Final Results
Zhejiang Expressway Co
16 March 2004
ZHEIJIANG EXPRESSWAY CO., LTD.
A joint stock limited company incorporated in the People's Republic of China
with limited liability)
2003 Annual Results Announcement
• Turnover grew by 14.0% to Rmb2,471,805,000;
• Net profit increased by 13.3% to Rmb1,008,792,000;
• Earnings per share up 13.3% at Rmb23.23 cents;
• A final dividend of Rmb11 cents per share is recommended.
The directors (the 'Directors') of Zhejiang Expressway Co., Ltd. (the 'Company')
are pleased to announce the audited annual results of the Company and its
subsidiaries (collectively the 'Group') for the year ended December 31, 2003
(the 'Period') prepared in conformity with accounting principles generally
accepted in Hong Kong, with basis of preparation as stated in Note 1 to the
consolidated income statement below.
During the Period, turnover for the Group amounted to Rmb2,471.8 million,
representing an increase of 14.0% over the same period in 2002; net profit
realized was Rmb1,008.8 million, representing an increase of 13.3%, while
earnings per share was Rmb23.23 cents (2002: Rmb20.50 cents).
The Directors recommend the payment of a final dividend of Rmb11 cents per share
in respect of the Period, subject to approval at the annual general meeting of
the shareholders of the Company to be held on May 21, 2004. Together with an
interim dividend of Rmb4 cents per share paid on November 6, 2003, total
dividend for the Period amounted to Rmb15 cents per share.
The audited consolidated income statement for the Period, together with the
assets and liabilities of the Group and relevant financial notes, are set out
below:
CONSOLIDATED INCOME STATEMENT
Year ended December 31,
2003 2002
Notes Rmb'000 Rmb'000
Turnover 2 2,471,805 2,168,078
Operating costs (731,451) (561,918)
Gross profit 1,740,354 1,606,160
Other revenue 2 127,285 66,457
Administrative expenses 3 (114,629) (95,209)
Other operating expenses 3 (54,243) (33,109)
Profit from operating activities 1,698,767 1,544,299
Finance costs (132,801) (163,224)
Share of profit of associates 17,394 11,719
Share of profit of a jointly-controlled entity 9,829 1,677
Profit before tax 1,593,189 1,394,471
Tax 4 (497,166) (400,952)
Profit before minority interests 1,096,023 993,519
Minority interests (87,231) (103,067)
Net profit from ordinary activities attributable to shareholders 1,008,792 890,452
Dividends
Interim (173,724) (173,724)
Proposed final (477,743) (390,880)
Earnings per share 5 23.23 cents 20.50 cents
Assets and liabilities
Total assets 15,068,687 14,505,834
Total liabilities (3,910,291) (3,826,254)
Minority interest (1,012,417) (977,789)
Net assets 10,145,979 9,701,791
Notes:
1. Basis of preparation
This financial statement has been prepared in accordance with Hong Kong
Statements of Standard Accounting Practice, accounting principles generally
accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies
Ordinance. It has been prepared under the historical cost convention, modified
with respect to the measurement of investments in securities.
2. Turnover and revenue
Year ended December 31,
2003 2002
Rmb'000 Rmb'000
Toll income 2,458,726 2,184,197
Service areas income 117,205 73,043
Advertising income 26,138 27,742
Road maintenance income 2,669 1,704
2,604,738 2,286,686
Less: Revenue taxes (132,933) (118,608)
Turnover 2,471,805 2,168,078
Income on investments 53,838 18,448
Interest income 12,593 17,063
Rental income 21,343 14,457
Vehicle service income 11,162 10,192
Exchange gains, net 2,282 1,121
Subsidy income 17,394 -
Other miscellaneous income 8,673 5,176
Other revenue 127,285 66,457
2,599,090 2,234,535
The Company and its subsidiaries were subject to Business Tax ('BT') in the PRC,
levied at 5% on toll income and 3% to 5% on other services income. In addition,
the Company and its subsidiaries were subject to the following types of revenue
taxes and surcharges:
- City Development Tax, levied at 1% to 7% of BT;
- Education Supplementary Tax, levied at 3.5% to 4% of BT; and
- Culture and Education Fees, levied at 3% on advertising income.
3. Profit from operating activities
The Group's profit from operating activities is arrived at after charging the
following:
Year ended December 31,
2003 2002
Rmb'000 Rmb'000
Depreciation 257,817 223,748
Amortization of expressway operating rights 8,700 8,700
Amortization of goodwill 12,221 15,612
4. Tax
As the Group had no taxable profits in Hong Kong during the Period, no Hong Kong
profits tax has been provided.
The Group was subject to Corporate Income Tax ('CIT') in the PRC levied at a
rate of 33% of taxable income based on income for financial reporting purposes
prepared in accordance with the laws and regulations in the PRC.
Year ended December 31,
2003 2002
Rmb'000 Rmb'000
Group
Tax charged 439,812 367,997
Tax refunded (33,249) (79,133)
406,563 288,864
Deferred 84,783 109,387
491,346 398,251
Share of tax attributable to associates 5,791 5,004
Share of deferred tax attributable to an associate (906) (3,294)
Share of deferred tax attributable to a jointly-controlled entity 935 991
Tax charge for the Period 497,166 400,952
During the Period, according to an approval from the Zhejiang Provincial Local
Tax Bureau, Zhejiang Shangsan Expressway Co., Ltd. ('Shangsan Co'), a subsidiary
of the Company, was entitled to a 50% CIT exemption for the year ended December
31, 2002 that amounted to Rmb33,249,000 under the category of 'enterprise
providing employment opportunities to redundant city and county workers' as
defined in the relevant national tax rules.
A reconciliation of the tax expense applicable to profit before tax using the
statutory rates for the PRC to the tax expense at the effective tax rates is as
follows:
Year ended December 31,
2003 2002
Rmb'000 Rmb'000
Group
Profit before tax 1,593,189 1,394,471
Tax at the statutory tax rate 525,752 460,175
Tax refunded (33,249) (79,133)
Income not subject to tax (10,451) (12,047)
Expenses not deductible for tax 15,114 18,118
Write-off of non-refundable tax - 13,839
Tax charge at the Group's effective tax rate 497,166 400,952
5. Earnings per share
The calculation of basic earnings per share is based on the net profit from
ordinary activities attributable to shareholders for the Period of
Rmb1,008,792,000 (2002: Rmb890,452,000) and the 4,343,114,500 shares (2002:
4,343,114,500 shares) in issue during the Period.
Diluted earnings per share for the years ended December 31, 2003 and 2002 have
not been calculated, as no diluting event occurred during these years.
6. Transfer to reserves
In accordance with the Company Law of the PRC and the respective company's
articles of association, the Company, its subsidiaries, its associates and its
jointly-controlled entity (collectively the 'Entities') are required to allocate
10% of their profit after tax, as determined in accordance with the PRC
accounting standards and regulations applicable to the Entities, to the
statutory surplus reserve (the 'SSR') until such reserve reaches 50% of the
registered capital of the Entities. As a result, Rmb100,634,000 was transferred
to the SSR for the Period. Subject to certain restrictions set out in the
Company Law of the PRC and the respective articles of association of the
Entities, part of the SSR may be converted to increase the Entities' share
capital.
In accordance with the Company Law of the PRC, the Entities are required to
transfer 5% of their profit after tax, as determined in accordance with the PRC
accounting standards and regulations applicable to the Entities, to the
statutory public welfare fund (the 'PWF'), which is a non-distributable reserve
other than in the event of the liquidation of the Entities. For the Period,
Rmb50,317,000 was transferred to the PWF. The PWF must be used for capital
expenditure on staff welfare facilities and these facilities remain as the
properties of the Entities.
BUSINESS REVIEW
2003 was a special year for the Company. Growth in traffic volume on the
Shanghai-Hangzhou-Ningbo Expressway was approximately half the usual rate as a
result of traffic diversion by the eastern section of Hangzhou City Ring Road
subsequent to its opening to traffic since the beginning of the year.
The outbreak of Severe Acute Respiratory Syndrome ('SARS') in the second quarter
of the year prompted local governments to adopt stringent measures to contain
the disease, further reducing traffic volumes on the roads, including
expressways throughout Zhejiang and neighboring cities and provinces.
But the phenomenal growth of China's economy remained unabated in 2003, as the
economy quickly recovered in the third quarter, leading to annual GDP growth
rates of 9.1% for the country as a whole and 14.0% for Zhejiang Province, the
highest rates of growth since the Asian financial crisis, despite a dip in the
second quarter as a result of SARS.
The strong economic growth, accompanied by exceptional growth in vehicle sales
and further expansion in expressway networks, among others, resulted in
continued growth in traffic volumes on the expressways operated by the Group
that more than compensated the fall in traffic volumes due to local traffic
diversions and temporary disruptions due to the occurrence of SARS.
Turnover for the Group grew by 14.0% during the Period to reach Rmb2,471.8
million, details of which are as follows:
Year ended December 31,
2003 2002
Rmb'000 Rmb'000 % Change
Toll income 2,458,726 2,184,197 +12.6
Shanghai-Hangzhou-Ningbo Expressway 1,908,764 1,745,931 +9.3
Shangsan Expressway 549,962 438,266 +25.5
Other income
Service areas 117,205 73,043 +60.5
Advertising 26,138 27,742 -5.8
Road maintenance 2,669 1,704 +56.6
2,604,738 2,286,686 +13.9
Revenue taxes (132,933) (118,608) +12.1
Turnover 2,471,805 2,168,078 +14.0
Toll Road Operations
Toll road operations remained the core business operation of the Group, as toll
income contributed to 94.4% of the overall income for the Group, though a slight
decrease from 95.5% in 2002 due to higher rates of growth in other business
operations.
Amongst the two major expressways operated by the Group, daily average full-trip
traffic volume for the Shanghai-Hangzhou-Ningbo Expressway in 2003 was 27,938,
representing an increase of 11.5% over 2002, while daily average full-trip
traffic volume for Shangsan Expressway was 15,011, an increase of 29.0%.
A slower traffic volume growth rate on the Shanghai-Hangzhou-Ningbo Expressway
was attained in 2003 compared to previous years. Apart from being a more mature
expressway, the expressway was also subject to direct traffic diversion by the
Hangzhou City Ring Road, as well as greater impact by measures taken to contain
the spread of SARS in the second quarter of the year.
The road surface-overlaying project on the Shanghai-Hangzhou-Ningbo Expressway
continued in 2003, with 126km renovated at a cost of Rmb159.7 million.
Since having turned profitable for the first time in 2002, the 9.45km Shida
Road, owned and operated by Hangzhou Shida Highway Co., Ltd., a 50%
jointly-controlled entity of the Company, underwent 78.0% growth in traffic
volume and 63.9% growth in toll income, realizing a net profit of Rmb17.8
million for the jointly-controlled entity during the Period (2002: Rmb1.4
million).
Other Business Operations
There are six pairs of service areas in operation along the expressways operated
by the Group in 2003, as compared to five in 2002. Driven by strong growth in
demand for restaurants, gas stations and vehicle services offered at these
service areas, revenue from the service area operations grew by 60.5% to reach
Rmb117.2 million in 2003.
Income from advertising came mainly from the advertising business operated by
Zhejiang Expressway Advertising Co., Ltd. ('Advertising Co'). Facing increasing
competition as well as accommodating inconveniences brought by construction
works relating to the Widening Project on the Shanghai-Hangzhou-Ningbo
Expressway during the Period, Advertising Co realized a turnover of Rmb24.7
million during the Period, representing a slight decrease of 5.8% over the same
period in 2002. Net profit realized was approximately Rmb5.0 million.
A separate business operation involving gas stations spanning across Zhejiang
Province is conducted through Zhejiang Expressway Petroleum Development Co.,
Ltd., a 50% owned associate of the Company. Strong growth in retail sales during
the Period helped to bring a 42.1% growth in revenue as compared to 2002 for the
associate company, and a 30.6% growth in net profit which amounted to Rmb21.3
million.
Project Investments
Phase 1 of the project to widen Shanghai-Hangzhou-Ningbo Expressway from four
lanes to eight lanes (the 'Widening Project') was completed in December 2003.
With a total investment of approximately Rmb550 million, Phase 1 covered a 44km
section from Hongken to Guzhu, currently the section with the highest traffic
flow. The opening to traffic of the eight-lane section substantially improved
travel conditions.
Construction works on Phase 2 of the Widening Project commenced in July 2003,
and is targeted for completion by the end of 2005. To be widened to a standard
six-lane expressway from Dajing to Shenshi (approximately 17km), and a standard
eight-lane expressway from Shenshi to Fengjing (approximately 79km), leading
into Shanghai, the 96km section's construction works will involve a cost of
approximately Rmb2,500 million.
Phase 3 of the Widening Project is expected to commence construction in June
2004 for completion by the end of 2007. The 80km section from Guzhu to Duantang,
leading into Ningbo, is also designed as a standard eight-lane expressway, with
an estimated widening cost of approximately Rmb2,300 million.
Other than the above, on May 8, 2003 the Company further acquired an additional
2% ownership interest in Zhejiang Shangsan Expressway Co., Ltd. ('Shangsan Co'),
a subsidiary of the Company, from Xinchang County Transport Development Company
('Xinchang Transport') for a cash consideration of Rmb57.6 million. As a result
of the acquisition, the Company's ownership interest in Shangsan Co increased
from 71.625% to 73.625%, while Xinchang Transport's ownership interest decreased
from 2% to zero.
Human Resources
During the Period, the Group's total number of employees increased by 746 to
2,744, among whom 509 were administrative staff, 393 were engineering
technicians, and 1,842 were involved in toll collection, maintenance and service
areas.
The increase in employees during the Period was mainly due to a change in
employment policies that changed the status of many seasonal and temporary
workers to long-term contract workers of the Group in response to the growing
demand for personnel in servicing ever increasing traffic flows on the two
expressways operated by the Group, especially in the substantially expanded
service area operations.
The Company encourages competitive performance and improvement in professional
skills amongst its employees through evaluation and training programs. In
addition to basic salaries, overall remuneration of the employees include a
bonus based on business performance of the Company, and for management team, a
bonus based on share price performance of the Company. Total remuneration for
the Period was Rmb89.7 million, representing an increase of 3.4% over 2002.
FINANCIAL ANALYSIS
As at December 31, 2003, net profit attributable to shareholders was
approximately Rmb1,008.8 million, representing an increase of 13.3% over 2002;
earnings per share increased 13.3% to Rmb23.23 cents, while return on equity for
the Period increased from 9.2% to 9.9%.
Financial Resources and Liquidity
As at December 31, 2003, the Group held Rmb567.2 million in cash and cash
equivalents, Rmb251.6 million in time deposits and Rmb1,104.3 million in
short-term investments, totaling Rmb1,923.1 million. Amongst the short-term
investments, approximately 92.1% was held in treasury bonds, with the remaining
invested mainly in close-ended security investment funds.
The Group had adequate net cash inflows from operating activities, which
amounted to Rmb1,670.3 million during the Period.
The current assets held by the Group amounted to Rmb1,999.4 million as at
December 31, 2003, amongst which account receivables, other receivables and
inventories accounted for 3.8% (As at December 31, 2002: 7.4%).
As a result, the Directors believe that the Group has sufficient financial
resources to meet its operational needs in the foreseeable future.
Borrowings and Debt Repayment Ability
During the Period, total interest-bearing borrowings of the Group decreased from
Rmb3,038.2 million at the beginning of the year to Rmb2,720.1 million by the end
of the year, amongst which Rmb975.9 million were short-term interest-bearing
liabilities, representing a decrease of 48.1% over 2002, and Rmb1,744.1 million
were long-term interest-bearing liabilities, representing an increase of 50.8%.
The Directors believe that the adjustment in the maturity profile of the Group's
interest-bearing borrowings during the Period is better suited to the Group's
present asset structure.
The annual coupon rate on the Rmb1 billion corporate bonds for a term of 10
years issued by the Company at the beginning of the year was fixed at 4.29%,
with interests payable annually. The floating rates of the Group's Rmb847.5
million World Bank loans, denominated in US dollars, ranged between 5.02% and
4.62% during the Period, averaging approximately 4.80%. The interest rates on
other borrowings of the Group, all in Rmb, were not materially different from
those in 2002.
With interest expenses at approximately Rmb142.3 million and profit before
interest and tax at approximately Rmb1,648.2 million, the Group's interest cover
ratio was 11.6 during the Period, representing a 30.3% increase over the same
period last year.
Capital Structure
As at December 31, 2003, the Group's capital structure comprised Rmb10,146.0
million in shareholders' equity, Rmb1,872.6 million in fixed rate liabilities,
Rmb847.5 million in floating rate liabilities and Rmb2,202.6 million in
interest-free liabilities and minority interest, representing approximately
67.3%, 12.4%, 5.6% and 14.6%, respectively, of the Group's total capital.
As at December 31, 2003, the ratio of the sum of fixed rate liabilities,
floating rate liabilities, interest-free liabilities and minority interest over
shareholder's equity was 48.5%, while the ratio of long-term interest-bearing
liabilities over shareholder's equity was 17.2%. The asset-liability ratio was
26.0%, allowing for adequate debt capacity for funding the Widening Project and
other future developments.
Capital Expenditure Commitments and Utilization
During the Period, the capital expenditure incurred by the Group was Rmb859.9
million, with corresponding capital expenditure for the Company amounting to
Rmb271.3 million. Amongst the Rmb859.9 million capital expenditure incurred by
the Group, Rmb605.4 million was utilized toward the Widening Project.
As at December 31, 2003, the Group and the Company had capital expenditure
commitments of Rmb5,053.4 million and Rmb2,953.5 million, respectively, for 2004
and beyond. In particular, approximately Rmb1,345.5 million capital expenditure
will be spent by the Group in 2004, with approximately Rmb1,141.0 million spent
on the Widening Project, Rmb50.5 million on equipment acquisition and Rmb154.0
million on expressway ancillary facilities. The Group will fund its capital
expenditures with its internal financial resources, meeting any shortfall by
utilizing other funding options, with a preference for debt financing.
Contingent Liabilities and Pledge of Assets
Other than a loan guarantee of Rmb30 million provided in favor of Hangzhou Shida
Highway Co., Ltd.('Shida Co'), a jointly controlled entity, in respect of a
commercial bank loan of the same amount extended to Shida Co from September 2001
to September 2009, the Group did not have any contingent liabilities as at
December 31, 2003. In addition, the Group had no pledge of assets during the
Period.
Foreign Exchange Exposure
The Group has a World Bank loan of approximately Rmb847.5 million, denominated
in US Dollars and borrowed for the construction of the Shanghai-Hangzhou-Ningbo
Expressway. In addition, dividends for H shares payable by the Company are
settled in HK dollars.
In view of the stable exchange rate between Renminbi and US dollars, the
Directors do not foresee any material foreign exchange risk for the Group.
However, there is no assurance that any foreign exchange exposure will not
adversely affect the operating results of the Group in the future.
OUTLOOK FOR 2004
With China being on the verge of a new round of accelerated economic growth,
according to many economic observers, the Yangtze River Delta region, including
the city of Shanghai and the two provinces of Jiangsu and Zhejiang, will be the
engine to power this next phase of economic expansion. Already a highly
urbanized region, the Yangtze River Delta region will undergo further
integration amongst its cities to accommodate a greater level of cooperation.
An important aspect to the integration drive is the announcement by regional
governments of more ambitious transportation plans that will result in the
operational mileage of expressways in Zhejiang Province to be further extended
by approximately 1000km within the next four years. The newly planned
expressways are intended to serve the anticipated growth in transportation
demand in the region by alleviating the excess traffic burdens forecasted in the
near future on existing expressway networks, including the corridor along the
Hangzhou Bay, connecting the three major cities of Shanghai, Hangzhou and
Ningbo. As such, the new expressways will present far more opportunities for the
Group than challenges.
Continued heavy investments in infrastructure in the region will help to sustain
accelerated economic growth, which will in turn spur substantial growth in
production and sales of vehicles, especially passenger cars for private
consumption. Faced with a rapidly expanding expressway network that is making
the transport system more easily accessible and efficient to more vehicles than
ever, the outlook on continued strong traffic volume growth on expressways
operated by the Group is favorable. As more expressways are being completed and
opened to traffic, and still more are being planned for Zhejiang Province,
prospects for new project investment and acquisition are also improving.
With anticipated growth in traffic on existing expressways, the Company has
taken steps to increase service capacities at its service areas, in addition to
continuing with its Phase 2 and Phase 3 of the Widening Project which is
targeted for full completion by the end of 2007.
The road surface-overlaying project on the Shanghai-Hangzhou-Ningbo Expressway
will be concluded in 2004, covering approximately 47km of roadways, ramps, toll
plazas and interchanges at an estimated cost of Rmb95.5 million.
Due to the growing traffic volume that has made it increasingly difficult to
perform road surface-overlaying works on a large scale during a relative short
period of time without adversely affecting normal traffic flow, starting from
2005, the Group will be conducting these works on a smaller scale but with
higher frequency, so that while the overall impact on normal traffic flow will
be minimized, the annual cost will be more evenly distributed, and the average
cost expected to be slightly lower than usual as a result of reduced routine
maintenance cost relating to road surface.
The Company intends to build upon its renewed emphasis on providing quality
service to its customers, while in the process taking advantage of all the
positive developments in the industry, creating value for its customers,
employees, business partners, shareholders and the community at large.
PROPOSED AMENDMENT TO ARTICLES OF ASSOCIAITON
The Company proposes to make certain amendments to its Articles of Association
in accordance with the relevant requirements under the revised Rules Governing
the Listing of Securities on the Stock Exchange of Hong Kong Limited as
announced on January 30, 2004. The proposed amendments to the Articles of
Association are subject to the approval of the shareholders of the Company by
way of special resolution at the upcoming annual general meeting of the Company
to be held on May 21, 2004. Details of the proposed amendments are set out in
the notice for the annual general meeting published on the same date of this
announcement. A further explanation of the purposes of the proposed amendments
will be provided in the 2003 annual report of the Company which is expected to
be dispatched to the shareholders of the Company on or around April 29, 2004.
APPRECIATIONS
I would like to take this opportunity to thank all our employees for their hard
work against all odds, and for their help in bringing yet another year of
satisfactory business performance.
By Order of the Board
Geng, Xiaoping
Chairman
Hangzhou, the PRC, March 15, 2004
A detailed results announcement containing all the information required by
paragraphs 45(1) to 45(3) of Appendix 16 to the Listing Rules will be
subsequently published on The Stock Exchange of Hong Kong's website at http://
www.hkex.com.hk in due course.
Notice of 2003 Annual General Meeting
NOTICE IS HEREBY GIVEN that the 2003 Annual General Meeting ('AGM') of Zhejiang
Expressway Co., Ltd. (the 'Company') will be held at 10:00a.m. on Friday, May
21, 2004 at 18th Floor, Zhejiang World Trade Center, 122 Shuguang Road, Hangzhou
310007, the PRC to conduct the following businesses:
A. As ordinary resolutions:
1. To consider and approve the report of the directors for the year 2003;
2. To consider and approve the report of the supervisory committee for the
year 2003;
3. To consider and approve the audited financial statements for the year
2003;
4. To consider and approve the proposed distribution of profits for the year
2003;
5. To consider and approve the financial budget for the year 2004;
6. To consider and approve the re-appointment of Ernst & Young (Hong Kong
Certified Public Accountants) and Zhejiang Pan-China Certified Public
Accountants as the international auditors and the PRC auditors of the Company,
respectively, and to authorize the board of directors to fix the remunerations.
B. As special resolutions:
1. To consider and, if thought fit, pass the following as a special
resolution:
'THAT the board of directors of the Company (the'Board') is hereby authorized:
(1) subject to paragraphs (2) and (3) below, to exercise during the Relevant
Period (as defined in paragraph (4) hereunder) all the powers of the Company to
allot, issue or otherwise deal with, either separately or concurrently, each of
the existing issued domestic shares ('Domestic Shares') and overseas listed
foreign shares ('H Shares') in the capital of the Company;
(2) subject to the approval as required under paragraph (1) above, to allot or
issue Domestic Shares and H Shares, either separately or concurrently, of not
more than 20 per cent. of each of the existing issued Domestic Shares and H
Shares in the capital of the Company as at the date of passing this resolution;
(3) approval as required in paragraph (1) above is subject to the granting of
approval from the China Securities Regulatory Commission;
(4) for the purpose of this resolution, 'Relevant Period' means the period
from the date upon which this resolution is passed until whichever is the
earliest of:
(a) from the passing of this special resolution, until conclusion of the
Company's next annual general meeting;
(b) the expiry of the twelve month period from the date of the passing of this
resolution; or
(c) the date of revocation or variation of the authority given under this
resolution by ordinary resolution (subject to any applicable PRC laws and
regulations) of the Company at a shareholders' general meeting;
(5) to make appropriate amendments to the relevant articles of the Articles of
Association of the Company after the completion of the allotment and issuance as
provided in paragraph (1) above, to increase the share capital of the Company
and reflect the new share structure of the Company, and to complete the related
registration formalities with the relevant regulatory government authorities.'
2. To consider and, if thought fit, pass the following resolution as a
special resolution:-
'THAT the proposals by the board of directors of the Company (the 'Board') to
amend the Articles of Association of the Company ('Articles') in the manner as
set out below is hereby approved, and the Board is hereby authorized to modify
the wordings of the amendments as appropriate and to do all such things as
necessary in respect of the amendments pursuant to the requirements (if any) of
the relevant PRC authorities or under the rules of any stock exchange on which
any securities of the Company are listed:-
(1) amend sub-paragraph (1) of Article 40 as follows:
'(1) a fee of such amount as may be prescribed from time to time in the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
for the registration of the transfer documents of the shares and other documents
relating to or affecting the ownership of shares is paid;';
(2) insert new Article 48A after the existing Article 48 and before the
existing Article 49 as follows:
'Article 48A The Company shall not exercise any powers to freeze or otherwise
impair any of the rights attaching to any share of the Company by reason only
that the person or persons who are interested directly or indirectly therein
have failed to disclose their interests to the Company.';
(3) amend the first paragraph of Article 70 as follows:
'Article 70 At any shareholders' general meeting a resolution shall be passed by
a show of hands, subject to any requirement in the Rules Governing the Listing
of Securities on The Stock Exchange of Hong Kong Limited, or unless a poll is
demanded by the following persons (prior to or after a show of hands):
(1) chairman of the meeting;
(2) at least two shareholders or proxies having the right to vote;
(3) a shareholder or shareholders (including proxy or proxies) representing
10% or more of the total voting rights of all the shareholders having the right
to vote at such meeting.';
(4) insert new Article 81A after the existing Article 81 and before the
existing Article 82 as follows:
'Article 81A Where any shareholder of the Company is, under the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong Limited required to
abstain from voting on any particular resolution or restricted to voting only
for or only against any particular resolution, any votes cast by or on behalf of
such shareholder in contravention of such requirement or restriction shall not
be counted.';
(5) amend the second paragraph of Article 91 as follows:
'The period during which a written notice of intention to propose a person for
election as director and a written notice by that person of his willingness to
be elected are to be given to the Company shall be at least 7 days, such period
shall commence on the day after the date when the notice of the general meeting
convened for such election is despatched and end no later than 7 days prior to
the date of such meeting.';
(6) amend the second and third paragraphs of Article 126 as follows:
'Unless the director, supervisor, general manager and other officers of the
Company so interested has disclosed such interest to the board of directors as
required in this Article and the board of directors has approved the same in a
meeting in which he has not been counted in the quorum and has refrained from
voting, the Company shall have the right to revoke such contract, transaction or
arrangement except as against a bona fide party without notice of the breach of
the duty by the director, supervisor, general manager and other officers
concerned.
If any connected person or any associate (as defined under the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong Limited) ('
Associate') of a director, supervisor, general manager or other officers of the
Company is interested in certain contracts, transactions or arrangements, such
director, supervisor, general manager or officers shall also be deemed as
interested in the same.';
(7) amend Article 127 as follows:
'Article 127 If, before the Company first considers the entering into of the
relevant contract, transaction or arrangement, a director, supervisor, general
manager and other officer of the Company gives written notice to the board of
directors, stating that by reasons of the facts contained in the notice, he, or
any of his Associates, is interested in such contract, transaction or
arrangement to be entered into by the Company subsequently, such director,
supervisor, general manager and other officers shall be deemed to have made such
disclosure as stipulated in the preceding Article of this Chapter to the extent
as stated in the notice.'; and
(8) amend and replace the entire Article 133 as follows:
'Article 133 Where a director, supervisor, general manager or other officer of
the Company is in breach of his obligations to the Company, the Company shall
apart from the various rights and remedies provided by laws and administrative
regulations be entitled to take the following measures:
(1) to demand the relevant director, supervisor, general manager or officer
pay damages for the losses sustained by the Company as a result of the
dereliction of duties on his part;
(2) to revoke any contract or transaction made between the Company and the
relevant director, supervisor, general manager or officer, or any Associate of
such persons, and a contract or transaction made between the Company and a third
party (if such third party knows or should have known that the director,
supervisor, general manager or officer representing the Company are in breach of
the obligations to the Company);
(3) to demand the relevant director, supervisor, general manager or officer
account for the profits received by him as a result of the breach of the
obligations;
(4) to recover from the relevant director, supervisor, general manager or
officer the monies which should have been received by the Company including, but
not limited to, commission received by them;
(5) to demand the relevant director, supervisor or officer return the interest
earned or that may be earned from the monies which should have been payable to
the Company;
(6) through legal proceedings, to demand a verdict that the properties which
the relevant director, supervisor or officer received as a result of the breach
of the obligations shall be the properties of the Company.''
By Order of the Board
Zhang Jingzhong
Company Secretary
Hangzhou, the PRC
March 15, 2004
Notes:
1. Registration procedures for attending the AGM
(1) Holders of H Shares of the Company ('H Shares') and domestic shares of
the Company ('Domestic Shares') intending to attend the AGM should return the
reply slip for attending the Annual General Meeting to the Company on or before
April 30, 2004.
(2) A shareholder or his/her/its proxy should produce proof of identity when
attending the AGM. If a corporate shareholder appoints its legal representative
to attend the meeting, such legal representative shall produce proof of identity
and a copy of the resolution of the board of directors or other governing body
of such shareholder appointing such legal representative to attend the meeting.
2. Proxy
(1) A shareholder eligible to attend and vote at the AGM is entitled to
appoint, in written form, one or more proxies to attend and vote at the AGM on
behalf of him. A proxy need not be a shareholder of the Company.
(2) A proxy should be appointed by a written instrument signed by the
appointor or his/her/its attorney. If the appointor is a corporation, the same
shall be affixed with its common seal or signed by its director(s) or duly
authorized representative(s). If the form of proxy is signed by the attorney of
the appointor, the power of attorney or other authorisation document(s) of such
attorney should be notarized.
(3) To be valid, the power of attorney or other authorisation document(s)
(which have been notarised) together with the completed form of proxy must be
delivered, in the case of holders of Domestic Shares, to the Company at the
address shown in paragraph 5(3) below and, in the case of holders of H Shares,
to Hong Kong Registrars Limited at Rooms 1901-1905, 19th Floor, Hopewell Center,
183 Queen's Road East, Hong Kong, not less than 24 hours before the time
designated for holding of the AGM.
(4) A proxy may exercise the right to vote by a show of hands or by poll.
However, if more than one proxy is appointed by a shareholder, such proxies
shall only exercise the right to vote on a poll.
3. Closure of Register of Members
The register of members holding H shares of the Company will be closed from
April 21, 2004 to May 20, 2004 (both days inclusive).
4. Eligibility for attending the Annual General Meeting
Holders of Domestic Shares and H Shares whose names appear on the register of
members of the Company at the close of April 26, 2004 shall have the right to
attend the AGM.
Holders of H Shares who intend to attend the AGM must deliver all transfer
instruments and the relevant share certificates to the share registrar for H
shares of the Company, Hong Kong Registrars Limited (which address is set out in
paragraph 5(2) below), at or before 4:00p.m. on Tuesday, April 20, 2004.
5. Miscellaneous
(1) The AGM will not last more than one day. Shareholders who attend shall
bear their own travelling and accommodation expenses.
(2) The address of the share registrar for the H Shares, Hong Kong
Registrars Limited, is:
Rooms 1712-1716
17th Floor, Hopewell Center
183 Queen's Road East
Hong Kong
(3) The address of the Company is:
19th Floor, Zhejiang World Trade Center
122 Shuguang Road
Hangzhou 310007
The PRC
Telephone No.: (+86)-571-8798 7700
Facsimile No.: (+86)-571-8795 0329
This information is provided by RNS
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