PURSUE EXCELLENCE, ENHANCE VALUE. “Pursue Excellence, Enhance Value” has always been the Group’s operating philosophy. Whether it is for our toll road operations or other ancillary businesses, we adhere to such a motto and will never cease to improve the management of our core businesses and our corporate governance. We aim to excel in every business that we are in, so as to enhance shareholder value and to contribute our best to our customers, business partners, employees and the society. C O N T E N T S 2 3 4 5 6 8 12 26 28 30 34 42 44 80 82 Definition of Terms Company Profile Major Corporate Events Particulars of Major Road Projects Financial and Operating Highlights Chairman’s Statement Management Discussion and Analysis Frequently Asked Questions Corporate Governance Directors, Supervisors and Senior Management Profiles Report of the Directors Report of the Supervisory Committee Report of the International Auditors Corporate Information Location Map of Expressways Operated by the Group D E F I N I T I O N O F T E R M S A Shares ADR(s) ADS(s) Advertising Co Audit Committee Board Company the domestic ordinary shares of Rmb1.00 each in the share capital of the Company proposed to be offered to the public in the PRC by the Company American Depositary Receipt(s) American Depositary Share(s) Zhejiang Expressway Advertising Co., Ltd., a 70% owned subsidiary of the Company the audit committee of the Company the board of Directors of the Company Zhejiang Expressway Co., Ltd., a joint stock limited company incorporated in the PRC with limited liability on March 1, 1997 Communications Investment Group Zhejiang Communications Investment Group Co., Ltd.（浙江省交通投資集團有 限公司）, a sole State-owned enterprise established on December 29, 2001 Directors GDP Group H Shares the directors of the Company gross domestic product the Company and its subsidiaries the overseas listed foreign shares of Rmb1.00 each in the share capital of the Company which are primarily listed on The Stock Exchange of Hong Kong Limited and traded in Hong Kong dollars Hong Kong Stock Exchange The Stock Exchange of Hong Kong Limited Huajian Jiaxing Co Huajian Transportation Economic Development Center, a State-owned enterprise Zhejiang Jiaxing Expressway Co., Ltd., a 99.993% owned subsidiary of the Company JoinHands Technology JoinHands Technology Co., Ltd., a 27.582% owned associate of the Company Listing Rules Period Petroleum Co PRC Rmb Shangsan Co Shareholders Shida Co the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange the period from January 1 to December 31, 2002 Zhejiang Expressway Petroleum Development Co., Ltd., a 50% owned associate of the Company the People’s Republic of China Renminbi, the lawful currency of the PRC Zhejiang Shangsan Expressway Co., Ltd., a 71.625% owned subsidiary of the Company shareholders of the Company Hangzhou Shida Highway Co., Ltd., a 50% jointly-controlled entity 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 Zhejiang Expressway Company Limited C O M PA N Y P R O F I L E Zhejiang Expressway Co., Ltd. is an infrastructure company On February 14, 2002, a Level I American Depositary Receipt principally engaged in investing in, constructing and managing (the “ADR”) program sponsored by the Company in respect high grade roads. The Company and its subsidiaries also carry of its H Shares, with the Bank of New York as depositary, was out certain ancillary businesses such as automobile servicing established in the United States and became effective. and operations of gas stations and billboard advertising along expressways. From January 24 to February 17, 2003, the Company issued Rmb1 billion of corporate bonds to institutional and public The Company was incorporated on March 1, 1997 as the investors in the PRC for the financing of its expressway widening main vehicle of the Zhejiang Provincial Government for investing projects. in, constructing and operating expressways and class 1 roads in Zhejiang Province. The Company intends to grasp any opportunities in project investments and acquisitions, with a view to achieving the The H Shares of the Company, which represent approximately Group’s vision of becoming a leading company investing in 33% of the issued share capital of the Company, were listed and operating infrastructure businesses, with an emphasis on on the Hong Kong Stock Exchange in May 1997, and expressways, in the PRC by 2010. subsequently obtained a secondary listing on the London Stock Exchange in May 2000. Set out below is the corporate and business structure of the Group. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 3 Zhejiang Expressway Company Limited M A J O R C O R P O R AT E E V E N T S JANUARY 18, 2002 JANUARY 24, 2003 The Company issued Rmb1 billion of corporate bonds to institutional and public investors in the PRC during the period from January 24 to February 17, 2003. FEBRUARY 11, 2003 A new session of the Board and Supervisory Committee was elected at the extraordinar y general meeting of the shareholders of the Company for a term of three years effective on March 1, 2003. The Company further acquired a 9.9% interest in the capital of Jiaxing Co. FEBRUARY 14, 2002 The United States Securities and Exchange Commission declared the registration statement in respect of the Depositary Shares evidenced by the American Depository Receipts representing H Shares of the Company effective. MARCH 13, 2002 Mr. Geng Xiaoping resigned from the post of General Manager of the Company while continued to serve as Chairman of the Company. Mr. Fang Yunti was appointed as the new General Manager of the Company. MARCH 14, 2002 The Company announced its annual results for the year ended December 31, 2001 in Hong Kong. MAY 15, 2002 The fifth anniversary of the Company’s listing on The Hong Kong Stock Exchange MAY 17, 2002 The Company organized the annual joint meeting of the overseas listed companies in the PRC. AUGUST 19, 2002 The Company further acquired a 6.625% and a 2.0% interest in the capital of Shangsan Co. AUGUST 20, 2002 The Company announced its interim results for the six months ended June 30, 2002 in Hong Kong. Zhejiang Expressway Company Limited P A RT I C U L A R S O F M A J O R R OA D P RO J E C T S Percentage of Remaining Ownership as at Length in Number of Number of Number of Start of Years of Project February 28, 2003 Kilometers Lanes Toll Stations Service Areas Operation Operation Shanghai-Hangzhou Expressway – Jiaxing Section – Yuhang Section – Hangzhou Section Hangzhou-Ningbo Expressway Shangsan Expressway 99.993% 51% 100% 100% 71.625% 88.1 11.1 3.4 145.0 142.0 4 4 4 4 4 6 2 0 12 11 1 0 0 2 3 1998 1995 – 1998 1995 1992 – 1996 2000 26 26 26 25 28 Detailed locations of these projects are shown on the map provided in the center divide. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 5 Zhejiang Expressway Company Limited F I N A N C I A L A N D O P E R AT I N G H I G H L I G H T S RESULTS Year ended December 31 1998 1999 2000 2001 2002 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 655,069 1,050,498 1,188,604 1,722,517 2,168,078 547,100 (73,795) (68,914) 706,552 (71,810) (86,431) 879,752 1,235,540 1,394,471 (186,391) (363,970) (400,952) (57,360) (110,957) (103,067) Turnover Profit Before Tax Tax Minority Interests Net Profit From Ordinary Activities Attributable To Shareholders 404,391 548,311 636,001 760,613 890,452 Earnings Per Share (EPS) 9.31 cents 12.62 cents 14.64 cents 17.51 cents 20.50 cents RETURN ON EQUITY (ROE) ROE 1998 4.97% 1999 6.50% 2000 7.10% 2001 8.19% 2002 9.18% MONTHLY AVERAGE DAILY FULL TRIP TRAFFIC VOLUME OF SHANGHAI-HANGZHOU- NINGBO EXPRESSWAY January February March April May June July August September October November December 1999 2000 2001 2002 2003 26,036 23,240 12,559 11,688 13,686 15,061 14,474 14,066 14,546 15,204 16,610 17,012 16,744 16,386 17,125 13,853 18,082 19,458 19,061 17,496 17,058 17,738 18,750 18,300 18,155 17,990 17,290 18,450 20,557 20,993 20,776 19,962 19,520 21,172 22,666 21,887 22,219 21,525 21,804 20,952 24,830 25,541 24,900 24,044 24,573 26,203 27,471 27,094 26,884 26,048 Zhejiang Expressway Company Limited FINANCIAL AND OPERATING HIGHLIGHTS 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 7 TURNOVER (RMB MILLION) NET PROFIT (RMB MILLION) 2,168 1,723 1,189 1,050 655 2000 1500 1000 500 0 890 761 636 548 404 800 600 400 200 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 EPS (RMB CENTS) ROE (%) 20.50 17.51 14.64 12.62 9.31 20 15 10 5 0 9.18 8.19 7.10 6.50 4.97 10 8 6 4 2 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 MONTHLY AVERAGE DAILY FULL TRIP TRAFFIC VOLUME OF SHANGHAI-HANGZHOU-NINGBO EXPRESSWAY 23,240 30,000 27,000 26,036 24,000 21,000 18,000 15,000 12,000 9,000 6000 3,000 0 Full Trips Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1999 2000 2001 2002 2003 Zhejiang Expressway Company Limited C H A I R M A N ' S S TAT E M E N T PRACTICING GOOD CORPORATE GOVERNANCE, PURSUING GROWTH IN SHAREHOLDERS’ VALUE. The Company achieved continued growth in operating results in 2002, its fifth consecutive year of growth since 1997. In the eleventh annual poll of Asia’s best-managed companies conducted by Asiamoney magazine, we were for the fifth time being voted by global fund managers as one of the top 10 best-managed companies among our Chinese peers. During the period, our share price had not only maintained upwards momentum since our secondary listing on the London Stock Exchange in May 2000, but also surpassed our issuing price at IPO in Hong Kong. Zhejiang Expressway Company Limited C H A I R M A N ’ S S TAT E M E N T corporate culture which we have been actively promoting is also indispensable in our ability to achieve continued and steady growth. We hold the view that a good corporate culture is crucial for a company to maintain long-term steady business performance. Through the promotion and demonstr ation by the management, as well as the acceptance and practice by all of our employees, the Company has gradually crystallized a corporate culture that embodies “harmony, openness, integrity and entrepreneurship” as its core values. The corporate culture reflects the spirit of keeping abreast with times, as well as accentuating the positive. It has permeated various aspects of our operations, including corporate governance, strategic development, operating management, information disclosure and investor relations. Good practices in corporate governance have already become an important part of the Company’s corporate culture. For A favorable operating environment, focused management and good corporate governance notwithstanding, I believe our example: 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 9 Zhejiang Expressway Company Limited — We promote equal rights for shareholders. When the Company’s financial activities, as well as the Company’s connected transactions are up for approval, shareholders director s, gener al manager s and other senior with interests involved forfeit their voting rights at the management in carrying out their duties, with an aim to general meetings of shareholders. protect the legal interests of the Company and its — The Board holds the interests of all shareholders as its shareholders. utmost consideration, and leads the Company to — The Board comprises executive directors and non- continued success in business operations. Other than executive directors, including independent non-executive adhering to the responsibility in enhancing shareholder directors. There are more non-executive directors than value, the Company pays due respect to the legally rights executive directors, and independent non-executive of its stakeholders, including its customers, employees, directors are in the majority among the non-executive banks and other creditors, suppliers and communities at directors. The views of independent non-executive large, and works actively in coordination with them to directors have significant influence on the decisions made achieve continued and healthy development of the by the board. Furthermore, diversity in experiences and Company. expertise is also being maintained in the board. — The Super visor y Committee, responsible to all — The positions of Chairman and General Manager are shareholders, supervises the legality and compliance of being held by different directors who are separately responsible for the tasks of the board and of the business operations, respectively, thus assuring a balance in the responsibilities of the Chairman and the General Manager, as well as a clear division of duties. On strategic development, the Company has been exceedingly prudent without being overly conservative. We maintained our focus on the core business operation of expressways, and continued to expand on expressway-related operation, while broadening our scope to other fields of infrastructure in order to capture potential business opportunities. “Pursue Excellence, Enhance Value” has always been our business philosophy. Customers are the sources of our value. In meeting their needs, we are also creating value for our shareholders and the society. On the other hand, employees are the creators of value. With such an understanding, the management of the Company, working with a team spirit with the entire staffs, handled businesses of the Company as if they were their own businesses, and always put the overall interests of the Company, customers and shareholders first. When faced with difficulties and challenges, they turn to innovation for creative solutions to overcome them. Our employees labored Zhejiang Expressway Company Limited C H A I R M A N ’ S S TAT E M E N T “ Having invested in Zhejiang Expressway for many years, we are pleased to see a company with superb management and a clear set of strategies for its business development. This, coupled with its high standards of corporate governance and high regard for shareholders’ interest, has won our great confidence in the Company. Since its listing, the Company has maintained continued business growth for five years, providing its shareholders excellent investment return. ” — Ms. Zhang Yang, Huajian Transportation Economic Development Center (one of the Company’s shareholders) day and night to ensure the safe and smooth operation of With regard to investor relations, the management takes a expressways. They responded enthusiastically to the Company’s hands-on approach, utilizing ever y oppor tunity in call for proposals in contribution to its management and communicating with investors, to give them a clear and business development. The internal Corporate Journal published comprehensive understanding on the business environment, monthly has become an impor tant platform for sharing operating strategies and growth prospects of the Company. infor mation, exchanging wor king exper iences and communicating sentiments among the employees. Our personnel policies and clear-cut performance evaluation policies, in which the hiring, promotion and remuneration of all employees are determined individually on merits, have also become an important part of our corporate culture. Having a good corporate culture is an important guarantee for the stability and continued steady development of a company. Corporate culture is not something that can be seen or touched, but its manifestation is real and powerful. I sincerely hope that all of our employees can continue to exemplify the spirit of Zhejiang Expressway’s corporate culture, and bring On the subject of information disclosure, in addition to making our endeavors to a new high. truthful, accurate, complete and timely disclosure in accordance with regulatory requirements, the Company also releases any and all information that could have substantial impact on the decision-making of shareholders and other stakeholders Geng Xiaoping following the principles of accountability and integrity, while Chairman making an effort to assure equal access to such information by all shareholders of the Company. March 4, 2003 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 11 Zhejiang Expressway Company Limited M A N AG E M E N T D I S C U S S I O N & A N A LYS I S BUSINESS REVIEW The past year has been a year of unrelenting growth for the Group. Turnover for the Group was approximately Rmb2,168 million, representing an increase of 25.9% over 2001, while net profit attributable to shareholders was approximately Rmb890 million, representing an increase of 17.1% over 2001. Zhejiang Expressway Company Limited M A N AG E M E N T D I S C U S S I O N & A N A LY S I S THE OPERATING ENVIRONMENT Seizing the opportunities presented by an increase in domestic Once again, leading the pact of provinces and municipalities demand and an expanded overseas market following China’s situated along the east coast of the PRC in economic accession to the WTO in late 2001, China’s economy continued performances, Zhejiang GDP grew by approximately 12.3% in to power ahead with a better-than-expected GDP growth 2002, the province’s highest growth rate in recent years, and rate of 8.0% for the year 2002. 4.3% higher than the national average. Economic Performances of Selected Provinces and Municipality in 2002 GDP Total Export Total Rmb billion % growth Rmb billion % growth Anhui Province Fujian Province Guangdong Province Jiangsu Province Shandong Province Shanghai Municipality Sichuan Province Zhejiang Province 356.9 468.2 1,167.4 1,063.6 1,055.2 540.9 487.5 767.0 +8.9 +10.5 +10.8 +11.6 +11.6 +10.9 +10.6 +12.3 2.5 17.4 118.5 38.5 21.1 32.1 2.7 29.4 +7.5 +24.8 +24.2 +33.3 +16.5 +16.0 +71.3 +28.0 Source: Zhejiang Bureau of Statistics Source: National Bureau of Statistics of China 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 13 Zhejiang Expressway Company Limited Zhejiang Province’s robust economic foundation is demonstrated by the fact that twenty-four of its counties have been included among “Top 100 Counties by Economic Strength” among a total of 2,861 counties nationwide according to a national research institute, making it the province having the most number of such counties among all provinces or municipalities in China: Number of Top 100 Counties by Economic Strength Province / Municipality / Autonomous Region No. of Counties Ranked Among “Top 100” Fujian Guangdong Hebei Henan Hubei Hunan Jiangsu Liaoning Shandong Shanghai Sichuan Xinjiang Zhejiang Total 8 15 3 2 2 1 17 5 20 1 1 1 24 100 Source: China Statistical Year Book and media reports As traffic in cities within Zhejiang Province is becoming increasingly congested due to the rapid increase of passenger cars, especially during rush hours, driving from city to city was made much easier by the end of the year, thanks to the substantially expanded expressway system. Following the completion and opening to traffic of an additional 537km of expressways by the end of 2002, the total mileage of expressways operational in Zhejiang Province has now reached 1,307km, linking every major city within the province to the provincial capital, Hangzhou. Source: Media reports Both production and sales of passenger cars soared to new heights amid a continued build-up in optimism towards the general economy and personal wealth, coupled with increasing availability of auto financing and more new passenger car models coming into the market than ever. During the year, sales in passenger cars reached 1,058,000 nation-wide, representing an increase of 50% over 2001, the highest growth rate since 1993. Much of the increase in demand came from the private sector, as approximately 60% of the sales went to private individuals. Zhejiang Expressway Company Limited Source: Media reports The combination of the above-mentioned factors, among others, has created a generally favorable operating environment for the Group’s business in 2002. M A N AG E M E N T D I S C U S S I O N & A N A LY S I S “Our operations department, as a service-providing department, is involved in a lot of aspects of work. The objective of operational work is to provide satisfactory services to our customers and to earn more income for the Company. This objective calls for carrying out our operational work with an emphasis on road safety and smooth traffic, comfortable travel conditions and quality service.” — Ms Zhang Xiuhua, Operations Department of the Company ANALYSIS OF BUSINESS OPERATIONS of 21.4% over 2001 and 79.9% of the Group’s total toll income During the year, the Group’s business operations continued to (2001: 81.9%). focus on the two major expressways: the 248km Shanghai- Hangzhou-Ningbo Expressway and the 142km Shangsan Expressway, with toll income contributing to approximately 95.5% of the Group’s total income, details of which are as follows: Toll income 2,184,197 1,756,265 +24.4 2002 Rmb’000 2001 Rmb’000 % change 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 15 Fully completed and opened to traffic in 2000, the Shangsan Expressway continued to operate at a high rate of growth in traffic volume, benefiting from both a lower basis of comparison and an increasingly enhanced expressway network within the province. During the Period, daily average full-trip traffic volume was 11,634, representing an increase of 39.8% over 2001, while toll income for the Period was approximately Rmb438 million, representing an increase of 37.8% over 2001 and 20.1% of the Group’s total toll income (2001: 18.1%). Shanghai-Hangzhou-Ningbo Expressway 1,745,931 1,438,191 Shangsan Expressway 438,266 318,074 Other income Advertising Road Maintenance Service Areas Revenue taxes Turnover +21.4 +37.8 +23.5 -63.3 27,742 22,462 1,704 4,649 73,043 34,465 +111.9 2,286,686 1,817,841 (118,608) (95,324) 2,168,078 1,722,517 +25.8 +24.4 +25.9 Toll Road Operations Since the Hangzhou-Ningbo section was completed and opened to traffic in 1996 and the entire expressway became fully operational in 1998, the Shanghai-Hangzhou-Ningbo Expressway has been undergoing robust growth in both traffic volume and toll income, which had continued in 2002. Daily average full-trip traffic volume was 25,048, representing an increase of 21.6% over 2001, while toll income for the Period was approximately Rmb1,746 million, representing an increase Zhejiang Expressway Company Limited Shida Road, a 9.45km interlink owned and operated by Shida Measures were taken during the Period to discourage over- Co, enjoyed a surge in traffic volume and toll income. The loaded trucks from getting onto the expressways operated by surge was mainly the result of Shida Road being the only link the Group, as it had become apparent that the damage that between the nor thern section of the newly completed such trucks did to the road surface in monetary terms costs Hangzhou City Ring Road and the Shanghai-Hangzhou-Ningbo more than the toll charges that they paid. In addition, they also Expressway. With traffic volume growth at 72% and toll income slowed down traffic flow on the expressways due to their growth at 46.8%, the jointly-controlled entity recorded its first- slower travel speeds. ever net profit for the year of approximately Rmb1.4 million (2001: - Rmb5.0 million). Operational Management Since mid-2001, the Company adopted a new vehicle classification standard that was aimed at correcting some larger vehicles from being classified as smaller vehicles. The continued efforts in implementing the new classification standard during the year resulted in toll income consistently growing at a higher rate than traffic volume for both expressways during the first half of the year. Working in coordination with Advertising Co, the Company issued updated travel directories on the expressways under the Group’s operation, in an effort to offer convenience to its expressway travelers. The Company also publicized the expressways to travelers in surrounding areas who might not be familiar with the Group’s expressways. Fur ther measures were taken by the Company to reduce human errors in classifying vehicles on the one hand, and to improve the quality of services provided to expressway users on the other hand, through installing more monitoring and display facilities at toll stations, along the expressways and within service areas. Road Maintenance Commenced in the second half of 2002, the major road surface- overlaying project on the Shanghai-Hangzhou-Ningbo Expressway covered a length of approximately 93km. Including sizable repairs and bridge-head differential-settlement treatments along the affected sections, the combined cost was Following the successful launch of pre-paid IC card system in October 1999 and a subsequent upgrade in October 2000, the system was expanded to cover the Shangsan Expressway in 2002. The system, designed to reduce cash transactions for toll collection, contributed to total sales of Rmb81.7 million for the year, representing an increase of 253% over 2001. Zhejiang Expressway Company Limited M A N AG E M E N T D I S C U S S I O N & A N A LY S I S approximately Rmb156.0 million, in addition to the cost of Rmb33.1 million attributable to routine maintenance works. Through careful coordination and strict site supervision, such as limiting construction works to night time in order to reduce the risk of accidents posed to expressway travelers, the Group’s maintenance works did not significantly impact normal traffic flow on the expressways. Traffic volume on the Shanghai- Hangzhou-Ningbo Expressway continued to grow unimpeded, while routine maintenance cost for the Company was slightly reduced as compared to 2001 as a result of the road surface- overlaying project. Another section of Shanghai-Hangzhou-Ningbo Expressway, totaling approximately 84km, will undergo road surface-overlay The Company took measures to relieve congestion and in 2003 at a cost of approximately Rmb141.4 million. queuing for service within the service areas, through expanding Quality Control the service areas on the one hand, and separating vehicles coming in for gasoline fill-up from vehicles seeking other services Since the adoption of internationally recognized quality such as restaurants and resting areas on the other hand. These standards early in 2001 for operations directly affecting the measures have been proven to be effective. Company’s customers, the quality control system was renewed and further expanded to cover virtually all aspects of internal Revenue from service areas was further enhanced with a newly management in 2002. Major projects undertaken during the implemented contract-out policy, through an open bidding year, such as the expressway widening projects and the road process, for some of the businesses available at these service surface-overlaying projects, all passed their respective quality areas. The policy has significantly increased returns generated tests, with no major breaches in quality control or complaints by the facilities concerned, contributing to a total revenue of approximately Rmb73.0 million for the five service areas, an increase of approximately 112% over 2001 when only three service areas were in operation. recorded. With regular internal auditing and annual external auditing on the execution of the system, the Company is confident that it is able to maintain and even improve the quality of services that it provides to its customers in a measurable manner. Other Businesses Service Area Operations After the opening of two more service areas at full capacity along the Shangsan Expressway at the beginning of 2002, there are currently five service areas in operation under the Group. However, the development of the Company’s service area operations still fell behind the increasing demand for such services. Zhejiang Expressway Company Limited Advertising Business The Company fur ther expanded its roadside billboard advertising business from the Shanghai-Hangzhou-Ningbo technology in the tobacco and power industries, JoinHands Technology recorded a net profit for the Period of Rmb6.8 million, a slight decrease by 1.4% as compared to 2001 due to Expressway to the Shangsan Expressway. The business is heavier investment in research and development. operated by Adver tising Co. Although turnover grew substantially by 23.6% to reach Rmb27.7 million for the Project Investments subsidiary, net profit grew slightly by 7.0% to Rmb7.8 million, Acquisitions mainly due to increased costs at the initial phase of business expansion to the Shangsan Expressway, as well as increased market competition from areas surrounding the expressway. Petroleum Co In addition to the acquisition of a 12.7% equity interest in Jiaxing Co in December 2001 and January 2002 and a 2.0% equity interest in Shangsan Co in December 2001, for a total consideration of Rmb444.6 million in cash, the Company further entered into acquisition agreements in August 2002 to purchase Growing demand, as well as increasing competition in the from Communications Investment Group and Tiantai County petroleum retail market, presented both opportunities and Transport Development Company a 6.625% equity interest challenges for Petroleum Co. Continued growth in retail sales and a 2.0% equity interest, respectively, in Shangsan Co for a contributed to a net profit for the Period of approximately consideration of Rmb187.6 million and Rmb57.6 million in cash, Rmb16.3 million for Petroleum Co (2001: - Rmb10.4 million). respectively. Details of the acquisitions were disclosed in the Company’s announcement dated August 20, 2002. Widening Project In response to the rapid expansion of the regional economy and the fast growth of expressway traffic, and in view of the decline of the average travel speed and level of service along the Shanghai-Hangzhou-Ningbo Expressway in recent years, initiatives have been undertaken to widen the expressway from its current four lanes to eight lanes (“Widening Project”). Involving a total distance of 223 km and at an estimated cost of approximately Rmb4,780 million, the overall Widening Project is expected to be completed by the end of 2007. The initial phase of the Widening Project, from Hongken to Guzhu, pertains to approximately 44km in length. Construction of the project commenced in October 2000 and is progressing ahead of schedule with completion expected by the end of 2003. At a construction cost of approximately Rmb647 million as of the latest budget, the section is expected to be widened to eight lanes instead of six as originally planned, with emergency parking areas provided at intervals of 500 meters. A committee JoinHands Technology Having expanded into the new field of design and consulting services for logistics centers, JoinHands Technology made further investments in project research and development during the year. Relying mainly upon its production and sale of POS equipment, as well as the application of two-dimensional coding Zhejiang Expressway Company Limited M A N AG E M E N T D I S C U S S I O N & A N A LY S I S of specialists and experts has approved the change in plans, the remaining balance from domestic commercial bank with final approval by relevant authorities to be obtained later borrowings. this year. The increase in equity interests and carrying capacity in existing The next phase of the Widening Project, from Dajing to Fengjing, expressways are general reflections of the Company’s growth per taining to approximately 95km and budgeted at strategy, which is to remain focused on expressway operations approximately Rmb2,508 million, is being designed for widening while continuing to seek potential investment opportunities to a standard eight-lane expressway. Construction works are among infrastructure projects for future expansion. expected to commence in the fourth quarter of 2003, with completion targeted by the end of 2006. Internal Control Following the establishment of an internal audit department in mid-2001, the Company further revised and enhanced its internal control mechanisms during the year through a combination of its own management experience and adaptation of the latest applicable rules, regulations and guidelines announced by regulatory authorities from time to time on this issue. The newly established internal control measures cover, among other aspects, operations management and financial controls, with a special emphasis on financial controls over various aspects of the Company’s operations, investment and funding activities. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 19 The last phase of the Widening Project, from Guzhu to Dazhujia, pertaining to approximately 84km, is budgeted at approximately Rmb1,625 million. Construction works are expected to commence in mid-2004, to be completed by the end of 2007. Construction works will take place off the shoulders of the expressways, such that traffic flow on the traveled lanes will not be stopped. Measures have been taken so as not to significantly slow down normal traffic flow. Among the total funding needs of approximately Rmb4.78 billion for the Widening Project, approximately Rmb2 billion will be financed by the Group’s internal resources, Rmb1 billion to Rmb3 billion from the issuance of corporate bonds, and Zhejiang Expressway Company Limited The internal audit department, working in coordination with the Company’s external auditors and independently from the management of the Company, conducted evaluations on the effectiveness of the Company’s internal control mechanisms under the direction of the Audit Committee from time to time, and reported periodically to the Audit Committee on its findings. Human Resources As at December 31, 2002, the Group had a total of 1,998 employees, among whom 342 were administrative staff, 161 were engineering technicians, and 1,495 were toll collection and maintenance staff. Recognizing that human resources are the first and foremost resources in any endeavor it undertakes, the Company made substantial efforts in training and recruiting staff with an aim to realize its long-term strategic goals. The Company initiated a scheme during the Period in which job performance evaluation is more closely linked with Investor Relations incentives. The scheme proved to be a great success, especially in the routine maintenance area. As a listed company, ever since its primary listing on The Hong Kong Stock Exchange, the Company has maintained an active In order to encourage a more active participation by employees investor relations program has been an important part of the in the day-to-day running of the Company, a campaign was Company’s commitment to serving the long-term interests of launched during the Period to invite employees to submit any all of its shareholders, not the least its minority shareholders. suggestions or proposals that they might have regarding the Company’s operational management. Among the 69 proposals submitted, while some have already been adopted in practice, 20 were selected and were rewarded for their outstanding contributions to the Company. In addition to regulatory disclosures made through corporate documents, press announcements, notices to the stock exchanges, etc., the Company keeps in close contact with its investors through regular global roadshows, participation in investor forums, and an open channel of dialogue with investors The series of measures had not only served to encourage and stock analysts. care and innovation among employees, but also served to improve efficiency and productivity of the Company’s business operations. During the Period, the number of vehicles served per person increased by 13.2% over 2001 in expressway operations, while net profit realized per person in the service areas increased by 19.3% over 2001. To facilitate our communication with investors and other interested parties in Hong Kong where all of our retail investors are located, a representative office of the Company was set up in Hong Kong on March 1, 2002. Zhejiang Expressway Company Limited M A N AG E M E N T D I S C U S S I O N & A N A LY S I S “Although I have not worked for Zhejiang Expressway for a long time, the Company’s good system in human resources development, staff deployment and training have deeply impressed me. With two years of conscientious work, I have been rewarded by the Company on a number of occasions: promotions, overseas training in Germany, being nominated an Outstanding Staff, etc. All these make me realize that it is performance and contribution that count in this company, not simply seniority. And there are lots of people in this company who have similar experience to mine. We all say that at Zhejiang Expressway, opportunities are in the hands of those who are capable.” — Mr Wang Weili, Engineering & Maintenance Department of the Company FINANCIAL ANALYSIS Driven by a better-than-expected business performance in remaining 15% held in corporate bonds and close-ended 2002, net profit attributable to shareholders realized by the security investment funds, etc. Group was approximately Rmb890 million, representing an increase of 17.1% over 2001, while return on equity for the year was approximately 9.2%, compared with 8.2% in 2001. Cash and cash equivalent LIQUIDITY AND FINANCIAL RESOURCES The Group continued to generate strong and steady cash inflows from its ordinary operating activities. Net cash inflow from operating activities in 2002 was approximately Rmb1,536 million, representing an increase of Rmb458 million over 2001. Account receivables, other receivables and inventories, on the Rmb US$ in Rmb equivalent Euro in Rmb equivalent HK$ in Rmb equivalent Time deposits Rmb US$ in Rmb equivalent Euro in Rmb equivalent HK$ in Rmb equivalent other hand, accounted for only 7.4% of the current assets of Short term investments Rmb1,952.2 million as at December 31, 2002. The Directors do not expect the Company to experience any problem with liquidity in the foreseeable future. As at December 31, 2002, the Group held Rmb1,807.2 million in cash and cash equivalents, time deposits and short-term investments, with cash and cash equivalents accounting for 36.9%, time deposits for 15.6% and short-term investments for 47.5% of the total. Rmb Total Rmb US$ in Rmb equivalent Euro in Rmb equivalent HK$ in Rmb equivalent Among the Rmb858,114,000 held in short-term investments, approximately 85% are held in government bonds, with the approximately 2.0%. Zhejiang Expressway Company Limited The average interest rates for bank deposits in Renminbi, US Dollars, Euro and HK Dollars during the Period were approximately 1.1%, 3.7%, 0.7% and 1.6%, respectively, while average yield of short-term investments during the year was 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 21 As at December 31, 2002 Rmb’000 2001 Rmb’000 666,291 434,771 532,358 365,110 131,744 22 2,167 7,393 56,991 5,277 282,779 384,255 192,824 260,579 79,967 0 9,988 92,731 24,259 6,686 858,114 1,012,186 858,114 1,012,186 1,807,184 1,831,212 1,583,296 1,637,875 211,711 100,124 22 12,155 81,250 11,963 BORROWINGS AND CAPITAL STRUCTURE In addition, non-interest bearing liabilities and shareholders’ As at December 31, 2002, the Group had total interest bearing borrowings in Renminbi equivalent to approximately Rmb3,038.2 million, among which Rmb2,147.6 million was subject to fixed interest rates, and Rmb890.6 million was subject to floating interest rates. Gross Amount Rmb’000 Maturity Profiles Within 1 year Rmb’000 2-5 years Inclusive Rmb’000 Beyond 5 years Rmb’000 equity amounted to approximately Rmb1,765.8 million and Rmb9,701.8 million, respectively. The ratio of total liabilities over shareholders’ equity at the end of 2002 was 49.5% (2001: 55.9%). Details of the Group’s capital structure as at December 31, 2002, together with its comparative figures for the corresponding period in 2001 are as follows: 2002 2001 Rmb’000 % Rmb’000 % Floating rates World Bank loan 890,600 99,553 318,264 472,783 Fixed rates Shareholders’ equity Fixed rate liabilities 9,701,791 2,147,600 66.9% 9,289,081 14.8% 2,093,569 Floating rate liabilities 890,600 6.1% 935,440 Interest-free liabilities 1,765,843 12.2% 2,159,448 Commercial bank loans 1,875,000 1,545,000 330,000 — Policy loans 72,600 37,000 32,800 2,800 Corporate bonds 200,000 200,000 — — Total Gearing ratio 1 Gearing ratio 2 14,505,834 100.0% 14,477,538 49.48% 11.92% 64.2% 14.5% 6.4% 14.9% 100.0% 55.90% 15.30% Total as at December 31, 2002 3,038,200 1,881,553 681,064 475,583 Note: Gearing ratio 1 represents the sum of fixed rate liabilities, floating rate liabilities and interest-free liabilities vs. the equity; gearing ratio 2 represents the total amount of the Total as at long-term liabilities vs. the equity. December 31, 2001 3,029,009 1,620,778 842,492 565,739 Net proceed, in the amount of Rmb991 million, from the issue With the average interest rate in 2002 at approximately 4.8%, of Rmb1 billion corporate bonds by the Company during the total interest expense for the year was approximately period from Januar y 24 to Februar y 17, 2003, has been Rmb163.2 million, resulting in a profit before taxation and collected by the Company on February 19, 2003. Details of interest to interest expense ratio of 8.9 (2001: 4.8). the issue were disclosed in the Company’s announcement dated January 22, 2003. Zhejiang Expressway Company Limited 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 23 M A N AG E M E N T D I S C U S S I O N & A N A LY S I S COMMITMENTS AND UTILIZATION OF CAPITAL EXPENDITURE Capital expenditures incurred during the period was approximately Rmb831.6 million, approximately Rmb689.8 million of which was used on acquisition of additional interests CONTINGENT LIABILITIES Other than a loan guarantee of Rmb30 million provided in favor of Shida Co, in respect of a commercial bank loan of the same amount extended to Shida Co from September 2001 to September 2009, the Group does not have any contingent in subsidiaries. Most of the remaining capital expenditure was liabilities as at December 31, 2002. used on the Widening Project and other expressway-related projects. GUARANTEES AND PLEDGES OF ASSETS Capital expenditure commitments for the Group as at Other than the guarantee mentioned above, the Group does December 31, 2002 amounted to approximately Rmb5,454 not have any other guarantees and pledges of assets. million, among which Rmb485 million will be used on acquiring additional interest in a subsidiary, Rmb4,483 million will be used on the Widening Project, with the remaining balance to be used on other expressway-related projects, details of which are as follows: Expressway Widening Project From Hongken to Guzhu From Dajing to Fengjing From Guzhu to Dazhujia Acquisition of additional 18.4% equity interest in Shangsan Co Renovation of Sanjiang Service Area Remaining construction works of the Shangsan Expressway Group Rmb’000 Company Rmb’000 349,542 349,542 2,508,190 2,508,190 1,625,410 1,625,410 485,000 485,000 14,000 14,000 460,529 — Construction works under Contract No. 11 of the Shanghai-Hangzhou Expressway 10,719 10,719 Total 5,453,390 4,992,861 The Company will finance its capital expenditure needs with its own financial resources, as well as through additional bank borrowings and/or issue of corporate bonds. Zhejiang Expressway Company Limited Province starting from the second half of 2002, the Group is expected to enroll in these compulsory schemes in 2003. Judging from the arrangements of the schemes, the Directors do not anticipate any significant impact of its participation in the scheme on the Group’s financial standing, in particular its consolidated income statement and consolidated balance sheet. FOREIGN EXCHANGE EXPOSURE The Group had an outstanding World Bank loan denominated in US Dollars in the amount of Rmb890.6 million as at December 31, 2002. In addition, the Company paid its dividends for H Shares in HK Dollars. Although all of the income of the Group is in Renminbi and the Directors do not anticipate any substantial fluctuations in the exchange rates between Renminbi and foreign currencies that will cause material foreign exchange exposure to the Group, there is no assurance that the foreign exposure will not affect the operating results of the Group. EMPLOYEES’ BASIC MEDICAL INSURANCE SCHEME Medical expenses for employees of the Group were accounted for as part of the benefits provided by the Group in 2002 and the years before, in accordance with relevant accounting rules and internal policies. Following the promulgation of employees’ basic medical insurance schemes by local governments in Zhejiang Zhejiang Expressway Company Limited M A N AG E M E N T D I S C U S S I O N & A N A LY S I S in 2003, which is expected to substantially improve road conditions whilst lowering routine maintenance costs at the same time. Secondly, the Company will further expand its service area operations to meet increased demand from the extended expressway network, by increasing the capacities at the current service areas through enlarging the areas and employing additional service staff, and by initiating the process of building more service areas along the expressways under the Group’s operation. By the end of 2003, the initial phase of the Widening Project for the Shanghai-Hangzhou-Ningbo Expressway is expected to be completed and open to traffic. As a result, a 44km section of eight- lane expressway with emergency parking areas will be operational, allowing for continued growth in traffic volume and providing substantially improved road conditions on the section. This will greatly 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z increase the carrying capacity of the expressway beyond 2004. 25 Over the longer term, the Company will benefit from the full completion and opening to traffic of more expressways in Zhejiang Province by the end of the year, including two major expressways linking the two neighboring provinces of Jiangxi and Fujian. The Company intends to grasp any opportunities in project investments and acquisitions, with a view to achieving the Group’s vision of becoming a leading company investing in and operating infrastructure businesses, with an emphasis on expressways, in the PRC by 2010. OUTLOOK FOR 2003 Zhejiang Province’s GDP grew at an accelerated rate during 2002 on a quarter-to-quarter basis. As both micro and macro environmental factors appear to be favorable for both the PRC and the province, prospects for continued economic growth for the province are good. The successful bidding by neighbouring Shanghai to host the World Expo 2010 will further fuel economic growth for the Yangtze River Delta region. Having achieved a record year of growth in 2002, especially for passenger cars, vehicle sales are set to reach a new high in 2003 amid a flurry of new manufacturers and models hitting the market with competitive prices. With the completion and opening to traffic of an additional 537km of expressways in Zhejiang Province by the end of 2002, the overall expressway network in the province is substantially expanded, thereby creating a networking effect that will certainly benefit most of the existing expressways in 2003. While the general business environment bodes well for the Company’s business operations, there are also challenges facing the Company’s management. A portion of the traffic flow on the Hangzhou and Yuhang sections of the Shanghai-Hangzhou- Ningbo Expressway is expected to be diver ted due to the opening to traffic of the Hangzhou City Ring Road whose eastern section overlaps with a 39.3km section of the Shanghai- Hangzhou-Ningbo Expressway at its Hangzhou end, though this is not expected to halt the overall trend of continued traffic growth on the expressway. Meanwhile, heavy traffic flow on certain sections of the Shanghai-Hangzhou-Ningbo Expressway has led to excessive road-surface deterioration as well as congestion, both on the expressways and in service areas. In response to the above-mentioned challenges, the Company has already under taken corresponding strategies to be implemented in 2003 and beyond. Firstly, following the completion of road surface-overlaying works in 2002 on a 93km section of the Shanghai-Hangzhou-Ningbo Expressway, another 84km of the expressway is slated for surface overlays Zhejiang Expressway Company Limited F R E Q U E N T LY A S K E D Q U E S T I O N S What was the reason for the substantial increase in operating have also led to an increase in relevant expenditures expenses in 2002? – Apar t from routine maintenance works on the expressways, a major road surface-overlaying project was carried out on the Shanghai-Hangzhou-Ningbo Expressway during the second half of 2002, covering approximately 93 kilometers. Including sizeable repairs from approximately Rmb19.2 million in 2001 to approximately Rmb42.2 million in 2002. Will there be more surface-overlaying works on the Shanghai- Hangzhou-Ningbo Expressway to be carried out in 2003 and 2004? If so, where are they and what are the related costs? and bridgehead differential-settlement treatments along – Yes, there will be another two par ts of Shanghai- the affected sections, the additional cost of the project Hangzhou-Ningbo Expressway, aggregating 84 kilometers was approximately Rmb156 million. – In addition to increased revenue contributions, expanded service area operations where five service areas were fully operational in 2002 compared with three in 2001 and 71 kilometers, undergoing major road surface- overlaying in 2003 and 2004, with estimated costs of approximately Rmb141 million and Rmb119 million, respectively. Zhejiang Expressway Company Limited FREQUENTLY ASKED QUESTIONS “Zhejiang Expressway is one of the best expressway companies we cover in China. We trust the management and we are happy with its very transparent operations.” — Mr. Henry Wu, UBS Warburg Asia Limited 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 27 – The project will mainly be covering the Jiaxing Section – The Company intends to finance the Widening Project as well as the section from Shaoxing to Ningbo of the Shanghai-Hangzhou-Ningbo Expressway. through issuing corporate bonds and commercial bank borrowings, etc., in addition to its own financial resources. The Company had successfully issued Rmb1 billion corporate The Company elected a new session of the Board, and bonds in early 2003. What is the state of the plan to issue appointed a new team of senior management early in 2003. domestic A Shares initiated in 2001? Will there be any changes or adjustments to the development – The Company has put aside its plan for issuing domestic strategies of the Company? A Shares in 2002. While the Company intends to keep – There will be finer adjustments made in the development all options open, there are currently no plans to raise strategies of the Company in response to the changing capital by means of an A shares issue. environment, but the Company’s long-term aspiration After the completion and opening to traffic of the initial phase in investing in and operation of infrastructure businesses, of the Widening Project by the end of 2003, when will the with an emphasis on expressways, in the PRC by 2010. remaining sections of the Shanghai-Hangzhou-Ningbo Expressway undergo widening? What are the costs and sources What is the long-term dividend payout policy that the Company of funding for the remaining works? will maintain? remains the same, which is to become a leading company – The next phase of the Widening Project will commence – Under normal circumstances, the Company will continue in the fourth quarter of 2003, with completion targeted by the end of 2006. Beginning from Dajing and ending at to be paying both interim and final dividends, with the annual dividend payout ratio maintaining within the range Fengjing, the project pertains to approximately 95 km, and will cost approximately Rmb2,508 million. of 60% to 70% of the net profit attributable to shareholders. – The last phase of the Widening Project will commence in mid-2004 and to be completed by the end of 2007. Beginning from Guzhu and ending at Dazhujia, the last phase per tains to approximately 84km, and will cost approximately Rmb1,625 million. Zhejiang Expressway Company Limited C O R P O R AT E G OV E R N A N C E SHAREHOLDERS AND GENERAL MEETINGS The Company protects the interests of Shareholders. The Shareholders, being the owners of the Company, are entitled to the rights provided by the laws and administrative regulations, and shall assume corresponding obligations. All the Shareholders are treated equally and are encouraged to actively participate in corporate governance of the Company. Shareholders have privity and rights to decision- making in respect of significant matters of the Company. The general meeting is the power organ of the Company, which performs its duties in accordance with the laws. Shareholders who have interests in connected transactions shall abstain from voting at the general meeting approving such connected transactions. Zhejiang Expressway Company Limited CORPORATE GOVERNANCE “Zhejiang Expressway is one of the best managed companies of great reno wn in China yielding outstanding results.” — Dr. Henry Hu Hung Lick, former independent non-ex ecutive director of the Compan y, currently President of Hong Kong Shue Yan College Three general meetings were held by the Company in 2002, SUPERVISORY COMMITTEE including an annual general meeting and two extraordinary general meetings. Among these meetings, payment of an interim dividend and issue of corporate bonds of Rmb1 billion in the PRC were approved at two of the extraordinary general meetings respectively. BOARD OF DIRECTORS The Board of Directors of the Company represents the interests of all the Shareholders, and continues to lead the Company to success in operation. In addition to the obligation of enhancing shareholder value, the Board is also accountable to the community where the Company’s clients, staff, suppliers and businesses are located. The Board of Directors of the Company is composed of nine Directors, four of them are Executive Directors, whilst the remaining five are Non-executive Directors. Among the five Non- executive Directors, three of them are Independent Non-executive Directors, representing one-third of the Board of Directors. Six meetings were held by the Board of Directors of the Company in 2002. The Super visor y Committee is responsible to all the Shareholders. It supervises the financial state of affairs of the Company as well as the compliance of the Directors, general managers and other senior officers of the Company in performing their duties, and protects the legal interests of the Company and Shareholders. The Supervisory Committee of the Company comprises five super visors, among whom one acts as shareholder s’ representative, one as staff ’s representative and the other three are independent supervisors. Two meetings were held by the Supervisory Committee of the Company in 2002 in order to review the financial statements of the Company. The Supervisory Committee was present at all meetings of the Board of Directors, and carried out a site visit to Shanghai-Hangzhou-Ningo Expressway and Shangsan Expressway and management offices along the expressways. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 29 Zhejiang Expressway Company Limited D I R E C TO R S , S U P E RV I S O R S A N D S E N I O R M A N AG E M E N T P R O F I L E S DIRECTORS EXECUTIVE DIRECTORS Mr. GENG Xiaoping, born in 1948, is the Chairman of the Company. Mr. Geng graduated from the East China College of Political Science and Law in 1984. From 1979 to 1991, he held various positions at the People’s Procuratorate of Zhejiang Province including Secretar y, Division Chief and Deputy Procurator. In 1991, he was appointed as Deputy Director of the Zhejiang Provincial Expressway Executive Commission where he was responsible for the business operation and administration of the expressway system in Zhejiang Province. Mr. Geng was the General Manager and Chairman of the Company from March 1997 to March 2002. Since December 2001, he has been appointed as a director and General Manager of the Communications Investment Group. He resigned from the office of the General Manager of the Company in March 2002. Mr. FANG Yunti, born in 1950, is a senior engineer, an Executive Director and the Gener al M a n a g e r o f t h e C o m p a ny responsible for the over all management of the Company. Mr. Fang graduated from Qing Hua University in 1976 with a major in automotive engineering. From 1983 to 1988, he was the Deputy General Manager of Zhejiang Province Automobile Transport Company. From 1988 to 1990, he was the Chief Engineer at the Provincial Road Transport Company. During the period from 1991 to 1996, he was the Deputy Chief and Chief of the Operating Administrative and Technical Equipment Divisions of the Zhejiang Provincial Expressway Executive Commission, where his responsibilities included operation management and equipment management in relation to the Shanghai-Hangzhou- Ningbo Expressway. Mr. Fang was an Executive Director and the Deputy General Manager of the Company from March 1997 to March 2002. Since March 2002, he has been an Executive Director and the General Manager of the Company. Zhejiang Expr essway Compan y Limited Mr. ZHANG Jingzhong, born in 1963, is a senior lawyer, an Executive Director and Deputy G e n e r a l M a n a g e r o f t h e Company. Mr. Zhang graduated f r o m Z h e j i a n g U n i v e r s i t y (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 the Associate Director of Hangzhou Municipal Foreign Economic Law Firm. In 1992, he obtained the qualifications required by the regulatory authorities in China to practise securities law. In January 1994, Mr. Zhang became a Senior Partner at T&C Law Firm in Hangzhou. Mr. Zhang has been an Executive Director of the Company since April 1997, and was the Secretary to the Board from April 1997 to June 2001. He has been the Deputy General Manager of the Company since March 2002. Mr. XUAN Daoguang, born in 1944, is a senior engineer, an Executive Director and Deputy G e n e r a l M a n a g e r o f t h e Company. Mr. Xuan graduated from Tong Ji University in 1960 with a degree in engineering, specialising in the construction and design of bridges and tunnels. Mr. Xuan has 43 year s of experience in engineering maintenance and has held positions such as Section Head and Head of the Road Administrative Division of Jinhua City and Head of the Engineering Maintenance Depar tment of the Zhejiang Provincial Expressway Executive Commission. Mr. Xuan has been an Executive Director of the Company since March 1997. He has been the Deputy General Manager of the Company since March 2000. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT PROFILES NON-EXECUTIVE DIRECTORS Ms. ZHANG Luyun, born in 1961, is a director and Deputy General Manager of the Communications Investment Group. Ms. Zhang g r a d u a t e d f r o m Z h e j i a n g U n i v e r s i t y, m a j o r i n g i n administration and management. From 1985 to 1997, she served as the Secretar y, Deputy Chief and Chief in the Office of Hangzhou City Government. In 1997, she was the Deputy President of Hangzhou Broadcasting and TV College and received the title of the Assistant Researcher in college-teaching. She joined the Communications Investment Group in December 2001 and has been a director and Deputy General Manager of the Communications Investment Group since then. Ms. ZHANG Yang, born in 1964, is the general assistant manager and the manager of the Securities D e p a r t m e n t o f H u a j i a n Tr a n s p o r t a t i o n E c o n o m i c Development Center. In 1987, she g r a d u a t e d f r o m L a n z h o u University with a bachelor’s degree in economics. In 2001, she completed the postgraduate studies in economics management in the Central Party School. From 1987 to 1994, she worked for the Ministry of Aviation. Ms. Zhang is currently a non-executive director of Shenzhen Expressway Company Limited and Sichuan Expressway Company Limited. INDEPENDENT NON-EXECUTIVE DIRECTORS Mr. TUNG Chee Chen, born in 1942, is the Chairman of Orient Overseas (International) Limited, an independent non-executive Director and the Chairman of the Audit Committee and the Nomination and Remuneration 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. He Zhejiang Expr essway Compan y Limited 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 31 is currently a registered Professional Engineer in the State of California. Mr. Tung has been an independent non-executive Director of the Company since March 1997. Mr. ZHANG Junsheng, born in 1 9 3 6 , i s a p r o f e s s o r, a n independent non-executive Director and a member of the A u d i t C o m m i t t e e o f t h e Company. Mr. Zhang graduated from Zhejiang University in 1958, and was a lecturer, an associate professor, and an advising professor at Zhejiang University. He was also a professor concurrently at, amongst other universities, Zhongshan University. In 1980, he became the Deputy General Secretary of Zhejiang University. In 1983, Mr. Zhang ser ved as the Deputy General Secretar y in the Hangzhou City Government. In 1985, he began to work for the Xinhua News Agency, Hong Kong Branch, and became its Deputy Director in 1987. Mr. Zhang took up the position of General Secretary of Zhejiang University in September 1998. In addition, Mr. Zhang is currently a Special Advisor to the Zhejiang Provincial Government, an Advisor to the Sichuan Provincial Government, and a Senior Advisor to the Shenzhen City Government. Mr. Zhang has been an independent non- executive Director of the Company since March 2000. Mr. ZHANG Liping, born in 1958, is an executive director and the gener al manager of Pacific Concord Holdings Limited. He obtained a master’s degree in i n t e r n a t i o n a l a f f a i r s a n d international laws from St. John’s University. After joining Merrill Lynch & Co., Inc. in 1989, he engaged in the business of investment banking and was a director of the investment banking division of Merrill Lynch Co. & Inc.. From 1996 he took the post of chairman, director and general manager of Seapower Corporate Finance Limited and was an executive director in Seapower Holdings Ltd. In 1998, he moved to Dresdner Kleinwort Benson and assumed the post of chairman, director, and general manager of the Greater China region. He was also a member of the Asia Executive Committee of Dresdner Kleinwort Benson. He is currently an independent non-executive director of Anhui Expressway Co., Ltd. SUPERVISORS SUPERVISOR REPRESENTING SHAREHOLDERS INDEPENDENT SUPERVISORS Mr. MA Kehua, born in 1952, is a senior economist, the Chairman and non-executive member of the Supervisory Committee. Mr. Ma graduated from 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 the Zhejiang Local Railway Company, and in 1993 became the Deputy Division Chief and Division Chief of Zhejiang Jinwen Railway Executive Commission responsible for material supply. Mr. Ma took up the post of Deputy General Secretary of Zhejiang Construction and Investment Company in March 1999, and is currently the Assistant General Manager of the Communications Investment Group. SUPERVISOR REPRESENTING EMPLOYEES Mr. Fang Zhexing, born in 1965, is a senior engineer, the Director of the internal audit department and the manager of the human resources depar tment of the Company. He is also the chairman of Hangzhou Shida Expressway Co., Ltd. Mr. Fang graduated from Zhejiang University in engineering where he received a master’s degree. 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 been the deputy manager and later the manager of the planning and development department and the manager of the project-development department of the Company. Zhejiang Expr essway Compan y Limited Mr. ZHENG Qihua, born in 1963, is a senior accountant and an independent non-executive member of the Super visor y Committee . He is a guest professor at the Zhejiang Finance and Economics Institute. Mr. Zheng was among the first batch of Chinese registered accountants to obtain qualifications required for pr actising accountancy involving securities in 1992. He has working and training experience in Hong Kong and Singapore, and he worked with the Listing Division of the China Securities Regulator y Commission during 1997 and 1998. He is currently the Deputy General Manager of Zhejiang Pan-China Cer tified Public Accountants. Mr. SUN Xiaoxia, born in 1963, is a professor and an independent non-executive member of the Supervisory Committee. Mr. Sun graduated from China Academy of Social Sciences with a doctor’s degree in law. He worked as Assistant Lecturer, Lecturer, Assistant Professor, Professor and Tutor for graduate students at Hangzhou University, School of Law. Mr. Sun is currently the Deputy Dean of the School of Law and the Dean of the Depar tment of Law, Zhejiang University. In addition, Mr. Sun is a lawyer with Zhejiang Zheda Law Firm, a standing member of China Jurisprudence Research Society, a standing member of China WTO Legal Research Society, a member of the International Society for Philosophy of Law and Social Philosophy (“IVR”), and a member of the IVR’s China Branch. Mr. JIANG Shaozhong, born in 1946, is a professor. Mr. Jiang graduated from the Management D e p a r t m e n t o f Z h e j i a n g University with a master’s degree. From 1982 he worked in the Management Depar tment of Zhejiang University as Lecturer, Assistant Professor, Professor, Dean of research office and Deputy Dean of the Department. From 1984 to 1985 he was a visiting scholar in Stanford University. From 1991 to 1998 he was the Deputy General Economist, the Chief of the Financial Division, the Chief of the Teaching Division and the Deputy Manager of the Management Department of Zhejiang University. He is currently the Deputy General Accountant of Zhejiang University. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT PROFILES OTHER SENIOR MANAGEMENT MEMEBERS Mr. JIANG Wenyao, born in 1966, an engineer, and is the Deputy G e n e r a l M a n a g e r o f t h e Company. Mr. Jiang graduated from Zhejiang University, majoring in industrial automation and manufacturing mechanics, and obtained a Master degree in engineering. From March, 1991 to February, 1997, he was with the Zhejiang Provincial Expressway Executive Commission, and worked in its Engineering Division, and Planning and Finance Division. He joined the Company since March, 1997, and has served as Deputy Manager of the General Depar tment, Manager of the Equipment Depar tment, Manager of the Operation Department, Assistant of the General Manager and Secretary of the Board. Ms. HUANG Qiuxia, born in 1956, an economist, and is the Deputy G e n e r a l M a n a g e r o f t h e Company. Ms. Huang graduated from Hangzhou Technology University in 1988. From 1976 to 1991, she was the Deputy Chief of Labor Division of Hangzhou Clock and Watch Factor y. She joined the Zhejiang Provincial Expressway Executive Commission in August, 1991, and involved in matters related to labor wages, personnel, external affairs and etc. During the period from March, 1997 to February, 2003, she has been the Deputy Manager and Manager of General Department of the Company. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 33 Mr. PAN Jiaxiang, born in 1951, an engineer, and is the Deputy G e n e r a l M a n a g e r o f t h e Company. Mr. Pan graduated from Hangzhou University, majoring in economic management. From 1987 to 1992, he was the Deputy Director of the Office of Shangyu City People's Government, and at the same time ser ved as the Director of the Executive Commission of the Shanghai- Hangzhou-Ningbo Expressway (Shangyu Section). From January, 1993 to April, 1996, he was the Director and the Secretary of Party Committee of Shangyu City Communications Bureau. He has worked in the Company since April, 1997, and served as Deputy Manager of Maintenance Department, Assistant of the General Manager and Director and Chief Supervisory Engineer of Widening Project Office, and General Manager of Shangsan Co. Mr. WU Junyi, born in 1969, a master 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 ser ved as Manager of Securities Investment Department and Manager of Planning and Finance Department. Zhejiang Expr essway Compan y Limited R E P O RT O F T H E D I R E C TO R S The directors present their report and the audited financial servicing and fuel facilities. There were no changes in the nature statements of the Company and the Group for the year ended of the Group’s principal activities during the year. December 31, 2002. PRINCIPAL ACTIVITIES SEGMENT INFORMATION During the year, the entire turnover and contribution to profit The principal activities of the Group comprise the design, from operating activities of the Group were derived from the construction, operation and management of high grade roads, Zhejiang Province in the People’s Republic of China (the “PRC”). as well as the development and provision of certain ancillary Accordingly, a further analysis of the turnover and contribution services, such as technical consultation, advertising, automobile to profit from operating activities by geographical area is not Zhejiang Expressway Company Limited REPORT OF THE DIRECTORS presented. However, an analysis of the Group’s turnover and An interim dividend of Rmb0.04 per share (approximately contribution to profit from operating activities by principal HK$0.038) was paid on October 31, 2002. The Directors activity for the year ended December 31, 2002 is set out in recommend the payment of a final dividend of Rmb0.09 per note 4 to the financial statements. share (approximately HK$0.084) in respect of the year, to RESULTS AND DIVIDENDS The Group’s profit for the year ended December 31, 2002 and the state of affairs of the Group and the Company at that shareholders on the register of members on April 3, 2003. This recommendation has been incorporated in the financial statements as an allocation of retained earnings within capital and reser ves in the balance sheet. Fur ther details of this accounting treatment are set out in note 12 to the financial date are set out in the financial statements on pages 45 to 79. statements. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 35 Zhejiang Expressway Company Limited SUMMARY FINANCIAL INFORMATION The following is a summary of the published consolidated results, and of the assets, liabilities and minority interests of the Group prepared on the basis set out in the notes below. Year ended December 31 RESULTS Turnover Operating costs Gross profit Other revenue Administrative expenses Other operating expenses Profit from operating activities Finance costs Share of profits of associates Share of profit/(loss) of a jointly- controlled entity Profit before tax Tax Profit before minority interests Minority interests Net profit from ordinary activities attributable to shareholders 2002 Rmb’000 2,168,078 (561,918) 2001 Rmb’000 1,722,517 (392,535) 1,606,160 1,329,982 66,457 (95,209) (33,109) 1,544,299 (163,224) 11,719 216,690 (88,487) (18,236) 1,439,949 (215,346) 12,396 2000 Rmb’000 1,188,604 (248,429) 940,175 242,888 (64,978) (75,317) 1,042,768 (197,083) 40,584 1,677 (1,459) (6,517) 1,394,471 (400,952) 993,519 (103,067) 1,235,540 (363,970) 871,570 (110,957) 879,752 (186,391) 693,361 (57,360) 1999 Rmb’000 1,050,498 (298,417) 752,081 167,528 (60,320) (2,374) 856,915 (172,922) 22,559 — 706,552 (71,810) 634,742 (86,431) 1998 Rmb’000 655,069 (220,537) 434,532 234,573 (45,611) (635) 622,859 (94,741) 18,982 — 547,100 (73,795) 473,305 (68,914) 890,452 760,613 636,001 548,311 404,391 Earnings per share 20.50 cents 17.51 cents 14.64 cents 12.62 cents 9.31 cents ASSETS, LIABILITIES AND MINORITY INTERESTS Total assets Total liabilities Minority interests Net assets Notes: 14,505,834 14,477,538 14,586,420 13,925,688 12,993,990 3,826,254 977,789 3,685,828 1,502,629 4,128,921 1,495,364 3,868,691 1,449,432 3,457,029 1,245,782 9,701,791 9,289,081 8,962,135 8,607,565 8,291,179 1. The consolidated results of the Group for the four years ended December 31, 2001 have been extracted from the Company’s 2001 annual report dated March 13, 2002, while those of the year ended December 31, 2002 were prepared based on the consolidated income statement as set out on page 45 of the financial statements. 2. The 2002 earnings per share is based on the net profit from ordinary activities attributable to shareholders for the year ended December 31, 2002 of Rmb890,452,000 (2001: Rmb760,613,000) and the 4,343,114,500 shares (2001: 4,343,114,500 shares) in issue during the year. Zhejiang Expressway Company Limited REPORT OF THE DIRECTORS MAJOR CUSTOMERS AND SUPPLIERS The five largest customers and suppliers contributed less than 30% of the total toll revenue and purchases, respectively, of from Communications Investment Group, the ultimate holding company of the Company, for a consideration of Rmb187.62 million. the Group during the year. Accordingly, a corresponding Since the purchase consideration represents less than 3% of analysis of major customers and suppliers is not presented. the book value of the net tangible assets of the Company as CONNECTED TRANSACTIONS disclosed in its latest published audited accounts, no shareholder approval is required under the Listing Rules. Details of the connected transactions of the Group (the “Connected Transactions”) carried out during the year for which FIXED ASSETS The Hong Kong Stock Exchange has granted a waiver from Details of movements in the fixed assets of the Company and compliance with Chapter 14 of the Listing Rules pursuant to the Group are set out in note 14 to the financial statements. its letter of March 10, 2000 are disclosed in the second paragraph of note 41 to the financial statements. CAPITAL COMMITMENTS The independent non-executive Directors have reviewed the Details of the capital commitments of the Company and the Connected Transactions and confirmed that, during the year Group as at December 31, 2002 are set out in note 37 to the ended December 31, 2002, such transactions were: financial statements. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 37 (i) carried out in accordance with the terms of the agreements governing each respective transaction in RESERVES question; (ii) entered into in the usual and ordinary course of business of the Company; and Details of movements in the reserves of the Company and the Group during the year are set out in note 35 to the financial statements. (iii) entered into on normal commercial terms and are fair DISTRIBUTABLE RESERVES and reasonable so far as the shareholders of the Company are concerned. As at December 31, 2002, before the proposed final dividend, the Company’s reserves available for distribution by way of Ernst & Young, the auditors of the Company (as required by cash or in kind, as determined based on the lower of the amount the Stock Exchange in its letter of March 10, 2000) have also determined under PRC accounting standards and the amount reviewed the said transactions and have confirmed that the determined under generally accepted accounting principles in independent non-executive Directors have given their approval Hong Kong, amounted to Rmb500,667,000. In addition, in of these transactions and that they were carried out by the accordance with the Company Law of the PRC, the amount Company in accordance with the terms of the agreements of approximately Rmb3,638,229,000 standing to the credit of governing each respective transaction during the year ended the Company’s share premium account as prepared in December 31, 2002. In addition, under the agreement dated August 19, 2002, the Company purchased 6.625% equity interest in Shangsan Co., accordance with the PRC accounting standards was available for distribution by way of capitalisation issues. Zhejiang Expressway Company Limited SUBSTANTIAL SHAREHOLDERS As at December 31, 2002, the following shareholders held 10% or more of the share capital of the Company according to the register of interests in shares required to be kept by the Company pursuant to Section 16(1) of the Securities (Disclosure of Interest) Ordinance (the “SDI Ordinance”): Name Zhejiang Communications Investment Group Co., Ltd. Huajian Transportation Economic Development Center Number of shares 2,432,500,000 (domestic shares) 476,760,000 (domestic shares) Percentage 56.01 10.98 HKSCC Nominees Limited 1,409,650,499 32.46 DIRECTORS (H shares) The Directors of the Company during the year and up to the Save as disclosed above, no person had registered an interest date of this report are: in the share capital of the Company that was required to be Executive Directors recorded pursuant to Section 16(1) of the SDI Ordinance. PURCHASE, SALE OR REDEMPTION 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. TRUST DEPOSITS As at December 31, 2002, other than the deposits of HK$2,037,111 (equivalent to Rmb2,161,579 approximately) and Rmb10,433,084 placed in non-bank financial institutions in Hong Kong and the PRC respectively, the Group did not have any trust deposits, nor any time deposits with any non- bank financial institution in the PRC. Nearly all of the Group’s deposits have been placed with commercial banks in the PRC and the Group has not encountered any difficulty in the withdrawal of funds. Mr. Geng Xiaoping Mr. Fang Yunti Mr. Zhang Jingzhong Mr. Xuan Daoguang Non-executive Directors Ms. Zhang Luyun (appointed on March 1, 2003) Ms. Zhang Yang (appointed on March 13, 2002) Ms. Zhang Chunming (term expired on February 28, 2003) Mr. Xia Linzhang (resigned on March 13, 2002) Independent Non-executive Directors Mr. Tung Chee Chen Mr. Zhang Junsheng Dr. Hu Hung Lick, Henry (term expired on February 28, 2003) Mr. Zhang Liping (appointed on March 1, 2003) Zhejiang Expressway Company Limited REPORT OF THE DIRECTORS CHANGE IN DIRECTORS AND SENIOR MANAGEMENT DIRECTORS’ AND SUPERVISORS’ INTERESTS IN CONTRACTS Pursuant to an extraordinary general meeting held on February None of the Directors or Supervisors had any material interest, 11, 2003, the term of office for the existing Directors is three whether direct or indirect, in any contract of significance to years, with effect from March 1, 2003. At the same meeting, which the Company, its holding company or any of its Mr. Geng Xiaoping was elected as the Chairman of the subsidiaries and fellow subsidiaries was a party, at the end of Company, Mr. Tung Chee Chen was appointed as the Chairman the year or at any time during the year. of the Audit Committee and the Nomination and Remunerations Committee, and Mr. Fang Yunti was appointed as the General Manager of the Company. DIRECTORS’ AND SUPERVISORS’ INTERESTS IN SHARES DIRECTORS’ AND SUPERVISORS’ SERVICE CONTRACTS As at December 31, 2002, none of the Directors, Supervisors or their associates had any personal, family, corporate or other interests in any equity or debt securities of the Company or Each of the Directors and supervisors (“Supervisors”) of the any associated corporations (as defined in the SDI Ordinance) Company has entered into a ser vice agreement with the as recorded in the register maintained by the Company Company, with effect from March 1, 2003, for a term of three pursuant to Section 29 of the SDI Ordinance or as otherwise 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 39 years. Save as disclosed above, none of the Directors and Supervisors has entered into any service contract with the Company which is not terminable by the Company within one year without payment of compensation other than statutory compensation. notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transaction by Directors of Listed Companies. DIRECTORS’ AND SUPERVISORS’ RIGHTS TO SUBSCRIBE FOR SHARES OR DEBENTURES At no time during the year was the Company, its holding company or any of its subsidiaries, jointly-controlled entity, associates and fellow subsidiaries a party to any arrangement enabling any Directors or Supervisors or their spouses or children under the age of 18 to acquire benefits by means of the acquisition of shares in, or debentures of the Company or any other body corporate. No rights to subscribe for shares in, or debentures of the Company have been granted by the Company to, nor have any such rights been exercised by, any person during the year and up to the date of this report. PENSION SCHEME As required by the State regulations of the PRC, the Group participates in a defined contribution pension scheme organised Zhejiang Expressway Company Limited by local social security authorities. Under the scheme, all TAXATION OF THE UNITED KINGDOM employees are entitled to an annual pension equal to a fixed propor tion of the average basic salary amount within the geographical area of their last employment at their retirement date. The Group is required to make contributions to local social security authorities at rates ranging from 20% to 22.5% of the average basic salaries of the employees of the previous year within the geographical area where the employees are under employment with the Group. The Group has no obligation for the payment of pension benefits beyond such annual contributions to the registered insurance companies. When an employee leaves the scheme, the Group is not entitled to a refund of any contributions that it has previously made. Hence, no forfeited contribution was used by the Group to reduce the level of its contributions during the year. During the year, contributions to registered insurance companies made by the Group under the defined contribution retirement scheme amounted to Rmb6,534,000 (2001: Rmb6,900,000). MEDICAL INSURANCE SCHEME Medical expenses for employees of the Group were accounted for as part of the benefits provided by the Group in 2002 and the years before in accordance with relevant accounting rules and internal policies. Following the promulgation of employees’ basic medical schemes by local governments in Zhejiang Province starting from the second half of 2002, the Group is expected to enroll in these compulsory schemes in 2003. Judging from arrangements of the schemes, the Directors do not anticipate any significant impact of its participation in the scheme on the Group’s financial standing, specifically its An individual holder of H shares who is a resident and domiciled in the United Kingdom (the “UK”) will, in general, be liable to UK income tax on dividends received from the Company. Where such an individual receives dividends from the Company without withholding of taxes, the amount included as income for the purpose of computing his or her UK tax liability is the gross amount of the dividend and this is taxed at the appropriate marginal rate (currently 10% in the case of a basic rate for a lower rate taxpayer and 32.5% in the case of a higher rate taxpayer). Where tax is withheld from the dividend, credit will be given against UK income tax for any tax withheld from the dividend up to the amount of the UK income tax liability. The Company would assume responsibility for withholding tax at source within the PRC if such a withholding is required. The current UK-Chinese Double Taxation Agreement provides that the maximum withholding tax on dividends from Chinese resident companies paid to UK residents is 10% of the gross dividend. UK resident holders of H Shares who are individuals but not domiciled within the UK will only be liable to income tax on a dividend from the Company to the extent that the dividend is remitted to the UK. A holder of H Shares which is a UK tax resident company will, in general, be liable to UK corporation tax on dividends received from the Company, with double tax relief available for withholding tax suffered. In certain cases (not to be discussed here), a holder of H Shares which is a UK tax resident company may be entitled to relief for “underlying” tax paid by the consolidated income statement and consolidated balance sheet. Company or its subsidiaries. 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. Zhejiang Expressway Company Limited REPORT OF THE DIRECTORS AUDIT COMMITTEE The Company has an audit committee, which was established in accordance with the requirement of the Code, for the purpose of reviewing and providing supervision over the Group’s financial reporting process and internal controls. The audit committee comprises the three independent non- executive Directors and the two non-executive Directors. AUDITORS Ernst & Young will retire and a resolution for their reappointment as international auditors of the Company will be proposed at the forthcoming annual general meeting. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 41 ACCOMMODATION BENEFITS FOR EMPLOYEES According to relevant rules and regulations in the PRC, the Group and its employees are all required to make contributions to an accommodation fund to local social security authorities, On Behalf of the Board which are in propor tion to the salaries and wages of the employees at an average rate of 7%. There are no further obligations beyond the contribution to the accommodation fund organised by local social security authorities. Geng Xiaoping Chairman Hangzhou, Zhejiang Province, the PRC March 4, 2003 POST BALANCE SHEET EVENTS Details of the significant post balance sheet events of the Group are set out in note 41 to the financial statements. COMPLIANCE WITH THE CODE OF BEST PRACTICE Due to the non-availability of certain Directors, no full board meeting of the Directors was held by the Company during the year as opposed to the recommendation of no less than one such meeting every six months in paragraph 1 of the Code of Best Practice as set out in Appendix 14 of the Listing Rules (the “Code”). Except for the above, the Directors are of the opinion that the Company complied with the Code throughout the accounting period covered by the annual report. Zhejiang Expressway Company Limited R E P O RT O F T H E S U P E RV I S O RY C O M M I T T E E Dear shareholders: In compliance with the Company Law of the PRC, the Company’s Articles of Association and the Regulations of the Supervisory Committee, the Supervisory Committee earnestly discharged its supervisory duties. Main tasks undertaken by the Supervisory Committee during 2002 were to understand and supervise the legality and appropriateness of activities of The Supervisory Committee concluded that the Directors, General Manager and other senior management of the Company achieved continued growth in results in 2002, and laid a strong foundation for fur ther development of the Company by broadening its financing channels through the establishment of a level 1 ADR program and the issuance of domestic corporate bonds. the Directors, General Manager and other senior management The Supervisory Committee reviewed the financial statements of the Company in their business decision-making and daily of the Company for 2002 prepared by the Board for submission management processes, through a combination of site to the general meeting of the shareholders, and concluded inspections, attendance of meetings of the Board, as well as that the statements accurately reflected the Company’s par ticipating in major corporate events. The Supervisory operating results and asset position in 2002, and conformed Committee carefully examined the financial standing of the to relevant laws, regulations and the Company’s Articles of Company discussed and reviewed the financial statements and Association. Dividend payout ratio for 2002 was fur ther dividend distribution proposals to be submitted by the Board increased compared to 2001, providing satisfactory returns in to the annual general meeting of the Shareholders. cash to the shareholders. Zhejiang Expressway Company Limited REPORT OF THE SUPERVISORY COMMITTEE In the course of the Company’s business operations, the as representative for shareholders. In addition, Mr. Fang Zhexing members of the Board, General Manager and other senior was elected by the staff as the super visor representing management of the Company observed their fiduciary duties employees. The term of the third session of the Supervisory and worked diligently while exercising their rights or discharging Committee is for a period of three years, starting from March their duties. There were no incidents of abuse of power or 1, 2003. infringement of the interests of shareholders and employees. The term of the second session of the Supervisory Committee expired on February 28, 2003. At the extraordinary general meeting of the shareholders held on February 11, 2003, four of the five members of the third session of the Supervisory Committee were elected: Mr. Zheng Qihua (re-elected), Mr. Sun Xiaoxia (re-elected) and Mr. Jiang Shaozhong (newly elected) as independent supervisors, and I myself was re-elected Finally, on behalf of the supervisory committee, I would like to thank Mr. Ni Ciyun and Mr. Lu Fan, who no longer serve as supervisors of the Company. By the order of the Supervisory Committee Ma Kehua Chairman of the Supervisory Committee March 3, 2003 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 43 Zhejiang Expressway Company Limited R E P O RT O F T H E I N T E R N AT I O N A L AU D I TO R S To the members Zhejiang Expressway Co., Ltd. (Established in the People’s Republic of China with limited liability) We have audited the financial statements on pages 45 to 79 In our opinion, the financial statements give a true and fair which have been prepared in accordance with accounting view of the state of affairs of the Company and of the Group principles generally accepted in Hong Kong. These financial as at December 31, 2002 and of the profit and cash flows of statements are the responsibility of the Company’s directors. the Group for the year then ended and have been properly Our responsibility is to express an opinion on these financial prepared in accordance with the disclosure requirements of statements based on our audit. the Hong Kong Companies Ordinance. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company’s directors, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. Ernst & Young Certified Public Accountants Hong Kong March 4, 2003 Zhejiang Expressway Company Limited C O N S O L I DAT E D I N C O M E S TAT E M E N T TURNOVER Operating costs Gross profit Other revenue Administrative expenses Other operating expenses PROFIT FROM OPERATING ACTIVITIES Finance costs Share of profits of associates Share of profit/(loss) of a jointly-controlled entity PROFIT BEFORE TAX Tax PROFIT BEFORE MINORITY INTERESTS Minority interests NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS DIVIDENDS Interim Proposed final EARNINGS PER SHARE Notes 5 5 6 7 8 9 12 13 YEAR ENDED DECEMBER 31 2002 Rmb’000 2,168,078 2001 Rmb’000 1,722,517 (561,918) (392,535) 1,606,160 1,329,982 66,457 (95,209) (33,109) 216,690 (88,487) (18,236) 1,544,299 1,439,949 (163,224) 11,719 1,677 (215,346) 12,396 (1,459) 1,394,471 1,235,540 (400,952) 993,519 (103,067) (363,970) 871,570 (110,957) 890,452 760,613 (173,724) (390,880) (564,604) (130,293) (304,018) (434,311) 20.50 cents 17.51 cents 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 45 Zhejiang Expressway Company Limited C O N S O L I DAT E D B A L A N C E S H E E T Notes DECEMBER 31 2002 Rmb’000 2001 Rmb’000 NON-CURRENT ASSETS Fixed assets Interest in a jointly-controlled entity Interests in associates Expressway operating rights Long term investments Long term receivables Goodwill CURRENT ASSETS Short term investments Inventories Trade receivables Other receivables Cash and cash equivalents and time deposits CURRENT LIABILITIES Trade payables Profits tax payable Other taxes payable Other payables and accruals Interest-bearing bank and other loans Long-term bonds repayable within one year NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank and other loans Long term bonds Other long term liabilities Deferred tax MINORITY INTERESTS CAPITAL AND RESERVES Issued capital Reserves Proposed final dividend 14 16 17 18 19 20 21 19 22 23 24 25 26 27 28 29 30 33 34 35 12 Geng Xiaoping Director Fang Yunti Director Zhejiang Expressway Company Limited 12,014,986 54,464 159,829 214,645 2,867 — 106,798 12,553,589 858,114 2,022 14,367 128,672 949,070 1,952,245 207,166 109,289 15,724 214,955 1,681,553 200,000 2,428,687 12,031,012 54,082 156,909 223,345 32,867 9,030 19,810 12,527,055 1,012,186 1,274 54,219 63,778 819,026 1,950,483 240,818 95,229 23,219 157,326 1,620,778 — 2,137,370 (476,442) (186,887) 12,077,147 12,340,168 1,156,647 — — 240,920 1,397,567 977,789 9,701,791 4,343,115 4,967,796 390,880 9,701,791 1,208,231 200,000 8,694 131,533 1,548,458 1,502,629 9,289,081 4,343,115 4,641,948 304,018 9,289,081 C O N S O L I DAT E D S U M M A RY S TAT E M E N T O F C H A N G E S I N E Q U I T Y TOTAL EQUITY Balance at beginning of year Share premium shared from an associate Net profit from ordinary activities attributable to shareholders Dividends paid on ordinary shares Balance at end of year Note 35 YEAR ENDED DECEMBER 31 2002 Rmb’000 2001 Rmb’000 9,289,081 — 890,452 (477,742) 9,701,791 8,962,135 644 760,613 (434,311) 9,289,081 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 47 Zhejiang Expressway Company Limited C O N S O L I DAT E D C A S H F L OW S TAT E M E N T Notes 36(a) 36(b) NET CASH INFLOW FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Interest received Additions to fixed assets Additions to construction in progress Acquisition of additional interests in existing subsidiaries Winding up of a subsidiary Dividends from an associate Proceeds from disposal of fixed assets Exchange gains, net Decrease/(increase) in time deposits Decrease/(increase) in investments Net cash flow used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid on ordinary shares Dividends paid to minority interests New bank and other loans Repayment of bank and other loans Net cash used in financing activities NET DECREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances Time deposits with original maturity of less than three months when acquired YEAR ENDED DECEMBER 31 2002 Rmb’000 2001 Rmb’000 (Restated) 1,536,309 1,077,957 14,483 (29,574) (286,935) (689,813) (145) 8,339 2,641 1,121 (203,679) 82,812 (1,100,750) (477,742) (40,643) 4,070,361 (4,061,170) 59,869 (29,471) (441,630) (93,368) — 6,620 1,400 53,172 311,721 (646,780) (778,467) (434,311) (31,177) 3,113,850 (3,531,439) (509,194) (883,077) (73,635) (583,587) 739,926 666,291 1,323,513 739,926 489,863 176,428 666,291 434,771 305,155 739,926 Zhejiang Expressway Company Limited B A L A N C E S H E E T NON-CURRENT ASSETS Fixed assets Interests in subsidiaries Interest in a jointly-controlled entity Interests in associates Expressway operating rights Long term investments Long term receivables CURRENT ASSETS Short term investments Inventories Trade receivables Other receivables Cash and cash equivalents and time deposits CURRENT LIABILITIES Trade payables Profits tax payable Other taxes payable Other payables and accruals Interest-bearing bank and other loans NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank and other loans Deferred tax CAPITAL AND RESERVES Issued capital Reserves Proposed final dividend Notes DECEMBER 31 2002 Rmb’000 2001 Rmb’000 14 15 16 17 18 19 20 19 22 23 24 25 26 27 29 33 34 35 12 5,208,083 4,127,294 64,055 126,500 168,710 — — 9,694,642 569,787 844 7,891 43,024 357,959 979,505 162,641 32,849 6,752 121,862 895,000 5,202,986 3,617,048 64,359 126,500 175,644 30,000 9,030 9,225,567 715,876 610 54,196 58,640 333,420 1,162,742 84,269 50,429 10,225 89,288 990,500 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 49 1,219,104 1,224,711 (239,599) (61,969) 9,455,043 9,163,598 330,000 117,320 447,320 100,000 62,261 162,261 9,007,723 9,001,337 4,343,115 4,273,728 390,880 9,007,723 4,343,115 4,354,204 304,018 9,001,337 Geng Xiaoping Director Fang Yunti Director Zhejiang Expressway Company Limited N OT E S TO F I N A N C I A L S TAT E M E N T S 1. CORPORATE INFORMATION Zhejiang Expressway Co., Ltd. was established 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 People’s Republic of China (the “PRC”), the Company changed its business registration into a Sino-foreign joint stock limited company. On February 27, 2001, the trading of the H Shares of the Company on the Berlin Stock Exchange commenced following a secondary listing on the Unofficial Regulated Market of the exchange. 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 the ADRs representing the deposited H Shares of the Company effective. The registered office of the Company is located at 19/F, Zhejiang World Trade Centre, 15 Shuguang Road, Hangzhou, Zhejiang Province, the PRC. During the year, the Group was involved in the following principal activities: (a) the design, construction, operation, maintenance and management of high grade roads; and (b) the development and provision of certain ancillary services such as technical consultation, advertising, automobile servicing and fuel facilities. In the opinion of the Directors, the ultimate holding company of the Company is Zhejiang Communications Investment Group Co., Ltd. (the “Communications Investment Group”), a State-owned enterprise established in the PRC. Zhejiang Expressway Company Limited NOTES TO FINANCIAL STATEMENTS 2. IMPACT OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE (“SSAPs”) The following recently-issued and revised SSAPs have been adopted for the first time in the preparation of the current year’s consolidated financial statements: SSAP 1 (Revised) SSAP 11 (Revised) SSAP 15 (Revised) SSAP 33 SSAP 34 : : : : : “Presentation of financial statements” “Foreign currency translation” “Cash flow statements” “Discontinuing operations” “Employee benefits” These SSAPs prescribe new accounting measurement and disclosure practices. The major effects on the Group’s accounting policies and on the amounts disclosed in the financial statements of these SSAPs which have had a significant effect on the financial statements are summarised as follows: SSAP 1 (Revised) prescribes the basis for the presentation of financial statements and sets out guidelines for their structure and minimum requirements for the content thereof. The principal impact of the revision to this SSAP is that a consolidated summary statement of changes in equity is now presented on page 47 of the financial statements in place of the consolidated statement of recognised gains and losses that was previously required. SSAP 11 (Revised) prescribes the basis for the translation of foreign currency transactions in the financial statements. The principal impact of the revision of this SSAP is that the profit and loss accounts of overseas subsidiaries are translated at the weighted average exchange rate for the year, rather than translated at the applicable rates of exchange ruling at the balance sheet date as was previously required. Since the Company does not have overseas subsidiaries, the adoption of the SSAP has no material impact on the financial statements. SSAP 15 (Revised) prescribes the format for the cash flow statement. The principal impact of the revision of this SSAP is that cash flows are now presented under three headings, that is, cash flows from operating, investing and financing activities, instead of the five headings previously required. The format of the cash flow statement set out on page 48 of the financial statements and the notes thereto have been revised in accordance with the new requirements. SSAP 33 prescribes the basis for reporting information about discontinuing/discontinued operations. The adoption of the SSAP has no impact on the financial statements. SSAP 34 prescribes the recognition and measurement criteria to apply to employee benefits, together with the required disclosures in respect thereof. The adoption of this SSAP has resulted in no change to the previously adopted accounting treatments for employee benefits. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 51 Zhejiang Expressway Company Limited 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PREPARATION These financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting Practice, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, modified with respect to the measurement of investments in securities, as further explained below. BASIS OF CONSOLIDATION The consolidated financial statements include the audited financial statements of the Company and its subsidiaries for the year ended December 31, 2002. The results of subsidiaries acquired or disposed of during the year are consolidated from or to their effective dates of acquisition or disposal, respectively. All significant intercompany transactions and balances are eliminated on consolidation. SUBSIDIARIES A subsidiary is a company whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities. Investments in subsidiaries are stated at cost less any impairment losses. JOINTLY-CONTROLLED ENTITIES A jointly-controlled entity is a joint venture company which is subject to joint control, resulting in none of the participating parties having unilateral control over the economic activity of the jointly-controlled entity. The Group’s share of the post-acquisition results and reserves of jointly-controlled entities is included in the consolidated income statement and consolidated reserves, respectively. The Group’s interests in jointly-controlled entities are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting less any impairment losses. The results of jointly-controlled entities are included in the Company’s income statement to the extent of dividends received and receivable. The Company’s interests in jointly-controlled entities are treated as long term assets and are stated at cost less any impairment losses. Zhejiang Expressway Company Limited NOTES TO FINANCIAL STATEMENTS 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) ASSOCIATES An associate is a company, not being a subsidiary or a joint venture, in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence. The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated income statement and consolidated reserves, respectively. The Group’s interests in associates are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses. The results of associates are included in the Company’s income statement to the extent of dividends received and receivable. The Company’s interests in associates are treated as long term assets and are stated at cost less any impairment losses. GOODWILL Goodwill arising on the acquisition of subsidiaries, associates and jointly-controlled entities represents the excess of the cost of the acquisition over the Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition. Goodwill arising on acquisition is recognised in the consolidated balance sheet as an asset and amortised on the straight-line basis over its estimated useful life of ten years. In the case of associates and jointly-controlled entities, any unamortised goodwill is included in the carrying amount thereof, rather than as a separately identified asset on the consolidated balance sheet. Prior to January 1, 2001, goodwill arising on acquisitions was eliminated against consolidated reserves in the year of acquisition. Upon SSAP 30 becoming effective, the Group adopted the transitional provision of SSAP 30 that permits goodwill on acquisitions which occurred prior to January 1, 2001, to remain eliminated against consolidated reserves. On disposal of subsidiaries, associates or jointly-controlled entities, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of goodwill which remains unamortised and any relevant reserves, as appropriate. Any attributable goodwill previously eliminated against consolidated reserves at the time of acquisition is written back and included in the calculation of the gain or loss on disposal. The carrying amount of goodwill, including goodwill remaining eliminated against consolidated reserves, is reviewed annually and written down for impairment when it is considered necessary. A previously recognised impairment loss for goodwill is not reversed unless the impairment loss was caused by a specific external event of an exceptional nature that was not expected to recur, and subsequent external events have occurred which have reversed the effect of that event. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 53 Zhejiang Expressway Company Limited 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) FIXED ASSETS AND DEPRECIATION Fixed assets, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price, costs transferred from construction in progress and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after fixed assets have been put into operation, such as repairs and maintenance and overhaul costs, is normally charged to the income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an additional cost of that fixed asset. Depreciation of expressways and bridges is provided by using the sinking fund method whereby the aggregate annual depreciation amounts, compounded at average rates ranging from 6.11% to 8.77% per annum, up to the expiry of the underlying 30-year expressway concession period, will be equal to the total cost of the expressways and bridges. Amortisation of land is provided on a straight-line basis to write off the cost of the land use rights over the underlying 30-year expressway concession period. Depreciation of fixed assets, other than expressways, bridges and land, is provided on a straight-line basis to write off the cost of the assets, less their estimated residual values, being 3% of the cost, over their estimated useful lives. The principal annual rates used for this purpose are as follows: Toll stations and ancillary facilities Communications and signalling equipment Motor vehicles Machinery and equipment Estimated useful life 30 years 10 years 8 years 5 - 8 years Annual depreciation rate 3.2% 9.7% 12.1% 12.1 - 19.4% The gain or loss on disposal or retirement of a fixed asset recognised in the income statement is the difference between the net sales proceeds and the carrying amount of the relevant asset. CONSTRUCTION IN PROGRESS Construction in progress represents costs incurred in the construction of expressways and bridges, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds, during the period of construction, installation and testing. Construction in progress is reclassified as fixed assets when completed and ready for use. Zhejiang Expressway Company Limited NOTES TO FINANCIAL STATEMENTS 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) IMPAIRMENT OF ASSETS An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price. An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the income statement in the period in which it arises, unless the asset is carried at a revalued amount, when the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is credited to the income statement in the period in which it arises, unless the asset is carried at a revalued amount, when the reversal of the impairment losses is accounted for in accordance with the relevant accounting policy for that revalued asset. EXPRESSWAY OPERATING RIGHTS Expressway operating rights represent the rights to operate the expressways and are stated at cost less accumulated amortisation and any impairment losses. Amortisation is provided on a straight-line basis over the periods of the expressway operating rights granted to the Company 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 55 and its subsidiaries. LONG TERM INVESTMENTS Long term investments are non-trading investments in listed and unlisted securities intended to be held on a long term basis. Held-to-maturity securities are stated at cost plus or minus the cumulative amortisation of the difference between the purchase price and the maturity amount, less any provision for impairment losses on an individual investment basis. The provision is recognised as an expense immediately. The profit or loss on disposal of a held-to-maturity security is accounted for in the period in which the disposal occurs and is the difference between the net sales proceeds and the carrying amount of the security. Unlisted equity securities are stated at cost, less any provisions for impairment losses on an individual investment basis. The provision is recognised as an expense immediately. The profit or loss on disposal of an unlisted security is accounted for in the period in which the disposal occurs and is the difference between the net sales proceeds and the carrying amount of the security. Zhejiang Expressway Company Limited 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) SHORT TERM INVESTMENTS Short term investments are investments in securities held for trading purposes and are stated at their fair values on the basis of their quoted market prices at the balance sheet date, on an individual investment basis. The gains or losses arising from changes in the fair value of a security are credited or charged to the income statement for the period in which they arise. REVENUE RECOGNITION Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases: (a) toll revenue, net of any applicable revenue taxes, when received; (b) from the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyers, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold; (c) from the rendering of services, based on the percentage of completion basis, provided that the revenue and the costs incurred as well as the estimated costs to completion can be measured reliably. The stage of completion of a transaction associated with the rendering of services is established by reference to the costs incurred to date as compared to the total costs to be incurred under the transaction; (d) rental income, on a time proportion basis over the lease terms; (e) interest income, on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable; and (f) dividends, when the shareholders’ right to receive payment has been established. TAX PRC income tax is provided at rates applicable to enterprises in the PRC on income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, based on existing PRC income tax legislation, practices and interpretations thereof. Deferred tax is provided, using the liability method, on all significant timing differences to the extent it is probable that the liability will crystallise in the foreseeable future. A deferred tax asset is not recognised until its realisation is assured beyond reasonable doubt. Zhejiang Expressway Company Limited NOTES TO FINANCIAL STATEMENTS 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) FOREIGN CURRENCY TRANSACTIONS The financial records of the Company and its subsidiaries are maintained and the financial statements are stated in Renminbi (“Rmb”). Foreign currency transactions are recorded at the applicable rates of exchange ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange ruling at that date. Exchange differences are dealt with in the income statement unless such exchange differences relate to funds borrowed specifically for the financing of the construction of expressways and bridges, in which case they are capitalised to the extent that they can be regarded as an adjustment to interest costs. CAPITALISATION OF BORROWING COSTS Borrowing costs directly attributable to the construction of expressways, tunnels and bridges are capitalised as part of the cost of those assets when it is probable that they will result in future economic benefits to the Group and the costs can be measured reliably. Other borrowing costs are recognised as an expense in the period in which they are incurred. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z The amount of borrowing costs capitalised is determined with reference to the actual borrowing costs incurred on funds 57 borrowed specifically for the construction of expressways, tunnels and bridges during the period, less any investment income arising from the temporary investment of those borrowings. Capitalisation of borrowing costs on funds borrowed specifically for the construction of expressway sections ceases when the construction of such expressway sections is substantially completed and the expressways are capable of commencing toll operations. OPERATING LEASES Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Rentals applicable to such operating leases are charged to the income statement on a straight-line basis over the lease terms. INVENTORIES Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis. Net realisable value is based on estimated selling prices less any estimated costs expected to be incurred to completion and disposal. DIVIDENDS Interim and final dividends proposed by the directors are classified as a separate allocation of retained earnings within capital and reserves in the balance sheet, until they have been approved by the shareholders in a general meeting. When these dividends are approved by the shareholders and declared, they are recognised as a liability. Zhejiang Expressway Company Limited 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) RELATED PARTIES Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subjected to common control or common significant influence. Related parties may be individuals or corporate entities. CASH EQUIVALENTS For the purpose of the consolidated cash flow statement, cash equivalents represent short term highly liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired. For the purpose of balance sheet classification, cash equivalents represent assets similar in nature to cash, which are not restricted as to use. 4. SEGMENT INFORMATION In accordance with the Group’s internal financial reporting, the Group has determined that business segments are its primary reporting format. During the year, the entire turnover and contribution to profit from operating activities of the Group were derived from the Zhejiang Province in the PRC. Accordingly, a further analysis of the turnover and contribution to profit from operating activities by geographical area is not presented. BUSINESS SEGMENTS The Group’s operating businesses are organised and managed separately, according to the nature of services provided, with each segment representing a strategic business unit that serves different markets: — Toll operation represents the design, construction, operation and management of high grade roads and the collection of the expressway tolls. — Advertising business represents the design and rental of advertising billboards along the expressways. — Road maintenance represents the maintenance of expressways and roads, including the cleaning of the road surface, minor repairs to the lanes, the cleaning of the gutters and sewers, grass mowing, afforestation and the maintenance of buildings, equipment and facilities provided to third parties. — Ancillary businesses mainly represent the sale of food, restaurant servicing, automobile servicing, as well as oil stations. Zhejiang Expressway Company Limited NOTES TO FINANCIAL STATEMENTS 4. SEGMENT INFORMATION (Continued) Tolls 2002 Rmb’000 2001 Rmb’000 Advertising 2002 Rmb’000 2001 Rmb’000 Road maintenance Ancillary businesses 2002 Rmb’000 2001 Rmb’000 2002 Rmb’000 2001 Rmb’000 Consolidated 2002 Rmb’000 2001 Rmb’000 GROUP Segment revenue: Turnover Other revenue 2,069,060 57,623 1,663,362 209,319 26,217 2,955 Total revenue 2,126,683 1,872,681 29,172 Segment results 1,518,584 1,425,341 11,941 — — 1,677 (1,459) — — Finance costs Share of profits of associates Share of profit/(loss) of a jointly-controlled entity Profit before tax Tax Profit before minority interests Minority interests Net profit from ordinary activities attributable to shareholders Segment assets Interests in associates Interest in a jointly-controlled entity Goodwill Total assets 21,190 72 21,262 11,084 — — 1,670 2,374 4,044 4,617 3,511 8,128 71,131 3,505 33,348 3,788 2,168,078 1,722,517 216,690 66,457 74,636 37,136 2,234,535 1,939,207 (683) (976) 14,457 4,500 1,544,299 1,439,949 (163,224) (215,346) — 11,719 12,396 11,719 12,396 — — — 1,677 (1,459) — — 1,394,471 1,235,540 (363,970) (400,952) 993,519 (103,067) 871,570 (110,957) 890,452 760,613 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 59 14,039,204 — 14,089,709 — 25,717 — 24,947 — 45,960 — 42,225 — 73,862 159,829 89,856 14,184,743 14,246,737 156,909 159,829 156,909 54,464 106,798 54,082 19,810 — — — — — — — — — — — — 54,464 106,798 54,082 19,810 14,200,466 14,163,601 25,717 24,947 45,960 42,225 233,691 246,765 14,505,834 14,477,538 Segment liabilities Deferred tax 3,537,924 240,920 3,514,937 131,533 Total liabilities 3,778,844 3,646,470 4,590 — 4,590 5,416 — 5,416 10,615 — 10,615 6,132 — 6,132 32,205 — 27,810 — 3,585,334 3,554,295 131,533 240,920 32,205 27,810 3,826,254 3,685,828 200,014 546,401 7,884 7,975 2,336 1,190 1,455 187 211,689 555,753 239,282 208,142 2,240 — 1,692 — 3,832 — 4,398 — 2,706 — 1,093 248,060 215,325 — 794 7,500 Other segment information: Capital expenditure Depreciation and amortisation Write-off of bad debts 794 7,500 Zhejiang Expressway Company Limited 5. TURNOVER AND REVENUE Turnover mainly represents toll income from the operation of expressways, the value of advertising services rendered, and the value of road maintenance services rendered, net of relevant revenue taxes. An analysis of turnover and revenue is as follows: Toll income Advertising income Road maintenance income Others Less: Revenue taxes Turnover Income on investments Interest income Rental income Trailer income Exchange gains, net Others Other revenue 2002 Rmb’000 2,184,197 27,742 1,704 73,043 2,286,686 (118,608) 2001 Rmb’000 1,756,265 22,462 4,649 34,465 1,817,841 (95,324) 2,168,078 1,722,517 18,448 17,063 14,457 10,192 1,121 5,176 66,457 105,522 41,503 6,726 8,278 53,172 1,489 216,690 2,234,535 1,939,207 The Company and its subsidiaries are subject to the Business Tax, levied at 5% on toll income and 3% to 5% on other services income. In addition, the subsidiaries are subject to the following types of revenue taxes and surcharge: – – – City Development Tax, levied at 1% to 7% of Business Tax; Education Supplementary Tax, levied at 3.5% to 4% of Business Tax; and Culture and Education Fees, levied at 3% on advertising income. Zhejiang Expressway Company Limited 6. PROFIT FROM OPERATING ACTIVITIES The Group’s profit from operating activities is arrived at after charging/(crediting): Depreciation Operating lease rentals on land and buildings Auditors’ remuneration Staff costs: Wages and salaries Pension contributions Amortisation of expressway operating rights* Amortisation of goodwill** Write-off of bad debts Loss on winding up of a subsidiary Loss on disposal of fixed assets Unrealised gain on revaluation of short term listed investments Net rental income Exchange gains, net Interest income Income on investments NOTES TO FINANCIAL STATEMENTS 2002 Rmb’000 223,748 902 1,975 86,733 6,534 8,700 15,612 794 205 1,040 9,571 (14,457) (1,121) (17,063) (18,448) 2001 Rmb’000 205,582 1,364 3,709 75,773 6,900 8,700 1,043 7,500 — 4,313 12,559 (6,726) (53,172) (41,503) (105,522) * The amortisation of expressway operating rights for the year is included in administrative expenses on the face of the income statement. ** The amortisation of goodwill for the year is included in other operating expenses on the face of the income statement. 7. FINANCE COSTS Interest on bank loans and other loans wholly repayable within five years Interest on other loans Total interest Less: interest capitalised 2002 Rmb’000 2001 Rmb’000 137,420 26,279 163,699 (475) 163,224 188,400 29,645 218,045 (2,699) 215,346 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 61 Zhejiang Expressway Company Limited 8. TAX No Hong Kong profits tax has been provided as the Group had no taxable profits in Hong Kong during the year. The Group was subject to Corporate Income Tax (“CIT”) levied at a rate of 33% of taxable income based on income for financial reporting purposes prepared in accordance with the laws and regulations in the PRC. Group: Tax charged Tax refunded/refundable Deferred Share of tax attributable to associates Share of deferred tax attributable to an associate Share of deferred tax attributable to a jointly-controlled entity Tax charge for the year Note 33 2002 Rmb’000 2001 Rmb’000 367,997 (79,133) 288,864 109,387 5,004 (3,294) 991 400,952 327,718 (68,791) 258,927 88,432 17,528 (1,951) 1,034 363,970 During the year, according to an approval from the Zhejiang Provincial Local Tax Bureau, Zhejiang Shangsan Expressway Co., Ltd. (“Shangsan Co”), one of the Company’s subsidiaries, was entitled to a 50% CIT exemption for the year ended December 31, 2001 amounted to Rmb16,749,000 under the category of “Enterprise providing employment opportunities to redundant city and country workers” as defined in the relevant national tax rules. In addition, according to a notice issued by the Jiaxing Finance Bureau (the “JFB”), one of the Company’s subsidiaries, Zhejiang Jiaxing Expressway Co., Ltd. (“Jiaxing Co”), received from the JFB an amount of Rmb71,290,000, representing a refund in relation to the CIT of Jiaxing Co for the period from the fourth quarter of 2000 to December 2001. Pursuant to a directive issued by the Zhejiang Provincial People’s Government in 1997, the Company was entitled to a refund from the Zhejiang Finance Bureau of an amount equal to 18% of its taxable income in respect of the CIT paid to the Zhejiang Tax Bureau. According to a directive from the Ministry of Finance on October 13, 2000, the Company was entitled to the tax refund until December 31, 2001. As Huajian Transportation Economic Development Center (“Huajian”), a state-owned enterprise under the China Merchants Group, became a substantial shareholder of the Company, the CIT that the Company paid has been divided into the national portion and the Zhejiang portion. The national portion of the total CIT paid, being Huajian’s portion of the total domestic shares (i.e. 16.39%) according to relevant regulations issued by the Ministry of Finance, is no longer entitled to the 18% refund granted by the Zhejiang Provincial People’s Government. Nevertheless, according to a notice issued by the State Council on December 31, 2001, with effect from January 1, 2002, CIT payments are divided into two portions on a 50/50 basis - the national portion and the local portion. Since the CIT in relation to the fourth quarter of 2001 was paid in 2002, the Company was only entitled to the 9% refund from the Zhejiang Finance Bureau in respect of the CIT for the fourth quarter of 2001. The CIT refund of Rmb8,906,000 recognised in year 2001 became not recoverable and has been recorded as tax charge for 2002. There was no material unprovided deferred tax in respect of the year (2001: Nil). Zhejiang Expressway Company Limited NOTES TO FINANCIAL STATEMENTS 9. NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS The net profit from ordinary activities attributable to shareholders for the year ended December 31, 2002 dealt with in the financial statements of the Company was Rmb484,128,000 (2001: Rmb544,670,000). 10. DIRECTORS’ AND SUPERVISORS’ REMUNERATION Directors’ and supervisors remuneration disclosed pursuant to the Listing Rules and Section 161 of the Hong Kong Companies Ordinance is as follows: Fees Other emoluments: Salaries, allowances and benefits in kind Bonuses paid and payable Pension scheme contributions 2002 Rmb’000 2001 Rmb’000 — 1,784 608 9 2,401 — 1,641 552 9 2,202 Salaries, allowances and benefits in kind include HK$152,000 (2001: HK$150,000), HK$150,000 (2001: HK$150,000) and Rmb36,000 (2001: Rmb20,000) payable to the three independent non-executive directors respectively. There were no other emoluments payable to the independent non-executive directors during the year (2001: Nil). The remuneration of the directors and supervisors fell within the following band: Nil to HK$1,000,000 Number of directors and supervisors 2002 10 2001 9 There was no arrangement under which a director or a supervisor waived or agreed to waive any remuneration during the year. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 63 Zhejiang Expressway Company Limited 11. FIVE HIGHEST PAID EMPLOYEES Salaries, allowances and benefits in kind Bonuses paid and payable Pension scheme contributions 2002 Rmb’000 1,614 662 11 2,287 2001 Rmb’000 1,394 598 11 2,003 The five highest paid employees during the year included four (2001: four) directors, details of whose remuneration are set out in note 10 above, as well as a non-director employee, whose remuneration for the year was less than HK$1,000,000. 12. DIVIDENDS Interim Proposed final 2002 2001 2002 2001 Per ordinary share Rmb 0.04 0.09 0.13 Rmb 0.03 0.07 0.10 Rmb’000 173,724 390,880 564,604 Rmb’000 130,293 304,018 434,311 The proposed final dividend for the year is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting. 13. EARNINGS PER SHARE The calculation of basic earnings per share is based on the net profit from ordinary activities attributable to shareholders for the year of Rmb890,452,000 (2001: Rmb760,613,000) and the 4,343,114,500 shares (2001: 4,343,114,500 shares) in issue during the year. Diluted earnings per share for the years ended December 31, 2002 and 2001 have not been calculated as no diluting event existed during these years. Zhejiang Expressway Company Limited 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 65 NOTES TO FINANCIAL STATEMENTS Machinery Motor vehicles equipment Rmb’000 Rmb’000 and Construction in progress Rmb’000 Total Rmb’000 14. FIXED ASSETS GROUP COST: Expressways and bridges Rmb’000 Land Rmb’000 Toll Communi- cations stations and and ancillary signalling facilities equipment Rmb’000 Rmb’000 At beginning of year: Winding up of a subsidiary Additions Transfers Write-off Disposals 527,628 — 4,182 — — — 11,182,630 — 3,113 19,370 (44,160) — 371,598 — 35,435 6,202 — (3,691) 139,788 — 6,808 56,110 — (30) 77,931 — 3,687 14,304 — (170) 93,362 (350) 6,011 5,767 — (403) 296,967 — 152,453 (101,753) — (243) 12,689,904 (350 ) 211,689 — (44,160 ) (4,537 ) At December 31, 2002 531,810 11,160,953 409,544 202,676 95,752 104,387 347,424 12,852,546 ACCUMULATED DEPRECIATION AND IMPAIRMENT: At beginning of year Winding up of a subsidiary Provided during the year Write-off Disposals 70,929 — 17,604 — — 462,634 — 142,570 (44,160) — 26,305 — 13,487 — (471) 36,438 — 25,854 — (11) 32,789 — 11,915 — (165) 29,797 (64) 12,318 — (209) At December 31, 2002 88,533 561,044 39,321 62,281 44,539 41,842 — — — — — — 658,892 (64 ) 223,748 (44,160 ) (856 ) 837,560 NET BOOK VALUE: At December 31, 2002 443,277 10,599,909 370,223 140,395 51,213 62,545 347,424 12,014,986 At December 31, 2001 456,699 10,719,996 345,293 103,350 45,142 63,565 296,967 12,031,012 COMPANY COST: At January 1, 2002 Additions Transfers Disposals 350,384 — — — 4,712,616 — — — 110,017 35,956 1,021 — 119,477 1,318 — (30) 51,575 2,784 — (170) 53,648 1,888 — (126) 223,102 75,739 (1,021) (69) 5,620,819 117,685 — (395 ) At December 31, 2002 350,384 4,712,616 146,994 120,765 54,189 55,410 297,751 5,738,109 ACCUMULATED DEPRECIATION: At January 1, 2002 Provided during the year Disposals 52,998 11,667 — 270,658 68,090 — At December 31, 2002 64,665 338,748 12,523 4,830 — 17,353 34,870 14,600 (6) 27,352 6,000 (165) 19,432 7,284 (107) 49,464 33,187 26,609 — — — — 417,833 112,471 (278 ) 530,026 NET BOOK VALUE: At December 31, 2002 285,719 4,373,868 129,641 71,301 21,002 28,801 297,751 5,208,083 At December 31, 2001 297,386 4,441,958 97,494 84,607 24,223 34,216 223,102 5,202,986 The fixed assets are mainly located in the PRC. The Group’s land included above are held under long-term lease. Zhejiang Expressway Company Limited 15. INTERESTS IN SUBSIDIARIES Unlisted shares, at cost Due from subsidiaries Due to subsidiaries Company 2002 Rmb’000 4,338,486 4,587 (215,779) 4,127,294 2001 Rmb’000 3,648,673 2,375 (34,000) 3,617,048 The amounts due from/to subsidiaries are unsecured, interest-free and have no fixed terms of repayment. Particulars of the Company’s subsidiaries, all of which are directly held, are as follows: Names of subsidiaries Date and place of registration Registered capital Rmb Percentage of equity attributable to the Company Principal activities Zhejiang Yuhang Expressway Co., Ltd. Note 1 75,223,000 51 Construction and management of the Yuhang (“Yuhang Co”) Section of the Shanghai-Hangzhou Expressway Zhejiang Jiaxing Expressway Co., Ltd. Note 2 1,859,200,000 99.993 Construction and management of the Jiaxing (“Jiaxing Co”) Section of the Shanghai-Hangzhou Expressway Zhejiang Shangsan Expressway Co., Ltd. Note 3 2,400,000,000 71.625 Construction and management of the Shangsan (“Shangsan Co”) Expressway Zhejiang Expressway Advertising Co., Ltd. Note 4 1,000,000 70 Advertising (“Advertising Co”) Zhejiang Gaotong Stone Development Note 5 5,000,000 80 Manufacturing, designing and selling of stone Co., Ltd. (“Gaotong Co”) and quarry materials 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. 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: Advertising Co was established on June 1, 1998 in the PRC as a limited liability company. Note 5: Gaotong Co was liquidated during the year. All of the Company’s subsidiaries are operating in the PRC. Zhejiang Expressway Company Limited NOTES TO FINANCIAL STATEMENTS 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 67 16. INTEREST IN A JOINTLY-CONTROLLED ENTITY Unlisted shares, at cost Share of net assets other than goodwill Amount due to a jointly-controlled entity Group 2002 Rmb’000 — 55,409 (945) 54,464 2001 Rmb’000 — 54,723 (641) 54,082 Company 2002 Rmb’000 65,000 — (945) 64,055 2001 Rmb’000 65,000 — (641) 64,359 The amount due to a jointly-controlled entity is unsecured, interest-free and has no fixed terms of repayment. Particulars of the jointly-controlled entity, which is directly held by the Company, are as follows: Name Business structure Place of registration and operations Ownership interest Percentage of Voting power Profit sharing Hangzhou Shida Corporate The PRC 50 50 50 Expressway Co., Ltd. Principal activities Construction and operation of Shiqiao-Dajing Road 17. INTERESTS IN ASSOCIATES Unlisted shares, at cost Share of net assets other than goodwill Amount due to an associate Group Company 2002 Rmb’000 — 159,829 — 159,829 2001 Rmb’000 — 158,159 (1,250) 156,909 2002 Rmb’000 126,500 — — 126,500 2001 Rmb’000 126,500 — — 126,500 The amount due to an associate is unsecured, interest-free and has no fixed terms of repayment. The Group’s share of the post-acquisition accumulated reserves of the associates as at December 31, 2002 was Rmb33,329,000 (2001: Rmb31,659,000). Particulars of the associates, which are directly held by the Company, are as follows: Name Business structure Place of registration and operations Percentage of equity attributable to the Group 2002 2001 Principal activities Zhejiang Expressway Petroleum Corporate The PRC 50 50 Construction and operation of gas Development Co., Ltd. stations and the sale of petroleum products JoinHands Technology Co., Ltd. Corporate The PRC 27.58 27.58 Providing logistic management and anti-counterfeiting systems in the PRC The financial statements of the above associates are coterminous with those of the Group. The consolidated financial statements have been adjusted for material transactions between the associates and Group companies. Zhejiang Expressway Company Limited 18. EXPRESSWAY OPERATING RIGHTS Cost: At January 1, 2002 and December 31, 2002 Accumulated amortisation: At January 1, 2002 Provided during the year At December 31, 2002 Net book value: At December 31. 2002 At December 31, 2001 19. INVESTMENTS LONG TERM INVESTMENTS Held-to-maturity securities, at amortised cost Unlisted equity investments, at cost Provisions for impairment of unlisted equity investments SHORT TERM INVESTMENTS Listed in the PRC, at amortised cost - Held-to-maturity securities Listed in the PRC, at market value - Government bonds - Convertible bonds - Close-end equity funds - Open-end equity funds - Enterprise bonds - Equity interests Group Rmb’000 Company Rmb’000 261,000 208,000 37,655 8,700 46,355 214,645 223,345 Group 2002 Rmb’000 2001 Rmb’000 2002 Rmb’000 Company — 3,644 3,644 (777) 2,867 30,000 8,650 38,650 (5,783) 32,867 — — — — — 32,356 6,934 39,290 168,710 175,644 2001 Rmb’000 30,000 — 30,000 — 30,000 Group 2002 Rmb’000 2001 Rmb’000 2002 Rmb’000 2001 Rmb’000 Company 30,000 726,764 — 51,754 — 10,000 39,596 828,114 858,114 — 30,000 — 733,724 160,614 97,810 20,038 — — 1,012,186 1,012,186 504,104 — 18,169 — — 17,514 539,787 569,787 562,848 101,078 51,950 — — — 715,876 715,876 The market values of the Group’s and the Company’s short term investments at the date of approval of these financial statements were approximately Rmb841,662,000 and Rmb547,191,000, respectively. Zhejiang Expressway Company Limited 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 69 20. LONG TERM RECEIVABLES Interest receivable in respect of the held-to-maturity securities 21. GOODWILL NOTES TO FINANCIAL STATEMENTS Group and Company 2002 Rmb’000 — 2001 Rmb’000 9,030 The amounts of the goodwill capitalised as an asset or recognised in the consolidated balance sheet, arising from the acquisition of subsidiaries, are as follows: Cost: At January 1, 2002 Acquisition of additional interests in subsidiaries during the year At December 31, 2002 Accumulated amortisation: At January 1, 2002 Provided during the year At December 31, 2002 Net book value: At December 31, 2002 At December 31, 2001 Group Rmb’000 20,853 102,600 123,453 1,043 15,612 16,655 106,798 19,810 The Group has adopted the transitional provision of SSAP 30 which permits goodwill and negative goodwill in respect of acquisitions which occurred prior to January 1, 2001 to remain eliminated against consolidated reserves or credited to the capital reserve, respectively. The amount of goodwill remaining in consolidated reserves, arising from the acquisition of subsidiaries, was Rmb352,860,000 as at December 31, 2002. The amount of goodwill is stated at cost which arose in prior years. 22. TRADE RECEIVABLES An aged analysis of the trade receivables as at the balance sheet date, based on invoice date, is as follows: Within 1 year 1 to 2 years Group Company 2002 Rmb’000 11,720 2,647 14,367 2001 Rmb’000 44,918 9,301 54,219 2002 Rmb’000 5,244 2,647 7,891 2001 Rmb’000 44,895 9,301 54,196 Zhejiang Expressway Company Limited 23. OTHER RECEIVABLES Prepayments Deposits and other debtors Profits tax refundable Group Company 2002 Rmb’000 1,830 126,842 — 128,672 2001 Rmb’000 30,808 10,225 22,745 63,778 2002 Rmb’000 294 42,730 — 43,024 24. CASH AND CASH EQUIVALENTS AND TIME DEPOSITS Cash and bank balance Time deposits with original maturity of less than three months when acquired Time deposits with original maturity over three months when acquired 25. TRADE PAYABLES Group Company 2002 Rmb’000 562,463 103,828 282,779 949,070 2001 Rmb’000 434,771 305,155 79,100 819,026 2002 Rmb’000 182,830 43,742 131,387 357,959 An aged analysis of the trade payables as at the balance sheet date, based on invoice date, is as follows: Within 1 year 1 to 2 years 2 to 3 years Over 3 years 26. OTHER PAYABLES AND ACCRUALS Accruals Other liabilities Amounts due to related parties Amount due to the holding company Notes 31 32 Group Company 2002 Rmb’000 200,181 4,863 1,901 221 207,166 2001 Rmb’000 113,793 126,796 229 — 240,818 2002 Rmb’000 158,859 2,778 1,004 — 162,641 Group Company 2002 Rmb’000 58,510 141,695 12,151 2,599 214,955 2001 Rmb’000 42,566 100,010 12,151 2,599 157,326 2002 Rmb’000 12,735 96,976 12,151 — 121,862 2001 Rmb’000 30,028 5,867 22,745 58,640 2001 Rmb’000 137,556 137,824 58,040 333,420 2001 Rmb’000 82,711 1,550 8 — 84,269 2001 Rmb’000 10,814 66,323 12,151 — 89,288 Zhejiang Expressway Company Limited 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 71 NOTES TO FINANCIAL STATEMENTS 27. INTEREST-BEARING BANK AND OTHER LOANS Current portion of bank and other loans 29 Note Group Company 2002 Rmb’000 1,681,553 2001 Rmb’000 1,620,778 2002 Rmb’000 895,000 2001 Rmb’000 990,500 28. LONG-TERM BONDS PAYABLE WITHIN ONE YEAR Long term bonds Group Company 2002 Rmb’000 200,000 2001 Rmb’000 — 2002 Rmb’000 — 2001 Rmb’000 — The bonds are unsecured, bearing interest at 3.78% per annum and are payable in 2003 upon maturity. 29. INTEREST-BEARING BANK AND OTHER LOANS Group Company Note Bank loans, unsecured Bank loans, secured Other loans, unsecured Bank loans repayable: Within one year In the second year In the third to fifth years, inclusive Other loans repayable: Within one year In the second year In the third to fifth years, inclusive Beyond five years Portion classified as current liabilities 27 2002 Rmb’000 1,875,000 — 963,200 2,838,200 1,545,000 — 330,000 1,875,000 136,553 82,441 268,623 475,583 963,200 2,838,200 (1,681,553) 2001 Rmb’000 1,655,500 — 1,173,509 2,829,009 1,510,500 130,000 15,000 1,655,500 110,278 76,524 420,968 565,739 1,173,509 2,829,009 (1,620,778) 2002 Rmb’000 1,075,000 150,000 — 2001 Rmb’000 1,090,500 — — 1,225,000 1,090,500 895,000 — 330,000 990,500 100,000 — 1,225,000 1,090,500 — — — — — 1,225,000 (895,000) — — — — — 1,090,500 (990,500) 100,000 Long term portion 1,156,647 1,208,231 330,000 Except for the Company’s bank loans of Rmb150,000,000 which are guaranteed by its subsidiary, the other bank loans are unsecured and bear interest at rates ranging from 4.536% to 4.941% per annum. The other loans are unsecured and bearing interest at rates ranging from 3.000% to 5.522% per annum. Zhejiang Expressway Company Limited 30. LONG TERM BONDS Long term bonds Classified as current liabilities Notes 28 Group 2002 Rmb’000 200,000 (200,000) — 2001 Rmb’000 200,000 — 200,000 The bonds are unsecured, bearing interest at 3.78% per annum and are repayable in 2003 upon maturity. 31. AMOUNTS DUE TO RELATED PARTIES The amounts due to related parties are unsecured, interest-free and have no fixed terms of repayment. 32. AMOUNT DUE TO THE HOLDING COMPANY The amount due to the holding company (i.e. the Communications Investment Group) is unsecured, interest-free and has no fixed terms of repayment. 33. DEFERRED TAX At January 1 Charge for the year At December 31 Note 8 Group Company 2002 Rmb’000 131,533 109,387 240,920 2001 Rmb’000 43,101 88,432 131,533 2002 Rmb’000 62,261 55,059 117,320 2001 Rmb’000 21,655 40,606 62,261 The deferred tax of the Group and the Company arose from differences in accounting profit of these financial statements prepared under the SSAPs, and the taxable income calculated in accordance with the tax laws and regulations in the PRC. The principal components of the Group’s and the Company’s provision for deferred tax is as follows: Revaluation on marketable securities Depreciation allowances Fixed assets write-off Group Company 2002 Rmb’000 3,158 238,318 (556) 240,920 2001 Rmb’000 4,144 140,021 (12,632) 131,533 2002 Rmb’000 4,249 113,071 — 117,320 2001 Rmb’000 3,789 58,472 — 62,261 The Group and the Company have no significant potential deferred tax liabilities for which provision has not been made. Zhejiang Expressway Company Limited NOTES TO FINANCIAL STATEMENTS 34. SHARE CAPITAL Registered, issued and fully paid: Domestic shares of Rmb1.00 each H Shares of Rmb1.00 each 2002 Number of shares 2001 Number of shares 2,909,260,000 1,433,854,500 2,909,260,000 1,433,854,500 4,343,114,500 4,343,114,500 2002 Rmb’000 2,909,260 1,433,855 4,343,115 2001 Rmb’000 2,909,260 1,433,855 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, and were admitted to the Official List on May 5, 2000. Dealings in the H Shares on the London Stock Exchange commenced on the same day. On February 27, 2001, the trading of the H Shares of the Company commenced on the Berlin Stock Exchange following a secondary listing on the Unofficial Regulated Market of the exchange. 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. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 73 Zhejiang Expressway Company Limited Share premium account Rmb’000 Goodwill reserve Rmb’000 Statutory surplus reserve Rmb’000 Public welfare fund Rmb’000 Retained profits Rmb’000 Total Rmb’000 3,645,082 (352,860) 285,031 128,002 609,747 4,315,002 — — — 130,267 — 415,298 — — 118,517 — 533,815 524,041 — 9,774 533,815 407,078 — 8,220 415,298 172,974 — — 79,434 — — — — 62,762 — 190,764 — — 62,747 — — (130,293) 760,613 (193,029) (304,018) 743,020 (173,724) 890,452 (181,264) (390,880) 644 (130,293) 760,613 — (304,018) 4,641,948 (173,724) 890,452 — (390,880) 253,511 887,604 4,967,796 246,993 — 6,518 253,511 185,008 — 5,756 190,764 86,487 — — 39,717 — 878,273 (9,591) 18,922 4,944,058 (9,591) 33,329 887,604 4,967,796 733,729 (10,277) 19,568 4,620,566 (10,277) 31,659 743,020 4,641,948 339,302 (130,293) 544,670 (119,151) (304,018) 330,510 (173,724) 484,128 (140,247) (390,880) 4,243,845 (130,293) 544,670 — (304,018) 4,354,204 (173,724) 484,128 — (390,880) 252,408 126,204 — — 93,498 — — — 46,749 — 345,906 172,953 109,787 4,273,728 35. RESERVES GROUP At January 1, 2001 Share premium shared from an associate Interim dividend - note 12 Net profit for the year Transfer from/(to) reserves Proposed final dividend - note 12 At December 31, 2001 and beginning of year Interim dividend - note 12 Net profit for the year Transfer from/(to) reserves Proposed final dividend - note 12 644 — — — — — — — — — 3,645,726 (352,860) — — — — — — — — At December 31, 2002 3,645,726 (352,860) Reserves retained by: Company and subsidiaries Jointly-controlled entity Associates 3,645,082 — 644 (350,331) — (2,529) At December 31, 2002 3,645,726 (352,860) Company and subsidiaries Jointly-controlled entity Associates 3,645,082 — 644 (350,331) — (2,529) At December 31, 2001 3,645,726 (352,860) COMPANY At January 1, 2001 Interim dividend - note 12 Net profit for the year Transfer from/(to) reserves Proposed final dividend - note 12 At December 31, 2001 and beginning of year Interim dividend - note 12 Net profit for the year Transfer from/(to) reserves Proposed final dividend - note 12 3,645,082 — — — — 3,645,082 — — — — At December 31, 2002 3,645,082 — — — — — — — — — — — Zhejiang Expressway Company Limited NOTES TO FINANCIAL STATEMENTS 35. RESERVES (Continued) In accordance with the Company Law of the PRC and the companies’ articles of association, the Company, its subsidiaries, its associates and its jointly-controlled entity (collectively, the “Entities”) are required to allocate 10% of their profit after tax, as determined in accordance with the PRC accounting standards and regulations applicable to the Entities, to the statutory surplus reserve (the “SSR”) until such reserve reaches 50% of the registered capital of the 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 SSR may be converted to increase the Entities’ share capital. In accordance with the Company Law of the PRC, the Entities are required to transfer 5% to 10% of their profit after tax, as determined in accordance with the PRC accounting standards and regulations applicable to the Entities, to the statutory public welfare fund (the “PWF”), which is a non-distributable reserve other than in the event of the liquidation of the Entities. The PWF must be used for capital expenditure on staff welfare facilities and these facilities remain as the properties of the Entities. The Directors of the Company have proposed to transfer Rmb93,498,000 (2001: Rmb79,434,000) and Rmb46,749,000 (2001: Rmb39,717,000) to the SSR and the PWF, respectively. These represent 10% (2001: 10%) and 5% (2001: 5%), respectively, of the Company’s profit after tax of Rmb934,980,000 (2001: Rmb794,343,000) determined in accordance with the PRC accounting standards. According to the relevant regulations in the PRC, the amount of profit available for distribution is the lower of the amount determined under the PRC accounting standards and the amount determined under the SSAPs. As at December 31, 2002, before the proposed final dividend, the Company had reserves of approximately Rmb500,667,000 (2001: Rmb634,528,000) available for distribution by way of cash or in kind. As at December 31, 2002, in accordance with the Company Law of the PRC, the amount of approximately Rmb3,638,229,000 (2001: Rmb3,638,229,000) standing to the credit of the Company’s share premium account was available for distribution by way of capitalisation issues. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 75 Zhejiang Expressway Company Limited 36. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (a) Reconciliation of profit before tax to net cash inflow from operating activities: Profit before tax Share of results of a jointly-controlled entity Share of results of associates Depreciation Amortisation of expressway operating rights Amortisation of goodwill Write-off of bad debts Interest income Interest expense Unrealised gain on revaluation of short term listed investments Exchange gains, net Loss on disposal of fixed assets Loss on winding up of a subsidiary Increase in inventories Decrease/(increase) in trade receivables Decrease/(increase) in deposits and other debtors Increase/(decrease) in trade payables Decrease in an amount due to the holding company Decrease in amounts due to related parties Increase/(decrease) in other taxes payable Increase/(decrease) in other liabilities Increase in accruals Increase/(decrease) in an amount due to an associate Increase in an amount due to a jointly-controlled entity Interest paid Profits tax paid Net cash inflow from operating activities (b) Winding up of a subsidiary Net assets disposed of: Fixed assets Cash and bank balances Inventories Other receivables Other payables Minority interests Loss on winding up of a subsidiary 2002 Rmb’000 1,394,471 (1,677) (11,719) 223,748 8,700 15,612 794 (17,063) 163,224 9,571 (1,121) 1,040 205 (966) 39,058 (15,526) 101,643 — — (7,495) 43,264 9,998 (1,250) 304 (166,447) (252,059) 1,536,309 2001 Rmb’000 1,235,540 1,459 (12,396) 205,582 8,700 1,043 7,500 (41,503) 215,346 12,559 (53,172) 4,313 — (556) (35,017) 164,981 (874) (2,210) (80,153) 6,216 (26,438) 3,018 1,250 551 (260,878) (276,904) 1,077,957 2002 Rmb’000 2001 Rmb’000 286 145 218 1,186 (1,579) (51) 205 — — — — — — — As detailed in note 15, the Company’s subsidiary, Gaotong Co, was liquidated during the year. This gave rise to the cash outflow of Rmb145,000 during the year. Gaotong Co had no significant impact in respect of the cash flows for operating activities, investing activities and financing activities. It had no significant impact on the Group’s consolidated turnover or profit after tax for the year. Zhejiang Expressway Company Limited NOTES TO FINANCIAL STATEMENTS 37. COMMITMENTS (a) On March 4, 2003, the Board approved an expense for road surface-overlaying project in the amount of Rmb141,400,000 for the year ending December 31, 2003. (b) Capital Commitments Contracted, but not provided for: - Construction of expressways - Purchase of machinery - Proposed investments in Shangsan Co - Proposed investments in Jiaxing Co - Construction of new buildings - Purchase of an office Authorised, but not contracted for: - Construction of expressways Group 2002 Rmb’000 177,730 37,423 485,000 — 14,000 — 714,153 4,739,237 5,453,390 2001 Rmb’000 344,127 35,446 542,600 386,992 — 5,720 1,314,885 1,274,740 2,589,625 Company 2002 Rmb’000 63,775 10,719 485,000 — 14,000 — 573,494 4,419,367 4,992,861 2001 Rmb’000 188,041 — 542,600 386,992 — 5,720 1,123,353 945,592 2,068,945 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 77 38. CONTINGENT LIABILITIES At the balance sheet date, contingent liabilities not provided for in the financial statements were as follows: Guarantees provided in favor of the holders of the corporate bonds issued by a subsidiary Guarantees provided to banks in connection with facilities granted to: - A subsidiary - A jointly-controlled entity Group 2002 Rmb’000 2001 Rmb’000 2002 Rmb’000 2001 Rmb’000 Company — — 216,254 208,694 — 30,000 30,000 — 30,000 30,000 650,000 30,000 896,254 565,000 30,000 803,694 Zhejiang Expressway Company Limited 39. OPERATING LEASE ARRANGEMETS The Group and the Company lease their oil stations and cables under operating lease arrangements, with leases negotiated for terms ranging from five to twenty five years. As at December 31, 2002, the Group and the Company had total future minimum lease rental receivables under non-cancelable operating leases falling due as follows: Within one year In the second to fifth years, inclusive Beyond five years Group Company 2002 Rmb’000 8,159 25,674 33,397 67,230 2001 Rmb’000 3,590 13,850 34,881 52,321 2002 Rmb’000 5,660 19,424 33,397 58,481 2001 Rmb’000 1,090 5,099 34,881 41,070 40. DIFFERENCES IN FINANCIAL STATEMENTS PREPARED UNDER PRC AND HONG KONG ACCOUNTING STANDARDS As reported in statutory accounts HK SSAP adjustments: Net profit before as at December 31 Net assets as at December 31 2002 Rmb’000 1,070,902 2001 Rmb’000 928,132 2002 Rmb’000 9,601,256 2001 Rmb’000 9,218,047 (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Goodwill Provision for deficit arising on the disposal of staff quarters Interest on subscription monies, net of deferred tax 30,995 37,170 (179,290) (214,452) — — 4,626 760 — — — — Depreciation provided, net of deferred tax (70,811) (77,039) (137,004) (74,656) Difference in share premium account during establishment Profits tax refundable Restatement of short term investments in securities at market value, net of deferred tax General provision on trade receivables and other debts Impairment loss, net of deferred tax CIT payment which was waived in prior years Proposed final dividend Others — (22,745) (1,971) (1,439) (12,076) — — 664 — 10,186 (20,224) (738) (1,307) (10,064) — 68 11,923 (3,686) 16,440 922 284 — 390,880 66 11,923 19,059 18,287 2,187 6,443 — 304,018 (1,775) As restated in the financial statements 993,519 871,570 9,701,791 9,289,081 Zhejiang Expressway Company Limited NOTES TO FINANCIAL STATEMENTS 41. RELATED PARTY TRANSACTIONS The following is a summary of the significant related party transactions carried out in the ordinary course of business between the Company, its subsidiaries and certain government bodies in the year. Under the reorganisation agreement, Zhejiang Provincial High Class Highway Investment Company Limited gave a number of undertakings to the Company, including a non-competition undertaking, a tax indemnity and an indemnity against losses incurred, which were not expressly transferred to the Company pursuant to the reorganisation and general indemnity provisions against any breach of representation warranty and undertakings contained in the agreement. Under the agreement dated August 19, 2002, the Company purchased a 6.625% equity interest in Shangsan Co from the Communications Investment Group, the ultimate holding company of the Company, for a consideration of Rmb187.62 million. Since the purchase consideration represents less than 3% of the book value of the net tangible assets of the Company as disclosed in its latest published audited accounts, no shareholder approval is required under the Listing Rules. In 2002, the Group entered into several rental agreements with Zhejiang Expressway Petroleum Development Co., Ltd. (“Petroleum Co”), an associate of the Company. Pursuant to the aforementioned agreements, the Group leased six oil stations to Petroleum Co. In 2002, the Group recorded a total rental income of Rmb6,550,000 from Petroleum Co. 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 79 42. POST BALANCE SHEET EVENTS On January 20 ,2003, the Company obtained the final approval from the State Development Planning Commission of the PRC to issue Rmb1 billion of 10-year 4.29% corporate bonds (the “Bonds”) to institutional and public investors in the PRC. The Bonds were offered for subscription by public investors in the PRC during the period from January 24, 2003 to February 17, 2003 and were fully subscribed. The Bonds issued are unconditionally and irrevocably guaranteed by the Zhejiang branch of China Construction Bank on a joint-liability basis with the Company. The Company intends to use the proceeds from the issue of the Bonds to fund the construction work to widen certain sections of the Shanghai-Hangzhou-Ningbo Expressway. Up to the date of this report, net proceeds from the issue of the Bonds amounting to Rmb991,000,000 have been received by the Company. 43. COMPARATIVE AMOUNTS As further explained in note 2, due to the adoption of certain new and revised SSAPs during the current year, the presentation of the financial statements and certain supporting notes have been revised to comply with the new requirements. Accordingly, certain comparative figures have been reclassified to conform with the current year’s presentation. 44. APPROVAL OF FINANCIAL STATEMENTS The financial statements were approved and authorised for issue by the board of directors on March 4, 2003. Zhejiang Expressway Company Limited C O R P O R AT E I N F O R M AT I O N EXECUTIVE DIRECTORS REPRESENTATIVE OFFICE IN HONG KONG Geng Xiaoping Fang Yunti Zhang Jingzhong Xuan Daoguang NON-EXECUTIVE DIRECTORS Zhang Luyun Zhang Yang INDEPENDENT NON-EXECUTIVE DIRECTORS Tung Chee Chen Zhang Junsheng Zhang Liping SUPERVISORS Ma Kehua Fang Zhexing Sun Xiaoxia Zheng Qihua Jiang Shaozhong COMPANY SECRETARY Zhang Jingzhong AUTHORISED REPRESENTATIVES Geng Xiaoping Zhang Jingzhong STATUTORY ADDRESS 19/F, Zhejiang World Trade Centre 15 Shuguang Road Hangzhou City, Zhejiang Province PRC 310007 Tel: Fax: 86-571-8798 5588 86-571-8798 5599 Zhejiang Expressway Company Limited Suite 2910 29/F, Bank of America Tower 12 Harcourt Road Hong Kong Tel: Fax: 852-2537 4295 852-2537 4293 LEGAL ADVISERS As to Hong Kong law: Herbert Smith 23rd Floor, Gloucester Tower 11 Pedder Street, Central Hong Kong As to English and US law: Herbert Smith Exchange House Primrose Street London EC2A 2HS United Kingdom As to PRC law: T & C Law Firm 18/F, Block A 100 Moganshan Road Yaojiang International Building Hangzhou, Zhejiang PRC AUDITORS AND REPORTING ACCOUNTANTS Ernst & Young Certified Public Accountants 15th Floor Hutchison House 10 Harcourt Road, Central Hong Kong CORPORATE INFORMATION 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 81 FINANCIAL ADVISOR & CORPORATE BROKER IN THE UNITED KINGDOM Cazenove & Co. Ltd 12 Tokenhouse Yard London EC2R 7AN United Kingdom PRINCIPAL BANKERS Bank of China, Zhejiang Branch Industrial and Commercial Bank of China, Zhejiang Branch Agriculture Bank of China, Zhejiang Branch Shanghai Pudong Development Bank, Hangzhou Branch H SHARE REGISTRAR AND TRANSFER OFFICE Hong Kong Registrars Limited Room 1901-1905 19th Floor, Hopewell Centre 183 Queen’s Road East Hong Kong H SHARES LISTING INFORMATION The Stock Exchange of Hong Kong Limited Code: 0576 London Stock Exchange plc Code: ZHEH ADRS INFORMATION US Exchange: OTC Symbol: ZHEXY CUSIP: 98951A100 ADR: H Shares 1:30 Zhejiang Expressway Company Limited L O C AT I O N M A P O F E X P R E S S WAYS O P E R AT E D B Y T H E G R O U P L O C AT I O N M A P O F E X P R E S S WAY S O P E R AT E D B Y T H E G R O U P 2 0 0 2 T R O P E R L A U N N A I I D E T M I L Y N A P M O C Y A W S S E R P X E G N A I J E H Z 83 Zhejiang Expressway Company Limited Zhejiang Expressway Company Limited