ZHEJIANG EXPRESSWAY CO., LTD. 
By
ZHEJIANG EXPRESSWAY CO., LTD.
2013 Annual Report
Focus on Transformational Development, Deepen Reform and Innovation
During the year of 2013, under the leadership of the parent company, the Company strived to accelerate the
transformational development of its listing platform and achieved its annual target. The Company also
actively looked to deepen reforms and innovation. As a result, the Group's operating performance improved
significantly.
Content
Definition of Terms
Company Profile
Review of Major Corporate Events
Particulars of Major Road Projects
Financial and Operating Highlights
Chairman's Statement
Management Discussion and Analysis
Principal Risks and Uncertainties
Corporate Governance Report
Directors, Supervisors and Senior Management Profiles
Report of the Directors
Report of the Supervisory Committee
Connected Transactions
Independent Auditor 's Report
Consolidated Financial Statements & Notes
Independent Auditor 's Report
(Issued by a third country auditor registered with the UK Financial Reporting Council)
Corporate Information
Location Map of Expressways in Zhejiang Province
Definition of Terms
ADR(s) American Depositary Receipt(s)
ADS(s) American Depositary Share(s)
Advertising Co Zhejiang Expressway Advertising Co., Ltd., a 70% owned subsidiary
of Development Co
Audit Committee the audit committee of the Company
Board the board of directors of the Company
Company or Zhejiang Expressway Zhejiang Expressway Co., Ltd., a joint stock limited company
incorporated in the PRC with limited liability on March 1, 1997
Communications Group Zhejiang Communications Investment Group Co., Ltd., a wholly
State-owned enterprise established on
December 29, 2001
Development Co Zhejiang Expressway Investment Development Co., Ltd., a 100% owned
subsidiary of the Company
Directors the directors of the Company
GDP gross domestic product
Group the Company and its subsidiaries
H Shares the overseas listed foreign shares of Rmb1.00 each in the share
capital of the Company which are primarily listed on the Hong Kong
Stock Exchange and traded in Hong Kong dollars since May 15, 1997
Hong Kong Stock Exchange The Stock Exchange of Hong Kong Limited
Jiaxing Co Zhejiang Jiaxing Expressway Co., Ltd., a 99.9995% owned subsidiary of
the Company
Jinhua Co Zhejiang Jinhua Yongjin Expressway Co., Ltd., a 100% owned subsidiary
of the Company
JoinHands Technology JoinHands Technology Co., Ltd., a 27.582% owned associate of the Company
Listing Rules the Rules Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited
Maintenance Co Zhejiang Expressway Maintenance Co., Ltd., a 100% owned subsidiary of
the Company
Period the period from January 1, 2013 to December 31, 2013
Petroleum Co Zhejiang Expressway Petroleum Development Co., Ltd., a 50% owned associate
of the Company
PRC the People's Republic of China
Rmb Renminbi, the lawful currency of the PRC
SFO Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong)
Shangsan Co Zhejiang Shangsan Expressway Co., Ltd., a 73.625% owned subsidiary of the
Company
Shareholders the shareholders of the Company
Shengxin Co Shengxin Expressway Co., Ltd., a 50% owned joint venture of the Company
Supervisory Committee the supervisory committee of the Company
Towing Co Zhejiang Expressway Vehicle Towing and Rescue Services Co., Ltd., a 100%
owned subsidiary of the Company
Yuhang Co Zhejiang Yuhang Expressway Co., Ltd., a 51% owned subsidiary of the Company
Zheshang Securities Zheshang Securities Co., Ltd., a 70.83% owned subsidiary of the Shangsan Co
Zhejiang Communications Finance Zhejiang Communications Investment Group Finance Co., Ltd., a 35% owned
associate of the Company
Company Profile
Zhejiang Expressway is an infrastructure company principally engaged in investing in, developing and operating
of high-grade roads. The Company and its subsidiaries also carry out certain ancillary businesses such as
automobile servicing, operation of gas stations and billboard advertising along expressways,
as well as securities business.
Major assets under management of the Group include the 248km Shanghai-Hangzhou-Ningbo Expressway, the 142 km
Shangsan Expressway, the 70 km Jinhua section of Ningbo-Jinhua Expressway, ancillary facilities along the three
expressways, and Zheshang Securities. All of the three expressways are situated within Zhejiang
Province in the PRC. As at December 31, 2013, total assets of the Company and its subsidiaries amounted to
Rmb32,089.19 million.
The Company was incorporated on March 1, 1997 as the main vehicle of the Zhejiang Provincial Government for
investing in, developing and operating expressways and Class 1 roads in Zhejiang Province.
Incorporated on December 29, 2001, Communications Group, the controlling shareholder of the Company, is a
provincial-level communications company which is wholly-owned by the State and established by the Zhejiang
Provincial Government. It mainly operates a diversity of businesses, such as investment, operations,
maintenance, toll collection and ancillary services of expressways; construction and building of transportation
project, ocean and coastal transport; as well as real estates. As at December 31, 2013,
consolidated assets of Communications Group totaled Rmb150,400.91 million.
The H Shares of the Company, which represent approximately 33% of the issued share capital of the Company, were
listed on the Hong Kong Stock Exchange on May 15, 1997, and the Company subsequently obtained a secondary listing
on the London Stock Exchange on May 5, 2000.
On February 14, 2002, a Level I American Depositary Receipt program sponsored by the Company in respect of its
H Shares, with the Bank of New York as the depositary, was established in the United States and became effective.
With good performance on the Group's existing expressway operations, the Company will capitalize on all
opportunities of investment and acquisition of new projects, aiming to develop itself into a first-class expressway
operator in China. In addition, the Company will also endeavor to enhance its core
competitiveness in the securities business, increasing its profit contribution to the Group.
For the corporate and business structure of the Group as at December 31, 2013, please visit:
http://photos.prnasia.com/prnk/20140401/8521401858-a
Review of Major Corporate Events
1. On January 16, 2013, the Company announced the final distribution notice for its ten-year 2003 corporate
bonds. On January 21, 2013, the final interest together with principal were paid accordingly.
2. On March 21, 2013, the Company announced its 2012 annual results in Hong Kong and thereafter conducted
its annual results presentations in Hong Kong and Britain.
3. On March 30, 2013, the Company entered into a capital increase agreement with Zhejiang Communications
Investment Group Finance Co., Ltd. and its existing shareholders, pursuant to which the Company has
conditionally agreed to make a capital contribution of Rmb280 million in cash to the equity capital of
Zhejiang Communications Finance, thereby enabling the Company to own a 35% equity interest in Zhejiang
Communications Finance.
4. On May 3, 2013, China Securities Regulatory Commission confirmed the acceptance of Zheshang Securities's
application for the listing of its shares as A shares on the Shanghai Stock Exchange.
5. On May 7, 2013, the Company announced its 2013 first quarterly results.
6. On June 21, 2013, the Company held its 2012 Annual General Meeting to approve the distribution of a final
dividend of Rmb0.24 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 Pan-China Certified
Public Accountants Ltd. as the PRC auditors of the Company. The acquisition of the remaining 76.55% equity
interest in Zhejiang Jinhua Yongjin Expressway Co., Ltd. and the proposal of issuing domestic corporate
bonds with an aggregate principal amount of up to Rmb1 billion were also approved.
7. On June 30, 2013, the Company completed the acquisition of the remaining 76.55% equity interest in Zhejiang
Jinhua Yongjin Expressway Co., Ltd., which then became a 100% owned subsidiary of the Company, and merger
accounting method was adopted.
8. On August 29, 2013, the Company announced its 2013 interim results in Hong Kong and thereafter conducted its
interim results presentations in Hong Kong.
9. On October 17, 2013, the Company held an Extraordinary General Meeting at which the distribution of an
interim dividend of Rmb0.06 per share was approved.
On the same day, the Development Co. was selected as one of the first "Top Ten Expressway Service Area
Management Companies in China," and became the only service area management company selected in Zhejiang
province.
10. On November 11, 2013, the Company announced its 2013 third quarterly results.
11. On January 28, 2014, Zhejiang Expressway Maintenance Co., Ltd., a 100% owned subsidiary of the Company,
was founded with registered capital of Rmb30 million.
Number Number Remaining
Percentage of Length in Number of Toll of Service Start of Years of
Expressway Ownership Kilometers of Lanes Stations Areas Operation Operation
Shanghai-Hangzhou
Expressway
- Jiaxing Section 99.9995% 88.1 8 7 2 1998 15
- Yuhang Section 51% 11.1 6 1 0 1995-1998 15
- Hangzhou Section 100% 3.4 4 2 0 1995 15
Hangzhou-Ningbo
Expressway
- Hangzhou to Hongken
section 100% 16.0 4 1 0 1992 14
- Hongken to Duantang
section 100% 124.0 8 9 2 1995 14
- Duantang to Dazhujia
section 100% 5.0 4 1 0 1996 14
Shangsan Expressway 73.625% 142.0 4 11 3 2000 17
Ningbo-Jinhua Expressway
- Jinhua Section 100% 69.7 4 7 1 2005 17
Current Toll rates on the Shanghai-Hangzhou-Ningbo Expressway
1. Passenger vehicle classification and toll rates
Vehicle Entrance Fee Mileage Fee
Class Classification Standard (Rmb/vehicle) (Rmb/vehicle/km)
1 Passenger vehicle with up to 7 seats 5 0.45
Truck with tonnage of 2 tons or below 5 0.45
2 Passenger vehicle with seats 8 to 19 5 0.45
Truck with tonnage of above 2 tons and up to 5 tons 10 0.80
3 Passenger vehicle with seats 20 to 39 10 0.80
Truck with tonnage of above 5 tons and up to 10 tons 15 1.20
4 Passenger vehicle with seats above 40 15 1.20
Truck with tonnage above 10 tons and up to 15 tons 15 1.40
5 Truck with tonnage above 15 tons 20 1.60
2. Toll rates on goods vehicles
Load Toll standards
Legally loaded Up to 5 tons Rmb0.09/ton per km
Above 5 tons and Rmb0.09/ton per km x 1.5 is reduced in a linear manner to
up to 15 tons Rmb0.09/ton per km
Above 15 tons and Rmb0.09/ton per km is reduced in a linear manner to
up to 30 tons Rmb0.06/ton per km
Over 30 tons Based on 30 tons calculation
Overloaded Overloaded below 10% Calculation based on the basic fee standard for legally loaded
vehicle
Overloaded up to 30% The overloaded portion over 10% is calculated based on Rmb0.09/ton
per km x 1.2; the remaining portion is calculated based on the fee
standard of "Overloaded below 10%"
Overloaded above 30% The legally loaded portion and the overloaded portion up to 30% is
and up to 50% calculated based on the fee standard of "Overloaded up to 30%";
the remaining portion is calculated based on
Rmb0.09/ton per km x 2
Overloaded above The legally loaded portion and the overloaded portion up to 30% is
50% and up to 100% calculated based on the fee standard of "Overloaded up to 30%"; the
remaining portion is calculated based on Rmb0.09/ton per km x 3
Overloaded over 100% The legally loaded portion and the overloaded portion up to 30% is
calculated based on the fee standard of "Overloaded up to 30%";
the remaining portion is calculated based on Rmb0.09/ton per km x 4
* The mileage fee for Class 1 vehicle on the Shangsan Expressway and Jinhua section of Ningbo-Jinhua
Expressway is Rmb0.40/vehicle/km. The toll rates for other passenger vehicles and trucks are the same
as those for the Shanghai-Hangzhou-Ningbo Expressway.
Financial and Operating Highlights
Results
Year ended December 31,
2009 2010 2011 2012 2013
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated) (Restated)
Revenue 6,175,626 6,959,504 6,994,391 6,927,415 7,851,115
Profit Before Tax 2,936,461 3,044,830 2,719,108 2,461,289 2,971,738
Income Tax Expense (811,530) (784,714) (704,705) (634,669) (756,761)
Profit for the year 2,124,931 2,260,116 2,014,403 1,826,620 2,214,977
Attributable to:
Owners of the Company 1,705,349 1,826,565 1,760,738 1,649,484 1,907,470
Non-controlling interests 419,582 433,551 253,665 177,136 307,507
Earnings Per Share (EPS) 39.27 cents 42.06 cents 40.54 cents 37.98 cents 43.92 cents
Return on Equity (ROE)
2009 2010 2011 2012 2013
(Restated) (Restated) (Restated) (Restated)
ROE 11.56% 11.92% 11.19% 10.28% 11.94%
For Segmental Revenue (Year 2013), Segmental Operating Cost (Year 2013) and other Financial and
Operating Highlights graphs, please visit: http://photos.prnasia.com/prnk/20140401/8521401858-b
Chairman's Statement
Dear Shareholders,
It is my honour to present the annual results of Zhejiang Expressway for the year 2013 on behalf of the Board
of Directors.
Over the course of the year, the global economy continued to fluctuate. While the U.S. has been creating jobs
and both its housing market and Wall Street have moved up sharply, the EU still remained in recession for much
of the year, and living standards in most of the developed world have yet to recover. In China,
the economy remained stable amid external volatility and stable GDP growth eased worries about a "hard landing".
Meanwhile, China's fixed-asset investment climbed 19.6%, which helped drive economic growth
at a moderate and sustainable pace.
Despite a number of natural disasters that struck our business' home province of Zhejiang, including the
devastating typhoon Fitow in October, which affected certain sections of our expressways for a short time,
the region remained a hub for China's manufacturing industry and privately-owned small- to mid-size
enterprises and achieved year-on-year GDP growth of 8.2%, a slight rise from 8.0% in the prior year. In 2013,
the total import and export value for Zhejiang Province was more than RMB 2 trillion. Of this, the province's
export value reached RMB1.5 trillion, representing double-digit year-on-year growth and ranking 3rd nationwide.
Carry on the Three-year Strategic Program and Focus on the Transformational Development
Steady growth in the provincial economy of Zhejiang as well as solid operating performance helped us record
our best financial results since 2008. We also achieved major progress in our three-year strategic program
aimed at transforming our business model through sound capital management, cost controls, and brand
improvements. With overwhelming support from our independent shareholders, we were able to acquire 76.55%
equity interest in the Jinhua section of the Ningbo-Jinhua Expressway, 66.28% of which were acquired from
our parent company, the Communications Group. The Jinhua acquisition illustrates two of our growth principles
- our commitment to achieving portfolio growth in our expressway network and collaboration with our parent
company for the benefit of all our shareholders.
In 2013, our three-year strategic initiative had a positive impact on our core businesses as well as our
future development plan. Following a thorough analysis and inspection of a series of projects, we initiated
a plan to identify potential new businesses that would be good candidates to fit into our transformation
model. On the corporate side, we took steps to improve risk controls by refining our audit system covering
construction project management, contract management, and other internal risks.
Despite the Chinese stock market being one of the world's worst performing in 2013, trading volumes remained
active. Zheshang Securities, our financial brokerage subsidiary, recorded a substantial increase in net
profit. The brand awareness and branch network of Zheshang Securities continued to expand during 2013. The
brokerage ranked top among its peers in terms of both bond issuance and number of deals, and margin trading
and securities lending became a new profit growth driver during the year. I am even more pleased to report
that the China Securities Regulatory Commission has accepted Zheshang Securities' application for an initial
public offering on the Shanghai Stock Exchange, and the Company has officially entered into the wait list.
As of the end of 2013, Zheshang Securities had 108 securities and futures business outlets across China and
RMB83.0 billion of assets under management.
Looking ahead, we believe that China is enduring some short-term pain as it continues to revamp its growth
model, but these moves will help the country over the long-term with innovation and structural reform. On
the whole, China's economy is expected to remain stable through this adjustment phase. In addition, while
there are clearly still a number of complex and lingering effects from the global financial crisis, the U.S.
and European markets are expected to continue to recover, albeit at a relatively slow pace. This should
create opportunities for manufacturers in Zhejiang Province, which in turn should continue to support a
moderate growth in our traffic volumes. Moreover, the newly announced Free Trade Zone in Shanghai is set
to ease and facilitate imports and exports, and attract foreign companies to establish headquarters there.
We believe this zone will also help to boost traffic volume in and around the Yangtze River Delta region.
Considering all of these factors, we will continue to push forward our transformational development plan
and seek to grasp potential investment opportunities, strengthen our talent base, form a sustainable corporate
culture, enhance efficiency, increase the use of information technology, and strengthen our overall
capabilities to manage our businesses. We believe these actions will help us continue to deliver excellent
results and further improvements in operational efficiency.
In conclusion, I would like to thank all of our stakeholders for their support and confidence as we work
towards making our company a better, stronger company. To our customers and clients, we owe you the highest
quality of service, on our roads, in our service area operations, and in our securities and futures business.
To our 6,238 employees, we adopt a performance-based incentive scheme and create a working environment second
to none. To our shareholders, we are committed to a stable long-term dividend payout policy. 2013 has been a
good year - and we expect 2014 to be even better.
Zhan Xiaozhang
Chairman
March 17, 2014
Management Discussion and Analysis
Director and General Manager
LUO Jianhu
BUSINESS REVIEW
In 2013, China's economy maintained a relatively fast pace of GDP growth of 7.7% compared with last year.
Though Zhejiang's economy saw a slight decrease in its growth rate during the fourth quarter, the Province's
economy and overall investment levels generally maintained solid momentum. During the Period, Zhejiang
Province's GDP increased 8.2% year-on-year.
As Zhejiang Province's economy steadily improved and its foreign trade showed signs of recovery, traffic
volume on the Group's expressways continued to see steady organic growth. In addition, stock market trading
volumes also resumed. As a result, income from the Group's overall operations increased 13.4% year-on-year.
Total income reached Rmb8,092.98 million, of which Rmb4,158.34 million was attributable to the three major
expressways operated by the Group, representing an increase of 6.6% year-on-year and 51.4% of the total
income; Rmb2,192.48 million was attributable to the Group's toll road-related businesses, representing an
increase of 6.9% year-on-year and 27.1% of the total income; and Rmb1,742.17 million was attributable to
the securities business, representing an increase of 47.5% year-on-year and 21.5% of the total income.
19.6%
Securities Business Income
52.7%
Toll Income
27.7%
Other Income
A breakdown of the Group's income for the Period is set out below:
2013 2012 % Change
Rmb'000 Rmb'000
(Restated)
Toll income
Shanghai-Hangzhou-Ningbo Expressway 3,122,022 2,968,396 5.2%
Shangsan Expressway 769,723 702,489 9.6%
Jinhua section, Ningbo-Jinhua
Expressway 266,594 231,481 15.2%
Other income
Service areas (mainly sales of
goods) 2,062,558 1,945,614 6.0%
Advertising 107,692 104,276 3.3%
Road maintenance 22,227 471 4619.1%
Securities business income
Commission 1,288,151 886,946 45.2%
Bank interest 454,017 293,924 54.5%
Subtotal 8,092,984 7,133,597 13.4%
Less: Revenue taxes (241,869) (206,182) 17.3%
Revenue 7,851,115 6,927,415 13.3%
Toll Road Operations
As the economy in Zhejiang Province stabilized with positive signs of progress and improvements were seen
in foreign trade, the Group's expressways achieved a high level of organic growth in traffic volume. Traffic
volume on the Shangsan Expressway grew at an even higher rate, benefiting from a higher concentration of
small and medium sized enterprises along its route, while the Jinhua Section of the Ningbo-Jinhua Expressway
benefited from a strong growth in trade at the nearby Yiwu small commodities market with the container
truck traffic growing at a fast pace.
In the meantime, the toll free policy on small passenger vehicles during major holidays led to a loss of
approximately Rmb140 million in toll income in 2013. In addition, the Group's toll income suffered a combined
loss of approximately Rmb100 million during the Period as a result of a gradual phasing out of the
"Unified Toll Card" policy, adjustments made to the rounding off of the last figures for passenger vehicle
tolls, as well as the policy adjusting passenger vehicle classifications.
Although the Jiaxing-Shaoxing Expressway (not operated by the Group), which first opened to passenger vehicles
in July, 2013, diverted some traffic away from the Group's Shanghai-Hangzhou-Ningbo Expressway, the loss in
traffic was partly offset by a rise in traffic on the Group's Shangsan Expressway. However, the positive impact
on Shangsan Expressway was not fully realized until the Jiaxing-Shaoxing Expressway opened to trucks at the
end of November, 2013. Overall the Company's toll income was adversely affected by approximately Rmb8 million
in 2013. Additionally, bad weather caused by Typhoon "Fitow" and other short-term unfavorable factors had also
affected the Group's toll income, which led to a loss of approximately Rmb15 million.
Although the Group's toll road operations were challenged by various negative factors in 2013, the management
was still able to deliver solid results and increase toll income by taking more initiatives to plug loopholes,
conducting marketing campaigns to attract traffic, and modifying weighing equipment for accurate measurements.
By the end of June 2013, the Group completed the acquisition of a 76.55% equity interest in Jinhua Co (which
operates the 69.7km Jinhua Section of the Ningbo-Jinhua Expressway). During the Period, as local roads that
run parallel to the Jinhua Section of the Ningbo-Jinhua Expressway were under construction, a large
number of vehicles on short-distance trips were redirected to the Ningbo-Jinhua Expressway as a result to
effective promotions and road signage. This led to a further increase in traffic volume and helped to drive
an increase in toll income of Rmb10 million.
Continued Progress Leads to Improved Results
2013 was the first year of the Company's three-year development plan. During the year, the Company achieved
its best performance since 2008, leveraging its listing platform and steadily pushing forward its
transformational development.
The average daily traffic volume in full-trip equivalents along the Group's Shanghai-Hangzhou-Ningbo Expressway
was 44,013 during the Period, representing an increase of 4.9% year-on-year. In particular, average daily
traffic volume in full-trip equivalents along the Shanghai-Hangzhou Section of the Shanghai-Hangzhou-Ningbo
Expressway was 44,182, representing an increase of 3.4% year-on-year, and that along the Hangzhou-Ningbo
Section was 43,891, representing an increase of 5.9% year-on-year. Average daily traffic volume in full-trip
equivalents along the Shangsan Expressway was 18,317 during the Period, representing an increase of 9.1%
year-on-year. Average daily traffic volume in full-trip equivalents along the Jinhua Section of the
Ningbo-Jinhua Expressway was 13,533 during the Period, representing an increase of 12.0% year-on-year.
Please visit: http://photos.prnasia.com/prnk/20140401/8521401858-c
Total toll income from the 248km Shanghai-Hangzhou-Ningbo Expressway, the 142km Shangsan Expressway and the
70km Jinhua Section of the Ningbo-Jinhua Expressway amounted to Rmb4,158.34 million during the Period,
representing an increase of 6.6% year-on-year. Toll income from the Shanghai-Hangzhou-Ningbo Expressway
amounted to Rmb3,122.02 million, representing an increase of 5.2% year-on-year; toll income from the Shangsan
Expressway amounted to Rmb769.72 million, representing an increase of 9.6% year-on-year; while toll income
from the Jinhua Section of the Ningbo-Jinhua Expressway amounted to Rmb266.59 million, representing an
increase of 15.2% year-on- year.
Toll Road-Related Business Operations
The Company operates certain toll road-related businesses along its expressways through its subsidiaries and
associated companies, including gas stations, restaurants and shops in service areas, as well as a roadside
advertising business.
During the Period, due to the renovation of the Jiaxing Service Area starting in July 2013, income from
service areas was adversely affected. However, increasing sales of refined oil products and additional
income from the external road maintenance projects ensured solid growth in the Group's toll road-related
businesses. As a result, income from toll road-related operations during the Period was Rmb2,192.48 million,
representing an increase of 6.9% year-on-year.
Please visit: http://photos.prnasia.com/prnk/20140401/8521401858-d
Securities Business on Fast Track
Zheshang Securities achieved breakthroughs in terms of business scale, accomplishing its strategic goal of
opening more than 100 outlets nationwide. Its asset under management reached a historic high of
RMB83.0 billion. Zheshang Securities' IPO application was accepted by the China Securities Regulatory
Commission and it is officially on the wait list for an IPO. Meanwhile, Zheshang Securities was classified
into "A-Class Broker" once again.
Securities Business
During the Period, the total trading volume of the Shanghai and Shenzhen stock markets increased 49.60%
compared with last year due to a revival of activity in the domestic securities market. Though the
securities brokerage business of Zheshang Securities saw a slight decline in market share, there was a
solid rise in income as a result of higher trading volumes.
Zheshang Securities continued to increase the number of its branches to facilitate the further development of its
securities brokerage business and to stabilize and increase its market share. Zheshang Securities had 108 business
outlets during the Period.
While accelerating the all-round development of each business segment, Zheshang Securities has been actively
working to improve its income and profit structure, and accelerate the development of the margin financing and
securities lending business to enhance its capabilities to expand new businesses. With continued business
innovation, Zheshang Securities believes it can diversify its business and reduce the dominant role that its
brokerage business had played in the past. Income from the securities brokerage, investment banking, asset
management, margin financing and securities lending businesses of Zheshang Securities all grew steadily
year-on-year.
In addition, in order to accelerate its listing process on the Shanghai Stock Exchange, Zheshang Securities
submitted an IPO application, which was accepted by the China Securities Regulatory Commission in
May, 2013. Zheshang Securities is now officially on the wait list for an IPO.
During the Period, Zheshang Securities' total operating income was Rmb1,742.17 million, an increase of 47.5%
year-on-year. Of such income, brokerage commission income amounted to Rmb1,288.15 million, up by 45.2%, and
interest income from the securities business amounted to Rmb454.02 million, up by 54.5%. Moreover, securities
investment gains of Zheshang Securities included in the consolidated statement of profit or loss and other
comprehensive income of the Group was Rmb85.42 million during the Period.
Long-Term Investments
Petroleum Co. (a 50% owned associate company of the Company) recorded income of Rmb6,481.14 million, an
increase of 6.4% year-on-year. The rise was due to an increase in both the retail price and sales volume of
petroleum products. During the period, net profit of Petroleum Co. was Rmb21.63 million (2012: net profit of
Rmb15.02 million).
Shengxin Co (a 50% owned joint venture of the Company) operates the 73.4km long Shaoxing Section of the
Ningbo-Jinhua Expressway. During the Period, the traffic volume of the Shaoxing Section of the Ningbo-Jinhua
Expressway rose due to the improving provincial economy. The average daily traffic volume in full-trip
equivalents was 12,692, an increase of 6.28% year-on-year. Toll income during the Period was
Rmb294.46 million. However, due to its relatively heavy financial burden, the joint venture reported a loss
of Rmb72.02 million.
JoinHands Technology Co., Ltd. (a 27.58%-owned associate company of the Company) operates a property leasing
business. There was no substantial improvement in its operations during the Period. The Company instituted
legal proceedings with regards to the transfer of the equity interest in the associated company. The Company
then lodged an appeal against the subsequent judgment of the Company's priority of compensation for the
mortgaged properties. The appeal was ruled in favor of the Company by the Hangzhou Intermediate People's
Court on April 28, 2013. These mortgaged properties in the associated company were auctioned off on
December 24, 2013. In accordance with the judicial auction procedures, the court will transfer the full
payment received from the auction to the Company after the buyer finishes all procedures for ownership
transfer of the auctioned properties.
On March 30, 2013, the Company entered into a capital increase agreement with Zhejiang Communications Finance
and its existing shareholders. The Company conditionally agreed to carry out a capital injection of
Rmb280 million in cash, and upon completion of the capital contribution, the Company beneficially owned a
35% equity interest in Zhejiang Communications Finance. During the Period, income from the associated
company were mainly derived from fees and commissions for providing financial services, including arranging
loans and receiving deposits from subsidiaries of Communications Group, and were accounted for as a share of
gain of associates of the Company from May 1, 2013. Zhejiang Communications Finance realized a net profit
of Rmb79.05 million from May 1, 2013 to the end of the Period.
FINANCIAL ANALYSIS
The Group adopts a prudent financial policy with an aim to provide shareholders of the Company with sound returns
over the long term.
During the Period, profit attributable to owners of the Company was approximately Rmb1,907.47 million, representing
an increase of 15.6% year-on-year, return on owners' equity was 11.9%, representing an increase of 16.1% year-on-year,
while earnings per share for the Company was Rmb43.92 cents.
Liquidity and financial resources
As at December 31, 2013, current assets of the Group amounted to Rmb16,652.84 million in aggregate (December 31,
2012 (restated): Rmb15,707.99 million), of which bank balances and cash accounted for 15.1% (December 31, 2012
(restated): 31.0%), bank balances held on behalf of customers accounted for 49.4% (December 31, 2012 (restated):
47.7%), and held for trading investments accounted for 7.1% (December 31, 2012 (restated): 9.5%). Current ratio
(current assets over current liabilities) of the Group as at December 31, 2013 was 1.4 (December 31, 2012 (restated):
1.4). Excluding the effect of the customer deposits arising from the securities business, the resultant current ratio
of the Group (current assets less bank balances held on behalf of customers over current liabilities less balance of
accounts payable to customers arising from securities business) was 2.2 (December 31, 2012 (restated): 2.4).
The amount of held for trading investments of the Group as at December 31, 2013 was Rmb1,181.03 million (December
31, 2012: Rmb1,486.77 million), of which 92.9% was invested in bonds, 6.7% was invested in stocks, and the rest was
invested in open-end equity funds.
During the Period, net cash inflow generated from the Group's operating activities amounted to Rmb979.98 million.
The Directors do not expect the Company to experience any problems with liquidity and financial resources in the
foreseeable future.
Injected Asset to Strengthen Portfolio
The Company completed the 76.55% equity interest transaction of the Jinhua Section of the Ningbo-Jinhua Expressway,
the first injection of existing asset from the Group. With relatively low financing costs, we completed the debt
swap with the Jinhua Co and successfully completed the process of integration and transition.
As at December 31,
2013 2012
Rmb'000 Rmb'000
(Restated)
Cash and cash equivalent
Rmb 1,773,310 3,382,797
US$ in Rmb equivalent 28,209 4,024
HK$ in Rmb equivalent 5,462 5,232
Time deposits
Rmb 704,459 1,459,433
US$ in Rmb equivalent - 23,975
Held-for-trading investments - Rmb 1,181,025 1,486,772
Available-for-sale investments - Rmb 281,924 134,899
Total 3,974,389 6,497,132
Rmb 3,940,718 6,463,901
US$ in Rmb equivalent 28,209 27,999
HK$ in Rmb equivalent 5,462 5,232
Borrowings and solvency
As at December 31, 2013, total liabilities of the Group amounted to Rmb12,420.24 million (December 31, 2012
(restated): Rmb11,863.63 million), of which 6.8% was bank and other borrowings, and 65.8% was accounts payable
to customers arising from securities business.
Total interest-bearing borrowings of the Group as at December 31, 2013 amounted to Rmb1,840.00 million,
representing a decrease of 21.4% compared to that as at December 31, 2012. The borrowings comprised outstanding
balances of domestic commercial bank loans of Rmb500.00 million, loans from a domestic non-bank financial
institution of Rmb340.00 million, and short-term loan note amounting to Rmb1 billion that was issued by
Zheshang Securities in 2013 for a term of 3 months. Of the interest-bearing borrowings, 16.3% was not payable
within one year.
As at December 31, 2013, the Group's loans from domestic commercial banks include short-term loans and
long-term loans, with floating interest rate ranging from 6.22% to 6.77% per annum; loans from a domestic
non-bank financial institution were short-term loans, with the interest rate fixed at 5.04% per annum. The
annual coupon rate for short-term loan note was fixed at 5.50%, while the annual interest rate for accounts
payable to customers arising from the securities business was fixed at 0.35%.
Maturity Profiles
Gross Within 2-5 years Beyond
amount 1 year inclusive 5 years
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Floating rates
Domestic commercial bank loans 500,000 200,000 300,000 -
Fixed rates
Domestic commercial bank loans - - - -
Loans from a non-bank
financial institution 340,000 340,000 - -
Short-term loan note 1,000,000 1,000,000 - -
Total as at December 31, 2013 1,840,000 1,540,000 300,000 -
Total as at December 31, 2012
(Restated) 2,340,000 1,660,000 680,000 -
Total interest expenses for the year amounted to Rmb95.16 million, while profit before interest and tax
amounted to Rmb3,066.90 million. The interest cover ratio (profit before interest and tax over interest
expenses) stood at 32.2 (2012 (restated): 18.6) times.
2013 2012
Rmb'000 Rmb'000
(Restated)
Profit before tax and interest 3,066,899 2,601,054
Interest expenses 95,161 139,765
Interest cover ratio 32.23 18.61
As at December 31, 2013, the asset-liability ratio (total liabilities over total assets) was 38.7% (December 31, 2012
(restated): 37.7%). Excluding the effect of customer deposits arising from the securities business, the resultant
asset-liability ratio (total liabilities less balance of accounts payable to customers arising from securities business
over total assets less bank balances held on behalf of customers) of the Group was 17.8% (December 31, 2012
(restated): 18.3%).
Capital structure
As at December 31, 2013, the Group had Rmb19,668.96 million in total equity, Rmb9,817.10 million in fixed-rate
liabilities, Rmb500.00 million in floating-rate liabilities, and Rmb2,103.13 million in interest-free liabilities,
representing 61.3%, 30.6%, 1.6% and 6.5% of the Group's total capital, respectively. The gearing ratio, which is
computed by dividing the total liabilities less accounts payable to customers arising from the securities business by
total equity, was 21.6% as at December 31, 2013 (December 31, 2012 (restated): 22.3%).
As at December 31, 2013 As at December 31,2012
Rmb'000 % Rmb'000 %
(Restated) (Restated)
Total equity 19,668,959 61.3% 19,621,681 62.3%
Fixed rate liabilities 9,817,103 30.6% 8,481,819 26.9%
floating rate liabilities 500,000 1.6% 1,340,000 4.3%
interest-free liabilities 2,103,132 6.5% 2,041,812 6.5%
Total 32,089,194 100.0% 31,485,312 100.0%
Long-term interest-bearing
liabilities 300,000 0.9% 680,000 2.2%
Gearing ratio 1 (note) 21.6% 22.3%
Gearing ratio 2 (note) 1.5% 3.5%
Asset-liabilities 1 (note) 38.7% 37.7%
Asset-liabilities 2 (note) 17.8% 18.3%
Note: Gearing ratio 1 represents the total liabilities less balance of accounts payable to customers arising from
securities business to the total equity; gearing ratio 2 represents the total amount of the long-term
interest-bearing liabilities to the total equity; Asset-liability ratio 1 represents total liabilities to
total assets; Asset-liability ratio 2 represents the total liabilities less balance of accounts payable to
customers arising from securities business to the total assets less bank balances held on behalf of customers.
Capital expenditure commitments and utilization
During the Period, capital expenditure of the Group totaled Rmb2,379.31 million, while capital expenditure of the
Company totaled Rmb2,087.69 million. Amongst the total capital expenditure of the Group, Rmb756.87 million was
incurred for acquiring 76.55% equity interest in Jinhua Co, Rmb280.00 million was incurred for 35% equity
investment in Zhejiang Communications Finance, Rmb1 billion was incurred for capital injection to Jinhua Co,
Rmb184.33 million was incurred for acquisition and construction of properties, Rmb90.00 million was incurred for
purchase and construction of equipments and facilities, and Rmb68.12 million was incurred for service area
renovation and expansion.
As at December 31, 2013, the capital expenditure committed by the Group and the Company totaled
Rmb1,717.02 million and Rmb311.06 million, respectively. Amongst the total capital expenditures committed by
the Group, Rmb1,324.08 million will be used for acquisition and construction of properties, Rmb344.94 million
for acquisition and construction of equipments and facilities, Rmb18.00 million for service area renovation and
expansion and Rmb30.00 million for setting up a l00% owned subsidiary of the Company, Zhejiang Expressway
Maintenance Co., Ltd.
The Group will finance the above-mentioned capital expenditure commitments with internally generated cash flow
first and then will consider using debt financing to meet any shortfalls in priority to using other methods.
Pursuant to the resolution of shareholder's meeting dated June 21, 2013 of the Company, the shareholders of
the Company have approved the proposed issue of domestic corporate bonds by the Company with an aggregate
principal amount of up to Rmb1 billion.
Contingent liabilities and pledge of assets
Pursuant to the board resolution of the Company dated November 16, 2012, the Company and Shaoxing
Communications Investment Group Co., Ltd. (the other joint venture partner that holds 50% equity interest in
Shengxin Co) provided Shengxin Co with joint guarantee for its bank loans of Rmb2,200.00 million, in
accordance with their proportionate equity interest in Shengxin Co.
Pursuant to the resolution of shareholders' meeting dated June 26, 2012 of Yuhang Co (a 51% equity interest
owned subsidiary of the Company), Yuhang Co provided a property under construction as a mortgaged asset
for its domestic commercial bank loan of Rmb100.00 million. As at December 31, 2013, the carrying amount of
the mortgaged asset was Rmb422.17 million.
Pursuant to the board resolution dated June 24, 2008 of Jinhua Co, Jinhua Co provided the operating
right of the expressway operated by it as pledged asset for its domestic commercial bank loans of
Rmb300.00 million. As at December 31, 2013, the carrying amount of the pledged asset was Rmb1,882.28 million.
Except for the above, as at December 31, 2013, the Group did not have any other contingent liabilities, pledge
of assets or guarantees.
Foreign exchange exposure
Save for dividend payments to the holders of H shares in Hong Kong dollars, the Group's principal operations were
transacted and booked in Renminbi. Therefore, the Group's exposure to exchange fluctuation is limited. During the
Period, the Group has not used any financial instruments for hedging purpose.
Although the Directors do not foresee any material foreign exchange risks for the Group, there is no assurance that
foreign exchange risks will not affect the operating results of the Group in the future.
Human Resources
As at December 31, 2013, there were 6,238 employees within the Group, amongst whom 1,324 worked in the managerial,
administrative and technical positions, while 4,914 worked in fields such as toll collection, maintenance, service
areas, securities and futures business outlets
As a result of the reform of the remuneration and performance-based system implemented two years ago, the total
remuneration of the employees, unit results and workforce commitment were further improved, as well as the
correlation between the appraisal results and the remuneration level was enhanced during the period, which
fully captalised on the benefits of the incentive appraisal system. The remuneration package comprises three
parts: basic salary, incentive pay and benefits. The basic salary is determined primarily based on the
seniority and ability of the staff. The incentive pay is pegged with productivity. Benefits for employees come
in the form of contributions made by the Group to local social security agencies covering pension, medical and
accommodation concerns that are calculated as a percentage of employees' income and in accordance with relevant
PRC 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 Rmb70.66 million.
OUTLOOK
With the steady and rapid development of China's economy and an upturn in Zhejiang Province's domestic and
foreign trade, it is anticipated that in 2014, the Group's toll road business, which is closely tied to macro
and regional economic development, will see traffic volume on its expressways grow steadily, although organic
growth rate is expected to be slower compared with 2013.
In addition, the Jiaxing-Shaoxing Expressway, which opened to passenger vehicles in July last year and opened
to trucks at the end of November 2013, is expected to have a sustainable positive impact on the Group's
Shangsan Expressway. Meanwhile, the Group will reinforce its initiatives to plug loopholes and increase the
efficiency of toll collection, and strengthen its promotion efforts in order to attract more vehicles to its
expressways and ease the negative impact of traffic diversion.
The establishment of the Shanghai Pilot Free Trade Zone is anticipated to facilitate the growth in traffic
volume of the surrounding areas of the Yangtze River Delta with the promotion of import and export trading.
In the future, it is believed that with the growth of trade and increasing demand of transportation and
logistics, the Group's expressways will see higher traffic volumes.
In response to the current uncertainties about the recovery of the securities market, Zheshang Securities is
seeking new profit growth drivers by trying to actively develop innovative businesses, and enhance cost and
risk controls. Meanwhile, Zheshang Securities will further accelerate the process of its proposed listing on
the Shanghai Stock Exchange to facilitate its sustainable and sound development.
Looking ahead to 2014, with the policies of China's new leadership to deepen reforms achieving early success,
the Group's management believes that the new round of economic reforms will bring new opportunities and
challenges to the Group's reform and development. The Group will continue to focus on its core expressway
business, raise service quality, further improve operational management ability, push forward with its
development of innovative securities businesses and improve its securities businesses. The Company will
also look for appropriate investment projects, cultivate diversified business management capabilities,
leverage the strategic synergies with its parent company, and enhance the utilization of capital,
in order to further increase its profitability and deliver satisfactory results.
Principal Risks and Uncertainties
TOLL ROAD BUSINESS RISKS
Economic Environment
As the global economy recovers gradually, it is expected to remain in a state of low rate of growth for
some time. The domestic economy, despite showing signs of picking up, was still trying to find a new
balance as a whole. Meanwhile, although the import and export trading conditions are showing signs of
recovery, but many uncertain factors remain, which is having an impact on Zhejiang, a province with
heavy reliance on export trading. Growth in the traffic volume and toll revenue of the Group's
expressways is expected to remain uncertain, creating uncertainties for the operations, financial
conditions and operating results of the Group.
Roads Competition
Despite the opening of Jiaxing-Shaoxing Expressway nearby, the impacts of traffic diversion on the
Group's expressways have largely stabilized. However, as Qianjiang Cross River Passage is scheduled
to commence service soon in 2014, coupled with the opening of other new expressways nearby, it is
expected that new traffic will be diverted from certain sections of Shanghai-Hangzhou-Ningbo
Expressway. Accordingly, we cannot be assured as to whether traffic volume to be generated on the
Group's expressways will be maintained at the same levels as before or will increase in the future,
or whether or not the operating results of the Group will be negatively affected.
Toll Policy
With the implementation of the toll waiver policy on small passenger vehicles on key festivals and holidays
by the PRC government on September 30, 2012, the expressway operators who charge for toll are negatively
affected. In addition, due to the introduction of a special project by five ministries and commissions for
the rectification of the toll road policy in Zhejiang province, a number of new policies focusing on
adjusting the toll policy of expressways within the province were successively issued. Despite that we
expect the possibility of further significant changes in the policies of the expressway industry in the near
term is minimal, we cannot be assured that they will not have any adverse effects on the toll revenue of the
Group.
SECURITIES BUSINESS RISKS
Market Fluctuations
The securities business is highly susceptible to market fluctuations and may experience periods of high
volatility accompanied by reduced liquidity. It may be materially affected by economic and other factors
such as the global market conditions; the availability and cost of capital; the liquidity of the global
markets; the level and volatility of stock prices, commodity prices and interest rates; currency values
and other market indices; inflation; natural disasters; acts of war or terrorism; as well as investor
sentiment and confidence in the financial markets. There is no assurance as to whether our securities
business will be adversely affected by fluctuations in the market, or whether our securities business
will continue to contribute to our overall profit margin.
Regulation of the Securities Business
We are subject to extensive regulations in the PRC that govern how we conduct our securities business, and we are
subject to risks of intervention by the PRC regulatory authorities. We could be fined, prohibited from engaging in
some of our business activities or subject to limitations or conditions on our business activities, among other
things. Significant regulatory actions against us could have material adverse impacts on our financial
position, cause us significant reputational harm, or harm our business prospects. New laws, regulations or
changes in the enforcement of existing laws or regulations applicable to our clients may also adversely
affect our business.
FINANCIAL RISKS
For financial risks and uncertainties of the Group, please see notes 5, 6 and 7 to the Consolidated Financial
Statements.
STATEMENT OF RESPONSIBILITY FROM THE DIRECTORS WITH RESPECT TO THE ANNUAL REPORT AND THE COMPANY'S ACCOUNTS
The Directors of the Company duly confirm that to the best of their knowledge:
- the consolidated financial statements prepared and subject to disclosure under the Hong Kong Financial
Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants give a true and fair
view of the assets, liabilities, financial position and profit of the Group, and cover the enterprises that
have been consolidated into the Company; and
- the "Management Discussion and Analysis" section included in this annual report includes a fair review of
the development and performance of the business and the position of the Group, covers the enterprises that
have been consolidated into the Company and describes the principal risks and uncertainties faced by the
Group.
From the beginning of year 2013 up to now, there has been no occurrence of significant events that would have
a material impact on the normal operation of the Group.
By Order of the Board
Tony ZHENG
Company Secretary
Hangzhou, Zhejiang Province, the PRC
March 17, 2014
Corporate Governance Report
CORPORATE GOVERNANCE PRACTICES
To govern the daily functioning of the Board of Directors of the Company, the Company has adopted its own
Guidelines on Corporate Governance that closely followed the principles of good governance in Appendix 14 of
the Listing Rules (available at www.hkex.com.hk) ("CG Code").
During the Period, the Company has complied with all code provisions in the CG Code and adopted the recommended
best practices in the CG Code as and when applicable.
DIRECTORS' SECURITIES TRANSACTIONS
The Company has adopted the Rules on Securities Dealings ("Rules on Securities Dealings") for the Directors,
supervisors, senior management personnel and other employees of the Company on terms no less exacting than
the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers
(the "Model Code") set out in Appendix 10 of the Listing Rules.
Upon specific inquiries to all the Directors, the Directors have confirmed their respective compliance with
the required standards for securities transactions by Directors as set out in the Model Code and the Rules on
Securities Dealings during the Period.
BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD")
The executive directors of the Company during the Period were:
Mr. ZHAN Xiaozhang (Chairman)
Ms. LUO Jianhu (General Manager)
Mr. DING Huikang
The non-executive directors of the Company during the Period were:
Mr. LI Zongsheng
Mr. WANG Weili
Mr. WANG Dongjie
The independent non-executive directors of the Company during the Period were:
Mr. ZHANG Junsheng
Mr. ZHOU Jun
Mr. PEI Ker-Wei
During the Period, the Board held a total of four meetings. Individual attendances by the directors (as indicated
by the numbers of meetings attended/numbers of relevant meetings held) are as follows:
Attendance Attendance by
in person proxy
Mr. ZHAN Xiaozhang (Chairman) 4/4
Ms. LUO Jianhu (General Manager) 4/4
Mr. DING Huikang 4/4
Mr. LI Zongsheng 4/4
Mr. WANG Weili 2/4 1/4
Mr. WANG Dongjie 2/4 1/4
Mr. ZHANG Junsheng 4/4
Mr. ZHOU Jun 4/4
Mr. PEI Ker-Wei 4/4
During the Period, the Company held two general meetings of the shareholders. The meetings were chaired by
Chairman, and all executive directors were present at the meetings.
The Board is charged with duties as well as given powers that are expressly specified in the articles of
association of the Company, the scope of which includes, amongst others: to determine the business plans and
investment proposals of the Company; to prepare the financial budget and final accounts of the Company; to
determine the dividend policy of the Company; to appoint or dismiss senior managerial officers of the Company
as well as to determine their remuneration; and to draw up proposals for any material acquisition or sale by
the Company.
To assist the Board to effectively discharge its duties, the Board has set up the Audit Committee, the Nomination
Committee, the Remuneration Committee, and the Strategic Committee.
While the Board fully retains its power to decide on matters within its scope of duties and powers, relevant
preparation and drawing up of plans or proposals were usually delegated to the management.
The Company has complied with the requirements under Rules 3.10(1) and (2) of the Listing Rules regarding the
appointment of independent non-executive directors, with three independent non-executive directors appointed,
at least one of whom possessing the appropriate professional qualification or accounting or related financial
management expertise.
Pursuant to Rule 3.13 of the Listing Rules, the Company had specifically inquired with all three independent
non-executive directors and received their respective confirmation of independence during the Period. The three
independent non-executive directors have all confirmed their compliance with requirements regarding independence
under Rule 3.13 of the Listing Rules. The Company still considers the independent non-executive directors to be
independent.
There were no financial, business, family or other material or relevant relationships between members of the
Board, including that between the Chairman and the General Manager of the Company.
Each newly appointed director receives induction on the first occasion of his or her appointment, so as to ensure
that he or she has appropriate understanding of the business and operations of the Company and that he or she is
fully aware of his or her responsibilities and obligations under the Listing Rules and relevant regulatory
requirements. Directors are also regularly updated on the Group's business and industry environments where
appropriate in the management's monthly reports to the Board as well as briefings and materials circulated to
the Board before board meetings.
In addition, during the Period, the Company has arranged for all its executive and non-executive directors to
undergo continuous trainings designed to develop and refresh their knowledge and skills so as to ensure that
their contribution to the Board remains informed and relevant. However, as the management considers that the
independent non-executive directors of the Company are very experienced, knowledgeable and resourceful, the
Company did not arrange any professional briefings or training programs for its independent non-executive
directors and has decided to leave it to the independent non-executive directors to undergo appropriate
training as they see fit.
CHAIRMAN AND GENERAL MANAGER
During the Period, Mr. ZHAN Xiaozhang served as Chairman, and Ms. LUO Jianhu served as General Manager of the
Company, respectively. The roles of Chairman and General Manager are fully segregated as expressly set out in
the articles of association of the Company.
NON-EXECUTIVE DIRECTORS
Terms for the non-executive directors of current session of the Board started on June 11, 2012, and will expire
on June 30, 2015.
SPECIAL COMMITTEES UNDER THE BOARD
The Board has set up the Audit Committee, the Nomination Committee, the Remuneration Committee, and the Strategic
Committee. Roles and responsibilities for each committee are specified in its terms of reference, details of which
can be found under the "Corporate Governance" section in the Company's web site.
The Audit Committee comprised of the three independent non-executive directors and two non-executive directors,
namely Mr. ZHANG Junsheng, Mr. ZHOU Jun, Mr. PEI Ker-Wei, Mr. WANG Weili and Mr. WANG Dongjie, of whom
Mr. ZHOU Jun serves as the Chairman of the Audit Committee.
The Nomination Committee comprised of three independent non-executive directors, one executive director and one
non-executive director, namely Mr. ZHANG Junsheng, Mr. ZHOU Jun, Mr. PEI Ker-Wei, Mr. ZHAN Xiaozhang and
Mr. LI Zongsheng, of whom Mr. ZHAN Xiaozhang serves as Chairman of the Nomination Committee.
The Company believes that diversification of board members is a key element to maintain the Company's competitive
advantage, improve business performances, and promoting the Company's continued development. When setting up the
board member composition, the Company takes into consideration a number of aspects that determine board member
diversification, including but not limited to gender, age, culture, education background, professional
experience, work and living background, knowledge and skill, etc. The Company's Nomination Committee is
responsible for assessing the board's structure, number of members, as well as a diversified composition,
providing recommendation or suggestion on candidates to serve as new directors of the Company to the board
when needed. The assessment as well as recommendation or suggestion above would have fully taken into
consideration any pros and cons to the diversification of board members.
The Remuneration Committee comprised of three independent non-executive directors and two non-executive
directors, namely, Mr. ZHANG Junsheng, Mr. ZHOU Jun, Mr. PEI Ker-Wei, Mr. LI Zongsheng and Mr. WANG Weili,
of whom Mr. ZHANG Junsheng serves as Chairman of the Remuneration Committee.
The Strategic Committee comprised of three executive directors, namely Mr. ZHAN Xiaozhang, Ms. LUO Jianhu and
Mr. DING Huikang as well as Mr. ZHANG Jingzhong, Mr. WU Junyi and several outside experts and advisors, of whom
Mr. ZHAN Xiaozhang serves as chairman of the Strategic Committee.
During the Period, the Audit Committee held a total of four meetings. Individual attendances by the members of
the Audit Committee (as indicated by the numbers of meetings attended/numbers of meetings held) are as follows:
Attendance Attendance
in person by proxy
Mr. ZHANG Junsheng 4/4
Mr. ZHOU Jun 4/4
Mr. PEI Ker-Wei 4/4
Mr. WANG Weili 2/4 1/4
Mr. WANG Dongjie 2/4 1/4
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, there were no changes to the members of the Board or senior management of the Company;
hence the Nomination Committee and the Remuneration Committee had not held any meetings.
During the Period, the Strategic Committee held three meetings, mainly discussed the Company's direction for
strategic development. Each and every member of the Strategic Committee attended the meetings.
The Board is responsible for developing and reviewing the Company's corporate governance policies and practices,
monitoring the Company's compliance with the Code and its disclosure within this report; the Board reviews and
monitors the training and continuous professional development of Directors and senior management through the
works of human resources department, and review and monitor the Company's policies and practices on compliance
with legal and regulatory requirements through the works of legal and internal audit department.
During the Period, the Directors have all confirmed their responsibility for preparing the accounts, and that
there were no events or conditions which would have a material impact on the Company's ability to continue to
operate as a going concern basis.
AUDITORS' REMUNERATION
During the Period, the Company had paid HK$4.10 million (approximately Rmb3.24 million equivalent) and
Rmb860,000 to Deloitte Touche Tohmatsu Certified Accountants (the Hong Kong auditors) and Pan-China Certified
Public Accountants Ltd. (the PRC auditors), respectively, for audit services conducted in 2012. The auditors
did not provide non-audit services to the Company.
SECRETARY TO THE BOARD
During the Period, the Secretary to the Board had complied with Rule 3.29 of the Listing Rules regarding
undergoing relevant professional trainings.
DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE'S INTERESTS IN SHARES AND UNDERLYING SHARES OF THE COMPANY
As at December 31, 2013, none of the Directors, Supervisors and General Manager had any interests or short
positions in the shares, underlying shares or debentures of the Company or any of its associated corporations
(within the meaning of Part XV of the SFO) as recorded in the register required to be kept pursuant to
Section 352 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to
the Model Code.
INTERESTS AND SHORT POSITIONS OF OTHER PERSONS IN SHARES AND UNDERLYING SHARES
As at December 31, 2013, the interests and short positions of other persons in the shares and underlying shares
of the Company according to the register required to be kept by the Company pursuant to Section 336 of the SFO,
or as otherwise notified to the Company and the Hong Kong Stock Exchange are set out below:
Percentage of
Total interests the issued
in number of share capital
ordinary shares of the Company
Substantial shareholders Capacity of the Company (domestic shares)
Communications Group Beneficial owner 2,909,260,000 100%
Percentage of
Total interests the issued
in number of share capital
ordinary shares of the Company
Substantial shareholders Capacity of the Company (H Shares)
JP Morgan Chase & Co Beneficial owner, investment 172,359,162(L) 12.02%(L)
manager and custodian
corporation/ 458,000(S) 0.03%(S)
approved lending
agent 118,560,942(P) 8.27%(P)
BlackRock, Inc. Interest of controlled
corporations 156,191,285(L) 10.89%(L)
232,000(S) 0.01%(S)
Deutsche Bank
Aktiengesellschaft Investment manager 87,120,436(L) 6.08%(L)
5,768,617(S) 0.40%(S)
Invesco Hong Kong Limited Investment manager/advisor
of various accounts 87,012,000(L) 6.07%(L)
The letter "L" denotes a long position. The Letter "S" denotes a short position. The letter "P" denotes interest
in a lending pool.
Save as disclosed above, as at December 31, 2013, no other persons had any interests or short positions in the
shares or underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO,
or as otherwise notified to the Company and the Hong Kong Stock Exchange.
SHAREHOLDERS' RIGHTS
Pursuant to the Articles of Association of the Company, two or more Shareholders who in aggregate hold 10% or
more of the voting rights of all the shares of the Company having the right to vote may write to the Board to
request the convening of an extraordinary general meeting and specifying the agenda of the meeting. Upon receipt
of the request in writing, the Board shall convene the extraordinary general meeting as soon as possible.
Shareholders who hold in aggregate 5% or more of the voting rights of all the shares of the Company having the
right to vote are entitled to propose additional motions in annual general meeting, provided that such motions
are served on the Company within 30 days after the issue of the notice of annual general meeting.
Written requests, proposals and enquiries may be sent to the Company through contact details listed in the section
below.
INVESTOR RELATIONS
The Board is committed to ensuring that all shareholders and the investment community have equal and timely
access to information about the Company so as to enable their accurate assessment of the Company's fair value.
Such information is available through channels including financial reports, shareholder meetings, statutory
announcements, the Hong Kong Stock Exchange website (www.hkexnews.hk) and the Company's own website
(www.zjec.com.cn).
Activities such as investor and analyst briefings, one-on-one meetings, conference calls, roadshows, and press
conferences are held regularly by senior management of the Company, particularly after results announcements.
Great importance is also attached to maintaining clear and effective communications channels with investors as
part of the Company's bid to enhance its transparency and to promote the understanding of its business in the
investment community. Any parties who wish to learn more about the Company may do so via the contact details
listed below:
Mr. Tony ZHENG
Company Secretary
12/F, Block A, Dragon Century Plaza
1 Hangda Road Hangzhou, Zhejiang 310007
China
Tel: 86-571-8798 7700
Fax: 86-571-8795 0329
E-mail: zhenghui@zjec.com.cn
During the Period, the last shareholders' meeting of the Company took place at 3:00 p.m. on Thursday, October
17, 2013 at the headquarters of the Company. Details of this extraordinary general meeting of the shareholders
were set out in the announcement dated October 17, 2013 on resolutions passed at the extraordinary general
meeting of the shareholders.
The next Annual General Meeting of the Company is expected to be held on May 5, 2014 to consider the resolutions
in respect of, among others, the reports of the Directors and of the Supervisory Committee for 2013, the audited
financial statements of the Company for 2013, a final dividend for 2013, the final accounts for 2013 and the
financial budget for 2014, as well as the re-appointment of external auditors.
The Company has an issued share capital of 4,343,114,500 shares comprised of domestic shares and H shares. The
domestic shares are held by Zhejiang Communications Investment Group Co., Ltd. as to 2,909,260,000 shares,
representing approximately 67% of the total issued capital of the Company. The remaining 1,433,854,500 shares
are H shares, representing approximately 33% of the total issued capital of the Company. As at the date of
this report, and to the best of the Directors' knowledge, 100% of the H shares of the Company are held by the
public.
There were no changes made to the articles of association of the Company during the Period.
INTERNAL CONTROLS
The Company has set up an internal monitoring system that aims to protect assets, preserve accounting and
financial information, as well as to ensure the accuracy of financial statements, including the establishment
of departments and units, setting out responsibilities, execution of management systems and quality control
mechanisms. The system is capable of taking necessary steps to react to possible changes in our businesses as
well as external operating environments. Throughout the operating process, the Company's various internal
control measures are being continuously enhanced, fulfilled and are deemed effective.
The Company's Audit Committee is charged with the duties of reviewing internal controls, directing monitoring
activities. Aside from reviewing the annual reporting by external auditors, the committee also reviews the
effectiveness of internal control system and risk management mechanism through reviewing the internal special
audit report on the Company's various core businesses prepared by internal audit department on a regular basis.
During the year, the Audit Committee focused on the management of the Company's toll revenue, as well as
compliance and risk control mechanism relating to innovative new business of the Company's securities business.
The internal audit department carried out specific audit into these compliance issues and monitored relevant
rectifications, ensuring the effectiveness of the Company's management systems.
During the Period, the Directors of the Company had carried out a review on the effectiveness of the Company's
internal control system, covering all material aspects of internal control, including financial control,
operational control, compliance control and risk management functions. There were no major breaches in the
internal control system that may have had an impact to Shareholders' interests, and the internal control system
was deemed to be effective and sufficient.
MANAGEMENT FUNCTIONS
The management functions of the Board and the management are expressly stipulated in the articles of association
of the Company. Pursuant to the articles of association of the Company, the management of the Company is
assigned the functions to be in charge of the production and business operation of the Company and to organize
the implementation of the resolutions of the board of directors, to organize the implementation of the annual
business plan and investment program of the Company, to prepare plans for the establishment of the internal
management structure of the Company, to prepare the basic management systems of the Company, and to formulate
basic rules and regulations of the Company, etc.
Directors, Supervisors and Senior Management Profiles
DIRECTORS
Executive Directors
Mr. ZHAN Xiaozhang, born in 1964, is a senior economist. Mr. Zhan holds a bachelor's degree in law. He further
obtained a master's degree in public administration from the Business Institute of Zhejiang University in 2005.
He has been appointed as the Chairman of the Company since June 2012.
From 1985 to 1991, Mr. Zhan worked as an officer at Transport Administrative Division under Waterway Transport
Authority of Zhejiang Provincial Bureau of Construction. From 1991 to 1998, he served as Deputy Secretary and
Secretary of the Communist Youth League Commission at Zhejiang Provincial Bureau of Communications.
From 1998 to 2002, he was Deputy Director of Waterway Transport Authority under Zhejiang Provincial Bureau of
Communications. From 2002 to 2003, he was Deputy Director of Human Resources Department at Zhejiang Provincial
Bureau of Communications. From 2003 to 2006, Mr. Zhan was Chairman of Zhejiang Wenzhou Yongtaiwen
Expressway Co., Ltd. From 2006 to 2008, he became Chairman of Zhejiang Jinji Property Co., Ltd. Mr. Zhan has
been Assistant to General Manager and Manager of Research and Development Department at Zhejiang Communications
Investment Group Co., Ltd from 2006 to 2009.
He served as an Executive Director and the General Manager of the Company from March 2009 to June 2012.
Mr. ZHAN currently serves as Deputy General Manager of Communications Group.
Ms. LUO Jianhu, born in 1971, graduated from the Department of Law at Hangzhou University with a bachelor's
degree in law, majoring in Economic Law. She is a lawyer and senior economist. Ms. Luo has been appointed as an
Executive Director and the General Manager of the Company since June 2012.
Since she started her career in August 1994, Ms. Luo had held such positions as the board secretary of Zhejiang
Transportation Engineering Construction Group Co., Ltd., the deputy director, director of the Legal Affairs
Department, the deputy director, director of the Secretarial Office to the board, board secretary and the
manager of the Investment and Development Department of Zhejiang Communications Investment Group Co., Ltd.
Mr. DING Huikang, born in 1955, is a professor-level senior engineer, an Executive Director, Deputy General
Manager of the Company and chairman of Maintenance Co. Mr. Ding graduated from Zhejiang Institute of
Communications majoring in Road and Bridge Engineering and Changsha Institute of Communications, majoring in
Economic Law. From 1980 to 1997, Mr. Ding successively held the positions of technician, assistant
engineer, engineer, assistant team leader and team leader at No. 1 Road Engineering Team of Zhejiang Province.
From 1997 to 2000, he served as General Manager and senior engineer of No.1 Transportation Engineering Co.,
Ltd. of Zhejiang Transportation Engineering Construction Group. From 2000 to 2004, he was head of the management
committee of Zhejiang Ningbo Yongtaiwen Expressway Second Phase Project. He has been Chairman of Zhejiang Ningbo
Yongtaiwen Expressway Co., Ltd. and Zhejiang Zhoushan Cross-Sea Bridge Co., Ltd. since 2004 and 2006 respectively.
He has been serving as Executive Director and Deputy General Manager since August 2010.
Non-Executive Directors
Mr. LI Zongsheng, born in 1967, is a senior economist. Since Mr. Li graduated from the Department of Chinese
Language at YanTai University in July 1991, he had served as the deputy director of the administrative office of
the Commission for Economy and Trade of Zaozhuang in Shandong Province and the head of the First Secretarial
Division of Zaozhuang Municipal Government Office.
Since he joined Zhejiang Communications Investment Group Co., Ltd. in July 2004, he had successively held the
positions of the head and deputy director of the Chinese Communist Party Working Department, deputy director of
the Discipline Office and the board secretary and deputy director of the Secretarial Office to the Board. He is
currently the manager of the Human Resources Department of Zhejiang Communications Investment Group Co. Ltd.
Mr. WANG Weili, born in 1966, graduated from Fuzhou University majoring in Road and Bridge. He is a senior
engineer with professional certification.
Since he started his career in September 1987, Mr. Wang had served as an engineer of Zhejiang Transportation
Design Institute, the vice director of Engineering Division of Executive Commission of Zhejiang Jinliwen
Expressway Co., Ltd. and the deputy general manager and chief engineer of Zhejiang-Jiashao Expressway
Co., Ltd. Since he joined Zhejiang Communications Investment Group Co., Ltd. in May 2006, he had successively
held the positions of the deputy manager of Project Management Department, deputy manager of Security Management
Department, manager of Expressway Management Department, deputy supervisor of the Expressway Construction
Management Office and managing director of Zhejiang Smart Expressway Services Co., Ltd.
He is currently the chairman of Jinliwen Expressway Co., Ltd.
Mr. WANG Dongjie, born in 1977, graduated from Southeast University majoring in Highway and Railway Engineering
with a master's degree in engineering. He is a senior engineer.
Since he started his career in March 2002, Mr. Wang had served as an engineer of the Executive Commission of
Hangzhou Ring Road North Line Project, the deputy executive chief of the Executive Commission for the interflow
renovation of Hangzhou airport road, the Engineering Division Chief of Management Office of Chun'an
section of Hangqian Expressway and the director and deputy general manager of Hangzhou Transportation Road and
Bridge Construction Company.
He joined Zhejiang Communications Investment Group Co., Ltd. in January 2007 and is currently the president of
the Investment and Development Department.
Independent Non-Executive Directors
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 Tutor, 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 and General Secretary in the Hangzhou City Communist Party Committee and Secretary in the Municipal
Political and Legislative 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. He is currently Special Advisor to the Zhejiang Provincial
Government. From 2003 to 2008, Mr. Zhang served as Director of the Zhejiang Province Economic Development
Consultation Committee. From 2005 to 2013, he successively held the positions of team leader of the Central
Supervision Team and inspection commissioner of the Ministry of Education. Mr. Zhang is currently the special
consultant (inspection) of the Ministry of Education, 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.
ZHOU Jun, born in 1969, is the executive director and vice president of Shanghai Industrial Investment (Holdings)
Co. Ltd. ("SIIC"). Mr. Zhou graduated from Nanjing University and Fudan University with a bachelor's degree and
a master's degree. He also serves as the chairman of S.I. Infrastructure Holdings Ltd. and eight other companies,
the Chairman of Asia Water Technology Ltd. in Singapore (SGX: 5GB), executive director and deputy CEO of Shanghai
Industrial Holdings Ltd. (HK: 0363), executive director of Shanghai Industrial Urban Development Group Ltd.
(HK: 0563). He worked for Guotai Securities Co., Ltd. (now Guotai Junan Securities Co). Before joining SIIC in
April 1996, the management positions he had held within the SIIC group of companies were deputy general manager
of SIIC Real Estate Holdings (Shanghai) Co., Ltd., deputy general manager of Shanghai United Holdings Co., Ltd.
(SH: 600607), managing director of Shanghai Cyber Galaxy Investment Co., Ltd. and general manager of the
Strategic Investment Department of SIIC. Mr. Zhou has about 20 years' professional experience in general
management, financial investment, real estate and project planning.
Mr. PEI Ker-Wei, born in 1957, is a Professor of Accountancy and Executive Dean for China Region at W. P. Carey
School of Business, Arizona State University. Mr. Pei received his Ph.D. degree in Accounting from University of
North Texas in 1986.
He is currently the director of W.P. Carey EMBA programs in China. He served as the chairman of the
Globalization Committee of the American Accounting Association in 1997 and as the president of the Chinese
Accounting Professors Association-North America in 1993 to 1994.
Mr. Pei currently serves as an external director of Baosteel Group and independent director of Want Want China
Holdings (00151.hk) and Zhong An Real Estate (00672. hk).
SUPERVISORS
Representing Shareholders
Mr. FU Zhexiang, born in 1958, graduated from Correspondence College of the Party Central School majoring in
Economics with a bachelor's degree. He is a senior accountant with professional certification.
Since he started his career in December 1976, Mr. Fu had served as the deputy chief of the Fee Collection
Division of Highway Inspection and Collection Bureau of Zhejiang Province and the deputy chief accountant of
Zhejiang Xin Gan Xian Express Passenger Transportation Co., Ltd. Since he joined Zhejiang Communications
Investment Group Co., Ltd. in February
2002, he had successively held the positions of the assistant to manager of the Financial Audit Department,
the deputy manager and manager of the Financial Management Department, and the deputy manager of the Internal
Audit Department.
He is currently the deputy chief economist of Zhejiang Communications Investment Group Co., Ltd. and chairman
of Zhejiang Communications Investment Group Finance Co., Ltd.
Independent Supervisors
Mr. WU Yongmin, born in 1963, is an Assistant Professor. Mr. Wu graduated from China University of Political
Science and Law with a master's degree.
He was the Deputy Dean of t he Department of Law at Hangzhou University, Deputy Dean of the
Department of Law at Zhejiang University's Law School, and Director of Zheda Law Firm. Mr. Wu studied at the
Christian-Albrechts-Universitat zu Kiel in 1996 as a visiting scholar. He is currently the Dean of the
Department of Law at the Law School of Zhejiang University, a Supervisor for master's degree candidates in
Business Law, a member of China Business Law Research Council, Deputy Director of Zhejiang Tax Law Research
Council, an Arbitrator of Hangzhou Arbitration Committee, and a Lawyer at Zhejiang Zeda Law Firm.
Mr. LIU Haisheng, born in 1969, obtained a doctorate degree in Economics from Fudan University,
a postdoctoral fellow in Accounting at Xiamen Universit y . He is currently Professor in Accounting,
a master student supervisor, a Certified Public Accountant (non-practicing) in the PRC, a member of the
Expert Consultancy Committee of Accounting Standards in Zhejiang Province, an Assessment Expert
on Financial Expenditures Performance of Zhejiang Province and Independent Supervisor of the Company.
He is currently a Vice Dean of the School of Finance and Accounting at Zhejiang Gongshang University. His main
research fields include accounting for intangible assets, strategic cost management and economic
theories. Mr. Liu is also independent director of a number of listed companies including Zhejiang Qianjiang
Motorcycle Co., Ltd.
Mr. ZHANG Guohua, born in 1963, obtained a doctorate degree in human resources management. He is a senior
economist and the vice president of China Everbright Bank, Hangzhou Branch (official chairman-level). Mr. Zhang
graduated from Hangzhou University in 1985 with a bachelor's degree in education and then received a
master's degree in educational psychology in 1988. In 2000, he was granted the Graduate Certificate of
Completion in finance by the School of Economics of Zhejiang University, and then obtained the doctorate degree
in psychology from the College of Science of Zhejiang University in 2007.
Since 1988, Mr. Zhang had successively worked in the headquarters of Industrial and Commercial Bank of China,
Hangzhou Institute of Financial Managers, Hangzhou Financial Urban Credit Cooperative and China Everbright
Bank, Hangzhou Branch and Wuxi Branch, and Ping An Bank, Hangzhou Branch. He had held the positions of deputy
director of the Office, supervisor of the Credit Union, Vice President and President, respectively.
Since July 10, 2008, he has served as an independent director of Zheshang Securities.
Supervisor Representing Employees
Ms. ZHANG Xiuhua, born in 1969, is a senior economist, the Supervisor representing employees of the Company.
Ms. Zhang graduated from Chongqing Jiaotong University majoring in transportation management with a bachelor's
degree in science, and obtained a master's degree in business administration from Zhejiang University in 2006.
From July 1991 to February 1997, she worked in the Operation Division of the Zhejiang Provincial Expressway
Executive Commission. She joined the Company since March 1997, and had served as assistant manager, deputy
manager and manager of the Operation Department.
Ms. Zhang currently serves as the Assistant to General Manager. She is also General Manager of Shengxin Co,
the director of Yuhang Co, Jiaxing Co, and Petroleum Co.
OTHER MEMBERS OF SENIOR MANAGEMENT
Mr. ZHANG Jingzhong, born in 1963, is a Senior Lawyer, the Deputy General Manager 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 a Senior Partner at T&C Law Firm in Hangzhou.
Mr. Zhang has been an Executive Director and Company Secretary of the Company since March 1997, and was
appointed Deputy General Manager in March 2002. He has been re-appointed as Company Secretary since March
2003 and Deputy General Manager since March 2006. Mr. Zhang also serves as Director at Shangsan Co, Development
Co, and Vice Chairman at Zheshang Securities.
FANG Zhexing, born in 1965, is a Senior Engineer, the Deputy General Manager of the Company. Mr. Fang graduated
from Zhejiang University where he received a master's degree in engineering in 1991.
From 1986 to 1988 he was the Assistant Engineer in the Project Management Office of the Electric Power and Water
Conservancy Bureau in Taizhou, Zhejiang Province. From 1991 until 1997, he was the Engineer in the Project
Management Office of Zhejiang Provincial Expressway Executive Commission, where he participated in the project
management of Shanghai- Hangzhou-Ningbo Expressway.
Since March 1997, he has served as the Deputy Manager and the Manager of the Planning and Development Department,
the Manager of the Project Development Department, the Director of Quality Management Office, the Director of
Internal Audit Department of the Company, the Manager of the Human Resources Department and the Secretary of
Disciplinary Committee. Mr. Fang is currently the Chairman of Development Co, Jiaxing Co and Advertising Co.
Mr. WU Junyi, born in 1969, a holder of master degree in accounting, and was 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 Securit ies
Invest ment Department and Manager of Planning and Finance Department. Mr. Wu has been re-designated as the
Manager of the Financial Management Department of Zhejiang Communications Investment Group Co., Ltd., and no
longer served as the Chief Financial Officer of the Company with effect from March 17, 2014.
Mr. Wang Dehua, who was born in 1974, graduated with an undergraduate degree in Accounting from Hangzhou
Institute of Electronics Engineering in 1996. He worked in the Foreign Funds Utilization Audit Department of
Zhejiang Provincial Audit Office from 1996 to 2003. Mr. Wang worked at the Corporation Division of the
Administrative and Finance Department of Liaison Office of the Central Government in the Hong Kong S.A.R. from
2003 to 2011, serving as its Deputy Director upon departure. Mr. Wang studied at School of Economics and Finance
of the Faculty of Business and Economics of the University of Hong Kong from 2005 to 2007, and graduated in 2007
with a master 's degree in Economics. He worked at Zhejiang Communications Investment Group Co., Ltd. from 2011
to 2014, serving as its Deputy General Manager upon departure. Mr. Wang Dehua has been appointed as the Chief
Financial Officer of the Company with effect from March 17, 2014.
Mr. Tony H. ZHENG, born in 1969, is the Company Secretary of the Company. Mr. Zheng graduated from University of
California at Berkeley in 1995 with a BS degree in Civil Engineering. He joined the Company in June 1997, and
has served as Deputy Director of the Secretarial Office to the Board and Assistant Company Secretary. Mr. Zheng
continues to serve as Director of the Secretarial Office to the Board, and Director of Hong Kong Representative
Office of the Company.
Report of the Directors
The Directors of the Company hereby present their report and the audited financial statements of the Group for
the year ended December 31, 2013.
PRINCIPAL ACTIVITIES
The principal activities of the Group comprise the operation, maintenance and management of high grade roads,
development and operation of certain ancillary services, such as advertising and fuel facilities, as well as
provision of security broking service and proprietary securities trading.
SEGMENT INFORMATION
During the year, the entire revenue and segment profit of the Group were derived from the People's Republic of
China ("PRC"). Accordingly, a further analysis of the revenue and segment profit by geographical area is not
presented. An analysis of the Group's revenue and segment profit by principal activities for the year ended
December 31, 2013 is set out in note 8 to the financial statements.
RESULTS AND DIVIDENDS
The Group's profit for the year ended December 31, 2013 and the state of financial position at that date are set
out in the financial statements.
An interim dividend of Rmb0.06 per share (approximately HK$0.08) was paid on November 20, 2013. The Directors
recommend the payment of a final dividend of Rmb0.25 (approximately HK$0.32) in respect of the year, to
shareholders whose names appeared on the register of members of the Company on May 14, 2014. This recommendation
has been incorporated in the financial statements as an allocation of retained earnings within the capital and
reserves section in the consolidated statement of financial position. The dividend payout ratio reached
70.6% during the Period. Further details of the dividends are set out in note 17 to the financial statements.
FIVE YEAR SUMMARY FINANCIAL INFORMATION
The following is a summary of the published consolidated results, and of the assets, liabilities and
non-controlling interests of the Group prepared on the basis set out in the notes below.
Year ended December 31,
2013 2012 2011 2010 2009
Results Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated) (Restated)
Revenue 7,851,115 6,927,415 6,994,391 6,959,504 6,175,626
Operating costs (4,955,609) (4,574,040) (4,277,222) (3,950,456) (3,325,756)
Gross profit 2,895,506 2,353,375 2,717,169 3,009,048 2,849,870
Security investment
gains 99,663 99,783 7,925 126,532 35,967
Other income 241,056 291,990 286,595 209,871 432,383
Administrative
expenses (84,792) (86,287) (90,618) (87,542) (73,886)
Other expenses (70,061) (49,778) (39,457) (23,689) (180,908)
Finance costs (95,161) (139,765) (171,440) (207,921) (151,220)
Share of profit of
associates 21,537 (4,513) 8,934 18,531 3,001
Share of profit of a
joint venture (36,010) (3,516) - - 21,254
Profit before tax 2,971,738 2,461,289 2,719,108 3,044,830 2,936,461
Income tax expense (756,761) (634,669) (704,705) (784,714) (811,530)
Profit for the year 2,214,977 1,826,620 2,014,403 2,260,116 2,124,931
Attributable to:
Owners of the Company 1,907,470 1,649,484 1,760,738 1,826,565 1,705,349
Non-controlling
interests 307,507 177,136 253,665 433,551 419,582
Earnings per share -
Basic and diluted 43.92 cents 37.98 cents 40.54 cents 42.06 cents 39.27 cents
As at December 31,
Assets and liabilities 2013 2012 2011 2010 2009
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated) (Restated)
Total assets 32,089,194 31,485,312 31,274,171 35,997,204 34,905,267
Total liabilities (12,420,235) (11,863,631) (12,027,203) (17,602,682) (17,165,182)
Net assets 19,668,959 19,621,681 19,246,968 18,394,522 17,740,085
Notes:
1. The consolidated results of the Group for the four years ended December 31, 2012 have been restated in
accordance with Accounting Guideline 5 "Merger Accounting for Common Control Combinations" issued by Hong
Kong Institute of Certified Public Accountants. While those of the year ended December 31, 2013 were
prepared based on the consolidated statement of profit or loss and other comprehensive income as set out on
the later part of the financial report.
2. The 2013 earnings per share is based on the profit attributable to owners of the Company for the year ended
December 31, 2013 of Rmb1,907,470,000 (2012 (Restated): Rmb1,649,484,000) and the 4,343,114,500
(2012: 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
ended December 31, as at December 31,
2013 2012 2013 2012
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 2,223,778 1,835,213 19,926,115 19,870,036
HK GAAP adjustments:
(a) Goodwill - - (199,769) (199,769)
(b) Amortization provided, net of
deferred tax (1,952) (1,952) (163,156) (161,204)
(c) Assessment on impact of
appreciation, (3,659) (3,547) 60,105 63,764
net of deferred tax
(d) Others - (7) 6,597 6,597
(e) Non-controlling interests (3,190) (3,087) 39,067 42,257
As restated in the financial statements 2,214,977 1,826,620 19,668,959 19,621,681
MAJOR CUSTOMERS AND SUPPLIERS
In the year under review, the five largest customers and suppliers of the Group accounted for less than 30% of
the total turnover and purchases, respectively.
None of the directors of the Company or any of their associates or any shareholders (which, to the best knowledge
of the directors, own more than 5% of the Company's issued share capital) had any beneficial interest in the
Group's five largest customers.
RELATED PARTY TRANSACTIONS
During the year, details of the related party transactions that the Company has entered into with its subsidiary
and fellow subsidiary are set out in note 51 to the financial statements. Certain related party transactions in
respect of the purchase of a 66.283% equity interest in the Jinhua Co and the capital contribution in Zhejiang
Communications Finance constitute non-exempt connected transactions as defined in Chapter 14A of the Listing
Rules, whereas the deposit services provided by Zhejiang Communications Finance constitute non-exempt continuing
connected transactions as defined in Chapter 14A of the Listing Rules. Please refer to the section headed
"Connected Transactions" below for further details about such connected transactions. The Company has complied
with the disclosure requirements in respect of such connected transactions in accordance with Chapter 14A of the
Listing Rules.
PROPERTY, PLANT AND EQUIPMENT
Details of movements in property, plant and equipment of the Group during the year are set out in note 19 to
the financial statements.
CAPITAL COMMITMENTS
Details of the capital commitments of the Group as at December 31, 2013 are set out in note 47 to the financial
statements.
RESERVES
Details of movements in the reserves of the Group during the year are set out in the consolidated statement of
changes in equity to the financial statements.
DISTRIBUTABLE RESERVES
As at December 31, 2013, 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 Rmb2,146,650,000. In addition, in accordance
with the Company Law of the PRC, the amount of approximately Rmb3,645,726,000 standing to the credit of the
Company's share premium account as prepared in accordance with the PRC accounting standards was available for
distribution by way of capitalization issues.
TRUST DEPOSITS
As at December 31, 2013, other than the deposits placed with a non-bank financial institution of
Rmb60,443,000, the Group's deposits have been placed with commercial banks in the PRC and the Group has not
encountered any difficulty in the withdrawal of funds.
PURCHASE, REDEMPTION OR SALE OF THE LISTED SECURITIES OF THE COMPANY
Neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company's listed
securities during the year.
DIRECTORS
The Directors of the Company during the year and as at the date of this report are:
EXECUTIVE DIRECTORS
Mr. ZHAN Xiaozhang (Chairman)
Ms. LUO Jianhu (General Manager)
Mr. DING Huikang
NON-EXECUTIVE DIRECTOR
Mr. LI Zongsheng
Mr. WANG Weili
Mr. WANG Dongjie
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. ZHANG Junsheng
Mr. ZHOU Jun
Mr. PEI Ker-Wei
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
Directors, Supervisors and Senior Management Profiles section 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
June 11, 2012, to June 30, 2015.
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, 2013 or during the year, none of the Directors or Supervisors had a material interest, either
directly or indirectly, in any contract of significance to the business of the Group to which the Company, its
holding company, or any of its subsidiaries or fellow subsidiaries was a party.
DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE'S RIGHTS TO SUBSCRIBE FOR SHARES OR DEBENTURES
At no time during the year were there rights to acquire benefits by means of the acquisition of shares in or
debentures of the Company granted to any Director, Supervisor and chief executive or their respective spouse or
minor children, or were any such rights exercised by them; or was the Company, its holding company, or any of
its subsidiaries or fellow subsidiaries a party to any arrangement to enable any such persons to acquire such
rights in any other body corporate.
SHARE CAPITAL
There were no movements in the Company's issued share capital during the year.
PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights in the Company's Articles of Association or the laws of the PRC
which would require the Company to offer new shares on a pro rata basis to existing shareholders.
TAXATION AND TAX RELIEF
According to a Notice issued jointly by PRC Ministry of Finance and State Administration of Taxation regarding
individual income tax policies (Caishuizi[1994]No.020), the dividend incomes received by foreign individuals
from a foreign- invested enterprise are exempt from individual income tax.
As stipulated by a Notice issued by the PRC State Administration of Taxation in relation to the withholding and
payment of enterprise income tax by Chinese resident enterprises for payment of dividend to H shareholders
who are overseas non-resident enterprises (Guoshuihan[2008]No. 897), the Company as a Chinese resident
enterprises is required to withhold 10% enterprise income tax when it distributes dividends for the year 2008
and thereafter to all non-resident enterprise holders of H shares of the Company (including HKSCC Nominees
Limited, other nominees, trustees or other entities and organizations, who will be deemed as non-resident
enterprise holders of H shares) whose names appear on the H share register of members of the Company on the
record date.
Under current practice of the Hong Kong Inland Revenue Department, no tax is payable in Hong Kong in respect of
dividends paid by the Company.
Shareholders are taxed or enjoy tax relief in accordance with the aforementioned regulations.
SUFFICIENCY OF PUBLIC FLOAT
Based on the information that is publicly available to the Company and within the knowledge of the Directors, as
at the latest practicable date prior to the issue of this annual report, the Company has maintained sufficient
amount of public float as required under the Listing Rules.
AUDITORS
Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong, who had served as the Company's Hong Kong
auditors since 2005, will retire and a resolution for their re-appointment as Hong Kong auditors of the Company
will be proposed at the forthcoming Annual General Meeting of the shareholders.
By Order of the Board
ZHAN Xiaozhang
Chairman
Hangzhou, Zhejiang Province, the PRC
March 17, 2014
Report of the Supervisory Committee
During the Period, the Supervisory Committee duly performed its supervisory responsibilities, and safeguarded
the legitimate interests of the shareholders and the Company in accordance with relevant rules and regulations
under the Company Law of the PRC, the Company's Articles of Association and the Rules of the Supervisory
Committee.
Main tasks undertaken by the Supervisory Committee during the Period were to assess and supervise lawfulness
and appropriateness of the activities of the Directors, General Manager and other senior management of the
Company in their business decision-making and daily management processes, through a combination of activities
including holding meetings of the Supervisory Committee and attending general meetings of shareholders and
meetings of the Board. The Supervisory Committee has carefully examined the operating results and the financial
standing of the Company, discussed and reviewed the financial statements to be submitted by the Board to the
general meeting of shareholders.
During the Period, the Supervisory Committee held two meetings of its own, and attended four meetings held by
the Board and two general meetings of shareholders. The Supervisory Committee observes that during the Period
and with the support of Communications Group, the Company was able to start its three-year development plan with
success, realizing the best business performance since 2008. A series of key areas of work achieved satisfactory
progress, including improvement in roadway conditions, enhancement in safety and risk control management, the
establishment of comprehensive standardized management systems, elevating brand images at the service areas,
first time asset injection by the Communications Group, as well as successful submission of IPO application on
the part of Zheshang Securities.
The Supervisory Committee has reviewed the financial statements of the Company for 2013 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 2013, and complied with the relevant laws, regulations and
the Company's Articles of Association. The Company maintained a high dividend payout ratio in recent years,
thereby maintaining a stable long term dividend payout policy and providing satisfactory return to its
shareholders.
During the Period, the members of the Board, General Manager and other senior management of the Company have
complied with their fiduciary duties and have acted in good faith and diligently while carrying out their
responsibilities. There was no incident of abuse of power or infringement of the interests of shareholders or
employees.
The Supervisory Committee is satisfied with the performances across various lines of business achieved by the
Board and the management of the Company.
By the order of the Supervisory Committee
FU Zhexiang
Chairman of the Supervisory Committee
Hangzhou, Zhejiang Province, the PRC
March 14, 2014
Connected Transactions
During the year ended 31 December 2013, the Company had the following non-exempt connected transactions and
non-exempt continuing connected transactions.
Connected Transactions
Acquisition of 76.55% equity interests in Jinhua Co
On 20 March 2013, the Company entered into an agreement with Communications Group pursuant to which the Company
conditionally agreed to purchase from Communications Group a 66.283% equity interest in Jinhua Co held by
Communications Group at a cash consideration of Rmb655,356,000 (the "Communications Group Acquisition").
On the same date, the Company entered into an agreement with Yiwu Communications Development Co., Ltd.
("Yiwu Development"), pursuant to which the Company conditionally agreed to purchase from Yiwu Development
a 10.267% equity interest in Jinhua Co held by Yiwu Development at a cash consideration of Rmb101,512,000
(the "Yiwu Acquisition", together with the Communications Group Acquisition, the "Acquisitions").
On June 30, 2013, the Company completed the Acquisitions. As the Company already owned a 23.45% equity interest
in Jinhua Co prior to the Acquisitions, the Company beneficially owns the entire equity interest in Jinhua Co
upon the completion of the Acquisitions.
As Communications Group is a substantial shareholder (as defined in the Listing Rules) of the Company and
therefore, a connected person of the Company, the Communications Group Acquisition constitutes a connected
transaction for the Company under Chapter 14A of the Listing Rules. Under the terms of the Yiwu Acquisition,
completion of the Yiwu Acquisition is conditional upon, among other things, the prior completion of the
Communications Group Acquisition (but not vice versa). Accordingly, although Yiwu Development is an independent
third party, Yiwu Development is also treated as a connected person of the Company and the Yiwu Acquisition
also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules.
Capital increase in Zhejiang Communications Finance
On March 30, 2013, the Company entered into a capital contribution agreement with Zhejiang Communications
Finance, Communications Group, Zhejiang Ningbo Yongtaiwen Expressway Co., Ltd. ("Ningbo Expressway Co") and
Zhejiang Taizhou Yongtaiwen Expressway Co., Ltd. ("Taizhou Expressway Co"), pursuant to which the Company
conditionally agreed to contribute an amount of RMB280,000,000, by way of cash, into the equity capital of
Zhejiang Communications Finance (the "Capital Contribution").
On May 2, 2013, the Company completed the Capital Contribution, and upon such completion, the Company
beneficially owns a 35% equity interest in Zhejiang Communications Finance.
The Communications Group is a substantial shareholder (as defined under the Listing Rules) of the Company, and
Communications Group also holds approximately 75% of the issued share capital of each of Ningbo Expressway Co.
and Taizhou Expressway Co. and 60% of the issued share capital of Zhejiang Communications Finance. Therefore,
each of Communications Group, Ningbo Expressway Co., Taizhou Expressway Co and Zhejiang Communications Finance
is a connected person of the Company and as a result, the Capital Contribution constitutes a connected
transaction for the Company under Chapter 14A of the Listing Rules.
Continuing Connected Transactions
Deposit services with Zhejiang Communications Finance
Pursuant to a financial services agreement (the "Financial Services Agreement") dated July 18, 2013 entered into
between the Company and Zhejiang Communications Finance, Zhejiang Communications Finance agreed to provide the
Company with a range of financial services including certain deposit services (the "Deposit Services") for a
term of three years from the date of the Financial Services Agreement subject to the terms and conditions
provided therein. As the Company, Communications Group (a substantial shareholder of the Company), Ningbo
Expressway Co. and Taizhou Expressway Co. beneficially own 35%, 40%, 15.625% and 9.375% of the issued share
capital of Zhejiang Communications Finance, respectively, Zhejiang Communications Finance is a connected person
of the Company and as a result, the Deposit Services constitute continuing connected transactions for the
Company under Chapter 14A of the Listing Rules.
During the year 2013, besides the Company, Jinhua Co has also placed deposits with Zhejiang Communications
Finance. As the definition of "the Company" used in the Financial Services Agreement did not specifically refer
to the Company's subsidiaries as potential recipients of the Deposit Services, on March 28, 2014, the Company
and Zhejiang Communications Finance entered into a supplemental agreement (the "Supplemental Agreement") to
supplement the Financial Services Agreement with retrospective effect from July 18, 2013, so as to make clear
that the definition of "the Company" used in the Financial Services Agreement as the proposed recipient of the
financial services under the agreement, was intended to refer to the Group. All other terms of the Financial
Services Agreement remain unchanged.
Under the Financial Services Agreem ent (as supplemented by the Supplemental Agreement ), Zhejiang Communications
Finance may provide Deposit Services including current deposit, time deposit, call deposit or agreement deposit
services to the Group. The Deposit Services will be provided under the Financial Services Agreement on a
non-exclusive basis and the Group is entitled to determine whether to accept the Deposit Services provided by
Zhejiang Communications Finance or decide to accept deposit services provided by other financial institutions.
The Group is not obliged to accept any Deposit Services provided by Zhejiang Communications Finance under the
Financial Services Agreement.
The interest rate to be paid by Zhejiang Communications Finance for the Group's deposits with Zhejiang
Communications Finance shall be determined based on the prevailing deposit interest rate promulgated by the
People's Bank of China for the same period and should not be lower than the deposit interest rates offered by
major commercial banks in the PRC for comparable deposits of comparable periods.
The maximum amount of the daily deposit balance (including any interest accrued thereon) for the Group's
deposits with Zhejiang Communications Finance shall not be more than Rmb700,000,000 during the term of the
Financial Services Agreement.
During the year under review, the maximum amount of the daily deposit balance (including any interest accrued
thereon) for the Group's deposits with Zhejiang Communications Finance under the Financial Services Agreement
was Rmb345,453,000.
The independent non-executive Directors have reviewed the continuing connected transactions described above
and confirmed that the continuing connected transactions have been entered into:
(a) in the ordinary and usual course of business of the Company;
(b) on normal commercial terms or on terms no less favorable to the Company than terms available to or from
independent third parties; and
(c) in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the
interests of the shareholders of the Company as a whole.
The Company's auditor was engaged to report on the Group's continuing connected transactions in accordance with
Hong Kong Standard on Assurance Engagements HKSAE 3000 "Assurance Engagements Other Than Audits or Reviews of
Historical Financial Information" and with reference to Practice Note 740 "Auditor's Letter on Continuing
Connected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong Institute of Certified Public
Accountants. The auditors have issued their unqualified letter containing their findings and conclusions in
respect of the continuing connected transactions in accordance with the Rule 14A.38 of the Listing Rules. A copy
of the auditor's letter has been provided to the Hong Kong Stock Exchange.
Independent Auditor's Report
TO THE MEMBERS OF ZHEJIANG EXPRESSWAY CO., LTD.
(Incorporated in the People's Republic of China with limited liability)
We have audited the consolidated financial statements of Zhejiang Expressway Co., Ltd. (the "Company") and its
subsidiaries (collectively referred to as the "Group"), which comprise the
consolidated statement of financial position as at December 31, 2013, and the consolidated statement of profit
or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of
cash flows for the year then ended, and a summary of significant accounting policies and other explanatory
information.
Directors' Responsibility for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of consolidated financial statements that give
a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute
of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for
such internal control as the directors determine is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to
report our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other
purpose. We do not assume responsibility towards or accept liability to any other person for the contents of
this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong
Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor 's judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation of consolidated financial statements that give a true and fair view in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the
Group as at December 31, 2013, 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, 2014
Consolidated Statement of Profit or Loss and other Comprehensive Income
For the year ended December 31, 2013
Year ended Year ended
NOTES 12/31/2013 12/31/2012
Rmb'000 Rmb'000
(Restated)
Revenue 8 7,851,115 6,927,415
Operating costs (4,955,609) (4,574,040)
Gross profit 2,895,506 2,353,375
Securities investment gains 9 99,663 99,783
Other income 10 241,056 291,990
Administrative expenses (84,792) (86,287)
Other expenses (70,061) (49,778)
Share of profit (loss) of
associates 21,537 (4,513)
Share of loss of a joint venture (36,010) (3,516)
Finance costs 11 (95,161) (139,765)
Profit before tax 12 2,971,738 2,461,289
Income tax expense 13 (756,761) (634,669)
Profit for the year 2,214,977 1,826,620
Other comprehensive income 14
Items that may be reclassified
to profit or loss:
Available-for-sale financial
assets:
- Fair value gain during the
year 4,865 4,800
- Reclassification adjustments
for cumulative gain
included in profit or loss
upon disposal (1,381) (175)
Income tax relating to components
of other comprehensive income (871) (1,156)
Other comprehensive income for
the year (net of tax) 2,613 3,469
Total comprehensive income
for the year 2,217,590 1,830,089
Profit for the year attributable
to:
Owners of the Company 1,907,470 1,649,484
Non-controlling interests 307,507 177,136
2,214,977 1,826,620
Total comprehensive income
attributable to:
Owners of the Company 1,909,017 1,651,293
Non-controlling interests 308,573 178,796
2,217,590 1,830,089
EARNINGS PER SHARE - Basic
and diluted 18 Rmb43.92 cents Rmb37.98 cents
Consolidated Statement of Financial Position
At December 31, 2013
NOTES 12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
NON-CURRENT ASSETS
Property, plant and equipment 19 1,762,042 1,634,299 1,582,832
Prepaid lease payments 20 68,156 70,321 72,476
Expressway operating rights 21 11,911,133 12,722,158 13,468,635
Goodwill 22 86,867 86,867 86,867
Other intangible assets 23 154,564 155,633 157,594
Deposit paid for acquisition
of a property 24 - - 323,800
Interests in associates 26 574,733 280,057 248,395
Interest in a joint venture 27 333,944 369,954 -
Available-for-sale investments 28 143,514 133,000 1,000
Other receivables 31 401,400 325,035 300,000
15,436,353 15,777,324 16,241,599
CURRENT ASSETS
Inventories 73,576 27,418 26,400
Trade receivables 29 101,428 64,447 52,475
Loans to customers arising
from margin financing business 30 2,946,911 724,123 -
Other receivables and prepayments 31 451,968 621,023 846,127
Prepaid lease payments 20 2,155 2,154 2,154
Available-for-sale investments 28 281,924 134,899 60,274
Held for trading investments 32 1,181,025 1,486,772 1,260,021
Financial assets held under
resale agreements 33 874,254 280,066 -
Bank balances held on behalf
of customers 34 8,228,160 7,491,625 7,177,508
Bank balances and cash
- Time deposits with original
maturity over three months 35 704,459 1,483,408 2,467,793
- Cash and cash equivalents 35 1,806,981 3,392,053 3,139,820
16,652,841 15,707,988 15,032,572
NOTES 12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
CURRENT LIABILITIES
Placements from other financial
institution 36 310,000 - -
Accounts payable to customers
arising from securities business 37 8,167,103 7,481,819 7,143,067
Trade payables 38 421,994 408,612 345,453
Tax liabilities 331,611 223,592 491,619
Other taxes payable 53,417 54,226 62,918
Other payables and accruals 39 995,496 991,260 741,031
Dividends payable 94,976 94,998 94,971
Bank and other borrowings 40 540,000 660,000 712,553
Long-term bonds due in one-year 41 - 1,000,000 -
Short-term loan note 42 1,000,000 - -
Derivative financial instrument - - 6,426
11,914,597 10,914,507 9,598,038
NET CURRENT ASSETS 4,738,244 4,793,481 5,434,534
TOTAL ASSETS LESS CURRENT
LIABILITIES 20,174,597 20,570,805 21,676,133
NON-CURRENT LIABILITIES
Bank and other borrowings 40 300,000 680,000 1,140,000
Long-term bonds 41 - - 1,000,000
Deferred tax liabilities 43 205,638 269,124 289,165
505,638 949,124 2,429,165
19,668,959 19,621,681 19,246,968
CAPITAL AND RESERVESShare capital 44 4,343,115 4,343,115 4,343,115
Reserves 11,629,423 11,701,345 11,396,418
Equity attributable to owners
of the Company 15,972,538 16,044,460 15,739,533
Non-controlling interests 45 3,696,421 3,577,221 3,507,435
19,668,959 19,621,681 19,246,968
The consolidated financial statements were approved and authorised for issue by the
board of directors on March 17, 2014 and are signed on its behalf by:
ZHAN Xiaozhang LUO Jianhu
DIRECTOR DIRECTOR
Consolidated Statement of Changes in Equity
For the year ended December 31, 2013
Attributable to owners of the Company
Investment
Share Share Statutory Capital revaluation Dividend
capital premium reserve reserve reserve reserve
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Note i)
At January 1, 2012
(Originally stated) 4,343,115 3,645,726 2,968,634 1,712 (1,555) 1,085,779
Merger accounting
restatement - - - - - -
At January 1, 2012
(Restated) 4,343,115 3,645,726 2,968,634 1,712 (1,555) 1,085,779
Profit for the year - - - - - -
Other comprehensive
income for the year - - - - 1,809 -
Total comprehensive
income for the year - - - - 1,809 -
Dividend paid to
non-controlling
interests - - - - - -
Interim dividend - - - - - -
Final dividend - - - - - (1,085,779)
Proposed final dividend - - - - - 1,042,347
Transfer to reserves - - 258,877 - - -
At December 31, 2012
(Restated) 4,343,115 3,645,726 3,227,511 1,712 254 1,042,347
Profit for the year - - - - - -
Other comprehensive
income for the year - - - - 1,547 -
Total comprehensive
income for the year - - - - 1,547 -
Arising from
acquisition of
a subsidiary under
common control and
additional interest
in a subsidiary
(Note 2) - - - - - -
Dividend paid to
non-controlling
interests - - - - - -
Interim dividend - - - - - -
Final dividend - - - - - (1,042,347)
Proposed final dividend - - - - - 1,085,779
Transfer to reserves - - 318,348 - - -
At December 31, 2013 4,343,115 3,645,726 3,545,859 1,712 1,801 1,085,779
- Cont'd -
Attributable to owners of the Company Non-
controlling
Special Retained interests Total
reserves profits Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Note ii)
At January 1, 2012
(Originally stated) 18,666 3,116,462 15,178,539 3,420,561 18,599,100
Merger accounting
restatement 797,471 (236,477) 560,994 86,874 647,868
At January 1, 2012
(Restated) 816,137 2,879,985 15,739,533 3,507,435 19,246,968
Profit for the year - 1,649,484 1,649,484 177,136 1,826,620
Other comprehensive
income for the year - - 1,809 1,660 3,469
Total comprehensive
income for the year - 1,649,484 1,651,293 178,796 1,830,089
Dividend paid to
non-controlling
interests - - - (109,010) (109,010)
Interim dividend - (260,587) (260,587) - (260,587)
Final dividend - - (1,085,779) - (1,085,779)
Proposed final dividend - (1,042,347) - - -
Transfer to reserves - (258,877) - - -
At December 31, 2012
(Restated) 816,137 2,967,658 16,044,460 3,577,221 19,621,681
Profit for the year - 1,907,470 1,907,470 307,507 2,214,977
Other comprehensive
income for the year - - 1,547 1,066 2,613
Total comprehensive
income for the year - 1,907,470 1,909,017 308,573 2,217,590
Arising from
acquisition of
a subsidiary under
common control and
additional interest
in a subsidiary
(Note 2) (678,005) - (678,005) (78,863) (756,868)
Dividend paid to
non-controlling
interests - - - (110,510) (110,510)
Interim dividend - (260,587) (260,587) - (260,587)
Final dividend - - (1,042,347) - (1,042,347)
Proposed final dividend - (1,085,779) - - -
Transfer to reserves - (318,348) - - -
At December 31, 2013 138,132 3,210,414 15,972,538 3,696,421 19,668,959
Notes:
(i) Statutory reserves comprise:
(a) Statutory surplus reserve
In accordance with the Company Law of the people's Republic of China (the "PRC") and the respective
articles of association of the Company and its subsidiaries (collectively the "Entities"), the Entities
are required to allocate 10% of the profit after tax, as determined in accordance with the PRC
accounting standards and regulations applicable to the Entities, to the statutory surplus reserve until
such reserve reaches 50% of the registered capital of the respective Entities. Subject to certain
restrictions set out in the Company Law of the PRC and the respective articles of association of the
Entities, part of the statutory surplus reserve may be converted to increase the respective Entities'
capital.
(b) General risk reserve
In accordance with the Finance Regulation for Financial Enterprises, securities companies are required
to allocate 10% of the profit after tax, as determined in accordance with the PRC accounting standards
and regulations, to the general risk reserve. This general risk reserve may be used to cover potential
losses on risk exposures.
(c) Transaction risk reserve
In accordance with the securities law of the PRC, securities companies are required to allocate not
less than 10% of the profit after tax, as determined in accordance with the PRC accounting standards
and regulations, to the transaction risk reserve. This transaction risk reserve may be used to cover
potential losses on securities transactions.
(ii) Special reserves mainly comprise:
(a) Other reserve which was arising from the Group's acquisition of additional interest in a subsidiary and
the difference between the carrying value of net assets attributable to the Group acquired and the
payment consideration arising from acquisition of a combining entity; and
(b) Merger reserve which was arising from the acquisition of a subsidiary under common control using the
merger accounting method. This includes the capital of the combining entity at its existing book values
since the first date it was under common control and was reduced by the Group's payment of cash
consideration of Rmb655,356,000 to the controlling party and cash payment for acquisition of additional
interest of Rmb22,649,000 to the non-controlling interest during the year December 31, 2013. Details of
the transaction are set out in Note 2.
Consolidated Statement of Cash Flows
For the year ended December 31, 2013
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
(Restated)
OPERATING ACTIVITIES
Profit before tax 2,971,738 2,461,289
Adjustments for:
Finance costs 95,161 139,765
Interest income (95,922) (181,659)
Share of (profit) loss of associates (21,537) 4,513
Gain on deregistration of an associate (16) -
Gain on disposal of an associate (-) (12)
Share of loss of a joint venture 36,010 3,516
Depreciation of property, plant and equipment 190,690 179,635
Amortisation of expressway operating rights 811,025 807,207
Amortisation of prepaid lease payments 2,164 2,155
Amortisation of other intangible assets 18,644 16,248
Fair value changes on derivative financial instrument - (2,841)
Fair value changes on held for trading investments (98,282) (99,608)
Gain on disposal of available-for-sale investments (1,381) (175)
Loss on disposal of property, plant and equipment 2,149 6,882
Allowance for trade receivables 7 125
Reversal of allowance for trade receivables (291) -
Allowance for advance to customers arising from margin
financing business 8,477 -
Operating cash flows before movements in working capital 3,918,636 3,337,040
Increase in inventories (46,158) (1,018)
Increase in trade receivables (36,988) (12,097)
Increase in loans to customers arising from margin financing
business (2,231,265) (724,123)
Increase in other receivables and prepayments (26,687) (4,904)
Decrease (increase) in held for trading investments 404,029 (127,143)
Increase in financial assets held under resale agreements (594,188) (280,066)
Increase in bank balances held on behalf of customers (736,535) (314,117)
Increase in placements from other financial institution 310,000 -
Increase in accounts payable to customers arising from
securities business 685,284 338,752
(Decrease) Increase in trade payables (45,035) 63,159
Decrease in other taxes payable (809) (8,692)
Increase in other payables and accruals 212,705 130,579
Decrease in derivative financial instruments - (3,585)
Cash generated from operations 1,812,989 2,393,785
Income taxes paid (713,099) (923,893)
Interest paid (119,915) (141,950)
NET CASH FROM OPERATING ACTIVITIES 979,975 1,327,942
Year ended Year ended
NOTES 12/31/2013 12/31/2012
Rmb'000 Rmb'000
INVESTING ACTIVITIES (Restated)
Interest received 138,492 158,650
Acquisition of a joint venture - (184,140)
Payment of consideration payable for the
acquisition of a joint venture in the prior year (189,331) -
Investment in an associate (280,000) -
Additional contribution in an associate - (50,000)
Proceed on deregistration of an associate 388 -
Proceed on disposal of an associate - 4,906
Dividends received from an associate 8,987 6,500
Proceeds on disposal of property, plant and
equipment 4,099 1,250
Repayment of entrusted loans from related parties 592,047 337,482
Repayment of entrusted loan from third parties - 300,000
Entrusted loans to related parties (450,000) (310,000)
Purchases of financial products investment (228,294) (1,069,500)
Settlement of financial products investment 163,726 970,000
Purchases of property, plant and equipment (252,408) (365,028)
Purchases of intangible assets (17,575) (14,287)
Refund of deposit paid for acquisition of a
property - 323,800
Purchase of available-for-sale investments (290,774) (204,388)
Proceeds on disposal of available-for-sale investments 138,100 2,563
Decrease in time deposits 778,949 984,385
NET CASH FROM INVESTING ACTIVITIES 116,406 892,193
FINANCING ACTIVITIES
Payment for the acquisition of a subsidiary under
common control and additional interest in a
subsidiary 2 (756,868) -
Dividends paid (1,302,934) (1,346,366)
Dividends paid to non-controlling shareholders (110,532) (108,983)
New bank borrowings raised 2,010,000 200,000
Repayment of bank and other borrowings (2,510,000) (712,553)
Repayment of long-term bonds (1,000,000) -
Issue of short-term loan note 1,000,000 -
Interest paid (11,119) -
NET CASH USED IN FINANCING ACTIVITIES (2,681,453) (1,967,902)
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (1,585,072) 252,233
CASH AND CASH EQUIVALENTS AT JANUARY 1 3,392,053 3,139,820
CASH AND CASH EQUIVALENTS AT DECEMBER 31 35 1,806,981 3,392,053
Notes to the Consolidated Financial Statements
For the year ended December 31, 2013
1. CORPORATE INFORMATION
Zhejiang Expressway Co., Ltd. (the "Company") was established in the People's Republic of China (the "PRC") with
limited liability on March 1, 1997. The H shares of the Company ("H Shares") were subsequently listed on The
Stock Exchange of Hong Kong Limited (the "Stock Exchange") on May 15, 1997.
All of the H Shares of the Company were admitted to the Official List of the United Kingdom Listing Authority
(the "Official List"). Dealings in the H Shares on the London Stock Exchange commenced on May 5, 2000.
On July 18, 2000, with the approval of the Ministry of Foreign Trade and Economic Co-operation of the PRC, the
Company changed its business registration into a Sino-foreign joint stock limited company.
On February 14, 2002, the United States Securities and Exchange Commission, following the approval by the Board
of Directors and the China Securities Regulatory Commission, declared the registration statement in respect of
the American Depositary Shares ("ADSs") evidenced by the American Depositary Receipts ("ADRs") representing the
deposited H Shares of the Company effective.
In the opinion of the directors, the immediate and ultimate holding company of the Company is Zhejiang
Communications Investment Group Co., Ltd. (the "Communications Group"), a state-owned enterprise established in
the PRC.
The addresses of the registered office and principal place of business of the Company are disclosed in the
corporate information section of the annual report.
The consolidated financial statements are presented in Renminbi ("Rmb"), which is also the functional currency
of the Company.
The Company is an investment holding company. The Company and its subsidiaries (collectively referred to as
the "Group") are involved in the following principal activities:
(a) the operation, maintenance and management of high grade roads;
(b) the development and provision of certain ancillary services such as advertising, and fuel facilities;
(c) the provision of the toll road maintenance service, automobile servicing and others;
(d) the provision of securities broking services, margin financing and securities lending services and
proprietary trading.
2. MERGER ACCOUNTING RESTATEMENT
On March 20, 2013, the Group entered into share transfer agreements with Communications Group and Yiwu
Communications Development Co., Ltd. ("Yiwu Development"), an indepdendent third party, to acquire the 66.283%
and 10.267% equity interests in Zhejiang Jinhua Yongjin Expressway Co., Ltd. ("Jinhua Co"), from Communications
Group and Yiwu Development, respectively, for corresponding cash consideration of Rmb655,356,000 and
Rmb101,512,000, totalling Rmb756,868,000. Jinhua Co is principally engaged in the operation and management of
the Jinhua Section of the Ningbo-Jinhua Expressway. Before the above acquisitions, Jinhua Co was a 23.45% owned
associate of the Group. After the completion of the acquisition, Jinhua Co then became a 100% owned subsidiary
of the Group. Since Communications Group is the parent company of the Company, the Group's acquisition of the
66.283% equity interest from Communications Group was regarded as a business combination involving entities
under common control and was accounted for using merger accounting method, in accordance with the guidance set
out in Accounting Guideline 5 "Merger Accounting for Common Control Combinations" ("AG5") issued by the Hong
Kong Institute of Certified Public Accountants (the "HKICPA") and the acquisition of 10.267% equity interest in
Jinhua Co from Yiwu Development was accounted for as acquisition of additional interest in a subsidiary.
As a result, in the comparative consolidated statement of profit or loss and other comprehensive income and
consolidated statement of cash flows for the year ended December 31, 2012 and the consolidated statement of
financial position as at December 31, 2012 have therefore been restated, in order to include the losses, assets
and liabilities of the combining entities since the date on which they first come under common control.
The adopting of merger accounting method in respect of the Group's acquisition of 66.283% equity interest in
Jinhua Co has resulted in a decrease in total comprehensive income attributable to owners of the Company and a
decrease in profit attributable to owners of the Company for the year ended December 31, 2012 by Rmb36,786,000
and Rmb36,786,000, respectively.
The effect of the merger accounting restatement in respect of the Group's acquisition of 66.283% equity interest
in Jinhua Co described above on the consolidated statement of profit or loss and other comprehensive income for
the year ended December 31, 2012 by line items is as follows:
Merger
Year ended accounting Year ended
12/31/2012 restatement 12/31/2012
Rmb'000 Rmb'000 Rmb'000
(Originally stated) (Restated)
Revenue 6,700,258 227,157 6,927,415
Operating costs (4,369,641) (204,399) (4,574,040)
Gross profit 2,330,617 22,758 2,353,375
Securities investment gains 99,783 - 99,783
Other income 288,644 3,346 291,990
Administrative expenses (82,092) (4,195) (86,287)
Other expenses (46,154) (3,624) (49,778)
Share of loss of associates (17,341) 12,828 (4,513)
Share of loss of a joint venture (3,516) - (3,516)
Finance costs (53,995) (85,770) (139,765)
Profit before tax 2,515,946 (54,657) 2,461,289
Income tax expense (646,864) 12,195 (634,669)
Profit for the year 1,869,082 (42,462) 1,826,620
Other comprehensive income
Items that may be reclassified to
profit or loss:
Available-for-sale financial assets:
- Fair value gain during the year 4,800 - 4,800
- Reclassification adjustments for
cumulative gain
included in profit or loss upon disposal (175) - (175)
Income tax relating to components of other
comprehensive income (1,156) - (1,156)
Other comprehensive income for the year
(net of tax) 3,469 - 3,469
Total comprehensive income for the year
Profit for the year attributable to: 1,872,551 (42,462) 1,830,089
Owners of the Company 1,686,270 (36,786) 1,649,484
Non-controlling interests 182,812 (5,676) 177,136
Total comprehensive income attributable
to: 1,869,082 (42,462) 1,826,620
Owners of the Company 1,688,079 (36,786) 1,651,293
Non-controlling interests 184,472 (5,676) 178,796
1,872,551 (42,462) 1,830,089
EARNINGS PER SHARE
- Basic and diluted Rmb38.83 cents Rmb(0.85)cents Rmb37.98 cents
The effects of the merger accounting restatement in respect of the Group's acquisition of 66.283% equity interest
in Jinhua Co described above on the consolidated statements of financial position as at January 1, 2012 and
December 31, 2012 by line items are as follows:
Merger Merger
January 1, accounting January 1, December 31, accounting December 31,
2012 restatement 2012 2012 restatement 2012
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Originally (Originally
stated) (Restated) stated) (Restated)
NON-CURRENT ASSETS
Property, plant and equipment 1,294,465 288,367 1,582,832 1,357,844 276,455 1,634,299
Prepaid lease payments 68,983 3,493 72,476 66,931 3,390 70,321
Expressway operating rights 11,364,938 2,103,697 13,468,635 10,732,058 1,990,100 12,722,158
Goodwill 86,867 - 86,867 86,867 - 86,867
Other intangible assets 157,594 - 157,594 155,633 - 155,633
Deposit paid for acquisition of a
property 323,800 - 323,800 - - -
Interests in associates 446,679 (198,284) 248,395 465,513 (185,456) 280,057
Interest in a joint venture - - - 369,954 - 369,954
Available-for-sale investments 1,000 - 1,000 133,000 - 133,000
Other receivables 382,000 (82,000) 300,000 325,035 - 325,035
14,126,326 2,115,273 16,241,599 13,692,835 2,084,489 15,777,324
CURRENT ASSETS
Inventories 26,400 - 26,400 27,418 - 27,418
Trade receivables 48,013 4,462 52,475 57,847 6,600 64,447
Loans to customers arising from
margin financing business - - - 724,123 - 724,123
Other receivables and prepayments 844,142 1,985 846,127 701,627 (80,604) 621,023
Prepaid lease payments 2,052 102 2,154 2,052 102 2,154
Available-for-sale investments 60,274 - 60,274 134,899 - 134,899
Held for trading investments 1,260,021 - 1,260,021 1,486,772 - 1,486,772
Financial assets held under
resale agreements - - - 280,066 - 280,066
Bank balances held on behalf of
customers 7,177,508 - 7,177,508 7,491,625 - 7,491,625
Bank balances and cash
- Time deposits with original
maturity over three months 2,467,793 - 2,467,793 1,483,408 - 1,483,408
- Cash and cash equivalents 3,120,430 19,390 3,139,820 3,362,709 29,344 3,392,053
15,006,633 25,939 15,032,572 15,752,546 (44,558) 15,707,988
The effects of the merger accounting restatement in respect of the Group's acquisition of 66.283% equity
interest in Jinhua Co described above on the consolidated statements of financial position as at January 1, 2012
and December 31, 2012 by line items are as follows: (Continued)
Merger Merger
January 1, accounting January 1, December 31, accounting December 31,
2012 restatement 2012 2012 restatement 2012
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Originally (Originally
stated) (Restated) stated) (Restated)
CURRENT LIABILITIES
Accounts payable to customers
arising from securities business 7,143,067 - 7,143,067 7,481,819 - 7,481,819
Trade payables 317,188 28,265 345,453 378,364 30,248 408,612
Tax liabilities 491,619 - 491,619 223,592 - 223,592
Other taxes payable 61,753 1,165 62,918 53,082 1,144 54,226
Other payables and accruals 724,216 16,815 741,031 973,031 18,229 991,260
Dividends payable 94,971 - 94,971 94,998 - 94,998
Bank and other borrowings 462,553 250,000 712,553 - 660,000 660,000
Long-term bonds due in one-year - - - 1,000,000 - 1,000,000
Derivative financial instrument 6,426 - 6,426 - - -
9,301,793 296,245 9,598,038 10,204,886 709,621 10,914,507
NET CURRENT ASSETS 5,704,840 (270,306) 5,434,534 5,547,660 (754,179) 4,793,481
TOTAL ASSETS LESS CURRENT
LIABILITIES 19,831,166 1,844,967 21,676,133 19,240,495 1,330,310 20,570,805
NON-CURRENT LIABILITIES
Bank and other borrowings - 1,140,000 1,140,000 - 680,000 680,000
Long-term bonds 1,000,000 - 1,000,000 - - -
Deferred tax liabilities 232,066 57,099 289,165 224,220 44,904 269,124
1,232,066 1,197,099 2,429,165 224,220 724,904 949,124
18,599,100 647,868 19,246,968 19,016,275 605,406 19,621,681
CAPITAL AND RESERVES
Share capital 4,343,115 - 4,343,115 4,343,115 - 4,343,115
Reserves 10,835,424 560,994 11,396,418 11,177,137 524,208 11,701,345
Equity attributable to owners of
the Company 15,178,539 560,994 15,739,533 15,520,252 524,208 16,044,460
Non-controlling interests 3,420,561 86,874 3,507,435 3,496,023 81,198 3,577,221
18,599,100 647,868 19,246,968 19,016,275 605,406 19,621,681
The effects of merger accounting restatement in respect of the Group's acquisition of 66.283% equity interest in
Jinhua Co described above on the Group's equity as at January 1, 2012 and December 31, 2012 are as follows:
Merger Merger
January 1, accounting January 1, December 31, accounting December 31,
2012 restatement 2012 2012 restatement 2012
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Originally (Originally
stated) (Restated) stated) (Restated)
Share capital 4,343,115 - 4,343,115 4,343,115 - 4,343,115
Share premium 3,645,726 - 3,645,726 3,645,726 - 3,645,726
Statutory reserve 2,968,634 - 2,968,634 3,227,511 - 3,227,511
Capital reserve 1,712 - 1,712 1,712 - 1,712
Investment revaluation reserve (1,555) - (1,555) 254 - 254
Dividend reserve 1,085,779 - 1,085,779 1,042,347 - 1,042,347
Special reserve 18,666 797,471 816,137 18,666 797,471 816,137
Retained profits 3,116,462 (236,477) 2,879,985 3,240,921 (273,263) 2,967,658
Non-controlling interests 3,420,561 86,874 3,507,435 3,496,023 81,198 3,577,221
18,599,100 647,868 19,246,968 19,016,275 605,406 19,621,681
3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs")
New and revised HKFRSs applied in the current year
The Group has applied the following new and revised HKFRSs issued by the Hong Kong Institute of Certified
Public Accountants (the "HKICPA") for the first time in the current year.
Amendments to HKFRSs Annual Improvements to HKFRSs 2009-2011 Cycle
Amendments to HKFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities
Amendments to HKFRS 10, Consolidated Financial Statements, Joint Arrangements and Disclosure
HKFRS 11 and HKFRS 12 of Interest in Other Entities: Transition Guidance
HKFRS 10 Consolidated Financial Statements
HKFRS 11 Joint Arrangements
HKFRS 12 Disclosure of Interests in Other Entities
HKFRS 13 Fair Value Measurement
HKAS 19 (as revised in 2011) Employee Benefits
HKAS 27 (as revised in 2011) Separate Financial Statements
HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures Amendments
to HKAS 1 Presentation of Items of Other Comprehensive Income
HK(IFRIC) - Int 20 Stripping Costs in the Production Phase of a Surface Mine
Except as disclosed below, the application of the new and revised HKFRSs in the current year has had no material
impact on the Group's financial performance and positions for the current and prior years and/or on the
disclosures set out in these consolidated financial statements.
Impact of the application of HKFRS 11
HKFRS 11 replaces HKAS 31 Interests in Joint Ventures, and the guidance contained in a related interpretation,
HK(SIC) - Int 13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers, has been incorporated
in HKAS 28 (as revised in 2011). HKFRS 11 deals with how a joint arrangement of which two or more parties have
joint control should be classified and accounted for. Under HKFRS 11, there are only two types of joint
arrangements - joint operations and joint ventures. The classification of joint arrangements under HKFRS 11
is determined based on the rights and obligations of parties to the joint arrangements by considering the
structure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement,
and, when relevant, other facts and circumstances. A joint operation is a joint arrangement whereby the parties
that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for
the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that
have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement.
Previously, HKAS 31 had three types of joint arrangements - jointly controlled entities, jointly controlled
operations and joint controlled assets. The classification of joint arrangement under HKAS 31 was primarily
determined based on the legal form of the arrangement (e.g. a joint arrangement that was established through a
separate entity was classified as a jointly controlled entity).
The directors of the Company reviewed and assessed the classification of the Group's investments in joint
arrangements in accordance with the requirements of HKFRS 11. The directors concluded that the Group's
investments in Shengxin Expressway Co., Ltd., which was classified as a jointly controlled entity under
HKAS 31 and was accounted for using the equity method, should be classified as a joint venture under HKFRS 11
and accounted for using the equity method.
Impact of the application of HKFRS 12
HKFRS 12 is a new disclosure and is applicable to entities that have interests in subsidiaries, joint ventures
and associates. In general, the application of HKFRS 12 has resulted in more extensive disclosures in the
consolidated financial statements (please see notes 26, 27 and 45 for details).
HKFRS 13 Fair Value Measurement
The Group has applied HKFRS 13 for the first time in the current year. HKFRS 13 establishes a single source of
guidance for, and disclosures about, fair value measurements.
The scope of HKFRS 13 is broad, and applies to both financial instrument items and non-financial instrument items
for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements,
subject to a few exceptions. HKFRS 13 contains a new definition for 'fair value' and defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the
principal (or most advantageous) market at the measurement date under current market conditions. Fair value
under HKFRS 13 is an exit price regardless of whether that price is directly observable or estimated using
another valuation technique. Also, HKFRS 13 includes extensive disclosure requirements.
In accordance with the transitional provisions of HKFRS 13, the Group has applied the new fair value measurement
and disclosure requirements prospectively. Disclosures of fair value information are set out in note 6(c).
Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income
The Group has applied the amendments to HKAS 1 Presentation of Items of Other Comprehensive Income. Upon the
adoption of the amendments to HKAS 1, the Group's 'statement of comprehensive income' is renamed as the
'statement of profit or loss and other comprehensive income'. Furthermore, the amendments to HKAS 1 require
additional disclosures to be made in the other comprehensive income section such that items of other
comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to
profit or loss and (b) items that may be reclassified subsequently to profit or loss when specific conditions
are met. Income tax on items of other comprehensive income is required to be allocated on the same basis - the
amendments do not change the option to present items of other comprehensive income either before tax or net of
tax. The amendments have been applied retrospectively, and hence the presentation of items of other
comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation
changes, the application of the amendments to HKAS 1 does not result in any impact on profit or loss, other
comprehensive income and total comprehensive income.
New and revised HKFRSs issued but not yet effective
Amendments to HKFRS 10, Investment Entities(Note 1)
HKFRS 12 and HKAS 27
Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions(Note 2)
Amendments to HKFRS 9 and Mandatory Effective Date of HKFRS 9 and Transition Disclosures(Note 3)
HKFRS 7
Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities(Note 1)
Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets(Note 1)
Amendments to HKAS 39 Novation of Derivatives and Continuation of Hedge Accounting(Note 1)
Amendments to HKFRSs Annual Improvements to HKFRSs 2010-2012 Cycle(Note 4)
Amendments to HKFRSs Annual Improvements to HKFRSs 2011-2013 Cycle(Note 2)
HKFRS 9 Financial Instruments(Note 3)
HKFRS 14 Regulatory Deferral Accounts(Note 5)
HK(IFRIC)-Int 21 Levies(Note 1)
1 Effective for annual periods beginning on or after January 1, 2014
2 Effective for annual periods beginning on or after July 1, 2014
3 Available for application - the mandatory effective date will be determined when the outstanding phases of
HKFRS 9 are finalised
4 Effective for annual periods beginning on or after July 1, 2014, with limited exceptions
5 Effective for first annual HKFRS financial statements beginning on or after January 1, 2016
Annual Improvements to HKFRSs 2010-2012 Cycle
The Annual Improvements to HKFRSs 2010-2012 Cycle include a number of amendments to various HKFRSs, which are
summarised below.
The amendments to HKFRS 3 clarify that contingent consideration that is classified as an asset or a liability
should be measured at fair value at each reporting date, irrespective of whether the contingent consideration is
a financial instrument within the scope of HKFRS 9 or HKAS 39 or a non-financial asset or liability.
Changes in fair value (other than measurement period adjustments) should be recognised in profit and loss. The
amendments to HKFRS 3 are effective for business combinations for which the acquisition date is on or after
July 1, 2014.
The amendments to HKFRS 8 (i) require an entity to disclose the judgements made by management in applying the
aggregation criteria to operating segments, including a description of the operating segments aggregated and the
economic indicators assessed in determining whether the operating segments have 'similar economic
characteristics'; and (ii) clarify that a reconciliation of the total of the reportable segments' assets to the
entity's assets should only be provided if the segment assets are regularly provided to the chief operating
decision-maker.
The amendments to the basis for conclusions of HKFRS 13 clarify that the issue of HKFRS 13 and consequential
amendments to HKAS 39 and HKFRS 9 did not remove the ability to measure short- term receivables and payables
with no stated interest rate at their invoice amounts without discounting, if the effect of discounting is
immaterial.
The amendments to HKAS 16 and HKAS 38 remove perceived inconsistencies in the accounting for accumulated
depreciation/amortisation when an item of property, plant and equipment or an intangible asset is revalued.
The amended standards clarify that the gross carrying amount is adjusted in a manner consistent with the
revaluation of the carrying amount of the asset and that accumulated depreciation/amortisation is the difference
between the gross carrying amount and the carrying amount after taking into account accumulated impairment
losses.
The amendments to HAKS 24 clarify that a management entity providing key management personnel services to a
reporting entity is a related party of the reporting entity. Consequently, the reporting entity should disclose
as related party transactions the amounts incurred for the service paid or payable to the management entity for
the provision of key management personnel services. However, disclosure of the components of such compensation
is not required.
The directors do not anticipate that the application of the amendments included in the Annual Improvements to
HKFRSs 2010-2012 Cycle will have a material effect on the Group's consolidated financial statements.
Annual Improvements to HKFRSs 2011-2013 Cycle
The Annual Improvements to HKFRSs 2011-2013 Cycle include a number of amendments to various HKFRSs, which are
summarised below.
The amendments to HKFRS 3 clarify that the standard does not apply to the accounting for the formation of all
types of joint arrangement in the financial statements of the joint arrangement itself.
The amendments to HKFRS 13 clarify that the scope of the portfolio exception for measuring the fair value of a
group of financial assets and financial liabilities on a net basis includes all contracts that are within the
scope of, and accounted for in accordance with, HKAS 39 or HKFRS 9, even if those contracts do not meet the
definitions of financial assets or financial liabilities within HKAS 32.
The directors do not anticipate that the application of the amendments included in the Annual Improvements to
HKFRSs 2011-2013 Cycle will have a material effect on the Group's consolidated financial statements.
HKFRS 9 Financial Instruments
HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets.
HKFRS 9 was subsequently amended in 2010 to include the requirements for the classification and measurement of
financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for
hedge accounting.
Key requirements of HKFRS 9 are described as follows:
- All recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and
Measurement are subsequently measured at amortised cost or fair value. Specifically, debt investments that
are held within a business model whose objective is to collect the contractual cash flows, and that have
contractual cash flows that are solely payments of principal and interest on the principal outstanding are
generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments
and equity investments are measured at their fair values at the end of subsequent reporting periods. In
addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair
value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend
income generally recognised in profit or loss.
- With regard to the measurement of financial liabilities designated as at fair value through profit or loss,
HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable
to changes in the credit risk of that liability is presented in other comprehensive income, unless the
recognition of the effects of changes in the liability's credit risk in other comprehensive income would
create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities
attributable to changes in the financial liabilities' credit risk are not subsequently reclassified to profit
or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability
designated as fair value through profit or loss was presented in profit or loss.
The new general hedge accounting requirements retain the three types of hedge accounting. However, greater
flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically
broadening the types of instruments that qualify for hedging instruments and the types of risk components of
non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been
overhauled and replaced with the principle of an 'economic relationship'. Retrospective assessment of hedge
effectiveness is also no longer required. Enhanced disclosure requirements about an entity's risk management
activities have also been introduced.
The directors anticipate that the adoption of HKFRS 9 in the future may have a significant impact on the amounts
reported in respect of the Group's financial assets and financial liabilities (e.g. the Group's investments
in unlisted equity securities currently classified as available-for-sale investments may have to be measured at
fair value at the end of subsequent reporting periods, with changes in the fair value being recognised in profit
or loss). Regarding the Group's financial assets, it is not practicable to provide a reasonable estimate of that
effect until a detailed review has been completed.
Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets
The amendments to HKAS 36 remove the requirement to disclose the recoverable amount of a cash generating unit
(CGU) to which goodwill or other intangible assets with indefinite useful lives had been allocated when there
has been no impairment or reversal of impairment of the related CGU. Furthermore, the amendments introduce
additional disclosure requirements regarding the fair value hierarchy, key assumptions and valuation techniques
used when the recoverable amount of an asset or CGU was determined based on its fair value less costs of
disposal.
The directors of the Company do not anticipate that the application of these amendments to HKAS 36 will have a
significant impact on the Group's consolidated financial statements.
4. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting
Standards issued by the HKICPA. In addition, the consolidated financial statements include applicable
disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong
Limited and by the Hong Kong Companies Ordinance.
The consolidated financial statements have been prepared on the historical cost basis except for certain
financial instruments that are measured at fair values at the end of each reporting period, as explained in
the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and
services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price is directly
observable or estimated using another valuation technique. In estimating the fair value of an asset or a
liability, the Group takes into account the characteristics of the asset or liability if market participants
would take those characteristics into account when pricing the asset or liability at the measurement date. Fair
value for measurement and/or disclosure purposes in these consolidated financial statements is determined on
such a basis, except leasing transactions that are within the scope of HKAS 17, and measurements that have some
similarities to fair value but are not fair value, such as net realisable value in HKAS 2 or value in use in
HKAS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3
based on the degree to which the inputs to the fair value measurements are observable and the significance of
the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset
or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability. The principal accounting policies are set
out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled
by the Company and its subsidiaries. Control is achieved when the Company:
- has power over the investee;
- is exposed, or has rights, to variable returns from its involvement with the investee; and
- has the ability to use its power to affect its returns
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group
loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during
the year are included in the consolidated statement of profit or loss and other comprehensive income from the
date the Group gains control until the date when the Group ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to
the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the
Company and to the non-controlling interests even if this results in the non-controlling interests having a
deficit balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies in line with the Group`s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation.
Allocation of total comprehensive income to non-controlling interests
Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and to the
non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Merger accounting for business combination involving entities under common control
The consolidated financial statements incorporate the financial statements items of the combining entities or
businesses in which the common control combination occurs as if they had been combined from the date when the
combining entities or businesses first came under the control of the controlling party.
The net assets of the combining entities or businesses are consolidated using the existing book values from the
controlling party's perspective. No amount is recognised in respect of goodwill or excess of acquirer's interest
in the net fair value of acquiree's identifiable assets, liabilities and contingent liabilities over cost at the
time of common control combination, to the extent of the continuation of the controlling party's interest.
The consolidated statement of profit or loss and other comprehensive income includes the results of each of the
combining entities or businesses from the earliest date presented or since the date when the combining entities
or businesses first came under the common control, where this is a shorter period, regardless of the date of the
common control combination.
The comparative amounts in the consolidated financial statements are presented as if the entities or businesses
had been combined at the end of the previous reporting period or when they first came under common control,
whichever is shorter.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition
of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units
(or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more
frequently when there is indication that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro-rata
basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised
directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
The Group's policy for goodwill arising on the acquisition of associates and joint venture is described below.
Interests in associates and a joint venture
An associate is an entity over which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee but is not control or joint control
over those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control
of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of
the parties sharing control.
The results and assets and liabilities of associates or a joint venture are incorporated in these consolidated
financial statements using the equity method of accounting. Under the equity method, an investment in an
associate or a joint venture is initially recognised in the consolidated statement of financial position at cost
and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of
the associate or joint venture. When the Group's share of losses of an associate or a joint venture exceeds the
Group's interest in that associate or joint venture (which includes any long-term interests that, in substance,
form part of the Group's net investment in the associate or joint venture), the Group discontinues recognising
its share of further losses. Additional losses are recognised only to the extent that the Group has incurred
legal or constructive obligations or made payments on behalf of the associate or joint venture.
An investment in an associate or a joint venture is accounted for using the equity method from the date on which
the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a
joint venture, any excess of the cost of the investment over the Group's share of the net fair value of the
identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the
carrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiable
assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit
or loss in the period in which the investment is acquired.
The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss
with respect to the Group's investment in an associate or a joint venture. When necessary, the entire carrying
amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment of
Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs
to sell) with its carrying amount, Any impairment loss recognised forms part of the carrying amount of the
investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that
the recoverable amount of the investment subsequently increases.
The Group discontinues the use of the equity method from the date when the investment ceases to be an associate
or a joint venture, or when the investment (or a portion thereof) is classified as held for sale. When the Group
retains an interest in the former associate or joint venture and the retained interest is a financial asset, the
Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value
on initial recognition in accordance with HKAS 39. The difference between the carrying amount of the associate
or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and
any proceeds from disposing of a part interest in the associate or joint venture is included in the determination
of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all
amounts previously recognised in other comprehensive income in relation to that associate or joint venture on
the same basis as would be required if that associate or joint venture had directly disposed of the related
assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that
associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or
liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification
adjustment) when the equity method is discontinued.
The Group continues to use the equity method when an investment in an associate becomes an investment in a joint
venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement
to fair value upon such changes in ownership interests.
When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use
the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had
previously been recognised in other comprehensive income relating to that reduction in ownership interest if
that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.
When a group entity transacts with an associate or a joint venture of the Group (such as a sale or contribution
of assets), profits and losses resulting from the transactions with the associate or joint venture is recognised
in the Group's consolidated financial statements only to the extent of interests in the associate or joint
venture that are not related to the Group.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for
estimated customer returns and other similar allowances.
Toll income from the operation of tolled roads is recognised when the tolls are received or become receivable.
Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time
all the following conditions are satisfied:
- the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
- the Group retains neither continuing managerial involvement to the degree usually associated with ownership
nor effective control over the goods sold;
- the amount of revenue can be measured reliably;
- it is probable that the economic benefits associated with the transaction will flow to the Group; and
- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Service income, including advertising income, is recognised when services are provided.
Commission income from securities broking business is recognised on a trade date basis.
Advisory and handling fee income are recognised when the relevant transactions have been provided or the
relevant services have been rendered.
Underwriting and sponsors fees are recognised as income in accordance with the terms of the underwriting
agreement or deal mandate when the relevant significant acts have been completed.
Asset management fee income is recognised when management services are provided in accordance with the management
contracts.
Dividend income from investments is recognised when the shareholders' rights to receive payment have been
established (provided that it is probable that the economic benefits will flow to the Group and the amount of
revenue can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to
the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by
reference to the principal outstanding and at the effective interest rate applicable, which is the rate that
exactly discounts the estimated future cash receipts through the expected life of the financial asset to that
asset's net carrying amount on initial recognition.
The Group's accounting policy for recognition of revenue from operating leases is described in the accounting
policy for leasing below.
Property, plant and equipment
Property, plant and equipment including buildings and leasehold land (classified as finance leases) held for
use in the production or supply of goods or services, or for administrative purposes (other than properties
under construction as described below), are stated in the consolidated statement of financial position at cost,
less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.
Properties in the course of construction for production, supply or administrative purposes are carried at cost,
less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs
capitalised in accordance with the Group's accounting policy. Such properties are classified to the appropriate
categories of property, plant and equipment when completed and ready for intended use. Depreciation of these
assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Depreciation is recognised so as to write off the cost of assets (other than properties under construction) less
their residual values over their useful lives, using the straight-line method. The estimated useful lives,
residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any
changes in estimate accounted for on a prospective basis.
Estimated Annual
useful life depreciation rate
Leasehold land and buildings 30 - 50 years 1.9% - 3.2%
Ancillary facilities 10 - 30 years 3.2% - 9%
Communication and signaling equipment 5 years 19.4%
Motor vehicles 5 - 8 years 12.1% - 19.4%
Machinery and equipment 5 - 8 years 12.1% - 19.4%
Property, plant and equipment (Continued)
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of
an item of property, plant and equipment is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit or loss.
Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation for intangible assets with finite useful lives is
recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period, with the effect of any changes in estimate being
accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired
separately are carried at cost less accumulated impairment losses (see the accounting policy in respect of
impairment losses on tangible and intangible assets below).
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are recognised separately from goodwill are initially
recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination with finite useful lives
are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as
intangible assets that are acquired separately.
Alternatively, intangible assets with indefinite useful lives are carried at cost less subsequent accumulated
impairment losses (see accounting policy in respect of impairment losses on tangible and intangible assets
below).
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of an intangible assets are measured at the difference
between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss in
the period when the asset is derecognised.
Expressway operating rights under service concession arrangements
When the Group has a right to charge for usage of concession infrastructure, it recognises concession intangible
assets based on fair value of the consideration paid upon initial recognition. Subsequent costs incurred on
expressway widening projects and upgrading services are recognised as additional costs of the expressway
operating rights. The concession intangible assets representing expressway operating rights are carried at cost
less accumulated amortisation and any accumulated impairment losses.
The concession intangible assets are amortised to write-off their cost over their expected useful lives in the
remaining concession period on a straight-line basis.
Costs in relation to the day-to-day servicing, repairs and maintenance of the expressway infrastructures are
recognised as expenses in the periods in which they are incurred.
Impairment losses on tangible and intangible assets other than goodwill (see the accounting policy in respect
of goodwill above)
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible
assets with finite useful lives to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount
of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the
asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also
allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset
(or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit
or loss.
Inventories
Inventories include consumables and parts for toll road operation and maintenance and those commodities held for
sale arising from the securities business.
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are calculated using
the weighted average method. Net realisable value represents the estimated selling price for inventories less
all estimated costs of completion and costs necessary to make the sale.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of
the relevant lease.
The Group as lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased
asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period
in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised
as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a
straight-line basis, except where another systematic basis is more representative of the time pattern in which
economic benefits from the leased asset are consumed.
Leasehold land and building
When a lease includes both land and building elements, the Group assesses the classification of each element as
a finance or an operating lease separately based on the assessment as to whether substantially all the risks and
rewards incidental to ownership of each element have been transferred to the Group, unless it is clear that both
elements are operating leases in which case the entire lease is classified as an operating lease. Specifically,
the minimum lease payments (including any lumpsum upfront payments) are allocated between the land and the
building elements in proportion to the relative fair values of the leasehold interests in the land element and
building element of the lease at the inception of the lease.
To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is
accounted for as an operating lease is presented as 'prepaid lease payments' in the consolidated statement of
financial position and is amortised over the lease term on a straight-line basis. When the lease payments cannot
be allocated reliably between the land and building elements, the entire lease is generally classified as a
finance lease and accounted for as property, plant and equipment.
Foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies other than the
entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the
dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies
are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items,
are recognised in profit or loss in the period in they arise.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which
are assets that necessarily take a substantial period of time to get ready for their intended use or sale,
are added to the cost of those assets, until such time as the assets are substantially ready for their intended
use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Retirement benefit costs
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have
rendered services entitling them to the contributions.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from 'profit before
tax' as reported in the consolidated statement of profit or loss and other comprehensive income because of items
of income or expense that are taxable or deductible in other years and items that are never taxable or
deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in
the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are
generally recognised for all deductible temporary differences to the extent that it is probable that taxable
profits will be available against which those deductible temporary differences can be utilised. Such deferred
tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in
subsidiaries and interests in associates and a joint venture, except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such
investments and interests are only recognised to the extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of the temporary differences and they are expected to
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted
or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the
manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount
of its assets and liabilities.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised
in other comprehensive income or directly in equity, in which case, the current and deferred tax are also
recognised in other comprehensive income or directly in equity respectively.
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual
provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from
the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at
fair value through profit or loss are recognised immediately in profit or loss.
Financial assets
Financial assets are classified into the following specified categories: financial assets at fair value through
profit or loss ("FVTPL"), available-for-sale ("AFS") financial assets and loans and receivables. The
classification depends on the nature and purpose of the financial assets and is determined at the time of
initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised
on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require
delivery of assets within the time frame established by regulation or convention in the market place.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and other premiums or discounts) through
the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying
amount on initial recognition.
Interest income is recognised on an effective interest basis for debt instruments other than those
financial assets classified as at FVTPL, of which interest income is included in net gains or losses.
Financial assets at FVTPL
Financial assets are classified as at FVTPL include financial asset held for trading.
A financial asset is classified as held for trading if:
- it has been acquired principally for the purpose of selling it in the near term; or
- on initial recognition it is part of a portfolio of identified financial instruments that the Group
manages together and has a recent actual pattern of short-term profit-taking; or
- it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement
recognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend or
interest earned on the financial asset and is included in the 'securities investment gains' line item.
Fair value is determined in the manner described in Note 6(c).
AFS financial assets
AFS financial assets are non-derivatives that are not either designated or classified as (a) loans and
receivables, (b)held-to-maturity investments or (c) financial assets at FVTPL.
Equity and debt securities held by the Group that are classified as AFS financial assets and are traded
in an active market are measured at fair value at the end of each reporting period. Changes in the
carrying amount of AFS monetary financial assets relating to interest income calculated using the
effective interest method and dividends on AFS equity investments are recognised in profit or loss.
Other changes in the carrying amount of AFS financial assets are recognised in other comprehensive
income and accumulated under the heading of investments revaluation reserve. When the investment is
disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in
the investments revaluation reserve is reclassified to profit or loss (see the accounting policy in
respect of impairment loss on financial assets below).
Dividends on AFS equity instruments are recognised in profit or loss when the Group's right to receive
the dividends is established.
AFS equity investments that do not have a quoted market price in an active market and whose fair value
cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such
unquoted equity investments are measured at cost less any identified impairment losses at the end of
each reporting period (see the accounting policy in respect of impairment loss on financial assets
below).
Loan and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. Loans and receivables (including trade receivables, loans to
customers arising from margin financing business, other receivables, financial assets held under
resale agreements, bank balances held on behalf of customers and bank balances and cash) are measured
at amortised cost using the effective interest method, less any identified impairment losses (see
accounting policy on impairment losses on financial assets below).
In particular, for financial assets held under resale agreements where the Group acquires financial
assets which will be resold at a predetermined price at a future date under resale agreements, the
cash advanced by the Group is recognised as secured loans and receivables and presented as amounts
held under resale agreements in the consolidated statement of financial position. The difference
between the purchase and resale consideration is amortised over the period of the respective
agreements using the effective interest method and is included in interest income.
Impairment loss on financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end
of each reporting period. Financial assets are considered to be impaired when there is objective
evidence that, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the financial assets have been affected.
For an AFS equity investment, a significant or prolonged decline in the fair value of the security
below its cost is considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
- significant financial difficulty of the issuer or counterparty; or
- breach of contract, such as default or delinquency in interest or principal payments; or
- it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
- the disappearance of an active market for that financial asset because of financial difficulties.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the
difference between the asset's carrying amount and the present value of the estimated future cash
flows, discounted at the financial asset's original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference
between the asset's carrying amount and the present value of the estimated future cash flows
discounted at the current market rate of return for a similar financial asset. Such impairment
loss will not be reversed in subsequent periods (see the accounting policy below).
The carrying amount of the financial asset is reduced by the impairment loss directly for all
financial assets with the exception of trade receivables and loans to customers arising from margin
financing business, where the carrying amount is reduced through the use of an allowance account.
When trade receivables are considered uncollectible, they are written off against the allowance
account. Subsequent recoveries of amounts previously written off are credited against the allowance
account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
For the loans to customers arising from margin financing business, the Group reviews its advances to
customers to assess impairment on a periodic basis. In determining whether an impairment loss should be
recognised in profit or loss, the Group reviews the value of the securities collateral received from the
customers firstly on individual basis, then on collective basis in determining the impairment. The
methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed
regularly to reduce any differences between loss estimates and actual loss experience.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in
other comprehensive income are reclassified to profit or loss in the period.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment losses was
recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that
the carrying amount of the investment at the date the impairment is reversed does not exceed what the
amortised cost would have been had the impairment not been recognised.
In respect of AFS equity investments, impairment losses previously recognised in profit or loss are not
reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in
other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect
of AFS debt investments, impairment losses are subsequently reversed through profit or loss if an increase in
the fair value of the investment can be objectively related to an event occurring after the recognition of
the impairment loss.
Financial liabilities and equity instruments
Financial liabilities and equity
Financial liabilities and equity instruments issued by a group entity are classified according to the
substance of the contractual arrangements entered into and the definitions of a financial liability and an
equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds
received, net of direct issue costs.
Other financial liabilities
Other financial liabilities (including accounts payable to customers arising from securities business, trade
payables, other payables, dividends payable, long term bonds, bank and other borrowings, placements from
other financial institution and loan note) are subsequently measured at amortised cost using the effective
interest method.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments (including all fee and points paid or received that form an integral
part of the effective interest rate, transaction costs and other premium or discounts) through the expected
life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on
initial recognition.
Interest expense is recognised on an effective interest basis other than financial liabilities classified as
at FVTPL.
Financial assets held under resale agreements
Financial assets held under agreements to resell are recorded as "financial assets held under resale
agreements". Financial assets held under resale agreements are initially measured at fair value and are
subsequently measured at amortised cost using the effective interest method.
Financial assets that have been purchased under agreements with a commitment to resell at a specific future
date are not recognised in the consolidated statement of financial position. The cost of purchasing such
assets is presented under "financial assets held under resale agreements" in the consolidated statement of
financial position. The difference between the purchasing price and reselling price is recognised as interest
income during the term of the agreement using the effective interest method.
Derivative financial instrument
Derivatives are initially recognised at fair value at the date when derivative contracts are entered into and
are subsequently remeasured to their fair value at the end of the each reporting period. The resulting gain
or loss is recognised in profit or loss immediately.
Securities lending arrangement
The Group lends investment securities to clients and requires cash and/or equity securities from customers
held as collaterals under such securities lending agreements. The cash collaterals arisen from these are
included in "accounts payable to customers arising from securities business". For those securities held by
the Group and lent to client that do not result in the derecognition of financial assets, they are included
in AFS investments.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with
the terms of a debt instrument. Financial guarantee contracts issued by the Group are initially measured at
their fair values and are subsequently measured at the higher of:
(i) the amount of obligation under the contract, as determined in accordance with HKAS 37 Provisions,
Contingent Liabilities and Contingent Assets; and
(ii) the amount initially recognised less, where appropriate, cumulative amortisation recognised in
accordance with the revenue recognition policies.
Derecognition
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of
the asset to another entity. If the Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred asset, the Group continues to recognise the
asset to the extent of its continuing involvement and recognises an associated liability. If the Group
retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group
continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds
received.
On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and
the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised
in other comprehensive income and accumulated in equity is recognised in profit or loss.
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged,
cancelled or expire. The difference between the carrying amount of the financial liability derecognised and
the consideration paid and payable is recognised in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a
past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding
the obligation. When a provision is measured using the cash flows estimated to settle the present obligation,
its carrying amount is the present value of those cash flows (where the effect of the time value of money is
material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be
received and the amount of the receivable can be measured reliably.
5. KEY SOURCES OF ESTIMATION UNCERTAINTY
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty
at the end of the reporting period, that have a significant risk of causing a material adjustment to the
carrying amounts of assets within the next financial year.
Estimated impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating
units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the
future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to
calculate the present value. Where the actual future cash flows are less than expected, a material impairment
loss may arise. As at December 31, 2013, the carrying amount of goodwill is Rmb86,867,000 (without
accumulated impairment loss) (2012: Rmb86,867,000 (without accumulated impairment loss)). Details of the
impairment testing are disclosed in Note 25.
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,
2013, the carrying amounts of intangible assets with indefinite useful lives were Rmb66,563,000 (without
accumulated impairment loss) (2012: Rmb66,563,000 (without accumulated impairment loss)). Details of the
impairment testing are disclosed in Note 25.
Estimated impairment of interest in a joint venture and associates
The Group regularly reviews whether there are any indications of impairment and recognises an impairment loss
if the carrying amount of the Group's interest in a joint venture or associates are lower than their
respective recoverable amount. The Group tests for impairment for the interest in a joint venture and
associate whenever there is an indication that the asset may be impaired. The recoverable amounts have been
determined based on the higher of the fair value less costs of disposal and value in use calculations. These
calculations require the use of estimates, such as discount rates, future profitability and growth rates.
Where the actual future cash flows are less than expected, a material impairment loss may arise. As at
December 31, 2013, the carrying amount of interest in a joint venture was Rmb333,944,000 (without accumulated
impairment loss) (2012: Rmb369,954,000 (without accumulated impairment loss)), and the carrying amount of
interest in associates was Rmb574,733,000 (with accumulated impairment loss of Rmb11,979,000) (2012:
Rmb280,057,000 (with accumulated impairment loss of Rmb11,979,000)).
Provision for financial guarantee contract
The directors of the Company based on its best estimate of the financial position and credit rating of the
guarantee to determine the probability of incurring a claim by the counterparty to the Company to estimate
fair value or the respective obligation under the financial guarantee contract. Based on expectations at the
end of the reporting period, the Group considers that it is more likely than not that no amount will be
payable under the arrangement. However, this estimate is subject to change depending on the probability of
the counterparty claiming under the guarantee which is a function of the likelihood that the financial
receivables held by the counterparty which are guaranteed suffer credit losses. In respect of the financial
guarantee contract in the amount of Rmb1,100,000,000 provided to a joint venture of the Group, the directors
of the Company considered that the fair value of the financial guarantee obligation was insignificant as at
December 31, 2013.
Fair value measurements and valuation processes
Some of the Group's assets and liabilities are measured at fair value for financial reporting purposes. The
board of directors of the Group has set up a valuation team, which is headed up by the Chief Financial
Officer ("CFO") of the Group, to determine the appropriate valuation techniques and inputs for fair value
measurements.
In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent
it is available, Where Level 1 inputs are not available, the Group engages third party qualified valuers to
perform the valuation.
The CFO works closely with the qualified external valuers to establish the appropriate valuation techniques
and inputs to the model. The CFO reports the valuation committee's findings to the board of directors of the
Group at the end of each reporting period to explain the cause of fluctuations in the fair value of the
assets and liabilities.
As at 31 December 2013, the fair value of the held-for-trading investment and available-for-sale investments
was estimated at an asset of Rmb1,181,025,000 (2012: Rmb1,486,772,000) and Rmb414,438,000 (2012:
Rmb256,899,000), respectively.
6. FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Financial assets
AFS investments
-- at cost 11,000 11,000 1,000
-- at fair value 414,438 256,899 60,274
Fair value through profit of loss
Held for trading investments 1,181,025 1,486,772 1,260,021
Loans and receivables (including cash and
cash equivalents) 15,485,366 14,350,238 13,922,073
Financial liabilities
Derivative financial instrument -- -- 6,426
Amortised cost 11,452,872 11,021,034 9,468,671
(b) Financial risk management objectives and policies
The Group's major financial instruments include AFS investments, held for trading investments, trade and
other receivables, loans to customers arising from margin financing business, financial assets held under
resale agreements, bank balances and cash, bank balances held on behalf of customers, trade and other
payables, placements from other financial institution, accounts payable to customers arising from securities
business, bank and other borrowings, dividends payable, long-term bonds, loan note and financial guarantee.
Details of the financial instruments are disclosed in respective notes. The risks associated with these
financial instruments include market risk (interest rate risk, currency risk and other price risk), credit
risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management
manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective
manner.
Market risk
(i) Interest rate risk
The Group is exposed to fair value interest rate risk in relation to loans to customers arising from margin
financing business, fixed-rate entrusted loans, financial assets held under resale agreements, fixed-rate
time deposits, fixed-rate bank and other borrowings, long-term bonds and short-term loan note (see notes 30,
31, 33, 35, 40, 41 and 42 for details).
The Group is also exposed to cash flow interest rate risk in relation to variable-rate bank balances held on
behalf of customers, bank balances and bank and other borrowings (see Notes 34, 35 and 40 for details).
The Group currently does not have an interest rate risk hedging policy as the management considers the Group
is not exposed to significant interest rate risk. The management will continue to monitor interest rate risk
exposure and consider hedging against it should the need arise.
The Group's exposures to interest rates on financial liabilities are detailed in the liquidity risk
management section of this note.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for
non-derivative instruments, comprising variable-rate bank balances, bank balances held on behalf of customers
and bank borrowings at the end of the reporting period.
The analysis is prepared assuming the balances outstanding at the end of the reporting period were
outstanding for the whole year. A 30 basis points (2012: 30 basis points) increase or decrease is the
sensitivity rate used when reporting interest rate risk internally to key management personnel and represents
management's assessment of the reasonably possible change in interest rates.
If interest rates had been 30 basis points (2012: 30 basis points) higher/lower and all other variables were
held constant, the Group's post-tax profit for the year ended December 31, 2013 would have
increased/decreased by Rmb21,679,000 (2012 (restated): Rmb21,904,000). This was mainly attributable to the
Group's exposure to interest rates on its variable-rate bank balances.
(ii) Currency risk
Several subsidiaries of the Company have foreign currency denominated monetary assets and liabilities, which
expose the Group to foreign currency risk. The Group is mainly exposed to HKD and USD relative to Rmb.
The carrying amounts of the Group's foreign currency denominated monetary assets and liabilities at the end
of the reporting date are as follows:
Assets Liabilities
12/31/2013 12/31/2012 12/31/2013 12/31/2012
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Hong Kong dollar ("HKD") 19,395 19,460 13,933 14,228
United States dollar ("USD") 65,157 68,543 36,948 40,544
Sensitivity analysis
This sensitivity analysis details the Group's sensitivity to a 5% (2012: 5%) increase and decrease in RMB
against HKD and USD. 5% (2012: 5%) is the sensitivity rate used when reporting foreign currency risk
internally to key management personnel and represents management's assessment of the reasonably possible
change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency
denominated monetary items and adjusts their translation at the end of the reporting period for a 5% (2012:
5%) change in foreign currency rates. If RMB had strengthened/weakened 5% (2012: 5%) against HKD, the Group's
post-tax profit for the year ended December 31, 2013 would have decreased/increased by Rmb205,000 (2012:
decreased/increased by Rmb196,000). If RMB had strengthened/weakened 5% (2012: 5%) against USD, the Group's
post-tax profit for the year ended December 31, 2013 would have decreased/increased by Rmb1,058,000 (2012
(restated): Rmb1,050,000).
(iii) Other price risk
The Group is exposed to equity and debt security price risk in relation to its held for trading and AFS
listed investments.
The Group currently does not have a price risk hedging policy and the management will continue to monitor
price risk exposure and consider hedging against it should the need arise.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to equity and debt security price
risks at the reporting date.
If the prices of the respective equity and debt instruments had been 5% (2012: 5%) higher/lower,
-- post-tax profit for the year ended December 31, 2013 would have increased/decreased by Rmb44,288,000
(2012 (restated): Rmb55,754,000) as a result of the changes in fair value of held for trading
investments; and
-- investment valuation reserve would have increased by Rmb15,541,000 (2012 (restated): Rmb9,634,000) for
the Group as a result of the changes in fair value of AFS listed investments, or the investment
revaluation reserve would decrease by the same amount and the Group would consider any potential
impairment effect, if necessary.
Credit risk
As at December 31, 2013, the Group's maximum exposure to credit risk which will cause a financial loss to the
Group due to failure to discharge an obligation by the counterparties provided by the Group is arising from
the carrying amount of the respective recognised financial assets as stated in the consolidated statement of
financial position and the amount of contingent liability in relation to financial guarantee issued by the
Group as disclosed in note 50.
The Group reviews the recoverable amount of each individual trade debt and entrusted loan receivables at the
end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In
this regard, the directors of the Company consider that the Group's credit risk is significantly reduced.
The Group has no credit period granted to its trade customers of toll operation businesses. All the Group's
trade receivable balance for toll operation business are toll receivables from the government-operated
organisation.
The Group also provides clients with margin financing business, and have financial assets held under resale
agreements which are secured by clients' securities or deposits held as collateral.
In respect of the margin financing and securities lending business of the Group's securities operation, which
was carried out by Zheshang Securities., Ltd. ("Zheshang Securities"), Zheshang Securities has appointed a
group of authorised persons who are charged with the responsibility of determination of credit limits, credit
approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts.
Each client has a maximum credit limit based on the quality of collateral held and the financial background
of the client. In addition, Zheshang Securities reviews the recoverable amount of each individual at the end
of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. Margin
calls are made when the trades of margin clients exceed their respective limits. Any such excess is required
to be made good within the next trading day. Failure to meet margin calls will result in the liquidation of
the customers' position. Zheshang Securities seeks to maintain strict control over its outstanding
receivables. It will also adhere to the Group's policies and procedures to conduct periodic credit assessment
and manage any concentration in the following exposures and perform regular reporting to the management:
(i) exposures to a particular client/counterparty or group of related clients/counterparties; and
(ii) exposures to a particular investment product.
The Investment Committee of Zheshang Securities is also responsible to the credit risk arising from its
proprietary trading operation, including the investments in available-for-sale investments and held for
trading investments. The Investment Committee assesses the financial performance of the issuers to ensure
that the issuers can satisfy the repayment of the principal and interest as they fall due. It has set
porfolio size limits and single issuer limits to limit Zheshang Securities' exposure to the credit risk.
Zheshang Securities also monitors the credit rating and market news of the issuers for any indication of
potential credit deterioration.
The credit risk on liquid funds is limited because the counterparties are state-owned banks or banks with
high credit ratings assigned by international credit-rating agencies.
As at December 31, 2013, other than the concentration of credit risk on trade receivables, entrusted loan
receivables, financial investment products and financial guarantee contract amounting to Rmb101,428,000 (2012
(restated): Rmb64,447,000), Rmb455,400,000 (2012: Rmb639,651,000), Rmb168,000,000 (2012 (restated):
Rmb103,432,000) and Rmb1,100,000,000 (2012: nil) as disclosed in Notes 29, 31 and 50, respectively, of which
these balances were only limited and concentrated to a few counterparties, the Group does not have any other
significant concentration of credit risk.
There are also no concentration risks on its margin financing business and financial assets held under resale
agreements as at December 31, 2013 and December 31 2012 respectively as the Group has a large number of
clients who are dispersed.
The Group's concentration of credit risk by geographical location is mainly in the PRC.
Liquidity risk
Most of the bank balances and cash at December 31, 2013 were denominated in Rmb which is not a freely
convertible currency in the international market. The exchange rate of Rmb is regulated by the PRC government
and the remittance of these Rmb funds out of the PRC is subject to foreign exchange controls imposed by the
PRC government.
The Group closely monitors its cash position resulting from its operations and maintains a level of cash and
cash equivalents deemed adequate by the management to enable the Group to meet in full its financial
obligations as they fall due for the foreseeable future.
The following table details the Group's remaining contractual maturity for its non-derivative financial
liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based
on the earliest date on which the Group can be required to pay. The table includes both interest and
principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived
from interest rate curve at the end of the reporting period.
Liquidity tables
Weighted On demand Total undis- Carrying
average or Less than 3 months - 1 - 3 counted amount at
interest rate 3 months 1 year year 3 - 5 years +5 years cash flows 31/12/2013
% Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
2013
Non-derivative
financial
liabilities
Placements from
other financial
institution 7.02 316,456 -- -- -- -- 316,456 310,000
Accounts payable
to customers
arising from
securities
business -- 8,167,103 -- -- -- -- 8,167,103 8,167,103
Trade payables -- 421,994 -- -- -- -- 421,994 421,994
Other payables -- 618,799 -- -- -- -- 618,799 618,799
Dividends
payable -- 94,976 -- -- -- -- 94,976 94,976
Bank and other
borrowings
-- fixed rate 5.04 442,618 -- -- -- -- 442,618 440,000
-- variable
rate 6.42 105,653 14,404 315,329 -- -- 435,386 400,000
Short-term loan
note 5.50 1,013,712 -- -- -- -- 1,013,712 1,000,000
Financial
guarantee -- 1,100,000 -- -- -- -- 1,100,000 --
------------------------------------------------------------------------------------------------------------------
12,281,311 14,404 315,329 -- -- 12,611,044 11,452,872
------------------------------------------------------------------------------------------------------------------
2012 (Restated)
Non-derivative
financial
liabilities
Accounts payable
to customers
arising from
securities
business 7,481,819 -- -- -- -- 7,481,819 7,481,819
Trade payables -- 371,006 37,606 -- -- -- 408,612 408,612
Other payables -- 695,605 -- -- -- -- 695,605 695,605
Dividends
payable -- 94,998 -- -- -- -- 94,998 94,998
Bank and other
borrowings
-- fixed rate 5.18 2,331 6,993 182,387 -- -- 191,711 180,000
-- variable
rate 6.16 326,473 384,353 442,382 101,006 -- 1,254,214 1,160,000
Long-term bonds
-- fixed rate 4.29 1,042,900 -- -- -- -- 1,042,900 1,000,000
------------------------------------------------------------------------------------------------------------------
10,015,132 428,952 624,769 101,006 -- 11,169,859 11,021,034
------------------------------------------------------------------------------------------------------------------
The amounts included above for financial guarantee contracts are the maximum amounts the Group could be required to
settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the
guarantee. Based on expectations at the end of the reporting period, the Group considers that it is more likely than
not that no amount will be payable under the arrangement. However, this estimate is subject to change depending on
the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the
financial receivables held by the counterparty which are guaranteed suffer credit losses.
The amounts included above for variable interest rate instruments for non-derivative financial liabilities are subject
to change if changes in variable interest rates differ to those estimates of the interest rates determined at the end
of the reporting period.
As at December 31 2013, the Group has not entered into any master netting arrangements with counterparties. The
collaterals of which, such as financial assets held under resale agreement, loans to customers arising from margin
financing business, placements from other financial institution and etc., are disclosed in the corresponding notes,
which are generally not on the net basis in financial position. However, the risk exposure associated with favourable
contracts is reduced by a master netting arrangement to the extent that if a default occurs, all amounts with the
counterparty are terminated and settled on a net basis.
(c) Fair value measurements of financial instruments
This note provides information about how the Group determines fair values of various financial assets and financial
liabilities.
Fair value measurements recognised in the statement of financial position that are measured at fair value on a
recurring basis
Some of the Group's financial assets and financial liabilities are measured at fair value at the end of each reporting
period. The following table gives information about how the fair values of these financial assets and financial
liabilities are determined (in particular, the valuation technique(s) and inputs used).
Basis of fair value Relationship of
measurement/ Significant unobservable
Fair value Fair value valuation technique(s) unobservable inputs to fair
Financial assets Classified as as at hierarchy and key input(s) input(s) value
31/12/2013
Rmb'000
1) Equity investments Held for Assets - Level 1 Quoted bid prices in N/A N/A
listed in exchange trading 78,658 an active market.
investments
2) Equity securities Held for Assets - Level 2 Shares of the net N/A N/A
and Open-ended trading 5,242 assets of the
equity funds investments products, determined
with reference to the
net asset value of
the products,
calculated by
observable (quoted)
prices of underlying
investment portfolio
and adjustments of
related expenses.
3) Fund listed in Available-for- Assets - Level 1 Quoted bid prices in N/A N/A
exchange sale 44,574 an active market.
investments
4) Debt investments Held for Assets - Level 1 Quoted bid prices in N/A N/A
listed in trading 443,810 an active market.
exchange and investments
debt investment
in interbank Available-for- Assets -
market sale 127,000
investments
Held for Assets - Level 2 Discounted cash flow. N/A N/A
trading 653,315 Future cash flows are
investments estimated based on
applying the interest
yield curves of
different types of
bonds as the key
parameter.
5) Investments in Available-for- Assets - Level 2 Shares of the net N/A N/A
structured sale 126,948 assets of the products,
products investments determined with
reference to the net
asset value of the
products, calculated by
observable (quoted)
prices of underlying
investment portfolio
and adjustments of
related expenses.
Assets - Level 3 Discounted cash flow. Actual yield The higher
74,402 Future cash flows are of the the actual
estimated based on underlying yield, the
expected applicable investment higher the
yield of the underlying portfolio fair
investment portfolio and the value
and adjustments of discount
related expenses, rate
discounted at a rate
that reflects the credit
risk of various
counterparties
6) Investments in Available-for- Assets - Level 3 Discounted cash flow. Actual yield The higher
trust products sale 41,514 flows are estimated of the the actual
investments Future cash based on underlying yield, the
expected applicable investment higher the
yield of the underlying portfolio fair
investment portfolio and the value
and adjustments of discount
related expenses, rate
discounted at a rate
that reflects the credit
risk of various
counterparties
As at December 31, 2013
Level 1 Level 2 Level 3 Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Held for trading investments
-- Equity securities
a. Manufacturing 43,720 -- -- 43,720
b. Financial services 15,482 -- -- 15,482
c. Information technology service 6,396 -- -- 6,396
d. Energy and water services 3,057 -- -- 3,057
e. Transportation, storage and postal
services 1,218 -- -- 1,218
f. Real Estate 2,002 -- -- 2,002
g. Construction 1,539 -- -- 1,539
h. Mining 2,937 -- -- 2,937
i. Wholesaling 1,170 -- -- 1,170
j. Agriculture, forestry, fishing and
animal husbandry 366 -- -- 366
k. Others 771 -- -- 771
--------------------------------------------------------------------------------------------
78,658 -- -- 78,658
--------------------------------------------------------------------------------------------
-- Open-ended fund -- 5,242 -- 5,242
--------------------------------------------------------------------------------------------
-- Corporate bonds 443,810 653,315 -- 1,097,125
--------------------------------------------------------------------------------------------
Sub-total 522,468 658,557 -- 1,181,025
--------------------------------------------------------------------------------------------
Available-for-sale investments
-- Fund 44,574 -- -- 44,574
-- Corporate bonds 127,000 -- -- 127,000
-- Structured products -- 126,948 74,402 201,350
-- Trust products -- -- 41,514 41,514
--------------------------------------------------------------------------------------------
Sub-total 171,574 126,948 115,916 414,438
--------------------------------------------------------------------------------------------
As at December 31, 2012
Level 1 Level 2 Level 3 Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Financial assets at FVTPL
Held for trading investments 1,486,772 -- -- 1,486,772
Available-for-sale financial assets
Listed equity and debt securities 256,899 -- -- 256,899
There were no transfers between instruments in Level 1 and Level 2 in the current and prior
years.
The following table represents the changes in Level 3 available-for-sale investments during
the year ended December 31, 2013.
Structured Trust
products products Total
Rmb'000 Rmb'000 Rmb'000
At beginning of the year -- -- --
Addition 74,810 41,000 115,810
Total (loss) gain recognised in other
comprehensive income (408) 514 106
At end of the year 74,402 41,514 115,916
7. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and equity balance. The Group's overall
strategy remains unchanged from prior year.
The capital structure of the Group consists of net debt, which includes the borrowings disclosed in Notes 40, 41 and
42, net of cash and cash equivalents and equity attributable to owners of the Company, comprising issued share
capital, reserves and retained profits.
The directors of the Company review the capital structure on a regular basis. As part of this review, the directors
consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the
directors, the Group will balance its overall capital structure through the payment of dividends and new share issues
as well as the issue of new debt or the redemption of existing debt.
8. SEGMENT INFORMATION
Information reported to the Chief Executive Officer of the Company, being the chief operating decision maker, for the
purposes of resource allocation and assessment of segment performance focuses on types of goods or services delivered
or provided.
Specifically, the Group's reportable and operating segments under HKFRS 8 are as follows:
(i) Toll operation -- the operation and management of high grade roads and the collection of the expressway tolls.
(ii) Service area and advertising businesses -- the sale of food, restaurant operation, automobile servicing,
operation of petrol stations and design and rental of advertising billboards along the expressways.
(iii) Other toll road related service -- the toll road maintenance service and others.
(iv) Securities operation -- the securities broking, margin financing and securities lending services and
proprietary trading.
Segment revenue and results
The following is an analysis of the Group's revenue and results by reportable and operating segment.
For the year ended December 31, 2013
Toll related operation
Service Other toll
area and road
Toll advertising related Securities Total
operation businesses service operation Segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
--------------------------------------------------------------------------------------------------------------------
Revenue
External sales 4,019,867 2,158,469 21,447 1,651,332 7,851,115 -- 7,851,115
Inter-segment sales -- 4,755 -- -- 4,755 (4,755) --
--------------------------------------------------------------------------------------------------------------------
Total 4,019,867 2,163,224 21,447 1,651,332 7,855,870 (4,755) 7,851,115
--------------------------------------------------------------------------------------------------------------------
Segment profit 1,721,848 59,789 30,787 402,553 2,214,977 2,214,977
--------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2012 (Restated)
Toll related operation
Service Other toll
area and road
Toll advertising related Securities Total
operation businesses service operation Segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
--------------------------------------------------------------------------------------------------------------------
Revenue
External sales 3,772,395 2,028,883 -- 1,126,137 6,927,415 -- 6,927,415
Inter-segment sales -- 7,919 -- -- 7,919 (7,919) --
--------------------------------------------------------------------------------------------------------------------
Total 3,772,395 2,036,802 -- 1,126,137 6,935,334 (7,919) 6,927,415
--------------------------------------------------------------------------------------------------------------------
Segment profit 1,598,710 62,241 -- 165,669 1,826,620 -- 1,826,620
--------------------------------------------------------------------------------------------------------------------
The accounting policies of the operating segments are the same as the Group's accounting policies described in Note 4.
Segment profit represents the profit after tax of each operating segment. This is the measure reported to the chief
operating decision maker, the Group's Chief Executive Officer, for the purposes of resource allocation and performance
assessment.
Inter-segment sales are charged at prevailing market rates.
Segment assets and liabilities
The following is an analysis of the Group's assets and liabilities by reportable and operating segment:
Segment assets Segment liabilities
12/31/2013 12/31/2012 01/01/2012 12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated) (Restated)
-------------------------------------------------------------------------------------------------------
Toll operation 14,784,868 17,404,526 17,679,206 (2,082,988) (3,836,988) (4,299,866)
Service area and
advertising business 926,171 647,043 695,675 (234,708) (157,674) (231,303)
Other toll road related
service 310,818 -- -- -- -- --
Securities operation 15,980,470 13,346,876 12,812,423 (10,102,539) (7,868,969) (7,496,034)
-------------------------------------------------------------------------------------------------------
Total segment assets
(liabilities) 32,002,327 31,398,445 31,187,304 (12,420,235) (11,863,631) (12,027,203)
Goodwill 86,867 86,867 86,867 -- -- --
-------------------------------------------------------------------------------------------------------
Consolidated assets
(liabilities) 32,089,194 31,485,312 31,274,171 (12,420,235) (11,863,631) (12,027,203)
-------------------------------------------------------------------------------------------------------
Segment assets and segment liabilities represent the assets and liabilities of the subsidiaries operating in the
respective reportable and operating segment.
Other segment information
Amounts included in the measure of segment profit or segment assets:
For the year ended December 31, 2013
Toll related operation
Service area Other toll
Toll and advertising road related Securities
operation businesses service operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
-------------------------------------------------------------------------------------------------
Income tax expense 585,570 18,252 (10) 152,949 756,761
Interest income 82,114 7,457 -- 6,351 95,922
Interest expense 84,764 -- -- 10,397 95,161
Interests in associates -- 224,035 310,818 39,880 574,733
Interest in a joint venture 333,944 -- -- -- 333,944
Share of profit (loss) of
associates -- 40 27,669 (6,172) 21,537
Share of loss of a joint
venture (36,010) -- -- -- (36,010)
Gain on fair value changes
on held for trading
investments 14,242 -- -- 84,040 98,282
Additions to non-current
assets (Note) 236,487 62,072 280,000 43,697 622,256
Depreciation and
amortisation 900,966 31,500 -- 90,057 1,022,523
Loss (gain) on disposal
of property, plant and
equipment 2,798 (783) -- 134 2,149
-------------------------------------------------------------------------------------------------
For the year ended December 31, 2012 (Restated)
Toll related operation
Service area Other toll
Toll and advertising road related Securities
operation businesses service operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
-------------------------------------------------------------------------------------------------
Income tax expense 556,468 18,078 -- 60,123 634,669
Interest income 141,684 10,693 -- 29,282 181,659
Interest expense 139,519 246 -- -- 139,765
Interests in associates -- 234,005 -- 46,052 280,057
Interest in a joint venture 369,954 -- -- -- 369,954
Share of profit (loss) of
associates -- 7,367 -- (11,880) (4,513)
Share of loss of a joint
venture (3,516) -- -- -- (3,516)
Gain on fair value changes
on held for trading
investments 10,290 -- -- 89,318 99,608
Additions to non-current
assets (Note) 617,984 14,333 -- 105,406 737,723
Depreciation and
amortisation 880,323 28,624 -- 96,298 1,005,245
Loss on disposal of
property, plant and
equipment 5,409 1,223 -- 250 6,882
-------------------------------------------------------------------------------------------------
Note: Non-current assets excluded financial instruments.
Revenue from major services
An analysis of the Group's revenue, net of discounts and taxes, for the year is as follows:
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
(Restated)
----------------------------------------------------------------------------------------------------
Toll operation revenue 4,019,867 3,772,395
Service area businesses revenue (mainly sales of goods) 2,054,543 1,937,955
Advertising business revenue 103,926 90,473
Commission income from securities operation 1,197,315 832,213
Interest income from securities operation 454,017 293,924
Others 21,447 455
----------------------------------------------------------------------------------------------------
7,851,115 6,927,415
----------------------------------------------------------------------------------------------------
Geographical information
The Group's operations are located in the PRC (country of domicile). All non-current assets of the Group are located
in the PRC.
All of the Group's revenue from external customers is attributed to the group entities' country of domicile (i.e.,
the PRC).
Information about major customers
During the years ended December 31, 2013 and 2012, there are no individual customer with sales over 10% of the total
sales of the Group.
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
----------------------------------------------------------------------------------------------------
Gain on fair value changes on held for trading investments 98,282 99,608
Cumulative gain reclassified from equity on disposal of AFS investments 1,381 175
----------------------------------------------------------------------------------------------------
99,663 99,783
----------------------------------------------------------------------------------------------------
The above securities investment gains wholly contributed from listed investments in both years.
10. OTHER INCOME
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
(Restated)
----------------------------------------------------------------------------------------------------
Interest income on bank balances, entrusted loan receivables
and financial products investment 95,922 162,292
Other interest income (Note 24) -- 19,367
Rental income (Note) 88,739 72,796
Handling fee income 2,781 5,685
Towing income 10,155 9,303
Gain on deregistration of an associate 16 --
Gain on disposal of an associate -- 12
Exchange loss, net (957) (2,155)
Fair value gain on derivative financial instrument -- 2,841
Loss on commodity trading, net (1,351) --
Others 45,751 21,849
----------------------------------------------------------------------------------------------------
241,056 291,990
----------------------------------------------------------------------------------------------------
Note: Rental income included contingent rent of approximately Rmb39,102,000(2012: Rmb33,697,000)
during the year.
11. FINANCE COSTS
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
(Restated)
----------------------------------------------------------------------------------------------------
Interest expenses wholly repayable within 5 years:
Bank and other borrowings 87,288 96,865
Long-term bonds 2,700 42,900
Short-term loan note 10,397 --
Total borrowing costs 100,385 139,765
Less: Amount capitalised in the cost of qualifying assets (Note) (5,224) --
----------------------------------------------------------------------------------------------------
95,161 139,765
----------------------------------------------------------------------------------------------------
Note: Borrowing costs capitalised during the year ended 31 December 2013 includes all the interest
income and interest expenses arising from the specific borrowing to the expenditure on
qualifying assets.
12. PROFIT BEFORE TAX
The Group's profit before tax has been arrived at after charging (crediting):
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
(Restated)
----------------------------------------------------------------------------------------------------
Depreciation of property, plant and equipment 190,690 179,635
Amortisation of prepaid lease payments 2,164 2,155
Amortisation of expressway operating rights (included in operating costs) 811,025 807,207
Amortisation of other intangible assets (included in operating costs) 18,644 16,248
----------------------------------------------------------------------------------------------------
Total depreciation and amortisation 1,022,523 1,005,245
----------------------------------------------------------------------------------------------------
Staff costs (including directors and supervisors):
-- Wages and salaries 761,109 639,842
-- Pension scheme contributions 70,657 64,377
----------------------------------------------------------------------------------------------------
831,766 704,219
----------------------------------------------------------------------------------------------------
Auditors' remuneration 8,125 5,971
Allowance for loans to customers arising from margin financing business 8,477 --
Allowance for trade receivables 7 125
Reversal of allowance for trade receivables (291) --
Loss on disposal of property, plant and equipment 2,149 6,882
Cost of inventories recognised as an expense 1,889,783 1,786,678
Fair value gain on derivative financial instrument -- (2,841)
----------------------------------------------------------------------------------------------------
13. INCOME TAX EXPENSE
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
(Restated)
----------------------------------------------------------------------------------------------------
Current tax:
PRC Enterprise Income Tax 821,118 655,910
Deferred tax (Note 43) (64,357) (21,241)
----------------------------------------------------------------------------------------------------
756,761 634,669
----------------------------------------------------------------------------------------------------
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, the
tax rate of the Group is 25%.
No Hong Kong Profits Tax has been provided as the Group's income neither arises in, nor is derived from Hong Kong
during the year.
The tax charge for the year can be reconciled to the profit before tax per the consolidated statement of profit or
loss and other comprehensive income as follows:
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
(Restated)
----------------------------------------------------------------------------------------------------
Profit before tax 2,971,738 2,461,289
Tax at the PRC enterprise income tax rate of 25% (2012:25%) 742,935 615,322
Tax effect of share of (profit) loss of associates (5,384) 1,128
Tax effect of share of loss of a joint venture 9,003 879
Tax effect of income not taxable for tax purposes -- (17)
Tax effect of expenses not deductible for tax purposes 10,207 17,357
----------------------------------------------------------------------------------------------------
Tax charge for the year 756,761 634,669
----------------------------------------------------------------------------------------------------
14. OTHER COMPREHENSIVE INCOME
Tax effect relating to other comprehensive income as follows:
Year ended 12/31/2013 Year ended 12/31/2012
Net-of- Net-of-
Before-tax Tax income-tax Before-tax Tax income-tax
amount benefit amount amount benefit amount
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
-------------------------------------------------------------------------------------------------------
Fair value gain on
AFS financial
assets arising during
the year 4,865 (1,216) 3,649 4,800 (1,200) 3,600
Reclassification
adjustments for
the cumulative gain
included in profit or
loss upon disposal of
AFS financial assets (1,381) 345 (1,036) (175) 44 (131)
-------------------------------------------------------------------------------------------------------
Total 3,484 (871) 2,613 4,625 (1,156) 3,469
-------------------------------------------------------------------------------------------------------
15. DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENTS' EMOLUMENTS
The emoluments paid or payable to each of the 9 (2012: 15) directors and 5 (2012: 8) supervisors, please visit:
http://photos.prnasia.com/prnk/20140401/8521401858-e
Notes:
(i) Resigned on June 11, 2012
(ii) Appointed on June 11, 2012.
(iii) Ms. Luo Jianhu is also the Chief Executive of the Company and her emoluments disclosed above include those
services rendered by her as the Chief Executive.
(iv) Resigned on June 11, 2012 and remained as the senior management of the Company
The emoluments of each of the directors and supervisors were below HK$1,000,000 (equivalent to Rmb786,200 (2012:
Rmb811,000)) in both years. Bonuses paid to directors and supervisors are performance-rated and are determined by the
Remuneration Committee of the Company, which comprises three independent non-executive directors.
No directors or supervisors waived any emoluments and no incentive was paid to any directors or supervisors as an
inducement to join the Company and no compensation for loss of office was paid to any directors, supervisors, past
directors or past supervisors during both years. Bonuses are determined by reference to the individual performance of
the directors.
The emoluments paid or payable to each of the 5 (2012: 5) senior managements are as follows:
Zhang Fang Wu Zheng Zhang
Jingzhong Zhexing Junyi Hui Xiuhua Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Note i) (Note ii)
-------------------------------------------------------------------------------------------------------
2013
Salaries, allowances and
benefits in kind 226 218 226 161 153 984
Bonuses paid and payable 339 328 339 241 229 1,476
Pension scheme
contributions 17 17 17 17 17 85
-------------------------------------------------------------------------------------------------------
Total emoluments 582 563 582 419 399 2,545
-------------------------------------------------------------------------------------------------------
2012
Salaries, allowances and
benefits in kind 214 420 420 321 251 1,626
Bonuses paid and payable 82 135 135 98 103 553
Pension scheme
contributions 12 24 24 24 24 108
-------------------------------------------------------------------------------------------------------
Total emoluments 308 579 579 443 378 2,287
-------------------------------------------------------------------------------------------------------
Notes:
(i) Resigned as director and remained as senior management on June 11, 2012.
(ii) Resigned as supervisor and remainined as senior management on June 11, 2012.
The emoluments of each of the senior managements were below HK$1,000,000 (equivalent to Rmb786,200 (2012: Rmb811,000))
in both years. Bonuses paid to senior managements are performance-rated and are determined by the Board of Directors
of the Company.
No senior management waived any emoluments and no incentive was paid to any senior management as an inducement to join
the Company and no compensation for loss of office was paid to any senior management, past senior management during
both years. Bonuses are determined by reference to the individual performance of the senior managements.
16. EMPLOYEES' EMOLUMENTS
The emoluments of the five highest paid individuals in the Group are as follows:
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
----------------------------------------------------------------------------------------------------
Salaries, allowances and benefits in kind 8,432 6,680
Bonuses paid and payable (Note) 9,287 16,315
Pension scheme contributions 137 126
----------------------------------------------------------------------------------------------------
17,856 23,121
----------------------------------------------------------------------------------------------------
Note:
The bonuses paid and payable are determined by reference to the performance of the relevant business
of the Group for the years ended December 31, 2013 and 2012.
No any emoluments and no incentive was waived as an inducement to join the Company and no
compensation for loss of office was paid to any five highest paid individuals in the Group during
both years. Bonuses are determined by reference to the individual performance of the five highest
paid individuals in the Group.
The five individuals with the highest emoluments in the Group during the year included five (2012:
five) non-director employees.
Their emoluments are within the following bands:
No. of individuals
Year ended Year ended
12/31/2013 12/31/2012
----------------------------------------------------------------------------------------------------
HK$3,500,001 to HK$4,000,000 (equivalent to Rmb2,751,701
(2012: Rmb2,838,501) to Rmb3,144,800 (2012: Rmb3,244,000) 1 --
HK$4,000,001 to HK$4,500,000 (equivalent to Rmb3,144,801
(2012: Rmb3,244,001) to Rmb3,537,900 (2012: Rmb3,649,500) 1 --
HK$4,500,001 to HK$5,000,000 (equivalent to Rmb3,537,901
(2012: Rmb3,649,501) to Rmb3,931,000 (2012: Rmb4,055,000)) 3 1
HK$5,000,001 to HK$5,500,000 (equivalent to Rmb3,931,001
(2012: Rmb4,055,001) to Rmb4,324,100 (2012: Rmb4,460,500)) -- 1
HK$5,500,001 to HK$6,000,000 (equivalent to Rmb4,324,101
(2012: Rmb4,460,501) to Rmb4,717,200 (2012: Rmb4,866,000) -- 1
HK$6,000,001 to HK$6,500,000 (equivalent to Rmb4,717,201
(2012: Rmb4,866,001) to Rmb5,110,300 (2012: Rmb5,271,500) -- 1
HK$6,500,001 to HK$7,000,000 (equivalent to Rmb5,110,301
(2012: Rmb5,271,501) to Rmb5,503,400 (2012: Rmb5,677,000) -- 1
----------------------------------------------------------------------------------------------------
17. DIVIDENDS
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
----------------------------------------------------------------------------------------------------
Dividends recognised as distribution during the year:
2013 Interim -- Rmb6 cents (2012: 2012 interim Rmb6 cents) per share 260,587 260,587
2012 Final -- Rmb24 cents (2012: 2011 Final Rmb25 cents) per share 1,042,347 1,085,779
----------------------------------------------------------------------------------------------------
1,302,934 1,346,366
----------------------------------------------------------------------------------------------------
The final dividend of Rmb25 cents per share in respect of the year ended December 31, 2013 (2012:
final dividend of Rmb24 cents per share in respect of the year ended December 31, 2012) has been
proposed by the directors and is subject to approval by the shareholders in the annual general
meeting.
18. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on profit for the year
attributable to owners of the Company of Rmb1,907,470,000 (2012 (Restated):
Rmb1,649,484,000) and the 4,343,114,500 (2012: 4,343,114,500) ordinary shares
in issue during the year.
Diluted earnings per share presented is the same as basic earnings per share as
there were no potential ordinary shares outstanding for the years ended
December 31, 2013 and 2012.
19. PROPERTY, PLANT AND EQUIPMENT
Leasehold Communication Machinery
land and Ancillary and signaling Motor and Construction
buildings facilities equipment vehicles equipment in progress Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
COST
At January
1, 2012
(Originally
stated) 523,284 509,936 356,146 196,404 401,083 243,425 2,230,278
Merger
accounting
restatement 60,812 203,510 110,266 8,428 2,625 6,062 391,703
At January
1, 2012
(Restated) 584,096 713,446 466,412 204,832 403,708 249,487 2,621,981
Additions 21,100 19,469 79,603 22,066 42,160 54,836 239,234
Transfer - 33,482 10,306 - - (43,788) -
Disposals (844) (11,869) (13,603) (6,840) (11,055) (544) (44,755)
At December
31, 2012
(Restated) 604,352 754,528 542,718 220,058 434,813 259,991 2,816,460
Additions 10,009 30,638 12,814 24,535 27,883 218,802 324,681
Transfer 23,878 56,317 9,924 184 2,700 (93,003) -
Disposals - (8,025) (6,507) (24,775) (21,864) - (61,171)
At December
31, 2013 638,239 833,458 558,949 220,002 443,532 385,790 3,079,970
DEPRECIATION
At January
1, 2012
(Originally
stated) 114,601 156,921 260,209 136,066 268,016 - 935,813
Merger
accounting
restatement 5,816 36,544 53,904 5,290 1,782 - 103,336
At January
1, 2012
(Restated) 120,417 193,465 314,113 141,356 269,798 - 1,039,149
Provided for
the year 41,752 31,177 36,502 17,324 52,880 - 179,635
Disposals (755) (5,639) (12,851) (6,643) (10,735) - (36,623)
At December
31, 2012
(Restated) 161,414 219,003 337,764 152,037 311,943 - 1,182,161
Provided for
the year 42,367 36,959 46,661 18,183 46,520 - 190,690
Disposals - (4,374) (6,051) (23,430) (21,068) - (54,923)
At December
31, 2013 203,781 251,588 378,374 146,790 337,395 - 1,317,928
CARRYING
VALUES
At December
31, 2013 434,458 581,870 180,575 73,212 106,137 385,790 1,762,042
At December
31, 2012
(Restated) 442,938 535,525 204,954 68,021 122,870 259,991 1,634,299
At January
1, 2012
(Restated) 463,679 519,981 152,299 63,476 133,910 249,487 1,582,832
The property, plant and equipment are located in the PRC.
The carrying value of properties shown above comprises:
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Leasehold land and buildings in the PRC:
Long lease 24,322 24,654 24,984
Medium-term lease 410,136 418,284 438,695
434,458 442,938 463,679
As at December 31, 2013, certain property, plant and equipment have been
pledged as collaterals to secure general banking facilities granted to the
Group. Details of which were set out in Note 49.
20. PREPAID LEASE PAYMENTS
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Analysed for reporting purposes as:
Current assets 2,155 2,154 2,154
Non-current assets 68,156 70,321 72,476
70,311 72,475 74,630
The Group's prepaid lease payments comprise leasehold land in the PRC under
medium-term leases. The amount represents prepayment of rentals under operating
leases for "land use rights" of land situated in the PRC.
As at December 31, 2013, certain prepaid lease payments have been pledged as
collaterals to secure general banking facilities granted to the Group. Details
of which were set out in Note 49.
21. EXPRESSWAY OPERATING RIGHTS
Rmb'000
Cost
At January 1, 2012 (Originally stated) 16,756,557
Merger accounting restatement 2,691,045
At January 1, 2012 (Restated) 19,447,602
Additions 60,730
At December 31, 2012 (Restated) and at December
31, 2013 19,508,332
Amortisation
At January 1, 2012 (Originally stated) 5,391,619
Merger accounting restatement 587,348
At January 1, 2012 (Restated) 5,978,967
Charge for the year 807,207
At December 31, 2012 (Restated) 6,786,174
Charge for the year 811,025
At December 31, 2013 7,597,199
Carrying values
At December 31, 2013 11,911,133
At December 31, 2012 (Restated) 12,722,158
At January 1, 2012 (Restated) 13,468,635
The above expressway operating rights were granted by the Zhejiang Provincial
Government for a period ranging from 25 to 30 years. During the expressway
concessionary period, the Group has the rights of operations and management of
Shanghai-Hangzhou-Ningbo Expressway, Shangsan Expressway and Jinhua Section of
the Ningbo-Jinhua Expressway and the toll-collection rights thereof. The Group
is required to manage and operate the expressways in accordance with the
regulations promulgated by the Ministry of Communication and relevant
government authorities. Upon the end of the respective concession service
periods, the toll expressways and their toll station facilities without
residual value, will be returned to the grantors at zero consideration.
As at December 31, 2013 and 2012, the expressway operating rights in respect of
Jinhua Section of the Ningbo- Jinhua Expressway has been pledged as collaterals
to secure general banking facilities granted to the Group. Details of which
were set out in Note 49.
22. GOODWILL
Rmb'000
Cost and carrying VALUES
At January 1, 2012, December 31, 2012 and December
31, 2013 86,867
Particulars regarding impairment testing on goodwill are disclosed in Note 25.
23. OTHER INTANGIBLE ASSETS
Securities/
Customer futures Trading
bases firm seats Software Total
licenses
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
COST
At January 1, 2012 101,147 63,083 3,480 49,249 216,959
Additions - - - 14,287 14,287
At December 31, 2012 101,147 63,083 3,480 63,536 231,246
Additions - - - 17,575 17,575
At December 31, 2013 101,147 63,083 3,480 81,111 248,821
AMORTISATION
At January 1, 2012 41,615 - - 17,750 59,365
Charge for the year 6,266 - - 9,982 16,248
At December 31, 2012 47,881 - - 27,732 75,613
Charge for the year 6,266 - - 12,378 18,644
At December 31, 2013 54,147 - - 40,110 94,257
CARRYING VALUES
At December 31, 2013 47,000 63,083 3,480 41,001 154,564
At December 31, 2012 53,266 63,083 3,480 35,804 155,633
The customer bases of Zheshang Securities Co., Ltd. ("Zheshang Securities") and
Zheshang Futures Broker Co., Ltd. ("Zheshang Futures") are amortised on a
straight-line basis over 15 years and 3 years, respectively.
The securities/futures firm licenses of the securities operation are considered
by the management of the Group to have indefinite useful lives because they can
be renewed at minimal cost even though the current licenses are effective for
three years.
The trading seats of the securities operation is considered by the management
of the Group to have an indefinite useful life because there is no economic or
regulatory limit to their useful life.
Software are amortised on a straight-line basis over three to five years.
Particulars of the impairment testing on intangible assets with indefinite
useful lives are disclosed in Note 25.
24. DEPOSIT PAID FOR ACQUISITION OF A PROPERTY
On December 26, 2011, Zheshang Securities entered into a provisional agreement
with a related party, Hangzhou Jinji Real Estate Co., Ltd. ("Jinji Co"), a
subsidiary of the Communications Group, for the purchase of a property in
Hangzhou for a provisional consideration of Rmb809,500,000. As at December 31,
2011, deposit of Rmb323,800,000 had been paid to the vendor. During the year
ended December 31, 2012, this provisional agreement has been terminated as
Jinji Co fails to deliver the property to Zheshang Securities, deposit of
Rmb323,800,000 together with interest, which is according to the prevailing
lending rate promulgated by the People's Bank of China ("PBOC"), of
Rmb19,367,000 had been repaid to Zheshang Securities.
25. IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE USEFUL
LIVES
For the purposes of impairment testing, goodwill and other intangible assets
with indefinite useful lives set out in Notes 22 and 23 have been allocated to
four individual cash generating units ("CGUs"), comprising two subsidiaries in
toll operation segment and two subsidiaries in securities operation segment.
The carrying amounts of goodwill and other intangible assets (net of
accumulated impairment losses) as at December 31, 2013 and 2012 allocated to
these units are as follows:
Securities/futures
Goodwill firm licenses Trading seats
12/31/ 12/31/ 12/31/ 12/31/ 12/31/ 12/31/
2013 2012 2013 2012 2013 2012
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
- Zheshang Futures 1,395 1,395 11,300 11,300 1,400 1,400
86,867 86,867 63,083 63,083 3,480 3,480
During the years ended December 31, 2013 and 2012, management of the Group
determines that there are no impairment of any of its CGUs containing goodwill
and other intangible assets with indefinite useful lives.
The basis of the recoverable amounts of the above CGUs and their major
underlying assumptions are summarised below:
Jiaxing Co and Shangsan Co
The recoverable amounts of Jiaxing Co and Shangsan Co are determined based on
value in use calculations. The key assumptions for the value in use
calculations relate to discount rates, growth rates, and expected changes in
toll revenue and direct costs during the forecast period. Those calculations
use cash flow projections based on financial budgets approved by management
covering a five-year period and a discount rate the management considered
appropriate. No growth rate has been assumed beyond the five-year period up to
the remaining toll road operating rights which are 15 years (2012: 16 years)
and 17 years (2012: 18 years) for Jiaxing Co. and Shangsan Co., respectively.
Management believes that any reasonably possible change in any of these
assumptions would not cause the aggregate carrying amount of Jiaxing Co's and
Shangsan Co's goodwill to exceed their aggregate recoverable amounts.
Zheshang Securities & Zheshang Futures
The recoverable amounts of Zheshang Securities & Zheshang Futures are
determined based on value in use calculations. The key assumptions for the
value in use calculations relate to the discount rate, growth rates and profit
margin during the forecast period. Those calculations use cash flow projections
based on financial budgets approved by management covering a five-year period
with discount rates management believe appropriate. Growth rate beyond the
five-year period is assumed to be zero. Management believes that any reasonably
possible change in any of these assumptions would not cause the carrying amount
of Zheshang Securities & Zheshang Futures' other intangible assets to exceed
its aggregate recoverable amounts.
26. INTERESTS IN ASSOCIATES
12/31/2013 12/31/2012 12/31/2011
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Unlisted investments in associates,
at cost less impairment 492,534 209,910 167,159
Share of post-acquisition profit, net of
dividends received 82,199 70,147 81,236
574,733 280,057 248,395
At December 31, 2013 and 2012, the Group had interests in the following
associates:
Place of Percentage of
Form of registration equity interest
business and attributable to Principal
Name of entity structure operation the Group activities
12/31/ 12/31/
2013 2012
% %
Zhejiang Expressway Petroleum Corporate The PRC 50 50 Operation of
Development Co., Ltd. petrol
("Petroleum Co") (Note i) stations and
sale of
petroleum
products
JoinHands Technology Co., Corporate The PRC 27.58 27.58 Provision of
Ltd. ("JoinHands Co") (Note printing
ii) services and
property
leasing
Zhejiang Concord Property Corporate The PRC 45 45 Investment
Investment Co., Ltd. and real
estate
development
Zhejiang Communications Corporate The PRC 35 N/A Finance and
Finance Co., Ltd. ("Zhejiang Investment
Communications Finance")
(Note iii)
Ningbo Expressway Advertising Corporate The PRC N/A 24.5 Management
Co., Ltd. ("Ningbo of
Advertising Co")(Note iv) advertising
billboards
along
expressways
Zheshang Fund Management Co., Corporate The PRC 13.04 13.04 Asset fund
Ltd. ("Zheshang Fund") (Note management
v)
All of the above associates are accounted for using the equity method in these
consolidated financial statements.
Notes:
(i) According to the Articles of Association of Petroleum Co, 66.67% voting
power is required to govern the significant financial and operating policies,
and the Company can only exercise significant influence over it.
(ii) In July 2011, the Company agreed to transfer all of its 27.582% equity
interest in JoinHands Co to Guangzhou Kaixin Consulting Co., Ltd. ("Kaixin
Co"), an independent third party, at a consideration of Rmb31,430,000. However,
as Kaixin Co failed to pay the consideration for the equity transfer according
to the terms of the Equity Interest Transfer Agreement, such transfer had not
been completed and the Company lodged a lawsuit against it in August 2011 at
the People's Court of Xihu District, Hangzhou City ("Hangzhou People Court").
The court ruled in favour of the Company, except for the execution of the
priority right for claim against the mortgaged commercial property and land use
right in Hangzhou held by JoinHands Co ("the Property") to the Company and the
liquidated damages, in March 2012. Both the Company and Kaixin Co filed appeals
respectively because of their respective objections against the court's
decision. During the year ended December 31, 2011, an impairment loss of
Rmb11,979,000 in relation to interest in the associate, JoinHands Co, was
recognised.
On April 28, 2013, a final judgement from Hangzhou People's Court has ruled in
favour of the Company, and the Property has been put in an open auction and
completed with a transaction price of Rmb24,120,000 during the year. Since the
transfer of the Property interest has not been completed for the year ended
December 31, 2013, the disposal of the associate has not been completed in this
year. The management expect the transaction would be completed in 2014.
(iii) In March 2013, the Group entered into a capital contribution agreement
with Zhejiang Communications Finance and the existing shareholders of Zhejiang
Communications Finance, pursuant to which the Company and the existing
shareholders agreed to make corresponding capital contribution of
Rmb280,000,000 and Rmb20,000,000, by way of cash, into the equity capital of
Zhejiang Communication Finance. Zhejiang Communication Finance then became a
35% owned associate of the Group.
(iv) This associate has been deregistered during the year ended December 31,
2013 and the Group entitled to received appropriation from deregistration
amounting to Rmb1,040,000, resulting in a gain on deregistration of an
associate of Rmb16,000. As at December 31, 2013, Rmb388,000 out of the total
appropriation has been received by the Group and a payable of Rmb 652,000 due
to the associate by the Group has been waived upon the deregistration.
(v) The Group is able to exercise significant influence over Zheshang Fund
because it has the power to appoint one out of four directors of that company
under the provisions stated in the Articles of Association of that company.
During the year ended December 31, 2012, Zheshang Securities, in proportion to
its equity interest, had made additional capital contribution of Rmb50,000,000
to Zheshang Fund.
The summarised financial information in respect of the Group's material
associates at the end of the reporting period is set out below. This represents
amounts shown in the associate's financial statements prepared in accordance
with HKFRSs:
Petroleum Co and its subsidiaries
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Current assets 180,869 219,364
Non-current assets 257,516 235,483
Current liabilities 46,735 77,112
Non-current liabilities 1,481 1,481
Equity attributable to owners of the Petroleum Co 333,482 329,824
Non-controlling interests of Petroleum Co 56,687 46,430
For the For the
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Revenue 6,472,584 6,083,272
Profit for the year 31,890 20,509
Profit attributable to owners of Petroleum Co 21,631 15,016
Profit attributable to non-controlling interests of
Petroleum Co 10,259 5,493
31,890 20,509
Dividends received from the associate during the 8,987 6,500
year
Reconciliation of the above summarised financial information to the carrying
amount of the interest in Petroleum Co recognised in the consolidated financial
statements:
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Net asset of the associate 333,482 329,824
Proportion of the Group's ownership interest in
Petroleum Co 50% 50%
Carrying amount of the Group's interest in
Petroleum Co 166,741 164,912
Zhejiang Communications Finance
12/31/2013
Rmb'000
Current assets 4,504,856
Non-current assets 2,184,472
Current liabilities 5,801,276
From date of
acquisition to
12/31/2013
Rmb'000
Revenue 155,239
Profit for the period 79,054
Dividends received from the associate during the period -
Capital contribution received during the period 300,000
Reconciliation of the above summarised financial information to the carrying
amount of the interest in Zhejiang Communications Finance recognised in the
consolidated financial statements:
12/31/2013
Rmb'000
Net asset of the associate 888,052
Proportion of the Group's ownership interest in Zhejiang
Communications Finance 35%
Carrying amount of the Group's interest in Zhejiang Communications
Finance 310,818
Aggregate information of associates that are not individually material
12/31/2013 12/31/2012
Rmb'000 Rmb'000
The Group's share of loss (16,948) (12,021)
Aggregate carrying amount of the Group's interests in
these associates 97,174 115,145
27. INTEREST IN A JOINT VENTURE
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Unlisted investment in a joint venture, at cost less
impairment 373,470 373,470
Share of post-acquisition loss (39,526) (3,516)
333,944 369,954
At December 31, 2013 and 2012, the Group had interest in the following joint
venture:
Percentage
Place of of equity
Form of registration interest
business and attributable Principal
Name of entity structure operation to the Group activities
12/31 12/31/
/2013 2012
% %
Shengxin Expressway Corporate The PRC 50 50 Management of the
Co., Ltd. ("Shengxin Shaoxing section of the
Co") Ningbo-Jinhua Expressway
On July 6, 2012, the Company entered into a sales and purchase agreement (the
"S&P Agreement") with Shaoxing Communications Investment Group Co., Ltd.
("Shaoxing Communications Group"), an independent third party, who owned 100%
equity interest of Shengxin Co, pursuant to which the Company conditionally
agreed to purchase from Shaoxing Communications Group, a 50% equity interest in
Shengxin Co for cash consideration of Rmb355,033,000, plus interest accrued on
the consideration at the interest rate according to the PBOC. The acquisition
has been completed on November 28, 2012.
As at December 31, 2012, 50% of the consideration amounting to Rmb177,516,000
and the relevant interest of Rmb6,622,000 were paid by the Company to Shaoxing
Communications Group, while the remaining 50% and unpaid interest was accounted
for as consideration payable and included in other payables and accruals in the
consolidated statement of financial position.
The summarised financial information in respect of the Group's interest in
Shengxin Co which is accounted for using the equity method at the end of the
reporting period is set out below. This represents amounts shown in the joint
venture's financial statements prepared in accordance with HKFRSs:
The consideration and accrued interest had been fully settled by the Company
during year end 31 December 2013.
Shengxin Co
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Current assets 34,629 18,202
Non-current assets 2,954,410 3,085,117
Current liabilities 43,557 30,371
Non-current liabilities 2,277,595 2,333,041
The above amounts of assets and liabilities include the following:
Cash and cash equivalents 29,743 13,250
Current financial liabilities (excluding trade and other
Payables and provisions) - -
Non-current financial liabilities (excluding trade and
other Payables and provisions) 2,200,000 2,250,000
From
date of
For the acquisition
year ended to
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Revenue 284,445 93,027
Loss for the year/period (72,020) (7,032)
Dividend received from the joint venture - -
The above loss for the year includes the following:
Depreciation and amortisation (171,910) (14,304)
Interest income 146 83
Interest expense (137,699) (7,258)
Income tax expense (4,464) (279)
Reconciliation of the above summarised financial information to the carrying
amount of the interest in Shengxin Co recognised in the consolidated financial
statements:
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Net asset of the joint venture 667,887 739,907
Proportion of the Group's ownership interest in the
joint venture 50% 50%
Carrying amount of the Group's interest in Shengxin Co 333,944 369,954
28. AVAILABLE-FOR-SALE INVESTMENTS
AFS investments comprise:
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Non-current assets:
Unlisted equity securities investments, at cost
(Note i) 11,000 11,000
Corporate bonds listed in the PRC with fixed
interest of 9.6% per annum and maturity date on May
31, 2017 122,000 122,000
Trust products 10,514 -
143,514 133,000
Current assets:
Listed equity securities investments in the PRC
(Note ii) - 134,899
Funds 44,574 -
Trust products 31,000 -
Corporate bonds 5,000 -
Financial products (Note iii) 201,350 -
281,924 134,899
425,438 267,899
As at December 31, 2013, the Group has entered into securities lending
arrangement with clients that resulted in the transfer of listed AFS
investments with total fair value of Rmb2,772,000 (2012: Rmb5,897,000) to
external clients, which did not result in derecognition of the financial
assets. Details of the collaterals were set out in Note 30.
Notes:
(i) Unlisted equity securities investments represent investments in unlisted
equity securities issued by private entities established in the PRC. They are
measured at cost less impairment at the end of the reporting period because the
range of reasonable fair value estimated is so significant that the directors
of the Company are of the opinion that their fair values cannot be measured
reliably.
(ii) Listed equity investments represent equity securities subscribed through
placement by listed issuers. They are measured at fair value. During the year
ended December 31, 2013, the gain on change in fair value of the investments of
Rmb4,865,000 (2012:Rmb4,800,000) has been recognised as other comprehensive
income.
(iii) The financial products comprise products offered by fund or asset
management companies where funds are mainly invested in listed
securities,open-ended funds or asset management plan and the Group's return of
investment is tied to the result of such investments.
29. TRADE RECEIVABLES
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Trade receivables comprise:
A fellow subsidiary (Note 51(i)(a)) 3,077 3,010 2,431
Third parties 99,023 62,393 50,875
Total trade receivables 102,100 65,403 53,306
Less: Allowance for doubtful debts (672) (956) (831)
101,428 64,447 52,475
The Group has no credit period granted to its trade customers of toll operation
and service area businesses. The Group's trade receivable balance for toll
operation is toll receivables from the Expressway Fee Settlement Centre of the
Highway Administration Bureau of Zhejiang Province, which are normally settled
within 3 months. All of these trade receivables were neither past due nor
impaired in both years.
In respect of the Group's asset management service operated by Zheshang
Securities of which was newly commenced during the year ended December 31,
2013, Trading limits are set for customers. The Group seeks to maintain tight
control over its outstanding accounts receivable in order to minimise credit
risk. Overdue balances are regularly monitored by management.
The following is an aged analysis of trade receivables net of allowance for
doubtful debts presented based on the invoice date at the end of the reporting
period, which approximated the respective revenue recognition dates:
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Within 3 months 90,812 64,138 49,773
3 months to 1 year 10,453 - 2,431
1 to 2 years - 146 -
Over 2 years 163 163 271
101,428 64,447 52,475
Movement of allowance for doubtful debts
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
At the beginning of the year 956 831 -
Impairment recognised for the year 7 125 831
Amount reversed during the year (291) - -
At the end of the year 672 956 831
The Group determines the allowance for impaired debts based on the evaluation
of collectability and ageing analysis of accounts and on management's judgement
including the assessment of change in credit quality and the past collection
history of each client. The directors consider the credit risk of the balance
to be minimal.
30. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING BUSINESS
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Loans to margin clients 2,955,388 724,123
Less: Allowance for doubtful debts (8,477) -
2,946,911 724,123
The Group has provided customers with margin financing and security lending for
securities transactions since June 2012, the credit facility limits to margin
clients are determined by the discounted market value of the pledged securities
accepted by the Group or the market value of cash collateral.
All of the loans to margin clients which are secured by the underlying pledged
securities are interest bearing. The Group maintains a list of approved stocks
for margin lending at a specified loan to collateral ratio. Any excess in the
lending ratio will trigger a margin call which the customers have to make good
of the shortfall. The Group has the right to process forced liquidation if the
customer fails to make good of the shortfall within a short period of time.
As at December 31, 2013, loans to customers under the margin financing and
securities lending activities carried out in the PRC were secured by the
customers' stock securities and cash collaterals. The undiscounted market value
of the stock security collaterals was amounted to Rmb8,207,640,000 (2012:
Rmb2,745,885,000). Cash collateral of Rmb222,313,000 (2012: Rmb75,976,000)
received from clients was included in accounts payable to customers arising
from securities business in Note 37.
No aged analysis is disclosed as in the opinion of the directors, the aged
analysis does not give additional value in view of the nature of business of
securities margin financing.
Movement in the allowance for doubtful debts
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Allowance for doubtful debts at the beginning of the - -
year
Impairment recognised for the year 8,477 -
At end of the year 8,477 -
The Group determines the allowance for impaired debts based on the evaluation
of collectability and ageing analysis of accounts and on management's judgement
including the assessment of change in credit quality, collateral and the past
collection history of each client. As at December 31, 2013, the allowance for
doubtful debts include individual assessment of Rmb2,572,000 and collective
assessment of Rmb5,905,000 The concentration of credit risk is limited due to
the customer base being large and unrelated.
31. OTHER RECEIVABLES AND PREPAYMENTS
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Current
Entrusted loans receivables from related
parties (Note 51(ii)) 54,000 314,616 350,704
Entrusted loan receivable from a third party
(Note a) - - 300,944
Interest receivables 122,392 73,440 72,932
Financial products investment receivables
(Note b) 168,000 103,432 -
Prepayments 30,195 31,543 40,623
Others 77,381 97,992 80,924
451,968 621,023 846,127
Non-Current
Entrusted loans receivables from related
parties (Note 51(ii)) 401,400 325,035 300,000
853,368 946,058 1,146,127
Notes:
(a) Pursuant to the board resolutions of the Company on January 30, 2011, and
the entrusted loan contracts, the Company provided short-term entrusted loans
during 2011 totaling Rmb500,000,000 with maturity date of March 31, 2012 to
Zhejiang Jiahe Industrial Co., Ltd. at a fixed interest rate of 12% per annum
and guaranteed by Greentown Real Estate Group Co., Ltd. in full. Part of the
loan of Rmb200,000,000 was early settled during 2011. The remaining balance was
settled during the year ended December 31, 2012.
(b) Short-term fixed-yield and principal protected bank financial products.
32. HELD FOR TRADING INVESTMENTS
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Held for trading investments include:
Listed securities in the PRC, at fair value:
Equity securities 78,658 8,953
Open-end equity funds 5,242 26,362
Corporate bonds with fixed interest ranging from
4.27% to 8.6% (2012: 5.20% to 9.60%) per annum 1,097,125 1,451,457
1,181,025 1,486,772
33. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Analysed by collateral type:
Bonds 20,500 119,900
Stock securities (note) 853,754 160,166
874,254 280,066
Analysed by market:
Shanghai/Shenzhen Stock Exchange 874,254 280,066
Note: The financial assets (pledged by stock) held under resale agreements are
those resale agreements which qualified investors entered into with the Group
to purchase the specified securities at a predetermined price and a
predetermined day in the future.
The collaterals include both equity and debt securities listed in the PRC. As
at December 31, 2013, the fair value of equity securities and debt securities
held as collaterals was Rmb1,915,221,000 (2012: Rmb299,918,000) and
Rmb20,500,000 (2012: Rmb119,900,000), respectively.
34. BANK BALANCES HELD ON BEHALF OF CUSTOMERS
From the Group's securities operation, the Group receives and holds money
deposited by customers (including other institution). These customers' money is
maintained in one or more segregated bank accounts. The Group has recognised
the corresponding accounts payable to respective customers and other
institution.
Bank balances held on behalf of customers carry interest at market rates which
range from 1.62% to 1.98% (2012: 1.62% to 1.98%) per annum.
Bank balances held on behalf of customers that are denominated in currencies
other than the functional currency of the respective group entities are set out
below:
HKD USD
Rmb'000 Rmb'000
As at December 31, 2013 13,933 36,948
As at December 31, 2012 14,228 40,544
35. BANK BALANCES AND CASH
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Time deposits with original maturity over
three months 704,459 1,483,408 2,467,793
Unrestricted bank balances and cash 1,130,759 2,643,133 2,311,747
Time deposits with original maturity of less
than three months 676,222 748,920 828,073
Cash and cash equivalents 1,806,981 3,392,053 3,139,820
2,511,440 4,875,461 5,607,613
Bank balances carry interest at the average market rate of 0.35% (2012: 0.42%)
per annum. Time deposits carry interest at fixed rates ranging from 1.35% to
3.30% (2012: 2.38% to 3.36%) 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, 2013 5,462 28,209
As at December 31, 2012 5,232 27,999
36. PLACEMENTS FROM OTHER FINANCIAL INSTITUTION
2013/12/31 2012/12/31
Rmb'000 Rmb'000
Placements from China Securities Finance Corporation
Limited ("CSF") 310,000 -
The placements from CSF were secured by a cash deposit of Rmb10,785,000 (2012:
nil) and debt and equity securities with total fair value of Rmb203,923,000
(2012: nil) as at December 31, 2013.
The placements with interest rate ranging from 7.0% to 7.1% (2012: nil) per
annum are repayable within 3 months from the end of the reporting period.
37. ACCOUNTS PAYABLE TO CUSTOMERS ARISING FROM SECURITIES BUSINESS
The amounts mainly represent money held on behalf of clients at the banks and
at the clearing houses by the Group.
The amounts include payables for securities/futures business as well as cash
collateral from customers for securities lending and/or margin financing
arrangement.
The majority of the accounts payable balance is repayable on demand except
where certain accounts payable to brokerage clients represent margin deposits
received from clients for their trading activities under normal course of
business. No aged analysis is disclosed as in the opinion of the directors an
aged analysis does not give any additional value in view of the nature of the
business.
As at December 31, 2013, Rmb222,313,000 (2012: Rmb75,976,000) cash collateral
have been received from clients for securities lending or margin financing
arrangement, of which under normal course of business. Only the excess amounts
over the required margin deposits stipulated are repayable on demand.
Accounts payable to customers arising from securities business that are
denominated in currencies other than the functional currency of the respective
group entities are set out below:
HKD USD
Rmb'000 Rmb'000
As at December 31, 2013 13,933 36,948
As at December 31, 2012 14,228 40,544
38. TRADE PAYABLES
Trade payables mainly represent the construction payables for the improvement
projects of toll expressways. The following is an aged analysis of trade
payables presented based on the invoice date:
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Within 3 months 214,669 236,246 103,264
3 months to 1 year 82,048 37,328 32,552
1 to 2 years 29,518 29,117 116,641
2 to 3 years 8,496 49,122 58,618
Over 3 years 87,263 56,799 34,378
421,994 408,612 345,453
39. OTHER PAYABLES AND ACCRUALS
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Other liabilities:
Accrued payroll and welfare 544,469 408,689 359,430
Consideration payable for acquisition of equity
interest in Shengxin Co (Note 27) (Note) - 189,331 -
Advance from rental and advertising customers 94,124 73,048 78,042
Toll collected on behalf of other toll roads 5,057 7,114 36,944
Retention payable 143,807 85,849 87,714
Others 192,382 184,888 134,376
979,839 948,919 696,506
Other accruals 15,657 42,341 44,525
995,496 991,260 741,031
Note: The amount was unsecured, repayable on demand and carried interest at
interest rate according to the PBOC. The amount was fully settled during the
year ended 31 December 2013.
40. BANK AND OTHER BORROWINGS
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Bank loans 500,000 1,140,000 1,752,553
Loans from related parties (See Note 51(i)) 340,000 200,000 100,000
840,000 1,340,000 1,852,553
Secured (Note) 400,000 1,140,000 1,290,000
Unsecured 440,000 200,000 562,553
840,000 1,340,000 1,852,553
Carrying amount repayable:
Within one year 540,000 660,000 712,553
More than one year, but not exceeding two
years 200,000 280,000 460,000
More than two years but not more than five
years 100,000 400,000 680,000
840,000 1,340,000 1,852,553
Less: Amounts due within one year (540,000) (660,000) (712,553)
Amounts shown under non-current liabilities 300,000 680,000 1,140,000
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
The bank and other borrowings comprise:
Fixed-rate borrowings 440,000 180,000 542,553
Variable-rate borrowings 400,000 1,160,000 1,310,000
840,000 1,340,000 1,852,553
The range of effective interest rates (which are also agreed to contracted
interest rates) on the Group's borrowings are as follows:
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Effective interest rate:
Fixed-rate borrowings 5.04% 5.18% 4.95% to
6.31%
Variable-rate borrowings 6.22% - 5.90% to 5.76% to
6.77% 6.31% 6.65%
Note: Details of the securities pledged for the grant of borrowings to the
Group were set out in Note 49.
The Group's borrowings were all dominated in the Group's functional currencies
as at December 31, 2013 and 2012.
41. LONG-TERM BONDS
12/31/2013 12/31/2012
Long-term bonds - listed in the PRC Rmb'000 Rmb'000
- 1,000,000
The long-term bonds are unsecured and carry interest payable annually at a
fixed rate of 4.29% (2012: 4.29%) per annum. As at December 31, 2012, the
long-term bonds were classified as current liabilities according to its
maturity on January 24, 2013 and had been repaid in full on the maturity date.
42. SHORT-TERM LOAN NOTE
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Short-term Loan note 1,000,000 -
As at December 31, 2013, the Group has short-term loan note issued at principal
value of Rmb1,000,000,000, which was interest bearing at a rate of 5.5% per
annum. The amount was matured on January 23, 2014 and had been repaid in full
on the maturity date. On January 17, 2014, the Group has issued another
short-term loan notes at principal value of Rmb1,000,000,000, which was
interest bearing at a rate of 6.28% per annum. The amount will be matured on
April 20, 2014.
43. DEFERRED TAXATION
The following are the major deferred tax liabilities and assets recognised and
movements thereon during the current and prior years:
Accelerated
tax
depreciation
Changes in of property
fair value plant and Fair
of held for equipment value
trading and and adjustment Temporary
available- expressway of differences
for-sale operating long term of accrued
investments rights assets expenses Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At January 1, 2012
(Originally stated) 23,953 218,557 31,899 (42,343) 232,066
Merger accounting
restatement - (42,065) 99,164 - 57,099
At January 1, 2012
(Restated) 23,953 176,492 131,063 (42,343) 289,165
Charge (credit) to profit
or loss 6,633 (15,670) (8,868) (3,336) (21,241)
Charge to other
comprehensive income 1,200 - - - 1,200
At December 31, 2012
(Restated) 31,786 160,822 122,195 (45,679) 269,124
Credit to profit or loss (5,381) (13,286) (8,868) (36,822) (64,357)
Charge to other
comprehensive income 871 - - - 871
At December 31, 2013 27,276 147,536 113,327 (82,501) 205,638
44. SHARE CAPITAL
Number of shares Share capital
12/31/ 12/31/ 12/31/ 12/31/
2013 2012 2013 2012
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
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.
45. NON-CONTROLLING INTERESTS
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
Balance at beginning of year 3,577,221 3,507,435 3,065,669
Share of total comprehensive income 308,573 178,796 248,706
Capital injection - - 336,642
Arising from acquisition of additional
interest in a subsidiary (Note) (78,863) - -
Dividend paid to non-controlling interests
during the year (110,510) (109,010) (143,582)
3,696,421 3,577,221 3,507,435
Note: As detailed in Note 2, during the year, the Group has acquired the
remaining 76.55% equity interest in Jinhua Co, of which 10.267% was acquired
from the non-controlling shareholder for a consideration of RMB101,512,000.
This acquisition of additional interest in a subsidiary has resulted in a
reduction of non-controlling interest of Rmb78,863,000.
The summarised financial information in respect of the Group's subsidiary that
has material non-controlling interests, namely Shangsan Co and its subsidiaries
and Yuhang Co (as defined in Note 52) at the end of the reporting period are
set out below. The summarised financial information below represents amounts
before intragroup elimination.
Shangsan Co and its subsidiaries
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Current assets 15,434,356 12,767,702
Non-current assets 3,052,155 3,241,847
Current liabilities 10,692,614 8,505,389
Non-current liabilities 19,758 66,375
Equity attributable to owners of the Company 4,460,933 4,299,211
Non-controlling interests 3,313,206 3,138,574
For the year For the year
ended ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Revenue 2,404,228 1,805,349
Expenses (1,710,102) (1,389,341)
Profit for the year 694,126 416,008
Other comprehensive income 2,228 3,469
Total comprehensive income 696,354 419,477
Profit attributable to owner of the Company 425,610 272,340
Profit attributable to non-controlling interests 268,516 143,668
694,126 416,008
Total comprehensive income attributable to owner
of the Company 426,772 274,149
Total comprehensive income attributable to
non-controlling interests 269,582 145,328
696,354 419,477
The summarised financial information in respect of the Group's subsidiary that
has material non-controlling interests, namely Shangsan Co and its subsidiaries
and Yuhang Co (as defined in Note 52) at the end of the reporting period are
set out below. The summarised financial information below represents amounts
before intragroup elimination.
For the year For the year
ended ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Dividends paid to non-controlling shareholders (94,950) (94,950)
Net cash outflow from operating activities (1,236,398) (383,926)
Net cash (outflow) inflow from investing
activities (851,427) 2,064,162
Net cash inflow (outflow) from financing
activities 554,950 (528,060)
Net cash (outflow) inflow (1,532,875) 1,152,176
Yuhang Co
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Current assets 198,150 145,227
Non-current assets 725,236 586,619
Current liabilities 104,544 52,025
Non-current liabilities 108,747 9,103
Equity attributable to owners of the Company 362,148 342,066
Non-controlling interests 347,947 328,652
For the year For the year
ended ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Revenue 114,089 110,832
Expenses (52,145) (51,050)
Profit for the year 61,944 59,782
For the year For the year
ended ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Profit and total comprehensive income
- attributable to owner of the Company 31,591 30,489
- attributable to non-controlling interests 30,353 29,293
61,944 59,782
Dividends paid to non-controlling shareholders (11,058) (11,058)
Net cash inflow from operating activities 93,743 29,760
Net cash outflow from investing activities (190,205) (20,841)
Net cash inflow (outflow) from financing activities 72,391 (22,542)
Net cash outflow (24,071) (13,623)
46. RETIREMENT BENEFITS SCHEMES
The employees of the Group are members of the state-managed retirement benefits
scheme operated by the PRC government. To supplement this existing retirement
benefits scheme, the Group adopted a corporate annuity scheme in accordance
with relevant rules and regulations. The Group is required to contribute a
certain percentage of payroll costs to these retirement benefits schemes to
fund the benefits. The only obligation of the Group with respect to these
retirement benefits schemes is to make the specified contributions.
No forfeited contributions are available to reduce the contribution payable in
future years.
47. COMMITMENTS
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Authorised but not contracted for:
- Purchase of machinery and equipment 344,933 238,504
- Renovation of service areas 18,000 70,850
- Acquisition and construction of properties 1,324,082 497,050
- Investment in an associate 30,000 280,000
1,717,015 1,086,404
48. OPERATING LEASES
The Group as lessee
Year ended Year ended
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Minimum lease payments 80,244 58,199
Contingent rental expenses 3,085 4,525
83,329 62,724
At the end of the reporting period, the Group had commitments for future
minimum lease payments under non-cancellable operating leases which fall due as
follows:
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Within one year 60,087 49,985
In the second to fifth years inclusive 125,500 112,900
Over five years 1,797 4,490
187,384 167,375
Operating lease payments represent rentals payable by the Group for certain
service areas along expressways located in Zhejiang and Tianjin, and the
operating branches of Zheshang Securities and Zheshang Futures. They are
negotiated for an average term of three to ten years and some of the rentals
contain both a fixed element and a contingent element linked to sales. The
above commitment represented the minimum lease payments payable to
lessors only and do not include any contingent rent elements.
The Group as lessor
The Group leased their service areas and communication ducts under operating
lease arrangements. Leases are negotiated for terms ranging from 1 to 25 years
and rentals are fixed annually.
At the end of the reporting period, the Group had contracted with tenants for
the following future minimum lease payments:
12/31/2013 12/31/2012
Rmb'000 Rmb'000
(Restated)
Within one year 60,090 25,539
In the second to fifth years inclusive 88,047 39,044
After five years 25,643 37,310
173,780 101,893
For certain of the Group's service areas, the rental income are variable and
being calculated at the higher of a pre-agreed percentage of revenue of the
relevant service areas made by the lessees or the minimum lease payments. The
above commitment represented the minimum lease payments from lessees only and
do not include any contingent rent elements.
49. PLEDGE OF ASSETS
At the end of reporting period, the Group had pledged the following assets to
banks as securities against general banking facilities granted to the Group:
12/31/2013 12/31/2012
Rmb'000 Rmb'000
(Restated)
Property, plant and equipment 381,797 -
Expressway operating rights 1,882,283 1,990,100
Prepaid lease payments 40,372 -
2,304,452 1,990,100
50. CONTINGENT LIABILITIES
12/31/2013 12/31/2012
Rmb'000 Rmb'000
Guarantees given to bank, in respect of a joint
venture (Note) 1,100,000 -
Note: During the year ended December 31, 2013, the Group provided a financial
guarantee to Shengxin Co, a 50% owned joint venture of the Group, in favour of
a bank for 50% of its outstanding bank borrowings and interest. As at December
31, 2013, total bank borrowings and accrued interest held by Shengxin Co
amounted to Rmb2,200,000,000. The directors of the Company consider that the
fair value of the guarantee is insignificant at initial recognition and default
by the guaranteed party is not probable as at December 31, 2013.
51. RELATED PARTY TRANSACTIONS AND BALANCES
The following is a summary of the related party during the year:
(i) Transactions and balances with government related parties
The Group operates in an economic environment currently predominated by
entities directly or indirectly owned or controlled by the PRC government
("government-related entities"). In addition, the Group itself is part of a
larger group of companies under the Communications Group which is controlled by
the PRC government. However, due to the business nature, in respect of the
Group's toll road and securities business, the directors are of the opinion
that it is impracticable to ascertain the identity of counterparties and
accordingly whether the transactions are with other government-related entities
in the PRC. Details of other significant transactions with government related
parties are summarised below:
(a) Transactions with Communications Group
(1) As disclosed in Note 2, on March 20, 2013, the Company entered into an
agreement with Communications Group pursuant to which the Company purchased
from Communications Group a 66.283% equity interest in the Jinhua Co held by
Communications Group at a cash consideration of Rmb655,356,000.
(2) On March 30, 2013, the Company entered into the capital contribution
agreement with Zhejiang Communications Finance and its existing shareholders
(all of who are subsidiaries of Communications Group). Pursuant to the
agreement, the Company contributed an amount of Rmb280,000,000 in the capital
of Zhejiang Communications Finance, by way of cash. Upon completion, the
Company owned 35% equity interest in Zhejiang Communications Finance and
Zhejiang Communications Finance then became an associate of the Company.
(3) Pursuant to the entrusted loan contracts entered into between Jinhua Co and
Communications Group on January 21, 2013, Communications Group agreed to
provide Jinhua Co with entrusted loans amounted to Rmb140,000,000 at a variable
interest rate of 6.00% per annum. Such loan with those entrust loans provided
by Communication Group before January 1, 2013 amounted to Rmb200,000,000 were
replaced by two new entrusted loan contracts on February 28, 2013 amounted to
Rmb170,000,000 each at a variable rate of 5.24% per annum, with maturity date
of August 10, 2015. All of the loans were early repaid in 2013. The total
interest expense amounted to Rmb10,886,000 was charged for the year ended
December 31, 2013.
(4) Pursuant to the leasing and operation agreement entered into between Jinhua
Co and Zhejiang Communications Investment Group Industrial Development Co. , Lt
d. ("Zhejiang Communications Investment"), a fellow subsidiary of
Communications Group, Jinhua Co leased the toll road service area to Zhejiang
Communications Investment and Zhejiang Communications Investment managed the
operation of the service area and the advertising business in respect of the
toll road service area. Such business began from January 1, 2011, and will be
expired at the same time with the operating right for Jinhua Section in 2030.
For the year ended December 31, 2013, Jinhua Co earned the leasing profit of
Rmb3,077,000 (2012 (restated): Rmb3,010,000) and the management fee of
Rmb600,000 (2012 (restated): Rmb600,000) from Zhejiang Communications
Investment.
(5) During the year ended December 31, 2013, the Group entered into certain
road maintenance contract with fellow subsidiaries of Communications Group, and
recognised respective service expenses of Rmb43,272,000 (2012: Rmb22,089,000).
(6) During the year ended December 31, 2013, the Group provided certain toll
road related inspection services to fellow subsidiaries of Communications Group
and recognised respective service income of Rmb7,286,000 (2012: nil).
(b) Transactions with other government related parties
(1) Pursuant to the operation management agreement entered into between
Zhejiang Expressway Investment Development Co., Ltd. ("Development Co"), a
wholly owned subsidiary of the Company, and Petroleum Co in respect of the
petrol stations in the service areas along the Shanghai-Hangzhou-Ningbo and
Shangsan Expressways, Petroleum Co assist Development Co in running their
petrol stations along these roads. Purchases of petroleum products from
Petroleum Co during year ended December 31, 2013 amounted to Rmb1,781,179,000
(2012: Rmb1,669,833,000). Petroleum Co is a government related entity and also
an associate of the Group.
(2) The Group has entered into various significant transactions, including
deposit placements, borrowings and other general banking facilities, with
certain banks and financial institution which are government-related entities
in its ordinary course of business. In view of the nature of those banking
transactions, the directors are of the opinion that separate disclosure would
not be meaningful.
(ii) Transactions and balances with associates and other non-government related
parties
(1) On March 8, 2013 and April 8, 2013, Zhejiang Communications Finance
provided Jinhua Co with loans amounted to Rmb70,000,000 and Rmb 20,000,000 at a
fixed interest rate of 5.4% per annum, with maturity date of March 7, 2014 and
April 7, 2014, respectively. All of the loans were early repaid in 2013.
Interest expense amounted to Rmb2,575,000 was charged for the year ended
December 31, 2013.
(2) On July 25, 2013 and December 30, 2013, Zhejiang Communications Finance
provided the Company with short-term loans amounted to Rmb190,000,000 and
Rmb150,000,000, at a fixed interest rate of 5.04% per annum, with maturity date
of January 25, 2014 and March 31, 2014 respectively. These loans have been
early repaid subsequent to the end of the reporting period. Interest expense
amounted to Rmb4,298,000 was charged for the year ended December 31, 2013.
(3) On August 7, 2012, the Company provided short-term entrusted loans to
Zhejiang Canal Concord Property Co., Ltd. ("Zhejiang Canal Concord"), a
subsidiary of Hangzhou Concord Co, who is a subsidiary of the Group's
associate, in the amount of Rmb190,000,000 at a fixed interest rate of 12% per
annum, with maturity date of February 7, 2014. Such amount was early repaid in
December 2013.
The Company also advanced a long-term entrusted loan of Rmb100,000,000 to
Zhejiang Canal Concord at a fixed interest rate of 12% per annum on November
28, 2011, with maturity date on May 17, 2013. Such entrusted loans are
guaranteed by World Trade Ltd, an independent third party, in full. Part of the
entrusted loan of Rmb17,953,000 was early settled during 2012 and the remaining
balance of Rmb82,047,000 was early settled in January 2013.
Pursuant to the board resolutions of the Company on June 11, 2012, the Company
advanced Rmb120,000,000 to Zhejiang Canal Concord, at a fixed interest rate of
12% per annum with maturity date on January 17, 2014. Such entrusted loans are
guaranteed by World Trade Ltd, in full. The respective amount was early settled
in December 2013.
The Company provided long-term entrusted loan during 2013 totalling
Rmb400,000,000 for a period of 18 months to Zhejiang Canal Concord at a fixed
interest rate of 12% per annum. Such entrusted loan is guaranteed by World
Trade Ltd in full.
(4) The Company provided long-term entrusted loan during 2011 totalling
Rmb200,000,000 with maturity date of April 25, 2013 to Hangzhou Canal Concord
at a fixed interest rate of 12% per annum. Such entrusted loan is guaranteed by
World Trade Ltd in full and amount to Rmb88,132,000 were early settled on
January 28, 2013, remaining amount was settled in April.
(5) The Group's subsidiary, Development Co provided short-term entrusted loans
of Rmb50,000,000 at a fixed interest rate of 12% per annum, with maturity date
on April 27, 2014 to Zhejiang Canal Concord. Such entrusted loan is guaranteed
by World Trade Ltd in full.
Interest income recognised in 2013 on the above entrusted loan transactions
with associates and its subsidiaries were Rmb44,476,000 (2012: Rmb70,993,000).
Interest receivables as at December 31, 2013 on the above entrusted loan
transactions with associates were Rmb5,400,000 (2012: Rmb47,604,000). The
amounts will be repaid at maturity.
(6) The Group entered into a financial services agreement with Zhejiang
Communications Finance. Pursuant to the agreement, Zhejiang Communications
Finance agreed to provide the Group with the Deposit Services, the Loan and
Financial Leasing Services, the Clearing Services and Other Financial Services.
On December 31, 2013, the balance of the Group under account of Zhejiang
Communications Finance is Rmb60,443,000 (2012: Rmb nil).
(iii) Key management emoluments
The remuneration of the directors, supervisors and key management personnel
during the year was Rmb4,820,000(2012: Rmb4,962,000) including retirement
benefit scheme contribution of Rmb136,000 (2012: Rmb191,000) which is
determined by the performance of the individuals and the market trends.
52. PARTICULARS OF SUBSIDIARIES OF THE COMPANY
Registered Percentage
Date and and of equity interest
Name of place of paid-in attributable
subsidiary registration capital to the Company Principal
Rmb Direct Indirect activities
12/31/ 12/31/ 12/31/ 12/31/
2013 2012 2013 2012
% % % %
(Restated) (Restated)
Yuhang Co Note 1 75,223,000 51 51 - - Management of
the Yuhang
Section of
the Shanghai-
Hangzhou
Expressway
Jiaxing Co Note 2 1,859,200,000 99.999454 99.999454 - - Management of
the Jiaxing
Section of
the Shanghai-
Hangzhou
Expressway
Shangsan Co Note 3 2,400,000,000 73.625 73.625 - - Management of
the Shangsan
Expressway
Development Note 4 120,000,000 100 100 - - Operation of
Co service areas
as well as
roadside
advertising
along the
expressways
operated by
the Group
Zhejiang Note 5 16,000,000 - - *70 *70 Provision of
Expressway advertising
Advertising services
Co., Ltd.
("Advertising
Co")
Zhejiang Note 6 8,000,000 **100 **100 - - Provision of
Expressway vehicle
Vehicle towing,
Towing and repair and
Rescue emergency
Services Co., rescue
Ltd. ("Towing services
Co")
Hangzhou Note 7 3,000,000 - - *51 *51 Provision of
Roadtone advertising
Advertising services
Co., Ltd.
("Roadtone
Co")
Zheshang Note 8 3,000,000,000 - - *** *** Operation of
Securities 52.15 52.15 securities
business
Zheshang Note 9 500,000,000 - - **** **** Operation of
Futures 52.15 52.15 securities
business
Zheshang Note 10 300,000,000 - - **** **** Operation of
Capital 52.15 52.15 securities
Management business
Zheshang Note 11 500,000,000 - - **** - Provision of
Securities 52.15 Asset
Asset management
Management service
Co., Ltd.
("Asset
Management")
Zhejiang Note 12 100,000,000 - - **** - Trading of
Zheqi Co., 52.15 future
Ltd
("Zhejiang
Zheqi")
Jinhua Co Note 13 900,000,000 100 23.45 - 66.28 Management of
the Jinhua
Section of
the
Ningbo-Jinhua
Expressway
* These two companies are subsidiaries of Development Co, a wholly-owned
subsidiary of the Company, and, accordingly, are accounted for as subsidiaries
by virtue of the Group's control over them.
** Pursuant to the resolution of directors' meeting on May 25, 2012 of
Development Co and the share transfer agreement, 100% shares of Towing Co were
transferred to the Company on September 26, 2012.
*** The company is a subsidiary of Shangsan Co, a non-wholly-owned subsidiary
of the Company, and, accordingly, is accounted for as a subsidiary by virtue of
the Group's control over it.
**** The companies are subsidiaries of Zheshang Securities, non-wholly-owned
subsidiaries of Shangsan Co, and, accordingly, are accounted for as
subsidiaries by virtue of the Group's control over it.
Note 1: Yuhang Co was established on June 7, 1994 in the PRC as a joint stock
limited company and was subsequently restructured into a limited liability
company under its current name on November 28, 1996. The Company is able to
control over Yuhang Co because it has the power to appoint five out of nine
directors of that company and under the provisions stated in the Articles of
Association of that company, the passing of ordinary resolutions at the board
meetings required one-half of the directors attending the meetings.
Note 2: Jiaxing Co was established on June 30, 1994 in the PRC as a joint stock
limited company and was subsequently restructured into a limited liability
company under its current name on November 29, 1996.
Note 3: Shangsan Co was established on January 1, 1998 in the PRC as a limited
liability company.
Note 4: Development Co was established on May 28, 2003 in the PRC as a limited
liability company.
Note 5: Advertising Co was established on June 1, 1998 in the PRC as a limited
liability company.
Note 6: Towing Co was established on July 31, 2003 in the PRC as a limited
liability company.
Note 7: Roadtone Co was established on July 27, 2004 in the PRC as a limited
liability company.
Note 8: Zheshang Securities was established on May 9, 2002 in the PRC as a
limited liability company. On November 16, 2013, the board of directors of the
Company announced that Zheshang Securities proposed to seek a separate listing
of its shares as A shares on the Shanghai Stock Exchange. This proposed
spin-off for separate listing has not yet been completed at the end of the
reporting period.
Note 9: Zheshang Futures was established on September 7, 1995 in the PRC as a
limited liability Company.
Note 10: Zheshang Capital Management was established on February 9, 2012 in the
PRC as a limited liability Company.
Note 11: Asset Management was established on July 22, 2013 in the PRC as a
limited liability Company.
Note 12: Zhejiang Zheqi was established on April 9, 2013 in in the PRC as a
limited liability Company.
Note 13: Jinhua Co was established in February, 2002 in the PRC as a limited
liability Company. As at December 31, 2012, 23.45% equity interest of Jinhua Co
was directly held by the Company. During the year ended December 31, 2013, the
Company acquired the remaining 66.283% and 10.267% equity interests in Jinhua
Co from Communications Group and non-controlling interests, respectively, and
Jinhua Co then became a wholly owned subsidiary and directly held by the
Company as at December 31, 2013.
Since the acquisition of the 66.283% from Communications Group were accounted
for using the merger accounting method as detailed in Note 2, the Group's prior
year's attributable interest in Jinhua Co was therefore 89.733% in total,
including the 66.283% indirect equity interest which was under common control
of Communications Group.
All of the Company's subsidiaries are operating in the PRC. As disclosed in
Note 42, Zheshang Securities has issued short-term loan note at principle value
of Rmb1,000,000,000 during the year. Except for this, none of the other
subsidiaries had in issue any debt securities at any time during the year.
53. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
NON-CURRENT ASSETS
Property, plant and equipment 266,358 257,178 200,810
Prepaid lease payments 1,688 1,783 1,878
Expressway operating rights 4,572,835 4,927,666 5,272,899
Other intangible assets 2,739 3,140 -
- Investments in subsidiaries (Note) 6,610,021 4,557,600 4,557,600
Investments in associates (Note) 397,670 410,073 410,073
Investment in a joint venture 373,470 373,470 -
Available-for-sale investments 72,514 62,000 -
Other receivables 401,400 325,035 382,000
12,698,695 10,917,945 10,825,260
CURRENT ASSETS
Inventories 3,616 4,209 9,745
Trade receivables 28,046 27,901 29,449
Other receivables 45,959 376,122 461,481
Prepaid lease payments 95 95 95
Available-for-sale investments 30,000 -
- Held for trading investment 80,000 80,000 80,000
Amount due from subsidiaries 328,324 522,795 1,089,193
Bank balances and cash
- Time deposits with original maturity over
three months 20,000 544,000 279,000
- Cash and cash equivalents 349,576 1,356,884 1,501,945
885,616 2,912,006 3,450,908
CURRENT LIABILITIES
Trade payables 139,071 184,262 195,641
Tax liabilities 106,073 169,301 238,285
Other taxes payable 8,846 16,164 16,939
Other payables and accruals 225,984 454,015 286,511
Amount due to subsidiaries 305,337 14,546 436,773
Bank borrowings 440,000 1,000,000 362,553
Derivative financial instrument - - 6,426
1,225,311 1,838,288 1,543,128
NET CURRENT (LIABILITIES) ASSETS (339,695) 1,073,718 1,907,780
TOTAL ASSETS LESS CURRENT LIABILITIES 12,359,000 11,991,663 12,733,040
12/31/2013 12/31/2012 01/01/2012
Rmb'000 Rmb'000 Rmb'000
NON-CURRENT LIABILITIES
Long-term bonds - - 1,000,000
Deferred tax liabilities 98,482 102,280 106,206
98,482 102,280 1,106,206
12,260,518 11,889,383 11,626,834
CAPITAL AND RESERVES
Share capital 4,343,115 4,343,115 4,343,115
Reserves 7,917,403 7,546,268 7,283,719
12,260,518 11,889,383 11,626,834
Investment
Share Share Statutory valuation Dividend Special Retained
capital premium reserves reserve reserves reserves profits Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At January
1, 2012 4,343,115 3,645,726 1,669,981 - 1,085,779 18,666 863,567 11,626,834
Total
comprehensive
income for
the year - - - - - - 1,608,915 1,608,915
Interim
dividend - - - - - - (260,587) (260,587)
Final
dividend - - - - (1,085,779) - - (1,085,779)
Proposed
final
dividend - - - - 1,042,347 - (1,042,347) -
Transfer to
reserves - - 156,762 - - - (156,762) -
At December
31, 2012 4,343,115 3,645,726 1,826,743 - 1,042,347 18,666 1,012,786 11,889,383
Total
comprehensive
income for
the year - - - 385 - - 1,673,684 1,674,069
Interim
dividend - - - - - - (260,587) (260,587)
Final
dividend - - - - (1,042,347) - - (1,042,347)
Proposed
final
dividend - - - - 1,085,779 - (1,085,779) -
Transfer to
reserve - - 166,316 - - - (166,316) -
At December
31, 2013 4,343,115 3,645,726 1,993,059 385 1,085,779 18,666 1,173,788 12,260,518
Note: As detailed in Note 2, during the year, the Group acquired the remaining
76.55% equity interest in Jinhua Co, which then became a wholly-owned
subsidiary of the Group. Prior to this acquisition, the Group held 23.45%
equity interest in Jinhua Co, and the respective investment cost amounting to
Rmb304,850,000 was recorded as investments in associates in the financial
statements of the Company.
The consideration for this acquisition amounting to Rmb756,868,000, together
with the previous investment cost of Rmb304,850,000 (as recorded in investment
in the associate in the prior year's statement of financial position) and the
additional capital contribution of Rmb1,000,000,000 made during 2013, there was
Rmb2,061,718,000 in total in respect of the investment cost in Jinhua Co has
been accounted for as investments in subsidiaries as at December 31, 2013.
Independent Auditor's Report
(ISSUED BY A THIRD COUNTRY AUDITOR REGISTERED WITH THE UK FINANCIAL REPORTING
COUNCIL)
TO THE MEMBERS OF ZHEJIANG EXPRESSWAY CO., LTD.
(Incorporated in the People's Republic of China with limited liability)
We have audited the consolidated financial statements of Zhejiang Expressway
Co., Ltd. (the "Company") and its subsidiaries (collectively referred to as the
"Group") set out on pages [�] to [�], which comprise the consolidated statement
of financial position as at December 31, 2013, and the consolidated statement
of profit or loss and other comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then
ended, and a summary of significant accounting policies and other explanatory
information.
Directors' Responsibility for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of
consolidated financial statements that give a true and fair view in accordance
with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute
of Certified Public Accountants and the disclosure requirements of the Hong
Kong Companies Ordinance, and for such internal control as the directors
determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit and to report our opinion solely to you, as a
body, in accordance with our agreed terms of engagement, and for no other
purpose. We do not assume responsibility towards or accept liability to any
other person for the contents of this report. We conducted our audit in
accordance with Hong Kong Standards on Auditing issued by the Hong Kong
Institute of Certified Public Accountants. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor 's judgment, including the assessment
of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation of consolidated
financial statements that give a true and fair view in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity's internal control.
An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view
of the state of affairs of the Group as at December 31, 2013, 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 LLP
Certified Public Accountants
(Registered as a Third Country Auditor with the UK Financial Reporting Council)
Shanghai, China
March 17, 2014
Corporate Information
Executive Directors Statutory Address
ZHAN Xiaozhang (Chairman) 12/F, Block A, Dragon Century Plaza
LUO Jianhu (General Manager) 1 Hangda Road
DING Huikang Hangzhou City, Zhejiang Province
PRC 310007
Non-Executive Directors Tel: 86-571-8798 5588
Fax: 86-571-8798 5599
LI Zongsheng
WANG Weili
WANG Dongjie Legal Advisers
Independent As to Hong Kong and US law:
Non-Executive Directors Herbert Smith Freehills
23rd Floor, Gloucester Tower
ZHANG Junsheng 15 Queen's Road Central
ZHOU Jun Hong Kong
PEI Ker-Wei
As to English law:
Supervisors Herbert Smith Freehills LLP
Exchange House
FU Zhexiang Primrose Street
WU Yongmin London EC2A 2HS
LIU Haisheng United Kingdom
ZHANG Guohua
ZHANG Xiuhua As to PRC law:
T & C Law Firm
Company Secretary 11/F, Block A, Dragon Century Plaza
1 Hangda Road
Tony Zheng Hangzhou City, Zhejiang Province
PRC 310007
Authorized Representatives
H Shares Listing Information
ZHAN Xiaozhang
ZHANG Jingzhong The Stock Exchange of Hong Kong Limited
Code: 0576
Auditors
London Stock Exchange Plc
Deloitte Touche Tohmatsu
35/F, One Pacific Place Code: ZHEH
88 Queensway
Hong Kong ADRs Information
Investor Relations Consultant US Exchange: OTC
PR Concepts Asia Limited Symbol: ZHEXY
16/F., Methodist House CUSIP: 98951A100
36 Hennessy Road, Wanchai ADR: H Shares 1:10
Hong Kong
Representative Office in Hong Kong
Tel: 852-2117 0861
Fax: 852-2117 0869 Suite 2910
29/F, Bank of America Tower
Principal Bankers 12 Harcourt Road
Hong Kong
Industrial and Commercial Bank of Tel: 852-2537 4295
China, Zhejiang Branch Fax: 852-2537 4293
Shanghai Pudong Development Bank, Website
Hangzhou Branch
www.zjec.com.cn
H Share Registrar and Transfer Office
Hong Kong Registrars Limited
Room 1712-1716, 17/F, Hopewell Centre
183 Queen's Road East
Hong Kong
Location Map of Expressways in Zhejiang Province
For Location Map of Expressways in Zhejiang Province, please visit:
http://photos.prnasia.com/prnk/20140402/8521401858-fNOTE: To view the full set of the company's 2013 Annual Report, please vist www.zjec.com.cn
