Brave to Reform and
Innovate with Accelerated
Transformation
In 2012, Zhejiang Expressway strived to tackle external challenges
guided by the idea of “Brave to Reform and Innovate with
Accelerated Transformation”. Bearing in mind that we must seize
every moment, we were vigorous and persistent in our development
and were quick to grasp opportunities to achieve breakthroughs in our
business. We not only endeavoured to accomplish our full year target but
to also realize rapid-yet-stable development on our path of transformation
so as to provide impetus for the further growth of the Group.
Content
2
4
6
7
8
10
16
32
36
Definition of Terms
Company Profile
Review of
Major Corporate Events
Particulars of
Major Road Projects
Financial and
Operating Highlights
Chairman’s Statement
Management Discussion
and Analysis
Principal Risks and
Uncertainties
Corporate Governance
Report
48
57
64
66
68
171
173
Directors, Supervisors and
Senior Management Profiles
Report of the Directors
Report of the Supervisory
Committee
Independent Auditor’s Report
Consolidated Financial
Statements & Notes
Corporate Information
Location Map of
Expressways in Zhejiang Province
ADR(s)
ADS(s)
Advertising Co
American Depositary Receipt(s)
American Depositary Share(s)
Zhejiang Expressway Advertising Co., Ltd.（浙江高速廣告有限責任
公司）, a 70% owned subsidiary of Development Co
Audit Committee
the audit committee of the Company
Board
the board of directors of the Company
Company or Zhejiang Expressway
Zhejiang Expressway Co., Ltd., a joint stock limited company
incorporated in the PRC with limited liability on March 1, 1997
Communications Group
Zhejiang Communications Investment Group Co., Ltd.（浙江省交通
投資集團有限公司）, a wholly State-owned enterprise established
on December 29, 2001
Development Co
Zhejiang Expressway Investment Development Co., Ltd.（浙江高速
投資發展有限公司）, a 100% owned subsidiary of the Company
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 Hong Kong
Stock Exchange and traded in Hong Kong dollars since May 15,
1997
Hong Kong Stock Exchange
The Stock Exchange of Hong Kong Limited
Jiaxing Co
Jinhua Co
2
Zhejiang Jiaxing Expressway Co., Ltd.（浙江嘉興高速公路有限責任
公司）, a 99.9995% owned subsidiary of the Company
Zhejiang Jinhua Yongjin Expressway Co., Ltd.（浙江金華甬金高速
公路有限公司）, a 23.45% owned associate of the Company
2012 ANNUAL REPORTDefinition of Terms JoinHands Technology
JoinHands Technology Co., Ltd.（中恒世紀科技實業股份有限公司）,
a 27.582% owned associate of the Company
Listing Rules
the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited
Period
the period from January 1, 2012 to December 31, 2012
Petroleum Co
Zhejiang Expressway Petroleum Development Co., Ltd.（浙江高速
石油發展有限公司）, a 50% owned associate of the Company
PRC
Rmb
SFO
the People’s Republic of China
Renminbi, the lawful currency of the PRC
Securities and Futures Ordinance (Chapter 571, Laws of Hong
Kong)
Shangsan Co
Zhejiang Shangsan Expressway Co., Ltd.（浙江上三高速公路有限
公司）, a 73.625% owned subsidiary of the Company
Shareholders
the shareholders of the Company
Shengxin Co
Shengxin Expressway Co., Ltd.（浙江紹興嵊新高速公路有限公司）,
a 50% owned jointly controlled entity of the Company
Supervisory Committee
the supervisory committee of the Company
Towing Co
Yuhang Co
Zhejiang Expressway Vehicle Towing and Rescue Services Co.,
Ltd.（浙江高速公路清障施救服務公司）, a 100% owned subsidiary
of the Company
Zhejiang Yuhang Expressway Co., Ltd.（浙江余杭高速公路有限責
任公司）, a 51% owned subsidiary of the Company
Zheshang Securities
Zheshang Securities Co., Ltd.（浙商證券股份有限公司）, a 70.83%
owned subsidiary of the Shangsan Co
3
ZHEJIANG EXPRESSWAY CO., LTD. Zhejiang Expressway is an infrastructure company principally engaged in investing in,
developing and operating of high-grade roads. The Company and its subsidiaries also
carry out certain ancillary businesses such as automobile servicing, operation of gas
stations and billboard advertising along expressways, as well as securities business.
Major assets under management of the Group include the 248km Shanghai-Hangzhou-
Ningbo Expressway, the 142 km Shangsan Expressway, ancillary facilities along the two
expressways, and Zheshang Securities. Both expressways are situated within Zhejiang
Province in the PRC. As at December 31, 2012, total assets of the Company and its subsidiaries
amounted to Rmb29,445.38 million.
The Company was incorporated on March 1, 1997 as the main vehicle of the Zhejiang Provincial
Government for investing in, developing and operating expressways and Class 1 roads in Zhejiang
Province.
Incorporated on December 29, 2001, Communications Group, the controlling
shareholder of the Company, is a provincial-level communications company
which is wholly-owned by the State and established by the Zhejiang
Provincial Government. It mainly operates a diversity of businesses, such
as investment, operations, maintenance, toll collection and ancillary
services of expressways; construction and building of transportation
project, ocean and coastal transport; as well as real estates. As at
December 31, 2012, consolidated assets of Communications Group
totaled Rmb141,763.88 million.
The H Shares of the Company, which represent approximately
33% of the issued share capital of the Company, were listed
on the Hong Kong Stock Exchange on May 15, 1997, and the
Company subsequently obtained a secondary listing on the
London Stock Exchange on May 5, 2000.
On February 14, 2002, a Level I American Depositary Receipt program sponsored by the
Company in respect of its H Shares, with the Bank of New York as the depositary, was
established in the United States and became effective.
With good performance on the Group’s existing expressway operations, the Company
will capitalize on all opportunities of investment and acquisition of new projects,
aiming to develop itself into a first-class expressway operator in China. In addition,
the Company will also endeavor to enhance its core competitiveness in the
securities business, expanding its operation network and increasing its profit
contribution to the Group.
4
2012 ANNUAL REPORTCompanyProfile Set out below is the corporate and business structure of the Group as at December 31, 2012:
Holders of
H Shares
Communications
Group
33%
67%
The Company
100%
Towing
Co
73.625%
100%
99.9995%
51%
50%
27.582%
23.45%
50%
Shangsan
Co
Development
Co
Jiaxing
Co
Yuhang
Co
Petroleum
Co
JoinHands
Technology
Jinhua Co
Shengxin
Co
70.83%
Zheshang
Securities
Operation of
expressway vehicle
towing and rescue
Operation of service
areas, roadside
advertising
Operation of gas
stations and sale of
petroleum related
products
Development and
application of
computer
technologies
100%
100%
Shangsan
Expressway
142.0 km
Jiaxing
Section
88.1 km
Yuhang
Section
11.1 km
Hangzhou
Section
3.4 km
Shanghai – Hangzhou Expressway
102.6 km
Hangzhou –
Ningbo
Expressway
145.0 km
Jinhua Section
of Yongjin
Expressway
69.7 km
Shaoxing Section
of Yongjin
Expressway
73.4 km
subsidiary
associate
jointly controlled entity
5
ZHEJIANG EXPRESSWAY CO., LTD. 1. In February 2012, financial magazine “The Asset” announced its “Asset Triple A
Asian Awards 2011” in Hong Kong, and Zhejiang Expressway was named “China’s
Most Promising Company under Infrastructure Industry”.
2. On March 20, 2012, the Company announced its 2011 annual results in Hong Kong,
and thereafter conducted its annual results presentations in Hong Kong, Singapore,
Australia and U.S.A..
3. On May 11, 2012, the Company announced its 2012 first quarterly results.
4. On June 11, 2012, the Company held its Annual General Meeting to approve the distribution
of a final dividend of Rmb0.25 per share, the re-appointment of Deloitte Touche Tohmatsu
Certified Public Accountants Hong Kong as the international auditors of the Company, and
the re-appointment of Pan-China Certified Public Accountants Ltd. as the PRC auditors of the
Company. Members of the Board and the Supervisory Committee for the sixth session were
elected.
On the same date, the Company held the first meeting of the Board for the sixth session at which
chairman of the Board, chairmen of various committees, senior management and authorised
representatives were elected.
5. On July 6, 2012, the Company announced the acquisition of a 50% equity interest in Shengxin Co
pursuant to the transfer agreement entered into with Shaoxing Communications Investment Group
Co., Ltd. (“SCIG”).
6. On August 24, 2012, the Company announced its 2012 interim results in Hong Kong, and
thereafter conducted its interim results presentations in Hong Kong and Singapore.
7. On September 29, 2012, all of the Company’s 52 electronic toll collection (ETC) lanes under
the second phase (Phase Two) commenced operation. As of today, there are a total of
90 ETC lanes in all of the toll stations in Shanghai-Hangzhou-Ningbo Expressway and
Shangsan Expressway.
8. From September 30, 2012 to October 7, 2012, the Company implemented, for the first
time, the new policy of expressway toll waiver for 7-seater or less passenger vehicles
on key festivals and holidays as launched by the PRC government. Key festivals and
holidays include the Chinese Lunar New Year, Ching Ming Festival, Labour Day and
National Day.
9. On October 12, 2012, the Company held an Extraordinary General Meeting at
which the distribution of an interim dividend of Rmb0.06 per share was approved.
10. On November 16, 2012, the Company announced its 2012 third quarterly
results.
On the same date, the Company announced the proposed A shares spin-off
and listing of Zheshang Securities on the Shanghai Stock Exchange.
11. On January 16, 2013, the Company announced the final distribution notice
for its ten-year 2003 corporate bonds and the final interest together with
principal were paid accordingly.
6
2012 ANNUAL REPORTReview of Major Corporate Events Number
Number
of Toll of Service
Remaining
Years of
Start of
Areas Operation Operation
Expressway
Shanghai-Hangzhou Expressway
– Jiaxing Section
– Yuhang Section
– Hangzhou Section
Hangzhou-Ningbo Expressway
– Hangzhou to Hongken section
– Hongken to Duantang section
– Duantang to Dazhujia section
Shangsan Expressway
Percentage of
Length in
Ownership Kilometers
Number
of Lanes
99.9995%
51%
100%
100%
100%
100%
73.625%
88.1
11.1
3.4
16.0
124.0
5.0
142.0
8
6
4
4
8
4
4
Stations
7
1
2
1
9
1
11
2
1998
0 1995-1998
1995
0
0
2
0
3
1992
1995
1996
2000
16
16
16
15
15
15
18
Current Toll rates on the
Shanghai-Hangzhou-Ningbo Expressway
1. Passenger vehicle classification and toll rates
Vehicle
Class
Classification Standard
Entrance Fee
(Rmb/vehicle)
Mileage Fee
(Rmb/vehicle/km)
1
2
3
4
5
Passenger vehicle with up to 7 seats
Truck with tonnage of 2 tons or below
Passenger vehicle with seats 8 to 19
Truck with tonnage of above 2 tons and up to 5 tons
Passenger vehicle with seats 20 to 39
Truck with tonnage of above 5 tons and up to 10 tons
Passenger vehicle with seats above 40
Truck with tonnage above 10 tons and up to 15 tons
Truck with tonnage above 15 tons
2. Toll rates on goods vehicles
Load
Toll standards
5
5
5
10
10
15
15
15
20
0.45
0.45
0.45
0.80
0.80
1.20
1.20
1.40
1.60
Legally loaded Up to 5 tons
Above 5 tons and
up to 15 tons
Above 15 tons and
up to 30 tons
Over 30 tons
Rmb0.09/ton per km
Rmb0.09/ton per km x 1.5 is reduced in a linear manner to Rmb0.09/ton
per km
Rmb0.09/ton per km is reduced in a linear manner to
Rmb0.06/ton per km
Based on 30 tons calculation
Overloaded
vehicle
Overloaded below 10% Calculation based on the basic fee standard for legally loaded
Overloaded up to 30%
The overloaded portion over 10% is calculated based on Rmb0.09/ton
per km x 1.2; the remaining portion is calculated based on the fee
standard of “Overloaded below 10%”
Overloaded above 30% The legally loaded portion and the overloaded portion up to 30% is
calculated based on the fee standard of “Overloaded up to 30%”;
and up to 50%
the remaining portion is calculated based on Rmb0.09/ton per km x 2
Overloaded above
50% and up to 100%
The legally loaded portion and the overloaded portion up to 30% is
calculated based on the fee standard of “Overloaded up to 30%”; the
remaining portion is calculated based on Rmb0.09/ton per km x 3
Overloaded over 100% The legally loaded portion and the overloaded portion up to 30% is
calculated based on the fee standard of “Overloaded up to 30%”;
the remaining portion is calculated based on Rmb0.09/ton per km x 4
*
The mileage fee for Class 1 vehicle on the Shangsan Expressway is Rmb0.40/vehicle/km. The toll rates for other passenger vehicles and trucks
are the same as those for the Shanghai-Hangzhou-Ningbo Expressway.
7
ZHEJIANG EXPRESSWAY CO., LTD.Particulars of Major Road Projects
Financial and
Operating Highlights
Results
Year ended December 31,
2008
2009
2010
2011
2012
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Revenue
6,323,470
6,036,294
6,769,064
6,781,352
6,700,258
Profit Before Tax
2,934,079
3,084,128
3,111,274
2,783,780
2,515,946
Income Tax Expense
(668,928)
(840,055)
(798,785)
(717,838)
(646,864)
Profit for the year
2,265,151
2,244,073
2,312,489
2,065,942
1,869,082
Attributable to:
Owners of the
Company
Non-controlling
interests
Earnings Per Share
1,892,787
1,795,488
1,871,499
1,805,345
1,686,270
372,364
448,585
440,990
260,597
182,812
(EPS)
43.58 cents
41.34 cents
43.09 cents
41.57 cents
38.83 cents
Return on Equity (ROE)
ROE
2008
13.83%
2009
12.66%
2010
12.71%
2011
11.89%
2012
10.86%
Segmental Revenue (year 2012)
Segmental Operating Cost (year 2012)
17%
Securities
Business
31%
Toll Road
Business
53%
Toll Road
Business
46%
Toll Road-Related
Business
30%
Toll Road Related
Business
23%
Securities
Business
8
2012 ANNUAL REPORT
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
50
40
30
20
10
0
46,000
44,000
42,000
40,000
38,000
36,000
34,000
32,000
30,000
Revenue (Rmb Million)
Net profit (Rmb Million)
6,323
6,036
6,769
6,781
6,700
2,000
1,893
1,795
1,871
1,805
1,686
1,600
1,200
800
400
0
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
EPS (Rmb Cents)
43.58
41.34
43.09
41.57
38.83
ROE (%)
13.83
12.66
12.71
11.89
10.86
15
12
9
6
3
0
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Monthly average daily full-trip traffic volume
on Shanghai-Hangzhou-Ningbo Expressway
Monthly average daily full-trip traffic volume
on Shangsan Expressway
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Jan
Feb Mar
Apr May
Jun
Jul
Aug Sep
Oct
Nov Dec
Jan
Feb Mar
Apr May
Jun
Jul
Aug Sep
Oct
Nov Dec
9
ZHEJIANG EXPRESSWAY CO., LTD. Chairman
ZHAN Xiaozhang
Dear Shareholders,
Brave to Reform and Innovate with
Accelerated Transformation
I am honoured to present to you the 2012 annual results of Zhejiang Expressway
on behalf of the Board of the Company for the first time. Here I would like to thank
Chairman Mr. Chen Jisong particularly for his crucial contribution to Zhejiang
Expressway.
10
2012 ANNUAL REPORTChairman’sStatement 2012 was full of challenges and obstacles. The fluctuating macro economy,
ongoing launch of unfavourable policies together with a downturn in the
securities market have exerted pressure on the growth of the Group’s business.
From the perspective of the macroeconomic environment, the European sovereign
debt crisis remained unstable, the U.S. economy recovered at a slow pace and the
Chinese domestic economic growth appeared to be decelerating, with a GDP growth of
7.8%, a record low in recent years. The economy of Zhejiang Province, which was heavily
reliant on foreign trade, was yet hit by the weakening overseas import and export markets.
The province recorded a total import and export value of US$312,230 million in foreign trade
in 2012, a year-on-year increase of only 0.9%. Meanwhile, the volume of cargo and passenger
traffic on roads across the province increased year-on-year by 4.4% and 1% respectively, which
were lower than the increase of 5.1% and 1.3% in 2011. From a policy perspective, the State’s
implementation of exemption from toll charges of passenger vehicles with seven seats and less
travelling on expressways during major festivals and holidays hit the industry’s income performance
to varying degrees.
Multiple challenges posed by the macro economy and policies have
slowed down the trend of growth in the traffic volume and toll
income of the Group’s toll roads. To this end, the Group further
increased the depth and breadth of measures to cut costs
and increase income during the year to ensure stable toll
income and traffic volume. On the other hand, the Group
was actively looking for investment opportunities and
announced a plan in July 2012 for the acquisition of a 50%
equity interest in the Shaoxing Section of Yongjin Expressway. The acquisition
was completed on 28 November 2012, marking the commencement of the
new company, which will strive to bring a good return for the Group as early
as possible.
11
ZHEJIANG EXPRESSWAY CO., LTD. On the securities market side, the domestic stock market in China remained in the doldrums, as marked
by a rise of only 3.17% in the Shanghai Composite Index during the whole year of 2012. Investors
were lack of confidence in stepping in the market and buying shares. The annual stock turnover of the
Shanghai Stock Exchange and Shenzhen Stock Exchange decreased by 30.7% and 18.5% respectively,
leading to a fall in both overall revenue and profitability of the industry. The sluggish external environment
impacted the Group’s securities and futures business performance, resulting in a substantial drop in both
revenue and profits. Nevertheless, the Group remains fully confident in the long-term development of
China’s securities industry. This is why the Group announced a plan during the year to spin off Zheshang
Securities and float its shares on the A-share market, and continued to expand Zheshang Securities’
business to boost its rapid development, as major initiatives of the Group to implement the transformation
strategy. By making aggressive efforts on developing and optimizing business on an ongoing basis,
Zhejiang Securities has built a financial business structure featuring securities, futures, funds and venture
capital. This structure will become an important source of growth momentum for the Company.
Despite numerous challenges, the performance of the Company in the capital market showed that the
share price of the Company increased by 19.61% in 2012, making the Company a top performer among
its peers, with the increase outperforming that of Hang Seng China Enterprises Index and on par with
that of Hang Seng Index. This suggests that the capital markets have expressed full recognition and
confidence in the Company’s business performance and
prospects. Such recognition and confidence have also
given us an impetus to seek ongoing progress and
innovation.
12
2012 ANNUAL REPORTChairman’s Statement In order to repay for the support of investors at large, the Board continued to maintain a high dividend
payout level even under the unfavourable business environment, hoping to share the fruits of development
with shareholders. The Board has recommended the payment of a final dividend of Rmb24 cents per
share for 2012, together with an interim dividend of Rmb6 cents per share already paid, the annual
dividend payout is Rmb30 cents per share, accounting for 77.3% of the Company’s profit available for
distribution to shareholders for the year. This proposed dividend payment is yet subject to approval by the
shareholders at the Company’s forthcoming 2012 Annual General Meeting.
Looking ahead to 2013, despite uncertainties prevail, the overall domestic and international economic
environment is expected to be better than last year. In terms of global economic trends, favorable factors
are gradually increasing and are expected to improve over 2012 despite the lack of growth momentum.
On the domestic front, the central government has proposed enhancing the speed of industrial structure
adjustment, while the economic growth in Zhejiang Province has shown signs of stability since the second
half of 2012 and even signs of acceleration at the end of the year. In the province, various infrastructure
as well as economic and financial development projects continue to kick off, while the toll road industry will
benefit from certain increase in traffic volume. As financial innovation in China’s securities industry meets
with the best period in history, the Group will grasp the trend towards business innovation to continue its
reformation and innovation on products, businesses and mechanisms, and accelerate the development of
the securities and futures business based on the needs of the real economy. However, generally speaking
the traditional principal businesses will continue to face various challenges from economic fluctuation and
adverse policies, suggesting that it is an imperative for the Group to carry out transformation development,
open up new space for development and secure a new growth momentum.
13
ZHEJIANG EXPRESSWAY CO., LTD.Chairman’s Statement As the leader of the new session of the Board, I will work together with all of the Group’s staff. Bearing in
mind that time and tide wait for no man and that every minute must be seized, we will aim precisely at the
direction for transformation and development, while further accelerating elimination of factors hindering
transformation and development, and will strive to make innovative breakthroughs. We will also listen to
all views with enthusiasm, evaluate the situation and timing in order to continue to grasp every investment
opportunity and explore new sources of profit on the foundation of the sustainable development of
the principal business, and focus on building corporate governance standards. We hope to win the
understanding and support of all of our shareholders who will unite and cooperate with us during the
process of exploration and innovation to speed up transformation and development, so as to create new
growth impetus for the Group, leading the Group to a new chapter.
Finally, on behalf of the Board, I would like to express my wholehearted thanks to all the shareholders for
their support and all the staff for their diligence and contributions over the past year. We will continue to
work hard and contribute back to shareholders and to society.
ZHAN Xiaozhang
Chairman
March 19, 2013
14
2012 ANNUAL REPORTChairman’s Statement Endeavour to Reduce Costs and
Enhance Efficiency
Despite 2012 being a challenging year, we were united
in our efforts to maintain stable results by reducing
costs, enhancing operational efficiency and exploring the
profit potential from different angles and aspects of existing
resources, as well as by striving for business innovation.
15
ZHEJIANG EXPRESSWAY CO., LTD. Management
Discussion and
Analysis
Director and General Manager
LUO Jianhu
BUSINESS REVIEW
Despite that China’s economy remained generally stable in 2012, its macroeconomic
growth was under greater downward pressure as a result of persistent deterioration of the
European sovereign debt crisis and significant slowdown in the global economic growth.
As a result, China’s GDP grew by 7.8% over 2012. Moreover, although Zhejiang’s
economy, which relied heavily on foreign trade, was hit by weakened overseas import
and export markets, the province’s economic growth rate showed signs of stabilization
in the second half of the year. Its GDP increased by 8.0% year-on-year during the
Period, 2 percentage points higher than that of the national level.
16
2012 ANNUAL REPORT As a result of some ongoing uncertainties in the macro environment, including
weakened foreign trade and sluggish domestic consumption, organic growth in
the traffic volume on the Group’s expressways tended to decelerate, and revenue
from the toll road operations was also undermined by the implementation of certain
new policies during the year. Impacted by the gloomy Chinese domestic stock market,
revenue from the securities business fell significantly year-on-year during the Period.
Therefore, revenue from the Group’s overall operations fell slightly year-on-year as well,
with a total income of Rmb6,898.43 million, representing a decrease of 1.1% year-on-year;
of which Rmb3,670.89 million was attributable to the two major expressways operated by
the Group, representing 53.2% of the total income; Rmb2,046.67 million was attributable to the
Group’s toll road-related businesses such as service area operations, gas stations, advertising
business and so forth, representing 29.7% of the total income; and Rmb1,180.87 million was
attributable to the securities business, representing 17.1% of the total income.
17
ZHEJIANG EXPRESSWAY CO., LTD. A breakdown of the Group’s income for the Period is set out below:
2012
Rmb’000
2011
Rmb’000
% Change
Toll income
Shanghai-Hangzhou-Ningbo Expressway
Shangsan Expressway
Other income
Service areas
Advertising
Road maintenance
Securities business income
Commission
Bank interest
2,968,396
702,489
1,941,924
104,276
471
886,946
293,924
2,954,949
688,984
1,842,206
89,756
377
1,044,415
356,524
Subtotal
Less: Revenue taxes
6,898,426
(198,168)
6,977,211
(195,859)
Revenue
6,700,258
6,781,352
0.5%
2.0%
5.4%
16.2%
24.9%
-15.1%
-17.6%
-1.1%
1.2%
-1.2%
Toll Road Operations
As Zhejiang’s economy showed signs of stabilization and recovery in the third and fourth quarters, organic
growth in the traffic volume on the Group’s expressways during the Period was also slightly better than
that in 2011. In particular, growth in the traffic volume on Shangsan Expressway, along which most of the
enterprises are small and medium sized, picked up faster. However, upon the implementation of the toll-
by-weight policy, the rapid growth in the number of large vehicles such as container trucks resulted in an
overall declining number of small and medium sized trucks. This in turn led to a continued decline in the
proportion of trucks to total traffic volume, and an increase in toll income from expressways being less
than the increase in traffic volume during the Period.
Meanwhile, since the implementation of the tolling policy based
on actual travel routes in Zhejiang Province on May 15, 2012,
the Company adopted a number of measures of promotion
and guidance in order to achieve greater growth in traffic
volume on some sections of the Shanghai-Hangzhou-Ningbo
Expressway and Shangsan Expressway.
18
2012 ANNUAL REPORTManagement Discussion and Analysis
However, the abolition of the “Unified Toll Card” policy on January 1, 2012, the adjustment to the rounding
of the last figures of tolls for passenger vehicles on May 15, 2012 and the launch of the policy for adjusting
passenger vehicle classification on August 1, 2012 resulted in a slight decrease in the Group’s toll income,
causing a total loss of approximately 3.2% in toll income for the whole year. The implementation of the
new policy on September 30, 2012 for exemption from toll charges of passenger vehicles with seven
seats and less travelling on expressways during major festivals and holidays led to a total decrease of
approximately Rmb58.00 million in the Group’s toll revenue during the Period, equivalent to a decrease of
approximately 1.6% in toll income for the whole year.
Tackling the challenging toll road operations in 2012, the Group continued to commit more resources to
operational and management facilities for enhancing service quality and raising tolling efficiency, while
further strengthening the initiatives for reducing costs, increasing benefits and income as well as plugging
loopholes. During the Period, the construction of the second phase project for ETC (Electronic Toll
Collection) lanes was completed ahead of the National Day long holiday to ensure that all ETC lanes at
the toll stations along the Group’s expressways were opened to traffic smoothly prior to the National Day
long holiday, as part of our efforts to deliver safe and smooth driving during the holiday season.
Average daily traffic volume in full-trip equivalents along the Group’s Shanghai-Hangzhou-Ningbo
Expressway was 41,963 during the Period, representing an increase of 3.8% year-on-year. In particular,
average daily traffic volume in full-trip equivalents along the Shanghai-Hangzhou Section of the Shanghai-
Hangzhou-Ningbo Expressway was 42,659, representing an increase of 4.9% year-on-year, and that
along the Hangzhou-Ningbo Section was 41,466, representing an increase of 3.0% year-on-year. Average
daily traffic volume in full-trip equivalents along the Shangsan Expressway was 16,787 during the Period,
representing an increase of 2.7% year-on-year.
Total toll income from the 248km Shanghai-Hangzhou-Ningbo
Expressway and the 142km Shangsan Expressway amounted to
Rmb3,670.89 million during the Period, representing an increase
of 0.7% year-on-year. In respect of such income, toll income
from the Shanghai-Hangzhou-Ningbo Expressway amounted to
Rmb2,968.40 million, representing an increase of 0.5% year-
on-year while toll income from the Shangsan Expressway
amounted to Rmb702.49 million, representing an increase of
2.0% year-on-year.
19
ZHEJIANG EXPRESSWAY CO., LTD.Management Discussion and Analysis Toll Road-Related Business Operations
The Company also operates certain toll road-related businesses along its expressways through its
subsidiaries and associated companies, including gas stations, restaurants and shops in service areas, as
well as roadside advertising and vehicle service businesses.
During the Period, the number of customers at service areas along the expressways decreased as a result
of slackened growth in traffic volume along the Group’s two expressways, the impact of traffic diversions
from the Shaoxing Section of Shanghai-Hangzhou-Ningbo Expressway following the opening of the
Shaozhu Expressway, and the closure of Yuyao Service Area for expansion construction work since June.
Meanwhile, sales of refined oil products continued to increase year-on-year on the rising prices of these
products. Accordingly, income from overall toll road-related businesses amounted to Rmb2,046.67 million
during the Period, representing a year-on-year increase of 5.9%.
20
2012 ANNUAL REPORTManagement Discussion and Analysis Securities Business
Although China’s stock market rebounded in the last month of 2012 and shown a hint of stabilizing, the
aggregate trading volume nevertheless fell by approximately 25% year-on-year as the market fluctuated
downward throughout 2012, which continued to dampen investor sentiment. Meanwhile, benefiting
from the new commission policy – the “Notice on Further Strengthening Customer Services and the
Management of Securities Trading Commissions of Securities Firms” implemented in early 2011, the
decline in the commission rate has begun to stabilize and has remained basically unchanged year-on-
year.
Hit by the repeated volatility at low levels in the stock market, revenue from Zheshang Securities’
securities brokerage business, investment banking and asset management businesses showed declines
in varying degrees year-on-year during the Period.
Nevertheless, Zheshang Securities continued to increase the number of its branches and the total number
of customers, and accelerated the launch of the margin financing and securities lending business for
further expanding new business capabilities. Zheshang Securities had 64 securities sales outlets during
the Period, an increase of six outlets year-on-year.
During the Period, Zheshang Securities realized an operating income of Rmb1,180.87 million, a decrease
of 15.7% year-on-year. Of such income, brokerage commission income amounted to Rmb886.95
million, a year-on-year decrease of 15.1%; and interest income from the securities business amounted
to Rmb293.92 million, a year-on-year decrease of 17.6%. Moreover, securities investment gains from
Zheshang Securities accounted for in the consolidated statement of comprehensive income amounted to
Rmb89.49 million during the Period.
21
ZHEJIANG EXPRESSWAY CO., LTD.Management Discussion and Analysis Further Expansion of
Securities Business
We will continue to expand the scope of business of
Zheshang Securities, to improve the operations and
management of the unit, explore innovative business
solutions and capture a greater market share so as to forge
Zheshang Securities into a new growth driver of Zhejiang
Expressway.
22
2012 ANNUAL REPORT Long-term Investments
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate company of the
Company) benefited from a rise in the retail prices of petroleum products and a growth in the sales
of petroleum products during the Period. As a result, the associate company realized an income of
Rmb6,090.71 million during the Period, representing an increase of 18.5% year-on-year. During the
Period, net profit of the associate company amounted to Rmb15.02 million (2011: net profit of 14.71
million).
The growth of traffic volume of the 69.7km Jinhua Section of the Yongjin Expressway, operated by
Zhejiang Jinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate company of the Company),
declined during the Period as domestic economic growth slowed down. This section recorded an average
daily traffic volume of 12,084 in full-trip equivalents, an increase of 12.2% year-on-year, while toll income
amounted to Rmb231.48 million, an increase of 6.1% year-on-year. Due to its heavy financial burden, the
associate company still incurred a loss of Rmb54.70 million during the Period (2011: a loss of Rmb68.10
million).
JoinHands Technology Co., Ltd. (a 27.582% owned associate company of the Company) generated
its income primarily from its property leasing activities. As the associate company did not make any
significant improvements to its operations, it incurred a net profit of Rmb0.15 million during the Period
(2011: a loss of Rmb1.81 million).
The Company entered into a transfer agreement with Guangzhou Kaixin Consulting Co., Ltd. (“Kaixin
Company”) in July 2011. As Kaixin Company has failed to pay the consideration for the equity interest
transfer according to the terms of the contract, the Company lodged a lawsuit against Kaixin Company.
On March 23, 2012, the court ruled that Kaixin Company pay the remaining consideration of Rmb28.587
million for the equity interest transfer and liquidated damages. The Company continued to appeal against
the said percentage of the liquidated damages and the dismissed priority right for claim against the
mortgaged real estate of JoinHands Technology. The case is pending a final judgment to be made by the
Intermediate People’s Court in Hangzhou City.
23
ZHEJIANG EXPRESSWAY CO., LTD.Management Discussion and Analysis Shengxin Expressway Co., Ltd. (“Shengxin Company”, a jointly controlled entity in which the Company
owns a 50% equity interest) operates the Shaoxing Section of the 73.4km Ningbo-Jinhua Expressway. On
July 6, 2012, the Company entered into a transfer agreement with Shaoxing Communications Investment
Group Co., Ltd. (“SXCI”) for the acquisition of a 50% equity interest in Shengxin Company, a wholly-
owned subsidiary of SXCI, for a cash consideration of Rmb355.03 million plus interest accrued on the
consideration. As at November 30, 2012, the Company had completed the industrial and commercial
changes of registration to Shengxin Company. In December 2012, Shengxin Company’s profit was
accounted for in the Group’s consolidated income statement. As at December 2012, toll revenue from the
jointly controlled entity amounted to Rmb23.91 million, and loss amounted to Rmb7.03 million.
Financial Analysis
The Group adopts a prudent financial policy with an aim to provide Shareholders of the Company with
sound returns over the long term.
During the Period, profit attributable to owners of the Company for the year was approximately
Rmb1,686.27 million, representing a decline of 6.6% year-on-year, return on owners’ equity was 10.9%,
representing a decline of 8.7% year-on-year, while earnings per share for the Company was Rmb38.83
cents.
Liquidity and Financial Resources
As at December 31, 2012, current assets of the Group amounted to Rmb15,752.55 million in aggregate
(2011: Rmb15,006.63 million), of which bank balances and cash accounted for 30.8% (2011: 37.2%),
bank balances held on behalf of customers accounted for 47.6% (2011: 47.8%), and held-for-trading
investments accounted for 9.4% (2011: 8.4%). Current ratio (current assets over current liabilities) of the
Group as at December 31, 2012 was 1.5 (2011: 1.6). Excluding the effect of customer deposits arising
from the securities business, the resultant current ratio of the Group (current assets less balance of cash
held on behalf of customers over current liabilities less balance of accounts payable to customer arising
from securities business) was 3.0 (2011: 3.6).
24
2012 ANNUAL REPORTManagement Discussion and Analysis The amount for held-for-trading investments of the Group as at December 31, 2012 amounted to
Rmb1,486.77 million (2011: Rmb1,260.02 million), of which 97.6% was invested in bonds, 0.6% was
invested in stocks, and the rest was invested in open-end equity funds.
During the Period, net cash inflow generated from the Group’s operating activities amounted to
Rmb1,537.71 million.
The Directors do not expect the Company to experience any problem with liquidity and financial resources
in the foreseeable future.
Cash and cash equivalent
Rmb
US$ in Rmb equivalent
HK$ in Rmb equivalent
Time deposits
Rmb
US$ in Rmb equivalent
Held-for-trading investments - Rmb
Available-for-sale investments - Rmb
Total
Rmb
US$ in Rmb equivalent
HK$ in Rmb equivalent
As at December 31,
2012
Rmb’000
3,353,453
4,024
5,232
1,459,433
23,975
1,486,772
134,899
6,467,788
6,434,557
27,999
5,232
2011
Rmb’000
3,111,774
3,385
5,271
2,444,247
23,546
1,260,021
60,274
6,908,518
6,876,316
26,931
5,271
Borrowings and Solvency
As at December 31, 2012, total liabilities of the Group amounted to Rmb10,429.11 million, of which 9.6%
was corporate bonds and 71.7% was payables to customers arising from securities business.
25
ZHEJIANG EXPRESSWAY CO., LTD.Management Discussion and Analysis
Total interest-bearing borrowings of the Group as at December 31, 2012 amounted to Rmb1 billion,
representing a decrease of 31.6% comparing to that as at December 31, 2011. The borrowings was totally
corporate bonds amounting to Rmb1 billion which was issued by the Company in 2003 with a term of 10
years. The annual coupon rate for corporate bonds was fixed at 4.29%, with interest payable annually.
On January 24, 2013, the principal and relevant interests of the corporate bonds have been fully repaid.
Besides, the annual interest rate for accounts payable to customer arising from the securities business
was fixed at 0.35%.
Gross
amount
Rmb’000
Maturity Profiles
Within
1 year
Rmb’000
2-5 years
inclusive
Rmb’000
Beyond
5 years
Rmb’000
Floating rates
Domestic commercial bank loans
Fixed rates
Domestic commercial bank loans
Domestic foreign bank loans
Corporate bonds
–
–
–
–
1,000,000
–
–
1,000,000
Total as at December 31, 2012
1,000,000
1,000,000
–
–
–
–
–
Total as at December 31, 2011
1,462,553
462,553
1,000,000
–
–
–
–
–
–
Total interest expenses for the Period amounted to Rmb54.00 million, while profit before interest and tax
amounted to Rmb2,569.94 million. The interest cover ratio (profit before interest and tax over interest
expenses) stood at 47.6 times (2011: 35.8).
Profit before tax and interest
Interest expenses
Interest cover ratio
2012
Rmb’000
2,569,941
53,995
47.6
2011
Rmb’000
2,863,823
80,043
35.8
26
2012 ANNUAL REPORTManagement Discussion and Analysis
The asset-liability ratio (total liabilities over total assets) was 35.4% as at December 31, 2012 (December
31, 2011: 36.2%). Excluding the effect of customer deposits arising from the securities business, the
resultant asset-liability ratio (total liabilities less balance of accounts payable to customer arising from
securities business over total assets less balance of cash held on behalf of customers) of the Group was
13.4% (December 31, 2011: 15.4%).
Capital Structure
As at December 31, 2012, the Group had Rmb19,016.28 million in total equity, Rmb8,481.82 million in
fixed-rate liabilities and Rmb1,947.29 million in interest-free liabilities, representing 64.6%, 28.8% and
6.6% of the Group’s total capital, respectively. The gearing ratio, which was computed by dividing the total
liabilities less accounts payable to customer arising from securities business by total equity, was 15.5% as
at December 31, 2012 (December 31, 2011: 18.2%).
Total equity
Fixed rate liabilities
floating rate liabilities
interest-free liabilities
As at December 31,
2012
As at December 31,
2011
Rmb’000
%
Rmb’000
19,016,275
8,481,819
–
1,947,287
64.6%
28.8%
0.0%
6.6%
18,599,100
8,505,620
100,000
1,928,239
%
63.9%
29.2%
0.3%
6.6%
Total
29,445,381
100.0%
29,132,959
100.0%
Long-term interest-bearing liabilities
Gearing ratio 1 (note)
Gearing ratio 2 (note)
Asset-liabilities 1 (note)
Asset-liabilities 2 (note)
1,000,000
–
0.0%
15.5%
0.0%
35.4%
13.4%
3.4%
18.2%
5.4%
36.2%
15.4%
Note: Gearing ratio 1 represents the total liabilities less balance of accounts payable to customers arising from
securities business to the total equity; gearing ratio 2 represents the total amount of the long-term interest-
bearing liabilities to the total equity; Asset-liability ratio 1 represents total liabilities to total assets; Asset-liability
ratio 2 represents the total liabilities less balance of accounts payable to customers arising from securities
business to the total assets less bank balances held on behalf of customers.
27
ZHEJIANG EXPRESSWAY CO., LTD.Management Discussion and Analysis
Capital Expenditure Commitments and Utilization
During the Period, capital expenditures of the Group totaled Rmb724.56 million, while capital expenditure
of the Company totaled Rmb467.96 million. Amongst the total capital expenditures of the Group,
Rmb373.47 million was incurred for acquiring 50% equity interest in Shengxin Company, Rmb50.00
million was incurred for capital increase of Zheshang Fund Management Co., Ltd. (an associate of
Zheshang Securities that held 25% equity interest), Rmb120.30 million was incurred for acquisition and
construction of properties, Rmb162.33 million was incurred for purchase and construction of equipment
and facilities, and Rmb12.39 million was incurred for service area renovation and expansion, Rmb6.07
million was incurred for the road widening project between the Shaoxing-Zhuji hub of the Shangsan
Expressway.
As at December 31, 2012, capital expenditures committed by the Group and the Company totaled
Rmb1,086.40 million and Rmb450.08 million, respectively. Amongst the total capital expenditures
committed by the Group, Rmb497.05 million will be used for acquisition and construction of properties,
Rmb238.50 million for acquisition and construction of equipment and facilities, Rmb70.85 million for
service area renovation and expansion and Rmb280.00 million for investment in an associate.
The Group will finance the above mentioned capital expenditure commitments mainly with internally
generated cash flow and will consider using debt financing to meet any shortfalls in priority to using other
methods.
Contingent Liabilities and Pledge of Assets
As at December 31, 2012, the Group did not have any contingent liabilities nor any pledge of assets or
guarantees.
Foreign Exchange Exposure
Save for the repayment of a domestic foreign bank loan in Hong Kong dollars amounting to an equivalent
of Rmb312.51 million and dividend payments to the holders of H shares in Hong Kong dollars, the Group’s
principal operations were transacted and booked in Renminbi.
28
2012 ANNUAL REPORTManagement Discussion and Analysis With an aim to hedge against foreign exchange risks arising from borrowings denominated in Hong Kong
dollars, the Group purchased Hong Kong dollar equivalent forward contracts with one-year term at a rate
lower than the spot exchange rate on the borrowing date in the year of 2011. The transaction completed
on May 31, 2012. Other than the above, the Group has not used other financial instruments for hedging
purposes during the Period.
Although the Directors do not foresee any material foreign exchange risks for the Group, there is no
assurance that foreign exchange risks will not affect the operating results of the Group in the future.
HUMAN RESOURCES
As at December 31, 2012, there were 6,127 employees within the Group, amongst whom 1,259 worked in
the managerial, administrative and technical positions, while 4,868 worked in fields such as toll collection,
maintenance, service areas, securities and futures business outlets.
To fully reflect the Company’s values and corporate culture, and to proactively implement its development
strategy, the Company further amended its remuneration policy and emphasised the concept of
remuneration based on responsibilities, competence and performance to clearly establish the relationship
between the salary raise, individual performance and corporate performance, and to help employees
strive for salary review. The remuneration package comprises three parts: basic salary, incentive pay
and benefits. The basic salary is determined primarily based on the seniority and ability of the staff. The
incentive pay is pegged with productivity. Benefits for employees come in the form of contributions made
by the Group to local social security agencies covering pension, medical and accommodation concerns
that are calculated as a percentage of employees’ income and in accordance with relevant PRC rules and
regulations. The Company continued to implement the corporate annuity scheme during the Period, and
total pension cost charged to the income statement during the Period amounted to Rmb62.86 million.
29
ZHEJIANG EXPRESSWAY CO., LTD.Management Discussion and Analysis Accelerate Transformation and
Race Against Time
Bearing in mind that every moment must be seized, we
will continue to step up business exploration and innovation
in order to accelerate the transformation of Zhejiang
Expressway, and to open a new chapter of development.
30
2012 ANNUAL REPORT OUTLOOK
Due to influences by the macro and regional economic development on the overall performance of toll
road operations, it is anticipated that the domestic economy will maintain steady development in 2013
under the government’s macro-control initiatives. In addition, based on available data, it is suggested
that Zhejiang’s economy is stabilising and improving, which would be conducive to the continued organic
growth in the traffic volume on the Group’s expressways in 2013.
Meanwhile, Jiaxing-Shaoxing Expressway, which is scheduled to open in the second half of 2013, is
anticipated to create a slight negative impact on the Group’s Shanghai-Hangzhou-Ningbo Expressway,
but a greater boost to the traffic volume on the Group’s Shangsan Expressway. As the income and
profit contribution from Shangsan Expressway is smaller than that from Shanghai-Hangzhou-Ningbo
Expressway, the opening of the Jiaxing-Shaoxing Expressway is unlikely to significantly impact on the
Group’s toll income for the whole year overall.
Moreover, as a new round of quantitative easing policies is being launched globally, it is expected that
China may make appropriate adjustments to its monetary policy in 2013, which may provide new impetus
to the sluggish Chinese securities market. This will help Zheshang Securities to seize an opportunity in
that while strengthening cost control and risk control, Zheshang Securities will further develop innovative
business, broaden the sources of income and speed up the process of the proposed listing of its shares
on the Shanghai Stock Exchange to address the challenges posed by market environment and intense
competition for facilitating the sound development of the securities business.
Looking ahead in 2013, the world economy is expected to remain in a major adjustment period; the
Chinese domestic economy is seeking a new balance in its development and the impact of national
policies on the toll road industry will continue. All of these factors have added to uncertainty to the Group’s
business development.
However, the Company’s management also observed that a number of positive factors are emerging as
well: strengthened U.S. economic recovery; China’s implementation of the four major national strategies
and commencement of the four major construction projects in Zhejiang Province at full speed, which will
present a rare opportunity for the Group’s development. In addition to continuous consolidation of the
Group’s principal expressway business as well as advancing the securities and financial business, the
Group will also be actively seeking suitable investment projects and nurturing management capabilities on
diversified businesses. The Group will also utilize its financial resources advantage to generate strategic
synergies with its parent company for expanding development space and improving profitability in future.
31
ZHEJIANG EXPRESSWAY CO., LTD.Management Discussion and Analysis Principal Risks and Uncertainties
TOLL ROAD BUSINESS RISKS
Economic Environment
As the global economy remained in a period of profound restructuring,
the domestic economy, despite showing signs of picking up, was still taking
shape towards a new balance as a whole. Meanwhile, the unfavourable export
trading conditions also affected Zhejiang, a province with heavy reliance on export
trading. Growth in the traffic volume and toll revenue of the Group’s expressways
is expected to remain uncertain, creating uncertainties for the operations, financial
conditions and operating results of the Group.
32
Management Discussion and Analysis2012 ANNUAL REPORT Roads Competition
Despite the opening of two expressways nearby, namely Shenjia Huhang Expressway and Zhuyong
Expressway, the impacts of traffic diversion on the Group’s two expressways were stabilized.
However, as Jiaxing-Shaoxing Cross River Passage is scheduled to commence service in the second
half of 2013, coupled with the opening of other new expressways nearby, it is expected that new
traffic will be diverted to certain sections of Shanghai-Hangzhou-Ningbo Expressway. In face of the
increasingly significant effects of traffic division due to the newly built expressways in Zhejiang province,
we have implemented ETC (electronic toll collection) system in all toll stations and improved the quality
of expressway service. We endeavoured to attract more traffic to the Group’s expressways through
improving the expressway bulletin and adopting various means of promotion and introduction to cope
with the challenges arising from the unfavourable toll road business environment. Accordingly, we cannot
be assured as to whether traffic volume to be generated on the Group’s expressways will be maintained
at the same levels as before or will increase in the future, or whether or not the operating results of the
Group will be negatively affected.
Toll Policy
With the implementation of the toll waiver policy on small passenger vehicles on key festivals and
holidays by the PRC government on September 30, 2012, the expressway operators who charge for
toll are negatively affected. In addition, due to the introduction of a special project by five ministries and
commissions for the rectification of the toll road policy in Zhejiang province, a number of new policies
focusing on adjusting the toll policy of expressways within the province were successively issued in
2012. Despite that we expect the possibility of major changes in the policies of the expressway industry
in the near term is minimal, we cannot be assured that there will be no change in the toll policy in
Zhejiang province, nor further adjustment to the toll standards for vehicle classes and toll calculation
methods adopted by expressway operators within the province. It is uncertain that changes in toll tariffs of
expressways arising therefrom will not have any adverse effects on the toll revenue of the Group.
33
ZHEJIANG EXPRESSWAY CO., LTD.Management Discussion and Analysis SECURITIES BUSINESS RISKS
Market Fluctuations
The securities business is highly susceptible to market fluctuations and may experience periods of high
volatility accompanied by reduced liquidity. It may be materially affected by economic and other factors
such as the global market conditions; the availability and cost of capital; the liquidity of the global markets;
the level and volatility of stock prices, commodity prices and interest rates; currency values and other
market indices; inflation; natural disasters; acts of war or terrorism; as well as investor sentiment and
confidence in the financial markets. There is no assurance as to whether our securities business will
be adversely affected by fluctuations in the market, or whether our securities business will continue to
contribute to our overall profit margin.
Regulation of the Securities Business
We are subject to extensive regulations in the PRC that govern how we conduct our securities business,
and we are subject to risks of intervention by the PRC regulatory authorities. We could be fined, prohibited
from engaging in some of our business activities or subject to limitations or conditions on our business
activities, among other things. Significant regulatory actions against us could have material adverse
impacts on our financial position, cause us significant reputational harm, or harm our business prospects.
New laws, regulations or changes in the enforcement of existing laws or regulations applicable to our
clients may also adversely affect our business.
FINANCIAL RISKS
For financial risks and uncertainties of the Group, please see notes 4, 5 and 6 to the Consolidated
Financial Statements.
34
2012 ANNUAL REPORTManagement Discussion and Analysis STATEMENT OF RESPONSIBILITY FROM THE
DIRECTORS WITH RESPECT TO THE ANNUAL
REPORT AND THE COMPANY’S ACCOUNTS
The Directors of the Company duly confirm that to the best of their knowledge:
—
the consolidated financial statements prepared and subject to disclosure under the Hong Kong
Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants
give a true and fair view of the assets, liabilities, financial position and profit of the Group, and cover
the enterprises that have been consolidated into the Company; and
—
the “Management Discussion and Analysis” section included in this annual report includes a fair
review of the development and performance of the business and the position of the Group, covers
the enterprises that have been consolidated into the Company and describes the principal risks and
uncertainties faced by the Group.
From the beginning of year 2012 up to now, there has been no occurrence of significant events that would
have a material impact on the normal operation of the Group.
By Order of the Board
Tony ZHENG
Company Secretary
Hangzhou, Zhejiang Province, the PRC
March 19, 2013
35
ZHEJIANG EXPRESSWAY CO., LTD.Management Discussion and Analysis Corporate
Governance Report
CORPORATE GOVERNANCE PRACTICES
To govern the daily functioning of the Board of Directors of the Company, the Company has adopted
its own Guidelines on Corporate Governance that closely followed the principles of good governance in
Appendix 14 of the Listing Rules (available at www.hkex.com.hk) (“CG Code”).
During the Period, the Company has complied with all code provisions in the CG Code and adopted the
recommended best practices in the CG Code as and when applicable.
DIRECTORS’ SECURITIES TRANSACTIONS
The Company has adopted the Rules on Securities Dealings (“Rules on Securities Dealings”) for the
Directors, supervisors, senior management personnel and other employees of the Company on terms
no less exacting than the required standard set out in the Model Code for Securities Transactions by
Directors of Listed Issuers (the “Model Code”) set out in Appendix 10 of the Listing Rules.
Upon specific inquiries to all the Directors, the Directors have confirmed their respective compliance with
the required standards for securities transactions by Directors as set out in the Model Code and the Rules
on Securities Dealings during the Period.
36
2012 ANNUAL REPORT BOARD OF DIRECTORS OF THE COMPANY (THE
“BOARD”)
The executive directors of the Company during the Period were:
Mr. ZHAN Xiaozhang (Chairman)
Mr. CHEN Jisong (Chairman, retired)
Ms. LUO Jianhu (General Manager)
Mr. JIANG Wenyao (retired)
Mr. ZHANG Jingzhong (retired)
Mr. DING Huikang
The non-executive directors of the Company during the Period were:
Ms. ZHANG Luyun (retired)
Mr. LI Zongsheng
Mr. WANG Weili
WANG Dongjie
The independent non-executive directors of the Company during the Period were:
Mr. TUNG Chee Chen (retired)
Mr. ZHANG Junsheng
Mr. ZHANG Liping (retired)
Mr. ZHOU Jun
Mr. PEI Ker-Wei
37
ZHEJIANG EXPRESSWAY CO., LTD. During the Period, the Board held a total of seven meetings. Individual attendances by the directors (as
indicated by the numbers of meetings attended/numbers of relevant meetings held) are as follows:
Mr. ZHAN Xiaozhang (Chairman)
Mr. CHEN Jisong (Chairman, retired)
Ms. LUO Jianhu (General Manager)
Mr. JIANG Wenyao (retired)
Mr. ZHANG Jingzhong (retired)
Mr. DING Huikang
Ms. ZHANG Luyun (retired)
Mr. LI Zongsheng
Mr. WANG Weili
Mr. WANG Dongjie
Mr. TUNG Chee Chen (retired)
Mr. ZHANG Junsheng
Mr. ZHANG Liping
Mr. ZHOU Jun
Mr. PEI Ker-Wei
Attendance
Attendance
Attendance
through
in person
by proxy
communication
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/6
1/3
2/3
1/6
1/3
6/6
3/3
3/3
3/3
3/3
5/6
2/3
3/3
2/3
3/3
1/3
4/6
2/3
3/3
3/3
During the Period, the Company held two general meetings of the shareholders. The meetings were
chaired by Chairman, and all executive directors were present at the meetings.
The Board is charged with duties as well as given powers that are expressly specified in the articles of
association of the Company, the scope of which includes, amongst others: to determine the business
plans and investment proposals of the Company; to prepare the financial budget and final accounts of
the Company; to determine the dividend policy of the Company; to appoint or dismiss senior managerial
officers of the Company as well as to determine their remuneration; and to draw up proposals for any
material acquisition or sale by the Company.
38
2012 ANNUAL REPORTCorporate Governance Report
To assist the Board to effectively discharge its duties, the Board has set up the Audit Committee,
the Nomination and Remuneration Committee, and the Strategic Committee; the Nomination and
Remuneration Committee was later separated into the Nomination Committee and the Remuneration
Committee.
While the Board fully retains its power to decide on matters within its scope of duties and powers, relevant
preparation and drawing up of plans or proposals were usually delegated to the management.
The Company has complied with the requirements under Rules 3.10(1) and (2) of the Listing Rules
regarding the appointment of independent non-executive directors, with three independent non-executive
directors appointed, at least one of whom possessing the appropriate professional qualification or
accounting or related financial management expertise.
Pursuant to Rule 3.13 of the Listing Rules, the Company had specifically inquired with all three
independent non-executive directors and received their respective confirmation of independence during
the Period. The three independent non-executive directors have all confirmed their compliance with
requirements regarding independence under Rule 3.13 of the Listing Rules. The Company still considers
the independent non-executive directors to be independent.
There were no financial, business, family or other material or relevant relationships between members of
the Board, including that between the Chairman and the General Manager of the Company.
CONTINUOUS PROFESSIONAL DEVELOPMENT
Under code provision A.6.5 of the CG Code, directors of the Company should participate in continuous
professional development to develop and refresh their knowledge and skills. Each newly appointed
director receives induction on the first occasion of his or her appointment, so as to ensure that he or she
has appropriate understanding of the business and operations of the Company and that he or she is
fully aware of his or her responsibilities and obligations under the Listing Rules and relevant regulatory
requirements. Directors are also regularly updated on the Group’s business and industry environments
where appropriate in the management’s monthly reports to the Board as well as briefings and materials
circulated to the Board before board meetings.
39
ZHEJIANG EXPRESSWAY CO., LTD.Corporate Governance Report In addition, during the Period, the Company has arranged for all its executive and non-executive directors
to undergo continuous trainings designed to develop and refresh their knowledge and skills so as to
ensure that their contribution to the Board remains informed and relevant. However, as the management
considers that the independent non-executive directors of the Company are very experienced,
knowledgeable and resourceful, the Company did not arrange any professional briefings or training
programmes for its independent non-executive directors and has decided to leave it to the independent
non-executive directors to undergo appropriate training as they see fit.
CHAIRMAN AND GENERAL MANAGER
During the Period, Mr. ZHAN Xiaozhang succeeded Mr. CHEN Jisong as Chairman, and Ms. LUO
Jianhu succeeded Mr. ZHAN Xiaozhang as General Manager of the Company, respectively. The roles of
Chairman and General Manager are fully segregated as expressly set out in the articles of association of
the Company.
NON-EXECUTIVE DIRECTORS
Terms for the non-executive directors of current session of the Board started on June 11, 2012, and will
expire on June 30, 2015.
SPECIAL COMMITTEES UNDER THE BOARD
The Board has set up the Audit Committee, the Nomination and Remuneration Committee, and the
Strategic Committee; the Nomination and Remuneration Committee was later separated into the
Nomination Committee and the Remuneration Committee. Roles and responsibilities for each committee
are specified in its terms of reference, details of which can be found under the “Corporate Governance”
section in the Company’s web site.
The Audit Committee comprised of the three independent non-executive directors and two non-executive
directors, namely Mr. ZHANG Junsheng, Mr. ZHOU Jun, Mr. PEI Ker-Wei, Mr. WANG Weili and Mr.
WANG Dongjie, of whom Mr. ZHOU Jun serves as the Chairman of the Audit Committee.
40
2012 ANNUAL REPORTCorporate Governance Report The Nomination Committee comprised of three independent non-executive directors, one executive
director and one non-executive director, namely Mr. ZHANG Junsheng, Mr. ZHOU Jun, Mr. PEI Ker-Wei,
Mr. ZHAN Xiaozhang and Mr. LI Zongsheng, of whom Mr. ZHAN Xiaozhang serves as Chairman of the
Nomination Committee.
The Remuneration Committee comprised of three independent non-executive directors and two non-
executive directors, namely, Mr. ZHANG Junsheng, Mr. ZHOU Jun, Mr. PEI Ker-Wei, Mr. LI Zongsheng
and Mr. WANG Weili, of whom Mr. ZHANG Junsheng serves as Chairman of the Remuneration
Committee.
The Strategic Committee comprised of three executive directors, namely Mr. ZHAN Xiaozhang, Ms. LUO
Jianhu and Mr. DING Huikang as well as Mr. ZHANG Jingzhong, Mr. WU Junyi and several outside
experts and advisors, of whom Mr. ZHAN Xiaozhang serves as chairman of the Strategic Committee.
During the Period, the Audit Committee held a total of four meetings. Individual attendances by the
members of the Audit Committee (as indicated by the numbers of meetings attended/numbers of meetings
held) are as follows:
Mr. TUNG Chee Chen (retired)
Mr. ZHANG Junsheng
Mr. ZHANG Liping (retired)
Ms. ZHANG Luyun (retired)
Mr. ZHOU Jun
Mr. PEI Ker-Wei
Mr. WANG Weili
Mr. WANG Dongjie
Attendance
in person
Attendance
by proxy
1/2
2/4
2/2
1/2
2/2
2/2
1/2
2/2
1/2
1/4
1/2
In the meetings held during the Period, the Audit Committee conducted, amongst others, review of
financial statements for the quarterly, interim and annual results, the effectiveness of the system of
internal control and the reporting thereof to the Board, as well as recommendation on the re-appointment
of external auditors.
41
ZHEJIANG EXPRESSWAY CO., LTD.Corporate Governance Report
Pursuant to Terms of Reference for the Remuneration Committee, one of the responsibilities of the
Remuneration Committee is to offer the Board recommendations on remunerations of executive directors
and senior management. Before the separation of Nomination and Remuneration Committee into two
independent committees of Nomination Committee and Remuneration Committee, the Nomination and
Remuneration Committee held a meeting during the Period, during which it reviewed the candidates for
directors and supervisors and their recommended remuneration in relation to change in sessions of the
Board and the Supervisory Committee of the Company. Each and every member of the Nomination and
Remuneration Committee attended the meeting. Proposed candidates for directors and supervisors for
the new session as well as their recommended remuneration that was reviewed by the Nomination and
Remuneration Committee were later reviewed and approved by the full Board and the general meeting of
shareholders.
During the Period, the Strategic Committee held three meetings, mainly discussed the Company’s
strategic development and transformation, as well as strategic positioning and development plan for the
next three years as proposed by relevant department. Each and every member of the Strategic Committee
attended the meetings.
The Board is responsible for developing and reviewing the Company’s corporate governance policies and
practices, monitoring the Company’s compliance with the Code and its disclosure within this report; the
Board reviews and monitors the training and continuous professional development of Directors and senior
management through the works of human resources department, and review and monitor the Company’s
policies and practices on compliance with legal and regulatory requirements through the works of legal
and internal audit department.
During the Period, the Directors have all confirmed their responsibility for preparing the accounts, and
that there were no events or conditions which would have a material impact on the Company’s ability to
continue to operate as a going concern basis.
42
2012 ANNUAL REPORTCorporate Governance Report AUDITORS’ REMUNERATION
During the Period, the Company had paid HK$3.85 million (approximately Rmb3.15 million equivalent)
and Rmb830,000 to Deloitte Touche Tohmatsu Certified Public Accountants (the Hong Kong auditors)
and Pan-China Certified Public Accountants Ltd. (the PRC auditors) for audit services conducted in 2011,
respectively. The auditors did not provide non-audit services to the Company.
SECRETARY TO THE BOARD
During the Period, the Secretary to the Board had complied with Rule 3.29 of the Listing Rules regarding
undergoing relevant professional trainings.
DIRECTORS, SUPERVISORS AND CHIEF
EXECUTIVE’S INTERESTS IN SHARES AND
UNDERLYING SHARES OF THE COMPANY
As at December 31, 2012, none of the Directors, Supervisors and General Manager had any interests or
short positions in the shares, underlying shares or debentures of the Company or any of its associated
corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept
pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock
Exchange pursuant to the Model Code.
43
ZHEJIANG EXPRESSWAY CO., LTD.Corporate Governance Report INTERESTS AND SHORT POSITIONS OF OTHER
PERSONS IN SHARES AND UNDERLYING
SHARES
As at December 31, 2012, the interests and short positions of other persons in the shares and underlying
shares of the Company according to the register required to be kept by the Company pursuant to Section
336 of the SFO, or as otherwise notified to the Company and the Stock Exchange are set out below:
Total interests
in number of
Percentage of
the issued
share capital
ordinary shares
of the Company
Substantial shareholders
Capacity
of the Company
(domestic shares)
Communications Group
Beneficial owner
2,909,260,000
100%
Total interests
in number of
Percentage of
the issued
share capital
ordinary shares
of the Company
Substantial shareholders
Capacity
of the Company
(H Shares)
JP Morgan Chase & Co
Beneficial owner,
156,633,546 (L)
investment manager and
42,000(S)
custodian corporation/
117,344,000(P)
approved lending agent
BlackRock, Inc.
Interest of controlled
130,448,159(L)
corporations
5,502,378(S)
10.92%(L)
0.00%(S)
8.18%(P)
9.09%(L)
0.38%(S)
Veritas Funds Plc
Beneficial owner
74,170,000(L)
5.17%(L)
The Real Return Group Limited
Interest of controlled
71,820,000(L)
5.01%(L)
corporations
The letter “L” denotes a long position. The Letter “S” denotes a short position. The letter “P” denotes
interest in a lending pool.
44
2012 ANNUAL REPORTCorporate Governance Report
Save as disclosed above, as at December 31, 2012, no other persons had any interests or short positions
in the shares or underlying shares of the Company that was required to be recorded pursuant to Section
336 of the SFO, or as otherwise notified to the Company and the Stock Exchange.
SHAREHOLDERS’ RIGHTS
Pursuant to the Articles of Association of the Company, two or more Shareholders who in aggregate hold
10% or more of the voting rights of all the shares of the Company having the right to vote may write to
the Board to request the convening of an extraordinary general meeting and specifying the agenda of
the meeting. Upon receipt of the request in writing, the Board shall convene the extraordinary general
meeting as soon as possible. Shareholders who hold in aggregate 5% or more of the voting rights of all
the shares of the Company having the right to vote are entitled to propose additional motions in annual
general meeting, provided that such motions are served on the Company within 30 days after the issue of
the notice of annual general meeting.
Written requests, proposals and enquiries may be sent to the Company through contact details listed on
page 46 of this report.
INVESTOR RELATIONS
The Board is committed to ensuring that all shareholders and the investment community have equal
and timely access to information about the Company so as to enable their accurate assessment
of the Company’s fair value. Such information is available through channels including financial
reports, shareholder meetings, statutory announcements, the Hong Kong Stock Exchange website
(www.hkexnews.hk) and the Company’s own website (www.zjec.com.cn).
Activities such as investor and analyst briefings, one-on-one meetings, conference calls, roadshows, and
press conferences are held regularly by senior management of the Company, particularly after results
announcements.
45
ZHEJIANG EXPRESSWAY CO., LTD.Corporate Governance Report Great importance is also attached to maintaining clear and effective communications channels with
investors as part of the Company’s bid to enhance its transparency and to promote the understanding of
its business in the investment community. Any parties who wish to learn more about the Company may do
so via the contact details listed below:
Mr. Tony ZHENG
Company Secretary
12/F, Block A, Dragon Century Plaza
1 Hangda Road Hangzhou, Zhejiang 310007
China
Tel: 86-571-8798 7700
Fax: 86-571-8795 0329
E-mail: zhenghui@zjec.com.cn
During the Period, the last shareholders’ meeting of the Company took place at 3:00 p.m. on Friday,
October 12, 2012 at the headquarters of the Company. Details of this extraordinary general meeting of
the shareholders were set out in the announcement dated October 12, 2012 on resolutions passed at the
extraordinary general meeting of the shareholders.
The next Annual General Meeting of the Company is expected to be held in May 2013, with exact date
and resolutions for review to be specified in notice of Annual General Meeting when it is published.
The Company has an issued share capital of 4,343,114,500 shares comprised of domestic shares and
H shares. The domestic shares are held by Zhejiang Communications Investment Group Co., Ltd. as to
2,909,260,000 shares, representing approximately 67% of the total issued capital of the Company. The
remaining 1,433,854,500 shares are H shares, representing approximately 33% of the total issued capital
of the Company. As at the date of this report, and to the best of the Directors’ knowledge, 100% of the H
shares of the Company are held by the public.
During the Period, Article 90 of the Company’s articles of association was deleted in its entirety and
substituted by the following:
“The Company shall have a board of directors. The Board of directors shall comprise nine directors, of
whom at least three shall be independent non-executive directors. The board of directors shall have one
chairman and one vice-chairman.”
46
2012 ANNUAL REPORTCorporate Governance Report INTERNAL CONTROLS
The Company has set up an internal monitoring system that aims to protect assets, preserve accounting
and financial information, as well as to ensure the accuracy of financial statements, including the
establishment of departments and units, setting out responsibilities, execution of management systems
and quality control mechanisms. The system is capable of taking necessary steps to react to possible
changes in our businesses as well as external operating environments. Throughout the operating process,
the Company’s various internal control measures are being continuously enhanced, fulfilled and are
deemed effective.
The Company’s Audit Committee is charged with the duties of reviewing internal controls, directing
monitoring activities. Aside from reviewing the annual reporting by external auditors, the committee also
reviews the effectiveness of internal control system and risk management mechanism through reviewing
the internal special audit report on the Company’s various core businesses prepared by internal audit
department on a quarterly basis. During the year, the Audit Committee focused on the compliance of
the Company’s internal control measures, as well as risk control mechanism relating to new business
investment and renovation of the Company’s securities business. The internal audit department carried
out specific audit into these compliance issues and monitored relevant rectifications, ensuring the
effectiveness of the Company’s management systems.
During the Period, the Directors of the Company had carried out a review on the effectiveness of the
Company’s internal control system, covering all material aspects of internal control, including financial
control, operational control, compliance control and risk management functions. There were no major
breaches in the internal control system that may have had an impact to Shareholders’ interests, and the
internal control system was deemed to be effective and sufficient.
MANAGEMENT FUNCTIONS
The management functions of the Board and the management are expressly stipulated in the articles of
association of the Company. Pursuant to the articles of association of the Company, the management
of the Company is assigned the functions to be in charge of the production and business operation of
the Company and to organize the implementation of the resolutions of the board of directors, to organize
the implementation of the annual business plan and investment program of the Company, to prepare
plans for the establishment of the internal management structure of the Company, to prepare the basic
management systems of the Company, and to formulate basic rules and regulations of the Company, etc.
47
ZHEJIANG EXPRESSWAY CO., LTD.Corporate Governance Report DIRECTORS
Executive Directors
Mr. ZHAN Xiaozhang, born in 1964, is a senior economist. Mr. Zhan holds
a bachelor’s degree in law. He further obtained a master’s degree in public
administration from the Business Institute of Zhejiang University in 2005. He has
been appointed as the Chairman of the Company since Jun 2012.
From 1985 to 1991, Mr. Zhan worked as an officer at Transport Administrative Division under Waterway
Transport Authority of Zhejiang Provincial Bureau of Construction. From 1991 to 1998, he served as
Deputy Secretary then Secretary of the Communist Youth League Commission at Zhejiang Provincial
Bureau of Communications. From 1998 to 2002, he was Deputy Director of Waterway Transport Authority
under Zhejiang Provincial Bureau of Communications. From 2002 to 2003, he was Deputy Director of
Human Resources Department at Zhejiang Provincial Bureau of Communications. From 2003 to 2006,
Mr. Zhan was Chairman of Zhejiang Wenzhou Yongtaiwen Expressway Co., Ltd. From 2006 to 2008, he
became Chairman of Zhejiang Jinji Property Co., Ltd. Mr. Zhan has been Assistant to General Manager
and Manager of Research and Development Department at Zhejiang Communications Investment Group
Co., Ltd from 2006 to 2009.
He served as an Executive Director and the General Manager of the Company from March 2009 to June
2012. Mr. ZHAN currently serves as Deputy General Manager of Communications Group.
48
2012 ANNUAL REPORTDirectors, Supervisors and Senior Management Profiles Ms. LUO Jianhu, born in 1971, graduated from the Department of Law at
Hangzhou University with a bachelor’s degree in law, majoring in Economic
Law. She is a lawyer and senior economist. Ms. Luo has been appointed as an
Executive Director and the General Manager of the Company since June 2012.
Since she started her career in August 1994, Ms. Luo had held such positions as the board secretary
of Zhejiang Transportation Engineering Construction Group Co., Ltd., the deputy director, director of the
Legal Affairs Department, the deputy director of the Secretarial Office to the board and the manager of the
Investment and Development Department of Zhejiang Communications Investment Group Co., Ltd.
Mr. DING Huikang, born in 1955, is a professor-level senior engineer, an
Executive Director and Deputy General Manager of the Company. Mr. Ding
graduated from Zhejiang Institute of Communications majoring in Road and
Bridge Engineering and Changsha Institute of Communications, majoring in
Economic Law. From 1980 to 1997, Mr. Ding successively held the positions of
technician, assistant engineer, engineer, assistant team leader and team leader at No.1 Road Engineering
Team of Zhejiang Province. From 1997 to 2000, he served as General Manager and senior engineer
of No.1 Transportation Engineering Co., Ltd. of Zhejiang Transportation Engineering Construction
Group. From 2000 to 2004, he was head of the management committee of Zhejiang Ningbo Yongtaiwen
Expressway Second Phase Project. He has been Chairman of Zhejiang Ningbo Yongtaiwen Expressway
Co., Ltd. and Zhejiang Zhoushan Cross-Sea Bridge Co., Ltd. since 2004 and 2006 respectively. He has
been serving as Executive Director and Deputy General Manager since August 2010.
49
ZHEJIANG EXPRESSWAY CO., LTD.
Non-Executive Directors
Mr. LI Zongsheng, born in 1967, is a senior economist. Since Mr. Li graduated
from the Department of Chinese Language at YanTai University in July 1991, he
had served as the deputy director of the administrative office of the Commission for
Economy and Trade of Zaozhuang in Shandong Province and the head of the First
Secretarial Division of Zaozhuang Municipal Government Office.
Since he joined Zhejiang Communications Investment Group Co., Ltd. in July 2004, he had successively
held the positions of the head and deputy director of the Chinese Communist Party Working Department,
deputy director of the Discipline Office and the board secretary and deputy director of the Secretarial
Office to the Board.
He is currently the manager of the Human Resources Department of Zhejiang Communications
Investment Group Co. Ltd.
Mr. WANG Weili, born in 1965, graduated from Fuzhou University majoring
in Road and Bridge. He is a senior engineer with professional certification.
Since he started his career in September 1987, Mr. Wang had served as an
engineer of Zhejiang Transportation Design Institute, the vice director of Engineering
Division of Executive Commission of Zhejiang Jinliwen Expressway Co., Ltd. and the deputy general
manager and chief engineer of Zhejiang-Jiashao Expressway Co., Ltd. Since he joined Zhejiang
Communications Investment Group Co., Ltd. in May 2006, he had successively held the positions of the
vice president of Project Management Department, Security Management Department and Expressway
Management Department and the deputy director of the Expressway Construction Management Office.
He is currently the manager of the Expressway Management Department of Zhejiang Communications
Investment Group Co. Ltd.
50
2012 ANNUAL REPORTDirectors, Supervisors and Senior Management Profiles
Mr. WANG Dongjie, born in 1977, graduated from Southeast University
majoring in Highway and Railway Engineering with a master’s degree in
engineering. He is a senior engineer.
Since he started his career in March 2002, Mr. Wang had served as an engineer of
the Executive Commission of Hangzhou Ring Road North Line Project, the deputy executive chief of the
Executive Commission for the interflow renovation of Hangzhou airport road, the Engineering Division
Chief of Management Office of Chun’an section of Hangqian Expressway and the director and deputy
general manager of Hangzhou Transportation Road and Bridge Construction Company.
He joined Zhejiang Communications Investment Group Co., Ltd. in January 2007 and is currently the
president of the Investment and Development Department.
Independent Non-Executive Directors
Mr. ZHANG Junsheng, born in 1936, is a professor, Independent Non-
executive Director and a member of the Audit Committee and the Nomination
and Remuneration Committee of the Company. Mr. Zhang graduated from Zhejiang
University in 1958, and was Lecturer, Associate Professor, and Advising Professor at
Zhejiang University. He was also Professor concurrently at, amongst other universities,
Zhongshan University. In 1980, he became Deputy General Secretary of Zhejiang University. In 1983, Mr.
Zhang served as Deputy General Secretary in the Hangzhou City Communist Party Committee. In 1985,
he began to work for the Xinhua News Agency, Hong Kong Branch, and had become its Deputy Director
since July, 1987 and was Consultant to the Sichuan Provincial Government and Senior Consultant to the
Shenzhen Municipal Government. Since September 1998, Mr. Zhang has taken up the position of General
Secretary of Zhejiang University. From 2003 to 2008, Mr. Zhang served as Director of the Zhejiang Province
Economic Development Consultation Committee and he is currently Special Advisor to the Zhejiang Provincial
Government, Chairman of Zhejiang University Development Committee, Honorary Doctor of Science of City
University of Hong Kong, Honorary Academician of Asian Knowledge Management Association and Honorary
Professor of Canadian Chartered Institute of Business Administration. Mr. Zhang has been Independent Non-
executive Director of the Company since March 2000.
51
ZHEJIANG EXPRESSWAY CO., LTD.Directors, Supervisors and Senior Management Profiles Mr. ZHOU Jun, born in 1969, is the executive director and vice president
of Shanghai Industrial Investment (Holdings) Co. Ltd. (“SIIC”). Mr. Zhou
graduated from Nanjing University and Fudan University with a bachelor’s degree
and a master’s degree. He also serves as the chairman of S.I. Infrastructure
Holdings Ltd. and eight other companies, the Chairman of Asia Water Technology
Ltd. in Singapore (SGX: 5GB), executive director and deputy CEO of Shanghai Industrial Holdings Ltd.
(HK: 0363), executive director of Shanghai Industrial Urban Development Group Ltd. (HK: 0563). He
worked for Guotai Securities Co., Ltd. (now Guotai Junan Securities Co.) before joining SIIC in April 1996.
The management positions he had held within the SIIC group of companies were deputy general manager
of SIIC Real Estate Holdings (Shanghai) Co., Ltd., deputy general manager of Shanghai United Holdings
Co., Ltd. (SH: 600607), managing director of Shanghai Cyber Galaxy Investment Co., Ltd. and general
manager of the Strategic Investment Department of SIIC. Mr. Zhou has about 20 years’ professional
experience in general management, financial investment, real estate and project planning.
Mr. PEl Ker-Wei, born in 1957, is a Professor of Accountancy and Executive
Dean for China Region at W. P. Carey School of Business, Arizona State
University. Mr. Pei received his Ph.D. degree in Accounting from University of
North Texas in 1986.
He is currently the director of W.P. Carey EMBA programs in China. He served as the chairman of the
Globalization Committee of the American Accounting Association in 1997 and as the president of the
Chinese Accounting Professors Association-North America in 1993 to 1994.
Mr. Pei currently serves as an external director of Baosteel Group and independent director of Want Want
China Holdings (00151.hk) and Zhong An Real Estate (00672. hk).
52
2012 ANNUAL REPORTDirectors, Supervisors and Senior Management Profiles SUPERVISORS
Supervisor Representing Shareholders
Mr. FU Zhexiang, born in 1958, graduated from Correspondence College of
the Party Central School majoring in Economics with a bachelor’s degree. He
is a senior accountant with professional certification.
Since he started his career in December 1976, Mr. Fu had served as the deputy
chief of the Fee Collection Division of Highway Inspection and Collection Bureau
of Zhejiang Province and the deputy chief accountant of Zhejiang Xin Gan Xian Express Passenger
Transportation Co., Ltd. Since he joined Zhejiang Communications Investment Group Co., Ltd. in
February 2002, he had successively held the positions of the assistant to manager of the Financial Audit
Department and the vice president of Financial Management Department and Internal Audit Department.
He is currently the manager and financial director of the Financial Management Department of Zhejiang
Communications Investment Group Co., Ltd.
Independent Supervisors
Mr. WU Yongmin, born in 1963, is an Assistant Professor. Mr. Wu
graduated from China University of Political Science and Law with a master’s
degree.
He was the Deputy Dean of the Department of Law at Hangzhou University, Deputy
Dean of the Department of Law at Zhejiang University’s Law School, and Director of Zheda Law Firm.
Mr. Wu studied at the Christian-Albrechts-Universitat zu Kiel in 1996 as a visiting scholar. He is currently
the Dean of the Department of Law at the Law School of Zhejiang University, a Supervisor for master’s
degree candidates in Business Law, a member of China Business Law Research Council, Deputy Director
of Zhejiang Tax Law Research Council, an Arbitrator of Hangzhou Arbitration Committee, and a Lawyer at
Zhejiang Zeda Law Firm.
53
ZHEJIANG EXPRESSWAY CO., LTD.Directors, Supervisors and Senior Management Profiles Mr. LlU Haisheng, born in 1969, is a professor. He obtained a doctorate
degree in Economics from Fudan University, a postdoctoral fellow in
Accounting at Xiamen University. He is currently Professor in Accounting, a
master student supervisor, a Certified Public Accountant (non-practicing) in the
PRC, a member of the Expert Consultancy Committee of Accounting Standards in
Zhejiang Province, an Assessment Expert on Financial Expenditures Performance of Zhejiang Province,
an executive member of the Zhejiang Association of Certified Financial Officers and Independent
Supervisor of the Company.
He is currently a Vice Dean of the School of Finance and Accounting at Zhejiang Gongshang University.
His main research fields include accounting for intangible assets, strategic cost management and
economic theories. Mr. LIU is also independent director of Ningbo Thermal Power Co., Ltd, Zhejiang
Qianjiang Motorcycle Co., Ltd and Zhejiang Enjoyor Electronics Co., Ltd.
Mr. ZHANG Guohua, born in 1963, obtained a doctorate degree in human
resources management. He is a senior economist and the president of Ping
An Bank, Hangzhou Branch. Mr. Zhang graduated from Hangzhou University
in 1985 with a bachelor’s degree in education and then received a master’s
degree in educational psychology in 1988. In 2000, he was granted the Graduate
Certificate of Completion in finance by the School of Economics of Zhejiang University, and then obtained
the doctorate degree in psychology from the College of Science of Zhejiang University in 2007.
Since 1988, Mr. Zhang had successively worked in the headquarters of Industrial and Commercial Bank
of China, Hangzhou Institute of Financial Managers, Hangzhou Financial Urban Credit Cooperative and
China Everbright Bank, Hangzhou Branch and Wuxi Branch. Since February 2009, he has been the
president of Ping An Bank, Hangzhou Branch.
Since July 10, 2008, he has served as an independent director of Zheshang Securities.
54
2012 ANNUAL REPORTDirectors, Supervisors and Senior Management Profiles Supervisor Representing Employees
Ms. ZHANG Xiuhua, born in 1969, is a senior economist, the Supervisor
representing employees of the Company. Ms. Zhang graduated from
Chongqing Jiaotong University majoring in transportation management with
a bachelor’s degree in science, and obtained a master’s degree in business
administration from Zhejiang University in 2006.
From July 1991 to February 1997, she worked in the Operation Division of the Zhejiang Provincial
Expressway Executive Commission. She joined the Company since March 1997, and had served as
assistant manager, deputy manager and manager of the Operation Department.
Ms. Zhang currently serves the Assistant to General Manager, she is also General Manager of Shengxin
Co., the director of Yuhang Co., Jiaxing Co., and Petroleum Co.
OTHER MEMBERS OF SENIOR MANAGEMENT
Mr. ZHANG Jingzhong, born in 1963, is a Senior Lawyer, the Deputy
General Manager of the Company. Mr. Zhang graduated from Zhejiang
University (previously known as Hangzhou University) in July 1984 with a
bachelor’s degree in law.
In 1984, he joined the Zhejiang Provincial Political Science and Law Policy Research Unit. From 1988
to 1994, he was Associate Director of Hangzhou Municipal Foreign Economic Law Firm. In 1992, he
obtained the qualifications required by the regulatory authorities in China to practice securities law. In
January 1994, Mr. Zhang became a Senior Partner at T&C Law Firm in Hangzhou.
Mr. Zhang has been an Executive Director and Company Secretary of the Company since March 1997,
and was appointed Deputy General Manager in March 2002. Mr. Zhang also serves as Director at
Shangsan Co., Development Co., and Vice Chairman at Zheshang Securities.
55
ZHEJIANG EXPRESSWAY CO., LTD.Directors, Supervisors and Senior Management Profiles Mr. FANG Zhexing, born in 1965, is a Senior Engineer, the Deputy General
Manager of the Company. Mr. Fang graduated from Zhejiang University where
he received a master’s degree in engineering in 1991.
From 1986 to 1988 he was the Assistant Engineer in the Project Management Office
of the Electric Power and Water Conservancy Bureau in Taizhou. From 1991 until 1997, he was the
Engineer in the Project Management Office of Zhejiang Provincial Expressway Executive Commission,
where he participated in the project management of Shanghai-Hangzhou-Ningbo Expressway.
Since March 1997, he has served as the Deputy Manager and the Manager of the Planning and
Development Department, the Manager of the Project Development Department, the Director of Quality
Management Office, the Director of Internal Audit Department of the Company, the Manager of the Human
Resources Department and the Secretary of Disciplinary Committee. Mr. Fang is currently the Chairman
of Jiaxing Co., and director of Jinhua Co..
Mr. WU Junyi, born in 1969, a holder of master degree in accounting, and
is the Chief Financial Officer of the Company. Mr. Wu graduated from Xi’an
Communications University in 1996. From 1996 to 1997, he was with the China
Investment Bank, Hangzhou Branch. He joined the Company in May 1997, and
has served as Manager of Securities Investment Department and Manager of
Planning and Finance Department.
Mr. Tony H. ZHENG, born in 1969, is the Company Secretary of the
Company. Mr. Zheng graduated from University of California at Berkeley in
1995 with a BS degree in Civil Engineering. He joined the Company in June
1997, and has served as Deputy Director of the Secretarial Office to the Board
and Assistant Company Secretary. Mr. Zheng continues to serve as Director of the
Secretarial Office to the Board, and Director of Hong Kong Representative Office of the Company.
56
2012 ANNUAL REPORTDirectors, Supervisors and Senior Management Profiles The Directors of the Company hereby present their report and the audited financial statements of the
Group for the year ended December 31, 2012.
PRINCIPAL ACTIVITIES
The principal activities of the Group comprise the operation, maintenance and management of high grade
roads, development and operation of certain ancillary services, such as advertising, automobile servicing
and fuel facilities, as well as provision of security broking service, margin financing and securities lending
services and proprietary securities trading.
SEGMENT INFORMATION
During the Period, the revenue and segment profit of the Group were wholly derived from the People’s
Republic of China (“PRC”). Accordingly, a further analysis of the revenue and segment profit by
geographical area is not presented. An analysis of the Group’s revenue and segment profit by principal
activity for the year ended December 31, 2012 is set out in note 7 to the financial statements.
RESULTS AND DIVIDENDS
The Group’s profit for the year ended December 31, 2012 and the state of financial position at that date
are set out in the financial statements on pages 68 to 170.
An interim dividend of Rmb0.06 per share (approximately HK$0.07) was paid on November 16, 2012.
The Directors recommend the payment of a final dividend of Rmb0.24 per share (approximately HK$0.30)
of the year to Shareholders. This recommendation has been incorporated in the financial statements as
an allocation of retained earnings within the capital and reserves section in the consolidated statement
of financial position. The dividend payout ratio reached 77.3% during the Period. Further details of the
dividends are set out in note 16 to the financial statements.
57
ZHEJIANG EXPRESSWAY CO., LTD.Reportof the Directors FIVE YEAR SUMMARY FINANCIAL INFORMATION
The following is a summary of the published consolidated results, and of the assets, liabilities and non-
controlling interests of the Group prepared on the basis set out in the notes below.
Results
Revenue
Operating costs
Year ended December 31,
2012
Rmb’000
2011
Rmb’000
2010
Rmb’000
2009
Rmb’000
2008
Rmb’000
6,700,258
(4,369,641)
6,781,352
(4,077,403)
6,769,064
(3,760,494)
6,036,294
(3,145,294)
6,323,470
(3,133,244)
Gross profit
Security investment gains (loss)
Other income
Administrative expenses
Other expenses
Share of (loss) profit of associates
Share of (loss) profit of jointly
controlled entities
Finance costs
2,330,617
99,783
288,644
(82,092)
(46,154)
(17,341)
2,703,949
7,925
281,929
(84,380)
(38,565)
(7,035)
3,008,570
126,532
199,791
(83,189)
(21,904)
2,453
2,891,000
35,967
426,280
(69,845)
(133,640)
(24,164)
3,190,226
(316,213)
211,420
(70,003)
(38,947)
10,659
(3,516)
(53,995)
–
(80,043)
–
(120,979)
21,254
(62,724)
23,746
(76,809)
Profit before tax
Income tax expense
2,515,946
(646,864)
2,783,780
(717,838)
3,111,274
(798,785)
3,084,128
(840,055)
2,934,079
(668,928)
Profit for the year
1,869,082
2,065,942
2,312,489
2,244,073
2,265,151
Attributable to:
Owners of the Company
Non-controlling interests
Earnings per share - Basic
and diluted
1,686,270
182,812
1,805,345
260,597
1,871,499
440,990
1,795,488
448,585
1,892,787
372,364
38.83 cents
41.57 cents
43.09 cents
41.34 cents
43.58 cents
58
2012 ANNUAL REPORTReport of the Directors
Assets and liabilities
2012
Rmb’000
2011
Rmb’000
2010
Rmb’000
2009
Rmb’000
2008
Rmb’000
As at December 31,
Total assets
29,445,381
29,132,959
33,652,055
32,402,781
25,287,521
Total liabilities
(10,429,106)
(10,533,859)
(15,956,940)
(15,337,927)
(8,990,253)
Net assets
19,016,275
18,599,100
17,695,115
17,064,854
16,297,268
Notes:
1.
The consolidated results of the Group for the four years ended December 31, 2011 have been extracted from
the Company’s 2011 annual report dated March 30, 2012, while those of the year ended December 31, 2012
were prepared based on the consolidated statement of comprehensive income as set out on page 68 of the
financial statements.
2.
The 2012 earnings per share is based on the profit attributable to owners of the Company for the year
ended December 31, 2012 of Rmb1,686,270,000 (2011: Rmb1,805,345,000) and the 4,343,114,500 (2011:
4,343,114,500) ordinary shares in issue during the year.
3. Differences in Financial Statements prepared under PRC GAAP and HKFRSs
As reported in the statutory financial
statements of the Group prepared in
accordance with PRC GAAP
HK GAAP adjustments:
(a) Goodwill
(b) Amortization provided, net of deferred tax
(c) Assessment on impact of appreciation,
net of deferred tax
(d) Others
(e) Non-controlling interests
Profit for the year
ended December 31,
Net assets
as at December 31,
2012
Rmb’000
2011
Rmb’000
2012
Rmb’000
2011
Rmb’000
1,877,675
2,073,734
19,264,630
18,838,862
–
(1,952)
(3,547)
(7)
(3,087)
–
(1,952)
(199,769)
(161,204)
(199,769)
(159,252)
(3,116)
–
(2,724)
63,764
6,597
42,257
67,311
6,604
45,344
As restated in the financial statements
1,869,082
2,065,942
19,016,275
18,599,100
59
ZHEJIANG EXPRESSWAY CO., LTD.Report of the Directors
MAJOR CUSTOMERS AND SUPPLIERS
In the year under review, the five largest customers and suppliers of the Group accounted for less than
30% of the total turnover and purchases, respectively.
None of the Directors of the Company or any of their associates or any Shareholders (which, to the best
knowledge of the Directors, own more than 5% of the Company’s issued share capital) had any beneficial
interest in the Group’s five largest customers.
RELATED PARTY TRANSACTIONS
During the year, details of the related party transactions that the Company has entered into with its
subsidiary and fellow subsidiary are set out in note 47 to the financial statements.
PROPERTY, PLANT AND EQUIPMENT
Details of movements in property, plant and equipment of the Group during the year are set out in note 18
to the financial statements.
CAPITAL COMMITMENTS
Details of the capital commitments of the Group as at December 31, 2012 are set out in note 45 to the
financial statements.
RESERVES
Details of movements in the reserves of the Group during the year are set out in the consolidated
statement of changes in equity on page 71 to the financial statements.
DISTRIBUTABLE RESERVES
As at December 31, 2012, before the proposed final dividend, the Company’s reserves available for
distribution by way of cash or in kind, as determined based on the lower of the amount determined
under PRC accounting standards and the amount determined under HK GAAP, amounted to
Rmb1,952,740,000. In addition, in accordance with the Company Law of the PRC, the amount of
approximately Rmb3,645,726,000 standing to the credit of the Company’s share premium account as
prepared in accordance with the PRC accounting standards was available for distribution by way of
capitalization issues.
60
2012 ANNUAL REPORTReport of the Directors TRUST DEPOSITS
As at December 31, 2012, the Group did not have any trust deposits with any non-bank financial institution
in the PRC. All of the Group’s deposits have been placed with commercial banks in the PRC and the
Group has not encountered any difficulty in the withdrawal of funds.
PURCHASE, REDEMPTION OR SALE OF THE
LISTED SECURITIES OF THE COMPANY
Neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed
securities during the year.
DIRECTORS
The Directors of the Company during the year and as at the date of this report are:
EXECUTIVE DIRECTORS
Mr. ZHAN Xiaozhang (Chairman)
Mr. CHEN Jisong (Chairman, retired)
Ms. LUO Jianhu (General Manager)
Mr. JIANG Wenyao (retired)
Mr. ZHANG Jingzhong (retired)
Mr. DING Huikang
NON-EXECUTIVE DIRECTOR
Ms. ZHANG Luyun (retired)
Mr. LI Zongsheng
Mr. WANG Weili
Mr. WANG Dongjie
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. TUNG Chee Chen (retired)
Mr. ZHANG Junsheng
Mr. ZHANG Liping (retired)
Mr. ZHOU Jun
Mr. PEI Ker-Wei
61
ZHEJIANG EXPRESSWAY CO., LTD.Report of the Directors DIRECTORS’ AND SENIOR MANAGEMENT’S
BIOGRAPHIES
Biographical details of the Directors of the Company and the senior management of the Group are set out
on pages 48 to 56 in the Company’s annual report.
DIRECTORS’ SERVICE CONTRACTS
Each of the Directors of the Company has entered into a service agreement with the Company, with effect
from June 11, 2012, to June 30, 2015.
Save as disclosed above, none of the Directors and Supervisors has entered into any service contract
with the Company which is not terminable by the Company within one year without payment of
compensation, other than statutory compensation.
DIRECTORS’ AND SUPERVISORS’ INTERESTS IN
CONTRACTS
As at December 31, 2012 or during the year, none of the Directors or Supervisors had a material interest,
either directly or indirectly, in any contract of significance to the business of the Group to which the
Company, its holding company, or any of its subsidiaries or fellow subsidiaries was a party.
DIRECTORS, SUPERVISORS AND CHIEF
EXECUTIVE’S RIGHTS TO SUBSCRIBE FOR
SHARES OR DEBENTURES
At no time during the year were there rights to acquire benefits by means of the acquisition of shares in
or debentures of the Company granted to any Director, Supervisor and chief executive or their respective
spouse or minor children, or were any such rights exercised by them; or was the Company, its holding
company, or any of its subsidiaries or fellow subsidiaries a party to any arrangement to enable any such
persons to acquire such rights in any other body corporate.
SHARE CAPITAL
There were no movements in the Company’s issued share capital during the year.
62
2012 ANNUAL REPORTReport of the Directors PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights in the Company’s Articles of Association or the laws of the
PRC which would require the Company to offer new shares on a pro rata basis to existing shareholders.
TAXATION AND TAX RELIEF
According to a Notice issued jointly by PRC Ministry of Finance and State Administration of Taxation
regarding individual income tax policies (Caishuizi【1994】No.020), the dividend incomes received by
foreign individuals from a foreign- invested enterprise are exempt from individual income tax.
As stipulated by a Notice issued by the PRC State Administration of Taxation in relation to the withholding
and payment of enterprise income tax by Chinese resident enterprises for payment of dividend to
H shareholders who are overseas non-resident enterprises (Guoshuihan【2008】No. 897), the
Company as a Chinese resident enterprises is required to withhold 10% enterprise income tax when it
distributes dividends for the year 2008 and thereafter to all non-resident enterprise holders of H shares
of the Company (including HKSCC Nominees Limited, other nominees, trustees or other entities and
organizations, who will be deemed as non-resident enterprise holders of H shares) whose names appear
on the H share register of members of the Company on the record date.
Under current practice of the Hong Kong Inland Revenue Department, no tax is payable in Hong Kong in
respect of dividends paid by the Company.
Shareholders are taxed or enjoy tax relief in accordance with the aforementioned regulations.
AUDITORS
Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong, who had served as the Company’s
Hong Kong auditors since 2005, will retire and a resolution for their reappointment as Hong Kong auditors
of the Company will be proposed at the forthcoming Annual General Meeting of the shareholders.
By Order of the Board
ZHAN Xiaozhang
Chairman
Hangzhou, Zhejiang Province, the PRC
March 19, 2013
63
ZHEJIANG EXPRESSWAY CO., LTD.Report of the Directors During the Period, the Supervisory Committee duly performed its supervisory responsibilities, and
safeguarded the legitimate interests of the shareholders and the Company in accordance with relevant
rules and regulations under the Company Law of the PRC, the Company’s Articles of Association and the
Rules of the Supervisory Committee.
Main tasks undertaken by the Supervisory Committee during the Period were to assess and supervise
lawfulness and appropriateness of the activities of the Directors, General Manager and other senior
management of the Company in their business decision-making and daily management processes,
through a combination of activities including holding meetings of the Supervisory Committee and attending
general meetings of shareholders and meetings of the Board. The Supervisory Committee has carefully
examined the operating results and the financial standing of the Company, discussed and reviewed the
financial statements to be submitted by the Board to the general meeting of shareholders.
During the Period, the Supervisory Committee held two meetings of its own, and attended six meetings
held by the Board and two general meetings of shareholders.
The Supervisory Committee observes that during the Period, faced with multiple factors such as slower
traffic volume growth rates resulting from slower economic growth rates, changes in government policies,
increased industrial standards, and lackluster stock market, maintaining the Company’s profit growth was
becoming increasingly difficult. Under the leadership of the Board, the management, key members and
the entire staff of the Company rose up to the challenges with enthusiasm and hard work, focusing on
development through transformation, safe and smooth operating conditions, lowering costs while growing
revenues through innovations and plugging leaks, while actively promoted new securities businesses and
pushed on with the spin-off process amid unfavourable capital market conditions, achieving new progress
in various aspects of the business, and fully realized the Company’s operating targets.
64
2012 ANNUAL REPORTReport of theSupervisory Committee The Supervisory Committee has reviewed the financial statements of the Company for 2012 prepared
by the Board for submission to the general meeting of shareholders, and concluded that the financial
statements accurately reflected the financial position of the Company in 2012, and complied with the
relevant laws, regulations and the Company’s Articles of Association. Despite that the annual results have
declined slightly, the Company nevertheless maintained a high dividend payout ratio in recent years,
thereby maintaining a stable long term dividend payout policy and providing satisfactory return to its
shareholders.
During the Period, the members of the Board, General Manager and other senior management of the
Company have complied with their fiduciary duties and have acted in good faith and diligently while
carrying out their responsibilities. There were no incident of abuse of power or infringement of the interests
of shareholders or employees.
The Supervisory Committee is satisfied with the performances across various lines of business achieved
by the Board and the management of the Company.
By the order of the Supervisory Committee
FU Zhexiang
Chairman of the Supervisory Committee
Hangzhou, Zhejiang Province, the PRC
March 18, 2013
65
ZHEJIANG EXPRESSWAY CO., LTD.Report of the Supervisory Committee TO THE MEMBERS OF ZHEJIANG EXPRESSWAY CO., LTD.
浙江滬杭甬高速公路股份有限公司
(Incorporated in the People’s Republic of China with limited liability)
We have audited the consolidated financial statements of Zhejiang Expressway Co., Ltd. (the “Company”)
and its subsidiaries (collectively referred to as the “Group”) set out on pages 68 to 170, which comprise
the consolidated statement of financial position as at December 31, 2012, and the consolidated statement
of comprehensive income, consolidated statement of changes in equity and consolidated statement
of cash flows for the year then ended, and a summary of significant accounting policies and other
explanatory information.
Directors’ Responsibility for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of consolidated financial statements
that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the
Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong
Companies Ordinance, and for such internal control as the directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to
fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit
and to report our opinion solely to you, as a body, in accordance with our agreed terms of engagement,
and for no other purpose. We do not assume responsibility towards or accept liability to any other person
66
2012 ANNUAL REPORTIndependentAuditor’s Report for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on
Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of consolidated financial statements that give a true and fair view in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
the directors, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of
the Group as at December 31, 2012, and of the Group’s profit and cash flows for the year then ended
in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in
accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
March 19, 2013
67
ZHEJIANG EXPRESSWAY CO., LTD.Independent Auditor’s Report Consolidated Statement of
Comprehensive Income
NOTES
2012
Rmb’000
2011
Rmb’000
7
8
9
10
11
12
13
Revenue
Operating costs
Gross profit
Securities investment gains
Other income
Administrative expenses
Other expenses
Share of loss of associates
Share of loss of a jointly controlled entity
Finance costs
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income (loss)
Available-for-sale financial assets:
– Fair value gain (loss) during the year
– Reclassification adjustments for cumulative
gain included in profit or loss upon disposal
Income tax relating to components of other
comprehensive income
Other comprehensive income (loss) for the year
(net of tax)
6,700,258
(4,369,641)
6,781,352
(4,077,403)
2,330,617
99,783
288,644
(82,092)
(46,154)
(17,341)
(3,516)
(53,995)
2,515,946
(646,864)
2,703,949
7,925
281,929
(84,380)
(38,565)
(7,035)
–
(80,043)
2,783,780
(717,838)
1,869,082
2,065,942
4,800
(175)
(1,156)
(9,746)
(4,072)
3,455
3,469
(10,363)
Total comprehensive income for the year
1,872,551
2,055,579
Profit for the year attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
1,686,270
182,812
1,805,345
260,597
1,869,082
2,065,942
1,688,079
184,472
1,799,941
255,638
1,872,551
2,055,579
EARNINGS PER SHARE – Basic and diluted
17
Rmb38.83 cents
Rmb41.57 cents
68
2012 ANNUAL REPORTFor the year ended December 31, 2012
Consolidated Statement of
Financial Position
NOTES
2012
Rmb’000
2011
Rmb’000
NON-CURRENT ASSETS
Property, plant and equipment
Prepaid lease payments
Expressway operating rights
Goodwill
Other intangible assets
Deposit paid for acquisition of a property
Interests in associates
Interest in a jointly controlled entity
Available-for-sale investments
Other receivables
CURRENT ASSETS
Inventories
Trade receivables
Loans to customers arising from margin
financing business
Other receivables and prepayments
Prepaid lease payments
Available-for-sale investments
Held for trading investments
Financial assets held under resale agreement
Bank balances held on behalf of customers
Bank balances and cash
– Time deposits with original maturity
over three months
– Cash and cash equivalents
18
19
20
21
22
23
25
26
27
30
28
29
30
19
27
31
32
33
34
34
1,357,844
66,931
10,732,058
86,867
155,633
–
465,513
369,954
133,000
325,035
1,294,465
68,983
11,364,938
86,867
157,594
323,800
446,679
–
1,000
382,000
13,692,835
14,126,326
27,418
57,847
724,123
701,627
2,052
134,899
1,486,772
280,066
7,491,625
26,400
48,013
–
844,142
2,052
60,274
1,260,021
–
7,177,508
1,483,408
3,362,709
2,467,793
3,120,430
15,752,546
15,006,633
69
ZHEJIANG EXPRESSWAY CO., LTD.At December 31, 2012
CURRENT LIABILITIES
Accounts payable to customers arising from
securities business
Trade payables
Tax liabilities
Other taxes payable
Other payables and accruals
Dividends payable
Long-term bonds due in one-year
Bank loans
Derivative financial instrument
NOTES
2012
Rmb’000
2011
Rmb’000
35
36
37
41
38
40
7,481,819
378,364
223,592
53,082
973,031
94,998
1,000,000
–
–
7,143,067
317,188
491,619
61,753
724,216
94,971
–
462,553
6,426
10,204,886
9,301,793
NET CURRENT ASSETS
5,547,660
5,704,840
TOTAL ASSETS LESS CURRENT LIABILITIES
19,240,495
19,831,166
NON-CURRENT LIABILITIES
Long-term bonds
Deferred tax liabilities
CAPITAL AND RESERVES
Share capital
Reserves
Equity attributable to owners of the Company
Non-controlling interests
41
42
43
–
224,220
1,000,000
232,066
224,220
1,232,066
19,016,275
18,599,100
4,343,115
11,177,137
15,520,252
3,496,023
4,343,115
10,835,424
15,178,539
3,420,561
19,016,275
18,599,100
The consolidated financial statements on pages 68 to 170 were approved and authorised for issue by the
board of directors on March 19, 2013 and are signed on its behalf by:
ZHAN Xiaozhang
DIRECTOR
LUO Jianhu
DIRECTOR
70
2012 ANNUAL REPORTConsolidated Statement of Financial PositionAt December 31, 2012
Attributable to owners of the Company
Share
capital
Rmb’000
Share
premium
Rmb’000
Statutory
reserves
(Note)
Rmb’000
Investment
revaluation
reserve
Rmb’000
Capital
reserve
Rmb’000
Dividend
reserve
Rmb’000
Special
reserve
Rmb’000
Retained
profits
Rmb’000
Total
Rmb’000
Total
Non-
controlling
interests
Rmb’000
Rmb’000
4,343,115
–
3,645,726
–
2,727,900
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
240,734
4,343,115
–
3,645,726
–
2,968,634
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
258,877
–
–
–
–
–
1,712
–
–
–
–
1,712
–
–
–
–
–
–
–
–
3,849
–
1,085,779
–
18,666
–
2,898,217 14,723,252
1,805,345
1,805,345
2,971,863 17,695,115
2,065,942
260,597
(5,404)
(5,404)
–
–
–
–
(5,404)
(4,959)
(10,363)
–
1,805,345
1,799,941
255,638
2,055,579
–
–
–
–
–
–
–
–
–
(1,085,779)
1,085,779
–
–
–
–
–
–
–
–
–
(260,587)
–
(1,085,779)
(240,734)
–
1,712
(260,587)
(1,085,779)
–
–
(143,582)
336,642
–
–
–
–
(143,582)
338,354
(260,587)
(1,085,779)
–
–
(1,555)
–
1,085,779
–
18,666
–
3,116,462 15,178,539
1,686,270
1,686,270
3,420,561 18,599,100
1,869,082
182,812
1,809
1,809
–
–
–
–
1,809
1,660
3,469
–
1,686,270
1,688,079
184,472
1,872,551
–
–
–
–
–
–
–
(1,085,779)
1,042,347
–
–
–
–
–
–
–
(260,587)
–
(1,042,347)
(258,877)
–
(260,587)
(1,085,779)
–
–
(109,010)
–
–
–
–
(109,010)
(260,587)
(1,085,779)
–
–
At January 1, 2011
Profit for the year
Other comprehensive loss
for the year
Total comprehensive income
for the year
Dividend paid to
non-controlling interests
Capital injection
Interim dividend
Final dividend
Proposed final dividend
Transfer to reserves
At December 31, 2011
Profit for the year
Other comprehensive income
for the year
Total comprehensive income
for the year
Dividend paid to
non-controlling interests
Interim dividend
Final dividend
Proposed final dividend
Transfer to reserves
At December 31, 2012
4,343,115
3,645,726
3,227,511
1,712
254
1,042,347
18,666
3,240,921 15,520,252
3,496,023 19,016,275
71
ZHEJIANG EXPRESSWAY CO., LTD.For the year ended December 31, 2012Consolidated Statement ofChanges in Equity
Note: Statutory reserves comprise:
(a) Statutory surplus reserve
In accordance with the Company Law of the People’s Republic of China (the “PRC”) and the respective
articles of association of the Company and its subsidiaries (collectively the “Entities”), the Entities are
required to allocate 10% of the profit after tax, as determined in accordance with the PRC accounting
standards and regulations applicable to the Entities, to the statutory surplus reserve until such reserve
reaches 50% of the registered capital of the respective Entities. Subject to certain restrictions set out
in the Company Law of the PRC and the respective articles of association of the Entities, part of the
statutory surplus reserve may be converted to increase the respective Entities’ capital.
(b) General risk reserve
In accordance with the Finance Regulation for Financial Enterprises, securities companies are required
to allocate 10% of the profit after tax, as determined in accordance with the PRC accounting standards
and regulations, to the general risk reserve. This general risk reserve may be used to cover potential
losses on risk exposures.
(c) Transaction risk reserve
In accordance with the Securities Law of the PRC, securities companies are required to allocate not less
than 10% of the profit after tax, as determined in accordance with the PRC accounting standards and
regulations, to the transaction risk reserve. This transaction risk reserve may be used to cover potential
losses on securities transactions.
72
2012 ANNUAL REPORTConsolidated Statement of Changes in EquityFor the year ended December 31, 2012 OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Finance costs
Interest income
Share of loss of associates
Share of loss of a jointly controlled entity
Depreciation of property, plant and equipment
Amortisation of expressway operating rights
Amortisation of prepaid lease payments
Amortisation of other intangible assets
Fair value changes on derivative financial instrument
Gain on disposal of available-for-sale investments
Gain on disposal of associate
Gain on fair value changes on held for trading investments
Loss (gain) on disposal of property, plant and equipment
Reversal of provisions
Impairment loss of interest in an associate
Operating cash flows before movements in working capital
Increase in inventories
(Increase) decrease in trade receivables
(Increase) decrease in other receivables
Increase in held for trading investments
Increase in loans to customers arising from
margin financing business
(Increase) decrease in bank balances held on behalf of customers
Increase (decrease) in accounts payable to customers arising from
securities business
Increase (decrease) in trade payables
(Decrease) increase in other taxes payable
Decrease in derivative financial instruments
Increase in other payables and accruals
Cash generated from operations
Income taxes paid
Interest paid
2012
Rmb’000
2011
Rmb’000
2,515,946
2,783,780
53,995
(178,899)
17,341
3,516
155,330
693,610
2,052
16,248
(2,841)
(175)
(12)
(99,608)
6,195
–
–
3,182,698
(1,018)
(9,834)
(5,493)
(127,143)
(724,123)
(314,117)
338,752
61,176
(8,671)
(3,585)
128,591
2,517,233
(923,893)
(55,633)
80,043
(141,187)
7,035
–
154,557
691,370
2,052
13,653
6,426
(4,072)
–
(3,853)
(56)
(21,238)
11,979
3,580,489
(8,685)
2,755
12,634
(452,396)
–
4,508,443
(4,487,963)
(231,507)
10,751
–
140,802
3,075,323
(709,945)
(79,449)
NET CASH FROM OPERATING ACTIVITIES
1,537,707
2,285,929
73
ZHEJIANG EXPRESSWAY CO., LTD.For the year ended December 31, 2012Consolidated Statement ofCash Flows
NOTE
INVESTING ACTIVITIES
Interest received
Acquisition of a jointly controlled entity
Additional contribution in an associate
Proceed on disposal of associates
Dividends received from associates
Proceeds on disposal of property, plant and
equipment
Repayment of entrusted loans from related parties
Repayment of entrusted loan from third parties
Entrusted loans to related parties
Entrusted loan to a third party
Loan to an associate
Purchases of financial products investment
Settlement of financial products investment
Purchases of property, plant and equipment
Addition in expressway operating rights
Purchases of intangible assets
Refund (Payment) of deposit paid for acquisition
of a property
Purchase of available-for-sale investments
Proceeds on disposal of available-for-sale
investments
Repayment of financial assets held under
resale agreement
Advance of financial assets held under resale
agreement
Decrease (increase) in time deposits
Deferred consideration on disposal of a jointly
controlled entity
Dividend received from a former jointly
controlled entity
NET CASH FROM (USED IN) INVESTING
ACTIVITIES
FINANCING ACTIVITIES
Dividends paid
Dividends paid to non-controlling shareholders
New bank loans raised
Repayment of bank and other loans
2012
Rmb’000
155,890
(184,140)
(50,000)
4,906
6,500
1,169
337,482
300,000
(310,000)
–
–
(1,069,500)
970,000
(351,840)
–
(14,287)
323,800
(204,388)
2,563
–
2011
Rmb’000
129,093
–
–
–
7,217
7,632
570,471
260,000
(690,000)
(500,000)
(82,000)
–
–
(312,910)
(136,000)
(16,227)
(323,800)
(4,200)
12,000
80,163
(280,066)
984,385
–
(2,142,248)
–
–
115,000
53,000
622,474
(2,972,809)
(1,346,366)
(108,983)
–
(462,553)
(1,346,366)
(168,930)
462,553
(822,000)
NET CASH USED IN FINANCING ACTIVITIES
(1,917,902)
(1,874,743)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
AT JANUARY 1
CASH AND CASH EQUIVALENTS AT
DECEMBER 31
242,279
(2,561,623)
3,120,430
5,682,053
32
3,362,709
3,120,430
74
2012 ANNUAL REPORTConsolidated Statement of Cash FlowsFor the year ended December 31, 2012
Notes to the Consolidated
Financial Statements
1.
CORPORATE INFORMATION
Zhejiang Expressway Co., Ltd. (the “Company”) was established in the People’s Republic of China
(the “PRC”) with limited liability on March 1, 1997. The H shares of the Company (“H Shares”) were
subsequently listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on May 15,
1997.
All of the H Shares of the Company were admitted to the Official List of the United Kingdom Listing
Authority (the “Official List”). Dealings in the H Shares on the London Stock Exchange commenced on
May 5, 2000.
On July 18, 2000, with the approval of the Ministry of Foreign Trade and Economic Co-operation of the
PRC, the Company changed its business registration into a Sino-foreign joint stock limited company.
On February 14, 2002, the United States Securities and Exchange Commission, following the approval
by the Board of Directors and the China Securities Regulatory Commission, declared the registration
statement in respect of the American Depositary Shares (“ADSs”) evidenced by the American Depositary
Receipts (“ADRs”) representing the deposited H Shares of the Company effective.
In the opinion of the directors, the immediate and ultimate holding company of the Company is Zhejiang
Communications Investment Group Co., Ltd. (the “Communications Group”), a state-owned enterprise
established in the PRC.
The addresses of the registered office and principal place of business of the Company are disclosed in the
corporate information section of the annual report.
The consolidated financial statements are presented in Renminbi (“Rmb”), which is also the functional
currency of the Company.
75
ZHEJIANG EXPRESSWAY CO., LTD.For the year ended December 31, 2012 1.
CORPORATE INFORMATION (Continued)
The Company is an investment holding company. The Company and its subsidiaries (collectively referred
as the “Group”) are involved in the following principal activities:
(a)
the operation, maintenance and management of high grade roads;
(b)
the development and provision of certain ancillary services such as advertising, automobile servicing
and fuel facilities; and
(c)
the provision of securities broking services, margin financing and securities lending services and
proprietary trading.
APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
2.
REPORTING STANDARDS (“HKFRSs”)
New and revised HKFRSs applied in the current year
In the current year, the Group has applied the following revised HKFRSs issued by the Hong Kong
Institute of Certified Public Accountants (the “HKICPA”).
Amendments to HKAS 12
Deferred Tax: Recovery of Underlying Asset; and
Amendments to HKFRS 7
Financial Instruments: Disclosures – Transfers of Financial Assets
The application of the amendments to HKFRSs in the current year has had no material impact on the
Group’s financial performance and positions for the current and prior years and/or on the disclosures set
out in these consolidated financial statements.
76
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
2.
REPORTING STANDARDS (“HKFRSs”) (Continued)
New and revised HKFRSs issued but not yet effective
The Group has not early applied the following new and revised HKFRSs that have been issued but are
not yet effective:
Amendments to HKFRSs
Annual Improvements to HKFRSs 2009 – 2011 Cycle1
Amendments to HKFRS 7
Disclosures – Offsetting Financial Assets and Financial
Liabilities1
Amendments to HKFRS 9
Mandatory Effective Date of HKFRS 9 and Transition
and HKFRS 7
Disclosures3
Amendments to HKFRS 10,
Consolidated Financial Statements, Joint Arrangements
HKFRS 11 and HKFRS 12
and Disclosure of Interests in Other Entities: Transition
Amendments to HKFRS 10,
Investment Entities2
HKFRS 12 and HKAS 27
Guidance1
HKFRS 9
HKFRS 10
HKFRS 11
HKFRS 12
HKFRS 13
Financial Instruments3
Consolidated Financial Statements1
Joint Arrangements1
Disclosure of Interests in Other Entities1
Fair Value Measurement1
HKAS 19 (as revised in 2011)
Employee Benefits1
HKAS 27 (as revised in 2011)
Separate Financial Statements1
HKAS 28 (as revised in 2011)
Investments in Associates and Joint Ventures1
Amendments to HKAS 1
Presentation of Items of Other Comprehensive Income4
Amendments to HKAS 32
Offsetting Financial Assets and Financial Liabilities2
HK(IFRIC) – Int 20
Stripping Costs in the Production Phase of a Surface Mine1
77
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
2.
REPORTING STANDARDS (“HKFRSs”) (Continued)
New and revised HKFRSs issued but not yet effective (Continued)
1
2
3
4
Effective for annual periods beginning on or after January 1, 2013.
Effective for annual periods beginning on or after January 1, 2014.
Effective for annual periods beginning on or after January 1, 2015.
Effective for annual periods beginning on or after July 1, 2012.
Annual Improvements to HKFRSs 2009 – 2011 Cycle issued in June 2012
The Annual Improvements to HKFRSs 2009 – 2011 Cycle include a number of amendments to various
HKFRSs. The amendments are effective for annual periods beginning on or after 1 January 2013.
Amendments to HKFRSs include the amendments to HKAS 1 Presentation of Financial Statements,
amendments to HKAS 16 Property, Plant and Equipment and the amendments to HKAS 32 Financial
Instruments: Presentation.
HKAS 1 requires an entity that changes accounting policies retrospectively, or makes a retrospective
restatement or reclassification to present a statement of financial position as at the beginning of the
preceding period (third statement of financial position). The amendments to HKAS 1 clarify that an entity
is required to present a third statement of financial position only when the retrospective application,
restatement or reclassification has a material effect on the information in the third statement of financial
position and that related notes are not required to accompany the third statement of financial position.
The amendments to HKAS 16 clarify that spare parts, stand-by equipment and servicing equipment
should be classified as property, plant and equipment when they meet the definition of property, plant and
equipment in HKAS 16 and as inventory otherwise. The directors do not anticipate that the application of
the amendments will have a material effect on the Group’s consolidated financial statements.
78
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
2.
REPORTING STANDARDS (“HKFRSs”) (Continued)
Annual Improvements to HKFRSs 2009 – 2011 Cycle issued in June 2012
(Continued)
The amendments to HKAS 32 clarify that income tax on distributions to holders of an equity instrument
and transaction costs of an equity transaction should be accounted for in accordance with HKAS 12
Income Taxes. The directors anticipate that the amendments to HKAS 32 will have no effect on the
Group’s consolidated financial statements as the Group has already adopted this treatment.
Amendments to HKAS 32 Offsetting Financial Assets and Financial
Liabilities and amendments to HKFRS 7 Disclosures – Offsetting Financial
Assets and Financial Liabilities
The amendments to HKAS 32 clarify existing application issues relating to the offset of financial assets
and financial liabilities requirements. Specifically, the amendments clarify the meaning of “currently has a
legally enforceable right of set-off” and “simultaneous realisation and settlement”.
The amendments to HKFRS 7 require entities to disclose information about rights of offset and related
arrangements (such as collateral posting requirements) for financial instruments under an enforceable
master netting agreement or similar arrangement.
The amendments to HKFRS 7 are effective for annual periods beginning on or after January 1, 2013 and
interim periods within those annual periods. The disclosures should also be provided retrospectively for
all comparative periods. However, the amendments to HKAS 32 are not effective until annual periods
beginning on or after January 1, 2014, with retrospective application required.
The directors anticipate that the application of these amendments to HKAS 32 and HKFRS 7 may result in
more disclosures being made with regard to offsetting financial assets and financial liabilities in the future.
79
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
2.
REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 9 Financial Instruments
HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial
assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of
financial liabilities and for derecognition.
Key requirements of HKFRS 9 are described as follows:
•
All recognised financial assets that are within the scope of HKAS 39 Financial Instruments:
Recognition and Measurement are subsequently measured at amortised cost or fair value.
Specifically, debt investments that are held within a business model whose objective is to collect the
contractual cash flows, and that have contractual cash flows that are solely payments of principal
and interest on the principal outstanding are generally measured at amortised cost at the end of
subsequent accounting periods. All other debt investments and equity investments are measured at
their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may
make an irrevocable election to present subsequent changes in the fair value of an equity investment
(that is not held for trading) in other comprehensive income, with only dividend income generally
recognised in profit or loss.
• With regard to the measurement of financial liabilities designated as at fair value through profit or
loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is
attributable to changes in the credit risk of that liability is presented in other comprehensive income,
unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive
income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of
financial liabilities attributable to changes in the financial liabilities’ credit risk are not subsequently
reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the
financial liability designated as fair value through profit or loss was presented in profit or loss.
80
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
2.
REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 9 Financial Instruments (Continued)
HKFRS 9 is effective for annual periods beginning on or after January 1, 2015, with earlier application
permitted.
The directors anticipate that the adoption of HKFRS 9 in the future will affect the classification and
measurement of the Group’s available-for-sale (“AFS”) investments but not the Group’s financial liabilities.
Regarding the Group’s AFS investments, it is not practicable to provide a reasonable estimate of that
effect until a detailed review has been completed.
New and revised standards on consolidation, joint arrangements,
associates and disclosures
In June 2011, a package of five standards on consolidation, joint arrangements, associates and
disclosures was issued, including HKFRS 10, HKFRS 11, HKFRS 12, HKAS 27 (as revised in 2011) and
HKAS 28 (as revised in 2011).
Key requirements of these five standards that are applicable to the Group are described below.
HKFRS 10 replaces the parts of HKAS 27 Consolidated and Separate Financial Statements that deal
with consolidated financial statements. HK (SIC) – Int 12 Consolidation – Special Purpose Entities
will be withdrawn upon the effective date of HKFRS 10. Under HKFRS 10, there is only one basis
for consolidation, that is, control. In addition, HKFRS 10 includes a new definition of control that
contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its
involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of
the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios.
81
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
2.
REPORTING STANDARDS (“HKFRSs”) (Continued)
New and revised standards on consolidation, joint arrangements,
associates and disclosures (Continued)
HKFRS 11 replaces HKAS 31 Interests in Joint Ventures. HKFRS 11 deals with how a joint arrangement
of which two or more parties have joint control should be classified. HK (SIC) – Int 13 Jointly Controlled
Entities – Non-monetary Contributions by Venturers will be withdrawn upon the effective date of HKFRS
11. Under HKFRS 11, joint arrangements are classified as joint operations or joint ventures, depending
on the rights and obligations of the parties to the arrangements. In contrast, under HKAS 31, there are
three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled
operations. In addition, joint ventures under HKFRS 11 are required to be accounted for using the equity
method of accounting, whereas jointly controlled entities under HKAS 31 can be accounted for using the
equity method of accounting or proportionate consolidation.
HKFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries,
joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure
requirements in HKFRS 12 are more extensive than those in the current standards.
In July 2012, the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 were issued to clarify certain
transitional guidance on the application of these five HKFRSs for the first time.
These five standards, together with the amendments relating to the transitional guidance, are effective for
annual periods beginning on or after January 1, 2013 with earlier application permitted provided that all of
these standards are applied at the same time.
The directors anticipate that these five standards will be adopted in the Group’s consolidated financial
statements for the annual period beginning January 1, 2013. The application of these five standards is not
expected to have material impact on amounts reported in the consolidated financial statements.
82
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL
2.
REPORTING STANDARDS (“HKFRSs”) (Continued)
HKFRS 13 Fair Value Measurement
HKFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair
value measurements. The standard defines fair value, establishes a framework for measuring fair value,
and requires disclosures about fair value measurements. The scope of HKFRS 13 is broad; it applies
to both financial instrument items and non-financial instrument items for which other HKFRSs require
or permit fair value measurements and disclosures about fair value measurements, except in specified
circumstances. In general, the disclosure requirements in HKFRS 13 are more extensive than those in
the current standards. For example, quantitative and qualitative disclosures based on the three-level fair
value hierarchy currently required for financial instruments only under HKFRS 7 Financial Instruments:
Disclosures will be extended by HKFRS 13 to cover all assets and liabilities within its scope.
HKFRS 13 is effective for annual periods beginning on or after January 1, 2013, with earlier application
permitted. The directors anticipate that the application of the new standard may affect certain amounts
reported in the consolidated financial statements and result in more extensive disclosures in the
consolidated financial statements.
3.
SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with Hong Kong Financial
Reporting Standards issued by the HKICPA. In addition, the consolidated financial statements include
applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange of
Hong Kong Limited and by the Hong Kong Companies Ordinance.
83
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
The consolidated financial statements have been prepared on the historical cost basis except for certain
financial instruments that are measured at fair values, as explained in the accounting policies set out
below. Historical cost is generally based on the fair value of the consideration given in exchange for
goods.
The principal accounting policies are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to
govern the financial and operating policies of an entity so as to obtain benefits from its activities.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the
consolidated statement of comprehensive income from the effective date of acquisition and up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies in line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein.
84
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allocation of total comprehensive income to non-controlling interests
Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and
to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost less accumulated impairment losses, if
any, and is presented separately in the consolidated statement of financial position.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units
(or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more
frequently when there is indication that the unit may be impaired. For goodwill arising on an acquisition in
a reporting period, the cash-generating unit to which goodwill has been allocated is tested for impairment
before the end of that reporting period. If the recoverable amount of the cash-generating unit is less than
its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit on a pro rata basis based on the carrying
amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss.
An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the amount of profit or loss on disposal.
85
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor
an interest in a joint venture. Significant influence is the power to participate in the financial and operating
policy decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these consolidated financial
statements using the equity method of accounting. The financial statements of associates used for
equity accounting purposes are prepared using uniform accounting policies as those of the Group for like
transactions and events in similar circumstances. Under the equity method, investments in associates
are initially recognised in the consolidated statement of financial position at cost and adjusted thereafter
to recognise the Group’s share of the profit or loss and other comprehensive income of the associates.
When the Group’s share of losses of an associate exceeds the Group’s interest in that associate
(which includes any long-term interests that, in substance, form part of the Group’s net investment in
the associate), the Group discontinues recognising its share of further losses. Additional losses are
recognised only to the extent that the Group has incurred legal or constructive obligations or made
payments on behalf of that associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets,
liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as
goodwill, which is included within the carrying amount of the investment.
Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent
liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
86
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments in associates (Continued)
The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any
impairment loss with respect to the Group’s investment in an associate. When necessary, the entire
carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS
36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use
and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the
carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with
HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.
When a group entity transacts with its associate, profits and losses resulting from the transactions with the
associate are recognised in the Group’ consolidated financial statements only to the extent of interests in
the associates that are not related to the Group.
Joint venture
Jointly controlled entity
Joint venture arrangement that involves the establishment of a separate entity in which venturers have
joint control over the economic activity of the entity are referred to as a jointly controlled entity.
The results and assets and liabilities of a jointly controlled entity are incorporated in the consolidated
financial statements using the equity method of accounting. Under the equity method, investments in
jointly controlled entities are initially recognised in the consolidated statement of financial position at cost
and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive
income of the jointly controlled entities. When the Group’s share of losses of a jointly controlled entity
equals or exceeds its interest in that jointly controlled entity (which includes any long-term interests that, in
substance, form part of the Group’s net investment in the jointly controlled entity), the Group discontinues
recognising its share of further losses. Additional losses are recognised only to the extent that the Group
has incurred legal or constructive obligations or made payments on behalf of that jointly controlled entity.
87
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Joint venture (Continued)
Jointly controlled entity (Continued)
The financial statements of the jointly controlled entities used for equity accounting purposes are prepared
using uniform accounting policies as those of the Group for like transactions and events in similar
circumstances.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets,
liabilities and contingent liabilities of a jointly controlled entity recognised at the date of acquisition is
recognised as goodwill, which is included within the carrying amount of the investment.
Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent
liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any
impairment loss with respect to the Group’s investment in a jointly controlled entity. When necessary, the
entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with
HKAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in
use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part
of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance
with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.
When a group entity transacts with its jointly controlled entity, profits and losses resulting from the
transactions with the jointly controlled entity are recognised in the Group’ consolidated financial
statements only to the extent of interest in the jointly controlled entity that are not related to the Group.
88
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts
receivable for goods sold and services provided in the normal course of business, net of discounts and
sales related taxes.
Toll income from the operation of tolled roads is recognised when the tolls are received or become
receivable.
Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at
which time all the following conditions are satisfied:
•
the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
•
the Group retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
•
the amount of revenue can be measured reliably;
•
it is probable that the economic benefits associated with the transaction will flow to the Group; and
•
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Service income, including advertising income, is recognised when services are provided.
Commission income from securities broking business is recognised on a trade date basis.
89
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue recognition (Continued)
Advisory and handling fee income are recognised when the relevant transactions have been provided or
the relevant services have been rendered.
Interest income from a financial asset is recognised when it is probable that the economic benefits will
flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a
time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is
the rate that exactly discounts the estimated future cash receipts through the expected life of the financial
asset to that asset’s net carrying amount on initial recognition.
Dividend income from investments is recognised when the shareholders’ rights to receive payment have
been established (provided that it is probable that the economic benefits will flow to the Group and the
amount of revenue can be measured reliably).
Property, plant and equipment
Property, plant and equipment including leasehold land and building held for use in supply of goods
or services, or for administrative purposes (other than construction in progress as described below)
are stated in the consolidated statement of financial position at cost less subsequent accumulated
depreciation and subsequent accumulated impairment losses, if any.
Depreciation is recognised so as to write off the cost of items of property, plant and equipment other than
construction in progress less their residual values over their estimated useful lives, using the straight-line
method, at the following rates per annum. The estimated useful lives, residual values and depreciation
method are reviewed at the end of each reporting period, with the effect of any changes in estimate
accounted for on a prospective basis.
90
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, plant and equipment (Continued)
Leasehold land and buildings
Ancillary facilities
Communication and signaling equipment
Motor vehicles
Machinery and equipment
Estimated
Annual
useful life
depreciation rate
30-50 years
10-30 years
5 years
5-8 years
5-8 years
1.9%-3.2%
3.2%-9%
19.4%
12.1%-19.4%
12.1%-19.4%
Properties in the course of construction for production, supply or administrative purposes are carried at
cost, less any recognised impairment loss. Costs include professional fees and, for qualifying assets,
borrowing costs capitalised in accordance with the Group’s accounting policy. Such properties are
classified to the appropriate categories of property, plant and equipment when completed and ready for
intended use. Depreciation of these assets, on the same basis as other property assets, commences
when the assets are ready for their intended use.
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal
or retirement of an item of property, plant and equipment is determined as the difference between the
sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
91
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible assets
Intangible assets acquired separately
Intangible assets recognised with finite useful lives that are acquired separately are carried at costs less
accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with
finite useful lives is recognised on a straight-line basis over their estimated useful lives. The estimated
useful life and amortisation method are reviewed at the end of each reporting period, with the effective
of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite
useful lives that are acquired separately are carried at cost less any subsequent accumulated impairment
losses (see the accounting policy in respect of impairment losses on tangible and intangible assets
below).
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from
use or disposal. Gains or losses arising from derecognition of an intangible asset are measured at the
difference between the net disposal proceeds and the carrying amount of the asset and are recognised in
profit or loss in the period when the asset is derecognised.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are recognised separately from goodwill and are
initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets with finite useful lives are carried at costs less
accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with
finite useful lives is recognised on a straight-line basis over their estimated useful lives.
Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent
accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and
intangible assets below).
92
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Expressway operating rights under service concession arrangements
When the Group has a right to charge for usage of concession infrastructure, it recognises concession
intangible assets based on fair value of the consideration paid upon initial recognition. Subsequent costs
incurred on expressway widening projects and upgrading services are recognised as additional costs of
the expressway operating rights. The concession intangible assets representing expressway operating
rights are carried at cost less accumulated amortisation and any accumulated impairment losses.
The concession intangible assets are amortised to write-off their cost over their expected useful lives in
the remaining concession period on a straight-line basis.
Costs in relation to the day-to-day servicing, repairs and maintenance of the expressway infrastructures
are recognised as expenses in the periods in which they are incurred.
Impairment losses on tangible and intangible assets other than goodwill
(see the accounting policy in respect of goodwill above)
At the end of the reporting period, the Group reviews the carrying amounts of its tangible and intangible
assets with finite useful lives to determine whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss, if any. When it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit
to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to
the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be
identified.
93
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment losses on tangible and intangible assets other than goodwill
(see the accounting policy in respect of goodwill above) (Continued)
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that they may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating
unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss
is recognised as income immediately.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are calculated
using the weighted average method. Net realisable value represents the estimated selling price for
inventories less all estimated costs of completion and costs necessary to make the sale.
94
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of
the relevant lease.
The Group as lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term,
except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rentals arising under operating leases are
recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are
recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental
expense on a straight-line basis, except where another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset are consumed.
95
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Leasing (Continued)
Leasehold land and building
When a lease includes both land and building elements, the Group assesses the classification of
each element as a finance or an operating lease separately based on the assessment as to whether
substantially all the risks and rewards incidental to ownership of each element have been transferred
to the Group, unless it is clear that both elements are operating leases in which case the entire lease
is classified as an operating lease. Specifically, the minimum lease payments (including any lump-sum
upfront payments) are allocated between the land and the building elements in proportion to the relative
fair values of the leasehold interests in the land element and building element of the lease at the inception
of the lease.
To the extent the allocation of the lease payments can be made reliably, interest in the leasehold land
that is accounted for as an operating lease is presented as “prepaid lease payments” in the consolidated
statement of financial position and is amortised over the lease term on a straight-line basis. When the
lease payments cannot be allocated reliably between the land and building elements, the entire lease is
generally classified as a finance lease and accounted for as property, plant and equipment.
Foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies other than
the functional currency of that entity (foreign currencies) are recorded in the respective functional currency
(i.e. the currency of the primary economic environment in which the entity operates) at the rates of
exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items
that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary
items, are recognised in profit or loss in the period in which they arise.
96
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use or
sale, are added to the cost of those assets until such time as the assets are substantially ready for their
intended use or sale. Investment income earned on the temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Retirement benefit costs
Payments to state-managed retirement benefit schemes and corporate annuity scheme are recognised as
an expense when employees have rendered services entitling them to the contributions.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before
tax’ as reported in the consolidated statement of comprehensive income because it excludes items of
income or expense that are taxable or deductible in other years and it further excludes items that are
never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the end of the reporting period.
97
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Taxation (Continued)
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax base used in the computation
of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it
is probable that taxable profits will be available against which those deductible temporary differences can
be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill
or from the initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments
in subsidiaries, associates and a jointly controlled entity, except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future. Deferred tax assets arising from deductible temporary differences associated
with such investments and interests are only recognised to the extent that it is probable that there will be
sufficient taxable profits against which to utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period
in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period.
98
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Taxation (Continued)
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow
from the manner in which the Group expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities. Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other comprehensive income or directly in equity,
in which case, the current and deferred tax are also recognised in other comprehensive income or directly
in equity respectively.
Financial instruments
Financial assets and financial liabilities are recognised in the consolidated statement of financial position
when a group entity becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the
fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in profit or loss.
Financial assets
The Group’s financial assets are classified into loans and receivables, financial assets at fair value
through profit or loss (“FVTPL”) and AFS financial assets. The classification depends on the nature
and purpose of the financial assets and is determined at the time of initial recognition. All regular way
purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular
way purchases or sales are purchases or sales of financial assets that require delivery of assets within the
time frame established by regulation or convention in the marketplace.
99
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and
of allocating interest income over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and other premiums or discounts) through the
expected life of the debt instrument, or, where appropriate, a shorter period to the net carrying amount on
initial recognition.
Interest income is recognised on an effective interest basis for debt instruments other than those financial
assets classified as at FVTPL, of which interest income is included in net gains or losses.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade
receivables, loans to customers arising from margin financing business, other receivables, bank balances
and cash, financial assets held under resale agreement and bank balances held on behalf of customers)
are measured at amortised cost using the effective interest method, less any identified impairment losses
(see accounting policy on impairment losses on financial assets below).
In particular, for financial assets held under resale agreements where the Group acquires financial
assets which will be resold at a predetermined price at a future date under resale agreements, the cash
advanced by the Group is recognised as secured loans and receivables and presented as amounts held
under resale agreements in the consolidated statement of financial position. The difference between the
purchase and resale consideration is amortised over the period of the respective agreements using the
effective interest method and is included in interest income.
100
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Financial assets at fair value through profit or loss
Financial asset at FVTPL include financial assets held for trading.
A financial asset is classified as held for trading if:
•
it has been acquired principally for the purpose of selling in the near term; or
•
it is a part of a portfolio of identified financial instruments that the Group manages together and has a
recent actual pattern of short-term profit taking; or
•
it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are measured at fair value, with changes in fair value arising from
remeasurement recognised directly in profit or loss in the period in which they arise. The net gain or loss
recognised in profit or loss excludes any dividend or interest earned on the financial assets and is included
in the securities investment gains line item in the consolidated statement of comprehensive income. Fair
value is determined in the manner described in Note 5(c).
101
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
AFS financial assets
AFS financial assets are non-derivatives that are either designated or not classified as any of the
categories of financial assets set out above.
Equity securities held by the Group that are classified as AFS and are traded in an active market are
measured at fair value at the end of each reporting period. Changes in the carrying amount of AFS
monetary financial assets relating to interest income calculated using the effective interest method and
dividends on AFS equity investments are recognised in profit or loss. Other changes in the carrying
amount of AFS financial assets are recognised in other comprehensive income and accumulated under
the heading of investments revaluation reserve. When the investment is disposed of or is determined to
be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve
is reclassified to profit or loss (see the accounting policy in respect of impairment loss on financial assets
below).
Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the
dividends is established.
AFS equity investments that do not have a quoted market price in an active market and whose fair value
cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such
unquoted equity investments are measured at cost less any identified impairment losses at the end of
each reporting period (see the accounting policy in respect of impairment loss on financial assets below).
102
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment loss on financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of the
reporting period. Financial assets are considered to be impaired where there is objective evidence that, as
a result of one or more events that occurred after the initial recognition of the financial asset, the estimated
future cash flows of the financial assets have been affected.
For an AFS equity investment, a significant or prolonged decline in the fair value of that investment below
its cost is considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
•
significant financial difficulty of the issuer or counterparty; or
•
breach of contract, such as default or delinquency in interest or principal payments; or
•
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
•
disappearance of an active market for that financial asset because of financial difficulties.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the
difference between the asset’s carrying amount and the present value of the estimated future cash flows
discounted at the financial asset’s original effective interest rate.
103
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment loss on financial assets (Continued)
For financial assets carried at cost, the amount of the impairment loss is measured as the difference
between the asset’s carrying amount and the present value of the estimated future cash flows discounted
at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed
in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets
with the exception of trade receivables and loans to customers arising from margin financing business,
where the carrying amount is reduced through the use of an allowance account. Changes in the carrying
amount of the allowance account are recognised in profit or loss. When a trade receivable and loans to
customers arising from margin financing business are considered uncollectible, they are written off against
the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or
loss.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously
recognised in other comprehensive income are reclassified to profit or loss in the period in which the
impairment takes place.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment losses
was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent
that the carrying amount of the asset at the date the impairment is reversed does not exceed what the
amortised cost would have been had the impairment not been recognised.
104
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment loss on financial assets (Continued)
Impairment losses on AFS equity investments will not be reversed through profit or loss. Any increase
in fair value subsequent to impairment loss is recognised directly in other comprehensive income and
accumulated in investment revaluation reserve.
Financial liabilities and equity instruments
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity
in accordance with substance of the contractual arrangements and the definitions of a financial liability and
an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds
received, net of direct issue costs.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments (including all fee and points paid or received that form an
integral part of the effective interest rate, transaction costs and other premium or discounts) through the
expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on
initial recognition.
Interest expense is recognised on an effective interest basis.
105
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial liabilities and equity instruments (Continued)
Financial liabilities
Financial liabilities including trade payables, accounts payable to customers arising from securities
business, other payables, bank loans, dividends payable and long-term bonds are subsequently
measured at amortised cost, using the effective interest method.
Derivative financial instrument
Derivatives are initially recognised at fair value at the date when a derivative contract is entered into and
are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or
loss is recognised in profit or loss immediately.
Securities lending arrangement
The Group lends investment securities to clients and requires cash and/or equity securities from
customers held as collaterals under such securities lending agreements. The cash collaterals arisen
from these are included in “accounts payable to customers arising from securities business”. For those
securities held by the Group and lent to client that do not result in the derecognition of financial assets,
they are included in AFS investments.
106
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Derecognition
The Group derecognises a financial asset only when the contractual rights to the cash flows from
the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the
risks and rewards of ownership and continues to control the transferred asset, the Group continues to
recognise the asset to the extent of its continuing involvement and recognises an associated liability. If
the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the
Group continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount
and the sum of the consideration received and receivable and the cumulative gain or loss that had been
recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged,
cancelled or expire. The difference between the carrying amount of the financial liability derecognised and
the consideration paid and payable is recognised in profit or loss.
107
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result
of a past event, it is probable that the Group will be required to settle that obligation, and a reliable
estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of
the consideration required to settle the present obligation at the end of the reporting period, taking into
account the risks and uncertainties surrounding the obligation. When a provision is measured using the
cash flows estimated to settle the present obligation, its carrying amount is the present value of those
cash flows (where the effect of the time value of money is material).
4.
KEY SOURCES OF ESTIMATION UNCERTAINTY
The following are the key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment
to the carrying amounts of assets within the next financial year.
Estimated impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating
units to which goodwill has been allocated. The value in use calculation requires the Group to estimate
the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order
to calculate the present value. Where the actual future cash flows are less than expected, a material
impairment loss may arise. As at December 31, 2012, the carrying amount of goodwill is Rmb86,867,000
(without accumulated impairment loss) (2011: Rmb86,867,000 (without accumulated impairment loss)).
Details of the recoverable amount calculation are disclosed in Note 24.
108
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 4.
KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)
Estimated impairment of intangible assets with indefinite useful lives
Determining whether intangible assets with indefinite useful lives are impaired requires an estimation
of the value in use of themselves or the cash-generating unit to which they belong. The value in use
calculation requires the Group to estimate the future cash flows expected to arise from themselves or the
cash-generating unit to which they belong and a suitable discount rate in order to calculate the present
value. Where the actual future cash flows are less than expected, a material impairment loss may arise.
As at December 31, 2012, the carrying amounts of intangible assets with indefinite useful lives were
Rmb66,563,000 (without accumulated impairment loss) (2011: Rmb66,563,000 (without accumulated
impairment loss)). Details of the recoverable amount calculation are disclosed in Note 24.
5.
FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
Financial assets
AFS investments
– at cost
– at fair value
12/31/2012
Rmb’000
12/31/2011
Rmb’000
11,000
256,899
1,000
60,274
Fair value through profit of loss held for trading investments
1,486,772
1,260,021
Loans and receivables (including cash and cash equivalents)
14,394,921
13,917,611
Financial liabilities
Derivative financial instrument
Amortised cost
–
9,618,015
6,426
9,468,671
109
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
5.
FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies
The Group’s major financial instruments include AFS investments, held for trading investments, trade and
other receivables, loans to customers arising from margin financing business, financial assets held under
resale agreement, bank balances and cash, bank balances held on behalf of customers, trade and other
payables, accounts payable to customers arising from securities business, bank loans, derivative financial
instrument, dividends payable and long-term bonds. Details of the financial instruments are disclosed in
respective notes. The risks associated with these financial instruments include market risk (interest rate
risk, currency risk and other price risk), credit risk and liquidity risk. The policies on how to mitigate these
risks are set out below. The management manages and monitors these exposures to ensure appropriate
measures are implemented on a timely and effective manner.
Market risk
(i)
Interest rate risk
The Group is exposed to fair value interest rate risk in relation to loans to customers arising from margin
financing business, financial assets held under resale agreement, fixed-rate time deposits, bank loans and
long-term bonds (see Notes 29, 32, 34, 38 and 41 for details).
The Group is also exposed to cash flow interest rate risk in relation to variable-rate bank balances held on
behalf of customers, bank balances and bank loans (see Notes 33, 34 and 38 for details).
The Group currently does not have an interest rate risk hedging policy as the management considers the
Group is not exposed to significant interest rate risk. The management will continue to monitor interest
rate risk exposure and consider hedging against it should the need arise.
The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management
section of this note.
110
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 5.
FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(i)
Interest rate risk (Continued)
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for
non-derivative instruments, comprising variable-rate bank balances, bank balances held on behalf of
customers and bank loans at the end of the reporting period.
The analysis is prepared assuming the balances outstanding at the end of the reporting period were
outstanding for the whole year. A 30 basis points (2011: 30 basis points) increase or decrease is the
sensitivity rate used when reporting interest rate risk internally to key management personnel and
represents management’s assessment of the reasonably possible change in interest rates.
If interest rates had been 30 basis points (2011: 30 basis points) higher/lower and all other variables were
held constant, the Group’s post-tax profit for the year ended December 31, 2012 would have increased/
decreased by Rmb24,422,000 (2011: Rmb22,945,000). This was mainly attributable to the Group’s
exposure to interest rates on its variable-rate bank balances.
(ii) Currency risk
The Group is mainly exposed to HKD and USD relative to Rmb.
Several subsidiaries of the Company have foreign currency denominated monetary assets and liabilities,
which expose the Group to foreign currency risk.
111
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 5.
FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(ii) Currency risk (Continued)
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the
end of the reporting date are as follows:
Assets
Liabilities
12/31/2012
Rmb’000
12/31/2011
Rmb’000
12/31/2012
Rmb’000
12/31/2011
Rmb’000
Hong Kong dollar (“HKD”)
United States dollar (“USD”)
19,460
68,543
15,164
63,495
14,228
40,544
322,446
36,564
Sensitivity analysis
This sensitivity analysis details the Group’s sensitivity to a 5% (2011: 5%) increase and decrease in RMB
against HKD and USD. 5% (2011: 5%) is the sensitivity rate used when reporting foreign currency risk
internally to key management personnel and represents management’s assessment of the reasonably
possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign
currency denominated monetary items and adjusts their translation at the end of the reporting period for
a 5% (2011: 5%) change in foreign currency rates. If RMB had strengthened/weakened 5% (2011: 5%)
against HKD, the Group’s post-tax profit for the year ended December 31, 2012 would have decreased/
increased by Rmb196,000 (2011: decreased/increased by Rmb11,523,000). If RMB had strengthened/
weakened 5% (2011: 5%) against USD, the Group’s post-tax profit for the year ended December 31, 2012
would have decreased/increased by Rmb1,050,000 (2011: Rmb1,010,000).
The Group has entered into certain foreign currency forward contracts. Management of the Company
are of the opinion that the Company’s exposure to currency risk related to the foreign currency forward
contract is minimum. Accordingly, no currency risk sensitivity analysis of foreign currency forward contract
is presented.
112
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
5.
FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Market risk (Continued)
(iii) Other price risk
The Group is exposed to equity and debt security price risk in relation to its held for trading and AFS listed
investments.
The Group currently does not have a price risk hedging policy and the management will continue to
monitor price risk exposure and consider hedging against it should the need arise.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to equity and debt security
price risks at the reporting date.
If the prices of the respective equity and debt instruments had been 5% (2011: 5%) higher/lower,
•
post-tax profit for the year ended December 31, 2012 would have increased/decreased by
Rmb55,754,000 (2011: Rmb47,251,000) as a result of the changes in fair value of held for trading
investments; and
•
investment valuation reserve would have increased/decreased by Rmb9,634,000 (2011:
Rmb2,260,000) for the Group as a result of the changes in fair value of AFS listed investments.
113
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 5.
FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk
As at December 31, 2012, the Group’s maximum exposure to credit risk which will cause a financial
loss to the Group due to failure to discharge an obligation by the counterparties provided by the Group
is arising from the carrying amount of the respective recognised financial assets as stated in the
consolidated statement of financial position.
The Group reviews the recoverable amount of each individual trade debt and entrusted loan receivables
at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable
amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly
reduced.
The Group provides clients with margin financing for securities transactions and securities lending to
clients, which are secured by clients’ securities or deposits held as collateral. Management has delegated
a team responsible for determination of credit limits, credit approvals and other monitoring procedures
to ensure that follow-up action is taken to recover overdue debts. Each client has a maximum credit limit
based on the quality of collateral held and the financial background of the client. In addition, the Group
and the Company review the recoverable amount of each individual at the end of the reporting period
to ensure that adequate impairment losses are made for irrecoverable amounts. Margin calls are made
when the trades of margin clients exceed their respective limits. Any such shortfall is required to be made
good within the next trading day. Failure to meet margin calls may result in the liquidation of the client’s
positions. The Group and the Company seek to maintain strict control over its outstanding receivables.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings
assigned by international credit-rating agencies.
114
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 5.
FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Credit risk (Continued)
Other than the concentration of credit risk on certain trade receivables, entrusted loan receivables,
loan receivable from an associate, corporate bonds, financial investment products and financial assets
held under resale agreement amounting to Rmb54,582,000 (2011: Rmb47,086,000), Rmb639,651,000
(2011: Rmb951,648,000), Rmb82,101,000 (2011: Rmb82,000,000), Rmb1,451,457,000 (2011:
Rmb1,059,726,000), Rmb103,432,000 (2011: nil) and Rmb280,066,000 (2011: nil) as disclosed in Notes
28, 30, 31 and 32, respectively, the Group does not have any other significant concentration of credit risk.
The Group’s concentration of credit risk by geographical location is mainly in the PRC.
Liquidity risk
Most of the bank balances and cash at December 31, 2012 were denominated in Rmb which is not a
freely convertible currency in the international market. The exchange rate of Rmb is regulated by the PRC
government and the remittance of these Rmb funds out of the PRC is subject to foreign exchange controls
imposed by the PRC government.
The Group closely monitors its cash position resulting from its operations and maintains a level of cash
and cash equivalents deemed adequate by the management to enable the Group to meet in full its
financial obligations as they fall due for the foreseeable future.
The following table details the Group’s remaining contractual maturity for its non-derivative financial
liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based
on the earliest date on which the Group can be required to pay. The table includes both interest and
principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived
from interest rate curve at the end of the reporting period.
115
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 5.
FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Liquidity risk (Continued)
In addition, the following table details the Group’s liquidity analysis for its derivative financial instruments.
The tables have been drawn up based on the undiscounted contractual cash inflows and (outflows) on
derivative instruments that settle on a gross basis. When the amount payable is not fixed, the amount
disclosed has been determined by reference to the foreign currency exchange rates prevailing at the end
of the reporting period. The liquidity analysis for the Group’s derivative financial instruments are prepared
based on the contractual maturities as the management consider that the contractual maturities are
essential for an understanding of the timing of the cash flows of derivatives.
Liquidity tables
2012
Non-derivative financial liabilities
Trade payables
Accounts payable to customers
arising from securities business
Other payables
Dividends payable
Long-term bonds – fixed rate
Weighted
average
interest rate
%
On demand
or
Less than
3 months
Rmb’000
3 months –
1 year
Rmb’000
1 – 3
years
Rmb’000
3 – 5 years
Rmb’000
Total
undiscounted
cash
flows
Rmb’000
+5 years
Rmb’000
Carrying
amount
at
31/12/2012
Rmb’000
–
342,686
35,678
0.42
–
–
4.29
7,489,675
662,834
94,998
1,042,900
–
–
–
–
9,633,093
35,678
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
378,364
378,364
7,489,675
662,834
94,998
1,042,900
7,481,819
662,834
94,998
1,000,000
9,668,771
9,618,015
116
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
5.
FINANCIAL INSTRUMENTS (Continued)
(b) Financial risk management objectives and policies (Continued)
Liquidity risk (Continued)
Liquidity tables (Continued)
Weighted
average
interest rate
%
On demand
or
Less than
3 months
Rmb’000
3 months –
1 year
Rmb’000
1 – 3
years
Rmb’000
3 – 5 years
Rmb’000
Total
undiscounted
cash
flows
Rmb’000
+5 years
Rmb’000
Carrying
amount
at
31/12/2011
Rmb’000
2011
Non-derivative financial liabilities
Trade payables
Accounts payable to customers
arising from securities business
Other payables
Dividends payable
Bank loans
– fixed rate
– variable rate
Long-term bonds – fixed rate
2011
Derivatives – gross settlement
Foreign currency forward contract
– inflow
– HKD
– outflow
– Rmb
0.50
–
–
5.08
6.44
4.29
–
–
–
284,893
32,295
7,151,996
450,892
94,971
–
–
–
–
–
–
–
54,115
1,609
42,900
315,128
102,698
–
–
–
1,085,800
8,081,376
450,121
1,085,800
–
–
–
313,259
(319,685)
(6,426)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
317,188
317,188
7,151,996
450,892
94,971
369,243
104,307
1,128,700
7,143,067
450,892
94,971
362,553
100,000
1,000,000
9,617,297
9,468,671
313,259
313,259
(319,685)
(319,685)
(6,426)
(6,426)
The amounts included above for variable interest rate instruments for non-derivative financial liabilities
are subject to change if changes in variable interest rates differ to those estimates of the interest rates
determined at the end of the reporting period.
117
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
5.
FINANCIAL INSTRUMENTS (Continued)
(c) Fair value
The fair value of financial assets and financial liabilities are determined as follows:
•
the fair value of foreign currency forward contract is measured using quoted forward exchange rates
and yield curves derived from quoted interest rates matching the maturities of the contract;
•
the fair value of financial assets and financial liabilities with standard terms and conditions and traded
on active liquid markets are determined with reference to quoted market bid prices and ask prices,
respectively; and
•
the fair value of other financial assets and financial liabilities (excluding derivative instruments) are
determined in accordance with generally accepted pricing models based on discounted cash flow
analysis.
The directors consider that the carrying amounts of financial assets and financial liabilities recorded at
amortised cost in the consolidated financial statements approximate their fair values.
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to
initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is
observable.
•
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market
for identical assets or liabilities.
•
Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
118
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
5.
FINANCIAL INSTRUMENTS (Continued)
(c) Fair value (Continued)
Fair value measurements recognised in the statement of financial position
(Continued)
•
Level 3 fair value measurements are those derived from valuation techniques that include inputs for
the asset or liability that are not based on observable market data (unobservable inputs).
Financial assets at FVTPL
Held for trading investments
Available-for-sale financial assets
Listed equity and debt securities
Total
12/31/2012
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
1,486,772
256,899
1,743,671
–
–
–
–
–
–
1,486,772
256,899
1,743,671
12/31/2011
Level 1
Rmb’000
Level 2
Rmb’000
Level 3
Rmb’000
Total
Rmb’000
Financial assets at FVTPL
Held for trading investments
Available-for-sale financial assets
Listed equity securities
Total
Financial liabilities at FVTPL
Derivative financial instrument
1,260,021
60,274
1,320,295
–
–
–
–
(6,426)
Total
1,320,295
(6,426)
There were no transfers between Level 1 and 2 in the current and prior years.
–
–
–
–
–
1,260,021
60,274
1,320,295
(6,426)
1,313,869
119
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
6.
CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as a going
concern while maximising the return to shareholders through the optimisation of the debt and equity
balance. The Group’s overall strategy remains unchanged from prior year.
The capital structure of the Group consists of net debt, which includes the borrowings disclosed in Notes
38 and 41, net of cash and cash equivalents and equity attributable to owners of the Company, comprising
issued share capital, reserves and retained profits.
The directors of the Company review the capital structure on a regular basis. As part of this review,
the directors consider the cost of capital and the risks associated with each class of capital. Based on
recommendations of the directors, the Group will balance its overall capital structure through the payment
of dividends and new share issues as well as the issue of new debt or the redemption of existing debt.
7.
SEGMENT INFORMATION
Information reported to the Chief Executive Officer of the Company, being the chief operating decision
maker, for the purposes of resource allocation and assessment of segment performance focuses on types
of goods or services delivered or provided.
Specifically, the Group’s reportable and operating segments under HKFRS 8 are as follows:
(i) Toll operation – the operation and management of high grade roads and the collection of the
expressway tolls.
(ii) Service area and advertising businesses – the sale of food, restaurant operation, automobile
servicing, operation of petrol stations and design and rental of advertising billboards along the
expressways.
(iii) Securities operation – the securities broking, margin financing and securities lending services and
proprietary trading.
120
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 7.
SEGMENT INFORMATION (Continued)
Segment revenue and results
The following is an analysis of the Group’s revenue and results by reportable and operating segment.
For the year ended December 31, 2012
Service
area and
advertising
businesses
Rmb’000
Toll
operation
Rmb’000
Securities
operation
Rmb’000
Total
Segment Elimination
Rmb’000
Rmb’000
Total
Rmb’000
Revenue
External sales
Inter-segment sales
3,548,692
–
2,025,429
7,919
1,126,137
–
6,700,258
7,919
–
(7,919)
6,700,258
–
Total
3,548,692
2,033,348
1,126,137
6,708,177
(7,919)
6,700,258
Segment profit
1,637,244
66,169
165,669
1,869,082
1,869,082
For the year ended December 31, 2011
Service
area and
advertising
businesses
Rmb’000
Toll
operation
Rmb’000
Securities
operation
Rmb’000
Total
Segment
Rmb’000
Elimination
Rmb’000
Total
Rmb’000
Revenue
External sales
Inter-segment sales
3,522,510
–
1,916,564
8,004
1,342,278
–
6,781,352
8,004
–
(8,004)
6,781,352
–
Total
3,522,510
1,924,568
1,342,278
6,789,356
(8,004)
6,781,352
Segment profit
1,695,078
71,763
299,101
2,065,942
2,065,942
121
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
7.
SEGMENT INFORMATION (Continued)
Segment revenue and results (Continued)
The accounting policies of the operating segments are the same as the Group’s accounting policies
described in Note 3. Segment profit represents the profit after tax of each operating segment. This is
the measure reported to the chief operating decision maker, the Group’s Chief Executive Officer, for the
purposes of resource allocation and performance assessment.
Inter-segment sales are charged at prevailing market rates.
Segment assets and liabilities
The following is an analysis of the Group’s assets and liabilities by reportable and operating segment:
Segment assets
Segment liabilities
12/31/2012
Rmb’000
12/31/2011
Rmb’000
12/31/2012
Rmb’000
12/31/2011
Rmb’000
Toll operation
Service area and advertising businesses
Securities operation
15,458,159
553,479
13,346,876
15,636,388
597,281
12,812,423
(2,402,463)
(157,674)
(7,868,969)
(2,806,522)
(231,303)
(7,496,034)
Total segment assets (liabilities)
Goodwill
29,358,514
86,867
29,046,092
86,867
(10,429,106)
–
(10,533,859)
–
Consolidated assets (liabilities)
29,445,381
29,132,959
(10,429,106)
(10,533,859)
Segment assets and segment liabilities represent the assets and liabilities of the subsidiaries operating in
the respective reportable and operating segment.
122
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
7.
SEGMENT INFORMATION (Continued)
Other segment information
Amounts included in the measure of segment profit or segment assets:
For the year ended December 31, 2012
Income tax expense
Interest income
Interest expense
Interests in associates
Interest in a jointly controlled entity
Share of result of associates
Share of loss of a jointly controlled entity
Gain on fair value changes on held for trading
investments
Additions to non-current assets (Note)
Depreciation and amortisation
Loss on disposal of property, plant
and equipment
For the year ended December 31, 2011
Income tax expense
Interest income
Interest expense
Interests in associates
Share of result of associates
Gain on fair value changes on held for trading
investments
Additions to non-current assets (Note)
Depreciation and amortisation
Impairment loss on interest in an associate
(Gain) loss on disposal of property, plant
and equipment
Service area
Toll and advertising
businesses
Rmb’000
operation
Rmb’000
Securities
operation
Rmb’000
Total
Rmb’000
567,031
138,924
53,749
185,456
369,954
(12,827)
(3,516)
10,290
604,822
742,318
19,710
10,693
246
234,005
–
7,366
–
–
14,333
28,624
60,123
29,282
–
46,052
–
(11,880)
–
89,318
105,406
96,298
646,864
178,899
53,995
465,513
369,954
(17,341)
(3,516)
99,608
724,561
867,240
4,722
1,223
250
6,195
Service area
Toll and advertising
businesses
Rmb’000
operation
Rmb’000
Securities
operation
Rmb’000
Total
Rmb’000
575,759
112,843
69,650
198,285
(15,968)
6,800
239,949
740,363
–
24,281
28,344
10,393
236,386
19,566
–
21,258
28,696
11,979
117,798
–
–
12,008
(10,633)
(2,947)
414,792
92,573
–
717,838
141,187
80,043
446,679
(7,035)
3,853
675,999
861,632
11,979
(528)
164
308
(56)
Note: Non-current assets excluded financial instruments.
123
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
7.
SEGMENT INFORMATION (Continued)
Revenue from major services
An analysis of the Group’s revenue, net of discounts and taxes, for the year is as follows:
Toll operation revenue
Service area businesses revenue (mainly sales of goods)
Advertising business rental revenue
Commission income from securities operation
Interest income from securities operation
Others
Year ended
12/31/2012
Rmb’000
3,548,692
1,934,501
90,473
832,213
293,924
455
Year ended
12/31/2011
Rmb’000
3,522,510
1,834,422
81,765
985,754
356,524
377
6,700,258
6,781,352
Geographical information
The Group’s operations are located in the PRC (country of domicile). All non-current assets of the Group
are located in the PRC.
All of the Group’s revenue from external customers is attributed to the group entities’ country of domicile
(i.e., the PRC).
Information about major customers
During the years ended December 31, 2012 and 2011, there are no individual customer with sales over
10% of the total sales of the Group.
124
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
8.
SECURITIES INVESTMENT GAINS
Gain on fair value changes on held for trading investments
Cumulative gain reclassified from equity on disposal of
AFS investments
Year ended
12/31/2012
Rmb’000
Year ended
12/31/2011
Rmb’000
99,608
175
99,783
3,853
4,072
7,925
The above securities investment gains wholly contributed from listed investments in both years.
9. OTHER INCOME
Interest income on bank balances, entrusted loan receivables
and financial products investment
Rental income (Note)
Handling fee income
Towing income
Other interest income (Note 23)
Gain on disposal of an associate
Exchange (loss) gain, net
Fair value gain on derivative financial instrument
Others
Note:
Year ended
12/31/2012
Rmb’000
Year ended
12/31/2011
Rmb’000
159,532
72,335
5,685
9,303
19,367
12
(2,155)
2,841
21,724
141,187
69,165
24,526
8,782
–
–
8,672
–
29,597
288,644
281,929
(i) Rental income included contingent rent of approximately Rmb33,697,000 (2011: Rmb28,747,000) during the
year.
125
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
10. FINANCE COSTS
Interest expenses wholly repayable within 5 years:
Bank loans
Long-term bonds
Year ended
12/31/2012
Rmb’000
Year ended
12/31/2011
Rmb’000
11,095
42,900
53,995
37,143
42,900
80,043
11. PROFIT BEFORE TAX
The Group’s profit before tax has been arrived at after charging (crediting):
Depreciation of property, plant and equipment
Amortisation of prepaid lease payments
Amortisation of expressway operating rights
(included in operating costs)
Amortisation of other intangible assets
(included in operating costs)
Year ended
12/31/2012
Rmb’000
155,330
2,052
Year ended
12/31/2011
Rmb’000
154,557
2,052
693,610
691,370
16,248
13,653
Total depreciation and amortisation
867,240
861,632
Staff costs (including directors and supervisors):
– Wages and salaries
– Pension scheme contributions
Auditors’ remuneration
Loss (gain) on disposal of property, plant and equipment
Cost of inventories recognised as an expense
Impairment loss on interest in an associate
(included in other expenses)
Fair value (gain) loss on derivative financial instrument
Reversal of provision for litigation (included in other expenses)
621,513
62,864
525,302
54,998
684,377
580,300
5,901
6,195
1,786,678
–
(2,841)
–
4,951
(56)
1,685,956
11,979
6,426
(21,238)
126
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
12.
INCOME TAX EXPENSE
Current tax:
PRC Enterprise Income Tax
Deferred tax (Note 42)
Year ended
12/31/2012
Rmb’000
Year ended
12/31/2011
Rmb’000
655,910
(9,046)
750,856
(33,018)
646,864
717,838
Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of
the EIT Law, the tax rate of the Group is 25%.
No Hong Kong Profits Tax has been provided as the Group’s income neither arises in, nor is derived from
Hong Kong during the year.
The tax charge for the year can be reconciled to the profit before tax per the consolidated statement of
comprehensive income as follows:
Profit before tax
Tax at the PRC enterprise income tax rate of 25% (2011:25%)
Tax effect of share of loss of associates
Tax effect of share of loss of a jointly controlled entity
Tax effect of income not taxable for tax purposes
Tax effect of expenses not deductible for tax purposes
Year ended
12/31/2012
Rmb’000
Year ended
12/31/2011
Rmb’000
2,515,946
2,783,780
628,987
4,335
879
(17)
12,680
695,945
1,759
–
(16)
20,150
Tax charge for the year
646,864
717,838
127
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
13. OTHER COMPREHENSIVE INCOME (LOSS)
Tax effect relating to other comprehensive income (loss) as follows:
Year ended 12/31/2012
Year ended 12/31/2011
Before-tax
amount
Rmb’000
Tax
benefit
Rmb’000
Net-of-
income-tax
amount
Rmb’000
Before-tax
amount
Rmb’000
Tax
benefit
Rmb’000
Net-of-
income-tax
amount
Rmb’000
4,800
(1,200)
3,600
(9,746)
2,437
(7,309)
(175)
44
(131)
(4,072)
1,018
(3,054)
Fair value gain (loss) on
AFS financial assets
arising during the year
Reclassification adjustments
for the cumulative gain
included in profit or loss
upon disposal of
AFS financial assets
Total
4,625
(1,156)
3,469
(13,818)
3,455
(10,363)
128
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
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129
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
14. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’
EMOLUMENTS (Continued)
Notes:
(i) Resigned on June 11, 2012.
(ii) Appointed on June 11, 2012.
(iii) Ms. Luo Jianhu is also the Chief Executive of the Company and her emoluments disclosed above include those
services rendered by her as the Chief Executive.
The emoluments of each of the directors and supervisors were below HK$1,000,000 (equivalent to
Rmb811,000) in both years. Bonuses paid to directors and supervisors are performance-rated and are
determined by the Remuneration Committee of the Company, which comprises three independent non-
executive directors.
No directors or supervisors waived any emoluments and no incentive was paid to any directors or
supervisors as an inducement to join the Company and no compensation for loss of office was paid to any
directors, supervisors, past directors or past supervisors during both years. Bonuses are determined by
reference to the individual performance of the directors.
130
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 14. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’
EMOLUMENTS (Continued)
The emoluments paid or payable to each of the 5 (2011: 3) senior managements are as follows:
Zhang
Jingzhong
Rmb’000
(note i)
Fang
Zhexing
Rmb’000
Wu
Junyi
Rmb’000
Zheng
Hui
Rmb’000
Zhang
Xiuhua
Rmb’000
(note i)
Total
Rmb’000
2012
Salaries, allowances and
benefits in kind
Bonuses paid and payable
Pension scheme contributions
Total emoluments
2011
Salaries, allowances and
benefits in kind
Bonuses paid and payable
Pension scheme contributions
Total emoluments
Note: (i) Appointed on June 11, 2012.
214
82
12
308
N/A
N/A
N/A
N/A
420
135
24
579
293
193
15
501
420
135
24
579
293
193
15
501
321
98
24
443
272
76
15
363
251
103
24
1,626
553
108
378
2,287
N/A
N/A
N/A
858
462
45
N/A
1,365
The emoluments of each of the senior managements were below HK$1,000,000 (equivalent to
Rmb811,000) in both years. Bonuses paid to senior managements are performance-rated and are
determined by the Board of Directors of the Company.
No senior management waived any emoluments and no incentive was paid to any senior management
as an inducement to join the Company and no compensation for loss of office was paid to any senior
management, past senior management during both years. Bonuses are determined by reference to the
individual performance of the senior managements.
131
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
15. EMPLOYEES’ EMOLUMENTS
The emoluments of the five highest paid individuals in the Group are as follows:
Salaries, allowances and benefits in kind
Bonuses paid and payable (Note)
Pension scheme contributions
Note:
Year ended
12/31/2012
Rmb’000
Year ended
12/31/2011
Rmb’000
6,680
16,315
126
23,121
9,289
17,681
118
27,088
The bonuses paid and payable are determined by reference to the performance of the relevant business of the Group
for the years ended December 31, 2012 and 2011.
The five individuals with the highest emoluments in the Group during the year included no (2011: no)
director, whose emoluments are set out in Note 14 above, and five (2011: five) non-director employees.
Their emoluments are within the following bands:
HK$4,500,001 to HK$5,000,000
(equivalent to Rmb3,648,001 to Rmb4,053,000)
HK$5,000,001 to HK$5,500,000
(equivalent to Rmb4,053,001 to Rmb4,459,000)
HK$5,500,001 to HK$6,000,000
(equivalent to Rmb4,459,001 to Rmb4,864,000)
HK$6,000,001 to HK$6,500,000
(equivalent to Rmb4,864,001 to Rmb5,270,000)
HK$6,500,001 to HK$7,000,000
(equivalent to Rmb5,270,001 to Rmb5,675,000)
HK$9,500,001 to HK$10,000,000
(equivalent to Rmb7,702,001 to Rmb8,107,000)
No. of individuals
Year ended
12/31/2012
Year ended
12/31/2011
1
1
1
1
1
–
1
–
–
2
1
1
132
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
16. DIVIDENDS
Dividends recognised as distribution during the year:
2012 Interim – Rmb6 cents
(2011: 2011 interim Rmb6 cents) per share
2011 Final – Rmb25 cents
(2011: 2010 Final Rmb25 cents) per share
Year ended
12/31/2012
Rmb’000
Year ended
12/31/2011
Rmb’000
260,587
260,587
1,085,779
1,085,779
1,346,366
1,346,366
The final dividend of Rmb24 cents per share in respect of the year ended December 31, 2012 (2011: final
dividend of Rmb25 cents per share in respect of the year ended December 31, 2011) has been proposed
by the directors and is subject to approval by the shareholders in the Annual General Meeting.
17. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on profit for the year attributable to owners of the
Company of Rmb1,686,270,000 (2011: Rmb1,805,345,000) and the 4,343,114,500 (2011: 4,343,114,500)
ordinary shares in issue during the year.
Diluted earnings per share presented is the same as basic earning per share as there were no potential
ordinary shares outstanding for the years ended December 31, 2012 and 2011.
133
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
18. PROPERTY, PLANT AND EQUIPMENT
Leasehold
land and
buildings
Rmb’000
Communication
Ancillary and signaling
equipment
facilities
Rmb’000
Rmb’000
Machinery
Motor
vehicles
Rmb’000
and Construction
in progress
Rmb’000
equipment
Rmb’000
Total
Rmb’000
COST
At January 1, 2011
Additions
Transfer
Disposals
At December 31, 2011
Additions
Transfer
Disposals
488,585
35,494
–
(795)
523,284
21,102
–
(844)
467,077
9,599
43,646
(10,386)
509,936
17,752
26,873
(11,735)
327,794
14,433
14,857
(938)
356,146
71,930
9,483
(11,938)
195,343
13,259
–
(12,198)
196,404
21,833
–
(6,540)
369,391
44,977
883
(14,168)
401,083
41,740
–
(11,055)
84,601
218,210
(59,386)
–
243,425
51,716
(36,356)
(544)
1,932,791
335,972
–
(38,485)
2,230,278
226,073
–
(42,656)
At December 31, 2012
543,542
542,826
425,621
211,697
431,768
258,241
2,413,695
DEPRECIATION
At January 1, 2011
Provided for the year
Disposals
At December 31, 2011
Provided for the year
Disposals
77,537
37,859
(795)
114,601
39,280
(755)
137,740
23,558
(4,377)
156,921
22,718
(5,613)
239,283
21,731
(805)
260,209
24,260
(11,786)
131,179
16,465
(11,578)
136,066
16,417
(6,403)
226,426
54,944
(13,354)
268,016
52,655
(10,735)
At December 31, 2012
153,126
174,026
272,683
146,080
309,936
–
–
–
–
–
–
–
812,165
154,557
(30,909)
935,813
155,330
(35,292)
1,055,851
CARRYING VALUES
At December 31, 2012
390,416
368,800
152,938
65,617
121,832
258,241
1,357,844
At December 31, 2011
408,683
353,015
95,937
60,338
133,067
243,425
1,294,465
The property, plant and equipment are mainly located in the PRC.
134
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
18. PROPERTY, PLANT AND EQUIPMENT (Continued)
The carrying value of properties shown above comprises:
Leasehold land and buildings in the PRC:
Long lease
Medium-term lease
19. PREPAID LEASE PAYMENTS
Analysed for reporting purposes as:
Current assets
Non-current assets
12/31/2012
Rmb’000
12/31/2011
Rmb’000
24,654
365,762
24,984
383,699
390,416
408,683
12/31/2012
Rmb’000
12/31/2011
Rmb’000
2,052
66,931
68,983
2,052
68,983
71,035
The Group’s prepaid lease payments comprise leasehold land in the PRC under medium-term leases. The
amount represents prepayment of rentals under operating leases for “land use rights” of land situated in
the PRC.
135
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
20. EXPRESSWAY OPERATING RIGHTS
COST
At January 1, 2011
Adjustment
At December 31, 2011
Additions
At December 31, 2012
AMORTISATION
At January 1, 2011
Charge for the year
Written off
At December 31, 2011
Charge for the year
At December 31, 2012
CARRYING VALUES
At December 31, 2012
At December 31, 2011
Rmb’000
16,772,702
(16,145)
16,756,557
60,730
16,817,287
4,701,205
691,370
(956)
5,391,619
693,610
6,085,229
10,732,058
11,364,938
The above expressway operating rights were granted by the Zhejiang Provincial Government for 30 years.
During the expressway concessionary period, the Group has the rights of operations and management of
Shanghai-Hangzhou-Ningbo Expressway and Shangsan Expressway and the toll-collection rights thereof.
The Group is required to manage and operate the expressways in accordance with the regulations
promulgated by the Ministry of Communication and relevant government authorities. Upon the end of the
respective concession service periods, the toll expressways and their toll station facilities without residual
value, will be returned to the grantors at zero consideration.
136
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
21. GOODWILL
COST AND CARRYING VALUES
At January 1, 2011, December 31, 2011 and December 31, 2012
Particulars regarding impairment testing on goodwill are disclosed in Note 24.
22. OTHER INTANGIBLE ASSETS
Rmb’000
86,867
Customer
bases
Rmb’000
Securities/
futures
firm licenses
Rmb’000
Trading
seats
Rmb’000
Software
Rmb’000
Total
Rmb’000
101,147
–
–
101,147
–
63,083
–
–
63,083
–
3,480
–
–
3,480
–
33,168
16,227
(146)
200,878
16,227
(146)
49,249
14,287
216,959
14,287
COST
At January 1, 2011
Additions
Written off
At December 31, 2011
Additions
At December 31, 2012
101,147
63,083
3,480
63,536
231,246
AMORTISATION
At January 1, 2011
Charge for the year
Written off
At December 31, 2011
Charge for the year
At December 31, 2012
CARRYING VALUES
At December 31, 2012
35,349
6,266
–
41,615
6,266
47,881
–
–
–
–
–
–
–
–
–
–
–
–
10,509
7,387
(146)
17,750
9,982
45,858
13,653
(146)
59,365
16,248
27,732
75,613
53,266
63,083
3,480
35,804
155,633
At December 31, 2011
59,532
63,083
3,480
31,499
157,594
137
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
22. OTHER INTANGIBLE ASSETS (Continued)
The customer bases of Zheshang Securities Co., Ltd. (“Zheshang Securities”) and Zheshang Futures
Broker Co., Ltd. (“Zheshang Futures”) are amortised on a straight-line basis over 15 years and 3 years,
respectively.
The securities/futures firm licenses of the securities operation are considered by the management of the
Group to have an indefinite useful life because they can be renewed at minimal cost even though the
current licenses are effective for three years.
The trading seats of the securities operation is considered by the management of the Group to have an
indefinite useful life because there is no economic or regulatory limit to their useful life.
Software are amortised on a straight-line basis over three to five years.
Particulars of the impairment testing on intangible assets with indefinite useful lives are disclosed in Note
24.
23. DEPOSIT PAID FOR ACQUISITION OF A PROPERTY
On December 26, 2011, Zheshang Securities entered into a provisional agreement with a related party,
Hangzhou Jinji Real Estate Co., Ltd. (“Jinji Co”), a subsidiary of the Communications Group, for the
purchase of a property in Hangzhou for a provisional consideration of Rmb809,500,000. As at December
31, 2011, deposit of Rmb323,800,000 had been paid to the vendor. During the year ended December 31,
2012, this provisional agreement has been terminated as Jinji Co fails to deliver the property to Zheshang
Securities, deposit of Rmb323,800,000 together with interest, which is according to the prevailing lending
rate promulgated by the People’s Bank of China (“PBOC”), of Rmb19,367,000 have been repaid to
Zheshang Securities.
138
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE
24.
ASSETS WITH INDEFINITE USEFUL LIVES
For the purposes of impairment testing, goodwill and other intangible assets with indefinite useful lives set
out in Notes 21 and 22 have been allocated to four individual cash generating units (“CGUs”), comprising
two subsidiaries in toll operation segment and two subsidiaries in securities operation segment. The
carrying amounts of goodwill and other intangible assets (net of accumulated impairment losses) as at
December 31, 2012 and 2011 allocated to these units are as follows:
Goodwill
Securities/futures
firm licenses
Trading
seats
12/31/2012 12/31/2011 12/31/2012 12/31/2011 12/31/2012 12/31/2011
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Rmb’000
Toll operation
– Zhejiang Jiaxing
Expressway Co., Ltd.
75,137
75,137
(“Jiaxing Co”)
– Zhejiang Shangsan
Expressway Co., Ltd.
(“Shangsan Co”)
Securities operation
– Zheshang Securities
– Zheshang Futures
–
–
–
–
–
–
–
–
10,335
10,335
–
1,395
–
1,395
51,783
11,300
51,783
11,300
2,080
1,400
2,080
1,400
86,867
86,867
63,083
63,083
3,480
3,480
During the year ended December 31, 2012, management of the Group determines that there are no
impairment of any of its CGUs containing goodwill and other intangible assets with indefinite useful lives.
139
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE
24.
ASSETS WITH INDEFINITE USEFUL LIVES (Continued)
The basis of the recoverable amounts of the above CGUs and their major underlying assumptions are
summarised below:
Jiaxing Co and Shangsan Co
The recoverable amounts of Jiaxing Co and Shangsan Co are determined based on value in use
calculations. The key assumptions for the value in use calculations relate to discount rates, growth rates,
and expected changes in toll revenue and direct costs during the forecast period. Those calculations use
cash flow projections based on financial budgets approved by management covering a five-year period
and a discount rate of 15% (2011: 15%). No growth rate has been assumed beyond the five-year period
up to the remaining toll road operating rights which are 16 years (2011: 17 years) and 18 years (2011: 19
years) for Jiaxing Co. and Shangsan Co., respectively.
Zheshang Securities
The recoverable amount of Zheshang Securities is determined based on value in use calculations. The
key assumptions for the value in use calculations relate to the discount rate, growth rates and profit
margin during the forecast period. Those calculations use cash flow projections based on financial
budgets approved by management covering a five-year period and a discount rate of 17.11% (2011:
16.58%). Growth rate beyond the five-year period is assumed to be zero.
Zheshang Futures
The recoverable amount of Zheshang Futures is determined based on value in use calculations. The key
assumptions for the value in use calculations relate to the discount rate, growth rates and profit margin
during the forecast period. Those calculations use cash flow projections based on financial budgets
approved by management covering a five-year period and a discount rate of 17.11% (2011: 16.58%).
Growth rate beyond the five-year period is assumed to be zero.
140
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 25.
INTERESTS IN ASSOCIATES
Unlisted investments in associates, at cost less impairment
Share of post-acquisition loss, net of dividends received
12/31/2012
Rmb’000
12/31/2011
Rmb’000
505,463
(39,950)
462,712
(16,033)
465,513
446,679
At December 31, 2012 and 2011, the Group had interests in the following associates:
Name of entity
Zhejiang Expressway Petroleum
Development Co., Ltd.
(“Petroleum Co”)
JoinHands Technology Co., Ltd.
(“JoinHands Co”) (Note iv)
Zhejiang Concord Property Investment
Co., Ltd.
Hangzhou Tianjun Industrial Co., Ltd.
(“Hangzhou Tianjun Co”) (Note i)
Form of
business
structure
Place of
registration and
operation
Percentage of equity
interest attributable to
the Group
12/31/2012 12/31/2011
%
%
Corporate
The PRC
50
50
Corporate
The PRC
27.58
27.58
Corporate
The PRC
45
45
Corporate
The PRC
N/A
(Note i)
N/A
(Note ii)
29.45
16.57
Hangzhou Yuhang Communication Time
Plaza Co., Ltd. (“Time Plaza Co”) (Note ii)
Corporate
The PRC
Ningbo Expressway Advertising Co., Ltd.
Corporate
The PRC
24.5
24.5
(“Ningbo Advertising Co”)
Zhejiang Jinhua Yongjin Expressway
Co., Ltd. (“Yongjin”)
Corporate
The PRC
23.45
23.45
Principal activities
Operation of petrol stations
and sale of petroleum
products
Provision of printing services
and property leasing
Investment and real estate
development
Investment and portfolio
management
Investment and real estate
development
Management of advertising
billboards along
expressways
Management of the Jinhua
section of the
Ningbo-Jinhua Expressway
Zheshang Fund Management
Co., Ltd. (“Zheshang Fund”) (Note iii)
Corporate
The PRC
13.04
13.04
Asset fund management
141
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
25.
INTERESTS IN ASSOCIATES (Continued)
Notes:
(i)
In November 2012, the Group entered into a share transfer agreement to dispose of its 29.45% equity interest in
Hangzhou Tianjun Co to an independent third party. The disposal was completed as at December 31, 2012.
(ii) The Group was able to exercise significant influence over Time Plaza Co because it had the power to appoint
one out of five directors of that company under the provisions stated in the Articles of Association of that
company. This associate has been de-registered during the year ended December 31, 2012.
(iii) The Group is able to exercise significant influence over Zheshang Fund because it has the power to appoint one
out of four directors of that company under the provisions stated in the Articles of Association of that company.
During the year ended December 31, 2012, Zheshang Securities, in proportion to its equity interest, has made
additional capital contribution of Rmb50,000,000 to Zheshang Fund.
(iv)
In July 2011, the Company has agreed to transfer all of its 27.582% equity interest in JoinHands Co to
Guangzhou Kaixin Consulting Co., Ltd. (“Kaixin Co”), an independent third party, at a consideration of
Rmb31,430,000. However, as Kaixin Co has failed to pay the consideration for the equity transfer according to
the terms of the Equity Interest Transfer Agreement, such transfer had not been completed and the Company
lodged a lawsuit against it in August 2011 at the People’s Court of Xihu District, Hangzhou City. The court
ruled in favour of the Company, except for the execution of the priority right for claim against the mortgaged
commercial property and land use right in Hangzhou held by JoinHands Co to the Company and the liquidated
damages, in March 2012. Both the Company and Kaixin Co filed appeals respectively because of their
respective objections against the court’s decision. During the year ended December 31, 2011, an impairment
loss of Rmb11,979,000 in relation to interest in the associate, JoinHands Co, was recognised.
142
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 25.
INTERESTS IN ASSOCIATES (Continued)
The summarised financial information in respect of the Group’s associates at the end of the reporting
period is set out below:
Total assets
Total liabilities
Net assets
Group’s share of net assets of associates, after impairment
loss of Rmb21,277,000 (2011: Rmb21,277,000)
Revenue
Loss for the year
12/31/2012
Rmb’000
12/31/2011
Rmb’000
7,521,127
(5,842,013)
6,503,934
(5,028,160)
1,679,114
1,475,774
465,513
446,679
6,312,126
5,452,262
(87,218)
(60,873)
Group’s share of loss of associates for the year
(17,341)
(7,035)
26.
INTEREST IN A JOINTLY CONTROLLED ENTITY
Unlisted investment in a jointly controlled entity,
at cost less impairment
Share of post-acquisition loss, net of dividends received
12/31/2012
Rmb’000
12/31/2011
Rmb’000
373,470
(3,516)
369,954
–
–
–
143
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
26.
INTEREST IN A JOINTLY CONTROLLED ENTITY (Continued)
At December 31, 2012 and 2011, the Group had interest in the following jointly controlled entity:
Name of entity
Form of
business
structure
Place of
registration and
operation
Percentage of equity
interest attributable to
the Group
Principal activities
12/31/2012
%
12/31/2011
%
Shengxin Expressway Co., Ltd.
Corporate
The PRC
50
N/A
(“Shengxin Co”) (Note)
Management of the
Shaoxing section of the
Ningbo-Jinhua
Expressway
Note:
On July 6, 2012, the Company entered into a sales and purchase agreement (the “S&P Agreement”) with Shaoxing
Communications Investment Group Co., Ltd. (“Shaoxing Communications Group”), an independent third party,
who owned 100% equity interest of Shengxin Co, pursuant to which the Company has conditionally agreed to
purchase from Shaoxing Communications Group, a 50% equity interest in Shengxin Co for a cash consideration
of Rmb355,033,000, plus interest accrued on the consideration at the interest rate according to the PBOC. The
acquisition has been completed on November 28, 2012.
As at December 31, 2012, 50% of the consideration amounting to Rmb177,516,000 and the relevant interest of
Rmb6,622,000 were paid by the Company to Shaoxing Communications Group, while the remaining 50% and unpaid
interest was accounted for as consideration payable and included in other payables and accruals in the consolidated
statement of financial position.
144
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
26.
INTEREST IN A JOINTLY CONTROLLED ENTITY (Continued)
The summarised financial information in respect of the Group’s interest in a jointly controlled entity which
is accounted for using the equity method at the end of the reporting period is set out below:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue
Expenses
27. AVAILABLE-FOR-SALE INVESTMENTS
AFS investments comprise:
Non-current assets:
Unlisted equity securities investments, at cost (Note i)
Debenture listed in the PRC with fixed interest of
9.6% per annum and maturity date on May 31, 2017
Current assets:
Listed equity securities investments
in the PRC, at fair value (Note ii)
12/31/2012
Rmb’000
12/31/2011
Rmb’000
9,101
1,542,558
(15,185)
(1,166,520)
11,954
(15,470)
–
–
–
–
–
–
12/31/2012
Rmb’000
12/31/2011
Rmb’000
11,000
122,000
133,000
134,899
267,899
1,000
–
1,000
60,274
61,274
145
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
27. AVAILABLE-FOR-SALE INVESTMENTS (Continued)
As at December 31, 2012, the Group has entered into securities lending arrangement with clients that
resulted in the transfer of listed AFS investments with total fair value of Rmb5,897,000 to external clients,
which did not result in derecognition of the financial assets. There was no such arrangement as at
December 31, 2011. Details of the collaterals were set out in Note 29.
Notes:
(i) Unlisted equity securities investments represent investments in unlisted equity securities issued by private
entities established in the PRC. They are measured at cost less impairment at the end of the reporting period
because the range of reasonable fair value estimated is so significant that the directors of the Company are of
the opinion that their fair values cannot be measured reliably.
(ii)
Listed equity investments represent equity securities subscribed through placement by listed issuers. They
are measured at fair value. During the year ended December 31, 2012, the gain on change in fair value of the
investments of Rmb4,800,000 (2011: loss on change in fair value of investment of Rm9,746,000) has been
recognised as other comprehensive gain (loss).
During the year ended December 31, 2012, the Group disposed of certain listed equity investments and
recognised a gain on disposal of Rmb175,000 (2011: Rmb4,072,000).
146
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 28. TRADE RECEIVABLES
The Group has no credit period granted to its trade customers of toll operation and service area
businesses. The following is an aged analysis of trade receivables presented based on the invoice date at
the end of the reporting period, which approximated the respective revenue recognition dates.
Within 3 months
3 months to 1 year
1 to 2 years
Over 2 years
12/31/2012
Rmb’000
12/31/2011
Rmb’000
57,538
–
146
163
57,847
47,742
–
–
271
48,013
Included in the Group’s trade receivable balance aged within 3 months were toll receivables from
the Expressway Fee Settlement Centre of the Highway Administration Bureau of Zhejiang Province
and Hangzhou Urban and Rural Construction Committee amounting to Rmb54,582,000 (2011:
Rmb47,086,000) which has been settled subsequent to the end of the reporting period. The directors
consider the credit risk of the balance to be minimal.
29. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING
BUSINESS
Loans to margin clients
Less: Allowance for doubtful debts
12/31/2012
Rmb’000
12/31/2011
Rmb’000
724,123
–
724,123
–
–
–
147
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
29. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING
BUSINESS (Continued)
The Group has provided customers with margin financing and security lending for securities transactions
since June 2012, the credit facility limits to margin clients are determined by the discounted market value
of the collateral securities accepted by the Group.
All of the loans to margin clients which are secured by the underlying pledged securities are interest
bearing at a fixed rate of 8.6%. The Group maintains a list of approved stocks for margin lending at
a specified loan to collateral ratio. Any excess in the lending ratio will trigger a margin call which the
customers have to make good of the shortfall. The Group has the right to process forced liquidation if the
customer fails to make good of the shortfall within a short period of time.
As at December 31, 2012, loans to customers under the margin financing and securities lending activities
carried out in the PRC were secured by the customers’ stock securities and cash collaterals. The
undiscounted market value of the stock security collaterals was amounted to Rmb2,745,885,000. Cash
collateral of Rmb75,976,000 received from clients was included in accounts payable to customers arising
from securities business in Note 35.
No aged analysis is disclosed as in the opinion of the directors, the aged analysis does not give additional
value in view of the nature of business of securities margin financing.
148
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 30. OTHER RECEIVABLES AND PREPAYMENTS
Analysed as:
Current
Entrusted loans receivables from related parties (Note 47(ii))
Entrusted loan receivable from a third party (Note a)
Loan receivable from an associate (Note 47(i))
Interest receivables
Financial products investment receivables (Note b)
Prepayments
Others
Non-current
Entrusted loans receivables from related parties (Note 47(ii))
Loan receivable from an associate (Note 47(i))
12/31/2012
Rmb’000
12/31/2011
Rmb’000
314,616
–
82,101
73,440
103,432
31,518
96,520
350,704
300,944
–
72,932
–
40,275
79,287
701,627
844,142
325,035
–
300,000
82,000
325,035
382,000
1,026,662
1,226,142
Notes:
(a) Pursuant to the board resolutions of the Company on January 30, 2011, and the entrusted loan contracts,
the Company provided short-term entrusted loans during 2011 totaling Rmb500,000,000 with maturity date of
March 31, 2012 to Zhejiang Jiahe Industrial Co., Ltd. at a fixed interest rate of 12% per annum and guaranteed
by Greentown Real Estate Group Co., Ltd. in full. Part of the loan of Rmb200,000,000 was early settled during
2011. The remaining balance was settled during the year ended December 31, 2012.
(b) Short-term fixed-yield and principal protected bank financial products.
149
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
31. HELD FOR TRADING INVESTMENTS
Held for trading investments include:
Listed securities in the PRC, at fair value:
Equity securities
Open-end equity funds
Corporate bonds with fixed interest ranging from 5.20% to 9.60%
12/31/2012
Rmb’000
12/31/2011
Rmb’000
8,953
26,362
195,609
4,686
(2011: 4.45% to 8.50%) per annum
1,451,457
1,059,726
1,486,772
1,260,021
32. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENT
As at December 31, 2012, the amounts represented equity and debt securities acquired by the Group
which would be resold at a predetermined price under resale agreements with a financial institution in
the PRC in 2013. The cash advanced by the Group carried interest at fixed rates ranging from 2.16% to
5.77% per annum. Subsequent to the year end, these equity and debt securities have been fully resold
and the cash advanced by the Group together with the corresponding interests have also been returned to
the Group.
The Group conducted resale agreement under usual and customary terms of placements and held
collaterals for these transactions.
The collaterals include both equity and debt securities listed in the PRC. As at December 31, 2012,
the fair value of equity securities and debt securities held as collaterals was Rmb299,918,000, and
Rmb119,900,000, respectively.
There was no financial asset held under resale agreement for the year ended December 31, 2011.
150
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
33. BANK BALANCES HELD ON BEHALF OF CUSTOMERS
From the Group’s securities operation, the Group receives and holds money deposited by customers
(including other institutions). These customers’ money is maintained in one or more segregated bank
accounts. The Group has recognised the corresponding accounts payable to respective customers and
other institutions.
Bank balances held on behalf of customers carry interest at market rates which range from 1.62% to
1.98% (2011: 1.62% to 1.98%) per annum.
Bank balances held on behalf of customers that are denominated in currencies other than the functional
currency of the respective group entities are set out below:
As at December 31, 2012
As at December 31, 2011
34. BANK BALANCES AND CASH
HKD
Rmb’000
14,228
9,893
USD
Rmb’000
40,544
36,564
12/31/2012
Rmb’000
12/31/2011
Rmb’000
Time deposits with original maturity over three months
1,483,408
2,467,793
Unrestricted bank balances and cash
Time deposits with original maturity of less than three months
2,613,789
748,920
2,292,357
828,073
Cash and cash equivalents
3,362,709
3,120,430
4,846,117
5,588,223
Bank balances carry interest at the average market rate of 0.42% (2011: 0.50%) per annum. Time
deposits carry interest at fixed rates ranging from 2.38% to 3.36% (2011: 1.49% to 3.50%) per annum.
151
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
34. BANK BALANCES AND CASH (Continued)
Bank balances and cash that are denominated in currencies other than the functional currency of the
respective group entities are set out below:
As at December 31, 2012
As at December 31, 2011
HKD
Rmb’000
5,232
5,271
USD
Rmb’000
27,999
26,931
35. ACCOUNTS PAYABLE TO CUSTOMERS ARISING FROM
SECURITIES BUSINESS
The amounts include payables for securities business as well as cash collateral from customers for
securities lending and/or margin financing arrangement. The settlement terms of accounts payables
arising from the securities business are one day after the trade date. No aged analysis is disclosed as in
the opinion of the directors an aged analysis does not give any additional value in view of the nature of the
business.
As at December 31, 2012, Rmb75,976,000 cash collateral have been received from clients for securities
lending or margin financing arrangement, of which under normal course of business were repayable
upon maturity within 6 months. Only the excess amounts over the required margin deposits stipulated are
repayable on demand.
Accounts payable to customers arising from securities business that are denominated in currencies other
than the functional currency of the respective group entities are set out below:
HKD
Rmb’000
14,228
9,893
USD
Rmb’000
40,544
36,564
As at December 31, 2012
As at December 31, 2011
152
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
36. TRADE PAYABLES
Trade payables mainly represent the construction payables for the improvement projects of toll
expressways. The following is an aged analysis of trade payables presented based on the invoice date:
Within 3 months
3 months to 1 year
1 to 2 years
2 to 3 years
Over 3 years
37. OTHER PAYABLES AND ACCRUALS
Other liabilities:
Accrued payroll and welfare
Consideration payable for acquisition of equity interest in
Shengxin Co. (Note26) (Note)
Advance from rental and advertising customers
Toll collected on behalf of other toll roads
Retention payable
Others
Other accruals
12/31/2012
Rmb’000
12/31/2011
Rmb’000
227,946
35,678
26,876
48,922
38,942
93,602
32,295
116,005
58,618
16,668
378,364
317,188
12/31/2012
Rmb’000
12/31/2011
Rmb’000
398,061
350,508
189,331
72,051
7,114
84,133
182,082
932,772
40,259
–
77,754
36,944
85,301
131,812
682,319
41,897
973,031
724,216
Notes: The amount was unsecured, repayable on demand and carried interest at interest rate according to the PBOC.
153
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
38. BANK LOANS
12/31/2012
Rmb’000
12/31/2011
Rmb’000
Bank loans, unsecured and repayable within one year
–
462,553
At December 31, 2011, the bank loans included several loans totalling Rmb362,553,000 carried interests
at fixed rates ranging from 4.95% to 6.31% per annum. At December 31, 2011, the bank loans also
included loans of Rmb100,000,000, which carried interests at floating rates based on the interest rate
according to the People’s Bank of China ranging from 6.31% to 6.56%. The Group’s bank loans were fully
repaid during the year ended December 31, 2012.
The Group’s borrowings that are dominated in currencies other than the functional currencies of the
relevant group entities are set out below:
HKD
Rmb’000
312,553
Litigation on
interest claim
Rmb’000
(note i)
21,238
(21,238)
–
As at December 31, 2011
39. PROVISIONS
At January 1, 2011
Overprovision in prior years
At December 31, 2011 and December 31, 2012
154
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
39. PROVISIONS (Continued)
Note:
(i)
The Group received a claim from the customers under the state bond investment agency agreements and fund
trust agreements for the additional interest compensation upon the settlement of the principal and interest at a
rate of 2.7%. During the year ended December 31, 2011, the plaintiffs withdrew from the legal proceedings and
obligation of the Group was fully discharged. Accordingly, the provision of Rmb21,238,000 has been released
and included in other expenses for the year ended December 31, 2011.
40. DERIVATIVE FINANCIAL INSTRUMENT
12/31/2012
Rmb’000
12/31/2011
Rmb’000
Foreign currency forward contract
–
6,426
As at December 31, 2011, the Group entered into foreign currency forward contract. The major terms of
the outstanding contract were as follows:
Notional amount
Maturity
Exchange rates
Buy HKD 386,000,000, sell Rmb
May 31, 2012
Rmb0.8292 to HKD1
The fair value of foreign currency forward contract is measured using quoted forward exchange rates and
yield curves derived from quoted interest rates matching maturities of the contract.
The settlement of the foreign currency forward contract on May 31, 2012 resulted in a gain on fair value
changes on derivative financial instruments of Rmb2,841,000 credited to profit or loss. The Group did not
enter into any foreign currency forward contract as at December 31, 2012.
155
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
41. LONG-TERM BONDS
12/31/2012
Rmb’000
12/31/2011
Rmb’000
Long-term bonds – listed in the PRC
1,000,000
1,000,000
The long-term bonds are unsecured, carry interest payable annually at a fixed rate of 4.29% per annum
and are repayable in 2013 upon maturity. The quoted price of the listed long-term bonds as at December
31, 2012 is Rmb992,421,000 (2011: Rmb1,000,000,000). The long-term bond is classified as current
liabilities according to its maturity as at December 31, 2012.
42. DEFERRED TAXATION
The following are the major deferred tax liabilities and assets recognised and movements thereon during
the current and prior years:
Changes in
fair value of
held for trading
Accelerated tax
depreciation
of property
plant and
and available- equipment and
expressway
investments operating rights
Rmb’000
Rmb’000
for-sale
Fair value
adjustment of
intangible
assets
Rmb’000
35,899
(14,383)
2,437
23,953
6,633
1,200
228,561
(10,004)
–
218,557
(10,004)
–
34,238
(2,339)
–
31,899
(2,339)
–
Others
Rmb’000
Total
Rmb’000
(30,741)
(11,602)
–
(42,343)
(3,336)
–
262,647
(33,018)
2,437
232,066
(9,046)
1,200
31,786
208,553
29,560
(45,679)
224,220
At January 1, 2011
Charge (credit) to profit or loss
Charge to other comprehensive loss
At December 31, 2011
Charge (credit) to profit or loss
Charge to other comprehensive loss
At December 31, 2012
Provisions
Rmb’000
(5,310)
5,310
–
–
–
–
–
156
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
43. SHARE CAPITAL
Registered, issued and fully paid:
Domestic shares of Rmb1.00 each
H Shares of Rmb1.00 each
Number of shares
Share capital
12/31/2012
12/31/2011
12/31/2012
Rmb’000
12/31/2011
Rmb’000
2,909,260,000
1,433,854,500
2,909,260,000
1,433,854,500
2,909,260
1,433,855
2,909,260
1,433,855
4,343,114,500
4,343,114,500
4,343,115
4,343,115
The domestic shares are not currently listed on any stock exchange.
The H Shares have been listed on the Stock Exchange since May 15, 1997. The H Shares were admitted
to the Official List on May 5, 2000 and their dealings on the London Stock Exchange commenced on the
same day.
On February 14, 2002, the United States Securities and Exchange Commission, following the approval
by the Board of Directors and the China Securities Regulatory Commission, declared the registration
statement in respect of the ADSs evidenced by ADRs representing the deposited H Shares of the
Company effective.
All the domestic shares and H Shares rank pari passu with each other as to dividends and voting rights.
157
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
44. RETIREMENT BENEFITS SCHEMES
The employees of the Group are members of the state-managed retirement benefits scheme operated
by the PRC government. To supplement this existing retirement benefits scheme, the Group adopted a
corporate annuity scheme in accordance with relevant rules and regulations. The Group is required to
contribute a certain percentage of payroll costs to these retirement benefits schemes to fund the benefits.
The only obligation of the Group with respect to these retirement benefits schemes is to make the
specified contributions.
No forfeited contributions are available to reduce the contribution payable in future years.
45. COMMITMENTS
Authorised but not contracted for:
– Investments in expressways upgrade services
– Purchase of machinery and equipment
– Renovation of service areas
– Acquisition and construction of properties
– Purchase of office buildings
– Investment in an associate
46. OPERATING LEASES
The Group as lessee
Minimum lease payments
Contingent rental expenses
158
12/31/2012
Rmb’000
12/31/2011
Rmb’000
–
238,504
70,850
497,050
–
280,000
6,070
345,344
20,970
407,203
485,700
–
1,086,404
1,265,287
Year ended
12/31/2012
Rmb’000
Year ended
12/31/2011
Rmb’000
58,199
4,525
62,724
13,637
4,958
18,595
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
46. OPERATING LEASES (Continued)
The Group as lessee (Continued)
At the end of the reporting period, the Group had commitments for future minimum lease payments under
non-cancellable operating leases which fall due as follows:
Within one year
In the second to fifth years inclusive
Over five years
12/31/2012
Rmb’000
12/31/2011
Rmb’000
49,985
112,900
4,490
167,375
14,851
61,241
13,540
89,632
Operating lease payments represent rentals payable by the Group for certain service areas along
expressways located in Zhejiang and Tianjin. They are negotiated for an average term of ten years and
rentals contain both a fixed element and a contingent element linked to sales.
The Group as lessor
The Group leased their service areas and communication ducts under operating lease arrangements.
Leases are negotiated for terms ranging from 1 to 25 years and rentals are fixed annually.
At the end of the reporting period, the Group had contracted with tenants for the following future minimum
lease payments:
Within one year
In the second to fifth years inclusive
After five years
12/31/2012
Rmb’000
12/31/2011
Rmb’000
24,913
37,255
37,310
99,478
34,896
37,001
24,943
96,840
159
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
46. OPERATING LEASES (Continued)
The Group as lessor (Continued)
For certain of the Group’s service areas, the rental income are variable and being calculated at the higher
of a pre-agreed percentage of sales of the relevant service areas made by the lessees or the minimum
lease payments. The above commitment represented the minimum lease payments from lessees only and
do not include any contingent rent elements.
47. RELATED PARTY TRANSACTIONS AND BALANCES
The following is a summary of the related party during the year:
(i)
Transactions and balances with government related parties
The Group operates in an economic environment currently predominated by entities directly or indirectly
owned or controlled by the PRC government (“government-related entities”). In addition, the Group
itself is part of a larger group of companies under the Communications Group which is controlled by the
PRC government. However, due to the business nature, in respect of the Group’s toll road business,
the directors are of the opinion that it is impracticable to ascertain the identity of counterparties and
accordingly whether the transactions are with other government-related entities in the PRC. Details of
other significant transactions with government related parties are summarised below:
160
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 47. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
Transactions and balances with government related parties
(i)
(Continued)
(a) Transactions with Communications Group
(1) Pursuant to the provisional agreement entered into between Zheshang Securities and a related
party, Jinji Co, a subsidiary of the Communications Group, dated December 26, 2011, Zheshang
Securities agreed to purchase a property in Hangzhou from Jinji Co for a provisional consideration
of Rmb809,500,000. As at December 31, 2011, deposit of Rmb323,800,000 has been paid to Jinji
Co. During the year ended December 31, 2012, this provisional agreement has been terminated as
Jinji Co fails to deliver the property to Zheshang Securities, deposit of Rmb323,800,000 together with
interest, which is according to the prevailing lending rate promulgated by the People’s Bank of China
(“PBOC”), of Rmb19,367,000 have been repaid to Zheshang Securities.
(2) Pursuant to the board resolutions of the Company on November 10, 2011, and the loan contract,
the Company provided long-term loan, totalling Rmb82,000,000 with maturity date on November 16,
2013 to the Group’s associated company, Yongjin at floating rates based on the benchmark interest
rate according to the People’s Bank of China ranging from 6.31% to 6.56% per annum.
(b) Transactions with other government related parties
(1) Pursuant to the operation management agreement entered into between Zhejiang Expressway
Investment Development Co., Ltd. (“Development Co”), a wholly owned subsidiary of the Company,
and Petroleum Co in respect of the petrol stations in the service areas along the Shanghai-
Hangzhou-Ningbo and Shangsan Expressways, Petroleum Co will have their expertise to assist
Development Co in running their petrol stations along the Shanghai-Hangzhou-Ningbo and
Shangsan Expressways. Purchases of petroleum products from Petroleum Co during year ended
December 31, 2012 amounted to Rmb1,669,833,000 (2011: Rmb1,566,140,000).
Petroleum Co is a government related entity and also an associate of the Group.
161
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
47. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
Transactions and balances with government related parties
(i)
(Continued)
(b) Transactions with other government related parties (Continued)
(2) The Group has entered into various significant transactions, including deposit placements,
borrowings and other general banking facilities, with certain banks and financial institutions which are
government-related entities in its ordinary course of business. In view of the nature of those banking
transactions, the directors are of the opinion that separate disclosure would not be meaningful.
(ii) Transactions and balances with associates and other non-
government related parties
(a) Transactions and balances with associates and its subsidiaries
(1) Pursuant to the resolutions of the shareholders’ meeting on June 21, 2010 of the Group’s subsidiary,
Development Co, and the entrusted loan contracts, Development Co provided short-term entrusted
loans during 2010 totalling Rmb270,000,000 with maturity dates from July 11, 2011 to September 20,
2011 to Hangzhou Concord Property Investment Co., Ltd. (“Hangzhou Concord Co”), a subsidiary of
the Group’s associate at a fixed interest rate of 12% per annum. Such entrusted loan is guaranteed
by World Trade Center Zhejiang Real Estate Development Co., Ltd. (“World Trade Ltd”), a related
party of Hangzhou Concord Co, in full. Part of the entrusted loan of Rmb120,000,000 was repaid
during 2011. Pursuant to the supplemental entrusted loan contract on July 6, 2011 of Development
Co, the maturity date of the entrusted loan totalling Rmb150,000,000 was deferred to July 10, 2012,
at a fixed interest rate of 12% per annum and guaranteed by World Trade Ltd in full, in which part of
the entrusted loan of Rmb50,471,000 was early settled during 2011. The remaining Rmb99,529,000
was fully settled during 2012.
162
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 47. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other non-
government related parties (Continued)
(a) Transactions and balances with associates and its subsidiaries
(Continued)
(2) Pursuant to the resolutions of the shareholders’ meeting on July 8, 2010 of Zhejiang Expressway
Advertising Co., Ltd. (“Advertising Co”), a subsidiary of Development Co, and the entrusted loan
contract, Advertising Co provided short-term entrusted loan during 2010 totalling Rmb30,000,000
with maturity date of July 10, 2011 to Hangzhou Concord Co at a fixed interest rate of 12% per
annum. Such entrusted loan was guaranteed by World Trade Ltd in full. Pursuant to the resolutions
of the shareholders’ meeting on May 25, 2011 of Development Co and the supplemental entrusted
loan contract, the maturity date of the entrusted loan totalling Rmb30,000,000 was deferred to July
10, 2012, at a fixed interest rate of 12% per annum and guaranteed by World Trade Ltd in full. The
balance was fully settled during 2012.
(3) Pursuant to the board resolutions of the Company on August 28, 2010, and the entrusted loan
contracts, the Company provided short-term entrusted loans during 2010 totalling Rmb200,000,000
with maturity date of September 30, 2011 to Hangzhou Concord Co at a fixed interest rate of 12%
per annum. Such entrusted loan was guaranteed by World Trade Ltd in full. The entrusted loan was
fully repaid during 2011.
163
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 47. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other non-
government related parties (Continued)
(a) Transactions and balances with associates and its subsidiaries
(Continued)
(4) Pursuant to the board resolutions of the Company on August 28, 2010, and the entrusted loan
contracts, the Company provided short-term entrusted loans during 2011 totalling Rmb390,000,000
with maturity dates from November 4, 2011 to August 7, 2012 and long-term entrusted loan
Rmb100,000,000 with maturity date on May 17, 2013 to Zhejiang Canal Concord Property Co., Ltd.,
a subsidiary of Hangzhou Concord Co, at a fixed interest rate of 12% per annum. Such entrusted
loans are guaranteed by World Trade Ltd in full. Part of the entrusted loan of Rmb200,000,000 was
early settled during 2011. The remaining balance of Rmb190,000,000 of the short-term entrusted
loans and part of the long-term entrusted loan of Rmb17,953,000 were settled in 2012.
(5) Pursuant to the board resolutions of the Company on August 28, 2010, and the entrusted loan
contract, the Company provided long-term entrusted loan during 2011 totalling Rmb200,000,000
with maturity date of April 25, 2013 to Hangzhou Canal Concord Property Co., Ltd., a subsidiary of
Hangzhou Concord Co at a fixed interest rate of 12% per annum. Such entrusted loan is guaranteed
by World Trade Ltd in full.
(6) Pursuant to the board resolutions of the Company on June 11, 2012, and the entrusted loan contract,
the Company provided long-term entrusted loan during 2012 totalling Rmb120,000,000 with maturity
date of January 17, 2014 to Zhejiang Canal Concord Property Co., Ltd., a subsidiary of Hangzhou
Concord Co at a fixed interest rate of 12% per annum. Such entrusted loan is guaranteed by World
Trade Ltd in full.
164
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 47. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other non-
government related parties (Continued)
(a) Transactions and balances with associates and its subsidiaries
(Continued)
(7) Pursuant to the board resolutions of the Company on August 28, 2010, and the entrusted loan
contract, the Company provided long-term entrusted loan during 2012 totalling Rmb190,000,000
with maturity date of February 7, 2014 to Zhejiang Canal Concord Property Co., Ltd., a subsidiary of
Hangzhou Concord Co at a fixed interest rate of 12% per annum. Such entrusted loan is guaranteed
by World Trade Ltd in full.
Interest income recognised in 2012 on the above entrusted loan transactions with associates and its
subsidiaries were Rmb70,993,000 (2011: Rmb71,491,000).
Interest receivables as at December 31, 2012 on the above entrusted loan transactions with associates
and its subsidiaries were Rmb47,604,000 (2011: Rmb31,175,000). The amounts will be repaid at maturity.
(b) Compensation of directors, supervisors, and key management
personnel
The remuneration of the directors, supervisors and key management personnel during the year was
Rmb4,962,000 (2011: Rmb4,342,000) including retirement benefit scheme contribution of Rmb191,000
(2011: Rmb109,000) which is determined by the performance of the individuals and the market trends.
165
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012 48. PARTICULARS OF SUBSIDIARIES OF THE COMPANY
Date and
place of
registration
Registered
and
paid-in capital
Rmb
Percentage of equity interest
attributable to the Company
Direct
Indirect
Principal activities
12/31/2012 12/31/2011 12/31/2012 12/31/2011
%
%
%
%
Note 1
75,223,000
51
51
Name of subsidiary
Zhejiang Yuhang
Expressway Co., Ltd.
(“Yuhang Co”)
Jiaxing Co
Note 2
1,859,200,000
99.999454
99.999454
Shangsan Co
Note 3
2,400,000,000
73.625
73.625
Development Co
Note 4
120,000,000
100
100
Advertising Co
Note 5
16,000,000
–
–
*70
*70
Note 6
8,000,000
100
100
–
–
–
–
–
–
–
–
–
–
Management of the
Yuhang Section of the
Shanghai-Hangzhou
Expressway
Management of the
Jiaxing Section of the
Shanghai-Hangzhou
Expressway
Management of the
Shangsan Expressway
Operation of service areas
as well as roadside
advertising along the
expressways operated
by the Group
Provision of advertising
services
Provision of vehicle
towing, repair and
emergency rescue
services
–
–
–
–
–
–
–
–
*51
*51
Provision of advertising
services
**52.15
**52.15
***52.15
***52.15
Operation of securities
business
Operation of securities
business
***52.15
N/A
Operation of securities
business
Zhejiang Expressway
Vehicle Towing and
Rescue Services Co., Ltd.
(“Towing Co”)
Hangzhou Roadtone
Advertising Co., Ltd.
(“Roadtone Co”)
Note 7
3,000,000
Zheshang Securities
Note 8
3,000,000,000
Zheshang Futures
Note 9
500,000,000
Zheshang Capital
Management Co., Ltd.
(“Zheshang Capital Co”)
Note 10
300,000,000
166
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
48. PARTICULARS OF SUBSIDIARIES OF THE COMPANY (Continued)
*
These two companies are subsidiaries of Development Co, a wholly-owned subsidiary of the Company, and,
accordingly, are accounted for as subsidiaries by virtue of the Group’s control over them.
Pursuant to the resolution of directors’ meeting on May 25, 2011 of Development Co and the share transfer
agreement, 100% shares of Towing Co were transferred to the Company on September 26, 2011.
**
The company is a subsidiary of Shangsan Co, a non-wholly-owned subsidiary of the Company, and,
accordingly, is accounted for as a subsidiary by virtue of the Group’s control over it.
***
The companies are subsidiaries of Zheshang Securities, non-wholly-owned subsidiaries of Shangsan Co,
and, accordingly, are accounted for as subsidiaries by virtue of the Group’s control over it.
Note 1: Yuhang Co was established on June 7, 1994 in the PRC as a joint stock limited company and was
subsequently restructured into a limited liability company under its current name on November 28, 1996. The
Company is able to control over Yuhang Co because it has the power to appoint five out of nine directors of
that company and under the provisions stated in the Articles of Association of that company, the passing of
ordinary resolutions at the board meetings required one-half of the directors attending the meetings.
Note 2: Jiaxing Co was established on June 30, 1994 in the PRC as a joint stock limited company and was
subsequently restructured into a limited liability company under its current name on November 29, 1996.
Note 3: Shangsan Co was established on January 1, 1998 in the PRC as a limited liability company.
Note 4: Development Co was established on May 28, 2003 in the PRC as a limited liability company.
Note 5: Advertising Co was established on June 1, 1998 in the PRC as a limited liability company.
Note 6: Towing Co was established on July 31, 2003 in the PRC as a limited liability company.
Note 7: Roadtone Co was established on July 27, 2004 in the PRC as a limited liability company.
167
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
48. PARTICULARS OF SUBSIDIARIES OF THE COMPANY (Continued)
Note 8: Zheshang Securities was established on May 9, 2002 in the PRC as a limited liability company. On
November 16, 2012, the board of directors of the Company announced that Zheshang Securities proposed
to seek a separate listing of its shares as A shares on the Shanghai Stock Exchange. This proposed spin-off
for separate listing has not yet been completed at the end of the reporting period.
Note 9: Zheshang Futures was established on September 7, 1995 in the PRC as a limited liability Company.
Note 10: Zheshang Capital Co was established on February 9, 2012 in the PRC as a limited liability Company.
All of the Company’s subsidiaries are operating in the PRC. None of them had in issue any debt securities
at any time during the year.
49. NON-CASH TRANSACTION
For the year ended December 31, 2010, consideration of Rmb338,354,000 was paid from the non-
controlling shareholders of Zheshang Securities for capital injection in Zheshang Securities. Upon the
approval from the relevant government authorities, the amount was recognised as capital contribution
from the non-controlling interest during the year ended December 31, 2011.
50. EVENTS AFTER THE REPORTING PERIOD
On January 24, 2013, the long-term bonds issued by the Company have been matured, and the principal
amount of Rmb1,000,000,000 and the relevant interests of the long-term bonds have been fully repaid.
168
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012 51. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
NON-CURRENT ASSETS
Property, plant and equipment
Prepaid lease payments
Expressway operating rights
Other intangible assets
Investments in subsidiaries
Investments in associates
Investment in a jointly controlled entity
Available-for-sale investments
Other receivables
CURRENT ASSETS
Inventories
Trade receivables
Other receivables
Prepaid lease payments
Held for trading investment
Amount due from subsidiaries
Bank balances and cash
– Time deposits with original maturity over three months
– Cash and cash equivalents
CURRENT LIABILITIES
Trade payables
Tax liabilities
Other taxes payable
Other payables and accruals
Amount due to subsidiaries
Bank loans
Long-term bonds
Derivative financial instrument
NET CURRENT ASSETS
12/31/2012
Rmb’000
12/31/2011
Rmb’000
257,178
1,783
4,927,666
3,140
4,557,600
410,073
373,470
62,000
325,035
200,810
1,878
5,272,899
–
4,557,600
410,073
–
–
382,000
10,917,945
10,825,260
4,209
27,901
458,223
95
80,000
440,694
544,000
1,356,884
9,745
29,449
543,481
95
80,000
1,007,193
279,000
1,501,945
2,912,006
3,450,908
184,262
169,301
16,164
454,015
14,546
–
1,000,000
–
195,641
238,285
16,939
286,511
436,773
362,553
–
6,426
1,838,288
1,543,128
1,073,718
1,907,780
TOTAL ASSETS LESS CURRENT LIABILITIES
11,991,663
12,733,040
169
ZHEJIANG EXPRESSWAY CO., LTD.Notes to the Consolidated Financial StatementsFor the year ended December 31, 2012
51. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
(Continued)
NON-CURRENT LIABILITIES
Long-term bonds
Deferred tax liabilities
CAPITAL AND RESERVES
Share capital
Reserves
12/31/2012
Rmb’000
12/31/2011
Rmb’000
–
102,280
1,000,000
106,206
102,280
1,106,206
11,889,383
11,626,834
4,343,115
7,546,268
4,343,115
7,283,719
11,889,383
11,626,834
Share
capital
Rmb’000
Share
premium
Rmb’000
Statutory
reserves
Rmb’000
Dividend
reserves
Rmb’000
Special
reserves
Rmb’000
Retained
profits
Rmb’000
Total
Rmb’000
4,343,115
3,645,726
1,518,224
1,085,779
18,666
835,114
11,446,624
–
–
–
–
–
–
–
–
–
–
–
–
–
–
151,757
–
–
(1,085,779)
1,085,779
–
–
–
–
–
–
1,526,576
(260,587)
–
(1,085,779)
(151,757)
1,526,576
(260,587)
(1,085,779)
–
–
4,343,115
3,645,726
1,669,981
1,085,779
18,666
863,567
11,626,834
–
–
–
–
–
–
–
–
–
–
–
–
–
–
156,762
–
–
(1,085,779)
1,042,347
–
–
–
–
–
–
1,608,915
(260,587)
–
(1,042,347)
(156,762)
1,608,915
(260,587)
(1,085,779)
–
–
At January 1, 2011
Total comprehensive
income for the year
Interim dividend
Final dividend
Proposed final dividend
Transfer to reserves
At December 31, 2011
Total comprehensive
income for the year
Interim dividend
Final dividend
Proposed final dividend
Transfer to reserves
At December 31, 2012
4,343,115
3,645,726
1,826,743
1,042,347
18,666
1,012,786
11,889,383
170
2012 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2012
Executive Directors
Statutory Address
ZHAN Xiaozhang (Chairman)
LUO Jianhu (General Manager)
DING Huikang
Non-Executive Directors
LI Zongsheng
WANG Weili
WANG Dongjie
Independent
Non-Executive Directors
ZHANG Junsheng
ZHOU Jun
PEI Ker-Wei
Supervisors
FU Zhexiang
WU Yongmin
LIU Haisheng
ZHANG Guohua
ZHANG Xiahua
Company Secretary
Tony Zheng
Authorized Representatives
ZHAN Xiaozhang
ZHANG Jingzhong
12/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
PRC 310007
Tel : 86-571-8798 5588
Fax: 86-571-8798 5599
Legal Advisers
As to Hong Kong and US law:
Herbert Smith Freehills
23rd Floor, Gloucester Tower
15 Queen’s Road Central
Hong Kong
As to English law:
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London EC2A 2HS
United Kingdom
As to PRC law:
T & C Law Firm
11/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
PRC 310007
171
ZHEJIANG EXPRESSWAY CO., LTD.Corporate Information Auditors
Deloitte Touche Tohmatsu
35/F, One Pacific Place
88 Queensway
Hong Kong
Investor Relations Consultant
Hill & Knowlton Strategies
36th Floor, PCCW Tower, Taikoo Place
979 King’s Road, Quarry Bay
Hong Kong
Tel : 852-2894 6321
Fax: 852-2576 1990
Principal Bankers
Industrial and Commercial Bank of China,
Zhejiang Branch
China Construction Bank, Zhejiang Branch
Shanghai Pudong Development Bank,
Hangzhou Branch
H Share Registrar and Transfer
Office
Hong Kong Registrars Limited
Room 1712-1716, 17/F, Hopewell Centre
183 Queen’s Road East
Hong Kong
H Shares Listing Information
The Stock Exchange of Hong Kong Limited
Code: 0576
London Stock Exchange Plc
Code: ZHEH
ADRs Information
US Exchange: OTC
Symbol: ZHEXY
CUSIP: 98951A100
ADR: H Shares 1:10
Representative Office in
Hong Kong
Suite 2910
29/F, Bank of America Tower
12 Harcourt Road
Hong Kong
Tel : 852-2537 4295
Fax: 852-2537 4293
Website
www.zjec.com.cn
172
2012 ANNUAL REPORTCorporate Information Location Map of Expressways in
Zhejiang Province
ZHEJIANG EXPRESSWAY CO., LTD.
173