LUZHOU XINGLU WATER XINGLU WATER LUZHOU 瀘 州 市 興 瀘 水 務 （ 集 團） 股 份有 限 公 司 （於中華人民共和國註冊成立的股份有限公司） (a joint stock company incorporated in the People’s Republic of China with limited liability) 股份代號：2281 Stock Code: 2281 ( GROUP ) CO., LTD. * 2016 年度報告 2016 Annual Report 2016 年度報告 Annual Report * 僅供識別 * For identification purposes only CONTENTS Corporate Information 2 Definitions 4 Financial Highlights 6 Chairman’s Statement 8 General Manager’s Report 10 Management Discussion and Analysis 17 Directors, Supervisors and Senior Management 32 Directors’ Report 44 Supervisory Committee’s Report 60 Corporate Governance Report 63 Independent Auditor’s Report 77 Consolidated Statement of Profit or Loss and Other Comprehensive Income 82 Consolidated Statement of Financial Position 83 Consolidated Statement of Changes In Equity 85 Consolidated Statement of Cash Flows 86 Notes to Consolidated Financial Statements 88 2 Annual Report 2016 CORPORATE INFORMATION BOARD OF DIRECTORS SECRETARY TO THE BOARD Executive Directors Mr. Chen Yongzhong (陳永忠先生) Mr. Zhang Qi (張歧先生) (Chairman of the Board) COMPANY SECRETARIES Mr. Liao Xingyue (廖星樾先生) Mr. Wang Junhua (王君華先生) Mr. Chen Yongzhong (陳永忠先生) Ms. Ng Wing Shan (吳詠珊女士) Non-executive Directors AUTHORISED REPRESENTATIVES Mr. Chen Bing (陳兵先生) Mr. Yang Ronggui (楊榮貴先生) Mr. Zhang Qi (張歧先生) Ms. Xu Yan (徐燕女士) Mr. Chen Yongzhong (陳永忠先生) Independent Non-executive Directors REGISTERED ADDRESS, Mr. Gu Ming’an (辜明安先生) HEADQUARTERS AND PRINCIPAL Mr. Lin Bing (林兵先生) PLACE OF BUSINESS IN THE PRC Mr. Cheng Hok Kai, Frederick (鄭學啟先生) 16 Baizi Road STRATEGY COMMITTEE Jiangyang District, Luzhou Sichuan Province, PRC Mr. Chen Bing (陳兵先生) (Chairman) Mr. Zhang Qii (張歧先生) PRINCIPAL PLACE OF BUSINESS IN Mr. Lin Bing (林兵先生) HONG KONG AUDIT COMMITTEE 18/F, Tesbury Centre 28 Queen’s Road East Mr. Cheng Hok Kai, Frederick (鄭學啟先生) Wanchai, Hong Kong (Chairman) Mr. Gu Ming’an (辜明安先生) DOMESTIC SHARE REGISTRAR Mr. Yang Ronggui (楊榮貴先生) China Securities Depository and Clearing NOMINATION AND REMUNERATION Corporation Limited COMMITTEE No. 17, Taipingqiao Avenue Xicheng District, Beijing Mr. Gu Ming’an (辜明安先生) (Chairman) Mr. Cheng Hok Kai, Frederick (鄭學啟先生) H SHARE REGISTRAR Mr. Zhang Qi (張歧先生) Computershare Hong Kong Investor Services Limited Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong Luzhou Xinglu Water (Group) Co., Ltd. 3 CORPORATE INFORMATION (Continued) LEGAL ADVISER STOCK CODE As to Hong Kong law: 2281 Luk & Partners Unit 2001, Level 20 COMPANY WEBSITE One International Finance Centre 1 Harbour View Street www.lzss.com Central, Hong Kong As to PRC law: Jia Yuan Law Offices (Beijing) F408, Level 4, Ocean Plaza 158 Fuxing Men Nei Avenue Xicheng District Beijing, PRC COMPLIANCE ADVISER BOCOM International (Asia) Limited 9th Floor, Man Yee Building 68 Des Voeux Road Central Hong Kong PRINCIPAL BANKERS Industrial and Commercial Bank of China Luzhou City Commercial Bank Bank of Communications Co., Ltd. INTERNATIONAL AUDITOR Deloitte Touche Tohmatsu 35th Floor, One Pacific Place 88 Queensway Hong Kong 4 Annual Report 2016 DEFINITIONS In this annual report, unless the context otherwise requires, the following expressions shall have the following meanings: “Annual General Meeting” the annual general meeting to be held by the Company on 15 June 2017, or any adjournment thereof “Articles of Association” the articles of association of the Company “associate(s)” has the meaning ascribed to it under the Listing Rules “Board” or “Board of Directors” the board of Directors “Chengdong Treatment Plant” the wastewater treatment plant we completed the construction and were in the process of acceptance of inspection in Longmatan District of Luzhou urban area “Chengnan Treatment Plant” the wastewater treatment plant we completed the construction and were in the process of acceptance of inspection in Jiangyang District of Luzhou urban area “Company”, “the Company” or Luzhou Xinglu Water (Group) Co., Ltd.* (瀘州市興瀘水務（集團）股份 “Xinglu Water”, “us” or “we” 有限公司), a joint stock company with limited liability established in the PRC, whose H Shares are listed on the Main Board of the Stock Exchange (stock code: 2281) “connected person(s)” has the meaning ascribed to it under the Listing Rules “Controlling Shareholder(s)” has the meaning ascribed to it under the Listing Rules “Corporate Governance Code” the Corporate Governance Code set out in Appendix 14 to the Listing Rules “Director(s)” the director(s) of the Company “Domestic Share(s)” the ordinary share(s) in issue in the share capital of the Company, with a nominal value of RMB1.00 each, which are subscribed for or credited as paid up in Renminbi “Group” or “our Group” the Company and its subsidiaries from time to time “H Share(s)” the ordinary share(s) in issue in the share capital of the Company, with a nominal value of RMB1.00 each, which are listed on the Main Board of the Stock Exchange “HKD”, “HK$” or the lawful currency of Hong Kong “Hong Kong dollars” “Hong Kong” or “HK” the Hong Kong Special Administrative Region of the PRC “IFRSs” International Financial Reporting Standards issued by the International Accounting Standards Board “IPO” the successful initial public offering of the Company’s H Shares through the Stock Exchange on 31 March 2017 “Latest Practicable Date” 24 April 2017, being the latest practicable date for the purpose of ascertaining certain information contained in this annual report before printing “Listing Date” 31 March 2017, being the date on which the H Shares were listed and from which dealings in the H Shares commenced on the Main Board of the Stock Exchange Luzhou Xinglu Water (Group) Co., Ltd. 5 DEFINITIONS (Continued) “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “Model Code” the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules “Nanjiao Supply Plant II” the tap water supply plant that we are currently constructing in Jiangyang District of Luzhou urban area “Naxi Treatment Plant” the wastewater treatment plant we operate in Naxi District of Luzhou urban area “PRC” or “China” the People’s Republic of China, and for the purpose of this report only, excluding Hong Kong, Macau Special Administrative Region of the PRC and Taiwan “Prospectus” the prospectus dated 21 March 2017 in relation to the IPO of H Shares “Qiancao Supply Plant II” the tap water supply plant that we are currently constructing in Jiangyang District of Luzhou urban area “Reporting Period” the period from 1 January 2016 to the twelve months ended 31 December 2016 “RMB” or “Renminbi” the lawful currency of the PRC “SFO” or “Securities and Futures the Securities and Futures Ordinance (Chapter 571 of the Laws of Ordinance” Hong Kong) “Share(s)” the ordinary share(s) of RMB1.00 each in the share capital of the Company, including H Shares and Domestic Shares “Shareholder(s)” holder(s) of the Share(s) “Stock Exchange” The Stock Exchange of Hong Kong Limited “subsidiary(ies)” has the meaning ascribed to it under the Listing Rules “Supervisor(s)” the supervisor(s) of the Company “Supervisory Committee” the supervisory committee of the Company “Shareholder with Undertaking” Xinglu Investment, the Controlling Shareholder of the Company “Xinglu Investment” Luzhou City Xinglu Investment Group Co., Ltd.* (瀘州市興瀘投資集團 有限公司), our Controlling Shareholder, a PRC limited liability company established on 28 January 2003 and owned as to 100% by Luzhou SASAC “Luzhou Laojiao” Luzhou Laojiao Group Co., Ltd.* (瀘州老窖集團有限責任公司), a PRC limited liability company established on 21 December 2000 and wholly owned by Luzhou SASAC “Luzhou Infrastructure” Luzhou City Infrastructure Investment Co., Ltd.* (瀘州市基礎建設投 資有限公司), a PRC limited liability company established on 29 May 2001 and owned as to 79.13% by Xinglu Investment, 20.86% by CDB Development Fund Co., Ltd.* (國開發展基金有限公司) and 0.01% by Luzhou Xinglu Jutai Real Estate Co., Ltd.* (瀘州興瀘居泰房地產有限公 司), a wholly-owned subsidiary of Xinglu Investment, respectively “%” per cent * For identification purposes only 6 Annual Report 2016 FINANCIAL HIGHLIGHTS The Board is pleased to announce the following financial highlights: CONSOLIDATED RESULTS Year ended 31 December 2016 2015 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000 Revenue 836,191 911,896 628,983 409,798 Profit before tax 165,812 170,352 136,719 105,833 Income tax expense (25,016) (25,934) (21,187) (17,880) Profit for the year 140,796 144,418 115,532 87,953 Profit and total comprehensive income for the year attributable to: – Owners of the Company 126,647 130,412 100,386 73,894 – Non-controlling interests 14,149 14,006 15,146 14,059 140,796 144,418 115,532 87,953 Return on average equity 11.4% 16.5% 20.4% 18.2% Basic earnings per share (RMB) 0.20 0.22 0.25 0.19 Luzhou Xinglu Water (Group) Co., Ltd. 7 FINANCIAL HIGHLIGHTS (Continued) CONSOLIDATED ASSETS AND LIABILITIES As at 31 December 2016 2015 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000 Total assets 2,659,137 2,059,228 1,433,324 1,033,326 Total liabilities (1,287,864) (963,971) (777,339) (558,403) 1,371,273 1,095,257 655,985 474,923 Equity attributable to owners of the Company 1,289,784 1,031,381 606,808 431,035 Non-controlling interests 81,489 63,876 49,177 43,888 1,371,273 1,095,257 655,985 474,923 Consolidated results of the Group for each of the three years ended 31 December 2013, 2014 and 2015 and the summary of consolidated assets and liabilities of the Group as at 31 December 2013, 2014 and 2015 are derived from the Prospectus. Consolidated financial statements of the Group for the year ended 31 December 2012 were not published. During the Reporting Period, the Group’s audited profit attributable to owners of the Company amounted to approximately RMB126.6 million.