2012 Interim Report
ZHEJIANG EXPRESSWAY CO., LTD.
2012 Interim Report
Achieve Growth through Innovation and Prudence
Overcoming difficulties, lowering costs, enhancing efficiency
In the first half of this year, macro-economic situation continued to move towards a downward direction, and
uncertainties in the policy environment continued to increase, casting negative impacts on those sectors which
are closely linked to the economy, such as transportation, finance and so on. In spite of this, through continuous
efforts of the staff of all levels at the Company and pragmatically driving the development of every project, better
results are reaped and operating performance basically met expectation.
Looking forward to the second half, we will continue to leverage on the change in the economy and policies, and push
forward key works in full swing, focus energy in overcoming difficulties at work, step up efforts in lowering cost
and enhancing efficiency, with the aim of achieving full year operation targets and extending the room of profits.
Contents
2012 Interim Results
Business Review
Financial Analysis
Outlook
Disclosure of Interests and Other Matters
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
Condensed Consolidated Statement of Financial Position
Condensed Consolidated Statement of Changes in Equity (Unaudited)
Condensed Consolidated Statement of Cash Flows (Unaudited)
Notes to Condensed Consolidated Financial Statements
Appendices
Corporate Information
Corporate Structure of the Group
Financial Highlights
Location Map of Expressways in Zhejiang Province
2012 Interim Results
The directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the "Company") announced the unaudited
consolidated operating results of the Company and its subsidiaries (collectively the "Group") for the six months
ended June 30, 2012 (the "Period"), with the basis of preparation as stated in note 1 to the condensed consolidated
financial statements set out below.
During the Period, revenue for the Group was Rmb3,329.18 million, generally on par with the same period in 2011.
Profit for the Period attributable to owners of the Company was Rmb891.59 million, representing a slight decrease of
1.0% year-on-year. Earnings per share for the Period was Rmb20.53 cents, representing a decrease of 1.0% over the
same period in 2011.
The Directors have recommended to pay an interim dividend of Rmb6 cents per share, subject to shareholders' approval
at the extraordinary general meeting of the Company expected to be held on October 12, 2012.
The interim report has not been audited or reviewed by the auditors but has reviewed by the audit committee of the
Company.
Business Review
China's domestic economic growth continued to slacken as a result of the instability in the world economy and Chinese
macro-control initiatives. Although China's domestic economy performed steadily as a whole in the first half of 2012,
the GDP growth rate fell significantly, recording an increase of 7.8% year-on-year. During the Period, due to a
number of factors such as the significant deceleration of growth in the foreign trade and export of the Zhejiang
Province, the province's GDP increased by 7.4% year-on-year, which remained lower than the national average growth
rate.
Given the slowdown of growth in the macro economy, the organic growth of traffic volume of the Group's expressways
also fell significantly in the first half of 2012. As China's stock market continued to tumble during the Period,
revenue from the securities business of the Group also recorded a decrease comparing with the same period last year.
Consequently, during the Period, income for the Group decreased by 0.3% year-on- year, amounting to Rmb3,424.25
million in total. Of such income, Rmb1,795.45 million was generated from the two major expressways owned and operated
by the Group, representing an increase of 0.2% year-on-year and accounting for 52.4% of total income; and Rmb1,035.30
million was generated from the toll road-related businesses, representing an increase of 8.4% year-on-year and
accounting for 30.2% of total income. The securities business contributed an income of Rmb593.50 million to the
Group, representing a decrease of 13.9% year-on-year and accounting for 17.4% of total income.
A breakdown of the Group's income for the Period is set out below:
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For the six months ended June 30,
----------------------------------------------------------------------------------------------------------------
2012 2011
Rmb'000 Rmb'000 % Change
Toll income
Shanghai-Hangzhou-Ningbo Expressway 1,456,618 1,437,224 1.3%
Shangsan Expressway 338,830 354,681 -4.5%
Other income
Service areas 985,507 911,890 8.1%
Advertising 49,796 43,053 15.7%
Securities business income
Commission 450,200 535,900 -16.0%
Bank interests 143,301 153,381 -6.6%
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Subtotal 3,424,252 3,436,129 -0.3%
Less: Revenue taxes (95,071) (96,762) -1.7%
----------------------------------------------------------------------------------------------------------------
Revenue 3,329,181 3,339,367 -0.3%
----------------------------------------------------------------------------------------------------------------
Toll Road Operations
During the Period, the deceleration in macro-economic growth caused the organic growth in the traffic volume of the
Group's two expressways to slow down significantly. In particular, with respect to the Shangsan Expressway, along
which most of the companies are small- and medium-sized enterprises, the extent of fall in the organic growth of
traffic volume was significantly greater than that of the Shanghai-Hangzhou-Ningbo Expressway.
Moreover, the total number of small- and medium-sized trucks declined slightly as a whole due to the rapid increase
in the number of container trucks following the implementation of the toll-by-weight policy so that the number of
trucks in total traffic volume decreased by 1.6 percentage points. This was also the main reason for the increase in
toll income from expressways was lower than the increase in traffic volume during the Period.
The abolition of the "Unified Toll Card" policy (referring to the payment of annual fees for Hangzhou's vehicles to
travel along loop expressways on an unlimited basis) in succession since January 1, 2012 had a slightly negative
impact on the toll income from the Shanghai-Hangzhou-Ningbo Expressway. As the utilization rate of the cards is
expected to decrease month by month in the second half of 2012, the impact on the toll income will continue to
increase month by month. Meanwhile, the tolling policy based on the actual travel routes implemented in Zhejiang
Province on May 15 this year had a positive impact on the traffic volume growth in some sections of the Group's
expressways. However, adjustment to the rounding of the last figures of tolls for passenger vehicles had a certain
degree of negative impact on the toll income of the Shanghai-Hangzhou-Ningbo Expressway.
Average daily traffic volume in full-trip equivalents along the Group's Shanghai-Hangzhou-Ningbo Expressway was
41,838 during the Period, representing an increase of 5.4% year-on-year. In particular, average daily traffic volume
in full-trip equivalents along the Shanghai-Hangzhou Section of the Shanghai-Hangzhou-Ningbo Expressway increased by
7.2% year-on-year, and that along the Hangzhou-Ningbo Section increased by 4.1% year-on-year. Average daily traffic
volume in full-trip equivalents along the Shangsan Expressway was 17,004 during the Period, representing a decrease
of 0.5% year-on-year.
Toll income from the Shanghai-Hangzhou-Ningbo Expressway amounted to Rmb1,456.62 million during the Period,
representing an increase of 1.3% year-on-year; while toll income from the Shangsan Expressway amounted to Rmb338.83
million during the Period, representing a decrease of 4.5% year-on-year.
Toll Road-Related Business Operations
The Company also operates certain toll road-related businesses along its expressways through its subsidiaries and
associated companies, including gas stations, restaurants and shops in service areas, as well as roadside advertising
and vehicle service businesses.
During the Period, the number of customers in the service areas along the Group's two expressways decreased as a
result of the slackened growth in the traffic volume of the expressways, and the traffic diversions from the Shaoxing
Section of the Shanghai-Hangzhou-Ningbo Expressway upon the opening of the Shaozhu Expressway. To address these
problems, the Company stepped up the development of new projects in the service areas by acquiring a four-year lease
and operational right of the Zhenhai service area in the Ningbo Loop Expressway in May this year, and introducing in
June this year in Zhejiang Province for the first time McDonald's, the fast food restaurant chain, to the service
areas of expressways to improve business performance and service quality.
Meanwhile, the government adjusted the prices of petroleum products more frequently during the Period. However, since
the price increases were greater than the price decreases, the sales amount of petroleum products continued to
increase year-on-year. During the Period, measures to adjust the mode of operation for the service areas to counter
adverse effects were very effective, and revenue from the service areas was basically the same compared to the same
period last year. Consequently, revenue from the expressway-related businesses amounted to Rmb1,035.30 million during
the Period, representing an increase of 8.4% year-on-year.
Securities Business
During the Period, the aggregate trading volume of China's domestic stock market declined substantially year-on-year
as the market remained volatile and showed a downward trend. Due to 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 basically remained stable over the past one year.
Moreover, new sales outlets continued to drive a stable increase in market share of the Company's securities business.
The Company had 60 securities sales outlets during the Period, an increase of six outlets year-on-year. However, the
increase in the number of operational units and employees both raised the operational costs and undermined the
profitability of the securities business during the Period.
Meanwhile, hit by the downturn of China's real economy and the slump in the stock market, revenue from the investment
banking and asset management businesses showed a decline in varying degrees year-on-year during the Period.
During the Period, the securities business realized an operating income of Rmb593.50 million, representing a decrease
of 13.9% year-on-year. Of such income, brokerage commission income amounted to Rmb450.20 million, representing a
decrease of 16.0% year-on-year; bank interest income amounted to Rmb143.30 million, representing a decrease of 6.6%
year-on-year. In addition, during the Period, securities investment income of Zheshang Securities included in the
Condensed Consolidated Statement of Comprehensive Income was Rmb57.89 million.
Long-Term Investments
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate company of the Company) ("Petroleum Co")
realized an income of Rmb2,909.18 million, representing an increase of 21.6% year-on-year during the Period due to a
rise in the prices of petroleum products and a growth in sales of petroleum products. In the Period, Petroleum Co
achieved a net profit of Rmb10.18 million (same period in 2011: Rmb17.52 million).
Zhejiang Jinhua Yongjin Expressway Co., Ltd. (Jinhua Co, a 23.45% owned associate company of the Company) operates
the 69.7km Jinhua Section of the Ningbo-Jinhua Expressway. During the Period, the continuous fall in the domestic
macro economy affected toll income of the Company. The Jinhua Section of the Ningbo-Jinhua Expressway recorded an
average daily traffic volume in full-trip equivalents of 11,773, representing an increase of 11.0% year-on-year;
while toll income amounted to Rmb112.20 million, representing an increase of 6.1% year- on-year. Due to its heavy
financial burden, the associate company still incurred a loss of Rmb32.61 million during the Period (same period in
2011: loss of Rmb30.13 million).
JoinHands Technology Co., Ltd. (a 27.582% owned associate company of the Company), whose revenue is mainly derived
from house leasing, did not show any improvement in its operation during the Period and therefore realized a loss of
Rmb1.20 million during the Period (same period in 2011: loss of Rmb1.20 million).
The Company entered into a transfer agreement with Guangzhou Kaixin Consulting Co., Ltd. ("Kaixin Company") in July
2011. However, 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 in August 2011 at the People's Court
of Xihu District, Hangzhou City. The court ruled in favour of the Company in March 2012. However, both the Company
and Kaixin Company filed appeals respectively because of their respective objections against the court's decision.
The Company is taking appropriate measures to increase the chance of winning the lawsuit in the second trial.
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 Expressway Co., Ltd. ("Shengxin Company", a
limited company that owns the toll collection rights to the Shaoxing Section of Yongjin Expressway), a wholly-owned
subsidiary of SXCI, for a cash consideration of Rmb355.03 million plus interest accrued on the consideration.
However, completion of the acquisition is conditional upon, amongst others, the approval from the relevant provincial
and municipal departments of the State-owned Assets Supervision and Administration Commission of the PRC, and the
transfer of the operating rights from SXCI to Shengxin Company being approved by the Zhejiang Provincial Government.
For details of the agreement, please refer to the announcement regarding the acquisition of the 50% equity interest
in Shengxin Expressway published by the Company on July 9, 2012.
Human Resources
The Company continued to revamp its remuneration and performance policy during the Period, better follow through the
growth strategy and promote the pegging of overall remuneration upgrade with the productivity of employees as a way
for salary increase. There was no significant change in other staff matters and training programs as compared with
the details disclosed in the Company's most recent annual report.
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 Period was approximately Rmb891.59 million,
representing a decline of 1.0% year-on-year, return on owners' equity was 5.95%, representing an increase of 0.3%,
while earnings per share for the Company was Rmb20.53 cents.
Liquidity and Financial Resources
As at June 30, 2012, current assets of the Group amounted to Rmb16,136.66 million in aggregate (December 31, 2011:
Rmb15,006.63 million), of which bank balances and cash accounted for 35.0% (December 31, 2011: 37.2%), bank balances
held on behalf of customers accounted for 46.2% (December 31, 2011: 47.8%), and held-for-trading investments
accounted for 6.1% (December 31, 2011: 8.4%). The current ratio (current assets over current liabilities) as at June
30, 2012 was 1.5 (December 31, 2011: 1.6). Excluding the effect of customer deposits from the securities business,
the resultant current ratio of the Group (current assets less bank balances held on behalf of customers over current
liabilities less balance of accounts payable to customers arising from the securities dealing business) was 2.5
(December 31, 2011: 3.6).
----------------------------------------------------------------------------------------------------------------
As at As at
June 30, December 31,
2012 2011
----------------------------------------------------------------------------------------------------------------
Rmb'000 Rmb'000
----------------------------------------------------------------------------------------------------------------
Cash and cash equivalent
Rmb 3,775,393 3,111,774
US$ in Rmb equivalent 3,657 3,385
HK$ in Rmb equivalent 5,361 5,271
Time deposit
Rmb 1,845,064 2,444,247
US$ in Rmb equivalent 23,824 23,546
Held-for-trading investments-Rmb 988,036 1,260,021
Available-for-sale investments-Rmb 281,473 60,274
Structured deposit-Rmb 170,658 -
Total 7,093,466 6,908,518
Rmb 7,060,624 6,876,316
US$ in Rmb equivalent 27,481 26,931
HK$ in Rmb equivalent 5,361 5,271
----------------------------------------------------------------------------------------------------------------
The amount of held-for-trading investments of the Group as at June 30, 2012 was Rmb988.04 million (December
31, 2011: Rmb1,260.02 million), of which approximate 90.5% was invested in bonds.
During the Period, net cash inflow generated from the Group's operating activities amounted to Rmb975.10 million. The
Directors do not expect the Company to experience any problem with liquidity and financial resources in the
foreseeable future.
Borrowings and Solvency
As at June 30, 2012, total liabilities of the Group amounted to Rmb11,148.45 million (December 31, 2011: Rmb10,533.86
million), of which 0.4% was short-term bank loans, 9.0% was corporate bonds and 66.4% was accounts payable to
customers arising from the securities dealing business.
Total interest-bearing borrowings of the Group as at June 30, 2012 amounted to Rmb1,050.00 million, representing a
decrease of 28.2% compared to the sum as at December 31, 2011. The borrowings comprised of outstanding balances of
loans from a domestic commercial bank, totaling Rmb50.00 million and corporate bonds amounting to Rmb1 billion that
was issued by the Company in 2003 for a term of 10 years. All the interest-bearing borrowings need to be repayable
within one year. The details of the relevant outstanding amounts are as follows:
----------------------------------------------------------------------------------------------------------------
Maturity Profiles
----------------------------------------------------------------------------------------------------------------
Gross Within >1 year-5 years Beyond
Amount 1 year inclusive 5 years
Rmb'000 Rmb'000 Rmb'000 Rmb'000
----------------------------------------------------------------------------------------------------------------
Floating rates
Domestic commercial bank loans 50,000 50,000 - -
Fixed rates
Corporate bonds 1,000,000 1,000,000 - -
----------------------------------------------------------------------------------------------------------------
Total as at June 30, 2012 1,050,000 1,050,000 - -
----------------------------------------------------------------------------------------------------------------
Total as at December 31, 2011 1,462,553 462,553 1,000,000 -
----------------------------------------------------------------------------------------------------------------
As at June 30, 2012, the Group's loan from the domestic commercial bank is one-year floating-rate loan, with interest
rate of 6.56% per annum. The annual coupon rate for corporate bonds was fixed at 4.29%, with interest payable once a
year. Besides, the annual interest rate for accounts payable to customers arising from the securities dealing business
was fixed at 0.5% and 0.4%.
Total interest expense for the Period amounted to Rmb31.22 million, while profit before interest and tax amounted to
Rmb1,372.72 million. Consequently, the interest cover ratio (profit before interest and tax over interest expenses)
stood at 44.0 times (June 30, 2011: 34.3 times).
The asset-liability ratio (total liabilities over total assets) was 37.7% as at June 30, 2012 (December 31, 2011:
36.2%). Excluding the effect of customer deposits from the securities business, the resultant asset-liability ratio
(total liabilities less balance of accounts payable to customers arising from the securities dealing business over
total assets less bank balances held on behalf of customers) of the Group was 16.9% (December 31, 2011: 15.4%).
Capital Structure
As at June 30, 2012, the Group had Rmb18,424.66 million equity in total, Rmb8,404.20 million fixed-rate liabilities,
Rmb50.00 million floating-rate liabilities and Rmb2,694.25 million interest-free liabilities, representing 62.3%,
28.4%, 0.2% and 9.1% of the Group's total capital, respectively. The gearing ratio, which was computed by dividing
the total liabilities less accounts payable to customers arising from the securities dealing business by total equity,
was 20.3% as at June 30, 2012 (December 31, 2011: 18.2%).
Capital Expenditure Commitments and Utilization
During the Period, the Group incurred capital expenditures of Rmb65.17 million, while the Company incurred capital
expenditures of Rmb13.07 million. Amongst the total capital expenditures of the Group, Rmb27.12 million was used for
acquisition and construction of properties, Rmb37.88 million was used for purchase of equipment, while Rmb0.17 million
was used for service area renovation and expansion.
As at June 30, 2012, capital expenditures committed by the Group and the Company totaled Rmb1,555.15 million and
Rmb564.24 million, respectively. Amongst the total capital expenditures committed by the Group, Rmb485.70 million
will be assigned to acquisition of an office building, Rmb380.08 million to acquisition and construction of
properties, Rmb307.47 million to acquisition of equipment, Rmb6.07 million to the widening project between the
Shaoxing-Zhuji hub and the Shaoxing-Jiaxing hub of the Shangsan Expressway, Rmb20.80 million to service area
renovation and expansion and Rmb355.03 million to acquisition of 50% equity interest in Shengxin Company.
The Group will finance its above-mentioned capital expenditure commitments mainly with internally generated cash flow,
with a preference for debt financing to meet any shortfalls thereof.
Contingent Liabilities and Pledge of Assets
As at June 30, 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 are
transacted and booked in Renminbi. Therefore, the Group's exposure to foreign exchange fluctuations is limited.
With an aim to hedge against foreign exchange risks arising from borrowings denominated in Hong Kong dollars, the
Group had 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. Apart from the
above-mentioned, the Group has not used 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.
Outlook
The acute problem regarding weak external demand due to the continuous downturn in the global economy together with
China's ongoing implementation of macro-control initiatives for the domestic real estate and other sectors have
caused China's current domestic economic growth to continue decelerating. This has also hit, to a large extent,
Zhejiang Province's economy with heavy reliance on import and export trade, thereby causing a negative impact on the
organic growth in the traffic volume of the Group's two expressways.
As the clean-up and rectification campaign for toll roads is close to completion, two new policies - the
toll-by-driving route policy and the improved vehicle tolls charging method - were introduced to the expressways
across Zhejiang Province in May 2012, and adjustment to passenger vehicle classes will be carried out from August 1,
2012. Such adjustment is expected to have a slight negative impact on the Group. The soon-to-be- implemented policy
for toll-free passenger vehicles with less than seven seats travelling on expressways during major festivals and
holidays is expected to lead to an approximately 3% decline in the Group's toll revenue for the whole year.
The 52 electronic toll collection ("ETC") lanes on the Group's expressways, initially scheduled for completion by
2012, will be completed by the end of September this year ahead of schedule, and a test run will be conducted
thereafter. This will further strengthen the expressways' traffic capacity, as well as improve their tolling
efficiency and levels of service and management.
Meanwhile, as China's stock market experiences increased uncertainties during the downward adjustment, the Group's
securities business will be subject to the significant impact of the volatility in the A-share market and the intense
competition in the securities brokerage industry. It is expected that Zheshang Securities will enhance the
competitiveness of its operating network and improve the revenue structure of the brokerage, investment banking,
asset management and other operations, while striving to create new businesses for facilitating the sound development
of the securities business.
The unfavourable situations, namely the global economic downturn and the slowdown in economic growth across the
country and the province as well as a certain degree of risk caused by the industry's policies such as the clean-up
and rectification campaign for toll roads, have rendered more complex and challenging situations to the Company's
new-term management than in the past. We only have to seize opportunities from challenges, keep a focused mind on any
changes in the industry's policies, come up with innovative management ideas and continue to identify appropriate
investment projects on condition that risks are controllable, with a view to enhancing shareholders' long-term value.
Disclosure of Interests and Other Matters
Purchase, Sale and Redemption of the Company's Shares
Neither the Company nor any of its subsidiaries had purchased, sold, redeemed or cancelled any of the Company's shares
during the Period.
Disclosure of Directors', Supervisors' and Chief Executive's Interests and Short Positions in the Shares, Underlying
Shares and Debentures
As at June 30, 2012, none of the Directors, Supervisors and chief executives had registered an interest or short
position in the shares, underlying shares or debentures of the Company or any of its associated corporations that was
required to be recorded pursuant to Section 352 of the Securities and Futures Ordinance (Cap 571) (the "SFO"), or as
otherwise notified to the Company and the Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers.
Other Interests Discloseable under the SFO
As at June 30, 2012, the following shareholders held 5% or more of the issued share capital of the Company according
to the register of interests in shares required to be kept by the Company pursuant to Section 336 of the SFO:
----------------------------------------------------------------------------------------------------------------
Total interests Percentage of the
in number of issued share capital
ordinary shares of the Company
Substantial shareholders Capacity of the Company (domestic shares)
----------------------------------------------------------------------------------------------------------------
Communications Investment Group Beneficial owner 2,909,260,000 100%
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Percentage of
Total interests the issued
in number of share capital
ordinary shares of the Company
Substantial shareholders Capacity of the Company (H Shares)
----------------------------------------------------------------------------------------------------------------
JP Morgan Chase & Co. Beneficial owner, 157,904,646 (L) 11.01%
investment manager and 130,199,100 (P) 9.08%
custodian corporation/
approved lending agent
BlackRock, Inc. Interest of controlled 114,929,961 (L) 8.01%
corporations 2,662,000 (S) 0.18%
Deutsche Bank Aktiengesellschaft Investment manager 86,085,627 (L) 6.00%
716,381 (S) 0.05%
Invesco Hong Kong Limited Investment manager/ 85,416,000 (L) 5.96%
advisor of various accounts
Veritas Funds Plc Beneficial owner 74,170,000 (L) 5.17%
T. Rowe Price Associates, Inc. Interest of controlled 72,450,000 (L) 5.05%
corporations
The Real Return Group Limited Interest of controlled 71,820,000 (L) 5.01%
corporations
----------------------------------------------------------------------------------------------------------------
The letter "L" denotes a long position. The Letter "S" denotes a short position. The Letter "P" denotes interest in a
lending pool.
Save as disclosed above, as at June 30, 2012, no person had registered an interest or short position in the shares or
underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO.
Compliance with the Code on Corporate Governance Practices and the Model Code
The Company was in compliance with the code provisions in the Code on Corporate Governance Practices set out in
Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules") during the
Period.
The Company has adopted a code of conduct regarding directors' securities transactions on terms no less exacting
than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers (the
"Model Code") in Appendix 10 to the Listing Rules. The Directors have confirmed their full compliance with the
required standard set out in the Model Code and its code of conduct regarding directors' securities transactions
during the Period.
Responsibility Statement of the Directors in Respect of the Interim Report and Accounts
Each of the Directors of the Company, whose name and function is listed in the section headed "Corporation
Information" of this report, confirms that, to the best of his/her knowledge:
-- the condensed consolidated financial statements prepared in accordance with Hong Kong Financial Reporting
Standards issued by the Hong Kong Institute of Certified Public Accountants give a true and fair view of the
assets, liabilities, financial position and profit of the Group and the undertakings included in the
consolidation taken as a whole; and
-- the management discussion and analysis included in the interim report includes a fair review of the development
and performance of the business and the position of the Group and the undertakings included in the
consolidation taken as a whole, together with a description of the principal risks and uncertainties that the
Group faces.
By order of the Board
Zhejiang Expressway Co., Ltd.
Zhan Xiaozhang
Chairman
Hangzhou, the PRC, August 24, 2012
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
----------------------------------------------------------------------------------------------------------------
For the six months ended June 30,
----------------------------------------------------------------------------------------------------------------
2012 2011
Notes Rmb'000 Rmb'000
----------------------------------------------------------------------------------------------------------------
Revenue 3 3,329,181 3,339,367
Operating costs (2,076,791) (1,986,690)
----------------------------------------------------------------------------------------------------------------
Gross profit 1,252,390 1,352,677
Securities investment gains 61,211 27,885
Other income 4 124,881 119,926
Administrative expenses (33,410) (36,032)
Other expenses (16,508) (19,323)
Share of loss of associates (15,849) (9,367)
Finance costs 5 (31,223) (41,852)
----------------------------------------------------------------------------------------------------------------
Profit before tax 6 1,341,492 1,393,914
Income tax expense 7 (328,225) (352,347)
----------------------------------------------------------------------------------------------------------------
Profit for the Period 1,013,267 1,041,567
----------------------------------------------------------------------------------------------------------------
Other comprehensive income
Available-for-sale financial assets:
- Fair values gain (loss) during the Period 5,436 (8,662)
- Reclassification adjustments for cumulative gain
included in profit or loss upon disposal - (4,072)
Income tax relating to components of other comprehensive
income (1,359) 3,184
----------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) for the Period (net of tax) 4,077 (9,550)
----------------------------------------------------------------------------------------------------------------
Total comprehensive income for the Period 1,017,344 1,032,017
----------------------------------------------------------------------------------------------------------------
Profit for the Period attributable to:
Owners of the Company 891,591 900,316
Non-controlling interests 121,676 141,251
----------------------------------------------------------------------------------------------------------------
1,013,267 1,041,567
----------------------------------------------------------------------------------------------------------------
Total comprehensive income for the Period attributable to:
Owners of the Company 893,717 895,336
Non-controlling interests 123,627 136,681
----------------------------------------------------------------------------------------------------------------
1,017,344 1,032,017
----------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE-BASIC 9 20.53 cents 20.73 cents
----------------------------------------------------------------------------------------------------------------
Condensed Consolidated Statement of Financial Position
----------------------------------------------------------------------------------------------------------------
As at As at
June 30, December 31,
2012 2011
----------------------------------------------------------------------------------------------------------------
Notes Rmb'000 Rmb'000
Unaudited Audited
----------------------------------------------------------------------------------------------------------------
NON-CURRENT ASSETS
Property, plant and equipment 1,272,588 1,294,465
Prepaid lease payments 67,958 68,983
Expressway operating rights 11,019,731 11,364,938
Goodwill 86,867 86,867
Other intangible assets 151,675 157,594
Earnest deposit paid for acquisition of a property 323,800 323,800
Interests in associates 430,830 446,679
Available-for-sale investments 1,000 1,000
Other receivables 11 82,000 382,000
----------------------------------------------------------------------------------------------------------------
13,436,449 14,126,326
----------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Inventories 23,563 26,400
Trade receivables 10 50,738 48,013
Other receivables 11 1,296,606 844,142
Prepaid lease payments 2,052 2,052
Available-for-sale investments 281,473 60,274
Held-for-trading investments 988,036 1,260,021
Structured deposits 12 170,658 -
Bank balances held on behalf of customers 7,454,088 7,177,508
Margin financing and securities lending 13 216,145 -
Bank balances and cash
- Time deposits with original maturity over three months 1,868,888 2,467,793
- Cash and cash equivalents 3,784,411 3,120,430
----------------------------------------------------------------------------------------------------------------
16,136,658 15,006,633
----------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable to customers arising from securities
dealing business 7,404,195 7,143,067
Trade payables 14 354,200 317,188
Tax liabilities 193,669 491,619
Other taxes payable 41,893 61,753
Other payables and accruals 15 628,171 724,216
Dividends payable 1,244,191 94,971
Bank loans 50,000 462,553
Long-term bonds 1,000,000 -
Derivative financial instrument - 6,426
----------------------------------------------------------------------------------------------------------------
10,916,319 9,301,793
----------------------------------------------------------------------------------------------------------------
NET CURRENT ASSETS 5,220,339 5,704,840
----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 18,656,788 19,831,166
----------------------------------------------------------------------------------------------------------------
NON-CURRENT LIABILITIES
Long-term bonds - 1,000,000
Deferred tax liabilities 232,131 232,066
----------------------------------------------------------------------------------------------------------------
232,131 1,232,066
----------------------------------------------------------------------------------------------------------------
18,424,657 18,599,100
----------------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES
Share capital 4,343,115 4,343,115
Reserves 10,643,362 10,835,424
----------------------------------------------------------------------------------------------------------------
Equity attributable to owners of the Company 14,986,477 15,178,539
Non-controlling interests 3,438,180 3,420,561
----------------------------------------------------------------------------------------------------------------
18,424,657 18,599,100
----------------------------------------------------------------------------------------------------------------
Condensed Consolidated Statement of Changes in Equity (Unaudited)
------------------------------------------------------------------------------------------------------------------------
Attributable to owners of the Company
------------------------------------------------------------------------------------------------------------------------
Investment
Share Share Statutory Capital revaluation Special Dividend Retained
capital premium reserves reserve reserve reserve reserve profits Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
------------------------------------------------------------------------------------------------------------------------
At January 1,
2011 4,343,115 3,645,726 2,727,900 - 3,849 18,666 1,085,779 2,898,217 14,723,252
Profit for the
Period - - - - - - - 900,316 900,316
Other
comprehensive
loss for the
Period - - - - (4,980) - - - (4,980)
------------------------------------------------------------------------------------------------------------------------
Total
comprehensive
income for the
Period - - - - (4,980) - - 900,316 895,336
Dividend paid
to
non-controlling
interest - - - - - - - - -
Capital injection - - - 2,055 - - - - 2,055
Final dividend - - - - - - (1,085,779) - (1,085,779)
Proposed interim
dividend - - - - - - 260,587 (260,587) -
------------------------------------------------------------------------------------------------------------------------
At June 30, 2011 4,343,115 3,645,726 2,727,900 2,055 (1,131) 18,666 260,587 3,537,946 14,534,864
------------------------------------------------------------------------------------------------------------------------
- Cont'd -
------------------------------------------------------------------------------------------------------------------------
Non-controlling
interests Total
------------------------------------------------------------------------------------------------------------------------
Rmb'000 Rmb'000
------------------------------------------------------------------------------------------------------------------------
At January 1,
2011 2,971,863 17,695,115
Profit for the
Period 141,251 1,041,567
Other
comprehensive
loss for the
Period (4,570) (9,550)
------------------------------------------------------------------------------------------------------------------------
Total
comprehensive
income for the
Period 136,681 1,032,017
Dividend paid to
non-controlling
interest (106,008) (106,008)
Capital injection 336,299 338,354
Final dividend - (1,085,779)
Proposed interim
dividend - -
------------------------------------------------------------------------------------------------------------------------
At June 30, 2011 3,338,835 17,873,699
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Attributable to owners of the Company
------------------------------------------------------------------------------------------------------------------------
Investment
Share Share Statutory Capital revaluation Special Dividend Retained
capital premium reserves reserve reserve reserve reserve profits Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
------------------------------------------------------------------------------------------------------------------------
At January 1,
2012 4,343,115 3,645,726 2,968,634 1,712 (1,555) 18,666 1,085,779 3,116,462 15,178,539
Profit for the
Period - - - - - - - 891,591 891,591
Other
comprehensive
income for the
Period - - - - 2,126 - - - 2,126
------------------------------------------------------------------------------------------------------------------------
Total
comprehensive
income for the
Period - - - - 2,126 - - 891,591 893,717
Dividend paid to
non-controlling
interests - - - - - - - - -
Final dividend - - - - - - (1,085,779) - (1,085,779)
Proposed interim
dividend - - - - - - 260,587 (260,587) -
------------------------------------------------------------------------------------------------------------------------
At June 30, 2012 4,343,115 3,645,726 2,968,634 1,712 571 18,666 260,587 3,747,466 14,986,477
------------------------------------------------------------------------------------------------------------------------
- Cont'd -
------------------------------------------------------------------------------------------------------------------------
Non-controlling
interests Total
------------------------------------------------------------------------------------------------------------------------
Rmb'000 Rmb'000
------------------------------------------------------------------------------------------------------------------------
At January 1,
2012 3,420,561 18,599,100
Profit for the
Period 121,676 1,013,267
Other
comprehensive
income for the
Period 1,951 4,077
------------------------------------------------------------------------------------------------------------------------
Total
comprehensive
income for the
Period 123,627 1,017,344
Dividend paid to
non-controlling
interests (106,008) (106,008)
Final dividend - (1,085,779)
Proposed interim
dividend - -
------------------------------------------------------------------------------------------------------------------------
At June 30, 2012 3,438,180 18,424,657
------------------------------------------------------------------------------------------------------------------------
Condensed Consolidated Statement of Cash Flows (Unaudited)
----------------------------------------------------------------------------------------------------------------
For the six months ended June 30,
----------------------------------------------------------------------------------------------------------------
2012 2011
Rmb'000 Rmb'000
----------------------------------------------------------------------------------------------------------------
Net cash from operating activities 975,097 666,121
Net cash from/(used in) investing activities 147,550 (1,062,242)
Net cash used in financing activities (458,666) (963,981)
----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in cash and cash equivalents 663,981 (1,360,102)
Cash and cash equivalents at beginning of the Period 3,120,430 5,682,053
----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of the Period 3,784,411 4,321,951
----------------------------------------------------------------------------------------------------------------
Notes to Condensed Consolidated Financial Statements
1. Basis of Preparation
The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure
requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited (the "Listing Rules") and with Hong Kong Accounting Standard 34 ("HKAS 34") "Interim Financial
Reporting".
2. Principal Accounting Policies
The condensed consolidated financial statements have been prepared on the historical cost basis except for
certain financial instruments that are measured at fair value, as appropriate.
The accounting policies applied in the condensed consolidated financial statements for the Period are consistent
with those applied in the preparation of the Group's annual financial statements for the year ended December 31,
2011.
In the current period, the Group has applied, for the first time, new and revised Hong Kong Financial Reporting
Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"), which are
effective for the Period. The application of these new and revised HKFRSs in the current interim period had no
material effect on the condensed consolidated financial statements and/or disclosures set out in these condensed
consolidated financial statements.
3. Segment Information
Comparing to the same period last year, there were no changes in the operating segments of the Group during the
Period.
Segment revenue and results
The following is an analysis of the Group's revenue and results by operating segments:
---------------------------------------------------------------------------------------------------------------
For the Period ended June 30, 2012
---------------------------------------------------------------------------------------------------------------
Service area
Toll and advertising Securities
operation business operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
---------------------------------------------------------------------------------------------------------------
Segment revenue from external customers 1,735,725 1,027,224 566,232 3,329,181
---------------------------------------------------------------------------------------------------------------
Segment profit 849,355 23,223 140,689 1,013,267
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
For the Period ended June 30, 2011
---------------------------------------------------------------------------------------------------------------
Service area
Toll and advertising Securities
operation business operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
---------------------------------------------------------------------------------------------------------------
Segment revenue from external customers 1,731,996 947,294 660,077 3,339,367
---------------------------------------------------------------------------------------------------------------
Segment profit 846,359 21,273 173,935 1,041,567
---------------------------------------------------------------------------------------------------------------
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 purpose of resource allocation and
performance assessment.
Revenue from major services
An analysis of the Group's revenue, net of discounts and taxes, for the Period is as follows:
---------------------------------------------------------------------------------------------------------------
For the six months ended June 30,
---------------------------------------------------------------------------------------------------------------
2012 2011
Rmb'000 Rmb'000
Unaudited Unaudited
---------------------------------------------------------------------------------------------------------------
Toll operation revenue 1,735,725 1,731,996
Service area business revenue 981,695 908,049
Advertising business revenue 45,529 39,245
Commission income from securities operation 422,931 506,696
Interest income from securities operation 143,301 153,381
---------------------------------------------------------------------------------------------------------------
Total revenue 3,329,181 3,339,367
---------------------------------------------------------------------------------------------------------------
4. Other Income
---------------------------------------------------------------------------------------------------------------
For the six months ended June 30,
---------------------------------------------------------------------------------------------------------------
2012 2011
Rmb'000 Rmb'000
Unaudited Unaudited
---------------------------------------------------------------------------------------------------------------
Interest income on bank balances and entrusted loan receivables 74,037 67,128
Interest income from structured deposits 658 -
Rental income 33,655 32,754
Net exchange (loss) gain (3,552) 2,252
Handling fee income 3,396 8,649
Towing income 5,557 5,805
Others* 11,130 3,338
---------------------------------------------------------------------------------------------------------------
Total 124,881 119,926
---------------------------------------------------------------------------------------------------------------
* In May, 2011, the Group borrowed a loan from a domestic foreign bank in HK dollars amounting to an equivalent
Rmb312.51 million with one-year term. With an aim to hedge against foreign exchange risks arising from the
loan, the Group had purchased HK dollar equivalent forward contracts with one-year term at a lower rate than
the spot exchange rate on the borrowing date. The transaction has been completed during the Period. The
floating income for the Period was Rmb2.84 million (2011: floating loss of Rmb2.72 million).
5. Financial Costs
---------------------------------------------------------------------------------------------------------------
For the six months ended June 30,
---------------------------------------------------------------------------------------------------------------
2012 2011
Rmb'000 Rmb'000
Unaudited Unaudited
---------------------------------------------------------------------------------------------------------------
Interest expenses wholly repayable within 5 years:
Bank loans 9,773 20,402
Long-term bonds 21,450 21,450
---------------------------------------------------------------------------------------------------------------
31,223 41,852
---------------------------------------------------------------------------------------------------------------
6. Profit before Tax
The Group's profit before tax has been arrived at after charging:
---------------------------------------------------------------------------------------------------------------
For the six months ended June 30,
---------------------------------------------------------------------------------------------------------------
2012 2011
Rmb'000 Rmb'000
Unaudited Unaudited
---------------------------------------------------------------------------------------------------------------
Depreciation of property, plant and equipment 74,055 73,064
Amortisation of expressway operating rights 345,207 345,658
Amortisation of prepaid lease payments 1,025 1,025
Amortisation of other intangible assets 9,151 7,969
Costs of inventories recognized as an expense 908,265 834,614
---------------------------------------------------------------------------------------------------------------
7. Income Tax Expense
---------------------------------------------------------------------------------------------------------------
For the six months ended June 30,
---------------------------------------------------------------------------------------------------------------
2012 2011
Rmb'000 Rmb'000
Unaudited Unaudited
---------------------------------------------------------------------------------------------------------------
Current tax:
PRC enterprise income tax 326,801 359,756
Deferred tax 1,424 (7,409)
---------------------------------------------------------------------------------------------------------------
328,225 352,347
---------------------------------------------------------------------------------------------------------------
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and implementation Regulation of the EIT Law,
the tax rate of the Group is 25% from January 1, 2008 onwards.
No Hong Kong Profits Tax has been provided as the Group's income neither arises in, nor is derived from Hong
Kong during the Period.
8. Dividends
The Directors have recommended the payment of an interim dividend of Rmb6 cents per share (2011: Rmb6 cents per
share), subject to shareholders' approval at the extraordinary general meeting of the Company expected to be
held on October 12, 2012.
9. Earnings per Share
The calculation of the basic earnings per share is based on profit for the Period attributable to owners of the
Company of Rmb891,591,000 (2011: Rmb900,316,000) and the 4,343,114,500 (2011: 4,343,114,500) ordinary shares in
issue during the Period.
No diluted earnings per share has been presented as there were no potential ordinary shares outstanding during
both periods.
10. Trade Receivables
The Group has no credit period granted to its trade customers of toll operation, service area businesses and
securities operation. The following is an aged analysis of trade receivables presented based on the invoice
date at the end of the reporting period:
---------------------------------------------------------------------------------------------------------------
As at As at
June 30, December 31,
2012 2011
---------------------------------------------------------------------------------------------------------------
Rmb'000 Rmb'000
Unaudited Audited
---------------------------------------------------------------------------------------------------------------
Within 3 months 50,467 47,742
3 months to 1 year - -
1 to 2 years - -
Over 2 years 271 271
---------------------------------------------------------------------------------------------------------------
Total 50,738 48,013
---------------------------------------------------------------------------------------------------------------
11. Other Receivables
---------------------------------------------------------------------------------------------------------------
As at As at
June 30, December 31,
2012 2011
---------------------------------------------------------------------------------------------------------------
Rmb'000 Rmb'000
Unaudited Audited
---------------------------------------------------------------------------------------------------------------
Current:
Entrusted loans receivables from related parties (Note 17 (ii)) 683,491 350,704
Entrusted loan receivable from a third party (Note a) 300,850 300,944
Interest receivables 33,338 72,932
Prepayments 35,770 40,275
Financial products investment receivables (Note b) 150,000 -
Others* 93,157 79,287
---------------------------------------------------------------------------------------------------------------
1,296,606 844,142
---------------------------------------------------------------------------------------------------------------
Non-current:
Entrusted loans receivables from related parties(Note 17 (ii)) - 300,000
Loan receivable from an associate(Note 17 (i) (a) (2)) 82,000 82,000
---------------------------------------------------------------------------------------------------------------
82,000 382,000
---------------------------------------------------------------------------------------------------------------
1,378,606 1,226,142
---------------------------------------------------------------------------------------------------------------
* The amounts were unsecured, interest-free and repayable on demand. Note:
(a) Pursuant to the board resolutions of the Company on January 30, 2011, the Company granted entrusted
loans of Rmb300,000,000 to Zhejiang Jiahe Industrial Co., Ltd. at a fixed interest rate of 12% per annum,
with maturity date of January 29, 2013. The entrusted loans are guaranteed by Greentown Real Estate Group
Co., Ltd. in full.
(b) Fixed-yield and principal-protected bank financial products.
12. Structured Deposits
The structured deposits represented (1) a yield enhanced deposit in Agricultural Bank of China for a principal
of Rmb100,000,000, with a guaranteed interest rate at 4.6% per annum and a variable interest ranging from 0% to
0.2% per annum, for a term of 49 days, depending on the exchange rate of certain foreign currencies, and
matured on July 6, 2012; and (2) a yield enhanced deposit in Agricultural Bank of China for a principal of
Rmb70,000,000, with a guaranteed interest rate at 4.4% per annum and a variable interest ranging from 0% to
0.2% per annum, for a term of 39 days, depending on the exchange rate of certain foreign currencies, and
matured on August 7, 2012.
13. Margin Financing and Securities Lending
The Group has provided customers with margin financing for securities transactions since June this year, which
are secured by customers' securities and deposits as collateral. As at June 30, 2012, total amount of margin
financing and securities lending was Rmb216,145,000 and the credit limit was determined by every customer's
financial background and the value of collateral held. As at June 30, 2012, the total value of securities
pledged and deposits as collateral amounted to Rmb813,146,000 and Rmb5,414,000, respectively. The value of
securities pledged as collateral was based on the market value of the securities at the end of the reporting
period. The margin financing and securities lending was neither past due nor impaired as at June 30, 2012.
14. Trade Payables
The following is an aged analysis of trade payable presented based on payment due date at the end of the
reporting period:
---------------------------------------------------------------------------------------------------------------
As at As at
June 30, December 31,
2012 2011
---------------------------------------------------------------------------------------------------------------
Rmb'000 Rmb'000
Unaudited Audited
---------------------------------------------------------------------------------------------------------------
Within 3 months 139,727 93,602
3 months to 1 year 82,306 32,295
1 to 2 years 42,615 116,005
2 to 3 years 63,366 58,618
Over 3 years 26,186 16,668
---------------------------------------------------------------------------------------------------------------
Total 354,200 317,188
---------------------------------------------------------------------------------------------------------------
15. Other Payables and Accruals
---------------------------------------------------------------------------------------------------------------
As at As at
June 30, December 31,
2012 2011
---------------------------------------------------------------------------------------------------------------
Rmb'000 Rmb'000
Unaudited Audited
---------------------------------------------------------------------------------------------------------------
Other liabilities:
Accrued payroll and welfare 261,534 350,508
Advance from customers 78,211 77,754
Toll collected on behalf of other toll roads 12,335 36,944
Others 257,204 217,113
---------------------------------------------------------------------------------------------------------------
609,284 682,319
Accruals 18,887 41,897
---------------------------------------------------------------------------------------------------------------
Total 628,171 724,216
---------------------------------------------------------------------------------------------------------------
16. Commitments
---------------------------------------------------------------------------------------------------------------
As at As at
June 30, December 31,
2012 2011
Rmb'000 Rmb'000
---------------------------------------------------------------------------------------------------------------
Authorized but not contracted for:
Investment in expressway upgrade services 6,070 6,070
Renovation of service areas 20,800 20,970
Purchase of equipments 307,468 345,344
Acquisition and construction of properties and its renovation work 380,080 407,203
Acquisition of an office building 485,700 485,700
Acquisition of 50% equity interest of Shengxin Expressway Company Co., Ltd. 355,033 -
---------------------------------------------------------------------------------------------------------------
Total 1,555,151 1,265,287
---------------------------------------------------------------------------------------------------------------
17. Related Party Transactions
The following is a summary of the related party transactions arising from the Group's operating activities:
(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 Zhejiang Communications Investment Group Co., Ltd.
("Communications Group") which is controlled by the PRC government.
(a) Transactions with Communications Group
(1) Pursuant to the memorandum of understanding and supplemental memorandum of understanding,
which were entered into between Zheshang Securities Co., Ltd. ("Zheshang Securities") and
Hangzhou Jinji Real Estate Co., Ltd. ("Jinji Company"), a subsidiary of Communications
Group, dated December 26, 2011 and August 24, 2012, respectively, Zheshang Securities
agreed to purchase a property in Hangzhou from Jinji Co for a provisional consideration of
Rmb809,500,000. In 2011, Zheshang Securities had paid earnest deposit of Rmb323,800,000 to
Jinji Co. The sale and purchase agreement has not been signed and the acquisition has not
been completed at the date of this report.
(2) Pursuant to the board resolutions of the Company on November 10, 2011, and the loan
contract, the Company provided long-term loan, totaling Rmb82,000,000 with maturity date
on November 16, 2013 to Zhejiang Jinhua Yongjin Expressway Co., Ltd. ("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%.
Yongjin is a subsidiary of the Communications Group and also an associate of the Group.
(b) Transactions with other government related parties
(1) Pursuant to the operation management agreement entered into between Zhejiang Expressway
Investment Co., Ltd. ("Development Co"), a wholly owned subsidiary of the Group, and
Zhejiang Expressway Petroleum Development Co., Ltd. ("Petroleum Co") in respect of the
petrol stations in the service areas along the Shanghai-Hangzhou-Ningbo and Shangsan
Expressways, Petroleum Co will with its expertise assist Development Co in running their
petrol stations along the Shanghai-Hangzhou-Ningbo and Shangsan Expressways. Purchases of
petroleum products from Petroleum Co during the Period amounted to Rmb844,686,000 (same
period in 2011: Rmb772,091,000).
Petroleum Co is a government related entity and also an associate of the Group.
(2) The Group has entered into various 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.
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.
(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 supplementary entrusted loan contract on July 6, 2011 of Development Co,
the maturity date of the entrusted loan totaling Rmb150,000,000 was deferred to July 10,
2012, at a fixed interest rate of 12% per annum and guaranteed by the World Trade Center
Zhejiang Real Estate Development Co., Ltd. ("World Trade Ltd"), a related party of
Hangzhou Concord Property Investment Co., Ltd. ("Hangzhou Concord Co"), in full, in which
part of the entrusted loan of Rmb50,471,000 was early settled in 2011 and the remaining
of Rmb99,529,000 was settled in July, 2012.
(2) Pursuant to the resolutions of the shareholders' meeting on May 25, 2011 of Zhejiang
Expressway Advertising Co., Ltd. ("Advertising Co"), a subsidiary of Development Co and
the supplementary entrusted loan contracts, the maturity date of the entrusted loan
totaling Rmb30,000,000 was deferred to July 10, 2012, at a fixed interest rate of 12%
annually and guaranteed by World Trade Ltd, a related party of Hangzhou Concord Co, in
full. This entrusted loan was settled in July, 2012.
(3) Pursuant to the board resolutions of the Company on August 28, 2010 and entrusted loan
contracts, the balances of the entrusted loan, represented Rmb190,000,000, provided by
the Company in 2011 to Zhejiang Canal Concord Property Co., Ltd., a subsidiary of
Hangzhou Concord Co, with maturity date of August 7, 2012, at a fixed interest rate of
12% annually and was guaranteed by World Trade Ltd, a related party of Hangzhou Concord
Co, in full. Besides, the Company provided entrusted loan of Rmb100,000,000 to Zhejiang
Canal Concord Property Co., Ltd. at a fixed interest rate of 12% per annum, with maturity
date of May 17, 2013. The entrusted loan was guaranteed by World Trade Ltd, a related
party of Hangzhou Concord Co, in full, while Zhejiang Canal Concord Property Co., Ltd.
provided land as pledge at the same time.
(4) Pursuant to the board resolutions of the Company on August 28, 2010, and the entrusted
loan contract, the Company provided entrusted loan totaling Rmb200,000,000 during 2011
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, a related party of Hangzhou Concord Co,
in full.
Interest income recognized for the six months ended June 30, 2012 on the above entrusted loan
transactions with associates and its subsidiaries was Rmb33,762,000 (same period in 2011:
Rmb31,602,000).
18. Contingent Liabilities and Pledge of Assets
The Group did not have any other contingent liabilities, pledge of assets or guarantees as at June 30, 2012.
19. Summary of financial information of the Company
---------------------------------------------------------------------------------------------------------------
As at As at
June 30, December 31,
2012 2011
---------------------------------------------------------------------------------------------------------------
Rmb'000 Rmb'000
Unaudited Audited
---------------------------------------------------------------------------------------------------------------
Investment in subsidiaries 4,557,600 4,557,600
Amounts due from subsidiaries 625,626 1,007,193
Other assets 8,871,805 8,683,869
---------------------------------------------------------------------------------------------------------------
14,055,031 14,248,662
---------------------------------------------------------------------------------------------------------------
Total liabilities 2,815,147 2,621,828
---------------------------------------------------------------------------------------------------------------
Capital and reserves
Share capital 4,343,115 4,343,115
Reserves 6,896,769 7,283,719
---------------------------------------------------------------------------------------------------------------
11,239,884 11,626,834
---------------------------------------------------------------------------------------------------------------
20. Events After the Reporting Period
On July 6, 2012, the Company entered into a sale and purchase agreement with Shaoxing Communications Investment
Group Co., Ltd. ("Shaoxing Communications Group"), pursuant to which the Company has conditionally agreed to
purchase from Shaoxing Communications Group, a 50% equity interest in Shengxin Expressway Co., Ltd for a cash
consideration of Rmb335,032,803, plus interest accrued on the consideration from March 31, 2012 to the date of
the receipt by Shaoxing Communications Group of the payment of the consideration. At the date of this report,
the acquisition has not been completed.
Details of the acquisition were set out in the announcement of the Company dated July 10, 2012.
21. Approval of Condensed Consolidated Financial Statements
The condensed consolidated financial statements were approved and authorized for issue by the board of
directors on August 24, 2012.
Corporate Information
Executive Directors Representative Office in
Hong Kong
ZHAN Xiaozhang (Chairman)
LUO Jianhu (General Manager) Suite 2910
DING Huikang 29/F, Bank of America Tower
12 Harcourt Road
Non-Executive Directors Hong Kong
Tel: 852-2537 4295
LI Zongsheng Fax: 852-2537 4293
WANG Weili
WANG Dongjie Legal Advisers
Independent As to Hong Kong and US law:
Non-Executive Directors Herbert Smith
23rd Floor, Gloucester Tower
ZHANG Junsheng 15 Queen's Road Central
ZHOU Jun Hong Kong
PEI Ker-Wei
As to English law:
Supervisors Herbert Smith LLP
Exchange House
FU Zhexiang Primrose Street
WU Yongmin London EC2A 2HS
LIU Haisheng United Kingdom
ZHANG Guohua
ZHANG Xiahua As to PRC law:
T & C Law Firm
Company Secretary 11/F, Block A, Dragon Century Plaza
1 Hangda Road
Tony Zheng Hangzhou City, Zhejiang Province
PRC 310007
Authorized Representatives
Auditors
ZHAN Xiaozhang
ZHANG Jingzhong Deloitte Touche Tohmatsu
35/F, One Pacific Place
Statutory Address 88 Queensway
Hong Kong
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
Investor Relations Consultant London Stock Exchange Plc
Hill & Knowlton Strategies Code: ZHEH
36th Floor, PCCW Tower, Taikoo Place
979 King's Road, Quarry Bay ADRs Information
Hong Kong
Tel: 852-2894 6321 US Exchange: OTC
Fax: 852-2576 1990 Symbol: ZHEXY
CUSIP: 98951A100
Principal Bankers ADR: H Shares 1:10
Industrial and Commercial Bank of China, Corporate Bond Listing
Zhejiang Branch Information
China Construction Bank, Zhejiang Branch
Shanghai Pudong Development Bank, The Shanghai Stock Exchange
Hangzhou Branch Symbol: 03
Code: 120308
H Share Registrar and Transfer
Office Website
Hong Kong Registrars Limited www.zjec.com.cn
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
For Corporate Structure of the Group, please visit:
http://www.prnasia.com/sa/attachment/2012/09/20120910202446376195.pdf
For Financial Highlights, please visit:
http://www.prnasia.com/sa/attachment/2012/09/20120910202447247861.pdf
For Location Map of Expressways in Zhejiang Province, please visit:
http://www.prnasia.com/sa/attachment/2012/09/20120910204050685244.pdf
----------------------------------------------------------------------------------------------
NOTE: To view the full set of the company's 2012 Interim Report, please visit www.zjec.com.cn
----------------------------------------------------------------------------------------------
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