2008 Annual Report
Leveraging Opportunities, Pursuing Growth
In 2009, both global and China's economies will still be affected by the
financial crisis, thereby bringing trials to the overall operations of the
domestic toll road industry. Meanwhile, the successive completion and opening
of neighbouring toll roads will continue to cause traffic diversions from the
Company's toll road operations. Year 2009 will indeed be a challenging year for
Zhejiang Expressway.
Faced with adversities, staff of all levels at Zhejiang Expressway will be
united to discharge their duties and strive to overcome different challenges.
Based on our solid foundation, we will try every possible means to leverage
opportunities and pursue growth, bringing the Company to a new platform.
Contents
2 Definition of Terms
4 Company Profile
6 Review of Major Corporate Events
7 Particulars of Major Road Projects
8 Financial and Operating Highlights
10 Chairman's Statement
14 Management Discussion and Analysis
26 Principle Risks and Uncertainties
28 Corporate Governance Report
33 Directors, Supervisors and Senior Management Profiles
37 Report of the Directors
43 Report of the Supervisory Committee
44 Independent Auditor's Report
46 Consolidated Financial Statements & Notes
112 Corporate Information
114 Location Map of Expressways in Zhejiang Province
Definition of Terms
ADR(s) American Depositary Receipt(s)
ADS(s) American Depositary Share(s)
Advertising Co Zhejiang Expressway Advertising Co., Ltd., a 70% owned
subsidiary of Development Co
Audit Committee the audit committee of the Company
Board the board of directors of the Company
Company or Zhejiang Expressway Co., Ltd., a joint stock limited company incorporated in
the
Zhejiang PRC with limited liability on March 1, 1997
Expressway
Communications Zhejiang Communications Investment Group Co., Ltd., a
Investment Group wholly State-owned enterprise established on December 29,
2001
Development Co Zhejiang Expressway Investment Development Co., Ltd., a 51%
owned subsidiary of the Company
Directors the directors of the Company
GDP gross domestic product
Group the Company and its subsidiaries
H Shares the overseas listed foreign shares of Rmb1.00 each in the
share capital of the Company which are primarily listed on
the Hong Kong Stock Exchange and traded in Hong Kong
dollars since May 15, 1997
Hong Kong Stock The Stock Exchange of Hong Kong Limited
Exchange
Huajian Huajian Transportation Economic Development Center, a
State-owned enterprise
Jiaxing Co Zhejiang Jiaxing Expressway Co., Ltd., a 99.9995% owned
subsidiary of the Company
Jinhua Co Zhejiang Jinhua Yongjin Expressway Co., Ltd., a 23.45%
owned associate of the Company
JoinHands JoinHands Technology Co., Ltd., a 27.582% owned associate
Technology of the Company
Listing Rules the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited
Period the period from January 1, 2008 to December 31, 2008
Petroleum Co Zhejiang Expressway Petroleum Development Co., Ltd., a 50%
owned associate of the Company
PRC the People's Republic of China
Rmb Renminbi, the lawful currency of the PRC
Services Co Zhejiang Expressway Vehicle Towing and Rescue Services Co.,
Ltd.（, a 85% owned subsidiary of Development Co
Shangsan Co Zhejiang Shangsan Expressway Co., Ltd., a 73.625% owned
subsidiary of the Company
Shareholders the shareholders of the Company
Shida Co Hangzhou Shida Highway Co., Ltd., a 50% jointly-controlled
entity of the Company
Supervisory the supervisory committee of the Company
Committee
Yuhang Co Zhejiang Yuhang Expressway Co., Ltd., a 51% owned
subsidiary of the Company
Zheshang Zheshang Securities Co., Ltd., a 70.46% owned subsidiary of
Securities the Shangsan Co
Company Profile
Zhejiang Expressway is an infrastructure company principally engaged in
investing in, developing and operating high grade roads. The Company and its
subsidiaries also carry out certain ancillary businesses such as automobile
servicing, operation of gas stations and billboard advertising along
expressways, as well as securities business.
Major assets under management include the 248km Shanghai-Hangzhou-Ningbo
Expressway, the 142 km Shangsan Expressway, ancillary facilities along the two
expressways, and Zheshang Securities. Both expressways are situated within
Zhejiang Province in the PRC. As at December 31, 2008, total assets of the
Company and its subsidiaries amounted to Rmb25,287.52 million.
The Company was incorporated on March 1, 1997 as the main vehicle of the
Zhejiang Provincial Government for investing in, developing and operating
expressways and Class 1 roads in Zhejiang Province.
Incorporated on December 29, 2001, Communications Investment Group, the
controlling shareholder of the Company, is a provincial-level communications
company which is wholly-owned by the State and established by the Zhejiang
Provincial Government. It mainly operates a diversity of businesses, such as
investment, operations, maintenance, toll collection and ancillary services of
expressways; construction and building of transportation project, ocean and
coastal transport; as well as real estates, etc. As at December 31, 2008, the
consolidated assets of Communications Investment Group totalled Rmb121.355
billion.
The H Shares of the Company, which represent approximately 33% of the issued
share capital of the Company, were listed on the Hong Kong Stock Exchange on
May 15, 1997, and the Company subsequently obtained a secondary listing on the
London Stock Exchange on May 5, 2000.
On February 14, 2002, a Level I American Depositary Receipt program sponsored
by the Company in respect of its H Shares, with the Bank of New York as
depositary, was established in the United States and became effective.
On August 12, 2005, a 10-year corporate bond of the Company, issued on January
24, 2003, was listed on the Shanghai Stock Exchange.
In addition to managing well the existing expressway operations under the
Group, the Company will continue to unearth potential and improve efficiency,
while striving to explore the value-added of toll road-related business
operations. Meanwhile, the Company will continue to improve the core competence
of the securities business, strengthen risk control capabilities and grasp
every opportunity in new project investment and acquisition, with the aim of
becoming a leading expressway operator in China.
Set out below is the corporate and business structure of the Group:
http://www.prnasia.com/sa/2009/04/01/200904011708.jpg
Review of Major Corporate Events
1. During the period from January to November of 2008, additional service
areas of the Company, including the Pinghu Service Area on the Hangpu
Expressway, the Wangqing Tuo Service Area and the Sicun Dian Service Area on
the Beijing-Shanghai Expressway, the Cicheng Service Area on the Shenhai
Expressway, the Changqing Service Area on the Shandong Jihe Expressway and the
North-shore Service Area on the Hangzhou Bay Bridge, consecutively started
official operation.
2. On March 10, 2008, the Company announced its 2007 annual results in
Hong Kong, and thereafter conducted its annual results presentations in Hong
Kong, Singapore and Europe.
3. On May 15, 2008, the Company convened its 2007 annual general meeting.
The meeting approved the distribution of a final dividend of Rmb 0.24 per
share, the re-appointment of Deloitte Touche Tohmatsu Certified Public
Accountants Hong Kong as the international auditors of the Company, and the
re-appointment of Zhejiang Pan China Certified Public Accountants as the PRC
auditors of the Company.
4. On May 15, 2008, the Company announced its 2008 first quarterly
results.
5. On August 4, 2008, the Company announced its 2008 interim results in
Hong Kong, and thereafter conducted its interim results presentations in Hong
Kong.
6. On September 22, 2008, the Company convened a 2008 extraordinary
general meeting. The meeting approved the distribution of an interim dividend
of Rmb 0.07 per share.
7. On November 11, 2008, the Company announced its 2008 third quarterly
results.
8. On November 27, 2008, the Company announced its withdrawal from
investment and participation in the development and operation of the
Jiaxing-Shaoxing Expressway.
9. On February 27, 2009, the Company convened an extraordinary general
meeting to elect and appoint members of the 5th Board of Directors and the
Supervisory committee of the Company, and approve the remuneration of all
directors and supervisors. The term of the 5th Board of Directors and the
Supervisory committee is for a period of three years from March 1, 2009 to
February 29, 2012.
10. On February 27, 2009, the Company convened the first meeting of the
5th Board of Directors to elect Mr. Chen Jisong as Chairman of the Company and
appoint him as Chairman of the Strategy Committee, Mr. Tung Chee Chen as
Chairman of the audit committee and Ms. Zhang Luyun as Chairwoman of the
Nomination and Remuneration Committee. At the meeting, the Company also
appointed other senior management members including the appointment of Mr. Zhan
Xiaozhang as General Manager of the Company, with a term of office of three
years from March 1, 2009 to February 29, 2012.
To view the Particulars of Major Road Projects, please visit:
http://www.prnasia.com:80/xprn/sa/attachment/2009/04/20090401-42246.pdf
To view the Financial and Operating Highlights, please visit:
http://www.prnasia.com:80/xprn/sa/attachment/2009/04/20090401-520087.pdf
http://www.prnasia.com/sa/2009/04/01/200904011815.gif
Chairman's Statement
By leveraging new opportunities and pursuing new growth, we will build Zhejiang
Expressway into a leading expressway operator in China.
Dear Shareholders,
Advancing to a New Platform with Renewed Forces
It is my honour to present you this annual report as chairman of the Company.
The new session of the Board of Directors of the Company was elected at the
Extraordinary General Meeting and the Board meeting held on February 27, 2009.
As the incoming chairman, I would like to extend my sincerest gratitude to Mr
Geng Xiaoping, the former chairman, who had led the management team during the
last decade and had made contributions to the Company.
Year 2008 was the most challenging year in Zhejiang Expressway's corporate
history. For the first fiscal year since its listing, Zhejiang Expressway
recorded an earnings decline. For the year ended 31 December 2008, the Company
recorded a total revenue of Rmb6,323.47 million, a decrease of 10.1%
year-on-year, while net profit dropped 21.7% to Rmb1,892.79 million. Earnings
per share was Rmb43.58 cents (2007: Rmb55.63 cents).
Indeed, I assumed the chairmanship with both worries and high hopes. Worries
because the Company is faced with some very challenging prospects for its
business, primarily due to the economic slowdown and the impact of traffic
diversions to competing expressways nearby. High hopes because given Zhejiang
Expressway more than ten-years of solid development foundation - especially its
two high-quality expressways, the Shanghai-Hangzhou-Ningbo Expressway and the
Shangsan Expressway - together with an experienced and fine management team, I
believe that the Company will advance to a new platform.
For a company that has gone through over ten years' double-digit growth, we at
Zhejiang Expressway do not feel good about our first-ever earnings decline.
While we are well aware that Zhejiang Expressway performed quite well with a
reasonable amount of profits recorded for a year where many companies got
"burnt" heavily, we cannot afford to be complacent. Instead, we would treat
the declined results in 2008 as a wake-up call to all of us at Zhejiang
Expressway: growth is not guaranteed. In view of a much more challenging
environment than before, we need to be better equipped than ever. With
continued traffic diversions from competing nearby highways, including the
Hangpu Expressway and the Hangzhou Bay Bridge, and with economic growth slowed
for the first time since many years, the Company can no longer expect that its
revenue will be fuelled by organic traffic growth on its expressways. Instead,
we must rely on our own efforts to re-build growth: by stimulating traffic
growth, further trimming our operating costs, and seeking new ways to enhance
earnings.
We will continue our efforts in enhancing comfort and convenience for our
expressway users, with an aim to retain existing customers as well as to
attract new ones. We will adopt active marketing and publicity measures to
increase the community's awareness about our expressways, their access points
and the travelling benefits that they offer. Meanwhile, we will continue to be
committed to our maintenance endeavours which are critical for both lowering
maintenance costs and maintaining travel comfort for our customers. Our efforts
in researching and developing new maintenance materials and technologies will
be strengthened, with an aim to extend the longevity of our road assets and to
achieve better cost efficiency in our day-to-day operations.
Whilst maintaining competitiveness of our core toll road business, we also need
to be aggressive in seeking new income sources for the Company. Our efforts
will include actively searching for the acquisition of quality expressway
assets, building Zhejiang Expressway into an excellent expressway operator in
China. The development of the service area management business has fared very
well in the past 2-3 years, with several new service area management contracts
being won during 2008. The fact that we won several contracts granted by
expressway owners outside Zhejiang Province certainly demonstrates our
competitiveness in this business. Indeed, as Zhejiang Expressway is building a
brand name in the service area management business, we will continue to
capitalize on such competitive advantage to seek further growth. Meanwhile, we
will continue to strengthen our own service area operations so as to attract
more travellers' patronage and expand revenue.
As both the central government and Zhejiang's provincial government are rolling
out various measures to stimulate the economy, and in particular the central
government's long-term commitment to increase the country's transportation
infrastructure investments, as a leading expressway operator Zhejiang
Expressway is faced with good development opportunities. Operating two of
Zhejiang Province's key transportation trunks, one of which is the province's
only eight-lane expressway to date, we at Zhejiang Expressway are well
positioned to re-capture growth when better times return. All we need is to
further strengthen ourselves in order to regain growth, a growth that in view
of the present tough environment is achievable only with hard-earned efforts.
With our renewed forces, I am confident that we will sail through the storms to
a new platform with even greater competitiveness.
Chen Jisong
Chairman
March 17, 2009
The principal business
Faced with escalating competition among toll roads, the Company is determined
to enhance the competitive edge of its toll road operation. The Company has
proactively researched and introduced a whole package of electronic toll
collection equipment and services so as to upgrade the convenience and speed of
its toll collection system, thereby putting the Company's innovative standards
at the forefront of its industry peers. Meanwhile, the maintenance department
of the Company has continuously enhanced the applications of new technologies,
materials and equipment so as to provide a comfortable, safe and highly
efficient traffic environment for drivers. In the future, the Company will
continue to exploit its management potential and to enhance its sales and
marketing and customer service, seeking the best possible development for the
principal business of Zhejiang Expressway.
Management Discussion and Analysis
Business Review
In 2008, the global financial crisis, which was triggered by the US subprime
credit crisis, continued to spread, resulting in the increasing difficulties
for China's economic operations. The growth rate of China's GDP exhibited a
significant slowdown compared to the past, with a decrease of 4 percentage
points year-on-year. Faced with tough challenges presented by the unprecedented
global financial crisis as well as the severe impact caused by natural
disasters such as the snowstorms and the mega earthquake in China, Zhejiang
Province's economic development could not escape unaffected. During the Period,
Zhejiang Province's GDP grew by 10.1%, with the growth rate decreased by 4.6
percentage points compared to 2007.
To view the GDP Growth Rate, please visit:
http://www.prnasia.com/sa/2009/04/01/200904011818.gif
Affected by the external factors including the macro-economy, natural disasters
and government policies, together with traffic diversions caused by
expressways' network construction, both traffic volumes and toll incomes
generated on the Group's two expressways witnessed declines. During the Period,
the Group realized a total income of Rmb6,510.21 million, representing a
decrease of 10.7% year-on-year; of which Rmb3,569.75 million was attributable
to the two major expressways operated by the Group, representing 54.8% of the
total income; Rmb1,766.00 million was attributable to the Group's toll
road-related businesses such as service area operations, gas stations,
advertising business and so forth, representing 27.1% of the total income; and
Rmb1,174.47 million was attributable to the securities business, representing
18.1% of the total income.
To view the Mileage of Expressway in Operation in Zhejiang Province, please
visit:
http://www.prnasia.com/sa/2009/04/01/200904011824.gif
A breakdown of the Group's income for the Period is set out below:
2008 2007
Rmb'000 Rmb'000 %Change
Toll income
Shanghai-Hangzhou-Ningbo Expressway 2,758,286 3,145,276 -12.3%
Shangsan Expressway 811,460 879,087 -7.7%
Service areas income 1,679,593 1,271,125 32.1%
Advertising income 82,622 70,870 16.6%
Securities business income 1,174,465 1,920,525 -38.9%
Other income 3,787 1,217 211.2%
Subtotal 6,510,213 7,288,100 -10.7%
Less: Revenue taxes (186,743) (257,720) -27.5%
Revenue 6,323,470 7,030,380 -10.1%
Toll Road Operations
China's macro-economic growth witnessed a slowdown, thereby causing the organic
growth rates of traffic volumes of the Group's two expressways to continue to
fall; of which the organic growth rate of traffic volume of the
Shanghai-Hangzhou-Ningbo Expressway reported a significant decrease while the
Shangsan Expressway hardly recorded any organic growth in traffic volume.
During the Period, traffic volumes and toll incomes generated on the
Shanghai-Hangzhou-Ningbo Expressway and the Shangsan Expressway witnessed
substantial decreases due to the direct impact of traffic diversions caused by
the expressway network. The Hangpu Expressway, which opened to traffic in early
2008, has directly diverted part of the traffic from the Shanghai-Hangzhou
section of the Shanghai-Hangzhou-Ningbo Expressway since February, thereby
having material effect on toll income. The Hangzhou Bay Bridge, opened to
passenger vehicles in early May 2008 and subsequently opened to truck traffic
in mid October, has diverted traffic in stages from the entire
Shanghai-Hangzhou-Ningbo Expressway and the Shangsan Expressway.
To view the Daily Traffic Volume of Shanghai-Hangzhou-Ningbo Expresswayand
Shangsan Expressway, please visit:
http://www.prnasia.com/sa/2009/04/01/200904011839.gif
In view of the snowstorms in China in early 2008, Zhejiang Provincial
Government implemented a toll-free policy for carrier vehicles of fresh
agricultural goods and products in order to ensure the supply of those goods
and products. Accordingly, toll income of the Company decreased.
Affected by the aforementioned unfavourable factors, the average daily traffic
volume in full-trip equivalents along the Shanghai-Hangzhou-Ningbo Expressway
was 37,688 during the Period, representing a decrease of 12.4% year-on-year. In
particular, the average daily traffic volume in full-trip equivalents along the
Shanghai-Hangzhou section of the Shanghai-Hangzhou-Ningbo Expressway was
37,984, representing a decrease of 20.8% year-on-year, and that along the
Hangzhou-Ningbo section was 37,477, representing a decrease of 5.0%
year-on-year. The average daily traffic volume in full-trip equivalents along
the Shangsan Expressway was 19,895 during the Period, representing a decrease
of 8.1% year-on-year.
Total toll income from the 248km Shanghai-Hangzhou-Ningbo Expressway and the
142km Shangsan Expressway amounted to Rmb3,569.75 million during the Period,
representing a decrease of 11.3% year-on-year. In respect of such income, toll
income from the Shanghai-Hangzhou-Ningbo Expressway amounted to Rmb2,758.29
million, representing a decrease of 12.3% year-on-year, while toll income from
the Shangsan Expressway amounted to Rmb811.46 million, representing a decrease
of 7.7% year-on-year.
Toll Road-related Business Operations
The Company also operates certain toll road-related businesses through its
subsidiaries and associated companies along its expressways, including gas
stations, restaurants and shops in service areas, as well as advertising and
vehicle service businesses along its expressways.
During the Period, falling traffic volumes of the Group's two expressways and
weakening consumption sentiments have brought slight income declines at the
service areas. However, due to the rising retail prices of petroleum products
during the Period, income generated from gas station operations at the service
areas realized a significant growth. In addition, income from the advertising
business also witnessed a growth as a result of further development of the
advertising business.
Leveraging on its impressive operating results and extensive management
experience in the service area business, over the past two years, the Group has
successfully bid for the operating rights of a number of service areas with
terms ranging between 5 to 10 years, including the Pinghu Service Area on the
Hangpu Expressway, the Wangqing Tuo Service Area and the Sicun Dian Service
Area on the Beijing-Shanghai Expressway, the Cicheng Service Area on the
Shenhai Expressway, the North-shore Service Area on the Hangzhou Bay Bridge and
the Changqing Service Area on the Shandong Jihe Expressway. These service areas
were opened consecutively during the Period.
During the Period, income from the aforementioned toll road-related business
operations amounted to Rmb1,781.10 million, representing a year-on-year
increase of 30.7%.
Securities Business
The domestic stock market remained sluggish with various stock indices dropping
significantly and trading volume continued to shrink. As a result, the Group's
income from the securities business reported a significant decline. During the
Period, the securities business realized an operating income of Rmb1,174.47
million, representing a decrease of 38.9% year-on-year. Among such income, the
brokerage commission income was Rmb1,006.74 million, representing a
year-on-year decrease of 43.8%; bank interest income amounted to Rmb167.73
million, representing a year-on-year increase of 30.7%. Apart from that, the
proprietary securities trading business recorded a loss of Rmb316.21 million as
accounted for in the income statement (profit for 2007: Rmb475.83 million).
Long-term Investments
During the Period, traffic volume on the 9.45km Shida Road (operated by
Hangzhou Shida Highway Co., Ltd., a 50% owned jointly-controlled entity of the
Company) increased by 1.6% year-on-year, while toll income amounted to Rmb91.66
million, up 3.6% year-on-year. Net profit realized was Rmb47.49 million,
increased by 16.4% year-on-year.
Petroleum Co. (a 50% owned associate of the Company) benefited from the surge
in oil prices during the Period, realizing an income of Rmb3,077.86 million,
representing an increase of 9.9% year-on-year while net profit realized was
Rmb22.02 million.
JoinHands Technology (a 27.582% owned associate of the Company) obtained its
income mainly from its printing operations and property leasing during the
Period. Due to a lack of improvement in the operations, the associate company
incurred a loss of Rmb5.05 million during the Period.
Jinhua Co. (a 23.45% owned associate of the Company) operates the 69.7Km Jinhua
section of Ningbo-Jinhua Expressway. In 2008, the average daily traffic volume
in full-trip equivalents along the section was 7,387, representing an increase
of 2.3% year-on-year; while toll income amounted to Rmb144.16 million, an
increase of 0.8% year-on-year. However, due to the associate company's heavy
financial burdens, the associate company incurred a loss of Rmb118.09 million
during the Period.
On 26 November 2004, the Company entered into an agreement with Jiaxing Jiashao
and Shaoxing Communication to set up the Zhejiang Jiashao Expressway Co., Ltd,
("JV Co"), for the purpose of investment and participation in the development
and operation of the Jiaxing-Shaoxing Expressway. The Company has on November
27, 2008 announced its withdrawal from such investment and participation. A sum
of Rmb35 million representing the capital investment by the Company in the
project to date, together with disposal gain thereon in the amount of Rmb8.37
million, calculated on the basis of the prevailing basic interest rate for
one-year loans announced by the People's Bank of China, was reimbursed by the
JV Co to the Company on November 28, 2008.
Financial Analysis
The Group adopts a prudent financial policy with an aim to provide shareholders
with sound returns over the long-term.
During the Period, profit attributable to equity holders of the Company was
approximately Rmb1,892.79 million, representing a decrease of 21.7%
year-on-year, while earnings per share for the Company was Rmb43.58 cents.
Profitability
The compound annual growth rates of earnings per share and return on equity in
the last five years were 11.5% and 4.9%, respectively. Details are as follows:
Year ended December 31,
2004 2005 2006 2007 2008
EPS (Rmb cents) 28.22 32.95 38.06 55.63 43.58
YoY Growth rate 21.5% 16.8% 15.5% 46.2% -21.7%
ROE 11.4% 12.8% 13.9% 18.3% 13.8%
YoY Growth rate 15.2% 11.8% 8.7% 31.4% -24.3%
Liquidity and Financial Resources
As at December 31, 2008, current assets of the Group amounted to Rmb10,450.20
million in aggregate (2007: Rmb12,178.25 million), of which bank balance and
cash accounted for 38.8% (2007: 24.9%), bank balance held on behalf of
customers accounted for 54.0% (2007: 59.4%) and held-for-trading investments
accounted for 2.4% (2007: 5.1%). Current ratio (current assets over current
liabilities) as at December 31, 2008 was 1.4 (2007: 1.2). Excluding the effect
of customer deposits arising from the securities business, the resultant
current ratio of the Group (current assets less balance of cash held on behalf
of customers over current liabilities less balance of customer deposits arising
from securities dealings ) of the Group was 2.6 (2007: 1.8).
As at December 31,
2008 2007
Rmb'000 Rmb'000
Cash and cash equivalent
Rmb 3,710,493 2,748,980
US$ in Rmb equivalent 22,668 21,507
HK$ in Rmb equivalent 3,784 3,324
Time deposits- Rmb 284,068 226,972
Held-for-trading investments-Rmb 247,587 621,220
Available-for-sale investments- Rmb 28,001 595,758
Structure deposit- Rmb 204,667 -
Total 4,501,268 4,217,761
Rmb 4,474,816 4,192,930
US$ in Rmb equivalent 22,668 21,507
HK$ in Rmb equivalent 3,784 3,324
The amount for held-for-trading investments of the Group as at December 31,
2008 amounted to Rmb247.59 million (2007: Rmb621.22 million), of which 96.5%
was invested in corporate bonds, 1.9% was invested in the stock market, while
the rest was invested in open-end equity funds.
During the Period, net cash inflow generated from the Group's operating
activities amounted to Rmb2,699.18 million, representing a decrease of 25.6%
over 2007.
The Directors do not expect the Company to experience any problem with
liquidity and financial resources in the foreseeable future.
Borrowings and Solvency
As at December 31, 2008, total liabilities of the Group amounted to Rmb8,990.25
million, of which 17.9% was borrowings and 62.4% was customer deposits arising
from securities dealings.
Total interest-bearing borrowings of the Group as at December 31, 2008 amounted
to Rmb1,609.76 million, representing a decrease of 0.8% over the beginning of
the year. The borrowings comprised outstanding balances of the World Bank
loans, denominated in US dollar, of approximately Rmb477.36 million in Renminbi
equivalent; government loans of Rmb37.40 million; loans from domestic
commercial banks totalling Rmb95.00 million; and corporate bonds amounting to
Rmb1 billion that was issued by the Company in 2003 for a term of 10 years. Of
the interest-bearing borrowings, 76.3% were not repayable within one year.
Maturity Profiles
Gross Within 2-5 years Beyond
amount 1 year inclusive 5years
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Floating rates
World Bank loan 477,364 248,497 228,867 -
Commerical bank loans 65,000 65,000 - -
Fixed rates
Commercial bank loans 30,000 30,000 - -
Government loans 37,400 37,400 - -
Corporate bonds 1,000,000 - 1,000,000 -
Total as at December 31, 2008 1,609,764 380,897 1,228,867 -
Total as at December 31, 2007 1,621,990 288,045 333,945 1,000,000
As at December 31, 2008, the Group's loans from domestic commercial banks
comprised semi-annual and annual short-term loans, with interest rates fixed at
6.21% per annum for semi-annual loans and with interest rate floated from 6.21%
to 7.20% per annum for annual loans; the interest rate for government loans was
fixed at 3.00% per annum; and the annual coupon rate for corporate bonds was
fixed at 4.29%, with interest payable annually. The annual interest rate for
customer deposits arising from securities dealing was fixed at 0.72% and 0.36%;
the annual floating rates of the Group's Rmb477.36 million World Bank loans,
denominated in US dollar, were from 2.84% to 5.36%.
Toll road-related business operations
Amid unfavourable market circumstances, our toll road-related business
operations have continued to develop rapidly and have become another source of
revenue growth for Zhejiang Expressway. In 2007, the Company made a
breakthrough by extending its service area operation beyond its operating
region: within the following 2 years the Company has won the operating rights
of 3 service areas on the Tianjin Section of the Beijing-Shanghai Expressway
and the Jiaxing Section of the Hangpu Expressway, as well as the North-shore
Service Area on the Hangzhou Bay Bridge, the Cicheng Service Area on the
Shenhai Expressway and the Changqing Service Area on the Shandong Jihe
Expressway. Looking forward, the Company will be committed to enhancing the
quality of its service areas and providing more value-added services to
drivers, establishing a quality and professional brand image for Zhejiang
Expressway.
Total interest expense for the Period amounted to Rmb76.81 million, while
profit before interest and tax amounted to Rmb3,010.89 million. The interest
cover ratio (profit before interest and tax over interest expenses) stood at
39.2 (2007: 44.3).
2008 2007
Rmb'000 Rmb'000
Profit before tax and interest 3,010,888 4,393,085
Interest expenses 76,809 99,100
Interest cover ratio 39.2 44.3
The asset-liability ratio (total liabilities over total assets) was 35.6% as at
December 31, 2008 (December 31, 2007: 42.7%). Excluding the effect of customer
deposits arising from the securities business, the resultant asset-liability
ratio (total liabilities less balance of customer deposits arising from
securities dealings over total assets less balance of cash held on behalf of
customers) of the Group was 17.2% (December 31, 2007: 22.4%).
Capital Structure
As at December 31, 2008, the Group had Rmb16,297.27 million total equity,
Rmb6,674.87 million fixed-rate liabilities, Rmb542.36 million floating-rate
liabilities and Rmb1,773.02 million interest-free liabilities, representing
64.5%, 26.4%, 2.1% and 7.0% of the Group's total capital, respectively. The
gearing ratio, which was computed by dividing the total liabilities less
balance of customer deposits arising from securities dealing by total equity,
was 20.8% as at December 31, 2008 (December 31, 2007: 28.8%).
As at December 31, 2008 As at December 31, 2007
Rmb'000 % Rmb'000 %
Total equity 16,297,268 64.5% 15,764,314 57.3%
Fixed rate liabilities ,674,873 26.4% 8,268,661 30.1%
Floating rate liabilities 42,364 2.1% 564,590 2.0%
Interest-free liabilities 1,773,016 7.0% 2,915,239 10.6%
Total 25,287,521 100.0% 27,512,804 100.0%
Long-term interest-bearing
liabilities 1,228,867 4.9% 1,333,945 4.8%
Gearing ratio 1 (Note) 20.8% 28.8%
Gearing ratio 2 (Note) 7.5% 8.5%
Asset-liability ratio 1 (Note) 35.6% 42.7%
Asset-liability ratio 2 (Note) 17.2% 22.4%
Note: Gearing ratio 1 represents the total liabilities less customer
deposits arising from securities dealing to the total equity; gearing ratio 2
represents the total amount of the long-term interest-bearing liabilities to
the total equity; Asset-liability ratio 1 represents total liabilities to total
assets; Asset-liability ratio 2 represents the total liabilities less customer
deposits arising from securities dealing to the total assets less bank balances
held on behalf of customers.
Capital Expenditure Commitments and Utilization
Capital expenditures of the Group and of the Company for the Period totalled
Rmb311.80 million and Rmb47.72 million, respectively, with Rmb97.40 million
incurred by the acquisition of equipment, Rmb60.25 million incurred by the
remaining construction work of widening project, and Rmb60.67 million incurred
by the service area renovation and expansion.
Capital expenditures committed by the Group and by the Company as at December
31, 2008 totalled Rmb1,712.56 million and Rmb849.93 million, respectively.
Amongst the total capital expenditures committed by the Group, Rmb1,003.26
million will be used on the remaining construction work of the widening
project, while Rmb130.00 million will be used for the acquisition of equipment
and Rmb84.30 million will be used for the acquisition and construction of
properties.
Please visit below for the summary as at December 31, 2008:
http://www.prnasia.com/xprn/sa/attachment/2009/04/20090401-371033.pdf
The Group will finance its above mentioned capital expenditure commitments
mainly with internally generated cash flow, with a preference for debt
financing to meet any shortfalls thereof.
Contingent Liabilities and Pledge of Assets
As at December 31, 2008, the Group did not have any contingent liabilities nor
any pledge of assets.
Foreign Exchange Exposure
Save for the repayment of a World Bank loan of Rmb477.36 million equivalent in
US dollars, as well as dividend payments to overseas shareholders in Hong Kong
dollars, the Group's principal operations are transacted and booked in
Renminbi. Therefore, the Group's exposure to foreign exchange fluctuations is
limited and the Group has not used any financial instrument for hedging
purposes.
Although the Directors do not foresee any material foreign exchange risks for
the Group, there is no assurance that foreign exchange risks will not affect
the operating results of the Group in the future.
Human resources
As at December 31, 2008, there were 4,631 employees within the Group, amongst
whom, 746 worked in the managerial, administrative and technical positions,
while 3,885 worked in fields such as toll collection, maintenance, service
areas, securities and futures business outlets.
The Company adopts a remuneration policy that aims to be competitive for
attracting and retaining talents. Overall remuneration package for employees
mainly comprised basic salaries, bonuses and benefits. Bonuses are designed to
reflect individual job performances, as well as business and share price
performances of the Group, while benefits for employees come in the form of
contributions made by the Group to various local social security agencies
covering pension, medical and accommodation concerns that are calculated as a
percentage of employees' income and in accordance with relevant rules and
regulations.
The Company continued to implement the corporate annuity scheme during the
Period, and total pension cost charged to the income statement during the
Period amounted to Rmb32.32 million.
Outlook
In 2008, in order to proactively cope with the negative impact brought by the
global financial crisis to the China's economy, the Chinese government adopted
proactive fiscal policies and moderately loosened monetary policies,
implementing a number of measures to boost domestic demand and to facilitate a
steady but relatively rapid economic growth. Meanwhile, the Zhejiang Provincial
Government improved the economic environment through various measures such as
increasing investment, boosting consumption and stimulating exports. However,
the trend of an economic slowdown has persisted since early 2009 and the
benefits of the macro-economic policies have yet to be seen. The economy of
Zhejiang Province is expected to see a growth momentum in 2009 in general,
though with the possibility of a continued decrease in GDP growth rate.
Therefore, the organic growth rates of traffic volumes generated on expressways
are expected to fall.
The traffic diversions caused by the open-to-traffic of the Hangpu Expressway
and the Hangzhou Bay Bridge in 2008 had gradually stabilized at the end of the
Period, but the Company will continue to be negatively affected by such traffic
diversions. Meanwhile, the entire Zhuyong Expressway will be opened to traffic
in May 2009, which is expected to significantly divert traffic from certain
sections on the Shangsan Expressway and the Hangzhou-Ningbo Expressway, thereby
reducing the respective toll incomes of the Group.
The toll-by-weight policy for trucks is expected to be implemented on the
expressways in Zhejiang Province in the second half of 2009 and will help
reduce the amount of overloaded trucks, thereby lowering road maintenance costs
for the Group in the long run.
A precise toll income allocation scheme for expressways in the Zhejiang
Province is expected to be implemented around mid-2009. The implementation of
the scheme will help reduce losses in toll incomes on certain road sections of
the Group due to traffic diversions, thereby making positive contribution to
toll income on the Shanghai-Hangzhou-Ningbo Expressway.
The non-stop electronic toll collection system within the expressway network in
the Yangtze River Delta Region, which was first implemented in Shanghai and
Jiangsu, is expected to be extended to other provinces including Zhejiang
Province within 2009. A real expressway network connection in the Yangtze River
Delta Region will then materialize. The implementation of such a system will
further enhance the traffic capacities of expressways, thereby providing a more
expedient and highly efficient service to vehicles travelling on expressways.
The fuel tax reform for vehicles implemented in early 2009 combines road
maintenance fees and other fees previously levied into a single fuel tax, which
is imposed on sale of petroleum products. This fairer levy scheme will have a
long-term and positive impact on the highway transportation industry.
The economic conditions will continue to be grave in 2009. Dragged by factors
including slowing economic growth and falling unit retail prices of petroleum
products, income from toll road-related business operations is expected to
witness a significant decline. The Group will proactively adopt various
measures to unearth unutilized potentials and to enhance efficiency, as well as
saving energy and reducing consumption, so as to contain the rate of revenue
decrease as much as possible.
Despite the great uncertainties facing China's stock market, policies adopted
by the government to maintain economic growth and expand domestic demands will
bring forth considerable opportunities to the stock market for a turnover
rebound. Meanwhile, the launch of different new operations of the Group's
securities business will create room for new development.
Faced with the new circumstances, the new session of the Board of the Group
will proactively identify new opportunities and formulate new development
plans. Supported by its entire staff, the Group will strive to mitigate and
eliminate different negative impact through various means such as attracting
more traffic volumes, seeking new sources of profit growth and controlling
costs, so as to continue to reward our shareholders with satisfactory operating
results.
Other businesses
Besides the toll road business and toll road-related business operations, other
businesses of the Company have been making contributions to the Company's
development. The securities business has been extending its presence to major
cities in the whole country, while other associates and jointly-controlled
entities such as Petroleum Co have made considerable profit contributions to
the Company. From now on, the Company will proactively leverage opportunities
and overcome obstacles, seeking further development for each of the other
businesses and unearthing new sources of profit growth for Zhejiang Expressway.
Principle Risks and Uncertainties
Toll Business Risks
Economic environment
Various evidences have indicated that the impact of the international financial
crisis that broke out in 2008 on the global real economy is deepening. A
decline in the growth of the PRC's macro economy is still possible. It is
anticipated that toll income from the natural growth of traffic volume on the
expressways will drop. The operations, financial position and operating results
of the Group may be adversely affected as a result.
Competition
The vehicle diversion as a result of the opening of Hangpu Expressway and
Hangzhou Bay Bridge will continue. Zhuyong Expressway will become fully
operational in May 2009, which is expected to result in a significant vehicle
diversion impact. Therefore, this will lead to competition with
Shanghai-Hangzhou-Ningbo Expressway and Shangsan Expressway of the Group. We
cannot guarantee traffic volume on the expressways under the Group will
maintain the same level or increase in the future, and that the operating
results of the Group will not be affected.
Concession period extension
Since the expansion works of Shanghai-Hangzhou-Ningbo Expressway has been
completed, we plan to apply for the extension of the concession period for the
construction and management of Shanghai-Hangzhou-Ningbo Expressway and charging
tolls from Shanghai-Hangzhou-Ningbo Expressway. We cannot guarantee the
Zhejiang Provincial Government will timely approve the application for
extending the concession or that no material delays or serious difficulties
will arise in the course of the application for extending the concession
period, which may may have an adverse impact on the operations, financial
position and operating results of the Group.
Toll-by-weight policy
It is anticipated that the toll-by-weight policy for trucks will be
implemented in Zhejiang Province in the second half of 2009. This means that
tolls will be charged from trucks based on their weight. Although the impact of
such measure is still uncertain, we cannot guarantee the Zhejiang Provincial
Government will approve a charging policy for trucks which will not adversely
affect the toll income of the Group.
Securities Business Risks
Market Fluctuations
Our securities business is susceptible to market fluctuates and may experience
periods of high volatility accompanied by reduced liquidity and may be
materially affected by economic and other factors such as global market
conditions; the availability and cost of capital; the liquidity of global
markets, the level and volatility of equity prices, commodity prices and
interest rates currency values and other market indices; inflation, natural
disasters; acts of war or terrorism; investor sentiment and confidence in the
financial markets. There is no assurance that our securities business will not
be adversely affected by fluctuations in the market, or that our securities
business will continue to contribute to our overall profit margin.
Regulation of Securities Business
We are subject to extensive regulations in the PRC in which we conduct our
securities business and face the risk of intervention by the PRC regulatory
authorities. We could be fined, prohibited from engaging in some of our
business activities or subject to limitations or conditions on our business
activities, among other things. Significant regulatory action against us could
have material adverse financial effects, cause us significant reputational
harm, or ham our business prospects. New laws or regulations or changes in the
enforcement of existing laws or regulations applicable to our clients may also
adversely affect our business.
Financial Risks
For financial risks and uncertainties of the Group, see notes 4, 5 and 6 to the
Consolidated Financial Statements.
Responsibility Statement of the Directors in respect of the Annual Report and
Accounts
The directors of the Company duly confirms that, to the best of their
knowledge:
- the consolidated financial statements prepared in accordance with Hong
Kong Financial Reporting Standards issued by the Hong Kong Institute of
Certified Public Accountants give a true and fair view of the assets,
liabilities, financial position and profit of the Group and the undertakings
included in the consolidation taken as a whole; and
- the management discussion and analysis included in this annual report
includes a fair review of the development and performance of the business and
the position of the Group and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties that the Group faces.
Year 2009 up to now, there are no substantial events happen that will have
material impact on the normal operation of the Group.
For and on behalf of the Board
ZHANG Jingzhong
Executive Director/Deputy General Manager
Hangzhou, Zhejiang Province, the PRC
March 17, 2009
Corporate Governance Report
Corporate governance practices
The Company has adopted the Guidelines on Corporate Governance that closely
followed the principles of good governance in Appendix 14 ("Appendix 14") of
the Rules Governing the Listing of Securities (the "Listing Rules") on the
Stock Exchange of Hong Kong Limited ("Stock Exchange").
During the financial year 2008 (the "Period"), the Company met all code
provisions in the Code on Corporate Governance Practices (the "Code") contained
in Appendix 14, and adopted the recommended best practices contained in the
Code whenever applicable.
Directors' securities transactions
The Company has formulated and adopted the Rules on Securities Dealings ("Rules
on Securities Dealings") for the directors, supervisors, senior management
personnel and other employees of the Company on terms no less exacting than the
required standard set out in the Model Code for Securities Transactions by
Directors of Listed Issuers (the "Model Code") contained in Appendix 10 of the
Listing Rules.
Upon specific inquiries to all the Directors, the Directors have confirmed
their respective compliance with the required standards for securities
transactions by directors as set out in the Model Code and the Rules on
Securities Dealings.
Board of directors of the Company (the "Board")
The executive directors of the Company during the Period are:
Mr. GENG Xiaoping (Chairman)
Mr. FANG Yunti (General Manager)
Mr. ZHANG Jingzhong
Mr. JIANG Wenyao
The non-executive directors of the Company during the Period are:
Ms. ZHANG Luyun
Ms. ZHANG Yang
The independent non-executive directors of the Company during the Period are:
Mr. TUNG Chee Chen
Mr. ZHANG Junsheng
Mr. ZHANG Liping
During the Period, the Board held a total of five meetings. Individual
attendances by the directors (as indicated by the numbers of meetings attended/
numbers of meetings held) are as follows:
Mr. GENG Xiaoping 5/5
Mr. FANG Yunti 5/5
Mr. ZHANG Jingzhong 5/5
Mr. JIANG Wenyao 5/5
Ms. ZHANG Luyun 4/5
Ms. ZHANG Yang 5/5
Mr. TUNG Chee Chen 5/5
Mr. ZHANG Junsheng 4/5
Mr. ZHANG Liping 5/5
The Board is charged with duties as well as given powers that are expressly
specified in the articles of association of the Company, the scope of which
includes, amongst others: to determine the business plans and investment
proposals of the Company; to prepare the financial budget and final accounts of
the Company; to determine the dividend policy of the Company; to appoint or
dismiss senior managerial officers of the Company as well as to determine their
remuneration; and to draw up proposals for any material acquisition or sale by
the Company.
To assist the Board effectively discharge its duties, the Board has set up four
special committees: the Audit Committee, the Nomination and Remuneration
Committee, the Strategic Committee, and the Connected Transaction Committee.
While the Board fully retains its power to decide on matters within its scope
of duties and powers, relevant preparation and drawing up of plans or proposals
were usually delegated to the management.
The Company has complied with the requirements under Rules 3.10(1) and (2) of
the Listing Rules, and the Board has appointed three Independent Non-executive
Directors, with at least one possessing the appropriate professional
qualification or with accounting or related financial management expertise.
Pursuant to Rules 3.13 of the Listing Rules, the Company has specifically
inquired all three Independent Non-executive Directors and received their
respective confirmation of independence during the Period. The Company still
considers the Independent Non-executive Directors to be independent.
There were no financial, business, family or other material/relevant
relationships between members of the Board, including that between the Chairman
and the General Manager of the Company.
Chairman and General Manager
During the Period, the positions of Chairman and General Manager of the Company
were separately held by Mr. GENG Xiaoping and Mr. FANG Yunti, respectively,
with fully segregated roles expressly set out in the articles of association of
the Company.
Non-executive directors
The non-executive directors of the Company are appointed for a period of three
years, from March 1, 2006 to February 28, 2009.
Nomination and remuneration of directors
The Board has a Nomination and Remuneration Committee, mainly responsible for
reviewing and making recommendations for the selection standards and procedures
for Directors, General Manager and other senior management of the Company;
identifying qualified candidates and making reviews and recommendations
thereon; and determining, supervising and monitoring the implementation of the
remuneration policies for the Directors and senior management personnel. For
the details of its terms of reference, please refer to the "Corporate
Governance" section in the Company's web site.
The Nomination and Remuneration Committee comprised of three Independent
Non-executive Directors, namely, Mr. TUNG Chee Chen, Mr. ZHANG Junsheng, and
Mr. ZHANG Liping, with Mr. ZHANG Liping as the Chairman of the committee.
During the Period, there were no changes to the members of the Board and senior
management for the current session. Since their remuneration was already
determined at an earlier time, the Nomination and Remuneration Committee of the
Company had not held any meetings during the Period.
Auditors' remuneration
During the Period, the Company had paid HK$3,600,000 (Rmb3,248,820 equivalent)
and Rmb840,000 to Deloitte Touche Tohmatsu Certified Public Accountants (the
Hong Kong auditors) and Zhejiang Pan China Certified Public Accountants (the
PRC auditors) for audit services for 2007, respectively. The auditors had
provided no other non-audit services to the Company.
Audit committee
The Board has an Audit Committee which is mainly responsible for providing
advice to the Board regarding the appointment, reappointment and removal of
external auditors; the supervision of the integrity of the Company's financial
statements and annual reports and accounts, half-yearly and quarterly reports,
and the review of important opinions in relation to financial reporting as set
out in statements and reports, and the review of the Company's financial
control, internal control and risk management system. For the details of its
terms of reference, please refer to the "Corporate Governance" section in the
Company's web site.
The Audit Committee comprised of five Non-executive Directors, three of whom
are Independent Non-executive Directors, namely Mr. TUNG Chee Chen, Mr. ZHANG
Junsheng and Mr. ZHANG Liping, and the remaining two are Non-executive
Directors, namely Ms. ZHANG Luyun and Ms. ZHANG Yang, with Mr. TUNG Chee Chen
as the Chairman of the committee.
During the Period, the Audit Committee held a total of four meetings.
Individual attendances by the members of the committee (as indicated by the
numbers of meetings attended/numbers of meetings held) are as follows:
Mr. TUNG Chee Chen 4/4
Mr. ZHANG Junsheng 4/4
Mr. ZHANG Liping 4/4
Ms. ZHANG Luyun 3/4
Ms. ZHANG Yang 4/4
In the meetings held during the Period, the Audit Committee conducted, amongst
others, review of financial statements for the quarterly, interim and annual
results, the effectiveness of the system of internal control and the reporting
thereof to the Board, as well as recommendation on the re-appointment of
external auditors.
During the Period, the Company has complied with the requirements on the
composition of the audit committee as set out in Rule 3.21 of the Listing
Rules.
During the Period, the Directors have all confirmed their responsibility for
preparing the accounts, and that there were no events or conditions which would
have a material impact on the Company's ability to continue to operate as a
going concern basis.
Directors, supervisors and chief executive's interests in shares and underlying
shares of the Company
As at December 31, 2008, the interests of the Directors, Supervisors and Chief
Executives in the share capital of the Company's associated corporations
(within the meaning of Part XV of the Securities and Futures Ordinance (the
"SFO")), as recorded in the register required to be kept by the Company
pursuant to Section 352 of the SFO, or as otherwise notified to the Company and
the Stock Exchange pursuant to the Model Code are set out below:
Interest in the shares of Zhejiang Expressway Investment Development Co., Ltd.*
Percentage of the
Contribution registered capital
of capital Nature of of associated
Name Position (Rmb) interest corporation
Mr. GENG Xiaoping Chairman 3,600,000 Legally and 3.00%
beneficially owned
Mr. FANG Yunti Director/
General Manager 2,880,000 Same as above 2.40%
Mr. JIANG Wenyao Director 1,980,000 Same as above 1.65%
Mr. ZHANG Jingzhong Director 1,650,000 Same as above 1.38%
Mr. FANG Zhexing Supervisor 1,050,000 Same as above 0.88%
* a 51% owned subsidiary of the Company
Save as disclosed above, as at December 31, 2008, none of the Directors,
Supervisors and Chief Executives had any interests or short positions in the
shares, underlying shares or debentures of the Company or any of its associated
corporations (within the meaning of Part XV of the SFO) as recorded in the
register required to be kept pursuant to Section 352 of the SFO, or as
otherwise notified to the Company and the Stock Exchange pursuant to the Model
Code.
Interests and short positions of other persons in shares and underlying shares
of the Company
As at December 31, 2008, the interests and short positions of other persons in
the shares and underlying shares of the Company according to the register
required to be kept by the Company pursuant to Section 336 of the SFO, or as
otherwise notified to the Company and the Stock Exchange are set out below:
http://www.prnasia.com/xprn/sa/attachment/2009/04/20090401-906047.pdf
Shareholders' rights
Pursuant to the Articles of Association of the Company, two or more
shareholders who in aggregate hold 10% or more of the voting rights of all the
shares of the Company having the right to vote may write to the Board to
request the convening of an extraordinary general meeting and specifying the
agenda of the meeting. Upon receipt of the request in writing, the Board shall
convene the extraordinary general meeting as soon as possible. Shareholders who
hold in aggregate 5% or more of the voting rights of all the shares of the
Company having the right to vote are entitled to propose additional motions in
annual general meeting, provided that such motions are served on the Company
within 30 days after the issue of the notice of annual general meeting.
Written requests, proposals and enquiries maybe send to the Company at the
following address:
Zhejiang Expressway Co., Ltd.
12/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou, Zhejiang 310007
The People's Republic of China
Attention: Company Secretary
Investor relations
There were no changes made to the Articles of Association of the Company during
the Period.
During the Period, the last shareholders' meeting of the Company took place at
9:00 a.m. on Thursday, May 15, 2008 at 12/F, Block A, Dragon Century Plaza, 1
Hangda Road, Hangzhou, Zhejiang Province, the People's Republic of China.
Shareholders voted by way of poll, and approved the reports of the directors
and of the supervisory committee for 2007, the audited financial statements for
2007, a final dividend for 2007, the final report for 2007 and the financial
budget for 2008, as well as the re-appointment of external auditors.
The next annual general meeting of the Company is expected to be held on May 4,
2009 to consider the resolutions in respect of the reports of the directors and
of the supervisory committee for 2008, the audited financial statements for
2008, a final dividend for 2008, the final report for 2008 and the financial
budget for 2009, as well as the re-appointment of external auditors.
The Company's shares comprised of Domestic Shares and H Shares. The Domestic
Shares were held by Zhejiang Communications Investments Group Co., Ltd as to
2,432,500,000 shares and by Huajian Transportation Economic Development Center
as to 476,760,000 shares, representing 56% and 11% of the total shareholding
respectively. As at the date of this report, and to the best of the Directors'
knowledge, 100% of the H shares of the Company, with a total shareholding of
1,433,854,500 shares, which accounts for approximately 33% of all issued
capital of the Company, are held by the public.
Internal controls
The Company has set up internal monitoring system that included the protection
of assets as well as the preservation of accounting and financial information,
capable of taking necessary steps in reaction to possible changes in our
business and operating environment. The Company's Audit Committee is charged
with the duties of monitoring, reviewing and directing the monitoring
activities. Aside from reviewing the annual reporting by outside auditors, the
Audit Committee also reviews internal special investigation report by internal
audit department, covering all major business activities of the Company on a
quarterly basis, to examine the effectiveness of internal control system and
risk management system. Any important comments and/or recommendations by the
Audit Committee are implemented by relevant units under the supervision of
internal audit department.
During the Period, the directors of the Company had carried out a review of the
effectiveness of the system of internal control of the Company, covering all
material controls, including financial, operational and compliance controls and
risk management functions. There were no major breaches in the internal control
system that may have had an impact to shareholders' interests.
Management functions
The management functions of the Board and the management are specifically
stipulated in the Articles of Association of the Company. Pursuant to the
Articles of Association of the Company, the management of the Company is
assigned the functions to be in charge of the production and business operation
of the Company and to organize the implementation of the resolutions of the
board of directors, to organize the implementation of the annual business plan
and investment program of the Company, to prepare plans for the establishment
of the internal management structure of the Company, to prepare the basic
management systems of the Company, and to formulate basic rules and regulations
of the Company, etc.
Directors, Supervisors and Senior Management Profiles
DIRECTORS
EXECUTIVE DIRECTORS
Mr. CHEN Jisong, born in 1952, is a senior engineer with professorial
certification. Mr. Chen has been appointed as the chairman of the Company since
March 1, 2009. In 1978, Mr. Chen graduated from Nanjing Institute of Technology
majoring in civil engineering with an emphasis on road construction. From 1978
to 1982, Mr. Chen served as Deputy Chief then Chief of Division No. 1 under the
Municipal Construction Department in Hangzhou, Zhejiang Province. From 1982 to
1990, he was Deputy Manager then Manager of the Municipal Construction Company
in Hangzhou, Zhejiang Province. From 1990 to 1997, he was Deputy Director then
Director of Urban and Suburban Construction Commission of Hangzhou, Zhejiang
Province. From 1990 to 1993, he served as Deputy Director of Economic
Development Zone in Hangzhou, Zhejiang Province. From 1997 to 2000, Mr. Chen
was Deputy Mayor of Hangzhou, Zhejiang Province. From 2000 to 2005, he became
Director of the Bureau of Construction of Zhejiang Provincial Government. Mr.
Chen has been Chairman of Communications Investment Group (the controlling
shareholder of the Company) since 2005.
Mr. ZHAN Xiaozhang, born in 1964, is a senior economist with a bachelor's
degree in law. Mr. Zhan has been appointed as an Executive Director and the
General Manager of the Company since March 1, 2009. In 2005, Mr. Zhan obtained
a master's degree in public administration from the Business Institute of
Zhejiang University. From 1985 to 1991, Mr. Zhan worked as an officer at
Transport Administrative Division under Waterway Transport Authority of
Zhejiang Provincial Bureau of Construction. From 1991 to 1998, he served as
Deputy Secretary then Secretary of the Communist Youth League Commission at
Zhejiang Provincial Bureau of Communications. From 1998 to 2002, he was Deputy
Director of Waterway Transport Authority under Zhejiang Provincial Bureau of
Communications. From 2002 to 2003, he was Deputy Director of Human Resources
Department at Zhejiang Provincial Bureau of Communications. From 2003 to 2006,
Mr. Zhan was Chairman of Zhejiang Wenzhou Yongtaiwen Expressway Co., Ltd. From
2006 to 2008, he became Chairman of Zhejiang Jinji Property Co., Ltd. Mr. Zhan
has been Assistant to General Manager and Manager of Research and Development
Department at Zhejiang Communications Investment Group Co., Ltd. (the
controlling shareholder of the Company) from 2006 to 2009.
Mr. ZHANG Jingzhong, born in 1963, is a senior lawyer, Executive Director and
Company Secretary of the Company. Mr. Zhang graduated from Zhejiang University
(previously known as Hangzhou University) in July 1984 with a bachelor's degree
in law. In 1984, he joined the Zhejiang Provincial Political Science and Law
Policy Research Unit. From 1988 to 1994, he was Associate Director of Hangzhou
Municipal Foreign Economic Law Firm. In 1992, he obtained the qualifications
required by the regulatory authorities in China to practice securities law. In
January 1994, Mr. Zhang became Senior Partner at T&C Law Firm in Hangzhou. Mr.
Zhang has been Executive Director and Company Secretary of the Company since
March 1997, and was appointed Deputy General Manager in March 2002. He was
re-appointed as Company Secretary in March 2003 and as Deputy General Manager
in March 2006. Mr. Zhang also serves as Director at Shangsan Co., Development
Co., Petroleum Co., and Vice Chairman at Zheshang Securities.
Mr. JIANG Wenyao, born in 1966, is Deputy General Manager of the Company. Mr.
Jiang graduated from Zhejiang University, majoring in industrial automation and
manufacturing mechanics, and obtained a master's degree in engineering. From
March 1991 to February 1997, he worked in the Engineering Division, the
Planning and Finance Division and the Equipment Division of the Zhejiang
Provincial Expressway Executive Commission. He joined the Company since March
1997, and has served as Deputy Manager of the General Department, Manager of
the Equipment Department, Manager of the Operation Department, Assistant to
General Manager and Company Secretary. He has been serving as Deputy General
Manager since March 2003 and Executive Director and Deputy General Manager
since March 2006. Mr. Jiang also serves as Director and General Manager at
Development Co., and Director at Yuhang Co., both subsidiaries of the Company.
Non-executive Directors
Ms. ZHANG Luyun, born in 1961, is a senior economist and Director and Deputy
General Manager of Communications Investment Group (the controlling shareholder
of the Company) Ms. Zhang graduated from the Department of Chinese Language at
Zhejiang University, majoring in Chinese Language, and obtained an EMBA degree
from China Europe International Business School in 2008. From 1983 to 1997, she
served as Secretary, Deputy Chief and Chief of the Office of Hangzhou City
Communist Party Committee. In 1997, she was Deputy President of Hangzhou
Broadcasting and TV College. She joined Communications Investment Group in
December 2001 and has been Director and Deputy General Manager since then. Ms.
Zhang has been Non-executive Director of the Company since March 2003.
Ms. ZHANG Yang, born in 1964, is Deputy General Manager of Huajian
Transportation Economic Development Center. In 1987, she graduated from Lanzhou
University with a bachelor's degree in economics. In 2001, she completed the
postgraduate studies in economics management at the Central Party School. From
1987 to 1994, she worked for the Ministry of Aviation. Ms. Zhang is currently
Non-executive Director of Shenzhen Expressway Company Limited, Sichuan
Expressway Company Limited, Jiangsu Expressway Company Limited and Xiamen Port
Development Company Limited. Ms. Zhang has been Non-executive Director of the
Company since March 2003.
Independent non-executive directors
Mr. TUNG Chee Chen, born in 1942, is Chairman (Chief Executive Officer) of
Orient Overseas (International) Limited. He is an Independent Non-executive
Director, a member of the Nomination and Remuneration Committee and Chairman of
the Audit Committee of the Company. Mr. Tung was educated at the University of
Liverpool, England, where he received his bachelor's degree in science. He
later obtained a master's degree in mechanical engineering at the Massachusetts
Institute of Technology in the United States. Mr. Tung has been Independent
Non-executive Director of the Company since March 1997. In addition, Mr. Tung
also holds directorships in the following listed public companies: Independent
Non-executive Director of BOC Hong Kong (Holdings) Limited, Cathay Pacific
Airways Limited, PetroChina Company Limited, Sing Tao News Corporate Limited,
Wing Hang Bank Limited and U-Ming Marine Transport Corp.
Mr. ZHANG Junsheng, born in 1936, is a professor, Independent Non-executive
Director and a member of the Audit Committee and the Nomination and
Remuneration Committee of the Company. Mr. Zhang graduated from Zhejiang
University in 1958, and was Lecturer, Associate Professor, and Advising
Professor at Zhejiang University. He was also Professor concurrently at,
amongst other universities, Zhongshan University. In 1980, he became Deputy
General Secretary of Zhejiang University. In 1983, Mr. Zhang served as Deputy
General Secretary in the Hangzhou City Communist Party Committee. In 1985, he
began to work for the Xinhua News Agency, Hong Kong Branch, and had become its
Deputy Director since July, 1987 and was Consultant to the Sichuan Provincial
Government and Senior Consultant to the Shenzhen Municipal Government. Since
September 1998, Mr. Zhang has taken up the position of General Secretary of
Zhejiang University. From 2003 to 2008, Mr. Zhang served as Director of the
Zhejiang Province Economic Development Consultation Committee and he is
currently Special Advisor to the Zhejiang Provincial Government, Chairman of
Zhejiang University Development Committee, Honorary Doctor of Science of City
University of Hong Kong, Honorary Academician of Asian Knowledge Management
Association and Honorary Professor of Canadian Chartered Institute of Business
Administration. Mr. Zhang has been Independent Non-executive Director of the
Company since March 2000.
Mr. ZHANG Liping, born in 1958, is Chief Executive Officer of Credit Suisse in
China. He is Independent Non-executive Director, a member of the Audit
Committee and Chairman of the Nomination and Remuneration Committee of the
Company. Mr. Zhang graduated from the University of International Business &
Economics of Beijing and received a master's degree in international affairs
and international laws from St. John's University in New York, the United
States. He also attended New York University's MBA program. Mr. Zhang held a
number of senior positions at other organizations, including Chief Executive
Officer of Imagi International Holdings Limited, Managing Director of Pacific
Concord Holdings Limited, Managing Director and Geographic Head - Greater China
Region of Dresdner Banking Group, and Director of the Investment Banking
Division and China Chief Representative of Merrill Lynch Co. & Inc. Mr. Zhang
has been Independent Non-executive Director of the Company since March 2003.
SUPERVISOR
Supervisor representing shareholders
Mr. MA Kehua, born in 1952, is a senior economist and Chairman of the
Supervisory Committee. Mr. Ma graduated from the Mechanics Department of
Shanghai Railway Institute in 1977, after which he worked as an Engineer at
Shanghai Railway Bureau No.1 Construction Company and the Plumbing and
Electricity Section of Shanghai Railway Bureau, Hangzhou Branch. Mr. Ma was in
charge of the Planning and Finance Division at Zhejiang Local Railway Company,
and in 1993 became Deputy Division Chief and Division Chief of Zhejiang Jinwen
Railway Executive Commission responsible for materials supply. Mr. Ma took up
the post of Deputy General Manager of Zhejiang Provincial High Class Highway
Investment Company Limited in June 1999, and is currently Deputy General
Manager of Communications Investment Group (the controlling shareholder of the
Company).
SUPERVISOR REPRESENTING EMPLOYEES
Mr. FANG Zhexing, born in 1965, is a Senior Engineer, the Manager of the Human
Resources Department of the Company. He is also the Chairman of Hangzhou Shida
Expressway Co., Ltd., a jointly controlled entity of the Company. Mr. Fang
graduated from Zhejiang University where he received a master's degree in
engineering. From 1986 to 1988 he was the Assistant Engineer in the Project
Management Office of the Electric Power and Water Conservancy Bureau in
Taizhou. From 1991 until 1997, he was the Engineer in the Project Management
Office of Zhejiang Provincial Expressway Executive Commission, where he
participated in the project management of Shanghai-Hangzhou-Ningbo Expressway.
Since March 1997, he has served as the Deputy Manager and the Manager of the
Planning and Development Department, the Manager of the Project Development
Department, the Director of Quality Management Office and the Director of
Internal Audit Department of the Company.
Independent supervisors
Mr. ZHENG Qihua, born in 1963, is a senior accountant and independent
non-executive member of the Supervisory Committee. Mr. Zheng was among the
first batch of Chinese registered accountants who obtained qualifications
required for practicing accountancy involving securities in 1992. He has
working and training experience in Hong Kong and Singapore, and he worked with
the Listing Division of the China Securities Regulatory Commission during 1997
and 1998. In 2004, he was a member of the Sixth Session of the Public Offering
Review Committee of the China Securities and Regulatory Commission. He is
currently Deputy General Manager of Zhejiang Pan-China Certified Public
Accountants and Guest Professor at Zhejiang Gongshang University and Zhejiang
Finance & Economics Institute.
Mr. JIANG Shaozhong, born in 1946, is a professor. Mr. Jiang graduated from the
Management Department of Zhejiang University with a master's degree. In 1982,
he worked in the Management Department of Zhejiang University as Lecturer,
Assistant Professor, Professor, Dean of Research Office and Deputy Dean of the
Department. From 1984 to 1985, he was Visiting Scholar at Stanford University
in the United States. From 1991 to 1998 he was Deputy General Economist, Chief
of the Financial Division, Chief of the Teaching Division and Standing Deputy
Dean of the Management School of Zhejiang University. He is currently Deputy
General Accountant of Zhejiang University.
Mr. WU Yongmin, born in 1963, is an assistant professor. Mr. Wu graduated from
China University of Political Science and Law with a master's degree in law in
1990. He was Deputy Dean of the Department of Law at Hangzhou University,
Deputy Dean and Standing Deputy Dean of the Department of Law at Zhejiang
University's Law School, and Director of Zhejiang Zheda Law Firm. Mr. Wu
studied at Christian-Albrechts-Universit ät zu Kiel in 1996 as Visiting
Scholar. He is currently Acting Dean of the Department of Law at the Law School
of Zhejiang University, Supervisor for master's degree candidates in Business
Law, member of China Business Law Research Council, Deputy Director of Zhejiang
Tax Law Research Council, Arbitrator of Hangzhou Arbitration Committee, and
Lawyer at Zhejiang Zeda Law Firm.
OTHER SENIOR MANAGEMENT MEMBERS
Mrs. HUANG Qiuxia, born in 1956, senior economist, and is the Deputy General
Manager of the Company. Mrs. Huang graduated from Hangzhou Non-professional
Technology University in 1988 majoring in Human Resource Management. From 1976
to 1991, she was the Deputy Chief of Labor Division of Hangzhou Clock and Watch
Factory. She joined the Zhejiang Provincial Expressway Executive Commission in
August 1991, and was involved in matters related to labor wages, personnel,
external affairs etc. During the period from March 1997 to February 2003, she
was the Deputy Manager and Manager of General Department of the Company. Mrs.
Huang also serves as Director and Deputy General Manager at Jiaxing Co.
Mr. PAN Jiaxiang, born in 1951, senior engineer, and is the Deputy General
Manager of the Company. Mr. Pan graduated from Hangzhou University, majoring in
economic management. From 1987 to 1992, he was the Deputy Director of the
Office of Shangyu City People's Government, and at the same time served as the
Director of the Executive Commission of the Shanghai-Hangzhou-Ningbo Expressway
(Shangyu Section). From January 1993 to April 1996, he was the Director and the
Secretary of Party Committee of Shangyu City Communications Bureau. He has
worked in the Company since April 1997, and served as Deputy Manager of
Maintenance Department, Assistant of the General Manager and Director and Chief
Supervisory Engineer of Widening Project Office, Director and General Manager
of Shangsan Co. Mr. Pan is also serving as a Director at Zheshang Securities.
Mr. WU Junyi, born in 1969, a holder of master degree in accounting, and is the
Chief Financial Officer of the Company. Mr. Wu graduated from Xi'an
Communications University in 1996. From 1996 to 1997, he was with the China
Investment Bank, Hangzhou Branch. He joined the Company in May 1997, and has
served as Manager of Securities Investment Department and Manager of Planning
and Finance Department.
Report of the Directors
The Directors of the company hereby present their report and the audited
financial statements of the Company and the Group for the year ended December
31, 2008.
PRINCIPAL ACTIVITIES
The principal activities of the Group comprise the operation, maintenance and
management of high grade roads, as well as development and operation of certain
ancillary services, such as advertising, automobile servicing and fuel
facilities, as well as provision of security broking service and proprietary
securities trading.
SEGMENT INFORMATION
During the year, the entire revenue and contribution to profit from operating
activities of the Group were derived from the People's Republic of China
("PRC"). Accordingly, a further analysis of the revenue and contribution to
profit from operating activities by geographical area is not presented.
However, an analysis of the Group's revenue and contribution to profit from
operating activities by principal activity for the year ended December 31, 2008
is set out in note 7 to the financial statements.
RESULTS AND DIVIDENDS
The Group's profit for the year ended December 31, 2008 and the state of
affairs of the Group and the Company at that date are set out in the financial
statements on pages 46 to 111.
An interim dividend of Rmb0.07 per share (approximately HK$0.08) was paid on
October 21, 2008. The Directors recommend the payment of a final dividend of
Rmb0.24 (approximately HK$0.27) in respect of the year, to shareholders whose
names appeared on the register of members of the Company on April 9, 2009. This
recommendation has been incorporated in the financial statements as an
allocation of retained earnings within the capital and reserves section in the
balance sheet. The dividend payout ratio reached 71.1% during the Period.
Further details of the dividends are set out in note 15 to the financial
statements.
FIVE YEAR SUMMARY FINANCIAL INFORMATION
The following is a summary of the published consolidated results, and of the
assets, liabilities and minority interests of the Group prepared on the basis
set out in the notes below.
Year ended December 31,
2008 2007 2006 2005 2004
Results Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated) (Restated)
REVENUE 6,323,470 7,030,380 4,763,780 3,456,385 3,131,993
Operating costs (3,133,244) 3,089,133) 2,076,670) (1,195,428) (881,355)
Gross profit 3,190,226 3,941,247 2,687,110 2,260,957 2,250,638
Security investment
(loss) income (316,213) 475,828 80,421 33,982 (36,158)
Other income 211,420 134,607 123,531 151,965 77,804
Administrative
expenses (70,003) (81,089) (71,022) (62,766) (74,506)
Other expenses (38,947) (93,259) (32,901) (41,635) (243,823)
Finance costs (76,809) (60,552) (71,991) (101,343) (103,457)
Share of profit
(loss) of associates 10,659 (4,655) 4,435 7,217 9,086
Share of profit
of a jointly
controlled entity 23,746 20,406 23,344 16,285 19,622
PROFIT BEFORE TAX 2,934,079 4,332,533 2,742,927 2,264,662 1,899,206
INCOME TAX EXPENSE (668,928) 1,191,638) (884,036) (692,366) (542,749)
PROFIT FOR THE
YEAR 2,265,151 3,140,895 1,858,891 1,572,296 1,356,457
Attributable to:
Equity holders
of the Company 1,892,787 2,415,965 1,652,871 1,431,192 1,225,699
Minority interests 372,364 724,930 206,020 141,104 130,758
EARNINGS PER
SHARE 43.58 cents 55.63 cents 38.06 cents 32.95 cents 28.22 cents
As at December 31,
2008 2007 2006 2005 2004
Assets and liabilities Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated) (Restated)
Total assets 25,287,521 27,512,804 19,570,419 16,311,656 15,465,649
Total liabilities (8,990,253)(11,748,490) (6,217,967) (3,947,788) (3,653,143)
Net assets 16,297,268 15,764,314 13,352,452 12,363,868 11,812,506
Notes:
1. The consolidated results of the Group for the four years ended December
31, 2007 have been extracted from the Company's 2007 annual report dated March
10, 2008, while those of the year ended December 31, 2008 were prepared based
on the consolidated income statement as set out on page 46 of the financial
statements.
2. The 2008 earnings per share is based on the profit attributable to
equity holders of the Company for the year ended December 31, 2008 of
Rmb1,892,787,000 (2007: Rmb2,415,965,000) and the 4,343,114,500 ordinary shares
(2007: 4,343,114,500 ordinary shares) in issue during the year.
3. Differences in Financial Statements prepared under PRC GAAP and HKFRSs
Profit for the year Net assets as at December 31,
2008 2007 2008 2007
Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
As reported in the
statutory financial
statements of the
Group prepared in
accordance
with PRC GAAP 2,276,136 3,140,837 16,508,461 15,965,225
HK GAAP adjustments:
(a) Goodwill - (4,385) (199,769) (199,769)
(b) Amortization
provided,
net of
deferred
tax (4,610) 6,443 (156,062) (152,155)
(c) Difference
in the
share premium
account
during
establishment - - 11,923 11,923
(d) General
provision on
accounts
receivable
and other
debts - (9,962) - -
(e) Assessment on
impact of
appreciation,
net of
deferred tax (2,851) 5,487 77,988 80,839
(f) Others (81) 804 3,510 3,591
(g) Minority
interests (3,443) 1,671 51,217 54,660
As restated in the
financial
statements 2,265,151 3,140,895 16,297,268 15,764,314
MAJOR CUSTOMERS AND SUPPLIERS
In the year under review, the five largest customers and suppliers of the Group
accounted for less than 30% of the total turnover and purchases, respectively.
None of the directors of the Company or any of their associates or any
shareholders (which, to the best knowledge of the directors, own more than 5%
of the Company's issued share capital) had any beneficial interest in the
Group's five largest customers.
CONNECTED TRANSACTIONS
During the year, the Company has entered into a continuing connected
transaction with its subsidiary and a fellow subsidiary, details of which are
set out in note 43 to the financial statements.
PROPERTY, PLANT AND EQUIPMENT
Details of movements in property, plant and equipment of the Company and the
Group during the year are set out in note 17 to the financial statements.
CAPITAL COMMITMENTS
Details of the capital commitments of the Company and the Group as at December
31, 2008 are set out in note 41 to the financial statements.
RESERVES
Details of movements in the reserves of the Company and the Group during the
year are set out in the consolidated statement of changes in equity on page 49
to the financial statements.
DISTRIBUTABLE RESERVES
As at December 31, 2008, before the proposed final dividend, the Company's
reserves available for distribution by way of cash or in kind, as determined
based on the lower of the amount determined under PRC accounting standards and
the amount determined under HK GAAP, amounted to Rmb1,692,892,000. In addition,
in accordance with the Company Law of the PRC, the amount of approximately
Rmb3,645,726,000 standing to the credit of the Company's share premium account
as prepared in accordance with the PRC accounting standards was available for
distribution by way of capitalisation issues.
TRUST DEPOSITS
As at December 31, 2008, other than the deposits of Rmb9,931,977 placed in
non-bank financial institutions in the PRC, the Group did not have any trust
deposits with any non-bank financial institution in the PRC. Nearly all of the
Group's deposits have been placed with commercial banks in the PRC and the
Group has not encountered any difficulty in the withdrawal of funds.
PURCHASE, REDEMPTION OR SALE OF THE LISTED SECURITIES OF THE COMPANY
Neither the Company nor any of its subsidiaries purchased, redeemed or sold any
of the Company's listed securities during the year.
DIRECTORS
The Directors of the Company during the year and up to the date of this report
are:
EXECUTIVE DIRECTORS
Mr. Geng Xiaoping (term expired on February 28, 2009)
Mr. Fang Yunti (term expired on February 28, 2009)
Mr. Chen Jisong (newly appointed on March 1, 2009)
Mr. Zhan Xiaozhang (newly appointed on March 1, 2009)
Mr. Zhang Jingzhong
Mr. Jiang Wenyao
NON-EXECUTIVE DIRECTORS
Ms. Zhang Luyun
Ms. Zhang Yang
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. Tung Chee Chen
Mr. Zhang Junsheng
Mr. Zhang Liping
CHANGE IN DIRECTORS AND SENIOR MANAGEMENT
At the extraordinary general meeting held by the Company on February 27, 2009,
Mr. CHEN Jisong and Mr. ZHAN Xiaozhang were newly elected as members of the
fifth session of the Board of Directors, Mr. ZHANG Jingzhong, Mr. JIANG Wenyao,
Ms. ZHANG Luyun, Ms. ZHANG Yang, Mr. TUNG Chee Chen, Mr. ZHANG Junsheng, and
Mr. ZHANG Liping were re-elected as members of the fifth session of the Board
of Directors. Mr. GENG Xiaoping and Mr. FANG Yunti retired from their positions
of the fourth session of the Board of Directors upon expiry of their term of
office on February 28, 2009 as they have approached their retirement age.
At the same extraordinary general meeting, Mr. MA Kehua, Mr. ZHENG Qihua, Mr.
JIANG Shaozhong and Mr. WU Yongmin were re-elected as members of the fifth
session of the Supervisory Committee. Mr. FANG Zhexing was re-elected as member
of the fifth session of the Supervisory Committee representing employees on the
employees' representative meeting held on February 19, 2009.
The term of the fifth session of the Board of Directors and the Supervisory
Committee is three years, commencing on March 1, 2009 and expiring on February
29, 2012.
Following the election, the fifth session of the Board of Directors held its
first meeting on February 27, 2009, and elected Mr. CHEN Jisong as Chairman of
the Company, appointed Mr. CHEN Jisong as Chairman of the Strategic Committee,
Mr. TUNG Chee Chen as Chairman of the Audit Committee, and Ms. ZHANG Luyun as
Chairwoman of the Nomination and Remuneration Committee.
In the same meeting of the Board of Directors, Mr. ZHAN Xiaozhang was appointed
as General Manager of the Company; Mr. JIANG Wenyao, Mr. ZHANG Jingzhong, Ms.
HUANG Qiuxia and Mr. PANG Jiaxiang were appointed as Deputy General Managers of
the Company; Mr. ZHANG Jingzhong was also appointed as Company Secretary of the
Company; and Mr. WU Junyi was appointed as Chief Financial Officer of the
Company.
The appointments above are for a term of three years, commencing on March 1,
2009 and expiring on February 29, 2012.
DIRECTORS' AND SENIOR MANAGEMENT'S BIOGRAPHIES
Biographical details of the Directors of the Company and the senior management
of the Group are set out on page 33 in the Company's annual report.
DIRECTORS' SERVICE CONTRACTS
Each of the Directors of the Company has entered into a service agreement with
the Company, with effect from March 1, 2009, for a term of three years.
Save as disclosed above, none of the Directors and Supervisors has entered into
any service contract with the Company which is not terminable by the Company
within one year without payment of compensation, other than statutory
compensation.
DIRECTORS' AND SUPERVISORS' INTERESTS IN CONTRACTS
As at December 31, 2008 or during the year, none of the Directors or
Supervisors had a material interest, either directly or indirectly, in any
contract of significance to the business of the Group to which the Company, its
holding company, or any of its subsidiaries or fellow subsidiaries was a party.
DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE'S RIGHTS TO SUBSCRIBE FOR SHARES OR
DEBENTURES
At no time during the year were there rights to acquire benefits by means of
the acquisition of shares in or debentures of the Company granted to any
Director, Supervisor and chief executive or their respective spouse or minor
children, or were any such rights exercised by them; or was the Company, its
holding company, or any of its subsidiaries or fellow subsidiaries a party to
any arrangement to enable any such persons to acquire such rights in any other
body corporate.
SHARE CAPITAL
There were no movements in the Company's issued share capital during the year.
PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights in the Company's Articles of
Association or the laws of the PRC which would require the Company to offer new
shares on a pro rata basis to existing shareholders.
AUDITORS
Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong will retire and
a resolution for their reappointment as international auditors of the Company
will be proposed at the forthcoming annual general meeting.
ON BEHALF OF THE BOARD
CHEN Jisong
Chairman
Hangzhou, Zhejiang Province, the PRC
March 17, 2009
Report of the Supervisory Committee
During the financial year 2008 (the "Period"), the Supervisory Committee duly
performed its supervisory duties, and safeguarded the legitimate interests of
the shareholders and the Company in accordance with relevant rules and
regulations under the Company Law of the PRC, the Company's Articles of
Association and the Rules of the Supervisory Committee. Main tasks undertaken
by the Supervisory Committee during the Period were to assess and supervise
lawfulness, legality and appropriateness of the activities of the Directors,
General Manager and other senior management of the Company in their business
decision-making and daily management processes, through a combination of
activities including holding meetings of the Supervisory Committee and
attending meetings of shareholders and meetings of the Board. The Supervisory
Committee has carefully examined the operating results and the financial
standing of the Company, and discussed and reviewed the financial statements to
be submitted by the Board to the general meeting.
The Supervisory Committee concluded that during the Period, the Directors,
General Manager and other senior management of the Company had taken every
feasible steps to counter the challenges brought by, among others, a slowdown
in the rate of macro economic growth and traffic volume diversions with respect
to the core expressway business; attracting more traffic flow through
improvement in services; exerted strict cost control measures in trying to
minimize the impact of declining revenue to the profits. As to the expressway
ancillary business, aside from expanding the existing service areas and
introducing locally-available special food, beverage and products in these
service areas, the Company had also further expanded its scope of concession in
service area operations, achieving new development. With regards to the
securities business, the Company had actively expanded its market share in
economically developed cities, thereby increasing the business' competiveness
and value, realizing a decent profit amid a domestic market that had fallen
dramatically during the Period.
The Supervisory Committee has reviewed the financial statements of the Company
for 2008 prepared by the Board for submission to the general meeting of
shareholders, and concluded that the financial statements accurately reflected
the financial position of the Company in 2008, and complied with the relevant
laws, regulations and the Company's Articles of Association. In 2008, the
Company maintained a high dividend payment despite the fall in its profits,
providing satisfactory return in cash to the shareholders.
During the Period, the members of the Board, General Manager and other senior
management of the Company have complied with their fiduciary duties and worked
in good faith and diligence while carrying out their responsibilities. There
was no incident of abuse of power or infringement of the interests of
shareholders or employees.
The Supervisory Committee is satisfied with the various results obtained by the
Board and the management of the Company.
By the order of the Supervisory Committee
MA Kehua
Chairman of the Supervisory Committee
Hangzhou, Zhejiang Province, the PRC
March 16, 2009
Independent Auditor's Report
Deloitte (Logo: http://www.prnasia.com/sa/2009/04/01/200904011905.gif )
TO THE MEMBERS OF ZHEJIANG EXPRESSWAY CO., LTD.
(Established in the People's Republic of China with limited liability)
We have audited the consolidated financial statements of Zhejiang Expressway
Co., Ltd. (the "Company") and its subsidiaries (collectively referred to as the
"Group") set out on pages 46 to 111, which comprise the consolidated balance
sheet as at December 31, 2008, and the consolidated income statement, the
consolidated statement of changes in equity and the consolidated cash flow
statement for the year then ended, and a summary of significant accounting
policies and other explanatory notes.
Directors' responsibility for the consolidated financial statements
The directors of the Company are responsible for the preparation and the true
and fair presentation of these consolidated financial statements in accordance
with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute
of Certified Public Accountants and the disclosure requirements of the Hong
Kong Companies Ordinance. This responsibility includes designing, implementing
and maintaining internal control relevant to the preparation and the true and
fair presentation of the consolidated financial statements that are free from
material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are
reasonable in the circumstances.
Auditor's responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit and to report our opinion solely to you, as a
body, and for no other purpose. We do not assume responsibility towards or
accept liability to any other person for the contents of this report. We
conducted our audit in accordance with Hong Kong Standards on Auditing issued
by the Hong Kong Institute of Certified Public Accountants. Those standards
require that we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance as to whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and true and
fair presentation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view
of the state of affairs of the Group as at December 31, 2008 and of the Group's
profit and cash flows for the year then ended in accordance with Hong Kong
Financial Reporting Standards and have been properly prepared in accordance
with the disclosure requirements of the Hong Kong Companies Ordinance.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
March 17, 2009
Consolidated Income Statement
For the year ended December 31, 2008
NOTES 2008 2007
Rmb'000 Rmb'000
(Restated)
Revenue 8 6,323,470 7,030,380
Operating costs (3,133,244) (3,089,133)
Gross profit 3,190,226 3,941,247
Securities investment
(losses) gains 9 (316,213) 475,828
Other income 8 211,420 134,607
Administrative expenses (70,003) (81,089)
Other expenses (38,947) (93,259)
Finance costs 10 (76,809) (60,552)
Share of profit (loss) of
associates 10,659 (4,655)
Share of profit of a jointly
controlled entity 23,746 20,406
Profit before tax 11 2,934,079 4,332,533
Income tax expense 12 (668,928) (1,191,638)
Profit for the year 2,265,151 3,140,895
Attributable to:
Equity holders of the Company 1,892,787 2,415,965
Minority interests 372,364 724,930
2,265,151 3,140,895
Dividends recognised as
distribution during the year:
Interim dividend of Rmb7
cents (2007: Rmb7 cents)
per share 304,018 304,018
Final dividend of Rmb24
cents (2007: Rmb20 cents)
per share 1,042,347 868,623
1,346,365 1,172,641
Proposed final dividend of Rmb24
cents (2007: Rmb24 cents)
per share 15 1,042,347 1,042,347
EARNINGS PER SHARE - Basic 16 Rmb43.58 cents Rmb55.63 cents
Consolidated Balance Sheet
At December 31, 2008
NOTES 2008 2007
Rmb'000 Rmb'000
(Restated)
NON-CURRENT ASSETS
Property, plant and equipment 17 1,031,248 906,877
Prepaid lease payments 18 47,654 59,227
Expressway operating rights 19 12,923,977 13,522,752
Goodwill 20 86,867 86,867
Other intangible assets 21 158,065 162,226
Interests in associates 23 464,262 495,103
Interest in a jointly controlled
entity 24 124,251 100,505
Available-for-sale investments 25 1,000 1,000
837,324 15,334,557
CURRENT ASSETS
Inventories 16,303 14,558
Trade receivables 26 75,999 82,677
Other receivables 27 177,170 587,362
Prepaid lease payments 18 1,265 1,500
Available-for-sale investments 25 28,001 595,758
Held-for-trading investments 28 247,587 621,220
Structured deposit 29 204,667 -
Bank balances held on behalf
of customers 30 5,643,192 7,239,389
Bank balances and cash
- Restricted bank balances 31 35,000 35,000
- Time deposits with original
maturity over three months 31 284,068 226,972
- Cash and cash equivalents 31 3,736,945 2,773,811
10,450,197 12,178,247
CURRENT LIABILITIES
Accounts payable to customers
arising from securities
dealing business 32 5,607,473 7,211,261
Trade payables 33 415,096 736,890
Tax liabilities 447,884 994,727
Other taxes payable 32,760 37,888
Other payables and accruals 34 537,762 556,320
Dividends payable 33,388 33,385
Interest-bearing bank and
other loans 35 380,897 288,045
Provisions 36 33,864 164,024
7,489,124 10,022,540
NET CURRENT ASSETS 2,961,073 2,155,707
TOTAL ASSETS LESS CURRENT
LIABILITIES 17,798,397 17,490,264
NON-CURRENT LIABILITIES
Interest-bearing bank and
other loans 35 228,867 333,945
Long-term bonds 37 1,000,000 1,000,000
Deferred tax liabilities 38 272,262 392,005
1,501,129 1,725,950
16,297,268 15,764,314
CAPITAL AND RESERVES
Share capital 39 4,343,115 4,343,115
Reserves 9,339,935 8,883,238
Equity attributable to equity
holders of the Company 13,683,050 13,226,353
Minority interests 2,614,218 2,537,961
16,297,268 15,764,314
The consolidated financial statements on pages 46 to 111 were approved and
authorised for issue by the Board of Directors on March 17, 2009 and are signed
on its behalf by:
ChenJisong ZhanXiaozhang
DIRECTOR DIRECTOR
Consolidated Statement of Changes in Equity
For the year ended December 31, 2008
To view the financial table, please visit:
http://www.prnasia.com/xprn/sa/attachment/2009/04/20090401-296992.pdf
Consolidated Cash Flow Statement
For the year ended December 31, 2008
2008 2007
Rmb'000 Rmb'000
(Restated)
Profit before tax 2,934,079 4,332,533
Adjustments for:
Finance costs 76,809 60,552
Interest income (59,782) (20,997)
Net exchange gain (40,143) (40,302)
Share of (profit) loss of associates (10,659) 4,655
Share of profit of a jointly controlled entity (23,746) (20,406)
Depreciation of property, plant and equipment 112,140 104,671
Amortisation of expressway operating rights 659,027 577,059
Amortisation of prepaid lease payments 1,503 1,787
Amortisation of other intangible assets 9,424 7,289
Impairments loss on available-for-sale investments 24,792 -
Loss on disposal of available-for-sale investments 89,680 -
Loss (gain) on fair value changes on held-for-trading
investments 201,741 (475,828)
Loss on disposal of property, plant and equipment 6,076 3,937
Gain on disposal of an associate (8,375) -
Net provision for the year (130,160) 129,224
Profit on disposal of a disposal group classified
as held for sale - (1,491)
Write-down of goodwill - 5,956
Operating cash flows before movements in working capital 3,842,406 4,668,639
Increase in inventories (1,745) (2,303)
Decrease (Increase) in trade receivables 6,678 (27,431)
Increase in other receivables (38,529) (36,848)
Decrease (Increase) in available-for-sale investments 222,676 (365,149)
Decrease in held-for-trading investments 171,892 90,040
Decrease (Increase) in bank balances held on behalf
of customers 1,596,197 (4,051,377)
(Decrease) Increase in accounts payable to customers
arising from securities dealing business (1,603,788) 4,063,508
(Decrease) Increase in trade payables (126,413) 97,011
(Decrease) Increase in other taxes payable (5,128) 17,133
(Decrease) Increase in other payables and accruals (6,095) 143,984
Decrease in amount due to a jointly-controlled entity - (5,841)
Cash generated from operations 4,058,151 4,591,366
Income taxes paid (1,277,862) (861,349)
Interest paid (81,110) (104,338)
NET CASH FROM OPERATING ACTIVITIES 2,699,179 3,625,679
NOTES 2008 2007
Rmb'000 Rmb'000
(Restated)
INVESTING ACTIVITIES
Interest received 55,115 20,997
Dividends received from an associate 6,500 6,500
Proceeds on disposal of property, plant and equipment 2,167 7,329
Proceeds on disposal of an associate 43,375 -
Repayment from (loan to) a related party 370,000 (370,000)
Repayment from an associate 100,000 -
Loan to an associate (100,000) -
Purchases of property, plant and equipment (217,118) (83,118)
Prepaid lease payments for land use rights - (22,541)
Addition in expressway operating rights (275,459) (402,986)
Purchases of intangible assets (5,263) (4,180)
Investment in structured deposit (200,000) -
Increase in time deposits (57,096) 95,660)
Proceeds on disposal of a disposal group classified as
held for resale - 1,150
Acquisition of a subsidiary - (52,213)
Investment in an associate - (281,400)
Dividends received from a jointly controlled entity - 13,724
NET CASH USED IN INVESTING ACTIVITIES (277,779)(1,262,398)
FINANCING ACTIVITIES
Dividends paid (1,343,223)(1,170,803)
Dividends paid to minority interests (139,818) (52,773)
New bank and other loans raised 700,893 820,000
Repayment of bank and other loans (674,208)(1,003,207)
Capital contribution from minority interests - 314,987
NET CASH USED IN FINANCING ACTIVITIES (1,456,356)(1,091,796)
NET INCREASE IN CASH AND CASH EQUIVALENTS 965,044 1,271,485
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,773,811 1,504,073
EFFECT OF FOREIGN EXCHANGE RATE CHANGES (1,910) (1,747)
CASH AND CASH EQUIVALENTS AT END OF YEAR 31 3,736,945 2,773,811
Notes to the Consolidated Financial Statements
For the year ended December 31, 2008
1. CORPORATE INFORMATION
Zhejiang Expressway Co. Ltd. (the "Company") was established in the People's
Republic of China (the "PRC") with limited liability on March 1, 1997. The H
shares of the Company ("H Shares") were subsequently listed on The Stock
Exchange of Hong Kong Limited (the "Stock Exchange") on May 15, 1997.
All of the H Shares of the Company were admitted to the Official List of the
United Kingdom Listing Authority (the "Official List"). Dealings in the H
Shares on the London Stock Exchange commenced on May 5, 2000.
On July 18, 2000, with the approval of the Ministry of Foreign Trade and
Economic Co-operation of the PRC, the Company changed its business registration
into a Sino-foreign joint stock limited company.
On February 14, 2002, the United States Securities and Exchange Commission,
following the approval by the Board of Directors and the China Securities
Regulatory Commission, declared the registration statement in respect of the
American Depositary Shares ("ADSs") evidenced by the American Depositary
Receipts ("ADRs") representing the deposited H Shares of the Company effective.
In the opinion of the directors, the immediate and ultimate holding company of
the Company is Zhejiang Communications Investment Group Co., Ltd. (the
"Communications Investment Group"), a state-owned enterprise established in the
PRC.
The addresses of the registered office and principal place of business of the
Company are disclosed in the corporate information section of the annual
report.
The consolidated financial statements are presented in Renminbi ("Rmb"), which
is also the functional currency of the Company.
The Company is an investment holding company. The Group is involved in the
following principal activities:
(a) the operation, maintenance and management of high grade roads;
(b) the development and provision of certain ancillary services such as
advertising, automobile servicing and fuel facilities; and
(c) the provision of securities broking services and proprietary trading.
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
("HKFRSs")
In the current year, the Group has applied the following amendments and
interpretations ("new HKFRSs") issued by the Hong Kong Institute of Certified
Public Accountants ("HKICPA") which are or have become effective.
HKAS 39 & HKFRS 7 (Amendments) Reclassification of Financial Assets
HK(IFRIC)-Int 11 HKFRS 2: Group and Treasury Share Transactions
HK(IFRIC)-Int 12 Service Concession Arrangements
HK(IFRIC)-Int 14 HKAS 19 - The Limit on a Defined Benefit Assets, Minimum
Funding Requirements and their Interaction
Except for the adoption of the HK(IFRIC) Int 12 Service Concession
Arrangements, which has resulted in changes to the Group's accounting policies
as detailed below, the adoption of the other new HKFRSs had no material effect
on how the results and financial position for the current or prior accounting
periods have been prepared and presented.
In the current year, the Group has applied the HK(IFRC)- Int 12 Service
Concession Arrangements.
The Group had entered into contractual service arrangements with local
government authorities (the "grantors") of the PRC to acquire toll expressway
infrastructures and expressway operating rights and to participate in the
redevelopment, expansion, investment, operation, management and maintenance of
toll expressways and their toll station facilities on behalf of the grantors in
accordance with the terms specified in the service concession arrangement
contracts. The Group received in exchange a right to propose and collect the
toll fees from vehicles using the toll expressways and other fees relating to
the expressways and their toll station facilities. After the acquisition of the
underlying toll expressway infrastructures and the related expressway operating
rights, under the arrangements, the Group incurred additional costs on the toll
expressways, for expressway widening projects and upgrade services carried out
by independent qualified contractors in the PRC based on approval from the
grantors under open market bid prices.
HK(IFRIC) - Int 12 Service Concession Arrangements provides guidance on the
accounting by the operator of a service concession arrangement which involves
the provision of public sector services.
In prior years, the toll expressway infrastructures and expressway operating
rights were measured at cost based on the fair value at the respective dates of
acquisitions upon the initial recognition.
The acquisition of toll expressway infrastructures, expressway operating rights
and subsequent additional costs incurred on the toll expressways relating to
widening projects and upgrade services, which the Group is entitled to the
operating rights of the toll expressways for the specified concession period,
were recorded as property, plant and equipment and expressway operating rights,
respectively, and were stated at cost less accumulated depreciation and any
accumulated impairment losses, while the land use rights relating to the
expressways was recorded in prepaid lease payments. Depreciation of the toll
expressways and amortisation of land use rights were calculated to write off
their costs, over their expected useful lives in the remaining concession
period on a straight-line basis.
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
("HKFRSs") (continued)
In accordance with HK(IFRIC)- Int 12, infrastructure and land use rights
relating to the expressways within the scope of this interpretation are not
recognized as property, plant and equipment and prepaid lease payments of the
operator as the service concession arrangement does not convey the right to
control the use of the public service infrastructure and the land use rights
relating to the expressways to the operator. If the operator provides
construction and upgrade services of the infrastructure, this interpretation
requires the operator to account for its revenue and costs in accordance with
HKAS 11 Construction Contracts for the construction and upgrade services of the
infrastructure and to account for the fair value of the consideration received
and receivable for the construction and upgrade services as an intangible asset
in accordance with HKAS 38 Intangible Assets to the extent that the operator
receives a right (a licence) to charge users of the public service, which
amounts are contingent on the extent that the public uses the service. In
addition, the operator accounts for the services in relation to the operation
of the infrastructure in accordance with HKAS 18 Revenue.
In the current year, the Group applied this interpretation retrospectively and
the financial impact on the adoption of this interpretation is summarised
below.
No construction revenue or profit on construction services has been recognised
as the Group's toll expressway infrastructures were acquired from the grantors.
Furthermore, the Group has not provided any construction services in relation
to subsequent widening projects and upgrade services as the widening projects
and upgrade services of toll expressways are carried out by independent
qualified contractors in the PRC based on the approval from the grantors. The
payment made by the Group for the expressways widening projects and upgrade
services is considered as additional costs of the expressway operating rights
and, accordingly, such additional costs are also reclassified as the intangible
assets under the service concession arrangements retrospectively.
Prepaid lease payments and toll expressway infrastructures in conjunction with
the service concession arrangements which the Group has no discretion or
latitude to deploy for other services other than arising in the service
concession arrangements are also reclassified as intangible assets acquired
under the service concession arrangements retrospectively. They were previously
separately presented and amortised on a straight-line basis over the respective
service concession period.
SUMMARY OF THE EFFECTS OF THE CHANGES IN ACCOUNTING POLICIES
The effect of changes in accounting policies resulted from the adoption of HK
(IFRIC)-Int 12 for the current and prior year by line items are as follows:
2008 2007
Rmb'000 Rmb'000
Decrease in depreciation of
property, plant and equipment 632,608 550,843
Decrease in amortisation of
prepaid lease payments 17,719 17,516
Increase in amortisation of
expressway operating rights (650,327) (568,359)
Profit for the year - -
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
("HKFRSs") (continued)
The effect of the application of the new interpretation as at December 31, 2007
is summarised below:
As at As at
31/12/2007 31/12/2007
(Originally stated) Adjustments (Restated)
Rmb'000 Rmb'000 Rmb'000
Balance sheet
items
Non-current assets
Property, plant
and equipment 13,906,689 (12,999,812) 906,877
Prepaid lease
payments 393,424 (334,197) 59,227
Expressway operating
rights 171,145 13,351,607 13,522,752
14,471,258 17,598 14,488,856
Current assets
Prepaid lease payment 19,098 (17,598) 1,500
Total effects on
assets 14,490,356 - 14,490,356
Retained profits 2,312,616 - 2,312,616
As at As at
1/1/2007 1/1/2007
(Originally stated) Adjustments (Restated)
Rmb'000 Rmb'000 Rmb'000
Balance sheet items
Non-current assets
Property, plant and
equipment 13,775,621 (12,878,824) 896,797
Prepaid lease
payments 390,658 (351,795) 38,863
Expressway operating
rights 179,845 13,248,135 13,427,980
14,346,124 17,516 14,363,640
Current assets
Prepaid lease
payment 18,626 (17,516) 1,110
Total effects on assets 14,364,750 - 14,364,750
Retained profits 1,379,398 - 1,379,398
The service concession arrangements operated by the Group's associates and a
jointly controlled entity are of similar arrangements of those operated by the
Group. Accordingly, the adoption of HK(IFRIC) Int 12 Service Concession
Arrangements has no material effect on its associates and a jointly controlled
entity and accordingly, no adjustment on the Group's share of result of
associates and a jointly controlled entity and Group's share of net assets of
the associates and jointly controlled entity has been required.
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
("HKFRSs") (continued)
The reclassification of the toll expressways and land use rights of the Group,
its associates and a jointly controlled entity has no impact on the profit for
the current and prior year and the retained profits at January 1, 2007,
accordingly, no adjustment on the Group basic earnings per share has been
required.
The Group has not early applied the following new and revised standards,
amendments or interpretations that have been issued but are not yet effective.
HKFRSs (Amendments) Improvements to HKFRSs (1)
HKAS 1 (Revised) Presentation of Financial Statements (2)
HKAS 23 (Revised) Borrowing Costs (2)
HKAS 27 (Revised) Consolidated and Separate Financial Statements (3)
HKAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligations Arising
on Liquidation (2)
HKAS 39 (Amendment) Eligible Hedged Items (3)
HKFRS 1 & HKAS 27 (Amendments) Cost of an Investment in a subsidiary,
Jointly Controlled Entity or Associate (2)
HKFRS 2 (Amendment) Vesting Conditions and Cancellations (2)
HKFRS 3 (Revised) Business Combinations(3)
HKFRS 7 (Amendments) Improving Disclosures about Financial Instruments (2)
HKFRS 8 Operating Segments(2)
HK(IFRIC)-Int 13 Customer Loyalty Programmes(4)
HK(IFRIC)-Int 15 Agreements for the Construction of Real Estate (2)
HK(IFRIC)-Int 16 Hedges of a Net Investment in a Foreign Operation (5)
HK(IFRIC)-Int 17 Distribution of Non-cash Assets to Owners (3)
HK(IFRIC)-Int 18 Transfer of Assets from Customers(6)
(1) Effective for annual periods beginning on or after January 1, 2009
except for the amendments to HKFRS 5, effective for annual periods beginning on
or after 1 July 2009
(2) Effective for annual periods beginning on or after January 1, 2009
(3) Effective for annual periods beginning on or after July 1, 2009
(4) Effective for annual periods beginning on or after July 1, 2008
(5) Effective for annual periods beginning on or after October 1, 2008
(6) Effective for transfers on or after July 1, 2009
The application of HKFRS 3 (Revised) may affect the Group's accounting for
business combination for which the acquisition date is on or after January 1,
2010. HKAS 27 (Revised) will affect the accounting treatment for changes in the
Group's ownership interest in a subsidiary. The Directors anticipate that the
application of the other new and revised standards, amendments or
interpretations will have no material impact on the results and the financial
position of the Group.
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared on the historical cost
basis except for certain financial instruments, which are measured at fair
values, as explained in the accounting policies set out below.
The consolidated financial statements have been prepared in accordance with
Hong Kong Financial Reporting Standards issued by the HKICPA. In addition, the
consolidated financial statements include applicable disclosures required by
the Rules Governing the Listing of Securities on the Stock Exchange and by the
Hong Kong Companies Ordinance.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with those used by
other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Minority interests in the net assets of consolidated subsidiaries are presented
separately from the Group's equity therein. Minority interests in the net
assets consist of the amount of those interests at the date of the original
business combination and the minority's share of changes in equity since the
date of the combination. Losses applicable to the minority in excess of the
minority's interest in the subsidiary's equity are allocated against the
interests of the Group except to the extent that the minority has a binding
obligation and is able to make an additional investment to cover the losses.
Business combinations
The acquisition of businesses is accounted for using the purchase method. The
cost of the acquisition is measured at the aggregate of the fair values, at the
date of exchange, of assets given, and liabilities incurred or assumed, and
equity instruments issued by the Group in exchange for control of the acquiree,
plus any costs directly attributable to the business combination. The
acquiree's identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under HKFRS 3 Business Combinations are
recognised at their fair values at the acquisition date.
Goodwill arising on acquisition is recognised as an asset and initially
measured at cost, being the excess of the cost of the business combination over
the Group's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised. If, after reassessment, the
Group's interest in the net fair value of the acquiree's identifiable assets,
liabilities and contingent liabilities exceeds the cost of the business
combination, the excess is recognised immediately in profit or loss.
The interest of minority shareholders in the acquiree is initially measured at
the minority's proportion of the net fair value of the assets, liabilities and
contingent liabilities recognised.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Acquisition of additional interest in a subsidiary
Goodwill is calculated as the difference between the consideration paid for the
additional interest and the book value of the net assets of the subsidiary
attributable to the additional interest acquired.
Goodwill
Goodwill arising on acquisitions prior to January 1, 2005
Goodwill arising on an acquisition of net assets and operations of another
entity for which the agreement date is before January 1, 2005 represents the
excess of the cost of acquisition over the Group's interest in the fair value
of the identifiable assets and liabilities of the relevant subsidiary at the
date of acquisition. For previously capitalised goodwill arising on
acquisitions of net assets and operations of another entity or a jointly
controlled entity after 1 January 2001, the Group has discontinued amortisation
from 1 January 2005 onwards, and such goodwill is tested for impairment
annually, and whenever there is an indication that the cash-generating unit to
which the goodwill relates may be impaired (see the accounting policy below).
Goodwill arising on acquisitions on or after January 1, 2005
Goodwill arising on an acquisition of a business for which the agreement date
is on or after January 1, 2005 represents the excess of the cost of acquisition
over the Group's interest in the fair value of the identifiable assets,
liabilities and contingent liabilities of the relevant business at the date of
acquisition. Such goodwill is carried at cost less any accumulated impairment
losses.
Capitalised goodwill arising on an acquisition of a business is presented
separately in the consolidated balance sheet.
If the potential benefit of the acquiree's income tax loss carry-forwards or
other deferred tax assets did not satisfy the criteria for separate recognition
when a business combination is initially accounted for but is subsequently
realised, the Group recognises the benefit as income and (a) reduces the
carrying amount of goodwill to the amount that would have been recognised if
the deferred tax assets had been recognised as an identifiable asset from the
acquisition date; and (b) recognises the reduction in the carrying amount of
the goodwill as an expense. However, this procedure shall not result in the
creation of an excess of the Group's interest in the net fair value of the
acquired identifiable assets, liabilities and contingent liabilities over the
cost of the business combination, nor shall it increase the amount of any gain
previously recognised in this manner.
For the purposes of impairment testing, goodwill arising from an acquisition is
allocated to each of the relevant cash-generating units, or groups of
cash-generating units, that are expected to benefit from the synergies of the
acquisition. A cash-generating unit to which goodwill has been allocated is
tested for impairment annually, and whenever there is an indication that the
unit may be impaired. For goodwill arising on an acquisition in a financial
year, the cash-generating unit to which goodwill has been allocated is tested
for impairment before the end of that financial year. When the recoverable
amount of the cash-generating unit is less than the carrying amount of the
unit, the impairment loss is allocated to reduce the carrying amount of any
goodwill allocated to the unit first, and then to the other assets of the unit
pro rata on the basis of the carrying amount of each asset in the unit. Any
impairment loss for goodwill is recognised directly in the consolidated income
statement. An impairment loss for goodwill is not reversed in subsequent
periods.
On subsequent disposal of the relevant cash generating unit, the attributable
amount of goodwill capitalised is included in the determination of the amount
of profit or loss on disposal.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments in associates
An associate is an entity over which the Group has significant influence and
that is neither a subsidiary nor an interest in a joint venture.
The results and assets and liabilities of associates are incorporated in these
consolidated financial statements using the equity method of accounting, except
when the investment is classified as held for sale in which case it is
accounted for under HKFRS 5 Non-current Assets, Held for Sale and Discontinued
Operation. Under the equity method, investments in associates are carried in
the consolidated balance sheet at cost as adjusted for post-acquisition changes
in the Group's share of the net assets of the associate, less any identified
impairment loss. When the Group's share of losses of an associate equals or
exceeds its interest in that associate, the Group discontinues recognising its
share of further losses. An additional share of losses is provided for and a
liability is recognised only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of that associate.
Where a group entity transacts with an associate of the Group, profits and
losses are eliminated to the extent of the Group's interest in the relevant
associate.
When an investment in an associate previously classified as held for sale no
longer meets the criteria to be so classified, such investment is accounted for
using equity method as from the date of its classification as held-for-sale.
The financial statements for the periods since classification as held for sale
is amended accordingly.
Investments in jointly controlled entities
Joint venture arrangements that involve the establishment of a separate entity
in which venturers have joint control over the economic activity of the entity
are referred to as jointly controlled entities.
The results and assets and liabilities of jointly controlled entities are
incorporated in the consolidated financial statements using the equity method
of accounting. Under the equity method, investments in jointly controlled
entities are carried in the consolidated balance sheet at cost as adjusted for
post-acquisition changes in the Group's share of the net assets of the jointly
controlled entities, less any identified impairment loss. When the Group's
share of losses of a jointly controlled entity equals or exceeds its interest
in that jointly controlled entity (which includes any long-term interests that,
in substance, form part of the Group's net investment in the jointly controlled
entity), the Group discontinues recognising its share of further losses. An
additional share of losses is provided for and a liability is recognised only
to the extent that the Group has incurred legal or constructive obligations or
made payments on behalf of that jointly controlled entity.
When a group entity transacts with a jointly controlled entity of the Group,
profits or losses are eliminated to the extent of the Group's interest in the
jointly controlled entity.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their
carrying amount will be recovered principally through a sale transaction rather
than through continuing use. This condition is regarded as met only when the
sale is highly probable and the asset (or disposal group) is available for
immediate sale in its present condition.
Non-current assets (and disposal groups) classified as held for sale are
measured at the lower of the assets'(disposal groups') previous carrying amount
and fair value less costs to sell.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods sold and services
provided in the normal course of business, net of discounts and revenue taxes.
Toll income from the operation of tolled roads is recognised when the tolls are
received or become receivable.
Sales of goods are recognised when goods are delivered and title has passed.
Service income is recognised when services are provided.
Commission income from securities broking business is recognised on a trade
date basis.
Advisory and handling fee income are recognised when the relevant transactions
have been provided or the relevant services have been rendered.
Interest income from a financial asset is accrued on a time basis, by reference
to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts the estimated future cash receipts
through the expected life of the financial asset to that asset's net carrying
amount.
Dividend income from investments is recognised when the shareholders' rights to
receive payment have been established.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, plant and equipment
Property, plant and equipment (other than construction in progress) are stated
at cost less subsequent accumulated depreciation and accumulated impairment
losses.
Depreciation is provided to write off the cost of items of property, plant and
equipment other than construction in progress over their estimated useful lives
and after taking into account their estimated residual values, using the
straight-line method, at the following rates per annum:
Estimated Annual
useful life depreciation rate
Leasehold land and buildings 30-50 years 1.9%-3.2%
Ancillary facilities 30 years 3.2%
Communications and signalling equipment 5 years 19.4%
Motor vehicles 5-8 years 12.1%-19.4%
Machinery and equipment 5-8 years 12.1%-19.4%
Construction in progress includes property, plant and equipment in the course
of construction and is stated at cost less any impairment losses. Cost
comprises the direct costs of construction and capitalised borrowing costs on
borrowed funds during the period of construction, installation and testing.
Construction in progress is classified to the appropriate category of property,
plant and equipment when completed and ready for intended use. Depreciation of
these assets, on the same basis as other property assets, commences when the
assets are ready for their intended use.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of the
asset. Any gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the
item) is included in the consolidated income statement in the year in which the
item is derecognised.
Prepaid lease payments
Payment for obtaining land use rights is accounted for as prepaid lease
payments and is charged to the consolidated income statement on a straight-line
basis over the lease terms.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible assets
Intangible assets acquired separately
Intangible assets acquired separately and with finite useful lives are carried
at costs less accumulated amortisation and any accumulated impairment losses.
Amortisation for intangible assets with finite useful lives is provided on a
straight-line basis over their estimated useful lives. Alternatively,
intangible assets with indefinite useful lives are carried at cost less any
subsequent accumulated impairment losses (see the accounting policy in respect
of impairment losses on tangible and intangible assets below).
Gains or losses arising from derecognition of an intangible asset are measured
at the difference between the net disposal proceeds and the carrying amount of
the asset and are recognised in the consolidated income statement when the
asset is derecognised.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are identified and
recognised separately from goodwill where they satisfy the definition of an
intangible asset and their fair values can be measured reliably. The cost of
such intangible assets is their fair value at the acquisition date.
Subsequent to initial recognition, intangible assets with finite useful lives
are carried at costs less accumulated amortisation and any accumulated
impairment losses. Amortisation for intangible assets with finite useful lives
is provided on a straight-line basis over their estimated useful lives.
Alternatively, intangible assets with indefinite useful lives are carried at
cost less any subsequent accumulated impairment losses (see the accounting
policy in respect of impairment losses on tangible and intangible assets
below).
Expressway operating rights under service concession arrangements
When the Group has a right to charge for usage of concession infrastructure, it
recognises concession intangible assets based on fair value of the
consideration paid upon initial recognition. Subsequent costs incurred on
expressway widening projects and upgrading services are recognized as
additional costs of the expressway operating rights. The concession intangible
assets representing expressway operating rights are carried at cost less
accumulated amortisation and any accumulated impairment losses.
The concession intangible assets are amortised to write-off their cost, over
their expected useful lives in the remaining concession period using an
amortisation period which reflects the pattern in which their future economic
benefits are expected to be consumed on a straight-line basis.
Costs in relation to the day-to-day servicing, repair and maintenance of the
expressway infrastructures are recognised as expenses in the periods in which
they are incurred.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment losses on tangible and intangible assets other than goodwill (see
the accounting policy in respect of goodwill above)
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication
that these assets have suffered an impairment loss. In addition, intangible
assets with indefinite useful lives are tested for impairment annually, and
whenever there is an indication that they may be impaired. If the recoverable
amount of an asset is estimated to be less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount. An
impairment loss is recognised as an expense immediately.
When an impairment loss subsequently reverses, the carrying amount of the asset
is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset in prior
years. A reversal of an impairment loss is recognised as income immediately.
Inventories
Inventories, representing merchandise held for resale, are stated at the lower
of cost and net realisable value. Cost is calculated using the weighted average
method.
Leasing
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised in the consolidated income
statement on a straight-line basis over the term of the relevant lease. Initial
direct costs incurred in negotiating and arranging an operating lease are added
to the carrying amount of the leased asset and recognised as an expense on a
straight-line basis over the lease term.
The Group as lessee
Rentals payable under operating leases are charged to profit or loss on a
straight-line basis over the term of the relevant lease. Benefits received and
receivable as an incentive to enter into an operating lease are recognised as a
reduction of rental expense over the lease term on a straight-line basis.
Contingent rents are charged as expenses in the periods in which they are
incurred.
Leasehold land and buildings
The land and building elements of a lease of land and buildings are considered
separately for the purpose of lease classification, unless the lease payments
cannot be allocated reliably between the land and building elements, in which
case, the entire lease is generally treated as a finance lease and accounted
for as property, plant and equipment. To the extent the allocation of the lease
payments can be made reliably, leasehold interests in land are accounted for as
operating leases.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currencies
In preparing the financial statements of each individual group entity,
transactions in currencies other than the functional currency of that entity
(foreign currencies) are recorded in the respective functional currency (i.e.
the currency of the primary economic environment in which the entity operates)
at the rates of exchanges prevailing on the dates of the transactions. At each
balance sheet date, monetary items denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date. Non-monetary
items that are measured in terms of historical cost in a foreign currency are
not retranslated.
Exchange differences arising on the settlement of monetary items, and on the
translation of monetary items, are recognised in profit or loss in the period
in which they arise.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, are capitalised as part of the cost of those
assets. Capitalisation of such borrowing costs ceases when the assets are
substantially ready for their intended use or sale. Investment income earned on
the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
Retirement benefit costs
Payments to state-managed retirement benefit schemes and corporate annuity
scheme are charged as an expense when employees have rendered service entitling
them to the contributions.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Taxation
Income tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported in the consolidated income statement
because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the consolidated financial statements and the
corresponding tax base used in the computation of taxable profit, and is
accounted for using the balance sheet 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 assets is reviewed at each balance sheet
date 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 the asset is realised. Deferred tax is
charged or credited to profit or loss, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also dealt
with in equity.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments
Financial assets and financial liabilities are recognised on the consolidated
balance sheet when a group entity becomes a party to the contractual provisions
of the instrument. Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities (other than
financial assets or financial liabilities at fair value through profit or loss)
are added to or deducted from the fair value of the financial assets or
financial liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised immediately in
profit or loss.
Financial assets
The Group's financial assets are classified into loans and receivables,
financial assets at fair value through profit or loss ("FVTPL") and
available-for-sale financial assets. All regular way purchases or sales of
financial assets are recognised and derecognised on a trade date basis. Regular
way purchases or sales are purchases or sales of financial assets that require
delivery of assets within the time frame established by regulation or
convention in the marketplace. The accounting policies adopted in respect of
each category of financial assets are set out below.
Effective interest method
The effective interest method is a method of calculating the amortised cost of
a financial asset and of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees paid or received that form an integral part
of the effective interest rate, transaction costs and other premiums or
discounts) through the expected life of the financial asset, or, where
appropriate, a shorter period.
Interest Income is recognised on an effective interest basis for debt
instruments other than those financial assets designated as at FVTPL, of which
interest income is included in net gains or losses.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. At each balance
sheet date subsequent to initial recognition, loans and receivables (including
trade receivables, other receivables and bank balances) are carried at
amortised cost using the effective interest method, less any identified
impairment losses (see accounting policy on impairment losses on financial
assets below).
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments
Financial assets at fair value through profit or loss
A financial asset is classified as held-for-trading if:
- it has been acquired principally for the purpose of selling in the near
future; or
- it is a part of an identified portfolio of financial instruments that
the Group manages together and has a recent actual pattern of short-term profit
taking; or
- it is a derivative that is not designated and effective as a hedging
instrument.
At each balance sheet date subsequent to initial recognition, financial assets
at FVTPL are measured at fair value, with changes in fair value recognised
directly in profit or loss in the period in which they arise. The net gain or
loss in profit or loss includes any dividend or interest earned on the
financial assets.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either
designated or not classified as any of the categories of financial assets set
out above.
At each balance sheet date subsequent to initial recognition,
available-for-sale financial assets are measured at fair value. Changes in fair
value are recognised in equity, until the financial asset is disposed of or is
determined to be impaired, at which time, the cumulative gain or loss
previously recognised in equity is removed from equity and recognised in profit
or loss (see accounting policy on impairment loss on financial assets below).
Available-for-sale equity investments that do not have a quoted market price in
an active market and whose fair value cannot be reliably measured are measured
at cost less any identified impairment losses at each balance sheet date
subsequent to initial recognition (see accounting policy on impairment loss on
financial assets below).
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of
impairment at each balance sheet date. Financial assets are impaired where
there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated
future cash flows of the financial assets have been impacted.
For an available-for sale equity investment, a significant or prolonged decline
in the fair value of that investment below its cost is considered to be
objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
- significant financial difficulty of the issuer or counterparty; or
- default or delinquency in interest or principal payments; or
- it becoming probable that the borrower will enter bankruptcy or
financial re-organisation.
For financial assets carried at amortised cost, an impairment loss is
recognised in profit or loss when there is objective evidence that the asset is
impaired, and is measured as the difference between the asset's carrying amount
and the present value of the estimated future cash flows discounted at the
original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is
measured as the difference between the asset's carrying amount and the present
value of the estimated future cash flows discounted at the current market rate
of return for a similar financial asset. Such impairment loss will not be
reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables and
other receivables, where the carrying amount is reduced through the use of an
allowance account. Changes in the carrying amount of the allowance account are
recognised in profit or loss. When a trade receivable or other receivable is
considered uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited to profit
or loss.
For financial assets measured at amortised cost, if, in a subsequent period,
the amount of impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment losses was recognised,
the previously recognised impairment loss is reversed through profit or loss to
the extent that the carrying amount of the asset at the date the impairment is
reversed does not exceed what the amortised cost would have been had the
impairment not been recognised.
Impairment losses on available-for-sale equity investments will not be reversed
in profit or loss in subsequent periods. Any increase in fair value subsequent
to impairment loss is recognised directly in equity. For available-for-sale
debt investments, impairment losses are subsequently reversed if an increase in
the fair value of the investment can be objectively related to an event
occurring after the recognition of the impairment loss.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Financial liabilities and equity
Financial liabilities and equity instruments issued by a group entity are
classified according to the substance of the contractual arrangements entered
into and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities. The accounting
policies adopted in respect of financial liabilities and equity instruments are
set out below.
Effective interest method
The effective interest method is a method of calculating the amortised cost of
a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the financial
liability, or, where appropriate, a shorter period.
Interest expense is recognised on an effective interest basis.
Financial liabilities
Financial liabilities including trade payables, accounts payable to customers,
other payables, ultimate holding company, dividend payable, interest-bearing
bank and other loans, and long-term bonds are subsequently measured at
amortised cost, using the effective interest method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make
specified payments to reimburse the holder for a loss it incurs because a
specified debtor fails to make payment when due in accordance with the original
or modified terms of a debt instrument. A financial guarantee contract issued
by the Group and not designated as at fair value through profit or loss is
recognised initially at its fair value less transaction costs that are directly
attributable to the issue of the financial guarantee contract. Subsequent to
initial recognition, the Group measures the financial guarantee contact at the
higher of: (i) the amount determined in accordance with HKAS 37 Provisions,
Contingent Liabilities and Contingent Assets; and (ii) the amount initially
recognised less, when appropriate, cumulative amortisation recognised in
accordance with HKAS 18 Revenue.
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Derecognition
Financial assets are derecognised when the rights to receive cash flows from
the assets expire or, the financial assets are transferred and the Group has
transferred substantially all the risks and rewards of ownership of the
financial assets. On derecognition of a financial asset, the difference between
the asset's carrying amount and the sum of the consideration received and
receivable and the cumulative gain or loss that have been recognized directly
in equity is recognised in profit or loss.
Financial liabilities are derecognised when the obligation specified in the
relevant contract is discharged, cancelled or expires. The difference between
the carrying amount of the financial liability derecognised and the
consideration paid and payable is recognised in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation as a result
of a past event, and it is probable that the Group will be required to settle
that obligation. Provisions are measured at the directors' best estimate of the
expenditure required to settle the obligation at the balance sheet date, and
are discounted to present value where the effect is material.
4. KEY SOURCES OF ESTIMATION UNCERTAINTY
The followings are the key assumptions concerning the future, and key sources
of estimation uncertainty at the balance sheet date, that have a significant
risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
Estimated impairment of intangible assets with indefinite useful lives
Determining whether intangible assets with indefinite useful lives are impaired
requires an estimation of the value in use of themselves or the cash-generating
unit to which they belong. The value in use calculation requires the Group to
estimate the future cash flows expected to arise from themselves or the
cash-generating unit to which they belong and a suitable discount rate in order
to calculate the present value. Where the actual future cash flows are less
than expected, a material impairment loss may arise. As at December 31, 2008,
the carrying amounts of intangible assets with indefinite useful lives were
Rmb66,563,000 (2007: Rmb66,563,000). Details of the recoverable amount
calculation are disclosed in Note 22.
4. KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)
Provision against litigation and guarantees
Measuring the provision against litigation and guarantees requires an
estimation of the expenditure required to settle the obligation arising from
the litigation and guarantees. The settlement amount depends on such factors as
the totality of facts, interpretation and application of laws and regulation,
and court rulings. Where the court rules differently than the Group has
expected, the ultimate settlement amount may be materially different from the
provision that has been made and affect the Group's profit and loss in future
periods. During the year, the Group has made provision against litigation and
guarantee of Rmb33,864,000 (2007: Rmb129,224,000) and written back of provision
of Rmb164,024,000 (2007: Nil). Details of the provision are disclosed in Note
36.
5. FINANCIAL INSTRUMENTS
(a)Categories of financial instruments
2008 2007
Rmb'000 Rmb'000
Financial assets
Available-for-sale investments 29,001 596,758
Fair value through profit or loss
Held-for-trading 247,587 621,220
Loans and receivables (including cash
and cash equivalents) 10,094,912 10,895,690
Financial liabilities
Amortised cost 8,050,884 10,062,673
Financial guarantee contracts - 52,610
(b) Financial risk management objectives and policies
The Group's major financial instruments include available-for-sale investments,
held-for-trading investments, trade and other receivables, bank balances, bank
balances held on behalf of customers, trade and other payables, amount due to
ultimate holding company, dividend payable, interest-bearing bank and other
loans, and long-term bonds. Details of these financial instruments are
disclosed in respective notes. The risks associated with these financial
instruments and the policies on how to mitigate these risks are set out below.
The management manages and monitors these exposures to ensure appropriate
measures are implemented on a timely and effective manner.
5. FINANCIAL INSTRUMENTS (continued)
(b) Financial risk management objectives and policies (continued)
Market risk
(i) Interest rate risk
The Group is exposed to fair value interest rate risk in relation to fixed-rate
structured deposit and time deposits and long-term bonds (see Notes 29, 31 and
37 for details).
The Group is also exposed to cash flow interest rate risk in relation to
variable-rate bank balances and other loans (see Notes 31 and 35 for details).
The Group currently does not have an interest rate risk hedging policy as the
management consider the Group is not exposed to significant interest rate risk.
The management will continue to monitor interest rate risk exposure and
consider hedging against it should the need arises.
The Group's exposures to interest rates on financial liabilities are detailed
in the liquidity risk management section of this note.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to
interest rates for non-derivative instruments, comprising variable-rate bank
balances and other loans, at the balance sheet date. In the opinion of the
directors, the variable-rate bank balances are not interest sensitive to the
market risk and the exposure to interest rates of other loans are insignificant
for the year ended 31 December 2008. Accordingly, no such sensitivity analysis
is presented.
For variable-rate bank balances and other loans for the year ended 31 December
2007, the analysis was prepared assuming the balances outstanding at the
balance sheet date were outstanding for the whole year. A 50 basis point
increase or decrease was used when reporting interest rate risk internally to
key management personnel.
If interest rates had been 50 basis points higher/lower and all other variables
were held constant, the Group's profit for the year ended December 31, 2007
would increase/decrease by Rmb31,528,000. This was mainly attributable to the
Group's exposure to interest rates on its variable-rate bank balances.
5. FINANCIAL INSTRUMENTS (continued)
(b)Financial risk management objectives and policies (continued)
Market risk (continued)
(ii) Currency risk
The carrying amounts of the Group's foreign currency denominated monetary
assets and liabilities at the reporting date are as follows:
Liabilities Assets
2008 2007 2008 2007
Rmb'000 Rmb'000 Rmb'000 Rmb'000
HKD 8,734 10,331 12,518 13,655
USD 519,409 635,475 64,713 92,392
The Group currently does not have a currency risk hedging policy as the
management considers that the risk is not significant. The management will
continue to monitor foreign currency risk exposure and consider hedging against
it should the need arises.
Sensitivity analysis
This sensitivity analysis details the Group's sensitivity to a 5% increase and
decrease in Rmb against HKD and USD. 5% is the sensitivity rate used when
reporting foreign currency risk internally to key management personnel. The
sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the year end for a 5% change in
foreign currency rates. If Rmb had strengthened/weakened 5% against HKD, the
Group's profit for the year ended December 31, 2008 would have increased/
decreased by Rmb142,000 (2007: Rmb111,000). If Rmb had strengthened/weakened 5%
against USD, the Group's profit for the year ended December 31, 2008 would have
increased/decreased by Rmb17,051,000 (2007: Rmb18,193,000).
5. FINANCIAL INSTRUMENTS (continued)
(b) Financial risk management objectives and policies (continued)
Market risk (continued)
(iii) Price risk
The Group is exposed to security price risk in relation its held-for-trading
and available-for-sale listed investments.
The Group currently does not have a price risk hedging policy as the management
consider the Group is not exposed to significant price risk. The management
will continue to monitor price risk exposure and consider hedging against it
should the need arises.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to
equity and debt security price risks at the reporting date.
If the prices of the respective equity and debt instruments had been 5% higher/
lower,
- profit for the year ended December 31, 2008 increase/decrease by
Rmb9,285,000 (2007: increase/decrease by Rmb20,811,000) as a result of the
changes in fair value of held-for-trading investments; and
- investment valuation reserve would increase by Rmb1,050,000 and profit
for the year ended December 31, 2008 would decrease by Rmb1,050,000 (2007:
investment valuation reserve would increase/decrease by Rmb19,958,000) for the
Group as a result of the changes in fair value of available-for-sale listed
investments.
Credit risk
As at December 31, 2008, the Group's maximum exposure to credit risk which will
cause a financial loss to the Group due to failure to discharge an obligation
by the counterparties arising from the carrying amount of the respective
recognised financial assets as stated in the consolidated balance sheet,
including a structured deposit as disclosed in Note 29.
In order to minimise the credit risk, the management of the Group has delegated
a team responsible for determination of credit limits, credit approvals and
other monitoring procedures to ensure that follow-up action is taken to recover
overdue debts. In addition, the Group reviews the recoverable amount of each
individual trade debt at each balance sheet date to ensure that adequate
impairment losses are made for irrecoverable amounts. In this regard, the
directors of the Company consider that the Group's credit risk is significantly
reduced.
The credit risk on liquid funds is limited because the counterparties are banks
with high credit ratings assigned by international credit-rating agencies.
Other than the concentration of credit risk on certain trade receivable,
deposits and other debtors, corporate bonds and structured deposit amounting to
Rmb71,640,000 (2007: Rmb69,453,000), Rmb58,046,000 (2007: Rmb131,100,000),
Rmb238,977,000 (2007: Rmb79,969,000) and Rmb204,667,000 (2007: nil) as
disclosed in notes 26, 27, 28 and 29 respectively, the Group does not have any
other significant concentration of credit risk. The Group's concentration of
credit risk by geographical locations is mainly in the PRC.
5. FINANCIAL INSTRUMENTS (continued)
(b)Financial risk management objectives and policies (continued)
Liquidity risk
Most of the bank balances and cash at December 31, 2008 were denominated in RMB
which is not a freely convertible currency in the international market. The
exchange rate of RMB is determined by the PRC government and the remittance of
these RMB funds out of the PRC is subject to foreign exchange controls imposed
by the PRC government.
The Group closely monitors its cash position resulting from its operations and
maintains a level of cash and cash equivalents deemed adequate by the
management to enable the Group to meet in full its financial obligations as
they fall due for the foreseeable future.
The following table details the Group's remaining contractual maturity for its
financial liabilities. For non-derivative financial liabilities, the table has
been drawn up based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group can be required to pay. The table
includes both interest and principal cash flows.
5. FINANCIAL INSTRUMENTS (continued)
(b) Financial risk management objectives and policies (continued)
Liquidity and interest risk tables
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5. FINANCIAL INSTRUMENTS (continued)
(c) Fair value
The fair value of financial assets and financial liabilities are determined as
follows:
- the fair value of financial assets with standard terms and conditions
and traded on active liquid markets are determined with reference to quoted
market bid prices; and
- the fair value of other financial assets and financial liabilities are
determined in accordance with generally accepted pricing models based on
discounted cash flow analysis using prices from observable current market
transactions.
The directors consider that the carrying amounts of financial assets and
financial liabilities recorded at amortised cost in the consolidated financial
statements approximate their fair values.
6. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able
to continue as a going concern while maximising the return to stakeholders
through the optimisation of the debt and equity balance. The Group's overall
strategy remains unchanged from prior year.
The capital structure of the Group consists of debt, which includes the
borrowings disclosed in Notes 35 and 37, equity attributable to equity holders
of the Company, comprising issued share capital, reserves and retained profits.
The directors of the Company review the capital structure on a regular basis.
As part of this review, the directors consider the cost of capital and the
risks associated with each class of capital. Based on recommendations of the
directors, the Group will balance its overall capital structure through the
payment of dividends, new share issues and share buy-backs as well as the issue
of new debt or the redemption of existing debt.
7. SEGMENT INFORMATION
In accordance with the Group's internal financial reporting practice, the Group
uses business segments as its primary segment reporting format. During the
year, the entire turnover and profit contribution from operating activities and
total assets of the Group are derived from and located in the PRC. Accordingly,
no geographical segment information is presented.
Business segments
The Group's operating businesses are structured and managed separately
according to the nature of services provided and sales of goods, with each
segment representing a strategic business unit that serves different markets:
- Toll operation represents the operation and management of high grade
roads and the collection of the expressway tolls.
- Service area businesses mainly represent the sale of food, restaurant
operation, automobile servicing as well as the operation of petrol stations.
- Advertising business represents the design and rental of advertising
billboards along the expressways.
- Securities operation represents securities broking and proprietary
trading.
- Others represents the maintenance of expressways and roads, including
the cleaning of the road surface, minor repairs to the lanes, the cleaning of
the gutters and sewers, grass mowing, afforestation, maintenance service
provided to third parties.
Segment information about these businesses is presented below.
7. SEGMENT INFORMATION (continued)
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8. REVENUE AND OTHER INCOME
An analysis of the Group's revenue, net of discounts and taxes, and other
income for the year is as follows:
2008 2007
Rmb'000 Rmb'000
Toll operation revenue 3,455,627 3,897,819
Service area businesses revenue 1,670,435 1,261,526
Advertising business revenue 78,032 64,891
Commission income from securities operation 947,861 1,684,284
Interest income from securities operation 167,728 120,643
Others 3,787 1,217
Total revenue 6,323,470 7,030,380
Interest income on bank balances and
entrusted loan 55,115 20,997
Rental income 40,858 32,079
Net exchange gain 40,143 40,302
Handling fee income 22,863 14,338
Towing income 15,095 19,446
Gain on disposal of an associate (Note 23(ii)) 8,375 -
Interest income from structured deposit 4,667 -
Others 24,304 7,445
Total other income 211,420 134,607
6,534,890 7,164,987
9. SECURITIES INVESTMENT (LOSSES) GAINS
2008 2007
Rmb'000 Rmb'000
(Loss) gain on fair value changes on
held-for-trading investments (201,741) 475,828
Loss on disposal of available-for-sale
investments (89,680) -
Impairment loss on available-for-sale
investments (24,792) -
(316,213) 475,828
10. FINANCE COSTS
2008 2007
Rmb'000 Rmb'000
Interest on bank loans wholly repayable
within five years 18,332 22,141
Interest on other loans 15,577 34,059
Interest on long-term bonds 42,900 42,900
Total borrowing costs 76,809 99,100
Less: amount capitalised in respect
of specific borrowings - (38,548)
76,809 60,552
11. PROFIT BEFORE TAX
The Group's profit before tax has been arrived at after charging (crediting):
2008 2007
Rmb'000 Rmb'000
(Restated)
Depreciation of property, plant and equipment 112,140 104,671
Amortisation of prepaid lease payments 1,503 1,787
Amortisation of expressway operating rights 659,027 577,059
Amortisation of other intangible assets 9,424 7,289
Total depreciation and amortisation 782,094 690,806
Auditors' remuneration 7,576 6,531
Loss on disposal of property, plant and equipment 6,076 3,937
Write-down of goodwill - 5,956
Staff costs (including directors and supervisors):
- Wages and salaries 292,193 374,507
- Pension scheme contributions 32,316 27,230
324,509 401,737
Cost of inventories recognised as an expense 1,518,520 1,115,597
12. INCOME TAX EXPENSE
The Group is subject to the PRC enterprise income tax ("EIT") levied at a rate
of 25% (2007: 33%) of taxable income determined in accordance with the PRC laws
and financial reporting system.
No Hong Kong profits tax has been provided as the Group had no taxable profits
derived in Hong Kong during the year.
2008 2007
Rmb'000 Rmb'000
PRC income tax: 731,019 1,314,241
Deferred tax (Note 38):
Current year (62,091) (16,996)
Attributable to a change in tax rate - (105,607)
(62,091) (122,603)
668,928 1,191,638
The tax charge for the year can be reconciled to the profit per the
consolidated income statement as follows:
2008 2007
Rmb'000 Rmb'000
Profit before tax 2,934,079 4,332,533
Tax at the PRC statutory income tax rate
of 25% (2007: 33%) 733,520 1,429,736
Tax effect of share of (profits) losses
of associates (2,665) 1,536
Tax effect of share of profit of a jointly
controlled entity (5,937) (6,734)
Tax effect of income not taxable for
tax purposes (23,505) (4,920)
Tax effect of expenses not deductible
for tax purposes 5,606 64,350
PRC income tax over provision in
prior year (i) (38,091) -
Utilisation of tax losses previously not
recognized as deferred tax assets (ii) - (186,723)
Decrease in opening deferred tax
liabilities resulting from the decrease
in income tax rate (iii) - (105,607)
Tax charge for the year 68,928 1,191,638
12. INCOME TAX EXPENSE (continued)
Notes:
(i) Certain staff costs incurred by a subsidiary, Zheshang Securities Co.,
Ltd. ("Zheshang Securities") in 2007 in excess of maximum amount deductible was
considered as a non-deductible expense and accordingly, income tax provision
was made in prior year. During the year, Zheshang Securities has obtained an
approval from the government authority for the deduction of these staff costs,
so the relevant income tax provision is released to the consolidated income
statement.
(ii)The tax loss utilised in 2007, arose mainly from a bad debt provision
made by Zheshang Securities prior to its acquisition by the Group in relation
to misappropriation of assets perpetrated by Kinghing Trust Investment Co.,
Ltd. ("Kinghing Investment"), former majority equity owner of Zheshang
Securities.
The bad debt provision was treated as a non-deductible expense at the
date of acquisition of Zheshang Securities by the Group in 2006. In 2007, the
relevant tax authorities granted Zheshang Securities a dispensation to claim
tax deduction on the bad debt provision and accordingly, the resulting tax loss
was utilised in 2007.
(ii)On March 16, 2007, the PRC promulgated Law of the People's Republic
of China on Enterprise Income Tax (the "New Law") by Order No.63 of the
President of the PRC. On December 6, 2007, the State Council of the PRC issued
Implementation Regulations of the New Law. The New Law and Implementation
Regulation has changed the tax rate from 33% to 25% for the Group from January
1, 2008.
13. DIRECTORS' AND SUPERVISORS' EMOLUMENTS
The emoluments paid or payable to each of the 9 (2007: 9) directors and 5
(2007: 5) supervisors are as follows:
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The emoluments of each of the directors and supervisors, other than Mr. Geng
Xiaoping, for both years were below HK$1,000,000 (equivalent to Rmb881,900).
Bonuses paid to directors and supervisors are determined by the Remuneration
Committee of the Company, which comprises three independent non-executive
directors.
No directors or supervisors waived any emoluments and no incentive was paid to
any directors or supervisors as an inducement to join the Company and no
compensation for loss of office was paid to any directors, supervisors, past
directors or past supervisors during both years. Bonuses are determined by
reference to the individual performance of the directors.
14. EMPLOYEES' EMOLUMENTS
The emoluments of the five highest paid individuals in the Group are as
follows:
2008 2007
Rmb'000 Rmb'000
Salaries, allowances and benefits in kind 7,769 1,000
Bonuses paid and payable 5,018 4,127
Pension scheme contributions 85 63
Incentive paid 7,400 63
Compensation for loss of office - -
20,272 5,253
The five individuals with the highest emoluments in the Group during the year
included no (2007: one) director, whose emoluments are set out in note 13
above, as well as five (2007: four) non-director employees.
Their emoluments are within the following bands:
2008 2007
No. of No. of
individuals individuals
HK$ nil to HK$1,000,000 - 1
HK$1,000,001 to HK$1,500,000 - 4
HK$3,000,001 to HK$3,500,000 1 -
HK$4,000,001 to HK$4,500,000 2 -
HK$4,500,001 to HK$5,000,000 1 -
HK$6,000,001 to HK$6,500,000 1 -
15. DIVIDENDS
The final dividend of Rmb24 cents (2007: Rmb24 cents) per share has been
proposed by the directors and is subject to approval by the shareholders in the
annual general meeting.
16. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on profit for the year
attributable to equity holders of the Company of Rmb1,892,787,000 (2007:
Rmb2,415,965,000) and the 4,343,114,500 (2007: 4,343,114,500) ordinary shares
in issue during the year.
No diluted earnings per share has been presented as there were no potential
dilutive ordinary shares in issue in both years.
17. PROPERTY, PLANT AND EQUIPMENT
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17. PROPERTY, PLANT AND EQUIPMENT (continued)
The carrying value of leasehold land and buildings shown above comprises:
2008 2007
Rmb'000 Rmb'000
Leasehold land and buildings in the PRC:
Long lease 26,514 11,664
Medium-term lease 343,891 299,257
370,405 310,921
18. PREPAID LEASE PAYMENTS
The Group's prepaid lease payments comprise leasehold land in the PRC under
medium-term lease.
Rmb'000
(Restated)
COST
At January 1, 2007
As originally stated 571,693
Effect of change in accounting policy (Note 2) (527,171)
As restated 44,522
Addition (restated) 22,541
At December 31, 2007, as restated 67,063
Addition 1,528
Disposal (12,414)
At December 31, 2008 56,177
AMORTISATION
At January 1, 2007
As originally stated 162,409
Effect of change in accounting policy (Note 2) (157,860)
As restated 4,549
Charge for the year (restated) 1,787
At December 31, 2007, as restated 6,336
Charge for the year 1,503
Disposal (581)
At December 31, 2008 7,258
CARRYING VALUES
At December 31, 2008 48,919
At December 31, 2007 60,727
2008 2007
Rmb'000 Rmb'000
Analysed for reporting purposes as:
Current assets 1,265 1,500
Non-current assets 47,654 59,227
48,919 60,727
The amount represents prepayment of rentals under operating leases for "land
use rights" situated in the PRC.
19. EXPRESSWAY OPERATING RIGHTS
Rmb'000
(Restated)
COST
At January 1, 2007
As originally stated 261,000
Effect of change in accounting policy (Note 2) 15,264,665
As restated 15,525,665
Addition (restated) 671,831
At December 31, 2007, as restated 16,197,496
Addition 60,252
At December 31, 2008 16,257,748
AMORTISATION
At January 1, 2007
As originally stated 81,155
Effect of change in accounting policy (Note 2) 2,016,530
As restated 2,097,685
Charge for the year (restated) 577,059
At December 31, 2007, as restated 2,674,744
Charge for the year 659,027
At December 31, 2008 3,333,771
CARRYING VALUES
At December 31, 2008 12,923,977
At December 31, 2007 13,522,752
The above expressway operating rights were granted by the Zhejiang Provincial
Government to the Group for 30 years. During the expressway concessionary
period, the Group has the rights of operation and management of
Shanghai-Hangzhou-Ningbo Expressway and Shangsan Expressway and the
toll-collection rights thereof. The Group is required to manage and operate the
expressways in accordance with the regulations promulgated by the Ministry of
Communication and relevant government authorities. Upon the end of the
respective concession service periods, the toll expressways and their toll
station facilities will be returned to the grantors at zero consideration.
20. GOODWILL
Rmb'000
COST AND CARRYING AMOUNT
At January 1, 2007 91,428
Arising on acquisition of a subsidiary 1,395
Write-down (5,956)
At December 31, 2007 and at December 31, 2008 86,867
Particulars regarding impairment testing on goodwill are disclosed in note 22.
21. OTHER INTANGIBLE ASSETS
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The above intangible assets, other than part of software licenses, were
purchased as part of business combinations during both 2006 and 2007. Other
software licenses were acquired from third parties.
The customer bases of the securities operation have a definite useful life. The
customer bases of Zheshang Securities Co., Ltd. ("Zheshang Securities") and
Zhejiang Tianma Futures Broker Co., Ltd ("Tianma Futures") are amortised on a
straight-line basis over 15 years and 3 years respectively.
21. OTHER INTANGIBLE ASSETS (continued)
The securities/futures firm licenses of the securities operation are considered
by the management of the Group to have an indefinite useful life because they
can be renewed at minimal cost even though the current licenses are effective
for three years.
The trading seats of the securities operation is considered by the management
of the Group to have an indefinite useful life because there is no economic or
regulatory limit to their useful life.
Software licenses are amortised on a straight-line basis over five years.
Particulars of the impairment testing on intangible assets with indefinite
useful lives are disclosed in note 22.
22. IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE
USEFUL LIVES
As explained in note 7, the Group uses business segments as its primary segment
for reporting segment information. For the purposes of impairment testing,
goodwill and other intangible assets with indefinite useful lives set out in
notes 20 and 21 have been allocated to four individual cash generating units
(CGUs), including two subsidiaries in toll operation segment and two
subsidiaries in securities operation segment. The carrying amounts of goodwill
and other intangible assets as at December 31, 2008 allocated to these units
are as follows:
Securities/futures Trading
Goodwill firm licenses seats
2008 2007 2008 2007 2008 2007
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Toll operation
- Zhejiang
Jiaxing
Expressway
Co., Ltd.
("Jiaxing Co") 75,137 75,137 - - - -
- Zhejiang
Shangsan
Expressway
Co., Ltd.
("Shangsan Co") 10,335 10,335 - - - -
Securities
operation
- Zheshang
Securities - - 51,783 51,783 2,080 2,080
- Zhejiang Tianma
Futures Broker
Co., Ltd.
("Tianma
Futures") 1,395 1,395 11,300 11,300 1,400 1,400
86,867 86,867 63,083 63,083 3,480 3,480
During the year ended December 31, 2008, the management of the Group determines
that the recoverable amounts exceed the carrying amounts of the respective CGUs
containing goodwill and other intangible assets with indefinite useful lives
and therefore no impairment has been recognised.
22. IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE
USEFUL LIVES (continued)
The basis of the recoverable amounts of the above CGUs and their major
underlying assumptions are summarised below:
Jiaxing Co and Shangsan Co
The recoverable amounts of Jiaxing Co and Shangsan Co are determined based on
value in use calculations. The key assumptions for the value in use
calculations relate to discount rates, growth rates, and expected changes in
toll revenue and direct costs during the forecast period. Those calculations
use cash flow projections based on financial budgets approved by management
covering a five-year period and a discount rate of 15% (2007: 15%). No growth
rate has been assumed beyond the five-year period up to the remaining toll road
operating rights which are twenty-year and twenty-two-year for Jiaxing Co. and
Shangsan Co. respectively.
Zheshang Securities
The recoverable amount of Zheshang Securities is determined based on value in
use calculations. The key assumptions for the value in use calculations relate
to the discount rate, growth rates and profit margin during the forecast
period. Those calculations use cash flow projections based on financial budgets
approved by management covering a four-year period and a discount rate of 23.5%
(2007: 23.5%).
Tianma Futures
The recoverable amount of Tianma Futures is determined based on value in use
calculations. The key assumptions for the value in use calculations relate to
the discount rate, growth rates and profit margin during the forecast period.
Those calculations use cash flow projections based on financial budgets
approved by management covering a five-year period and a discount rate of 19.3%
(2007: 19.3%).
23. INTERESTS IN ASSOCIATES
2008 2007
Rmb'000 Rmb'000
(Restated)
Unlisted investments in associates, at cost 431,290 466,290
Share of post-acquisition profits, net of
dividends received 32,972 28,813
464,262 495,103
At December 31, 2008, the Group had interests in the following associates:
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23. INTERESTS IN ASSOCIATES (continued)
Notes:
(i) On April 19, 2007, the Company entered into an equity transfer
agreement with Guangzhou Zhongda Kaisi Group Co., Ltd. ("Zhongda Kaisi")
whereby Zhongda Kaisi undertook to bid for such equity interest of JoinHands
Co. at the property exchange centre at a price no less than its valuation to be
determined by an accredited valuer. The carrying value of investment in
JoinHands Co was classified as an asset held for sale in prior year. Due to the
economic downturn, Zhongda Kaisi failed to complete the transaction and the
Group does not have any active plan to dispose such investment at the balance
sheet date. As a result, the directors determine to reclassify the carrying
value of the investment from assets held for sale to interest in associate
using equity method of accounting as from the date of its classification as
held-for-sale. The financial statements for the periods since classification as
held-for-sale is amended to interests in associates accordingly.
(ii) Investment in Jiashao Co has been disposed during the year at a cash
consideration of Rmb43,375,000, resulted at a gain on disposal of Rmb8,375,000.
(iii) The Group is able to exercise significant influence over Time Plaza
Co because it has the power to appoint one out of five directors of that
company.
(iv) The Group is able to exercise significant influence over Ningbo
Advertising Co because it has the power to appoint two out of five directors of
that company.
The summarised financial information in respect of the Group's associates at
balance sheet date is set out below:
2008 2007
Rmb'000 Rmb'000
Total assets 4,089,893 4,382,281
Total liabilities (2,537,904) (2,673,300)
Net assets 1,551,989 1,708,981
Group's share of net assets of associates 464,262 495,103
Revenue 3,874,147 2,966,548
Loss for the year (59,378) (14,580)
Group's share of results of associates
for the year 10,659 (4,655)
24. INTEREST IN A JOINTLY CONTROLLED ENTITY
2008 2007
Rmb'000 Rmb'000
Unlisted investment in a jointly controlled
entity, at cost 65,000 65,000
Share of post-acquisition profits, net of
dividends received 59,251 35,505
124,251 100,505
At December 31, 2008, the Group had interests in the following jointly
controlled entity:
Percentage
of equity
Form of Place of interest
business registration held by Profit Principal
Name of entity structure and operation the Group sharing activities
Hangzhou Shida Corporate The PRC 50% 50% Operation of
Expressway Co., Ltd. the Shiqiao-
Dajing expressway
The Group's entitlement to voting rights and share in the profit of the jointly
controlled entity is in proportion to its ownership interests.
The summarised financial information in respect of the Group's interest in the
jointly controlled entity which are accounted for using the equity method is
set out below:
2008 2007
Rmb'000 Rmb'000
Current assets 36,136 25,400
Non-current assets 141,033 148,295
Current liabilities (38,509) (58,433)
Non-current liabilities (14,409) (14,757)
Income 46,703 44,989
Expenses (22,957) (24,583)
25. AVAILABLE-FOR-SALE INVESTMENTS
Available-for-sale investments comprise:
2008 2007
Rmb'000 Rmb'000
Non-current assets:
Unlisted equity investments, at cost (i) 1,000 1,000
Current assets:
Listed equity investments in the PRC,
at fair value (ii) 28,001 595,758
29,001 596,758
Notes:
(i) Unlisted equity investments represent investments in unlisted equity
securities issued by private entities established in the PRC. They are measured
at cost less impairment at each balance sheet date because the range of
reasonable fair value estimated is so significant that the directors of the
Company are of the opinion that their fair values cannot be measured reliably.
(ii) Listed equity investments represent equity securities subscribed
through placement by listed issuers. They are measured at fair value. During
the year, the loss on change in fair value of the investments of Rmb345,081,000
(2007: gain on change in fair value of Rmb230,609,000) has been debited to
equity. Subsequently, the Group disposed certain investments and recognized a
loss on disposal of Rmb89,680,000 (2007: Nil) to consolidated income statement.
Management determines that the decrease in quoted market price of the remaining
investments is significant or prolonged, accordingly, the impairment loss on
such investments of Rmb24,792,000 (2007: Nil) has been transferred directly to
the consolidated income statement.
26. TRADE RECEIVABLES
The Group has no credit period granted to its trade customers of toll
operation, service area operation and securities operation. An aging analysis
of trade receivables at the balance sheet date, based on invoice date, is as
follows:
2008 2007
Rmb'000 Rmb'000
Within 3 months 71,640 69,453
3 months to 1 year 3,408 7,477
1 to 2 years 288 4,181
Over 2 years 663 1,566
75,999 82,677
Included in the balance aged within 3 months were tolls receivable from the
Expressway Fee Settlement Centre of the Highway Administration Bureau of
Zhejiang Province and Hangzhou Urban and Rural Construction Committee amounting
to Rmb71,640,000 (2007: Rmb69,453,000) which has been settled subsequent to the
balance sheet date. The directors consider the credit risk of the balance to be
minimal. The Group has not provided for impairment loss on the balances past
due as set out above and does not hold any collateral over these balances.
27. OTHER RECEIVABLES
2008 2007
Rmb'000 Rmb'000
Other debtors (Note) 115,041 168,992
Prepayments 62,129 48,370
Entrusted loan to a related party (Note 43(a)) - 370,000
177,170 587,362
The amounts are unsecured, interest-free and repayable on demand.
Note: Included in other debtors is loan receivables from minority
shareholders for the capital contribution into Zheshang Securities of
Rmb58,046,000 (2007: Rmb131,100,000).
28. HELD-FOR-TRADING INVESTMENTS
2008 2007
Rmb'000 Rmb'000
Listed securities in the PRC, at fair value:
Equity securities 4,596 533,574
Open-end equity funds 4,014 7,677
Corporate bonds ranging from 4.28% to
8.35% per annum and maturity date from
June 2, 2009 to July 23, 2018 238,977 79,969
247,587 621,220
29. STRUCTURED DEPOSIT
The structured deposit represents a yield enhanced deposit in Standard
Chartered Bank (the "Issuer") for a principal of Rmb200,000,000 with a
guaranteed interest rate at 4% per annum and a variable interest ranging from
0% - 2% per annum, depending on the settlement price of certain commodities,
payable annually on the maturity date June 1, 2009. The directors consider that
the fair value of embedded derivative in relation to the variable rate interest
depending on the commodity price is minimal.
30. BANK BALANCES HELD ON BEHALF OF CUSTOMERS
From its securities operation, the Group receives and holds money deposited by
customers and other institutions. These customers' money is maintained in one
or more segregated bank accounts. The Group has recognised the corresponding
accounts payable to respective customers and other institutions.
Bank balances held on behalf of customers carry interest at market rates which
range from 0.99% to1.64% (2007: 0.99% to 2.62%) per annum.
Bank balances held on behalf of customers that are denominated in currencies
other than the functional currency of the respective group entities are set out
below:
HKD USD
Rmb'000 Rmb'000
As at December 31, 2008 8,734 42,045
As at December 31, 2007 10,331 70,885
31. BANK BALANCES AND CASH
2008 2007
Rmb'000 Rmb'000
Restricted bank balances (Note) 35,000 35,000
Time deposits with original maturity
over three months 284,068 226,972
Unrestricted bank balances and cash 3,478,945 2,738,811
Time deposits with original maturity of
less than three months 258,000 35,000
Cash and cash equivalents 3,736,945 2,773,811
4,056,013 3,035,783
Note: The restricted bank balances is frozen by China Securities
Depository and Clearing Corporation Limited Shanghai Branch in connection with
the guarantees issued by Zheshang Securities, in which Rmb33,000,000 has been
released in January 2009. For details, please refer to Note 36(iii).
Bank balances carry interest at market rates which range from 0.36% to 0.72%
(2007: 0.72% to 2.62%) per annum. Time deposits carry interest at fixed rates
ranging from 1.35% to 4.14% (2007: 1.62% to 4.41%) per annum.
Bank balances and cash that are denominated in currencies other than the
functional currency of the respective group entities are set out below:
HKD USD
Rmb'000 Rmb'000
As at December 31, 2008 3,784 22,668
As at December 31, 2007 3,324 21,507
32. ACCOUNTS PAYABLE TO CUSTOMERS ARISING FROM SECURITIES DEALING BUSINESS
The settlement terms of accounts payables arising from the securities dealing
business are one day after the trade date. No aging analysis is disclosed as in
the opinion of the directors an aged analysis does not give any additional
value in view of the nature of the business.
Accounts payable to customers arising from securities dealing business that are
denominated in currencies other than the functional currency of the respective
group entities are set out below:
HKD USD
Rmb'000 Rmb'000
As at December 31, 2008 8,734 42,045
As at December 31, 2007 10,331 70,885
33. TRADE PAYABLES
Trade payables mainly represent the construction payables for the improvement
projects of toll expressways. An aging analysis of trade payables at the
balance sheet date, based on invoice date, is as follows:
2008 2007
Rmb'000 Rmb'000
Within 3 months 216,913 500,371
3 months to 1 year 169,772 200,735
1 to 2 years 24,778 25,244
2 to 3 years 2,336 9,867
Over 3 years 1,297 673
415,096 736,890
34. OTHER PAYABLES AND ACCRUALS
2008 2007
Rmb'000 Rmb'000
Other liabilities:
Accrued payroll and welfare 295,359 315,693
Advance from customers 67,997 57,774
Toll collected on behalf of other toll roads 34,462 35,339
Others 91,946 92,559
489,764 501,365
Accruals 47,998 52,356
Amount due to ultimate holding company - 2,599
537,762 556,320
The amount due to ultimate holding company, the Communications Investment
Group, is unsecured, interest-free and repayable on demand.
35. INTEREST-BEARING BANK AND OTHER LOANS
2008 2007
Rmb'000 Rmb'000
Bank loans, unsecured 95,000 20,000
Other loans, unsecured 514,764 601,990
609,764 621,990
Bank loans repayable:
Within one year 95,000 20,000
Other loans repayable:
Within one year 285,897 268,045
In the second year 84,402 89,339
In the third to fifth years, inclusive 144,465 244,606
514,764 601,990
609,764 621,990
Less: Amount due within one year
shown under current liabilities (380,897) (288,045)
228,867 333,945
The bank loans included a loan of Rmb30,000,000 (2007: Rmb20,000,000) carrying
fixed rate at 6.21% (2007: 6.57%) and a loan of Rmb65,000,000 (2007: nil)
carrying floating rates based on the China Central Bank benchmark interest rate
ranging from 6.21% to 7.20% (2007: nil).
The other loans represent mainly loans from the World Bank via municipal
governments and carry floating interest at London Inter-Bank Offered Rate -
0.05% ranging from 2.84% to 5.36% (2007: 5.10%) per annum (both the effective
interest rate and contracted interest rate), the rate prescribed by the World
Bank, and are repayable by semi-annual instalments.
The bank and other loans of the Group that are denominated in currencies other
than Rmb amounted to Rmb477,364,000 (USD69,845,000) as at December 31, 2008
(2007: Rmb564,590,000 (USD77,292,000)).
36. PROVISIONS
Financial
Litigation guarantees Litigation
on disputes to third on interest Other
over state bond parties claim litigation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(note i) (note ii) (note iii) (note iv)
At January 1, 2007 - 34,800 - - 34,800
Provision for the year 111,414 17,810 - - 129,224
At December 31, 2007 111,414 52,610 - - 164,024
Provision for the year - - 21,683 12,181 33,864
Reversal for the year (111,414) (52,610) - - (164,024)
At December 31, 2008 - - 21,683 12,181 33,864
Notes:
(i) Fourteen customers of Zheshang Securities previously entered into
state bond investment agency agreements with Kinghing Investment, whereby
Zheshang Securities kept in custody state bonds with principal and interest at
a rate of 2.7% in aggregate of Rmb111.4 million. These state bonds were pledged
as security for certain third party repo trading transactions and the funds
obtained were misappropriated by Kinghing Investment. Kinghing Investment was
unable to return the misappropriated funds in time and as a result, the
security over the state bonds was enforced to settle the relevant repo trading
transactions.
In the opinion of directors, Kinghing Investment should take full
responsibility for breach of the state bond investment agency agreements.
Kinghing Investment had ceased its operations and its restructuring was
underway. In 2007, these customers filed legal proceedings against Zheshang
Securities for the disputes over the state bond investment agency agreements.
The Court of First Instance ruled against Zheshang Securities which appealed to
the Court of Second Instance over the rulings given by the Court of First
Instance. The Court of Second Instance overturned the rulings given to two of
these customers by the Court of First Instance and sent the two cases back for
retrial.
In January 2008, the Intermediate People's Court of Jinhua City opened a
case for the bankruptcy settlement of Kinghing Investment and appointed the
settlement team of Kinghing Investment as the administrator.
Considering the developments in the legal proceedings and the risk
management applied in the PRC financial industry, the directors resolved to
make a full provision of Rmb111.4 million in 2007.
In December 2008, Kinghing Investment has fully repaid the principal and
interest to all 14 customers and the obligation of Zheshang Securities has been
discharged. The provision for the litigation has been reversed and credited to
the consolidated income statement during the year.
(ii) Zheshang Securities granted guarantees to corporate customers and
individual customers in respect of the state bond investment agency agreements
and fund trust agreements entered into between Kinghing Investment and these
corporate customers and individual customers. As Kinghing Investment ceased its
operations and in the process of liquidation, the directors considered that it
was probable that such guarantees would be exercised. As a result, full
provision of Rmb34.8 million and Rmb17.8 million for corporate customers and
individual customers, respectively, were made in prior years.
In December 2008, Kinghing Investment has fully repaid the claims and
interest at a rate of 2.7% to these customers and the obligation of Zheshang
Securities has been discharged. Accordingly, the provisions for guarantees have
been credited to the consolidated income statement during the year.
36. PROVISIONS (continued)
Notes: (continued)
(iii) The Group has received a claim from the customers under the state
bond investment agency agreements and fund trust agreements for the additional
interest compensation upon the settlement of the principal and interest at a
rate of 2.7%. The litigation will be processed in 2009. Based on the legal
opinion, management considered that it is probable that the claim is ruled
against the Group and accordingly, a provision for the interest compensation
amounting to Rmb21,683,000 has been recognised in the consolidated income
statement for the year.
(iv) Sinobase International Ltd. initiated a lawsuit against Zheshang
Securities in November 2008 in respect of a dispute for asset management
entrustment contract entered into with Zheshang Securities in September 2005
with a principal and default compensation in aggregate of Rmb12,181,000. Taking
into account of the current progress of the legal proceedings and the risk
management principle applied in the PRC financial industry, the directors
considered that claim is probable and a full provision of such claim has been
recognised in the consolidated income statement for the year.
37. LONG-TERM BONDS
2008 2007
Rmb'000 Rmb'000
Long-term bonds - listed in the PRC 1,000,000 1,000,000
The long-term bonds are unsecured, carry interest payable annually at a fixed
rate of 4.29% per annum and are repayable in 2013 upon maturity.
38. DEFERRED TAXATION
The following are the major deferred tax liabilities and assets recognised and
movements thereon during the current and prior years:
http://www.prnasia.com/xprn/sa/attachment/2009/04/20090401-449786.pdf
39. SHARE CAPITAL
Number of shares Share capital
2008 2007 2008 2007
Rmb'000 Rmb'000
Registered,
issued and
fully paid:
Domestic
shares of
Rmb1.00 each 2,909,260,000 2,909,260,000 2,909,260 2,909,260
H Shares of
Rmb1.00 each 1,433,854,500 1,433,854,500 1,433,855 1,433,855
4,343,114,500 4,343,114,500 4,343,115 4,343,115
There were no movements in share capital during both years.
The domestic shares are not currently listed on any stock exchange.
The H Shares have been listed on the Stock Exchange since May 15, 1997. The H
Shares were admitted to the Official List on May 5, 2000 and their dealings on
the London Stock Exchange commenced on the same day.
On February 14, 2002, the United States Securities and Exchange Commission,
following the approval by the Board of Directors and the China Securities
Regulatory Commission, declared the registration statement in respect of the
ADSs evidenced by ADRs representing the deposited H Shares of the Company
effective.
All the domestic shares and H Shares rank pari passu with each other as to
dividends and voting rights.
40. RETIREMENT BENEFITS SCHEMES
The employees of the Group are members of the state-managed retirement benefits
scheme operated by the PRC government. To supplement this existing retirement
benefits scheme, the Group adopted a corporate annuity scheme during the year
in accordance with relevant rules and regulations. The Group is required to
contribute a certain percentage of payroll costs to these retirement benefits
schemes to fund the benefits. The only obligation of the Group with respect to
these retirement benefits schemes is to make the specified contributions.
No forfeited contributions are available to reduce the contribution payable in
future years.
41. COMMITMENTS
2008 2007
Rmb'000 Rmb'000
Contracted for but not provided for in
the consolidated financial statements:
- Investments in expressways upgrade
services 272,518 -
- Capital injection into Jiashao Co - 1,110,375
- Acquisition of additional interest
in Shangsan Co 485,000 485,000
757,518 1,595,375
Authorised but not contracted for:
- Investments in expressways upgrade
services 730,739 1,123,066
- Purchase of machinery 130,000 80,000
- Renovation of service areas 10,000 54,310
- Purchase of office buildings
and its renovation work 84,300 -
955,039 1,257,376
42. OPERATING LEASES
The Group as lessee
2008 2007
Rmb'000 Rmb'000
Minimum lease payments 7,811 -
Contingent rental expenses 1,189 -
9,000 -
At the balance sheet date, the Group had commitments for future minimum lease
payments under non-cancellable operating leases which fall due as follows:
2008 2007
Rmb'000 Rmb'000
Within one year 7,540 2,300
In the second to fifth years inclusive 49,330 29,350
Over five years 56,700 40,900
113,570 72,550
Operating lease payments represent rentals payable by the Group for certain
service areas along expressways located in Zhejiang and Tianjin. The leases
were entered into during 2008 and 2007. They are negotiated for an average term
of 10 years and rentals contain both a fixed element and a contingent element
linked to sales.
42. OPERATING LEASES (continued)
The Group as lessor
The Group leased their service areas and communication ducts under operating
lease arrangements. Leases are negotiated for terms ranging from 1 to 25 years
and rentals are fixed annually.
At December 31, 2008, the Group had contracted with tenants for the following
future minimum lease payments:
2008 2007
Rmb'000 Rmb'000
Within one year 46,227 18,936
In the second to fifth years inclusive 39,005 13,074
After five years 35,048 20,576
120,280 52,586
43. RELATED PARTY TRANSACTIONS AND BALANCES
The following is a summary of the related party transactions arising from the
Group's daily operating activities:
(a) Pursuant to the board resolutions of the Company on December 17, 2007,
the Group signed an entrusted loan contract on December 26, 2007 with Zhejiang
Jinji Property Co., Ltd ("Jinji Co."), a subsidiary of the Communications
Investment Group, via China Citic Bank. Pursuant to the contract, the Company
agreed to provide a one-year loan of Rmb370,000,000 to Jinji Co via the bank at
a fixed interest rate of 8.97% per annum. The entrusted loan was guaranteed by
the Communications Investment Group and fully repaid in 2008. See also Note 27.
Pursuant to the resolutions of the annual general meeting on June 27,
2008 of Zhejiang Expressway Investment Development Co., Ltd. ("Development
Co"), a subsidiary of the Company, and the entrusted loan contracts,
Development Co. provided short-term entrusted loans during 2008 amounting to
Rmb100,000,000 to Zhejiang Concord Property Investment Co., Ltd. ("Concord Co")
the associate of Development Co., at a fixed interest rate of 12% per annum,
via China Everbright Bank Hangzhou Zhaohui Branch. The entrusted loans were
fully repaid within 2008.
Net interest income recognised in 2008 on the above transactions with
Jinji Co. and Concord Co. are respectively Rmb32,010,000 (2007: nil) and
Rmb4,542,000 (2007: nil).
(b) Pursuant to the operation management agreement entered into between
Development Co and Petroleum Co in respect of the petrol stations in the
service areas along the Shanghai-Hangzhou-Ningbo and Shangsan Expressways,
Petroleum Co will with their expertise assist Development Co in running their
petrol stations along the Shanghai-Hangzhou-Ningbo and Shangsan Expressways.
Purchases of petroleum products from Petroleum Co during 2008 amounted to
Rmb1,381,404,000 (2007: Rmb970,761,000).
(c) See notes 27 and 34 for details of amounts due from minority
shareholders of a subsidiary and amount due to ultimate holding company.
43. RELATED PARTY TRANSACTIONS AND BALANCES (continued)
Transactions and balances with other state-controlled entities in the PRC
The Group operates in an economic environment currently predominated by
entities directly or indirectly owned or controlled by the PRC government
("state-controlled entities"). In addition, the Group itself is part of a
larger group of companies under the Communications Investment Group which is
controlled by the PRC government. Apart from the transactions with the
Communications Investment Group and parties under the common control of the
Communications Investment Group, the Group also conducts business with other
state-controlled entities. The directors consider those state-controlled
entities are independent third parties so far as the Group's business
transactions with them are concerned.
In addition, the Group has entered into various transactions, including deposit
placements, borrowings and other general banking facilities, with certain banks
and financial institutions which are state-controlled entities in its ordinary
course of business. In view of the nature of those banking transactions, the
directors are of the opinion that separate disclosure would not be meaningful.
In respect of the Group's toll road business, the directors are of the opinion
that it is impracticable to ascertain the identity of counterparties and
accordingly whether the transactions are with other state-controlled entities
in the PRC.
Compensation of directors, supervisors, and key management personnel
Other than the directors, supervisors and key management personnel disclosed in
notes 13 and 14, the remuneration of other key management personnel during the
year was approximately Rmb1,384,000 including retirement benefit scheme
contribution of Rmb42,000 (2007: Rmb1,374,000 including retirement benefit
scheme contribution of Rmb36,000) which is determined by the performance of the
individuals and the market trends.
44. PARTICULARS OF SUBSIDIARIES OF THE COMPANY
Please visit below link for details:
http://www.prnasia.com/xprn/sa/attachment/2009/04/20090401-950265.pdf
45. COMPARATIVE FIGURES
Certain comparative figures including Note 9, have been reclassified to conform
with the current year's presentation.
Corporate Information
EXECUTIVE DIRECTORS
Chen Jisong (Chairman)
Zhan Xiaozhang (General Manager)
Zhang Jingzhong
Jiang Wenyao
NON-EXECUTIVE DIRECTORS
Zhang Luyun
Zhang Yang
INDEPENDENT NON-EXECUTIVE DIRECTORS
Tung Chee Chen
Zhang Junsheng
Zhang Liping
SUPERVISORS
Ma Kehua
Fang Zhexing
Zheng Qihua
Jiang Shaozhong
Wu Yongmin
COMPANY SECRETARY
Zhang Jingzhong
AUTHORIZED REPRESENTATIVES
Chen Jisong
Zhang Jingzhong
STATUTORY ADDRESS
12/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
PRC 310007
Tel: 86-571-8798 5588
Fax: 86-571-8798 5599
REPRESENTATIVE OFFICE IN HONG KONG
Suite 2910
29/F, Bank of America Tower
12 Harcourt Road
Hong Kong
Tel: 852-2537 4295
Fax: 852-2537 4293
LEGAL ADVISERS
As to Hong Kong and US law:
Herbert Smith
23rd Floor, Gloucester Tower
15 Queen's Road Central
Hong Kong
As to English law:
Herbert Smith LLP
Exchange House
Primrose Street
London EC2A 2HS
United Kingdom
As to PRC law:
T & C Law Firm
11/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
PRC 310007
AUDITORS
Deloitte Touche Tohmatsu
35/F, One Pacific Place
88 Queensway
Hong Kong
INVESTOR RELATIONS CONSULTANT
Rikes Hill & Knowlton Limited
Room 1312, Wing On Centre
111 Connaught Road Central
Hong Kong
Tel: 852-2520 2201
Fax: 852-2520 2241
PRINCIPAL BANKERS
Industrial and Commercial Bank of China,
Zhejiang Branch
China Construction Bank, Zhejiang Branch
Shanghai Pudong Development Bank,
Hangzhou Branch
H SHARE REGISTRAR AND TRANSFER OFFICE
Hong Kong Registrars Limited
Room 1712-1716, 17/F, Hopewell Centre
183 Queen's Road East
Hong Kong
H SHARES LISTING INFORMATION
The Stock Exchange of Hong Kong Limited
Code: 0576
LONDON STOCK EXCHANGE PLC
Code: ZHEH
ADRS INFORMATION
US Exchange: OTC
Symbol: ZHEXY
CUSIP: 98951A100
ADR: H Shares 1:30
CORPORATE BOND LISTING INFORMATION
The Shanghai Stock Exchange
Code: 120308
Website
www.zjec.com.cn
Location Map of Expressways in Zhejiang Province
http://www.prnasia.com/sa/2009/04/01/200904012013.jpg
Statement :
1. An electronic version of the Company's 2008 annual report is available at
http://www.zjec.com.cn/extra/col11/2008_nb_en.pdf
2. A copy of this document has been submitted to the UK Listing Authority and will
shortly be available for inspection at the UK Listing Authority Document
Viewing Facility which is situated at the Financial Services Authority, 25 the
North Colonnade Canary Wharf, London E14 5HS.
April 2 ,2009