2010 Annual Report / Financial Statements
Leveraging Opportunities, Pursuing Growth
As the economies of China and Zhejiang Province underwent solid recovery
growth, Zhejiang Expressway's operation also witnessed a healthy return to
growth in year 2010. The toll road business has demonstrated its integral
strengths and registered double-digit growth in revenue, while the securities
business has been fast expanding and is now contributing a significant share of
the Group's profits.
In 2011, we expect some uncertainties to remain, but we also see opportunities
abound as China's domestic economy is expected to continue its healthy growth.
We believe that the two "pillar" businesses of the Group will grow from
strength to strength, and more importantly, they will provide reliable support
to our other business ventures in the future. Zhejiang Expressway will be
actively leveraging opportunities amidst a dynamic market, seeking to build
other suitable new businesses to pursue growth whilst strengthening our core
business, with a view to bringing greater returns to our shareholders.
Contents
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
Independent Auditor's Report
Consolidated Financial Statements & Notes
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 Co., Ltd., a joint stock limited company
Zhejiang Expressway 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 51% owned
subsidiary of the Company
Directors the directors of the Company
GDP gross domestic product
Group the Company and its subsidiaries
H Shares the overseas listed foreign shares of Rmb1.00 each in the share
capital of the Company which are primarily listed on the Hong Kong Stock
Exchange and traded in Hong Kong dollars since May 15, 1997
Hong Kong Stock Exchange The Stock Exchange of Hong Kong Limited
Huajian Huajian Transportation Economic Development Center a
State-owned enterprise
Jiaxing Co Zhejiang Jiaxing Expressway Co., Ltd., a 99.9995%
owned subsidiary of the Company
Jinhua Co Zhejiang Jinhua Yongjin Expressway Co., Ltd., a 23.45%
owned associate of the Company
JoinHands 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
Period the period from January 1, 2010 to December 31, 2010
Petroleum Co Zhejiang Expressway Petroleum Development Co., Ltd.,
a 50% owned associate of the Company
PRC the People's Republic of China
Rmb Renminbi, the lawful currency of the PRC
Services Co Zhejiang Expressway Vehicle Towing and Rescue Services Co., Ltd.,
a 85% owned subsidiary of Development Co
Shangsan Co Zhejiang Shangsan Expressway Co., Ltd. a 73.625%
owned subsidiary of the Company
Shareholders the shareholders of the Company
Supervisory Committee the supervisory committee of the Company
Yuhang Co Zhejiang Yuhang Expressway Co., Ltd. a 51% owned
subsidiary of the Company
Zheshang Securities Zheshang Securities Co., Ltd., a 70.46% owned
subsidiary of the Shangsan Co
Company Profile
Zhejiang Expressway is an infrastructure company principally engaged in
investing in, developing and operating high-grade roads. The Company and its
subsidiaries also carry out certain ancillary businesses such as automobile
servicing, operation of gas stations and billboard advertising along
expressways, as well as the securities business.
Major assets under management of the Group include the 248km
Shanghai-Hangzhou-Ningbo Expressway, the 142 km Shangsan Expressway, ancillary
facilities along the two expressways, and Zheshang Securities. Both expressways
are situated within Zhejiang Province in the PRC. As at December 31, 2010,
total assets of the Company and its subsidiaries amounted to Rmb33,652.06
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, 2010, consolidated
assets of Communications Group totaled Rmb133,325.18 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.
On August 12, 2005, a 10-year corporate bond of the Company, issued on January
24, 2003, was listed on the Shanghai Stock Exchange.
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, expanding its operation network and
increasing its profit contribution to the Group.
Set out below is the corporate and business structure of the Group as at
December 31, 2010:
(http://www.prnasia.com/sa/attachment/2011/03/20110331435815.pdf )
Review of Major Corporate Events
1. On March 14, 2010, the Company announced the 2009 annual results in Hong
Kong, and thereafter conducted its annual results roadshow in Hong Kong,
Singapore, the U.K. and the U.S.A.
2. At 00:00 on April 16, 2010, the toll-by-weight policy came into full effect
for the Shanghai-Hangzhou-Ningbo Expressway and the Shangsan Expressway. The
traditional toll standards for trucks whereby toll was collected according to
truck classes would be changed to toll collected by truck weights.
3. On May 10, 2010, the Company held its 2009 annual general meeting. The
meeting approved the distribution of a final dividend of RMB0.25 per share, the
re-appointment of Deloitte Touche Tohmatsu Certified Public Accountants Hong
Kong as the international auditors of the Company, and the re-appointment of
Pan-China Certified Public Accountants Ltd. as the PRC auditors of the Company.
On the same day, the Company announced its 2010 first quarterly results.
4. On May 20, 2010, the Company, Communications Group and Yiwu Communications
Development Co., Ltd. entered into an agreement to further inject Rmb23.45
million into Jinhua Co. After the capital injection, the Company continued to
hold 23.45% equity interests in Jinhua Co.
5. On July 2, 2010, Huajian, one of the major shareholders of the Company,
transferred its 11% equity interests in the Company to the Company's
controlling shareholder, Communications Group, at no consideration. After the
share transfer, the equity interests held by Communications Group in the
Company has increased to approximately 67%.
6. During the period between August 13 and October 20, 2010, the Company
acquired a total of 49% equity interests in Zhejiang Expressway Investment
Development Co, Ltd ("Development Co") which was held by the Company's
middle-to-senior level management and staff. After the acquisition, Development
Co became a wholly-owned subsidiary of the Company.
7. On August 29, 2010, the Company announced its 2010 interim results in Hong
Kong, and thereafter conducted its interim results roadshow in Hong Kong and
Singapore.
8. On October 18, 2010, the Company held an extraordinary general meeting. The
meeting elected Mr. Ding Huikang as executive director of the Company and
approved his remuneration and Mr. Liu Haisheng as supervisor of the Company.
Prior to the meeting, the Company had approved on August 28, 2010 the
resignation of Ms Zhang Yang from the office of non-executive director and the
resignation of Mr. Zheng Qihua from the office of supervisor. The meeting also
approved the distribution of an interim dividend of RMB0.06 per share.
9. On October 20, 2010, Shangsan Co further injected Rmb861.65 million into
Zheshang Securities. Upon completion of the capital injection, Shangsan Co will
hold 70.83% equity interests in Zheshang Securities.
10. On November 19, 2010, the Company announced its 2010 third quarterly
results.
Particulars of Major Road Projects
Remaining
Length in Number Number Number Start of Years of
Percentage Kilometers of of of Operation Operation
of Lanes Toll Service
Ownership Stations Areas
Expressway
Shanghai-Hangzhou
Expressway
-- Jiaxing
Section 99.9995% 88.1 8 7 2 1998 18
-- Yuhang Section 51% 11.1 6 1 0 1995-1998 18
-- Hangzhou
Section 100% 3.4 4 2 0 1995 18
Hangzhou-Ningbo
Expressway
-- Hangzhou to
Hongken section 100% 16.0 4 1 0 1992 17
-- Hongken to
Duantang section 100% 124.0 8 9 2 1995 17
-- Duantang to
Dazhujia section 100% 5.0 4 1 0 1996 17
Shangsan
Expressway 73.625% 142.0 4 11 3 2000 20
Current Toll rates on the Shanghai-Hangzhou-Ningbo Expressway
1. Passenger vehicle classification and toll rates
Vehicle Entrance Fee
Class Mileage Fee
Classification Standard (Rmb/vehicle) (Rmb/vehicle/km)
1 Passenger vehicle with up to 20 seats 5 0.45
Truck with tonnage of 2 tons or below
2 Passenger vehicle with seats above 20 and up to 10 0.80
40
Truck with tonnage of above 2 tons and up to 5
tons
3 Passenger vehicle with seats above 40 15 1.20
Truck with tonnage of above 5 tons and up to 10
tons
4 Truck with tonnage above 10 tons and up to 15 15 1.40
tons
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 Rmb0.09/ton
up to 15 tons 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
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 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,
2006 2007 2008 2009 2010
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Revenue 4,763,780 7,030,380 6,323,470 6,036,294 6,769,064
Profit Before 2,742,927 4,332,533 2,934,079 3,084,128 3,111,274
Tax
Income Tax (884,036) (1,191,638) (668,928) (840,055) (798,785)
Expense
Profit for the 1,858,891 3,140,895 2,265,151 2,244,073 2,312,489
year
Attributable
to:
Owners of the 1,652,871 2,415,965 1,892,787 1,795,488 1,871,499
Company
Non- 206,020 724,930 372,364 448,585 440,990
controlling
interests
Earnings Per 38.06 55.63 43.58 41.34 43.09
Share (EPS) cents cents cents cents cents
RETURN ON EQUITY (ROE)
2006 2007 2008 2009 2010
ROE 13.90 % 18.27 % 13.83 % 12.66 % 12.71 %
MONTHLY AVERAGE DAILY FULL TRIP TRAFFIC VOLUME
Shanghai-Hangzhou-Ningbo
Expressway
2006 2007 2008 2009 2010
January 35,342 38,233 42,024 32,126 36,438
February 33,785 40,239 36,261 31,494 35,833
March 38,810 42,536 42,791 33,748 38,175
April 40,789 45,657 44,917 36,725 40,564
May 39,255 44,462 38,583 34,507 38,361
June 38,307 42,938 36,595 33,692 38,073
July 37,067 41,989 36,143 33,574 39,418
August 38,716 43,112 35,856 34,181 38,916
September 40,870 44,646 38,146 36,275 40,666
October 40,342 45,037 35,864 36,191 42,200
November 39,486 44,238 32,792 33,623 38,772
December 39,375 42,840 32,251 34,596 37,761
Average 38,536 43,001 37,688 34,241 38,765
Shangsan Expressway
2006 2007 2008 2009 2010
January 20,079 19,057 21,505 19,682 17,887
February 20,174 23,618 22,453 19,659 21,894
March 19,897 22,132 22,301 18,049 18,212
April 20,554 22,402 22,995 19,783 19,561
May 20,215 22,287 20,219 19,106 18,304
June 18,619 20,699 19,028 18,394 17,482
July 18,691 20,957 18,779 18,552 17,682
August 19,379 21,485 18,919 18,720 15,895
September 20,542 22,312 19,853 19,905 16,586
October 20,717 22,738 18,732 19,238 17,189
November 19,428 21,503 17,043 16,724 15,725
December 19,136 20,833 16,493 17,277 14,974
Average 19,783 21,652 19,895 18,751 17,616
(http://www.prnasia.com/sa/attachment/2011/04/20110404835041.pdf )
Chairman's statement
In 2010, the Company's operation saw a healthy return to growth. In 2011, Under
the leadership of the board of directors, we will be meticulous in our planning
and innovative in our development endeavors, fully leveraging the strategic
opportunities presented to the Company. Whilst steadily growing our toll road
business and pro-actively expanding the securities business, Zhejiang
Expressway will also actively search for opportunities to develop other new
businesses so as to broaden the Group's income base.
Dear Shareholders,
Gathering Strengths to Build Up Our Business Platform
It is my pleasure to present to you the 2010 annual report of Zhejiang
Expressway on behalf of the board of directors of the Company. Having overcome
the negative impact brought by consecutive traffic diversions and the aftermath
of the financial crisis that had plagued us during the past two years, the
Company's operation saw a healthy return to growth in year 2010. I am pleased
to report that for the year ended 31 December 2010, the Group recorded a total
revenue of Rmb 6,769.06 million, an increase of 12.1% over the same period of
2009, while net profit rose 4.2% year-on-year to Rmb1,871.5 million and
earnings per share was Rmb43.09 cents (2009: Rmb41.34 cents).
The fine operating results indicate that we are on a healthy track to re-climb
from the declines that we have suffered since 2008. The improved performance
demonstrates the resilient operational strengths of the Company and the
earnings quality of its assets. More importantly, the confidence and support of
our shareholders and the hard work of the entire management and staff have
contributed to enhancing the profitability of the Company. The good work that
we have done during the past year has indeed laid a solid foundation for
building up a stronger business platform for the future.
The current development focus of Zhejiang Expressway is still its toll road
assets - assets that have generated satisfactory returns to our shareholders
year after year, and will continue to serve as our pillars for supporting our
future growth. Both the Shanghai-Hangzhou-Ningbo Expressway and the Shangsan
Expressway have been affected by traffic diversions from newly opened roads
nearby since 2008. However, as the economy continues to grow healthily and
partly owing to the strategic locations of the two expressways within the
Yangzi River Delta region, organic traffic growth on the expressways has
gradually outweighed the negative impact of traffic diversions caused by
competing roads over the past two years. And as the expansion works along
Shanghai Section of the Shanghai-Hangzhou-Ningbo Expressway was completed in
early 2010, together with the implementation of the toll-by-weight policy, we
witnessed the return of double-digit growth for the Shanghai-Hangzhou-Ningbo
Expressway after two years of decline. Meanwhile, the decline of toll revenue
generated on the Shangsan Expressway has narrowed to 2.3% in 2010, with the
impact of traffic diversions due to Zhuyong Expressway having already
stabilized. Overall speaking, our toll road business looks set to re-gather
their strengths and will serve as a pivotal support to the Group's future
business growth.
Our securities business has become another pillar of Zhejiang Expressway, a
pillar that we will also rely on for fueling future growth. Now contributing
approximately 17% of the Group's net profit, Zheshang Securities has grown from
strength to strength all these years. Despite a turbulent stock market in year
2010, the securities company has achieved satisfactory operating results and
has rolled out successful developments. With a total of 54 branches spreading
across 48 primary cities in 13 provinces, Zheshang Securities has further
expanded its market share of the nation's brokerage business. It has also made
significant inroads in building new operations in asset management, investment
banking and futures, shoring up its competitive edges in offering diverse
financial services to a growing market.
With our toll road operations and securities business burnishing their
performance in recent years, Zhejiang Expressway looks toward the future with
great confidence. With the rollout of the State's 12th Five-year Plan, the
Company is faced with an excellent opportunity for building up its business
platform. Under the leadership of the board of directors, we will be meticulous
in our planning and innovative in our development endeavors in 2011, fully
leveraging the strategic opportunities presented to the Company. Whilst
steadily growing our toll road business and pro-actively expanding the
securities business, Zhejiang Expressway will also actively search for
opportunities to develop other new businesses so as to broaden the Group's
income base. Relying on our parent company's support, we will investigate
possibilities in other infrastructure businesses. In order to meet any emerging
funding needs once suitable projects are identified, we are also strengthening
our internal capital operation so as to prepare ourselves well for various
funding scenarios in the future.
Harboring our strong toll road operations and securities business as our two
pillars, we believe that the Group is now well poised for building up a
stronger business platform - a platform that will, together with the concerted
efforts of all our staff, take the Group much farther with greater success.
Chen Jisong
Chairman
March 13, 2011
Continuing to Strengthen the Toll Road Business
While the toll road operations have re-climbed to strength in 2010, Zhejiang
Expressway is by no means complacent about its core business. Faced with an
ever-improving road network and growing competition within the industry, the
Company will continue to develop new technologies on road maintenance and toll
collection and to enhance service quality, with a view to maintaining its
market leadership position and strengthening its core competitiveness. It will
also strive to seek acquisitions of suitable assets or operate expressway
projects entrusted by external parties, so as to further strengthen Zhejiang
Expressway's toll road business and pursue long-term development of the
Company.
Management Discussion and Analysis
BUSINESS REVIEW
In 2010, as the Government applied a number of initiatives to strengthen and
improve macro-economic controls and accelerated economic restructuring, China
has managed to consolidate and expand the achievements in countering the impact
of the global financial crisis, thereby enabling the Chinese economy to operate
well in general. In 2010, China's national GDP grew by 10.3% year-on-year. As a
result of the overall economic recovery, Zhejiang Province also experienced
stable and relatively fast development in 2010 and saw various sectors
gradually returning to balanced developments. GDP in Zhejiang Province rose
11.8% during the Period as compared to the same period of the previous year.
GDP Growth Rate:
(http://www.prnasia.com/sa/attachment/2011/03/20110331753010.pdf )
As China's domestic macro economy stabilized and improved, revenue from the
Group's overall operations grew during the Period compared to the same period
of the previous year. However, performance varied across the different
operations. During the Period, the Group realized a total income of Rmb6,979.57
million, representing an increase of 11.9% year-on-year; of which Rmb3,590.46
million was attributable to the two major expressways operated by the Group,
representing 51.4% of the total income; Rmb1,731.07 million was attributable to
the Group's toll road-related businesses such as service area operations, gas
stations, advertising business and so forth, representing 24.8% of the total income;
and Rmb1,658.05 million was attributable to the securities business,
representing 23.8% of the total income.
A breakdown of the Group's income for the Period is set out below:
2010 2009
Rmb'000 Rmb'000 % Change
--------------------------------------------------------------------------
Toll income
Shanghai-Hangzhou-Ningbo Expressway 2,848,805 2,451,957 16.2 %
Shangsan Expressway 741,652 759,434 -2.3 %
Other income
Service areas 1,641,748 1,185,813 38.4 %
Advertising 85,881 85,076 0.9 %
Road maintenance 3,439 3,784 -9.1 %
Securities business income
Commission 1,431,416 1,582,623 -9.6 %
Bank interest 226,630 170,074 33.3 %
--------------------------------------------------------------------------
Subtotal 6,979,571 6,238,761 11.9 %
Less: Revenue taxes (210,507) (202,467) 4.0 %
--------------------------------------------------------------------------
Revenue 6,769,064 6,036,294 12.1 %
--------------------------------------------------------------------------
TOLL ROAD OPERATIONS
The Group saw a relatively high rate of organic growth in traffic volume along
its two expressways during the Period, as a result of a number of favorable
factors in 2010 such as the growth in cargo throughput on the highways,
increasing automobile sales volume and resumed growth in exports in Zhejiang
Province.
Meanwhile, upon completion of the works on the Shanghai section of the
Shanghai-Hangzhou Expressway on January 1, 2010 and after the Company had
stepped up various promotional activities, traffic volume along the
Shanghai-Hangzhou section quickly returned to the level prior to traffic
diversions. In addition, the World Expo held in Shanghai contributed to an
increase in traffic volume of passenger vehicles traveling on the two
expressways of the Group.
The implementation of the toll-by-weight policy for trucks in April 2010 has
effectively reduced excessive overloading of trucks and boosted toll income
from trucks. It has also changed the past few years' trend whereby the increase
in toll income from the Group's expressways had been lower than the increase in
traffic volume, with the increase in toll income being approximately three
percentage points higher than the increase in traffic volume in 2010.
The dual-path identification system for expressways in Zhejiang Province
launched in mid-October 2009 led to a growth in traffic volume along the
Shanghai-Hangzhou-Ningbo Expressway while having a negative impact on the
traffic volume along the Group's Shangsan Expressway. This was the major reason
for a decline in toll income and traffic volume along the Shangsan Expressway
compared to the same period of the previous year. However, the implementation
of the system during the Period had a slightly positive impact on toll income
from the two expressways as a whole.
In order to improve tolling efficiency and to facilitate the access by drivers
and passengers to toll stations on expressways in a more efficient and
convenient way, the Company has commenced full operation of eight electronic
toll stations at the first stage in April 2010. Since its official operation,
the electronic tolling system has accounted for 30% of the use of electronic
toll collection on all expressways throughout the province, and the system was
well-received by users.
The official operation in February 2010 of the Shenjia Huhang Expressway
adjacent to the Shanghai-Hangzhou Expressway had a minor impact on the traffic
volume along the Group's expressways. However, the opening of the Zhuyong
Expressway on July 22, 2010 had a more significant negative impact on the
Shangsan Expressway, apart from creating slight traffic diversions upon the
Group's Shanghai-Hangzhou-Ningbo Expressway.
Consequently, the average daily traffic volume in full-trip equivalents along
the Shanghai-Hangzhou-Ningbo Expressway was 38,784 during the Period,
representing an increase of 13.3% year-on-year. In particular, the average
daily traffic volume in full-trip equivalents along the Shanghai-Hangzhou
section of the Shanghai- Hangzhou-Ningbo Expressway was 39,548, an increase of
19.7% year-on-year, and that along the Hangzhou-Ningbo section was 38,238, an
increase of 8.9% year-on-year. The average daily traffic volume in full-trip
equivalents along the Shangsan Expressway was 17,584 during the Period,
representing a decrease of 6.2% year-on-year.
Total toll income from the 248km Shanghai-Hangzhou-Ningbo Expressway and the
142km Shangsan Expressway amounted to Rmb3,590.46 million during the Period,
representing an increase of 11.8% year-on-year. In respect of such income, toll
income from the Shanghai-Hangzhou-Ningbo Expressway amounted to Rmb2,848.81
million, an increase of 16.2% year-on-year, while toll income from the Shangsan
Expressway amounted to Rmb741.65 million, a decrease of 2.3% year-on-year.
TOLL ROAD-RELATED
BUSINESS OPERATIONS
The Company also operates certain toll road-related businesses along its
expressways through its subsidiaries and associated companies, including gas
stations, restaurants and shops in service areas, as well as roadside
advertising and vehicle service businesses.
During the Period, the stabilization and recovery of the macro economy,
continued growth in vehicle ownership in the province, and the hosting of the
Shanghai World Expo not only brought an increase in traffic volume along the
Group's two expressways, but also stimulated a rise in the spending will among
travelers in the service areas. A rebound in traffic volume, a substantial
growth in sales of petroleum products and a rise in the prices of petroleum
products also brought income growth to gas stations, resulting in a substantial
increase in income from the service areas as well. Income from toll
road-related businesses amounted to Rmb1,742.12 million during the Period,
representing a year-on-year increase of 35.5%.
SECURITIES BUSINESS
The domestic stock market in China remained volatile and showed a falling trend
in 2010, with a decrease in trading volume compared to the past. Meanwhile, the
establishment of additional operation networks by various major domestic
securities firms had further intensified competition among securities firms,
causing commission rates to continue to decline.
Zheshang Securities has been taking a positive approach to cope with the
intensely competitive environment and endeavoring to expand various businesses,
and consequently the market share of its securities brokerage business and the
total number of customers continued to rise, and its operation network
increased to 54 branches. The asset management business grew substantially,
having been approved to launch five integrated asset management plans in 2010
and ranked among the top domestic securities firms in terms of net operating
income. Meanwhile, Zheshang Securities' investment banking and futures
businesses achieved satisfactory growth as well.
During the Period, Zheshang Securities realized an operating income of
Rmb1,658.05 million, a decrease of 5.4% year-on-year. Of such income, brokerage
commission income amounted to Rmb1,431.42 million, a year-on-year decrease of
9.6%; and bank interest income amounted to Rmb226.63 million, a year-on-year
increase of 33.3%. In order to control risks, Zheshang Securities invested more
than 70% of its proprietary securities business in bonds with relatively lower
risks and as such, the securities investment income as accounted for in the
consolidated statement of comprehensive income amounted to Rmb119.91 million.
LONG-TERM INVESTMENTS
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate
company of the Company) was blessed by a rise in the retail prices of petroleum
and a growth in petroleum sales during the Period, and consequently realized an
income of Rmb3,551.90 million in 2010, representing an increase of 32.3%
year-on-year. However, the opening of five new gas stations in 2010 resulted in
increases in corresponding rental expenses, labor costs and repair expenses.
During the Period, net profit of the associate company amounted to Rmb17.52
million, which remained at basically the same level as the previous year.
The 69.7km Jinhua Section of the Ningbo-Jinhua Expressway, operated by Zhejiang
Jinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate company of the
Company), benefited from an increase in toll income in 2010 compared to a lower
operating income base in 2009, as a result of the introduction of the
toll-by-weight system and the introduction of the more accurately analyzed
dual-path identification system. It recorded an average daily traffic volume of
9,277 in full-trip equivalents during the Period, while toll income amounted to
Rmb189.95 million, an increase of 37.3% year-on-year. Due to its heavy
financial burden, the associate company still incurred a loss of Rmb68.45
million during the Period but the loss is gradually decreasing.
JoinHands Technology Co., Ltd. (a 27.582% owned associate company of the
Company) generated its income primarily from its printing operations and
property leasing. During the Period, it did not show any improvement to its
operations but had reduced the percentage of its shareholding in a subsidiary,
and consequently it managed to realize a net profit of Rmb4.27 million during
the Period.
Financial Analysis
The Group adopts a prudent financial policy with an aim to provide shareholders
with sound returns over the long-term.
During the Period, profit attributable to owners of the Company for the year
was approximately Rmb1,871.50 million, representing an increase of 4.2%
year-on-year, while earnings per share for the Company was Rmb43.09 cents.
LIQUIDITY AND FINANCIAL RESOURCES
As at December 31, 2010, current assets of the Group amounted to Rmb19,673.10
million in aggregate (2009: Rmb17,903.78 million), of which bank balances and
cash accounted for 30.5% (2009: 29.5%), bank balances held on behalf of
customers accounted for 59.4% (2009: 64.4%), and held-for-trading investments
accounted for 4.1% (2009: 2.9%). Current ratio (current assets over current
liabilities) as at December 31, 2010 was 1.3 (2009: 1.3). Excluding the effect
of 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 the securities dealing business) was 2.6 (2009: 2.6).
The amount for held-for-trading investments of the Group as at December 31,
2010 amounted to Rmb803.77 million (2009: Rmb517.90 million), of which 74.7%
was invested in corporate bonds, 24.6% was invested in the stock market, 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 Rmb2,550.50 million, representing a decrease of 14.8%.
The Directors do not expect the Company to experience any problem with
liquidity and financial resources in the foreseeable future.
As at December 31,
2010 2009
Rmb'000 Rmb'000
------------------------------------------------------------------------
Cash and cash equivalent
Rmb 5,674,173 5,018,914
US$ in Rmb equivalent 2,616 25,423
HK$ in Rmb equivalent 5,264 4,666
Time deposits
Rmb 301,286 228,452
US$ in Rmb equivalent 24,259 --
Held-for-trading
investments-Rmb 803,772 517,895
Available-for-sale
investments- Rmb 71,928 54,704
Financial assets held
under resale
agreement- Rmb 80,163 --
Total 6,963,461 5,850,054
Rmb 6,931,322 5,819,965
US$ in Rmb equivalent 26,875 25,423
HK$ in Rmb equivalent 5,264 4,666
------------------------------------------------------------------------
BORROWINGS AND SOLVENCY
As at December 31, 2010, total liabilities of the Group amounted to
Rmb15,956.94 million, of which 11.4% was borrowings and 72.9% was accounts
payable to customers arising from the securities dealing business.
Total interest-bearing borrowings of the Group as at December 31, 2010 amounted
to Rmb1,822.00 million, representing an increase of 12.3% over the beginning of
the year. The borrowings comprised outstanding balances of loans from domestic
commercial banks totaling Rmb822.00 million, and corporate bonds amounting to
Rmb1 billion that was issued by the Company in 2003 for a term of 10 years. Of
the interest-bearing borrowings, 54.9% were not repayable within one year.
Maturity Profiles
Gross Within 2-5 years Beyond
amount 1 year inclusive 5years
Rmb'000 Rmb'000 Rmb'000 Rmb'000
--------------------------------------------------------------------------
Floating rates
Commercial bank loans 350,000 350,000 -- --
Fixed rates
Commercial bank loans 472,000 472,000 -- --
Corporate bonds 1,000,000 -- 1,000,000 --
Total as at December 31,
2010 1,822,000 822,000 1,000,000 --
Total as at December 31, 1,622,384 478,055 1,144,329 --
2009
As at December 31, 2010, the Group's loans from domestic commercial banks
comprised half-year and 1-year short-term loans, of which Rmb472.00 million was
fixed-rate loans with interest rates ranging from 5.10% to 5.81% per annum,
Rmb350.00 million was floating-rate loans with interest rates ranging from
5.00% to 5.52% per annum. The annual coupon rate for corporate bonds was fixed
at 4.29%, with interest payable annually. The annual interest rate for accounts
payable to customer arising from the securities dealing business was fixed at
0.36%. The Group's World Bank loans, denominated in US dollar, of approximately
Rmb422.38 million equivalent, have been fully repaid during the Period.
Total interest expense for the Period amounted to Rmb120.98 million, while
profit before interest and tax amounted to Rmb3,232.25 million. The interest
cover ratio (profit before interest and tax over interest expenses) stood at
26.7 (2009: 50.2).
2010 2009
Rmb'000 Rmb'000
Profit before tax and interest 3,232,253 3,146,852
Interest expenses 120,979 62,724
Interest cover ratio 26.7 50.2
The asset-liability ratio (total liabilities over total assets) was 47.4% as at
December 31, 2010 (December 31, 2009: 47.3%). 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 the securities dealing business over total assets less bank balances held
on behalf of customers) of the Group was 19.7% (December 31, 2009: 18.4%).
Pursuing a Steady Development of the Securities Business
The securities business of Zhejiang Expressway has gradually grown to maturity
and has become a significant player in the securities sector. Now counting 54
branches with operations spreading across 48 major cities in 13 provinces,
Zheshang Securities endeavors to continue to expand its market share and
enhance its competitiveness. Whilst continuing to strengthen the new businesses
that it has recently expanded into such as investment banking, asset
management, futures and fixed income, Zheshang Securities will also focus on
developing its human capital, with a view to becoming a market leader in the
country's securities and finance industry.
CAPITAL STRUCTURE
As at December 31, 2010, the Group had Rmb17,695.12 million total equity,
Rmb13,103.03 million fixed-rate liabilities, Rmb350.00 million floating-rate
liabilities and Rmb2,503.91 million interest-free liabilities, representing
52.6%, 38.9%, 1.0% and 7.5% of the Group's total capital, respectively. The
gearing ratio, which was computed by dividing the total liabilities less
accounts payable to customers arising from the securities dealing business by
total equity, was 24.4% as at December 31, 2010 (December 31, 2009: 22.5%).
As at As at
December 31, 2010 December 31, 2009
Rmb'000 % Rmb'000 %
------------------------------------------------------------------------
Total equity 17,695,115 52.6 % 17,064,853 52.7 %
Fixed rate liabilities 13,103,030 38.9 % 12,702,930 39.2 %
Floating rate liabilities 350,000 1.0 % 422,384 1.3 %
Interest-free liabilities 2,503,910 7.5 % 2,212,614 6.8 %
------------------------------------------------------------------------
Total 33,652,055 100.0 % 32,402,781 100.0 %
------------------------------------------------------------------------
Long-term interest-bearing
liabilities 1,000,000 3.5 % 1,144,329 3.5 %
Gearing ratio 1 (Note) 24.4 % 22.5 %
Gearing ratio 2 (Note) 5.7 % 6.7 %
Asset-liability ratio 1
(Note) 47.4 % 47.3 %
Asset-liability ratio 2
(Note) 19.7 % 18.4 %
Note: Gearing ratio 1 represents the total liabilities less accounts payable to
customers arising from the securities dealing 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 accounts payable to customers arising from the securities
dealing business to the total assets less bank balances held on behalf of
customers.
CAPITAL EXPENDITURE COMMITMENTS AND UTILIZATION
During the Period, capital expenditures of the Group totaled Rmb461.82 million,
while capital expenditures of the Company totaled Rmb169.16 million. Amongst
the total capital expenditures of the Group, Rmb149.48 million was incurred for
acquisition and construction of properties, Rmb133.48 million for purchase of
equipment, Rmb97.09 million for the acquisition of 49% equity interests in
Zhejiang Expressway Investment Development Co., Ltd., Rmb23.45 million due to
the further capital contribution into Zhejiang Jinhua Yongjin Expressway Co.,
Ltd., Rmb24.30 million for the road widening project between the Shaoxing-Zhuji
hub and the Shaoxing-Jiaxing hub of the Shangsan Expressway and Rmb25.00
million for the establishment of Zheshang Fund Management Co.,Ltd.(a 25% owned
associate of Zheshang Securities Co., Ltd.).
As at December 31, 2010, capital expenditures committed by the Group and the
Company totaled Rmb765.66 million and Rmb226.72 million, respectively. Amongst
the total capital expenditures committed by the Group, Rmb360.18 million will
be used for acquisition and construction of properties, Rmb342.76 million for
acquisition of equipment, Rmb46.62 million for the widening project between the
Shaoxing-Zhuji hub and the Shaoxing-Jiaxing hub of the Shangsan Expressway, and
Rmb16.10 million for service area renovation and expansion.
The Group will finance its above mentioned capital expenditure commitments
mainly with internally generated cash flow, with a preference for debt
financing to meet any shortfalls thereof.
CONTINGENT LIABILITIES AND PLEDGE OF ASSETS
As at December 31, 2010, the Group did not have any contingent liabilities nor
any pledge of assets or guarantees.
FOREIGN EXCHANGE EXPOSURE
Save for the dividend payments to overseas shareholders in Hong Kong dollars,
the Group's principal operations are transacted and booked in Renminbi.
Therefore, the Group's exposure to foreign exchange fluctuations is limited and
the Group has not used financial instrument for hedging purposes.
Although the Directors do not foresee any material foreign exchange risks for
the Group, there is no assurance that foreign exchange risks will not affect
the operating results of the Group in the future.
HUMAN RESOURCES
As at December 31, 2010, there were 5,827 employees within the Group, amongst
whom 1,195 worked in the managerial, administrative and technical positions,
while 4,632 worked in fields such as toll collection, maintenance, service
areas, securities and futures business outlets.
The Company adopts a remuneration policy that aims to be competitive for
attracting and retaining talents. The overall remuneration package for
employees comprised mainly basic salaries, bonuses and benefits. Bonuses are
designed to reflect individual job performances, as well as business and share
price performances of the Group. Such bonuses are designed as short-term
incentives, while a long-term incentive mechanism has yet to be established.
Benefits for employees come in the form of contributions made by the Group to
various local social security agencies covering pension, medical and
accommodation concerns that are calculated as a percentage of employees' income
and in accordance with relevant rules and regulations. The Company continued to
implement the corporate annuity scheme during the Period, and total pension
cost charged to the income statement during the Period amounted to Rmb44.86
million.
The remuneration level fixed by the Company is sufficient to attract and retain
the directors required for its successful operation. All the directors did not
participate in determining their emoluments to avoid payment of excessive
remuneration.
OUTLOOK
The Chinese economy has improved in general despite encountering a highly
complex domestic and international economic environments as well as multiple
and frequent natural disasters. In Zhejiang Province, under the current
environment underpinned by a significant improvement in infrastructure
developments and an increasing stimulation of the economy by consumption,
foreign trade exports resumed high growth and automotive retail sales
registered a continuous rapid increase. With the above favorable factors, the
Group's two expressways are expected to continue to undergo significant organic
growth in traffic volume in 2011.
However, the opening of the Zhuyong Expressway in July 2010 will continue to
divert traffic flows from the Group's Hangzhou-Ningbo Expressway and Shangsan
Expressway. While the operation of the Shanghai-Hangzhou High-speed Railway on
October 26, 2010 has a certain negative impact on passenger buses running
between Hangzhou and Shanghai, it is not expected to have a major impact on the
Group's total toll income in 2011.
The implementation of the toll-by-weight policy for trucks on April 16, 2010
has generated more satisfactory growth in the Group's toll income. This policy
is anticipated to continue to have a more positive impact on the Group's toll
income in 2011. Coupled with this is the initial launch of an electronic
tolling system for expressways in Zhejiang Province. After achieving a
satisfactory result at the Stage-One launch of the system, Stage Two will be
implemented at the end of 2011, which will cover all of the Group's toll
stations by 2015.
As China is anticipated to further tighten liquidity in order to curb
inflation, there will be increasing uncertainties about the stock market in
2011. Coupled with the fact that fierce competition among securities firms has
not shown any sign of subsiding, Zheshang Securities will continue to face
intense competition. By making aggressive efforts to develop its core
businesses such as investment banking, asset management and fixed income,
Zheshang Securities will steadily expand its operation network and strive to
deliver satisfactory operating results.
2011 will be the first year of the 12th Five-year Plan where the Company aims
to upgrade its capabilities for business evolution. While endeavoring to become
a market leader in its principal business of expressway operations, the Company
will devote aggressive efforts to cultivating management capabilities for
diversified operations. We will make use of our good cash flow, continuing to
seek suitable investments and acquisitions or operate other external expressway
projects entrusted to the Group. Through various means such as debt and/or
equity financing, we will fully leverage our existing financing capabilities to
expand the room for business development. Ultimately, the Company's management
and staff will continue to strive for good operating results for the Company
and create greater value for our shareholders.
Actively Seeking New Business Opportunities
With its core expressway business and the securities business serving as the
Company's pillars, the Company is well poised for capturing any emerging
business opportunities. We will look into possibilities in infrastructure
related businesses such as ports and logistics, transportation and related
property developments, both in Zhejiang Province and beyond. Leveraging our
human and financial resources, Zhejiang Expressway will capitalize on its
existing strong business foundation and aim to build an even stronger one.
Principal Risks and Uncertainties
TOLL ROAD BUSINESS RISKS
Economic environment
Since complexities regarding the recovery of both the international and
domestic economies still exist, coupled with the uncertainties regarding the
recovery growth of Zhejiang Province's internal and external trades, as well as
possible new difficulties encountered by the macro-economy amid the current
inflationary pressure, it is anticipated that traffic growth along the Group's
expressways remains uncertain in the future. The operations, financial position
and operating results of the Group remain uncertain.
Competition
Although the Shenjia Huhang Expressway and the Zhuyong Expressway were
successively opened in 2010, the future openings of nearby expressways such as
the Jiaxing-Shaoxing Cross River Passage are expected to result in new traffic
diversions for the Shangsan Expressway and certain sections of the
Shanghai-Hangzhou-Ningbo Expressway. Therefore, we cannot be assured as to
whether traffic volumes to be generated on the expressways under the Group will
be at the same levels as before or will increase in the future, or whether the
operating results of the Group will be affected.
Concession period extension
Since the expansion works of the Shanghai-Hangzhou-Ningbo Expressway has been
completed, we plan to apply for the extension of the concession period for the
construction, management and toll collection of the Shanghai-Hangzhou-Ningbo
Expressway. We cannot be assured as to whether the Zhejiang Provincial
Government will timely approve the application for extending the concession or
whether material delays or serious difficulties will arise in the course of the
application for extending the concession period, which may have an adverse
impact on the operations, financial position and operating results of the
Group.
Toll policy
Although Zhejiang Province has implemented the toll-by-weight policy for trucks
in April 2010, local toll road policies in Hangzhou City are expected to change
due to further inflation in prices of goods and an increase in petroleum
product prices. It is also expected that toll standards for vehicle classes and
toll calculation methods adopted by expressways in the province may be adjusted
further. Changes in toll standards for expressways may arise and we cannot be
assured as to whether this will adversely affect the toll income of the Group.
SECURITIES BUSINESS RISKS
Market Fluctuations
Our securities business is 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; and 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 Securities Business
We are subject to extensive regulations in the PRC in which we conduct our
securities business and we are regulated 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
financial effects, cause us significant reputational harm, or harm our business
prospects. New laws or regulations or changes in the enforcement of existing
laws or regulations applicable to our clients may also adversely affect our
business.
FINANCIAL RISKS
For financial risks and uncertainties of the Group, see notes 4, 5 and 6 to the
Consolidated Financial Statements.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL REPORT AND ACCOUNTS
The directors of the Company duly confirm that, to the best of their knowledge:
- the consolidated financial statements prepared in accordance with Hong Kong
Financial Reporting Standards issued by the Hong Kong Institute of Certified
Public Accountants give a true and fair view of the assets, liabilities,
financial position and profit of the Group, and covers 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 that the Group faces.
From the beginning of Year 2010 up to now, there have been no significant
events that would have material impact on the normal operation of the Group.
For and on behalf of the Board
ZHANG Jingzhong
Executive Director/Deputy General Manager
Hangzhou, Zhejiang Province, the PRC
March 13, 2011
Corporate Governance Report
CORPORATE GOVERNANCE
PRACTICES
The Company has adopted its own Guidelines on Corporate Governance that closely
followed the principles of good governance in Appendix 14 ("Appendix 14") of
the Rules Governing the Listing of Securities (the "Listing Rules") on the
Stock Exchange of Hong Kong Limited ("Stock Exchange").
During the financial year 2010 (the "Period"), the Company had met all
provisions in the Code on Corporate Governance Practices (the "Code") in
Appendix 14, and adopted the recommended best practices contained in the Code
whenever 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") in Appendix 10 of the Listing Rules.
Upon specific inquiries to all the directors of the Company (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. CHEN Jisong(Chairman)
Mr. ZHAN Xiaozhang (General Manager)
Mr. JIANG Wenyao
Mr. ZHANG Jingzhong
Mr. DING Huikang (Effective since October 18, 2010)
The non-executive directors of the Company during the Period were:
Ms. ZHANG Luyun
Ms. ZHANG Yang (Resigned on August 28, 2010)
The independent non-executive directors of the Company during the Period were:
Mr. TUNG Chee Chen
Mr. ZHANG Junsheng
Mr. ZHANG Liping
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:
Mr. CHEN Jisong (Chairman) 4/4
Mr. ZHAN Xiaozhang(General Manager) 4/4
Mr. JIANG Wenyao 4/4
Mr. ZHANG Jingzhong 4/4
Mr. DING Huikang 1/1
Ms. ZHANG Luyun 4/4
Ms. ZHANG Yang 3/3
Mr. TUNG Chee Chen 4/4
Mr. ZHANG Junsheng 4/4
Mr. ZHANG Liping 4/4
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
three special committees: the Audit Committee, the Nomination and 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 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/relevant
relationships between members of the Board, including that between the Chairman
and the General Manager of the Company.
CHAIRMAN AND GENERAL MANAGER
During the Period, Mr. CHEN Jisong and Mr. ZHAN Xiaozhang were the Chairman and
the 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
The non-executive directors of the Company are appointed for a period of three
years, from March 1, 2009 to February 29, 2012.
NOMINATION AND REMUNERATION OF DIRECTORS
The Board has a Nomination and Remuneration Committee, mainly responsible for
reviewing and making recommendations for the selection standards and procedures
for Directors, General Manager and other senior management of the Company;
identifying qualified candidates and making reviews and recommendations
thereon; and determining, supervising and monitoring the implementation of the
remuneration policies for the Directors and senior management personnel. For
the details of its terms of reference, please refer to the "Corporate
Governance" section in the Company's web site.
The Nomination and Remuneration Committee comprised of non-executive directors,
namely, Ms. ZHANG Luyun, Ms. ZHANG Yang (resigned on August 28, 2010), Mr. TUNG
Chee Chen, Mr. ZHANG Junsheng, and Mr. ZHANG Liping, with Ms. ZHANG Luyun as
the Chairwoman of the committee since March 1, 2009.
During the Period, the Nomination and Remuneration Committee held two meetings
through written communications to review and recommend candidates for the newly
appointed director/deputy general manager and supervisor, including the
recommended remunerations thereof.
AUDITORS' REMUNERATION
During the Period, the Company had paid HK$3,800,000 (approximately
Rmb3,400,000 equivalent) and Rmb850,000 to Deloitte Touche Tohmatsu Certified
Public Accountants (the Hong Kong auditors) and Pan-China Certified Public
Accountants Ltd. (the PRC auditors) for audit services conducted in 2009,
respectively. The auditors did not provide non-audit services to the Company.
AUDIT COMMITTEE
The Board has an Audit Committee which is mainly responsible for providing
advice to the Board regarding the appointment, reappointment and removal of
external auditors; the supervision of the integrity of the Company's financial
statements and annual reports and accounts, half-yearly and quarterly reports,
and the review of important opinions in relation to financial reporting as set
out in statements and reports, and the review of the Company's financial
control, internal control and risk management system. For the details of its
terms of reference, please refer to the "Corporate Governance" section in the
Company's web site.
The Audit Committee comprised of the non-executive directors, of whom Mr. TUNG
Chee Chen, Mr. ZHANG Junsheng and Mr. ZHANG Liping are independent
non-executive directors, Ms. ZHANG Luyun and Ms. ZHANG Yang (resigned on August
28, 2010) are non-executive directors, with Mr. TUNG Chee Chen as the Chairman
of the committee.
During the Period, the Audit Committee held a total of four meetings.
Individual attendances by the members of the committee (as indicated by the
numbers of meetings attended/numbers of meetings held) are as follows:
Mr. TUNG Chee Chen 4/4
Mr. ZHANG Junsheng 4/4
Mr. ZHANG Liping 4/4
Ms. ZHANG Luyun 4/4
Ms. ZHANG Yang (Resigned on August 28, 2010) 3/3
In the meetings held during the Period, the Audit Committee conducted, amongst
others, review of financial statements for the quarterly, interim and annual
results, the effectiveness of the system of internal control and the reporting
thereof to the Board, as well as recommendation on the re-appointment of
external auditors.
During the Period, the Company has complied with Rule 3.21 of the Listing Rules
regarding the composition of the audit committee.
During the Period, the Directors have all confirmed their responsibility for
preparing the accounts, and that there were no events or conditions which would
have a material impact on the Company's ability to continue to operate as a
going concern basis.
DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE'S INTERESTS IN SHARES AND UNDERLYING
SHARES OF THE COMPANY
As at December 31, 2010, none of the Directors, Supervisors and Chief
Executives had any interests or short positions in the shares, underlying
shares or debentures of the Company or any of its associated corporations
(within the meaning of Part XV of the SFO) as recorded in the register required
to be kept pursuant to Section 352 of the SFO, or as otherwise notified to the
Company and the Stock Exchange pursuant to the Model Code.
INTERESTS AND SHORT POSITIONS OF OTHER PERSONS IN SHARES
AND UNDERLYING SHARES
As at December 31, 2010, the interests and short positions of other persons in
the shares and underlying shares of the Company according to the register
required to be kept by the Company pursuant to Section 336 of the SFO, or as
otherwise notified to the Company and the Stock Exchange are set out below:
Percentage
the issued of
Total interests share
in number of capital
ordinary shares of the Company
Substantial Capacity of the Company (domestic shares)
shareholders
----------------------------------------------------------------------------
Communications Beneficial 2,909,260,000 100 %
Group owner
----------------------------------------------------------------------------
Percentage of
the issued
Total interests share capital
in number of of the
ordinary shares Company
Substantial Capacity of the Company (H Shares)
shareholders
----------------------------------------------------------------------------
JP Morgan Chase Beneficial 184,584,607(L) 12.87 %
& Co. owner,
investment 140,452,750(P) 9.80 %
manager and
custodian
corporation/
approved
lending agent
BlackRock, Inc. Interest of 143,654,140(L) 10.02 %
controlled
corporations 2,895,979(S) 0.20 %
Invesco Hong Investment 127,952.860(L) 8.92 %
Kong Limited manager
----------------------------------------------------------------------------
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, 2010, 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 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 at the
following address:
Zhejiang Expressway Co., Ltd.
12/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou, Zhejiang 310007
The People's Republic of China
Attention: Company Secretary
INVESTOR RELATIONS
The Company made the following changes to the articles of association during
the extraordinary general meeting of the shareholders held on October 18, 2010:
(1) Amended Article 19 of the Articles as follows:
"After the establishment of the Company, 4,343,114,500 ordinary shares were
issued of which 1,433,854,500 were issued as overseas listed foreign invested
shares representing approximately 33% of the total number of ordinary shares
which were issued by the Company. The shareholding structure of the Company
comprises 4,343,114,500 ordinary shares of which 2,909,260,000 domestic
invested shares are held by the promoter, Zhejiang Communications Investment
Group Co., Ltd. and 1,433,854,500 overseas listed foreign
invested shares are held by holders of overseas listed foreign invested
shares."
(2) Amended Article 90 of the Articles as follows:
"The Company shall have a board of directors. The board of directors shall
comprise nine directors, of whom five shall be executive directors and four
shall be non-executive directors. Of the four non-executive directors, three
shall be independent non-executive directors. The board of directors shall have
one chairman and one vice-chairman."
During the Period, the last shareholders' meeting of the Company took place at
3:00 p.m. on Monday, October 18, 2010 at 12/F, Block A, Dragon Century Plaza, 1
Hangda Road, Hangzhou, Zhejiang Province, the People's Republic of China.
Details of this extraordinary general meeting of the shareholders were set out
in the announcement dated October 18, 2010 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 9,
2011 to consider the resolutions in respect of, among others, the reports of
the directors and of the supervisory committee for 2010, the audited financial
statements for 2010, a final dividend for 2010, the final report for 2010 and
the financial budget for 2011, as well as the re-appointment of external
auditors.
The Company's 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.
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 quarterly basis. During the year, the Audit
Committee focused on the compliance of regulatory guidelines by the Company's
securities business, as well as compliance with the Company's important
management systems. 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. CHEN Jisong,
born in 1952, is a senior engineer with professional certification. Mr. Chen
has been appointed as the chairman of the Company since March 1, 2009. In 1978,
Mr. Chen graduated from Nanjing Institute of Technology. From 1978 to 1982, Mr.
Chen served as Deputy Chief then Chief of Division No. 1 under the Municipal
Construction Department in Hangzhou, Zhejiang Province. From 1982 to 1990, he
was Deputy Manager then Manager of the Municipal Construction Company in
Hangzhou, Zhejiang Province. From 1990 to 1997, he was Deputy Director then
Director of Urban and Suburban Construction Commission of Hangzhou, Zhejiang
Province. From 1990 to 1993, he served as Deputy Director of Economic
Development Zone in Hangzhou, Zhejiang Province. From 1997 to 2000, Mr. Chen
was Deputy Mayor of Hangzhou, Zhejiang Province. From 2000 to 2005, he became
Director of the Bureau of Construction of Zhejiang Provincial Government. Mr.
Chen has been Chairman of Communications Group (the controlling shareholder of
the Company) since 2005.
Mr. ZHAN Xiaozhang, born in 1964, is a senior economist with a bachelor's
degree in law. In 2005, Mr. Zhan obtained a master's degree in public
administration from the Business Institute of Zhejiang University. Mr. Zhan has
been appointed as an Executive Director and the General Manager of the Company
since March 1, 2009. From 1985 to 1991, Mr. Zhan worked as an officer at
Transport Administrative Division under Waterway Transport Authority of
Zhejiang Provincial Bureau of Construction. From 1991 to 1998, he served as
Deputy Secretary then Secretary of the Communist Youth League Commission at
Zhejiang Provincial Bureau of Communications. From 1998 to 2002, he was Deputy
Director of Waterway Transport Authority under Zhejiang Provincial Bureau of
Communications. From 2002 to 2003, he was Deputy Director of Human Resources
Department at Zhejiang Provincial Bureau of Communications. From 2003 to 2006,
Mr. Zhan was Chairman of Zhejiang Wenzhou Yongtaiwen Expressway Co., Ltd. From
2006 to 2008, he became Chairman of Zhejiang Jinji Property Co., Ltd. Mr. Zhan
has been Assistant to General Manager and Manager of Research and Development
Department at Communications Group (the controlling shareholder of the Company)
from 2006 to 2009.
Mr. JIANG Wenyao, born in 1966, is an Executive Director and Deputy General
Manager of the Company. Mr. Jiang graduated from Zhejiang University, majoring
in industrial automation and manufacturing mechanics, and obtained a master's
degree in engineering. From March 1991 to February 1997, he worked in the
Engineering Division, the Planning and Finance Division and the Equipment
Division of the Zhejiang Provincial Expressway Executive Commission. He joined
the Company since March 1997, and has served as Deputy Manager of the General
Department, Manager of the Equipment Department, Manager of the Operation
Department, Assistant to General Manager and Company Secretary. He has been
serving as Deputy General Manager since March 2003 and Executive Director and
Deputy General Manager since March 2006. Mr. Jiang also serves as Director and
General Manager at Development Co., and Director at Yuhang Co., both
subsidiaries of the Company.
Mr. ZHANG Jingzhong, born in 1963, is a senior lawyer, Executive Director and
Company Secretary of the Company. Mr. Zhang graduated from Zhejiang University
(previously known as Hangzhou University) in July 1984 with a bachelor's degree
in law. In 1984, he joined the Zhejiang Provincial Political Science and Law
Policy Research Unit. From 1988 to 1994, he was Associate Director of Hangzhou
Municipal Foreign Economic Law Firm. In 1992, he obtained the qualifications
required by the regulatory authorities in China to practice securities law. In
January 1994, Mr. Zhang became Senior Partner at T&C Law Firm in Hangzhou. Mr.
Zhang has been Executive Director and Company Secretary of the Company since
March 1997, and was appointed Deputy General Manager in March 2002. He was
re-appointed as Company Secretary in March 2003 and as Deputy General Manager
in March 2006. Mr. Zhang also serves as Director at Shangsan Co., Development
Co., Petroleum Co., and Vice Chairman at Zheshang Securities.
Mr. DING Huikang, born in 1955, is an Executive Director and Deputy General
Manager of the Company. 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.
NON-EXECUTIVE DIRECTORS
Ms. ZHANG Luyun, born in 1961, is a senior economist and Director and Deputy
General Manager of Communications Group (the controlling shareholder of the
Company) Ms. Zhang graduated from the Department of Chinese Language at
Zhejiang University, majoring in Chinese Language, and obtained an EMBA degree
from China Europe International Business School in 2008. From 1983 to 1997, she
served as Secretary, Deputy Chief and Chief of the Office of Hangzhou City
Communist Party Committee. In 1997, she was Deputy President of Hangzhou
Broadcasting and TV College. She joined Communications Group in December 2001
and has been Director and Deputy General Manager since then. Ms. Zhang has been
Non-executive Director of the Company since March 2003.
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. TUNG Chee Chen, born in 1942, is Chairman (Chief Executive Officer) of
Orient Overseas (International) Limited. He is an Independent Non-executive
Director, a member of the Nomination and Remuneration Committee and Chairman of
the Audit Committee of the Company. Mr. Tung was educated at the University of
Liverpool, England, where he received his bachelor's degree in science. He
later obtained a master's degree in mechanical engineering at the Massachusetts
Institute of Technology in the United States. Mr. Tung has been Independent
Non-executive Director of the Company since March 1997. In addition, Mr. Tung
also holds directorships in the following listed public companies: Independent
Non-executive Director of BOC Hong Kong (Holdings) Limited, Cathay Pacific
Airways Limited, PetroChina Company Limited, Sing Tao News Corporate Limited,
Wing Hang Bank Limited and U-Ming Marine Transport Corp.
Mr. ZHANG Junsheng, born in 1936, is a professor, Independent Non-executive
Director and a member of the Audit Committee and the Nomination and
Remuneration Committee of the Company. Mr. Zhang graduated from Zhejiang
University in 1958, and was Lecturer, Associate Professor, and Advising
Professor at Zhejiang University. He was also Professor concurrently at,
amongst other universities, Zhongshan University. In 1980, he became Deputy
General Secretary of Zhejiang University. In 1983, Mr. Zhang served as Deputy
General Secretary in the Hangzhou City Communist Party Committee. In 1985, he
began to work for the Xinhua News Agency, Hong Kong Branch, and had become its
Deputy Director since July, 1987 and was Consultant to the Sichuan Provincial
Government and Senior Consultant to the Shenzhen Municipal Government. Since
September 1998, Mr. Zhang has taken up the position of General Secretary of
Zhejiang University. From 2003 to 2008, Mr. Zhang served as Director of the
Zhejiang Province Economic Development Consultation Committee and he is
currently Special Advisor to the Zhejiang Provincial Government, Chairman of
Zhejiang University Development Committee, Honorary Doctor of Science of City
University of Hong Kong, Honorary Academician of Asian Knowledge Management
Association and Honorary Professor of Canadian Chartered Institute of Business
Administration. Mr. Zhang has been Independent Non-executive Director of the
Company since March 2000.
Mr. ZHANG Liping, born in 1958, is Chief Executive Officer of Credit Suisse in
China. He is Independent Non-executive Director, a member of the Audit
Committee and Chairman of the Nomination and Remuneration Committee of the
Company. Mr. Zhang graduated from the University of International Business &
Economics of Beijing and received a master's degree in international affairs
and international laws from St. John's University in New York, the United
States. He also attended New York University's MBA program. Mr. Zhang held a
number of senior positions at other organizations, including Chief Executive
Officer of Imagi International Holdings Limited, Managing Director of Pacific
Concord Holdings Limited, Managing Director and Geographic Head - Greater China
Region of Dresdner Banking Group, and Director of the Investment Banking
Division and China Chief Representative of Merrill Lynch Co. & Inc. Mr. Zhang
has been Independent Non-executive Director of the Company since March 2003.
SUPERVISORS
SUPERVISOR REPRESENTING SHAREHOLDERS
Mr. MA Kehua, born in 1952, is a senior economist and Chairman of the
Supervisory Committee. Mr. Ma graduated from the Mechanics Department of
Shanghai Railway Institute in 1977, after which he worked as an Engineer at
Shanghai Railway Bureau No.1 Construction Company and the Plumbing and
Electricity Section of Shanghai Railway Bureau, Hangzhou Branch. Mr. Ma was in
charge of the Planning and Finance Division at Zhejiang Local Railway Company,
and in 1993 became Deputy Division Chief and Division Chief of Zhejiang Jinwen
Railway Executive Commission responsible for materials supply. Mr. Ma took up
the post of Deputy General Manager of Zhejiang Provincial High Class Highway
Investment Company Limited in June 1999, and is currently Deputy General
Manager of Communications Group (the controlling shareholder of the Company).
SUPERVISOR REPRESENTING EMPLOYEES
Mr. FANG Zhexing, born in 1965, is a Senior Engineer, the Supervisor
Representing Employees 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. 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 and the Manager of the Human Resources Department.
Mr. Fang is currently the Director of Disciplinary Committee and is also the
Chairman of Jiaxing Co., and director of Jinhua Co..
INDEPENDENT SUPERVISORS
Mr. JIANG Shaozhong, born in 1946, is a professor. Mr. Jiang graduated from the
Management Department of Zhejiang University with a master's degree. In 1982,
he worked in the Management Department of Zhejiang University as Lecturer,
Assistant Professor, Professor, Dean of Research Office and Deputy Dean of the
Department. From 1984 to 1985, he was Visiting Scholar at Stanford University
in the United States. From 1991 to 1998 he was Deputy General Economist, Chief
of the Financial Division, Chief of the Teaching Division and Standing Deputy
Dean of the Management School of Zhejiang University. He is currently Deputy
General Accountant of Zhejiang University.
Mr. WU Yongmin, born in 1963, is an assistant professor. Mr. Wu graduated from
China University of Political Science and Law with a master's degree in law in
1990. He was Deputy Dean of the Department of Law at Hangzhou University,
Deputy Dean and Standing Deputy Dean of the Department of Law at Zhejiang
University's Law School, and Director of Zhejiang Zheda Law Firm. Mr. Wu
studied at Christian-Albrechts-Universit ?t zu Kiel in 1996 as Visiting
Scholar. He is currently Acting Dean of the Department of Law at the Law School
of Zhejiang University, Supervisor for master's degree candidates in Business
Law, member of China Business Law Research Council, Deputy Director of Zhejiang
Tax Law Research Council, Arbitrator of Hangzhou Arbitration Committee, and
Lawyer at Zhejiang Zeda Law Firm.
Mr. LIU Haisheng, born in 1969, is a professor. He obtained a doctorate degree
in Economics from Fudan University, a postdoctoral fellow in Accounting at
Xiamen University. 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, an executive member of the Zhejiang Association of Certified
Financial Officers 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 Ningbo Thermal Power Co., Ltd, Zhejiang Qianjiang Motorcycle Co.,
Ltd and Zhejiang Enjoyor Electronics Co., Ltd.
OTHER SENIOR MANAGEMENT MEMBER
Mr. WU Junyi, born in 1969, a holder of master degree in accounting, and is the
Chief Financial Officer of the Company. Mr. Wu graduated from Xi'an
Communications University in 1996. From 1996 to 1997, he was with the China
Investment Bank, Hangzhou Branch. He joined the Company in May 1997, and has
served as Manager of Securities Investment Department and Manager of Planning
and Finance Department.
Report of the Directors
The Directors of the company hereby present their report and the audited
financial statements of the Company and the Group for the year ended December
31, 2010.
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, automobile servicing and fuel facilities, as
well as provision of security broking service and proprietary securities
trading.
SEGMENT INFORMATION
During the year, the entire revenue and 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
activity for the year ended December 31, 2010 is set out in note 7 to the
financial statements.
RESULTS AND DIVIDENDS
The Group's profit for the year ended December 31, 2010 and the state of
financial position at that date are set out in the financial statements on
pages 49 to 123.
An interim dividend of Rmb0.06 per share (approximately HK$0.07) was paid on
November 18, 2010. The Directors recommend the payment of a final dividend of
Rmb0.25 (approximately HK$0.29) in respect of the year, to shareholders whose
names appeared on the register of members of the Company on April 14, 2011.
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
71.9% during the Period. Further details of the dividends are set out in note
16 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,
2010 2009 2008 2007 2006
Results Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
REVENUE 6,769,064 6,036,294 6,323,470 7,030,380 4,763,780
Operating costs (3,760,494) (3,145,294) (3,133,244) (3,089,133) (2,076,670)
Gross profit 3,008,570 2,891,000 3,190,226 3,941,247 2,687,110
Security 126,532 35,967 (316,213) 475,828 80,421
investment
income (loss)
Other income 199,791 426,280 211,420 134,607 123,531
Administrative (83,189) (69,845) (70,003) (81,089) (71,022)
expenses
Other expenses (21,904) (133,640) (38,947) (93,259) (32,901)
Finance costs (120,979) (62,724) (76,809) (60,552) (71,991)
Share of profit 2,453 (24,164) 10,659 (4,655) 4,435
(loss) of
associates
Share of profit
of
a jointly -- 21,254 23,746 20,406 23,344
controlled
entity
PROFIT BEFORE 3,111,274 3,084,128 2,934,079 4,332,533 2,742,927
TAX
INCOME TAX (798,785) (804,055) (668,928) (1,191,638) (884,036)
EXPENSE
PROFIT FOR THE 2,312,489 2,244,073 2,265,151 3,140,895 1,858,891
YEAR
Attributable
to:
Owners of the 1,871,499 1,795,488 1,892,787 2,415,965 1,652,871
Company
Non-controlling 440,990 448,585 372,364 724,930 206,020
interests
EARNINGS PER 43.09 cents 41.34 cents 43.58 cents 55.63 cents 38.06 cents
SHARE-BASIC
As at December 31,
2010 2009 2008 2007 2006
Assets and Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
liabilities
(Restated) (Restated)
Total assets 33,652,055 32,402,781 25,287,521 27,512,804 19,570,419
Total (15,956,940) (15,337,927) (8,990,253) (11,748,490) (6,217,967)
liabilities
Net assets 17,695,115 17,064,854 16,297,268 15,764,314 13,352,452
Notes:
1.The consolidated results of the Group for the four years ended December 31, 2009
have been extracted from the Company’s 2009 annual report dated March 30, 2010,
while those of the year ended December 31, 2010 were prepared based on the
consolidated statement of comprehensive income as set out on page 49 of the
financial statements.
2.The 2010 earnings per share is based on the profit attributable to owners of the
Company for the year ended December 31, 2010 of Rmb1,871,499,000
(2009: Rmb1,795,488,000) and the 4,343,114,500 ordinary shares (2009: 4,343,114,500
ordinary shares) in issue during the year.
3. Differences in Financial Statements prepared under PRC GAAP and HKFRSs
Profit for Net assets
the year as
at December
31,
2010 2009 2010 2009
Rmb'000 Rmb'000 Rmb'000 Rmb'000
As reported in the
statutory financial
statements of the Group
prepared
in accordance with PRC 2,321,359 2,257,855 17,926,462 17,287,330
GAAP
HK GAAP adjustments:
(a) Goodwill -- -- (199,769) (199,769)
(b) Amortization
provided,
net of deferred tax (1,952) (13,709) (157,300) (155,348)
(c) Assessment on impact
of
appreciation, net of (3,677) (3,884) 70,427 74,104
deferred tax
(d) Others -- 3,719 7,228 7,228
(e) Non-controlling (3,241) 92 48,067 51,309
interests
As restated in the 2,312,489 2,244,073 17,695,115 17,064,854
financial statements
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 43
to the financial statements.
PROPERTY, PLANT AND EQUIPMENT
Details of movements in property, plant and equipment of the Group during the
year are set out in note 18 to the financial statements.
CAPITAL COMMITMENTS
Details of the capital commitments of the Group as at December 31, 2010 are set
out in note 41 to the financial statements.
RESERVES
Details of movements in the reserves of the Group during the year are set out
in the consolidated statement of changes in equity on page 52 to the financial
statements.
DISTRIBUTABLE RESERVES
As at December 31, 2010, before the proposed final dividend, the Company's
reserves available for distribution by way of cash or in kind, as determined
based on the lower of the amount determined under PRC accounting standards and
the amount determined under HK GAAP, amounted to Rmb1,868,794,000. In addition,
in accordance with the Company Law of the PRC, the amount of approximately
Rmb3,645,726,000 standing to the credit of the Company's share premium account
as prepared in accordance with the PRC accounting standards was available for
distribution by way of capitalisation issues.
TRUST DEPOSITS
As at December 31, 2010, the Group did not have any trust deposits with any
non-bank financial institution in the PRC. All of the Group's deposits have
been placed with commercial banks in the PRC and the Group has not encountered
any difficulty in the withdrawal of funds.
PURCHASE, REDEMPTION OR
SALE OF THE LISTED SECURITIES
OF THE COMPANY
Neither the Company nor any of its subsidiaries purchased, redeemed or sold any
of the Company's listed securities during the year.
DIRECTORS
The Directors of the Company during the year and as at the date of this report
are:
EXECUTIVE DIRECTORS
Mr. CHEN Jisong (Chairman)
Mr. ZHAN Xiaozhang (General Manager)
Mr. JIANG Wenyao
Mr. ZHANG Jingzhong
Mr. DING Huikang (Effective since October 18, 2010)
NON-EXECUTIVE DIRECTORS
Ms. ZHANG Luyun
Ms. ZHANG Yang (Resigned on August 28, 2010)
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. TUNG Chee Chen
Mr. ZHANG Junsheng
Mr. ZHANG Liping
CHANGE IN DIRECTORS AND SENIOR MANAGEMENT
At the board meeting held by the Company on August 28, 2010, Ms. ZHANG Yang
resigned from her position as Director of the Company due to changes in her job
responsibilities. Mr. DING Huikang was nominated to be Director and Deputy
General Manager of the Company. The appointment of Mr. DING Huikang's Executive
Directorship was subsequently approved by resolutions passed at the
extraordinary general meeting of shareholders held on October 18, 2010.
The term of Mr. DING Huikang's Executive Directorship commenced on October 18,
2010 and expires on February 29, 2012.
DIRECTORS' AND SENIOR MANAGEMENT'S BIOGRAPHIES
Biographical details of the Directors of the Company and the senior management
of the Group are set out on page 36 in the Company's annual report.
DIRECTORS' SERVICE CONTRACTS
Each of the Directors of the Company has entered into a service agreement with
the Company, with effect from March 1, 2009 or the date of appointment, to
February 29 , 2012.
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, 2010 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
During the Period, one of the Company's major shareholders, Huajian transferred
its all shares to the Company's majority shareholder, Communications Group.
Before the transfer, Huajian and Communications Group held respectively 11%
(476,760,000 shares) and 56% (2,432,500,000 shares) shareholding of the
Company. After the transfer, shareholding held by the Communications Group
increased to 67% (2,909,260,000 shares). The remaining 1,433,854,500 Shares are
H Shares, representing approximately 33% of the total issued share capital of
the Company.
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
In accordance with the Notice on Taxation of Dividends and Stock (Options)
Transfer Income Obtained by Foreign-invested Companies, Foreign Companies and
Foreign Citizens (Guoshuifa [1993] No.045) published by the State
Administration of Taxation, foreign individuals holding H Shares are exempted
from paying personal income tax for dividends obtained from companies
incorporated in PRC that issue H Shares.
As stipulated by the Notice on Issues Relating to Enterprise Income Tax
Withholding over Dividends Distributable to Their H-Share Holders Who are
Overseas Non-resident Enterprises by Chinese Resident Enterprises published by
the State Administration of Taxation PRC (Guoshuihan [2008] No.897), when
Chinese resident enterprises distribute annual dividends for the year 2008 and
years thereafter to their H-Share holders who are overseas non-resident
enterprises, the enterprise income tax shall be withheld at a uniform rate of
10%.
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.
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 reappointment as Hong Kong auditors of the Company will be proposed
at the forthcoming annual general meeting.
ON BEHALF OF THE BOARD
CHEN Jisong
Chairman
Hangzhou, Zhejiang Province, the PRC
March 13, 2011
Report of the Supervisory Committee
During the financial year 2010 (the "Period"), the Supervisory Committee duly
performed its supervisory duties, and safeguarded the legitimate interests of
the shareholders and the Company in accordance with relevant rules and
regulations under the Company Law of the PRC, the Company's Articles of
Association and the Rules of the Supervisory Committee.
Main tasks undertaken by the Supervisory Committee during the Period were to
assess and supervise lawfulness, legality and appropriateness of the activities
of the Directors, General Manager and other senior management of the Company in
their business decision-making and daily management processes, through a
combination of activities including holding meetings of the Supervisory
Committee and attending meetings of shareholders and meetings of the Board. The
Supervisory Committee has carefully examined the operating results and the
financial standing of the Company, and discussed and reviewed the financial
statements to be submitted by the Board to the general meeting.
During the Period, the Supervisory Committee held two meetings of its own, and
attended four meetings of the Board and two shareholders' meeting.
The Supervisory Committee observes that during the Period, the Directors,
General Manager and other senior management of the Company worked strenuously
in leading the staff to successfully implement major projects such as
toll-by-weight for trucks and security measures for Shanghai World Expo;
grasping opportunities and accelerated the development of securities and
futures business while the core expressway business regained growth for the
first time in three years, with timely initiated major policy reforms in road
maintenance and employee remunerations.
The Supervisory Committee has reviewed the financial statements of the Company
for 2010 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 2010, and complied with the relevant
laws, regulations and the Company's Articles of Association. The Company kept
absolute dividend payment for the recent years unchanged while its annual
results recorded small single digit growth, thereby keeping the long term
dividend payout policy stable.
During the Period, the members of the Board, General Manager and other senior
management of the Company have complied with their fiduciary duties and worked
in good faith and diligence while carrying out their responsibilities. There
was no incident of abuse of power or infringement of the interests of
shareholders or employees.
The Supervisory Committee is satisfied with the various results obtained by the
Board and the management of the Company.
By the order of the Supervisory Committee
MA Kehua
Chairman of the Supervisory Committee
Hangzhou, Zhejiang Province, the PRC
March 11, 2011
Independent Auditor's Report
TO THE MEMBERS OF ZHEJIANG EXPRESSWAY CO., LTD.
(Established in the People's Republic of China with limited liability)
We have audited the consolidated financial statements of Zhejiang Expressway
Co., Ltd. (the "Company") and its subsidiaries (collectively referred to as the
"Group") set out on pages 49 to 123, which comprise the consolidated statement
of financial position as at December 31, 2010, and the consolidated statement
of 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 the
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, 2010, 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 13, 2011
Consolidated Statement of Comprehensive Income
For the Year ended December 31, 2010
NOTES 2010 2009
Rmb'000 Rmb'000
Revenue 7 6,769,064 6,036,294
Operating costs (3,760,494) (3,145,294)
Gross profit 3,008,570 2,891,000
Securities investment gains 8 126,532 35,967
Other income 9 199,791 426,280
Administrative expenses (83,189) (69,845)
Other expenses (21,904) (133,640)
Share of profit (loss) of 2,453 (24,164)
associates
Share of profit of a -- 21,254
jointly controlled entity
Finance costs 10 (120,979) (62,724)
Profit before tax 11 3,111,274 3,084,128
Income tax expense 12 (798,785) (840,055)
Profit for the year 2,312,489 2,244,073
Other comprehensive (loss) 13
income
Available-for-sale
financial assets:
- Fair value gain during 14,342 34,234
the year
- Reclassification
adjustments for cumulative
gain included in profit (25,052) (13,632)
or loss upon disposal
Income tax relating to 2,678 (5,150)
components of other
comprehensive income
Other comprehensive (loss) (8,032) 15,452
income for the year (net of
tax)
Total comprehensive income 2,304,457 2,259,525
for the year
Profit for the year
attributable to:
Owners of the Company 1,871,499 1,795,488
Non-controlling interests 440,990 448,585
2,312,489 2,244,073
Total comprehensive income
for the year attributable
to:
Owners of the Company 1,867,332 1,803,504
Non-controlling interests 437,125 456,021
2,304,457 2,259,525
EARNINGS PER SHARE - Basic 17 Rmb 43.09 cents Rmb 41.34 cents
Consolidated Statement of Financial Position
At December 31, 2010
NOTES 2010 2009
Rmb'000 Rmb'000
NON-CURRENT
ASSETS
Property, plant 18 1,120,626 1,035,628
and equipment
Prepaid lease 19 71,035 30,342
payments
Expressway 20 12,071,497 12,755,338
operating rights
Goodwill 21 86,867 86,867
Other intangible 22 155,020 154,819
assets
Interests in 24 472,910 435,007
associates
Available-for- 25 1,000 1,000
sale investments
13,978,955 14,499,001
CURRENT ASSETS
Inventories 17,715 17,342
Trade 26 50,768 50,570
receivables
Other 27 953,153 451,167
receivables
Prepaid lease 19 2,052 1,421
payments
Available-for- 25 71,928 54,704
sale investments
Held for trading 28 803,772 517,895
investments
Financial assets 29 80,163 --
held under
resale agreement
Bank balances 30 11,685,951 11,532,284
held on behalf
of customers
Bank balances
and cash
- Restricted 31 -- 942
bank balances
- Time deposits 31 325,545 228,452
with original
maturity over
three months
- Cash and cash 31 5,682,053 5,049,003
equivalents
19,673,100 17,903,780
CURRENT
LIABILITIES
Accounts payable 32 11,631,030 11,502,930
to customers
arising from
securities
dealing business
Trade payables 33 548,695 647,373
Tax liabilities 450,708 512,551
Other taxes 51,002 30,492
payable
Other payables 34 1,049,301 637,665
and accruals
Dividends 120,319 18
payable
Interest-bearing 35 822,000 478,055
bank and other
loans
Provisions 36 21,238 122,477
14,694,293 13,931,561
NET CURRENT 4,978,807 3,972,219
ASSETS
TOTAL ASSETS 18,957,762 18,471,220
LESS CURRENT
LIABILITIES
NON-CURRENT
LIABILITIES
Interest- 35 -- 144,329
bearing bank
and other
loans
Long-term 37 1,000,000 1,000,000
bonds
Deferred tax 38 262,647 262,037
liabilities
1,262,647 1,406,366
17,695,115 17,064,854
CAPITAL AND
RESERVES
Share capital 39 4,343,115 4,343,115
Reserves 10,380,137 9,840,505
Equity 14,723,252 14,183,620
attributable
to owners of
the Company
Non- 2,971,863 2,881,234
controlling
interests
17,695,115 17,064,854
The consolidated financial statements on pages 49 to 123 were approved and authorised
for issue by the Board of Directors on March 13, 2011 and are signed on its behalf by:
CHEN Jisong ZHAN Xiaozhang
DIRECTOR DIRECTOR
Consolidated Statement of Changes in Equity
For the Year ended December 31, 2010
Attributable to owners of the Company
Statutory Investment
Share Share reserves revaluation Dividend
capital premium (Note) reserve reserve
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At January 1, 2009 4,343,115 3,645,726 2,116,529 -- 1,042,347
Profit for the year -- -- -- -- --
Other comprehensive
income for the -- -- -- 8,016 --
year
Total comprehensive
income for the -- -- -- 8,016 --
year
Dividend paid to
non-controlling -- -- -- -- --
interests
Interim dividend -- -- -- -- --
Final dividend -- -- -- -- (1,042,347)
Proposed final -- -- -- -- 1,085,779
dividend
Transfer to -- -- 350,482 -- --
reserves
At December 31,
2009
and January 1, 4,343,115 3,645,726 2,467,011 8,016 1,085,779
2010
Profit for the year -- -- -- -- --
Other comprehensive
income for the -- -- -- (4,167) --
year
Total comprehensive
income for the -- -- -- (4,167) --
year
Dividend paid to
non-controlling -- -- -- -- --
interests
Acquisition of
additional
interests in -- -- -- -- --
subsidiaries
Interim dividend -- -- -- -- --
Final dividend -- -- -- -- (1,085,779)
Proposed final -- -- -- -- 1,085,779
dividend
Transfer to -- -- 260,889 -- --
reserves
At December 31, 4,343,115 3,645,726 2,727,900 3,849 1,085,779
2010
Attributable Non-controlling Total
to owners of
the Company
interests
Special Retained
reserve profits Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At January 1, 2009 -- 2,535,333 13,683,050 2,614,218 16,297,268
Profit for the year -- 1,795,488 1,795,488 448,585 2,244,073
Other comprehensive
income for the -- -- 8,016 7,436 15,452
year
Total comprehensive
income for the -- 1,795,488 1,803,504 456,021 2,259,525
year
Dividend paid to
non-controlling -- -- -- (189,005) (189,005)
interests
Interim dividend -- (260,587) (260,587) -- (260,587)
Final dividend -- -- (1,042,347) -- (1,042,347)
Proposed final -- (1,085,779) -- -- --
dividend
Transfer to reserves -- (350,482) -- -- --
At December 31, 2009
and January 1, -- 2,633,973 14,183,620 2,881,234 17,064,854
2010
Profit for the year -- 1,871,499 1,871,499 440,990 2,312,489
Other comprehensive
income for the -- -- (4,167) (3,865) (8,032)
year
Total comprehensive
income for the -- 1,871,499 1,867,332 437,125 2,304,457
year
Dividend paid to
non-controlling -- -- -- (228,950) (228,950)
interests
Acquisition of
additional
interests in 18,666 -- 18,666 (117,546) (98,880)
subsidiaries
Interim dividend -- (260,587) (260,587) -- (260,587)
Final dividend -- -- (1,085,779) -- (1,085,779)
Proposed final -- (1,085,779) -- -- --
dividend
Transfer to reserves -- (260,889) -- -- --
At December 31, 2010 18,666 2,898,217 14,723,252 2,971,863 17,695,115
Note: Statutory reserves comprise:
(a) Statutory surplus reserve
In accordance with the Company Law of the People’s Republic of China (the “PRCâ€)
and the respective articles of association of the Company and its subsidiaries
(collectively the “Entitiesâ€), 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.
Consolidated Statement of Cash Flows
For the Year ended December 31, 2010
NOTE 2010 2009
Rmb'000 Rmb'000
OPERATING ACTIVITIES
Profit before tax 3,111,274 3,084,128
Adjustments for:
Finance costs 120,979 62,724
Interest income (56,414) (30,727)
Share of (profit) loss of associates (2,453) 24,164
Share of profit of a jointly controlled entity -- (21,254)
Depreciation of property, plant and equipment 134,794 122,774
Amortisation of expressway operating rights 691,332 676,220
Amortisation of prepaid lease payments 2,039 1,265
Amortisation of other intangible assets 12,706 13,438
Impairments loss on interest in an associate -- 9,298
Gain on disposal of available-for-sale (25,052) (13,632)
investments
Gain on fair value changes on held for trading (101,480) (22,335)
investments
Loss on disposal of property, plant and
equipment 3,753 33,072
Loss on written off of expressway operating 142 --
rights
Gain on disposal of a jointly controlled entity -- (274,494)
Operating cash flows before movements in working 3,891,620 3,664,641
capital
Increase in inventories (373) (1,039)
(Increase) decrease in trade receivables (198) 25,429
Increase in other receivables (43,466) (23,129)
Increase in held for trading investments (184,397) (247,973)
Increase in bank balances held on behalf of (153,667) (5,889,092)
customers
Increase in accounts payable to customers arising
from securities dealing business 128,100 5,895,457
(Decrease) increase in trade payables (98,678) 232,277
Increase (decrease) in other taxes payable 20,510 (2,268)
Increase in other payables and accruals 73,282 99,903
(Decrease) increase in provisions (101,239) 88,613
Cash generated from operations 3,531,494 3,842,819
Income taxes paid (860,018) (785,613)
Interest paid (120,979) (62,724)
NET CASH FROM OPERATING ACTIVITIES 2,550,497 2,994,482
INVESTING ACTIVITIES
Interest received 37,894 31,694
Dividends received from associates 13,000 42
Proceeds on disposal of property, plant and 27,043 3,834
equipment
Proceeds on disposal of a jointly controlled -- 252,000
entity
Repayment of entrusted loan from a related party 120,000 --
Entrusted loans to a related party (500,000) (120,000)
Entrusted loan to a third party (60,000) --
Purchases of property, plant and equipment (250,588) (164,060)
Prepaid lease payments for land use rights (43,363) (1,324)
Addition in expressway operating rights (7,633) (507,581)
Purchases of intangible assets (12,907) (10,192)
(Increase) decrease in available-for-sale (204) 2,381
investments
Increase in financial assets held under resale (80,163) --
agreement
Decrease in structured deposit -- 200,000
(Increase) decrease in time deposits (97,093) 55,616
Decrease in restricted bank balances 942 34,058
Investments in associates (48,450) (4,249
NET CASH USED IN INVESTING ACTIVITIES (901,522) (227,781
FINANCING ACTIVITIES
Acquisition of additional interest in
subsidiaries (98,880) --
Prepayment from non-controlling shareholders 338,354 --
Dividends paid (1,226,065) (1,336,304)
Dividends paid to non-controlling shareholders (228,950) (130,959)
New bank loans raised 822,000) 200,000)
Repayment of bank and other loans (622,384) (187,380)
NET CASH USED IN FINANCING ACTIVITIES (1,015,925) (1,454,643)
NET INCREASE IN CASH AND CASH EQUIVALENTS 633,050 1,312,058
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,049,003 3,736,945
CASH AND CASH EQUIVALENTS AT END OF YEAR 31 5,682,053 5,049,003
Notes to the Consolidated Financial Statements
For the year ended December 31, 2010
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 as the "Group") is involved in the following principal
activities:
(a) the operation, maintenance and management of high grade roads;
(b) the development and provision of certain ancillary services such as
advertising, automobile servicing and fuel facilities; and
(c) the provision of securities broking services and proprietary trading.
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
("HKFRSs")
New and revised Standards and Interpretations applied in the current year
In the current year, the Group has applied the following new and revised
standards and interpretations issued by the Hong Kong Institute of Certified
Public Accountants ("HKICPA").
HKFRS 2 (Amendments) Group Cash-settled Share-based Payment Transactions
HKFRS 3 (as revised in 2008) Business Combinations
HKAS 27 (as revised in 2008) Consolidated and Separate Financial Statements
HKAS 39 (Amendments) Eligible Hedged Items
HKFRSs (Amendments) Improvements to HKFRSs issued in 2009
HKFRSs (Amendments) Amendments to HKFRS 5 as part of Improvements to
HKFRSs issued in 2008
HK(IFRIC) - Int 17 Distributions of Non-cash Assets to Owners
HK - Int 5 Presentation of Financial Statements - Classification by
the Borrower of a Term Loan that Contains a Repayment
on Demand Clause
Except as described below, the application of the new and revised standards and
interpretations in the current year has had no material effect on the
consolidated financial statements of the Group.
Amendments to HKAS 17 Leases
As part of Improvements to HKFRSs issued in 2009, HKAS 17 Leases has been
amended in relation to the classification of leasehold land. Before the
amendments to HKAS 17, the Group was required to classify leasehold land as
operating leases and to present leasehold land as prepaid lease payments in the
consolidated statement of financial position. The amendments to HKAS 17 have
removed such a requirement. The amendments require that the classification of
leasehold land should be based on the general principles set out in HKAS 17,
that is, whether or not substantially all the risks and rewards incidental to
ownership of a leased asset have been transferred to the lessee.
In accordance with the transitional provisions set out in the amendments to
HKAS 17, the Group reassessed the classification of unexpired leasehold land as
at January 1, 2010 based on information that existed at the inception of the
leases. The application of the amendments to HKAS 17 has had no impact on the
consolidated financial statements of the Group and therefore no adjustment is
required.
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
("HKFRSs") (Continued)
HKAS 27 (as revised in 2008) Consolidated and Separate Financial Statements
The Group has applied HKAS 27 (as revised in 2008) for changes in ownership
interests in existing subsidiaries of the Group in the current year.
Specifically, the revised Standard has affected the Group's accounting policies
regarding changes in the Group's ownership interests in its subsidiaries that
do not result in loss of control. Under HKAS 27 (as revised in 2008), all such
increases or decreases are dealt with in equity, with no impact on goodwill or
profit or loss. These changes have been applied prospectively from January 1,
2010 in accordance with the relevant transitional provisions.
The application of the revised Standard has affected the accounting for the
Group's acquisition of additional equity interest in subsidiaries, Zhejiang
Expressway Investment Development Co., Ltd. ("Development Co") and Zhejiang
Expressway Vehicle Towing and Rescue Service Co., Ltd. ("Service Co"), in the
current year. The change in policy has resulted in the difference of
Rmb18,666,000 between the consideration paid of Rmb98,880,000 and the
non-controlling interests recognised of Rmb117,546,000 being recognised
directly in equity, instead of in profit or loss. Therefore, the change in
accounting policy has resulted in a decrease in the profit for the year of
Rmb18,666,000 and a decrease in the basic earnings per share for the year of
Rmb0.4 cents. In addition, the cash consideration paid in the current year of
Rmb98,880,000 has been included in cash flows used in financing activities.
New and revised Standards and Interpretations issued but not yet effective
The Group has not early applied the following new and revised standards and
interpretations that have been issued but are not yet effective:
HKFRSs (Amendments) Improvements to HKFRSs issued in 2010 (1)
HKFRS 7 (Amendments) Disclosures - Transfers of Financial Assets (3)
HKFRS 9 Financial Instruments (4)
HKAS 12 (Amendments) Deferred Tax: Recovery of Underlying Assets (5)
HKAS 32 (Amendments) Classification of Rights Issues (7)
HK (IFRIC) - Int 14 (Amendments) Prepayments of a Minimum Funding Requirement (6)
HK (IFRIC) - Int 19 Extinguishing Financial Liabilities with Equity
Instruments (2)
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
("HKFRSs") (Continued)
New and revised Standards and Interpretations issued but not yet effective
(Continued)
1 Effective for annual periods beginning on or after July 1, 2010 or January 1,
2011, as appropriate.
2 Effective for annual periods beginning on or after July 1, 2010.
3 Effective for annual periods beginning on or after January 1, 2011.
4 Effective for annual periods beginning on or after January 1, 2013.
5 Effective for annual periods beginning on or after January 1, 2012.
6 Effective for annual periods beginning on or after January 1, 2011.
7 Effective for annual periods beginning on or after February 1, 2010.
HKFRS 9 Financial Instruments (as issued in November 2009) introduces new
requirements for the classification and measurement of financial assets. HKFRS
9 Financial Instruments (as revised in November 2010) adds requirements for
financial liabilities and for derecognition.
* Under HKFRS 9, all recognised financial assets that are within the scope of
HKAS 39 Financial Instruments: Recognition and Measurement are subsequently
measured at either 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 accounting periods.
* In relation to financial liabilities, the significant change relates to
financial liabilities that are designated as at fair value through profit or
loss. Specifically, under HKFRS 9, for financial liabilities that are
designated as at fair value through profit or loss, 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 presentation 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 attributable to a financial
liability's credit risk are not subsequently reclassified to profit or loss.
Previously, under HKAS 39, the entire amount of the change in the fair value of
the financial liability designated as at fair value through profit or loss was
presented in profit or loss.
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
("HKFRSs") (Continued)
New and revised Standards and Interpretations issued but not yet effective
(Continued)
HKFRS 9 is effective for annual periods beginning on or after January 1, 2013,
with earlier application permitted.
The directors anticipate that HKFRS 9 will be adopted in the Group's
consolidated financial statements for financial year ending December 31, 2013
and that the application of the new Standard will affect the classification and
measurement of the Group's available-for-sale investments and may affect the
classification and measurement of the Group's other financial assets but not on
the Group's financial liabilities.
3. 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, as explained in the accounting policies set out below. Historical cost
is generally based on the fair value of the consideration given in exchange for
goods.
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 (its subsidiaries). Control
is achieved where the Company has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated statement of comprehensive income from the
effective date of acquisition and up to the effective date of disposal, as
appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with those used by
other members of the Group.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of consolidation (Continued)
All intra-group transactions, balances, income and expenses are eliminated in
full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the
Group's equity therein.
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. Prior to January 1,
2010, losses applicable to the non-controlling interests in excess of the
non-controlling interests in the subsidiary's equity were allocated against the
interests of the Group except to the extent that the non-controlling interests
had a binding obligation and were able to make an additional investment to
cover the losses.
Changes in the Group's ownership interests in existing subsidiaries
Changes in the Group's ownership interests in subsidiaries that do not result
in the Group losing control over the subsidiaries are accounted for as equity
transactions. The carrying amounts of the Group's interests and the
non-controlling interests are adjusted to reflect the changes in their relative
interests in the subsidiaries. Any difference between the amount by which the
non-controlling interests are adjusted and the fair value of the consideration
paid or received is recognised directly in equity and attributed to owners of
the Company.
Goodwill
Goodwill arising on acquisitions prior to January 1, 2001
Goodwill arising on acquisitions of net assets and operations of another entity
prior to January 1, 2001 continues to be held in reserves, and will be charged
to the retained profits at the time when the business to which the goodwill
relates is disposed of or when a cash-generating unit to which the goodwill
relates becomes impaired.
Goodwill arising on acquisitions on or after January 1, 2001
Goodwill arising on an acquisition of a business is carried at cost less any
accumulated impairment losses, if any, and is presented separately in the
consolidated statement of financial position.
For the purposes of impairment testing, goodwill is allocated to each of the
cash-generating units (or groups of cash-generating units) that is expected to
benefit from the synergies of the combination.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill (Continued)
A cash-generating unit to which goodwill has been allocated is tested for
impairment annually, or more frequently whenever there is indication that the
unit may be impaired. For goodwill arising on an acquisition in a reporting
period, the cash-generating unit to which goodwill has been allocated is tested
for impairment before the end of that reporting period. If the recoverable
amount of the cash-generating unit is less than the carrying amount of the
unit, 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 pro
rata on the basis of the carrying amount of each asset in the unit. Any
impairment loss for goodwill is recognised directly in profit or loss in the
consolidated statement of comprehensive income. 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 amount of profit or loss on
disposal.
Investments in associates
An associate is an entity over which the investor has significant influence and
that is neither a subsidiary nor an interest in a joint venture. 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.
The results and assets and liabilities of associates are incorporated in these
consolidated financial statements using the equity method of accounting. Under
the equity method, investments in associates are 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 associates. When the Group's share of losses of an associate
equals or exceeds its interest in that associate (which includes any long-term
interests that, in substance, form part of the Group's net investment in the
associate), 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 that associate.
Any excess of the cost of acquisition over the Group's share of the net fair
value of the identifiable assets, liabilities and contingent liabilities of an
associate recognised at the date of acquisition 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, liabilities and contingent liabilities over the cost of acquisition,
after reassessment, is recognised immediately in profit or loss.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments in associates (Continued)
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. 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.
When a group entity transacts with its associate, profits and losses resulting
from the transactions with the associate are recognised in the Group'
consolidated financial statements only to the extent of interests in the
associate that are not related to the Group.
Investments in jointly controlled entities
Joint venture arrangements that involve the establishment of a separate entity
in which venturers have joint control over the economic activity of the entity
are referred to as jointly controlled entities.
The results and assets and liabilities of jointly controlled entities are
incorporated in the consolidated financial statements using the equity method
of accounting. Under the equity method, investments in jointly controlled
entities are 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 jointly controlled
entities. When the Group's share of losses of a jointly controlled entity
equals or exceeds its interest in that jointly controlled entity (which
includes any long-term interests that, in substance, form part of the Group's
net investment in the jointly controlled entity), the Group discontinues
recognising its share of further losses. Additional losses are recognised only
to the extent that the Group has incurred legal or constructive obligations or
made payments on behalf of that jointly controlled entity.
Any excess of the cost of acquisition over the Group's share of the net fair
value of the identifiable assets, liabilities and contingent liabilities of a
jointly controlled entity recognised at the date of acquisition 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, liabilities and contingent liabilities over the cost of acquisition,
after reassessment, is recognised immediately in profit or loss.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments in jointly controlled entities (Continued)
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 a
jointly controlled entity. 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.
When a group entity transacts with its jointly controlled entity, profits and
losses resulting from the transactions with the jointly controlled entity are
recognised in the Group' consolidated financial statements only to the extent
of interests in the jointly controlled entity that are not related to the
Group.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods sold and services
provided in the normal course of business, net of discounts and sales related
taxes.
Toll income from the operation of tolled roads is recognised when the tolls are
received or become receivable.
Revenue from sale of goods is recognised when goods are delivered and title has
passed.
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.
Interest income from a financial asset is accrued on a time basis, by reference
to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts the estimated future cash receipts
through the expected life of the financial asset to that asset's net carrying
amount on initial recognition.
Dividend income from investments is recognised when the shareholders' rights to
receive payment have been established.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, plant and equipment
Property, plant and equipment including leasehold land and building held for
use in supply of goods and services, or for administrative purposes (properties
under construction as described below) are stated at cost less subsequent
accumulated depreciation and accumulated impairment losses, if any.
Depreciation is recognised so as to write off the cost of items of property,
plant and equipment other than properties under construction less their
residual values over their estimated useful lives, using the straight-line
method, at the following rates per annum. 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.
Annual
Estimated depreciation
useful life rate
Leasehold land and buildings 30-50 years 1.9%-3.2%
Ancillary facilities 10-30 years 3.2%-9%
Communications and signalling equipment 5 years 19.4%
Motor vehicles 5-8 years 12.1%-19.4%
Machinery and equipment 5-8 years 12.1%-19.4%
Properties in the course of construction for production, supply or
administrative purposes are carried at cost, less any recognised impairment
loss. Costs include 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.
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.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible assets
Intangible assets acquired separately
Intangible assets acquired separately and with finite useful lives are carried
at costs less accumulated amortisation and any accumulated impairment losses.
Amortisation for intangible assets with finite useful lives is provided on a
straight-line basis over their estimated useful lives. Alternatively,
intangible assets with indefinite useful lives are carried at cost less any
subsequent accumulated impairment losses (see the accounting policy in respect
of impairment losses on tangible and intangible assets below).
Gains or losses arising from derecognition of an intangible asset are measured
at the difference between the net disposal proceeds and the carrying amount of
the asset and are recognised in profit or loss in the period when the asset is
derecognised.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are identified and
recognised separately from goodwill where they satisfy the definition of an
intangible asset and their fair values can be measured reliably. The cost of
such intangible assets is their fair value at the acquisition date.
Subsequent to initial recognition, intangible assets with finite useful lives
are carried at costs less accumulated amortisation and any accumulated
impairment losses. Amortisation for intangible assets with finite useful lives
is provided on a straight-line basis over their estimated useful lives.
Alternatively, intangible assets with indefinite useful lives are carried at
cost less any subsequent accumulated impairment losses (see the accounting
policy in respect of impairment losses on tangible and intangible assets
below).
Expressway operating rights under service concession arrangements
When the Group has a right to charge for usage of concession infrastructure, it
recognises concession intangible assets based on fair value of the
consideration paid upon initial recognition. Subsequent costs incurred on
expressway widening projects and upgrading services are 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, repair and maintenance of the
expressway infrastructures are recognised as expenses in the periods in which
they are incurred.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment losses on tangible and intangible assets other than goodwill (see
the accounting policy in respect of goodwill above)
At the end of the reporting period, the Group reviews the carrying amounts of
its tangible and intangible assets to determine whether there is any indication
that these assets have suffered an impairment loss. 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. In addition, intangible assets with
indefinite useful lives are tested for impairment annually, and whenever there
is an indication that they may be impaired. If the recoverable amount of an
asset is estimated to be less than its carrying amount, the carrying amount of
the asset is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.
When an impairment loss subsequently reverses, the carrying amount of the asset
is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset in prior
years. A reversal of an impairment loss is recognised as income immediately.
Inventories
Inventories, representing merchandise held for resale, are stated at the lower
of cost and net realisable value. Cost is calculated using the weighted average
method.
Leasing
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised in 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 expense on a straight-line basis
over the term of the relevant lease. Benefits received and receivable as an
incentive to enter into an operating lease are recognised as a reduction of
rental expense over the lease term on a straight-line basis.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Leasing(Continued)
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.
Specifically, the minimum lease payments (including any lump-sum 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.
For a leasehold land which are classified as operating lease, whilst the
building element is classified as finance lease, interest in the leasehold land
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 to the extent the allocation of the lease payments can be made reliably.
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, unless it is clear that
both elements are operating leases, in which case the entire lease is
classified as an operating lease.
Foreign currencies
In preparing the financial statements of each individual group entity,
transactions in currencies other than the functional currency of that entity
(foreign currencies) are recorded in the respective functional currency (i.e.
the currency of the primary economic environment in which the entity operates)
at the rates of exchanges prevailing on the dates of the transactions. At 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
translation of monetary items, are recognised in profit or loss in the period
in which they arise.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 state-managed retirement benefit schemes and corporate annuity
scheme are charged as an expense when employees have rendered service 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 as reported in the consolidated statement of
comprehensive income because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items that are
never taxable or deductible. The Group's liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by
the 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 base 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
difference to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference
arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Taxation (Continued)
Deferred tax liabilities are recognised for taxable temporary differences
associated with investments in subsidiaries and associates, and interests in
joint ventures, 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. Deferred tax is recognised in profit or loss,
except when it relates to items that are recognised in other comprehensive
income or directly in equity, in which case the deferred tax is also recognised
in other comprehensive income or directly in equity respectively.
Financial instruments
Financial assets and financial liabilities are recognised in the consolidated
statement of financial position 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.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets
The Group's financial assets are classified into loans and receivables,
financial assets at fair value through profit or loss ("FVTPL") and
available-for-sale financial assets. All regular way purchases or sales of
financial assets are recognised and derecognised on a trade date basis. Regular
way purchases or sales are purchases or sales of financial assets that require
delivery of assets within the time frame established by regulation or
convention in the marketplace. The accounting policies adopted in respect of
each category of financial assets are set out below.
Effective interest method
The effective interest method is a method of calculating the amortised cost of
a financial asset and of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees paid or received that form an integral part
of the effective interest rate, transaction costs and other premiums or
discounts) through the expected life of the financial asset, or, where
appropriate, a shorter period 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.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Subsequent to
initial recognition, loans and receivables (including trade receivables, other
receivables, bank balances, financial assets held under resale agreement and
balances held on behalf of customers) are carried at amortised cost using the
effective interest method, less any identified impairment losses (see
accounting policy on impairment losses on financial assets below).
Financial assets held under resale agreements are transactions where the Group
acquires financial assets which will be resold at a predetermined price at a
future date under resale agreements. The cash advanced is recognised as amounts
held under agreements in the consolidated statement of financial position.
Assets held under resale agreements are not recognised. 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.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Effective interest method (Continued)
Financial assets at fair value through profit or loss
Financial asset at FVTPL include financial assets held for trading and
structured deposits with embedded derivatives.
A financial asset is classified as held for trading if:
* it has been acquired principally for the purpose of selling in the near
future; or
* it is a part of an identified portfolio of financial instruments that the
Group manages together and has a recent actual pattern of short-term profit
taking; or
* it is a derivative that is not designated and effective as a hedging
instrument.
Financial assets at FVTPL are measured at fair value, with changes in fair
value arising from remeasurement recognised directly in profit or loss in the
period in which they arise. The net gain or loss in profit or loss includes any
dividend or interest earned on the financial assets.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either
designated or not classified as any of the categories of financial assets set
out above.
Available-for-sale financial assets are measured at fair value at the end of
each reporting period. Changes in fair value are recognised in other
comprehensive income and accumulated in investment revaluation reserve, until
the financial asset is disposed of or is determined to be impaired, at which
time, the cumulative gain or loss previously accumulated in the investment
revaluation reserve is reclassified to profit or loss (see accounting policy on
impairment loss on financial assets below).
For available-for-sale equity investments that do not have a quoted market
price in an active market and whose fair value cannot be reliably measured,
they are measured at cost less any identified impairment losses at the end of
the reporting period (see accounting policy on impairment loss on financial
assets below).
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of
impairment at the end of the reporting period. Financial assets are impaired
where there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated
future cash flows of the financial assets have been affected.
For an available-for sale equity investment, a significant or prolonged decline
in the fair value of that investment below its cost is considered to be
objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
* significant financial difficulty of the issuer or counterparty; or
* default or delinquency in interest or principal payments; or
* it becoming probable that the borrower will enter bankruptcy or financial
re-organisation.
For financial assets carried at amortised cost, an impairment loss is
recognised in profit or loss when there is objective evidence that the asset is
impaired, and is measured as the difference between the asset's carrying amount
and the present value of the estimated future cash flows discounted at the
original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is
measured as the difference between the asset's carrying amount and the present
value of the estimated future cash flows discounted at the current market rate
of return for a similar financial asset. Such impairment loss will not be
reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables,
where the carrying amount is reduced through the use of an allowance account.
Changes in the carrying amount of the allowance account are recognised in
profit or loss. When a trade receivable is considered uncollectible, it is
written off against the allowance account. Subsequent recoveries of amounts
previously written off are credited to profit or loss.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)
For financial assets measured at amortised cost, if, in a subsequent period,
the amount of impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment losses was recognised,
the previously recognised impairment loss is reversed through profit or loss to
the extent that the carrying amount of the asset at the date the impairment is
reversed does not exceed what the amortised cost would have been had the
impairment not been recognised.
Impairment losses on available-for-sale equity investments will not be reversed
in profit or loss in subsequent periods. Any increase in fair value subsequent
to impairment loss is recognised directly in other comprehensive income and
accumulated in investment revaluation reserve.
Financial liabilities and equity
Financial liabilities and equity instruments issued by a group entity are
classified according to the substance of the contractual arrangements entered
into and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities.
Effective interest method
The effective interest method is a method of calculating the amortised cost of
a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the financial
liability, or, where appropriate, a shorter period.
Interest expense is recognised on an effective interest basis.
Financial liabilities
Financial liabilities including trade payables, accounts payable to customers
arising from securities dealing business, other payables, dividends payable,
interest-bearing bank and other loans, and long-term bonds are subsequently
measured at amortised cost, using the effective interest method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Derecognition
Financial assets are derecognised when the rights to receive cash flows from
the assets expire or, the financial assets are transferred and the Group has
transferred substantially all the risks and rewards of ownership of the
financial assets.
On derecognition of a financial asset 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.
Financial liabilities are derecognised when the obligation specified in the
relevant contract is discharged, cancelled or expires. The difference between
the carrying amount of the financial liability derecognised and the
consideration paid and payable is recognised in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation as a result
of a past event, and it is probable that the Group will be required to settle
that obligation. Provisions are measured at the 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. Where 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 is material).
4. KEY SOURCES OF ESTIMATION UNCERTAINTY
The following is the key assumptions concerning the future, and 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 and liabilities 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 units 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,
2010, the carrying amount of goodwill is Rmb86,867,000 (2009: Rmb86,867,000).
Details of the recoverable amount calculation are disclosed in Note 23.
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, 2010,
the carrying amounts of intangible assets with indefinite useful lives were
Rmb66,563,000 (2009: Rmb66,563,000). Details of the recoverable amount
calculation are disclosed in Note 23.
Provision against litigation and guarantees
Measuring the provision against litigation and guarantees requires an
estimation of the expenditure required to settle the obligation arising from
the litigation and guarantees. The settlement amount depends on such factors as
the totality of facts, interpretation and application of laws and regulation,
and court rulings. Where the court rules differently than the Group has
expected, the ultimate settlement amount may be materially different from the
provision that has been made and affect the Group's profit and loss in future
periods. At December 31, 2010, the Group has made provision against litigation
and guarantee of Rmb21,238,000 (2009: Rmb122,477,000). During the year ended
December 31, 2010, the Group has reversed the overprovision in prior years
amounted to Rmb13,426,000 (2009: nil). Details of the provision are disclosed
in Note 36.
5. FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
2010 2009
Rmb'000 Rmb'000
Financial assets
Available-for-sale investments
- at cost 1,000 1,000
- at fair value 71,928 54,704
Fair value through profit of loss
Held for trading investments 803,772 517,895
Loans and receivables
(including cash and cash equivalents) 18,724,410 17,257,635
Financial liabilities
Amortised cost 14,505,097 14,223,057
(b) Financial risk management objectives and policies
The Group's major financial instruments include available-for-sale investments,
held for trading investments, trade and other receivables, financial assets
held under resale agreement, bank balances, bank balances held on behalf of
customers, trade and other payables, accounts payable to customers arising from
securities dealing business, interest-bearing bank and other loans and
long-term bonds. Details of these financial instruments are disclosed in
respective notes. The risks associated with these financial instruments 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.
5. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk
(i) Interest rate risk
The Group is exposed to fair value interest rate risk in relation to financial
assets held under resale agreement, fixed-rate time deposits, and long-term
bonds (see Notes 29, 31 and 37 for details).
The Group is also exposed to cash flow interest rate risk in relation to
variable-rate bank balances held on behalf of customers, bank balances and
interest-bearing bank and other loans (see Notes 30, 31 and 35 for details).
The Group currently does not have an interest rate risk hedging policy as the
management consider the Group is not exposed to significant interest rate risk.
The management will continue to monitor interest rate risk exposure and
consider hedging against it should the need arises.
The Group's exposures to interest rates on financial liabilities are detailed
in the liquidity risk management section of this note.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to
interest rates for non-derivative instruments, comprising variable-rate bank
balances and bank and other loans, at the end of the reporting period.
The analysis was prepared assuming the balances outstanding at the end of the
reporting period were outstanding for the whole year. A 30 basis point increase
or decrease was used based on management's assessment.
If interest rates had been 30 basis points (2009: 30 basis points) higher/lower
and all other variables were held constant, the Group's post-tax profit for the
year ended December 31, 2010 would increase/decrease by Rmb38,291,000 (2009:
Rmb36,357,000). This was mainly attributable to the Group's exposure to
interest rates on its variable-rate bank balances.
5. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(ii) Currency risk
Several subsidiaries of the Company have foreign currency denominated monetary
assets and liabilities, which expose the Group to foreign currency risk.
The carrying amounts of the Group's foreign currency denominated monetary
assets and liabilities at the end of the reporting period are as follows:
Assets Liabilities
2010 2009 2010 2009
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Hong Kong dollar ("HKD") 20,180 18,954 14,947 14,288
United Sates dollar ("USD") 85,383 81,650 58,718 478,611
The Group currently does not have a currency risk hedging policy as the
management considers that the risk is not significant. The management will
continue to monitor foreign currency risk exposure and consider hedging against
it should the need arises.
Sensitivity analysis
The Group is mainly exposed to HKD and USD relative to Rmb.
This sensitivity analysis details the Group's sensitivity to a 5% (2009: 5%)
increase and decrease in Rmb against HKD and USD. 5% (2009: 5%) is the
sensitivity rate used when reporting foreign currency risk internally to key
management personnel. The sensitivity analysis includes only outstanding
foreign currency denominated monetary items and adjusts their translation at
the year end for a 5% (2009: 5%) change in foreign currency rates. If Rmb had
strengthened/weakened 5% against HKD, the Group's post-tax profit for the year
ended December 31, 2010 would have decreased/increased by Rmb196,000 (2009:
Rmb175,000). If Rmb had strengthened/weakened 5% against USD, the Group's
post-tax profit for the year ended December 31, 2010 would have decreased/
increased by Rmb1,000,000 (2009: increased/decreased by Rmb14,886,000).
5. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(iii) Other price risk
The Group is exposed to equity and debt security price risk in relation to its
held for trading and available-for-sale listed investments.
The Group currently does not have a price risk hedging policy as the management
consider the Group is not exposed to significant price risk. The management
will continue to monitor price risk exposure and consider hedging against it
should the need arises.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to
equity and debt security price risks at the end of the reporting period.
If the prices of the respective equity and debt instruments had been 5% (2009:
5%) higher/lower,
* post-tax profit for the year ended December 31, 2010 would increase/decrease
by Rmb30,141,000 (2009: Rmb19,421,000) as a result of the changes in fair value
of held for trading investments; and
* investment valuation reserve would increase/decrease by Rmb2,697,000 (2009:
Rmb2,051,000) as a result of the changes in fair value of available-for-sale
listed investments.
Credit risk
As at December 31, 2010, 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.
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 credit risk on liquid funds is limited because the counterparties are banks
with high credit ratings assigned by international credit-rating agencies.
5. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk (Continued)
Other than the concentration of credit risk on certain trade receivables,
entrusted loan receivables, corporate bonds and financial assets held under
resale agreement amounting to Rmb48,232,000 (2009: Rmb45,140,000),
Rmb560,000,000 (2009: Rmb120,000,000), Rmb600,735,000 (2009: Rmb511,344,000)
and Rmb80,163,000 (2009: nil) as disclosed in Notes 26, 27, 28 and 29,
respectively, the Group does not have any other significant concentration of
credit risk. The Group's concentration of credit risk by geographical location
is mainly in the PRC.
Liquidity risk
Most of the bank balances and cash at December 31, 2010 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 based on the agreed repayment terms. 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 as at the end of the reporting period.
5. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Liquidity tables
Weighted
average Less than 3 months 1 - 3
-
interest 3 months 1 year years
rate
% Rmb'000 Rmb'000 Rmb'000
2010
Non-derivative
financial
liabilities
Trade payables -- 166,438 382,257 --
Accounts
payable to
customers
arising
from
securities
dealing 0.36 11,641,498 -- --
business
Other payables -- 503,372 -- --
Bank and other
loans
- fixed rate 5.38 35,951 448,259 --
- variable 5.45 4,765 363,849 --
rate
Long-term 4.29 42,900 -- 85,800
bonds
12,394,924 1,194,365 85,800
Total Carrying
undiscounted amount at
3 - 5 +5 cash flows 31/12/2010
years years
Rmb'000 Rmb'000 Rmb'000 Rmb'000
2010
Non-derivative
financial
liabilities
Trade payables -- -- 548,695 548,695
Accounts
payable to
customers
arising
from
securities
dealing -- -- 11,641,498 11,631,030
business
Other payables -- -- 503,372 503,372
Bank and other
loans
- fixed rate -- -- 484,210 472,000
- variable -- -- 368,614 350,000
rate
Long-term 1,042,900 -- 1,171,600 1,000,000
bonds
1,042,900 -- 14,717,989 14,505,097
5. FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Liquidity risk (Continued)
Liquidity tables (Continued)
Weighted
average Less than 3 1 - 3
months
-
interest 3 months 1 year years
rate
% Rmb'000 Rmb'000 Rmb'000
2009
Non-derivative
financial
liabilities
Trade payables -- 410,900 236,473 --
Accounts
payable to
customers
arising from
securities 0.36 11,513,283 -- --
dealing
business
Other payables -- 450,370 -- --
Bank and other
loans
- fixed rate 5.31 30,133 176,770 --
- variable 2.58 195,734 87,475 146,962
rate
Long-term bonds 4.29 42,900 -- 85,800
12,643,320 500,718 232,762
Total Carrying
undiscounted amount at
3 - 5 +5 cash flows 31/12/2009
years years
Rmb'000 Rmb'000 Rmb'000 Rmb'000
2009
Non-derivative
financial
liabilities
Trade payables -- -- 647,373 647,373
Accounts payable
to
customers
arising from
securities -- -- 11,513,283 11,502,930
dealing business
Other payables -- -- 450,370 450,370
Bank and other
loans
- fixed rate -- -- 206,903 200,000
- variable -- -- 430,171 422,384
rate
Long-term bonds 1,085,800 -- 1,214,500 1,000,000
1,085,800 -- 14,462,600 14,223,057
The amounts included above for variable interest rate instruments for non-derivative
financial liabilities is 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.
(c) Fair value
The fair value of financial assets and financial liabilities are determined as follows:
* the fair value of financial assets with standard terms and conditions and traded
on active liquid markets are determined with reference to quoted market bid prices; and
* the fair value of other financial assets and financial liabilities are determined
in accordance with generally accepted pricing models based on discounted cash flow analysis.
5. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value (Continued)
The directors consider that the carrying amounts of financial assets and
financial liabilities recorded at amortised cost in the consolidated financial
statements approximate their fair values.
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are
measured subsequent to initial recognition at fair value, grouped into Levels 1
to 3 based on the degree to which the fair value is observable.
* Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active market for identical assets or liabilities.
* Level 2 fair value measurements are those derived from inputs other than
quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices).
* Level 3 fair value measurements are those derived from valuation techniques
that include inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
31/12/2010
Level 1 Level 2 Level 3 Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Financial assets at FVTPL
Non-derivative financial assets
held for trading 803,772 -- -- 803,772
Available-for-sale financial assets
Listed equity securities 71,928 -- -- 71,928
Total 875,700 -- -- 875,700
(c) Fair value (Continued)
31/12/2009
Level 1 Level 2 Level 3 Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Financial assets at FVTPL
Non-derivative financial assets
held for trading 517,895 -- -- 517,895
Available-for-sale financial assets
Listed equity securities 54,704 -- -- 54,704
Total 572,599 -- -- 572,599
There were no transfers between Level 1 and 2 in the current and prior years.
6. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able
to continue as a going concern while maximising the return to stakeholders
through the optimisation of the debt and equity balance. The Group's overall
strategy remains unchanged from prior year.
The capital structure of the Group consists of debt, which includes the
borrowings disclosed in Notes 35 and 37, equity attributable to 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, new share issues and share buy-backs as well as the issue
of new debt or the redemption of existing debt.
7. 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 operating and reportable 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) Securities operation - the securities broking and proprietary trading.
Segment revenue and results
The following is an analysis of the Group's revenue and results by operating
segment.
For the year ended December 31, 2010
Service
area
and
Toll advertising Securities Total
operation businesses operation Segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Revenue
External sales 3,475,319 1,715,064 1,578,681 6,769,064 -- 6,769,064
Inter-segment -- 5,798 -- 5,798 (5,798) --
sales
Total 3,475,319 1,720,862 1,578,681 6,774,862 (5,798) 6,769,064
Segment 1,594,389 102,920 615,180 2,312,489 2,312,489
profit
7. SEGMENT INFORMATION (Continued)
Segment revenue and results (Continued)
For the year ended December 31, 2009
Service
area
and
Toll advertising Securities Total
operation businesses operation Segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Revenue
External 3,107,505 1,259,888 1,668,901 6,036,294 -- 6,036,294
sales
Inter- -- 1,785 -- 1,785 (1,785) --
segment
sales
Total 3,107,505 1,261,673 1,668,901 6,038,079 (1,785) 6,036,294
Segment 1,557,013 69,902 617,158 2,244,073 2,244,073
profit
The accounting policies of the operating segments are the same as the Group's
accounting policies described in Note 3. 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.
7. SEGMENT INFORMATION (Continued)
Segment assets and liabilities
The following is an analysis of the Group's assets and liabilities by operating
segment at the end of the reporting period:
Segment assets Segment liabilities
2010 2009 2010 2009
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Toll operation 15,411,964 16,130,461 (3,098,340) (2,911,913)
Service area 890,656 752,089 (421,751) (353,202)
and
advertising
businesses
Securities 17,262,568 15,433,364 (12,436,849) (12,072,812)
operation
Total segment 33,565,188 32,315,914 (15,956,940) (15,337,927)
assets
(liabilities)
Goodwill 86,867 86,867 -- --
Consolidated 33,652,055 32,402,781 (15,956,940) (15,337,927)
assets
(liabilities)
Segment assets and segment liabilities represent the assets and liabilities of
the subsidiaries operating in the respective operating segment.
7. SEGMENT INFORMATION (Continued)
Other segment information
Amounts included in the measure of segment profit or loss or segment assets:
Service area
Toll and advertising Securities
operation businesses operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
For the year ended
December 31, 2010
Income tax expense 553,871 25,865 219,049 798,785
Interest income 32,218 24,196 -- 56,414
Interest expense 107,210 13,769 -- 120,979
Interests in associates 214,253 235,298 23,359 472,910
Share of result of (16,079) 24,415 (5,883) 2,453
associates
Fair value changes on
held for
trading investments 6,620 -- 94,860 101,480
Addition to non-current 208,067 11,930 142,944 362,941
assets (Note)
Depreciation and 739,955 29,137 71,779 840,871
amortisation
Loss (gain) on disposal
of property,
plant and equipment 7,480 (3,130) (597) 3,753
For the year ended
December 31, 2009
Income tax expense 543,669 21,323 275,063 840,055
Interest income 26,413 4,314 -- 30,727
Interest expense 56,613 6,111 -- 62,724
Interests in associates 206,881 223,384 4,742 435,007
Share of result of (27,164) 2,258 742 (24,164)
associates
Share of result of 21,254 -- -- 21,254
jointly controlled entity
Fair value changes on
held for
trading investments 673 -- 21,662 22,335
Addition to non-current 555,957 37,743 93,706 687,406
assets (Note)
Depreciation and 734,564 29,750 49,383 813,697
amortisation
Loss on disposal of
property,
plant and equipment 21,119 689 11,264 33,072
Note: Non-current assets excluded financial instruments.
7. SEGMENT INFORMATION (Continued)
Revenue from major services
An analysis of the Group's revenue, net of discounts and taxes, for the year is
as follows:
2010 2009
Rmb'000 Rmb'000
Toll operation revenue 3,475,319 3,107,505
Service area businesses 1,633,628 1,178,318
revenue
Advertising business 77,997 77,786
revenue
Commission income from 1,352,051 1,498,827
securities operation
Interest income from 226,630 170,074
securities operation
Others 3,439 3,784
6,769,064 6,036,294
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, 2009 and 2010, there are no individual
customers with sales of 10% or more of the Group's total sales.
8. SECURITIES INVESTMENT GAINS
2010 2009
Rmb'000 Rmb'000
Gain on fair value changes on held for trading
investments 101,480 22,335
Cumulative gain reclassified from equity on disposal of
available-for-sale investments 25,052 13,632
126,532 35,967
The above securities investment gains wholly contributed from listed
investments in both years.
9. OTHER INCOME
2010 2009
Rmb'000 Rmb'000
Interest income on bank balances and entrusted 56,278 27,613
loan receivables
Rental income 66,369 58,697
Net exchange gain 15,303 547
Handling fee income 23,689 28,644
Towing income 11,056 11,243
Gain on disposal of a jointly controlled entity -- 274,494
(Note)
Interest income from structured deposit 136 3,114
Others 26,960 21,928
199,791 426,280
Note: On September 10, 2009, the Group entered into an agreement with Hangzhou
Communications Group Co., Ltd ("Hangzhou Communications Group"), a state-owned
enterprise, pursuant to which the Group agreed to sell, and Hangzhou
Communications Group agreed to purchase, the entire 50% interest of the Group
in Hangzhou Shida Expressway Co., Ltd. ("Shida JV"), which was to undertake the
operation of Shiqiao-Dajing expressway, for a consideration of Rmb367,000,000.
The disposal was completed in November 2009 and the gain on disposal of the
jointly controlled entity of Rmb274,494,000 was recognised in the profit or
loss for the year ended December 31, 2009.
10. FINANCE COSTS
2010 2009
Rmb'000 Rmb'000
Interest expenses wholly repayable within 5 years:
Bank loans 14,462 6,111
Other loans 63,617 13,713
Long-term bonds 42,900 42,900
120,979 62,724
11. PROFIT BEFORE TAX
The Group's profit before tax has been arrived at after charging (crediting):
2010 2009
Rmb'000 Rmb'000
Depreciation of property, plant and equipment 134,794 122,774
Amortisation of prepaid lease payments 2,039 1,265
Amortisation of expressway operating rights 691,332 676,220
(included in operating costs)
Amortisation of other intangible assets (included in 12,706 13,438
operating costs)
Total depreciation and amortisation 840,871 813,697
Staff costs (including directors and supervisors):
- Wages and salaries 483,114 399,663
- Pension scheme contributions 44,857 33,244
527,971 432,907
Auditors' remuneration 7,415 5,408
Loss on disposal of property, plant and equipment 3,753 33,072
Cost of inventories recognised as an expense 1,480,688 1,041,496
Impairment loss on interest in an
associate (included in other expenses) -- 9,298
(Reversal of) provision for litigation (included in (13,426) 95,660
other expenses)
12. INCOME TAX EXPENSE
2010 2009
Rmb'000 Rmb'000
Current tax:
PRC Enterprise Income Tax 794,590 841,722
Deferred tax (Note 38) 4,195 (1,667)
798,785 840,055
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% from
January 1, 2008 onwards.
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 per the
consolidated statement of comprehensive income as follows:
2010 2009
Rmb'000 Rmb'000
Profit before tax 3,111,274 3,084,128
Tax at the PRC enterprise income tax rate of 25% 777,819 771,032
Tax effect of share of (profit) loss of associates (613) 6,041
Tax effect of share of profit of a jointly -- (5,314)
controlled
entity
Tax effect of income not taxable for tax purposes (12) (22)
Tax effect of expenses not deductible for tax
purposes 21,591 68,318
Tax charge for the year 798,785 840,055
13. OTHER COMPREHENSIVE (LOSS) INCOME
Year ended Year ended
December December 31,
31, 2010 2009
Tax Tax
Before- (expense)Net-of- Before- (expense)Net-of-
tax tax tax tax
amount benefit amount amount benefit amount
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Fair value gain on available-
for-sale financial assets
arising during the 14,342 (3,585) 10,757 34,234 (8,558) 25,676
year
Reclassification adjustments
for the cumulative gain
included in profit or loss
upon disposal of available-
for-sale financial (25,052) 6,263 (18,789) (13,632) 3,408 (10,224)
assets
Total (10,710) 2,678 (8,032) 20,602 (5,150) 15,452
14. DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS
The emoluments paid or payable to each of the 10 (2009: 11) directors
and 6 (2009: 5) supervisors are as follows:
Chen Zhan Zhang Jiang Geng Fang
Jisong Xiaozhang Jingzhong Wenyao Xiaoping Yunti
@ @ @ @ @ @
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
(Note i) (Notei)
2010
Salaries,
allowances and
benefits in 4 458 391 390 -- --
kind
Bonuses paid -- 220 193 193 -- --
and payable
Pension scheme -- 15 15 15 -- --
contributions
Total 4 693 599 598 -- --
emoluments
2009
Salaries,
allowances and
benefits in 3 404 376 361 90 76
kind
Bonuses paid -- 276 209 224 61 37
and payable
Pension scheme -- 13 15 15 -- 3
contributions
Total 3 693 600 600 151 116
emoluments
Ding Zhang Zhang Tung Zhang Zhang Ma
HuiKang Luyun^ Yang^ Chee Junsheng Liping* Kehua#
@ Chen* *
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
(Note (Note
ii) iii)
2010
Salaries,
allowances and
benefits in 162 3 2 214 53 214 3
kind
Bonuses paid 80 -- -- -- -- -- --
and payable
Pension scheme 6 -- -- -- -- -- --
contributions
Total 248 3 2 214 53 214 3
emoluments
2009
Salaries,
allowances and
benefits in -- 4 4 222 54 222 3
kind
Bonuses paid -- -- -- -- -- -- --
and payable
Pension scheme -- -- -- -- -- -- --
contributions
Total -- 4 4 222 54 222 3
emoluments
Fang Zheng Jiang Wu Liu
Zhexing Qihua# Shaozhong Yongmin Haisheng Total
# # # #
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
(Note (Note
iv) v)
2010
Salaries,
allowances and
benefits in 4 1 2 2 1 1,904
kind
Bonuses paid -- -- -- -- -- 686
and payable
Pension scheme -- -- -- -- -- 51
contributions
Total 4 1 2 2 1 2,641
emoluments
2009
Salaries,
allowances and
benefits in 4 3 3 2 -- 1,831
kind
Bonuses paid -- -- -- -- -- 807
and payable
Pension scheme -- -- -- -- -- 46
contributions
Total 4 3 3 2 -- 2,684
emoluments
@ Executive directors
^ Non-executive directors
* Independent non-executive directors
# Supervisors
14. DIRECTORS' AND SUPERVISORS' EMOLUMENTS (Continued)
Notes:
(i) Resigned on February 28, 2009.
(ii) Appointed on August 28, 2010.
(iii) Resigned on August 28, 2010.
(iv) Resigned on August 26, 2010.
(v) Appointed on August 26, 2010.
The emoluments of each of the directors and supervisors were below HK$1,000,000
(equivalent to Rmb850,900) in both years. Bonuses paid to directors and
supervisors are determined by the Remuneration Committee of the Company, which
comprises three independent non-executive directors.
No directors or supervisors waived any emoluments and no incentive was paid to
any directors or supervisors as an inducement to join the Company and no
compensation for loss of office was paid to any directors, supervisors, past
directors or past supervisors during both years. Bonuses are determined by
reference to the individual performance of the directors.
15. EMPLOYEES' EMOLUMENTS
The emoluments of the five highest paid individuals in the Group are as
follows:
2010 2009
Rmb'000 Rmb'000
Salaries, allowances and benefits in kind 7,640 10,426
Bonuses paid and payable (Note) 14,797 658
Pension scheme contributions 107 57
Incentive paid -- 2,500
Compensation for loss of office -- --
22,544 13,641
Note: The bonuses paid and payable is determined by reference to the
performance of the relevant business of the Group for the two years ended
December 31, 2010 and 2009.
15. EMPLOYEES' EMOLUMENTS (Continued)
The five individuals with the highest emoluments in the Group during the year
included no (2009: no) director, whose emoluments are set out in Note 14 above,
and five (2009: five) non-director employees.
Their emoluments are within the following bands:
No. of individuals
2010 2009
HK$2,000,001 to HK$2,500,000
(equivalent to Rmb1,702,001 to -- 2
Rmb2,127,000)
HK$2,500,001 to HK$3,000,000
(equivalent to Rmb2,127,001 to -- 2
Rmb2,553,000)
HK$3,500,001 to HK$4,000,000
(equivalent to Rmb2,978,001 to 1 --
Rmb3,404,000)
HK$4,000,001 to HK$4,500,000
(equivalent to Rmb3,404,001 to 1 --
Rmb3,829,000)
HK$4,500,001 to HK$5,000,000
(equivalent to Rmb3,829,001 to 1 1
Rmb4,255,000)
HK$5,000,001 to HK$5,500,000
(equivalent to Rmb4,255,001 to 1 --
Rmb4,680,000)
HK$8,000,001 to HK$8,500,000
(equivalent to Rmb6,807,001 to 1 --
Rmb7,233,000)
16. DIVIDENDS
2010 2009
Rmb'000 Rmb'000
Dividends recognised as distribution during
the year:
2010 Interim - Rmb6 cents
(2009: 2009 interim Rmb6 cents) per share 260,587 260,587
2009 Final - Rmb25 cents
(2009: 2008 Final Rmb24 cents) per share 1,085,779 1,042,347
1,346,366 1,302,934
The final dividend of Rmb25 cents per share in respect of the year ended
December 31, 2010 (2009: final dividend of Rmb25 cents per share in respect of
the year ended December 31, 2009) has been proposed by the directors and is
subject to approval by the shareholders in the annual general meeting.
17. 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 Rmb1,871,499,000 (2009:
Rmb1,795,488,000) and the 4,343,114,500 (2009: 4,343,114,500) ordinary shares
in issue during the year.
No diluted earnings per share has been presented as there were no potential
ordinary shares outstanding for the years ended December 31, 2009 and 2010.
18. PROPERTY, PLANT AND EQUIPMENT
Leasehold Communication
land and Ancillary and
signalling
buildings facilities equipment
Rmb'000 Rmb'000 Rmb'000
COST
At January 1, 412,966 485,858 266,236
2009
Additions 36,559 22,112 39,936
Transfer -- 14,955 --
Disposals (12,491) (21,131) --
At December
31, 2009
and January 437,034 501,794 306,172
1, 2010
Additions 51,551 1,052 28,669
Transfer -- 473 --
Disposals -- (36,242) (7,047)
At December 488,585 467,077 327,794
31, 2010
DEPRECIATION
At January 1, 42,561 118,512 187,372
2009
Provided for 17,500 24,163 36,635
the year
Disposals (12,486) (15,727) --
At December
31, 2009
and January 47,575 126,948 224,007
1, 2010
Provided for 29,962 22,156 20,718
the year
Disposals -- (11,364) (5,442)
At December 77,537 137,740 239,283
31, 2010
CARRYING
VALUES
At December 411,048 329,337 88,511
31, 2010
At December 389,459 374,846 82,165
31, 2009
Machinery
Motor and Construction
vehicles equipment in progress Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
COST
At January 1, 173,247 306,273 8,502 1,653,082
2009
Additions 11,007 45,580 8,866 164,060
Transfer -- -- (14,955) --
Disposals (6,979) (35,233) -- (75,834)
At December
31, 2009
and January 177,275 316,620 2,413 1,741,308
1, 2010
Additions 21,653 64,672 82,991 250,588
Transfer -- 330 (803) --
Disposals (3,585) (12,231) -- (59,105)
At December 195,343 369,391 84,601 1,932,791
31, 2010
DEPRECIATION
At January 1, 110,924 162,465 -- 621,834
2009
Provided for 14,396 30,080 -- 122,774
the year
Disposals (6,691) (4,024) -- (38,928)
At December
31, 2009
and January 118,629 188,521 -- 705,680
1, 2010
Provided for 15,972 45,986 -- 134,794
the year
Disposals (3,422) (8,081 -- (28,309)
At December 131,179 226,426 -- 812,165
31, 2010
CARRYING
VALUES
At December 64,164 142,965 84,601 1,120,626
31, 2010
At December 58,646 128,099 2,413 1,035,628
31, 2009
The property, plant and equipment are mainly located in the PRC.
18. PROPERTY, PLANT AND EQUIPMENT (Continued)
The carrying value of properties shown above comprises:
2010 2009
Rmb'000 Rmb'000
Leasehold land and buildings in the PRC:
Long lease 25,314 25,976
Medium-term lease 385,734 363,483
411,048 389,459
19. PREPAID LEASE PAYMENTS
2010 2009
Rmb'000 Rmb'000
Analysed for reporting purposes as:
Current assets 2,052 1,421
Non-current assets 71,035 30,342
73,087 31,763
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" situated in the PRC.
20. EXPRESSWAY OPERATING RIGHTS
Rmb'000
COST
At January 1, 2009 16,257,748
Addition 507,581
At December 31, 2009 and January 1, 2010 16,765,329
Addition 7,633
Written off (260)
At December 31, 2010 16,772,702
AMORTISATION
At January 1, 2009 3,333,771
Charge for the year 676,220
At December 31, 2009 and January 1, 2010 4,009,991
Charge for the year 691,332
Written off (118)
At December 31, 2010 4,701,205
CARRYING VALUES
At December 31, 2010 12,071,497
At December 31, 2009 12,755,338
The above expressway operating rights were granted by the Zhejiang Provincial
Government to the Group for 30 years. During the expressway concessionary
period, the Group has the rights of operation and management of
Shanghai-Hangzhou-Ningbo Expressway and Shangsan Expressway and the
toll-collection rights thereof. The Group is required to manage and operate the
expressways in accordance with the regulations promulgated by the Ministry of
Communication and relevant government authorities. Upon the end of the
respective concession service periods, the toll expressways and their toll
station facilities will be returned to the grantors at zero consideration.
21. GOODWILL
Rmb'000
COST AND CARRYING VALUES
At January 1, 2009, December 31, 2009, January 1, 2010 and 86,867
December 31, 2010
Particulars regarding impairment testing on goodwill are disclosed in Note 23.
22. OTHER INTANGIBLE ASSETS
Securities/
Customer futures Trading Software
bases firm licenses seats licenses Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
COST
At January 1, 2009 101,147 63,083 3,480 10,069 177,779
Additions -- -- -- 10,192 10,192
At December 31, 2009
and January 1, 2010 101,147 63,083 3,480 20,261 187,971
Additions -- -- -- 12,907 12,907
At December 31, 2010 101,147 63,083 3,480 33,168 200,878
AMORTISATION
At January 1, 2009 18,446 -- -- 1,268 19,714
Charge for the year 8,650 -- -- 4,788 13,438
At December 31, 2009
and January 1, 2010 27,096 -- -- 6,056 33,152
Charge for the year 8,253 -- -- 4,453 12,706
At December 31, 2010 35,349 -- -- 10,509 45,858
CARRYING VALUES
At December 31, 2010 65,798 63,083 3,480 22,659 155,020
At December 31, 2009 74,051 63,083 3,480 14,205 154,819
The customer bases of Zheshang Securities Co., Ltd ("Zheshang Securities") and
Zheshang Futures Broker Co., Ltd (formerly known as Zhejiang Tianma 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 an indefinite useful life because they
can be renewed at minimal cost even though the current licenses are effective
for three years.
The trading seats of the securities operation is considered by the management
of the Group to have an indefinite useful life because there is no economic or
regulatory limit to their useful life.
Software licenses are amortised on a straight-line basis over three to five
years.
Particulars of the impairment testing on intangible assets with indefinite
useful lives are disclosed in Note 23.
23. 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 21 and 22 have been allocated to
four individual cash generating units ("CGUs"), including two subsidiaries in
toll operation segment and two subsidiaries in securities operation segment.
The carrying amounts of goodwill and other intangible assets (net of
accumulated impairment losses) as at December 31, 2010 and 2009 allocated to
these units are as follows:
Securities /futures Trading
Goodwill firm licenses seats
2010 2009 2010 2009 2010 2009
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Toll operation
- Zhejiang
Jiaxing
Expressway 75,137 75,137 -- -- -- --
Co., Ltd.
("Jiaxing
Co")
- Zhejiang
Shangsan
Expressway
Co., Ltd.
("Shangsan 10,335 10,335 -- -- -- --
Co")
Securities
operation
- Zheshang -- -- 51,783 51,783 2,080 2,080
Securities
- Zheshang 1,395 1,395 11,300 11,300 1,400 1,400
Futures
86,867 86,867 63,083 63,083 3,480 3,480
23. IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE USEFUL
LIVES(Continued)
During the year ended December 31, 2010, the 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 of 15% (2009: 15%). No growth
rate has been assumed beyond the five-year period up to the remaining toll road
operating rights which are 18 years (2009: 19 years) and 20 years (2009: 21
years) for Jiaxing Co. and Shangsan Co., respectively.
Zheshang Securities
The recoverable amount of Zheshang Securities is determined based on value in
use calculations. The key assumptions for the value in use calculations relate
to the discount rate, growth rates and profit margin during the forecast
period. Those calculations use cash flow projections based on financial budgets
approved by management covering a five-year period and a discount rate of
18.01% (2009: 17.5%). Growth rate beyond the five-year period is assumed to be
nil.
Zheshang Futures
The recoverable amount of Zheshang Futures is determined based on value in use
calculations. The key assumptions for the value in use calculations relate to
the discount rate, growth rates and profit margin during the forecast period.
Those calculations use cash flow projections based on financial budgets
approved by management covering a five-year period and a discount rate of
18.01% (2009: 17.5%). Growth rate beyond the five-year period is assumed to be
nil.
24. INTERESTS IN ASSOCIATES
2010 2009
Rmb'000 Rmb'000
Unlisted investments in associates, at cost 474,691 426,241
Share of post-acquisition (loss) profits, net of (1,781) 8,766
dividends received
472,910 435,007
At December 31, 2010 and 2009, the Group had interests in the following
associates:
Form of Place of Percentage
of equity
business registration interest
attributable
to
Name of entity structure and operation the Group Principal
activities
2010 2009
% %
Zhejiang Corporate The PRC 50 50 Operation
Expressway of petrol
Petroleum stations
Development Co., and sale
Ltd. of
petroleum
("Petroleum Co") products
JoinHands Corporate The PRC 27.58 27.58 Provision
Technology of
Co., Ltd. printing
services
and
property
leasing
Zhejiang Concord Corporate The PRC 45 22.95 Investment
Property and
Investment
Co., Ltd. real
estate
development
Hangzhou Tianjun Corporate The PRC 29.45 29.45 Investment
Industrial Co., and
Ltd
portfolio
management
Hangzhou Yuhang Corporate The PRC 16.57 16.57 Investment
Communication Time and
Plaza Co., Ltd. real
("Time Plaza Co") estate
(Note i) development
Ningbo Expressway Corporate The PRC 24.5 12.5 Management
Advertising Co., of
Ltd.
("Ningbo advertising
Advertising Co")
(Note ii) billboards
along
expressways
Zhejiang Jinhua Corporate The PRC 23.45 23.45 Management
Yongjin Expressway of the
Jinhua
Co., Ltd. section of
("Yongjin") the
Ningbo-
Jinhua
Expressway
Zheshang Fund Corporate The PRC 12.97 -- Asset fund
Management management
Co., Ltd.
("Zheshang Fund")
(Note iii)
24. INTERESTS IN ASSOCIATES(Continued)
Notes:
(i) The Group is able to exercise significant influence over Time Plaza Co
because it has the power to appoint one out of five directors of that company
under the provisions stated in the Articles of Association of that company.
(ii) The Group is able to exercise significant influence over Ningbo
Advertising Co because it has the power to appoint two out of five directors of
that company under the provisions stated in the Articles of Association of that
company.
(iii) 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, 2009, an impairment loss of Rmb9,298,000 in
relation to interest in an associate, Yongjin, was recognised.
The recoverable amounts of Yongjin 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 twenty-year period
and a discount rate of 8% (2009: 8%).
The summarised financial information in respect of the Group's associates at
the end of the reporting period is set out below:
2010 2009
Rmb'000 Rmb'000
Total assets 6,304,394 4,754,409
Total liabilities (4,590,133) (3,265,061)
Net assets 1,714,261 1,489,348
Group's share of net assets of associates, after
impairment
loss of Rmb9,298,000 (2009: Rmb9,298,000) 472,910 435,007
Revenue 4,600,647 2,907,878
Loss for the year (7,822) (104,542)
Other comprehensive income -- --
Group's share of results of associates for the 2,453 (24,164)
year
25. AVAILABLE-FOR-SALE INVESTMENTS
Available-for-sale investments comprise:
2010 2009
Rmb'000 Rmb'000
Non-current assets:
Unlisted equity securities investments, at cost
(Note i) 1,000 1,000
Current assets:
Listed equity securities investments in the PRC, at 71,928 54,704
fair value (Note ii)
72,928 55,704
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, 2010, the gain on change in fair value of the investments of
Rmb14,342,000 (2009: Rmb34,234,000) has been recognised as other comprehensive
income.
During the year ended December 31, 2010, the Group disposed certain listed
equity investments and recognised a gain on disposal of Rmb25,052,000 (2009:
Rmb13,632,000).
26. TRADE RECEIVABLES
The Group has no credit period granted to its trade customers of toll
operation, service area businesses and securities operation. The following is
an aged analysis of trade receivables presented based on the invoice date at
the end of the reporting period.
2010 2009
Rmb'000 Rmb'000
Within 3 months 49,666 49,739
3 months to 1 year -- --
1 to 2 years 271 218
Over 2 years 831 613
50,768 50,570
Included in the Group's trade receivable balance aged within 3 months were
tolls receivable from the Expressway Fee Settlement Centre of the Highway
Administration Bureau of Zhejiang Province and Hangzhou Urban and Rural
Construction Committee amounting to Rmb48,232,000 (2009: Rmb45,140,000) which
has been settled subsequent to the end of the reporting period. The directors
consider the credit risk of the balance to be minimal. The Group has not
provided for impairment loss on the balances past due as set out above and does
not hold any collateral over these balances.
27. OTHER RECEIVABLES
2010 2009
Rmb'000 Rmb'000
Consideration receivable* (Note a) 115,000 115,000
Entrusted loans receivables from a 500,000 120,000
related party (Note 43(a))
Entrusted loan receivable from a third 60,000 --
party (Note b)
Dividend receivable from a former 53,000 53,000
jointly controlled entity*
Prepayments 53,223 54,783
Others* 171,930 108,384
953,153 451,167
* The amounts were unsecured, interest-free and repayable on demand.
27. OTHER RECEIVABLES(Continued)
Notes:
(a) The balance represented the receivable of the unsettled consideration of
disposal of Shida JV during the year ended December 31, 2009 (Note 9).
(b) Pursuant to the board resolutions of the Company on August 28, 2010,
Shangsan Co, a subsidiary of the Company, and the entrusted loan contracts,
Shangsan Co provided short-term entrusted loans during 2010 totalling
Rmb60,000,000 with maturity date of December 22, 2011 to Taizhou State-Owned
Asset Operations Co., Ltd. ("Taizhou Co"), a non-controlling shareholder of a
subsidiary of Shangsan Co at a fixed interest rate of 5.56% per annum, via
Industrial and Commercial Bank of China. Taizhou Co has pledged 30,000,000
shares in Zheshang Securities representing 1.42% equity interest in Zheshang
Securities as collateral.
28. HELD FOR TRADING INVESTMENTS
2010 2009
Rmb'000 Rmb'000
Held for trading investments include:
Listed securities in the PRC, at fair value:
Equity securities 197,592 293
Open-end equity funds 5,445 6,258
Corporate bonds with fixed interest ranging
from 3.5% to 8.5% per annum and
maturity date from November 24, 2012 to December 17,
2020 600,735 511,344
803,772 517,895
29. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENT
The amounts represent debt securities acquired by the Group which will be
resold at a predetermined price on January 6, 2011 under resale agreements with
a financial institution in the PRC during the year. The amounts carry interest
at fixed rates ranging from 2.89% to 2.98% and have been subsequently settled
in January 2011.
The Group conducts resale agreement under usual and customary terms of
placements and holds collateral for these transactions.
The directors consider that the fair value of the collateral which are
corporate bonds approximate the carrying amount of the financial assets held
under resale agreement.
As at December 31, 2010, the Group did not hold for resale agreement any
collateral which it was permitted to sell or repledge in the absence of default
for the transactions.
30. BANK BALANCES HELD ON BEHALF OF CUSTOMERS
From the Group's securities operation, the Group receives and holds money
deposited by customers and other institutions. These customers' money is
maintained in one or more segregated bank accounts. The Group has recognised
the corresponding accounts payable to respective customers and other
institutions.
Bank balances held on behalf of customers carry interest at market rates which
range from 1.26% to 1.89% (2009: 1.26% to 1.80%) 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, 2010 14,916 58,508
As at December 31, 2009 14,288 56,227
31. BANK BALANCES AND CASH
2010 2009
Rmb'000 Rmb'000
Restricted bank balance (Note) -- 942
Time deposits with original maturity 325,545 228,452
over three months
Unrestricted bank balances and cash 2,650,053 4,819,503
Time deposits with original maturity of 3,032,000 229,500
less than three months
Cash and cash equivalents 5,682,053 5,049,003
6,007,598 5,278,397
Note: The restricted bank balance was frozen by China Securities Depository and
Clearing Corporation Limited Shanghai Branch in connection with the guarantees
issued by Zheshang Securities, in which the full amount of Rmb942,000 was
released in January 2010.
Bank balances carry interest at the market rate of 0.36% (2009: 0.36%) per
annum. Time deposits carry interest at fixed rates ranging from 1.35% to 2.50%
(2009: 1.35% to 2.25%) 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, 2010 5,264 26,875
As at December 31, 2009 4,666 25,423
32. ACCOUNTS PAYABLE TO CUSTOMERS ARISING FROM SECURITIES DEALING BUSINESS
The settlement terms of accounts payables arising from the securities dealing
business are one day after the trade date. No 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.
Accounts payable to customers arising from securities dealing business that are
denominated in currencies other than the functional currency of the respective
group entities are set out below:
HKD USD
Rmb'000 Rmb'000
As at December 31, 2010 14,947 58,718
As at December 31, 2009 14,288 56,227
33. 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 payment due date at the end of the reporting
period.
2010 2009
Rmb'000 Rmb'000
Within 3 months 166,438 410,900
3 months to 1 year 232,122 77,793
1 to 2 years 60,701 136,065
2 to 3 years 83,256 22,011
Over 3 years 6,178 604
548,695 647,373
34. OTHER PAYABLES AND ACCRUALS
2010 2009
Rmb'000 Rmb'000
Other liabilities:
Accrued payroll and welfare 386,033 341,870
Advance from customers 67,102 62,589
Toll collected on behalf of other toll roads 33,630 36,149
Prepayment from non-controlling shareholder of 338,354 --
Zheshang Securities (Note)
Others 182,365 154,475
1,007,484 595,083
Accruals 41,817 42,582
1,049,301 637,665
Note: Amount represents prepayment for additional capital injection to Zheshang
Securities from a non-controlling shareholder of Zheshang Securities. Such
amount will be credited to non-controlling interest upon the approval of the
relevant government authorities.
35. INTEREST-BEARING BANK AND OTHER LOANS
2010 2009
Rmb'000 Rmb'000
Bank loans, unsecured 822,000 200,000
Other loans, unsecured -- 422,384
822,000 622,384
Carrying amount of bank loans repayable:
Within one year 822,000 200,000
Carrying amount of other loans repayable:
Within one year -- 278,055
More than one year, but not exceeding two -- 87,016
years
More than two year, but not exceeding five -- 57,313
years
-- 422,384
822,000 622,384
Less: Amount due within one year shown under (822,000) (478,055)
current liabilities
-- 144,329
At December 31, 2010, the bank loans included a loan of Rmb472,000,000 (2009:
Rmb200,000,000) carrying fixed rates ranging from 5.10% to 5.81% (2009: 5.31%).
At December 31, 2010, the bank loans also included a loan of Rmb350,000,000
(2009: nil) carrying floating rates based on the China Central Bank benchmark
interest rate ranging from 5.00% to 5.52%.
The other loans mainly represent loans from the World Bank via municipal
governments and carry a floating interest rate ranges from 7.54% to 7.80%
(2009: 1.82% to 4.55%) per annum (both the effective interest rate and
contracted interest rate). There is no (2009: Rmb422,384,000 (USD61,859,000))
bank and other loans for the Group that are denominated in currencies other
than Rmb as at December 31, 2010.
36. PROVISIONS
Litigation Litigation
on
on public Other
deposits
interest and funds litigation Total
claim
Rmb'000 Rmb'000 Rmb'000 Rmb'000
(note i) (note ii) (note iii)
At January 1, 2009 21,683 -- 12,181 33,864
Provision for the year -- 94,860 800 95,660
Utilisation of provision -- (7,047) -- (7,047)
At December 31, 2009 and 21,683 87,813 12,981 122,477
January 1, 2010
Overprovision in prior (445) -- (12,981) (13,426)
years
Utilisation of provision -- (87,813) -- (87,813)
At December 31, 2010 21,238 -- -- 21,238
Notes:
(i) The Group has received a claim from the customers under the state bond
investment agency agreements and fund trust agreements for the additional
interest compensation upon the settlement of the principal and interest at a
rate of 2.7%. Based on the legal opinion, management considered that it is
probable that the claim is ruled against the Group and accordingly, a provision
for the interest compensation amounting to Rmb21,683,000 has been recognised in
the profit and loss as at December 31, 2008. Based on the litigation process,
overprovision in prior years of Rmb445,000 is recognised during the year ended
December 31, 2010. The litigation is currently in process.
(ii) Prior to the restructuring of Zheshang Securities by the Company, the
original person-in-charge of one of the Sales Departments under Zheshang
Securities illegally misappropriated customers' deposits and funds, which
caused a loss of approximately Rmb90,000,000 to the relevant customers. During
the year ended December 31, 2009, clients who incurred losses due to the case
have filed civil lawsuit against Zheshang Securities. Zheshang Securities made
during the year ended December 31, 2009 a provision amounting to Rmb94,860,000
for the principal and related interest involved in the lawsuit, of which
Rmb7,047,000 has been settled. During the year ended December 31, 2010,
Zheshang Securities has fully settled the principal and interest to all
customers. The obligation of Zheshang Securities was fully discharged as at
December 31, 2010.
(iii) Sinobase International Ltd. initiated a lawsuit against Zheshang
Securities in November 2008 in respect of a dispute for asset management
entrustment contract entered into with Zheshang Securities in September 2005
with a principal and default compensation in aggregate of Rmb12,181,000. Full
provision of such claim was recognised in profit and loss during the year ended
December 31, 2008. Taking into account of the current progress of the legal
proceedings, an additional provision of Rmb800,000 had been made for such claim
in 2009. Sinobase International Ltd. has withdrawn the legal proceeding against
Zheshang Securities during the year ended December 31, 2010. The obligation of
Zheshang Securities was fully discharged and the provision of Rmb12,981,000 is
reversed accordingly as at December 31, 2010.
37. LONG-TERM BONDS
2010 2009
Rmb'000 Rmb'000
Long-term bonds - listed in the PRC 1,000,000 1,000,000
The long-term bonds are unsecured, carry interest payable annually at a fixed
rate of 4.29% per annum and are repayable in 2013 upon maturity. The quoted
price of the listed long-term bonds as at December 31, 2010 is
RMB1,000,000,000.
38. DEFERRED TAXATION
The following are the major deferred tax liabilities and assets recognised and
movements thereon during the current and prior years:
Changes in
fair value Accelerated
of tax
Impairment held for depreciation
trading
of and of property
available- available-
for-sale for-sale plant and
investments Provisions investments equipment
Rmb'000 Rmb'000 Rmb'000 Rmb'000
At January 1, (6,198) (8,466) 2,473 252,788
2009
Charge (credit) 6,198 (200) 19,292 (14,223)
to profit or loss
Credit to other -- -- (8,558) --
comprehensive
income
At December 31,
2009 and
January 1, 2010 -- (8,666) 13,207 238,565
Charge (credit) -- 3,356 26,277 (10,004)
to profit or loss
Credit to other -- -- (3,585) --
comprehensive
income
At December 31, -- (5,310) 35,899 228,561
2010
Fair value
adjustment
of
intangible
assets Others Total
Rmb'000 Rmb'000 Rmb'000
At January 1, 2009 38,916 (7,251) 272,262
Charge (credit) to (2,339) (10,395) (1,667)
profit or loss
Credit to other -- -- (8,558)
comprehensive
income
At December 31,
2009 and
January 1, 2010 36,577 (17,646) 262,037
Charge (credit) to (2,339) (13,095) 4,195
profit or loss
Credit to other -- -- (3,585)
comprehensive
income
At December 31, 34,238 (30,741) 262,647
2010
39. SHARE CAPITAL
Number of Share
shares capital
2010 2009 2010 2009
Rmb'000 Rmb'000
Registered, issued
and fully paid:
Domestic shares 2,909,260,000 2,909,260,000 2,909,260 2,909,260
of Rmb1.00 each
H Shares of 1,433,854,500 1,433,854,500 1,433,855 1,433,855
Rmb1.00 each
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.
39. SHARE CAPITAL(Continued)
On February 14, 2002, the United States Securities and Exchange Commission,
following the approval by the Board of Directors and the China Securities
Regulatory Commission, declared the registration statement in respect of the
ADSs evidenced by ADRs representing the deposited H Shares of the Company
effective.
All the domestic shares and H Shares rank pari passu with each other as to
dividends and voting rights.
40. RETIREMENT BENEFITS SCHEMES
The employees of the Group are members of the state-managed retirement benefits
scheme operated by the PRC government. To supplement this existing retirement
benefits scheme, the Group adopted a corporate annuity scheme during the year
in accordance with relevant rules and regulations. The Group is required to
contribute a certain percentage of payroll costs to these retirement benefits
schemes to fund the benefits. The only obligation of the Group with respect to
these retirement benefits schemes is to make the specified contributions.
No forfeited contributions are available to reduce the contribution payable in
future years.
41. COMMITMENTS
2010 2009
Rmb'000 Rmb'000
Contracted but not provided for in the consolidated
financial statements:
- Investments in expressways upgrade services -- --
Authorised but not contracted for:
- Investments in expressways upgrade services 46,620 50,000
- Purchase of machinery 342,757 128,000
- Renovation of service areas 16,100 30,000
- Purchase of office buildings and its renovation 360,180 216,000
work
765,657 424,000
42. OPERATING LEASES
The Group as lessee
2010 2009
Rmb'000 Rmb'000
Minimum lease payments 11,765 11,565
Contingent rental expenses 4,501 5,046
16,266 16,611
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:
2010 2009
Rmb'000 Rmb'000
Within one year 13,637 11,765
In the second to fifth years inclusive 58,651 52,061
Over five years 29,117 49,400
101,405 113,226
Operating lease payments represent rentals payable by the Group for certain
service areas along expressways located in Zhejiang and Tianjin. They are
negotiated for an average term of ten years and rentals contain both a fixed
element and a contingent element linked to sales.
42. OPERATING LEASES(Continued)
The Group as lessor
The Group leased their service areas and communication ducts under operating
lease arrangements. Leases are negotiated for terms ranging from 1 to 25 years
and rentals are fixed annually.
At the end of the reporting period, the Group had contracted with tenants for
the following future minimum lease payments:
2010 2009
Rmb'000 Rmb'000
Within one year 28,010 34,421
In the second to fifth years inclusive 40,113 35,139
After five years 19,183 23,481
87,306 93,041
43. RELATED PARTY TRANSACTIONS AND BALANCES
The following is a summary of the related party transactions arising from the
Group's daily operating activities:
(a) Pursuant to the resolutions of the shareholders' meeting on September 15,
2009 of Development Co, a subsidiary of the Company, and the entrusted loan
contracts, Development Co provided short-term entrusted loans during 2009
totalling Rmb120,000,000 with maturity date of September 24, 2010 to Hangzhou
Concord Property Investment Co., Ltd.("Hangzhou Concord Co"), a subsidiary of
an associate of Development Co at a fixed interest rate of 12% per annum, via
Industrial and Commercial Bank of China. The entrusted loan was fully repaid
during 2010.
Pursuant to the resolutions of the shareholders' meeting on June 21, 2010 of
Development Co, and the entrusted loan contracts, Development Co provided
short-term entrusted loans during 2010 totalling Rmb270,000,000 with maturity
date from July 11, 2011 to September 20, 2011 to Hangzhou Concord Co at a fixed
interest rate of 12% per annum, via Industrial and Commercial Bank of China.
Such entrusted loan is guaranteed by World Trade Center Zhejiang Real Estate
Development Co., Ltd. ("World Trade Ltd"), a related party of Hangzhou Concord
Co, in full.
43. RELATED PARTY TRANSACTIONS AND BALANCES(Continued)
Pursuant to the resolutions of the shareholders' meeting on July 8, 2010 of
Zhejiang Expressway Advertising Co., Ltd. ("Advertising Co"), a subsidiary of
Development Co, and the entrusted loan contracts, Advertising Co provided
short-term entrusted loans during 2010 totalling Rmb30,000,000 with maturity
date of July 11, 2011 to Hangzhou Concord Co at a fixed interest rate of 12%
per annum, via Industrial and Commercial Bank of China. Such entrusted loan is
guaranteed by World Trade Ltd, a related party of Hangzhou Concord Co, in full.
Pursuant to the board resolutions of the Company on August 28, 2010, and the
entrusted loan contracts, the Company provided short-term entrusted loans
during 2010 totalling Rmb200,000,000 with maturity date of September 30, 2011
to Hangzhou Concord Co at a fixed interest rate of 12% per annum, via
Industrial and Commercial Bank of China. Such entrusted loan is guaranteed by
World Trade Ltd, a related party of Hangzhou Concord Co, in full.
Interest income recognised in 2010 on the above transactions with Hangzhou
Concord Co were Rmb26,432,000 (2009: Rmb3,700,000).
(b) Pursuant to the operation management agreement entered into between
Development Co and Petroleum Co in respect of the petrol stations in the
service areas along the Shanghai-Hangzhou-Ningbo and Shangsan Expressways,
Petroleum Co will with their expertise assist Development Co in running their
petrol stations along the Shanghai-Hangzhou-Ningbo and Shangsan Expressways.
Purchases of petroleum products from Petroleum Co during year ended December
31, 2010 amounted to Rmb1,358,463,000 (2009: Rmb922,280,000).
(c) Pursuant to the capital injection agreement entered into between Yongjin
and the Company on May 20, 2010, the Company agreed to further inject
Rmb23,450,000 working capital in proportion to its equity interest in Yongjin.
(d) Pursuant to the acquisition agreements entered into between the vendors of
Development Co and the Company, the Company acquired 49% equity interest in
Development Co (of which 3.9% are held by Mr. Jiang Wenyao and Mr. Zhang
Jingzhong, who are the directors of the Company, and Mr. Fang Zhexing, who is
the supervisor of the Company). Upon completion of the acquisition, Development
Co. became a wholly-owned subsidiary of the Company.
43. RELATED PARTY TRANSACTIONS AND BALANCES(Continued)
Transactions and balances with other state-controlled entities in the PRC
The Group operates in an economic environment currently predominated by
entities directly or indirectly owned or controlled by the PRC government
("state-controlled entities"). In addition, the Group itself is part of a
larger group of companies under the Communications Group which is controlled by
the PRC government. Apart from the transactions with the Communications Group
and parties under the common control of the Communications Group disclosed in
Note 9, the Group also conducts business with other state-controlled entities.
The directors consider those state-controlled entities are independent third
parties so far as the Group's business transactions with them are concerned.
The Group has entered into various transactions, including deposit placements,
borrowings and other general banking facilities, with certain banks and
financial institutions which are state-controlled entities in its ordinary
course of business. In view of the nature of those banking transactions, the
directors are of the opinion that separate disclosure would not be meaningful.
In addition, on September 10, 2009, the Group entered into an agreement with
Hangzhou Communications Group, a state-owned enterprise, pursuant to which the
Group agreed to sell, and Hangzhou Communications Group agreed to purchase, the
entire 50% interest of the Group in Shida JV for a consideration of
Rmb367,000,000. The disposal was completed in November 2009 and the gain on
disposal of the jointly controlled entity of Rmb274,494,000 was recognised in
the profit or loss for the year ended December 31, 2009.
In respect of the Group's toll road business, the directors are of the opinion
that it is impracticable to ascertain the identity of counterparties and
accordingly whether the transactions are with other state-controlled entities
in the PRC.
Compensation of directors, supervisors, and key management personnel
Other than the directors, supervisors and key management personnel disclosed in
Notes 14 and 15, the remuneration of other key management personnel during the
year was approximately Rmb1,506,000 including retirement benefit scheme
contribution of Rmb47,000 (2009: Rmb1,374,000 including retirement benefit
scheme contribution of Rmb47,000) which is determined by the performance of the
individuals and the market trends.
44. PARTICULARS OF SUBSIDIARIES OF THE COMPANY
Date and Registered
place and
Name of of paid-in
subsidiary registration capital
Rmb
Zhejiang Note 1 75,223,000
Yuhang
Expressway
Co., Ltd
("Yuhang
Co")
Jiaxing Co Note 2 1,859,200,000
Shangsan Co Note 3 2,400,000,000
Development Co Note 4 120,000,000
Advertising Co Note 5 3,500,000
Service Co Note 6 8,000,000
Hangzhou Note 7 3,000,000
Roadtone
Advertising
Co., Ltd.
("Roadtone
Co")
Zheshang Note 8 2,120,000,000
Securities
Zheshang Note 9 150,000,000
Futures
Percentage of
equity interest
Name of attributable to the Principal
subsidiary Company activities
Direct Indirect
2010 2009 2010 2009
% % % %
Zhejiang 51 51 -- -- Management of the
Yuhang Yuhang
Expressway Section of the
Co., Ltd Shanghai
("Yuhang -Hangzhou
Co") Expressway
Jiaxing Co 99.999454 99.999454 -- -- Management of the
Jiaxing
Section of the
Shanghai
-Hangzhou
Expressway
Shangsan Co 73.625 73.625 -- -- Management of the
Shangsan
Expressway
Development 100 51 -- -- Operation of
Co service areas as
well as
roadside
advertising
along he the
expressways
operated by the
Group
Advertising -- -- *70 *35.7 Provision of
Co advertising
services
Service Co -- -- *100 *43.35 Provision of
vehicle towing,
repair and
emergency rescue
services
Hangzhou -- -- *51 *26.01 Provision of
Roadtone advertising
services
Advertising
Co., Ltd.
("Roadtone
Co")
Zheshang -- -- **51.88 ** Operation of
Securities 51.88 securities
business
Zheshang -- -- ***51.88 *** Operation of
Futures 51.88 securities
business
44. PARTICULARS OF SUBSIDIARIES OF THE COMPANY(Continued)
* These three 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.
** 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 company is a subsidiary of Zheshang Securities, a non-wholly-owned
subsidiary of Shangsan Co, and, accordingly, is accounted for as a subsidiary
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: Service 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. It was previously known as "Kinghing Securities Co.,
Ltd." before being acquired by Shangsan Co.
Note 9: Zheshang Futures was established on September 7, 1995 in the PRC as a
limited liability Company.
All of the Company's subsidiaries are operating in the PRC. None of them had in
issue any debt securities at the end of the year.
Corporate Information
EXECUTIVE DIRECTORS
Chen Jisong (Chairman)
Zhan Xiaozhang (General Manager)
Jiang Wenyao
Zhang Jingzhong
Ding Huikang
NON-EXECUTIVE DIRECTORS
Zhang Luyun
INDEPENDENT NON-EXECUTIVE
DIRECTORS
Tung Chee Chen
Zhang Junsheng
Zhang Liping
SUPERVISORS
Ma Kehua
Fang Zhexing
Jiang Shaozhong
Wu Yongmin
Liu Haiseng
COMPANY SECRETARY
Zhang Jingzhong
AUTHORIZED REPRESENTATIVES
Chen Jisong
Zhang Jingzhong
STATUTORY ADDRESS
12/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
PRC 310007
Tel: 86-571-8798 5588
Fax: 86-571-8798 5599
REPRESENTATIVE OFFICE IN
HONG KONG
Suite 2910
29/F, Bank of America Tower
12 Harcourt Road
Hong Kong
Tel: 852-2537 4295
Fax: 852-2537 4293
LEGAL ADVISERS
As to Hong Kong and US law:
Herbert Smith
23rd Floor, Gloucester Tower
15 Queen's Road Central
Hong Kong
As to English law:
Herbert Smith LLP
Exchange House
Primrose Street
London EC2A 2HS
United Kingdom
As to PRC law:
T & C Law Firm
11/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
PRC 310007
AUDITORS
Deloitte Touche Tohmatsu
35/F, One Pacific Place
88 Queensway
Hong Kong
INVESTOR RELATIONS
CONSULTANT
Rikes Hill & Knowlton Limited
Room 1312, Wing On Centre
111 Connaught Road Central
Hong Kong
Tel: 852-2520 2201
Fax: 852-2520 2241
PRINCIPAL BANKERS
Industrial and Commercial Bank of China,
Zhejiang Branch
China Construction Bank, Zhejiang Branch
Shanghai Pudong Development Bank,
Hangzhou Branch
H SHARE REGISTRAR AND
TRANSFER OFFICE
Hong Kong Registrars Limited
Room 1712-1716, 17/F, Hopewell Centre
183 Queen's Road East
Hong Kong
H SHARES LISTING INFORMATION
The Stock Exchange of Hong Kong Limited
Code: 0576
LONDON STOCK EXCHANGE PLC
Code: ZHEH
ADRS INFORMATION
US Exchange: OTC
Symbol: ZHEXY
CUSIP: 98951A100
ADR: H Shares 1:10
CORPORATE BOND LISTING
INFORMATION
The Shanghai Stock Exchange
Symbol: 03
Code: 120308
Website
www.zjec.com.cn
Location Map of Expressways in Zhejiang Province
(http://www.prnasia.com/sa/attachment/2011/04/2011040193886.pdf )
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NOTE: To view the full set of the company's 2010 Annual Report, please vist www.zjec.com.cn
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