businesses that are approved by the laws
and regulations or the CBRC.
Name of the Company's parent company is Jingwei Textile Machinery Company Limited, and name
of the Company's ultimate parent company is China Hi-Tech Group Corporation.
This financial report has been approved for submission by the Company's Board of Directors.
2. Basis of preparation of financial statements
On the basis of going concern and transactions and events actually occurred, the Company prepares
its financial statements with the following accounting policies and accounting estimates in
accordance with the Accounting Standards for Business Enterprises - basic Standards, specific
accounting standards and other relevant provisions (hereinafter collectively known as "Accounting
Standards for Business Enterprises" or "CAS")
3. Declaration on compliance with the Accounting Standards for Business
Enterprises
The financial statements have been prepared in compliance with the <Accounting Standards for
Business Enterprises> to truly and completely reflect the Company's financial position as of 31
December 2018 and its operating results, cash flows and other relevant information for the year
- 19 -
F-21
ended 31 December 2018.
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
4. The company's significant accounting policies and accounting estimates
4.1 Accounting Year
The accounting year of the Company is from I January to 31 December of each calendar year.
4.2. Functional Currency
The reporting currency of the Companies is Renminbi ("RMB"), except for that subsidiaries
registered in Hong Kong use Hong Kong dollars ("HKD") and subsidiaries registered in British
Virgin Island and Cayman Islands use US dollars ("USD").
4.3 Measurement of Value
The methods for measurement of value of the Company include historical cost, replacement cost, net
realiz.able value, present value and fair value.
4.4 Business Combinations
4.4.1 The business combinations involving entities under common control
In a business combination involving enterprises under common control, if the acquirer pays for the
business combination in cash, by transferring of non-cash assets or assuming liabilities, net assets in
the ultimate controlling party's consolidated financial statements are measured at their canying
amounts of the acquiree at the acquisition date. If the acquirer issues equity instruments for the
business combination, the acquirer measures the share capital by the par value of the shares issued.
The difference between the original investment costs and the carrying amounts (or the total par value
of shares issued) will be adjusted to the capital reserves. If the capital reserves is insufficient to
absorb the difference, the remaining amount shall be deducted from retained earnings.
For a business combination involving enterprise under common control, which achieved in stages
that involves multiple exchange transactions, if it is on the "package deal" criterion, the merging
enterprise shall treat transaction as a way of getting control.If the business combination does not
belongs to "package control", it shall, on the acquisition date, regard the share of the book value of
the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The
difference between the initial cost of the long-term equity investment and the consideration of
carrying amount previously held for the combination and consideration paid on the acquisition date
is adjusted to the capital reserve (capital premium). If the balance of the capital reserve is
- 20 -
F-22
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
insufficient, any excess is adjusted to retained earnings.
4.4.2 Business combinations involving enterprises not under uncommon control
In a business combination involving enterprises not under common control, the combination costs
are the aggregate of the fair values of the assets paid, the liabilities incurred or assumed and the
equity instruments issued by the acquirer in exchange for control over the acquiree at the acquisition
date. At the acquisition date, the acquired assets, liabilities and contingent liabilities of the acquiree
that meet the recognition criteria are measured at their fair value. The Company shall recognize the
difference of the combination costs in excess of its interest portion in the fair va]ue of the net
identifiable assets acquired from the acquiree as goodwill. The Company shall recognize the
difference of the combination costs less than its interest portion in the fair va1ue of the net
identifiable assets acquired from the acquiree in the non-operating income for current period after
reassessment.
For the business combinations not under the same control realized through step by step multiple
transactions, the initial cost of long-term equity investment shall be sum of consideration of carrying
amount previously held for the combination and consideration paid on the acquisition date. As for
the equity interests that the Group holds in the acquiree before the acquiring date, they shall be
re-measured according to their fair values at the acquiring date; the positive difference between their
fair values and carrying amounts shall be recorded into the investment gains for the period including
the acquiring date. The equity hold by the acquiree which involved with the other comprehensive
income and the other owners' equities changes except for the net gains and losses, other
comprehensive income and the profits distribution and other related comprehensive gains and other
owners ' equities which in relation to the equity interests that the Group holds in the acquiree before
the acquiring date should be transferred into the current investment income on the acquiring date,
except for the other comprehensive income occurred from the re-measurement of the net profits of
the defined benefit plans or the changes of the net assets of the investees.
We use sum of consideration of carrying amount previously held for the combination and
consideration paid on the acquisition date as the initial cost of long-term equity investment, and
compare it with the share of fair value of the identifiable net assets it obtains from the acquire as the
basis of goodwi11 or current profit and loss.
4.5. Preparation of Consolidated Financial Statements
- 21 -
F-23
4.5.1 The scope of consolidated financial statements
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
The Company incorporates all its subsidiaries (including individual entities under its control) into
the scope of the consolidated financial statements, including the enterprises controlled by the
Company, divisible part in the investees and structured entities.
4.5.2 Uniform accounting policies, balance sheet date and accounting period
If the subsidiaries adopt different accounting policies or accounting period compared with those of
the Company, the Company shall make necessary adjustments on the subsidiaries' financial
statements according to its accounting policies or accounting period when the consolidated financial
statements are prepared.
If any transaction or event occurred overseas of a subsidiary company outside China that is outside
China due to restrictions in laws and regulations, or does not exist within the territory, or if the
transaction is not common, and if the accounting standards of the company fail to regulate, the
overseas subsidiary may have already performed the accounting treatment. In accordance with the
principle of the basic principles, after adjusting in accordance with international financial reporting
standards, it will be incorporated into the related items of the consolidated financial statements of the
domestic parent company.
4.5.3 The elimination in the preparation of consolidated financial statements
The consolidated financial statements are prepared based on the individual financial statements of
the Company and its subsidiaries, after elimination of the transactions incurred among the Company
and the subsidiaries. The portion of a subsidiary's equity that is not attributable to the Company is
treated as minority interests and presented in the consolidated balance sheet within equity. The
equity investment of the Company held by one subsidiary shall be treated as the Company's treasury
shares and a deduction of the shareholders' equity which is presented as "less: treasury shares" in the
consolidated balance sheet within equity.
4.5.4 The accounting treatment for obtaining subsidiaries through a business combination
Where a subsidiary or business has been acquired through a business combination involving
enterprises under common control in the reporting period, the obtained subsidiary or business is
deemed to be included in the consolidated financial statements from the date they are controlled by
the ultimate controlling party. Their assets, liabilities, operating results and cash flows are included
in the consolidated financial statements from the beginning of the accounting period in which the
- 22 -
F-24
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
acquisition occurred. Where a subsidiary or business has been acquired through a business
combination not involving enterprises under common control, their individual financial statements
are adjusted based on the fair value of identifiable net assets at the acquisition date when preparing
the consolidated financial statements.
4.6 Joint arrangement classification and accounting treatments
4.6.1 The classification of joint arrangement
Joint arrangements are classified as joint operations or joint ventures. A joint arrangement will be
classified as joint operation when the joint arrangement achieves not through an individual entity.
Individual entity is an entity with individual identifiable finance structure, including single legal
entity and entity unqualified as legal entity but qualified as lawful entity. A joint arrangement is
usually be classified as joint venture when the joint arrangement achieves through incorporating an
individual entity. When changes arising from relevant events or environment cause changes of the
cooperative parties' rights and obligations in the joint arrangements, the cooperative parties shall
reassess the classification of the joint arrangements.
4.6.2The accounting treatment of joint operations
The party participating in joint operations shall recognize the following items relating to its interests
in the joint operations and account for them in accordance with related requirements of Accounting
Standards for Business Enterprises: a) Its solely-held assets and solely-assumed liabilities, and b) Its
share of any assets and liabilities held jointly; c) Its revenue from the sale of its share of the output
arising from the joint operation; d) Its share of the revenue from the sale of the output by the joint
operation; e) Its own expenses; and f) Its share of any expenses incurred jointly.
The other parties involving in joint operations without common control power shall account for their
investments referring to the treatment method of joint operation participants if they are entitled to
relevant assets and undertake relevant liabilities of the joint operations, otherwise, they shall account
for their investments according to related requirements of Accounting Standards for Business
Enterprises.
4.6.3The accounting treatment of joint ventures
The parties participating in a joint venture account for its investment in accordance with Accounting
Standards for Business Enterprises No.2 - Long-term Equity Investment. And the other parties
- 23 -
F-25
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
involving in joint ventures without common control power shall account for their investments
according to their influence extent on the joint ventures.
4.7 Cash and cash equivalents
The cash in the Company's statement of cash flows is cash on hand and deposits that can be readily
drawn on demand. Cash equivalents in the statement of cash flows are short-term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of change in value.
4.8 Foreign Currency Business and Foreign Currency Translation
4.8.1 Foreign currency business translation
The approximate shot exchange rate on the transaction date is adopted and translated as RMB
amount when the foreign currency transaction is initially recognized. On the balance sheet date, the
monetary items of foreign currency are translated as per the shot exchange rate on the balance sheet
date, the foreign exchange conversion gap due to the exchange rate, except for the balance of
exchange conversion arising from special foreign currency borrowings capitals and interests for the
purchase and construction of qualified capitalization assets, shall be recorded into the profits and
losses of the current period. The non-monetary items of foreign currency measured at the historical
cost shall still be translated at the spot exchange rate on the transaction date, of which the RMB
amount shall not be changed. The non-monetary items of foreign currency measured at the fair value
shall be translated at the spot exchange rate on the fair value recognized date; the gap shall be
recorded into the current profits and losses or other comprehensive incomes.
4.8.2 The translation of financial statements denominated in foreign currency
If the company's holding subsidiaries, joint ventures, joint ventures, etc., use different recording
currency, they need to convert their recording currency to RMB, and then prepare consolidated
financial statements. For the assets and liabilities in the balance sheet, the shot exchange rate on the
balance sheet date is adopted as the translation exchange rate. For the owner's equity, the shot
exchange rate on the transaction date is adopted as the translation exchange rate, with the exception
of "undistributed profits". The incomes and expenses in the income statement shall be translated at
the spot exchange rate or the approximate exchange rate on the transaction date. The translation gap
of financial statement of foreign currency converted above shall be listed in other comprehensive
incomes under the owner's equity in the consolidated balance sheet.
- 24 -
F-26
4.9 Financial Instruments
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
4.9.1 Recognition and classification of financial instruments
Financial instruments include financial assets, financial liabilities and equity instruments. A financial
asset, financial liability or equity instrument is recognized when the Company becomes one party of
financial instrument contracts.
The financial assets are classified into the following four categories upon initial recognition:
financial assets at fair value through profit or loss ("FVTPL" financial assets), held-to-maturity
investments, receivables, and available-for-sale financial assets ("AFS" financial assets). The
classification of financial assets depends on the holding intention and capability of the Company
except for receivables. The financial liabilities are classified into financial liabilities at fair value
through profit or loss ("FVTPL" financial liabilities) and other financial liabilities upon initial
recognition.
Financial assets at fair value through profit or loss include financial assets held for trading in the
short term and those upon initial recognition designated as at fair value through profit or loss.
Receivables are non-derivative financial assets with fixed or determinable amounts that are not
quoted in an active market. AFS financial assets are those non-derivative financial assets that are
designated as available for sale and financial assets other than those above mentioned.
Held-to-maturity investments are non-derivative financial assets with fixed or detenninable amounts
and fixed maturity dates that the Company has the positive intention and capability to hold to
maturity.
4.9.2 Measurement of financial instruments
The Company measures the financial instruments at fair value upon initial recognition. The
subsequent measurement includes: a) FVTPL financial assets, AFS financial assets and FVTPL
financial liabilities are measured at fair value; b) Held-to-maturity investments, loans,receivables,
and other financial liabilities are subsequently measured at amortized cost; c) Equity instruments that
are not quoted in an active market and whose fair value cannot be reliably measured, and derivative
financial assets or derivative financial liabilities linked to the equity instruments that will be settled
by delivering the equity instruments are subsequently measured at cost. The gains or losses of fair
value changes arising from subsequent measurement of financial assets and liabilities shall be
accounted for according to the following methods except hedging instrument involving in: a) The
- 25 -
F-27
Zhongrong International Trust Company limited Notes to the Financial Statements
For the year ended 31 December 2018
gains or losses arising from fair value changes of FVTPL financial assets and FVTPL financial
liabilities are recognized in the profit or loss for current period; b) The gains or losses arising from
fair value changes of AFS financial assets are recognized in other comprehensive income.
4.9.3 Recognition method of financial instruments' fair value
For financial assets or financial liabilities in active markets, the Company uses the quoted prices in
active markets to determine their fair value. If there is no active market, the Company uses valuation
techniques to determine their fair value. The valuation techniques mainly include market approach,
income approach and cost approach.
4.9.4 Recognition and measurement of transfer of financial assets
The Company derecognizes a financial asset if it transfers substantially all the risks and rewards of
the financial asset or it does not transfer or maitain substantially all the risks and rewards of
ownership of the financial asset, but surrender control on the financial asset. If a financial asset
meets the derecognition criteria, the difference between the transfer consideration received and the
sum of transferred financial asset's carrying amount and the accumulated change amount on fair
value which has been recognized in other comprehensive income shall be charged to profit or loss
for current period. If the partial transfer of financial asset meets the derecognition criteria, the entire
carrying amount of the transferred financial asset shall be split into the derecognized portion and
retained portion according to their respective fair value.
A financial liability shall be entirely or partially derecognized if its present obligations are wholly or
partly dissolved.
4.9.5Impairment of financial assets
If the financial assets measured at amortized costs are impaired, the impairment provision shall be
recognized at the difference of the carrying amount of financial assets and the present value of
estimated future cash flows (excluding future credit losses that have not been incurred). If there is
objective evidence of a recovery in value of the financial asset which can be related objectively to an
event occurring after the impairment was recognized, the previously recognized impairment loss is
reversed through profit or loss for current period.
When impairment of financial assets measured at costs occurs, provision for impairment is
withdrawn. When there is no quoted price in an active market and the fair value cannot be reliably
measured, the equity instrument investment or derivative financial asset that is linked to the equity
- 26 -
F-28
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
instrument and must be settled through delivery of the equity instrument is depreciated. The
difference between the book value and the present value determined by discounting the future cash
flow based on the current market yield of a similar financial asset is recognized as an impainnent
loss.
If there is objective evidence that AFS financial assets are impaired, accumulated losses due to
decreases in fair value previously recognized directly in the shareholders' equity are transferred to
profit or loss for the current period. In the subsequent periods, if the fair value of AFS debt
instruments increases and the increase can be related objectively to an event occurring after the
impairment was recognized, the previously recognized impairment losses are reversed and charged
to profit or loss for the current period. For AFS equity instruments, the increase of fair value in the
subsequent periods shall be accounted for in the shareholders' equity.
For the equity instrument investment, when the fair value of the available-for-sale financial assets of
the company falls seriously or non-temporarily, the difference between the initial cost and the fair
value at the end of the period is recognized as impairment loss. The cumulative loss of value within
other comprehensive income is transferred out and recorded into impairment loss. The specific
quantitative criteria for judging the "serious" or "non-temporary" decline in fair value, the
calculation method of the cost, the method of determining the fair value at the end of the period, and
the determination basis for the period of continued decline are:
Specific quantitative criteria for fair value decline " seriously"
Specific quantitative criteria for fair value decline "non-temoorarilv•
Calculation of cost
Fair value determination at period end
Definition of continuous decline periods
4.10 Receivables
Decrease in closing fair value relative to the cost has reached or exceeded 50%
Fall for 12 consecutive months
Consideration of payment at acquisition (net of cash dividends declared but not yet paid or due but unpaid interest on bonds) and the relevant transaction cost are recognized as the investment cost. As for a financial instrument for which there is an active market, the quoted prices in the active market shall be used to recognize the fair values thereof. Where there is no active market for a financial instrument, the enterprise concerned shall adopt value appraisal techniques to determine its fair value. The rebound in the continuous fall or the period with the tread of fall is less than 20% margin. Rebound duration not more than six months is treated as continuous decrease period
Receivables include accounts receivable, long-term receivables and other receivables. If there are
objective evidence that the receivables are impaired, the Company recognizes the doubtful debts
- 27 -
F-29
Zhongrong International Trust Company Limited Notes to the Fina nclal Statements
For the year ended 31 December 2018
allowance on the shortfall between the present value of future cash flows and the carrying amount
of the receivables.
4. l O. l Individual receivables with significant amount and bad debt reserve is individually accrued
Criteria for significant amount: Receivables with a book balance of more than I 00 million (inclusive
Bad debt reserve accrual method for individual receivable with significant amount
Confinnation based on the difference between the book balance and the present value of ex ected future cash flow
4.10.2. Group of receivables and bad debt reserve
Recognition Method of groups Nature of receivables and credit nsks
Group 1 Divide by credit risks related to the age of receivables
Group 2 Divide by related party within the scope of consolidation
Group 3 Divide into employee petty cash, rent depositetc etc.
Bad debt reserve accrual method for a group
Group1 Aging Analysis Method
Group2 Not to accrue bad debt reserve
Group 3 Not to accrue bad debt reserve
In the groups, those adopting aging analysis method to withdraw bad debt provision:
Percentage of bad debt Percentage of bad debt
Age reserve on account reserve on other
receivable(%) receivable(%)
Within 1 year
1-2 years IO IO
2-3 years 30 30
3-4 years 50 50
4-5 years 70 70
Over 5 years l00 100
4.10.3. Individual receivables without significant amount but bad debt reserve is individually
accrued
Reason for individually Individual amount is not significant, and the credit risk characteristics
accrual of bad debt cannot be reflected if bad debt reserve is accrued under a group of
reserve
Bad debt reserve accrual method
receivables
Confirmation based on the difference between the book value and
the present value of expected future cash flow
- 28 -
F-30
4.11 Inventories
4.11.1 Categories of inventories
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Inventories are the finished goods or commodities that the Company holds to se11, the work in
progress in production process, and the material and goods consumed during the production process
or seivice rendering process in daily operation. Inventories include raw materials, revolving
materials, consigned processing materials, packaging materials, low-value consumables, work in
progress, self-manufactured semifinished product and finished goods (commodities) etc.
4.11.2 Measurement of inventories upon delivery
Weighted average method is used to measure the actual costs of inventories upon delivery.
4.11.3 Provision for diminution in value of inventories
At each balance sheet date, inventories are measured at the lower of cost and net realisable value.
When the cost of inventory exceeds its net realizable value, provision for diminution in value of
inventories is recognized. The Company usually recognizes provision for diminution in value of
inventories by a single inventory item. For the inventory items of large quantity and low price, the
Company recognizes provision for diminution in value ofinventories based on inventory categories.
4.11.4 Inventory count system
The Company adopts the perpetual inventory system.
4.11.5 Amortization methods of low-value consumables and packaging materials
Low-cost consumables and packaging materials are amortized by the once-off amortization method
4.12 Loans and Advances to Customers
4.12. I Loans and receivables: impairment loss of loans and receivables is detennined according to
the difference between book value of the asset and the current value of estimated future cash flow
discounted at the original real interest rate of the asset. If discounting does not have prominent
impact on cash flow then discounting is not necessary.
4.12.2 Classification of loan risks
According to CBRC's requirements in "Yin Jian" [2007] No. 54: Guidance for the Risk-Based
Loan Categorization, loan risks are classified into five levels, which are, normal, concerned, inferior,
doubted and loss. When there is evidence showing a client's repaying ability is in clearly in trouble
which leads to a loan cannot be fully repaid, the loan is classified as a non-perfonning loan (which
includes the latter three levels: inferior, doubted and Joss).
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F-31
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
General principles for the five categories of loans are as follows:
a. Nonna(: A borrower can perform a contract, and there is lack of sufficient reasons to suspect
that the principal and interest of a loan cannot be fully repaid on time.
b. Concerned: A borrower has the ability to repay the principal and interest of a loan for the time
being, but there are some factors likely to having adverse effect on the repayment.
c. Inferior: An obvious problem has appeared in a borrower's ability of repayment,the principal
and interest of a loan cannot be fully repaid by completely depending on the nonnal business
revenue of the borrower, and even ifa security is executed, there might be some losses incureed
d. Doubted: Aborrower cannot fully repaythe principal and interest of a loan, and even if a
security is executed, large losses are surely to be incurred.
e. Loss: After the adoption of all possible measures or all necessary legal proceedings, the
principal and interest of a loan cannot be recovered, or only a very small part of it can be recovered
4.12.3. Impairment provision for loans
According to the requirements by the CBRC in "Yin Jian Notice" [2007] No. 22: "A Notice about
General Adoption of Accounting Standards for BusinessEnterprises in Financial Institutions of
Banking Sector", the Company has accrued impairment provision for loans based on their end of
period risk rating results. The loans with special risk characteristics have been individually assessed.
The percentages of impairment provision are given below:
Risk Level
Normal
Concerned
Inferior
Doubted
Loss
4.13. Long-Tenn Equity Investment
4.13. I Determination of investment cost
Percentages of impairment provision(%)
5
25
50
100
Long-term equity investment acquired through a business combination: For a business combination
involving enterprises under common control, the initial investment cost of a long-term equity
investment is the acquirer's share of the carrying amount of the owners' equity in the acquiree at the
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F-32
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
acquisition date. For a business combination not involving enterprises under common control, the
initial investment cost of a long-term equity investment is the cost of acquisition detennined at the
date of acquisition. For a long-term equity investment acquired in cash, the initial investment cost is
the amount of cash paid. For a long-term equity investment acquired by issuing equity securities, the
initial investment cost is the fair value of the equity securities issued. For a long-term equity
investment acquired by debt restructuring, the initial investment cost is determined according to
related requirements of Accounting Standards for Business Enterprises No. 12- Debt Restructuring.
For a long-term equity investment acquired by exchange of non-cash assets, the initial investment
cost shall be determined according to related accounting standards.
4. I 3.2 Subsequent measuremen at and recognition of profit or loss
For long-term equity investments that the Company has control over the invested unit, the Company
accounts for such long-term equity investments using the cost method in the Company's financial
statement. The Company accounts for the long-term equity investment under common control or on
which the Company has significant influence using the equity method.
4.13.3 Basis for recognition of joint control or significant influence over an investee
Joint control of an investee is that the decision of activities that can significantly affect the
arrangement's return must require the unanimous consent of the parties sharing control, including
sale and purchase of goods or services, financial assets management, purchase and disposal of assets,
research and development activity and financing activities etc. The Company holding of 20%-50%
voting capital of the investee presents it can exercise significant influence over the investee. The
Company usually can exercise significant influence over the investee even its voting capital less than
20% if it can meet one of the following situations: a) Appointing representatives in the board of
directors or similar governing body of the investee; b) Participating in the strategy and policy
decision process; c) Delegating management personnel; d) The investee relying on the Company's
technique or technical material; e) Significant transactions occur between the Company and the
investee.
4.14. Fixed Assets
4.14.1 Recognition criteria for fixed assets
Fixed assets are tangible assets that are held for usein the production or supply of goods of services,
- 31 -
F-33
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
for rental to others, or for administrative purposes, and have useful lives of more than one
accounting year. It is confirmed when the following conditions are met: the economic benefits
associated with the fixed asset are likely to flow into the enterprise; the cost of the fixed asset can be
reliably measured.
4.14.2 Classification and depreciation method of fixed assets
The categories of fixed assets mainly include: buildings, machinery & equipment, electronic
equipment and vehicles. The Company adopts the straight-line method for depreciation. The useful
life and residual value of an asset is assessed based on its nature and the manner of use. At the end of
each financial year, the useful lives, residual values and the depreciation method are reviewed, and
adjusted if there are variances with the original estimates. Other than fully depreciated assets which
are still in use and land individually measured and recorded, depreciation is provided for all fixed
assets.
Category Estimated useful life (years) Estimated residual value Annual depreciation rate(%) rate(%)
Buildings 20 3 4.85
Machinery and equipment 5 3 19.40
Electronic equipment 3-5 3 19,40-32.30
Transportation vehicles 3-5 3 19.40-32.30
Other 3-5 3 19.40-32.30
4.14.3 Recognition and measurement of fixed assets from finance lease
A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership
of an asset. At the commencement of the lease term, the Company, as the lessees, shall recognize
finance leases as assets at amounts equal to the lower of the fair value of the leased property or the
present value of the minimum lease payments, each determined at the inception of the lease.
Subsequent measurement of fixed assets under finance lease should be in accordance with the
accounting policies adopted for self-owned fixed assets in respect of provision of depreciation and
impairment.
4.15. Intangible Assets
4.15.1 The measurement of intangible assets
The intangible assets shall be initially measured according to its cost. Acquisition costs of intangible
assets include purchase price and relevant expenditures. The invested cost of intangible assets
contributed by investors shall be determined according to the conventional value in the investment
- 32 -
F-34
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
contract or agreement, except for those of unfair value in the contract or agreement. If the
conventional value in the investment contract or agreement is unfair, the costs of intangible assets
shall be their fair value. The costs of internally generated intangible assets include the total
development expenditures to bring the asset to its intended use.
The subsequent measurements for intangible assets are as follows: a) The intangible assets with
definite useful life are amortized by straight line method and reviewed the useful life and
amortization method at the end of each year. Any discrepancy between the review and initial
estimates shall be adjusted accordingly. b) The intangible assets with indefinite useful life are not
amortized, and reviewed for the useful life at the end of each year. If there are objective evidence
indicating their useful life is definite, the Company shall estimate the useful life of the intangible
assets and amortize them by straight line method.
Assettvpe Amortl7.atio n vcar The wav of amurtizion
Software 3-10 Straight line
Trademark Useru llife cannot be determined. not amortization not amortization
4.15.2 The assessment basis for indefinite useful life
Intangible assets without foreseeable period to bring economic benefits to the Company or with
uncertain useful life are classified as intangible assets of indefinite life. The judgment basis for
indefinite life includes: a) The legal rights are derived from contractual rights or other legal rights,
however there is no explicit useful life indicated in the contracts or regulations; b) Although
considering the industry practice or demonstration from related professionals comprehensively, the
benefit period of the intangible assets still can't be decided.
At the end of each year, the Company reviews the intangible assets with indefinite useful life mainly
using bottom-to-top approach. The related departments who use the intangible assets will perform a
basic review and evaluate whether there are changes on the basis to detennine indefinite useful life.
4.15.3 The specific criteria for research phase and development phase of internally generated
projects, and the specific criteria for capitalization of expenditure incurred during development
phase
Expenditure in the research phase is recognized as an expense in profit or loss for current period
when it is incurred. Expenditure in the development phase of internally generated projects is
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F-35
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
capitalized if they meet the criteria of intangible assets.
4.16 lmpainnent of assets
At each balance sheet date, if there are impainnent indications for the long-term assets including
long-term equity investments, investment property subsequently measured at cost model, fixed
assets, construction in progress, productive biological assets measured at cost, oil and gas assets,
intangible assets, goodwill, etc., the Company shall perfonn impairment test. If the outcome of
impairment test indicates the recoverable amount of the asset is lower than its carrying amount, the
Company shall recognize the provision for impairment based on the amount of the shortfall.
The recoverable amount of an asset is detennined by the higher of the net amount after deducting the
disposal costs from the asset's fair value and the present value of the asset's estimated future cash
flow. The provision for impairment of asset is estimated and recognized on individual basis. If it is
not possible to estimate the recoverable amount of the individual asset, the Company shall determine
the recoverable amount of the asset group to which the asset belongs. The asset group is the
minimum portfolio of assets that could generate cash inflow independently.
Impairment tests are conducted for goodwill presented in the financial statements separately at least
at the end of every accounting year regardless whether there are impairment indications or not. The
carrying amount of goodwill arising from business combinations is allocated to relevant asset groups
or asset group portfolio. The related impairment loss shall be recognized if the impairment test
indicates the recoverable amount of the asset groups or asset group portfolio embodied the goodwill
is lower than their carrying amounts. The amount of impairment loss shall firstly be deducted from
the carrying amount of goodwill embodied in the asset groups or asset group portfolio, then be
deducted from the carrying amounts of other assets' based on the proportions of their carrying
amounts in the asset group or asset groups portfolio.
The impairment losses of assets will not be reversed in subsequent periods once they are recognized.
4.17 Long-Tenn Unamortized Expenses
Long-tenn deferred expenses refer to expenses that have been paid but their benefit period is more
than one year (excluding one year). Long-term deferred expenses will be amortized in the benefit
periods. If one long-term deferred expense can't benefit the Company in the subsequent periods, the
remaining balance of the long-term deferred expense shall be recognized as expense in profit or loss
for the current period.
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F-36
4.18. Employee payroll
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Employee benefits refer to all forms of consideration or compensation given by the Company in
exchange for service rendered by employees or for the termination of employment relationship.
Employee benefits include short-term employee benefits, post-employment benefits, termination
benefits and other long-term employee benefits.
4.18.1 Short-time employee benefits
In the accounting period in which employees have rendered services, the Company recognizes the
employee benefits as liability, and charges to profit or loss for the current period, or includes in the
cost of relevant assets in accordance with other accounting standards. Welfare benefit are charged to
profit or loss for the current period or included in the cost of relevant assets when incurred. Welfare
benefit in non-monetary fonns is measured at fair value. In the accounting period in which
employees have rendered services, the Company recognizes the social security contributions as
liability according to regulations such as medical insurance, work injury insurance and maternity
insurance as well as housing funds, and charges to profit or loss for the current period or includes in
the cost of relevant assets.
4.18.2 Post-employment benefits and termination benefits
During the accounting period in which employees provide the service, the Company calculates the
defined contribution plans payable according to the basis and percentage required by local
government, recognized as the liability and charges to profit and loss for current period or includes
in the cost of related assets. The Company attributes the obligation incurred by defined benefits
plans using the projected accumulated benefit unit credit method to periods in which the employees
rendered services and charges the obligation to profit and loss for the current period or includes in
the cost of related assets.
Tennination benefits provided by the Company to employees are recognized as an employee benefit
liability and charged to profit or loss for the current period at the earlier of the following dates: a)
The Company cannot unilaterally withdraw the offer of termination benefits because of an
employment termination plan or a curtailment proposal; and B) When the Company recognizes costs
or expenses related to the restructuring that involves the payment oftennination benefits.
4.18.3 Other long-term employee benefits
If other long-term employee benefits provided by the Company to the employees meet the conditions
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F-37
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
for classifying as a defined contributions plan, those benefits are accounted for in accordance with
the above requirements relating to defined contribution plan. Besides, net obligations or net assets of
other long-term employee benefits are recognized and measured in accordance with the above
requirements relating to defined benefits plan.
4.19 Bonds Payable
Bonds issued by the Company is initially recognized at the actual amount received, and is
subsequently measured at amortized cost using real interest method. When a discount or premium
happens on a bond, interest is adjusted at the amortized discount or premium of each accounting
period using real interest method.
4.20 Anticpation liabilities
Anticpation liabilities is when the obligation that related to the contingency is current obligation that
the company is undertaking, and undertaking the obligation may result in an outflow of economic
benefits, at the same time, the amount of the obligation can be measured reliably. Provisions are
initially measured at the best estimate of the payment to settle the associated obligations. lfthere is a
continuous range for the necessary expenses and probabilities of occurrence of all the outcomes
within this range are equal, the best estimate shall be determined at the average amount of upper and
lower limits within the range. If the contingency involves two or more items, the best estimate shall
be determined according to all the possible outcomes with their relevant probabilities.
The Company shall review the carrying amounts of provisions at each balance sheet date, and if
there are conclusive evidences that indicate the carrying amounts of provisions can't reflect the
present best estimate of the payment, the carrying amounts of provisions will be adjusted to the
present best estimate of the payment.
4.21 Income
The Company's income is mainly arising from income from rendering services, abalienating of right
to use assets, investment income and other income.
4.21.1 Rendering services
When the result of rendering services can be reliably estimated on the balance sheet date, which
refers to the four stand are all met: l) the amount of revenuecan be measured reliably; 2) it is
probable that the economic benefits will flow to the seller; 3) the stage of completion at the balance
sheet date can be measured reliably; and 4) the costs incurred,or to be incurred,in respect of the
- 36 -
F-38
Zhongrong International Trust Company limited Notes to the Financial Statements
For the year ended 31 December 2018
transaction can be measured reliably,revenue is recognized using the percentage of completion
method, and the percentage of completion is estimated according to the percentage of incurred cost
in the estimated total cost. When the result of rendering services cannot be reliably estimated on the
balance sheet date, if incurred cost is recovered, then revenue is recognized according to the cost
incurred, and cost is recognized at the same amount; if incurred cost cannot be recovered, then
revenue is not recognized and the incurred cost is recognized in profit or loss of current period
Income from rendering services of the Company mainly includes commissions of entrusted Asset
Management business, and fees of consulting, advisory and qualified investor reference. A
commission of entrusted Asset Management business is the reward to trustee according to a trust
contract. A fee of consulting, advisory and qualified invest reference is a service charge paid by a
client according to contract or agreemetn.
Types of income of the Company are mainly divided into: security investment business income,
equity investment business income, loan business income, property right business income, equity
earning right business income, floating performance reward, mutual fund management fee and
financial services business income, etc. The calculation method is described as follows.
For security investment business, valuation is normally according to the market value of daily
holding products. Net assets value from valuation multiplied by the rewarding rate agreed in the trust
contract, divided by number of days, which comes to the amount of reward per day.
Equity investment business is normally long term, of which reward is calculated according to the
recouped amount at maturity of repurchasing premium deducting holding period expenses.
Loans, property right and equity earning right businesses are normally rewarded at the amount of
size of assets multiplied by the rewarding rate agreed in the trust contract,and divided by the times of
charging.
Floating performance reward is normally calculated after liquidation,at the amount of net earnings at
liquidation multiplied by the rewarding rate agreed in the contract.
Mutual fund management fee is normally charged at the amount of size of fund managed multiplied
by management fee rate agreed in fund contract, and divided by times of charging
Financial services business normally charges service fees according to the standards agreed in
contracts of different types of service.
4.21.2 Abalienating of right to use assets
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F-39
Zhongrong International Trust Company limited Notes to the Financial Statements
For the year ended 31 December 2018
When it is probable that the economic benefits will flow to the Company, and the amount ofrevenue
can be measured reliably, revenue from abalienating the right to use assets can be recognized
4.21.2.1 Interest income is determined by the period of time of other party uses the Company's cash
and the real interest rate, which refers to revenue recognized from the Company issuing
self-operated loans and accruing interest income in each period.
For loans issued by the Company, interest is accrued in each period and revenue is recognized.If a
loan is not repaid after 90 days of its maturity (including rollover, the same hereafter), the current
period interest is not accrued and accounted off the balance sheet; in the meantime, interests that are
already accrued in balance sheet adjust profit or loss of current period, and accounted off balance
sheet.
Interest income from financial firms'saving deposits is recognized in interest income on deposits at
the time of receiving interest settlement notice from the bank; interest income in placements to other
financial institutions is calculated based on the period of time of abalienating the right to use assets
and applicable interest rate.
When a financial asset is impaired, interest income is calculated using the discount rate at which
future cash flow is discounted at the time of impairment.
4,21,2.2 Utility charge is calculated according to the charging time and method agreed in relevant
contract or agreement.
4.21.3 Investment income
The Company's investment income refers to the earnings from holding long-term equity investment,
and earnings from buying, selling and holding financial assets. For long-term equity investment
under cost method, investment income is recognized when cash dividend or profit sharing is
declared by the investee; for long-term equity investment under equity method, investment income is
recognized at the Company's share in the net profit or adjusted net profit of the investee. For
financial assets, investment income of current period is recognized at the amount of difference
between buying price and selling price deducting relevant taxes and fees, and profit sharing and
dividends during the holding period is also recognized investment income of current period.
4.22 Government grants
4.22.1 Category of government grants & Accounting treatment of government grants
Government grants are the monetary assets and non-monetary assets received from the government
- 38 -
F-40
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
without consideration. If the government grant is monetary assets, it should be measured according
to the amount received or receivable. If government grant are non-monetary assets, they shall be
measured in accordance with the fair value; if the fair value cannot be obtained reliably, they shall be
measured in accordance with the nominal amount.
Government grant related to day-to-day activities are included in other benefits in accordance with
the nature of economic operations. Government subsidies unrelated to daily activities are included in
non-operating income and expenditure.
Government grant for the purchase, construction or other formation of long-term assets are clearly
stipulated in government documents and are recognized as government grant related to assets.
Government documents do not specify the object of subsidies, which can form long-term assets. The
government subsidy corresponding to the value of assets is regarded as the government subsidy
related to assets, and the rest as the government subsidy related to income. For those government
grant that is difficult to distinguish, the whole government grant is as the government grant related to
income. Asset-related government grant reduce the book value ofrelated assets.
Government grant other than assets-related government subsidies are recognized as revenue-related
government subsidies. If the government subsidy related to income is used to compensate the related
expenses or losses of the enterprise in the following period, it shall be recognized as deferred income
and shall be included in the current profit and loss during the period of affirming the relevant
expenses; if it is used to compensate the related expenses or losses incurred by the enterprise, it shall
be directly included in the current profit and loss.
4.22.2 The recognition time point for government grants
The receivable government grants will be recognized when there are conclusive evidence to indicate
the Company could meet all related government grants requirements and the Company expects to
receive the government grants in the future. Other government grants will be recognized when the
grant fund received.
4.23 Deferred tax asset and deferred tax liability
4.23. l Temporary differences arise from the difference between the carrying amount of an asset or
liability (asset or liability not recognized in balance sheet but the tax base is ascertained by the
current tax laws and regulation, the tax base is the temporary difference) and its tax base are
recognized as deferred tax calculating by the effective tax rate in the expected period to receive the
- 39 -
F-41
asset or discharge the liability.
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
4.23.2 The recognition of deferred income tax assets is limited to the amount of taxable income that
is likely to be obtained to offset temporary differences. On the balance sheet date, if there is
conclusive evidence that sufficient taxable income is likely to be obtained in the future to offset
temporary differences, deferred income tax assets not recognized in previous accounting periods
shall be recognized. If it is likely that sufficient taxable income will not be available to offset
deferred income tax assets in the future, the book value of deferred income tax assets will be written
down.
4.23.3 The taxable temporary differences associated with investments in subsidiaries and associates
shall be recognized deferred tax liability; except the Company is able to control the timing of the
reversal of the temporary difference and it is probable that the temporary difference will not reverse
in the foreseeable future. The deductible temporary differences associated with investments in
subsidiaries, associates, the corresponding deferred tax asset is recognized when it is probable that
the temporary difference will reverse in the foreseeable future and it is probable that taxable profits
will be available in the future against which the temporary difference can be utilized.
4.24 Leases
Leases are classified into finance leases and operating leases. The judgment criteria for financial
leases are: Leases that transfer substantially all the risks and rewards related to the ownership of
assets. The Company recognizes those meet with the following one or certain standards as the fixed
assets by finance lease: The leasing contract had agreed that when the lease tenn expires, the
ownership of leasing the fixed assets could be transferred to the Company; the Company owns the
choosing right for purchasing and leasing the fixed assets, with the set purchase price which is
estimated far lower than the fair value of the fixed assets by finance lease when executing the
choosing right, so the Company could execute the choosing right reasonably on the lease starting
date; even if the ownership of the fixed assets not be transferred, the lease period is of75% or above
of the useful life of the lease fixed assets; The current value of the minimum lease payment on the
lease starting date of the Company is almost equal to the fair value of the lease fixed assets on the
lease starting date;the nature of the lease assets is special that only the Company could use it if not
execute large transformation. for leases that do not meet the above conditions, they are recognized
as operating leases.
- 40 -
F-42
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
The accounting treatment of the company's leasing business is handled in accordance with the
provisions of the "Accounting Standards for Business Enterprises - Leases".
4.25 Held-for-sale
Non-current assets or disposal groups are classified as held-for-sale assets when all the following
conditions are met: a) the asset (or disposal group) must be available for immediate sale in its
present condition subject only to terms that are usual and customary for sales of such assets (or
disposal groups); b) the sale must be highly probable, i.e. the Company has signed an irrevocable
transfer agreement with the transferee and the transfer is expected to be completed within one year.
If related regulations require pre-approval for the sale, the sale transaction has been approved.
When non-current asset (or disposal group) classified as held for sale is initially measured or
remeasured at each balance sheet date, if the book value of the non-current asset ( or disposal group)
is higher than its fair value, the difference will be deducted from the book value and recognized as
impairment provision of held for sale in the profit and loss for current period.
Non-current asset (or disposal group) classified as held-for-sale asset will be presented as
held-for-sale assets and the liabilities in the disposal group will be presented as held-for-sale
liabilities in the balance sheet.
4.26 discontinued operations
A discontinued operation is a clearly distinguished component of an entity, that either has been
disposed of, or is classified as held for sale, and meets any of the following criteria:
(a) represents a separate major line of business or geographical area of operations,
(b) is part of a single co-ordinated plan to dispose of a separate major line of business or
geographical area of operations or
(c) is a subsidiary acquired exclusively with a view to resale.
4.27 Fair value
4.27.1 Criteria of fair value measurement in Level I inputs
We use financial instruments such as stocks, bonds, and funds listed in the centralized securities
trading system as the level I inputs fair value measurement items, and its fair value is determined
based on the closing price or settlement price announced by the stock exchange (or clearing
institution).
4.27.2 Criteria of fair value measurement in Level 2 inputs
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F-43
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
We use the asset management plan as the level 2 inputs fair value measurement item. When
detennining the fair value, the company will give priority to the recommended valuations issued by
authoritative third-party agencies. If the company cannot directly obtain the recommended
valuations published by authoritative third-party agencies, the company will use valuation methods
such as the valuation announced by the manager, valuation model to evaluate the leval 2 inputs fair
value measurement items.
4.27.3 Criteria of fair value measurement in Level 3 inputs
The company uses unlisted equity as a level 3 inputs fair value measurement item. When evaluating
the unlisted equity, the company uses the available actual transaction price as its fair value. For
unlisted equity whose fair value cannot be reliably measured, the company uses the cost method for
measurement.
4.28 Determination of Operating Activity, Investing Activity and Financing Activity
4.28.1. An investing activity of the Company refers to activities related to constructing the
Company's long-term assets, which mainly include, fixed assets, intangible assets,
under-construction project, and long-tenn equity investment on which the Company has control,
common control or significant influence, and other assets with a holding period longer than a year or
one operating cycle.
4.28.2. A financing activity of the Company refers to activities which cause changes on the size and
structure of the Company's capital, bonds and long-term debt
4.28.3. An operating activity of the Company refers to any of the Company's activities other than
investing activities and financing activities. Operating activities mainly include issuing loans,
inter-bank lending, Asset Management, consulting and advisory services, financial assets investment
and investment operations, etc Buying and selling financial assets belongs to the day-to-day
operations of the Company, and its cash flows are reflected in cash flow from operating.Short-term
loan issuance and repaid principal, cash lending to other financial institutions, buying and selling
securities and other financial assets are accounted at net value.
4.29. Entrusted Business
The main entrusted business of the Company is trust property management
The trust property management is the Company trustee mange the settlers' trustproperties according
with the trust agreement. In comply with relevant regulationst, the Company manage the inherent
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F-44
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
property and trust property separately and use different accounting method. The trust project the
trustee manage, utilize and dispose the trust property alone or collective according to the agreement
seen as a basic unit, each project is an independent accounting body, and independently accounting
the mange, utilize and dispose the trust properties and prepared in the financial statement. The asset,
liability and profit and loss do not include into the Company's financial statement
4.30. Provision of Trust Compensation Reserve
According to the Regulations on Trust Companies issued by CBRC, 5% of the Company's after-tax
net profit is accrued in trust compensation reserve, with a limit of 20% of the Company's registered
capital. The major purpose of the trust compensation reserve is to offset any losses in entrusted
assets due to possible management and operating mistake.
4.31 Provision of General Risk Reserve
According to the regulations in "Cai Jin" (2012) No. 20, the higher of the amount of potential risk
estimation lower than provision for impairment of assets and 1.5% of ending balance of risk assets,
is accrued in provision of general risk reserve from after-tax net profit.
5. Changes in accounting policies and accounting estimates, and correction
of errors from last period
5.1 . Changes in accounting policies
On June 15, 2018, the Ministry of Finance issued the Notice of the Ministry of Finance on Revising
the Format of the 2018 Annual General Enterprise Financial Statements (Accounting [2018] No. 15).
Enterprises implementing the Accounting Standards for Business Enterprises shall follow the
Accounting Standards for Business Enterprises and the Notice. Request for the preparation of
financial statements for the 2018 and subsequent periods.The main influence on the financial
statements after the Company adopts the above two standards and the Notice (Caikuai (2018) No.IS)
fi II 1sas o owmg:
Reason and content of Item affected The amount of Restatement Amount Amount
accounting policy change item affected amount of presented in presented in
prior period non-operating non-operating
income of prior expenses of
period prior period
Withholding tax fees are Other income 9,401,197.45 1,600,371.55 1,600,371.55
charged to other income
5.2. Major changes in accounting estimates
- 43 -
F-45
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
There is no change in accounting estimates during this reporting period.
5.3. Correction of errors from last period.
There is no need to disclose conection error from last period during this reporting period.
6. TAXES
6.1 MaJor Taxes an d Tax Rates
Category of tax Taxation basis Tax rate
Value-added tax Value-added tax payable 6%, 3%, 5%
City maintenance and commodity turnover tax payable 7%
construction tax
Education fee affixture commodity turnover tax payable 3%
Local education commodity turnover tax payable 2%
surcharge
Corproateincome tax commodity turnover tax payable 25%, 16.5%
Note: Zhongrong Culture International Management Co., Ltd., Zhongrong International Capital
Management Co., Ltd., Zhongrong International Wealth Management Co., Ltd., Zhongrong PT
Securities Co., Ltd., Zhongrong PT Finance Co., Ltd., Zhongrong PT Trading Co., Ltd., Zhongrong
PT Financial Co., Ltd. is registered in Hong Kong with a profits tax rate of 16.5%;
Wealthln International Holdings Limited, ZRT Grandton (International) Holdings LTD, Zhongrong
International Holdings Limited, Zhongrong International Bonds 2015 Co., Ltd., Blackhawk
Investment Management Limited, Zhongrong International Bonds 2016 Co., Ltd., Zhongrong
International Bonds 2018 Co., Ltd., Fu Standard Global Co., Ltd. is registered in the Virgin Islands
and is not subject to corporate income tax;
Zhongrong International Capital Management Co., Ltd. (Cayman), ZRT Grandton Investment
Management (International) LTD, China Finance Capital Holdings Co., Ltd., ZRC Management
Limited, registered in Cayman, are not subject to corporate income tax.
6.2 Tax Preferences & Approval Documents
Tax preferences and approvals not disclosed during the reporting period of the company
6.3 Other matters need to be explained
There are no other matters needing to be disclosed during the reporting period.
7. Consolidated and consolidated financial statements
7.1 Sub-enterprise situation
- 44 -
F-46
Gra
dat
Typ
e o
f L
ocat
ion
of
Loc
atio
n o
f N
o.
Nam
e o
f sub
sidi
ary
ion
ente
rpri
se
oper
atio
n re
gist
rati
on
Btjii
ngZh
ongr
ong
Din
gxin
I ln
vcstm
cnt
Man
agem
ent
2 I
Bei
jing
Bei
jing
Com
pany
2 Zh
oogo
og M
utual
F wtd
2 2
Shen
zhen
Sh
enzh
en
Man
agem
ent C
crnpa
ny
3 O
mig
liyua
n No.
I =ru
bied
2
4 fw
ids t
rust
Zlm
gron
gFun
d-To
ngdl
No.l
4 2
4 QD
II si
ngle
~ m
anga
gmcn
u
Zlm
groo
g(Bc
ijing
)Am
5
3 I
Bei
jing
Bei
jing
Man
agem
ent C
crnpa
ny
Zhoo
groo
g Cha
n~e C
apiia
6
3 I
Shan
ghai
Sh
angh
ai
lnvc.5
1ment
Man
agem
ent C
o., Lt
d
~ C
liang
kwi In
vestm
ent
7 4
1 Sh
angh
ai
Shan
ghai
M
anag
emen
t Com
pany
Stm
ghai
Jiash
eng I
nvest
ment
8 5
I Sh
angh
ai
Shan
ghai
M
anag
emen
t Com
pany
9 ZR
C M
~t Li
mite
d 5
I Ca
ym~n
C
aym
an
IO
Bcijin
gZho
ngro
ng H
uizhi
Huma
n 3
I B
eijin
g B
eijin
g Rc
rowo
o.
Pai
d-in
M
ain b
usin
ess
capi
tal(
tcn
thou
sand
yua
n)
Inve
stmen
t 12
2,00
0.00
m
anag
emen
t
Fund
11
5,00
0.00
m
anag
emen
t
Oth
er u
sufru
ct
53,2
00.0
0 in
vestm
ent
Bill
inve
stmen
t 10
00.0
0
Ass
et
30,0
00.0
0 m
anag
emen
t
Ass
et
8,00
0.00
m
anag
emen
t
AsS
<:t
500.
00
man
agem
ent
Ass
et
man
agem
ent
Ass
et
man
agem
ent
Hum
an re
sour
ces
1,00
0.00
-45
-
Zho
ngro
ng In
tern
atio
na
l Tru
st C
ompa
ny L
imite
d
No
tes
to th
e F
inan
cial
Sta
tem
en
ts
For
the
ye
ar
ende
d 3
1 D
ece
mb
er
20
18
Pro
port
ion
Inve
stm
ent
Mod
P
ropo
rtio
n o
f (t
en
e o
f sh
are-
hold
ing(
%)
of
voti
ng
thou
sand
ri
ght(
%)
acqu
vu
an)
irin
g
100.
00
100
.00
122.
000.
00
I
51.0
0 51
.00
58,6
50.0
0 I
71.7
0 71
.70
53,2
00.0
0 4
100.
00
100.
00
1000
.00
4
100.
00
100.
00
30,0
00.0
0 I
100.
00
100.
00
8,00
0.00
I
80.0
0 80
.00
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00
I
80.0
0 8
0.00
I
80,
00
80.0
0 I
100
.00
100
.00
1,00
0. 0
0 I
F-47
Gra
dat
Typ
e o
f L
ocat
ion o
f L
ocat
ion
of
No.
N
ame
of s
ubsi
diar
y io
n en
terp
rise
op
erat
ion
regi
stra
tion
11
Shan
ghai
Huizh
i Hum
an R
esoorc
cs 4
I Sh
angh
ai
Shan
ghai
12
Dazi
Ding
dteng
Cap
ital l
~en
l 3
I Lh
asa
Takt
se
C~Ti
pany
Dazi
Ding
rui
Capit
al lnv
C\trn
enl
13
3 I
Lhas
a Ta
ktse
~
y
Dazi
Ding
shen
g Olp
ilal ln
ll:50n
elll
14
3 I
Lhas
a Ta
ktse
C0
01!X
]l1Y
Shcn
2hrn
Zhon
gron
g Boo
shaig
15
3
I Sh
enzh
en
Shen
zhen
AS
9:J. M
anag
emen
l
16
Shcn
zlien
Zho
ogro
ng R
oogy
ilong
3
I Sh
enzh
en
Shen
zhen
ln
lanetF
inan
reSa
vicc
sCom
flllly
17
Zhoo
gron
g Huix
ing A
sset
3 I
Bei
jing
Bei
jing
M~c
men
t Com
pany
18
Guan
gzho
u Zho
ngyin
Culi
ure
4 I
Gua
ngzh
ou
Gua
ngzh
ou
ln\'l:S
tmen
t ~!an
agem
ent C
ompa
ny
19
Zlm
gong
lnlcm
alioo
al Cu
hure
5 3
Hon
gkon
g H
ongk
ong
Man
agem
cnl C
ompa
ny
Dazi
Zhoo
gron
g D
in~
AS9
:J. 20
3
I Lh
asa
Takt
sc
Man
agirn
ent C
omflll
!Y
Bcijin
g Zho
ogro
ng
l\bld
a 21
4
I B
eijin
g Be
ijing
AS
Y:J.
Man
agem
ent C
ompa
ny
Shcn
zhcn
Zho
ngrw
gSilk
Roo
d 22
3
I Sh
enzh
en
Shen
zhen
~ ~ lw
1agc
mcn
t Com
pany
Pai
d-in
M
ain
busi
ness
ca
pita
l(te
n th
ousa
nd y
uan)
I lum
an re
sour
c.:s
200.
00
Ass
et
200,
00
man
agem
enl
Ass
et
200.
00
man
agem
ent
Ass
et
man
agem
ent
Ass
et
500.
00
man
agem
ent
Asse
1 2,
600.
00
man
agem
enl
Ass
et
890,
00
man
ngem
enl
Ass
el
man
agem
enl
Ass
et
man
agem
ent
Ass
et
man
agem
ent
Ass
et
man
agem
ent
Ass
et
1,00
0.00
m
anag
emen
t
-~6
-
Zho
ngro
ng I
nte
rna
tion
al T
rust
Com
pany
Lim
ited
N
otes
to t
he
Fin
anci
al S
tate
men
ts
For t
he y
ear e
nded
31
Dec
embe
r 20
18
Pro
port
ion
Inve
stm
ent
Mod
P
ropo
rtio
n o
f (t
en
C o
f sh
are-
hold
ing(
¾)
of
voti
ng
thou
sand
ri
ght(
¾)
acqu
yu
an)
irin
g
100.
00
100.
00
200.
00
1
100.
00
100.
00
200.
00
I
100.
00
100.
00
200.
00
I
100.
00
100.
00
I
80.0
0 80
.00
400.
00
I
80.0
0 80
.00
2,60
0.00
I
80.0
0 80
.00
712,
00
I
80.0
0 80
.00
I
80.0
0 80
.00
I
80.0
0 80
.00
I
80.0
0 80
.00
I
80.0
0 80
.00
800.
00
I
F-48
Gra
dat
Typ
e o
f Lo
catio
n o
f L
ocat
ion
of
No.
N
ame
of s
ubsi
diar
y io
n en
terp
rise
op
erat
ion
regi
stra
tion
Shan
ghai
Ding
mu ln
l'C\tll
lelll
23
3 1
Shan
ghai
Sh
angh
ai
Man
agan
ent C
OOllll
JT)'
Beiji
ng
Zhoo
gmng
Di
ngho
og
24
3 I
Bei
jing
Bei
jing
lnl'C
ltmalt
CanJ
rlllY
ZJ1CJ
W011g
Huy
in A
sld
25
3 I
Shan
ghai
Sh
angh
ai
MY,
agan
cnt C
anJD
1)'
Wea
llh ln
lnle
mal
imal
Th
e B
ritish
V
irgin
Th
e B
ritis
h 26
4
3 H
okin
g,lli
nita
l Is
land
s V
irgin
Isla
nds
27
Zhoo
gmng
Dill
f,\'.in
g A
sset
3 M
anag
ancn
t Can
lJlllY
l
Shan
ghai
Sh
angh
ai
.ltmdu
n lnv
cstm
ffll M
an:ig
emert
28
3
I Sh
angh
ai
Shan
ghai
(S
h.r1g
hai) C
an[D
l)'
Slm
oog l
nvem
imt M
.mag
emert
2
9
4 I
Shan
ghai
Sh
angh
ai
(Sha
ngha
i) Ccm
JllllY
ZRT G
r.mdtm
(lnter
n.1ion
a) Th
e B
ritis
h V
irgin
Th
e B
ritish
30
5
3 H
ddin
gLlD
Is
land
s V
irgin
Isla
nds
Rllila
i lnV0
1men
t M;m
gcm
ent
31
5 I
Shan
gl1a
i Sh
angh
ai
(Slm
gh.>i
) Ccm
pany
ZRTG
rado
o
32
lnves
imert
~ l.m
gcm
cnt
6 3
Cay
man
C
aym
an
(lnlcm
atioo
al) LT
D
Zhoo
gron
g Shi
hmgA
sld
33
3 I
Bei
jing
Bei
jing
Mnn
agcm
cnt C
an(X
lll)'
34
Zhoo
groo
g Zha
ng Yu
n Xing
Asse
t 3
I B
eijin
g B
eijin
g
Pnid
-in
Mai
n bu
sine
ss
capi
tal(
ten
thou
sand
yua
n)
Ass
et
man
agem
ent
Ass
et
man
agem
ent
Ass
et
1,00
0.00
m
anag
emen
t
Ass
et
man
agem
ent
Ass
et
500,
00
man
agem
ent
Ass
et 50
0.00
m
anag
emen
t
Ass
et
200.
00
man
agem
ent
Asse
t
man
agem
ent
Ass
et
man
agem
ent
Ass
et
man
agem
ent
Ass
et
500.
00
man
agem
ent
Ass
et
500.
00
-47
-
Zho
ngro
ng I
nter
nati
ona
l Tru
st C
ompa
ny lim
ited
N
otes
to
th
e Fi
nanc
ial S
tate
men
ts
For t
he
year
end
ed 3
1 D
ecem
ber
20
18
Prop
orti
on
Inve
stm
ent
Mod
P
ropo
rtio
n o
f (t
en
e o
f sh
are-
hold
ing(
%)
of
voti
ng
thou
sand
ri
ght(
%)
acq
u yu
an)
irin_
g
100.
00
100.
00
I
100.
00
100.
00
I
80.0
0 80
.00
800.
00
I
80.0
0 80
.00
I
80.0
0 80
.00
400,
00
I
80.0
0 80
.00
400.
00
I
80.0
0 80
.00
160.
00
1
80.0
0 80
.00
I
80.0
0 80
.00
I
80.0
0 80
.00
I
80.0
0 80
.00
400.
00
I
80.0
0 80
.00
400.
00
I
F-49
Gra
dal
Typ
e o
r L
ocat
ion o
f L
ocat
ion
of
No.
N
ame
of s
ubsi
diar
y io
n en
terp
rise
op
erat
ion
regi
stra
lion
Man
:igan
cnt C
001p
any
35
Zhoo
groo
g Day
oo C
apl:l
l 3
lnves
tnent
Man
agem
ent C
ompa
ny
I Sh
angh
ai
Shan
ghai
36
Beijin
gZho
ogro
ng H
engn
ri Cap
ilal
3 I
Bei
jing
Bei
jing
Invest
ment
Man
agem
ent C
ompa
ny
37
Shm
ghai
l.mgs
h111
As.
Id
I I
Shan
ghai
Sh
angh
ai
Man
agem
ent C
001p
any
Zhoo
gra,g
lntem
a!ioo
al Ho
lding
s Th
e B
ritish
Virg
in
The
Brit
ish
38
4 3
Limi
to:I
Isla
nds
Virg
in I
slan
ds
Zhoo
gron
g Inte
rnatio
nal C
apila
l 39
5
Man
agan
cnt L
imito
:I 3
Hon
gkon
g H
ongk
ong
Zhon
groo
g lnte
matio
oal B
ond
The
Brit
ish V
irgin
Th
e B
ritis
h 40
5
3 20
15 Li
mito:
1 Is
land
s V
irgin
Isla
nds
41
Zhon
groo
g Hol
dqs L
imi1e
d 5
3 C
aym
an
Cay
man
Bl&:
khaiv
k lnv
cstm
all
The
Brit
ish
Virg
in
The
Brit
ish
42
4 3
M~
tLim
ito
:I
Isla
nds
Virg
in Is
land
s
Zhon
groo
g lme
matio
oal B
ond 2
016
The
Brit
ish
Virg
in
The
Brit
ish
43
5 3
Limi
to:I
Isla
nds
Virg
in Is
land
s
Zhoo
gron
g lnte
matio
oal C
apila
l
44
Maa
agm
ienl
5 3
Cay
man
C
aym
an
Limi
too (C
ll\'llll
lll)
45
\l'c;Jl
th Po
inter
Gloto
l Lim
ited
5 3
The
Brit
ish
Virg
in
The
Brit
ish
Pai
d-in
M
ain
busi
ness
ca
pita
l(tc
n th
ousa
nd y
uan)
man
agem
ent
Ass
et
2,00
0.00
m
anag
emen
t
Ass
et
500.
00
man
agem
ent
Ass
et
30,0
00.0
0 m
anag
emen
t
Ass
et 28
,083
.78
man
agem
ent
Ass
et
7,47
3.27
m
anag
emen
t
Ass
et
9,68
8.35
m
anag
emen
t
Ass
et
man
agem
ent
Ass
et
man
agem
ent
Ass
et 6,
631.
20
man
agem
ent
Ass
et
man
agem
ent
Ass
et
-18
-
Zho
ngro
ng I
nte
rna
tion
al T
rust
Com
pany
Lim
ited
N
otes
to th
e Fi
nanc
ial S
tate
men
ts
For
the
year
en
ded
31
Dec
embe
r 20
18
Pro
port
ion
Inve
stm
ent
Mod
P
ropo
rtio
n o
f (t
en
e o
f sh
are-
hold
ing(
%)
of
voti
ng
thou
sand
ri
ght(
%)
acqu
vu
an)
irin
g
80.0
0 80
.00
1,60
0.00
I
80.0
0 80
.00
400.
00
I
100.
00
100.
00
30,0
00.0
0 I
100.
00
100.
00
28,0
83.7
8 I
100.
00
100.
00
7,47
3.27
I
100,
00
100.
00
9,68
8.35
I
100.
00
100.
00
I
100.
00
100.
00
I
100.
00
100.
00
6,63
1.20
I
100.
00
100.
00
I
100.
00
100.
00
1
F-50
Gra
dat
Typ
e o
f L
ocat
ion o
f L
ocat
ion
of
No.
N
ame
of s
ubsi
diar
y io
n en
terp
rise
op
erat
ion
regi
stra
tion
Isla
nds
Virg
in Is
land
s
Zhoo
groo
g lnte
malio
oal W
eallh
4
6
5 3
Hon
gkon
g H
ongk
ong
Man
agem
ent L
imite
d
47
Zh
oogr
ong P
rSer
uriti
cs L
imite
d 5
3 H
ongk
ong
Hon
gkon
g
48
Zh
oogr
ong P
rFin
amx:
Lim
ited
5 3
Hon
gkon
g H
ongk
ong
49
Zh
mgr
oog P
TTra:
ling L
imite
d 5
3 H
ongk
ong
Hon
gkon
g
50
Zhon
groo
g PT
~l L
imilc
d 5
3 H
ongk
ong
Hon
gkon
g
Zhoo
groo
g lntc
mali
mal
Bood
2018
Th
e B
ritis
h V
irgin
T
he B
ritis
h 51
5
3 Li
mited
Is
land
s V
irgin
[sl
ands
52
Hm
in Zh
ongr
ong D
inpl
ll Re
al 3
I lla
erbi
n l[a
erbi
n Es
late L
imile
d
53
Zhon
gding
Hon
gdao
Scru
ilics
3
4 In
vestm
ent F
IDld
Zhon
groo
Din~
11-D
ingro
n!')if
eng
54
3 4
No.
II Fu
nd
Sh.m
g)lai
c~
hoos
c
inlcr-
-Oilll
k 0-1
ye8I
S, hi
gh-{o
-
55
mrou
m-gar
o: 3
4
cn:di
t ro
:.x la
unch
cdso
:uili
cs
inves
tmen
t fund
s
Pai
d-in
M
ain b
usin
ess
capi
tal(
ten
thou
sand
yua
n)
man
agem
ent
Ass
et
man
agem
ent
Ass
et
8695
.84
man
agem
ent
Ass
et
88.6
7 m
anag
emen
t
Ass
et
0.89
m
anag
emen
t
Ass
et
648.
11
man
agem
ent
Ass
et
man
agem
ent
Real
Esta
te
Secu
rity
5,00
0.00
In
vestm
ent
Equi
ty in
vestm
ent
8,82
5.00
1,05
3.30
-19
-
Zh
on
gro
ng
In
tern
ati
on
al T
rust
Co
mp
an
y L
imit
ed
N
otes
to t
he
Fina
ncia
l Sta
tem
ents
F
or th
e y
ear
end
ed 3
1 D
ecem
ber
20
18
Pro
port
ion
Inve
stm
ent
Mod
P
ropo
rtio
n o
f (t
en
e o
f sh
are-
hold
ing(
%)
of
voti
ng
thou
sand
ri
ght(
%)
acqu
yu
an)
irin
g
100.
00
100.
00
I
94.8
1 94
.81
1042
9.28
3
100.
00
100.
00
23
6.01
3
100.
00
100.
00
3
100.
00
100.
00
648.
11
l
100.
00
10
0.00
I
100.
00
100.
00
3
100.
00
10
0.00
5,
000.
00
4
63.0
6 63
.06
5,65
5.33
4
94.9
4 94
.94
1,00
0.00
4
F-51
Gra
dat
Typ
e o
f L
ocat
ion
of
Loc
atio
n o
f N
o.
Nam
e o
f sub
sidi
ary
ion
ente
rpri
se
oper
atio
n re
gist
ratio
n
Shan
ghai
cle:ni
ng ho
ose
56
intcr-
oonk
1-3y
cars,
high-g
.mk:
3 4
aalit
ind
ex la
unch
ed =
line
s
inl'cs
tmen
t rlDl
ds
SIUlllg
hai
clc;ir
ing ho
ose
inter
-lmk 1
-3~
57
high-!
CHTic
dium-
fillllc
3
4
Cffll
il ind
e.x la
unch
ed se
curiti
es
invest
ment
fund
s
Shan
ghai
clea
ring h
ouse
inter
-ban
k 3-
5 ye
ars.
58
high
-to-m
ediu
m-g
arde
3
4
cicd
it in
dex
launc
hed
secu
ritie
s inv
estm
ent f
unds
59
Zhon
gron
gron
gjun
No.
3
4 73
Sta
nd-a
long
Tru
st
Paid
-in
Mai
n bu
sine
ss
capi
tal(
ten
thou
sand
yua
n)
1,07
1.89
1,05
0.31
1,03
3.9
1
801.
26
Zho
ngro
ng In
tern
atio
na
l Tru
st C
ompa
ny L
imite
d
Not
es t
o th
e Fi
nanc
ial S
tate
men
ts
For t
he y
ear
ende
d 31
Dec
embe
r 201
8
Prop
ortio
n In
vest
men
t M
od
Prop
ortio
n o
f (t
en
e o
f sh
are-
hold
ing(
%)
of
votin
g th
ousa
nd
righ
t(%
) ac
qu
vuan
) ir
ing
93.3
0 93
.30
1,00
0.00
4
95.2
7 95
.27
1,00
0 00
4
96.7
3 96
.73
1,00
0.10
4
94.9
4 94
.94
1220
.46
4
Not
e: T
ype
of e
nter
pris
e: 1
. Dom
estic
non
-fin
anci
al s
ub-e
nter
pris
es, 2
. Dom
estic
fin
anci
al s
ub-e
nter
pris
es, 3
. Off
shor
e su
b-en
terp
rise
s, 4
. Stru
ctur
ed s
ubje
ct
Mod
e o
f acq
uiri
ng:
1. I
nves
t in,
2. M
erge
r of e
nter
pris
es u
nder
the
sam
e co
ntro
l, 3.
Mer
ger o
f Ent
erpr
ises
not
und
er th
e sa
me
Con
trol,
4. S
hare
pur
chas
e.
If th
e pr
opor
tion
of sh
ares
hel
d by
a s
ubsi
diar
y is
dif
fere
nt fr
om t
he p
ropo
rtio
n o
f vot
ing
right
s, i
t sho
uld
expl
ain
the
prop
ortio
n o
f vot
ing
right
s an
d th
e re
ason
s fo
r th
e
diff
eren
ces.
-50
-
F-52
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
7.2 Important non-wholly-funded sub-enterprises
7.2.1 minority shareholders
Profit or loss Dividends to
Proportion of attributable to minority Closing balance
No. Name of subsidiary of minority minority share minority shareholders shareholders of
current period interest
of current period
1 Zhongrong Fund
49% 14,184,180.37 648. 752. 767.87 Management Company
7.2.2 Major financial information
Year ended Year ended
Item 31/12/2018 31/12/2017
Zhongrong Fund Management Zhongrong Fund Management Companv Comoanv
Current assets 1,223,443,319.47 1,222,035,079.48
Non-current assets: 134,763,137.18 130,904,721.77
Total of assets 1,358,206,456.65 1,352,939,801.25
Current liabilities 32,037,848.91 47,843,914.87
Non-current liabilities
Total ofliabilities 32,037,848.91 47,843,914.87
Operating income 239,945,380.85 341,311,557.42
Net profit 29,007,678.62 17,206,219.47
Total comprehensive income 20,916,699.25 18,173,407.60
Cash flows from operating -35,924, 743.27 -229,880,216.63 activities
7.2.3 Subsidiaries or structured entities no longer included in the consolidation scope in the current
period
Reasons
Shareh Proport not
Registrati Busines olding ion of included Disposal day Dispos
Item voting in the al day on s nature ratio assets
(%) rights scope of liability (%) consolida
tion
Shenzhen Qianhai Atlantuo Investment Asset Shenzhen manage 86.67 86.67 Write off 3,002,682.79
Center (Limited Partnership) ment
ZRC Investment Limited Asset Liquidati Cayman manage 80.00 80.00 141,467.79 ment on
- 51 -
Disposal day net assets
2,682.79
3,628.03
F-53
I I
Registrati Busines Item on s nature
Beijing Zhongrong Mingxin Investment Asset Beijing manage
Management Co., Ltd. ment
Wealthin Asset Management Limited Asset
Cayman manage ment
The Asset Wealthln Financial Holdings Limited British
Virgin manage
Islands ment
Zhongrong Yicheng Asset Management Co., Asset Shanghai manage
Ltd. ment
Zhongrong Juchuang Asset Management Asset Shenzhen manage
Co., Ltd. ment
Zhongrong Huizhi Financial Services Asset Shanghai manage
(Shanghai) Co., Ltd. ment
Zhongrong Global Capital Management Co., The Asset British
Virgin manage
Ltd. Islands ment
Shanghai Ruiyang Investment Management Asset Shanghai manage
Co., Ltd. ment
Huzhou Rongrui Investment Management Fund
manage Huzhou ment
Co., Ltd.
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Reasons
Shareh Proport not
aiding ion of included Disposal day Dispos voting in the al day
ratio assets (%)
rights scope of liability (%) consolida
tion
100.00 100.00 Write off
Liquidati 80.00 80.00 on
80.00 80.00 Liquidati
on
80.00 80.00 Write off 5,053,759.61
80.00 80.00 Write off
80.00 80.00 Write off 30,346,065.22
100.00 100.00 Liquidati
on
100.00 100.00 Write off 2,159,453.27
Write off
Disposal day net assets
856.669.24
327,910.33
-16.719.42
3,622.61
7.2.4 Subsidiaries or structured entities newly included in the consolidation scope in the current
period
Net assets at the end of the Name Current net profit
period
Zhongrong Fund-Tongda No. l ODIi Sinsi:le Asset Manasi:ement Plan 9,984,502.03 -15,497.97
Zhongrong International Bond 2018 Co., Ltd. 269,887.17 500,696.74
Harbin Zhongrong Dingxin Real Estate Co., Ltd.
- 52 -
F-54
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
7.2.5 Structured entities included in the consolidated financial statements
Item Proportion of Capital size Net asset size Investment Net profit
Shareholding return
(%)
Chuangliyuan No.I assembled funds 100.00 614,163,938.31 613,746,051.24 82,478,227.06 114,286, 186.83
trust
Zhongrong Fund-Tongda No. I QDII 100.00 10,003,583.63 9,984,502.03 -15,497.97
Single Asset Management Plan
Zhongding Hong Dao Security JOO.OD 19,375,032.28 18,793,302.00 -4,756,358.85 -8,867,552.81
Investment Fund
Zhongrong Dingxin-Dingronglifcng 63.06 115,583,621.10 107,014,362.76 -24,901,000.00 -24,920,204.42
No.II Fund
Shanghai clearing house, inter-bank
0-1 years, high-to-medium grade 94.94 11,904,391.73 10,977,658.60 41,009.72 255,268,71
credit index launched securities
investment funds
Shanghai clearing house, inter-bank
1-3 years, high-grade credit index 93.30 12,733,292.49 11,209,908.86 19,231.98 283,488.63
launched securities investment funds
Shanghai clearing house, inter-bank
1-3 years, high-to-medium-grade 95.27 12,771,388,49 10,952,531.34 6,413.73 267,480.20
credit index launched securities
investment funds
Shanghai clearing house, inter-bank
3-5 years, high-to-medium-grade 96.73 12,394,764.79 10,871,601.44 29,053.77 258,543.48
credit index launched securities
investment funds
Zhongrong-jurong No.73 single fund 94.94 7,791,345.59 8,284,279.69
trust 7,791,437.64
Total 816,721,450.46 801,341,263.86 52,916,577.41 89,831,992.34
(1) Chuangliyuan No.I assembled funds trust
This trust was established and administrated by the company. The fund size is RMB 532,000,000.00
The company subscribed532,000,000.00 shares by RMB 532,000,000.00, which takes up 100.00%
of the total shares. Raised fund of the trust was mainly used for projects of trust loans, other income
right trust or some other trust projects.
(2) Zhongrong Fund-Tongda No. 1 QDII Single Asset Management Plan
- 53 -
F-55
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
The asset management plan is managed by the company and managed by Zhongrong Fund
Management Co., Ltd., with a scale of 10,000,000.00 yuan. The company subscribes for
10,000,000.00 shares at 10,000,000.00 yuan, accounting for I 00.00% of the scale. The plan is a
fixed-income QDII specific customer asset management plan. Investment scope structured bills,
interbank deposits, etc.
(3) Zhongding Hong Dao Security Investment Fund
The fund was established on April 23, 2015 and has long-term existence. BeijingZhongrong
Dingxin Investment Management Co., Ltd., a subsidiary of the company, is the manager of the fund.
The fund is invested in stocks, securities investment funds, national debt, and central bank of
financial bonds. Bills, corporate bonds, corporate bonds, stock index futures, the fund's surviving
scale ofS0,000,000.00 yuan. The proportion of the company's investment in the total scale is
100.00%.
(4) Zhongrong Dingxin-Dingronglifeng No.I I Fund
The fund was established on July 13, 2016. Beijing Zhongrong Dingxin Investment Management
Co., Ltd., a subsidiary of the company, is the fund manager, raising a scale of88,250,000.00 yuan.
The fund has subscribed to Beijing Zhongxin Dingyuan Equity Investment Management Center
(limited partnership). The limited partnership share thus indirectly holds a 0.64% stake in Hunan
Happy Sunshine Interactive Entertainment Media Co., Ltd. In 2018, the equity was acquired by a
listed company, and the fund was eventually invested in shares of listed companies. The company's
investment cost is 56,553,287.67 yuan, holding a fund share of 55,650,000.00, accounting for 63.06%
of the total scale.
(5) Shanghai clearing house, inter-bank 0-1 years, high-to-medium grade credit index launched
securities investment funds
The fund is a bond-initiated securities investment fund. The minimum fund-raising share of the fund
is RMB 10,000,000.00, and the term of the subscription share is not less than three years from the
effective date of the fund contract. The fund mainly invests in products approved by the China
Banking Regulatory Commission and the China Securities Regulatory Commission, such as the
underlying index vouchers and their alternative vouchers. The manager of the fund is Zhongrong
Fund Management Co., Ltd.
(6) Shanghai clearing house, inter-bank 1-3 years, high-grade credit index launched securities
- 54 -
F-56
investment funds
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
The fund is a bond-initiated securities investment fund. The minimum fund-raising share of the fund
is RMB I 0,000,000.00, and the tenn of the subscription share is not less than three years from the
effective date of the fund contract. The fund mainly invests in products approved by the China
Banking Regulatory Commission and the China Securities Regulatory Commission, such as the
underlying index vouchers and their alternative vouchers. The manager of the fund is Zhongrong
Fund Management Co., Ltd.
(7) Shanghai clearing house, inter-bank 1-3 years, high-to-medium-grade credit index launched
securities investment funds
The fund is a bond-initiated securities investment fund. The minimum fund-raising share of the fund
is I 0,000,000.00 yuan, and the term of the subscription share is not less than 3 years from the
effective date of the fund contract. The fund mainly invests in products approved by the China
Banking Regulatory Commission and the China Securities Regulatory Commission, such as the
underlying index vouchers and their alternative vouchers. The manager of the fund is Zhongrong
Fund Management Co., Ltd.
(8) Shanghai clearing house, inter-bank 3-5 years, high-to-medium-grade credit index launched
The fund was established on December 22, 2016. The fundraising scale was 120,521,100.00 yuan,
and the company subscribed for 9,001,000.00 shares at 9,001,000.00 yuan. Investment scope: The
fund mainly invests in products approved by the China Banking Regulatory Commission and the
China Securities Regulatory Commission, such as the underlying index vouchers and their
alternative vouchers. The manager of the fund is Zhongrong Fund Management Co., Ltd.
(9) Zhongrong-jurong No.73 single fund trust
The product was purchased by Zhongrong (Beijing) Asset Management Co., Ltd. in 201 7. The
product scale is 34,980,828.64 yuan, and the existing scale is 8,012,561.91 yuan. The product funds
are used for Yutian Real Estate Co., Ltd. Yuhuafu project loan.
7.2.6 Equity in structuralized entities not included in the scope of consolidated financial statement.
Dec 31, 2018 Dec31,2017
Date of Maximum
Item Scale risk Maximum risk establishment Book value Book value exposure exposure
- 55 -
F-57
Huashenghengli I
Congrongchengzhang (Priority) August 25, 2009
Trust
Zhongrong-Rongjun 13 Collective
Fund Trust Plan March 16, 2018
Zhongrong-Rongheng No. 303
Collective Fund Trust Plan June 7, 2018
Zhongrong-Hongjin 142 Collective July31,2018
Fund Trust Plan
Zhongrong-Chanjin 6 Trust Loan
Collection Fund Trust Plan September 14, 2018
Zhongrong Dingxin Tianshi Equity April 1, 2015
Investment Fund No. I Fund
Zhongrong-Changhe Shengshi 2 July 31, 2018
Collective Fund Trust Plan
Ruiguan (Shanghai) Investment
Partnership (Limited Partnership) September 10, 2015
Zhongrong State-owned Enterprise
Reform Flexible Configuration December 16, 2014
Hybrid Securities Investment Fund
Zhongrong Rongyu Shuangli Bond
Securities Investment Fund July 21, 2016
Zhongrong Quantitative
Multi-factor Hybrid Initiative December 29, 2016
Securities Investment Fund
Zhongrong quantified small-cap
stock-initiated securities May 17,2017
investment fund
Zhongrong Shanghai, Hong Kong
and Shenzhen consumption theme November 16, 2017
A
Zhongrong Fund - Rongyuan No. I
Asset Management March 21, 2017
Zhongrong Fund - Optimal
Configuration No. I Asset March 30, 2015
Management Plan
Zhongrong Fund - Featured
Dividend Configuration No. I April 19,2017
Asset Management Plan
Zhongrong Wenjian Tianli Bond
Securities Investment Fund October 20, 2015
146,400,000 00
341,370,000.00
454,600,000.00
770,000,000.00
600,000,000.00
223,600,000.00
2,522,000,000,.00
450,000,000.00
640,520,240.95
419,672,984.05
89,696,268.79
122,042,309.59
298,956,669.34
81,809,823.50
505,000,000.00
30,064,319.98
354,762,573.42
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
43,618,912.10 43,618,912.10 43,425,923.59
21,370,000.00 21,370,000.00
74,400,000.00 74,400,000.00
250,000,000.00 250,000,000.00
363,000,000.00 363,000,000.00
85,148,000.00 85,148,000.00 38,784,000.00
I00,000,000.00 I 00,000,000.00
65,418,325.06 65,418,325.06
15,747,387.77 15,747,387.77 18,429,735.40
944,000.00 944,000.00 966,000.00
6,336,246.42 6,336,246.42 8,382,325.99
7,202,324.12 7,202,324.12 l 0,517,473.31
7,425,148.5 I 7,425,148.51 9,971,199.44
1,101,049.55 l ,IOl,049.55 1,093,049.19
3,775,000.00 3,775,000.00 4,485,000.00
2,026,773.61 2,026,773.61 2,641,637.52
5,944,582.25 5,944,582.25
- 56 -
43,425,923.59
38,784,000.00
18,429,735.40
966,000.00
8,382,325.99
10,517,47331
9,971,199.44
1,093,049.19
4,485,000.00
2,641,637.52
F-58
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Zhongrong Jushang 3 months
regular open bond-type sponsored March 8, 2018 2,959,999,000.00 10,551,000.00 I 0,551,000.00
securities investment fund
Zhongrong Juyc regularly opens a
bond-initiated securities investment October 17. 2018 509,999,000.00 I 0,066,000.00 I 0,066,000.00
fund for 3 months
Zhongrong Ju'an 3 months regular
open bond-type sponsored April 10, 2018 1,009,999,000.00 I 0,533,000.00 I 0,533,000.00
securities investment fund
Zhongrong Juming's 3-month
regular open bond-type sponsored December 7, 2018 509,999,000.00 I 0,006,000.00 I 0,006,000.00
securities investment fund
Zhongrong Rongding Hedging No. April 21, 2017
10 48,572,767.75 68,002.86 68,002.86
Zhongrong-Zhuoli 83 Collective
Fund Trust June 2,2016 1,000,000,,000 00 500,000,000.00 500,000,000.00 500,000,000.00
Note: I . Huasheng Hengli I calm growth securities investment collective fund trust plan
The trust is scheduled to be established in August 2009 with an initial size of 601,000,000.00
yuan. As a sub-principal, the company purchased RMB 89,900,000.00 of trust products established
and managed by the company. It was originally scheduled to expire in August 201 I. In 2012, it was
decided to postpone the August 2013 through the beneficiary conference. On August 23, 2013, the
trust products all allocated the trust benefits of the priority beneficiaries, and the secondary
beneficiaries signed supplementary contracts to change the product structure of the original trusts
and postponed until August 25, 2016. The beneficiary signed the project extension agreement on
August 22, 2016. The project was postponed until January 26,2018. After the expiration, the project
will be extended to January 26, 2020.
2. Zhongrong-Rongjun No. 13 Collective Fund Trust Plan
The trust is scheduled to be established on March 16, 2018. The maturity date is March 16,
2020. The manager is the company. The trust has a scale of 341,370,000.00 yuan. The company
purchased 21,370,000.00 shares for 21,370,000.00 yuan. Trust program funds are used to invest in
operating property funds or other financial instruments or products recognized by regulatory
agencies.
3. Zhongrong-Hengrong No. 303 Collective Fund Trust Plan
- 57 -
500,000,000.00
F-59
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
The trust is scheduled to be established on June 7, 2018. The expiration date is June 7, 2019.
The manager is the company. The scale of the trust is 454,600,000.00 yuan. The company
purchased 74,400,000.00 shares for 74,400,000.00 yuan. The trust funds are invested in the transfer
of equity beneficiary rights, and the financing party is Hangzhou Magnetic Resources Investment
Management Partnership (limited partnership);
4. Zhongrong-Hongjin No. 142 Collective Fund Trust Plan
The trust is scheduled to be established on July 31, 2018. The maturity date is July 31, 2020.
The manager is the company. The trust is 770,000,000.00 yuan. The company purchases the priority
of 250,000,000.00 with 250,000,000.00 yuan. The trust funds are invested in Dazhou Mianshi Real
Estate Development Co., Ltd.
5. Zhongrong-Hongjin 6 Trust Loan Collection Fund Trust Plan
The trust is scheduled to be established on September 14, 2018. The maturity date expires on
September 14, 2019. The manager is the company. The scale of the trust is 600,000,000.00 yuan.
The company purchased 363,000,000.00 shares at 363,000,000.00 yuan. The trust funds are used to
issue operating property loans to Xinjiang Tianying Real Estate Development Co., Ltd.
6. Zhongrong Dingxin Tianshi Equity Investment Fund No. I Fund
The fund was established on April I, 2015 and eventually invested in the shares of listed
companies. Beijing Zhongrong Dingxin Investment Management Co., Ltd., a subsidiary of the
company, is the manager of the fund. Zhongrong Dingxin purchased 40,000,000.00 shares at
40,000,000.00 yuan.
7. Zhongrong-Changhe Shengshi No. 2 Collective Fund Trust Plan
The trust plan was established on July 31, 2018. The maturity date is August 31, 2021. The
manager is the company, and the trust plan is mainly invested in the real estate sector. Zhongrong
Dingxin purchased 100,000,000.00 shares at 100,000,000.00 yuan.
8. Ruiguan (Shanghai) Investment Partnership (Limited Partnership)
The fund was established on September 10, 2015, and the fund is invested in the real estate
- 58 -
F-60
Zhongrong International Trust Company limited Notes to the Financial Statements
For the year ended 31 December 2018
sector. Shaorong Investment Management (Shanghai) Co., Ltd., a subsidiary of the Company, is the
manager of the fund. Zhongrong Dingxin purchased a share of 50,000,000.00 for 63,939,726.02
yuan.
9. Zhongrong State-owned Enterprise Reform Flexible Configuration Hybrid Securities
Investment Fund
The fund was established on December 16, 2014, with a scale of 640,520,240.95 yuan, and
Zhongrong Fund Management Co., Ltd. subscribed for 18,247,262.77 shares at 20,000,000.00 yuan.
Investment scope: Financial instruments with good liquidity, including various types of stocks,
bonds, warrants, medium-term notes, central bank bills, short-term financing bills, private equity
bonds, asset-backed securities, stock index futures, and laws and regulations Or other financial
instruments that the China Securities Regulatory Commission allows the fund to invest in.
10. Zhongrong Rongyu Shuangli Bond Securities Investment Fund
The fund was established on July 21, 2016, with a scale of 419,672,984.05 yuan, and
Zhongrong Fund Management Co., Ltd. subscribed for l,000,000.00 shares at 1,000,000.00 yuan.
The fund's investment scope is a liquidity instrument with good liquidity, including domestically
issued stocks, bonds, bank deposits, money market instruments, warrants, asset-backed securities,
and other financial instruments that the China Securities Regulatory Commission allows the fund to
invest.
11. Zhongrong quantitative multi-factor hybrid sponsored securities investment fund
The plan was established on December 29, 2016, with a scale of 89,696,268.79 yuan, and
Zhongrong Fund Management Co., Ltd. subscribed for 10,001,000.00 shares at 10,001,000.00 yuan.
The fund's investment scope is a liquidity instrument with good liquidity, including domestically
issued stocks, bonds, bond repurchases, money market instruments, bank deposits, interbank deposit
certificates, warrants, asset-backed securities, stock index futures, and laws and regulations or China.
The SFC allows the fund to invest in other financial instruments.
12. Zhongrong quantified small-cap stock-type sponsored securities investment fund
The fund was established on May 17, 2017, with a scale of 122,042,309.59 yuan, and
- 59 -
F-61
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Zhongrong Fund Management Co., Ltd. subscribed for 10,001,000.00 shares at I 0,00 I ,000.00 yuan.
The fund's investment scope is a liquidity instrument with good liquidity, including domestically
issued stocks, bonds, bond repurchases, money market instruments, bank deposits, interbank deposit
certificates, warrants, asset-backed securities, stock index futures, and laws and regulations or China
The SFC allows the fund to invest in other financial instruments.
13, Zhongrong Shanghai and Hong Kong's deep consumption theme A
The plan was established on November 16, 2017, with a scale of 298,956,669.34 yuan, and
Zhongrong Fund Management Co., Ltd. subscribed for 10,001,000.00 shares at 10,001,000.00 yuan.
The fund's investment scope is a liquidity instrument with good liquidity, including domestically
issued stocks, bonds, bond repurchases, money market instruments, bank deposits, interbank deposit
certificates, warrants, asset-backed securities, stock index futures, and laws and regulations or China.
The SFC allows the fund to invest in other financial instruments.
14. Zhongrong Fund-Fuyuan No. 1 Asset Management Plan
The plan was established on March 21, 2017, with a scale of 81,809,823.50 yuan, and
Zhongrong Fund Management Co., Ltd. subscribed for 1,000,000.00 shares at 1,000,000.00 yuan.
The fund's investment scope: money market instruments, including cash, bank demand, time
deposits, notice deposits, interbank deposits, agreement deposits, interbank deposit receipts, bond
repurchases, public money funds; fixed listings on exchanges and interbank markets Income
securities, including interest rate bonds and credit bonds. Public bond funds, including funds issued
and managed by asset managers.
15. Zhongrong Fund - Optimal Configuration No. 1 Asset Management Plan
The plan was established on March 30, 2015, raising a size of 505,000,000.00 yuan, and
Zhongrong Fund Management Co., Ltd. subscribed for 5,000,000.00 shares at 5,000,000.00 yuan.
The investment scope of the fund: the newly-issued new-shares, secondary market stocks issued by
the asset custodians from the principals issued by the asset custodians, the primary market bonds
issued in accordance with the law, and the secondary market bonds. Convertible bonds,
fixed-income assets such as central bank bills, bond reverse repo, bank deposits, money market
instruments, stock index futures, public funds (including fund products managed by plan managers),
- 60 -
F-62
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
and legal, regulatory, and regulatory agencies Other financial instruments after the person agrees.
16. Zhongrong Fund-Selected Dividend Configuration No. I Asset Management Plan
The plan was established on April 19, 2017, with a scale of 30,064,319.98 yuan, and
Zhongrong Fund Management Co., Ltd. subscribed for 2,300,000.00 shares at 2,300,000.00 yuan.
The investment scope of the fund: the cross-border financial derivatives, currency market
instruments, bank deposits, money funds and laws listed on the Hong Kong Stock Exchange, such
as stocks and OTC options, which are allowed to be traded within the scope of the Shanghai-Hong
Kong stock market trading interconnection mechanism. Regulations or other financial instruments
permitted by the China Securities Regulatory Commission.
17. Zhongrong Steady Tim Lee Bond Securities Investment Fund
The fund was established on October 20, 2015, with a scale of 354,762,573.42 yuan, and
Zhongrong Fund Management Co., Ltd. subscribed for 6,619,802.06 shares at 6,000,000.00 yuan.
The fund's investment scope: stocks, bonds, bank deposits, money market instruments, warrants,
asset-backed securities, and other financial instruments that the China Securities Regulatory
Commission allows the fund to invest in. The Fund may also hold stocks derived from the
conversion of convertible corporate bonds, investment in secondary market stocks, and other
financial instruments such as warrants that the China Securities Regulatory Commission allows the
fund to invest.
18, Zhongrong Jushang 3 months regular open bond-type sponsored securities investment fund
The fund was established on March 8, 2018, with a scale of 2,959,999,000.00 yuan, and
Zhongrong Fund Management Co., Ltd. subscribed for 10,000,000.00 shares at 10,001,000.00 yuan.
The fund's investment scope is financial instruments with good liquidity, including government
bonds, financial bonds, corporate bonds, corporate bonds, local government bonds, interbank
deposits, subordinated bonds, private equity bonds for small and medium-sized enterprises, and
convertible bonds (including separate transactions). Converting bonds), exchangeable bonds,
short-term financing bills, ultra-short-term financing bills, medium-term notes, asset-backed
securities, bond repurchases, central bank bills, bank deposits, government bond futures, and other
financial instruments that the China Securities Regulatory Commission allows for fund investment.
- 61 -
F-63
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
(But it must comply with the relevant regulations of the China Securities Regulatory Commission).
19. Zhongrong Juye regularly opened a bond-initiated securities investment fund for 3 months.
The fund was established on October 17, 2018, and the fundraising scale was no less than
509,999,000.00 yuan. The company subscribed for 10,000,000.00 shares at 10,001,000.00 yuan.
The fund's investment scope is financial instruments with good liquidity, including government
bonds, financial bonds, corporate bonds, corporate bonds, local government bonds, interbank
deposits, subordinated bonds, private equity bonds for small and medium-sized enterprises, and
convertible bonds (including separate transactions). Converting bonds), exchangeable bonds,
short-term financing bills, ultra-short-term financing bills, medium-term notes, asset-backed
securities, bond repurchases, central bank bills, bank deposits, government bond futures, and other
financial instruments that the China Securities Regulatory Commission allows for fund investment.
(But it must comply with the relevant regulations of the China Securities Regulatory Commission).
20, Zhongrong Juan 3 months regular open bond-type sponsored securities investment fund
The fund was established on April l 0, 2018, and the fundraising scale was no less than
1,009,999,000.00 yuan. The company subscribed for 10,000,000.00 shares at 10,001,000.00 yuan.
The fund's investment scope is financial instruments with good liquidity, including government
bonds, financial bonds, corporate bonds, corporate bonds, local government bonds, interbank
deposits, subordinated bonds, private equity bonds for small and medium-sized enterprises, and
convertible bonds (including separate transactions). Converting bonds), exchangeable bonds,
short-term financing bills, ultra-short-term financing bills, medium-term notes, asset-backed
securities, bond repurchases, central bank bills, bank deposits, government bond futures, and other
financial instruments that the China Securities Regulatory Commission allows for fund investment.
(But it must comply with the relevant regulations of the China Securities Regulatory Commission).
21. Zhongrong Juming regularly opened a bond-initiated securities investment fund for 3
months.
The fund was established on December 7, 2018, and the fundraising scale was no less than
509,999,000.00 yuan. The company subscribed for 10,000,000.00 shares at 10,001,000.00 yuan.
The fund's investment scope is financial instruments with good liquidity, including government
- 62 -
F-64
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
bonds, financial bonds, corporate bonds, corporate bonds, local government bonds, interbank
deposits, subordinated bonds, private equity bonds for small and medium-sized enterprises, and
convertible bonds (including separate transactions). Converting bonds), exchangeable bonds,
short-term financing bills, ultra-short-term financing bills, medium-term notes, asset-backed
securities, bond repurchases, central bank bills, bank deposits, and other financial instruments that
the China Securities Regulatory Commission allows the fund to invest in (but only Comply with the
relevant regulations of the China Securities Regulatory Commission).
22, Zhongrong Fund - Ronghe Hedging Asset Management Plan No. I 0
The fund was established on April 21, 2017, and the fundraising scale was not less than
48,572,767.75 yuan. The company subscribed for 10,000,000.00 shares at 1,000,000.00 yuan. The
investment scope of the fund: investment products traded by securities and futures exchanges such
as stocks, bonds, stock index futures, and treasury futures issued in accordance with the law;
investment products of inter-bank market transactions such as central bank bills, (super) short-term
financing bills, and medium-term notes; Financial products approved or filed by financial regulatory
authorities such as exchangeable bonds and securities investment funds, and other investment
products recognized by the China Securities Regulatory Commission.
23, Zhongrong-Zhuoli 83 Collective Fund Trust Plan
The plan was established on June 2, 2016, and the due date is June 2, 2019. The manager is the
company. Galaxy Jinhui-Zhongrong Trust's 2016 first trust beneficiary asset support special plan
purchased 500,000,000.00 shares at 500,000,000.00 yuan.
7.2.7 Changes in the share of the parent company's owner's equity in the subsidiary company
Total sub - enterprise owner undefined s equity(set out as Share of parent company in ownerundefineds equity "Equity attributable to shareholders of parent company")
of child enterprise Subsidiaries
Balance as at Current changes Balance as at Balance as at Current changes Balance as at 1/1/2018 31/12/2018 1/1/2018 31/12/2018
Chuangliyuan No.I 1,585,488,430.26 -1,036,570,795.87 548,917,634.39 1,145,000,000.00 -613,000,000.00 532,000,000.00 collective funds trust Zhongrong Huijin Asset 37,517,059.99 11,260,858.98 48,777,918.97 8,000,000.00 2.,000,000.00 I 0,000,000.00 Mana11.ement Co., Ltd. Pinghe Securities Co.,
56,386,510.40 36,938,350.71 93,324,861.11 57,354,2.27.84 25,091,077.49 82,445,305.33 Ltd.
8. Notes to the consolidated financial statements
- 63 -
F-65
8. I Cash at bank and on hand Item
Cash on hand
Cash at bank
Other monetary funds
Total
Including: the total balance deposited overseas
82D 'tR epos1 eserva 10n or a ance f fi B I Item
Customer payment
Total
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Balance asat 31/12/2018 Balance as at 1/1/2018
3,961.95 1,642.33
I l,417,218,751.70 9,031,215,333.53
83,346,836.16 61,978.57
11,500,569,549.81 9,031,278,954.43
904,558,580.64 2,045,713,354.56
Balance as at 31/12/2018 Balance as at 1/1/20 I 8
l 61,994.81 845,454.55
161,994.81 845,454.55
8 3 f' manc1a . I assets measure at air va ue t roug 1 pro 1t or oss or t e current per10 d fi . h fi fi h . d
Item Balance as at 31/12/2018 Balance as at 1/1/2018
I. Financial assets held for trading 10,747,358.00 29,453,200.00
Including: Debt instrument investment
Equity instrument investment 10,747,358.00 29,453,200.00
Others
2. Financial assets designated upon initial
recognition as at fair value through profit or I 0,402,282,124.91 4, 722,676,6 I 8.02
loss
Including: Debt instrument investment 485,932,829.09 186.896,843.54
Equity instrument investment
Others 9,916,349,295.82 4,535,779,774.48
Total I 0,413,029,482.91 4,752, 129,818.02
Note: It is designated as a financial asset that is measured at fair value through profit or loss - others
are money market funds purchased.
8.4 Accounts receivable Balance as at 31/12/2018
Item Balance Allowance for doubtful debts
Amount PCT
Amount Allowance
(%) rate (%) Individually significant and subject to separate allowance
Allowance for doubtful debts on portfolio 125,922,617.74 100.00
Individually insignificant but allowance for doubtful debts individually
Total 125,922,617.74 100.00
( Continued)
11cm Balance as at 1/1/2018
- (i,1 -
F-66
Individually significant and subject to separate allowance
Allowance for doubtful debts on portfolio
Individually insignificant but allowance for doubtful debts individually
Total
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Balance Allowance for doubtful debts
Amount PCT
Amount Allowance
(%) rate(%)
168,304,186.08 100.00
168,304,186.08 100.00
8.4.1 Withdrawal of bad debt provision accounts receivable according to credit risk characteristics
(I) Accounts receivable whose allowance for doubtful debts is using aging analysis method:
As at 31/12/2018 As at 1/1/2018
Aging Allowan Allowance Allowance
Allowance Balance cerate for doubtful Balance rate(%)
for doubtful (%) debts debts
Within I year 125,922,617.74 100.00 16&,304,186.08 100.00
Total 125,922,617.74 100.00 168.304.186.08 100.00
8.5 Prepayments
8 5 1 A . .. ,gmg ana1ys1s o prepayments f
Balance as at 31/12/2018
Aging PCT Allowance for Balance doubtful debts (%)
Within I year 7,855,768.75 100.00
Total 7,855,768.75 100.00
8.6 Interest receivable
8.6.1 Items of interest receivable
Item Balance as at 31/12/2018
Fixed-tenn deposits 14.079,869.13
Entrusted loans
Bond investments 22,485,558.32
Others I, 791,276.83
Total 38,356,704.28
Note: "Others" mainly are interest accured for the trust plan.
8.7 Other receivables
Balance as at 1/1/2018
PCT Allowance for Balance
(%) doubtful debts
277,474.30 100.00
277,474.30 100.00
Balance as at 1/1/2018
13,961,716.69
5,828,777.48
30,015,091.43
49,805,585.60
Balance as at 31/12/2018
Category Balance Allowance for doubtful
debts
Amount PCT Amount A!lowance (%) rate(%)
Individually significant and subject to separate allowance
- 65 -
F-67
Category
Allowance for doubtful debts on portfolio
Group I: Grouped by age
Group 2: Grouped by nature of receivable
Individually insignificant but allowance for doubtful debts individually
Total
( Continued)
Category
Individually significant and subject to separate allowance
Allowance for doubtful debts on portfolio
Group 1: Grouped by age
Group 2: Grouped by nature ofreceivable
Individually insignificant but allowance for doubtful debts individuallv
Total
8.7.1 Allowance for doubtful debts on portfolio
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
B I 31/12/2018 a ance as at
Balance Allowance for doubtful debts
Amount PCT
Amount Allowance
(%) rate(%)
78,968,593.49 78.03 468,542.06 0.59
45,227,877.31 44.69 468,542.06 1.04
33,740,716.18 33.34
22,238,462.31 21.97
101,207,055.80 100.00 468,542.06 0.46
Balance as at 1/1/2018
Balance Allowance for doubtful debts
Amount PCT Amount Allowance (%) rate(%)
30,000,000.00 17.20
122,503,109.74 70.23 468,542.06 0.38
78,339,960.12 44.91 468,542.06 0.60
44,163,149.62 25.32
21,917,335.00 12.57
174,420,444.74 100.0 468.542.06 0.27 0
(I) Other receivables whose allowance for doubtful debts is using aging analysis method:
Balance as at 31/12/2018 Balance as at 1/1/2018
Aging Allowance Allowance for Allowa Allowance for Balance rate(%) doubtful debts
Balance nee rate doubtful debts
(%)
Within I 44,759,335.25 year 98.96 77,871,418.06 99.40
1-2 years
2-3 years
More than 468,542.06 1.04 468,542.06 468,542.06 0.60 468,542.06
3 years
Total 45,227,877.31 100.00 468,542.06 78,339,960.12 100.00 468,542.06
(2) Other receivables whose doubtful debts is made
Balance as at 31/12/2018 Balance as at 1/1/2018
Allowance Allowa Allowance Category Allowanc for Balance e rate(%) doubtful Balance nee rate for doubtful
debts (%) debts
Group 2: Grouped by 33,740,716.18 100.00 44,163,149.62 100.00 nature of receivable
Total 33.740,716.18 100.00 44.163.149.62 100.00
- (1(i -
F-68
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
8720th .. er rece1va es ue rom . bl d ti e op 1ve e ors o e ompany are as o ows: th t ti d bt fth C ti II Percentage in Balance of
Debtor name Nature of Balance as at Aging total other allowance for balance 31/12/2018 doubtful debts as
receivables (%) at 31/12/2018
Beijing Ttanlide Electromechanical Rent deposit 14,777,491.98 Within 1 year 14.60
Eauioment Co., Ltd. Shenzhou Shuma accounts System Integration prepaid 10,910,113.37 Within I year 10.78 Services Co., Ltd.
Heng Sheng Prepaid 4, 188,266.64 Within I year 4.14 Electronics Co., Ltd. purchase Hutchison Real Estate
Rent deposit 2,961,765.59 Within 1 year 2.93 Agency Lid. Shanghai Lujiazui Finance and Trade Rent deposit 2,184,473.17 Within I year 2.16 Zone Development
Co., Ltd.
Total -- 35,022,110.75 -- 34.60
888 uymg b k th ac e sa e o ffi . 1 manc,a assets
Item Balance as at 31/12/2018 Balance as at 1/1/2018
Bond 100,000.00 38,000,000.00
Less: Allowance for doubtful debts
Total 100,000.00 38,000,000.00
8.9 Holding assets for sale
Balance as at Fair value at Estimated Item Schedule
31/12/2018 31/12/2018 disposal cost
Zhongrong Huixing Asset 5,021,093.59 13,862,420.79 2019
Management Co., Ltd.
Total 5,021,093.59 13,862,420.79 --
Note: In November 20 I 8, the company listed 80% equity of Zhongrong Huixing Asset Management
Co., Ltd. on the Beijing Equity Exchange. The equity has been won by Beijing Minghe Investment
Group Co., Ltd. for RMB 12,928,600. The equity transaction is expected to be completed in the
second quarter of 2019. Therefore, the Company transferred the assets and liabilities of Huixing
Company to the items held for sale.
8.10 Loans and advances
8.10.1 Distribution of loans and advances by individuals and enterprises
Item Balance as at 31/12/2018 Balance as at 1/1/2018
Business Loans and advances l,431,705,488.28 3,544,052,778. 70
- 67 -
F-69
-Loans
-Discount
--Others
Total Loans and advances
Less: Loan loss provision
Include: Individual amount
Group amount
Book Value of Loans and advances
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
I ,431,705,488.28 3,544,052,778. 70
l,431,705,488.28 3,544,052,778.70
1.431, 705,488.28 3.544,052.778.70
8.10.2 Loans and advances by industry distribution
Balance as at Balance as at Item PCT(%) PCT(%)
31/12/2018 1/1/2018
Manufacture 140,798,750.89 9.83 634,193,616.51 17.89
Transportation, warehousing and postal 64,322,786.56 4.49 397,390,761.60 11.21
services
Information Transmission, Computer 472,759,771.17 33.02 69,319,912.54 1.96
Services and Software Industry
finance 155,684,904.95 10.87 7 I 3,256,903.45 20.13
real estate 598,139,274.71 41.78 1,059,891,584.60 29.91
Leasing and Business Services 670,000,000.00 18.90
Total Loans and advances 1,431,705,488.28 100.00 3,544,052,778. 70 100.00
Less: Loan loss provision
Include: Individual amount
Group amount
Book Value of Loans and advances l,431,705,488.28 100.00 3,544,052,778.70 100.00
8 IO 3 D" t .b t' IS rt u 10n o fl d d oans an a vances b ,y region
Balance as at Balance as at Item PCT(%) PCT(%)
31/(2/2018 1/1/2018
South China 1,089,664,003.53 76.11 988,448,488.05 27.89
Northeast China 28,231,578.60 1.97 500,000,000.00 14.11
North China 1,000,000,000.00 28.22
East China 249,487,119.59 17.43 104,019,912.54 2.94
Central and South China 64,322,786.56 4.49 202,876,447.09 5.72
Northwest China 420,000,000.00 11.85
Southwest China 328,707,931.02 9.27
Total Loans and advances 1,431,705,488.28 100.00 3,544,052,778.70 100.00
Less: Loan loss provision
Include: Individual amount
Group amount
Book Value of Loans and advances 1,431,705,488.28 100.00 3,544,052,778.70 100.00
- 68 -
F-70
8 10 4 D' t 'b f IS n U 1000 fl oansan
Item
Credit loans
Guaranteed loans
Secured loans
Include: Mortgage loans
Pledge loans
Total Loans and advances
Less: Loan loss provision
Include: lndividual amount
Group amount
Total Loans and advances
d d a vances
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
b >Y guaran ee
Balance as at 31/12/2018 Balance as at 1/1/2018
155,684,904.95 56,368,128.97
71,684.60
1,276,020,583.33 3,487,612,965.13
569,907,696.04 691,588,774.48
706,112,887.29 2,796,024, 190.65
1,431,705,488.28 3,544,052,778.70
l,431,705,488.28 3,544,052,778.70
8.11 Available-for-sale financial assets
8.11.1 Available-for-sale financial assets
As at 31/12/2018 As at 1/1/20 I 8 Item Provision for Carrying Provision for Carrying Book balance imoairment amount Book balance imoairment amount
Available-for-sale 666,533,772 68
debt instruments 666,533,772.68 502,435,261 18 502,435,261 18
Available-for-sale
equity 3,456,804,221. l 5 70,436,092.07 3,386,368,129.08 7,713,700,175 52 I 00,444,006 57 7,613,256,168 95
instruments
Including:
measured at fair 1,933,039,340 24 70,436,092.07 1,862,603,248.17 1,900,240,68S.6 l l 00,444,006.57 1,799,796,679.04
value
measured al cost 1,523,764,880 91 1,523,764,88091 S,813,459,489.91 5,813,459,489.9]
Total 4,123,337,993.83 70,436,092.07 4,052,901,901.76 8,216,135,436.70 I 00,444,006 57 8,115,691,430.13
8.11.2 Available-for-sale financial assets measured at fair value
Category of available-for-sale Available-for-sale Available-for-sale Others Total financial assets equity instrument debt instrument
Cost of equity instrument/
amortized cost of debt instrument 1,870,102,214.46 676,647,330.72 2,546,749,545.18
Fairvatue 1,862,603,248.17 666,533,772.68 2,529,137,020.85
Accumulated change of fair value 62,937,125.78 -10,I 13,558.04 52,823,567.74
in other comprehensive income
Impairment provision 70,436,092.07 70,436,092.07
811 3 P rov1S1on or 1mpamnen o ava1 a e- or-sa e manc1a asse s f• t f ·1 bl fi I fi • I
Category of available-for-sale Balance as at Balance as at Additions Reductions
finW1cial assets 1/1/2018 31/12/2018
- 69 -
F-71
Debt instrument investment
Equity instrument invesbnent I 00,444,006.57
Total I 00,444,006.57
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
30,007 ,9 I 4.50 70,436,092.07
30,007,914.50 70,436,092.07
va1a e- or-sa e manc1a 8 11 4A ·1 bl ti I fi • I assets measure d d f . d aten o per10
Book balance Provisi
ratio in on for
Name of investee investe Di~ idcnds impair
e(%) ment
Balance as at Balance as at Additions Reductions
1/1/2018 31/12/2018
Huijujin No. I Collective
Fund Trust Plan 2,000,000,000.00 7,380,000,000.00 9,380,000,000.00 226,701,369.86
Zhujin 169 Collective
Fund Trust Plan 100,000,000.00 I 00,000,000.00 9,707,397.27
Jiyuan 2 Collective Fund
Trust Plan 1,336,100,000.00 893,000,000.00 2,229,100,000.00 78,332,237.37
Huarong Yufu-lnnovation
No. 1 Asset Management 650,000,000 00 650,000,000 00 6,060,054.79
Plan
Rongjun 13 Collect1vc 117,400,000.00 96,030,000.00 21,370,000 00 6.26 821,267.02
Fund Trust Plan
Xiangrong 303 Collective 454,600,000.00 380,200,000.00 74,400,000.00 16.44 18,259,173.70
Fund Trust Plan
Hongjin 142 Collective 250,000,000.00 250,000,000.00 32.47
Fund Trust Plan
Chanjin 6 Collective Fund 400,000,000.00 37,000,000.00 363,000,000.00 60.50
Trust Plan
China Trust Industry
Protection Fund 132,858,201.24 30,612,113 76 2,198,884.09 161,271,430.91 2,019.9 14.•14
(Zhongrong)
China Trust Industry
Protection Fund 25,500,000.00 25.500,000.00
(Chuangliyuan No. I)
Hubei Changjiang
Economic Belt Industry 2,000,000.00 2,000,000.00 1.00
Fund Management Co.,
Ltd.
Rongtong Guoding Asset 33,200,000.00 33,200,000.00 15.30
- 70 -
F-72
Management Pannership
(Limited Partnership)
Zhongrong-Rongshuo
No.6 Collective Fund 50,000,000.00
Trust Plan
Zhongrong-Rongxi 10
Collective Fund Trust Plan 30,000,000.00
Zhengtong Co., Ltd. 25,000,000.00
Beijing Fengyue Taihe
Equity Investment
Partnership (Limited 41,267,100.00
Partnership)
Beijing Rong Dingkun
Investment Center 40,020,000.00
(Limited Partnership)
Shenzhen Zhongrong
Qidian Investment 100,000,00
Management Center
(Limited Partnership)
Zhuhai Rongwu Equity
Investment Partnership 100,000.00
(Limited Partnership)
Hunan Happy Sunshine
Interactive Entertainment 86,993,287.67
Media Co., Ltd. (Mango
IV)
Shanghai Changyu I.DO
Investment Co., Ltd.
Hejun Business School 5,000,000.00
Huzhou Rongyuan
Ruikang Equity 1,000,000.00
Investment Partnership
HuiJin2BI I 09,315,950.00
HuiJin2B2 165,004,950.00
Dmggua 02 Collective 80,000,000.00
Fund Trust Plan
Ronggu 21 Collective
Fund Trust Plan 200,000,000.00
Zhongrong-Rongxiang
No. 166 Collective Fund 200,000,000.00
Trust Plan
Zhuoli 83 Collective Fund 500,000,000.00
Trust Plan
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
50,000,000.00
30,000,000.00
25,000,000.00 1.24
4 l,267.100.00
40,000,000.00 20,000.00 0.01
100,000.00 0.10
I 00,000.00 0.02
86,993,.287.67
1.00
5,000,000.00
1,000,000.00
I 09,315,950.00
97,201,500.00 67,803,450.00 17.84
80,000,000.00
200,000,000 00
200,000,000 00
S00,000,000.00 50.00
- 71 -
2,596,338.74
8,855,781.64
5,.233,333.33
14,572,916.67
2,179,726.03
57,098,065.17
F-73
Total 5,813,459,489.91 9,525,612,113.76
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
13,815,306,722.76 1,523,764,880.91 432,437,576.03
Note: "Hongjin No. 142 Collective Fund Trust Plan" "Chanjin No. 6 Collective Fund Trust Plan" "Zhuoli 83
Collective Fund Trust Plan'' is an investment in fixed income trust plan. The purpose of the company's investment is
to obtain fixed income. Although the holding share at the end of the period exceeds 20%, ii does not have significant
influence or control, so it is accounted for in available-for-sale financial assets .
8 11 5 A ·1 bl f• vat a e- or-sa e manc,a assets wit I fi • I 'h d restncte . d sa es peno Deadline of
Balance as at Balance as at Detailed varieties restricted sales
31/12/2018 1/1/2018 period
Henan Huaying Agricultural Development Co., 2019/1/20 136,740,000.00 328.335,000.00
Ltd. regular supplement
8.12 Long-tenn equity investments
8 12 1 Th fL e category o ong-term equity investment Balance as at Balance as at
Item Additions Reductions 1/1/2018 31/12/2018
Investment in joint ventures 2,146,752,079.42 178,291,242.52 110,513,377.59 2,214,529,944.35
Subtotal 2,146,752,079.42 178,29 I ,242.52 I 10,513,377.59 2,214,529,944.35
Minus: Depereciation reserves
Total 2,146,752,079.42 178,291,242.52 110,513,377.59 2,214,529,944.35
- 72 -
F-74
fL
- Bal
ance
A
ddili
In
vest
ec
capi
taliz
ed c
ost
as a
t 1/
1120
18
on o
f R
educ
tion
of
inve
st
inve
stm
ent
men
t
Ass
ocia
tes
Chi
na T
rust
Indu
stry
Pro
tect
ion
1,50
0,00
0,00
0.00
1,
686,
312,
328.
66
Fund
Co .
• Ltd
.
Har
bin
Rur
al
Com
mer
cial
Ban
k 28
1,09
0,07
4.90
34
3,49
I ,3
I 8.5
4
Co.
,Ltd
.
Chi
na T
rust
Reg
istra
tion
Co.
, 10
0,00
0,00
0.00
[0
1,84
2,95
9.28
Ltd.
Shen
zhen
Yur
ong
Equ
ity In
vest
men
t 4,
900,
000.
00
5,81
3,37
7.59
5,
813,
377.
59
Fund
Man
agem
ent
Co.
, Ltd
.
Shen
zhen
Rui
yuan
Bao
Fun
d 1,
960.
000.
00
1,95
9,93
9.40
M
anag
emen
t Co.
,
Ltd.
Shan
ghai
Ron
gou
Equ
ity I
nves
tmen
t 4,
000,
000.
00
7,23
5,54
9.88
Fund
Man
agem
ent
1
Mov
cmcn
l dur
ing
the
rman
cial
yea
r
Inve
stm
ent
Adj
ustm
ent o
f in
com
e/lo
ss
reco
gniz
ed
othe
r C
hang
es o
f
unde
r the
co
mpr
ehen
siv
othe
r equ
ity
cQui
tv m
etho
d e
inco
me
124,
799,
745.
33
50,3
01,8
62.1
8 2,
440,
646.
41
692,
687.
78
682.
85
50,2
89.4
8
-73
-
Zho
ngro
ng In
tern
atio
na
l Tru
st C
ompa
ny L
imite
d
Not
es to
the
Fina
ncia
l Sta
tem
ents
Fo
r the
yea
r en
ded
31 D
ecem
ber 2
018
Prov
isio
n
Prov
isio
fo
r C
ash
divi
dend
or
Bal
ance
im
pain
nen
prof
it an
noun
ced
to
n fo
r 0t
h as
at 3
1/12
/201
8 t a
s at
be is
sued
im
pain
n er
s 31
/12/
201
ent
8
75,0
00,0
00.0
0 1,
736,
112,
073.
99
29,7
00,0
00.0
0 36
6,53
3,82
7.13
102,
535,
647.
06
1,96
0,62
2.25
7,28
5,83
9.36
F-75
Mov
emen
t dur
ing
the
finan
cial
yea
r
Bal
ance
A
dditi
In
vest
men
t A
djus
tmen
t of
Zho
ngro
ng In
tern
atio
na
l Tru
st C
ompa
ny L
imite
d
Not
es to
the
Fin
anci
al S
tate
men
ts
For
the
year
end
ed 3
1 D
ecem
ber 2
018
Prov
isio
n
Prov
isio
B
alan
ce
for
Inve
stee
ca
pita
lized
cos
t in
com
e/lo
ss
Cas
h di
vide
nd o
r im
pairm
en
as a
t 1/1
1217
5 on
of
Red
uctio
n of
re
cogn
ized
ot
her
Cha
nges
of
prof
it an
noun
ced
to
n fo
r 0
th
asat
31/1
2/20
18
tas
at
inve
st
inve
stm
ent
unde
r the
co
mpr
ehen
siv
othe
r equ
ity
be is
sued
im
pairm
er
s 3
1/12
/201
m
ent
eoui
tv m
etho
d e
inco
me
ent
8
Co.
, Ltd
.
Shen
zhen
Shen
rong
hui
Inve
stm
ent
96,6
06.0
7 5,
328.
49
101,
934.
56
Con
sulti
ng C
o.,
Ltd.
Tot
al
l ,89
1,95
0,07
4.90
2,
146,
752,
079.
42
5,81
3.37
7.59
17
5,85
0,59
6.11
2,
440,
646.
41
I 04,
700,
000.
00
2,21
4,52
9,94
4.35
8.13
.3 M
aior
fl
----
----
-~
----
----
---~
---
----
----
----
----
---
--.
---
-~-
~-
· 1
inf<
,f
. .
Yea
r end
ed 3
1/12
/201
8 Y
ear e
nded
31/
12/2
017
Item
C
hina
Tru
st I
ndus
try
Har
bin
Rur
al
Chi
na T
rust
C
hina
Tru
st I
ndus
try
Har
bin
Rur
al
Chi
na T
rust
Pro
tect
ion
Fun
d C
o., L
td.
Com
mer
cial
Ban
k C
o.,
Reg
istr
atio
n C
o.,
Pro
tect
ion
Fun
d C
o., L
td.
Com
mer
cial
Ban
k C
o.,
Reg
istr
atio
n I ,
,1
I t,
I I
tA
l"'n
I
,,1
Cur
rent
ass
ets
57,5
42,6
07,9
71.4
3 14
,658
,919
,957
.40
2,57
0,22
3,53
0.81
59
,951
,480
,880
.55
15,5
31,2
09,8
30. I
0 2,
559,
183,
850.
01
Non
-cur
rent
ass
ets
9,26
3,53
4,30
2.82
32
,059
,419
,262
.83
47,9
51,1
58.0
1 7,
448,
087,
706.
95
26,2
87,3
19,1
72.2
4 15
,062
,625
.79
Tot
al o
f ass
ets
66,8
06,1
42,2
74.2
5 46
,718
,339
,220
.23
2,61
8,17
4,68
8.82
67
,399
,568
,587
.50
41,8
18,5
29,0
02.3
4 2,
574,
246,
476.
34
Cur
rent
liab
ilit
ies
52,0
95,9
49,7
07.0
0 42
,946
,028
,267
.71
40,0
77,9
70.0
7 51
,471
,174
,067
.76
38,3
48,9
19,7
24.1
9 18
,957
,697
.84
Non
-cur
rent
liab
ilit
ies
1,40
0,00
0,00
0.00
2,
027,
307.
00
3,00
0,00
0,00
0.00
Tot
al o
f li
abil
ities
53
,495
,949
,707
.00
42,9
46,0
28,2
67.7
I 42
,105
,277
.07
54,4
71,1
74,0
67.7
6 38
,348
,919
,724
.19
18,9
57,6
97.8
4
Net
ass
ets
13,3
10,1
92,5
67.2
5 3,
772,
3 I 0,
952.
52
2,57
6,06
9,41
1.75
12
,928
,394
,519
.74
3,46
9,60
9,27
8.15
2,
555,
288,
778.
50
Sha
re o
f net
ass
ets
by s
hare
hold
ing
I, 73
6,11
2,07
3.99
36
6,53
3,82
7.13
I 0
2,53
5,64
7 .06
1,
686,
312,
328.
66
343,
491,
318.
54
101,
842,
959.
28
Adj
ustm
ents
-74
-
F-76
Yea
r end
ed 3
1/12
/201
8
Item
C
hina
Tru
st In
dust
ry
Har
bin
Rur
al
Chi
na T
rust
Prot
ectio
n Fu
nd C
o., L
td.
Com
mer
cial
Ban
k C
o.,
Reg
istra
tion
Co.
, I
t..l
r
,..i
Boo
k va
lue
of e
quity
inve
stm
ent i
n 1,
736,
112,
073.
99
366,
533,
827.
13
102,
535,
647,
06
asso
ciat
es
Fair
val
ue o
f equ
ity in
vest
men
t with
qu
oted
pri
ce
Ope
ratin
g in
com
e 4,
681,
163,
423.
82
1,26
3,22
5,14
8.59
12
5,12
0,56
8.99
Net
pro
fit
957,
80 I ,
064.
75
470,
794,
290.
73
20,8
81,4
71.7
3
Oth
er c
ompr
ehen
sive
inco
me
Tot
al c
ompr
ehen
sive
inco
me
957,
801,
064.
75
470,
794,
290.
73
20,8
81,4
71.7
3
Div
iden
ds re
ceiv
ed f
rom
ass
ocia
tes
75,0
00,0
00.0
0 29
,700
,000
.00 -
75 -
Zho
ngro
ng In
tern
atio
na
l Tru
st C
ompa
ny L
imite
d
Not
es t
o th
e Fi
nanc
ial S
tate
men
ts
For t
he y
ear
ende
d 31
Dec
embe
r 201
8
Yea
r end
ed 3
1/12
/201
7
Chi
na T
rust
Indu
stry
H
arbi
n R
ural
C
hina
Tru
st
Prot
ectio
n Fu
nd C
o., L
td.
Com
mer
cial
Ban
k C
o.,
Reg
istra
tion
I tt
l f'
n
I t,
l
1,68
6,31
2,32
8.66
34
3,49
1,31
8.54
10
1,84
2,95
9.28
4.08
6,26
0,90
4.40
2,
235,
917,
305.
59
122,
445,
423.
70
931,
753,
494.
57
445,
331,
427.
03
51,9
77,0
62.3
3
931
,753
,494
.57
445,
331,
427.
03
51,9
77,0
62.3
3
72,0
00,0
00.0
0 29
,700
,000
.00
F-77
8.13 Fixed assets
8.13.1 Movement of fixed assets
Item Balance as at 1/1/2018
1.Original price total 99,566,604.86
Incl: Transportation equipment 12,495,615.74
Electrical equipment 3,399,504.67
Computers 68,660,334.52
Others 15,011,149.93
2.Accumulated depreciation total 77,746,156.82
Incl, Transportation equipment 11,150,015.69
Electrtcal equipment 2,514,237.52
Computers 52,690,265.70
Others 11,391,637.91
3. Total book value 21,820,448.04
Incl: Transportation equipment 1,345,600.05
Electrical equipment 885,267.15
Computers 15,970,068 82
Others 3,619,512 02
8.14 Intangible assets
8 14 IC ategones o mtang1 r· "bl e assets
Item Balance as at 1/1/2018
I.Original price total 83,960,288.41
Incl, Software 78,960,288.41
Trademark 5,000,000.00
2.Accumulated amortization total 31,404,719.24
Incl: Software 31,404,719.24
Trademark
3. Book value of intangible assets 52,555,569.17 total
Incl, Software 47,555,569.17
Trademark 5,000,000.00
Addit ions
- 76 -
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Additions Reductions Balance as at 31/12/2018
17,686,251.65 20,316,147.49 96,936,709.02
29,259.93 3,357,175 00 9,167,700.67
4,387,836.52 1,274,827 ,00 6,512,514.19
8,199,137.08 10,945,707.94 65,913,763.66
5,070,018.12 4,738,437.55 15,342,730.50
13, 132,968,99 19,551,176.04 71,327,949.77
288,384 43 3,256,459.75 8,181,940.37
700,900.97 1,186,016.79 2,029,121.70
I0,032,034.19 10,600,011.17 52,122,288.72
2,111,649.40 4,508,688.33 8,994,598.98
25,608,759.25
985,760.30
4,483,392.49
13,791,474.94
6,348,131.52
Additions Reductions Balance as
at31/12/2018
27,501,951.30 111,462,239.71
27,501,951.30 106,462,239.71
5,000,000.00
12,599,348.77 44,004,068.01
12,599,348.77 44,004,068.01
67,458,171.70
62,458,171.70
5,000,000,00
Reduct ions Balance as at
F-78
at 1/1/2018
Introduction and Management lnfonnation system 287,819.71 of Independent Development talents
Total 287,819.71
8.16 Goodwill
8.16. l Book value of goodwill
Item
Zhingrong PT Securities Limited
Total
8.17 Long-term deferred expenses
Item Balance as at 1/1/2018
Remodeling expenses 19,539,337.04
Software utility fees 41,074.60
Housing rent 4,365,799.99
Total 23,946,211.63
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Internally 31/12/2018
development Others Profit Recognized as
or loss intangible assets expenditures
753,99069
II
1,041,810.40
753,990.69 1,041,81040
Balance as at Additions Reductions Balance as at
1/1/2018 31/12/2018
23,947,504.99 23,947,504.99
23,947,504.99 23,947,504.99
Additions Amortization Reductions Balance as at Reasons of 31/12/2018 Reductions
87,274,124.54 27,447,944.59 79,365,516.99
5,153,224.50 2,894,989.08 19,198.15 2,280, I II 87 Transfer for sale
4,365,799.99
92,427,349 04 34,708,733.66 19,198.15 81,645,628.86 -
8.18 Deferred tax assets and deferred tax liabilities
8.18.1 Deferred tax assets and deferred tax liabilities before offsetting
As at 31/12/2018 As atl/1/2018
Item Deferred tax Deductable or Deferred tax Deductable or assets or taxable temporary assets or taxable temporary liabnities differences liabilities differences
I .deferred tax assets: 620,SS5,5SO. I 6 2,482,222,200.64 632,615,941.08 2,530,463,764.33
Provisions for impainnent of assets 17,609,023.02 70,436,092.08 25,111,001.64 100,444,006.57
Accrued not paid payroll 579,328,225 .I 0 2,317,312,900.40 636,770,332.81 2,547,081,33124
Fair value changes of available-for-sale 11,339,081.31 45,356,325.24 -3,033,278.54 -12,133,114.16 financial assets
Valuation of held-for-trading financial assets and financial derivatives
Deductible tax losses 12,279,220.73 49,116,882,92 6,097,137.17 24,388,548.68
Others -32,329,252.00 -129,317,008.00
Sub-total 620,555,550.16 2,482,222,200.64 632,6 I 5,941.08 2,530,463,764.33
2.Deferred tax liabilities: 24,771,340.83 99,085,363.32 29,746,250 DO 118,985,000.00
Valuation of held-for-trading financial 263,405.60 1,053,622.40
assets and financial derivatives i - 77-
F-79
Item
Change in fair value of available-for-sale financial assets included in other comprehensive income
Accelerated depreciation
Sub-total
8_ 19 Other assets
Item
Prepayment of enterprise income tax
Deductible input tax
Total
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
M*~Wi ~W~@i :iai:~ 1Yr~f.!1Jit t" I iiJ!lUll/ M~m jai:~J,)ffflffl. i'iJ~ tll/ J§Z~ ffl.
ff! ffl Wfll1tt~~ ilt t" Ifft ffi W111tt~~
22,059,313.85 88,237,255.40 29,746,250.00 118,985,000.00
2,448,621.38 9,794,485.52
24,771,340.83 99,085,363.32 29,746.250.00 118,985,000.00
Balance as at 31/12/2018 Balance as at 1/1/2018
8,023,841.97 9,622,034.28
9,265,423.07 2,375,796.08
17,289,265.04 11,997,830.36
8.20 Placements from banks and other financial institutions
Item Balance as at 31/12/2018 Balance as at 1/1/2018
Placements from banks
Placements from other financial institutions 3,400,000,000.00 2,ooo,ooo,000.00
Total 3,400,000,000.00 2,000,000,000.00
8 ?J A ·- bl ccounts paya e
Item Balance as at 31/12/2018 Balance as at 1/1/2018
Within I year (including I year) 45,020,805.94 62,893,808.85
1-2 years (including 2 years)
Total 45,020,805.94 62,893,808.85
8.22 Advances from customers
Item Balance as at 31112/2018 Balance as at 1/1/2018
Within 1 year (including I year) 23,433,609.64 45,827,326.53
More than I year 7,357,862.27 5,574,370.07
Total 30,791,471.91 51,401,696.60
1gm 1cant accounts paya ew1t s· ·fi bl . h agmgover year:
Creditor Balance as at 31/12/2018 Unsettled reason
Zhongrong-rongjia xinya Pharmaceutical Industry M&A 940,383.10 deposit received of Fund fund manaj?.ement Beijing Rongdingkun Investment Center (limited 1,133,958.73 deposit received of oartnershio) fund mana2ement
Ningbo Mcishan Bonded Port Area Ronghui Equity 1,508,520.46
deposit received of Investment Partnership (Limited Partnership) fund management
Total 3,582,862.29 --
8.23Employee benefits payable
8.23. l Movement of employee benefits payable
- 78-
F-80
Item As at 1/1/2018
I. Short-term employee 2,483, I 50,825.08
benefits
II. Post-employment benefits-947,961.89
--defined contribution plans
III. Termination benefits
IV.Other benefits due within
one year
Total 2,484,098,786.97
Zhongrong International Trust Company limited Notes to the Financial Statements
For the year ended 31 December 2018
Increase Decrease As at 31/12/2018
2,137,145,602.30 2,237,667,870.29 2,382,628,557.09
92,274,606.10 92,369,575.01 852,992.98
3,758,068.76 3,758,068.76
2,233,178,277.16 2,333,795,514.06 2,383,481,550.07
8 23 2 D ·1 f h h eta1 so t e s ort-term emo ovee b fi ene its
Item As at 1/1/2018 Accrued Paid As at 31/12/2018
I. Salaries, bonus, and allowances 2,477,847,698.02 1,977.401,015.63 2,077,713,077.85 2,377,535,635.80
2. Staff welfare 11,248,661.31 11,248,661.31
3.Social insurances 499,749.30 49,599,734.43 49,630,748.86 468,734.87
Including: Medical insurance 447,144.83 44,128,617.35 44,148,015.34 427,746.84
Work injury insurance 13,746.15 1,621,964.99 1,623,229.32 12,481.82
Maternity insurance 38,858.32 3,849,152.09 3,859,504.20 28,506.21
Others
4. Housing Fund 172,408.52 57,129,854.55 57,150,909.15 151,353.92
5. Union funds and employee
education fee 4,517,917.17 38,977,738.95 39,135,875.69 4,359,780.43
6. Short-term paid absences
7. Short-term profit-sharing plan
8. Other 113,052.07 2,788,597.43 2,788,597.43 113,052.07
Total 2,483,150,825.08 2,137,145,602.30 2,237,667,870.29 2,382,628,557.09
8 23 3 D fi d 'b . e me contn ut1on pans
Item As at 1/1/2018 Accrued Paid As at 31/ 12/2018
I. Primary endowment
insurance 910,394.51 89,141,814.30 89,234,114.16 818,094.65
2. Unemployment insurance 37,567.38 3,132,791.80 3,135,460.85 34,898.33
3. Pension insurance
Total 947,961.89 92,274,606.10 92,369,575.0 I 852,992.98
824T d axes an h bl sure arges paya e Reclassification
Category As at 1/1/2018 Accrued Paid reduction in the As at 31/12/2018 current period
Value added tax 56,095,001.50 233,188,000.48 215,783,308.06 - 1,811 ,534.12 75,311,228.04
sale tax
Resource tax
- 79 -
F-81
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Reclassification Category As at 1/1/2018 Accrued Paid reduction in the As at 31/12/2018
current period corporate income
273,277,209.79 539,725,387.87 tax
603,367,977.33 -593,386.08 210,228,006.41
Urban maintenance and 3,828,157.04 15,582,181.27 14,225,062.66 5,185,275.65 construction tax
property tax 236,166.98 236,166.98
land holding tax
Personal Income 22,598,482.18 535,588,868.59 507,520,0 I 8.30 50,667,332.47 Tax
Education 2,805,584.35 11,594,366.40 10,649,095.12 3,750,855.63 surchar_ge
Other taxes 1,043,440.39 741,270,005.46 496,611,570.79 245,701,875.06
total 359,647,875.25 2,077,184,977.05 1,848,393,199.24 -2,404,920.20 590,844,573.26
8 25 I bl nterest paya e
Category Balance as at 31/12/2018 Balance as at 1/1/2018
Interest on corporate bonds 11,302,202.94 9,993,499.62
Interest payable for short-term loan
Interests of placemen ts from banks and other financial institutions
Total
8.26 Other payables
8.26.1 Payables by age
Category
Within ]year
1-2 years
2-Jyears
Over 3 years
Total
8 2 Id' r bT . f. . 7Ho mg 1a 11t1es or sa e
Item Balance as at 31/12/2018
Zhongrong Huixing Asset 913,860.79 Mana2ement Co., Ltd.
Total 913,860.79
9,589,611.11 5,026,666.66
20,891 ,814.05 15,020, 166.28
Balance as at 31 /12/2018 Balance as at 1/1/2018
88,081,930.99 67,075,847.12
2,010,869.08 21 ,961,673.67
16,036,931.43 2,240,794.96
6,799,570.01 5,405,504.60
112,929,301.51 96,683,820.35
Balance as at Estimated Schedule 1/1/2018 disposal cost
913,860.79 2019
913,860.79 --
8 28 N 1· bT . d on-current 1a 1 1t1es . h" ue wtt m one year
Category Balance as at 31/12/2018 Balance as at 1/1 /2018
Long-tenn loans due within one year 2,848,409,858.81 1,467,943,494.48
Total 2,848,409,858.81 1,467,943,494.48
-80-
F-82
8.29 Bonds payable
8.29.l Presented by details
Category
The6. 95 percent.guaranteednotesdue2019
The7 .60 percent.guaranteednotesdue2020
Total
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Balance as at 31/12/2018 Balance as at 1/1/2018
3,255,369,704.68
1,366,970,186.20
l ,366.970.186.20 3.255,369,704.68
8.29.2 Movement of bonds payable (excluding other financial instruments like preference shares,
perpetual loans etc.)
Amortizat Impact of
ion of exchange
Bond name Par value Issue Bond Issue Balance as Issued in this Reclassificati premium
rate Balance as at date period amount at 1/1/2018 issue changes of 31/12/2018 on
or current
discount period
The 6,95
percent 2,852,345,92 2016.6. 3 year 3,431,600,00 3,255,369,10 3,255,369,70
guaranteed 0.00 21 s 000 4.68 4 68
notes due
2019
The 7.60
percent IJ72,640.00 2018.6. 2 year
guaranteed 1,.311,380,000 1,311,380,000 -5,512,402 61,162,589. 1,366,970, 18
0.00 II s .00 .00 99 19 6.20 notes due
2020
Total 4,224,985,92 4,742,980,00 3,255,369, 70 1,311,.380,000 3,255,369, 70 -5,572,402. 61,162,589. 1,366,970, 18
0.00 0.00 4.68 .00 4.68 99 19 6.20
8 29 3 Ch anges m interests o on oava e fb d bl
Accrual interest of Paid interest of Bond name Opening balance Closing balance
current period current period
The 6.00 percent guaranteed notes 3.679.424.90 43,025,167.82 46.704,592.72
due 2018
The 6.95 percent guaranteed notes 6,314,074.72 218,496,574.85 219,304,037 .85 5,506,611 .72
due2019
The 7 .60 percent., guaranteed notes 60,292,452.18 54,496,860.96 5,795,591.22
due2020
Total 9,993,499.62 321,814,194.85 320,505,491.53 11,302,202.94
8 30L ong-term em, oyee b fi ene its paya bl e
Category Balance as at 1/1/2018 Accrued Paid Balance as at 31/12/2018
Performance bonus 425,342,698.02 65,821,472.20 491,164,170.22
-81-
F-83
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Category Balance as at 1/1/2018 Accrued Paid Balance as at 31/12/2018
Total 425,342,698.02 65,821,472.20 491,164,170.22
8.31 Paid-in capital
Balance as at 1/1/2018 Balance as at 31/12/2018
Name of investor Propor Increase Decrease Proport Book amount tion Book amount (%) ion(%)
Total 12,000,000,000.00 100.00 12.000,000,000.oo 100.00
Jingwei Textile Machinery 4,496,370,281.27
Company Limited 37.470 4,496,370,281.27 37.470
Zhongzhi Enterprise 3,958,370,343.73
Company Co ., Ltd 32.986 3,958,370,343.73 32.986
Harbin Investment Company 2,584,575,000.00
Limited 21.538 2,584,575,000.00 21.538
Shengyang An Tai Da 960,684,375.00 8.006 960,684,375.00 8.006
Company Trading Co ., Ltd
8.32 Capital reserve
Category Balance as at 1/1/2018 Increase Decrease Balance as at 31/12/2018
I. Share premiums 232,721,267.57 6,832,956.79 239,554,224.36
II. Other capital reserve
Other 3,702,600.65 2,440,646.41 6,143,247.06
Total 236,423,868.22 9,273,603.20 245,697,471.42
Incl: Among them: state-owned exclusive capital reserve
Note:
1. Reasons for the increase in capital premium during the period:
In December 2018, Dingxin Headquarters acquired a 20% stake in Huijin Minority
Shareholders for a consideration of2 million yuan. The new long-term equity investment obtained
by purchasing minority shares and the proportion ofnew shareholdings should be enjoyed by the
subsidiary from the date of purchase (or Consolidation date) The difference between the net assets
share that begins to be continuously calculated adjusts the capital reserve.
2. Reasons for the increase in capital reserve during the period:
The capital reserve of the invested company Harbin Rural Commercial Bank Co., Ltd.
increased, and the capital reserve was confirmed to be 2,440,646.41 yuan according to the
proportion.
- 82-
F-84
8 33 S urp us reserve
Category Balance as at
1/1/2018
Statutory surplus 1,521,491,740.03
Total 1,521,491,740.03
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Increase Decrease Balance as at 31/12/2018
175,074,587.04 1,696,566,327.07
175,074,587.04 1,696,566,327.07
Note: Increase in surplus reserve refers to that I 0% of net profit is accrued in legal reserve.
8.34 General risk reserve
Item Year ended 31/12/2018 Year ended 31/12/2017
General risk reserve 348,288,909.53 304,673,563.41
Trust compensation reserve 875,763,354.83 788,226,061.31
Total 1,224,052,264.36 1,092,899,624.72
Note: 1. According to the regulations in"Cai Jin" (2012) No.20, the higher of the amount of potential
risk estimation lower than provision for impairment of assets and 1.5% of ending balance of risk
assets, is accrued in provision of general risk reserve from after-tax net profit.
2.According to Article 49 in the Regulations on Trust Companies, 5% of the Company's after-tax net
profit is accrued in trust compensation reserve, with a limit of 20% of the Company's registered
capital. The major purpose of the trust compensation reserve is to offset any losses in entrusted
assets due to possible management and operating mistake.
8 35 R . d etame eammgs
Item Year ended 31/12/2018 Year ended 31/12/2017
Opening balance of current period l,953,539,632.41 4,800,581,900.77
Increase in current period 2,065,654,242.05 2,747,369,279.87
Incl: Transferred from net profit of current period 2,065,654,242.05 2,747,369,279.87
Other adjustment to increase
Decrease in current period 706,626,802.70 S,594,411,548.23
Incl: Appropriation of statutory surplus reserve 175,074,587.04 216,960,641.67
Provision for general risk reserve of current period 131,152,639.64 271,868,756.18
Common share dividends payable 400,000,000.00 I, 100,000,000.00
Common share dividends converted to share 4,000,000,000.00 capital
Other adjustment to decrease 399,576.02 5,582,150.38
Closing balance of current period 3,312,567,071.76 1,953,539,632.4 l
8.36 Net interest income
- 83-
F-85
Item
Interest income
-Interest income from deposits in other banks
-Interest income from issuing loans and advances
Interest expenses
-Placements from banks and other financial
institutions
Net interest income
8.37 Net fee and commission income
Item
Net commission income on trust
Mutual fund management fees
Total
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Year ended 31/12/2018 Year ended 31/12/2017
526,033,812.21 500,924,021.00
233,214,035.99 369,535,775.43
292,819,776.22 131,388,245.57
210,929,777.78 124,331,944.44
210,929,777.78 124,331,944.44
315, I 04,034.43 376,592,076.56
Year ended 31/12/2018 Year ended 31/12/2017
2, 185,920,173.76 2,829,969,255.96
179,835,416.30 244,491,033.90
2,365,755,590.06 3,074,460,289.86
8.38 Operating income, Other operating income and operating cost
Year ended 31/12/2018 Year ended 31/12/2017 Item
Income
I. Primary operating business 552,208,543.68
Asset management income 392,278,756.40
Consulting services income 159,140,056.71
Human resources income 639,782.70
Technical services income 140,606.14
lntennediary services income
Sale goods income 9,341.73
II. Other operating business 1,479,535,911.38
Interest income from loans to
banks and other financial
institutions
Project issuance income 1,475,475,646.95
Other 4,060,264.43
Total 2,031,744,455.06
8.39 Investment income
8.39.1 The detail of investment income
Category
Gain/(Loss) from long-term equity investments in equity method
· 84 ·
Cost Income Cost
7,172.84 587,785,815.50 80,436.41
192,948,629.72
392,696,651.68
2,056,810.19
7,172.84 83,723.91 80,436.41
156,781.24 1,113,936,512.36 82,852.53
5,560,338.78
1,106,517,902.78
156,781.24 1,858,270.80 82,852.53
163,954.08 I, 701,722,327,86 163,288.94
Year ended 31/12/2018 Year ended 31112/2017
175,850,596.11 I 71,698,636.69
F-86
Category
Gain/(Loss) on disposal of long term equity investment
Gain/(Loss) from financial assets measured at fair value throul!.h profit and loss for the current period Gain/(Loss) on disposal of financial assets measured at fair value through profit or loss for the current oeriod Gain/(Loss) on held-to-maturity financial assets during the holding period
Gain/(Loss) on disposal of held-to-maturity financial assets
Gains on available-for-sale financial assets during the holding Period
Gains on disposal of available-for-sale financial assets
Gains on remeasurement of the equity at fair value after getting control Gains on remeasurement of the remaining equity at fair value after losin.l!: control
Others
Total
8.40 Gain from fair value changes
Source of gains/(losses) from changes in fair value
Financial assets measured at fair value through profit or loss for the current period
Total
8.41 Gains from foreign exchange
Category
Gains from foreign exchange
Total
8.42 Taxes and surcharges
Category
Urban maintenance and construction tax
Educational surcharge
Others
Total
8.43 Operation and administrative expenses
Category
I. Administrative expenses
Staff expenses
Depreciation expenses
Maintenance expenses
• 85-
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Year ended 31/12/2018 Year ended 31/12/2017
-554,771.76 386,332,560.82
263,397,417.31 147,891,764.88
-4,513,214.07 3,374,478.85
738,705,378.54 490,512,289.38
-25,163,333.04 180,198,716.96
95,709.20
l ,147,817,782.29 1,380,008,447.58
Year ended 31/ 12/2018 Year ended 31/12/2017
13,966,819.55 -1,973,390.31
13,966.819.55 -1,973,390.31
Year ended 31/12/2018 Year ended 31/12/2017
215,351.07 -351,845.82
215,351.07 -351,845.82
Year ended 31/12/2018 Year ended 31/12/2017
15,634,242.88 16,720,440.29
11,631,553.29 12,212,041.14
4,484,188.95 11,378,387.34
31,749,985.12 40,310,868. 77
Year ended 31/12/2018 Year ended 31/12/2017
2,762,292,544.04 2,508,793,250.94
2,281,910,460.24 1,993,224,009.64
12,608,608.65 12,589,514.75
1,083,332.24 I, 174,91 1.44
F-87
Category
Intangible assets amortization expenses
Business related hospitality expenses
Travel expenses
Office expenses
Conference expenses
Expenses on Intermediaries
Consulting expenses
Rental expenses
Water and electricity
Long-term unamortized expenses
Amortization of low cost and short lived articles
Supervision expenses
Other
2.Finance expenses
Total
8.44 Impairment on assets
Category
Allowance for doubtful debts
Impairment loss on available-for-sale financial assets
Total
8.45 Gains (Losses) from disposal of assets
Item
Gains on disposal of fixed assets
Total
8.46 Other income
Item type
Decoration subsidies Income related
Office rental subsidy Income related
No lay-off Subsidiaries Income related
Return of personal income tax fee Income related
Total
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Year ended 31/12/2018 Year ended 31/12/2017
12,599,348.77 8,806,170.46
24,282,335.74 31,428,509.89
42,189,169.09 43,993,312.85
8,346,271.74 7,56I,512.44
12,911,691.86 9,671,407.80
15,071,264.49 13,510,909.90
I ,866,267 .07 14,073,003.93
171,626,014.78 196,446,072.62
4,681,373.55 2,895,959.80
27,733,943.57 28,163,824.75
9,170,637.51 4,164,941.77
973,600.00
136,211,824.74 140, I I 5,588.90
315,718,178.78 348,139,279.63
3,078,010,722.82 2,856,932,530.57
Year ended 31/12/2018 Year ended 31/12/2017
20,004,822.62
83,388,431.5 I 330,429.37
83.388.431.51 20.335,251.99
Year ended 31/12/2018 Year ended 31/12/2017
893,671.06 476,418.21
893,671 .06 476,4I8.21
Amount to be
Year ended Year ended included in current 31/12/2018 31/12/2017 non-recurring
Jtains and losses
313,600.00
3,865,700.00 1,756,000.00 3,865,700.00
81,148.24 8I,148.24
9,40 I, 197.45 1,600,371.55 9,401,197.45
13,348,045.69 3,669,971.55 13,348,045.69
- 86-
F-88
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
8.47 Non-operating income
Year ended Year ended Amount to be included
Item 31/12/2018 31/12/2017 in non-recurring gain or loss
Gains on disposal of non-current assets 50,777.17
Government subsidy I S,321,9 I 6.29 4,508,727.11 15,321,916.29
Others 1,660,260.84 10,054,056.3 I 1,659,960.84
Total 16,982, 177.13 14,613,560.59 16,982,177.13
Details of government subsidy
Item Year ended Year ended Relevant approval documents 31/12/2018 31/12/2017 Received the Great Contribution Award of the
Financial allocation 1,380,000.00 Management Committee of the Shilong Economic Development Zone in 2017
Shenzhen headquarters Shenzhen Futian District Supports Headquarters
identified support 1,000,000.00 Economy and Several Policies for the Development of
Listed Companies" Shenzhen Municipal People's Government Financial
Financial Development Special 1,478,916.29 1,000,000.00
Development Service Office Reimbursed Shenzhen Fund City's 35th Batch of Special Financial Development
Funds (Increase in Asset Size) Shenzhen Municipal Finance Committee Financial
Financial Development Special 2.000.000.00 2,500,000.00
Development Special Fund for Supplementary Fund Provisions of Shenzhen Municipality for the
Implementation of Certain Financial Regulations
No lay-off Subsidiaries 8,727.11
Shijingshan District promotes technological transformation Notice on Cashing in the 2018 New Enterprise and technological innovation I 0,463,000.00 Technology Transformation and Technology Innovation of Shijingshan Park in Policy Zhom1:1mancun
Total 15,321,916.29 4,508,727.11
8.48 Non-operating expenses
Year ended Year ended Amount to be included in
Item 31/12/2018 31/12/2017 non-recurring gain or loss for the vcar
Losses on disposal of non-current 433,429.87 236,833.56 433,429.87 assets
Donation 400,000.00 629,040.00 400,000.00
Compensation expenditure 2,528,660.58
Others 5,573,667.84 7,330,006.63 5,573,667.84
Total 6,407,097.71 10,724,540.77 6,407,097.71
8.49 Income tax expenses
8.49. l Details of income tax ex nses
Item Year ended 31/12/2018 Year ended 31/12/2017
· 87 -
F-89
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Item Year ended 31/12/2018 Year ended 31/12/2017
Current income tax expense calculated according to tax 534, 73 I ,520.06 795,072,460.17
laws
Deferred income tax 29,144,777.76 20,296,581.90
Others
Total 563,876,297.82 815,369,042.07
849 2R econc1 1at1on tween mcome tax expenses an T . be d fi . accountm~ pro 1t 1s as fi II 0 ows:
Item Amount
Profit before tax 2,706,107,735.10
Income tax expenses calculated at statutory/applicable tax rates 691,081,963.19
Effect of different tax rate -29,024,611.56
Effect of adjustment for income tax in prior year -2,%0,750.42
Effect of income not subject to income tax -93,459,058.97
Effect of expenses undeductible for tax purposes 3,182,723.14
Effect of utilization of tax losses in prior years which haven't been recognized -8,276,992.26
deferred tax assets
Effect of unrecognized deductible temporary differences and deductible losses 3,104,680.30
in current period
Others 228,344.40
Income tax expenses 563,876,297.82
8.5 I Other comprehensive income attributable to the owner of the parent company
8.51.1 Other comprehensive income items and their income tax impacts and transfers to profit or
loss
Year ended 31/12/2018 Year ended 31/12/2017 Item Before tax Before tax
Amount Income Tax After tax Net Amount Income Tax After tax Net
Other comprehensive income items which will be reclassified -149,677,38S.96 -23,328,273 86 -126,349,112.10 74,313,651.37 6,376,645.52 67,937,005.85 subsequently to profit or loss I. Gains or losses arising from changes in fair value
-243,212,570.36 -43,713,659.14 -199,498,911.22 86,693,151.49 6,321,735.52 80,371,415.97 of available-for-sale financial assets Less: other comprehensive income in prior periods
-81,541,541.12 -20,385,385.28 -61,156,155.84 1,132,138.51 -S4,910.00 1,187,048.51 transfer in profit or loss for the current period
subtotal -161,671 ,029.24 -23,328,273.86 -138,342, 7SS.38 85,561 ,012.98 6,376,645.52 79,184,367.46
2. Translation differences from translation of foreign
12,039,S 12.22 12,039,SI2.22 - l 1,247,361.61 -11,247,361.61 currency financial statements Less: other comorehensive 4S,868.94 45,868.94
-88-
F-90
Year ended 31/12/2018 Item
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Year ended 31/12/2017
Before tax Before tax Amount Income Tax After tax Net
Amount Income Tax After tax Net
income in prior periods transfer in profit or loss for the current ocriod
subtotal 11,993,643.28 11,993,643.28 -11,247,361.61 -I 1,247,361.61 Total of other
-149,677,385.96 -23,328,273.86 -126,349,112.10 74,313,651.37 6,376,645.52 67,937,005 85 comprehensive income
8.51.2 Adjustment of interns underlying other comprehensive income
(]) Table 1
Movement in the year
Less: other
comprehensiv Amount
e income in Amount after Balance as at after tax Balance as at
Item Amount before prior periods Less: income tax attributable 1/1/2018 attributable 31/12/2018
tax transfer in tax to the
profit or loss Company to minority
interests for the current
period
Other comprehensive
income items which will be
reclassified subsequently to
profit or loss
Including: Gains or losses
arising from changes in fair
value of available-for-sale 160,771,043.32 -221,242,296.91 -81,541,54 I.I 2 -22,059,295.99 -138,342,755.38 20,701,295.58 22,428,287.94
financial assets
Translation
differences from translation
of foreign currency 7,169,637.11 12,648,915.51 45,868.94 11,993.643.28 608,804.10 19, t63,280.39
financial statements
Total of other 167,940,680.43 -208,593,381 .40 -81,495,672.18 -22,059,295 99 -126,349,112 10 21,310,099.68 41,591,568.33
comprehensive income
(2) Table 2
Remeasur The share The share Gains and Held-to Effecti Translation
ement of ofother of other losses from -maturit ve differences in
Item change in comprehens comprehe changes in fair y part of foreign total
net ive income nsive value of investm cash currency
liabilities that the income available-for-s cnts flow financial
-89-
F-91
or net investee that will
assets of cannot be
defined reclassify reclassifie
benefit into profit d into
plans or loss profit or
underthe loss after
equity the
method investee in
the equity
method
I. Balance at the
beginning of last
year
2.lncrese or
decrease of the
amount in last
year (if decrease
represented
with"-")
3. balance at the
beginning of this
year
4. Increse or
decrease of the
amount in this
year(if decrease
represented
with"-")
5.Balance at the
end of this year
8.51 Consolidated statement of cash flow
8 51 1 S - uoo ement to statement o cas f h fl ow
Item
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
ale financial reclassi hedge statements
assets fled to gains
availabl and
e-for-sa losses
le
financia
I assets
gains
and
losses
81,586,675.86 18,416,998.72 100,003,674.58
79,184,367 46 -11,247.361.61 67,937,005.85
160,771,043.32 7,169,637.11 l 67,940,680.43
-138,342. 755.38 11,993,643.28 -126,349,112.10
22,428,287.94 19,163,280.39 41,591,568.33
Year ended Year ended 31/12/2018 31/12/2017
I. Net profit adjusted to cash flows from operating activities
Net profit 2,142,231,437.28 2,805,382,332.97
Add: provision for asset impairment 20,335,251.99
Depreciation of fixed assets, depreciation and depletion of oil and gas assets and depreciation of productive biological 12,878,869.05 12,589,514.75 assets
Amortization of intangible assets 12,599,348.77 8,806, 170.46
-90-
F-92
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Item Year ended Year ended 31/12/2018 31/12/2017
Amortization of long-term deferred expenses 27,521,594.57 28,384,189.56
Losses on disposal of fixed assets, intangible assets and -893,671.06 -344,521.90 other lone:-term assets{"-" for gains)
Losses on write-down of fixed assets("-" for gains) 433,429.87 54,160.08
Losses from changes in fair value ("-" for gains)
Financial expenses("-" for income) 322,749,043.67 351,556,821.29
Investments losses("-" for gains) -175,917,879.14 -557,891,197.51
Decreases in the deferred tax assets("-" for increases) 27,336,038.44 25,015,790.87
Increases in the deferred tax liabilities ("-" for decreases) 2,712,026.98 -1,417, 769.40
Decreases in inventories("-" for increases) 7,172.84 -34,039.85
Decreases in operating receivables("-" for increases) 645,746,372.43 -11,600,214,785.58
Increases in operating payables("-" for decreases) 1,528,555,421.53 6,544,178,233.05
Others
Net cash flows from operating activities 4,545,959,205.23 -2,363,599,849.22
2. Significant investing and financing activities not involving cash inflow and outflow -- --Conversion of debt into capital
Convertible corporate bonds maturing within one year
Fixed assets acquired under financial lease
3. Net change in cash and cash equivalents -- --Cash as at 31/12/2018 11,500,569,549.81 9,031,278,954.43
Less: cash as at 1/112018 9,031,278,954.43 11,100,175,309.54
Add: cash equivalents as at 31/12/2018
Less: cash equivalents as at 1/1/2018
Net increase in cash and cash equivalents 2.469,290,595.38 -2,068,896,355.1 l
8.51.2 Cash and cash equivalents
Item Balance as at Balance as at 31/12/2018 1/1/2018
I. Cash 11,500,569,549.81 9,031,278,954.43
Including: cash on hand 3,961.95 1,642.33
Unrestricted bank deposits l l,417,218,751.70 9,031,215,333.53
Unrestricted other cash and cash equivalents I
83,346,836.16 61 ,978.57
Unrestricted deposits with central bank
Deposits with banks and other financial institutions
Loans to or from banks and other financial institutions
II. Cash equivalents
Including: bonds investment maturing within 3 months
III. Cash and cash equivalents as at 31/12/2018 11,500,569,549.81 9,031,278,954.43
- 91 ·
F-93
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Item
Including; cash and cash equivalents restricted for use in the Company or the subsidiaries
8.52 Monetary items denominated in foreign currency
Item Balance in foreign
currency as at 31/12/2018
Cash at hand and in banks --Including: USD 90,705,808.81
EUR
HKD 301,137,949.89
Accounts receivable --Including: USD
EUR
HKD 21,676,438.35
Prepayments
Including: USO
HKD 8,965,725.58
Other receivables
Including: USO 1,636,483.65
HKD 6,825,981.71
Bonds payable --Including: USD 200,000,000.00
HKD
Interest payable
Including: USO 1,646,783.27
HKD
Other payables
Including: USD 292,46421
HKO 3,052,462.75
9. Contingencies
None
10. Events after the balance sheet date
None
11. Risks related to financial instruments
-92-
Balance as at Balance as at 31/1212018 1/1/2018
Balance translated into Exchange rate
RMB as at 31/12/2018
--6.8632 622,532, I 07 .02
0.8762 263,857,071.69
--
0.8762 18,992,895.28
0.8762 7,855,768.75
6.8632 11,231,514.59
0.8762 5,980,925.17
--6.8632 1,366,970,186.20
6.8632 11,302,202.94
6.8632 2,007,240.37
0.8762 2,674,567.86
F-94
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
The major financial instruments of the Company include: held-for trading financial assets,
available-for-sale financial assets, bonds, placements from banks and other financial institutions, other
interest-bearing loans and monetary capital. The major purpose of these financial instruments is for
the Company's operations and financing. The Company has multiple other financial assets and
liabilities directly created in operations, such as, account rseceivable and accounts payable, etc.
Main risks caused by the Company's financial instruments are credirt risk, liquidity risk and market
risk
11.1. Classification of financial instruments
(1) Book value of all types of financial instruments on balance sheet date is listed below:
Closing balance
Financial assets
measured Financial asset accounts at fair Loans and Available-for-sale
Monetary capital Total value through profit receivables financial assets
and loss
Monetary capital 11,500,569,549.8) I l ,500,569,549.81
Financial assets
measured at fair I 0,413,029,482.91 10,413,029,482.91
value through profit and
loss
Loans and receivables 1,557,628, I 06.02 1,557,628, I 06.02
Interest receivable 38.356.704.28 38,356,704.28
Available-for-sale 4,052,901,901.76 4,052,901 ,901.76
financial assets
(Continue)
Opening balance
Financial asset accounts Financial assets measured
at fair Available-for-sale Monetary capital Loans and receivables Total
value through profit and loss financial assets
Monetary capital 9,031,278,954.43 9,031,278,954.43
Financial assets 4,752,129,818.02 4,752,129,818.02
· 93 -
F-95
Financial asset accounts
Monetary capital
measured at fair
value through profit
and loss
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Opening balance
Financial assets measured
at fair Available-for-sale Loans and receivables Total
value through profit and loss financial assets
Loans and receivables 3, 712.356,964. 78 3,712,356,964.78
Interest receivable 49,805,585.60 49,805,585.60
Available-for-sale 8,115,691,430.13 8, 115.69 I ,430.13
financial assets
Note: financial instruments here do not include prepayments, receipts in advance and taxes payable .
1 L2. Credit risk
The Company only trade with the third parties with approval and good credit recrod. Accounts
receivable of the Company are mainly trustee reward to be received, which are primarily because that
the trust projects' final paying date limits have not reached according to contracts. Additionally, the
Company continuously monitors the balance of accounts receivable in order to avoid significant bad
debt risks
The Company's other financial assets include monetary capital, held-for-atding financial assets,
available-for-sale financial assets and other receivables. The credit risks of these financial assets are
mainly from default of trading partners, and the maximum risk exposure equals to the face value of
these financial assets.
Because the Company only trade with the thrid parties with approval and good credit record, no
collateral is requried. Credit risks are cenrtally managed according to the trading partners'area and
industries. The Company's account rseceivable is from clients from a diversity of industries, which
means there is no highly concentrated significant credit risk. Other receivables of the Company are
mainly housing rent deposits, cash advances of trust projects and prepayment of purchase contract
Balance of the Company's receivables does not involve any collatreal or other credit enhancement.
-94-
F-96
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
The Company's manc1a assets that are cons1 ere fi • I .d d d ti II as bemg impaired ts analyze as o ows:
Closing balance
I Account Overdue without Overdue for
Total impairment
Less than I month l-3months !Other applicable 11>eriods
Accounts receivable 125,922,617.74 125,922,617.74
Other receviables 100,738,513.74 100,738,513.74
Interest receivable 38,356,704.28 38,356,704.28
Prepayments 7,855.768.75 7.855.768.75
(Continue)
Opening balance
Overdue for Account Overdue without
Total Other applicable impairment Less than I month 1-3 months
periods
Accounts receivable 168,304, 186.0f 168,304,186.0E
Other receviables 173,951,902.6~ 173,951,902.6~
Interest receivable 49,805,585.6( 49,805,S85.6()
Prepayments 277,474.3( 277,474.3(
11.3. Liquidity risk
The Company manages capital shortage risks using the circulation liquidity plan instrument. This
instrument considers both the maturity dates of financial insrtuments and forecasted cash flows from
operating.
The objective of the Company is to maintain the sustainability and flexibility of financing using
multiple financial methods such as placements from banks and other financial institutions and
long-tenn bonds, etc.
Time to maturity of the financial liabilities according to non-discounted contract cash flows is
d ft II analyze as o ows:
Closeing balance Account
Less than I year 1-2 year, 2-3 years Over3 years Total
Placements from banks
and other financial 3,400,000,000.00 3,400,000,000.00 institutions
Accounts payable 45,020,805.94 45,020,805.94
Other payables 88,081,930.99 2,010,869.08 16,036,931.43 6,799,570.0 I 112,929,301.51
-95-
F-97
Account Less than I year
Bonds payable 2,848,409,858.81
(Continue)
Account Less than I year
Placements from banks
and other financial 2,000,000,000.00 institutions
Accounts payable 62,893,808.85
Other payables 67,075,847.12
Bonds payable 1,467,943,494.48
11.4. Market risk
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Closeing balance
1-2 years 2-3 years Over3 years Total
1,366,970, 186.20 4,215,380,045.01
Opening balance
1-2 years 2-3 years Over 3 years Total
2,000,000,000.00
62,893,808.85
21,961,673.67 2,240,794.96 5.405.504.60 96,683,820.35
3,255,369.,704.68 4,723,313,199.16
Market risk is mainly referring to the risk of fluctuated fair value or futrue cash flows of financial
instruments caused by market price changes. Market risk includes interest rate risk, foreign exchange
risk, and other price related risk such as price risk of equity instrument investment.
(I) Interest risk
Bond instruments issued by the Company are long-term bonds with fixed interest, and bank deposits'
interest rate only changes along with the base interest rate of the central bank. Therefore, the interest
rate risk of Company is fairly low.
(2) Foreign exchange risk
Except for the subsidiaries established overseas, which hold assets in US dollars or Hong Kong
dollars as the settlement currency, the foreign currency assets held by the Company account for a
small proportion of the total assets. Since there are no large cross-border transactions between
domestic and foreign companies, the exchange rate risk faced by the company is not significant.
(3) Price risk of equity instrument investment
The investment price risk of equity instruments refers to the risk that the fair value of equity securities
will decrease due to changes in the level of stock indices and the value of individual securities.
The listed equity instrument investments held by the Company are listed on the Shanghai and
Shenzhen stock exchanges and are measured at market quotes on the balance sheet date.The closing
market stock index of Shanghai and Shenzhen Stock Exchange markets on the date closest to balance
-96-
F-98
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
sheet date, as well as the highest and lowest closing points of the year are listed below:
Stock Exchange Closing balance Highest/lowest closing
Opening balance Highest/ lowest closing
point of current year point of previous year
Shanghai-A
share index 2493.90 3587.03/,2449.2(] 3307.17 3587.03/3016.53
Shenzhen
- A share index 7239.79 l 1633.46/7084.44 11040.45 11714. 98/9482.84
The table below presents the sensitivity of the Company's net profit and owners' equity to every I 0%
change in the fair value of equity instrument investment, assuming other variables are kept constant.
Current period Type Increase/( decrease) of net lncrease/(decrease) of
Face value profit owner s' equity
Listed equity instrument
investments
Transaction equity
instrument investments I 0, 747,358.00 ±806,05 I .85 ±806,051.85
Available-for-sale equity
instrument investment 178,308,823.50 ±13,373,161.76
(Continue)
Previous period Type Increase/( decrease) of net Increase/( decrease) of
Face vatue profit owner s' equity
Listed equity instrument
investments
Transaction equity
instrument investments 29,453,200.00 ±2,208,990.0< ±2,208,990.00
Available-for-sale equity
instrument investment 569,938,398.48 ±42.745,379.89
11.5. Capital management
The major objective of asset management by the Company's is to maintain the capability of
sustainable operating, to keep healthy capital ratios, so as to support business development and
maximize shareholders' value.
The Company manages capital structure and makes necessary adjustment according to economic
situation and changes in particular assets'risk characteristics.In order to meet the management
requirements on trust companies according to Manual of Net Asset Management by CBRC, based on
· 97-
F-99
Zhongrong International Trust Company limited Notes to the Financial Statements
For the year ended 31 December 2018
the its own business scope and trusted assets' characteristics,the Company decides on the target size of
the trust service business, adjusts the Company's target capital size, and makes share a]location plans
or proposes to shareholders for additional investment. 1n 2015 and 2014, objective, policies and
procedures of asset management have not been changed.
12. Fair value disclosure
12. l fair value of assets and liabilities measured at fair value at the end of the period
balance at the end Items Leval 1 inputs Leval 2 inputs Leval 3 inputs
of the period
I.Continuing fair value measurement
I. Financial assets at fair value
through profit or loss 8,926.043,031.42 1,486,986,451.49 I0,413,029,482.91
(I) transactional financial assets 10,747,358.00 I 0, 747,358.00
!)Debt instrument investment
2)Equity instrument investment I 0, 747,358.00 IO, 747,358.00
3)Derivative financial instruments -(2)Financial assets designated as
measured at fair value and whose
changes are charged to profit or loss 8,915,295,673.42 1,486,986,451.49 10,402,282,124.9I
for the current period
I )Debt instrument investment 485,932,829.09 485,932,829.09
2)Equity instrument investment
3)Others 8,915,295,673.42 1,00 I ,053,622.40 9,916,349,295.82
2.Availablc-for-sale financial assets 823,748,026.36 I, 705,388,994.49 2,529,137,020.85
(I) Debt instrument investment 529,956,973.88 136,576,798.80 666,533,772.68
(2) Equity instrument investment 293,791,052.48 221,248,980.60 515,040,033.08
(3) Fund investment 1,247,563,215.09 1,247,563,215.09
(4) Trust investment 100,000,000.00 100,000,000.00
(5) Asset management plan
(6) Others
Total assets measured at fair value 9,749,791,057.78 3,192,375,445.98 12,942,166,503.76
12.2 continued measurement items in fair value, transition between levels within the curent period,
the reasons for the conversion, and the policy for determining the timing of conversion within the
current period
By the end ofDecember,31,2018, there is no transition between leval 1 inputs and leval 2 inputs.
- 98-
F-100
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
12.3. Fair value of financial assets and financial liabilities that are not measured at fair value
Fair value of financial instruments recorded not at fair value: The carrying amount of the Company's
financial instruments is stated at cost or amortised cost, which is not significantly different from the
fair value by the end of December 3 I, 20 I 8.
13.Related parties and transactions
13 I Th e parent company o fth C e ompany
Name of Shareholding ratio Voting rights
Registration Registered proportion of parent
place Type of business
capital of the Company
the company (%) Company(%) Jingwei Textile Machinery Beijing Manufacturing 704,130,000.00 37.47 37.47 Company Limited
13.2 Subsidiaries of the Company
For details of the subsidiaries of the Company, please see the notes: VII. Business combinations and
consolidated financial statements
13.3 Details of the company's joint ventures and associates
Name of invested company relation Organizationg code
1. China Trust Registration Co., Ltd. Equity investment 9131 OOOOMA IFL3CJ7Q
2. Shenzhen huarong equity investment fund Equity investment 91440300576369345N mana2ement Co., Ltd.
3. China Trust Industry Protection Fund Co., Ltd. Equity investment 91110000327249174E
4. Harbin Rural Commercial Bank Co., Ltd. Equity investment 91230JOOMA18WOOMOY
5. Shanghai rongou equity investment fund management Equity investment 9131000008410624XC Co. Ltd.
6. Shenzhen ruiyuanbaoxing fund management Co., Ltd. Equity investment 91440300071104587W
7. Shenzhen shenronghui investment consulting Co.,Ltd. Equity investment 914403003597615434
J 3 .4 Related transaction
(1) Related party funds lending
Relarted parties Amount or fund Beginning of End of fund Notes lending fund lending lending China Trust Industry Protection Fund 810,000,000.00 2018/2/12 2019/2/12
Withdrawal of Co .• Ltd. funds China Trust Industry Protection Fund 590,000,000.00 2018/5/21 2019/5/21 Withdrawal of Co., Ltd. funds China Trust Industry Protection Fund 1,200,000,000.00 2018/6/4 2019/3/4 Withdrawal of Co., Ltd. funds China Trust Industry Protection Fund 800,000,000.00 2018/8/3 2019/5/3
Withdrawal of Co .• Ltd. funds
- 99-
F-101
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
(2) Related transactions for purchase and sale of goods, provision and acceptance of services
Current period amount
Types of related Content of Proportio Pricing Policy
relarted parties related nof transactions and Decision
transactions Amount similar Procedure type of sales
Harbin hatou property limited acceptance of Property cost 1,002,741.61 4.70 Fair value liabilitv company service
Harbin hatou property limited acceptance of Heating cost 153,141.56 38.60 Fair value liability company service Harbin hatou property limited acceptance of
Utilities 267,121.38 7.47 Fair value liability company service Harbin hatou property limited acceptance of Parking fee 3,773.60 2.17 Fair value liability company service
(3) I eases b etween re ate d :mrt1es Pricing
Asset Lessor Tenant conditio beginning of the
end of the lease rental fees accordanc Impact of
n lease
Harbin Zhongrong Direct Investment International rent
September 1,2017 August 31,2020 Group Co., Ltd. Trust Co., Ltd.
13.5 Accounts receivals and accounts payable between related parties
I .Accounts payable
Balance at the end of the
Accounts Related parties period
Bad debt Book value preparation
Other reveivables Zhongzhi Enterprise 9,000.00 Group Co., Ltd.
Total 9,000.00
eof rental rental fees fees
Not 2,451,143.8 Fair value significant
Balance at the beginning of the period
Bad debt Book value preparation
67,500.00
67,500.00
14. Notes to important accounts in the parent company's financial statements
14. !Accounts Receivable
Closing balance
Type Book balance Bad debt
Amount Percentage Amount
Percentage (%) (%)
Individual accounts receivable with significant amount and bad debt reserve is individuallv accrud Accounts receivable on which bad debt
69,167,419.63 100.00 reserve is accrued bv £TOUD
Individual account receviable without
• 100·
F-102
Type
significant amount but bad debt reserve is individually accrued
Total
(continue)
Type
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Closing balance
Book balance Bad debt
Amount Percentage Amount Percentage (%) (%)
69,167,419.63 100.00
Opening balance
Book balance Bad debt
/\mount Percentag
Amount Percentage
e(%) (%}
Individual accounts receivable with significant amount and bad debt reserve is individually accrud Accounts receivable on which bad debt
49,894,201 .20 100.00 reserve is accrued by arouo Individual account receviable without significant amount but bad debt reserve is individually accrued
Total 49,894,201.20 100.00
14. 1. 1 Accrual of bad debt provision of accounts receivable according to credit risk characteristics
(1) Accounts receivables are accrued bad debt reserve using aging analysis method
Closing balance Opening balance Age Percentage Percenta Book balance (%) Bad debt Book balance
l?C (%) Bad debt
Within I 69,167,419.63 100.00 year
Total 69,167,419.63 100.00
14.2 Other Receivables
Type
Individual other receivables with significant amount and bad debtreserveis individually accrued Other receivables on which bad debt reserve is Accrued by group
Grouped by age
Grouped by nature ofreceivable
Individual other receivable without significant amount but bad debt reserve is individually accrued
Total
(continue)
Type
49,894,201.20 100.00
49,894,201.20 100.00
Closing balance
Book balance Bad debt
Amount Percentag Amount Percentage
e(%) {%)
56,193,525.55 100.00 468,542.06 0.83
22,452,809.37 39.96 468,542.06 2.09
33,740,716.18 60.04
56,193,525.55 100.00 468,542.06 0.83
Opening balance
- 101 -
Book balance
Amount IPercentag e(%)
Bad debt
Amount I Percenta e:e(%}
F-103
Type
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Opening balance
Book balance Bad debt
Amount Percentag Amount
Percenta e(%) 2e (%)
Individual other receivables with significant amount and bad debtreserveis individually accrued Other receivables on which bad debt reserve is II 5,092,967.11 100.00 468,542.06 0.41 Accrued by group
Grouped by age 70,308,143.41 61.09 468,542.06 0.67
Grouped by nature of receivable 44,784,823.70 38.91
Individual other receivable without significant amount but bad debt reserve is individually accrued
Total I 15,092,967. I l 100.00 468,542.06 0.41
14.2. IOther receivables on which bad debt reserve is Accrued by group
t er rece1va e ts accru e t reserve usmg agm (1) 0 h . bl . ed bad d b ana ys1s met o I • h d
Closing balance Opening balance Age Percentage Percentag
Book balance (%) Bad debt Book balance e(%) Bad debt
Within l year 21,984,267.3 I 97.91 69,839,601.35 99.33
1-2 years
2-3 years
Over 3 years 468,542.06 2.09 468,542.06 468,542.06 0.67 468,542.06
Total 22,452,809.37 100.00 468,542.06 70,308,143.41 100.00 468.542.06
(2) Other receivables with accrued bad debt reserve using aging analysis method
Closing balance Opening balance Group name Percentage Book Percentage
Book balance (%)
Bad debt balance (%) Bad debt
Grouped by nature of 33,740,716.18 100.00 44,784,823.70 100.00 receivable
Total 33,740,716.18 100.00 44,784,823.70 100.00
14.3 Long-term Equity Investment
14 3 1 L . . . ong-tenn equity investment c asst tcatton . 'fi
Increase in Decrease in Project Opening balance
investment investment Closing balance
Investments to subsidiaries 2,951,500,000.00 514,000,000.00 l,ll7,000,000.00 2,348,500,000.00
Investments to joint ventures
Investments to associates 2,137,459,984.07 178,234,941.70 110,513,377.59 2,205, 181,548.18
Subtotal 5,088,959,984.07 692,234,941.70 l,227,513,377.59 4,553,681,548.18
Less: impairment of
Long-term equity investment
Total 5.088.959.984.07 692.234.941.70 1,227,513,377.59 4,553,681.548. 18
14.3.2. Long-term equity investment details. -102 -
F-104
Invested umt The cost of Opening
incre investment balance asc in Decrease in inves investment tment
Associaleli
1 China Trust
Industry t,50D.D0D 000 00 1.686,J 12.328 66
Security Fund
ii Harbin
Rural 281,090.074,90 343.491,318 S4
Commercial
Bank Co, ltd
ill China
Trust I 00.000.000 00 IOI .8•2.959.28
Registration
Co , ltd
iv_ Shenzhen
Huarong
Equity 4,900,000 00 S,813,377 59 5,813,377.59
Investment
Fund
Managemen
To1al l,88S.990,074 90 2,137,459,984 07 5,813,377 59
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Closing Changes in current penod balance
Othe Investment r Other Declaring Provi
income chan sion Ot recognized comprehensi distribution of for he ges
ve income cash dividends under the in adjustment or profits impa1 rs equity method equu rment
V
124,799,745.33 75.00D.000.00 1,736,112,073_99
50,301,862 18 2,440,646,41 ~9,700,000 00 366,533,827 13
692.687 78 102.53S,647,06
175.794.29S.29 2,440,646 41 104,700,000 00 2.205,181.S48 18
Note: Chuang Li Yuan No. I Trust Plan is included in the consolidated structured entity.
14.3Main financial infonnation of important joint ventures
Balance as at 31/12/2018 Balance as at 31/12/2017
China Trust Harbin Rural China Trust China Trust Harbin Rural China Trust
Item Industry Commercial Registration Industry Security Commercial Registration
Security Fund Bank Co., ltd Co,, ltd Fund Co,,ltd Bank Co., ltd Co.,ltd
Co.,ltd
Current assets 57,542,607,971 43 14,658,919,957 40 2,570,223,530 8 I 59,951,480,880 55 I 5,531,209,830.10 2,559,183,850.0
Non-current assets 9,263,534,.302 82 32,059,419,262 83 47,951,15801 7,448,087,706.95 26,287,319,172 24 15,062,625 79
Total assets 66,806,142,274 25 46,718,339,220 23 2,618,174,688.82 67,.399,568,587.50 41,818,529,002.34 2,574,246,476 3
Current liabilities 52,095,949,707 00 42,946,028,267 71 40,077,970 07 51,471,174,067.76 38,348,919,724.19 18,957,697 84
Non-current liabilities I ,400,000,000.00 2,027,307 00 3,000,000,000,00
Total Liabilities 53,495,949,707 00 42,946,028,267 71 42,105,277 07 54,471,174,067.76 38,348,919,724.19 18,957,697.84
-103-
F-105
Balance as at 3 l/ 12/20 I 8
China Trust
Item Harbin Rural
Industry Commercial
Security Fund Bank Co., ltd
Co.,ltd
Net assets 13,310,192,567 25 3,772,310,952 52
Net asset share based 1,736,112,073.99 366,533,827.13 on shareholding ratio
Adjustment matters
Book value of equity investment in 1,736,112,073.99 366,533,827.13 associates Fair value of equity investments with oublic quotations
Operating income 4,681,163,423 82 1,263,225,148,59
Net profit 957,801,064 75 470,794,290 73
Other comprehensive income
Total comprehensive 957,801,064 75 470,794,290 73
income
Dividends from associates received by
75,000.000 00 29,700,000 00 the company in the current period
14.4 Net interest income
Project
Interest income
-Due from banks
-Loand and advances issued
Among them: individual loans and advances
company loans and advances
Interest expense
-Withdrawal of funds
Net interest income
14.5 Net Fee and Commission net Income
Project
Net Fee and Commission Income
Net commission income on trust
Net Fee and Commission expenses
-Net fee
Net Fee and Commission net Income
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Balance as at 31/12/2017
China Trust China Trust Harbin Rural China Trust
Registration Industry Security Commercial Registration
Co., ltd Fund Co.,ltd Bank Co., ltd Co., ltd
2,576,069,411.75 12,928,394,519.74 3,469,609,278.15 2,SSS,288,778.S
I02,535,647.06 ] ,686,312,328,66 343,491,318 54 101,842,959.28
I 02,535,647 06 1,686,312.328 66 343,491,318 54 IO 1,842,959.28
125, I 20,568 99 4,086,260,904.40 2,235,917,305 59 122,445,423 70
20,881,471.73 931,753,494 57 445,331,427.03 51,977,062.33
20,881,471 73 931,753,494.57 445,331,427 03 5 I ,977 ,062 33
72,000,000 00 29,700,000 00
Changes in current period Changes in previous period
337,163,077.54 370,935,039.18
216,922,540, 12 350,363,760.35
120,240,537.42 20,571,278.83
120,240,537.42 20,571,278.83
210,929,777.78 124,331,944.44
210,929,777.78 124,331,944.44
126,233,299.76 246.603.094.74
Changes in current period Changes in previous period
2,173,730,801.43 2,880,122,338.25
2,173,730,801.43 2,880, 122,338.25
2,173,730,801.43 2,880, 122,338.25
-104 -
F-106
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
14.6 Operating income, Other operating business and operating cost
Changes in current period Changes in previous period Project
Income Cost Income Cost
I. Primary operating business
income of asset management
II. Other operating business 1,471,839,750.47 I, I 00, 790,533.96
Project distribution income 1,466,780,393.33 l,095,047,841.10
others 5,059,357.14 5,742,692.86
Total l,471,839,750.47 1,100, 790.533.96
14.7. Investment Income
14. 7 .1. Investment income details.
Sources of investment income Changes in current period Changes in previous period
Gain/(Loss) from long-term equity investments in
equity method 175,794,295.29 171,195,151.95
Gain/(Loss) on disposal of long term equity investment -34,660.59
Gain/(Loss) from financial assets measured at fair value 147,857,914.93 73,394,044.37
through profit and loss for the current period
Gains on available-for-sale financial assets during the 487,570,188.29 233,763,635.17
holding period
Gains on disposal of available-for-sale financial assets 640,950.63 52,832,098.20
Others 59,284,898.64 108,599,917.82
Total 871,113,587.19 639,784,847.51
Note: The "Other" item is a dividend for the Chuangliyuan No. I Collective Fund Trust Plan.
14.8 Supplement to statement of cash flows
Item Changes in current Changes in previous
period period
I. Net profit adjusted to cash flows from operating activities
Net profit l,750,745,870.36 2,169,606,416.67
Add: provision for asset impairment
Depreciation of fixed assets, depreciation and depletion of oil and gas assets and depreciation of productive biological 8,772,119.0S 7,710,817.09 assets
Amortization of intangible assets 6,067,289.33 4,747,727.14
Amortization of long-term deferred expenses 23,482,574.87 22,758,456.71
Losses on disposal of fixed assets, intangible assets and -897,797.18 -298,910.57
other long-tenn assets("-" for gains)
Losses on write-down of fixed assets("-" for gains) 405,726.05
Losses from changes in fair value("-" for gains)
-105-
F-107
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Item Changes in current Changes in previous oeriod oeriod
Financial expenses("-" for income) -215,351.07 351,845.82
Investments losses("·" for gains) -23S,044,S33.34 -279,79S,069.77
Decreases in the deferred tax assets("-" for increases) 39,591,112.40 17,319,503.91
Increases in the deferred tax liabilities("-" for decreases) 2,712,026.98
Decreases in inventories("-" for increases)
Decreases in operating receivables("-" for increases) 511,669,477.23 -5, 752,205,936.79
Increases in operating payables("·" for decreases) 1,5S I ,S81,819.26 565,465,278.83
Others
Net cash flows from operating activities 3,658,870,333.94 -3,244,339,870.96
2. Significant investing and financing activities not involving cash inflow and outflow --
Conversion of debt into capital
Convertible corporate bonds maturing within one year
Fixed assets acquired under financial lease
3. Net change in cash and cash equivalents --Cash as at 31/12/2018 I 0, 122,381,489.80 6,106,194,939.39
Less: cash as at 1/1/2018 6,106,194,939.39 8,439,764,548.45
Add: cash equivalents as at 31/12/2018
Less: cash equivalents as at l/I/2018
Net increase in cash and cash equivalents 4,016,186,550.41 -2,333,569,609.06
15.Additional materials
15.1 Details of non-recurring gains and losses of the currrent period
Details of non-recurring gains and losses Amount Description
i. Gains and losses from disposal of non-current assets, including the written-off part in the 589,888.63
provision for impairment of assets
ii. Ultra vires approval, or without formal approval, or occasionally tax returns and deductions
iii. Government subsidy ecognized in profit loss of current period, except for the continuous
fixed amount government subsidies closely related to the Company's normal operations 8,805,764.53
according to the government's policies and standards
iv. Fees for possession of capital charged on non-financial institutions that is recognized in profit
and loss of current period
v. Gains created when the Company acquires subsidiaries.joint ventures or affiliated enterprises,
the amount of investment cost is less than the interest in the acquiree's recognizable net assets'
fair value
vi. Gains and losses from exchange of non-monetary assets
-106 -
F-108
Zhongrong International Trust Company Limited Notes to the Financial Statements
For the year ended 31 December 2018
Details of non-recurring gains and losses Amount Description
Vii Gains and losses from entrusting other parties to invest or manage assets
viii. Provision for impairment of assets due to force majeure, such as natural disaster
ix. Gains and losses from debt restructuring
x. Corporate restructuring expenses, such as expenses on placement of employees, and
integration
xi. Gains and losses from the surplus of the fair value in trading showed by the trading price
xii. Net gains and losses of current period from business combination under common control
from the beginningof period to the date of combination
xiii. Gains and losses from events not related to the Company's normal operation or
contingencies
xiv. Gains and losses from fair value changes caused by holding held-for-trading financial assets
and liabilities, as well as disposal of held-for-trading financial assets and liabilitiesand
available-foMale financial assets, apart from effective hedging businesse rselevant to the
Company's normal operations
xv. Reverse of provision for impairment of accounts receivable on which bad debt reserve is
individually accrued
xvi. Gains and losses from external entrusted loans
xvii. Gains and losses from fair value changes of investment properties which are subsequently
measured using fair value model
xviii. Influences on gains and losses of current period by one-time adjustment on profitand loss
of current period required by tax and accounting laws and regualtions
xix. Management fees from entrusted operations
xx. Non-operating income and expenses other than above mentioned items 6,397,413.66
xxi. Other gains and losses in accordance with the standards of non-recurring gains and losses 9,401 ,197.45
Total non-recurring gains and losses 25,194,264.27
Less: Influences from income tax 3,549,729.62
Non-recurring gains and losses after removing influences from income tax 21,644,534.65
Incl.: Non recurring gains and losses attributable to parent company's interest 16,580,536.39
Non-recurring gains and losses attributable to minority shareholders 5,063,998.26
15.2 As for the non-recurring gains and losses accounts defined by the Company according
"Explanatory Announcement No. 1 on lnfonnation Disclosure for Companies Offering Their
Securities to the Public" and the non-recurring gains and losses accounts listed in "Explanatory
Announcement No. I on Information Disclosure for Companies Offering Their Securities to the
Public" but defined as recurrent gains and losses, the reasons are explained as follows:
-107-
F-109
Account Amount involved
Zhongrong International Trust Company limited Notes to the Financial Statements
For the year ended 31 December 2018
Reason
Investment income 972,521,957.94 The Company considers financial assets investment
business as a major operating activity
16.Approval of financial statements
The company's financial report is approved by the director.
-108-
Zhongrong International Trust Co., Ltd
March 20, 2019
(�l WUYIGE Certified Public Accountants.LLP ��Jirrµi/ii'iJEIK�ifM!f 1 % 15/F, Xueyuan International Tower �it/t!El,,f,:;/;:/Jl 15 Fi/; No.1 Zhichun Road, Haidian Dist. ilJ�tlli 100083 Beijing, China, 100083
Auditor's Report
11! it Telephone, +86 < 10) 82330558 1t a Fax: +86 < 10) 82327668 iiXHJ!: Internet, www.daxincpa.corn.cn
DAXIN SHEN ZI [2018] No. 1-00734
To the Shareholders of Zhongrong International Trust Co., Ltd:
I. Opinion
We have audited the financial statements of Zhongrong International Trust Co., Ltd (hereafter
referred to as "the Company"), which comprise the consolidated and the Company's balance sheets
as at December 31, 2017, the consolidated and the Company's statements of income, the
consolidated and the Company's statements of cash flows and the consolidated and the Company's
statements of changes in equity for the year then ended, and notes to the financial statements.
In our opinion, the accompanying financial statements give a true and fair view of the financial
position of the Company as at December 31, 2017, and of its financial performance and cash flows
for the year then ended in accordance with Accounting Standards for Business Enterprises.
II.Basis for Opinion
We conducted our audit in accordance with Chinese Certified Public Accountants Auditing
Standards. Our responsibilities under those standards are further described in the Auditor's
Responsibilities for the Audit of the Financial Statements section of our report. We are independent
of the Company in accordance with the Code of Ethics for Chinese Certified Public Accountants and
have fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
III. Responsibilities of the Dir ectors and Those Charged with Governance for the Financial
Statements
The directors of the Company are responsible for the preparation of financial statements that give a
true and fair view in accordance with Accounting Standards for Business Enterprises, and for such
internal control as the directors determine is necessary to enable the preparation of the financial
statements that are free from material misstatement, whether due to fraud or error.
- 1-
F-110
F-111
WUYIGE Cer1ified Public Accountanls.LlP ~tllfiliil!J~ ra'.nil/Hi! 1 -I} 15/F, Xueyuan lnlematlonal Tower ,;i,J;olll!ij:*lli 15 /;'; No. 1 Zhichun Road, Haldlan Dist llill~ 100083 Beijing, China. 100083
rt! ii5 Telegoone, +86 < 10 l 82330558 iOtFax, +86 C10l 82327668 l<ilJJI: lnlemel, www,daxincpa,oom,cn
In preparing the financial statements, the directors are responsible for assessing the Company's
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the
Company or to cease operations or have no realistic alternative but to do so.
Those charged with governance arc responsible for overseeing the Company's financial reporting
process,
IV. Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report
that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements,
As part of an audit in accordance with auditing standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
A. Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
B. Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control.
C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
D. Conclude on the appropriateness of the directors' use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty e,dsts related to events or
-2-
F-112
'NUYIGE Certified Publie Accountants.LLP ~t :f.filil/ll~IH:!l'Yl'l! 1 f} 15/F, Xueyuan lntematlonal Tower ~F.i<illilr-JCL!i 15 ~ No. 1 Zhichun Road, Haidian Dist. illl!!il 100083 Beijing, China, 100083
rt!i.ti Telephooe, +86 ( 10> 82330558 Wll Fax, +86 (to> 82327668 iqJt Internet, www.daxincpa.com,cn
conditions that may cast significant doubt on the Company's ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor' s report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
E. Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
F, Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
WUYIGE COUNT ANTS LLP.
. 3.
Certified Public Accountant o
(Engagement partner)
Certified Public Account
F-113
Consolidated Balance Sheet
Prepared by, Zhongrong International Trust Co.,Ltd 31-Dec-l7 Unit: RMB Yuan
hem Note As al 31/12/2017 As al 1/1/2017
Assets:
Cash a t bank and on hand 8.1 9,031,278,954.43 11, I 00, 175,309.54
Deposit Reservation for Ra lance 8.2 845.454.55
Financial assets measured al fair value through profit or loss 8.3 4, 752.129,8 I 8.02 4.086,5 14.116.4 1
for the current penod
Derivative financial assets
Notes receivable
Accounts receivable 8.4 168,304, 186.08 2 11,359,36 I. I(
Prepayments 8.5 277,474.30
Interest receivable 8.6 49,805,585.60 38,653,417.9'
Dividends receivable 8.7 55, 161.595.1!
Other receivables 8.8 173,95 1,902.68 580,723,657 .9(
Financial assets purchased under resale agreements 8.9 38,000.000.00 I 0,000,000.0(
Inventories 8.10 34,039.85
Held-for-sale assets ./' Loans and advances 10 customers 8.11 3,544,o5:t n 0 .o I~ 700,000.000.0(
Available-for-sale financial assets 8.12 8.115.691.430.p Y .. X 6,027,738,263.73
Non-current assets due within one year ' ,\~ Held-to-maturity investments ~ ..:¢X Long-term receivables Vr~ Long-tenn equity investments 8.13 2, 146,752,079.42 '\t",ff,l'0\008, 100.3! ., Investment property '\.~~-Fixed assets 8.14 21,820,448.04
y ~ 312J 91, 77
Construction in process '\'..~ Construction materials
Disposal of property, plant and equipment
Intangible assets 8.15 52.555.569.17 37.659,773.2S
Development expenditures 287.819.71
Goodwill 8.16 23.947.504.99
Long-term deferred expenses 8.17 23.946,211.63 38,7 13,670.31
Deferred lax assets 8.18 632.615.941.08 634, 195,455.4~
Other assets 8.19 11. 997 .830.36
Total of assets 28. 788,295,028.74 25,651.245.213. IC
Legal representativeLegal: Person in charge or accounting function: Person in charge of accounting :
- ,1 -
F-114
Consolidated Balance Sheet ( Continued) Prepared by, Zhongrong International Trust Co.,Ltd 31-Dec-17 Unit, RMB Yuan
hem Note Asat31/1212017 Asat 1/1/2017
Liabilities:
Short-tenn loans 8.20 344,422,050.0(
Placements fonn banks and other financial institutions 8.21 2,000,000,000.00 1,300,000.000.0C
Financial liabilities measured at fair value through profit or loss for the current period
Derivative financial liabilities
Notes payatlc
Accounts payable 8.22 62.893.808.85 11.983.193. 75
Advances from customers 823 51 ,401 ,696.60 31 ,157,205.51
Financial assets sold under repurchase agreements
Fees and commissions payable
Employee bcnefits payable 8.24 2.484,098.786.97 2.322.024,819.3]
Taxes and surcharges payable 8.25 359,647,875.25 649,811 ,872.81
Interest payable 8.26 15,020,166.28 15,104,452.72
Dividends payable 8.27 1,200.000.000.0(
Other payables 8.28 96.683.820.35 281,555.085.6"
Held-for-sale liabilities
Non-current liabilities due within one year 8.29 1.467,943.494.48 . Long-tenn loans L k\. Bonds payable 8.30 3,255,369,704\ 8 ~'~\. 4,990,614,182.88
Other long-tenn payables ~»\. Long-tcnn employee benefits payable 8.31 425,342,698.02 \:~:\. 510,392.911.0'
Specific pa)ables \.-~, Provisions Y~\ Deferred income ,~ Deferred ta~ I iabilities 8.18 29, 746.250.00 ,$.). Other liabilities ,~~-i '
Total oflinbilitics 10,248.148,301.48 11,~.Qj>J 7\7'
Equity: \.Li .. J~
Paid-in capi1al (or Share capital) 8.32 12.000.000.000.00 6.ooo,oo\60'<i.o(
Other equil} instruments
Capital reserve 8.33 236.423,868.22 234.521.087.4l
Other comprehensive income 8.51 167,940.680.43 100.003.674.Sl
lncluding:Foreign currency translation differences 7,169,637.11 18,4 16,998.71
Surplus reserve 8.34 1.521.491. 740.03 1,304,531 ,098.3(
General risk reserve 8.35 1.092,899.624.72 821,030.868.5<
Retained earnings 8.36 1.953.539,632.41 4.800,581 .900.7;
Equity nttribulable to pnrcnt company I 6,972,295,545.8 I 13,260.668.629.7?
Minority interests 1,567,851.181.45 733,5 I 0,809.62
Tola! equity 18.540.146,727.26 13,994.179,439.35
Tola I liabililics an~ equily 28,788.295,028.74 25.651 ,245,213. IO
Legal representative legal: Person in charge ofaccountmg function: Person in charge of accounting :
- 3 -
F-115
Balance Sheet
Prepared by, Zbongrong International Trust Co .. Ltd 31-Dec-17 Unit, RMB Yuan
Item Note As at 31/12/2017 Asatl/1/2017
Assets:
Cash at bank and on hand 6, I 06.194.939.39 8,439.764,548.4'
Deposit Reservation for Balance
Financial assets measured at fair value through profit or loss 2,923,057,654.2 I 2,658,525,081.24
for the current period
Derivative financial assets
Notes receivable
Accounts receivable 14.1 49.894,201.20 111,418,253.8!
Prepayments
Interest receivable 28,340,087.29 25,800,617 .6(
Dividends receivable 55,161,595.11
Other receivables 14.2 114,624,425.05 71 ,325,557.51
Financial assets purchased under resale agreements
Inventories ~\
Held-for-sale assets ,~ ~ Loans and advances 10 customers 1,500,000,00~ ?'~ Available-for-sale financial assets 4,503,987,523.31 \"",#~ 479, 107,8 13.61
Non-current assets due "•thin one year ,~, Held-to-maturity investments \~\ Long-term receivables \.~~\. Long-tem1 equity investments 14.3 5.088,959.984.07 \.~ 20.669.051.3!
Investment property ' qcj) Fixed assets 13,429,733.0 I ¼ so, 114.04
Construction in process
Disposal of property, plant and equipment
Intangible assets 41,548.194.52 32,757.142.2,
Development expenditures
Goodwill
Long-tenn deferred expenses 15.657.444.95 33.050.859.83
Deferred tax assets 603,824,789.37 617,71 1,686.2,
Other assets
Totnl of assets 20,989,518.976.37 18.562.842.321.3,
Legal representativeLegal, Person in charge of accounting function: Person in charge of accounting:
- 6 -
F-116
Balance Sheet (Continued)
Prepared by: Zhongrong International Trust Co.,Ltd 31-Dec-17 Unit: RMB Yuan
Item Note Asat3l/12/2017 As at I/112017
Liabilities:
Short•lcrm loal\3
Placements fonn banks and other financial institutions 2.000,000.000.00 1,300.000,000.0(
Financial liabilities measured at fair value through profit or loss for the current period
Derivative financial liabilities
Notes payable
Accounts payable
Advances from customers 12,290,122.58 17,107,474.02
Financial aisets sold under repurchase agreements
Fees and commissions payable
Employee benefits payable 2.345.089.391.85 2.139,783,544.5
Taxes and mrcharges payable 307.836,515.62 5S4.510.062.3t
I merest payable 5,026,666.66 3,226.666.6(
Dividends payable 1,200,000,000.0(
Other payables 22,246,974.28 27 .346.431.52
Meld-for-sale liabilities
Non-current liabilities due within one year i..
Long-tenn loans ~/ :..\. Bonds payable XS ~~\ Other long~cnn payables
, ~..x-Long-tenn employee benefits payable 42S.342,698.02 ,~~, S10.392.911.0
Specific payables '\~\. Provisions \~_, Deferred ta< liabilities \ '4<\ Other liabilities \.~"to\.
Total oflinbilities 5,117,832,369.01 V'~ ,090.11
Equity: \-e>~\. Paid-in capital (or Share capital) 12,000.000.000.00 6"~~ • .J.~ .
' ,.. -Other equity instruments V
Capital reser"c 236.239,848.81 234,337,068.0
Other comprehensive income 12.649,219.90 22.947.04 I.~
lncluding:Foreign currency tr:rnsla11on differences
Surplus reserve 1,521 ,491.740.03 1,304,531 ,098.3(
General risl reserve 1.092,899.624.72 821.030.868.5•
Re1aincd earnings 1.008.406.173.90 4.427.629, I 55.01
Equily allributable to pare,11 company I 5,871,686.607 .36 12,810,475,231.14
Minority ir.terests
Tolal equily I S.871.686,607.36 12.810,475,231.14
Tolnl liabililics and equity 20,989.518.976.37 18.562,842.321.32
Legal representati"eLegal, Person in cho.rge of accounting func1ion: Person in charge of accounting :
- 7 -
F-117
Consolidated Statement of Income Prepared by, Zhongrong International Trust Co.,Ltd Forthcycarcnded3I Deccmber'.1017 Unit, RMB Yuan
Item Nole Year ended 31/1212017 Year ended 31112/2016
I .Total operating income 6,533,003,923.94 6.796,554,337 .OS
Net interest income 315,808.649.53 153,808,410.9
Interest income 8.37 440,140,593.97 203, 723,549.8(
Interest expenses 8.37 124,331,944.44 49,915,138.8,
Net fee and commission income 3,074.460,289.86 3,958,391,779.71
Fee and commission income 8.38 3,074.460,289.86 3,958,391,779.71
Fee and commission expenses
Operating income 8.39 587.785,8 15.50 954,04l,915.4t
Investment income("-" for loss) 8.40 1,380.008,447.58 533.575,306. It
Including: Investment income from associates and joint ventures 171,698,636.69 165,653,295.8'
Gain from fair value changes("·" for loss) 8.41 • 1 ,973.390.31 16.220,745.54
Foreign exchange gains("·" for loss) 8.42 -351,845.82 474.350.2,
Other operating income 8.39 I, 174,719,939.39 I, 179.617,286.64
Gains from disposal of assets("·" for loss) 8.46 476,418.21 424,542.31
Otl,er income 8.47 2,069,600.00
2.Total operating costs 2,917.741.940.27 3,421,169,147.62
Business tax and surcharge 8.43 40,310,868.77 I 18.835,852.4"
Operation and administrative expenses 8.44 2,856.932,530.57 3,289.657, 7 I 8.84
Losses of assets impairment 8.45 20,335.251.99 12,624,255.6(
Other operating cost 8.39 163,288.94 51,320.7'
3.Operating profits("-" for loss) 3,6 15-261.983.67 \ 3,375,385, l 89.4f
Add: Non-operating income 8.48 16,213.932.14 \ 157,698,859.33
Less:Non-operaling expenses 8.49 I 0.724,540.77 '.,\ 8.418,043.23
4.Profit before tax("-" for loss) 3,620,751.375.04 ::,".Ai \ 3,524,666,005.5f
Less: income tax expenses 8.50 815,369,042.07 \~,\Xi ~\. 820,653,559.9~
5.Nct profit("-" for net loss) 2,805,382,332.97 \# ' 2,704,012,445.5,
Net profit auributable lo parent company 2,747,369.279.87 \ ~ \ 2.63 l ,390.374.4f
Profit/loss attributable to minority share-holders 58,013,053.10 \r ...t.c\. 72,622,071.1 1
Profit or loss from continuing operations 2,805,382.332.97 , a x 104.o 12,445.51
Profit or loss from discontinued operations ,~~-.\ 6.Olher comprehensive income net of tax 68.555,358.48 \ 'W-58,570,745,2~
( t) Comprehensive income not 10 be reclassified as profil or loss \_Y_&?\ !)Changes in remeasured defined benefit obligations or net assets \_'....// 2)Portion of comprehensive income not to be reclassified as profit or loss ..... under eouitv method (2) Comprehensive income to be reclassified as profit or loss 67,937,005.85 56.22,1,548.5~
I) Portion of comprehensive income to be reclassified as profil or loss under eauitv method 2)Gain or loss from fair value changes of available-for-sale financial assets 79,184,367.46 40,063.497.54 3) Gain or loss from reclassification of held-to-maturity investments as available,.for-salc financial assets 4) Guin or loss on effective cash now hedging
5) Currency translation difference -I 1.247.361.6 l 16,161,051.0"
Other comprehensive income anributable to minori1y share-holders. ne1 of 1a~ 618,352.63 2,346, 196.7C
7.Total comprehcnsi,re income 2,873,937.691.45 2,762,583, l 90.8f
Total comprehensive income allribuiable to parent company 2.815,306,285. 72 2.687,614.923.05
• To1al comprehensive income auributable 10 mfnoriiy share,.hotders 58.631,405.73 74,968.267.81
8. Earnings per share
(I) Basic earnings per slurc
(2) Diluted earnin.(lS per share
Legal n,prescntativelcgal: Person in charge of accounting function: Person in charge ofaccoun1ir1g :
- 8 -
F-118
Statement of Income Prepared by: Zhongrong International Trust Co .. Lld For theyearended3I Dccember2017 Unit: RMB Yuan
11cm Note Year ended 3i/1212017 Ycarended 31/12/2016
I .Total operating income 4,867,425,386,85 5,523.422,492.9(
Net interest income 245,603,094.74 138,846,405.8 I
I ntcrest income 14,4 370,935,039.18 188,761,544.74
Interest expenses 124,331,944.44 49,915, 138.8
Net fee and commission income 2,880, 122,338.25 3,774,414,525.8!
Fee and commission income 14,S 2,88), 122,338.25 3,774,414,525.8!
Fee ond commission expenses
Operating income
lnvcsuncnt income(•-• for loss) 14.7 639,784,847.51 480,116,920.74
Gain from fair value changes("-" for loss)
Foreign exchange gains("-" for loss) -351,845.82 474,350.2
Other operating inco:ne 14.6 I, IOl,790.533.96 1, 129,145,747.8,
Gains from disposal ofasselS(•-• for loss) 476,418.2 1 424,542.3
Other income
2. Total operating costs 2,050,810,042.97 2,584,787,253.3(
Business ta, and surcharge 35,170,575.02 101,297,686.0(
Operation and administrative expenses 2,015,639,467.95 2,483,489,567.2'
Losses of asse-ts impairment
Other operating cost
3.0pemting profits(•-• for loss) 2,816,615,343,88 2,938,635,239,6(
Add: Non-opemling income 4, 15~6\: 125,976,509.01
Less:Non-operating expenses 7,it$;il .1,i 7,168,925.1'
4.Profit before tax("-" for loss) 2,812,98~ 3 ~ ·\ 3.057,442,823.5
Lcss:incomc tox cxptnses 643,374,3) .li I?'\. 692,727,471.9(
5.Nct profit("-" for net loss) 2, 169,606,4 I 6'.\) ?Pl,~ 2,364.715,351.6'
Net profit attributable 10 parent company 2,169,606.4 16.6 ~~~\. 2,364,715,351.6'
Profit/loss attributable to minority share-holders ,-~"' Profit or loss from continuing operations 2, 169,606,416.67 ,- ,,.-_\. 2,364.715,351.6,
Profit or loss from discontinued operations \~~\. 6.0ther comprehensive income ncl of tax - 10,297,821.19 v,:~\. 23,079,294.8,
( I) Comprehensive income not lo be reclassified as profit or loss ~ !)Changes in remeasured defined benefit obligations or net assets ,~~, 2)Portion of comprehensive income not to be reclassified as profit or loss \7_)..) under couitv method (2) Comprehensive income to be reclassified as profit or loss -10,297,821.19 .... 23.079,294,8:
I) Ponion of comprehensive income to be reclassified as profit or loss under couitv method 2) Gain or Joss from fair value changes of available-for-sale financial assets -10.297,821.19 23.079.294,S:
3) Gain or loss from rcclassificalion of held-to-maturity investments as available-for-sale financial assets 4) Gain or loss on effective cash now hedging
5) Currency translation difference
7.Total comprehensive income 2,159,308,595.48 2,387,794,646.4'
Total comprehensive income attributable to parent company 2.159.308,595.48 2,387.794.646,4'
• To1al comprehensive income attributable 10 minority share-holders
8.Eamings per share
(I) Basic earnings per share
(2) Diluted earnings per share
Legal rcprescntativeLegal: Person in charge ofaccounting function: Person in charge of accounting :
- 9 -
F-119
Consolidated Statement of Cash Flows Pttp.trcd by, ZhongtQrlg ln1em111ion11I Trust Co,.Ltd for the )'C.!lr cndtd 31 Dt,ccmbtr 2017 Uni1: RMB Ywin
Item N~c Year C'ftdcd ) l /12/?0l7 Yctu'a,dedll/12/2016
I .Cash Oows from op,et"311ns ac:11v11ies
CASh rec-c1\-ed fro., s:,Jcs .ind S,ffi,•iees 618,S74.82\l.5 I 928,96S,86S, I'
6 Net inercasc 1n custimer depoJilS and deposits and deposits from banks ;,nd o1het" financ1:lt ins111utioos
6 Net incre:;isc in loans rrom the ccn1ral lxtnk
6Ncl inuca.sc in placemcols from other fin~ci<1l m.i.titulion•
6CllSh rc«i\"td from prm,iums of original insurance 0001rnc1~
6Nct cash received rrom reinsurantc busineu
A Nert incre:tR in dC!l)Os.it.s l"rom policyholders
6Ne1 incn!3SC in (disposal of) ftnoncial assets me3Sured :11 fai.r value 1hrough profit nnd 2.,368,!)1 1, t.lS 4J
loss
.6.Nc1 increase 1n (d1spos.,J o() available ior sa:lc fin:mc111I assets
fl Cash received !Tom lntcresi ,fees and oomminions 4,7!9,979 ,.,960 S,SS4,80.0,S3S 11
.6Nc.t incre:asc in plDCffllcnls rrom bank:$ and other linilflcial in5titu11ons 7(0,000.000.00 -400,000.000,0<
6.Nct incre.uc in rcpurch:u.c: buJUICSS cap11al
Taxes and surcharges refunds
Cash received rcl:ucd to other opcraung 3Cti\'itics 2.2~7.747.874 16 77),020,330,6<
Total casfl innov.'S from opera1ing acti\·i1ics 8~-126,)01,933 27 9,·ns.701.s76-4
Cash p.Ud for gooJs and services 127.956.l:.'! 544,3300<
ANct. incr-C3SC in lo.ins and advances to customCf'S :?,94S.238,080,91 700.000.000,0<
6Ne1 incfeMC ,n dcposi1s wi1h cenu.i.l b3Rk .vid other financial insiitulions.
.0.Cnh paid for o."'lginal inwrnncc conttatl claum:
.0.Nct inctCMC in (d1spos:il of) financial llSSC:lS fflC3Surcd 31 fair \'aluc throu~ pn>lil :ind S18.262.6J8.28
loss
ANc:1 inc~ in (dis.pos:il of) available fOI J;3]c financial as.sd$ l,~J7,738,90S,32 J,S05.373,95l.7S
0. Cash pa.id for i,'1C.rcst .fee:$ alld com.missions IJ~,)06,S4961 52,880,02? 7!
6Cash J)Wd for policyholder dividend CKJ>CfUCS
CIWI p:;nd to and for cmp,Oyces l ,9J9,S~ 4 20 ?.213,876,87:.'!.)3
Ta.us and surchar;cs etih payments u!f!;ql ,10'\p I, I Sl,608,720.S<
Ca.sh plld rdaicd to othtt opttruing ::1c1iviliC$ 2,4cl\.7~'9•.7! 979,139,4'9.Sl
Total c;uh out nows from opcraling DC11\'itics 10.n9;.,.-1.:ii..'ii9 \. S.60S.-l:?7.3S~ 31
Net ca.sh nows from opmalins activitu:s 8.S2 -2.m,s~ -' 620.?74.S24 11
2,Cash nows from in\es;un.s ac,1ivi1ies1 , ... ;.;> '\.
CllSll rcceh·ed froin wilhdr:,,w of investments 48,8$7,371 ~ :,J/9'. -" 19,000,000.00
Cash recci,·cd f1oin invc:unicnt moome 159,658,158.69 ~-:>' ~ \. 00,917.679.79
Net cash received from disposal of\propcrt)·. plMI nod cquipcme,u.inw,g1blc ;u5CU, and SSl.708,00 ~~ 1,030,416,69 Olhtr lonl!•tcrm w:st:tS
Net cuh received from dispoial ofsubs1ditmcs and other business units I ,Ol!6,56S,057.49 \.'~'\. 7,S94,08l,ll
CIWI received related to other im•esting :,,c-1iv11ics 19,603,443 43 ,-~, Tot:d ca$11 inflows (rom in\·C$1lng actl\·itics l ,J IS,237 ,738,72 ,~ '\. 68,542,177.70
Cash pmid for property. plmnt and tqu1pcmcnl,mt11ngiblc ~ts and 01hcr long-term 1S,19-1,1268J '\. ?-~ .I 16,1518S =•
Cash payment$ fo, in~,e11.mc,us 24J80,J4Z.J0 '\. v ·..m.:~u.919.01
/j. Nc1 incrc.:uc in pledge loans \.-,. J ~ Net Cash paid for3cquisition of subsiduvi~ a:nd other business umlS ~®,87l,S-12,.29 '"..,. Cash pilld related to other im•cstin.s, activities 34.908, 140,98 28,128,670 9!
Total cash ou10ows from mvcsting activi1ics 384.3S4,IS2M 466,864.347.81
NM ,en~>, nt1,~ rmm in\•~1ine ~j\+i1ie~ 9J0,883.S&6 12 -198.122.170 11
3 C'~h nows rrom lirunc-ing 11et1\•i1ics
Cash ,cee1ved from irwestmcnt.s by otM'f.s 2.rn.sos.s19 63 2S0,4M,684,S(
lnel1.1ding;c;uh received by s.ubsid14fics from minority shareholders' in\·dtmcnt.s .tSl,SOS.879.61 250,40,,684,S(
Cash l'C'CCt\'cd from borrowings 1,216,162.4<
.D.Cmh rce<:ivcd i.n lhc iSSUllnC'cO(bonds J.llS,600.0000<
Cztih rccci\'cd ref:icd 10 olhcr fin:incmgactiviucs
Total ash inflows from lin11ne1ni; isc1i\•111cs '.?, .. 51,SOS,879 63 l,567,1? 1.--146.9(
Cash ttp.iymeins bt debts Hl.OJ),SSS.00
Cash payments fo1 dis.tribution or dividends, profit and interest t..'(pcnses ~.646,558,666,46 Sl5,::!S8,J84.:?:
lncluding~dh•idtnds or pror., p:ud by subsidiaries 10 minority shareholders .!l,J..ll,87S_2S ], 14:?,659.27
C3Sh paid ,elated 10 other fini,.nci n& ac1i\•i1ies l,HS,OS I.SS
To1:1I cnsh ou10ows from finilnems. :,ctn itics 2.900,)27.603.J I SIS,258.384.27
Net cash no\,'S from linancins actl\itics -5.38.521.72368 3,0Sl,963,062,61
4 EtTca of forrign e.xchang.c r:,,1c c.h:angc-s on c~ .ind c3Sh cqu,valems .97 .658.368 SJ 92,IOS,70S.8!
S. Ne1 i:nt:re:uc in cast- nnd cash equiv.ilent.s S.S? •2.068.S96.JSS. I I J.J66,021.1225i
Add.~i.nning balance of cash and ca.sh cqu1valttUs I l,I00.11S,l09 54 7,lH,IS,.18691
6.End1ng. bafancc or «1Sh and e3:5h cqulvalcn1s. 8.52 9.0ll.27S.9S•.43 II ,l00,l 1S,l09,5<
l.cgisl rep,cscntMl\'CLqµllr Pason 1n charge o( accouming funcr,on.
- 10 -
F-120
Statement of Cash Flows Prep.lied by: ZhMJg'OOS lntcmmuonal Tru~ Co ,Ltd For the year ended) I Dc«-mbcr 2017 Unill RMB Y1.1~n
llom Note Year ended l J/12/?017 Yr:ucndcd )l/12/W16
I.Cash flows from opcr.lllng 11cuvi11cs
Cash rcee1,'Cd (rem sales and sc,viees 6Nct incrc.1SC in eus.timer deposits and dcposils :;md dcpo$ils irom ban~s 3ftd other financial insti1u1ions 6Nct increase in loans from 1hc central bank
.ONc.t i~ in placc-~t.J from other titlA!lcial i11scitu1io,u
fl Cash received from premiums of original insurance con1rac:1s
D.Nct cash rttcl\'cd from t"cinsurnncc b11$incss
6Nct increase tn depos11s i,om polieyholdcB
.6.Net incre:i.sc in (disposa.1 ot) fin:,,nei.il iuscts measured :i.1 fol.I vaJuc th.rough profit nnd 2,924.000.000 00
loss
6Nct increase ln (di5PO~I of) available for sale firumc1al aucts
.6. Ca.sh rccci"cd from interest ,(CC$ :snd commissions 4.SS0.670.0S7.29 S,340,107,038.01
6Nct incre;i$C in phlctmcnts from banks and other fimmcia.l institut ions 700.000.000,00 -400,000.00(),00
6Nct increase in rcpurch35C burnu:ss c:tp11aJ
Taxes and surcharscs refunds
Cash rccci\·ed reb.tod 10 o ther operating aciivnics 1:Jl.695.611.18 91,489,79'-68
To11!1 cash inflows. (rom opc11u1ng .ldivtt!CJ S.4Sl.l6S.668.47 7.9SS.S96.8Jl.7)
Cash p:1id for goods and scrvic.cs
b. Nel incrt=llSC in loans and ad\·:incc-s ro cus1omer5 i.;00,000.000.00
6Nct increase indepos.it5 with ccnmll bank and 01hcr financial ins1i1u1lot,;s
C:,.Cash paid for c,rig.inal iosuraru:c 00n1mctel.1.ims
ANcl increase in(disposal of) financ.u:al m:scH memurcd .1.1 fair \'aluc 1hrough profit :and 191.138.S28.60
loss
A Net incrense in(disposril of) ,1\•:til1;1bt1:: for $ale financial assets 3.761,998.148.Sl J.259.231 « fl Cash pa,d for i"lctcst. fees :ind commiu.iofls I 22,Sl 1.944.4~ S:?,S84.027, 78
L\C.uh paid for policyholder div,dcnd cxpcn$CS ~~ '" Cash p;ud 10 and for cmployees 1.SSl.091 '.\ll lj l<," 1.927, IS 1,696.81
TaxCJ 3nd s1.1rchrges cash ~meots 1.081.439.611..T! k~'\. 990,993,J-4-4 42
Cash paid rel:ucd 10 01hcr operating activi1ics 47!,l06,16S'.\; ...... ~" 400,976,069.Sl
Total CMh ou1now"S from opc:rating.act1v11ics 8.72'-70S.Sl9.4 .... .;.,s.\ 3.J7S.264.l70.04
Net cosh nows from opcrntingactivities ~).2.a4,3l9,870.96 '\,.~--:...,.\..'\. 4,SSO,JJ:?.462.71
2.C~h noW$ from inves1ins activities, '-·--...:, Co.sh received rrorn wi1hdr.i.w or IO'IC$lf11Cf11S I .S9l.OOO.OOO.OO v --~ , I l,000.000.0<
Cash rceeivcd rrcm in,·estmcn1 lncomc 269,668,Sll.02 y...-, ~' 70,237,671 23
Nc1 CASh rcca\·cd (rom disposal onpropcny. plam and cqu1pcmcn1.1nt.angiblc lllSC1S SS0,708.00 Y~\ 1.030,416.6!
and 01hcr lontt•lei-m asse1s
Net c.u.h received from disposal of subsid1t1tics and 01her buslncu units "<ii(< '\. 7,594,081.22
Ca.sh reeci,·cd rcl.ited to other 1n,·estinJJ ~ ivi1ics '\.~'P ., Total CllSh inflows from ln,<c:sting 11Ct1\-ilics l,S6S,:!t9,221 ,02 '~J,J62,169. IJ
Ca.sh paid for propt11)1. plan1 and cqu1pemc1u,in1angiblc- asscis Md otbCf long•lctm 60.097,11 J .30 \~~~7043' asscts
Cash payments for 1n,•cs.1mtnls S94,000.000.00 , .9117.~ .~ -0(
6Nc1 incrC3:SC m pledge loans '\../ Net C3Sh paid ro, acqu1s11ion of sub.sidi:vies and other bus.mess units
C.uh p3id related 10 other im·estin.g actiYitic-.s
Total cash outflows from in\'Cllins n<:1i,·it1cs 6l,,097.I IJ.30 2..984,101.704.J'J
Nd t"~<h nn~ r,nm in,.-e,uing t1e1ivi1i~ 1.21 1, 122. 107 72 •2.SlQ0,l1Q,SlS U
) .Cash nows from firuincing ac1ivi1lr$
Cuh reec1,•ed from inYCStmcnts by others l,000.000.000 00
lncluding:cash rcccivcd b)' sub~diarics from minority sh3teholdcrs' invcsunc:nlS
Cash rc«wed from borro\.\inss
.6Cash r«c1vcd il the issuance orbondl
0-sh rccci\·cd related to 01her finruicins activities
Total c:ash 1nnow1 r,om fi~cin~ tct1\•111cs 2.000.000.000 00
Cash tepaymen1s for debts
CMh payments fwdis1ribution ofdividcnd1, profit ll!ld interest C.'<pcnscs 2.300,000.000,00 J00.000.000.0C
lncluding:d1\•idcnds or profi1 paid by sub~du>.ncs 10 minority shareholders
Cesh p;i.id rc!a1rd to other fin~cins ~th•i1ies
To1.1I cash outOows from financing aicuvi1jcs l ,l00.000.000.00 300,000,000.0<
Net c:ish nows from financing ac1ivi1ics .JO(l,000.000.00 -J00,000.000.0C
.a Effect offore1gn e. ... :h:angc r:ne changes on cllh iJnd cash equ1~cn1s •lSl,3-IS.32 <74..JS0.27
S Ne1 increa$C in c-.is~ :and cash cqui\'nlcnts •2,331.569,609.06 1,390,561.277 3(
Add:begin.nmg b31ancc o( cash and cash cquivaJcn1s 8.439.76-1.l4S.4l 7.0j9.l97).70 6~
6.Enchn,s. baliintt of cash and cash equivalents 6.106.194.939.)9 8.4l9.764.S~8A5
PCfSOn 1n charse of occoun11ny.
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Zhongrong International Trust Company Limited
Zhongrong International Trust Co., Ltd Notes to financial statements
(All amounts are denominated in RMB unless otherwise stated)
1. Basic information about the company
Zhongrong International Trust Co., Ltd (hereinafter referred as "the Company") formerly known as
Harbin International Trust Investment Co., Ltd. established in 1987. In March 2002, the Company
was granted "The Approval of Capital Offering for Harbin International Trust Company" (Shen Yin
FuZi [2002] No.270) by Shenyang Branch of The People's Bank of China, and the investors of the
Company were Harbin State-owned Assets Supervision and Administration Commission, Zhongzhi
Enterprise Company Co., Ltd., Harbin Investment Company Limited, Harbin Hongda Construction
Co., Ltd., Heilongjiang Province Mudanjiang New Materials Technology Co., Ltd. and Haci
Company Limited. In April 2002, according to the requirement of "The Notice of the Scheme of
Reorganizing Trust and Investment Companies" issued by The People's Bank of China and
forwarded by General Office of the State Council (Guo Ban Fan [1999] No.12) and "The Scheme of
Further Improvement of Reorganizing Trust and Investment Companies" (Yin Fa [2000] No.389)
issued by The People's Bank of China, the Company was re-registered and renamed as Zhongrong
International Trust and Investment Co., Ltd. In June 2000, the Company obtained The License of the
Business Corporation issued by Harbin Administration of Industry and Commerce, with the
registered capital of RMB 325 million. In July 2007, the Company was renamed as Zhongrong
International Trust Co., Ltd, approved by China Banking Regulatory Commission (CBRC) with
"The Approval of Name and Business Scope Change of Zhongrong International Trustand
Investment Co., Ltd." (Yin Jian Fu [2007] No 295). In July 2010, the Company obtained "The
Approval of Change in Registered Capital and Articles of Incorporation of Zhongong International
Trust Co., Ltd" (Hei Yin Jian Fu [2010] No.339) from Heilongjiang Branch,CBRC, registered
capital has changed from RMB 325 million to RMB 580 million by transferring retained earnings
into Paid-in-capital.
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Zhongrong International Trust Company Limited
In March 2011, the Company obtained "The Approval of Change in Registered Capital and
Company Articles of Incorporation of Zhongrong International Trust Co., Ltd" (Hei Yin Jian Fu
[2011] No.75) from Heilongjiang Branch, CBRC. The registered capital increased by RMB 820
million, including the monetary capital increase of RMB 300 million from Jingwei Textile
Machinery Company Limited, Zhongzhi Enterprise Company Co., Ltd., Harbin Investment
Company Limited and Dalian Xinxing Real Estate Development Company Co., Ltd., and RMB 520
million transferred from retained earnings to Paid-in-capital according to the proportion of
shareholding. The new registered capital was RMB 1.4 billion
In October 2011, the Company obtained "The Approval of Change in Equity Stake and Registered
Capital, Adjustment of Equity Structure and Amendment of the Company Articles of Incorporation
of Zhongrong International Trust Co., Ltd" (Hei Yin Jian Fu [2011] No.447) from Heilongjiang
Branch, CBRC. The RMB107.68 million of the Company's equity held by Dalian Xinxing Real
Estate Development Company Co., Ltd. was transferred to Shengyang An Tai Da Commercial
Trading Ltd. Jingwei Textile Machinery Company Limited, Zhongzhi Enterprise Company Co., Ltd.,
Harbin Investment Company Company Limited and Shengyang An Tai Da Commercial Trading Ltd.
Increased the Company's registered capital by RMB 75 million as per their proportion of
shareholding, and the registered capital was 1.475 billion
In August 2012, the Company obtained "The Approval of Change in Equity Stake and Registered
Capital, Adjustment of Equity Structure and Amendment of the Company Articles of Incorporation
of Zhongrong International Trust Co., Ltd" (Hei Yin Jian Fu [2012] No.284) from Heilongjiang
Branch, CBRC. The Registered capital of the Company increased by RMB 12.5 million, including
the monetary capital increase of RMB 12.5million from Jingwei Textile Machinery Company
Limited, Zhongzhi Enterprise Company Co., Ltd. and Shengyang An Tai Da Commercial Trading
Ltd. who Paid-in RMB 59,697,537.50, RMB 52,550,412.50, and RMB12,752,050.00, respectively.
The registered capital was RMB1.6 billion.
In June 2014, the Company obtained "The Approval of Change in Registered Capital and Company
Articles of Incorporation of Zhongrgrong lnternational Trust Co., Ltd" (Hei Yin Jian Fu [2014]
No.148) from Heilongjiang Branch,CBRC. The registered capital increased by RMB 4.4 bion,
including RMB 1.1737 billion transferred from additional paid-in capital and RMB 3.2263 billion
transferred from retained earnings by Jingwei Textile Machinery Company Limited, Zhongzhi
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Zhongrong International Trust Company Limited
Enterprise Company Co., Ltd., Harbin Investment Company Company Limited and Shengyang An
Tai Da Commercial Trading Ltd. according to the proportion of shareholding. Until this, the
Company's registered capital is RMB 6 billion.
Capital, Adjustment of Equity Structure and Amendment of the Company Articles of Incorporation
Branch, CBRC. The registered capital of the Company increased by RMB 2million transferred from
retained earnings, including the capital increase by Jingwei Textile Machinery Company Limited,
Zhongzhi Enterprise Company Co. Ltd., Harbin Investment Comapany Limited and Shenyang An
Da Tai Commercial Trading Ltd. according to their proportion of shareholding. Until this, the
Capital, Adjustment of Equity Structure and Amendment of the Company Articles of Incorporation
of Zhong
Branch, CBRC. The registered capital of the Company increased by RMB 2million transferred from
retained earnings, including the capital increase by Jingwei Textile Machinery Company Limited,
Zhongzhi Enterprise Company Co. Ltd., Harbin Investment Comapany Limited and Shenyang An
Da Tai Commercial Trading Ltd. according to their proportion of shareholding. Until this, the
In De
Capital, Adjustment of Equity Structure and Amendment of the Company Articles of Incorporation
2) from Heilongjiang
Branch, CBRC. The registered capital of the Company increased by RMB 2 million, including the
monetary capital increase of RMB 2 million from Jingwei Textile Machinery Company Limited,
Zhongzhi Enterprise Company Co. Ltd., Harbin Investment Comapany Limited and Shenyang An
Da Tai Commercial Trading Ltd. Who paid in RMB749,395,046.88, RMB659,728,390.62,
capital is RMB 12 billion.
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Zhongrong International Trust Company Limited
ed social credit code is: 912301991270443422; registered capital is 12 billion;
legal representative is Liu Yang; term of validity: from January 15, 1993 to long term; registered
location: No.33 Songshan Road, Nangang District, Harbin.
The Company's main business scope includes: money trust; moveable property trust; real estate trust;
Securities trust; other property or property rights trust; engaging in mutual fund investment
businesses serve as an initiator of the investment fund or fund management company; operating asset
restructuring, merger and acquisition, project financing, corporate finance, financial advisory and
othe related services; entrusted securities underwriting business that is approved by the relevant
departments of the State Council; dealing with intermediary,consulting and credit investigation
businesses; safe deposit box service; utilizing self-owned assets th rough placements from banks and
other financial institutions, loans to banks and other financial institutions, loan issuance, leasing and
investing; providing guarantee for other parties using self-owned capital; engaging in issuing loans
to banks and other financial institutions; as well as other businesses that are approved by the laws
and regulations or the CBRC.
Name of the Company's parent company is Jingwei Textile Machinery Company Limited, and name
of the Company's ultimate parent company is China Hi-Tech Group Corporation.
This financial report has been approved for submission by the Company's Board of Directors.
Basis of preparation of financial statements
On the basis of going concern and transactions and events actually occurred, the Company prepares
its financial statements with the following accounting policies and accounting estimates in
accordance with the Accounting Standards for Business Enterprises basic Standards, specific
accounting standards and other relevant provisions (hereinafter collectively known as "Accounting
Standards for Business Enterprises" or "CAS")
Declaration on compliance with the Accounting Standards for Business
Enterprises
The financial statements have been prepared in compliance with the <Accounting Standards for
Business Enterprises> to truly and completely reflect the Company 1
December 2017 and its operating results, cash flows and other relevant information for the year
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ended 31 December 2017.
The company's significant accounting policies and accounting estimates
4.1 Accounting Year
The accounting year of the Company is from1January to 31 December of each calendar year.
4.2.Functional Currency
The reporting currency of the Companies is Renminbi ("RMB"), except for that subsidiaries
registered in Hong Kong use Hong Kong dollars ("HKD") and subsidiaries registered in British
Virgin Island and Cayman Islands use US dollars ("USD").
4.3 Measurement of Value
The methods for measurement of value of the Company include historical cost, replacement cost, net
realizable value, present value and fair value.
4.4 Business Combinations
4.4.1The business combinations involving entities under common control
In a business combination involving enterprises under common control, if the acquirer pays for the
business combination in cash, by transferring of non-cash assets or assuming liabilities, net assets in
the ultimate controlling party's consolidated financial statements are measured at their carrying
amounts of the acquiree at the acquisition date. If the acquirer issues equity instruments for the
business combination, the acquirer measures the share capital by the par value of the shares issued.
The difference between the original investment costs and the carrying amounts (or the total par value
of shares issued) will be adjusted to the capital reserves. If the capital reserves is insufficient to
absorb the difference, the remaining amount shall be deducted from retained earnings.
For a business combination involving enterprise under common control, which achieved in stages
enterprise shall treat transaction as a way of getting control.If the business combination does not
the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The
difference between the initial cost of the long-term equity investment and the consideration of
carrying amount previously held for the combination and consideration paid on the acquisition date
is adjusted to the capital reserve (capital premium). If the balance of the capital reserve is
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insufficient, any excess is adjusted to retained earnings.
4.4.2 Business combinations involving enterprises not under uncommon control
In a business combination involving enterprises not under common control, the combination costs
are the aggregate of the fair values of the assets paid, the liabilities incurred or assumed and the
equity instruments issued by the acquirer in exchange for control over the acquiree at the acquisition
date. At the acquisition date, the acquired assets, liabilities and contingent liabilities of the acquiree
that meet the recognition criteria are measured at their fair value. The Company shall recognize the
difference of the combination costs in excess of its interest portion in the fair value of the net
identifiable assets acquired from the acquiree as goodwill. The Company shall recognize the
difference of the combination costs less than its interest portion in the fair value of the net
identifiable assets acquired from the acquiree in the non-operating income for current period after
reassessment.
For the business combinations not under the same control realized through step by step multiple
transactions, the initial cost of long-term equity investment shall be sum of consideration of carrying
amount previously held for the combination and consideration paid on the acquisition date. As for
the equity interests that the Group holds in the acquiree before the acquiring date, they shall be
re-measured according to their fair values at the acquiring date; the positive difference between their
fair values and carrying amounts shall be recorded into the investment gains for the period including
the acquiring date. The equity hold by the acquiree which involved with the other comprehensive
income and the other owners equities changes except for the net gains and losses, other
comprehensive income and the profits distribution and other related comprehensive gains and other
owners equities which in relation to the equity interests that the Group holds in the acquiree before
the acquiring date should be transferred into the current investment income on the acquiring date,
except for the other comprehensive income occurred from the re-measurement of the net profits of
the defined benefit plans or the changes of the net assets of the investees.
We use sum of consideration of carrying amount previously held for the combination and
consideration paid on the acquisition date as the initial cost of long-term equity investment, and
compare it with the share of fair value of the identifiable net assets it obtains from the acquire as the
basis of goodwill or current profit and loss.
4.5. Preparation of Consolidated Financial Statements
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4.5.1 The scope of consolidated financial statements
The Company incorporates all its subsidiaries (including individual entities under its control) into
the scope of the consolidated financial statements, including the enterprises controlled by the
Company, divisible part in the investees and structured entities.
4.5.2 Uniform accounting policies, balance sheet date and accounting period
If the subsidiaries adopt different accounting policies or accounting period compared with those of
the Company, the Company shall make necessary adjustments on the subsidiaries' financial
statements according to its accounting policies or accounting period when the consolidated financial
statements are prepared.
If any transaction or event occurred overseas of a subsidiary company outside China that is outside
China due to restrictions in laws and regulations, or does not exist within the territory, or if the
transaction is not common, and if the accounting standards of the company fail to regulate, the
overseas subsidiary may have already performed the accounting treatment. In accordance with the
principle of the basic principles, after adjusting in accordance with international financial reporting
standards, it will be incorporated into the related items of the consolidated financial statements of the
domestic parent company.
4.5.3 The elimination in the preparation of consolidated financial statements
The consolidated financial statements are prepared based on the individual financial statements of
the Company and its subsidiaries, after elimination of the transactions incurred among the Company
and the subsidiaries. Company is
treated as minority interests and presented in the consolidated balance sheet within equity. The
equity investment of the Company held by one subsidiary shall be treated as the Company's treasury
shares and a deduction of the shareholders' equity which is presented as "less: treasury shares" in the
consolidated balance sheet within equity.
4.5.4 The accounting treatment for obtaining subsidiaries through a business combination
Where a subsidiary or business has been acquired through a business combination involving
enterprises under common control in the reporting period, the obtained subsidiary or business is
deemed to be included in the consolidated financial statements from the date they are controlled by
the ultimate controlling party. Their assets, liabilities, operating results and cash flows are included
in the consolidated financial statements from the beginning of the accounting period in which the
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acquisition occurred. Where a subsidiary or business has been acquired through a business
combination not involving enterprises under common control, their individual financial statements
are adjusted based on the fair value of identifiable net assets at the acquisition date when preparing
the consolidated financial statements.
4.6 Joint arrangement classification and accounting treatments
4.6.1The classification of joint arrangement
Joint arrangements are classified as joint operations or joint ventures. A joint arrangement will be
classified as joint operation when the joint arrangement achieves not through an individual entity.
Individual entity is an entity with individual identifiable finance structure, including single legal
entity and entity unqualified as legal entity but qualified as lawful entity. A joint arrangement is
usually be classified as joint venture when the joint arrangement achieves through incorporating an
individual entity. When changes arising from relevant events or environment cause changes of the
cooperative parties' rights and obligations in the joint arrangements, the cooperative parties shall
reassess the classification of the joint arrangements.
4.6.2The accounting treatment of joint operations
The party participating in joint operations shall recognize the following items relating to its interests
in the joint operations and account for them in accordance with related requirements of Accounting
Standards for Business Enterprises: a) Its solely-held assets and solely-assumed liabilities, and b) Its
share of any assets and liabilities held jointly; c) Its revenue from the sale of its share of the output
arising from the joint operation; d) Its share of the revenue from the sale of the output by the joint
operation; e) Its own expenses; and f) Its share of any expenses incurred jointly.
The other parties involving in joint operations without common control power shall account for their
investments referring to the treatment method of joint operation participants if they are entitled to
relevant assets and undertake relevant liabilities of the joint operations, otherwise, they shall account
for their investments according to related requirements of Accounting Standards for Business
Enterprises.
4.6.3The accounting treatment of joint ventures
The parties participating in a joint venture account for its investment in accordance with Accounting
Standards for Business Enterprises No.2 - Long-term Equity Investment. And the other parties
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involving in joint ventures without common control power shall account for their investments
according to their influence extent on the joint ventures.
4.7 Cash and cash equivalents
The cash in the Company's statement of cash flows is cash on hand and deposits that can be readily
drawn on demand. Cash equivalents in the statement of cash flows are short-term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of change in value.
4.8 Foreign Currency Business and Foreign Currency Translation
4.8.1 Foreign currency business translation
The approximate shot exchange rate on the transaction date is adopted and translated as RMB
amount when the foreign currency transaction is initially recognized. On the balance sheet date, the
monetary items of foreign currency are translated as per the shot exchange rate on the balance sheet
date, the foreign exchange conversion gap due to the exchange rate, except for the balance of
exchange conversion arising from special foreign currency borrowings capitals and interests for the
purchase and construction of qualified capitalization assets, shall be recorded into the profits and
losses of the current period. The non-monetary items of foreign currency measured at the historical
cost shall still be translated at the spot exchange rate on the transaction date, of which the RMB
amount shall not be changed. The non-monetary items of foreign currency measured at the fair value
shall be translated at the spot exchange rate on the fair value recognized date; the gap shall be
recorded into the current profits and losses or other comprehensive incomes.
4.8.2 The translation of financial statements denominated in foreign currency
If the company's holding subsidiaries, joint ventures, joint ventures, etc., use different recording
currency, they need to convert their recording currency to RMB, and then prepare consolidated
financial statements. For the assets and liabilities in the balance sheet, the shot exchange rate on the
balance sheet date is adopted as the translation exchange rate. For the
exchange rate on the transaction date is adopted as the translation exchange rate, with the exception
the spot exchange rate or the approximate exchange rate on the transaction date. The translation gap
of financial statement of foreign currency converted above shall be listed in other comprehensive
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4.9 Financial Instruments
4.9.1 Recognition and classification of financial instruments
Financial instruments include financial assets, financial liabilities and equity instruments. A financial
asset, financial liability or equity instrument is recognized when the Company becomes one party of
financial instrument contracts.
The financial assets are classified into the following four categories upon initial recognition:
-to-maturity
investments, receivables, and available-for-
classification of financial assets depends on the holding intention and capability of the Company
except for receivables. The financial liabilities are classified into financial liabilities at fair value
recognition.
Financial assets at fair value through profit or loss include financial assets held for trading in the
short term and those upon initial recognition designated as at fair value through profit or loss.
Receivables are non-derivative financial assets with fixed or determinable amounts that are not
quoted in an active market. AFS financial assets are those non-derivative financial assets that are
designated as available for sale and financial assets other than those above mentioned.
Held-to-maturity investments are non-derivative financial assets with fixed or determinable amounts
and fixed maturity dates that the Company has the positive intention and capability to hold to
maturity.
4.9.2 Measurement of financial instruments
The Company measures the financial instruments at fair value upon initial recognition. The
subsequent measurement includes: a) FVTPL financial assets, AFS financial assets and FVTPL
financial liabilities are measured at fair value; b) Held-to-maturity investments, loans,receivables,
and other financial liabilities are subsequently measured at amortized cost; c) Equity instruments that
are not quoted in an active market and whose fair value cannot be reliably measured, and derivative
financial assets or derivative financial liabilities linked to the equity instruments that will be settled
by delivering the equity instruments are subsequently measured at cost. The gains or losses of fair
value changes arising from subsequent measurement of financial assets and liabilities shall be
accounted for according to the following methods except hedging instrument involving in: a) The
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gains or losses arising from fair value changes of FVTPL financial assets and FVTPL financial
liabilities are recognized in the profit or loss for current period; b) The gains or losses arising from
fair value changes of AFS financial assets are recognized in other comprehensive income.
4.9.3 Recognition method of financial instruments' fair value
For financial assets or financial liabilities in active markets, the Company uses the quoted prices in
active markets to determine their fair value. If there is no active market, the Company uses valuation
techniques to determine their fair value. The valuation techniques mainly include market approach,
income approach and cost approach.
4.9.4 Recognition and measurement of transfer of financial assets
The Company derecognizes a financial asset if it transfers substantially all the risks and rewards of
the financial asset or it does not transfer or maitain substantially all the risks and rewards of
ownership of the financial asset, but surrender control on the financial asset. If a financial asset
meets the derecognition criteria, the difference between the transfer consideration received and the
sum of transferred financial asset's carrying amount and the accumulated change amount on fair
value which has been recognized in other comprehensive income shall be charged to profit or loss
for current period. If the partial transfer of financial asset meets the derecognition criteria, the entire
carrying amount of the transferred financial asset shall be split into the derecognized portion and
retained portion according to their respective fair value.
A financial liability shall be entirely or partially derecognized if its present obligations are wholly or
partly dissolved.
4.9.5Impairment of financial assets
If the financial assets measured at amortized costs are impaired, the impairment provision shall be
recognized at the difference of the carrying amount of financial assets and the present value of
estimated future cash flows (excluding future credit losses that have not been incurred). If there is
objective evidence of a recovery in value of the financial asset which can be related objectively to an
event occurring after the impairment was recognized, the previously recognized impairment loss is
reversed through profit or loss for current period.
When impairment of financial assets measured at costs occurs, provision for impairment is
withdrawn. When there is no quoted price in an active market and the fair value cannot be reliably
measured, the equity instrument investment or derivative financial asset that is linked to the equity
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instrument and must be settled through delivery of the equity instrument is depreciated. The
difference between the book value and the present value determined by discounting the future cash
flow based on the current market yield of a similar financial asset is recognized as an impairment
loss.
If there is objective evidence that AFS financial assets are impaired, accumulated losses due to
decreases in fair value previously recognized directly in the shareholders' equity are transferred to
profit or loss for the current period. In the subsequent periods, if the fair value of AFS debt
instruments increases and the increase can be related objectively to an event occurring after the
impairment was recognized, the previously recognized impairment losses are reversed and charged
to profit or loss for the current period. For AFS equity instruments, the increase of fair value in the
subsequent periods shall be accounted for in the shareholders' equity.
For the equity instrument investment, when the fair value of the available-for-sale financial assets of
the company falls seriously or non-temporarily, the difference between the initial cost and the fair
value at the end of the period is recognized as impairment loss. The cumulative loss of value within
other comprehensive income is transferred out and recorded into impairment loss. The specific
quantitative criteria for judging the "serious" or "non-temporary" decline in fair value, the
calculation method of the cost, the method of determining the fair value at the end of the period, and
the determination basis for the period of continued decline are:
Specific quantitative criteria for fair value decline " seriously"
Decrease in closing fair value relative to the cost has reached or exceeded 50%
Specific quantitative criteria for fair value decline "non-temporarily" Fall for 12 consecutive months
Calculation of cost Consideration of payment at acquisition (net of cash dividends declared but not yet paid or due but unpaid interest on bonds) and the relevant transaction cost are recognized as the investment cost.
Fair value determination at period end
As for a financial instrument for which there is an active market, the quoted prices in the active market shall be used to recognize the fair values thereof. Where there is no active market for a financial instrument, the enterprise concerned shall adopt value appraisal techniques to determine its fair value.
Definition of continuous decline periods The rebound in the continuous fall or the period with the tread of fall is less than 20% margin. Rebound duration not more than six months is treated as continuous decrease period
4.10 Receivables
Receivables include accounts receivable, long-term receivables and other receivables. If there are
objective evidence that the receivables are impaired, the Company recognizes the doubtful debts
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allowance on the shortfall between the present value of future cash flows and the carrying amount
of the receivables.
4.10.1Individual receivables with significant amount and bad debt reserve is individually accrued
Criteria for significant amount: Receivables with a book balance of more than 100 million (inclusive)
Bad debt reserve accrual method for individual receivable with significant amount
Confirmation based on the difference between the book balance and the present value of expected future cash flow
4.10.2. Group of receivables and bad debt reserve
Recognition Method of groups Nature of receivables and credit risks
Group 1 Divide by credit risks related to the age of receivables
Group 2 Divide by related party within the scope of consolidation
Group 3 Divide into employee petty cash, rent depositetc etc.
Bad debt reserve accrual method for a group
Group 1 Aging Analysis Method
Group 2 Not to accrue bad debt reserve
Group 3 Not to accrue bad debt reserve
In the groups, those adopting aging analysis method to withdraw bad debt provision:
Age Percentage of bad debt
reserve on account receivable(%)
Percentage of bad debt reserve on other receivable(%)
Within 1 year
1-2 years 10 10
2-3 years 30 30
3-4 years 50 50
4-5 years 70 70
Over 5 years 100 100
4.10.3.Individual receivables without significant amount but bad debt reserve is individually accrued
Reason for individually accrual of bad debt reserve
Individual amount is not significant, and the credit risk characteristics cannot be reflected if bad debt reserve is accrued under a group of receivables
Bad debt reserve accrual method
Confirmation based on the difference between the book value and the present value
of expected future cash flow
4.11 Inventories
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4.11.1 Categories of inventories
Inventories are the finished goods or commodities that the Company holds to sell, the work in
progress in production process, and the material and goods consumed during the production process
or service rendering process in daily operation. Inventories include raw materials, revolving
materials, consigned processing materials, packaging materials, low-value consumables, work in
progress, self-manufactured semifinished product and finished goods (commodities) etc.
4.11.2 Measurement of inventories upon delivery
Weighted average method is used to measure the actual costs of inventories upon delivery.
4.11.3 Provision for diminution in value of inventories
At each balance sheet date, inventories are measured at the lower of cost and net realisable value.
When the cost of inventory exceeds its net realizable value, provision for diminution in value of
inventories is recognized. The Company usually recognizes provision for diminution in value of
inventories by a single inventory item. For the inventory items of large quantity and low price, the
Company recognizes provision for diminution in value of inventories based on inventory categories.
4.11.4 Inventory count system
The Company adopts the perpetual inventory system.
4.11.5 Amortization methods of low-value consumables and packaging materials
Low-cost consumables and packaging materials are amortized by the once-off amortization method
4.12 Loans and Advances to Customers
4.12.1 Loans and receivables: impairment loss of loans and receivables is determined according to
the difference between book value of the asset and the current value of estimated future cash flow
discounted at the original real interest rate of the asset. If discounting does not have prominent
impact on cash flow then discounting is not necessary.
4.12.2 Classification of loan risks
According to CBRC's requirements in "Yin Jian" [2007] No. 54: Guidance for the Risk-Based
Loan Categorization, loan risks are classified into five levels, which are, normal, concerned, inferior,
doubted and loss. When there is evidence showing a client's repaying ability is in clearly in trouble
which leads to a loan cannot be fully repaid, the loan is classified as a non-performing loan (which
includes the latter three levels: inferior, doubted and loss).
General principles for the five categories of loans are as follows:
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a. Normal: A borrower can perform a contract, and there is lack of sufficient reasons to suspect
that the principal and interest of a loan cannot be fully repaid on time.
b. Concerned: A borrower has the ability to repay the principal and interest of a loan for the time
being, but there are some factors likely to having adverse effect on the repayment.
c. Inferior: An obvious problem has appeared in a borrower's ability of repayment,the principal
and interest of a loan cannot be fully repaid by completely depending on the normal business
revenue of the borrower, and even if a security is executed, there might be some losses incureed
d. Doubted: Aborrower cannot fully repaythe principal and interest of a loan, and even if a
security is executed, large losses are surely to be incurred.
e. Loss: After the adoption of all possible measures or all necessary legal proceedings, the
principal and interest of a loan cannot be recovered, or only a very small part of it can be recovered
4.12.3. Impairment provision for loans
According to the requirements by the CBRC in "Yin Jian Notice" [2007] No. 22: "A Notice about
General Adoption of Accounting Standards for BusinessEnterprises in Financial Institutions of
Banking Sector", the Company has accrued impairment provision for loans based on their end of
period risk rating results. The loans with special risk characteristics have been individually assessed.
The percentages of impairment provision are given below:
Risk Level Percentages of impairment provision(%)
Normal -
Concerned 5
Inferior 25
Doubted 50
Loss 100
4.13. Long-Term Equity Investment
4.13.1 Determination of investment cost
Long-term equity investment acquired through a business combination: For a business combination
involving enterprises under common control, the initial investment cost of a long-term equity
investment is the acquirer's share of the carrying amount of the owners' equity in the acquiree at the
acquisition date. For a business combination not involving enterprises under common control, the
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initial investment cost of a long-term equity investment is the cost of acquisition determined at the
date of acquisition. For a long-term equity investment acquired in cash, the initial investment cost is
the amount of cash paid. For a long-term equity investment acquired by issuing equity securities, the
initial investment cost is the fair value of the equity securities issued. For a long-term equity
investment acquired by debt restructuring, the initial investment cost is determined according to
related requirements of Accounting Standards for Business Enterprises No. 12- Debt Restructuring.
For a long-term equity investment acquired by exchange of non-cash assets, the initial investment
cost shall be determined according to related accounting standards.
4.13.2 Subsequent measuremen at and recognition of profit or loss
For long-term equity investments that the Company has control over the invested unit, the Company
accounts for such long-term equity investments using the cost method in the Company's financial
statement. The Company accounts for the long-term equity investment under common control or on
which the Company has significant influence using the equity method.
4.13.3 Basis for recognition of joint control or significant influence over an investee
Joint control of an investee is that the decision of activities that can significantly affect the
arrangement's return must require the unanimous consent of the parties sharing control, including
sale and purchase of goods or services, financial assets management, purchase and disposal of assets,
research and development activity and financing activities etc. The Company holding of 20%-50%
voting capital of the investee presents it can exercise significant influence over the investee. The
Company usually can exercise significant influence over the investee even its voting capital less than
20% if it can meet one of the following situations: a) Appointing representatives in the board of
directors or similar governing body of the investee; b) Participating in the strategy and policy
decision process; c) Delegating management personnel; d) The investee relying on the Company's
technique or technical material; e) Significant transactions occur between the Company and the
investee.
4.14. Fixed Assets
4.14.1 Recognition criteria for fixed assets
Fixed assets are tangible assets that are held for usein the production or supplyof goods of
services,for rental to others, or for administrative purposes, and have useful lives of more than one
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accounting year Fixed assets are initially measured at cost. Depeciationis accrued from the next
month of when fixed asset reaches its serviceable condition, and is calculated on the straight-line
basis.
4.14.2 Classification and depreciation method of fixed assets
The categories of fixed assets mainly include: buildings, machinery & equipment, electronic
equipment and vehicles. The Company adopts the straight line method for depreciation. The useful
life and residual value of an asset is assessed based on its nature and the manner of use. At the end of
each financial year, the useful lives, residual values and the depreciation method are reviewed, and
adjusted if there are variances with the original estimates. Other than fully depreciated assets which
are still in use and land individually measured and recorded, depreciation is provided for all fixed
assets.
Category Estimated useful life (years) Estimated residual value rate(%) Annual depreciation rate(%)
Buildings 20 3 4.85
Machinery and equipment 5 3 19.40
Electronic equipment 3-5 3 19.40-32.30
Transportation vehicles 3-5 3 19.40-32.30
Other 3-5 3 19.40-32.30
4.14.3 Recognition and measurement of fixed assets from finance lease
A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership
of an asset. At the commencement of the lease term, the Company, as the lessees, shall recognize
finance leases as assets at amounts equal to the lower of the fair value of the leased property or the
present value of the minimum lease payments, each determined at the inception of the lease.
Subsequent measurement of fixed assets under finance lease should be in accordance with the
accounting policies adopted for self-owned fixed assets in respect of provision of depreciation and
impairment.
4.15. Intangible Assets
4.15.1 The measurement of intangible assets
The intangible assets shall be initially measured according to its cost. Acquisition costs of intangible
assets include purchase price and relevant expenditures. The invested cost of intangible assets
contributed by investors shall be determined according to the conventional value in the investment
contract or agreement, except for those of unfair value in the contract or agreement. If the
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conventional value in the investment contract or agreement is unfair, the costs of intangible assets
shall be their fair value. The costs of internally generated intangible assets include the total
development expenditures to bring the asset to its intended use.
The subsequent measurements for intangible assets are as follows: a) The intangible assets with
definite useful life are amortized by straight line method and reviewed the useful life and
amortization method at the end of each year. Any discrepancy between the review and initial
estimates shall be adjusted accordingly. b) The intangible assets with indefinite useful life are not
amortized, and reviewed for the useful life at the end of each year. If there are objective evidence
indicating their useful life is definite, the Company shall estimate the useful life of the intangible
assets and amortize them by straight line method.
Asset type Amortization year
Software 3-10
Trademark Usefullife cannot be determined, not amortization
4.15.2 The assessment basis for indefinite useful life
Intangible assets without foreseeable period to bring economic benefits to the Company or with
uncertain useful life are classified as intangible assets of indefinite life. The judgment basis for
indefinite life includes: a) The legal rights are derived from contractual rights or other legal rights,
however there is no explicit useful life indicated in the contracts or regulations; b) Although
considering the industry practice or demonstration from related professionals comprehensively, the
benefit period of the intangible assets still can't be decided.
At the end of each year, the Company reviews the intangible assets with indefinite useful life mainly
using bottom-to-top approach. The related departments who use the intangible assets will perform a
basic review and evaluate whether there are changes on the basis to determine indefinite useful life.
4.15.3 The specific criteria for research phase and development phase of internally generated
projects, and the specific criteria for capitalization of expenditure incurred during development
phase
Expenditure in the research phase is recognized as an expense in profit or loss for current period
when it is incurred. Expenditure in the development phase of internally generated projects is
capitalized if they meet the criteria of intangible assets.
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4.16 Impairment of assets
At each balance sheet date, if there are impairment indications for the long-term assets including
long-term equity investments, investment property subsequently measured at cost model, fixed
assets, construction in progress, productive biological assets measured at cost, oil and gas assets,
intangible assets, goodwill, etc., the Company shall perform impairment test. If the outcome of
impairment test indicates the recoverable amount of the asset is lower than its carrying amount, the
Company shall recognize the provision for impairment based on the amount of the shortfall.
The recoverable amount of an asset is determined by the higher of the net amount after deducting the
disposal costs from the asset's fair value and the present value of the asset's estimated future cash
flow. The provision for impairment of asset is estimated and recognized on individual basis. If it is
not possible to estimate the recoverable amount of the individual asset, the Company shall determine
the recoverable amount of the asset group to which the asset belongs. The asset group is the
minimum portfolio of assets that could generate cash inflow independently.
Impairment tests are conducted for goodwill presented in the financial statements separately at least
at the end of every accounting year regardless whether there are impairment indications or not. The
carrying amount of goodwill arising from business combinations is allocated to relevant asset groups
or asset group portfolio. The related impairment loss shall be recognized if the impairment test
indicates the recoverable amount of the asset groups or asset group portfolio embodied the goodwill
is lower than their carrying amounts. The amount of impairment loss shall firstly be deducted from
the carrying amount of goodwill embodied in the asset groups or asset group portfolio, then be
deducted from the carrying amounts of other assets' based on the proportions of their carrying
amounts in the asset group or asset groups portfolio.
The impairment losses of assets will not be reversed in subsequent periods once they are recognized.
4.17 Long-Term Unamortized Expenses
Long-term deferred expenses refer to expenses that have been paid but their benefit period is more
than one year (excluding one year). Long-term deferred expenses will be amortized in the benefit
periods. If one long-term deferred expense can't benefit the Company in the subsequent periods, the
remaining balance of the long-term deferred expense shall be recognized as expense in profit or loss
for the current period.
4.18. Employee payroll
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Employee benefits refer to all forms of consideration or compensation given by the Company in
exchange for service rendered by employees or for the termination of employment relationship.
Employee benefits include short-term employee benefits, post-employment benefits, termination
benefits and other long-term employee benefits.
4.18.1 Short-time employee benefits
In the accounting period in which employees have rendered services, the Company recognizes the
employee benefits as liability, and charges to profit or loss for the current period, or includes in the
cost of relevant assets in accordance with other accounting standards. Welfare benefit are charged to
profit or loss for the current period or included in the cost of relevant assets when incurred. Welfare
benefit in non-monetary forms is measured at fair value. In the accounting period in which
employees have rendered services, the Company recognizes the social security contributions as
liability according to regulations such as medical insurance, work injury insurance and maternity
insurance as well as housing funds, and charges to profit or loss for the current period or includes in
the cost of relevant assets.
4.18.2 Post-employment benefits and termination benefits
During the accounting period in which employees provide the service, the Company calculates the
defined contribution plans payable according to the basis and percentage required by local
government, recognized as the liability and charges to profit and loss for current period or includes
in the cost of related assets. The Company attributes the obligation incurred by defined benefits
plans using the projected accumulated benefit unit credit method to periods in which the employees
rendered services and charges the obligation to profit and loss for the current period or includes in
the cost of related assets.
Termination benefits provided by the Company to employees are recognized as an employee benefit
liability and charged to profit or loss for the current period at the earlier of the following dates: a)
The Company cannot unilaterally withdraw the offer of termination benefits because of an
employment termination plan or a curtailment proposal; and B) When the Company recognizes costs
or expenses related to the restructuring that involves the payment of termination benefits.
4.18.3 Other long-term employee benefits
If other long-term employee benefits provided by the Company to the employees meet the conditions
for classifying as a defined contributions plan, those benefits are accounted for in accordance with
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the above requirements relating to defined contribution plan. Besides, net obligations or net assets of
other long-term employee benefits are recognized and measured in accordance with the above
requirements relating to defined benefits plan.
4.19 Bonds Payable
Bonds issued by the Company is initially recognized at the actual amount received, and is
subsequently measured at amortized cost using real interest method. When a discount or premium
happens on a bond, interest is adjusted at the amortized discount or premium of each accounting
period using real interest method.
4.20 Provisions
the Company; b) It is probable that an outflow of economic benefits will be required to settle the
obligation; c) The amount of the obligation can be measured reliably. Provisions are initially
measured at the best estimate of the payment to settle the associated obligations. If there is a
continuous range for the necessary expenses and probabilities of occurrence of all the outcomes
within this range are equal, the best estimate shall be determined at the average amount of upper and
lower limits within the range. If the contingency involves two or more items, the best estimate shall
be determined according to all the possible outcomes with their relevant probabilities.
The Company shall review the carrying amounts of provisions at each balance sheet date, and if
there are conclusive evidences that indicate the carrying amounts of provisions can't reflect the
present best estimate of the payment, the carrying amounts of provisions will be adjusted to the
present best estimate of the payment.
4.21 Income
The Company's income is mainly arising from income from rendering services, abalienating of right
to use assets, investment income and other income.
4.21.1 Rendering services
When the result of rendering services can be reliably estimated on the balance sheet date, which
refers to the four stand are all met: 1) the amount of revenuecan be measured reliably; 2) it is
probable that the economic benefits will flow to the seller; 3) the stage of completion at the balance
sheet date can be measured reliably; and 4) the costs incurred,or to be incurred,in respect of the
transaction can be measur ed reliably,revenue is recognized using the percentage of completion
method, and the percentage of completion is estimated according to the percentage of incurred cost
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Zhongrong International Trust Company Limited
in the estimated total cost. When the result of rendering services cannot be reliably estimated on the
balance sheet date, if incurred cost is recovered, then revenue is recognized according to the cost
incurred, and cost is recognized at the same amount; if incurred cost cannot be recovered,then
revenue is not recognized and the incurred cost is recognized in profit or loss of current period
Income from rendering services of the Company mainly include commissions of entrusted Asset
Management business, and fees of consulting, advisory and qualified investor reference. A
commission of entrusted Asset Management business is the reward to trustee according to a trust
contract. A fee of consulting, advisory and qualified invest reference is a service charge paid by a
client according to contract or agreemetn.
Type of income of the Company are mainly divided into: security investment business income,
equity investment business income, loan business income, property right business income, equity
earning right business income, floating performance reward, mutual fund management fee and
financial services business income, etc. The calculation method is described as follows.
For security investment business, valuation is normally according to the market value of daily
holding products. Net assets value from valuation multiplied by the rewarding rate agreed in the trust
contract ,divided by number of days, which comes to the amount of reward per day.
Equity investment business is normally long term, of which reward is calculated according to the
recouped amount at maturity of repurchasing premium deducting holding period expenses.
Loans, property right and equity earning right businesses are normally rewarded at the amount of
size of assets multiplied by the rewarding rate agreed in the trust contract,and divided by the times of
charging.
Floating performance reward is normally calculated after liquidation,at the amount of net earnings at
liquidation multiplied by the rewarding rate agreed in the contract.
Mutual fund management fee is normally charged at the amount of size of fund managed multiplied
by management fee rate agreed in fund contract, and divided by times of charging
Financial services business normally charges service fees according to the standards agreed in
contracts of different types of service.
4.21.2 Abalienating of right to use assets
When it is probable that the economic benefits will flow to the Company, and the amount of revenue
can be measured reliably, revenue from abalienating the right to use assets can be recognized
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Zhongrong International Trust Company Limited
4.21.2.1 Interest income is determined by the period of time of other party uses the Company's cash
and the real interest rate, which refers to revenue recognized from the Company issuing
self-operated loans and accruing interest income in each period.
For loans issued by the Company, interest is accrued in each period and revenue is recognized.If a
loan is not repaid after 90 days of its maturity (including rollover, the same hereafter), the current
period interest is not accrued and accounted off the balance sheet; in the meantime, interests that are
already accrued in balance sheet adjust profit or loss of current period, and accounted off balance
sheet.
Interest income from financial firms'saving deposits is recognizedin interest income on deposits at
the time of receiving interest settlement notice from the bank; interest income in placements to other
financial institutions is calculated based on the period of time of abalienating the right to use assets
and applicable interest rate.
When a financial asset is impaired, interest income is calculated using the discount rate at which
future cash flow is discounted at the time of impairment.
4.21.2.2 Utility charge is calculated according to the charging time and method agreed in relevant
contract or agreement.
4.21.3 Investment income
The Company's investment income refers to the earnings from holding long-term equity investment,
and earnings from buying, selling and holding financial assets. For long-term equity investment
under cost method, investment income is recognized when cash dividend or profit sharing is
declared by the investee; for long-term equity investment under equity method, investment income is
recognized at the Company's share in the net profit or adjusted net profit of the investee. For
financial assets, investment income of current period is recognized at the amount of difference
between buying price and selling price deducting relevant taxes and fees, and profit sharing and
dividends during the holding period is also recognized investment income of current period.
4.22 Government grants
4.22.1 Category of government grants
Government grants are the monetary assets and non-monetary assets received from the government
without consideration and be classified as government grants related to assets or government grants
related to income.
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4.22.2 Accounting treatment of government grants
Government grants related to assets received before January 1, 2017 were recognized as deferred
income which are amortized in profit and loss for each period over the asset's estimated useful
period on a systematic basis. Government grants related to assets received after January 1, 2017
deducte the carrying amounts of related assets. Government grants related to the Company's routine
operation will be recorded in other income and government grants not related to the Company's
routine operation will be recorded in non-operating income.
The government subsidies measured in nominal amount is recorded in the current profits and losses.
Revenue-related government subsidies, which are used to compensate for the related costs or losses
of the Company in the future period, are recognized as deferred income, and are recognized in the
profits and losses of the current period in the period in which the relevant costs, expenses or losses
are recognized. The relevant costs, expenses or losses that have been used to compensate the
Company have been directly recorded in the current profits and losses. Government subsidies related
to the company's daily activities are included in other income; those unrelated to the daily activities
of the company are included in non-operating income.
4.22.3 The detailed criteria to distinguish government grants related to assets and government grants
related to income:
Government grants obtained by the Company for purchase, construction or formation of long-term
assets are recognized as the government grants related to assets. The government grants other than
the government grants related to assets are classified as government grants related to income.
If there is no explicit recipient in the related government grant document, the judgement criteria to
distinguish government grants related to assets and government grants related to income: if a
government document specifies a particular project for which a subsidy is targeted, the relative
proportions of the amount of expenditure that forms the asset and the amount of expenditure
included in the expense shall be divided according to budget of the specific project, and the division
ratio shall be reviewed on each balance sheet date, and changes shall be made if necessary; if there
are only general statements in government documents, subsidies shall be recognized as income
related government subsidies.
4.22.4 The recognition time point for government grants
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The receivable government grants will be recognized when there are conclusive evidence to indicate
the Company could meet all related government grants requirements and the Company expects to
receive the government grants in the future. Other government grants will be recognized when the
grant fund received.
4.23 Deferred tax asset and deferred tax liability
4.23.1 Temporary differences arising from the difference between the carrying amount of an asset or
liability (asset or liability not recognized in balance sheet but the tax base is ascertained by the
current tax laws and regulation, the tax base is the temporary difference) and its tax base are
recognized as deferred tax calculating by the effective tax rate in the expected period to receive the
asset or discharge the liability.
4.23.2 Deferred tax assets are recognized for deductible temporary differences to the extent that it is
probable that taxable profit will be available against which the deductible temporary differences can
be utilized and should be recognized for deductible loss or tax reduction that could be carried
forward in subsequent periods to the extent that it is probable that taxable income will be available
against which deductible loss or tax reduction can be utilized. If it is probable that sufficient taxable
profits will not be available in future periods to allow the benefit of the deferred tax asset to be
utilized, the carrying amount of the deferred tax asset is reduced.
4.23.3 The taxable temporary differences associated with investments in subsidiaries and associates
shall be recognized deferred tax liability; except the Company is able to control the timing of the
reversal of the temporary difference and it is probable that the temporary difference will not reverse
in the foreseeable future. The deductible temporary differences associated with investments in
subsidiaries, associates, the corresponding deferred tax asset is recognized when it is probable that
the temporary difference will reverse in the foreseeable future and it is probable that taxable profits
will be available in the future against which the temporary difference can be utilized.
4.24 Leases
Leases are classified into finance leases and operating leases. The judgment criteria for financial
leases are: Leases that transfer substantially all the risks and rewards related to the ownership of
assets. The Company recognizes those meet with the following one or certain standards as the fixed
assets by finance lease: The leasing contract had agreed that when the lease term expires, the
ownership of leasing the fixed assets could be transferred to the Company; the Company owns the
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Zhongrong International Trust Company Limited
choosing right for purchasing and leasing the fixed assets, with the set purchase price which is
estimated far lower than the fair value of the fixed assets by finance lease when executing the
choosing right, so the Company could execute the choosing right reasonably on the lease starting
date; even if the ownership of the fixed assets not be transferred, the lease period is of 75% or above
of the useful life of the lease fixed assets; The current value of the minimum lease payment on the
lease starting date of the Company is almost equal to the fair value of the lease fixed assets on the
lease starting date;the nature of the lease assets is special that only the Company could use it if not
execute large transformation. For leases that do not meet the above conditions, they are recognized
as operating leases.
The accounting treatment of the company's leasing business is handled in accordance with the
provisions of the "Accounting Standards for Business Enterprises - Leases".
4.25 Held-for-sale
Non-current assets or disposal groups are classified as held-for-sale assets when all the following
conditions are met: a) the asset (or disposal group) must be available for immediate sale in its
present condition subject only to terms that are usual and customary for sales of such assets (or
disposal groups); b) the sale must be highly probable, i.e. the Company has signed an irrevocable
transfer agreement with the transferee and the transfer is expected to be completed within one year.
If related regulations require pre-approval for the sale, the sale transaction has been approved.
When non-current asset (or disposal group) classified as held for sale is initially measured or
remeasured at each balance sheet date, if the book value of the non-current asset (or disposal group)
is higher than its fair value, the difference will be deducted from the book value and recognized as
impairment provision of held for sale in the profit and loss for current period.
Non-current asset (or disposal group) classified as held-for-sale asset will be presented as
held-for-sale assets and the liabilities in the disposal group will be presented as held-for-sale
liabilities in the balance sheet.
4.26 discontinued operations
A discontinued operation is a clearly distinguished component of an entity ,that either has been
disposed of, or is classified as held for sale, and meets any of the following criteria:
(a) represents a separate major line of business or geographical area of operations,
(b) is part of a single co-ordinated plan to dispose of a separate major line of business or
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geographical area of operations or
(c) is a subsidiary acquired exclusively with a view to resale.
4.27 Fair value
4.27.1 Criteria of fair value measurement in Level 1 inputs
We use financial instruments such as stocks, bonds, and funds listed in the centralized securities
trading system as the level 1 inputs fair value measurement items, and its fair value is determined
based on the closing price or settlement price announced by the stock exchange (or clearing
institution).
4.27.2 Criteria of fair value measurement in Level 2 inputs
We use the asset management plan as the level 2 inputs fair value measurement item. When
determining the fair value, the company will give priority to the recommended valuations issued by
authoritative third-party agencies. If the company cannot directly obtain the recommended
valuations published by authoritative third-party agencies, the company will use valuation methods
such as the valuation announced by the manager valuation model to evaluate the leval 2 inputs fair
value measurement items.
4.27.3 Criteria of fair value measurement in Level 3 inputs
The company uses unlisted equity as a level 3 inputs fair value measurement item. When evaluating
the unlisted equity, the company uses the available actual transaction price as its fair value. For
unlisted equity whose fair value cannot be reliably measured, the company uses the cost method for
measurement.
4.28 Determination of Operating Activity, Investing Activity and Financing Activity
4.28.1. An investing activity of the Company refers to activities related to constructing the
Company's long-term assets, which mainly include, fixed assets, intangible assets,
under-construction project, and long-term equity investment on which the Company has control,
common control or significant influence, and other assets with a holding period longer than a year or
one operating cycle.
4.28.2. A financing activity of the Company refers to activities which cause changes on the size and
structure of the Company's capital, bonds and long-term debt
4.28.3. An operating activity of the Company refers to any of the Company's activities other than
investing activities and financing activities. Operating activities mainly include issuing loans,
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Zhongrong International Trust Company Limited
inter-bank lending, Asset Management, consulting and advisory services, financial assets investment
and investment operations, etc Buying and selling financial assets belongs to the day-to-day
operations of the Company, and its cash flows are reflected in cash flow from operating.Short-term
loan issuance and repaid principal, cash lending to other financial institutions, buying and selling
securities and other financial assets are accounted at net value.
4.29. Entrusted Business
The main entrusted business of the Company is trust property management
The trust property management is the Company trustee mange the settlers' trustproperties according
with the trust agreement. In comply with relevant regulationst,he Company manage the inherent
property and trust property separately and use different accounting method. The trust project the
trustee manage, utilize and dispose the trust property alone or collective according to the agreement
seen as a basic unit, each project is an independent accounting body, and independently accounting
the mange, utilize and dispose the trust properties and prepared in the financial statement. The asset,
liability and profit and loss do not include into the Company's financial statement
4.30.Provision of Trust Compensation Reserve
According to the Regulations on Trust Companies issued by CBRC, 5% of the Company's after-tax
net profit is accrued in trust compensation reserve, with a limit of 20% of the Company's registered
capital. The major purpose of the trust compensation reserve is to offset any losses in entrusted
assets due to possible management and operating mistake.
4.31 Provision of General Risk Reserve
According to the regulations in "Cai Jin" (2012) No. 20, the higher of the amount of potential risk
estimation lower than provision for impairment of assets and 1.5% of ending balance of risk assets,
is accrued in provision of general risk reserve from after-tax net profit.
5. Changes in accounting policies and accounting estimates,and correction of
errors from last period
5.1. Changes in accounting policies
The Ministry of Finance released < CAS No.42-Held for sale Assets and Discontinued Operations>
in year 2017 which will be in effect from May 28, 2017. The accounting standard requires
prospective application for the existed held for sale assets and discontinued operations.
The Ministry of Finance revised < CAS No.16-Government grants> which will be in effect from
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Zhongrong International Trust Company Limited
June 12, 2017. The accounting standard requires prospective application for the existed government
grants at January 1, 2017 and adjustment for the government grants received from January 1, 2017 to
the enforcement date.
The Ministry of Finance released < Notice for amendments of financial statements format of
industrial and commercial enterprises>(Caikuai (2017) No.30) in year 2017 and the enterprises who
adopt <Accounting Standards for Business Enterprises> should prepare the financial statements for
year 2017 and the following financial periods in according to <Accounting Standards for Business
Enterprises> and the Notice.
The main influence on the financial statements after the Company adopts the above two standards
and the Notice (Caikuai (2017) No.30) is as following: Reason and content of
accounting policy change
Item affected The amount
of item
affected
Restatement
amount of
prior period
Amount
presented in
non-operating
income of prior
period
Amount
presented in
non-operating
expenses of
prior period
Government grants
related to the Company's
rountine operation
recorded in other income
Other income 2,069,600.00
Presentation adjustment
for gains(losses) from
disposal of assets
Gains (Losses)
from disposal of
assets
476,418.21 424,542.37 424,542.37
5.2. Changes in accounting estimates
There is no change in accounting estimates during this reporting period.
5.3.Correction of errors from last period.
There is no need to disclose conection error from last period during this reporting period.
6. TAXES
6.1 Major Taxes and Tax Rates Category of tax Taxation basis Tax rate
Value-added tax Value-added tax payable 6% 3% 5% City maintenance and construction tax commodity turnover tax payable 7%
Education fee affixture commodity turnover tax payable 3%
Local education commodity turnover tax payable 2%
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Zhongrong International Trust Company Limited
Category of tax Taxation basis Tax ratesurcharge
Corproateincome tax Income tax payable 25% 16.5% 9%
Note: Subsidiaries Taktse Dingcheng Capital Investment Limited, Taktse Dingrui
Capital vestmeng
Limited, Taktse Dingsheng Capital Investment Limited, Taktse Zhongrong Dingsheng Asset
Management Limted are register in Taktse Tibet, and the applicable corporate tax rate is 9%.
Zhongrong International Culture Management Limited, Zhongrong International Capital
Management Limited and Zhongrong International Wealth Management Limited are register in
Hong Kong, and the applicable corporate tax rate is 16.5%.
Wealth InInternational Holdings Limited, Wealth InAsset Management Limited, Wealth In Financial
Holdings Limited, ZRTGrandton (International) Holding LTD, ZRTGrandton Investment
Management (International) LTD, Zhongrong International Holdings Limited, Zhongrong
International Bond 2015 Ltd., Zhongrong Korea Bond Ltd., Zhongrong International Bond 2016
Ltd., Foremost Worldwide Company Limited, Zhongrong Worldwide Capital Management Limited
are registered in British Virgin Island, where zero corporate tax is applied
Zhongrong International Capital Management Limited (Cayman), Zhongrong Holdings Limited
ZRC Investment Limited, ZRC Management Limited are registered in Cayman Islands where zero
corporate tax is applied.
7. Consolidated and consolidated financial statements
7.1 Sub-enterprise situation
No. Name of subsidiary
Gradation
Type
of enterprise
Location of
operation
Location of
registration
Main business
Paid-in capital(ten thousand yuan)
Proportion of shareholding
(%)
Proportion of voting right(%)
Investment (ten thousand yuan)
Mode of
acquiring
1
Bejiing Zhongrong
Dingxin
Investment
Management
Company
2 1 Beijing Beijing Investment
management
122,000.0
0 100.00 100.00
122,000.0
0 1
2 Zhongrong
Mutual Fund 2 2
Shenzhe
n
Shenzhe
n
Fund
management
115,000.0
0 51.00 51.00 58,650.00 1
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Zhongrong International Trust Company Limited
No. Name of subsidiary
Gradation
Type
of enterprise
Location of
operation
Location of
registration
Main business
Paid-in capital(ten thousand yuan)
Proportion of shareholding
(%)
Proportion of voting right(%)
Investment (ten thousand yuan)
Mode of
acquiring
Management
Company
3
Chuangliyuan
No.1 assembled
funds trust
2
Other
usufruct
investment
159,690.0
0 71.70 71.70
114,500.0
0 4
4
Zhongrong
(Beijing) Asset
Management
Company
3 1 Beijing Beijing Asset
management 30,000.00 100.00 100.00 30,000.00 1
5
Huzhou Rong Rui
Investment
Management
Company
4 1 Zhejiang Beijing Fund
management 100.00 100.00 100.00 100.00 1
6
Zhongrong
Changhe Capital
Investment
3 1 Shanghai Shanghai Asset
management 8,000.00 100.00 100.00 8,000.00 1
7
Shanghai
Changkun
Investment
Management
Company
4 1 Shanghai Shanghai Asset
management 500.00 80.00 80.00 400.00 1
8
Shanghai
Jiasheng
Investment
Management
Company
5 1 Shanghai Shanghai Asset
management 80.00 80.00 1
9
Shenzhen
Qianhai
Yatelantu
Investment
Cente(LP)
4 1 Shenzhe
n
Shenzhe
n
Asset
management 300.00 86.67 86.67 300.00 1
10 ZRCManageme
ntLimited 5 3 Cayman Cayman
Asset
management 80.00 80.00 1
11 ZRCInvestment
Limited 6 3 Cayman Cayman
Asset
management 80.00 80.00 1
12
Beijing
Zhongrong
Huizhi Human
Resources
3 1 Beijing Beijing Human
resources 1,000.00 100.00 100.00 1,000.00 1
13 Shanghai 4 1 Shanghai Shanghai Human 200.00 100.00 100.00 200.00 1
F-155
Zhongrong International Trust Company Limited
No. Name of subsidiary
Gradation
Type
of enterprise
Location of
operation
Location of
registration
Main business
Paid-in capital(ten thousand yuan)
Proportion of shareholding
(%)
Proportion of voting right(%)
Investment (ten thousand yuan)
Mode of
acquiring
Huizhi Human
Resources
resources
14
Dazi Dingcheng
Capital
Investment
Company
3 1 Taktse Taktse Asset
management 200.00 100.00 100.00 200.00 1
15
Dazi Dingrui
Capital
Investment
Company
3 1 Taktse Taktse Asset
management 200.00 100.00 100.00 200.00 1
16
Beijing
Zhongrong
Mingxin
Investment
Management
Company
4 1 Beijing Beijing Asset
management 100.00 100.00 1
17
Dazi Dingsheng
Capital
Investment
Company
3 1 Taktse Taktse Asset
management 100.00 100.00 1
18
Shenzhen
Zhongrong
Baosheng Asset
Management
3 1 Shenzhen Shenzhen Asset
management 500.00 80.00 80.00 400.00 1
19
Shenzhen
Zhongrong
Rongyi Internet
Finance Services
Company
3 1 Shenzhen Shenzhen Asset
management 2,600.00 80.00 80.00 2,600.00 1
20
Zhongrong
Huixing Asset
Management
Company
3 1 Beijing Beijing Asset
management 890.00 80.00 80.00 712.00 1
21
Guangzhou
Zhongyin Culture
Investment
Management
Company
4 1 Guangzho
u
Guangzho
u
Asset
management 80.00 80.00 1
22 Zhongong
International 5 3 Hongkong
Hongkon
g
Asset
management 80.00 80.00 1
F-156
Zhongrong International Trust Company Limited
No. Name of subsidiary
Gradation
Type
of enterprise
Location of
operation
Location of
registration
Main business
Paid-in capital(ten thousand yuan)
Proportion of shareholding
(%)
Proportion of voting right(%)
Investment (ten thousand yuan)
Mode of
acquiring
Culture
Management
Company
23 Dazi Zhongrong Dingsheng Asset Management Company
3 1 Taktse Taktse Asset
management 80.00 80.00 1
24
Beijing
Zhongrong
Wenda Asset
Management
Company
4 1 Beijing Beijing Asset
management 80.00 80.00 1
25
Shenzhen
Zhongrong Silk
Road Asset
Management
Company
3 1 Shenzhen Shenzhen Asset
management 1,000.00 80.00 80.00 800.00 1
26
Shanghai Dingmu
Investment
Management
Company
3 1 Shanghai Shanghai Asset
management 100.00 100.00 1
27
Beijing Zhongrong Dinghong Investment Company
3 1 Beijing Beijing Asset
management 100.00 100.00 1
28
Zhongrong
Huixing Asset
Management
Company
3 1 Shanghai Shanghai Asset
management 1,000.00 80.00 80.00 800.00 1
29
WealthInIntern
ationalHoldings
Limited
4 3
The
British
Virgin
Islands
The
British
Virgin
Islands
Asset
management 80.00 80.00 1
30
WealthInAsset
ManagementLi
mited
5 3 Cayman Cayman Asset
management 80.00 80.00 1
31
WealthInFinan
cialHoldingsLi
mited
6 3
The
British
Virgin
Islands
The
British
Virgin
Islands
Asset
management 80.00 80.00 1
32
Zhongrong
Dingxing Asset
Management
Company
3 1 Shanghai Shanghai Asset
management 500.00 80.00 80.00 400.00 1
F-157
Zhongrong International Trust Company Limited
No. Name of subsidiary
Gradation
Type
of enterprise
Location of
operation
Location of
registration
Main business
Paid-in capital(ten thousand yuan)
Proportion of shareholding
(%)
Proportion of voting right(%)
Investment (ten thousand yuan)
Mode of
acquiring
33
Jundun
Investment
Management
(Shanghai)
Company
3 1 Shanghai Shanghai Asset
management 500.00 80.00 80.00 400.00 1
34
Shaorong
Investment
Management
(Shanghai)
Company
4 1 Shanghai Shanghai Asset
management 200.00 80.00 80.00 160.00 1
35
ZRTGrandton(I
nternational)Ho
ldingLTD
5 3
The
British
Virgin
Islands
The
British
Virgin
Islands
Asset
management 80.00 80.00 1
36
Ruilai Investment
Management
(Shanghai)
Company
5 1 Shanghai Shanghai Asset
management 80.00 80.00 1
37
ZRTGrandtonI
nvestmentMana
gement
International
)LTD
6 3 Cayman Cayman Asset
management 80.00 80.00 1
38
Zhongrong
Yicheng Asset
Management
Company
3 1 Shanghai Shanghai Asset
management 500.00 80.00 80.00 400.00 1
39
Zhongrong
Shihong Asset
Management
Company
3 1 Beijing Beijing Asset
management 500.00 80.00 80.00 400.00 1
40
Zhongrong
Juchuang Asset
Management
Company
3 1 Shenzhen Shenzhen Asset
management 80.00 80.00 1
41
Zhongrong
Zhang Yun Xing
Asset
Management
Company
3 1 Beijing Beijing Asset
management 500.00 80.00 80.00 400.00 1
F-158
Zhongrong International Trust Company Limited
No. Name of subsidiary
Gradation
Type
of enterprise
Location of
operation
Location of
registration
Main business
Paid-in capital(ten thousand yuan)
Proportion of shareholding
(%)
Proportion of voting right(%)
Investment (ten thousand yuan)
Mode of
acquiring
42
Zhongrong
Huizhi Financial
Services
(Shanghai)
Company
3 1 Shanghai Shanghai Asset
management 3,000.00 80.00 80.00 2,400.00 1
43
Zhongrong
Dayou Capital
Investment
Management
Company
3 1 Shanghai Shanghai Asset
management 2,000.00 80.00 80.00 1,600.00 1
44
Beijing
Zhongrong
Hengrui
Capital
Investment
Management
Company
3 1 Beijing Beijing Asset
management 500.00 80.00 80.00 400.00 1
45
Zhongrong
Shanghai Asset
Management
Company
3 1 Shanghai Shanghai Asset
management 30,000.00 100.00 100.00 30,000.00 1
46
Zhongrong
International
Holdings Limited
4 3
The
British
Virgin
Islands
The
British
Virgin
Islands
Asset
management 28,083.78 100.00 100.00 28,083.78 1
47
Zhongrong
International
Capital
Management
Limited
7 3 Hongkong Hongkon
g
Asset
management 7,473.27 100.00 100.00 7,473.27 1
48
Zhongrong
International
Bond 2015
Limited
5 3
The
British
Virgin
Islands
The
British
Virgin
Islands
Asset
management 9,688.35 100.00 100.00 9,688.35 1
49
Zhongrong
Holdings
Limited
5 3 Cayman Cayman Asset
management 100.00 100.00 1
50
BlackhawkInve
stmentManage
mentLimited
5 3
The
British
Virgin
The
British
Virgin
Asset
management 100.00 100.00 1
F-159
Zhongrong International Trust Company Limited
No. Name of subsidiary
Gradation
Type
of enterprise
Location of
operation
Location of
registration
Main business
Paid-in capital(ten thousand yuan)
Proportion of shareholding
(%)
Proportion of voting right(%)
Investment (ten thousand yuan)
Mode of
acquiring
Islands Islands
51
Zhongrong
International
Bond 2016
Limited
5 3
The
British
Virgin
Islands
The
British
Virgin
Islands
Asset
management 6,631.20 100.00 100.00 6,631.20 1
52
Zhongrong
International
Capital
Management
Limited(Cayma
n)
5 3 Cayman Cayman Asset
management 100.00 100.00 1
53 Wealth Pointer
Global Limited 5 3
The
British
Virgin
Islands
The
British
Virgin
Islands
Asset
management 100.00 100.00 1
54
Zhongrong
International
Wealth
Management
Limited
5 3 Hongkong Hongkon
g
Asset
management 100.00 100.00 1
55
Zhongrong
Universal
Capital
Management
6 3
The
British
Virgin
Islands
The
British
Virgin
Islands
Asset
management 100.00 100.00 1
56
Zhongrong PT
Securities
Limited
5 3 Hongkong Hongkon
g
Asset
management 6,159.17 93.12 93.12 5,735.42 3
57
Zhongrong PT
Finance
Limited
5 3 Hongkong Hongkon
g
Asset
management 88.67 100.00 100.00 88.67 3
58
Zhongrong PT
Trading
Limited
5 3 Hongkong Hongkon
g
Asset
management 0.89 100.00 100.00 0.89 3
59 Zhongrong PT
Captail Limited 5 3 Hongkong
Hongkon
g
Asset
management 0.07 100.00 100.00 0.07 1
60
Shanghai
Ruiyang
Investment
Management
3 1 Shanghai Shanghai Asset
management 250.00 100.00 100.00 250.00 1
61 Zhong Ding Hong 3 4 Securities 5,000.00 100.00 100.00 5,000.00 4
F-160
Zhongrong International Trust Company Limited
No. Name of subsidiary
Gradation
Type
of enterprise
Location of
operation
Location of
registration
Main business
Paid-in capital(ten thousand yuan)
Proportion of shareholding
(%)
Proportion of voting right(%)
Investment (ten thousand yuan)
Mode of
acquiring
Dao Securities
Investment Fund
investment
62
Zhongron
Dingxin-Dingron
glifeng No.11
Fund
3 4 Equity
investment 8,825.00 63.06 63.06 5,655.33 4
63
Shanghai
clearing house
inter-bank 0-1
years, high-to-
medium-garde
credit index
launched
securities
investment
funds
3 4 1,058.43 94.48 94.48 1,000.00 4
64
Shanghai
clearing house
inter-bank 1-3
years, high-garde
credit index
launched
securities
investment
funds
3 4 1,049.80 95.26 95.26 1,000.04 4
65
Shanghai
clearing house
inter-bank 1-3
years,
high-to-medium-g
arde
credit index
launched
securities
investment
funds
3 4 1,050.31 95.21 95.21 1,000.00 4
66
Shanghai
clearing house
inter-bank 3-5
years,
high-to-medium-g
3 4 1,034.66 96.66 96.66 1,000.10 4
F-161
Zhongrong International Trust Company Limited
No. Name of subsidiary
Gradation
Type
of enterprise
Location of
operation
Location of
registration
Main business
Paid-in capital(ten thousand yuan)
Proportion of shareholding
(%)
Proportion of voting right(%)
Investment (ten thousand yuan)
Mode of
acquiring
arde
credit index
launched
securities
investment
funds
67
Zhongrongrong
jun No. 73
Stand-along
Trust
5 4 3,498.08 100.00 100.00 3,498.08 4
Note: Type of enterprise: 1. Domestic non-financial sub-enterprises, 2. Domestic financial
sub-enterprises, 3. Offshore sub-enterprises, 4. Structured subject
Mode of acquiring: 1. Invest in, 2. Merger of enterprises under the same control, 3. Merger of
Enterprises not under the same Control, 4. Share purchase.
If the proportion of shares held by a subsidiary is different from the proportion of voting rights, it
should explain the proportion of voting rights and the reasons for the differences.
7.2 Important non-wholly-funded sub-enterprises
7.2.1 minority shareholders
No. Name of subsidiary Proportion of minority share
Profit or loss attributable to minority shareholders of current period
Dividends to minority shareholders of current period
Closing balance of minority interest
1 Zhongrong Fund Management Company
49% 8,449,807.53 640,500,140.72
2 Chuangliyuan No.1 assembled funds trust
28.30% 13,667,239.62 13,538,010.98 799,424,549.83
7.2.2 Major financial information
Item
Year ended 31/12/2017 Year ended 31/12/2016 Zhongrong Fund
Management Company
Chuangliyuan No.1 assembled funds
trust
Zhongrong Fund Management
Company
Chuangliyuan No.1 assembled funds
trust Current assets 1,222,035,079.48 18,469,827.83 846,210,961.37 29,516,500.89
Non-current assets: 130,904,721.77 1,949,820,900.00 146,119,389.55 2,505,500,000.00
F-162
Zhongrong International Trust Company Limited
Item
Year ended 31/12/2017 Year ended 31/12/2016
Zhongrong Fund Management
Company
Chuangliyuan No.1 assembled funds
trust
Zhongrong Fund Management
Company
Chuangliyuan No.1 assembled funds
trust Total of assets 1,352,939,801.25 1,968,290,727.83 992,330,350.92 2,535,016,500.89
Current liabilities 47,843,914.87 32,048,435.72 107,313,751.77 46,390.41
Non-current liabilities
Total of liabilities 47,843,914.87 32,048,435.72 107,313,751.77 46,390.41
Operating income 341,311,557.42 382,521,694.28 10,427,463.39
Net profit 17,206,219.47 131,588,822.88 60,961,450.86 25,039,014.59 Total comprehensive income 18,173,407.60 131,588,822.88 65,805,621.42 25,039,014.59
Cash flows from operating activities -229,880,216.63 655,308,062.11 -7,998,674.38 -2,512,609,893.52
7.2.3 Subjects newly included in the scope of consolidation and those who are no longer included in
the scope of consolidation
7.2.3.1 Subsidiaries or structured entities newly included in the consolidation scope in the current
period
Name Balance as at 31/12/2017of
net assets
Year ended 31/12/2017 of
net profit Remarks
Zhongrongrongjun No. 73 Stand-along Trust 34,752,319.96 -228,508.04 Zhongrong fund
Shanghai clearing house inter-bank 3-5 years, high-to-medium-garde credit index launched securities investment funds 10,619,847.95 273,955.06 Zhongrong
fund
Zhongrong-cherongrong No.2 Stand-along Trust 220,039,749.46 16,113,759.90 Chuangliyuan NO.1
Zhongrong-jiazhiningjun No.3 Stand-along Trust 50,006,606.83 3,406,559.56 Chuangliyuan NO.1
Zhongrong-cherongrong No.2 Stand-along Trust 150,754,845.00 2,295,940.89 Chuangliyuan NO.1
Yinhejinhui - Zhongrong Trust's First issue in 2016 Trust Beneficial Asset Support Plan 750,029,711.41 8,423.85 Chuangliyuan
NO.1
Zhongrong PT Securities Limited 60,552,524.06 5,098,716.28 Zhongrongdingxin
Zhongrong PT Finance Limited 4,126,016.63 1,822,021.18 Zhongrongdingxin
Zhongrong PT Trading Limited -94,336.79 18,349.79 Zhongrongdingxin
Zhongrong PT Captail Limited 669.86 Zhongrongdingxin
7.2.3.2 Subsidiaries or structured entities no longer included in the consolidation scope in the current
period
Name Disposal day of
net assets
Net profit from the beginning of the
current period to the disposal date
Remarks
Zhongrong-rongyinantai No.32 assembled funds trust 350,000,000.00 Chuangliyuan NO.1
Zhongrong Guofu Investment Management Company 18,530,424.19 4,859,314.93 Zhongrongdi
F-163
Zhongrong International Trust Company Limited
Name Disposal day of
net assets
Net profit from the beginning of the
current period to the disposal date
Remarks
ngxin
Zhongrong Guosheng(Tianjin) Management
Investment Company
Zhongrongdi
ngxin
Beijing Zhongrong Jintong Netwok Technology
Company 24,318.08 -504.81
Zhongrongdi
ngxin
Zhongrong-China Railway Constuction Investmen
Stand-along Trust 2,140,060.10 140,060.10
Zhongrongdi
ngxin
Beijing Ai Si Pi Wei Asset Management Company 5,067,025.25 -11,041.32 Zhongrongdi
ngxin
Shenwanlingxin-Zhangyunbaina Asset Management
Plan 88,583,261.02 124,129.42
Zhongrongdi
ngxin
Beijing Rong Xin Ding Fu Investment Management
Company 710.00 Zhongrong
fund
7.2.3.3 Sale of subsidiary equity in the current period
(1) Subsidiaries for the sale of equity to the loss of control in the current period
Name Disposal day Disposing of
price
Profits or losses
arising from
losing control
Profits or losses arising
from measurement of the
fair value of remaining
equity Zhongrong Guofu Investment Management Company
July 2017
400,492,720.00 385,668,380.65
Zhongrong
Guosheng(Tianjin)
Management Investment
Company
July 2017
Shenwanlingxin-Zhangyunba
ina Asset Management Plan
December
2017 99,748,195.04 350,000.00
Zhongrong-rongyinantai
No.32 assembled funds trust March 2017 350,000,000.0
0
7.2.3.4 Structured entities included in the consolidated financial statements
The structuralized entities that have been included in the scope of consolidated financial statement in
the current period are: Chuangliyuan No.1 assembled funds trust, Zhong Ding Hong Dao Securities
Investment Fund, Zhongrong Dingxin-Dingronglifeng No.11 Fund, Shanghai clearing house,
inter-bank 0-1 years, high-to-medium-grade credit index launched securities investment
funds, Shanghai clearing house, inter-bank 1-3 years, high-grade credit index launched securities
F-164
Zhongrong International Trust Company Limited
investment funds, Shanghai clearing house, inter-bank 1-3 years, high-to-medium-grade credit index
launched securities investment funds,Shanghai clearing house, inter-bank 3-5 years,
high-to-medium-grade credit index launched securities investment funds, Zhongrongjurong
No.73-individual trust fund
(1) Chuangliyuan No.1 assembled funds trust
This trust was established and administrated by the company. The fund size is RMB 1,596,900,000.00.
The company subscribed 1,145,000,000.00 shares by RMB 1,145,000,000.00, which takes up 71.70% of
the total shares.Raised fund of the trust was mainly used for projects of trust loans, other income
right trust or some other trust projects.
(2) Zhongding Hong Dao Security Investment Fund
This mutual fund was established on April 23, 2015 with a long-term duration. This fund invests on
securities, security investing mutual funds, national bonds, central bank bills, corporate bonds,
state-owned company bonds and stock index futures, and the initial size of the Fund is
51,000,000.00 yuan. The Company's wholly owned subsidiary Zhongrong Dingxin Investment
Management Company has subscribed 50,000,000.00 shares at RMB 50,000,000.00, which takes up
98.04% of the total shares. The fund share of other fund investors was 1.96%. In fiscal year 2017,
holders of other fund shares processed redemption of shares. By the end of December 2017, the
proportion of the company's investment in the total scale is 100.00%
(3) Zhongrong Dingxin-Dingronglifeng No.11 Fund
This fund was established on July 13 2016. The company's subsidiary Dazi Dingcheng Capital
Investment Company is the fund manager. The fund size is RMB 88,250,000.00. This fund is mainly
used to subscribe the share of Beijing Zhonghedingyuan Equity Investment Management
Center(LP),so the company can hold 0.64 percent of equity of Hunan happy sunshine interactive
entertainment media Co., Ltd. Indirectly.Cost of investments of "Zhongrongdingxin" is RMB
56,553,287.67, holding 55,650,000.00 fund shares, which takes up 63.06% of the total shares.
(4) Shanghai clearing house, inter-bank 0-1 years, high-to-medium grade credit index launched
securities investment funds
The fund is a bond-type sponsored securities investment fund. The total minimum fund-raising share
of the fund is RMB 10,000,000.00, and the period for holding the subscription share is not less than
3 years from the effective date of the fund contract. The fund was mainly used for products approved
F-165
Zhongrong International Trust Company Limited
by the China Banking Regulatory Commission and the China Securities Regulatory Commission,
such as the underlying index component vouchers and their optional component vouchers. The fund
is managed by Zhongrong Fund Management Co., Ltd.
(5) Shanghai clearing house, inter-bank 1-3 years, high-grade credit index launched securities
investment funds
The fund is a bond-type sponsored securities investment fund. The total minimum fund-raising share
of the fund is RMB 10,000,000.00, and the period for holding the subscription share is not less than
3 years from the effective date of the fund contract. The fund was mainly used for products approved
by the China Banking Regulatory Commission and the China Securities Regulatory Commission,
such as the underlying index component vouchers and their optional component vouchers. The fund
is managed by Zhongrong Fund Management Co., Ltd.
(6) Shanghai clearing house, inter-bank 1-3 years, high-to-medium-grade credit index launched
securities investment funds
The fund is a bond-type sponsored securities investment fund. The total minimum fund-raising share
of the fund is RMB 10,000,000.00, and the period for holding the subscription share is not less than
3 years from the effective date of the fund contract. The fund was mainly used for products approved
by the China Banking Regulatory Commission and the China Securities Regulatory Commission,
such as the underlying index component vouchers and their optional component vouchers. The fund
is managed by Zhongrong Fund Management Co., Ltd.
(7) Shanghai clearing house, inter-bank 3-5 years, high-to-medium-grade credit index launched
securities investment funds
The fund was established on December 22, 2016, with a scale of RMB 120,521,100.00, and the
Company has a subscription share of RMB 9,001,000.00 of 9,001,000.00. The fund was mainly used
for products approved by the China Banking Regulatory Commission and the China Securities
Regulatory Commission, such as the underlying index component vouchers and their optional
component vouchers.
(8) Zhongrong-jurong No.73 single fund trust
The product was purchased in 2017 and raised a total of 34,980,828.00 RMB. The product raised
funds for Guotian Real Estate Co., Ltd. Yuhua Project loan. Termination of the trust: December 5,
2018.
F-166
Zhongrong International Trust Company Limited
Item Proportion of
Shareholding
(%)
Capital size Net asset size Investment
return
Net profit
Chuangliyuan No.1 assembled
funds trust 71.70
1,968,290,727.8
3
1,936,242,292.1
1
100,575,777.7
7 131,588,822.88
Zhongding Hong Dao Security
Investment Fund 100.00 29,533,052.29 27,660,854.81 -1,616,989.18 -4,473,037.63
Zhongrong Dingxin-Dingronglifeng
No.11 Fund 63.06 86,210,596.54 86,200,596.54 -2,696.36
Shanghai clearing house,
inter-bank 0-1 years,
high-to-medium grade credit
index launched securities
investment funds
94.48 10,899,264.50 10,773,564.14 191,033.10
Shanghai clearing house, inter-bank
1-3 years, high-grade credit index
launched securities investment
funds
95.26 11,299,900.95 10,705,602.95 201,787.35
Shanghai clearing house, inter-bank
1-3 years, high-to-medium-grade
credit index launched securities
investment funds
95.21 10,815,499.91 10,691,882.07 190,149.31
Shanghai clearing house, inter-bank
3-5 years, high-to-medium-grade
credit index launched securities
investment funds
96.66 10,738,760.38 10,619,847.95 -1,207,911.74 273,955.06
Zhongrong-jurong No.73 single
fund trust 100.00 34,752,412.01 34,752,319.96 -208,140.98 -228,508.04
Total 2,162,540,214.4
1
2,127,646,960.5
3 97,542,735.87 127,741,505.67
7.2.3.5 Equity in structuralized entities not included in the scope of consolidated financial statement.
On December 31, 2017, the structuralized entities that are related to the Company but not included in
the scope of consolidated financial statement are: On December 31, 2017, the structuralized entities
that are related to the Company but not included in the scope of consolidated financial statement are:
Huashenghengli 1 Congrongchengzhang (Priority) Trust ,Zhongrong-huiju No.1 Collective Fund
Trust Plan, Zhongrong-zhujin No.169 Collective Fund Trust Plan, Zhongrong-yiyuan No.2
Collective Fund Trust Plan, Huarongyufu-chuangxing Asset Management Plan No.1,
Zhongrong-Rongyu No.10 Collective Fund Trust Plan, Zhongrong-RongShuo No.6 Collective Fund
Trust Plan, Zhongrongdingxintianshi Equity Investment Fund No.1, Zhongrong State-owned
F-167
Zhongrong International Trust Company Limited
Enterprises Reforms Flexible Allocation of Hybrid Securities Investment Funds, Zhongrong
Fund-rongyu Double Bond Securities Inversment Fund, Zhongrong Quantized Multiple Factors
Mixed Initiating Securities Investment Fund, Zhongrong quantified small facial stocks initiating
securities investment fund , Zhongrong Shanghai Hong Kongand Shenzhen's consumption theme A,
Zhongrong Fund-Graded Fund Conservatism Income Asset Management Plan N0.1, Zhongrong
Fund-Multi-Strategy Zengli Asset Management Plan N0.1, Zhongrong Fund-Rongliang Hedging
Asset Management Plan N0.1, Zhongrong Fund -rongyuan Asset Management Plan No.1,
Zhongrong zhizheng wenli Asset Management Plan No.1, Zhongrong Fund Fine Selection and
Allocation No. 1 Asset Management Plan, Zhongrong Fund-Jinniu Fund Strategy Choice fof Asset
Management Plan, Zhongrong Fund - Featured Dividend Configuration No. 1 Asset Management
Plan, Zhongrong Fund-rongyuan Asset Management Plan No.2, Zhongrong-dinggua Collective Fund
Trust Plan No.2, Zhongrong-ronggu Collective Fund Trust Plan No.21, Zhongrong-xiangrong
Collective Fund Trust Plan No.166, Zhongrong-zuoli Collective Fund Trust Plan No.83.
(1) Huashenghengli 1 Congrongchengzhang(Priority) Trust
This plan was established on August 2009 with RMB 601 million fund raised. As the secondary
client, the company purchase RMB 89.90 million trust products and took charge of management.
Due time of the trust was on August 2011 it was changed to August 2013 through 2012 Beneficiary
Meeting. Trust interest of the priority beneficiary was all distributed on August 23, 2013. Secondary
beneficiary signed supplementary contract, so the due time was postponed till August 25, 2016.
Structure of the trust was also changed, raising fund was changed to RMB 300.50 million. On
August 22 2016, beneficiary signed project rollover agreement,he project was postponed to
January26, 2018.
Details of the book value of equity-related assets and liabilities,as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Huashenghengli 1 Unstructured 43,425,923.5
9 43,425,923.59
43,526,212.6
8 43,526,212.68
F-168
Zhongrong International Trust Company Limited
(2)Zhongrong-huijujin No.1 Monetary Fund Collective Trust Plan
The trust plan was established on May 3, 2012 and the terminiation date was May 2, 2022. The
administrator was the company. The trust's existing scale was RMB 60,678,200,000.00. The
company purchased 2,000,000,000.00 shares for RMB 2,000,000,000.00. Investment scope includes
bank deposits, money market funds, bond funds, exchanges and inter-bank market bonds, and fixed
income products (including reverse repurchases with a term of less than one year, trust products or
trust beneficiary rights, claims or additional repurchases. Debt income rights, equity repurchased
equity income rights, fixed-income bank financial products, etc.
Details of the book value of equity-relatedassets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book
value
Maximum
risk
exposure
Zhongrong-huijujin No.1
Monetary Fund Collective
Trust Plan
Unstructured 2,000,000,000.00 2,000,000,000.00
(3) Zhongrong-zhujin No. 169 Collective Fund Trust Plan
The trust plan was established on August 1, 2017 and the termination date was November 8, 2019.
The administrator was the company. The trust raised a scale of 600,000,000.00 yuan, and the
company purchased 100,000,000.00 shares of RMB 100,000,000.00. The amount of the trust
property after deducting initial expenses is used to subscribe for the limited partnership share of
Shanghai Yuegan Venture Capital Partnership (Limited Partnership), and the income generated from
the trust property is used as the source of trust interest to obtain investment income for the
beneficiary.
Details of the book value of equity-relatedassets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value Maximum risk
exposure Book value
Maximum
risk
exposure
F-169
Zhongrong International Trust Company Limited
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value Maximum risk
exposure Book value
Maximum
risk
exposure
Zhongrong-zhujin No. 169
Collective Fund Trust Plan Priority leval
100,000,000.
00 100,000,000.00
(4) Zhongrong-juyuan No. 2 Collective Fund Trust Plan
The trust plan was established on November 10, 2017 and the termination date was November 10,
2022. The administrator was the company. The trust raised a scale of RMB1, 800,000,000.00, and
the company purchased 1,336,100,000.00 shares of RMB 1,336,100,000.00. The trust invests in
fixed-income investments from medical and health, cultural industries, real estate, and
environmental protection(Including trust products or trust beneficiary rights, equity gains from
additional repurchases, limited partnership funds, private funds such as contract funds, and
fixed-income bank wealth management products), as well as debt investment in these areas.
Details of the book value of equity-relatedassets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong-juyuan No. 2
Collective Fund Trust Plan Unstructured
1,336,100,000.00
1,336,100,000.00
(5)Huarong Yufu-Creative No.1 Asset management plan
The asset management plan was established on December 18, 2014 and expired on April 30, 2018.
The administrator was Huarong Yufu Equity Investment Fund Management Co., Ltd. The company
purchased 650,000,000.00 shares for RMB 650,000,000.00.
The capital of the asset management plan is used to subscribe for the trust plan approved by the
company. The income generated from the management of property, investment or disposal of the
planned property.
F-170
Zhongrong International Trust Company Limited
Details of the book value of equity-relatedassets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Huarong Yufu-Creative
No.1 Asset management
plan
Unstructured 650,000,000.
00 650,000,000.00
(6)Zhongrong-Rongyu No.10 Collective Fund Trust Plan
This trust plan was established on February 3, 2015 ,due date is January 23, 2020, the administrator
is the company. It mainly invests in M&A funds in medical and related industries. The Company's
wholly owned subsidiary Zhongrong Dingxin Investment Management Company subscribed 30
million shares with RMB 30 million.
Details of the book value of equity-related assets and liabilities,as well as maximum risk exposure
are given below:
Item
Dec 31, 2017 Dec 31, 2016
Book value
Maximum
risk
exposure
Book value Maximum risk
exposure
Zhongrong-Rongyu No.10 Collective Fund Trust Plan 30,000,000.00 30,000,000.00 30,000,000.00 30,000,000.00
(7)Zhongrong-RongShuo No.6 Collective Fund Trust Plan
The trust plan was established on December 30, 2014 and the expiry date was December 30, 2018.
The administrator was the company. The trust funds raised by the trust are used to subscribe for the
limited partnership share of Xinjingchenlan (Shanghai) Investment Center (Limited Partnership).
The company's subsidiary, Zhongrongdingxin, subscribed for the trust plan in 2014. On December
31, 2017, the company held 50,000,000.00 share of the product and the subscription cost was
RMB50, 000,000.00.
Details of the book value of equity-related assets and liabilities, as well as maximum risk exposure
F-171
Zhongrong International Trust Company Limited
are given below:
Item
Dec 31, 2017 Dec 31, 2016
Book value
Maximum
risk
exposure
Book value
Maximum
risk
exposure Zhongrong-RongShuo No.6 Collective Fund Trust Plan 50,000,000.00 50,000,000.00 50,000,000.00 50,000,000.00
(8)Zhongrongdingxintianshi Equity Investment Fund No.1
This mutual fund was established on April 1, 2015, and mainly invests in subscription of shares of
pre-IPO companies. During this year the Company's wholly owned subsidiary Zhongrong Dingxin
Investment Management Company subscribed 40 million shares of this fund with RMB 40 million.
The Company's wholly owned subsidiary Zhongrong Dingxin Investment Management Company is
the manager of this fund.
Details of the book value of equity-related assets and liabilities, as well as maximum risk exposure
are given below:
Item
Dec 31, 2017 Dec 31, 2016
Book value Maximum risk
exposure Book value
Maximum
risk
exposure
Zhongrongdingxintianshi Equity Investment Fund No.1 38,060,000.00 38,060,000.00
38,784,000.0
0
38,784,000.0
0
(9) Zhongrong State-owned Enterprises Reforms Flexible Allocation of Hybrid Securities
Investment Funds
The plan was established on December 16, 2014, with a raised scale of RMB 640,520,240.95. Zhong
Rong Fund, a subsidiary of the Company, subscribed for 20,000,000.00 shares for RMB
20,000,000.00. Scope of Investment: Financial instruments with good liquidity, including domestic
stocks, bonds, warrants, medium-term notes, central bank bills, short-term financing bonds, SME
private placement bonds, asset-backed securities, stock index futures, and laws and regulations or
other securities that the China Securities Regulatory Commission allows the fund to invest in.
Details of the book value of equity-relatedassets and liabilities, as well as maximum risk exposure
F-172
I
Zhongrong International Trust Company Limited
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum
risk
exposure
Book value
Maximum
risk
exposure
Zhongrong State-owned
Enterprises Reforms
Flexible Allocation of
Hybrid Securities
Investment Funds
Unstructured 18,429,735.40 18,429,735.40
(10)Zhongrong Fund-Rongyu Double Bond Securities Investment Fund
This plan was established on July 21, 2016 with RMB 419,672,984.05 fund raised, Zhongrong Fund
subscribed 1,000,000.00shares with RMB 1,000,000.00.This fund mainly invested in financial
instruments with good liquidity, including stocks issued by law, bonds, cash in bank, money market
instruments, warrant, ABS and some other financial instruments allowed by CSRC.
Details of the book value of equity-related assets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong Fund-Rongyu Double Bond Securities Investment Fund
Unstructured 966,000.00 966,000.00
(11) ZhongrongQuantized Multiple Factors Mixed Initiating Securities Investment Fund
This plan was established on December 29, 2016 with RMB 89,696,268.79 fund raised.Zhongrong
Fund subscribed10,001,000.00 shares with RMB 10,001,000.00. Scope of investment: financial
instruments with good liquidity, including stocks issued by law, bonds, bond repurchase, interbank
deposit, cash in bank, money market instruments, warrant, ABS, stock index futures and some other
financial instruments allowed by CSRC.
F-173
Zhongrong International Trust Company Limited
Details of the book value of equity-related assets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
ZhongrongQuantized Multiple Factors Mixed Initiating Securities Investment Fund
Unstructured 8,382,325.99 8,382,325.99 10,000,388.9
2 10,000,388.92
(12) Zhongrong Fund - Featured Dividend Configuration No. 1 Asset Management Plan
On May 17, 2017, the plan raised 122,042,309.59 yuan, and Zhong Rong Fund, a subsidiary of the
company, subscribed for 10,001,000.00 shares at RMB 10,001,000.00. The fund's investment scope
is financial instruments with good liquidity, including domestic issuance of listed stocks, bonds,
bond repurchases, money market instruments, bank deposits, interbank certificates of deposit,
warrants, asset-backed securities, stock index futures, and laws and regulations or China The CSRC
allows the fund to invest in other financial instruments.
Details of the book value of equity-relatedassets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum
risk
exposure
Book value
Maximum
risk
exposure
Zhongrong Fund - Featured Dividend Configuration No. 1 Asset Management Plan
Unstructured 10,517,473.31 10,517,473.31
(13)Zhongrong Shanghai Hong Kongand Shenzhen's consumption theme A
The plan was established on November 16, 2017, raising a total of RMB 298,956,669.34. Zhong
Rong Fund, a subsidiary of the company, subscribed for 10,001,000.00 shares at a price of RMB
10,001,000.00. Investment scope: Financial instruments with good liquidity, including domestic
issuance of listed stocks, bonds, bond repurchases, money market instruments, bank deposits,
F-174
Zhongrong International Trust Company Limited
interbank certificates of deposit, warrants, asset-backed securities, stock index futures, laws and
regulations or the China Securities Regulatory Commission Other financial instruments that allow
the fund to invest.
Details of the book value of equity-relatedassets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong Shanghai Hong Kongand Shenzhen's consumption theme A
Unstructured 9,971,199.44 9,971,199.44
(14)Zhongrong Fund Fine Selection and Allocation No. 1 Asset Management Plan
This plan was established on July 29, 2016 with RMB 321,298,100.00 fund raised. Zhongrong Fund
subscribed 3,200,000.00 preferred shares with RMB 3,200,000.00. Scope of investment: financial
instruments with good liquidity, including graded fund listed on the exchange, money market
fund, national debt, central bank bills, financial bonds, cash in bank. It could invest in the money
market fund managed by the manager as needed.
Details of the book value of equity-related assets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong Fund Fine Selection and Allocation No. 1 Asset Management Plan
Unstructured 3,206,563.65 3,206,563.65 3,222,564.46 3,222,564.46
(15) Zhongrong Fund-Multi-Strategy ZengIi Asset Management Plan No.1
This plan was established on November 16, 2016 with RMB 222,058,586.53 fund raised. The
company subscribed 2,300,000.00 Preferred shares with RMB 2,300,000.00. This fund mainly inve
F-175
Zhongrong International Trust Company Limited
sted in financial instruments with good liquidity, including Shanghai and Shenzhen A shares traded
on thestock exchange, securities investment fund, national debt, central bank bills, financial bonds,
cash inbank,etc. It could invest in the money market fund or graded fund managed by the manager as
needed.
Details of the book value of equityrelated assets and liabilities, as well as maximum risk exposure ar
e given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong Fund-Multi-Strategy ZengIi Asset Management Plan No.1
Unstructured 2,281,920.19 2,281,920.19 2,298,022.45 2,298,022.45
(16)Zhongrong FundRongliang Hedging Asset Management Plan N0.1
This plan was established on December 29, 2016 with RMB62,814,863.09 fund raised. Zhongrong F
und subscribed 1,000,000.00 shares with RMB 1,000,000.00. Scope of investment: stocks issued by
law traded on the stock exchange, bonds, stock index futures, treasury bond futures,central bank bills
, shortterm financing bonds and super shortterm financing bonds, mediumterm notes traded in bank
market, exchangeable bonds, securities investment fund and some other financial products allowed b
y CSRC.
Details of the book value of equityrelated assets and liabilities,as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong Fund-Rongliang Hedging Asset Management Plan N0.1
Unstructured 1,003,039.00 1,003,039.00 1,000,038.88 1,000,038.88
(17) Zhongrongjiyuan-rongyuan No.1 Asset management plan
F-176
Zhongrong International Trust Company Limited
The plan was established on March 21, 2017 and raised a total of RMB 81,809,823.50. Zhong Rong
Fund, a subsidiary of the Company, subscribed for 1,000,000.00 shares for RMB 1,000,000.00.
Scope of Investment: Money market instruments, including cash, bank calls, time deposits, notice
deposits, inter-bank deposits, agreement deposits, interbank certificates of deposit, bond repurchases,
public money funds; fixed-income securities listed on exchanges and interbank markets, Including
interest rate bonds, credit bonds. Public bond funds, including funds issued and managed by asset
managers.
Details of the book value of equity-relatedassets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrongjiyuan-rongyuan No.1 Asset management plan
Unstructured 1,093,049.19 1,093,049.19
(18) Zhongrong zhizhen stable profit No.1
The plan was established on June 26, 2017 and raised a total of RMB 44,147,037.45. Zhong Rong
Fund, a subsidiary of the Company, subscribed for 1,000,000.00 shares with a subscription of RMB
1,000,000.00. Investment scope: Fixed income category, including bonds, non-public oriented debt
financing instruments (PPN), non-public issuance of corporate bonds, asset-backed notes,
asset-backed securities, etc.; money market instruments and deposit instruments, including cash,
bank deposits, money funds , bond repurchases, etc.; Treasury bond futures, stock index futures.
Details of the book value of equity-relatedassets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
F-177
Zhongrong International Trust Company Limited
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong zhizhen stable profit No.1 Unstructured 977,043.97 977,043.97
(19) Zhongrong Fund Fine Selection and Allocation No. 1 Asset Management Plan
This entity was established on March 30, 2015 with RMB 505,000,000.00 fund raised. The Compay'
s subsidiary Zhongrong Mutual Fund Management Company subscribed 5 million preferred shares o
f with RMB 5 million. The scope of investment of this entity include: new shares legally issued in th
e primary market and stocks in secondary market in China, fixed income assets such as bonds legally
issued in primary market and bonds and convertible bonds legally issued in secondary market, centr
al bank bills, reverse purchasebonds, bank deposits, and money market instrumentsetc., as well as st
ock index futures, publicly offered funds (including planned manager's fund products) and other fina
ncial instruments which are approved by laws, regulations,regulators and all clients. The Company's
subsidiary Zhongrong Mutual Fund Management Companyis the manager of this plan.
Details of the book value of equityrelated assets and liabilities, as well as maximum risk exposure a
re given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong Fund Fine Selection and Allocation No. 1 Asset Management Plan
Unstructured 4,485,000.00 4,485,000.00 4,150,000.00 4,150,000.00
(20) Zhongrong Fund-Jinniu Fund Strategy Choice fof Asset Management Plan
This plan was established on July 27, 2016 with RMB 51,000,000.00 fund raised,. The company sub
scribed 1,000,000.00 Preferredshares with RMB 1,000,000.00. This fund mainly invested in securitie
s investment fund, cash in bank, money market instrument and so on. It could invest in the money m
arket fund managed by the manager as needed.
F-178
Zhongrong International Trust Company Limited
Details of the book value of equityrelated assets and liabrities,as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong Fund-Jinniu Fund Strategy Choice fof Asset Management Plan
Unstructured 1,036,000.00 1,036,000.00
(21) Zhongrong fund- featured dividend configuration No.1 asset management plan
The plan was established on April 19, 2017 and raised a total of RMB 30,064,319.98. Zhong Rong
Fund, a subsidiary of the company, subscribed for 2,300,000.00 shares at RMB 2,300,000.00. Scope
of Investment: Stocks listed on the Stock Exchange of Hong Kong Stock Exchange Market Trading
Interconnection System, cross-border financial derivatives such as OTC options, money market
instruments, bank deposits, money funds, laws and regulations or China Other financial instruments
permitted by the Securities and Futures Commission.
Details of the book value of equity-relatedassets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong fund- featured dividend configuration No.1 asset management plan
Unstructured 2,641,637.52 2,641,637.52
(22) Zhongrong fund- Involvement hedge No.2 asset management plan
The plan was established on April 25, 2017 and raised a total amount of RMB 32,500,000.00. Zhong
Rong Fund, a subsidiary of the Company, subscribed for 1,500,000.00 shares with a subscription of
RMB 1,500,000.00. Scope of investment: Investment varieties traded on securities and futures
exchanges such as stocks, bonds, stock index futures, etc. issued in accordance with the law;
F-179
Zhongrong International Trust Company Limited
investment products of inter-bank market transactions such as central bank bills, short-term
financing bills, and medium-term notes; and approvals by financial supervision agencies such as
securities investment funds or Recorded and issued financial products and other investment products
approved by the China Securities Regulatory Commission.
Details of the book value of equity-relatedassets and liabilities, as well as maximum risk exposure
are given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong fund- Involvement hedge No.2 asset management plan
Unstructured 1,519,500.00 1,519,500.00
(23) Zhongrong-Dinggua No. 2 -ronggu No. 21 Trust Loan
-
Zhongrong-Zhuoli No.83 Collective Fund Trust Plan."
The funds raised from the above collective trust plan are mainly used for the trust loan, which invest
in the share of the Trust: The main Chuangliyuan No. 1 Collective Fund Trust Plan which is the
structure of the company's consolidation scope and the yinhe Jinhui - Zhongrong Trust's 2016 First
Trust Beneficial Assets Support Plan, which was incorporated into the Chuang Liyuan No. 1
Collective Fund Trust Plan, including:
The Zhongrong-Dinggua No.02 Collective Fund Trust Plan was established on May 23, 2017. The
expiry date is May 23, 2022. The cumulative scale by the end of December 31, 2017 was 1.302
billion yuan, and subscribed for 80 million shares with a subscription of 80 million yuan.
The Zhongrong-ronggu No. 21 Trust Loan Collective Trust Plan was established on July 21, 2017.
The expiry date was October 21, 2018. By the end of December 31, 2017, the continuation size was
RMB 1 billion, and Chuang Liyuan NO.1 subscribed for 200 million shares with a subscription of
200 millionyuan;
F-180
Zhongrong International Trust Company Limited
The Zhongrong-xiangrong No. 166 Trust Loan Collective Trust Plan was established on September
27, 2017. The expiry date was March 27, 2019. By the end of December 31, 2017, the continuation
size was RMB 0.4 billion, and Chuang Liyuan NO.1 subscribed for 200 million shares with a
subscription of 200 million yuan;
The Zhongrong-zhuoli No. 83 Trust Loan Collective Trust Plan was established on June 2, 2016. The
expiry date was June 2, 2019. By the end of December 31, 2017, the continuation size was RMB 1
billion, and Yinhejinhui-Zhongrong trust 2016 Beneficiary Asset Support Special Plan subscribed for
500 million shares with a subscription of 500 million yuan;
Details of the book value of equityrelated assets and liabilities, as well as maximum risk exposure a
re given below:
Item Type of
structuring
Dec 31, 2017 Dec 31, 2016
Book value
Maximum risk
exposure
Book value
Maximum
risk
exposure
Zhongrong-Dinggua No. 2 Collective Fund Trust Plan Unstructured 80,000,000.00 80,000,000.00
Zhongrong-ronggu No. 21 Trust Loan Collective Fund Trust Plan
Unstructured 200,000,000.0
0 200,000,000.00
Zhongrong-Xiangrong No.166 Collective Fund Trust Plan
Unstructured 200,000,000.0
0 200,000,000.00
Zhongrong-Zhuoli No.83 Collective Fund Trust Plan. Unstructured
500,000,000.0
0 500,000,000.00
500,000,000.0
0
500,000,000.0
0
Business combination not under the same control during the current period
company Acquisition date Net assets
Fair value of Idientifiable net assets Transaction price Price method
Zhongrong PT
Securities Limited January,2017 28,854,084.98 28,854,084.98 Asset base method 52,801,589.97
Zhongrong PT Finance Limited January,2017
2,173,865.39 2,173,865.39 Asset base method 2,173,865.390 Zhongrong PT Trading Limited January,2017
Continued)
company
Goodwill Income of purchased party from acquisition date to the end of
the period
Net profit of purchased party from acquisition date to the end of
the period Price method
F-181
Zhongrong International Trust Company Limited
company
Goodwill Income of purchased party from acquisition date to the end of
the period
Net profit of purchased party from acquisition date to the end of
the period Price method
Zhongrong PT Securities
Limited 23,947,504.99 The lower of cost or
market 29,031,380.46 5,098,716.28
Zhongrong PT Finance Limited
The lower of cost or
market
60,783,427.33 1,822,021.18
Zhongrong PT Trading Limited 48,146.48 18,349.79
Total 23,947,504.99 89,862,954.27 6,939,087.25
Note: The confirmation basis for the acquisition of the fair value of the identifiable net assets of the three companies
mentioned above: both were confirmed by Walker (Beijing) International Asset Valuation Co., Ltd., and issued by the
Walker Review Word [2017] No. 0203, Walker's Comment Word [2017] Verification No. 0204 and the evaluation
report No. 0205 of the Walkerson Comment [2017]. The transaction price is monetary resource. Changes of Parent
company's share of owner's equity in subsidiaries:
Subsidiaries
Total sub - enterprise owner undefined s equity(set out as "Equity attributable to shareholders of parent company")
Share of parent company in ownerundefineds equity of child
enterprise
As at 1/1/2017 As at 31/12/2017 As at 1/1/2017 As at 31/12/2017 Zhongrong dingxin investment management company 1,613,109,831.74 2,250,695,450.51 1,613,109,831.74 2,250,695,450.51
Zhongrong fund management Co., Ltd. 884,992,289.76 1,303,128,913.06 451,346,067.78 664,595,745.66
Chuangliyuan No.1 collective funds trust 2,534,970,110.48 1,585,488,430.26 2,336,148,925.47 1,136,817,742.28
8. Notes to the consolidated financial statements
8.1 Cash at bank and on hand Item Balance as at 31/12/2017 Balance as at 1/1/2017
Cash on hand 1,642.33 5,279.33
Cash at bank 9,031,215,333.53 11,080,509,172.68
Other monetary funds 61,978.57 19,660,857.53
Total 9,031,278,954.43 11,100,175,309.54 Including: the total balance deposited overseas 2,045,713,354.56 2,205,943,685.67
8.2 Deposit Reservation for Balance Item Balance as at 31/12/2017 Balance as at 1/1/2017
Customer payment 845,454.55
Total 845,454.55
F-182
Zhongrong International Trust Company Limited
8.3 Financial assets measured at fair value through profit or loss for the current period Item Balance as at 31/12/2017 Balance as at 1/1/2017
1. Financial assets held for trading 29,453,200.00 14,698,452.95
Including: Debt instrument investment 29,453,200.00 14,698,452.95
Equity instrument investment
Others
2. Financial assets designated upon initial
recognition as at fair value through profit
or loss
4,722,676,618.02 4,071,815,663.46
Including: Debt instrument investment 186,896,843.54
Equity instrument investment 350,960,988.69
Others 4,535,779,774.48 3,720,854,674.77
Total 4,752,129,818.02 4,086,514,116.41
Note: It is designated as a financial asset that is measured at fair value through profit or loss others are money
market funds purchased.
8.4 Accounts receivable
8.4.1 Accounts receivable by category
Item
Balance as at 31/12/2017
Balance Allowance for doubtful debts
Amount PCT (%) Amount Allowance
rate (%) Individually significant and subject to separate allowance
Allowance for doubtful debts on portfolio 168,304,186.08 100.00 Individually insignificant but allowance for doubtful debts individually
Total 168,304,186.08 100.00
Continued)
Item
Balance as at 1/1/2017
Balance Allowance for doubtful debts
Amount PCT (%) Amount Allowance
rate (%) Individually significant and subject to separate allowance
Allowance for doubtful debts on portfolio 211,359,361.10 100.00 Individually insignificant but allowance for doubtful debts individually
Total 211,359,361.10 100.00
8.4.2 Withdrawal of bad debt provision accounts receivable according to credit risk characteristics
(1) Accounts receivable whose allowance for doubtful debts is using aging analysis method:
F-183
Zhongrong International Trust Company Limited
Aging
As at 31/12/2017 As at 1/1/2017
Balance Allowance rate
(%)
Allowance for doubtful
debts Balance Allowance
rate(%)
Allowance for doubtful
debts Within 1 year 168,304,186.08 100.00 211,359,361.10 100.00
Total 168,304,186.08 100.00 211,359,361.10 100.00
8.5 Prepayments
8.5.1 Aging analysis of prepayments
Aging Balance as at 31/12/2017 Balance as at 1/1/2017
Balance PCT (%) Allowance for doubtful debts Balance PCT (%) Allowance for
doubtful debts Within 1 year 277,474.30 100.00
Total 277,474.30 100.00
8.6 Interest receivable
8.6.1 Items of interest receivable Item Balance as at 31/12/2017 Balance as at 1/1/2017
Fixed-term deposits 13,961,716.69 28,396,697.17
Entrusted loans 4,188,573.61
Bond investments 5,828,777.48 6,068,146.44
Others 30,015,091.43 0.77
Total 49,805,585.60 38,653,417.99
Note: "Others" mainly are interest accured for the trust plan.
8.7 Dividends receivable
Item Balance as at 31/12/2017
Balance as at 1/1/2017
Reasons of unrecovered Whether impaired
Dividends Receivable within 1 year
Incl: Xinhu Wealth Co.Ltd. 34,358,320.39 Dividends Receivable over 1 year
Incl: Xinhu Wealth Co.Ltd. 20,803,274.80
Total 55,161,595.19
8.8 Other receivables
Category
Balance as at 31/12/2017
Balance Allowance for doubtful debts
Amount PCT (%) Amount Allowance
rate (%) Individually significant and subject to separate allowance 30,000,000.00 17.20
Allowance for doubtful debts on portfolio 122,503,109.74 70.23 468,542.06 100.00
Group 1: Grouped by age 78,339,960.12 44.91 468,542.06 100.00
Group 2: Grouped by nature of receivable 44,163,149.62 25.32
F-184
Zhongrong International Trust Company Limited
Category
Balance as at 31/12/2017
Balance Allowance for doubtful debts
Amount PCT (%) Amount Allowance
rate (%) Individually insignificant but allowance for doubtful debts individually 21,917,335.00 12.57
Total 174,420,444.74 100.00 468,542.06 100.00
Continued)
Category
Balance as at 1/1/2017
Balance Allowance for doubtful debts
Amount PCT (%) Amount Allowance
rate (%) Individually significant and subject to separate allowance 110,003,414.11 18.52 12,624,255.6
0 96.42
Allowance for doubtful debts on portfolio 462,917,578.43 77.96 468,542.06 3.58
Group 1: Grouped by age 425,885,027.15 71.72 468,542.06 3.58
Group 2: Grouped by nature of receivable 37,032,551.28 6.24 Individually insignificant but allowance for doubtful debts individually 20,895,463.02 3.52
Total 593,816,455.56 100.00
13,092,797.66 100.00
Note: Portfolio 1 is a provision for bad debts accrued according to age, and Portfolio 2 is a provision for bad debts
accrued based on the nature of payments.
8.8.1 Individually significant and subject to separate allowance of other receivables
Company name Book balance as
at 31/12/2017
Allowance for
doubtful debts Aging
Allowance rate
(%)
Allowance
reason
Monetary Fund Fast
Redemption (T+0)
Capital prepaid
30,000,000.00 Within 1 year
Total 30,000,000.00
8.8.2 Allowance for doubtful debts on portfolio
(1) Other receivables whose allowance for doubtful debts is using aging analysis method:
Aging
Balance as at 31/12/2017 Balance as at 1/1/2017
Balance Allowance rate (%)
Allowance for doubtful debts Balance
Allowance rate
(%)
Allowance for doubtful debts
Within 1 year 77,871,418.06 99.40 425,416,485.09 99.89
1-2 years
2-3 years More than 3 years 468,542.06 0.60 468,542.06 468,542.06 0.11 468,542.06
Total 78,339,960.12 100.00 468,542.06 425,885,027.15 100.00 425,885,027.15
(4) Other receivables whose doubtful debts is made
F-185
Zhongrong International Trust Company Limited
Category
Balance as at 31/12/2017 Balance as at 1/1/2017
Balance Allowance rate (%)
Allowance for
doubtful debts
Balance Allowance rate
(%)
Allowance for doubtful
debts
Group 2:Grouped by nature of receivable 44,163,149.62 37,032,551.28
Total 44,163,149.62 37,032,551.28
8.8.3Other receivables written-off during the year
Company name Nature of
other receivables
Written-off amount Written-off reason Written-off
procedure
Whether generated by the
related party transactions or
not Zhongrong Fund - Selective No.3 Asset Management Plan
Accounts prepaid for products
32,629,078.22
The product does not match withdraw condition in expiry liquidation
shareholders' committee resolution
Deny
Total 32,629,078.22
8.8.4 Other receivables due from the top five debtors of the Company are as follows:
Debtor name Nature of balance
Balance as at 31/12/2017 Aging
Percentage in
total other
receivables (%)
Balance of allowance for
doubtful debts as at 31/12/2017
Beijing Jiangong Haiya Construction
Engineering Co., Ltd.
Prepaid decoration
cost 32,143,431.33 Within 1 year 18.43
E-commerce Department Loan 30,000,000.00 Within 1 year 17.20
Beijing Tianlide Electromechanical
Equipment Co., Ltd. Rent deposit 11,534,246.52 Within 1 year 6.61
Beijing Construction Machinery Tianrun Asset Management
Co., Ltd.
Rent deposit 7,301,811.00 Within 1 year 4.19
Inspur Software Co., Ltd.
accounts prepaid 5,549,789.54 Within 1 year 3.18
Total 86,529,278.39 49.61
8.9 Buying back the sale of financial assets Item Balance as at 31/12/2017 Balance as at 1/1/2017
Bond 38,000,000.00 10,000,000.00
Total 38,000,000.00 10,000,000.00
8.10 Inventories
8.10.1 Inventories by categories
Category
Balance as at 31/12/2017 Balance as at 1/1/2017
Book balance Provision for diminution in
value
Carrying amount Book balance
Provision for diminution
in value
Carrying amount
Finished goods 34,039.85 34,039.85
F-186
Zhongrong International Trust Company Limited
Category
Balance as at 31/12/2017 Balance as at 1/1/2017
Book balance Provision for diminution in
value
Carrying amount Book balance
Provision for diminution
in value
Carrying amount
Total 34,039.85 34,039.85
8.11 Loans and advances
8.11.1 Distribution of loans and advances by individuals and enterprises Item Balance as at 31/12/2017 Balance as at 1/1/2017
Business Loans and advances 3,544,052,778.70 700,000,000.00
Loans 3,544,052,778.70 700,000,000.00
Total Loans and advances 3,544,052,778.70 700,000,000.00
Less: Loan loss provision
Include: Individual amount
Group amount
Book Value of Loans and advances 3,544,052,778.70 700,000,000.00
8.11.2 Loans and advances by industry distribution
Item Balance as at
31/12/2017 PCT (%)
Balance as at
1/1/2017 PCT (%)
Manufacture 634,193,616.51 17.89
Transportation, warehousing and postal services
397,390,761.60 11.21
Information Transmission, Computer Services and Software Industry
69,319,912.54 1.96
finance 713,256,903.45 20.13
real estate 1,059,891,584.60 29.91 350,000,000.00 50.50
Leasing and Business Services 670,000,000.00 18.90 350,000,000.00 50.50
Total Loans and advances 3,544,052,778.70 100.00 700,000,000.00 100.00
Less: Loan loss provision
Include: Individual amount
Group amount
Book Value of Loans and advances 3,544,052,778.70 100.00 700,000,000.00 100.00
8.11.3 Distribution of loans and advances by region
Item Balance as at
31/12/2017 PCT (%)
Balance as at
1/1/2017 PCT (%)
South China 988,448,488.05 27.89 50,000,000.00 7.14
Northeast China 500,000,000.00 14.11
North China 1,000,000,000.00 28.22 350,000,000.00 50.00
East China 104,019,912.54 2.94
Central and South China 202,876,447.09 5.72
F-187
Zhongrong International Trust Company Limited
Northwest China 420,000,000.00 11.85 300,000,000.00 42.86
Southwest China 328,707,931.02 9.27
Total Loans and advances 3,544,052,778.70 100.00 700,000,000.00 100.00
Less: Loan loss provision
Include: Individual amount
Group amount
Book Value of Loans and advances 3,544,052,778.70 100.00 700,000,000.00 100.00
8.11.4 Distribution of loans and advances by guarantee Item Balance as at 31/12/2017 Balance as at 1/1/2017
Credit loans 56,368,128.97
Guaranteed loans 71,684.60
Secured loans 3,487,612,965.13 700,000,000.00
Include: Among them: mortgage loans
691,588,774.48
Pledge loans 2,796,024,190.65 700,000,000.00
Total Loans and advances 3,544,052,778.70 700,000,000.00
Less: Loan loss provision
Include: Individual amount
Group amount
Total Loans and advances 3,544,052,778.70 700,000,000.00
8.12 Available-for-sale financial assets
8.12.1 Available-for-sale financial assets
Item
As at 31/12/2017 As at 1/1/2017
Book balance Provision
for impairment
Carrying amount Book balance
Provision for
impairment
Carrying amount
Available-for-
sale debt
instruments
502,435,261.18 502,435,261.
18 613,424,186.
86 613,424,186.86
Available-for-
sale equity
instruments
7,713,700,175.52
100,444,006.57
7,613,256,168.95
5,609,206,480.37
194,892,403.50
5,414,314,076.87
Including:
measured at
fair value
1,900,240,685.61
100,444,006.57
1,799,796,679.04
2,778,195,123.19
194,892,403.50
2,583,302,719.69
measured at
cost 5,813,459,48
9.91 5,813,459,489.91
2,831,011,357.18 2,831,011,357
.18
Total 8,216,135,436.70
100,444,006.57
8,115,691,430.13
6,222,630,667.23
194,892,403.50
6,027,738,263.73
8.12.2 Available-for-sale financial assets measured at fair value
F-188
Zhongrong International Trust Company Limited
Category of available-for-sale financial assets
Available-for-sale
equity instrument
Available-for-sale
debt instrument Others Total
Cost of equity instrument/
amortized cost of debt instrument 1,707,716,362.04 1,707,716,362.04
Fair value 1,799,796,679.04 1,799,796,679.04
Accumulated change of fair value
in other comprehensive income 192,524,323.57 192,524,323.57
Impairment provision 100,444,006.57 100,444,006.57
8.12.3Changes in impairment of available-for-sale financial assets Category of available-for-sale
financial assets
Balance as at
1/1/2017 Additions Reductions
Balance as at
31/12/2017
Debt instrument investment
Equity instrument investment 194,892,403.50 330,429.37 94,778,826.30 100,444,006.57
Total 194,892,403.50 330,429.37 94,778,826.30 100,444,006.57
8.12.4Available-for-sale financial assets measured at end of period
Name of investee
Book balance
Provision
for
impairment
ratio in
investe
e (%)
Dividen
ds
Balance as at
1/1/2017 Additions Reductions
Balance as at
31/12/2017
Huijujin No.1 monetary fund
collective fund trust plan
4,000,000,0
00.00
2,000,000,0
00.00
2,000,000,000
.00 3.30 75,013,6
98.63
Zhujin No.169 collective fund
trust plan
700,000,000
.00
600,000,000
.00
100,000,000.0
0 16.67
Jiyuan No.2 collective fund trust
plan
1,800,000,0
00.00
463,900,000
.00
1,336,100,000
.00 74.23
Huarong yufu-creative No.1 Asset
management plan
650,000,000
.00
650,000,000.0
0 20.97
China Trust Industry Protection
Fund (Zhongrong)
117,561,283.3
4
15,296,917.
90
132,858,201.2
4 1,783,01
2.80
China Trust Industry Protection
Fund (Zhongrong) (Chuangliyuan
No.1)
25,500,000.0
0 25,500,000.00
Rongyu No.1 Equity Investment
Collective fund Trust Plan
600,000,000.
00
600,000,000
.00
46,257,5
26.02
Chengan No.1 Collective fund
Trust Plan Usufruct
280,000,000.
00
280,000,000
.00
9,987,94
5.21
Xingchuang NO.48 Collective
fund Trust Plan Usufruct
100,000,000.
00
100,000,000
.00
1,474,52
0.54
Zhuoli No.83 Collective fund 500,000,000. 500,000,000 500,000,000 500,000,000.0
50.00 8,227,39
F-189
Zhongrong International Trust Company Limited
Trust Plan Usufruct 00 .00 .00 0- 7.26
Hongxi No.3 Collective fund
Trust Plan Usufruct
300,000,000.
00
300,000,000
.00
5,064,65
7.54
Huijiner B1 109,315,950
.00
109,315,950.0
0 18.64
2,797,31
5.07
Huijiner B2 165,004,950
.00
165,004,950.0
0 28.13
3,189,78
0.00
Dinggua No.2 collective fund
trust plan
80,000,000.
00 80,000,000.00
6.14
Ronggu No.21 Trust Loan
Collective Fund Trust Plan
200,000,000
.00
200,000,000.0
0 20.00
3,640,00
0.26
Zhongrong-xiangrong No.166
Collective Fund Trust Plan
200,000,000
.00
200,000,000.0
0 50.00
867,139.
12
He jun business school regular
supplement 5,000,000.00 5,000,000.00
3.00
Huzhou rongyuan ruikang Stock
investment partnership company 1,000,000.00 1,000,000.00
0.09
Hubei Province Yangtze River
Economic Zone Industrial Fund
Management Limited
2,000,000.00 2,000,000.00
1.00
Zhongrong-rongshuo No.6
Collective Fund Trust Plan
50,000,000.0
0 50,000,000.00
18.41
Zhongrong-rongyu No.10
Collective Fund Trust Plan
30,000,000.0
0 30,000,000.00
10.28
Zhengtong securities Co., Ltd. 25,000,000.0
0 25,000,000.00
1.24
Rongwu guiding Asset
Management Partnership (Limited
Partnership)
33,200,000.0
0 33,200,000.00
15.30
Chongqing Dinv Ares Television
Media Co., Ltd.
44,062,500.0
0
44,062,500.
00
ZRConcordhealthcareInvestmentS
P
541,981,185.
17
541,981,185
.17
Beijing Fengyue Taihe Equity
Investment Partnership (Limited
Partnership)
40,493,100.0
0 774,000.00 - 41,267,100.00
7.71
Shenzhen Zhong Rong qidian
Investment Management Center
(Limited Partnership)
100,000.00 100,000.00
0.01
Shanghai Yuque Enterprise
Management Partnership (limited
partnership)
1,000,000.00 1,000,000.0
0 -
Zhuhai Rongwu Equity 100,000.00 100,000.00
0.02
F-190
Zhongrong International Trust Company Limited
Investment Partnership (Limited
Partnership)
Shanghai ChangxuanInvestment
Co., Ltd. 1.00 1.00
Beijing Rong Dingkun Investment
Center (limited partnership)
40,020,000.0
0 40,020,000.00
17.03
Tairong Hanxin (Tianjin)
Investment Management
Partnership (Limited Partnership)
5,000,000.00 5,000,000.0
0
China Railway Construction and
Financial (Beijing) Investment
Management Co., Ltd.
2,000,000.00 2,000,000.0
0
Hunan Happy Sunshine
Interactive Entertainment Media
Co., Ltd. (mango tv)
86,993,287.6
7 - 86,993,287.67
0.64
Zhuguang Holdings Preferred
Stock
264,918,618.
31
49,563,957.
22
215,354,661.0
9
Xingmei Holdings Private Equity 348,505,568.
55
61,424,968.
46
287,080,600.0
9
China CITIC Bank Win-Win
Guaranteed Daily Express
A-Month RMB Wealth
Management Product
20,000,000.
00
20,000,000.
00
Zhongrongdingxin-wenlong No.2 18,000,000.
00
18,000,000.
00
Zhongrong-Changhe Shengshi
No. 3 Collective Fund Trust Plan
20,000,000.
00
20,000,000.
00
Total 3,444,435,54
4.04
8,478,391,8
17.90
5,606,932,6
10.85
6,315,894,751
.09
Note:Jiyuan No.2 collective fund trust plan Huarong yufu-creative No.1 Asset management plan Zhuoli No.83
Collective fund Trust Plan Usufruct HuijinerB2 Ronggu No.21 Trust Loan Collective Fund Trust Plan
Zhongrong-xiangrong No.166 Collective Fund Trust Plan are invested in unclassified trust plans or ABS priority
fixed- ncome. Although the share held
at the end of the period exceeds 20%, it does not have significant impact and control, so they are recognized as
available for sale financial assets.
8.12.5 Available-for-sale financial assets with restricted sales period
Detailed varieties
Deadline of
restricted sales
period
Balance as at
1/1/2017
Balance as at
31/12/2017
Henan Huaying Agricultural Development Co., 2019/1/20 328,335,000.00 283,815,000.00
F-191
Zhongrong International Trust Company Limited
Ltd. regular supplement
8.13 Long-term equity investments
8.13.1Categories of Long-term equity investments
Item Balance as at
1/1/2017 Additions Reductions
Balance as at
31/12/2017
Investment in joint ventures 2,101,008,100.38 173,388,312.75 127,644,333.71 2,146,752,079.4
2
Subtotal 2,101,008,100.38 173,388,312.75 127,644,333.71 2,146,752,079.4
2
Minus Depereciation reserves
Total 2,101,008,100.38 173,388,312.75 127,644,333.71 2,146,752,079.4
2
F-192
Zhon
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Com
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F-193
Zhon
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Com
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Lim
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18,5
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18,6
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F-194
Zhon
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Com
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Not
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cipa
te in
the
com
pany
's m
ajor
bus
ines
s dec
isio
ns.
8.13
.3 M
ajor
fina
ncia
l inf
orm
atio
n of
join
t ven
ture
s
Item
Yea
r end
ed 3
1/12
/201
7 Y
ear e
nded
31/
12/2
016
Chi
na T
rust
Indu
stry
Pr
otec
tion
Fund
Co.
, Ltd
. H
arbi
n R
ural
Com
mer
cial
B
ank
Co.
, Ltd
. C
hina
Tru
st
Reg
istra
tion
Co.
, Ltd
. C
hina
Tru
st In
dust
ry
Prot
ectio
n Fu
nd C
o., L
td.
Shan
ghai
Ron
gou
Equi
ty In
vest
men
t Fu
nd M
anag
emen
t C
o., L
td.
Har
bin
Rur
al
Com
mer
cial
Ban
k C
o.,
Ltd.
Cur
rent
ass
ets
59,9
51,4
80,8
80.5
5 15
,531
,209
,830
.10
2,55
9,18
3,85
0.01
39
,550
,594
,405
.45
17,6
13,5
49.2
3 19
,840
,419
,017
.37
Non
-cur
rent
ass
ets
7,44
8,08
7,70
6.95
26
,287
,319
,172
.24
15,0
62,6
25.7
9 9,
986,
054,
756.
82
16
,572
,714
,249
.15
Tota
l of a
sset
s 67
,399
,568
,587
.50
41,8
18,5
29,0
02.3
4 2,
574,
246,
476.
34
49,5
36,6
49,1
62.2
7 17
,613
,549
.23
36,4
13,1
33,2
66.5
2
Cur
rent
liab
ilitie
s 51
,471
,174
,067
.76
38,3
48,9
19,7
24.1
9 18
,957
,697
.84
36,6
95,2
04,6
19.8
0 -8
20.0
0 33
,130
,361
,562
.06
Tota
l of n
on-c
urre
nt
liabi
litie
s 3,
000,
000,
000.
00
300,
000,
000.
00
F-195
Zhon
gron
g In
tern
atio
nal T
rust
Com
pany
Lim
ited
Item
Yea
r end
ed 3
1/12
/201
7 Y
ear e
nded
31/
12/2
016
Chi
na T
rust
Indu
stry
Pr
otec
tion
Fund
Co.
, Ltd
. H
arbi
n R
ural
Com
mer
cial
B
ank
Co.
, Ltd
. C
hina
Tru
st
Reg
istra
tion
Co.
, Ltd
. C
hina
Tru
st In
dust
ry
Prot
ectio
n Fu
nd C
o., L
td.
Shan
ghai
Ron
gou
Equi
ty In
vest
men
t Fu
nd M
anag
emen
t C
o., L
td.
Har
bin
Rur
al
Com
mer
cial
Ban
k C
o.,
Ltd.
Tota
l of l
iabi
litie
s 54
,471
,174
,067
.76
38,3
48,9
19,7
24.1
9 18
,957
,697
.84
36,9
95,2
04,6
19.8
0 -8
20.0
0 33
,130
,361
,562
.06
Net
ass
ets
12,9
28,3
94,5
19.7
4 3,
469,
609,
278.
15
2,55
5,28
8,77
8.50
12
,541
,444
,542
.47
17,6
14,3
69.2
3 3,
282,
771,
704.
46
Shar
e of
net
ass
ets b
y sh
areh
oldi
ng
1,68
6,31
2,32
8.66
34
3,49
1,31
8.54
10
1,84
2,95
9.28
1,
635,
339,
126.
83
7,04
5,74
7.69
32
4,99
4,39
8.74
Adj
ustm
ents
Boo
k va
lue
of e
quity
in
vest
men
t in
asso
ciat
es
1,68
6,31
2,32
8.66
34
3,49
1,31
8.54
10
1,84
2,95
9.28
1,
635,
339,
126.
83
7,04
5,74
7.69
32
4,99
4,39
8.74
Fair
valu
e of
equ
ity
inve
stm
ent w
ith q
uote
d pr
ice
Ope
ratin
g in
com
e 4,
086,
260,
904.
40
2,23
5,91
7,30
5.59
12
2,44
5,42
3.70
2,
340,
160,
296.
05
347,
972.
06
2,01
8,61
5,31
1.76
Net
pro
fit
931,
753,
494.
57
445,
331,
427.
03
51,9
77,0
62.3
3 86
0,73
9,16
4.00
4,
351,
929.
93
422,
518,
045.
33
Oth
er c
ompr
ehen
sive
in
com
e
Tota
l com
preh
ensi
ve
inco
me
931,
753,
494.
57
445,
331,
427.
03
51,9
77,0
62.3
3 86
0,73
9,16
4.00
4,
351,
929.
93
422,
518,
045.
33
Div
iden
ds re
ceiv
ed fr
om
asso
ciat
es
72,0
00,0
00.0
0 29
,700
,000
.00
37,5
00,0
00.0
0
F-196
Zhongrong International Trust Company Limited
8.14 Fixed assets
8.14.1 Movement of fixed assets
Item Balance as at 1/1/2017 Additions Reductions Balance as at
31/12/2017 1.Original price total 98,321,057.00 17,902,338.42 16,656,790.56 99,566,604.86
Incl Transportation equipment 13,494,467.63 387,707.74 1,386,559.63 12,495,615.74
Electrical equipment 10,830,610.95 374,241.42 7,805,347.70 3,399,504.67
Computers 55,026,906.57 16,890,972.12 3,257,544.17 68,660,334.52
Other 18,969,071.85 249,417.14 4,207,339.06 15,011,149.93
2.Accumulated depreciation total 68,978,565.23 20,247,477.14 11,479,885.55 77,746,156.82
Incl Transportation equipment 12,184,350.25 275,629.20 1,309,963.76 11,150,015.69
Electrical equipment 5,378,788.37 496,105.46 3,360,656.31 2,514,237.52
Computers 37,937,916.06 17,586,986.70 2,834,637.06 52,690,265.70
Other 13,477,510.55 1,888,755.78 3,974,628.42 11,391,637.91
3. Book value total 29,342,491.77 21,820,448.04
Incl Transportation equipment 1,310,117.38 1,345,600.05
Electrical equipment 5,451,822.58 885,267.15
Computers 17,088,990.51 15,970,068.82
Other 5,491,561.30 3,619,512.02
8.15 Intangible assets
8.15.1 Categories of intangible assets
Item Balance as at 1/1/2017 Additions Reductions Balance as at
31/12/2017 1.Original price total 60,258,322.07 23,701,966.34 83,960,288.41
Incl Software 55,258,322.07 23,701,966.34 78,960,288.41
Trademark 5,000,000.00 5,000,000.00 2.Accumulated depreciation total 22,598,548.78 8,806,170.46 31,404,719.24
Incl Software 22,598,548.78 8,806,170.46 31,404,719.24
Trademark 3.Accumulated amortization total
Incl Software
Trademark
4.Book value total 37,659,773.29 52,555,569.17
Incl Software 32,659,773.29 47,555,569.17
Trademark 5,000,000.00 5,000,000.00
8.15.2 Development expenditures Project Balance as Additions Reductions Balance as at
F-197
Zhongrong International Trust Company Limited
at 1/1/2017
Internally development
expenditures Others Profit
or loss Recognized as
intangible assets
31/12/2017
Introduction and Management Information system of Independent Development talents
287,819.71 287,819.71
Total 287,819.71 287,819.71
8.16 Goodwill
8.16.1Cost of goodwill
Item Balance as at 1/1/2017 Additions Reductions Balance as at
31/12/2017 Zhingrong PT Securities Limited 23,947,504.99 23,947,504.99
Total 23,947,504.99 23,947,504.99
8.17 Long-term deferred expenses
Item Balance as at 1/1/2017 Additions Amortization Reductions Balance as at
31/12/2017 Remodeling expenses 28,776,531.01 16,588,487.99 25,825,681.96 19,539,337.04
Software utility fees 2,451,717.35 2,410,642.75 41,074.60
Housing rent 7,485,421.95 24,097,662.85 27,217,284.81 4,365,799.99
Total 38,713,670.31 40,686,150.84 55,453,609.52 23,946,211.63
8.18 Deferred tax assets and deferred tax liabilities
8.18.1 Deferred tax assets and deferred tax liabilities before offsetting
Item
As at 31/12/2017 As at 1/1/2017
Deferred tax assets or liabilities
Deductable or taxable temporary
differences
Deferred tax assets or liabilities
Deductable or taxable temporary
differences eferred tax assets: 632,615,941.08 2,530,463,764.33 634,195,455.49 2,536,781,821.90 Provisions for impairment of assets 25,111,001.64 100,444,006.57 51,879,164.78 207,516,659.10
Accrued not paid payroll 636,770,332.81 2,547,081,331.24 635,860,331.43 2,543,441,325.71
Fair value changes of available-for-sale financial assets
-3,033,278.5
4 -12,133,114.16 -26,244,908.94 -104,979,635.78
Valuation of held-for-trading financial assets and financial derivatives
24,196.75 96,787.00
Deductible tax losses 6,097,137.17 24,388,548.68 5,005,923.47 20,023,693.87
Others -32,329,252.00 -129,317,008.00 -32,329,252.00 -129,317,008.00
Sub-total 632,615,941.08 2,530,463,764.33 634,195,455.49 2,536,781,821.90
F-198
Zhongrong International Trust Company Limited
Item
As at 31/12/2017 As at 1/1/2017
Deferred tax assets or liabilities
Deductable or taxable temporary
differences
Deferred tax assets or liabilities
Deductable or taxable temporary
differences Deferred tax liabilities: 29,746,250.00 118,985,000.00
Change in fair value of available-for-sale financial assets included in other comprehensive income
29,746,250.00 118,985,000.00
Sub-total 29,746,250.00 118,985,000.00
Note:"Others" is the equity of Jianghai Securities Co., Ltd displaced by Harbin Hatou Investment Co., Ltd in a way of
private issuing shares for this period in 2016. It forms a temporary difference between book value and taxbase of
available-for-sale financial assets.
8.19 Other assets Item Balance as at 31/12/2017 Balance as at 1/1/2017
Prepayment of enterprise income tax 9,622,034.28
Deductible input tax 2,375,796.08
Total 11,997,830.36
8.20 Short-term loans
8.20.1 Short-term loans by categories: Item Balance as at 31/12/2017 Balance as at 1/1/2017
Loans on credit 344,422,050.00
Total 344,422,050.00
8.21 Placements from banks and other financial institutions Item Balance as at 31/12/2017 Balance as at 1/1/2017
Placements from banks
Placements from other financial institutions 2,000,000,000.00 1,300,000,000.00
Total 2,000,000,000.00 1,300,000,000.00
8.22 Accounts payable Item Balance as at 31/12/2017 Balance as at 1/1/2017
Within 1 year(including 1 year) 62,893,808.85 11,361,632.82
More than 1 year 621,560.93
Total 62,893,808.85 11,983,193.75
8.23 Advances from customers Item Balance as at 31/12/2017 Balance as at 1/1/2017
Within 1 year(including 1 year) 45,827,326.53 31,157,205.58
More than 1 year 5,574,370.07
Total 51,401,696.60 31,157,205.58
F-199
Zhongrong International Trust Company Limited
Significant accounts payable with aging over 1 year: Creditor Balance as at 31/12/2017 Unsettled reason
Zhongrong-rongjia xinya Pharmaceutical Industry M&A Fund 3,501,874.18 deposit received of fund management
Beijing Rongdingkun Investment Center (limited partnership) 2,072,495.89 deposit received of fund management
Total 5,574,370.07
8.24Employee benefits payable
8.24.1 Movement of employee benefits payable Item As at 1/1/2017 Increase Decrease As at 31/12/2017
I. Short-term employee
benefits 2,321,369,263.56 2,003,558,571.89 1,841,777,010.37 2,483,150,825.08
Post-employment benefits-
defined contribution plans 655,555.77 83,109,238.63 82,816,832.51 947,961.89
3,663,585.64 3,663,585.64
one year
Total 2,322,024,819.33 2,090,331,396.16 1,928,257,428.52 2,484,098,786.97
8.24.2 Details of the short-term employee benefits Item As at 1/1/2017 Accrued Paid As at 31/12/2017
1. Salaries, bonus, and allowances 2,311,369,574.62 1,866,863,143.22 1,700,385,019.82 2,477,847,698.02
2. Staff welfare 5,243,539.79 5,243,539.79
3.Social insurances 494,112.64 44,451,921.60 44,446,284.94 499,749.30
Including: Medical insurance 409,152.05 39,677,051.40 39,639,058.62 447,144.83
Work injury insurance 52,345.59 1,449,854.07 1,488,453.51 13,746.15
Maternity insurance 32,615.00 3,325,016.13 3,318,772.81 38,858.32
Other
4. Housing Fund 115,132.12 51,086,195.07 51,028,918.67 172,408.52
5. Union funds and employee
education fee 9,390,444.18 32,461,831.77 37,334,358.78 4,517,917.17
6. Short-term paid absences
7. Short-term profit sharing plan
8. Other 3,451,940.44 3,338,888.37 113,052.07
Total 2,321,369,263.56 2,003,558,571.89 1,841,777,010.37 2,483,150,825.08
8.24.3 Defined contribution plans Item As at 1/1/2017 Accrued Paid As at 31/12/2017
1. Primary endowment
insurance 631,749.78 80,167,303.02 79,888,658.29 910,394.51
2 Unemployment insurance 23,805.99 2,941,935.61 2,928,174.22 37,567.38
3 Pension insurance
F-200
Zhongrong International Trust Company Limited
Total 655,555.77 83,109,238.63 82,816,832.51 947,961.89
8.25Taxes and surcharges payable
Category As at 1/1/2017 Accrued Paid Reclassification reduction in the current period
As at 31/12/2017
Value added tax 110,454,721.92 260,396,554.37 314,992,131.13 -235,856.34 56,095,001.50
Business tax -182,640.36 - -182,640.36 Enterprise income tax 459,358,156.72 795,159,949.23 984,368,163.17 -3,127,267.01 273,277,209.79
Urban maintenance and construction tax
7,523,385.63 16,673,112.82 20,368,341.41 3,828,157.04
Individual income tax 66,985,615.18 436,619,233.64 481,006,366.64 22,598,482.18
Educational surtax 5,600,094.70 12,259,547.86 15,054,058.21 2,805,584.35
Other taxes and surcharges 72,539.02 5,966,438.81 4,995,537.44 1,043,440.39
Total 649,811,872.81 1,527,074,836.73 1,820,601,957.64 -3,363,123.35 359,647,875.25
8.26 Interest payable Category Balance as at 31/12/2017 Balance as at 1/1/2017
Interest on corporate bonds 9,993,499.62 10,598,194.32
Interest payable for short-term loan 1,279,591.74 Interests of placements from banks and other financial institutions 5,026,666.66 3,226,666.66
Total 15,020,166.28 15,104,452.72
8.27 Dividends payable
Company name Balance as at 31/12/2017
Balance as at 1/1/2017 Reason for unpaid over 1 year
Dividends for common shares 1,200,000,000.00
Total 1,200,000,000.00
8.28 Other payables
8.28.1 Payables by age Category Balance as at 31/12/2017 Balance as at 1/1/2017
Within 1year 67,075,847.12 265,055,914.80
1-2 years 21,961,673.67 5,060,500.24
2-3years 2,240,794.96 10,012,158.11
Over 3 years 5,405,504.60 1,426,512.48
Total 96,683,820.35 281,555,085.63
8.29 Non-current liabilities due within one year Category Balance as at 31/12/2017 Balance as at 1/1/2017
Long-term loans due within one year 1,467,943,494.48
F-201
Zhongrong International Trust Company Limited
Category Balance as at 31/12/2017 Balance as at 1/1/2017
Total 1,467,943,494.48
8.30 Bonds payable
8.30.1 Presented by details
Category Balance as at 31/12/2017 Balance as at 1/1/2017 The6.00 percent.guaranteednotesdue2018 1,548,308,792.54
The6.95 percent.guaranteednotesdue2019 3,255,369,704.68 3,442,305,390.34
Total 3,255,369,704.68 4,990,614,182.88
8.30.2 Movement of bonds payable (excluding other financial instruments like preference shares,
perpetual loans etc.)
Bond name Par value Issue date
Bond
period
Issue amount
Balance as at 1/1/2017
Interest accrued on par value
Amortization of premium or discount
Reclassification
Impact of exchange
rate changes of
current period
Balance as at
31/12/2017
The6.00percent.guar
anteednotesdue2018
1,471,770,00
0.00
2015/
6/15
3yea
rs
1,471,770,
000.00
1,548,308,
792.54 8,221,403.65 1,467,943,
494.48
-88,586,7
01.71
The6.95percent.guar
anteednotesdue2019
3,270,600,00
0.00
2016/
6/21
3yea
rs
3,270,600,
000.00
3,442,305,
390.34 9,761,440.28 -196,697,
125.94 3,255,369,
704.68
Total 4,742,370,00
0.00
4,742,370,
000.00
4,990,614,
182.88
17,982,843.9
3
1,467,943,
494.48
-285,283,
827.65
3,255,369,
704.68
8.30.3 Changes in interests of bond payable
Bond name Opening balance Accrual interest of
current period
Paid interest of
current period Closing balance
The6.00percent.guaranteednotesdu
e2018 3,902,062.50 99,277,666.15 99,500,303.75 3,679,424.90
The6.95percent.guaranteednotesdu
e2019 6,696,131.82 244,147,004.60 244,529,061.70 6,314,074.72
Total 10,598,194.32 343,424,670.75 344,029,365.45 9,993,499.62
8.31 Long-term employee benefits payable
Category Balance as at 1/1/2017 Accrued Paid Balance as at
31/12/2017 Performance bonus 510,392,911.05 85,050,213.03 425,342,698.02
Total 510,392,911.05 85,050,213.03 425,342,698.02
8.32 Paid-in capital
Name of investor Balance as at 1/1/2017
Incress Decrease
Balance as at 31/12/2017
Book amount Proportion Book amount Propo
rtion
F-202
I I I I
I I I I I
Zhongrong International Trust Company Limited
(%) (%)
Jingwei Textile Machinery
Company Limited 2,248,185,140.64
37.47
0
2,248,185,140.6
4
4,496,370,281.2
7
37.47
0
Zhongzhi Enterprise
Company Co ., Ltd 1,979,185,171.86
32.98
6
1,979,185,171.8
6
3,958,370,343.7
3
32.98
6
Harbin Investment
Company Limited 1,292,287,500.00
21.53
8
1,292,287,500.0
0
2,584,575,000.0
0
21.53
8
Shengyang An Tai Da
Company Trading Co .,
Ltd
480,342,187.50 8.006 480,342,187.50 960,684,375.00 8.006
Total 6,000,000,000.00 100.0
0 6,000,000,000.0
0 12,000,000,000.00
100.0
0
Note: The Company increased its capital three times in 2017. Shareholders transferred their undistributed profits
proportionally by RMB 4,000,000,000.00 in the previous two times, and increased the paid-in capital by RMB
2,000,000,000.00, which was verified by Heilongjiang Jinyuda Certified Public Accountants Co., Ltd. and the report
number was Jinyuda kuaiyanzi (2017) C0850.
8.33 Capital reserve
Category Balance as at 1/1/2017 Increase Decrease Balance as at 31/12/2017
Share premiums 232,537,248.16 232,537,248.16
Other 1,983,839.32 1,902,780.74 3,886,620.06
Total 234,521,087.48 1,902,780.74 236,423,868.22 Incl:Among them: state-owned exclusive capital reserve
Note: 1. the composition of the capital reserve at the beginning of the year:
The subsidiaries Shenzhen Zhongrong Baosheng Capital Management Co., Ltd, Shanghai Changkun Investment
Management Co., Ltd introduced minority shareholders. Equity of parent company was dilutive, confiming additional
paid-in capital increasing by RMB 184,019.41.
The additional paid-in capital of investee Harbin Rural Commercial Bank Co., Ltd increased, confirming additional
paid-in capital increasing by RMB 1,799,819.91.
2.increase of capital reserve
The capital reserve of Harbin Rural Commercial Bank Co., Ltd increased, which leads to the capital reserve increase
of the company. According to the proportion, the capital reserve was RMB 1,902,780.74.
8.34 Surplus reserve
F-203
Zhongrong International Trust Company Limited
Category Balance as at 1/1/2017 Increase Decrease Balance as at
31/12/2017 Statutory surplus 1,304,531,098.36 216,960,641.67 1,521,491,740.03
Total 1,304,531,098.36 216,960,641.67 1,521,491,740.03
Note: Increase in surplus reserve refers to that 10% of net profit is accrued in legal reserve.
8.35 General risk reserve
Item Year ended 31/12/2017 Year ended 31/12/2016
General risk reserve 304,673,563.41 141,285,128.06
Trust compensation reserve 788,226,061.31 679,745,740.48
Total 1,092,899,624.72 821,030,868.54
Note: 1. According to the regulations in"Cai Jin" (2012) No.20, the higher of the amount of potential risk estimation
lower than provision for impairment of assets and 1.5% of ending balance of risk assets, is accrued in provision of
general risk reserve from after-tax net profit.
2.According to Article 49 in the Regulations on Trust Companies, 5% of the Company's after-tax net profit is accrued
in trust compensation reserve, with a limit of 20% of the Company's registered capital. The major purpose of the trust
compensation reserve is to offset any losses in entrusted assets due to possible management and operating mistake.
8.36 Retained earnings Item Year ended 31/12/2017 Year ended 31/12/2016
Opening balance of current period 4,800,581,900.77 3,431,444,594.38
Increase in current period 2,747,369,279.87 2,631,390,374.46
Incl: Transferred from net profit of current period 2,747,369,279.87 2,631,390,374.46
Other adjustment to increase
Decrease in current period 5,594,411,548.23 1,262,253,068.07
Less: Appropriation of statutory surplus reserve 216,960,641.67 236,471,535.16
Provision for general risk reserve of current period 271,868,756.18 125,781,532.91
Common share dividends payable 1,100,000,000.00 900,000,000.00 Common share dividends converted to share
capital 4,000,000,000.00
Other adjustment to decrease 5,582,150.38
Closing balance of current period 1,953,539,632.41 4,800,581,900.77
8.37 Net interest income
Item Year ended 31/12/2017 Year ended 31/12/2016
Interest income 440,140,593.97 203,723,549.80
Interest income from deposits in other banks 369,535,775.43 193,296,086.41
Interest income from issuing loans and advances 70,604,818.54 10,427,463.39
F-204
Zhongrong International Trust Company Limited
Interest expenses 124,331,944.44 49,915,138.87
Placements from banks and other financial
institutions 124,331,944.44 49,915,138.87
Net interest income 315,808,649.53 153,808,410.93
8.38 Net fee and commission income
Item Year ended 31/12/2017 Year ended 31/12/2016
Net commission income on trust 2,829,969,255.96 3,764,289,248.04
Mutual fund management fees 244,491,033.90 194,102,531.67
Total 3,074,460,289.86 3,958,391,779.71
8.39 Operating income, Other operating income and operating cost
Item Year ended 31/12/2017 Year ended 31/12/2016
Income Cost Income Cost
Primary operating business 587,785,815.50 80,436.41 954,041,915.46 51,320.75
Asset management income 192,948,629.72 312,512,634.23
Consulting services income 392,696,651.68 639,632,524.22
Human resources income 2,056,810.19 381,423.01
Technical services income 56,037.74 51,320.75
Intermediary services income 1,459,296.26
Sale goods income 83,723.91 80,436.41
Other operating business 1,174,719,939.39 82,852.53 1,179,617,286.64
Interest income from loans to
banks and other financial
institutions
66,343,765.81 42,162,731.49
Project issuance income 1,100,575,942.67 1,123,496,189.27
Sales service income 5,941,960.11 10,765,783.89
Other 1,858,270.80 82,852.53 3,192,581.99
Total 1,762,505,754.89 163,288.94 2,133,659,202.10 51,320.75
8.40 Investment income
Category Year ended 31/12/2017 Year ended 31/12/2016 Gain/(Loss) from long-term equity investments in equity method 171,698,636.69 165,653,295.83
Gain/(Loss) on disposal of long term equity investment 386,332,560.82 1,283,057.69 Gain/(Loss) from financial assets measured at fair value through profit and loss for the current period 147,891,764.88 164,844,825.62
Gain/(Loss) on disposal of financial assets measured at fair value through profit or loss for the current period 3,374,478.85 -77,330,334.24
Gain/(Loss) on held-to-maturity financial assets during the holding period
Gain/(Loss) on disposal of held-to-maturity financial assets
F-205
Zhongrong International Trust Company Limited
Category Year ended 31/12/2017 Year ended 31/12/2016 Gains on available-for-sale financial assets during the holding period 490,512,289.38 228,701,178.69
Gains on disposal of available-for-sale financial assets 180,198,716.96 50,423,282.57 Gains on remeasurement of the remaining equity at fair value after losing control
Others
Total 1,380,008,447.58 533,575,306.16
8.41 Gain from fair value changes
Source of gains/(losses) from changes in fair value Year ended 31/12/2017 Year ended 31/12/2016 Financial assets measured at fair value through profit or loss for the current period -1,973,390.31 16,220,745.54
Total -1,973,390.31 16,220,745.54
8.42 Gains from foreign exchange
Category Year ended 31/12/2017 Year ended 31/12/2016
Gains from foreign exchange -351,845.82 474,350.27
Total -351,845.82 474,350.27
8.43 Taxes and surcharges
Category Year ended 31/12/2017 Year ended 31/12/2016
Business tax 79,740,476.82
Urban maintenance and construction tax 16,720,440.29 21,842,118.77
Educational surcharge 12,212,041.14 16,045,349.52
Others 11,378,387.34 1,207,907.32
Total 40,310,868.77 118,835,852.43
8.44 Operation and administrative expenses
Category Year ended 31/12/2017 Year ended 31/12/2016
1. Administrative expenses 2,508,793,250.94 3,059,638,340.41
Staff expenses 1,993,224,009.64 2,513,885,687.38
Depreciation expenses 12,589,514.75 12,758,063.48
Maintenance expenses 1,174,911.44 935,767.44
Intangible assets amortization expenses 8,806,170.46 5,380,380.30
Business related hospitality expenses 31,428,509.89 30,868,233.68
Travel expenses 43,993,312.85 47,678,301.48
Office expenses 7,561,512.44 10,441,232.57
Conference expenses 9,671,407.80 10,506,542.54
Expenses on Intermediaries 13,510,909.90 35,844,697.63
F-206
Zhongrong International Trust Company Limited
Category Year ended 31/12/2017 Year ended 31/12/2016
Consulting expenses 14,073,003.93 51,714,051.23
Rental expenses 196,446,072.62 181,599,746.48
Water and electricity 2,895,959.80 3,022,277.60
Long-term unamortized expenses 28,163,824.75 22,868,317.17
Amortization of low cost and short lived articles 4,164,941.77 5,962,593.28
Supervision expenses 973,600.00 5,660,652.23
Other 140,115,588.90 120,511,795.92
2.Finance expenses 348,139,279.63 230,019,378.43
Total 2,856,932,530.57 3,289,657,718.84
8.45 Impairment on assets
Category Year ended 31/12/2017 Year ended 31/12/2016
Allowance for doubtful debts 20,004,822.62 12,624,255.60
Impairment loss on available-for-sale financial assets 330,429.37
Total 20,335,251.99 12,624,255.60
8.46 Gains (Losses) from disposal of assets
Item Year ended 31/12/2017 Year ended 31/12/2016
Gains on disposal of fixed assets 476,418.21 424,542.37
Total 476,418.21 424,542.37
8.47 Other income
Item type Year ended 31/12/2017 Year ended 31/12/2016
Decoration subsidies Income related 313,600.00
Office rental subsidy Income related 1,756,000.00
Total 2,069,600.00
8.48 Non-operating income
Item Year ended 31/12/2017
Year ended 31/12/2016
Amount to be included in non-recurring gain
or loss for the year Gains on disposal of non-current assets 50,777.17 50,777.17
Government subsidy 4,508,727.11 5,000,000.00 4,508,727.11
Others 11,654,427.86 152,698,859.33 11,654,427.86
Total 16,213,932.14 157,698,859.33 16,213,932.14
Details of government subsidy
Item Year ended 31/12/2017
Year ended 31/12/2016
F-207
Zhongrong International Trust Company Limited
Item Year ended 31/12/2017
Year ended 31/12/2016
Financial allocation 5,000,000.00
Incentives to newly registered financial institution,according to"Shenzhen Futian District Industrial Development Special Funds to Support the lmplementation of Investment Rules"
Shenzhen headquarters
identified support 1,000,000.00
Shenzhen Futian District Supports Headquarters Economy and Several Policies for the Development of Listed Companies"
Financial Development Special
Fund 1,000,000.00
Shenzhen Municipal People's Government Financial Development Service Office Reimbursed Shenzhen City's 35th Batch of Special Financial Development Funds (Increase in Asset Size)
Financial Development Special
Fund 2,500,000.00
Shenzhen Municipal Finance Committee Financial Development Special Fund for Supplementary Provisions of Shenzhen Municipality for the Implementation of Certain Financial Regulations
No lay-off Subsidiaries 8,727.11
Total 4,508,727.11 5,000,000.00
8.49 Non-operating expenses
Item Year ended 31/12/2017
Year ended 31/12/2016
Amount to be included in non-recurring gain or loss for
the year Losses on disposal of non-current assets 236,833.56 81,899.08 236,833.56
Donation 629,040.00 850,000.00 629,040.00
Compensation expenditure 2,528,660.58 2,528,660.58
Others 7,330,006.63 7,486,144.15 7,330,006.63
Total 10,724,540.77 8,418,043.23 10,724,540.77
Note: "Other" is mainly to pay investor compensation
8.50 Income tax expenses
8.50.1 Details of income tax expenses
Item Year ended 31/12/2017 Year ended 31/12/2016
Current income tax expense calculated according to tax laws 795,072,460.17 902,083,695.48
Deferred income tax 20,296,581.90 -81,430,135.49
Total 815,369,042.07 820,653,559.99
8.50.2 Reconciliation between income tax expenses and accounting profit is as follows: Item Amount
Profit before tax 3,620,751,375.04
Income tax expenses calculated at statutory/applicable tax rates 905,187,843.76
Effect of different tax rate -51,016,061.58
Effect of adjustment for income tax in prior year 639,876.92
Effect of income not subject to income tax -43,062,634.49
F-208
Zhongrong International Trust Company Limited
Item Amount
Effect of expenses undeductible for tax purposes 4,197,041.24
Effect of utilization of tax losses in prior years which haven't been recognized
deferred tax assets -8,179,139.76
Effect of unrecognized deductible temporary differences and deductible losses
in current period 7,759,397.67
Others -157,281.69
Income tax expenses 815,369,042.07
8.51 Other comprehensive income
8.51.1 Other comprehensive income items and their income tax impacts and transfers to profit or
loss
Item Year ended 31/12/2017 Year ended 31/12/2016
Before tax Amount Income Tax After tax Net Before tax
Amount Income Tax After tax Net
Other comprehensive income items which will be reclassified subsequently to profit or loss
74,313,651.3
7
6,376,645.5
2
67,937,005.8
5
69,682,733.7
8
13,458,185.1
9
56,224,548.5
9
1. Gains or losses arising from changes in fair value of available-for-sale financial assets
86,693,151.4
9
6,321,735.5
2
80,371,415.9
7
114,449,385.
21
28,274,401.6
9
86,174,983.5
2
Less: other comprehensive income in prior periods transfer in profit or loss for the current period
1,132,138.51 -54,910.00 1,187,048.51 60,927,702.4
8
14,816,216.5
0
46,111,485.9
8
subtotal 85,561,012.9
8
6,376,645.5
2
79,184,367.4
6
53,521,682.7
3
13,458,185.1
9
40,063,497.5
4 2. Translation differences from translation of foreign currency financial statements
-11,247,361.61 -11,247,361.
61 16,161,051.0
5 16,161,051.05
Less: other comprehensive income in prior periods transfer in profit or loss for the current period
subtotal -11,247,361.61 -11,247,361.
61 16,161,051.0
5 16,161,051.05
Total of other comprehensive income
74,313,651.37
6,376,645.52
67,937,005.85
69,682,733.78
13,458,185.19
56,224,548.59
8.51.2 Adjustment of intems underlying other comprehensive income
(1) Table 1
Item Balance as at
1/1/2016
Movement in the year Balance as at
31/12/2017 Amount
before tax
Less: other
comprehensive
Less:
income
Amount
after tax
Amount
after tax
F-209
Zhongrong International Trust Company Limited
income in prior
periods transfer
in profit or loss
for the current
period
tax attributable
to the
Company
attributabl
e to
minority
interests
Other comprehensive
income items which will
be reclassified
subsequently to profit or
loss
Including: Gains or losses
arising from changes in
fair value of
available-for-sale financial
assets
81,586,675.86
87,325,047.74 1,132,138.51 6,534,619.
58 79,184,367.
46 473,922.1
9 160,771,043.3
2
Translation
differences from
translation of foreign
currency financial
statements
18,416,998.72
-11,102,931.17 -11,247,361.
61 144,430.4
4 7,169,637.11
Total of other
comprehensive income 100,003,674.
58 76,222,116.5
7 1,132,138.51 6,534,619.58
67,937,005.85
618,352.63
167,940,680.43
(2) Table 1
Item
Remeasur
ement of
change in
net
liabilities
or net
assets of
defined
benefit
plans
The share of
other
comprehensiv
e income that
the investee
cannot
reclassify into
profit or loss
under the
equity method
The share of
other
comprehensi
ve income
that will be
reclassified
into profit or
loss after the
investee in
the equity
method
Gains
and
losses
from
changes
in fair
value of
available
-for-sale
financial
assets
Held-to-m
aturity
investmen
ts
reclassifie
d to
available-f
or-sale
financial
assets
gains and
losses
Effecti
ve part
of cash
flow
hedge
gains
and
losses
Translation
differences in
foreign
currency
financial
statements
other
s total
1. Balance at the
beginning of last
year
41,523,1
78.32
2,255,947.6
7
43,779,1
25.99
2.Increse or
decrease of the
amount in last
year(if decrease
40,063,4
97.54
16,161,051.0
5
56,224,5
48.59
F-210
Zhongrong International Trust Company Limited
represented
-
3. balance at the
beginning of this
year
81,586,6
75.86
18,416,998.7
2
100,003,
674.58
4. Increse or
decrease of the
amount in this
year(if decrease
represented
-
79,184,3
67.46
-11,247,361.6
1
67,937,0
05.85
5.Balance at the
end of this year
160,771,
043.32 7,169,637.11
167,940,
680.43
8.52 Notes to statement of cash flows
8.52.1 Supplement to statement of cash flows
Item Year ended 31/12/2017
Year ended 31/12/2016
1. Net profit adjusted to cash flows from operating activities
Net profit 2,805,382,332.97 2,704,012,445.57
Add: provision for asset impairment 20,335,251.99 12,624,255.60 Depreciation of fixed assets, depreciation and depletion of
oil and gas assets and depreciation of productive biological assets
12,589,514.75 12,758,063.48
Amortization of intangible assets 8,806,170.46 5,380,380.30
Amortization of long-term deferred expenses 28,384,189.56 45,713,101.25 Losses on disposal of fixed assets, intangible assets and other long-term assets ("-" for gains) -344,521.90 -342,643.29
Losses on write-down of fixed assets ("-" for gains 54,160.08
Losses from changes in fair value ("-" for gains) -16,220,745.54
Financial expenses ("-" for income) 351,556,821.29 230,446,068.89
Investments losses ("-" for gains) -557,891,197.51 -166,936,353.52
Decreases in the deferred tax assets ("-" for increases) 25,015,790.87 -81,430,135.49
Increases in the deferred tax liabilities ("-" for decreases) -1,417,769.40
Decreases in inventories ("-" for increases) -34,039.85
Decreases in operating receivables ("-" for increases) -11,600,214,785.58 -2,362,150,285.29
Increases in operating payables ("-" for decreases) 6,544,178,233.05 236,420,372.15
Others
Net cash flows from operating activities -2,363,599,849.22 620,274,524.11 2. Significant investing and financing activities not involving cash inflow and outflow
Conversion of debt into capital
Convertible corporate bonds maturing within one year
Fixed assets acquired under financial lease
F-211
Zhongrong International Trust Company Limited
Item Year ended 31/12/2017
Year ended 31/12/2016
3. Net change in cash and cash equivalents
Cash as at 31/12/2017 9,031,278,954.43 11,100,175,309.54
Less: cash as at 1/1/2017 11,100,175,309.54 7,734,154,186.97
Add: cash equivalents as at 31/12/2017
Less: cash equivalents as at 1/1/2017
Net increase in cash and cash equivalents -2,068,896,355.11 3,366,021,122.57
8.52.2 Net cash paid of acquiring subsidiaries during the year
Item Amount 1.Cash and cash equivalents paid during the year for business combination incurred in the year 282,652,308.01
Less: cash and cash equivalents held by subsidiaries at acquisition date 32,780,765.72
Add: cash and cash equivalents paid during the year for business combination incurred in prior periods
Net cash paid of acquiring subsidiaries during the year 249,871,542.29 2.Cash and cash equivalents received during the year from disposing subsidiaries incurred in the year 1,092,566,532.36
Less: Cash and cash equivalents held by subsidiaries when losing control 6,001,474.87
Add: cash and cash equivalents received during the year from disposing subsidiaries incurred in prior periods
Net cash received from disposing subsidiaries during the year 1,086,565,057.49
Note: As a result of the consolidation of the structured entity, the net cash paid by the subsidiary was 269,989,661.92
yuan, and the net cash received by the structured entity's disposal of the subsidiary was 699,998,525.13 yuan.
8.52.3 Cash and cash equivalents
Item Balance as at 31/12/2017
Balance as at 1/1/2017
9,031,278,954.43 11,100,175,309.54
Including: cash on hand 1,642.33 98,678,843.24
Unrestricted bank deposits 9,031,215,333.53 10,981,835,608.77
Unrestricted other cash and cash equivalents 61,978.57 19,660,857.53
Unrestricted deposits with central bank
Deposits with banks and other financial institutions Loans to or from banks and other financial
institutions
Cash equivalents
Including: bonds investment maturing within 3 months
Cash and cash equivalents as at 31/12/2017 9,031,278,954.43 11,100,175,309.54 Including: cash and cash equivalents restricted for use in the Company or the subsidiaries
8.53 Monetary items denominated in foreign currency
F-212
Zhongrong International Trust Company Limited
Item Balance in foreign
currency as at 31/12/2017 Exchange rate
Balance translated into
RMB as at 31/12/2017
Cash at hand and in banks
Including: USD 275,309,140.52 6.54120 1,800,852,150.00
HKD 271,493,238.93 0.83733 227,329,433.76
Accounts receivable
Including: USD
HKD 33,491,769.82 0.83733 28,043,663.62
Prepayments
Including: USD
HKD 331,379.86 0.83733 277,474.30
Other receivables
Including: USD 168,114.54 6.54120 1,099,670.73
HKD 5,025,573.68 0.83733 4,208,063.61
Bonds payable
Including: USD 497,671,635.89 6.5412 3,255,369,704.68
HKD
Interest payable
Including: USD 1,527,777.72 6.54120 9,993,499.62
HKD
Other payables
Including: USD 1,158,862.38 6.54120 7,580,350.60
HKD 12,040,576.17 0.83733 10,081,935.65
8.54 Government grants
The Company recognized government grants amounting to4,508,727.11 Yuan, government grants
related to income 4,508,727.11 Yuan.
8.54.1Government grants related to income
Item Presented amount in profit and loss of current period Presented item in profit and loss
Shenzhen headquarters
identified support 1,000,000.00
Shenzhen Futian District Supports Headquarters Economy and Several Policies for the Development of Listed Companies"
Financial Development
Special Fund 1,000,000.00
Shenzhen Municipal People's Government Financial Development Service Office Reimbursed Shenzhen City's 35th Batch of Special Financial Development Funds (Increase in Asset Size)
Financial Development
Special Fund 2,500,000.00
Shenzhen Municipal Finance Committee Financial Development Special Fund for Supplementary Provisions of Shenzhen Municipality for the Implementation of Certain Financial Regulations
No lay-off Subsidiaries 8,727.11
Total 4,508,727.11
F-213
Zhongrong International Trust Company Limited
9. Contingencies
None
10. Events after the balance sheet date
None
11. Risks related to financial instruments
The major financial instruments of the Company include: held-for trading financial assets,
available-for-sale financial assets, bonds, placements from banks and other financial institutions, other
interest-bearing loans and monetary capital. The major purpose of these financial instruments is for
the Company's operations and financing. The Company has multiple other financial assets and
liabilities directly created in operations, such as, account rseceivable and accounts payable, etc.
Main risks caused by the Company's financial instruments are credirt risk, liquidity risk and market
risk
11.1. Classification of financial instruments
(1) Book value of all types of financial instruments on balance sheet date is listed below:
Financial asset accounts
Closing balance
Monetary
capital
Financial assets
measured
At fair
value through profit
and loss
Loans and
receivables
Available-for-sale
financial assets Total
Monetary capital 9,031,278,954.43 9,031,278,954.43
Financial assets
measured at fair
value through profit
and loss
4,752,129,818.02 4,752,129,818.02
Loans and receivables 3,712,356,964.78 3,712,356,964.78
Interest receivable 49,805,585.60 49,805,585.60
Available-for-sale
financial assets 8,115,691,430.13 8,115,691,430.13
(Continue)
F-214
Zhongrong International Trust Company Limited
Financial asset accounts
Opening balance
Monetary capital
Financial assets measured
at fair
value through profit and
loss
Loans and
receivables
Available-for-sal
e
financial assets
Total
Monetary capital 11,100,175,309.54 11,100,175,309.54
Financial assets
measured at fair
value through profit
and loss
4,086,514,116.41 4,086,514,116.41
Loans and receivables 911,359,361.10 911,359,361.10
Interest receivable 38,653,417.99 38,653,417.99
Available-for-sale
financial assets 6,027,738,263.73 6,027,738,263.73
Note: financial instruments here do not include prepayments, receipts in advance and taxes payable .
11.2. Credit risk
The Company only trade with the third parties with approval and good credit recrod. Accounts
receivable of the Company are mainly trustee reward to be received, which are primarily because that
the trust projects' final paying date limits have not reached according to contracts. Additionally, the
Company continuously monitors the balance of accounts receivable in order to avoid significant bad
debt risks
The Company's other financial assets include monetary capital, held-for-atding financial assets,
available-for-sale financial assets and other receivables. The credit risks of these financial assets are
mainly from default of trading partners, and the maximum risk exposure equals to the face value of
these financial assets.
Because the Company only trade with the thrid parties with approval and good credit record, no
collateral is requried. Credit risks are cenrtally managed according to the trading partners'area and
industries. The Company's account rseceivable is from clients from a diversity of industries, which
means there is no highly concentrated significant credit risk. Other receivables of the Company are
mainly housing rent deposits, cash advances of trust projects and prepayment of purchase contract
F-215
Zhongrong International Trust Company Limited
Balance of the Company's receivables does not involve any collatreal or other credit enhancement.
The Company's financial assets that are considered as being impaired is analyzed as follows:
Account
Closing balance
Total Overdue without
impairment
Overdue for
Less than 1 month 1-3 months Other applicable periods
Accounts receivable 168,304,186.08 168,304,186.08
Other receviables 173,951,902.68 173,951,902.68
Interest receivable 49,805,585.60 49,805,585.60
Dividends receivable 277,474.30 277,474.30
(Continue)
Account
Opening balance
Total Overdue without
impairment
Overdue for
Less than 1 month 1-3 months Other applicable
periods
Accounts receivable 211,359,361.10 211,359,361.10
Other receviables 580,723,657.90 580,723,657.90
Interest receivable 38,653,417.99 38,653,417.99
Dividends receivable 55,161,595.19 55,161,595.19
11.3. Liquidity risk
The Company manages capital shortage risks using the circulation liquidity plan instrument. This
instrument considers both the maturity dates of financial insrtuments and forecasted cash flows from
operating.
The objective of the Company is to maintain the sustainability and flexibility of financing using
multiple financial methods such as placements from banks and other financial institutions and
long-term bonds, etc.
Time to maturity of the financial liabilities according to non-discounted contract cash flows is
analyzed as follows:
Account Closeing balance
Less than 1 year 1-2 years 2-3 years Over 5 years Total
Placements from banks
and other financial
institutions 2,000,000,000.00 2,000,000,000.00
Accounts payable 62,893,808.85 62,893,808.85
F-216
Zhongrong International Trust Company Limited
Account Closeing balance
Less than 1 year 1-2 years 2-3 years Over 5 years Total
Other payables 67,075,847.12 21,961,673.67 2,240,794.96 5,405,504.60 96,683,820.35
Bonds payable 1,467,943,494.48 3,255,369,,704.68 4,723,313,199.16
(Continue)
Account Opening balance
Less than 1 year 1-2 years 2-3 years Over 5 years Total
Placements from banks
and other financial
institutions 1,300,000,000.00 1,300,000,000.00
Accounts payable 11,983,193.75 11,983,193.75
Other payables 265,055,914.80 5,060,500.24 10,012,158.11 1,426,512.48 281,555,085.63
Bonds payable 1,548,308,792.54 3,442,305,390.34 4,990,614,182.88
11.4. Market risk
Market risk is mainly referring to the risk of fluctuated fair value or futrue cash flows of financial
instruments caused by market price changes. Market risk includes interest rate risk, foreign exchange
risk, and other price related risk such as price risk of equity instrument investment.
(1) Interest risk
Bond instruments issued by the Company are long-term bonds with fixed interest, and bank deposits'
interest rate only changes along with the base interest rate of the central bank. Therefore, the interest
rate risk of Company is fairly low.
(2) Foreign exchange risk
The risk of changes in foreign exchange exposed to the Company is mainly related to the operations
of the Company's overseas subsidiaries. During the current period the subsidiary had issued dollar
bonds of USD225,000,000.00 in 2015 and dollar bonds of USD500,000,000.00 in 2016 ,
whereas the bookkeeping primary currency of the Company is RMB, which means that fluctuations
of foreign exchange rate have impacts on the Company's operating results and the bond's interest or
the principal amount at maturity due to foreign exchange purchasing.Currently the Company has not
adopted forward exchange contract to hedge foreign exchange risk.
As of December 31, 2017, the bonds principal payable of the Company is USD725,000,000.00,
accrued interest is USD1,527,777.72 and finance expenses - interest expenses is USD50,916,990.39.
A sensitive analysis on foreign exchange risk has been presented in the table below, which reflecting
F-217
Zhongrong International Trust Company Limited
the impacts on net profit when US dollar exchange rate reasonably and possibly changes, assuming
other variables are kept constant.
Account
Current period
[USD] Exchange rate
increase/decrease
Total profitlnet profit
increase/decrease
RMB to [USD] decrease -0.10 5,091,699.04/5,091,699.04
RMB to [USD] increase +0.10 -5,091,699.04/-5,091,699.04
(Continue)
Account
Previous period
[USD] Exchange rate
increase/decrease
Total profitlnet profit
increase/decrease
RMB to [USD] decrease -0.10 3,370,698.67/3,370,698.67
RMB to [USD] increase +0.10 -3,370,698.67/-3,370,698.67
(3) Price risk of equity instrument investment
Price risk of equity instrumentinvestment refers to the risk of fair value decrease of equity securities
due to the changes in stock index level and individual stock's value.
As of December 31, 2017, the Company is exposed to the price risk of equity instrument investment
due to some particular held-for-tading equity instrument investments and available-for-sale equity
instrument investments. The listed equity instrument investments held by the Company are listed in
Shanghai and Shenzhen Stock Exchange markets, and are measured at market price on balance sheet
date.
The closing market stock index of Shanghai and Shenzhen Stock Exchange markets on the date
closest to balance sheet date, as well as the highest and lowest closing points of the year are listed
below:
Stock Exchange Closing balance Highest/lowest closing
point of current year Opening balance
Highest/ lowest closing
point of previous year
Shanghai A
share index 3307.17 3587.03/3016.53 3103.64 3301.21/2638.30
Shenzhen
- A share index 11040.45 11714.98/9482.84 10177.14 11124.81/8986.52
F-218
Zhongrong International Trust Company Limited
The table below presents the sensitivity of the Company's net profit and owners' equity to every 10%
change in the fair value of equity instrument investment, assuming other variables are kept constant.
Type Current period
Face value lncrease/(decrease) of net
profit
lncrease/(decrease) of
owner s' equity
Listed equity instrument
investments
Transaction equity
instrument investments 29,453,200.00 ±2,208,990.00 ±2,208,990.00
Available-for-sale equity
instrument investment 569,938,398.48 ±42,745,379.89
(Continue)
Type Previous period
Face value lncrease/(decrease) of net
profit
lncrease/(decrease) of
owner s' equity
Listed equity instrument
investments
Transaction equity
instrument investments 14,698,452.95 ±1,102,383.97 ±1,102,383.97
Available-for-sale equity
instrument investment 707,128,325.08 ±53,034,624.38
11.5. Capital management
The major objective of asset management by the Company's is to maintain the capability of
sustainable operating, to keep healthy capital ratios, so as to support business development and
maximize shareholders' value.
The Company manages capital structure and makes necessary adjustment according to economic
situation and changes in particular assets'risk characteristics.In order to meet the management
requirements on trust companies according to Manual of Net Asset Management by CBRC, based on
the its own business scope and trusted assets' characteristics,the Company decides on the target size of
the trust service business, adjusts the Company's target capital size, and makes share allocation plans
or proposes to shareholders for additional investment. In 2015 and 2014, objective, policies and
procedures of asset management have not been changed.
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Zhongrong International Trust Company Limited
Fair value disclosure
12.1 fair value of assets and liabilities measured at fair value at the end of the period
Items Leval 1 inputs Leval 2 inputs Leval 3 inputs balance at the
end of the period
I.Continuing fair value measurement 4,752,129,818.02 4,752,129,818.02
1. Financial assets at fair value through
profit or loss
(1) transactional financial assets 29,453,200.00 29,453,200.00
1)Debt instrument investment
2)Equity instrument investment 29,453,200.00 29,453,200.00
3)Derivative financial instruments
(2)Financial assets designated as
measured at fair value and whose
changes are charged to profit or loss
for the current period
4,722,676,618.02 4,722,676,618.02
1)Debt instrument investment 186,896,843.54 186,896,843.54
2)Equity instrument investment - -
3)Others 4,535,779,774.48 4,535,779,774.48
2.Available-for-sale financial assets 569,938,398.48 1,229,858,280.56 1,799,796,679.04
(1)Debt instrument investment - - -
(2)Equity instrument investment 569,938,398.48 569,938,398.48
(3)Fund investment 1,168,188,603.48 1,168,188,603.48
(4) Trust investment 43,425,923.59 43,425,923.59
(5)Asset management plan 18,243,753.49 18,243,753.49
(6)Others
Total assets measured at fair value 5,322,068,216.50 1,229,858,280.56 - 6,551,926,497.06
12.2 continued measurement items in fair value, transition between levels within the curent period,
the reasons for the conversion, and the policy for determining the timing of conversion within the
current period
By the end of December,31,2017, there is no transition between leval 1 inputs and leval 2 inputs.
12.3. Fair value of financial assets and financial liabilities that are not measured at fair value
Fair value of financial instruments recorded not at fair value: The carrying amount of the Company's
financial instruments is stated at cost or amortised cost, which is not significantly different from the
fair value by the end of December 31, 2017.
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Zhongrong International Trust Company Limited
13.Related parties and transactions
13.1 The parent company of the Company
Name of parent
company
Registration place
Type of business Registered capital
Shareholding ratio of the
Company (%)
Voting rights proportion %
of the Company
Jingwei Textile Machinery Company Limited
Beijing Manufacturing 704,130,000.00 37.47 37.47
13.2 Subsidiaries of the Company
For details of the subsidiaries of the Company, please see the notes: VII. Business combinations and
consolidated financial statements
13.3 Details of the company's joint ventures and associates
Name of invested company relation Organizationg code
1. China Trust Registration Co., Ltd. Equity investment 91310000MA1FL3CJ7Q 2. Shenzhen huarong equity investment fundmanagement Co., Ltd. Equity investment 91440300576369345N
3. China Trust Industry Protection Fund Co.,Ltd. Equity investment 91110000327249174E
4. Harbin Rural Commercial Bank Co., Ltd. Equity investment 91230100MA18W00M0Y 5. Shanghai rongou equity investment fundmanagement Co., Ltd. Equity investment 9131000008410624XC
6. Shenzhen ruiyuanbaoxing fund managementCo., Ltd. Equity investment 91440300071104587W
7. Shenzhen shenronghui investment consultingCo.,Ltd. Equity investment 914403003597615434
13.4 Related transaction
(1) Related party funds lending
Relarted parties Amount of fund lending
Beginning of fund lending
End of fund lending Notes
China Trust Industry Protection Fund Co., Ltd. 800,000,000.00 2016/8/10 2017/8/10 Withdrawal of
funds China Trust Industry Protection Fund Co., Ltd. 500,000,000.00 2016/10/13 2017/4/13 Withdrawal of
funds China Trust Industry Protection Fund Co., Ltd. 500,000,000.00 2016/10/13 2017/4/13 Withdrawal of
funds China Trust Industry Protection Fund Co., Ltd. 300,000,000.00 2016/10/13 2017/4/13 Withdrawal of
funds China Trust Industry Protection Fund Co., Ltd. 250,000,000.00 2016/10/27 2017/10/13 Withdrawal of
funds China Trust Industry Protection Fund Co., Ltd. 1,000,000,000.00 2017/6/9 2017/12/9 Withdrawal of
funds China Trust Industry Protection Fund Co., Ltd. 1,000,000,000.00 2017/6/9 2017/12/9 Withdrawal of
funds China Trust Industry Protection Fund Co., Ltd. 500,000,000.00 2017/7/24 2017/10/24 Withdrawal of
funds China Trust Industry Protection Fund Co., Ltd. 1,200,000,000.00 2017/11/29 2018/5/29 Withdrawal of
funds
F-221
Zhongrong International Trust Company Limited
China Trust Industry Protection Fund Co., Ltd. 800,000,000.00 2017/12/20 2018/6/20 Withdrawal of
funds
(2) Related transactions for purchase and sale of goods, provision and acceptance of services
relarted parties Types of related transactions
Content of related
transactions
Current period amount
Amount
Proportion of
similar type of sales
Pricing Policy and Decision
Procedure
Harbin hatou property limited liability company
acceptance of service Property cost 774,995.38 3.79 Fair value
Harbin hatou property limited liability company
acceptance of service Heating cost 156,657.07 34.77 Fair value
Harbin hatou property limited liability company
acceptance of service Utilities 326,415.43 15.76 Fair value
Harbin hatou property limited liability company
acceptance of service Parking fee 1,886.80 0.56 Fair value
Total 1,259,954.68
(3) leases between related parties
Lessor Tenant Asset
condition
beginning of the lease end of the lease rental fees
Pricing accordanceof rental
fees
Impact of rental fees
Harbin Investment
Group Co., Ltd.
Zhongrong International
Trust Co., Ltd.
Direct rent January 1,2017 December 31,2017 2,448,905.31 Fair value Not
significant
13.5 Accounts receivals and accounts payable between related parties
Accounts payable
Accounts Related parties Balance at the end of the period
Balance at the beginning of the period
Other reveivables Zhongzhi Enterprise Group Co., Ltd. 67,500.00 67,500.00
14.
14.1Accounts Receivable
Type
Closing balance
Book balance Bad debt
Amount Percentage (%) Amount Percentage
(%) Individual accounts receivable with significant amount and bad debt reserve is individually accrud
Accounts receivable on which bad debt reserve is accrued by group 49,894,201.20 100.00
Individual account receviable without significant amount but bad debt reserve is individually accrued
Total 49,894,201.20 100.00
(continue) Type Opening balance
F-222
Zhongrong International Trust Company Limited
Book balance Bad debt
Amount Percentage (%) Amount Percentage
(%) Individual accounts receivable with significant amount and bad debt reserve is individually accrud
Accounts receivable on which bad debt reserve is accrued by group 111,418,253.88 100.00
Individual account receviable without significant amount but bad debt reserve is individually accrued
Total 111,418,253.88 100.00
14.1.1 Accrual of bad debt provision of accounts receivable according to credit risk characteristics
(1) Accounts receivables are accrued bad debt reserve using aging analysis method
Age Closing balance Opening balance
Book balance Percentage (%) Bad debt Book balance Percenta
ge (%) Bad debt
Within 1 year 49,894,201.20 100.00 111,418,253.88 100.00
Total 49,894,201.20 100.00 111,418,253.88 100.00
14.2 Other Receivables
Type
Closing balance
Book balance Bad debt
Amount Percentage (%) Amount Percenta
ge (%) Individual other receivables with significant amount and bad debtreserveis individually accrued
Other receivables on which bad debt reserve is Accrued by group 115,092,967.11 100.00 468,542.06 100.00
Grouped by age 70,308,143.41 61.09 468,542.06 100.00
Grouped by nature of receivable 44,784,823.70 38.91 Individual other receivable without significant amount but bad debt reserve is individually accrued
Total 115,092,967.11 100.00 468,542.06 100.00
(continue)
Type
Opening balance
Book balance Bad debt
Amount Percentage (%) Amount Percenta
ge (%) Individual other receivables with significant amount and bad debtreserveis individually accrued
Other receivables on which bad debt reserve is Accrued by group 71,794,099.62 100.00 468,542.06 100.00
Grouped by age 34,761,548.34 48.42 468,542.06 100.00
Grouped by nature of receivable 37,032,551.28 51.58 Individual other receivable without significant amount but bad debt reserve is individually accrued
Total 71,794,099.62 100.00 468,542.06 100.00
14.2.1Other receivables on which bad debt reserve is Accrued by group
F-223
Zhongrong International Trust Company Limited
(1) Other receivable is accrued bad debt reserve using aging analysis method
Age Closing balance Opening balance
Book balance Percentage (%) Bad debt Book balance Percenta
ge (%) Bad debt
Within 1 year 69,839,601.35 99.33 34,293,006.28 98.65 -
1-2 years -
2-3 years -
Over 3 years 468,542.06 0.67 468,542.06 468,542.06 1.35 468,542.06
Total 70,308,143.41 100.00 468,542.06 34,761,548.34 100.00 468,542.06
(2) Other receivables with accrued bad debt reserve using aging analysis method
Group name Closing balance Opening balance
Book balance Percentage (%) Bad debt Book
balance Percentage
(%) Bad debt
Grouped by nature of receivable 44,784,823.70 100.00 37,032,551.2
8 100.00
Total 44,784,823.70 100.00 37,032,551.28 100.00
14.3 Long-term Equity Investment
14.3.1. Long-term equity investment classification.
Project Opening balance Increase in
investment
Decrease in
investment Closing balance
Investments to subsidiaries 3,952,500,000.00 594,000,000.00 1,595,000,000.00 2,951,500,000.0
0
Investments to joint ventures
Investments to associates 2,068,169,051.38 173,097,932.69 103,807,000.00 2,137,459,984.0
7
Subtotal 6,020,669,051.38 767,097,932.69 1,698,807,000.00 5,088,959,984.0
7
Less: impairment of Long-term
equity investment
Total 6,020,669,051.38 767,097,932.69 1,698,807,000.00 5,088,959,984.0
7
14.3.2. Long-term equity investment details.
Invested unit The cost of investment
Opening balance
Changes in current period
Closing
balance
Balance of
impairment by theend of the period
increase in investment
Decrease in investment
Investment income
recognized under the
equity method
Declaring distribution of
cash dividends or
profits
1.Subsidiaties 3,952,500,000
.00
3,952,500,000
.00
594,000,000.0
0
1,595,000,00
0.00
2,951,5
00,000.
00
i.Beijing 1,220,000,000 1,220,000,000 1,220,0
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Zhongrong International Trust Company Limited
Invested unit The cost of investment
Opening balance
Changes in current period
Closing
balance
Balance of
impairment by theend of the period
increase in investment
Decrease in investment
Investment income
recognized under the
equity method
Declaring distribution of
cash dividends or
profits
Zhongrong
Dingxin
Investment
Management
Company
.00 .00 00,000.
00
Ii, Zhongrong
Mutual Fund
Management
Company
382,500,000.0
0
382,500,000.0
0
204,000,000.0
0
586,50
0,000.0
0 iii
iii.Chuangliy
uan No.1
assembled
funds trust
2,350,000,000
.00
2,350,000,000
.00
390,000,000.0
0
1,595,000,00
0.00
1,145,0
00,000.
00
2.Associates1,885,990,074
.90
2,068,169,051
.38 -
173,097,932
.69
103,807,000.0
0
2,137,4
59,984.
07
i. China Trust
Registration
Co., ltd
100,000,000.0
0
100,000,000.0
0
1,842,959.2
8
101,84
2,959.2
8
ii. Shenzhen
Huarong
Equity
Investment
Fund
Management
Company
4,900,000.00 7,835,525.81 84,851.78 2,107,000.00 5,813,3
77.59
iii. Xinhu
Wealth
InvestmenMt
anagement
Company
China Trust
Industry
Security Fund
1,500,000,000
.00
1,635,339,126
.83
122,973,201
.83 72,000,000.00
1,686,3
12,328.
66
iv. Harbin
Rural
Commercial
Bank Co., ltd
281,090,074.9
0
324,994,398.7
4
48,196,919.
80 29,700,000.00
343,49
1,318.5
4
F-225
Zhongrong International Trust Company Limited
Invested unit The cost of investment
Opening balance
Changes in current period
Closing
balance
Balance of
impairment by theend of the period
increase in investment
Decrease in investment
Investment income
recognized under the
equity method
Declaring distribution of
cash dividends or
profits
Total 5,838,490,074
.90
6,020,669,051
.38
594,000,000.0
0
1,595,000,00
0.00
173,097,932
.69
103,807,000.0
0
5,088,9
59,984.
07
Note: Chuang Li Yuan No. 1 Trust Plan is included in the consolidated structured entity.
14.4 Net interest income
Project Changes in current period Changes in previous period
Interest income 370,935,039.18 188,761,544.74
Due from banks 350,363,760.35 188,761,544.74
Loand and advances issued 20,571,278.83
Among them: individual loans and advances
company loans and advances 20,571,278.83
Interest expense 124,331,944.44 49,915,138.87
Withdrawal of funds 124,331,944.44 49,915,138.87
Net interest income 246,603,094.74 138,846,405.87
14.5 Net Fee and Commission net Income
Project Changes in current period Changes in previous period
Net Fee and Commission Income 2,880,122,338.25 3,774,414,525.89
Net commission income on trust 2,880,122,338.25 3,774,414,525.89
Net Fee and Commission expenses
Net fee
Net Fee and Commission net Income 2,880,122,338.25 3,774,414,525.89
14.6 Operating income Other operating business and operating cost
Project Changes in current period Changes in previous period
Income Cost Income Cost
income of asset management
1,100,790,533.96 1,129,145,747.82
Project distribution income 1,095,047,841.10 1,124,558,227.23
others 5,742,692.86 4,587,520.59
Total 1,100,790,533.96 1,129,145,747.82
14.7.Investment Income
F-226
Zhongrong International Trust Company Limited
14.7.1. Investment income details. Sources of investment income Changes in current period Changes in previous period
Gain/(Loss) from long-term equity investments in
equity method 279,795,069.77 190,956,095.36
Gain/(Loss) on disposal of long term equity investment
Gain/(Loss) from financial assets measured at fair value
through profit and loss for the current period 73,394,044.37 143,275,346.39
Gain/(Loss) on disposal of financial assets measured
at fair value through profit or loss for the current period
Gain/(Loss) on held-to-maturity financial assets during
the holding period
Gain/(Loss) on disposal of held-to-maturity financial
assets
Gains on available-for-sale financial assets during the
holding period 233,763,635.17 145,885,478.99
Gains on disposal of available-for-sale financial assets 52,832,098.20
Gains on remeasurement of the remaining equity at fair
value after losing control
Others
Total 639,784,847.51 480,116,920.74
14.8 Supplement to statement of cash flows
Item Changes in current period
Changes in previous period
1. Net profit adjusted to cash flows from operating activities
Net profit 2,169,606,416.67 2,364,715,351.63
Add: provision for asset impairment Depreciation of fixed assets, depreciation and depletion of
oil and gas assets and depreciation of productive biological assets
7,710,817.09 8,996,974.85
Amortization of intangible assets 4,747,727.14 3,421,711.67
Amortization of long-term deferred expenses 22,758,456.71 43,124,467.74 Losses on disposal of fixed assets, intangible assets and other long-term assets ("-" for gains) -298,910.57 -342,643.29
Losses on write-down of fixed assets ("-" for gains
Losses from changes in fair value ("-" for gains)
Financial expenses ("-" for income) 351,845.82 -474,350.27
Investments losses ("-" for gains) -279,795,069.77 -190,956,095.36
Decreases in the deferred tax assets ("-" for increases) 17,319,503.91 -52,507,651.72
Increases in the deferred tax liabilities ("-" for decreases)
Decreases in inventories ("-" for increases)
Decreases in operating receivables ("-" for increases) -5,752,205,936.79 2,547,478,815.12
Increases in operating payables ("-" for decreases) 565,465,278.83 -143,124,117.66
F-227
Zhongrong International Trust Company Limited
Item Changes in current period
Changes in previous period
Others
Net cash flows from operating activities -3,244,339,870.96 4,580,332,462.71 2. Significant investing and financing activities not involving cash inflow and outflow
Conversion of debt into capital
Convertible corporate bonds maturing within one year
Fixed assets acquired under financial lease
3. Net change in cash and cash equivalents
Cash as at 31/12/2017 6,106,194,939.39 8,439,764,548.45
Less: cash as at 1/1/2017 8,439,764,548.45 7,049,197,270.65
Add: cash equivalents as at 31/12/2017
Less: cash equivalents as at 1/1/2017
Net increase in cash and cash equivalents -2,333,569,609.06 1,390,567,277.80
15.Additional materials
15.1 Details of non-recurring gains and losses of the currrent period
Details of non-recurring gains and losses Amount Description
i. Gains and losses from disposal of non-current assets, including the written-off part in the
provision for impairment of assets 298,910.57
ii. Ultra vires approval, or without formal approval,or occasionally tax returns and
deductions 1,449,569.99
iii. Government subsidy ecognized in profit loss of current period, except for the continuous
fixed amount government subsidies closely related to the Company's normal operations
according to the government's policies and standards
4,500,000.00
iv. Fees for possession of capital charged on non-financial institutions that is recognized
in profit and loss of current period
v. Gains created when the Company acquires subsidiaries, joint ventures or affiliated
enterprises, the amount of investment cost is less than the interest in the acquiree's
recognizable net assets' fair value
vi. Gains and losses from exchange of non-monetary assets
Vii Gains and losses from entrusting other parties to invest or manage assets
viii. Provision for impairment of assets due to force majeure, such as natural disaster
ix. Gains and losses from debt restructuring
x. Corporate restructuring expenses, such as expenses on placement of employees, and
integration
xi. Gains and losses from the surplus of the fair value in trading showed by the trading price
F-228
Zhongrong International Trust Company Limited
Details of non-recurring gains and losses Amount Description
xii. Net gains and losses of current period from business combination under common
control from the beginningof period to the date of combination
xiii. Gains and losses from events not related to the Company's normal operation or
contingencies
xiv. Gains and losses from fair value changes caused by holding held-for-trading financial
assets and liabilities,as well as disposal of held-for-trading financial assets and liabilitiesand
available-for-sale financial assets, apart from effective hedging businesse rselevant to the
Company's normal operations
xv. Reverse of provision for impairment of accounts receivable on which bad debt reserve is
individually accrued
xvi. Gains and losses from external entrusted loans
xvii. Gains and losses from fair value changes of investment properties which are
subsequently measured using fair value model
xviii. Influences on gains and losses of current period by one-time adjustment on profitand
loss of current period required by tax and accounting laws and regualtions
xix. Management fees from entrusted operations
xx. Non-operating income and expenses other than above mentioned items -142,984.06
xxi. Other gains and losses in accordance with the standards of non-recurring gains and
losses -139,686.92
Total non-recurring gains and losses 5,965,809.58
Less: Influences from income tax 1,526,739.72
Non-recurring gains and losses after removing influences from income tax 4,439,069.86
Incl.: Non recurring gains and losses attributable to parent company's interest 2,198,945.11
Non-recurring gains and losses attributable to minority shareholders 2,240,124.75
15.2 As for the non-recurring gains and losses accounts defined by the Company according
"Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their
Securities to the Public" and the non-recurring gains and losses accounts listed in "Explanatory
Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the
Public" but defined as recurrent gains and losses, the reasons are explained as follows:
Account Amount involved Reason
Investment income 1,380,008,447.58
The Company considers financial assets
investment business as a major operating
activity
F-229
Zhongrong International Trust Company Limited
16.Approval of financial statements
The company's financial report is approved by the director.
Zhongrong International Trust Co., Ltd
Date March 21, 2018
Notes to the financial statements on pages 17 to 98 are signed by the following responsible persons
Legal representative Responsible for accounting work The head of the accounting
agency
Signature: Signature: Signature
Date: Date: Date:
F-230
F-231
Independent auditor's report to the member of Zhongrong International Holdings Limited (Incorporated in the British Virgin Islands with limited liability)
Opinion
We have audited the consolidated financial statements of Zhongrong International Holdings Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 4 to 50, which comprise the consolidated statement of financial position as at 31 December 2018, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial positions of the Group as at 31 December 2018 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA").
Basis for opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the "Auditor's responsibilities" section of our report. We are independent of the Group in accordance with the Code of Ethics for Professional Accountants ("the Code") issued by the HKICPA, and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Director's responsibilities for the consolidated financial statements
The sole director is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA, and for such internal control as the sole director determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the sole director is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the sole director either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The sole director is responsible for overseeing the Group's financial reporting process.
- 1 -
F-232
Independent auditor's report to the member of Zhongrong International Holdings Limited (Incorporated in the British Virgin Islands with limited liability)
Auditor's responsibilities
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also :-
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
- 2 -
F-233
Independent auditor's report to the member of Zhongrong International Holdings Limited (Incorporated in the British Virgin Islands with limited liability)
Auditor's responsibilities (cont'd)
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the sole director.
Conclude on the appropriateness of the sole director's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the sole director regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
The engagement director on the audit resulting in this independent auditor's report is Tan Yik Chung Wilson (Practising Certificate Number: P05103).
PKF Hong Kong Limited Certified Public Accountants Hong Kong
2 6 MAR 2019
PKF Hong Kong Limited :k1~~,ll,\;ffli (i!f ;i) @"~Hi!i;J:~JI Pli1'i I~ 0jejj Tel 852 2806 3822 • Fax 852 2806 3712 • EmaH [email protected] • Website www.pkf-hk.com 26/F, Citicorp Centre • 18 Whitfield Road • Causeway Bay • Hong Kong • W~-/!P]f;;llt~~~rim+;\.9Jc;tit~Q:iffir:f:11L.,.=+Affi
PKF Hong Kong Umi!ed Is a member firm of the PKF International limited family of legally Independent firms and does not accept any responsibility or liability for the actions or Inactions of any Individual member or correspondent firm or firms. :;k(f'lWff!;li{('.§'itt-)@iiH-i!HlllM!fftr.fl~jjjAitWJ::.m:rr.~rn['t,JPKF~UMii'l~l«fl.Plr, ;p1J~tlMETiflX:~rrrX!Z.JtflkR~~llif~['t,JfrE'}~;tt1:11'~ftfTPii:Kli'.afffoJW(:f:~ftfli •
- 3 -
F-234
Zhongrong International Holdings Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 31 December 2018
Note 2018 RMB
Revenue 4 242,962,466 Other income and other gain, net 5 180,824,090 Administrative expenses (66,984,232) Finance costs 6 (333,407,529)
Profit before income tax 7 23,394,795 Income tax expense 8 (287,598)
Profit for the year 23,107,197
Other comprehensive (loss)/income :-Items that may be reclassified subsequently to profit or loss :-
Exchange difference arising on translation of foreign subsidiaries 11,347,358
Fair value loss on financial assets at fair value through other comprehensive income (10,113,558)
Surplus on revaluation of available-for-sale financial assets
Item that will not be reclassified subsequently to profit or loss :-
Fair value loss on financial assets designated at fair value through other comprehensive income (61,406,209)
Other comprehensive (loss)/income for the year (60,172,409)
Total comprehensive (loss)/income for the year (37,065,212)
Profit for the year attributable to :-Member of the Company 22,726,812 Non-controlling interests 380,385
23,107,197
Total comprehensive (loss)/income for the year attributable to :-
Member of the Company (37,669,422) Non-controlling interests 604,210
(37,065,212)
- 4 -
2017 RMB
301,572,059 183,084,786 (63,956,768)
(343,684,701)
77,015,376 (7,067,688)
69,947,688
(12,266,471)
60,054,430
47,787,959
117,735,647
69,198,466 749,222
69,947,688
117,174,306 561,341
117,735,647
F-235
Zhongrong International Holdings Limited Consolidated statement of financial position As at 31 December 2018
Non-current assets Property, plant and equipment Goodwill Available-for-sale financial assets Financial assets at fair value through other
comprehensive income Loans to third parties
Current assets Trade and other receivables Available-for-sale financial assets Financial assets at fair value through other
comprehensive income Financial assets at fair value through profit or loss Loans to third parties Amounts due from fellow subsidiaries Tax recoverable Client trust bank balances Cash and cash equivalents
Current liabilities Trade payables Accruals and other payables Debentures Tax payable
Net current assets
Net assets less current liabilities
Non-current liability Debentures
Net assets
"5"
Note 2018 2017 RMB RMB
9 1,853,214 2,835,394 10 27,974,118 27,974,118 12 215,354,661
13 338,055,883 14 459,833,528 199,302,962
827,716,743 445,467,135
15 58,640,533 38,357,979 12 1,368,914,009
13 1,399,137,090 16 485,932,829 186,896,844 14 964,140,227 1,140,049,817 17 847,797 1,099,670
6,823,163 18 36,172,068 48,781,369
861,374,130 1,990,103,263
3,813,067,837 4,774,202,951
20 38,977,132 53,985,965 21 33,539,415 36,335,628 22 2,848,409,859 1,467,943,494
83,264 16,165,358
2,921,009,670 1,574,430,445
892,058,167 3,199,772,506
1,719,774,910 3,645,239,641
22 1,366,970,186 3,255,369,705
352,804,724 389,869,936
F-236
Zhongrong International Holdings Limited Consolidated statement of financial position As at 31 December 2018
Note Representing :-
Equity attributable to member of the Company Share capital 23(a) Reserves
Non-controlling interests
Total equity
2018 RMB
280,837,766 66,859,314
347,697,080
5,107,644
352,804,724
Approved and authorised for issue by the sole director on 2 6 MAR 2019
Zhang Xianghui Director
- 6 -
2017 RMB
280,837,766 104,867,214
385,704,980
4,164 956
389,869,936
F-237
Zh
on
gro
ng
In
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al H
old
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imit
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C
on
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eq
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1 D
ece
mb
er
2018
Sh
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RM
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At
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17
280,
837,
766
Acq
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n o
f su
bsi
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rie
s -
No
te 1
1 (c
)
Ch
an
ge
in o
wne
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tere
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in a
sub
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ary
-N
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11 (d
)
Pro
fit fo
r the
ye
ar
Oth
er
com
preh
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for t
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r
At3
1 D
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mb
er2
01
7 a
nd 1
Ja
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20
18
28
0,83
7,76
6
Imp
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initi
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pplic
atio
n o
f HK
FR
S 9
Adj
uste
d ba
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e at
1 J
an
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ry 2
01
8
280,
837,
766
Ch
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ge
in o
wne
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p in
tere
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in a
su
bsi
dia
ry -
No
te 1
1 (f)
Pro
fit fo
r the
ye
ar
Oth
er c
ompr
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sive
loss
for
the
year
At
31 D
ece
mb
er
2018
28
0,83
7,76
6
Sh
are
T
ran
sla
tio
n
prem
ium
re
serv
e
RMB
RMB
14,4
24,9
69
18,5
26,7
86
(12,
078,
590)
14,4
24,9
69
6,44
8,19
6
14,4
24,9
69
6,44
8,19
6
11,1
23,5
33
14,4
24,9
69
17,5
71,7
29
Att
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to m
em
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(A
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/ N
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con
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/Jin
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rese
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(r
ecyc
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) re
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) p
rofi
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To
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s T
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l
RM
B
RMB
RMB
RM
B
RM
B
RM
B
RM
B
1,35
1,77
9 (4
6,03
3,18
7)
269,
108,
113
269,
108,
113
3,02
6,17
6 3,
026,
176
(577
,439
) (5
77,4
39)
577,
439
69,1
98,4
66
69,1
98,4
66
749,
222
69,9
47,6
88
60,0
54,4
30
47,9
75,8
40
(187
,881
) 47
,787
,959
(577
,439
) 61
,406
,209
23
,165
,279
38
5,70
4,98
0 4,
164,
956
389,
869,
936
(61,
406,
209)
61
,406
,209
(577
,439
) -
61,4
06,2
09
23,1
65,2
79
385,
704,
980
4,16
4,95
6 38
9,86
9,93
6
(338
,478
) (3
38,4
78)
338,
478
22,7
26,8
12
22,7
26,8
12
380,
385
23,1
07,1
97
(10,
113,
558)
(61
,406
,209
) (6
0,39
6,23
4)
223,
825
(60,
172,
409)
(915
,917
) (1
0,11
3,55
8)
45,8
92,0
91
347,
697,
080
5,1
07
,64
4
35
2,8
04
,72
4
-7-
F-238
Zhongrong International Holdings Limited Consolidated statement of cash flows For the year ended 31 December 2018
Cash flows from operating activities Profit before income tax Adjustments for :-
Bank interest income Depreciation Provision for long service payment Finance costs Fair value gain on financial assets at fair value
through profit or loss Gain on disposal of financial assets at fair value
through profit or loss Gain on disposal of financial assets at fair value
through other comprehensive income Investment income from financial assets at fair value
through profit or loss Investment income from financial assets at fair value
through other comprehensive income Investment income from available-for-sale financial assets Loss on disposal of subsidiaries Gain on discharge of debentures
Operating profit before working capital changes Changes in working capital:-
Trade and other receivables Loans to third parties Client trust account Trade payables Financial assets at fair value through profit or loss Amounts due from fellow subsidiaries Accruals and other payables
Cash used in operations Tax paid
Net cash used in operating activities
-8-
2016 2017 RMB RMB
23,394,795 77,015,376
(169,018) (217,869) 1,453,360 1,172,652
395,952 333,407,529 343,684,701
(17,409,008) (18,655,278)
(1,718,039)
(3,841,405)
(38,840,715)
(113,017,714) (161,850,378)
205,699 (7,751,929)
177,827,546 239,431,165
(20,282,554) 33,453,804 (84,620,976) (1,211,404,155) 12,609,301 (48,781,369)
(15,008,833) 18,974,934 (272,950,972) 173,618,501
251,873 639,786,637 (40,684,234) (335,108,820)
(242,858,849) (490,029,303) (23,158,657) (55,432)
(266,017,506) (490,084,735)
F-239
Zhongrong International Holdings Limited Consolidated statement of cash flows For the year ended 31 December 2018
Cash flows from investing activities Investment and interest income received Net cash outflow on disposal of subsidiaries - Note 11(b) Net cash outflow on acquisition of subsidiaries - Note 11(c) Purchase of property, plant and equipment Payment for acquisition of financial assets at fair value
through other comprehensive income Proceeds from disposal of financial assets at fair value
through other comprehensive income Payment for acquisition of available-for-sale
financial assets Proceeds from disposal of available-for-sale
financial assets
Net cash (used in)/generated from investing activities
Cash flows from financing activities Debentures interest paid Payment for discharge of debentures Payment for redemption of debentures Proceeds from issuance of debentures
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of the year
Analysis of the balance of cash and cash equivalents Cash and cash equivalents
- 9 -
2018 2017 RMB RMB
138,034,817 217,869 (205,699)
(23,635,473) (381,078) (2,443,963)
(1,062,690,987)
915,644,052
(403,803,132)
1,217,546,343
(9,598,895) 787,881,644
(309,464,553) (321,238,850) (563,417,374)
(1,502,001,293) 1,311,380,000
(1,063,503,220) (321,238,850)
(1,339,119,621) (23,441,941)
1,990,103,263 2,176,408,739
210,390,488 (162,863,535)
861,374,130 1,990,103,263
861,374,130 1,990,103,263
F-240
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
1. General
Zhongrong International Holdings Limited (the "Company") is a limited company incorporated in the British Virgin Islands ("BVI"). The addresses of its registered office and principal place of business of the Company are P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, the British Virgin Islands and Units 6501-02, 65/F., The Center, 99 Queen's Road Central, Hong Kong respectively.
The Company and its subsidiaries (collectively referred to as the "Group") are principally engaged in investment holding, provision of consultancy and financing services, securities and futures trading business and asset management business. The principal activities of the subsidiaries of the Group are set out in note 11.
2. Basis of preparation
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRS"), Hong Kong Accounting Standards ("HKAS") and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (hereinafter collectively referred to as "Hong Kong Financial Reporting Standards").
(b) Initial application of Hong Kong Financial Reporting Standards
In the current year, the Group initially applied the following Hong Kong Financial Reporting Standards :-
HKFRS 9 HKFRS 15 HK(IFRIC)-lnt 22
Amendments to HKAS 40 Amendments to H KFRS 2
Amendments to HKFRS 4
Annual Improvements to HKFRSs (2014-2016)
Financial Instruments Revenue from Contracts with Customers Foreign Currency Transactions and Advance
Consideration Transfers of Investment Property Classification and Measurement of Share-based
Payment Transactions Applying HKFRS 9 Financial Instruments with HKFRS 4
Insurance Contracts Amendments to HKFRS 1 and HKAS 28
On initial application of HKFRS 9, the Group's investments in available-for-sale financial assets were reclassified or designated as financial assets at fair value through other comprehensive income (see notes 12 and 13) and impairment of trade receivables shall be estimated on the basis of lifetime expected credit losses. The differences between the previous carrying amounts financial assets and financial liabilities and the carrying amounts of financial assets and financial liabilities measured in accordance with HKFRS 9 were recognised in retained profits or other components of equity as appropriate at the date of initial application. Comparative figures were not restated.
- 10 -
F-241
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
2. Basis of preparation (cont'd)
(b) Initial application of Hong Kong Financial Reporting Standards (cont'd)
The following table summarises the impact of transition to HKFRS 9 on fair value reserves at 1 January 2018.
RMB Fair value reserve (recycling)
Transferred to fair value reserve (non-recycling) relating to fund investment now measured at financial assets at fair value through other comprehensive income
Net decrease in fair value reserve (recycling) at 1 January 2018
Fair value reserve (non-recycling)
Transferred from fair value reserve (recycling) relating to fund investment now measured at financial assets at fair value through other comprehensive income
Net increase in fair value reserve (non-recycling) at 1 January 2018
(61,406,209)
(61,406,209)
61,406,209
61,406,209
On initial application of HKFRS 15, promises in contracts with customers within its scope shall be identified as a performance obligation satisfied over time or a performance obligation satisfied at a point in time. For performance obligations satisfied over time, revenue shall be recognised over time by measuring the progress towards complete satisfaction of that performance obligation. For performance obligations satisfied at a point in time, revenue shall be recognised when the customers obtains control of the promised good or service. Given the nature of the Group's business, the initial application of HKFRS 15 does not necessitate material changes in the Group's revenue recognition and measurement policies, or retrospective adjustments of the comparatives presented in the financial statements.
The initial application of other financial reporting standards does not necessitate material changes in the Group's accounting policies and retrospective adjustments of the comparatives presented in the financial statements.
- 11 -
F-242
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
2. Basis of preparation (cont'd)
(c) Hong Kong Financial Reporting Standards in issue but not yet effective
The following Hong Kong Financial Reporting Standards in issue at 31 December 2018 have not been applied in the preparation of the Group's consolidated financial statements for the year then ended since they were not yet effective for the annual period beginning on 1 January 2018 :-
HKFRS 16 HKFRS 17 HK(IFRIC)-lnt 23 Amendments to HKAS 19 Amendments to HKAS 28 Amendments to HKFRS 9 Annual Improvements
to HKFRSs (2015-2017)
Leases Insurance Contracts Uncertainty over Income Tax Treatments Plan Amendment, Curtailment or Settlement Long-term Interests in Associates and Joint Ventures Prepayment Features with Negative Compensation Amendments to HKFRS 3, HKFRS 11, HKAS 12 and
HKAS 23
The Group is required to initially apply HKFRS 16, HK(IFRIC)-lnt 23, Amendments to HKAS 19, Amendments to HKAS 28 and Amendments to HKFRS 9, Amendments to HKFRS 3, HKFRS 11, HKAS 12 and HKAS 23 of Annual Improvements to HKFRSs (2015-2017) in its annual consolidated financial statements beginning on 1 January 2019, and to initially apply HKFRS 17 in its annual consolidated financial statements beginning on 1 January 2021.
The Group is in the process of making an assessment of what the impact of these amendments, new standards and interpretations is expected to be in the period of initial application. So far the Group has identified some aspects of HKFRS 16 which may have an impact on the consolidated financial statements. While the assessment has been substantially completed for HKFRS 16, the actual impact upon the initial adoption of this standard may differ as the assessment completed to date is based on the information currently available to the Group, and further impacts may be identified before the standard is initially applied in the Group's consolidated financial statements for the year ending 31 December 2019. The Group may also change its accounting policy elections, including the transition options, until the standard is initially applied in that financial report.
3. Significant accounting policies
(a) Measurement basis
These consolidated financial statements are prepared under the historical cost basis as modified by revaluation of financial assets at fair value through other comprehensive income and financial assets at fair value through profit or loss as explained in the accounting policies set out below.
- 12 -
F-243
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(b) Business combination
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; 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. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another HKFRS.
- 13 -
F-244
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(c) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered.
The results of subsidiaries acquired or disposed of during the year are dealt with in the consolidated statement of profit or loss from the dates of acquisition or to the dates of disposal respectively. All significant intra-group transactions and balances have been eliminated on consolidation.
Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Group can elect to measure any non-controlling interests either at fair value or at their proportionate share of the subsidiary's net identifiable assets.
Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to members of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated statement of profit or loss and the consolidated statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the members of the Company.
Changes in the Group's interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised.
When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of an investment in an associate.
- 14 -
F-245
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(d) Subsidiaries
Subsidiaries are entities controlled by the Group.
In the Company's statement of financial position, the investments in subsidiaries are stated at cost less provision for impairment losses.
(e) Revenue recognition
Commission and handling services income on dealing in securities, futures and commodities and foreign exchange contracts is recognised at a point in time when the relevant contract notes have been exchanged.
Consultation service income is recognised at a point in time when the services are rendered.
Revenue from asset management service is recognised over time with reference to time elapsed, which faithfully depicts the relative value of the services provided to customer to date.
Interest income is recognised as it accrues using the effective interest method.
Dividend income from investments is recognised when the members' right to receive payment has been established.
- 15 -
F-246
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(f) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use.
Repairs and maintenance costs are charged to profit or loss in the period in which it is incurred.
Depreciation is calculated to write off the costs of property, plant and equipment to their estimated residual values over their estimated useful lives on a straight-line basis at the following annual rates :-
Furniture and fixtures Leasehold improvement Motor vehicle
over 3 years over the lease term over 5 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
The gain or loss arising from the disposal of an asset is determined as the difference between the net disposal proceeds and the carrying value of the asset and is recognised in profit or loss.
(g) Goodwill
Goodwill represents the excess of
(i) the aggregate of the fair value of the considered transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group's previously held equity interest in the acquiree; over
(ii) the net fair value of the acquiree's identifiable assets and liabilities measured as at the acquisition date.
When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain purchase.
Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (see note 3(m)).
On disposal of a cash generating unit during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.
- 16 -
F-247
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(h) Financial assets
(i) Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under HKFRS 15.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are "solely payments of principal and interest (SPPI)" on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
The Group's business model for managing financial assets refers to how ii manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade dale, i.e., the date that the Group commits to purchase or sell the asset.
(ii) Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories :-
Financial assets at amortised cost (debt instruments) Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments) Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) Financial assets at fair value through profit or loss
- 17 -
F-248
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(h) Financial assets (cont'd)
(ii) Subsequent measurement (cont'd)
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met :-
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and The 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.
Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group's financial assets at amortised cost includes accounts receivable.
Financial assets at fair value through OCI (debt instruments)
The Group measures debt instruments at fair value through OCI if both of the following conditions are met :-
The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling; and The 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.
For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement of profit or loss and other comprehensive income computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss.
Financial assets designated at fair value through OCI (equity instruments)
Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under HKAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.
- 18 -
F-249
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(h) Financial assets (cont'd)
(ii) Subsequent measurement (cont'd)
Financial assets designated at fair value through OCI (equity instruments) (cont'd)
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss and other comprehensive income when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss and other comprehensive income.
This category includes listed equity investments which the Group had not irrevocably elected to classify at fair value through OCI. Dividends on listed equity investments are also recognised as other revenue in the statement of profit or loss and other comprehensive income when the right of payment has been established.
- 19 -
F-250
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(h) Financial assets (cont'd)
(iii) Decognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group's statement of financial position) when :-
the rights to receive cash flows from the asset have expired; or the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a "pass-through" arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group's continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
(i) Financial liabilities
(i) Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group's financial liabilities include trade payables, accruals and other payables and debentures.
- 20 -
F-251
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(i) Financial liabilities (cont'd)
(ii) Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:-
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by HKFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in HKFRS 9 are satisfied. The Group has designated convertible redeemable bond as at fair value through profit or loss.
Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income.
- 21 -
F-252
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(i) Financial liabilities (cont'd)
(iii) Decognition
A financial liability is derecognised when the obligation under the liability is discharged or canceled, or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the statement of profit or loss and other comprehensive income.
U) Payables
Payables are recognised initially at fair values and subsequently measured at amortised costs using the effective interest method.
(k) Employee benefits
Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the period in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.
Obligations for contributions to defined contribution retirement plans are recognised as an expense in profit or loss as incurred.
(I) Expected credit losses ("ECLs")
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive).
In measuring ECLs, the Group takes into account reasonable and supportable information that is available without undue cost or effort. This includes information about past events, current conditions and forecasts of future economic conditions. ECLs are measured on either of the following bases :-
12-month ECLs : these are losses that are expected to result from possible default events within the 12 months after the reporting date; and
Lifetime EC Ls: these are losses that are expected to result from all possible default events over the expected lives of the items to which the ECL model applies.
- 22 -
F-253
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(I) Expected credit losses ("ECLs") (cont'd)
Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. For other receivables, the Group recognises a loss allowance equal to 12-month ECLs unless there has been a significant increase in credit risk of the other receivables since initial recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs.
In assessing whether the credit risk of a receivable has increased significantly since initial recognition, the Group compares the risk of default occurring on the receivable assessed at the reporting date with that assessed at the date of initial recognition. In making this reassessment, the Group considers that a default event occurs when (i) the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or (ii) the financial asset is 30 days past due. The Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.
Depending on the nature of the receivables, the assessment of a significant increase in credit risk is performed on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the receivables are grouped based on shared credit risk characteristics, such as past due status and credit risk ratings.
EC Ls are remeasured at each reporting date to reflect changes in the receivables' credit risk since initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss. The Group recognises an impairment gain or loss for all receivables with a corresponding adjustment to their carrying amount through a loss allowance account.
At each reporting date, the Group assesses whether a financial asset is credit-impaired. A financial asset is considered credit-impaired if there is observable evidence that the debtors have significant difficulties.
The gross carrying amount of receivable is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.
Subsequent recoveries of an asset that was previously written off are recognised as a reversal of impairment in profit or loss in the period in which the recovery occurs.
- 23 -
F-254
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(m) Impairment of non-financial assets
At the end of each reporting period, the Group determines whether there is any indication of impairment of assets. If there is any indication of impairment, the recoverable amount of the relevant asset or group of assets is estimated and compared with the carrying amount.
If the recoverable amount of an asset or a group of assets is less than its carrying amount, the carrying amount of the asset or group of assets is reduced to the recoverable amount. Impairment losses are recognised as an expense in profit or loss.
(n) Receivables
A receivable is recognised when the Group has an unconditional right to receive consideration. A right to receive consideration is unconditional if only the passage of time is required before payment of that consideration is due.
Receivables are stated at amortised cost using the effective interest method less allowance for credit losses (see note 3(1)).
(o) Borrowing costs
Borrowing costs include interest charges and other costs incurred in connection with the borrowing of funds and are expensed as incurred.
(p) Income tax
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 net profit as reported in the consolidated statement of profit or loss because it excludes items of income and expense that are taxable or deductible in other years, and it further excludes profit or loss items that are never taxable and deductible.
Deferred tax is the tax expected to be payable or recoverable on 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, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such 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.
The carrying amount of deferred tax asset is reviewed at the end of each 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.
- 24 -
F-255
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(p) Income tax (cont'd)
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or asset is realised. Deferred tax is charged or credited to the profit or loss, except when it relates to items charged or credited to other comprehensive income or directly to equity, in which case the deferred tax is also dealt with in other comprehensive income or directly in equity respectively.
(q) Cash equivalents
Cash equivalents are short-term, highly liquid investments which are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(r) Leases
Leases are classified as finance leases whenever the terms of the leases transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the terms of the relevant leases.
( s) Related parties
(a) A person or a close member of that person's family, is related to the Group if that person :-
(i) has control or joint control over the Group; (ii) has significant influence over the Group; or (iii) is a member of the key management personnel of the Group or the Group's
parent.
(b) An entity is related to the Group if any of the following conditions applies:-
(i) the entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) one entity is an associate or a joint venture of the other entity (or an associate or a joint venture of a member of a group of which the other entity is a member).
(iii) both entities are joint ventures of the same third party. (iv) one entity is a joint venture of a third entity and the other entity is an
associate of the third entity. (v) the entity is a post-employment benefit plan for the benefit of employees of
either the Group or an entity related to the Group. (vi) the entity is controlled or jointly controlled by a person identified in (a).
- 25 -
F-256
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(s) Related parties (cont'd)
(b) An entity is related to the Group if any of the following conditions applies:- (cont'd)
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that, person in their dealings with the entity.
(t) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in Renminbi which is the Group's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rate of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
(iii) Group companies
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:-
assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
income and expenses for each profit or loss are translated at monthly exchange rates; and
all resulting exchange differences are recognised in other comprehensive income and accumulated separately in equity in the translation reserve.
- 26 -
F-257
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
3. Significant accounting policies (cont'd)
(u) Significant judgement
In the process of applying the Group's accounting policies, judgements that can significantly affect the amounts recognised in the consolidated financial statements are made in determining :-
(i) whether there is an indication of impairment of assets; (ii) the expected manner of recovery of the carrying amount of assets; and (iii) whether the discount rates used to calculate the recoverable amount of assets are
appropriate for the purpose of impairment review.
4. Revenue
Revenue represents income received from provision of consultancy, financing services and securities, futures and commodities brokerage service.
Revenue from contracts with customers
Recognised at a point in time Commission and handling services income Consultation services income
Recognised over time Management fee income
Not within the scope of HKFRS 15
Interest income from margin client Interest income from fellow subsidiaries Interest income from loan receivables
- 27 -
2018 RMB
29,888,491 75,836,249
4,981,015
1,270,491
130,986,220
242,962,466
2017 RMB
25,303,236 147,504,060
305,971
894,049 66,833,766 60,730,977
301,572,059
F-258
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
5. Other income and other gain, net
Bank interest income Gain on disposal of financial assets at fair value
through other comprehensive income Gain on disposal of financial assets at fair value
through profit or loss Sundry income Fair value gain on financial assets at fair value
through profit or loss Investment income from financial assets at fair value
through profit or loss Investment income from financial assets at fair value
through other comprehensive income Investment income from available-for-sale financial assets Gain on discharge of debentures Loss on disposal of subsidiaries - Note 11 (b)
6. Finance costs
Interest expenses on debentures Other interest expense
7. Profit before income tax
Profit before income tax is arrived at after charging :-
(a) Staff costs
Salaries, wages and other benefits Contribution to defined contribution retirement plan
(b) other items
Auditor's remuneration Depreciation Operating lease charges in respect of office premises
- 28 -
2018 2017 RMB RMB
169,018 217,869
3,841,405
1,718,039 643,222
17,409,008 18,655,278
38,840,715
113,017,714 161,850,378
7,751,929 (205,699)
180,824,090 183,084,786
2018 2017 RMB RMB
333,407,529 343,424,670 260,031
333,407,529 343,684,701
2018 2017 RMB RMB
42,756,810 40,077,345 668,003 479,649
43,424,813 40,556,994
496,966 548,783 1,453,360 1,172,652 7,759,100 6,011,076
F-259
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
8. Income tax expense
(a) Taxation in the consolidated statement of profit or loss and other comprehensive income represents :-
Current tax - Hong Kong profits tax Provision for the year Under-provision in prior year
Current tax - PRC income tax
2018 RMB
248,089 39,509
287,598
2017 RMB
7,011,070 1,186
7,012,256
Provision for the year _____ 55,432
287,598 7,067,688
The provision for Hong Kong profits tax is calculated at 16.5% (2017 16.5%) of the estimated assessable profit for the year.
PRC income tax is calculated at 25% (2017: 25%) of the estimated assessable profit of the Group as determined in accordance with relevant tax rules and regulations in the PRC for the year.
(b) Income tax expense for the year can be reconciled to the profit before income tax per the consolidated statement of profit or loss and other comprehensive income as follows :-
Profit before income tax
Tax effect at the profits tax rate of 16.5% Tax effect of income not taxable for tax purpose Tax effect of expenses not deductible for tax purpose Tax effect of other temporary differences not recognised Tax effect of unused tax losses not recognised Tax effect of utilisation of tax losses not previously
recognised Under-provision in prior year Other PRC income tax
Income tax expense
2018 RMB
23,394,795
3,860,141 (75,850,400) 72,097,408
897,145 2,251,949
(2,887,282) 39,509
(120,872)
287,598
2017 RMB
77,015,376
12,707,537 (133,634,589) 129,093,738
54,824
(1,210,440) 1,186
55,432
7,067,688
(c) As at 31 December 2018, the Group has not recognised deferred tax assets in respect of cumulative tax losses of approximately RMB50,757,362 (2017: RMB54,607,865) as it is not probable that future taxable profits, against which the assets can be utilised, will be available in the relevant tax jurisdictions. The tax losses have no expiry date under current tax legislation. Other temporary differences are not material.
- 29 -
F-260
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
9. Property, plant and equipment
Furniture and fixtures
RMB Cost:-
At 1.1.2017 438,376 Acquisition of subsidiaries 5,020,926 Additions 403,462 Written off Exchange realignment (336,504)
At 31.12.2017 5,526,260
Accumulated depreciation :-
At 1.1.2017 131,597 Acquisition of subsidiaries 4,861,388 Charge for the year 232,736 Written off Exchange realignment (303,464)
At 31.12.2017 4,922,257
Net book value :-
At 31.12.2017 604,003
Cost:-
At 1.1.2018 5,526,260 Additions 353,429 Written off (2,476,071) Exchange realignment 283,486
Al31.12.2018 3,687,104
Accumulated depreciation :-
At 1.1.2018 4,922,257 Charge for the year 368,406 Written off (2,476,071) Exchange realignment 241,940
Al 31.12.2018 3,056,532
Net book value :-
At 31.12.2018 630,572
- 30 -
Leasehold Motor improvement vehicles Total
RMB RMB RMB
570,476 673,347 1,682,199 3,127,410 8,148,336 2,040,501 2,443,963
(2,051,060) (2,051,060) (284,126) (43,043) (663,673)
3,403,201 630,304 9,559,765
570,476 43,544 745,617 2,514,249 7,375,637
813,665 126,251 1,172,652 (2,051,060) (2,051,060)
(208,258) (6,753) (518,475)
1,639,072 163,042 6,724,371
1,764,129 467,262 2,835,394
3,403,201 630,304 9,559,765 27,649 381,078
(2,476,071) 142,797 29,260 455,543
3,573,647 659,564 7,920,315
1,639,072 163,042 6,724,371 961,587 123,367 1,453,360
(2,476,071) 111,341 12,160 365,441
2,712,000 298,569 6,067,101
861,647 360,995 1,853,214
F-261
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
10. Goodwill
Goodwill arising from acquisition of subsidiaries - Note 11(c)
2018 RMB
27,974,118
2017 RMB
27,974,118
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. Before recognition of impairment losses, the carrying amount of goodwill had been allocated as follows :-
Financing services and securities, futures and commodities brokerage service
RMB
27,974,118
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amount of the CGUs is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. A discount factor at a rate was 11.21 % applied in the value in use model. Cash flows beyond the five-year period are extrapolated using nil growth rate.
11. Investments in subsidiaries - the Company
Unlisted shares, at cost
2018 RMB
350,779,740
Details of the Company's subsidiaries at 31 December 2018 are as follows:-
Place of incorporation or Proportion of
registration/ equity interests attributable Name of subsidiary Note operations to the Company
Direct Indirect 2018 2018
Zhongrong International Capital Hong Kong 100% Management Limited (2017: 100%) (2017: -) ("Zhongrong International Capital")
Zhongrong International Bond BVI 100% 2015 Limited (2017: 100%) (2017: ·)
Zhongrong International Bond BVI 100% 2016 Limited (2017: 100%) (2017: ·)
Zhongrong International Bond a BVI 100% 2018 Limited (2017: ·) (2017: -)
- 31 -
2017 RMB
347,021,913
Principal activities
Advising on securities and asset management
Bond issuance
Bond issuance
Bond issuance
F-262
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
11. Investments in subsidiaries - the Company (cont'd)
Details of the Company's subsidiaries at 31 December 2018 are as follows (cont'd):-
Place of incorporation or Proportion of
registration/ equity interests attributable Principal Name of subsidiary Note operations to the Company activities
Direct Indirect 2018 2018
Blackhawk Investment b BVI Financial Management Limited (2017: 100%) (2017:-) investing (formerly known as Zhongrong Korea Bond Limited)
Zhongrong International Wealth Hong Kong 100% Financial Management Limited (2017 : 100%) (2017:-) investing
and lending
Wealth Pointer Global Limited BVI 100% Financial (2017: 100%) (2017:-) investing
Zhongrong Capital b Cayman Islands Investment holding Holding Limited (2017: 100%) (2017 :-)
Zhongrong PT Capital Limited Hong Kong 100% Provision of (formerly known as Zhongrong (2017: 100%) (2017 : -) arrangement International Financial Services service Management (HongKong) (2017: Inactive) Limited)
Zhongrong International Hong Kong Inactive Asset Management (2017 : 100%) (2017 : -) (HongKong) Limited
Zhongrong International Hong Kong Inactive Finance Management (2017 : 100%) (2017:-) (HongKong) Limited
Zhongrong PT Securities C, d, f Hong Kong 94.8% Securities, futures Limited (2017: 93.1%) (2017:-) and commodities
brokerage
Zhongrong PT Finance C, e Hong Kong 100% Provision of Limited (2017: 100%) (2017:-) financing service
Zhongrong PT Trading c, e Hong Kong 100% Inactive Limited (2017 : 100%) (2017 : -)
Zhongrong Universal Capital b BVI Investment Management Limited (2017 : -) (2017: 100%) Holding
Zhongrong International Capital Cayman Islands 100% Asset Management (Cayman) (2017 : 100%) (2017 : -) management Limited
- 32 -
F-263
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
11. Investments in subsidiaries -the Company (cont'd)
Notes:-
(a) Incorporated during the year.
(b) During the year ended 31 December 2018, the Group disposed 100% equity interests in Blackhawk Investment Management Limited (formerly known as Zhongrong Korea Bond Limited), Zhongrong Capital Holding Limited and Zhongrong Universal Capital Management Limited with nil consideration.
Net assets disposed of:
Bank balance
Net cash outflow in respect of net assets disposed of :
Cash consideration Less : Bank balance disposed of
Loss on disposal of subsidiaries - note 5
Consideration received Less : Net assets disposed of
RMB
205,699
205,699
(205,699)
(205,699)
(205,699)
(205,699)
(c) During the year ended 31 December 2017, the Group acquired 90% equity interests in Zhongrong PT Finance Limited, Zhongrong PT Securities Limited and Zhongrong PT Trading Limited at a total consideration of RMB54,885,884.
Details of net assets acquisition transaction are as follows:-
Net assets acquired of:
Property, plant and equipment Loan receivables Trade and other receivables Bank balance Trade payables Accrued expenses and other payables
Non-controlling interests
- 33 -
RMB
772,699 127,948,625 38,579,762 31,250,411
(35,011,031) (133,602,524)
29,937,942 (3,026,176)
26,911,766
F-264
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
11. Investments in subsidiaries - the Company (cont'd)
Notes (cont'd):-
(c) During the year ended 31 December 2017, the Group acquired 90% equity interests in Zhongrong PT Finance Limited, Zhongrong PT Securities Limited and Zhongrong PT Trading Limited at a total consideration of RMB54,885,884. (cont'd)
Details of net assets acquisition transaction are as follows (cont'd) :-
Goodwill arising on acquisition - Note 10
Cash consideration paid Less : Net book value of identifiable net assets acquired
Net cash outflow in respect of the net assets acquired :Cash consideration Less : Cash and bank balances acquired
RMB
54,885,884 (26,911,766)
27,974,118
54,885,884 (31,250,411)
23,635,473
The Group recognised goodwill of RMB27,974,118 arising from acquisition of the Zhongrong PT Securities Limited, Zhongrong PT Finance Limited and Zhongrong PT Trading Limited because the purchase consideration exceeded the fair value of net assets acquired. The newly acquired business contributed revenue of RMB85,205,972 to the Group and contributed a profit of RMB10,836,883 to the Group for the period between the date of acquisition and the end of reporting period.
(d) During the year ended 31 December 2017, the Group made a capital injection to Zhongrong PT Securities Limited at a consideration of RMB26,014,024. The equity interest increased from 90.0% to 93.1 %.
(e) During the year ended 31 December 2017, the Group acquired the remaining interests in Zhongrong PT Finance Limited and Zhongrong PT Trading Limited at a total consideration of RMB186,226.
(f) During the year ended 31 December 2018, the Group made a capital injection to Zhongrong PT Securities Limited at a consideration of RMB27,570,936. The equity interest increased from 93.1 % to 94.8%. The effect of changes in the ownership interest in Zhongrong PT Securities Limited during the year is summarised as follows :-
Carrying amount of non-controlling interests before capital injection Carrying amount of non-controlling interests immediately after
capital injection
Changes recognised within equity
- 34 -
RMB
4,083,537
(4,422,015)
(338,478)
F-265
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
12. Available-for-sale financial assets
Unlisted note investments - Hong Kong, at cost - Notes 12(a) and (c)
Unlisted fund investment - Hong Kong, at fair value - Notes 12(b) and (c)
Classification :Current assets Non-current assets
Notes :-
At 31.12.2018
RMB
At 1.1.2018
RMB
At 31.12.2017
RMB
502,435,261
1,081,833,409
1,584,268,670
1,368,914,009 215,354,661
1,584,268,670
(a) Note investments are unlisted in Hong Kong with fixed interest rates range from 8.5% to 11 % per annum and will be matured in years 2018 and 2019. Those investments are measured at cost less impairment losses at the end of each reporting period because there are no quoted market prices for these investments. In addition, the range of reasonable fair value estimates is significant. Accordingly, the management is of the opinion that a reasonable estimate of the fair value cannot be made.
(b) Unlisted fund investment is stated at fair value using valuation techniques in which all significant inputs are directly or indirectly based on observable market data and nature of products.
(c) At 1 January 2018, on initial application of HKFRS 9, note investments were reclassified as financial assets at fair value through other comprehensive income and fund investment was reclassified as financial assets designated at fair value through other comprehensive income.
- 35 -
F-266
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
13. Financial assets at fair value through other comprehensive income
At At At 31.12.2018 1.1.2018 31.12.2017
RMB RMB RMB
Unlisted note investments - Hong Kong - Notes 13(a) and (c) 136,576,799 502,435,261
Unlisted fund investment - Hong Kong - Notes 13(b) and (d) 1,070,659,200 1,081,833,409
Listed note investments - Hong Kong - Note 13(e) 529,956,974
1,737,192,973 1,584,268,670
Classification :-Current assets 1,399,137,090 1,368,914,009 Non-current assets 338,055,883 215,354,661
1,737,192,973 1,584,268,670
Notes:-
(a) At 1 January 2018, on initial application of HKFRS 9, the note investments, which were held within a business model of collecting contractual cash flows and reselling, were reclassified from available-for-sale financial assets. No remeasurement gain or loss was recognised upon reclassification as the note investments were carried at cost that were not materially different from their fair values at the beginning of the year.
(b) At 1 January 2018, on initial application of HKFRS 9, the Group has designated the fund investment that is not held for trading as financial assets at fair value through other comprehensive income as the investment is held for strategic purpose. No remeasurement gain or loss was recognised upon reclassification as the fund investment was carried at fair value.
(c) Note investments are unlisted in Hong Kong with fixed interest rates at 11% (2017: range from 8.5% to 11%) per annum and will be matured in year 2019 (2017: years 2018 and 2019).
(d) At 31 December 2018, the fund investment that is classified as fair value through other comprehensive income was settled in January 2019. The management is of the opinion that the receipt approximates its fair value as at 31 December 2018.
(e) Note investments are listed in Hong Kong with fixed interest rates range from 8.5% to 9.625% per annum and will be matured in years 2019 and 2020.
The fair value of such investments is determined directly by reference to their published price quotations in an active market.
- 36 -
F-267
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
14.
15.
Loans to third parties
Loans to customers
2018 RMB
1,423,973,755
2017 RMB
1,339,352,779
The Group's loans receivable, which arise from the money lending business of providing personal loans in Hong Kong, are denominated in Hong Kong dollars and United State dollars.
Except for loans receivable of RMB155,684,905 (2017: RMB56,368,129) which are unsecured, loans receivable are secured by collaterals or guarantee provided by the customers, bear interest and are repayable with fixed terms agreed with the customers.
As at 31 December 2018 and 2017, all of the loans receivable were neither past due nor impaired.
A maturity profile of the loans receivable as at the end of the reporting period, based on the maturity date, net of provision is as follows :-
Within one year Two to five years
Trade and other receivables
Trade receivables Deposits and prepayments Interest receivables
2018 RMB
964,140,227 459,833,528
1,423,973,755
2018 RMB
18,992,896 17,162,079 22,485,558
58,640,533
2017 RMB
1,140,049,817 199,302,962
1,339,352,779
2017 RMB
28,043,664 4,485,538 5,828,777
38,357,979
For the brokerages and handling service, the Group allows a credit up to the respective settlement dates of the securities, futures and commodities transactions or, for customers with whom the Group provides margin financing, a credit period mutually agreed with the contracting parties. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management. Also, the Group's trade receivables are related to a large number of customers, there is no significant concentration of credit risks.
Overdue trade receivables arising from securities trading bear interest ranging from prime rate plus 1 % to prime rate plus 15% per annum. Receivables arising from the provision of margin financing are secured by clients' securities being held as collaterals, bear interest ranging from prime rate plus 1% to prime rate plus 10% per annum.
- 37 -
F-268
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
15. Trade and other receivables (cont'd)
The fair value of the collaterals held by the Group as pledges for margin trade receivables as at 31 December 2018 with aggregate carrying amounts of RMB14,735, 136 (2017 : RMB18,477,450) was RMB496,893,523 (2017: RMB1 ,321, 136,011).
For the other business, the Group has a policy of allowing its customers credit periods normally ranging from 30 to 120 days.
An ageing analysis of trade receivables is as follows :-
Neither past due nor impaired Less than 1 month 1 month to 3 month
16. Financial assets at fair value through profit or loss
Unlisted securities - held for trading:-Note investment - Hong Kong - Note 16(a) Note investment- PRC - Note 16(b)
Notes :-
2018 RMB
18,458,564 376,899 157,433
18,992,896
2018 RMB
243,086,265 242,846,564
485,932,829
2017 RMB
27,802,478 147,205 93,981
28,043,664
2017 RMB
186,896,844
186,896,844
(a) Note investment represents a bond-linked instrument which is acquired in April 2018.
(b) Note investment represents a bond-linked instrument which is acquired in December 2017.
- 38 -
F-269
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
17. Amounts due from fellow subsidiaries
As at 31 December 2018, the amounts are unsecured, interest-free and repayable on demand.
As at 31 December 2017, the amounts were unsecured and repayable on demand. Except for an amount of RMB1 ,099,670, which were interest bearing at 10% per annum, the remaining balance were interest-free.
18. Client trust bank balances
The Group maintains segregated trust accounts with authorised institutions to hold clients' monies arising from its securities, futures and commodities brokerage business. The Group has classified the clients' monies as cash held on behalf of customers under the current assets section of the consolidated statement of financial position and recognised the corresponding accounts payable to respective clients on grounds that it may be liable for any loss or misappropriation of clients' monies and the Group is allowed to retain some or all of the interest on the clients' money. The client trust bank balances are restricted and governed by the Hong Kong Securities and Futures (Client Money) Rules under Hong Kong Securities and Futures Ordinance. The Group is not permitted to use the clients' monies to settle its own obligations.
19. Other cash flow information
Reconciliation of liabilities arising from financing activities :-
The table below details change in the Group's liabilities from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the Group's consolidated statement of cash flows as cash flows arising from financing activities :-
At1.1.2018 Interest paid Interest expense Issuance of debentures Redemption of debentures Discharge of debentures Exchange realignment
At 31.12.2018
Interest payable
RMB
9,993,500 (309,464,553) 315,487,426
(4,714,170)
11,302,203
- 39 -
Debentures RMB
4,723,313,199
17,920,103 1,311,380,000
(1,502,001,293) (563,417,374) 228,185,410
4,215,380,045
Total RMB
4,733,306,699 (309,464,553) 333,407,529
1,311,380,000 (1,502,001,293)
(563,417,374) 223,471,240
4,226,682,248
F-270
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
19. Other cash flow information (cont'd)
20.
21.
Reconciliation of liabilities arising from financing activities (cont'd) :-
Interest payable Debentures Total
RMB RMB RMB
At 1.1.2017 10,598,194 4,990,614,183 5,001,212,377 Interest paid (321,238,850) (321,238,850) Interest expense 325,701,765 17,982,936 343,684,701 Exchange realignment (5,067,609) (285,283,920) (290,351,529)
At 31.12.2017 9,993,500 4,723,313,199 4,733,306,699
Trade payables 2018 2017 RMB RMB
Trade payables arising from dealing and broking 38,977,132 53,985,965
The majority of the Group's trade payables balances represent surplus funds placed with the Group arising from its securities, futures and commodities brokerage business. They are unsecured, interest-free and payable on the settlement day of the relevant trade or upon demand from customers, except for certain trade payables to clients which represent margin deposits received from clients for their trading activities under the normal course of business. Only the excess amounts over the required margin deposits stipulated are repayable on demand.
Accrued expense and other payables 2018 2017 RMB RMB
Accrued expense 19,848,259 10,351,200 Interest payable 11,302,203 9,993,500 Other payable 2,388,953 15,990,928
33,539,415 36,335,628
All of the accrued expense and other payables are expected to be settled within one year.
- 40 -
F-271
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
22. Debentures 2018 RMB
Debentures 4,215,380,045
Analyses for reporting purposes Current 2,848,409,859 Non-current 1,366,970,186
4,215,380,045
The carrying amounts of the above borrowings are repayable :-
Within one year Between one and two years
2,848,409,859 1,366,970,186
4,215,380,045
2017 RMB
4,723,313,199
1,467,943,494 3,255,369,705
4,723,313,199
1,467,943,494 3,255,369,705
4,723,313,199
On 15 June 2015, the subsidiary of the Company, Zhongrong International Bond 2015 Limited ("the 2015 Issuer"), issued a three-year note with aggregate principal amount of USD225,000,000. The notes are unconditionally and irrevocably guaranteed by the Company, and bear interest at the rate of 6% per annum, payable semi-annually in arrears on 15 June and 15 December in each year, commencing with the first interest payment date on 15 December 2015. The 2015 Issuer redeemed the notes at principal amount on 28 May, 6 June and 12 June 2018.
On 21 June 2016, the subsidiary of the Company, Zhongrong International Bond 2016 Limited ("the 2016 Issuer"), issued a three-year note with aggregate principal amount of USD500,000,000. The notes are unconditionally and irrevocably guaranteed by the Company, and bear interest at the rate of 6.95% per annum, payable semi-annually in arrears on 21 June and 21 December in each year, commencing with the first interest payment date on 21 December 2016. On 10 December 2018 and 12 December 2018, the 2016 Issuer discharged the note with aggregate principal amount of USD84,400,000. The 2016 Issuer will redeem the remaining note at principal amount on 21 June 2019.
On 11 June 2018, the subsidiary of the Company, Zhongrong International Bond 2018 Limited ("the 2018 Issuer"), issued a two-year note with aggregate principal amount of USD200,000,000. The notes are unconditionally and irrevocably guaranteed by the Company, and bear interest at the rate of 7.6% per annum, payable semi-annually in arrears on 11 June and 11 December in each year, commencing with the first interest payment date on 11 December 2018. The 2018 Issuer will redeem the notes at principal amount on 11 June 2020.
- 41 -
F-272
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
23. Share capital and capital management
(a)
(b)
Share capital 2018 2017 US$ US$
Authorised :-
44,000,000 ordinary shares of US$1 each 44,000,000 44,000,000
RMB RMB Issued and fully paid :-
44,000,000 ordinary shares US$1 each 280,837,766 280,837,766
Capital management
The Group's equity capital management objectives are to safeguard the Group's ability to continue as a going concern and to provide an adequate return to the member commensurately with the level of risk. To meet these objectives, the Group manages the equity capital structure and makes adjustments to it in the light of changes in economic conditions by paying dividends to the member, issuing new equity shares, and raising or repaying debt as appropriate.
Two of the Company's subsidiaries are licensed with the Hong Kong Securities and Futures Commission {the "SFC") for the business they operates in. These subsidiaries are subject to liquid capital requirements under the Hong Kong Securities and Futures (Financial Resources) Rules ("SF(FR)R") adopted by the SFC. Under the SF(FR)R, these subsidiaries' minimum paid-up share capital requirement is HK$30,000,000 (approximately RMB26,286,000) and HK$5,000,000 (approximately RMB4,381,000) respectively; they must maintain a level of required liquid capital (assets and liabilities adjusted as determined by SF(FR)R) which is the higher of the floor requirement of HK$15,000,000 (approximately RMB13, 143,000) and HK$100,000 (approximately RMB87,620) respectively and 5% of their total adjusted liabilities. The required information is filed with the SFC on a timely basis.
- 42 -
F-273
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
23. Share capital and capital management (cont'd)
(b) Capital management (cont'd)
The Group's equity capital management strategy, which is unchanged from the previous periods, is to maintain a reasonable proportion in net debt and equity capital. The Group monitors equity capital on the basis of the debt-to-equity capital ratio, which is calculated as net debt over equity capital. Net debt is calculated as total debt less cash and cash equivalents. Equity capital comprises all components of equity (i.e. share capital, reserves and non-controlling interests). The debt-to-equity capital ratios at 31 December 2018 and 31 December 2017 were as follows:-
2018 2017 RMB RMB
Total debt 4,287,979,856 4,829,800,150 Less : Cash and cash equivalents (861,374,130) (1,990,103,263)
Net debt 3,426,605,726 2,839,696,887
Total equity 352,804,724 389,869,936
Debt-to-equity capital ratio 9.7 7.3
24. Nature and extent of financial instrument risks
(a) Credit risk
Credit risk is the risk that a party to a financial instrument will cause a financial loss for the Group by failing to discharge an obligation. The Group manages credit risk by setting up credit control policy and periodic evaluation of credit performance of the other parties, measured by the extent of past due or default.
In respect of trade receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customers' past history of making payment when due and current ability to pay, and take into account information specific to the customer. The Group does not obtain collateral from customers. The Group does not expect there are significant ECLs on trade receivables following the credit evaluation of the customers and their repayment history.
The Group also assessed that there is no significant loss allowance recognised for other receivables, loans to third parties and amounts due from fellow subsidiaries as at 31 December 2018 in view that there was no past due experience and no deterioration of the other debtors' credit.
The Group's bank balances are placed with major financial institutions located in Hong Kong with high credit quality and the credit risk is considered as insignificant.
- 43 -
F-274
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
24. Nature and extent of financial instrument risks (cont'd)
(b) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. The Group manages liquidity risk by monitoring its liquidity position through periodic preparation of cash flows and cash balances forecasts and periodic evaluation of the ability of Group to meet its financial obligations, measured by the debt-to-equity capital ratio.
Maturities of the financial liabilities of the Group as at 31 December 2018 were as follows:-
As at 31 December 2018
Total contractual
Carrying undiscounted Less than 1 In 2 to 5 amount cash flows year years
RMB RMB RMB RMB
Trade payables 38,977,132 38,977,132 38,977,132 Accruals and other payables 33,539,415 33,539,415 33,539,415
Debentures 4,215,380,045 4,474,790,310 3,055,785,581 1,419,004,729
4,287,896,592 4,547,306,857 3,128,302,128 1,419,004,729
As at 31 December 2017 Total
contractual Carrying undiscounted Less than 1 In 2 to 5 amount cash flows year years
RMB RMB RMB RMB
Trade payables 53,985,965 53,985,965 53,985,965 Accruals and other payables 36,335,628 36,335,628 36,335,628
Debentures 4,723,313,199 5,117,489,650 1,733,236,300 3,384,253,350
4,813,634,792 5,207,811,243 1,823,557,893 3,384,253,350
- 44 -
F-275
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
24. Nature and extent of financial instrument risks (cont'd)
(c) Interest rate risk
The Group's exposure to interest rate risk arises primarily from its receivables arising from the provision of margin financing and bank balances with floating interest rates which expose the Group to cash flow interest rate risk. The Group mitigates its interest rate risk by monitoring market interest rate movements and revising the interest rates offered to its customers on an ongoing basis in order to limit potential adverse effects of interest rate movements on net interest income.
The following table details the interest rate profile of the Group's net balances as at 31 December 2018 :-
Variable rate balances :-Trade receivable for margin client Client trust bank balances Bank balances
2018 RMB
14,735,136 36,172,068
861,374,130
912,281,334
2017 RMB
18,477,450 48,781,369
1,990,103,263
2,057,362,082
At 31 December 2018, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would increase/decrease the Group's profit after tax and retained profits by RMB9, 122,813 (2017 : RMB20,573,621). Other components of equity would not be affected by the changes in interest rates.
The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for non-derivative financial instruments in existence at that date. The 100 basis point increase or decrease represents management's assessment of a reasonably possible change in interest rates over the period until the next annual reporting date.
- 45 -
F-276
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
24. Nature and extent of financial instrument risks (cont'd)
(d) Foreign currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group manages currency risk, when it is considered significant, by entering into appropriate currency forward contracts.
The Group's entities are measured using the currency of the primary economic environment in which the entity operates as the functional currency.
The management considers the Group's financial assets and financial liabilities exposed to currency risk were primarily denominated in Renminbi and Hong Kong dollar. Carrying amounts of financial assets and financial liabilities as at 31 December 2018 exposed to currency risk derived from Renminbi and Hong Kong dollar were as follows :-
Financial assets denominated in foreign currencies :-
2018 RMB
Cash and cash equivalents 168,291,858
Financial liabilities denominated in foreign currencies :-Accrual and other payables (252,572)
Net financial assets exposed to currency risk 168,039,286
2017 RMB
129,511,824
(474,198)
129,037,626
The net financial assets denominated in Renminbi and Hong Kong dollar are analysed as follows:-
RMB Hong Kong dollar
2018 RMB
22,187,848 145,851,438
168,039,286
2017 RMB
22,432,437 106,605,189
129,037,626
Should functional currency of each Group's entities at 31 December 2018 devalue by 5% against Renminbi and Hong Kong dollar, the carrying amount of the net financial assets exposed to currency risk at 31 December 2018 determined in accordance with HKAS 21 "The Effects of Changes in Foreign Exchange Rates" would have increased by RMB8,401,964 (2017 : RMB6,451,881), and hence the equity at 31 December 2018 would be increased, by RMB8,401,964 (2017: RMB6,451,881); and the profit for the year ended 31 December 2018 would have increased by RMB8,401,964 (2017 : RMB6,451,881).
- 46 -
F-277
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
24. Nature and extent of financial instrument risks (cont'd)
(e) Fair value
(i) Financial instruments carried at fair value
The following table presents the carrying value of financial instruments measured at fair value at 31 December 2018 across the three levels of the fair value hierarchy defined in HKFRS 13, Fair Value Measurement, with the fair value of each financial instrument categorised in its entirety based on the lowest level of input that is significant to that fair value measurement. The levels are defined as follows:-
• Level 1 : Fair values measured using unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
• Level 2 : Fair value measured using observable inputs and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available.
• Level 3 : Fair value measured using significant unobservable inputs.
Financial assets at fair value through other
comprehensive income -note13
Financial assets at fair value through profit or loss - note 16
2017
Available-for-sale
financial assets -note12
Financial assets at fair value through
profit or loss - note 16
Level 1 RMB
529,956,974
629,966,974
Level 1
RMB
- 47 -
Level 2 RMB
Level 2
RMB
Level3 RMB
1,207,235,999
486,932,829
1,693,168,828
Level 3
RMB
1,081,833,409
186,896,844
1,267,730,253
Total RMB
1,737,192,973
486,932,829
2,223,126,802
Total
RMB
1,081,833,409
186,896,844
1,267,730,253
F-278
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
24. Nature and extent of financial instrument risks (cont'd)
(e) Fair value (cont'd)
(i) Financial instruments carried at fair value (cont'd)
During the year ended 31 December 2018 and 2017, there were no significant transfers between levels of the financial assets and financial liabilities.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
Information about Level 3 fair value measurements is as follows:
Financial assets at fair value through other comprehensive income - note investments
Financial assets at fair value through profit or loss
Valuation technique
1 ncome approach
Hull-White model
Significant
unobservable input
Discount for lack of
marketability
Discount for lack of
marketability
Percentage
20
10 to 13
The fair value of financial assets at fair value through other comprehensive income was determined using the income approach. The fair value measurement is negatively correlated to the discount for lack of marketability. As at 31 December 2018, it was estimated that with all other variables held constant, a decrease/increase in discount for lack of marketability by 5% would have decreased/increased the Group's other comprehensive loss for the year by approximately RMB6,828,840.
As at 31 December 2018, the fund investment that is classified as fair value through other comprehensive income was settled in January 2019. The management is of the opinion that the receipt approximates its fair value as at 31 December 2018.
The fair value of financial assets at fair value through profit or loss was determined using the Hull-White model. The fair value measurement is negatively correlated to the discount for lack of marketability. As at 31 December 2018, it was estimated that with all other variables held constant, a decrease/increase in discount for lack of marketability by 5% would have increased/decreased the Group's profit for the year by approximately RMB24,296,641.
- 48 -
F-279
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
24. Nature and extent of financial instrument risks (cont'd)
(e) Fair value (cont'd)
(ii) Fair value of financial instruments carries at other than fair value
The carrying amounts of the Group's financial instruments carried at cost or amortised cost were not materially different from their fair values as at 31 December 2018.
(f) Market price risk
Market price risk is the risk that the fair value or future cash flows of a financial instrument traded in the market will fluctuate because of changes in market prices.
The Group manages market prices risk, when it is considered significant, by entering into appropriate derivatives contracts.
The Group is exposed to debt price risk arising from note investments classified as financial assets at fair value through other comprehensive income.
At 31 December 2018, the Group has financial assets at fair value through other comprehensive income of RMB529,956,97 4 (Note 13) (2017 : Nil) exposed to market price risk. If the prices of the note investments had been 10% higher/lower, fair value reserve (non-recycling) would increase/decrease by approximately RMB52,995,697 (2017 : Nil) for the Group as a result of the changes in fair value of financial assets at fair value through other comprehensive income.
At 31 December 2018 and 2017, the Group has no financial assets at fair value through profit or loss (Note 16) exposed to market price risk.
25. Operating lease arrangements
As at 31 December 2018, the total future minimum lease payments under non-cancellable operating leases are as follows :-
Within one year After one year but within 5 years
2018 RMB
8,760,168 9,100,644
17,860,812
2017 RMB
6,652,998 3,426,354
10,079,352
Operating lease payments represent rental payable by the Group for the office premises. Leases are negotiated with lease terms of one to three years with fixed monthly rentals.
- 49 -
F-280
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2018
26. Related party transactions
Apart from the transactions as disclosed in note 17 to the consolidated financial statements, the Group had the following material transactions with its related parties during the year :-
Acquisition of subsidiaries from a fellow subsidiary Interest income from a fellow subsidiary
27. Parent and the ultimate holding companies
2018 RMB
2017 RMB
54,885,884 66,833,766
The sole director considers the parent and ultimate holding companies to be Shanghai Longshan Capital Investment Limited and China Hengtian Group Company Limited respectively. Both companies are established in the PRC.
28. Comparative figures
Certain comparative figures have been reclassified to conform to the current year's presentation.
- 50 -
- 1 -
Independent of Zhongrong International Holdings Limited (Incorporated in the British Virgin Islands with limited liability)
Opinion
We have audited the consolidated financial statements of Zhongrong International Holdings Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 4 to 45, which comprise the consolidated statement of financial position as at 31 December 2017, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial positions of the Group as at 31 December 2017 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ) issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ).
Basis for opinion
s the Group in accordance with the Code of
ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
s responsibilities for the consolidated financial statements
The sole director is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA, and for such internal control as the sole director determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the sole director is responsible for assessing the Group s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the sole director either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The sole director is responsible for overseeing the Group s financial reporting process.
F-281
- 2 -
I Zhongrong International Holdings Limited (Incorporated in the British Virgin Islands with limited liability)
ies Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also :- - Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s internal control.
F-282
F-283
Independent auditor's report to the member of Zhongrong International Holdings Limited (Incorporated in the British Virgin Islands with limited liability)
Auditor's responsibilities (cont'd)
Accountants & business advisers
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the sole director.
Conclude on the appropriateness of the sole director's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the sole director regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
The engagement director on the audit resulting in this independent auditor's report is Tan Yik Chung Wilson (Practising Certificate Number: P05103).
PKF Hong Kong Limited Certified Public Accountants Hong Kong
2 5 APR 2018
PKF Hong Kong Limited ;;l;;fl.~<f!i.lll' (fficii) tfH~iliiJf~Ji/i~llH}i'i'l Tel 852 2806 3822 • Fax 852 2806 3712 • Email [email protected] • Website www.pkf-hk.com 26/F, Citicorp Centre • 18 Whitfield Road • Causeway Bay • Hong Kong • i\'Al:l)llli'ii!liil!!Z,r!1j;il!-J-A,11/iti,>JJil'im'P•c•=+t--l'll
PKF Hong Kong Limited is a member firm of the PKF International Limlted family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. fr.1A~~;J.l{('@'~)~tl1Jli$WiPri1'Jil&0ofJ:1a'J)ti,!t_t.~Jl~"l)ll;i'l':,JPKF~~~~~ggv;_~Pfr, 1'1'JJ!;~w.l~¥lffl~tf¥,ij1J~m:lll!ft,JfJ°~!¾;!.'t:,f{'FJl8~fi1i:iti®{ffnJ-Jt{-f~~f~ 0
- 3 -
- 4 -
Zhongrong International Holdings Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 31 December 2017
Note 2017 2016 RMB RMB
Revenue 4 300,678,010 272,840,861 Other income and other gain, net 5 183,978,835 13,561,561 Administrative expenses (63,956,768 ) (36,534,142 ) Finance costs 6 (343,684,701 ) (226,944,131 )
Profit before income tax 7 77,015,376 22,924,149 Income tax expense 8 (7,067,688 ) (9,062,295 )
Profit for the year 69,947,688 13,861,854
Other comprehensive income :- Items that may be reclassified subsequently to profit
to loss :- Exchange difference arising on translation of foreign
subsidiaries (12,266,471 ) 16,270,838 Surplus/(deficit) on revaluation of available-for-sale
financial assets 60,054,430 (311,057 )
Other comprehensive income for the year 47,787,959 15,959,781
Total comprehensive income for the year 117,735,647 29,821,635
Attributable to :- Member of the Company 117,174,306 29,821,635 Non-controlling interests 561,341 -
117,735,647 29,821,635
F-284
- 5 -
Zhongrong International Holdings Limited Consolidated statement of financial position As at 31 December 2017
Note 2017 2016 RMB RMB
Non-current assets Property, plant and equipment 9 2,835,394 936,582 Goodwill 10 27,974,118 - Available-for-sale financial assets 12 215,354,661 2,305,322,866 Loans to third parties 13 199,302,962 -
445,467,135 2,306,259,448 Current assets
Trade and other receivables 14 38,357,979 33,232,021 Available-for-sale financial assets 12 1,368,914,009 -
Financial assets at fair value through profit or loss 15 186,896,844 350,960,988 Loans to third parties 13 1,140,049,817 -
Amounts due from fellow subsidiaries 16 1,099,670 640,886,307 Client trust bank balances 17 48,781,369 - Cash and cash equivalents 1,990,103,263 2,176,372,310
4,774,202,951 3,201,451,626 Current liabilities Trade payables 19 53,985,965 -
Accruals and other payables 20 36,335,628 238,457,540 Debentures 21 1,467,943,494 - Tax payable 16,165,358 9,531,238
1,574,430,445 247,988,778
Net current assets 3,199,772,506 2,953,462,848
Net assets less current liabilities 3,645,239,641 5,259,722,296
Non-current liability Debentures 21 3,255,369,705 4,990,614,183
Net assets 389,869,936 269,108,113
F-285
F-286
Zhongrong International Holdings Limited Consolidated statement of financial position As at 31 December 2017
Representing :-
Equity attributable to member of the Company Share capital Reserves
Non-controlling interests
Total equity
Note
22(a)
2017 RMB
280,837,766 104,867,214
385,704,980
4,164,956
389,869,936
Approved and authorised for issue by the sole director on 2 5 APR 2018
Zhang Xianghui Director
- 6 -
2016 RMB
280,837,766 (11,729,653)
269,108,113
269,108,113
- 7 -
Zhon
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,854
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-
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F-287
- 8 -
Zhongrong International Holdings Limited Consolidated statement of cash flows For the year ended 31 December 2017 2017 2016 RMB RMB Cash flows from operating activities Profit before income tax 77,015,376 22,924,149 Adjustments for :- Bank interest income (217,869 ) (158,467 ) Interest income from margin clients (894,049 ) - Depreciation 1,172,652 452,151 Finance costs 343,684,701 226,944,131 Fair value gain on financial assets at fair value through profit or loss
(18,655,278
)
(32,198,720
)
(Gain)/loss on disposal of financial assets at fair value through profit or loss
(1,718,039
)
52,585,854
Investment income from available-for-sale financial assets (161,850,378 ) (33,416,684 ) Gain on disposal of subsidiaries - (373,544 ) Operating profit before working capital changes 238,537,116 236,758,870 Changes in working capital :- Trade and other receivables 33,453,804 187,459,212 Loans to third parties (1,211,404,155 ) - Client trust account (48,781,369 ) - Trade payables 18,974,934 - Financial assets at fair value through profit or loss 173,618,501 (335,726,588 ) Amounts due from fellow subsidiaries 639,786,637 (595,701,965 ) Accruals and other payables (335,108,820 ) 238,300,263 Cash used in operations (490,923,352 ) (268,910,208 ) Tax (paid)/refunded (55,432 ) 276,750 Net cash used in operating activities (490,978,784 ) (268,633,458 ) Net cash flow from investing activities Interest income received 1,111,918 158,467 Net cash outflow on acquisition of subsidiaries - note 11(c) (23,635,473 ) - Purchase of property, plant and equipment (2,443,963 ) (892,375 ) Payment for acquisition of available-for-sale financial assets
(403,803,132
)
(2,303,971,086
)
Proceeds from disposal of available-for-sale financial assets
1,217,546,343
1,231,022,889
Net cash outflow on disposal of subsidiaries - (18,152,160 ) Net cash generated from/(used in) investing activities 788,775,693 (1,091,834,265 )
F-288
- 9 -
Zhongrong International Holdings Limited Consolidated statement of cash flows For the year ended 31 December 2017 2017 2016 RMB RMB Net cash flow from financing activities Debentures interest paid (321,238,850 ) (212,115,725 ) Proceeds from issuance of shares - 219,602,600 Proceeds from issuance of debentures - 3,315,600,000 Net cash (used in)/generated from financing activities (321,238,850 ) 3,323,086,875 Net (decrease)/increase in cash and cash equivalents (23,441,941 ) 1,962,619,152 Cash and cash equivalents at the beginning of the year 2,176,408,739 120,757,842 Effect of foreign exchange rate changes (162,863,535 ) 92,995,316 Cash and cash equivalents at end of the year 1,990,103,263 2,176,372,310 Analysis of the balance of cash and cash equivalents Cash and cash equivalents 1,990,103,263 2,176,372,310
F-289
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 10 -
1. General
Zhongrong International Holdings Limited (the Company ) is a limited company incorporated in theBritish Virgin Islands . The addresses of its registered office and principal place of businessof the Company are P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, the BritishVirgin Islands and Units 6501-respectively.
The Company and its subsidiaries (collectively referred to as the Group ) are principally engagedin investment holding, provision of consultancy and financing services, securities and futurestrading business and asset management business. The principal activities of the subsidiaries of theGroup are set out in note 11.
2. Basis of preparation
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with Hong KongFinancial Reporting Standards ( HKFRS ), Hong Kong Accounting Standards ( HKAS ) andInterpretations issued by the Hong Kong Institute of Certified Public Accountants (hereinafter
(b) Initial application of Hong Kong Financial Reporting Standards
In the current year, the Group initially applied the following Hong Kong Financial ReportingStandards :-
Amendments to HKAS 7 Disclosure Initiative Amendments to HKAS 12 Recognition of Deferred Tax Assets for Unrealised
Losses Annual Improvements Amendments to HKFRS 12 (2014-2016)
The initial application of these financial reporting standards does not necessitate material changes in the Group and retrospective adjustments of the comparatives presented in the consolidated financial statements.
F-290
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 11 -
2. Basis of preparation (cont d)
(c) Hong Kong Financial Reporting Standards in issue but not yet effective
The following Hong Kong Financial Reporting Standards in issue at 31 December 2017 havenot been applied in the preparation of the consolidated financial statements for the year thenended since they were not yet effective for the annual period beginning on 1 January 2017 :-
HKFRS 9 (2014) Financial Instruments HKFRS 15 Revenue from Contracts with Customers HKFRS 16 Leases HK(IFRIC)-Int 22 Foreign Currency Transactions and Advance
Consideration HK(IFRIC)-Int 23 Uncertainty over Income Tax Treatments Amendments to HKAS 28 Sale or Contribution of Assets between an Investor and
and HKFRS 10 its Associate or Joint Venture Amendments to HKAS 40 Transfers of Investment Property Amendments to HKFRS 2 Classification and Measurement of Share-based
Payment Transactions Amendments to HKFRS 4 Applying HKFRS 9 Financial Instruments with HKFRS 4
Insurance Contracts Amendments to HKFRS 9 Prepayment Features with Negative Compensation Annual Improvements Amendments to HKFRS 1 and HKAS 28 (2014-2016)
The Group is required to initially apply HKFRS 9 (2014), HKFRS 15, HK(IFRIC)-Int 22, Amendments to HKAS 40, Amendments to HKFRS 2, Amendments to HKFRS 4 and Amendments to HKAS 28 of Annual Improvements (2014-2016) in its annual consolidated financial statements beginning on 1 January 2018, and to initially apply HKFRS 16, HK(IFRIC)-Int 23 and Amendments to HKFRS 9 in its annual consolidated financial statements beginning on 1 January 2019. Amendments to HKAS 28 and HKFRS 10 have no mandatory effective date. Amendments to HKFRS 1 of Annual Improvements (2014-2016) are not relevant to the Group.
3. Significant accounting policies
(a) Measurement basis
These consolidated financial statements are prepared under the historical cost basis asmodified by revaluation of available-for-sale financial assets and financial assets at fair valuethrough profit or loss as explained in the accounting policies set out below.
F-291
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 12 -
3. Significant accounting policies (con d)
(b) Business combination
Acquisitions of businesses are accounted for using the acquisition method. Theconsideration transferred in a business combination is measured at fair value, which iscalculated as the sum of the acquisition-date fair values of the assets transferred by theGroup, liabilities incurred by the Group to the former owners of the acquiree and the equityinterests issued by the Group in exchange for control of the acquiree. Acquisition-relatedcosts are generally recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed arerecognised at their fair value, except that :-
deferred tax assets or liabilities, and assets or liabilities related to employee benefitarrangements are recognised and measured in accordance with HKAS 12 IncomeTaxes and HKAS 19 Employee Benefits respectively;
liabilities or equity instruments related to share-based payment arrangements of theacquiree or share-based payment arrangements of the Group entered into to replaceshare-based payment arrangements of the acquiree are measured in accordance withHKFRS 2 Share-based Payment at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance withHKFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measuredin 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. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another HKFRS.
F-292
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 13 -
3. Significant accounting policies (con d)
(c) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered. The results of subsidiaries acquired or disposed of during the year are dealt with in the consolidated statement of profit or loss from the dates of acquisition or to the dates of disposal respectively. All significant intra-group transactions and balances have been eliminated on consolidation. Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Group can elect to measure any non-controlling
assets. Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to shareholders of the Company. Noncontrolling interests in the results of the Group are presented on the face of the consolidated statement of profit or loss and the consolidated statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between noncontrolling interests and the shareholders of the Company.
ult in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised. When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of an investment in an associate.
F-293
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 14 -
3. Significant accounting policies (con d)
(d) Subsidiaries
Subsidiaries are entities controlled by the Group. In the Companyat cost less provision for impairment losses.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows :-
Advisory service, consultancy fee, handling fee and management fee income.
Revenue from the provision of services is recognised when services are rendered.
Commission income
Commission income on dealing in securities, futures and commodities and foreign exchange contracts is recognised on the transaction dates when the relevant contract notes have been exchanged.
Interest income
Interest income is recognised as it accrues using the effective interest method.
Dividend income
Dividend income from investments is recognised when the members right to receive payment has been established.
F-294
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 15 -
3.
(f) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use.
Repairs and maintenance costs are charged to profit or loss in the period in which it is incurred.
Depreciation is calculated to write off the costs of property, plant and equipment to their estimated residual values over their estimated useful lives on a straight-line basis at the following annual rates :-
Furniture and fixtures over 3 years Leasehold improvement over the lease term Motor vehicle over 5 years
are reviewed, and adjusted if appropriate, at the
end of each reporting period.
The gain or loss arising from the disposal of an asset is determined as the difference between the net disposal proceeds and the carrying value of the asset and is recognised in profit or loss.
(g) Goodwill
Goodwill represents the excess of
(i) the aggregate of the fair value of the considered transferred, the amount of any
non-controlling interest in the acquiree and the fair value of the Group s previously held equity interest in the acquiree; over
(ii) the net fair value of the acquiree s identifiable assets and liabilities measured as at
the acquisition date.
When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain purchase.
Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (see note 3(j)).
On disposal of a cash generating unit during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.
F-295
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 16 -
3.
(h) Investments
The Group classified its investments in the following categories: financial assets at fair value through profit or loss and available-for-sale financial assets.
The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluations this designation at every reporting date.
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months after the end of each reporting period.
(ii) Available-for-sale investments
Available-for-sale investments are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the end of reporting period.
Purchases and sales of investments are recognised on trade-date - the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. As an exception to this, investments in equity securities that do not have a quoted price in an active market for an identical instrument and whose fair value cannot otherwise be reliably measured are recognised in the consolidated statement of financial position at cost less impairment losses.
F-296
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 17 -
3.
(h) Investments
Realised and unrealised gains and losses arising from changes in the fair value of the
the period in which they arise. Unrealised gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised in equity. When the available-for-sale financial assets are disposed of or impaired, the accumulated gains or losses in equity are recognised in profit or loss.
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of the security classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the profit or loss - is removed from equity and recognised in the profit or loss. Impairment losses recognised in the profit or loss on equity instruments are not reversed through the profit or loss.
(i) Borrowings and payables
Borrowings and payables are recognised initially at fair values and subsequently measured at amortised costs using the effective interest method.
(j) Employee benefits
Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the period in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values. Obligations for contributions to defined contribution retirement plans are recognised as an expense in profit or loss as incurred.
F-297
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 18 -
3.
(k) Impairment of assets
(i) Investments in securities and trade and other receivables
Investments in equity securities and trade and other receivables that are stated atcost or amortised cost or are classified as available-for-sale investments arereviewed at the end of each reporting period to determine whether there is objectiveevidence of impairment. Objective evidence of impairment includes observable datathat comes to the attention of the Group about one or more of the following lossevents :-
- significant financial difficulty of the debtor;- a breach of contract, such as a default or delinquency in interest or principal
payments;- it becoming probable that the debtor will enter bankruptcy or other financial
reorganisation;- significant changes in the technological, market, economic or legal environment
that have an adverse effect on the debtor; and- a significant or prolonged decline in the fair value of an investment in an equity
instrument below its cost.
If any such evidence exists, any impairment loss is determined and recognised as follows :-
- For trade and other current receivables and other financial assets carried atamortised cost, the impairment loss is measured as the difference between the
carrying amount and present value of estimated future cash flows,
interest rate computed at initial recognition of these assets), where the effect ofdiscounting is material. This assessment is made collectively where thesefinancial assets share similar risk characteristics, such as similar past duestatus, and have not been individually assessed as impaired. Future cashflows for financial assets which are assessed for impairment collectively arebased on historical loss experience for assets with credit risk characteristicssimilar to the collective group.
F-298
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 19 -
3. Significant accounting policies
(k) Impairment of assets (cont d)
(i) Investments in securities and trade and other receivables (cont d)
- If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairexceeding that which would have been determined had no impairment loss been recognised in prior years.
- For available-for-sale investments, the cumulative loss that has been recognised
in the investment revaluation reserve is reclassified to profit or loss. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that asset previously recognised in profit or loss.
- Impairment losses recognised in profit or loss in respect of available-for-sale
investments are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognised in other comprehensive income.
- Impairment losses are written off against corresponding assets directly, except
for impairment losses recognised in respect of trade debtors included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.
(ii) Impairment of other assets
Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased :- - property, plant and equipment; - goodwill and other intangible assets; and - interests in subsidiaries in the Company s statement of financial position.
F-299
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 20 -
3.
(k) Impairment of assets (cont d)
(ii) Impairment of other assets (cont d)
If any such . In addition, for goodwill, the recoverable amount is estimated annually whether or not there is any indication of impairment. - Calculation of recoverable amount
The recoverable amount of an asset is the greater of its fair value less cost to sell 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 time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash generating unit).
- Recognition of impairment losses
An impairment loss is recognised in profit or loss whenever the carrying amount of an asset, or the cash generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash generating units are allocated to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.
- Reversals of impairment losses
In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.
have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.
(l) Receivables
Receivables are recognised initially at fair values and subsequently measured at amortised cost using effective interest method, less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of
amount. The amount of the provision is recognised in profit or loss.
F-300
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 21 -
3.
(m) Borrowing costs
Borrowing costs include interest charges and other costs incurred in connection with the borrowing of funds and are expensed as incurred.
(n) Income tax
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 net profit as reported in the consolidated statement of profit or loss because it excludes items of income and expense that are taxable or deductible in other years, and it further excludes profit or loss items that are never taxable and deductible.
Deferred tax is the tax expected to be payable or recoverable on 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, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such 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.
The carrying amount of deferred tax asset is reviewed at the end of each 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 is calculated at the tax rates that are expected to apply in the period when the liability is settled or asset is realised. Deferred tax is charged or credited to the profit or loss, except when it relates to items charged or credited to other comprehensive income or directly to equity, in which case the deferred tax is also dealt with in other comprehensive income or directly in equity respectively.
(o) Cash equivalents
Cash equivalents are short-term, highly liquid investments which are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(p) Leases
Leases are classified as finance leases whenever the terms of the leases transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the terms of the relevant leases.
F-301
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 22 -
3.
(q) Related parties
(a) , is related to the Group if that
person :-
(i) has control or joint control over the Group; (ii) has significant influence over the Group; or (iii) is a member of the key management personnel of the Group or the Group's
parent.
(b) An entity is related to the Group if any of the following conditions applies :-
(i) the entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) both entities are joint ventures of the same third party. (iv) one entity is a joint venture of a third entity and the other entity is an
associate of the third entity. (v) the entity is a post-employment benefit plan for the benefit of employees of
either the Group or an entity related to the Group. (vi) the entity is controlled or jointly controlled by a person identified in (a). (vii) a person identified in (a)(i) has significant influence over the entity or is a
member of the key management personnel of the entity (or of a parent of the entity).
(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that, person in their dealings with the entity.
(r) Foreign currency translation
(i) Functional and presentation currency
Items measured using the currency of the primary economic environment in which the entity operates (the The consolidated financial statements are presented in Renminbi
F-302
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 23 -
3.
(r) Foreign currency translation (ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rate of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
(iii) Group companies
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows :-
- assets and liabilities for each statement of financial position presented are
translated at the closing rate at the date of that statement of financial position;
- income and expenses for each profit or loss are translated at monthly exchange rates; and
- all resulting exchange differences are recognised in other comprehensive
income and accumulated separately in equity in the translation reserve. (s) Significant judgement
affect the amounts recognised in the consolidated financial statements are made in determining :-
(i) whether there is an indication of impairment of assets; (ii) the expected manner of recovery of the carrying amount of assets; and (iii) whether the discount rates used to calculate the recoverable amount of assets are
appropriate for the purpose of impairment review.
F-303
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 24 -
4. Revenue Revenue represents income received from provision of consultancy, financing services and securities, futures and commodities brokerage service. 2017 2016 RMB RMB Commission and handling services income 25,303,236 - Consultation services income 147,810,031 217,473,071 Interest income from fellow subsidiaries 66,833,766 13,216,795 Interest income from loan receivables 60,730,977 42,150,995 300,678,010 272,840,861 5. Other income and other gain, net 2017 2016 RMB RMB Bank interest income 217,869 158,467 Interest income from margin client 894,049 - Gain/(loss) on disposal of financial assets at fair value through profit or loss 1,718,039 (52,585,854 ) Sundry income 643,222 - Fair value gain on financial assets at fair value through profit or loss 18,655,278 32,198,720 Investment income from available-for-sale financial assets 161,850,378 33,416,684 Gain on disposal of subsidiaries - 373,544 183,978,835 13,561,561 6. Finance costs 2017 2016 RMB RMB Interest expenses on debentures 343,424,670 226,944,131 Other interest expense 260,031 - 343,684,701 226,944,131
F-304
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 25 -
7. Profit before income tax
Profit before income tax is arrived at after charging :-2017 2016 RMB RMB
(a) Staff costs
Salaries, wages and other benefits 40,077,345 18,904,242 Contribution to defined contribution retirement plan 479,649 157,301
40,556,994 19,061,543
(b) Other items
Auditor s remuneration 548,783 309,862 Depreciation 1,172,652 452,151 Operating lease charges in respect of office premises 6,011,076 2,421,580
8. Income tax expense
(a) Taxation in the consolidated statement of profit or loss and other comprehensive incomerepresents :-
2017 2016 RMB RMB
Current tax - Hong Kong profits tax Provision for the year 7,011,070 9,062,295
Under-provision in prior year 1,186 -
7,012,256 9,062,295 Current tax - PRC income tax
Provision for the year 55,432 -
7,067,688 9,062,295
The provision for Hong Kong profits tax is calculated at 16.5% (2016 : 16.5%) of the estimated assessable profit for the year.
PRC income tax is calculated at 25% (2016 : 25%) of the estimated assessable profit of the Group as determined in accordance with relevant tax rules and regulations in the PRC for the year.
F-305
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 26 -
8. Income tax expense (cont d)
(b) Income tax expense for the year can be reconciled to the profit before income tax per the consolidated statement of profit or loss and other comprehensive income as follows :-
2017 2016 RMB RMB
Profit before income tax 77,015,376 22,924,149 Tax effect at the profits tax rate of 16.5% 12,707,537 3,782,484 Tax effect of income not taxable for tax purpose (133,634,589 ) (12,714,071 ) Tax effect of expenses not deductible for tax purpose 129,093,738 11,371,261 Tax effect of other temporary differences not recognised 54,824 (45,942 ) Tax effect of unused tax losses not recognised - 10,284,685 Tax effect of utilisation of tax losses not previously
recognised (1,210,440 ) (3,616,122 )
Under-provision in prior year 1,186 - PRC income tax 55,432 - Income tax expense 7,067,688 9,062,295
(c) As at 31 December 2017, the Group has not recognised deferred tax assets in respect of
cumulative tax losses of approximately RMB54,607,865 (2016 : RMB61,943,865) as it is not probable that future taxable profits, against which the assets can be utilised, will be available in the relevant tax jurisdictions. The tax losses have no expiry date under current tax legislation. Other temporary differences are not material.
F-306
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 27 -
9. Property, plant and equipment Furniture Leasehold Motor and fixtures improvement vehicles Total RMB RMB RMB HK$ Cost :- At 1.1.2016 153,060 532,811 - 685,871 Additions 262,447 - 649,251 911,698 Exchange realignment 22,869 37,665 24,096 84,630 31.12.2016 438,376 570,476 673,347 1,682,199 Accumulated depreciation :- At 1.1.2016 29,427 227,744 - 257,171 Charge for the year 96,700 313,725 41,726 452,151 Exchange realignment 5,470 29,007 1,818 36,295 At 31.12.2016 131,597 570,476 43,544 745,617 Net book value :- At 31.12.2016 306,779 - 629,803 936,582 Cost :- At 1.1.2017 438,376 570,476 673,347 1,682,199 Acquisition of subsidiaries 5,020,926 3,127,410 - 8,148,336 Additions 403,462 2,040,501 - 2,443,963 Written off - (2,051,060 ) - (2,051,060 ) Exchange realignment (336,504 ) (284,126 ) (43,043 ) (663,673 ) At 31.12.2017 5,526,260 3,403,201 630,304 9,559,765 Accumulated depreciation :- At 1.1.2017 131,597 570,476 43,544 745,617 Acquisition of subsidiaries 4,861,388 2,514,249 - 7,375,637 Charge for the year 232,736 813,665 126,251 1,172,652 Written off - (2,051,060 ) - (2,051,060 ) Exchange realignment (303,464 ) (208,258 ) (6,753 ) (518,475 ) At 31.12.2017 4,922,257 1,639,072 163,042 6,724,371 Net book value :- At 31.12.2017 604,003 1,764,129 467,262 2,835,394
F-307
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 28 -
10. Goodwill 2017 2016 RMB RMB Goodwill arising from acquisition of subsidiaries - Note 11(c) 27,974,118 -
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. Before recognition of impairment losses, the carrying amount of goodwill had been allocated as follows :-
RMB
Financing services and securities, futures and commodities brokerage service 27,974,118
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amount of the CGUs is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. A discount factor at a rate was 11.21% applied in the value in use model. Cash flows beyond the five-year period are extrapolated using nil growth rate.
11. Investments in subsidiaries - the Company 2017 2016 RMB RMB Unlisted shares, at cost 347,021,913 362,359,171
Details of the Company s subsidiaries at 31 December 2017 are as follows :-
Name of subsidiary
Note
Place of incorporation or
registration/ operations
Proportion of
equity interests attributable to the Company
Principal activities
Direct Indirect 2017 2017 Zhongrong International Capital Hong Kong 100% - Advising on Management Limited (2016 : - ) (2016 : 100% ) securities and ( Zhongrong International
Capital ) asset
management
Zhongrong International Bond BVI 100% - Bond issuance 2015 Limited (2016 : 100% ) (2016 : - ) Zhongrong International Bond BVI 100% - Bond issuance 2016 Limited (2016 : 100% ) (2016 : - ) Zhongrong Korea Bond Limited a BVI 100%
(2016 : 100% )
- (2016 : -
)
Financial investing
F-308
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 29 -
11. Investments in subsidiaries -
Details of the Company s subsidiaries at 31 December 2017 are as follows :-
Name of subsidiary
Note
Place of incorporation or
registration/ operations
Proportion of
equity interests attributable to the Company
Principal activities
Direct Indirect 2017 2017 Zhongrong International Wealth
Management Limited Hong Kong 100%
(2016 : 100% )
- (2016 : -
)
Financial investing
and lending Wealth Pointer Global Limited BVI 100% - Financial (2016 : - ) (2016 : 100% ) investing Zhongrong Capital
Holding Limited Cayman Islands 100%
(2016 : 100% )
- (2016 : -
)
Investment holding
Zhongrong PT Capital Limited
(formerly known as Zhongrong International Financial Services Management (HongKong) Limited
b Hong Kong 100% (2016 : -
)
- (2016 : -
)
Inactive
Zhongrong International
Asset Management (HongKong) Limited
b Hong Kong 100% (2016 : -
)
- (2016 : -
)
Inactive
Zhongrong International
Finance Management (HongKong) Limited
b Hong Kong 100% (2016 : -
)
- (2016 : -
)
Inactive
Zhongrong PT Securities
Limited c, d Hong Kong 93.1%
(2016 : - )
- (2016 : -
)
Securities, futures and commodities brokerage
Zhongrong PT Finance
Limited c, e Hong Kong 100%
(2016 : - )
- (2016 : -
)
Provision of financing service
Zhongrong PT Trading
Limited c, e Hong Kong 100%
(2016 : - )
- (2016 : -
)
Inactive
Zhongrong Universal Capital BVI - 100% Investment Management Limited (2016 : - ) (2016 : 100% ) Holding Zhongrong International Capital
Management (Cayman) Cayman Islands -
(2016 : - )
100% (2016 : 100%
)
Asset management
Limited
Notes :-
(a) During the year, the Company repurchased 100 shares in Zhongrong Korea Bond Limited at par value of USD19,000,000 (equivalent to RMB128,008,700).
F-309
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 30 -
11. Investments in subsidiaries -
Notes (cont d) :-
(b) Incorporated during the year
(c) During the year, the Group acquired 90% equity interests in Zhongrong PT Finance Limited, Zhongrong PT Securities Limited and Zhongrong PT Trading Limited at a total consideration of RMB54,885,884.
Details of net assets acquisition transaction are as follows :-
Net assets acquired of :-
RMB
Property, plant and equipment 772,699 Loan receivables 127,948,625 Trade and other receivables 38,579,762 Bank balance 31,250,411 Trade payables (35,011,031 ) Accrued expenses and other payables (133,602,524 ) 29,937,942 Non-controlling interest (3,026,176 ) 26,911,766 Goodwill arising on acquisition - note 10 Cash consideration paid 54,885,884 Less : Net book value of identifiable net assets acquired (26,911,766 ) 27,974,118 Net cash outflow in respect of the net assets acquired :- Cash consideration 54,885,884 Less : Cash and bank balances acquired (31,250,411 ) 23,635,473
The Group recognised goodwill of RMB27,974,118 arising from acquisition of the Zhongrong PT Securities Limited, Zhongrong PT Finance Limited and Zhongrong PT Trading Limited because the purchase consideration exceeded the fair value of net assets acquired. The newly acquired business contributed revenue of RMB85,205,972 to the Group and contributed a profit of RMB10,836,883 to the Group for the period between the date of acquisition and the end of reporting period.
(d) During the year, the Group made a capital injection to Zhongrong PT Securities Limited at a
consideration of RMB26,014,024. The equity interest increased from 90.0% to 93.1%.
(e) During the year, the Group acquired the remaining interests in Zhongrong PT Finance Limited and Zhongrong PT Trading Limited at a total consideration of RMB186,226.
F-310
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 31 -
12. Available-for-sale financial assets 2017 2016 RMB RMB Unlisted securities :- Note investments - Hong Kong at cost (Note 12(a)) 502,435,261 613,424,187 Investment funds - Hong Kong, at fair value (Note 12(b)) 1,081,833,409 1,691,898,679 1,584,268,670 2,305,322,866 Classification :- Current assets 1,368,914,009 - Non-current assets 215,354,661 2,305,322,866 1,584,268,670 2,305,322,866
Notes :-
(a) Note investments are unlisted in Hong Kong with fixed interest rates range from 8.5% to 11% per annum and will be matured in years 2018 and 2019. Those investments are measured at cost less impairment losses at the end of each reporting period because there are no quoted market prices for these investments. In addition, the range of reasonable fair value estimates is significant. Accordingly, the management is of the opinion that a reasonable estimate of the fair value cannot be made.
(b) Unlisted investment funds are stated at fair value using valuation techniques in which all
significant inputs are directly or indirectly based on observable market data and nature of products.
F-311
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 32 -
13. Loans to third parties 2017 2016 RMB RMB Loans to customers 1,339,352,779 -
The Group loans receivable, which arise from the money lending business of providing personal loans in Hong Kong, are denominated in Hong Kong dollars and United State dollars. Except for loans receivable of RMB56,368,129 (2016 : Nil) which are unsecured, loans receivable are secured by collaterals or guarantee provided by the customers, bear interest and are repayable with fixed terms agreed with the customers. As at 31 December 2017, all of the loans receivable were neither past due nor impaired. A maturity profile of the loans receivable as at the end of the reporting period, based on the maturity date, net of provision is as follows :-
2017 2016 RMB RMB Within one year 1,140,049,817 - Two to five years 199,302,962 - 1,339,352,779 -
F-312
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 33 -
14. Trade and other receivables 2017 2016 RMB RMB Trade receivables 28,043,664 23,299,401 Deposits and prepayments 4,485,538 3,824,874 Interest receivables 5,828,777 6,068,146 Others - 39,600 38,357,979 33,232,021
For the brokerages and handling service, the Group allows a credit up to the respective settlement dates of the securities, futures and commodities transactions or, for customers with whom the Group provides margin financing, a credit period mutually agreed with the contracting parties. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management. Also, the Group's trade receivables are related to a large number of customers, there is no significant concentration of credit risks. Overdue trade receivables arising from securities trading bear interest ranging from prime rate plus 1% to prime rate plus 15% per annum. Receivables arising from the provision of margin financing are secured by clients securities being held as collaterals, bear interest ranging from prime rate plus 1% to prime rate plus 10% per annum. The fair value of the collaterals held by the Group as pledges for margin trade receivables as at 31 December 2017 with aggregate carrying amounts of RMB18,477,450 (2016 : Nil) was RMB1,321,136,011 (2016 : Nil). For the other business, the Group has a policy of allowing its customers credit periods normally ranging from 30 to 120 days.
F-313
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 34 -
14. Trade and other receivables (cont d)
An ageing analysis of trade receivables is as follows :-
2017 2016 RMB RMB Neither past due nor impaired 27,802,478 23,299,401 Less than 1 month 147,205 - 1 month to 3 month 93,981 - 28,043,664 23,299,401
The aging analysis of trade receivables that are neither individually nor collectively considered to be impaired relate to a single customer for whom there was no recent history of default. Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, the management is of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable.
15. Financial assets at fair value through profit or loss 2017 2016 RMB RMB Unlisted securities - held for trading :- Investment funds - Hong Kong - Notes 15(a) - 350,294,905 Investment funds - Cayman Islands - Notes 15(a) - 666,083 Notes investment - PRC - Note 15(b) 186,896,844 - 186,896,844 350,960,988
Notes :-
(a) Unlisted investment funds were fully disposed during the year. (b) Note investment represents a bond-linked instrument which is acquired in December 2017.
F-314
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 35 -
16. Amounts due from fellow subsidiaries
The amounts are unsecured, interest-free and repayable on demand except amounting to RMB1,099,670 (2016 : RMB607,806,799) are interest bearing at 10% per annum (2016 : range between 10% and 15% per annum) and repayable on demand.
17. Client trust bank balances The Group maintains segregated trust accounts with authorised institutions to hold clients monies arising from its securities, futures and commodities brokerage business. The Group has classified the clients monies as cash held on behalf of customers under the current assets section of the consolidated statement of financial position and recognised the corresponding accounts payable to respective clients on grounds that it may be liable for any loss or misappropriation of clients monies and the Group is allowed to retain some or all of the interest on the clients money. The client trust bank balances are restricted and governed by the Hong Kong Securities and Futures (Client Money) Rules under Hong Kong Securities and Futures Ordinance. The Group is not permitted to use the clients monies to settle its own obligations.
18. Other cash flow information
Reconciliation of liabilities arising from financing activities :-
cash and non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified of cash flows as cash flows arising from financing activities :-
At Interest Exchange At 1 January Interest expense adjustments 31 December 2017 paid (note ) 2017 RMB RMB RMB RMB RMB Interest payable 10,598,194 (321,238,850 ) 325,701,765 (5,067,609 ) 9,993,500 Debentures 4,990,614,183 - 17,982,936 (285,283,920 ) 4,723,313,199 5,001,212,377 (321,238,850 ) 343,684,701 (290,351,529 ) 4,733,306,699 Note :- Exchange adjustments include realised exchange difference recognised in the consolidated statement of profit or loss.
F-315
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 36 -
19. Trade payables 2017 2016 RMB RMB Trade payables arising from dealing and broking 53,985,965 -
The majority of the Group s trade payables balances represent surplus funds placed with the Group arising from its securities, futures and commodities brokerage business. They are unsecured, interest-free and payable on the settlement day of the relevant trade or upon demand from customers, except for certain trade payables to clients which represent margin deposits received from clients for their trading activities under the normal course of business. Only the excess amounts over the required margin deposits stipulated are repayable on demand.
20. Accrued expense and other payables 2017 2016 RMB RMB Accrued expense 10,351,200 8,449,447 Interest payable 9,993,500 10,598,194 Other payable 15,990,928 219,409,899 36,335,628 238,457,540
All of the accrued expense and other payables are expected to be settled within one year.
F-316
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 37 -
21. Debentures 2017 2016 RMB RMB Debentures 4,723,313,199 4,990,614,183 Analyses for reporting purposes Current 1,467,943,494 - Non-current 3,255,369,705 4,990,614,183 4,723,313,199 4,990,614,183 The carrying amounts of the above borrowings are repayable :- Within one year 1,467,943,494 - Between one and two years 3,255,369,705 1,548,308,793 Between two and five years - 3,442,305,390 4,723,313,199 4,990,614,183
On 15 June 2015, the subsidiary of the Company, Zhongrong International Bond 2015 Limited ( the 2015 Issuer ), issued a three-year note with aggregate principal amount of USD225,000,000. The notes are unconditionally and irrevocably guaranteed by the Company, and bear interest at the rate of 6% per annum, payable semi-annually in arrears on 15 June and 15 December in each year, commencing with the first interest payment date on 15 December 2015. The 2015 Issuer will redeem the notes at principal amount on 15 June 2018. On 21 June 2016, the subsidiary of the Company, Zhongrong International Bond 2016 Limited ( the 2016 Issuer ), issued a three-year note with aggregate principal amount of USD500,000,000. The notes are unconditionally and irrevocably guaranteed by the Company, and bear interest at the rate of 6.95% per annum, payable semi-annually in arrears on 21 June and 21 December in each year, commencing with the first interest payment date on 21 December 2016. The 2016 Issuer will redeem the notes at principal amount on 21 June 2019.
22. Share capital and capital management
(a) Share capital 2017 2016 US$ US$ Authorised :- 44,000,000 ordinary shares of US$1 each 44,000,000 44,000,000 RMB RMB Issued and fully paid :- 44,000,000 ordinary shares US$1 each 280,837,766 280,837,766
F-317
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
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22. Share capital and capital management (cont d)
(b) Capital management
continue as a going concern and to provide an adequate return to the member commensurately with the level of risk. To meet these objectives, the Group manages the equity capital structure and makes adjustments to it in the light of changes in economic conditions by paying dividends to the member, issuing new equity shares, and raising or repaying debt as appropriate. Two of the Company are licensed with the Hong Kong Securities and
in. These subsidiaries are subject to liquid capital requirements under the Hong Kong Securities and Futures
Under the SF(FR)R, these minimum paid-up share capital requirement is HK$30,000,000
(approximately RMB25,119,900) and HK$5,000,000 (approximately RMB4,186,650) respectively; they must maintain a level of required liquid capital (assets and liabilities adjusted as determined by SF(FR)R) which is the higher of the floor requirement of HK$15,000,000 (approximately RMB12,559,950) and HK$100,000 (approximately RMB83,733) respectively and 5% of their total adjusted liabilities. The required information is filed with the SFC on a timely basis.
is unchanged from the previous
periods, is to maintain a reasonable proportion in net debt and equity capital. The Group monitors equity capital on the basis of the debt-to-equity capital ratio, which is calculated as net debt over equity capital. Net debt is calculated as total debt less cash and cash equivalents. Equity capital comprises all components of equity (i.e. share capital, reserves and non-controlling interests). The debt-to-equity capital ratios at 31 December 2017 and 31 December 2016 were as follows :-
2017 2016 RMB RMB Total debt 4,829,800,150 5,238,602,961 Less : Cash and cash equivalents (1,990,103,263 ) (2,176,372,310 ) Net debt 2,839,696,887 3,062,230,651 Total equity 389,869,936 269,108,113 Debt-to-equity capital ratio 7.3 11.4
F-318
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
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23. Nature and extent of financial instrument risks
(a) Credit risk
Credit risk is the risk that a party to a financial instrument will cause a financial loss for the Group by failing to discharge an obligation. The Group manages credit risk by setting up credit control policy and periodic evaluation of credit performance of the other parties, measured by the extent of past due or default. The carrying amounts of financial assets as at 31 December 2017, which represented the amounts of maximum exposure to credit risk, were as follows :-
2017 2016 RMB RMB
Loans to third parties 1,339,352,779 - Trade and other receivables 38,357,979 33,232,021 Available-for-sale financial assets 1,584,268,670 2,305,322,866 Financial assets at fair value through profit or loss 186,896,844 350,960,988 Amounts due from fellow subsidiaries 1,099,670 640,886,307 Client trust bank balances 48,781,369 - Cash and cash equivalents 1,990,103,263 2,176,372,310
5,188,860,574 5,506,774,492
The sole director is satisfied with the credit quality of the financial assets.
F-319
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 40 -
23. Nature and extent of financial instrument risks (cont d)
(b) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. The Group manages liquidity risk by monitoring its liquidity position through periodic preparation of cash flows and cash balances forecasts and periodic evaluation of the ability of Group to meet its financial obligations, measured by the debt-to-equity capital ratio. Maturities of the financial liabilities of the Group as at 31 December 2017 were as follows :- As at 31 December 2017 Total contractual Carrying undiscounted Less than 1 In 2 to 5 amount cash flows year years HK$ HK$ HK$ HK$ Trade payables 53,985,965 53,985,965 53,985,965 - Accruals and other payables
36,335,628
36,335,628
36,335,628
-
Debentures 4,723,313,199 5,117,489,650 1,733,236,300 3,384,253,350 4,813,634,792 5,207,811,243 1,823,557,893 3,384,253,350
As at 31 December 2016 Total contractual Carrying undiscounted Less than 1 In 2 to 5 amount cash flows year years HK$ HK$ HK$ HK$ Accruals and
other payables
238,457,540
238,457,540
238,457,540
-
Debentures 4,990,614,183 5,758,477,619 334,710,250 5,423,767,369 5,229,071,723 5,996,935,159 573,167,790 5,423,767,369
F-320
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
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23. Nature and extent of financial instrument risks (cont d)
(c) Interest rate risk
The Group s exposure to interest rate risk arises primarily from its receivables arising from the provision of margin financing and bank balances with floating interest rates which expose the company to cash flow interest rate risk. The Group mitigates its interest rate risk by monitoring market interest rate movements and revising the interest rates offered to its customers on an ongoing basis in order to limit potential adverse effects of interest rate movements on net interest income. The following table details the interest rate profile of the Group s net balances as at 31 December 2017 :-
2017 2016 RMB RMB Variable rate balances :- Trade receivable for margin client 18,477,450 - Client trust bank balances 48,781,369 - Bank balances 1,990,103,263 2,176,372,310 2,057,362,082 2,176,372,310
At 31 December 2017, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would increase/decrease the Group s profit after tax and retained profits by RMB20,573,621 (2016 : RMB21,763,723). Other components of equity would not be affected by the changes in interest rates. The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for non-derivative financial instruments in existence at that date. The 100 basis point increase or decrease represents management's assessment of a reasonably possible change in interest rates over the period until the next annual reporting date.
F-321
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
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23. Nature and extent of financial instrument risks (cont d)
(d) Foreign currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group manages currency risk, when it is considered significant, by entering into appropriate currency forward contracts. The Group s entities are measured using the currency of the primary economic environment in which the entity operates as the functional currency. The management considers tto currency risk were primarily denominated in Renminbi and Hong Kong dollar. Carrying amounts of financial assets and financial liabilities as at 31 December 2017 exposed to currency risk derived from Renminbi and Hong Kong dollar were as follows :-
2017 2016 RMB RMB Financial assets denominated in foreign currencies :- Trade and other receivables - 27,163,875 Amounts due from fellow subsidiaries - 5,483,459 Cash and cash equivalents 129,511,824 333,982,026 129,511,824 366,629,360 Financial liabilities denominated in foreign currencies :- Accrual and other payables (474,198 ) (50,464 ) Net financial assets exposed to currency risk 129,037,626 366,578,896
F-322
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 43 -
23. Nature and extent of financial instrument risks (cont d)
(e) Foreign currency risk (cont d)
The net financial assets denominated in Renminbi and Hong Kong dollar are analysed as follows :-
2017 2016 RMB RMB RMB 22,432,437 20,150,735 Hong Kong dollar 106,605,189 346,428,161 129,037,626 366,578,896
Should functional currency of each Group s entities at 31 December 2017 devalue by 5% against Renminbi and Hong Kong dollar, the carrying amount of the net financial assets exposed to currency risk at 31 December 2017 determined in accordance with HKAS 21
ed by RMB6,451,881 (2016 : RMB18,328,945), and hence the equity at 31 December 2017 would be increased, by RMB6,451,881 (2016 : RMB18,328,945); and the profit for the year ended 31 December 2017 would have increased by RMB6,451,881 (2016 : RMB18,328,945).
(e) Fair value
(i) Financial instruments carried at fair value
The following table presents the carrying value of financial instruments measured at fair value at 31 December 2017 across the three levels of the fair value hierarchy defined in HKFRS 13, Fair Value Measurement, with the fair value of each financial instrument categorised in its entirety based on the lowest level of input that is significant to that fair value measurement. The levels are defined as follows :-
Level 1 : Fair values measured using unadjusted quoted prices in active
markets for identical assets or liabilities at the measurement date.
Level 2 : Fair value measured using observable inputs and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available.
Level 3 : Fair value measured using significant unobservable inputs.
F-323
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 44 -
23. Nature and extent of financial instrument risks (cont d)
(f) Fair value (cont d)
(i) Financial instruments carried at fair value (cont d)
2017 Level 1 Level 2 Level 3 Total RMB RMB RMB RMB Available-for-sale
financial assets - note 12
-
-
1,081,833,409
1,081,833,409
Financial assets at fair value through
profit or loss - note 15 - - 186,896,844 186,896,844 - - 1,267,730,253 1,267,730,253
2016 Level 1 Level 2 Level 3 Total RMB RMB RMB RMB Available-for-sale
financial assets - note 12
-
-
1,691,898,679
1,691,898,679
Financial assets at fair value through
profit or loss - note 15 - - 350,960,988 350,960,988 - - 2,042,859,668 2,042,859,668
During the year ended 31 December 2017 and 2016, there were no significant transfers between levels of the financial assets and financial liabilities.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. For the note investment that is classified as fair value through profit or loss was acquired in December 2017. The management are of the opinion that the acquisition cost approximates its fair value as at 31 December 2017.
F-324
Zhongrong International Holdings Limited Notes to the consolidated financial statements For the year ended 31 December 2017
- 45 -
23. Nature and extent of financial instrument risks (cont d)
(f) Fair value (cont d)
(ii) Fair value of financial instruments carries at other than fair value
The carrying amounts of the company financial instruments carried at cost or amortised cost were not materially different from their fair values as at 31 December 2017.
24. Operating lease arrangements
As at 31 December 2017, the total future minimum lease payments under non-cancellable operating leases are as follows :-
2017 2016 RMB RMB Within one year 6,652,998 3,525,482 After one year but within 5 years 3,426,354 7,050,963 10,079,352 10,576,445
Operating lease payments represent rental payable by the Group for the office premises. Leases are negotiated with lease terms of one to three years with fixed monthly rentals.
25. Related party transactions
Apart from the transactions as disclosed in note 16 to the consolidated financial statements, the Group had the following material transactions with its related parties during the year :-
2017 2016 RMB RMB Disposal of a subsidiary to intermediate holding company - 2,500,000 Acquisition of subsidiaries from a fellow subsidiary 54,885,884 Interest income from a fellow subsidiary 66,833,766 13,221,993 26. Immediate and the ultimate holding companies
The sole director considers the immediate and ultimate holding companies to be Shanghai Longshan Capital Investment Limited and China Hengtian Group Company Limited respectively. Both companies are established in the PRC.
F-325
ISSUER GUARANTOR
Zhongrong International Bond 2019 LimitedVistra Corporate Services Centre
Wickhams Cay IIRoad TownTortola
British Virgin Islands
Zhongrong International Holdings LimitedVistra Corporate Services Centre
Wickhams Cay IIRoad TownTortola
British Virgin Islands
COMPANY
Zhongrong International Trust Co. Ltd.Room 1609, Taikang International TowerNo.2, Wudinghou Street, Xicheng District
Beijing 100033, PRC
TRUSTEE
Bank of Communications Trustee Limited1/F, Far East Consortium Bldg.121 Des Voeux Road Central
Hong Kong
PRINCIPAL PAYING AGENT
Bank of Communications Co., Ltd. Hong Kong Branch20 Pedder Street
Central, Hong Kong
REGISTRAR AND TRANSFER AGENT
Bank of Communications Co., Ltd. Hong Kong Branch20 Pedder Street
Central, Hong Kong
LEGAL ADVISERS
To the Issuer, the Guarantor andthe Company as to English law
To the Issuer, the Guarantor andthe Company as to PRC law
To the Issuer and the Guarantor asto British Virgin Islands law
Linklaters10th Floor, Alexandra House
Chater RoadHong Kong
Global Law Office15 & 20/F, Tower 1China Central PlaceNo. 81 Jianguo RoadChaoyang DistrictBeijing 100025
PRC
Walkers (Hong Kong)15th Floor, Alexandra House
18 Chater RoadCentral
Hong Kong
To the Joint Lead Managers and the Trusteeas to English law
To the Joint Lead Managers as to PRC law
Clifford Chance27th Floor, Jardine HouseOne Connaught Place
CentralHong Kong
Commerce & Finance Law Offices6F NCI Tower, A12 Jianguomenwai Avenue
Chaoyang DistrictBeijing 100022, PRC
AUDITORS
To the Company To the Guarantor
WUYIGE Certified Public Accountants LLP5F, Xueyuan International Tower
No. 1 Zhichun RoadHaidian DistrictBeijing, PRC
PKF Hong Kong Limited26/F, Citicorp Centre18 Whitfield RoadCauseway BayHong Kong