2014 Annual Report / Financial Statements
ZHEJIANG EXPRESSWAY CO., LTD.
(Stock Code: 0576)
2014 Annual Report
Deepen Reform and Business Innovation
2014 was the first year of comprehensive reform as well as a keystone year in our three-year development plan that
transitioned the Company from the past into the future. Under the leadership of the Communications Group, the
Company focused on reform and innovation as main themes and outperformed our annual targets, reaching new records in
operating results.
Content
Definition of Terms
Company Profile
Review of Major Corporate Events
Particulars of Major Road Projects
Financial and Operating Highlights
Chairman's Statement
Management Discussion and Analysis
Principal Risks and Uncer tainties
Corporate Governance Report
Directors, Super visors and Senior Management Profiles
Report of the Directors
Report of the Super visory Committee
Continuing Connected Transactions
Independent Auditor's Report
Consolidated Financial Statements & Notes
Independent Auditor's Report
(Issued by a third country auditor registered with the UK Financial Reporting Council)
Corporate Information
Location Map of Expressways in Zhejiang Province
Definition of Terms
ADR(s) American Depositary Receipt(s)
ADS(s) American Depositary Share(s)
Advertising Co Zhejiang Expressway Advertising Co., Ltd., a 70% owned subsidiary of Development Co
Audit Committee the audit committee of the Company
Board the board of directors of the Company
Company or Zhejiang Expressway Zhejiang Expressway Co., Ltd., a joint stock limited company incorporated in the
PRC with limited liability on March 1, 1997
Communications Group Zhejiang Communications Investment Group Co., Ltd., a wholly State-owned enterprise
established on December 29, 2001
Development Co Zhejiang Expressway Investment Development Co., Ltd., a 100% owned subsidiary of
the Company
Directors the directors of the Company
GDP gross domestic product
Group the Company and its subsidiaries
H Shares the overseas listed foreign shares of Rmb1.00 each in the share capital of the
Company which are primarily listed on the Hong Kong Stock Exchange and traded in
Hong Kong dollars since May 15, 1997
Hong Kong Stock Exchange The Stock Exchange of Hong Kong Limited
Jiaxing Co Zhejiang Jiaxing Expressway Co., Ltd., a 99.9995% owned subsidiary of the Company
Jinhua Co Zhejiang Jinhua Yongjin Expressway Co., Ltd., a 100% owned subsidiary of the
Company
Listing Rules the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited
Maintenance Co Zhejiang Expressway Maintenance Co., Ltd., a 100% owned subsidiary of the Company
Period the period from January 1, 2014 to December 31, 2014
Petroleum Co Zhejiang Expressway Petroleum Development Co., Ltd., a 50% owned associate of the
Company
PRC the People's Republic of China
Rmb Renminbi, the lawful currency of the PRC
SFO Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong)
Shangsan Co Zhejiang Shangsan Expressway Co., Ltd., a 73.625% owned subsidiary of the Company
Shareholders the shareholders of the Company
Shengxin Co Shengxin Expressway Co., Ltd., a 50% owned joint venture of the Company
Supervisory Committee the supervisory committee of the Company
Towing Co Zhejiang Expressway Vehicle Towing and Rescue Services Co., Ltd., a 100% owned
subsidiary of the Company
Yuhang Co Zhejiang Yuhang Expressway Co., Ltd., a 51% owned subsidiary of the Company
Zheshang Securities Zheshang Securities Co., Ltd., a 70.83% owned subsidiary of the Shangsan Co
Zhejiang Communications Finance Zhejiang Communications Investment Group Finance Co., Ltd., a 35% owned associate
of the Company
Company Profile
Zhejiang Expressway is an infrastructure company principally engaged in investing in, developing and operating of
high-grade roads. The Company and its subsidiaries also carry out certain ancillary businesses such as automobile
servicing, operation of gas stations and billboard advertising along expressways, as well as securities business.
Major assets under management of the Group include the 248km Shanghai-Hangzhou-Ningbo Expressway, the 142 km
Shangsan Expressway, the 70 km Jinhua section of Ningbo-Jinhua Expressway, ancillary facilities along the three
expressways, and Zheshang Securities. All of the three expressways are situated within Zhejiang Province in the PRC.
As at December 31, 2014, total assets of the Company and its subsidiaries amounted to Rmb51,354.74 million.
The Company was incorporated on March 1, 1997 as the main vehicle of the Zhejiang Provincial Government for
investing in, developing and operating expressways and Class 1 roads in Zhejiang Province.
Incorporated on December 29, 2001, Communications Group, the controlling shareholder of the Company, is a
provincial-level communications company which is wholly-owned by the State and established by the Zhejiang
Provincial Government. It mainly operates a diversity of businesses, such as investment, operations, maintenance,
toll collection and ancillary services of expressways; construction and building of transportation project, ocean
and coastal transport; as well as real estates. As at December 31, 2014, consolidated assets of Communications Group
totaled Rmb170,063.12 million.
The H Shares of the Company, which represent approximately 33% of the issued share capital of the Company, were
listed on the Hong Kong Stock Exchange on May 15, 1997, and the Company subsequently obtained a secondary listing on
the London Stock Exchange on May 5, 2000.
On February 14, 2002, a Level I American Depositary Receipt program sponsored by the Company in respect of its H
Shares, with the Bank of New York as the depositary, was established in the United States and became effective.
With good performance on the Group's existing expressway operations, the Company will capitalize on all
opportunities of investment and acquisition of new projects, aiming to develop itself into a first-class expressway
operator in China. In addition, the Company will also endeavor to enhance its core competitiveness in the securities
business, increasing its profit contribution to the Group.
For the corporate and business structure of the Group as at December 31, 2014, please visit:
http://photos.prnasia.com/prnk/20150330/8521501909-a
Review of Major Corporate Events
1. On January 28, 2014, Zhejiang Expressway Maintenance Co., Ltd., a 100% owned subsidiary of the Company, was
incorporated with a registered capital of Rmb30 million.
2. On March 18, 2014, the Company announced its 2013 annual results in Hong Kong and thereafter conducted its
annual results presentations in Hong Kong, the US and Canada.
3. On May 5, 2014, the Company held its Annual General Meeting, among others, to approve the payment of a final
dividend of Rmb0.25 per share, the re-appointment of Deloitte Touche Tohmatsu Certified Public Accountants
Hong Kong as the international auditors of the Company, and the re-appointment of Pan- China Certified Public
Accountants Ltd. as the PRC auditors of the Company.
4. On May 15, 2014, the Company announced its 2014 first quarterly results.
5. On August 28, 2014, the Company announced its 2014 interim results in Hong Kong and thereafter conducted its
interim results presentations in Hong Kong.
6. On October 1, 2014, the Company introduced a Starbucks store to the Jiaxing Service Area of Shanghai- Hangzhou
Expressway, which marked the first Starbucks store in the expressway service area in the nation. The Starbucks
store has commenced operation.
7. On October 16, 2014, the Company held an Extraordinary General Meeting at which the payment of an interim
dividend of Rmb0.06 per share was approved.
8. On November 11, 2014, the Company announced its 2014 third quarterly results.
9. On March 19, 2015, the Company announced its 2014 annual results in Hong Kong and thereafter conducted its
annual results presentations in Hong Kong and Japan.
Percentage Number Number Remaining
of Length in Number of of Toll of Service Start of Years of
Expressway Ownership Kilometers Lanes Stations Areas Operation Operation
Shanghai-Hangzhou Expressway
-- Jiaxing Section 99.9995% 88.1 8 7 2 1998 14
-- Yuhang Section 51% 11.1 6 1 0 1995-1998 14
-- Hangzhou Section 100% 3.4 4 2 0 1995 14
Hangzhou-Ningbo Expressway
-- Hangzhou to Hongken section 100% 16.0 4 1 0 1992 13
-- Hongken to Duantang section 100% 124.0 8 9 2 1995 13
-- Duantang to Dazhujia section 100% 5.0 4 1 0 1996 13
Shangsan Expressway 73.625% 142.0 4 11 3 2000 16
Ningbo-Jinhua Expressway
-- Jinhua Section 100% 69.7 4 7 1 2005 16
Current Toll rates on the Shanghai-Hangzhou-Ningbo Expressway
1. Passenger vehicle classification and toll rates
Vehicle Entrance Fee Mileage Fee
Class Classification Standard (Rmb/vehicle) (Rmb/vehicle/km)
1 Passenger vehicle with up to 7 seats 5 0.45
Truck with tonnage of 2 tons or below 5 0.45
2 Passenger vehicle with seats 8 to 19 5 0.45
Truck with tonnage of above 2 tons and up to 5 tons 10 0.80
3 Passenger vehicle with seats 20 to 39 10 0.80
Truck with tonnage of above 5 tons and up to 10 tons 15 1.20
4 Passenger vehicle with seats above 40 15 1.20
Truck with tonnage above 10 tons and up to 15 tons 15 1.40
5 Truck with tonnage above 15 tons 20 1.60
2. Toll rates on goods vehicles
Load Toll standards
Legally loaded Up to 5 tons Rmb0.09/ton per km
Above 5 tons and up to 15 tons Rmb0.09/ton per km x 1.5 is reduced in a linear manner
to Rmb0.09/ton per km
Above 15 tons and up to 30 tons Rmb0.09/ton per km is reduced in a linear manner to
Rmb0.06/ton per km
Over 30 tons Based on 30 tons calculation
Overloaded Overloaded below 10% Calculation based on the basic fee standard for legally
vehicle loaded
Overloaded up to 30% The overloaded portion over 10% is calculated based on
Rmb0.09/ton per km x 1.2; the remaining portion is
calculated based on the fee standard of "Overloaded
below 10%"
Overloaded above 30% and up to 50% The legally loaded portion and the overloaded portion
up to 30% is calculated based on the fee standard of
"Overloaded up to 30%"; the remaining portion is
calculated based on Rmb0.09/ton per km x 2
Overloaded above 50% and up to 100% The legally loaded portion and the overloaded portion
up to 30% is calculated based on the fee standard of
"Overloaded up to 30%"; the remaining portion is
calculated based on Rmb0.09/ton per km x 3
Overloaded over 100% The legally loaded portion and the overloaded portion
up to 30% is calculated based on the fee standard of
"Overloaded up to 30%"; the remaining portion is
calculated based on Rmb0.09/ton per km x 4
* The mileage fee for Class 1 vehicle on the Shangsan Expressway and Jinhua section of Ningbo-Jinhua
Expressway is Rmb0.40/vehicle/km. The toll rates for other passenger vehicles and trucks are the same as
those for the Shanghai-Hangzhou-Ningbo Expressway.
Financial and Operating Highlights
Results
Year ended December 31,
2010 2011 2012 2013 2014
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated)
Revenue 6,959,504 6,994,391 6,927,415 7,851,115 9,051,123
Profit Before Tax 3,044,830 2,719,108 2,461,289 2,971,738 3,768,192
Income Tax Expense (784,714) (704,705) (634,669) (756,761) (917,948)
Profit for the year 2,260,116 2,014,403 1,826,620 2,214,977 2,850,244
Attributable to:
Owners of the Company 1,826,565 1,760,738 1,649,484 1,907,470 2,349,052
Non-controlling interests 433,551 253,665 177,136 307,507 501,192
Earnings Per Share (EPS) 42.06 cents 40.54 cents 37.98 cents 43.92 cents 54.09 cents
Return on Equity (ROE)
2010 2011 2012 2013 2014
(Restated) (Restated) (Restated)
ROE 11.92% 11.19% 10.28% 11.94% 13.82%
For Segmental Revenue (Year 2014), Segmental Net Profit (Year 2014) and other Financial and
Operating Highlights graphs, please visit: http://photos.prnasia.com/prnk/20150330/8521501909-b
Chairman's Statement
Dear Shareholders,
It is my honor to present the annual results of Zhejiang Expressway ("ZJE" or "the Company", collectively referred
to as "the Group" with subsidiaries) for the year 2014 on behalf of the Board of Directors.
In 2014, global economic recovery was complicated and still subject to downward pressure. Unstable monetary policies
in major economies in the world gave rise to constant fluctuation in the capital markets. China's economy saw
moderate and steady growth in the face of external volatility, entering a phase that some have coined the "New
Normal". This means that China is now more focused on quality growth of the economy. Although both GDP and the
nominal increase of fixed-asset investments had slowed down compared to past years, China's economy will have
higher sustainability alongside structural optimization and higher growth quality amid a more stable economy.
Zhejiang Province, where the Company is located, faced downward economic pressure last year against the backdrop of
a complicated external environment. The economic growth in Zhejiang Province in the whole year experienced a
moderate slowdown but the pace remained healthy, delivering a year-on-year growth of 7.6%. In general, the Group's
toll road business saw stable growth, with traffic volume on our three expressways experiencing varying levels of
organic growth due to the different pace of economic expansion in the regions where they are located. As for
policies, the China Securities Regulatory Commission released a number of favorable policies to encourage
securities brokerage firms to develop innovative businesses, so as to encourage development in the whole securities
sector. Benefitting from this, margin financing and securities lending has become a major profit driver for the
Group's securities business.
2014 was the first year that the Company began to implement internal reform, marking a milestone of its three-year
strategic program. We successfully accomplished our annual goals and reached a record high in revenue via focusing
on reform and innovation as two main themes within our businesses. The Group continuously strengthened efforts to
increase toll income by taking more initiatives to plug loopholes, while implementing a series of measures to
effectively reduce costs and increase efficiency. For example, we analyzed the routes of certain vehicles and
successfully adopted targeted publicity measures to attract additional traffic. As a result, the Shangsan
Expressway and the Jinhua Section of the Ningbo-Jinhua Expressway saw a significant increase of traffic volume.
Meanwhile we continued to strengthen cost management in order to expand the Group's competitive advantage. We
successfully reduced over 20% of equipment use cost and administration fees. On the personnel side, we believe
that human capital is our most powerful resource, and when effectively utilized can be the key driving force
in the transformation and upgrade of corporate development. In line with this, we are currently working on a
three-year plan for human resources to further improve our staff management system, increase motivational
initiatives, and broaden the hiring channels in order to create more opportunities for acquiring talent.
We are dedicated to inspiring every employee within the Company to be a value creator so as to stimulate
corporate vitality and development.
Thanks to the establishment of the Shanghai-Hong Kong Stock Connect program and the increase of trading volume in
Shanghai and Shenzhen markets, the securities industry grew rapidly and huge opportunities were present in the
innovative business segment. We are happy to see that Zheshang Securities has entered a high growth phase, but we
will remain vigilant towards the various risks that can arise from such growth. For Zheshang Securities, we
continue to prioritize two goals: firstly, the most urgent task is to strengthen communication and coordination
among all parties and strive to complete its A-share listing process in 2015 in order to release the potential
investment value in the securities business and bring higher returns to our shareholders.
Secondly, we have always emphasized innovative development that is compliant with regulations. Going forward,
we will continue to concentrate on business innovation while ensuring the effective execution of risk management
including focusing on operationalrisks, compliance risks and liquidity risks that are caused by increased financial
leverage, as well as enhancing auditing and supervising efforts.
The "New Normal" is the primary feature of China's economic development for the present and the near future. While
it provides us with directions to improve management ability within our main businesses, it also helps us explore
new investment opportunities. Now the development of the Group has entered a new stage where we will begin roll-out
of our long-term strategic plan leveraging on our advantage in resources and capital as well as the resources of our
main business. In line with this, we will place emphasis on projects related to industry upgrades under development
in Zhengjiang Province. Looking ahead in 2015, we will continue to create better internal conditions for company
development and enhance our managerial ability on every level in order to realize new breakthroughs.
Looking back on the fiscal year, I would like to thank our directors, management teams on each level, and 6,456
employees for their dedication and support that made the Company's steady development possible. I would also like
to thank all the shareholders for their long-term support and trust. We expect to deepen the development of our
main business and push forward business transformation so as to provide higher returns with better performance
to our investors.
Zhan Xiaozhang
Chairman
March 18, 2015
The Company will spare no effort in its transition and will closely adhere to the themes of "Reform, Innovation,
and Transformational Development". We look to actively improve management effectiveness and efficiency, while
undertaking comprehensive strategic planning for the 13th Five Year Plan.
Management Discussion and Analysis
BUSINESS REVIEW
In 2014, China's economy grew at a slower while steady pace with a 7.4% increase in GDP compared with last year.
Zhejiang Province's economy benefited from smooth growth in fixed assets investment and consumption, as well as from
solid increase in exports. During the Period, Zhejiang Province's GDP increased 7.6% year-on-year and demonstrated
an upward trend on quarterly basis.
As Zhejiang Province's economy steadily improved and foreign trade increased during the Period, traffic volume on
the Group's expressways continued to witness decent organic growth. In addition, trading in the domestic stock
market was active. As a result, income from the Group's overall operations increased 15.5% year-on- year. Total
income reached Rmb9,343.77 million, of which Rmb4,407.70 million was generated from the three major expressways
operated by the Group, representing an increase of 6.0% year-on-year and 47.2% of the total income; Rmb2,388.00
million was from the Group's toll road-related businesses, representing an increase of 8.9% year-on-year and 25.5%
of the total income; and Rmb2,548.07 million was from the securities business, representing an increase of 46.3%
year-on-year and 27.3% of the total income.
27.3%
Securities Business Income
47.2%
Toll Road Operations Income
25.5%
Toll Road-Related Business Operations Income
A breakdown of the Group's income for the Period is set out below:
2014 2013
Rmb'000 Rmb'000 % Change
Toll Road Operations Income
Shanghai-Hangzhou-Ningbo Expressway 3,111,048 3,122,022 -0.4%
Shangsan Expressway 987,429 769,723 28.3%
Jinhua Section, Ningbo-Jinhua Expressway 309,222 266,594 16.0%
Toll Road-Related Business Operations Income
Service areas 2,216,382 2,062,558 7.5%
Advertising 85,362 107,692 -20.7%
Road maintenance 86,257 22,227 288.1%
Securities business income
Commission 1,808,953 1,288,151 40.4%
Interest income 739,116 454,017 62.8%
Subtotal 9,343,769 8,092,984 15.5%
Less: Revenue taxes (292,646) (241,869) 21.0%
Revenue 9,051,123 7,851,115 15.3%
Toll Road Operations
Given the steadily improving economy in Zhejiang Province and the growth in foreign trade, the Group's expressways
maintained solid organic growth in traffic volume. During the Period, the Group's three expressways, the Shanghai-
Hangzhou-Ningbo Expressway, the Shangsan Expressway and the Jinhua Section of the Ningbo-Jinhua Expressway, recorded
organic growth of 6.5%, 7.4% and 11.8%, respectively, in traffic volume, with the varied rates of growth due to the
different regions where the three expressways are located.
The Jiaxing-Shaoxing Bridge (not operated by the Group), which first opened for traffic in July, 2013, diverted some
traffic away from the Group's Shanghai-Hangzhou-Ningbo Expressway. However, the Company's proactive efforts in
adopting measures such as attracting more traffic with better road signage resulted in an additional rise in traffic
on the Group's Shangsan Expressway and the Hangzhou-Ningbo Section of the Shanghai-Hangzhou- Ningbo Expressway, and
allowed the positive impact on the Shangsan Expressway brought by the Jiaxing- Shaoxing Bridge to be fully realised.
During the Period, the opening of the Jiaxing-Shaoxing Bridge helped to drive an increase in toll income of Rmb154.79
million from the Shangsan Expressway, while it resulted in a decrease in toll income of Rmb112.90 million
from the Shanghai-Hangzhou-Ningbo Expressway.
Meanwhile, the Jinhua Section of the Ningbo-Jinhua Expressway continued to see high organic growth in traffic volume
as a result of strong growth in trade at the nearby Yiwu small commodities market and the booming development of e-
commerce and foreign trade in the surrounding areas. Since local roads that run parallel to the Jinhua Section of
the Ningbo-Jinhua Expressway were under construction, and measures to attract more traffic with better road signage
continued to be adopted, they led to positive growth in toll income. During the Period, toll income of the Jinhua
Section of the Ningbo-Jinhua Expressway increased by Rmb11.74 million.
For the bar charts of the Traffic Volume (Full-trip equivalents/day) and Toll Income (RMB million), please visit:
http://photos.prnasia.com/prnk/20150330/8521501909-c
In addition, construction on the Hangzhou Airport Road, started on April 15, 2014, resulted in a decrease of
Rmb57.91 million in toll income from the Shanghai-Hangzhou-Ningbo Expressway, despite our effort to open a four-hour
window for trucks to pass through every day. The opening of Qianjiang Road (not operated by the Group) on April 16,
2014 also led to a decrease of Rmb10.24 million in toll income from the Shanghai-Hangzhou- Ningbo Expressway.
In response to several diversions that affected traffic volume on the Group's toll road operations, the management
of the Company took more initiatives to plug loopholes, introduced better road signage to attract more traffic,
conducted marketing campaigns to promote the Company's distance-based toll pricing, and fine- tuned weighing
equipment for accurate measurements to increase toll income.
During the Period, the average daily traffic volume in full-trip equivalents along the Group's Shanghai-Hangzhou-
Ningbo Expressway was 45,198, representing an increase of 2.7% year-on-year. In particular, the average daily
traffic volume in full-trip equivalents along the Shanghai-Hangzhou section of the Shanghai-Hangzhou- Ningbo
Expressway was 43,563, representing a decrease of 1.4% year-on-year, and that along the Hangzhou- Ningbo Section was
46,366, representing an increase of 5.6% year-on-year. Average daily traffic volume in full- trip equivalents along
the Shangsan Expressway was 22,898, representing an increase of 25.0% year-on-year. Average daily traffic volume in
full-trip equivalents along the Jinhua Section of the Ningbo-Jinhua Expressway was 15,911, representing an increase
of 17.6% year-on-year.
Total toll income from the 248km Shanghai-Hangzhou-Ningbo Expressway, the 142km Shangsan Expressway and the 70km
Jinhua Section of the Ningbo-Jinhua Expressway was Rmb4,407.70 million during the Period, representing an increase
of 6.0% year-on-year. Toll income from the Shanghai-Hangzhou-Ningbo Expressway was Rmb3,111.05 million, representing
a decrease of 0.4% year-on-year; toll income from the Shangsan Expressway was Rmb987.43 million, representing an
increase of 28.3% year-on-year. Toll income from the Jinhua Section of the Ningbo-Jinhua Expressway was Rmb309.22
million, representing an increase of 16.0% year-on-year.
Toll Road-Related Business Operations
The Company 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 advertising at
service areas, toll stations and expressway interchanges, and road maintenance.
Undertake more initiatives to plug loopholes, reduce costs and increase income, and enhance operation management
in main businesses
The company has been actively improving efficiency by introducing targeted promotions and road signage and
intensifying investigation and corrective actions against traffic violations to recoup toll income losses.
Simultaneously, the Company has endeavored to strengthen bidding procedure control on maintenance projects, reduce
equipment costs and carry out diligent and thrifty operation to reduce administrative expenses. Through our efforts,
the Company has achieved remarkable results in reducing costs and increasing income during the year.
During the Period, the opening of the Jiaxing-Shaoxing Bridge diverted a certain amount of traffic volume from the
Shanghai-Hangzhou-Ningbo Expressway. As a result the sales in service areas along the Shanghai-Hangzhou- Ningbo
Expressway, which had been a bigger contributor to revenue in the past, were adversely influenced. In addition, a
large number of billboards along the expressways were removed due to a clean up campaign of billboards along all
expressways in Zhejiang Province. This resulted in a substantial decline in advertising revenue and a slight decline
in overall revenue from services areas. However, the Group's toll road-related businesses as a whole recorded solid
growth as a result of additional income from external road maintenance projects and increased sales of refined oil
products. Income from toll road-related operations during the Period was Rmb2,388.00 million, representing an
increase of 8.9% year-on-year.
Securities Business
During the Period, Zheshang Securities' average brokerage commission rate declined from 0.08% to 0.067% as a result
of more intensified competition in the securities industry and relaxed controls on commissions. The total trading
volume of the Shanghai and Shenzhen stock markets increased 63.8% from last year due to a revival of activity in the
domestic securities market. During the Period, the brokerage business of Zheshang Securities saw a substantial
increase in trading volume and posted a year-on-year increase of 27.3% in brokerage commission income.
In addition, while accelerating the all-round development of each business segment, Zheshang Securities has been
actively exploring innovative business strategies, and constantly working to streamline its income and profit
structure and reduce the dominant role that its brokerage business has played in the past. Income from investment
banking, margin financing and securities lending, and asset management recorded year-on-year increases of 52.1%,
97.1% and 134.5%, respectively.
Zheshang Securities' IPO application to the Shanghai Stock Exchange was accepted by the China Securities Regulatory
Commission in May, 2013. Zheshang Securities remains on the wait list for an IPO.
During the Period, Zheshang Securities' total operating income was Rmb2,548.07 million, an increase of 46.3% year-
on-year. Of this, brokerage commission income rose 40.4% year-on-year to Rmb1,808.95 million, and interest income
from the securities business was Rmb739.12 million, an increase of 62.8%. Moreover, securities investment gains of
Zheshang Securities included in the consolidated statement of profit or loss and other comprehensive income of the
Group was Rmb262.39 million (2013: gains of Rmb85.42 million) during the Period.
Grasp growing opportunities in the industry and facilitate Zhejiang Securities' IPO application process in the A-
share market
Zhejiang Securities continues to expand its business and accelerate nationwide coverage by leveraging opportunities
in the industry; total assets under management hit a record high of RMB83.15 billion as at December 31, 2014.
Zhejiang Securities aims to list on the A-share market in 2015 so as to bring better return for shareholders and
unlock the potential investment value of the securities business.
Long-Term Investments
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate company of the Company) recorded income
of Rmb6,365.63 million, which was flat compared with last year as a result of both the sales volume increase of
refined oil products in the first three quarters of the year and continuous adjustments to domestic refined oil
product pricing, especially the three consecutive cuts in September 2014. During the Period, net profit of the
associate company was Rmb26.83 million (2013: net profit of Rmb21.63 million).
Shengxin Expressway Co., Ltd. ("Shengxin Co", a 50% owned joint venture of the Company) operates the 73.4km long
Shaoxing Section of the Ningbo-Jinhua Expressway. During the Period, the average daily traffic volume in full-trip
equivalents was 13,994, an increase of 10.3% year-on-year. Toll income during the Period was Rmb317.63 million.
However, due to increased road maintenance expenses and its relatively heavy financial burden, the joint venture
reported a loss of Rmb66.55 million (2013: loss of Rmb72.02 million).
During the Period, the income of Zhejiang Communications Investment Group Finance Co., Ltd. (a 35% owned associate
company of the Company) was mainly derived from fees and commissions from providing financial services, including
arranging loans and receiving deposits, for the subsidiaries of Zhejiang Communications Investment Group Co., Ltd.,
the Company's controlling shareholder. During the Period, this associate company realized a net profit of Rmb153.20
million (2013: net profit of Rmb79.05 million).
FINANCIAL ANALYSIS
The Group adopts a prudent financial policy with an aim to provide shareholders of the Company with sound returns
over the long term.
During the Period, profit attributable to owners of the Company was approximately Rmb2,349.05 million, representing
an increase of 23.2% year-on-year, return on owners' equity was 13.8%, representing an increase of 15.7% year-on-
year, while earnings per share for the Company was Rmb54.09 cents.
Liquidity and financial resources
As at December 31, 2014, current assets of the Group amounted to Rmb35,745.72 million in aggregate (December 31,
2013: Rmb16,652.84 million), of which bank balances and cash accounted for 11.4% (December 31, 2013: 15.1%), bank
balances held on behalf of customers accounted for 46.4% (December 31, 2013: 49.4%) held for trading investments
accounted for 5.9%(December 31, 2013: 7.1%) and loans to customers arising from margin financing business held for
trading investments accounted for 23.9% (December 31, 2013: 17.7%). The current ratio (current assets over current
liabilities) of the Group as at December 31, 2014 was 1.2 (December 31, 2013: 1.4). Excluding the effect of the
customer deposits arising from the securities business, the resultant current ratio of the Group (current assets
less bank balances held on behalf of customers over current liabilities less balance of accounts payable to
customers arising from securities business) was 1.6 (December 31, 2013: 2.2).
The amount of held for trading investments of the Group as at December 31, 2014 was Rmb2,124.74 million (December
31, 2013: Rmb1,181.03 million), of which 91.2% was invested in bonds, 4.2% was invested in stocks, and the rest was
invested in open-end equity funds.
During the Period, net cash inflow generated from the Group's operating activities amounted to Rmb3,669.55 million.
The Directors of the Company do not expect the Company to experience any problems with liquidity and financial
resources in the foreseeable future.
As at December 31,
2014 2013
Rmb'000 Rmb'000
Cash and cash equivalents
Rmb 3,266,792 1,773,310
US$ in Rmb equivalent 28,832 28,209
HK$ in Rmb equivalent 6,098 5,462
Time deposits - Rmb 761,320 704,459
Held-for-trading investments - Rmb 2,124,740 1,181,025
Available-for-sale investments - Rmb 570,021 281,924
Total 6,757,803 3,974,389
Rmb 6,723,294 3,940,718
US$ in Rmb equivalent 28,481 28,209
HK$ in Rmb equivalent 6,028 5,462
Borrowings and solvency
As at December 31, 2014, total liabilities of the Group amounted to Rmb30,225.12 million (December 31, 2013:
Rmb12,420.24 million), of which 1.2% was bank and other borrowings, 4.0% was subordinated bonds, 20.8% was
financial assets sold under repurchase agreements, 6.4% was placements from other financial institutions and
54.7% was accounts payable to customers arising from securities business.
Focus on core businesses while prudently seeking diversification opportunities
Bring the Company's transition to a new level
We will fully utilize our resources and funding advantages, plan long-term deployment based on the resources of our
core businesses, focus on participating in upgrading projects for industries in Zhejiang Province, and seize
investment opportunities in new businesses in order to break new ground in transformative projects in 2015.
As at December 31, 2014, total interest-bearing borrowings of the Group amounted to Rmb2,433.57 million,
representing an increase of 32.3% compared to that as at December 31, 2013. The borrowings comprised outstanding
balances of domestic commercial bank loans of Rmb350.00 million, subordinated bonds of Rmb1,200.00 million, and
beneficial certificates of Rmb883.57 million. Of the interest-bearing borrowings, 57.5% was not payable within one
year.
As at December 31, 2014, all of the Group's loans from domestic commercial banks were long-term loans, of which
long-term loans due in one year amounted to Rmb150.00 million, with floating interest rate ranging from 5.895% to
6.765% per annum. The annual interest rates for subordinated bonds were fixed at 6.3% and 5.9%. The fixed interest
rates of beneficial certificates ranged from 5.1% to 7.0% per annum, while the annual interest rate for accounts
payable to customers arising from the securities business was fixed at 0.35%.
Maturity Profile
Gross Within 2-5 years Beyond
amount 1 year inclusive 5 years
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Floating rates
Domestic commercial bank loans 350,000 150,000 200,000 --
Fixed rates
Bonds payable 1,200,000 -- 1,200,000 --
Beneficial certificates 883,570 883,570 -- --
Total as at December 31, 2014 2,433,570 1,033,570 1,400,000 --
Total as at December 31, 2013 1,840,000 1,540,000 300,000 --
Total interest expenses for the Period amounted to Rmb85.60 million, of which capitalized interest amounted to
Rmb7.37 million, while profit before interest and tax amounted to Rmb3,846.42 million. The interest cover ratio
(profit before interest and tax over interest expenses) stood at 44.9 (2013: 32.2) times.
2014 2013
Rmb'000 Rmb'000
Profit before tax and interest 3,846,423 3,066,899
Interest expenses 85,599 95,161
Interest cover ratio 44.94 32.23
As at December 31, 2014, the asset-liability ratio (total liabilities over total assets) of the Group was 58.9%
(December 31, 2013: 38.7%). Excluding the effect of customer deposits arising from the securities business, the
resultant asset-liability ratio (total liabilities less balance of accounts payable to customers arising from
securities business over total assets less bank balances held on behalf of customers) of the Group was 39.3%
(December 31, 2013: 17.8%).
Capital structure
As at December 31, 2014, the Group had Rmb21,129.62 million in total equity, Rmb26,867.77 million in fixed- rate
liabilities, Rmb350.00 million in floating-rate liabilities, and Rmb3,007.35 million in interest-free liabilities,
representing 41.1%, 52.3%, 0.7% and 5.9% of the Group's total capital, respectively. The gearing ratio, which is
computed by dividing the total liabilities less accounts payable to customers arising from the securities business
by total equity, was 64.7% as at December 31, 2014 (December 31, 2013: 21.6%).
As at December 31, 2014 As at December 31, 2013
Rmb'000 % Rmb'000 %
Total equity 21,129,622 41.1% 19,668,959 61.3%
Fixed rate liabilities 26,867,773 52.3% 9,817,103 30.6%
Floating rate liabilities 350,000 0.7% 500,000 1.6
Interest-free liabilities 3,007,349 5.9% 2,103,132 6.5%
Total 51,354,744 100.0% 32,089,194 100.0%
Long-term interest-bearing liabilities 1,400,000 2.7% 300,000 0.9%
Gearing ratio 1 (note) 64.7% 21.6%
Gearing ratio 2 (note) 6.6% 1.5%
Asset-liabilities ratio1 (note) 58.9% 38.7%
Asset-liabilities ratio 2 (note) 39.3% 17.8%
Note: Gearing ratio 1 represents the total liabilities less balance of accounts payable to customers arising from
securities business to the total equity; Gearing ratio 2 represents the total amount of the long-term
interest-bearing liabilities to the total equity; Asset-liabilities ratio 1 represents total liabilities to
total assets; Asset-liabilities ratio 2 represents total liabilities less balance of accounts payable to
customers arising from securities business to total assets less bank balances held on behalf of customers.
Capital expenditure commitments and utilization
During the Period, capital expenditure of the Group totaled Rmb1,509.44 million, while capital expenditure of the
Company totaled Rmb300.93 million. Amongst the total capital expenditure of the Group, Rmb30.00 million was incurred
for setting up a wholly-owned subsidiary of the Company, Rmb1,276.98 million was incurred for acquisition and
construction of properties, Rmb195.28 million was incurred for purchase and construction of equipments and
facilities, and Rmb7.18 million was incurred for service area renovation and expansion.
As at December 31, 2014, the capital expenditure committed by the Group and the Company totaled Rmb1,020.15 million
and Rmb510.81 million, respectively. Amongst the total capital expenditures committed by the Group, Rmb308.05
million will be used for acquisition and construction of properties, Rmb431.40 million for acquisition and
construction of equipments and facilities, Rmb67.70 million for service area renovation and expansion and Rmb213.00
million for equity investment.
The Group will finance the above-mentioned capital expenditure commitments with internally generated cash flow first
and then will consider using debt financing to meet any shortfalls in priority to using other methods.
Contingent liabilities and pledge of assets
Pursuant to the board resolution of the Company dated November 16, 2012, the Company and Shaoxing Communications
Investment Group Co., Ltd. (the other joint venture partner that holds 50% equity interest in Shengxin Co) provided
Shengxin Co with joint guarantee for its bank loans of Rmb2,200.00 million, in accordance with their proportionate
equity interest in Shengxin Co. During the Period, Rmb50.00 million of the bank loans had been repaid.
Pursuant to the resolution of shareholders' meeting dated June 26, 2012 of Zhejiang Yuhang Expressway Co., Ltd.
("Yuhang Co", a 51% equity interest owned subsidiary of the Company), Yuhang Co provided a property under
construction as a mortgaged asset for its domestic commercial bank loan of Rmb150.00 million. As at December 31,
2014, the carrying amount of the mortgaged asset was Rmb786.71 million.
Pursuant to the board resolution dated June 24, 2008 of Zhejiang Jinhua Yongjin Expressway Co., Ltd. ("Jinhua Co"),
Jinhua Co provided the operating right of the expressway operated by it as pledged asset for its domestic commercial
bank loans of Rmb200.00 million. As at December 31, 2014, the carrying amount of the pledged asset was Rmb1,777.27
million.
Except for the above, as at December 31, 2014, the Group did not have any other contingent liabilities, pledge of
assets or guarantees.
Foreign exchange exposure
Save for dividend payments to the holders of H shares in Hong Kong dollars, the Group's principal operations were
transacted and booked in Renminbi. Therefore, the Group's exposure to exchange fluctuation is limited. During the
Period, the Group has not used any financial instruments for hedging purpose.
Although the Directors do not foresee any material foreign exchange risks for the Group, there is no assurance that
foreign exchange risks will not affect the operating results of the Group in the future.
Human resources
During the Period, the Company actively revamped its human resource management, enhanced its remuneration and
performance policy, and prompted the increase in overall payment of remuneration to be linked to the operating
performance of Company and the productivity of employees. As at December 31, 2014, there were 6,456 employees within
the Group, amongst whom 1,530 worked in the managerial, administrative and technical positions, while 4,926 worked
in fields such as toll collection, maintenance, service areas, securities and futures business outlets.
OUTLOOK
As the world economy continues to struggle for recovery, China's economy is moving into a "new normal" as it
downshifts from rapid growth to more moderate levels of growth. It is anticipated that the Group's toll road
business, which is closely tied to macro-economic development, will see steady growth in traffic volume in 2015,
while the rate of growth is expected to be lower than 2014.
Qianjiang Road, which opened in the first half of last year, and the Hangzhou Airport Road, which is currently under
construction, will continue to have a slight diversion impact on traffic from the Shanghai-Hangzhou-Ningbo
Expressway. In addition, the Dongyang-Yongkang Expressway, which will open to traffic soon, is expected to have a
slight diversion impact on traffic from the Jinhua Section of the Ningbo-Jinhua Expressway. In view of the negative
impact brought by the diversions on surrounding new road networks, the Company will closely monitor and conduct
timely research and analysis as well as to improve road signage to attract more traffic to the Group's expressways,
thereby minimizing the loss caused by traffic diversions. Meanwhile, the Company will also work to further control
operating costs.
After the launch of Shanghai-Hong Kong Stock Connect program, it is expected that a series of favorable policies
will be launched to promote the development of the capital markets in China, including an expansion of the
Shanghai-Hong Kong Stock Connect program and the launch of the Shenzhen-Hong Kong Connect program, which will
present new opportunities to the Group's securities business. Meanwhile, Zheshang Securities will pay close
attention to market policy updates, push to continue innovation in its business, and seek new profit drivers. In
addition, while Zheshang Securities focuses on reinforcing cost and risk controls, it will look to push forward its
listing process on the Shanghai Stock Exchange, promoting a sustainable and healthy development of its various lines
of businesses.
Looking ahead to 2015, with China's economy moving into a "new normal" mode of development, the Group's management
believes that the new round of economic reforms will bring new opportunities and challenges to the Group's
transformational development. The Group will strengthen its core expressway business and improve its securities
businesses as well as look for appropriate investment projects through diversified channels to further exploit its
growth potential and boost profitability in the future.
Principal Risks and Uncertainties
TOLL ROAD BUSINESS RISKS
Economic Environment
As the global economy continues to struggle for recovery, China's economy is moving into a "new normal" as it
downshifts from rapid growth to more moderate levels of growth. Meanwhile, although the import and export trading
conditions are showing signs of recovery, but many uncertain factors remain, which is having an impact on Zhejiang,
a province with heavy reliance on export trading. Growth in the traffic volume and toll revenue of the Group's
expressways is expected to remain uncertain, creating uncertainties for the operations, financial conditions and
operating results of the Group.
Roads Competition
Dongyang-Yongkang Expressway, which is scheduled to commence service soon in 2015, is expected to have a slight
diversion impact on traffic from the Jinhua section of the Ningbo-Jinhua Expressway. In addition, the opening of
other new expressways nearby, it is expected that new traffic will be diverted from certain sections of the Group's
expressways. Accordingly, we cannot be assured as to whether traffic volume to be generated on the Group's
expressways will be maintained at the same levels as before or will increase in the future, or whether or not the
operating results of the Group will be negatively affected.
Toll Policy
With the implementation of the toll waiver policy on small passenger vehicles on key festivals and holidays by the
PRC government on September 30, 2012, the expressway operators who charge for toll are negatively affected. In
addition, due to the introduction of a special project by five ministries and commissions for the rectification of
the toll road policy in Zhejiang province, a number of new policies focusing on adjusting the toll policy of
expressways within the province were successively issued. Despite that we expect the possibility of further
significant changes in the policies of the expressway industry in the near term is minimal, we cannot be assured
that they will not have any adverse effects on the toll revenue of the Group.
SECURITIES BUSINESS RISKS
Market Fluctuations
The securities business is highly susceptible to market fluctuations and may experience periods of high volatility
accompanied by reduced liquidity. It may be materially affected by economic and other factors such as the global
market conditions; the availability and cost of capital; the liquidity of the global markets; the level and
volatility of stock prices, commodity prices and interest rates; currency values and other market indices;
inflation; natural disasters; acts of war or terrorism; as well as investor sentiment and confidence in the
financial markets. There is no assurance as to whether our securities business will be adversely affected by
fluctuations in the market, or whether our securities business will continue to contribute to our overall profit
margin.
Regulation of the Securities Business
We are subject to extensive regulations in the PRC that govern how we conduct our securities business, and we are
subject to risks of intervention by the PRC regulatory authorities. We could be fined, prohibited from engaging in
some of our business activities or subject to limitations or conditions on our business activities, among other
things. Significant regulatory actions against us could have material adverse impacts on our financial position,
cause us significant reputational harm, or harm our business prospects. New laws, regulations or changes in the
enforcement of existing laws or regulations applicable to our clients may also adversely affect our business.
FINANCIAL RISKS
For financial risks and uncertainties of the Group, please see notes 4, 5 and 6 to the Consolidated Financial
Statements.
STATEMENT OF RESPONSIBILITY FROM THE DIRECTORS WITH RESPECT TO THE ANNUAL REPORT AND THE COMPANY'S ACCOUNTS
The Directors of the Company, whose names and functions are listed in the later part of this report, duly confirm that to the best
of their knowledge:
-- the consolidated financial statements prepared and subject to disclosure under the Hong Kong Financial
Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants give a true and fair
view of the assets, liabilities, financial position and profit of the Group, and cover the enterprises that
have been consolidated into the Company; and
-- the "Management Discussion and Analysis" section included in this annual report includes a fair review of the
development and performance of the business and the position of the Group, covers the enterprises that have
been consolidated into the Company and describes the principal risks and uncertainties faced by the Group.
From the beginning of year 2014 up to now, there has been no occurrence of significant events that would have a
material impact on the normal operation of the Group.
By Order of the Board
Tony ZHENG
Company Secretary
Hangzhou, Zhejiang Province, the PRC
March 18, 2015
Corporate Governance Report
CORPORATE GOVERNANCE PRACTICES
To govern the daily functioning of the Board of Directors of the Company, the Company has adopted its own Guidelines
on Corporate Governance that closely followed the principles of good governance in Appendix 14 of the Listing Rules
(available at www.hkex.com.hk) ("CG Code").
During the Period, the Company has complied with all code provisions in the CG Code and adopted the recommended best
practices in the CG Code as and when applicable.
DIRECTORS' SECURITIES TRANSACTIONS
The Company has adopted the Rules on Securities Dealings ("Rules on Securities Dealings") for the Directors,
supervisors, senior management personnel and other employees of the Company on terms no less exacting than the
required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model
Code") set out in Appendix 10 of the Listing Rules.
Upon specific inquiries to all the Directors, the Directors have confirmed their respective compliance with the
required standards for securities transactions by Directors as set out in the Model Code and the Rules on Securities
Dealings during the Period.
BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD")
The executive directors of the Company during the Period were:
Mr. ZHAN Xiaozhang (Chairman)
Ms. LUO Jianhu (General Manager)
Mr. DING Huikang
The non-executive directors of the Company during the Period were:
Mr. LI Zongsheng (resigned on December 29, 2014)
Mr. WANG Weili (resigned on December 29, 2014)
Mr. WANG Dongjie
Mr. DAI Benmeng
Mr. ZHOU Jianping
The independent non-executive directors of the Company during the Period were:
Mr. ZHANG Junsheng (resigned on December 29, 2014)
Mr. ZHOU Jun
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang Rosa
During the Period, the Board held a total of eight meetings. Individual attendances by the directors (as indicated
by the numbers of meetings attended/numbers of relevant meetings held) are as follows:
Attendance
Attendance Attendance through
in person by proxy communication
Mr. ZHAN Xiaozhang (Chairman) 4/8 4/8
Ms. LUO Jianhu (General Manager) 4/8 4/8
Mr. DING Huikang 4/8 4/8
Mr. LI Zongsheng (resigned on December 29, 2014) 3/7 4/7
Mr. WANG Weili (resigned on December 29, 2014) 3/7 4/7
Mr. WANG Dongjie 2/8 1/8 4/8
Mr. DAI Benmeng 1/1
Mr. ZHOU Jianping 1/1
Mr. ZHANG Junsheng (resigned on December 29, 2014) 4/6 2/6
Mr. ZHOU Jun 4/8 4/8
Mr. PEI Ker-Wei 4/8 2/8
Ms. LEE Wai Tsang Rosa 1/1
During the Period, the Company held three general meetings of the shareholders. The meetings were chaired by
Chairman, and all executive directors were present at the meetings.
The Board is charged with duties as well as given powers that are expressly specified in the articles of association
of the Company, the scope of which includes, amongst others: to determine the business plans and investment
proposals of the Company; to prepare the financial budget and final accounts of the Company; to determine the
dividend policy of the Company; to appoint or dismiss senior managerial officers of the Company as well as to
determine their remuneration; and to draw up proposals for any material acquisition or sale by the Company.
To assist the Board to effectively discharge its duties, the Board has set up the Audit Committee, the Nomination
Committee, the Remuneration Committee, and the Strategic Committee.
While the Board fully retains its power to decide on matters within its scope of duties and powers, relevant
preparation and drawing up of plans or proposals were usually delegated to the management.
The Company has complied with the requirements under Rules 3.10(1) and (2) of the Listing Rules regarding the
appointment of independent non-executive directors, with three independent non-executive directors appointed, at
least one of whom possesses the appropriate professional qualification or accounting or related financial management
expertise.
Pursuant to Rule 3.13 of the Listing Rules, the Company had specifically inquired with all three independent non-
executive directors and received their respective confirmation of independence during the Period. The three
independent non-executive directors have all confirmed their compliance with requirements regarding independence
under Rule 3.13 of the Listing Rules. The Company still considers the independent non-executive directors to be
independent.
There were no financial, business, family or other material or relevant relationships between members of the Board,
including that between the Chairman and the General Manager of the Company.
Each newly appointed director receives induction on the first occasion of his or her appointment, so as to ensure
that he or she has appropriate understanding of the business and operations of the Company and that he or she is
fully aware of his or her responsibilities and obligations under the Listing Rules and relevant regulatory
requirements. Directors are also regularly updated on the Group's business and industry environments where
appropriate in the management's monthly reports to the Board as well as briefings and materials circulated to the
Board before board meetings.
In addition, during the Period, the Company has arranged for all its executive and non-executive directors to
undergo continuous trainings designed to develop and refresh their knowledge and skills so as to ensure that their
contribution to the Board remains informed and relevant. However, as the management considers that the independent
non-executive directors of the Company are very experienced, knowledgeable and resourceful, the Company did not
arrange any professional briefings or training programs for its independent non-executive directors and has decided
to leave it to the independent non-executive directors to undergo appropriate training as they see fit.
CHAIRMAN AND GENERAL MANAGER
During the Period, Mr. ZHAN Xiaozhang served as Chairman, and Ms. LUO Jianhu served as General Manager of the
Company, respectively. The roles of Chairman and General Manager are fully segregated as expressly set out in the
articles of association of the Company.
NON-EXECUTIVE DIRECTORS
Terms for the non-executive directors of current session of the Board started on or after June 11, 2012 and will
expire on June 30, 2015.
SPECIAL COMMITTEES UNDER THE BOARD
The Board has set up the Audit Committee, the Nomination Committee, the Remuneration Committee, and the Strategic
Committee. Roles and responsibilities for each committee are specified in its terms of reference, details of which
can be found under the "Corporate Governance" section in the Company's website.
The Audit Committee comprised of the three independent non-executive directors and two non-executive directors,
namely Mr. ZHOU Jun, Mr. PEI Ker-Wei, Ms. LEE Wai Tsang Rosa, Mr. WANG Dongjie and Mr. ZHOU Jianping of whom Mr.
ZHOU Jun serves as Chairman of the Audit Committee.
The Nomination Committee comprised of the three independent non-executive directors, one executive director and one
non-executive director, namely Mr. ZHOU Jun, Mr. PEI Ker-Wei, Ms. LEE Wai Tsang Rosa, Mr. ZHAN Xiaozhang and Mr. DAI
Benmeng, of whom Mr. ZHAN Xiaozhang serves as Chairman of the Nomination Committee.
The Company believes that diversification of board members is a key element to maintain the Company's competitive
advantage, improve business performances, and promote the Company's continued development. When setting up the board
member composition, the Company takes into consideration a number of aspects that determine board member
diversification, including but not limited to gender, age, culture, education background, professional experience,
work and living background, knowledge and skill, etc. The Company's Nomination Committee is responsible for
assessing the board's structure, number of members, as well as a diversified composition, providing recommendation
or suggestion on candidates to serve as new directors of the Company to the board when needed. The assessment as
well as recommendation or suggestion above would have fully taken into consideration any pros and cons to the
diversification of board members.
The Remuneration Committee comprised of the three independent non-executive directors and two non-executive
directors, namely, Mr. ZHOU Jun, Mr. PEI Ker-Wei, Ms. LEE Wai Tsang Rosa, Mr.DAI Benmeng and Mr. ZHOU Jianping, of
whom Mr. PEI Ker-Wei, serves as Chairman of the Remuneration Committee.
The Strategic Committee comprised of the three executive directors, namely Mr. ZHAN Xiaozhang, Ms. LUO Jianhu and
Mr. DING Huikang as well as Mr. ZHANG Jingzhong, Mr. WANG Dehua, Mr. ZHENG Hui and several outside experts and
advisors, of whom Mr. ZHAN Xiaozhang serves as Chairman of the Strategic Committee.
During the Period, the Audit Committee held a total of four meetings. Individual attendances by the members of the
Audit Committee (as indicated by the numbers of meetings attended/numbers of meetings held) are as follows:
Attendance Attendance
in person by proxy
Mr. ZHANG Junsheng (resigned on December 29, 2014) 4/4
Mr. ZHOU Jun 4/4
Mr. PEI Ker-Wei 4/4
Mr. WANG Weili (resigned on December 29, 2014) 4/4
Mr. WANG Dongjie 2/4 1/4
In the meetings held during the Period, the Audit Committee conducted, amongst others, review of financial
statements for the quarterly, interim and annual results, the effectiveness of the system of internal control and
the reporting thereof to the Board, as well as recommendation on the re-appointment of external auditors.
During the Period, the Nomination Committee held a total of four meetings. Individual attendances by the members of
the Nomination Committee (as indicated by the numbers of meetings attended/numbers of meetings held) are as follows:
Attendance
Attendance Attendance through
in person by proxy communication
Mr. ZHANG Junsheng (resigned on December 29, 2014) 1/3 1/3 1/3
Mr. ZHOU Jun 2/4 2/4
Mr. PEI Ker-Wei 2/4
Ms. LEE Wai Tsang Rosa 1/1
Mr. ZHAN Xiaozhang 2/4 2/4
Mr. LI Zongsheng (resigned on December 29, 2014) 2/3 1/3
Mr. DAI Benmeng 1/1
During the Period, the Nomination Committee mainly discussed the candidates for directors of the Board and senior
management of the Company. Proposed candidates for senior management of the Company that were reviewed by the
Nomination Committee were later reviewed and approved by the Board. Proposed candidates for directors of the Board
that were reviewed by the Nomination Committee were later reviewed and approved by the Board and the extraordinary
general meeting of shareholders.
During the Period, there were no changes to the remuneration policies of the members of the Board or senior
management of the Company; hence the Remuneration Committee had not held any meetings.
During the Period, the Strategic Committee held one expanded meeting, mainly discussed the Company's direction for
transformational development. Each and every member of the Strategic Committee and the other non-executive directors
of the Company attended the expanded meeting.
The Board is responsible for developing and reviewing the Company's corporate governance policies and practices,
monitoring the Company's compliance with the Code and its disclosure within this report; the Board reviews and
monitors the training and continuous professional development of Directors and senior management through the works
of human resources department, and review and monitor the Company's policies and practices on compliance with legal
and regulatory requirements through the works of legal and internal audit department.
During the Period, the Directors have all confirmed their responsibility for preparing the accounts, and that there
were no events or conditions which would have a material impact on the Company's ability to continue to operate as a
going concern basis.
AUDITORS' REMUNERATION
During the Period, the Company had paid HK$4.18 million (approximately Rmb3.30 million equivalent) and Rmb1.12
million to Deloitte Touche Tohmatsu Certified Accountants (the Hong Kong auditors) and Pan-China Certified Public
Accountants Ltd. (the PRC auditors), respectively, for audit services conducted in 2013. The auditors did not
provide non-audit services to the Company.
SECRETARY TO THE BOARD
During the Period, the Secretary to the Board had complied with Rule 3.29 of the Listing Rules regarding undergoing
relevant professional trainings.
DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE'S INTERESTS IN SHARES AND UNDERLYING SHARES OF THE COMPANY
As at December 31, 2014, none of the Directors, Supervisors and General Manager had any interests or short positions
in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the
meaning of Part XV of the SFO) as recorded in the register required to be kept pursuant to Section 352 of the SFO,
or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code.
INTERESTS AND SHOR T POSITIONS OF OTHER PERSONS IN SHARES AND UNDERLYING SHARES
As at December 31, 2014, the interests and short positions of other persons in the shares and underlying shares of
the Company according to the register required to be kept by the Company pursuant to Section 336 of the SFO, or as
otherwise notified to the Company and the Hong Kong Stock Exchange are set out below:
Percentage of
Total interests the issued
in number of share capital
ordinary shares of the Company
Substantial shareholders Capacity of the Company (domestic shares)
Communications 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, 185,970,909(L) 12.96%(L)
investment manager and 115,033,408(P) 8.02%(P)
custodian corporation/
approved lending agent
BlackRock, Inc. Interest of controlled corporations 160,340,581(L) 11.18%(L)
The letter "L" denotes a long position. The letter "P" denotes interest in a lending pool.
Save as disclosed above, as at December 31, 2014, no other persons had any interests or short positions in the
shares or underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO, or
as otherwise notified to the Company and the Hong Kong Stock Exchange.
SHAREHOLDERS' RIGHTS
Pursuant to the Articles of Association of the Company, two or more Shareholders who in aggregate hold 10% or more
of the voting rights of all the shares of the Company having the right to vote may write to the Board to request the
convening of an extraordinary general meeting and specifying the agenda of the meeting. Upon receipt of the request
in writing, the Board shall convene the extraordinary general meeting as soon as possible. Shareholders who hold in
aggregate 5% or more of the voting rights of all the shares of the Company having the right to vote are entitled to
propose additional motions in annual general meeting, provided that such motions are served on the Company within 30
days after the issue of the notice of annual general meeting.
Written requests, proposals and enquiries may be sent to the Company through contact details listed near the end of
this report.
INVESTOR RELATIONS
The Board is committed to ensuring that all shareholders and the investment community have equal and timely access
to information about the Company so as to enable their accurate assessment of the Company's fair value. Such
information is available through channels including financial reports, shareholder meetings, statutory
announcements, the Hong Kong Stock Exchange website (www.hkexnews.hk) and the Company's own website
(www.zjec.com.cn).
Activities such as investor and analyst briefings, one-on-one meetings, conference calls, roadshows, and press
conferences are held regularly by senior management of the Company, particularly after results announcements.
Great importance is also attached to maintaining clear and effective communications channels with investors as part
of the Company's bid to enhance its transparency and to promote the understanding of its business in the investment
community. Any parties who wish to learn more about the Company may do so via the contact details listed below:
Mr. Tony Hui ZHENG
Company Secretary
12/F, Block A, Dragon Century Plaza
1 Hangda Road Hangzhou, Zhejiang 310007 China
Tel: 86-571-87987700
Fax: 86-571-87950329
E-mail: zhenghui@zjec.com.cn
During the Period, the last shareholders' meeting of the Company took place at 10:00 a.m. on Monday, December 29,
2014 at the headquarters of the Company. Details of this extraordinary general meeting of the shareholders were set
out in the announcement dated December 29, 2014 on resolutions passed at the extraordinary general meeting of the
shareholders.
The Date of the next annual general meeting of the Company and resolutions for review will be specified in notice of
annual general meeting when it is published.
The Company has an issued share capital of 4,343,114,500 shares comprised of domestic shares and H shares. The
domestic shares are held by Zhejiang Communications Investment Group Co., Ltd. as to 2,909,260,000 shares,
representing approximately 67% of the total issued capital of the Company. The remaining 1,433,854,500 shares are H
shares, representing approximately 33% of the total issued capital of the Company. As at the date of this report,
and to the best of the Directors' knowledge, 100% of the H shares of the Company are held by the public.
There were no changes made to the articles of association of the Company during the Period.
INTERNAL CONTROLS
The Company has set up an internal monitoring system that aims to protect assets, preserve accounting and financial
information, as well as to ensure the accuracy of financial statements, including the establishment of departments
and units, setting out responsibilities, execution of management systems and quality control mechanisms. The system
is capable of taking necessary steps to react to possible changes in our businesses as well as external operating
environments. Throughout the operating process, the Company's various internal control measures are being
continuously enhanced, fulfilled and are deemed effective.
The Company's Audit Committee is charged with the duties of reviewing internal controls, directing monitoring
activities. Aside from reviewing the annual reporting by external auditors, the committee also reviews the
effectiveness of internal control system and risk management mechanism through reviewing the internal special audit
report on the Company's various core businesses prepared by internal audit department on a regular basis. During the
year, the Audit Committee focused on the management of the Company's financial budget, the cost accounting about the
Company's maintenance as well as risk control mechanism relating to information technology of Zheshang Securities.
The internal audit department carried out specific audit into these compliance issues and monitored relevant
rectifications, ensuring the effectiveness of the Company's management systems.
During the Period, the Directors of the Company had carried out are view on the effectiveness of the Company's
internal control system, covering all material aspects of internal control, including financial control, operational
control, compliance control and risk management functions. There were no major breaches in the internal control
system that may have had an impact to Shareholders' interests, and the internal control system was deemed to be
effective and sufficient.
MANAGEMENT FUNCTIONS
The management functions of the Board and the management are expressly stipulated in the articles of association of
the Company. Pursuant to the articles of association of the Company, the management of the Company is assigned the
functions to be in charge of the production and business operation of the Company and to organize the implementation
of there solutions of the board of directors, to organize the implementation of the annual business plan and
investment program of the Company, to prepare plans for the establishment of the internal management structure of
the Company, to prepare the basic management systems of the Company, and to formulate basic rules and regulations of
the Company, etc.
Directors, Supervisors and Senior Management Profiles
DIRECTORS
Executive Directors
Mr. ZHAN Xiaozhang, born in 1964, is a senior economist. Mr. Zhan holds a bachelor's degree in law. He further
obtained a master's degree in public administration from the Business Institute of Zhejiang University in 2005. He
has been appointed as the Chairman of the Company since June 2012.
From 1985 to 1991, Mr. Zhan worked as an officer at Transport Administrative Division under Waterway Transport
Authority of Zhejiang Provincial Bureau of Construction. From 1991 to 1998, he served as Deputy Secretary and
Secretary of the Communist Youth League Commission at Zhejiang Provincial Bureau of Communications. From 1998 to
2002, he was Deputy Director of Waterway Transport Authority under Zhejiang Provincial Bureau of Communications.
From 2002 to 2003, he was Deputy Director of Human Resources Department at Zhejiang Provincial Bureau of
Communications. From 2003 to 2006, Mr. Zhan was Chairman of Zhejiang Wenzhou Yongtaiwen Expressway Co., Ltd. From
2006 to 2008, he became Chairman of Zhejiang Jinji Property Co., Ltd. Mr. Zhan has been Assistant to General Manager
and Manager of Research and Development Department at Zhejiang Communications Investment Group Co., Ltd from 2006 to
2009.
He served as an Executive Director and the General Manager of the Company from March 2009 to June 2012. Mr. ZHAN
currently also serves as Deputy General Manager of Zhejiang Communications Investment Group Co., Ltd.
Ms. LUO Jianhu, born in 1971, graduated from the Department of Law at Hangzhou University with a bachelor's degree
in law, majoring in Economic Law. She is a lawyer and senior economist. Ms. Luo has been appointed as an Executive
Director and the General Manager of the Company since June 2012.
Since she started her career in August 1994, Ms. Luo had held such positions as the board secretary of Zhejiang
Transportation Engineering Construction Group Co., Ltd., the Deputy Director, Director of the Legal Affairs
Department, the Deputy Director, Director of the Secretarial Office to the Board, Board Secretary and the Manager of
the Investment and Development Department of Zhejiang Communications Investment Group Co., Ltd.
Mr. DING Huikang, born in 1955, is a professor-level Senior Engineer, an Executive Director, Deputy General Manager
of the Company and Chairman of Maintenance Co. Mr. Ding graduated from Zhejiang Institute of Communications majoring
in Road and Bridge Engineering and Changsha Institute of Communications, majoring in Economic Law. From 1980 to
1997, Mr. Ding successively held the positions of technician, assistant engineer, engineer, assistant team leader
and team leader at No.1 Road Engineering Team of Zhejiang Province. From 1997 to 2000, he served as General Manager
and senior engineer of No.1 Transportation Engineering Co., Ltd. of Zhejiang Transportation Engineering Construction
Group. From 2000 to 2004, he was head of the management committee of Zhejiang Ningbo Yongtaiwen Expressway Second
Phase Project. He has been Chairman of Zhejiang Ningbo Yongtaiwen Expressway Co., Ltd. and Zhejiang Zhoushan Cross-
Sea Bridge Co., Ltd. since 2004 and 2006 respectively. He has been serving as Executive Director and Deputy General
Manager since August 2010.
Non-Executive Directors
Mr. WANG Dongjie, born in 1977, graduated from Southeast University majoring in Highway and Railway Engineering with
a master's degree in engineering. He is a Senior Engineer.
Since he started his career in March 2002, Mr. Wang had served as an Engineer of the Executive Commission of
Hangzhou Ring Road North Line Project, the Deputy Executive Chief of the Executive Commission for the interflow
renovation of Hangzhou airport road, the Engineering Division Chief of Management Office of Chun'an section of
Hangqian Expressway and the Director and Deputy General Manager of Hangzhou Transportation Road and Bridge
Construction Company.
He joined Zhejiang Communications Investment Group Co., Ltd. in January 2007 and is currently the President of the
Investment and Development Department.
Mr. DAI Benmeng, born in 1965, graduated from the Party School of the Zhejiang Committee of the Communist Party of
China with a bachelor's degree specialising in economics and management and is a Senior Economist. He began working in
February 1987 and has been a director and the Deputy General Manager of Wenzhou Shipping Co., Ltd., a Director and the
General Manager of Zhejiang Wenzhou Yongtaiwen Expressway Co., Ltd., a Director and the General Manager of Zhejiang
Jinji Property Co., Ltd., the person in charge of Zhejiang Province North Zhejiang Expressway Management Co., Ltd., the
Chairman of Zhejiang ShenSuZheWan Expressway Co., Ltd., and the General Manager of the Shanghai-Jiaxing-Huzhou-Hangzhou
branch of the Communications Group. Mr. Dai is currently the Manager of the Human Resources Department of the
Communications Group.
Mr. ZHOU Jianping, born in 1957, graduated from Xi'an Highway College with a bachelor's degree specialising in
vehicular transport and is a Senior Engineer at professor level. He began working in September 1975 and has been the
Deputy Supervisor of the Business Management Office, Supervisor of the office, Assistant of the General Manager, and
Deputy General Manager of Zhejiang Province Vehicular Transport General Company, the Deputy Head of Quzhou Municipal
Communications Bureau, Zhejiang Province, the manager of the Asset Management Department of the Communications Group,
and the person in charge of the Hangjinqu Branch of the Communications Group. Mr. Zhou is currently the Deputy Chief
Economist and the Manager of the Operations Department of the Communications Group.
Independent Non-Executive Directors
Mr. ZHOU Jun, born in 1969, is the Executive Director and Vice President of Shanghai Industrial Investment
(Holdings) Co. Ltd. ("SIIC"). Mr. Zhou graduated from Nanjing University and Fudan University with a bachelor's
degree and a master's degree. He also serves as the Chairman of S.I. Infrastructure Holdings Ltd. and eight other
companies, the Chairman of Asia Water Technology Ltd. in Singapore (SGX: 5GB), Executive Director and Deputy CEO of
Shanghai Industrial Holdings Ltd. (HK: 0363), Executive Director of Shanghai Industrial Urban Development Group Ltd.
(HK: 0563). He worked for Guotai Securities Co., Ltd. (now Guotai Junan Securities Co). Before joining SIIC in April
1996, the management positions he had held within the SIIC group of companies were Deputy General Manager of SIIC
Real Estate Holdings (Shanghai) Co., Ltd., Deputy General Manager of Shanghai United Holdings Co., Ltd. (SH:
600607), Managing Director of Shanghai Cyber Galaxy Investment Co., Ltd. and General Manager of the Strategic
Investment Department of SIIC. Mr. Zhou has about 20 years' professional experience in general management, financial
investment, real estate and project planning.
Mr. PEI Ker-Wei, born in 1957, is a Professor of Accountancy and Executive Dean for China Region at W. P. Carey
School of Business, Arizona State University. Mr. Pei received his Ph.D. degree in Accounting from University of
North Texas in 1986.
He is currently the director of W.P. Carey EMBA programs in China. He served as the chairman of the Globalization
Committee of the American Accounting Association in 1997 and as the president of the Chinese Accounting Professors
Association-North America in 1993 to 1994.
Mr. Pei currently serves as an External Director of Baosteel Group and Independent Director of Want Want China
Holdings (00151.hk) and Zhong An Real Estate (00672. hk).
Ms. LEE Wai Tsang, Rosa, born in 1977, is the chairman and an executive director of Grand Investment International
Ltd. (a company listed on the Main Board of the Stock Exchange, Stock Code: 1160) and oversees its day-to-day
investment, operation and administration. Ms. Lee holds a bachelor degree from the University of Southern
California, a Master of Science in Finance from Boston College and a MBA from the University of Chicago. Ms. Lee is
a licensed person for the regulated activities of dealing and advising in securities and asset management under the
SFO. Ms. Lee is a director of Grand Finance Group Company Ltd. and several of its subsidiaries, Tianjin Yishang
Friendship Holdings Co., Ltd. and MBP Software Group Holdings Ltd. Ms. Lee has extensive experience in management,
investment, securities and auditing.
SUPERVISORS
Representing Shareholders
Mr. FU Zhexiang, born in 1958, graduated from Correspondence College of the Party Central School majoring in
Economics with a bachelor's degree. He is a Senior Accountant with professional certification.
Since he started his career in December 1976, Mr. Fu had served as the Deputy chief of the Fee Collection Division
of Highway Inspection and Collection Bureau of Zhejiang Province and the Deputy Chief Accountant of Zhejiang Xin Gan
Xian Express Passenger Transportation Co., Ltd. Since he joined Zhejiang Communications Investment Group Co., Ltd.
in February 2002, he had successively held the positions of the Assistant to Manager of the Financial Audit
Department, the Deputy Manager and manager of the Financial Management Department, and the Deputy Manager of the
Internal Audit Department.
He is currently the Deputy Chief Economist of Zhejiang Communications Investment Group Co., Ltd. and Chairman of
Zhejiang Communications Investment Group Finance Co., Ltd.
Independent Supervisors
Mr. WU Yongmin, born in 1963, is an Assistant Professor. Mr. Wu graduated from China University of Political Science
and Law with a master's degree.
He was the Deputy Dean of the Department of Law at Hangzhou University, Deputy Dean of the Department of Law at
Zhejiang University's Law School, and Director of Zheda Law Firm. Mr. Wu studied at the Christian-Albrechts-
Universitat zu Kiel in 1996 as a visiting scholar. He is currently the Dean of the Department of Law at the Law
School of Zhejiang University, a Supervisor for master's degree candidates in Business Law, a member of China
Business Law Research Council, Deputy Director of Zhejiang Tax Law Research Council, an Arbitrator of Hangzhou
Arbitration Committee, and a Lawyer at Zhejiang Zeda Law Firm.
Mr. ZHANG Guohua, born in 1963, obtained a doctorate degree in human resources management. He is a Senior Economist
and the Vice President of China Everbright Bank, Hangzhou Branch (official chairman-level). Mr. Zhang graduated from
Hangzhou University in 1985 with a bachelor's degree in education and then received a master's degree in educational
psychology in 1988. In 2000, he was granted the Graduate Certificate of Completion in finance by the School of
Economics of Zhejiang University, and then obtained the doctorate degree in psychology from the College of Science
of Zhejiang University in 2007.
Since 1988, Mr. Zhang had successively worked in the headquarters of Industrial and Commercial Bank of China,
Hangzhou Institute of Financial Managers, Hangzhou Financial Urban Credit Cooperative and China Everbright Bank,
Hangzhou Branch and Wuxi Branch, and Ping An Bank, Hangzhou Branch. He had held the positions of Deputy Director of
the Office, Supervisor of the Credit Union, Vice President and President, respectively.
Since July 10, 2008, he has served as an Independent Director of Zheshang Securities.
Supervisor Representing Employees
Ms. ZHANG Xiuhua, born in 1969, is a Senior Economist, the Supervisor representing employees of the Company. Ms.
Zhang graduated from Chongqing Jiaotong University majoring in transportation management with a bachelor's degree
in science, and obtained a master's degree in business administration from Zhejiang University in 2006.
From July 1991 to February 1997, she worked in the Operation Division of the Zhejiang Provincial Expressway
Executive Commission. She joined the Company since March 1997, and had served as Assistant manager, Deputy Manager
and Manager of the Operation Department.
Ms. Zhang currently serves as the Deputy General Manager. She is also General Manager of Shengxin Co, the Director
of Yuhang Co, Jiaxing Co, and Petroleum Co.
Labour Union Chairman
Mr. ZHAN Huagang, born in 1961, is the party committee member and labour union chairman of the Company. He is a
professor-level Senior Engineer. Mr. Zhan graduated from Zhejiang University with a bachelor's degree in internal
combustion engine from the department of thermophysical engineering.
From July 1982 to June 1991, he worked at Zhejiang Province Vehicular Transport Company, Zhejiang Office of Motor
Vehicles and Zhejiang Highway Management Bureau. From June 1991 to January 1996, he worked at Zhejiang Road and
Bridge Engineering Office. From January 1996 to March 1997, he worked at the Operation Division and Maintenance
Division of the Zhejiang Provincial Expressway Executive Commission as senior engineer.
Since March 1997, he has been working at Zhejiang Expressway Co., Ltd. as Deputy Manager and Manager of the
Operations Management Department, Manager of the Investment Development Division, Manager of the Equipment
Management Department, Manager of the Engineering Management Department and Head of the Maintenance Management
Office. He is concurrently the Deputy General Manager of Zhejiang Expressway Investment Development Co., Ltd. and
Chairman and General Manager of Zhejiang Expressway Advertising Co., Ltd.
OTHER MEMBERS OF SENIOR MANAGEMENT
Mr. CHENG Tao, born in 1964, is the party committee secretary of the Company. Mr. Cheng graduated from Changsha
University of Science & Technology with a bachelor's degree in transportation engineering. He is a Senior
Administration Engineer and Senior Economist.
Mr. Cheng began his career in September 1983 and held the positions of Secretary of CYL Committee at Zhejiang
Shipping and Technical School; Secretary of CYL Committee at Zhejiang Road and Bridge Engineering Office; Secretary
of Party General branch at No.3 Company of Zhejiang Provincial Transportation Engineering & Construction Group Co.,
Ltd.; Party Committee Deputy Secretary of Zhejiang Provincial Transportation Engineering & Construction Group Co., Ltd.;
Vice Chairman, Party Committee Secretary and Chairman of Zhejiang Provincial Transportation Engineering & Construction
Group Co., Ltd.
Mr. ZHANG Jingzhong, born in 1963, is a Senior Lawyer, the Deputy General Manager of the Company. Mr. Zhang
graduated from Zhejiang University (previously known as Hangzhou University) in July 1984 with a bachelor's degree
in law.
In 1984, he joined the Zhejiang Provincial Political Science and Law Policy Research Unit. From 1988 to 1994, he was
Associate Director of Hangzhou Municipal Foreign Economic Law Firm. In 1992, he obtained the qualifications required
by the regulatory authorities in China to practice securities law. In January 1994, Mr. Zhang became a Senior Partner
at T&C Law Firm in Hangzhou.
Mr. Zhang has been an Executive Director and Company Secretary of the Company since March 1997, and was appointed
Deputy General Manager in March 2002. He has been re-appointed as Company Secretary since March 2003 and Deputy
General Manager since March 2006. Mr. Zhang also serves as Director at Shangsan Co.
Mr. FANG Zhexing, born in 1965, is a Senior Engineer, the Deputy General Manager of the Company. Mr. Fang graduated
from Zhejiang University where he received a master's degree in engineering in 1991.
From 1986 to 1988 he was the Assistant Engineer in the Project Management Office of the Electric Power and Water
Conservancy Bureau in Taizhou, Zhejiang Province. From 1991 until 1997, he was the Engineer in the Project
Management Office of Zhejiang Provincial Expressway Executive Commission, where he participated in the project
management of Shanghai-Hangzhou- Ningbo Expressway.
Since March 1997, he has served as the Deputy Manager and the Manager of the Planning and Development Department,
the Manager of the Project Development Department, the Director of Quality Management Office, the Director of
Internal Audit Department of the Company, the Manager of the Human Resources Department and the Secretary of
Disciplinary Committee. Mr. Fang is currently the Chairman of Development Co, Jiaxing Co and Advertising Co.
Mr. WANG Dehua, who was born in 1974, graduated with an undergraduate degree in Accounting from Hangzhou Institute
of Electronics Engineering in 1996. He worked in the Foreign Funds Utilization Audit Department of Zhejiang
Provincial Audit Office from 1996 to 2003. Mr. Wang worked at the Corporation Division of the Administrative and
Finance Department of Liaison Office of the Central Government in the Hong Kong S.A.R. from 2003 to 2011, serving as
its Deputy Director upon departure. Mr. Wang studied at School of Economics and Finance of the Faculty of Business
and Economics of the University of Hong Kong from 2005 to 2007, and graduated in 2007 with a master's degree in
Economics. He worked at Zhejiang Communications Investment Group Co., Ltd. from 2011 to 2014, serving as its Deputy
General Manager upon departure. Mr. Wang Dehua has been appointed as the Chief Financial Officer of the Company with
effect from March 17, 2014.
Mr. Tony H. ZHENG, born in 1969, is the Deputy General Manager and Company Secretary of the Company. Mr. Zheng
graduated from University of California at Berkeley in 1995 with a BS degree in Civil Engineering. He joined the
Company in June 1997, and has served as Deputy Director of the Secretarial Office to the Board and Assistant Company
Secretary. Mr. Zheng continues to serve as Director of the Secretarial Office to the Board, and Director of Hong
Kong Representative Office of the Company.
Report of the Directors
The Directors of the Company hereby present their report and the audited financial statements of the Group for the
year ended December 31, 2014.
PRINCIPAL ACTIVITIES
The principal activities of the Group comprise the operation, maintenance and management of high grade roads,
development and operation of certain ancillary services, such as advertising and fuel facilities, as well as
provision of security broking service and proprietary securities trading.
SEGMENT INFORMATION
During the year, the entire revenue and segment profit of the Group were derived from the People's Republic of China
("PRC"). Accordingly, a further analysis of the revenue and segment profit by geographical area is not presented. An
analysis of the Group's revenue and segment profit by principal activities for the year ended December 31, 2014 is
set out in note 7 to the financial statements.
RESULTS AND DIVIDENDS
The Group's profit for the year ended December 31, 2014 and the state of financial position at that date are set out
in the financial statements.
An interim dividend of Rmb 0.06 per share (approximately HK$0.08) was paid on November 27, 2014. The Directors have
recommended the payment of a final dividend of Rmb0.265 (approximately HK$0.336) per share in respect of the year.
The final dividend is subject to shareholders' approval at the 2014 annual general meeting of the Company. This
recommendation has been incorporated in the financial statements as an allocation of retained earnings within the
capital and reserves section in the consolidated statement of financial position. The dividend payout ratio reached
60.1% during the Period. Further details of the dividends are set out in note 16 to the financial statements.
FIVE YEAR SUMMARY FINANCIAL INFORMATION
The following is a summary of the published consolidated results, and of the assets, liabilities and non-controlling
interests of the Group prepared on the basis set out in the notes below.
Year ended December 31,
2014 2013 2012 2011 2010
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Results (Restated) (Restated) (Restated)
Revenue 9,051,123 7,851,115 6,927,415 6,994,391 6,959,504
Operating costs (5,576,211) (4,955,609) (4,574,040) (4,277,222) (3,950,456)
Gross profit 3,474,912 2,895,506 2,353,375 2,717,169 3,009,048
Security investment gains 278,252 99,663 99,783 7,925 126,532
Other income 250,492 241,056 291,990 286,595 209,871
Administrative expenses (85,533) (84,792) (86,287) (90,618) (87,542)
Other expenses (103,443) (70,061) (49,778) (39,457) (23,689)
Finance costs (78,231) (95,161) (139,765) (171,440) (207,921)
Share of profit (loss) of associates 65,020 21,537 (4,513) 8,934 18,531
Share of loss of a joint venture (33,277) (36,010) (3,516) -- --
Profit before tax 3,768,192 2,971,738 2,461,289 2,719,108 3,044,830
Income tax expense (917,948) (756,761) (634,669) (704,705) (784,714)
Profit for the year 2,850,244 2,214,977 1,826,620 2,014,403 2,260,116
Attributable to:
Owners of the Company 2,349,052 1,907,470 1,649,484 1,760,738 1,826,565
Non-controlling interests 501,192 307,507 177,136 253,665 433,551
Earnings per share -- Basic and diluted 54.09 cents 43.92 cents 37.98 cents 40.54 cents 42.06 cents
2014 2013 2012 2011 2010
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Assets and liabilities (Restated) (Restated) (Restated)
Total assets 51,354,744 32,089,194 31,485,312 31,274,171 35,997,204
Total liabilities (30,225,122) (12,420,235) (11,863,631) (12,027,203) (17,602,682)
Net assets 21,129,622 19,668,959 19,621,681 19,246,968 18,394,522
Notes:
1. The consolidated results of the Group for the four years ended December 31, 2013 have been extracted from the
Company's 2013 annual report dated March 17, 2014, while those for the year ended December 31, 2014 were
prepared based on the consolidated statement of profit or loss and other comprehensive income as set out in the
later part of the financial report.
2. The 2014 earnings per share is based on the profit attributable to owners of the Company for the year ended
December 31, 2014 of Rmb 2,349,052,000 (2013: Rmb1,907,470,000) and the 4,343,114,500 (2013: 4,343,114,500)
Ordinary shares in issue during the year.
3. Differences in Financial Statements prepared under PRC GAAP and HKFRSs
Profit for the year Net assets
ended December 31, as at December 31,
2014 2013 2014 2013
Rmb'000 Rmb'000 Rmb'000 Rmb'000
As reported in the statutory financial
statements of the Group prepared in
accordance with PRC GAAP 2,859,438 2,223,778 21,395,060 19,926,115
HK GAAP adjustments:
(a) Goodwill -- -- (199,769) (199,769)
(b) Amortization provided, net of deferred tax (1,952) (1,952) (165,108) (163,156)
(c) Assessment on impact of appreciation,
net of deferred tax (3,656) (3,659) 56,449 60,105
(d) Others (399) -- 7,110 6,597
(e) Non-controlling interests (3,187) (3,190) 35,880 39,067
As restated in the financial statements 2,850,244 2,214,977 21,129,622 19,668,959
MAJOR CUSTOMERS AND SUPPLIERS
In the year under review, the five largest customers and suppliers of the Group accounted for less than 30% of the
total turnover and purchases, respectively.
None of the directors of the Company or any of their associates or any shareholders (which, to the best knowledge of
the directors, own more than 5% of the Company's issued share capital) had any beneficial interest in the Group's
five largest customers.
RELATED PARTY TRANSACTIONS
During the year, details of the related party transactions that the Company has entered into with its subsidiary and
fellow subsidiary are set out in related notes to the financial statements. The deposit services provided by
Zhejiang Communications Finance constitute non-exempt continuing connected transactions as defined in Chapter 14A of
the Listing Rules. Please refer to the section headed "Continuing Connected Transactions" below for further details
about such connected transactions. The Company has complied with the disclosure requirements in respect of such
connected transactions in accordance with Chapter 14A of the Listing Rules.
DONATION
During the year, the total amount of donation made by the group is Rmb1,068,000 for charitable or other purposes
PROPERTY, PLANT AND EQUIPMENT
Details of movements in property, plant and equipment of the Group during the year are set out in note 18 to the
financial statements.
CAPITAL COMMITMENTS
Details of the capital commitments of the Group as at December 31, 2014 are set out in note 47 to the financial
statements.
RESERVES
Details of movements in the reserves of the Group during the year are set out in the consolidated statement of
changes in equity in the financial statements.
DISTRIBUTABLE RESERVES
As at December 31, 2014, before the proposed final dividend, the Company's reserves available for distribution by
way of cash or in kind, as determined based on the lower of the amount determined under PRC accounting standards and
the amount determined under HK GAAP, amounted to Rmb2,303,383,000. In addition, in accordance with the Company Law
of the PRC, the amount of approximately Rmb3,645,726,000 standing to the credit of the Company's share premium
account as prepared in accordance with the PRC accounting standards was available for distribution by way of
capitalization issues.
TRUST DEPOSITS
As at December 31, 2014, other than the deposits placed with an on-bank financial institution of Rmb556,751,000,
the Group's deposits have been placed with commercial banks in the PRC and the Group has not encountered any
difficulty in the withdrawal of funds.
PURCHASE, REDEMPTION OR SALE OF THE LISTED SECURITIES OF THE COMPANY
Neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company's listed securities
during the year.
DIRECTORS
The Directors of the Company during the year and as at the date of this report are:
EXECUTIVE DIRECTORS
Mr. ZHAN Xiaozhang (Chairman)
Ms. LUO Jianhu (General Manager)
Mr. DING Huikang
NON-EXECUTIVE DIRECTORS
Mr. LI Zongsheng (resigned on December 29, 2014)
Mr. WANG Weili (resigned on December 29, 2014)
Mr. WANG Dongjie
Mr. DAI Benmeng
Mr. ZHOU Jianping
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. ZHANG Junsheng (resigned on December 29, 2014)
Mr. ZHOU Jun
Mr. PEI Ker-Wei
Ms. LEE Wai Tsang Rosa
DIRECTORS' AND SENIOR MANAGEMENT'S BIOGRAPHIES
Biographical details of the Directors of the Company and the senior management of the Group are set out in
the earlier parts of the Company's annual report.
DIRECTORS' SERVICE CONTRACTS
Each of the Directors of the Company has entered into a service agreement with the Company, with effect from June
11, 2012, or the date of appointment to June 30, 2015.
Save as disclosed above, none of the Directors and Supervisors has entered into any service contract with the
Company which is not terminable by the Company within one year without payment of compensation, other than statutory
compensation.
DIRECTORS' AND SUPERVISORS' INTERESTS IN CONTRACTS
As at December 31, 2014 or during the year, none of the Directors or Supervisors had a material interest, either
directly or indirectly, in any contract of significance to the business of the Group to which the Company, its
holding company, or any of its subsidiaries or fellow subsidiaries was a party.
DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE'S RIGHTS TO SUBSCRIBE FOR SHARES OR DEBENTURES
At no time during the year were there rights to acquire benefits by means of the acquisition of shares in or
debentures of the Company granted to any Director, Supervisor and chief executive or their respective spouse or
minor children, or were any such rights exercised by them; or was the Company, its holding company, or any of its
subsidiaries or fellow subsidiaries a party to any arrangement to enable any such persons to acquire such rights in
any other body corporate.
SHARE CAPITAL
There were no movements in the Company's issued share capital during the year.
PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights in the Company's Articles of Association or the laws of the PRC which
would require the Company to offer new shares on a pro rata basis to existing shareholders.
TAXATION AND TAX RELIEF
According to a Notice issued jointly by PRC Ministry of Finance and State Administration of Taxation regarding
individual income tax policies (Caishuizi [1994] No.020), the dividend incomes received by foreign individuals from
a foreign-invested enterprise are exempt from individual income tax.
As stipulated by a Notice issued by the PRC State Administration of Taxation in relation to the withholding and
payment of enterprise income tax by Chinese resident enterprises for payment of dividend to H shareholders
Who are overseas non-resident enterprises (Guoshuihan [2008] No.897), the Company as a Chinese resident
enterprises is required to withhold 10% enterprise income tax when it distributes dividends for the year 2008 and
thereafter to all non-resident enterprise holders of H shares of the Company (including HKSCC Nominees Limited,
other nominees, trustees or other entities and organizations, who will be deemed as non-resident enterprise holders
of H shares) whose names appear on the H share register of members of the Company on the record date.
Under current practice of the Hong Kong Inland Revenue Department, no tax is payable in Hong Kong in respect of
dividends paid by the Company.
Shareholders are taxed or enjoy tax relief in accordance with the aforementioned regulations.
SUFFICIENCY OF PUBLIC FLOAT
Based on the information that is publicly available to the Company and within the knowledge of the Directors, as at
the latest practicable date prior to the issue of this annual report, the Company has maintained sufficient amount
of public float as required under the Listing Rules.
AUDITORS
Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong, who had served as the Company's Hong Kong auditors
since 2005, will retire and a resolution for their re-appointment as Hong Kong auditors of the Company will be
proposed at the forthcoming Annual General Meeting of the shareholders.
By Order of the Board
ZHAN Xiaozhang
Chairman
Hangzhou, Zhejiang Province, the PRC
March 18, 2015
Report of the Supervisory Committee
During the Period, the Supervisory Committee duly performed its supervisory responsibilities, and safeguarded the
legitimate interests of the shareholders and the Company in accordance with relevant rules and regulations under the
Company Law of the PRC, the Company's Articles of Association and the Rules of the Supervisory Committee.
Main tasks undertaken by the Supervisory Committee during the Period were to assess and supervise lawfulness and
appropriateness of the activities of the Directors, General Manager and other senior management of the Company in
their business decision-making and daily management processes, through a combination of activities including holding
meetings of the Supervisory Committee and attending general meetings of shareholders and meetings of the Board. The
Supervisory Committee has carefully examined the operating results and the financial standing of the Company,
discussed and reviewed the financial statements to be submitted by the Board to the general meeting of shareholders.
During the Period, the Supervisory Committee held two meetings of its own, and attended four meetings held by the
Board and three general meetings of shareholders. The Supervisory Committee observes that during the Period, the
Company took a series of steps to deepen reform and completed tasks planned by the Company at beginning of year 2014
aiming to enhance efficiency, improve performances, and accelerate sustainable development with reform and
innovation as the main instrument. A series of key areas of work achieved satisfactory progress, including
enhancement in the operation of toll roads, acceleration in transformational development, the effective
implementation of reform measures involving maintenance organization, human resources, and improvement in management
efficiency. The Company achieved its best business performance since 2008 in 2014.
The Supervisory Committee has reviewed the financial statements of the Company for 2014 prepared by the Board for
submission to the general meeting of shareholders, and concluded that the financial statements accurately reflected
the financial position of the Company in 2014, and complied with the relevant laws, regulations and the Company's
Articles of Association. The Company maintained a relatively high dividend payout ratio in recent years, providing
satisfactory return to its shareholders.
During the Period, the members of the Board, General Manager and other senior management of the Company have
complied with their fiduciary duties and have acted in good faith and diligently while carrying out their
responsibilities. There was no incident of abuse of power or infringement of the interests of shareholders or
employees.
The Supervisory Committee is satisfied with the performances across various lines of business achieved by the Board
and the management of the Company.
By the order of the Supervisory Committee
FU Zhexiang
Chairman of the Supervisory Committee
Hangzhou, Zhejiang Province, the PRC
March 17, 2015
Continuing Connected Transactions
During the year ended 31 December, 2014, the Company had the following non-exempt continuing connected transactions.
Deposit services with Zhejiang Communications Finance
Pursuant to a financial services agreement (the "Financial Services Agreement") dated July 18, 2013 entered into
between the Company and Zhejiang Communications Finance, Zhejiang Communications Finance agreed to provide the
Company with a range of financial services including certain deposit services (the "Deposit Services") for a term of
three years from the date of the Financial Services Agreement subject to the terms and conditions provided therein.
And on March 28, 2014, the Company and Zhejiang Communications Finance entered into a supplemental agreement (the
"Supplemental Agreement") to supplement the Financial Services Agreement with retrospective effect from July 18,
2013, so as to make clear that the definition of "the Company" used in the Financial Services Agreement as the
proposed recipient of the financial services under the agreement, was intended to refer to the Group. As the
Company, Communications Group (a substantial shareholder of the Company), Zhejiang Ningbo Yongtaiwen Expressway Co.,
Ltd and Zhejiang Taizhou Yongtaiwen Expressway Co., Ltd beneficially own 35%, 40%, 15.625% and 9.375% of the
issued share capital of Zhejiang Communications Finance, respectively, Zhejiang Communications Finance is a
connected person of the Company and as a result, the Deposit Services constitute continuing connected transactions
for the Company under Chapter 14A of the Listing Rules.
Under the Financial Services Agreement (as supplemented by the Supplemental Agreement), Zhejiang Communications
Finance may provide Deposit Services including current deposit, time deposit, call depositor agreement deposit
services to the Group. The Deposit Services will be provided under the Financial Services Agreement on a non-
exclusive basis and the Group is entitled to determine whether to accept the Deposit Services provided by Zhejiang
Communications Finance or decide to accept deposit services provided by other financial institutions. The Group is
not obliged to accept any Deposit Services provided by Zhejiang Communications Finance under the Financial Services
Agreement (as supplemented by the Supplemental Agreement).
The interest rate to be paid by Zhejiang Communications Finance for the Group's deposits with Zhejiang Communications
Finance shall be determined based on the prevailing deposit interest rate promulgated by the People's
Bank of China for the same period and should not be lower than the deposit interest rates offered by major
commercial banks in the PRC for comparable deposits of comparable periods.
The maximum amount of the daily deposit balance (including any interest accrued thereon) for the Group's deposits
with Zhejiang Communications Finance shall not be more than Rmb700,000,000 during the term of the Financial Services
Agreement.
During the year under review, the maximum amount of the daily deposit balance (including any interest accrued
thereon) for the Group's deposits with Zhejiang Communications Finance under the Financial Services Agreement (as
supplemented by the Supplemental Agreement) was Rmb627,870,000.
The independent non-executive Directors have reviewed the continuing connected transactions described above and
confirmed that the continuing connected transactions have been entered into:
(a) In the ordinary and usual course of business of the Company;
(b) On normal commercial terms or on terms no less favorable to the Company than terms available to or from
independent third parties; and
(c) In accordance with the relevant agreement governing them on terms that are fair and reasonable and in the
interests of the shareholders of the Company as a whole.
The Company's auditor was engaged to report on the Group's continuing connected transactions in accordance with Hong
Kong Standard on Assurance Engagements HKSAE3000 "Assurance Engagements Other Than Audits or Reviews of Historical
Financial Information" and with reference to Practice Note 740 "Auditor's Letter on Continuing Connected Transactions
under the Hong Kong Listing Rules" issued by the Hong Kong Institute of Certified Public Accountants.
The auditors have issued their unqualified letter containing their findings and conclusions in respect of the
continuing connected transactions in accordance with the Rule 14A.56 of the Listing Rules. A copy of the auditor's
letter has been provided to the Hong Kong Stock Exchange.
Independent Auditor's Report
TO THE MEMBERS OF ZHEJIANG EXPRESSWAY CO., LTD.
(Incorporated in the People's Republic of China with limited liability)
We have audited the consolidated financial statements of Zhejiang Expressway Co., Ltd. (the "Company") and its
subsidiaries (collectively referred to as the "Group") set out in the later part of this report, which comprise the
consolidated statement of financial position as at December 31, 2014, and the consolidated statement of profit or
loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash
flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
Directors' Responsibility for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of consolidated financial statements that give a
true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of
Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for such
internal control as the directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to
report our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other
purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this
report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute
of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation
of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group
as at December 31, 2014, and of the Group's profit and cash flows for the year then ended in accordance with Hong
Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of
the Hong Kong Companies Ordinance.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
18 March, 2015
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended December 31, 2014
Year ended Year ended
NOTES 12/31/2014 12/31/2013
Rmb'000 Rmb'000
Revenue 7 9,051,123 7,851,115
Operating costs (5,576,211) (4,955,609)
Gross profit 3,474,912 2,895,506
Securities investment gains 8 278,252 99,663
Other income 9 250,492 241,056
Administrative expenses (85,533) (84,792)
Other expenses (103,443) (70,061)
Share of profit of associates 65,020 21,537
Share of loss of a joint venture (33,277) (36,010)
Finance costs 10 (78,231) (95,161)
Profit before tax 11 3,768,192 2,971,738
Income tax expense 12 (917,948) (756,761)
Profit for the year 2,850,244 2,214,977
Other comprehensive income 13
Items that may be reclassified subsequently to profit or loss:
Available-for-sale financial assets:
-- Fair value gain during the year 68,301 4,865
-- Reclassification adjustments for cumulative gain included
in profit or loss upon disposal -- (1,381)
Income tax relating to components of other comprehensive income (17,075) (871)
Other comprehensive income for the year (net of tax) 51,226 2,613
Total comprehensive income for the year 2,901,470 2,217,590
Profit for the year attributable to:
Owners of the Company 2,349,052 1,907,470
Non-controlling interests 501,192 307,507
2,850,244 2,214,977
Total comprehensive income attributable to:
Owners of the Company 2,375,654 1,909,017
Non-controlling interests 525,816 308,573
2,901,470 2,217,590
EARNINGS PER SHARE -- Basic and diluted 17 Rmb54.09 cents Rmb43.92 cents
Consolidated Statement of Financial Position
At December 31, 2014
NOTES 12/31/2014 12/31/2013
Rmb'000 Rmb'000
NON-CURRENT ASSETS
Property, plant and equipment 18 2,987,465 1,762,042
Prepaid lease payments 19 66,001 68,156
Expressway operating rights 20 11,112,507 11,911,133
Goodwill 21 86,867 86,867
Other intangible assets 22 155,590 154,564
Interests in associates 24 627,866 574,733
Interest in a joint venture 25 300,667 333,944
Available-for-sale investments 26 221,232 143,514
Other receivables 29 50,828 401,400
15,609,023 15,436,353
CURRENT ASSETS
Inventories 170,654 73,576
Trade receivables 27 135,609 101,428
Loans to customers arising from margin financing business 28 8,545,913 2,946,911
Other receivables and prepayments 29 832,238 451,968
Prepaid lease payments 19 2,155 2,155
Available-for-sale investments 26 570,021 281,924
Held for trading investments 30 2,124,740 1,181,025
Financial assets held under resale agreements 31 2,724,598 874,254
Bank balances held on behalf of customers 32 16,576,751 8,228,160
Bank balances and cash
-- Time deposits with original maturity over three months 33 761,320 704,459
-- Cash and cash equivalents 33 3,301,722 1,806,981
35,745,721 16,652,841
CURRENT LIABILITIES
Placements from other financial institutions 34 1,940,000 310,000
Accounts payable to customers arising from securities business 35 16,545,146 8,167,103
Trade payables 36 693,604 421,994
Tax liabilities 463,648 331,611
Other taxes payable 67,642 53,417
Other payables and accruals 37 1,561,274 995,496
Dividends payable 76,139 94,976
Bank and other borrowings 38 150,000 540,000
Short-term financing note payable 39 883,570 1,000,000
Financial assets sold under repurchase agreements 40 6,299,057 --
28,680,080 11,914,597
NET CURRENT ASSETS 7,065,641 4,738,244
TOTAL ASSETS LESS CURRENT LIABILITIES 22,674,664 20,174,597
NON-CURRENT LIABILITIES
Bank and other borrowings 38 200,000 300,000
Bonds payable 41 1,200,000 --
Deferred tax liabilities 42 145,042 205,638
1,545,042 505,638
21,129,622 19,668,959
CAPITAL AND RESERVES
Share capital 43 4,343,115 4,343,115
Reserves 12,658,711 11,629,423
Equity attributable to owners of the Company 17,001,826 15,972,538
Non-controlling interests 44 4,127,796 3,696,421
21,129,622 19,668,959
The consolidated financial statements in this report were approved and authorised for issue by the board of
directors on 18 March, 2015 and are signed on its behalf by:
ZHAN Xiaozhang LUO Jianhu
DIRECTOR DIRECTOR
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2014
Attributable to owners of the Company
_____________________________________________
Share Share Statutory Capital
capital premium reserve reserve
Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Note i)
At January 1, 2013 4,343,115 3,645,726 3,227,511 1,712
Profit for the year - - - -
Other comprehensive income
for the year - - - -
_________ _________ _________ _________
Total comprehensive income-
for the year - - - -
_________ _________ _________ _________
Arising from acquisition of a
subsidiary under common control
and additional interest in a subsidiary
(Note 2) - - - -
Dividend paid to non-controlling-
interests - - - -
Interim dividend - - - -
Final dividend - - - -
Proposed final dividend - - - -
Transfer to reserves - - 318,348 -
_________ _________ _________ _________
At December 31, 2013 4,343,115 3,645,726 3,545,859 1,712
Profit for the year
Other comprehensive income
for the year - - - -
_________ _________ _________ _________
Total comprehensive income
for the year - - - -
_________ _________ _________ _________
Deregistration of a subsidiary - - - -
Dividend paid to non-controlling-
interests - - - -
Interim dividend - - - -
Final dividend - - - -
Proposed final dividend - - - -
Transfer to reserves - - 361,196 -
_________ _________ _________ _________
At December 31, 2014 4,343,115 3,645,726 3,907,055 1,712
Attributable to owners of the Company
_____________________________________________
Investment
revaluation Dividend Special Retained
reserve reserve reserves profits
Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Note ii)
At January 1, 2013 254 1,042,347 816,137 2,967,658
Profit for the year - - - 1,907,470
for the year 1,547 - - -
_______ _________ _______ __________
Total comprehensive income-
for the year 1,547 - - 1,907,470
_______ _________ _______ __________
Arising from acquisition of a
subsidiary under common control
and additional interest in a subsidiary
(Note 2) - - (678,005) -
Dividend paid to non-controlling-
interests - - - -
Interim dividend - - - (260,587)
Final dividend - (1,042,347) - -
Proposed final dividend - 1,085,779 - (1,085,779)
Transfer to reserves - - - (318,348)
_______ _________ _______ __________
At December 31, 2013 1,801 1,085,779 138,132 3,210,414
Profit for the year 2,349,052
Other comprehensive income
for the year 26,602 - - -
_______ _________ _______ __________
Total comprehensive income
for the year 26,602 - - 2,349,052
_______ _________ _______ __________
Deregistration of a subsidiary - - - -
Dividend paid to non-controlling-
interests - - - -
Interim dividend - - - (260,587)
Final dividend - (1,085,779) - -
Proposed final dividend - 1,150,925 - (1,150,925)
Transfer to reserves - - - (361,196)
_______ _________ _______ __________
At December 31, 2014 28,403 1,150,925 138,132 3,786,758
_______ _________ _______ __________
Non-
controlling
Total interests Total
Rmb'000 Rmb'000 Rmb'000
At January 1, 2013 16,044,460 3,577,221 19,621,681
Profit for the year 1,907,470 307,507 2,214,977
Other comprehensive income
for the year 1,547 1,066 2,613
_________ __________ __________
Total comprehensive income-
for the year 1,909,017 308,573 2,217,590
_________ __________ __________
Arising from acquisition of a
subsidiary under common control
and additional interest in a subsidiary
(Note 2) (678,005) (78,863) (756,868)
Dividend paid to non-controlling-
interests - (110,510) (110,510)
Interim dividend (260,587) - (260,587)
Final dividend (1,042,347) - (1,042,347)
Proposed final dividend - - -
Transfer to reserves - - -
_________ __________ __________
At December 31, 2013 15,972,538 3,696,421 19,668,959
Profit for the year 2,349,052 501,192 2,850,244
Other comprehensive income
for the year 26,602 24,624 51,226
_________ __________ __________
Total comprehensive income
for the year 2,375,654 525,816 2,901,470
_________ __________ __________
Deregistration of a subsidiary - (1,420) (1,420)
Dividend paid to non-controlling-
interests - (93,021) (93,021)
Interim dividend (260,587) - (260,587)
Final dividend (1,085,779) - (1,085,779)
Proposed final dividend - - -
Transfer to reserves - - -
_________ __________ __________
At December 31, 2014 17,001,826 4,127,796 21,129,622
_________ __________ __________
Notes:
(i) Statutory reserves comprise:
(a) Statutory surplus reserve
In accordance with the Company Law of the People's Republic of China (the "PRC") and the
respective articles of association of the Company and its subsidiaries (collectively the
"Entities"), the Entities are required to allocate 10% of the profit after tax, as determined
in accordance with the PRC accounting standards and regulations applicable to the Entities, to
the statutory surplus reserve until such reserve reaches 50% of the registered capital of the
respective Entities. Subject to certain restrictions set out in the Company Law of the PRC and
the respective articles of association of the Entities, part of the statutory surplus reserve
may be converted to increase the respective Entities' capital.
(b) General risk reserve
In accordance with the Finance Regulation for Financial Enterprises, securities companies are
required to allocate 10% of the profit after tax, as determined in accordance with the PRC
accounting standards and regulations, to the general risk reserve. This general risk reserve
may be used to cover potential losses on risk exposures.
(c) Transaction risk reserve
In accordance with the Securities Law of the PRC, securities companies are required to allocate
not less than 10% of the profit after tax, as determined in accordance with the PRC accounting
standards and regulations, to the transaction risk reserve. This transaction risk reserve may
be used to cover potential losses on securities transactions.
(ii) Special reserves mainly comprise:
(a) Other reserve which was arising from the Group's acquisition of additional interest in a
subsidiary and the difference between the carrying value of net assets attributable to the Group
acquired and the payment consideration arising from acquisition; and
(b) Merger reserve which was arising from the acquisition of a subsidiary under common control using
the merger accounting method. This includes the capital of the combining entity at its existing
book values since the first date it was under common control and was reduced by the Group's
payment of cash consideration of Rmb655,356,000 to the controlling party and the excess in payment
for the acquisition of additional interest to non-controlling interest of its carrying amount by
Rmb22,649,000 during the year December 31, 2013. Details of the transaction were set out
in Note 46.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2014
Year ended Year ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Profit before tax 3,768,192 2,971,738
Adjustments for:
Finance costs 78,231 95,161
Interest income (59,107) (95,922)
Share of profit of associates (65,020) (21,537)
Gain on disposal of an associate (29,890) -
Gain on deregistration of an associate - (16)
Share of loss of a joint venture 33,277 36,010
Depreciation of property, plant and equipment 197,815 190,690
Amortisation of expressway operating rights 798,626 811,025
Release of prepaid lease payments 2,155 2,164
Amortisation of other intangible assets 20,293 18,644
Impairment loss on available-for-sale investments 6,554 -
Fair value changes on held for trading investments (278,252) (98,282)
Gain on disposal of available-for-sale investments - (1,381)
Loss on disposal of property, plant and equipment 13,439 2,149
Loss on write-down of inventories 830 -
Allowance for trade receivables 280 7
Reversal of allowance for other receivables (6) (291)
Allowance for advance to customers
arising from margin financing business 10,911 8,477
_________ _________
Operating cash flows before movements in working capital 4,498,328 3,918,636
Increase in inventories (97,908) (46,158)
Increase in trade receivables (34,461) (36,988)
Increase in loans to customers arising from margin financing business (5,609,913) (2,231,265)
Increase in other receivables and prepayments (85,533) (26,687)
(Increase) decrease in held for trading investments (665,463) 404,029
Increase in financial assets held under resale agreements (1,850,344) (594,188)
Increase in bank balances held on behalf of customers (8,348,591) (736,535)
Increase in placements from other financial institutions 1,630,000 310,000
Increase in accounts payable to customers arising from
securities business 8,378,043 685,284
Increase (decrease) in trade payables 63,931 (45,035)
Decrease (increase) in other taxes payable 14,225 (809)
Increase in other payables and accruals 430,127 212,705
Increase in financial assets sold under repurchase agreement 6,299,057 -
_________ _________
Cash generated from operations 4,621,498 1,812,989
Income taxes paid (863,582) (713,099)
Interest paid (88,366) (119,915)
_________ _________
NET CASH FROM OPERATING ACTIVITIES 3,669,550 979,975
_________ _________
Year ended Year ended
NOTES 12/31/2014 12/31/2013
Rmb'000 Rmb'000
INVESTING ACTIVITIES
Interest received 21,908 138,492
Payment of consideration payable for the acquisition of
a joint venture in the prior year - (189,331)
Investment in an associate - (280,000)
Proceeds from disposal of an associate 29,234 -
Proceeds from deregistration of associates - 388
Refundable deposit received for the disposal an associate 103,500 -
Dividends received from an associate 9,701 8,987
Proceeds on disposal of property, plant and equipment 13,627 4,099
Repayment of entrusted loans from related parties 50,000 592,047
Entrusted loans to a related party (100,000) (450,000)
Purchases of financial products investment (89,000) (228,294)
Settlement of financial products investment 240,000 163,726
Purchases of property, plant and equipment (1,218,312) (252,408)
Purchases of intangible assets (21,319) (17,575)
Purchase of available-for-sale investments (508,490) (290,774)
Proceeds on disposal of available-for-sale investments 204,422 138,100
(Increase) decrease in time deposits (56,861) 778,949
_________ _________
NET CASH (USED IN) FROM INVESTING ACTIVITIES (1,321,590) 116,406
FINANCING ACTIVITIES
Payment for the acquisition of a subsidiary
under common control and additional
interest in a subsidiary 46 - (756,868)
Dividends paid (1,346,366) (1,302,934)
Dividends paid to non-controlling shareholders (111,858) (110,532)
Contribution from limited partnership in a subsidiary 20,000 -
Distribution made to the non-controlling shareholders for
the deregistration of a subsidiary (1,420) -
New bank borrowings raised 512,500 2,010,000
Repayment of bank and other borrowings (1,002,500) (2,510,000)
Repayment of long-term bonds payable - (1,000,000)
New issue of long-term bonds payable 1,200,000 -
Issue of short-term financing note payable 4,033,570 1,000,000
Repayment of short-term financing note payable (4,150,000)
Interest paid (7,145) (11,119)
_________ _________
NET CASH USED IN FINANCING ACTIVITIES (853,219) (2,681,453)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,494,741 (1,585,072)
CASH AND CASH EQUIVALENTS AT JANUARY 1 1,806,981 3,392,053
CASH AND CASH EQUIVALENTS AT
DECEMBER31 33 3,301,722 1,806,981
_________ _________
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2014
1. CORPORATE INFORMATION
Zhejiang Expressway Co., Ltd. (the "Company") was established in the People's Republic of China
(the "PRC") with limited liability on March 1, 1997. The H shares of the Company ("H Shares")
were subsequently listed on The Stock Exchange of Hong Kong Limited (the "Stock Exchange") on
May 15, 1997.
All of the H Shares of the Company were admitted to the Official List of the United Kingdom Listing
Authority (the "Official List"). Dealings in the H Shares on the London Stock Exchange commenced
on May 5, 2000.
On July 18, 2000, with the approval of the Ministry of Foreign Trade and Economic Co-operation of
the PRC, the Company changed its business registration into a Sino-foreign joint stock limited
company.
On February 14, 2002, the United States Securities and Exchange Commission, following the approval
by the Board of Directors and the China Securities Regulatory Commission, declared the registration
statement in respect of the American Depositary Shares ("ADSs") evidenced by the American Depositary
Receipts ("ADRs") representing the deposited H Shares of the Company effective.
In the opinion of the directors, the immediate and ultimate holding company of the Company is
Zhejiang Communications Investment Group Co., Ltd. (the "Communications Group"), a state-owned
enterprise established in the PRC.
The addresses of the registered office and principal place of business of the Company are disclosed
in the corporate information section of the annual report.
The consolidated financial statements are presented in Renminbi ("Rmb"), which is also the
functional currency of the Company.
The Company is an investment holding company. The Company and its subsidiaries (collectively
referred to as the "Group") are involved in the following principal activities:
(a) the operation, maintenance and management of high grade roads;
(b) the development and provision of certain ancillary services such as advertising, and fuel
facilities;
(c) the provision of the toll road maintenance service, automobile servicing and others;
(d) the provision of securities broking services, margin financing and securities lending services
and proprietary trading.
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs")
New and revised HKFRSs applied in the current year
The Group has applied the following new and revised HKFRSs issued by the Hong Kong Institute of
Certified Public Accountants (the "HKICPA") for the first time in the current year.
Amendments to HKFRS 10, Investment Entities
HKFRS 12 and HKAS 27
Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities
Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets
Amendments to HKAS 39 Novation of Derivatives and Continuation of Hedge
Accounting
HK(IFRIC) - Int 21 Levies
Except as disclosed below, the application of the new and revised HKFRSs in the current year has
had no material impact on the Group's financial performance and positions for the current and prior
years and/or on the disclosures set out in these consolidated financial statements.
Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities
The Group has applied the amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities
for the first time in the current year. The amendments to HKAS 32 clarify the requirements relating
to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the
meaning of 'currently has a legally enforceable right of set-off' and 'simultaneous realisation and
settlement'.
The amendments have been applied retrospectively. The Group has assessed whether certain of its
financial assets and financial liabilities qualify for offset based on the criteria set out in the
amendments and concluded that the application of the amendments has had no material impact on the
amounts recognised in the Group's consolidated financial statements.
Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets
The Group has applied the amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial
Assets for the first time in the current year. The amendments to HKAS 36 remove the requirement to
disclose the recoverable amount of a cash-generating unit ("CGU") to which goodwill or other
intangible assets with indefinite useful lives had been allocated when there has been no impairment or
reversal of impairment of the related CGU. Furthermore, the amendments introduce additional disclosure
requirements applicable to when the recoverable amount of an asset or a CGU is measured at fair value
less costs of disposal. These new disclosures include the fair value hierarchy, key assumptions and
valuation techniques used which are in line with the disclosure required by HKFRS 13 Fair Value
Measurements.
The application of these amendments has had no material impact on the disclosures in the Group's
consolidated financial statements.
New and revised HKFRSs issued but not yet effective
HKFRS 9 Financial Instruments1
HKFRS 14 Regulatory Deferral Accounts2
HKFRS 15 Revenue from Contracts with Customers3
Amendments to HKFRS 11 Accounting for Acquisitions of
Interests in Joint Operations5
Amendments to HKAS 1 Disclosure Initiative5
Amendments to HKAS 16 and HKAS 38 Clarification of Acceptable Methods of
Depreciation and Amortisation5
Amendments to HKAS 19 Defined Benefit Plans: Employee
Contributions4
Amendments to HKFRSs Annual Improvements to HKFRSs 2010-2012 Cycle6
Amendments to HKFRSs Annual Improvements to HKFRSs 2011-2013 Cycle4
Amendments to HKFRSs Annual Improvements to HKFRSs 2012-2014 Cycle5
Amendments to HKAS 16 and HKAS 41 Agriculture: Bearer Plants5
Amendments to HKAS 27 Equity Method in Separate Financial Statements5
Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture5
Amendments to HKFRS 10, HKFRS 12 Investment Entities: Applying the
and HKAS 28 Consolidation Exception5
1 Effective for annual periods beginning on or after January 1, 2018
2 Effective for first annual HKFRS financial statements beginning on or after January 1, 2016
3 Effective for annual periods beginning on or after January 1, 2017
4 Effective for annual periods beginning on or after July 1, 2014
5 Effective for annual periods beginning on or after January 1, 2016
6 Effective for annual periods beginning on or after July 1, 2014, with limited exceptions
HKFRS 9 Financial Instruments
HKFRS 9 issued in 2009 introduced new requirements for the classification and measurement of financial
assets. HKFRS 9 was subsequently amended in 2010 to include requirements for the classification and
measurement of financial liabilities and for derecognition, and further amended in 2013 to include the
new requirements for general hedge accounting. Another revised version of
HKFRS 9 was issued in 2014 mainly to include a) impairment requirements for financial assets and b)
limited amendments to the classification and measurement requirements by introducing a 'fair value
through other comprehensive income' ("FVTOCI") measurement category for certain simple debt
instruments.
Key requirements of HKFRS 9 are described below:
- All recognised financial assets that are within the scope of HKAS 39 Financial Instruments:
Recognition and Measurement are subsequently measured at amortised cost or fair value. Specifically,
debt investments that are held within a business model whose objective is to collect the contractual
cash flows, and that have contractual cash flows that are solely payments of principal and interest on
the principal outstanding are generally measured at amortised cost at the end of subsequent accounting
periods. Debt instruments that are held within a business model whose objective is achieved both by
collecting contractual cash flows and selling financial assets, and that have contractual terms of the
financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding, are measured at FVTOCI. All other debt investments and
equity investments are measured at their fair value at the end of subsequent accounting periods. In
addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in
the fair value of an equity investment (that is not held for trading) in other comprehensive income,
with only dividend income generally recognised in profit or loss.
- With regard to the measurement of financial liabilities designated as at fair value through profit
or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that
is attributable to changes in the credit risk of that liability is presented in other comprehensive
income, unless the recognition of the effects of changes in the liability's credit risk in other
comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair
value of financial liabilities attributable to changes in the financial liabilities' credit risk are
not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the
fair value of the financial liability designated as fair value through profit or loss was presented in
profit or loss.
- In relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model,
as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an
entity to account for expected credit losses and changes in those expected credit losses at each
reporting date to reflect changes in credit risk since initial recognition. In other words, it is no
longer necessary for a credit event to have occurred before credit losses are recognised.
The directors of the Company anticipate that the application of HKFRS 9 in the future may have a
material impact on amounts reported in respect of the Group's financial assets and financial
liabilities (e.g. the Group's investments in unlisted equity securities currently classified as
available-for-sale investments may have to be measured at fair value at the end of subsqeunt reporting
periods, with changes in the fair value being recognised in profit or loss). Regarding the Group's
financial assets, it is not practicable to provide a reasonable estimate of that effect until a
detailed review has been completed.
HKFRS 15 Revenue from Contracts with Customers
In July 2014, HKFRS 15 was issued which establishes a single comprehensive model for entities to
use in accounting for revenue arising from contracts with customers. HKFRS 15 will supersede the
current revenue recognition guidance including HKAS 18 Revenue, HKAS 11 Construction Contracts and the
related Interpretations when it becomes effective.
The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. Specifically, the Standard
introduces a 5-step approach to revenue recognition:
- Step 1: Identify the contract(s) with a customer
- Step 2: Identify the performance obligations in the contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contract
- Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e.
when 'control' of the goods or services underlying the particular performance obligation is
transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with
specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15. The directors of the
Company anticipate that the application of HKFRS 15 in the future may have a material impact on the
amounts reported and disclosures made in the Group's consolidated financial statements. However, it is
not practicable to provide a reasonable estimate of the effect of HKFRS 15 until the Group performs a
detailed review.
Amendments to HKAS 16 and HKAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation
The amendments to HKAS 16 prohibit entities from using a revenue-based depreciation method for items
of property, plant and equipment. The amendments to HKAS 38 introduce a rebuttable presumption that
revenue is not an appropriate basis for amortisation of an intangible asset. This presumption can only
be rebutted in the following two limited circumstances:
a) when the intangible asset is expressed as a measure of revenue; or
b) when it can be demonstrated that revenue and consumption of the economic benefits of the
intangible asset are highly correlated.
The amendments apply prospectively for annual periods beginning on or after January 1, 2016.
Currently, the Group uses the straight-line method for depreciation and amortisation for its property,
plant and equipment, expressway operating rights and other intangible assets respectively. The
directors of the Company believe that the straight-line method is the most appropriate method to
reflect the consumption of economic benefits inherent in the respective assets and accordingly, the
directors of the Company do not anticipate that the application of these amendments to HKAS 16 and
HKAS 38 will have a material impact on the Group's consolidated financial statements.
Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions
The amendments to HKAS 19 clarify how an entity should account for contributions made by employees or
third parties to defined benefit plans, based on whether those contributions are dependent on the
number of years of service provided by the employee.
For contributions that are independent of the number of years of service, the entity may either
recognise the contributions as a reduction in the service cost in the period in which the related
service is rendered, or to attribute them to the employees' periods of service using the projected
unit credit method; whereas for contributions that are dependent on the number of years of service,
the entity is required to attribute them to the employees' periods of service.
The directors of the Company do not anticipate that the application of these amendments to HKAS 19
will have an impact on the Group's consolidated financial statements as the Group does not have any
defined benefit plans.
Amendments to HKAS 27 Equity Method in Separate Financial Statements
The amendments allow an entity to account for investments in subsidiaries, joint ventures and
associates in its separate financial statements
- At cost
- In accordance with HKFRS 9 Financial Instruments (or HKAS 39 Financial Instruments: Recognition
and Measurement for entities that have not yet adopted HKFRS 9), or
- Using the equity method as described in HKAS 28 Investments in Associates and Joint Ventures.
The accounting option must be applied by category of investments.
The amendments also clarify that when a parent ceases to be an investment entity, or becomes an
investment entity, it shall account for the change from the date when the change in status occurred.
In addition to the amendments to HKAS 27, there are consequential amendments to HKAS 28 to avoid a
potential conflict with HKFRS 10 Consolidated Financial Statements and to HKFRS 1 First time Adoption
of Hong Kong Financial Reporting Standards.
The directors of the Company do not anticipate that the application of these amendments to HKAS 27
will have a material impact on the Group's consolidated financial statements.
Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
Amendments to HKAS 28:
- The requirements on gains and losses resulting from transactions between an entity and its
associate or joint venture have been amended to relate only to assets that do not constitute a
business.
- A new requirement has been introduced that gains or losses from downstream transactions involving
assets that constitute a business between an entity and its associate or joint venture must be
recognised in full in the investor's financial statements.
- A requirement has been added that an entity needs to consider whether assets that are sold or
contributed in separate transactions constitute a business and should be accounted for as a single
transaction.
Amendments to HKFRS 10
- An exception from the general requirement of full gain or loss recognition has been introduced
into HKFRS 10 for the loss control of a subsidiary that does not contain a business in a transaction
with an associate or a joint venture that is accounted for using the equity method.
- New guidance has been introduced requiring that gains or losses resulting from those transactions
are recognised in the parent's profit or loss only to the extent of the unrelated investors' interests
in that associate or joint venture. Similarly, gains and losses resulting from the remeasurement at
fair value of investments retained in any former subsidiary that has become an associate or a joint
venture that is accounted for using the equity method are recognised in the former parent's profit or
loss only to the extent of the unrelated investors' interests in the new associate or joint venture.
The directors of the Company do not anticipate that the application of these amendments to HKFRS 10
and HKAS 28 will have a material impact on the Group's consolidated financial statements.
Annual Improvements to HKFRSs 2010-2012 Cycle
The Annual Improvements to HKFRSs 2010-2012 Cycle include a number of amendments to various HKFRSs,
which are summarised below.
The amendments to HKFRS 8 (i) require an entity to disclose the judgements made by management in
applying the aggregation criteria to operating segments, including a description of the operating
segments aggregated and the economic indicators assessed in determining whether the operating segments
have 'similar economic characteristics'; and (ii) clarify that a reconciliation of the total of the
reportable segments' assets to the entity's assets should only be provided if the segment assets are
regularly provided to the chief operating decision-maker.
The amendments to the basis for conclusions of HKFRS 13 clarify that the issue of HKFRS 13 and
consequential amendments to HKAS 39 and HKFRS 9 did not remove the ability to measure short-term
receivables and payables with no stated interest rate at their invoice amounts without discounting, if
the effect of discounting is immaterial. As the amendments do not contain any effective date, they are
considered to be immediately effective.
The amendments to HKAS 16 and HKAS 38 remove perceived inconsistencies in the accounting for
accumulated depreciation/amortisation when an item of property, plant and equipment or an intangible
asset is revalued. The amended standards clarify that the gross carrying amount is adjusted in a
manner consistent with the revaluation of the carrying amount of the asset and that accumulated
depreciation/amortisation is the difference between the gross carrying amount and the carrying amount
after taking into account accumulated impairment losses.
The amendments to HKAS 24 clarify that a management entity providing key management personnel services
to a reporting entity is a related party of the reporting entity. Consequently, the reporting entity
should disclose as related party transactions the amounts incurred for the service paid or payable to
the management entity for the provision of key management personnel services. However, disclosure of
the components of such compensation is not required.
The directors of the Company do not anticipate that the application of these amendments will have a
material effect on the Group's consolidated financial statements.
Annual Improvements to HKFRSs 2011-2013 Cycle
The Annual Improvements to HKFRSs 2011-2013 Cycle include a number of amendments to various HKFRSs,
which are summarised below.
The amendments to HKFRS 3 clarify that the standard does not apply to the accounting for the formation
of all types of joint arrangement in the financial statements of the joint arrangement itself.
The amendments to HKFRS 13 clarify that the scope of the portfolio exception for measuring the fair
value of a group of financial assets and financial liabilities on a net basis includes all contracts
that are within the scope of, and accounted for in accordance with, HKAS 39 or HKFRS 9, even if those
contracts do not meet the definitions of financial assets or financial liabilities within HKAS 32.
The amendments to HKAS 40 clarify that HKAS 40 and HKFRS 3 are not mutually exclusive and application
of both standards may be required. Consequently, an entity acquiring investment property must
determine whether:
a) the property meets the definition of investment property in terms of HKAS 40; and
b) the transaction meets the definition of a business combination under HKFRS 3.
The directors of the Company do not anticipate that the application of these amendments will have a
material effect on the Group's consolidated financial statements.
Annual Improvements to HKFRSs 2012-2014 Cycle
The Annual Improvements to HKFRSs 2012-2014 Cycle include a number of amendments to various HKFRSs,
which are summarised below.
The amendments to HKFRS 5 introduce specific guidance in HKFRS 5 for when an entity reclassifies an
asset (or disposal group) from held for sale to held for distribution to owners (or vice versa), or
when held-for-distribution accounting is discontinued. The amendments apply prospectively.
The amendments to HKFRS 7 provide additional guidance to clarify whether a servicing contract is
continuing involvement in a transferred asset for the purpose of the disclosures required in relation
to transferred assets and clarify that the offsetting disclosures (introduced in the amendments to
HKFRS 7 Disclosure - Offsetting Financial Assets and Financial Liabilities issued in December 2011 and
effective for periods beginning on or after 1 January 2013) are not explicitly required for all
interim periods. However, the disclosures may need to be included in condensed interim financial
statements to comply with HKAS 34 Interim Financial Reporting.
The amendments to HKAS 34 clarify the requirements relating to information required by HKAS 34 that is
presented elsewhere within the interim financial report but outside the interim financial statements.
The amendments require that such information be incorporated by way of a cross-reference from the
interim financial statements to the other part of the interim financial report that is available to
users on the same terms and at the same time as the interim financial statements.
The directors of the Company do not anticipate that the application of these will have a material
effect on the Group's consolidated financial statements.
3. SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The consolidated financial statements have been prepared in accordance with Hong Kong Financial
Reporting Standards issued by the HKICPA. In addition, the consolidated financial statements include
applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange
of Hong Kong Limited and by the Hong Kong Companies Ordinance, which for the year continue to be those
of the predecessor Companies Ordinance (Cap. 32), in accordance with transitional and saving
arrangement for Part 9 of the Hong Kong Companies Ordinance (Cap. 622), "Accounts and Audit", which
are set out in sections 76 to 87 of Schedule 11 to that Ordinance.
Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis except for
certain financial instruments that are measured at fair values at the end of each reporting period, as
explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods
and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date, regardless of whether that
price is directly observable or estimated using another valuation technique. In estimating the fair
value of an asset or a liability, the Group takes into account the characteristics of the asset or
liability if market participants would take those characteristics into account when pricing the asset
or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these
consolidated financial statements is determined on such a basis, except leasing transactions that are
within the scope of HKAS 17, and measurements that have some similarities to fair value but are not
fair value, such as net realisable value in HKAS 2 or value in use in HKAS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2
or 3 based on the degree to which the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its entirety, which are described as
follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable
for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company and its subsidiaries. Control is achieved when the Company:
- has power over the investee;
- is exposed, or has rights, to variable returns from its involvement with the investee; and
- has the ability to use its power to affect its returns
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases
when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated statement of profit or loss
and other comprehensive income from the date the Group gains control until the date when the Group
ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the owners of the Company
and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the
owners of the Company and to the non-controlling interests even if this results in the non-
controlling interests having a deficit balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies in line with the Group`s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on consolidation.
Allocation of total comprehensive income to non-controlling interests
Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Merger accounting for business combination involving entities under common control
The consolidated financial statements incorporate the financial statements items of the combining
entities or businesses in which the common control combination occurs as if they had been combined
from the date when the combining entities or businesses first came under the control of the
controlling party.
The net assets of the combining entities or businesses are consolidated using the existing book values
from the controlling party's perspective. No amount is recognised in respect of goodwill or excess of
acquirer's interest in the net fair value of acquiree's identifiable assets, liabilities and
contingent liabilities over cost at the time of common control combination, to the extent of the
continuation of the controlling party's interest.
The consolidated statement of profit or loss and other comprehensive income includes the results of
each of the combining entities or businesses from the earliest date presented or since the date when
the combining entities or businesses first came under the common control, where this is a shorter
period, regardless of the date of the common control combination.
The comparative amounts in the consolidated financial statements are presented as if the entities or
businesses had been combined at the end of the previous reporting period or when they first came under
common control, whichever is shorter.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of
acquisition of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-
generating units (or groups of cash-generating units) that is expected to benefit from the synergies
of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or
more frequently when there is indication that the unit may be impaired. If the recoverable amount of
the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the
unit on a pro-rata basis based on the carrying amount of each asset in the unit. Any impairment loss
for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is
not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in
the determination of the profit or loss on disposal.
The Group's policy for goodwill arising on the acquisition of associates and joint venture is
described below.
Interests in associates and a joint venture
An associate is an entity over which the Group has significant influence. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but is not
control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint arrangement. Joint control is the contractually agreed
sharing of control of an arrangement, which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or a joint venture are incorporated in these
consolidated financial statements using the equity method of accounting. Under the equity method, an
investment in an associate or a joint venture is initially recognised in the consolidated statement of
financial position at cost and adjusted thereafter to recognise the Group's share of the profit or
loss and other comprehensive income of the associate or joint venture. When the Group's share of
losses of an associate or a joint venture exceeds the Group's interest in that associate or joint
venture (which includes any long-term interests that, in substance, form part of the Group's net
investment in the associate or joint venture), the Group discontinues recognising its share of further
losses. Additional losses are recognised only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the associate or joint venture.
An investment in an associate or a joint venture is accounted for using the equity method from the
date on which the investee becomes an associate or a joint venture. On acquisition of the investment
in an associate or a joint venture, any excess of the cost of the investment over the Group's share of
the net fair value of the identifiable assets and liabilities of the investee is recognised as
goodwill, which is included within the carrying amount of the investment. Any excess of the Group's
share of the net fair value of the identifiable assets and liabilities over the cost of the
investment, after reassessment, is recognised immediately in profit or loss in the period in which the
investment is acquired.
The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any
impairment loss with respect to the Group's investment in an associate or a joint venture. When
necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment
in accordance with HKAS 36 Impairment of Assets as a single asset by comparing its recoverable amount
(higher of value in use and fair value less costs to sell) with its carrying amount, Any impairment
loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment
loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the
investment subsequently increases.
The Group discontinues the use of the equity method from the date when the investment ceases to be an
associate or a joint venture, or when the investment (or a portion thereof) is classified as held for
sale. When the Group retains an interest in the former associate or joint venture and the retained
interest is a financial asset, the Group measures the retained interest at fair value at that date and
the fair value is regarded as its fair value on initial recognition in accordance with HKAS 39. The
difference between the carrying amount of the associate or joint venture at the date the equity method
was discontinued, and the fair value of any retained interest and any proceeds from disposing of a
part interest in the associate or joint venture is included in the determination of the gain or loss
on disposal of the associate or joint venture. In addition, the Group accounts for all amounts
previously recognised in other comprehensive income in relation to that associate or joint venture on
the same basis as would be required if that associate or joint venture had directly disposed of the
related assets or liabilities. Therefore, if a gain or loss previously recognised in other
comprehensive income by that associate or joint venture would be reclassified to profit or loss on the
disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to
profit or loss (as a reclassification adjustment) when the equity method is discontinued.
The Group continues to use the equity method when an investment in an associate becomes an
investment in a joint venture or an investment in a joint venture becomes an investment in an
associate. There is no remeasurement to fair value upon such changes in ownership interests.
When the Group reduces its ownership interest in an associate or a joint venture but the Group
continues to use the equity method, the Group reclassifies to profit or loss the proportion of the
gain or loss that had previously been recognised in other comprehensive income relating to that
reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the
disposal of the related assets or liabilities.
When a group entity transacts with an associate or a joint venture of the Group (such as a sale or
contribution of assets), profits and losses resulting from the transactions with the associate or
joint venture is recognised in the Group's consolidated financial statements only to the extent of
interests in the associate or joint venture that are not related to the Group.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is
reduced for estimated customer returns and other similar allowances.
Toll income from the operation of tolled roads is recognised when the tolls are received or become
receivable.
Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at
which time all the following conditions are satisfied:
- the Group has transferred to the buyer the significant risks and rewards of ownership of the
goods;
- the Group retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
- the amount of revenue can be measured reliably;
- it is probable that the economic benefits associated with the transaction will flow to the Group;
and
- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Service income, including advertising income, is recognised when services are provided.
Commission income from securities broking business is recognised on a trade date basis.
Advisory and handling fee income are recognised when the relevant transactions have been provided or
the relevant services have been rendered.
Underwriting and sponsors fees are recognised as income in accordance with the terms of the
underwriting agreement or deal mandate when the relevant significant acts have been completed.
Asset management fee income is recognised when management services are provided in accordance with the
management contracts.
Dividend income from investments is recognised when the shareholders' rights to receive payment have
been established (provided that it is probable that the economic benefits will flow to the Group and
the amount of revenue can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits
will flow to the Group and the amount of income can be measured reliably. Interest income is accrued
on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts the estimated future cash receipts through the
expected life of the financial asset to that asset's net carrying amount on initial recognition.
The Group's accounting policy for recognition of revenue from operating leases is described in the
accounting policy for leasing below.
Property, plant and equipment
Property, plant and equipment including buildings and leasehold land (classified as finance leases)
held for use in the production or supply of goods or services, or for administrative purposes (other
than properties under construction as described below), are stated in the consolidated statement of
financial position at cost, less subsequent accumulated depreciation and subsequent accumulated
impairment losses, if any.
Properties in the course of construction for production, supply or administrative purposes are carried
at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying
assets, borrowing costs capitalised in accordance with the Group's accounting policy. Such properties
are classified to the appropriate categories of property, plant and equipment when
completed and ready for intended use. Depreciation of these assets, on the same basis as other
property assets, commences when the assets are ready for their intended use.
Depreciation is recognised so as to write off the cost of assets (other than properties under
construction) less their residual values over their useful lives, using the straight-line method. The
estimated useful lives, residual values and depreciation method are reviewed at the end of each
reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Estimated Annual
useful life depreciation rate
Leasehold land and buildings 30 - 50 years 1.9% - 3.2%
Ancillary facilities 10 - 30 years 3.2% - 9%
Communication and signaling equipment 5 years 19.4%
Motor vehicles 5 - 8 years 12.1% - 19.4%
Machinery and equipment 5 - 8 years 12.1% - 19.4%
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of property, plant and equipment is determined as the difference
between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less
accumulated amortisation and accumulated impairment losses. Amortisation for intangible assets with
finite useful lives is recognised on a straight-line basis over their estimated useful lives. The
estimated useful life and amortisation method are reviewed at the end of each reporting period, with
the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets
with indefinite useful lives that are acquired separately are carried at cost less accumulated
impairment losses (see the accounting policy in respect of impairment losses on tangible and
intangible assets below).
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are recognised separately from goodwill are
initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination with finite
useful lives are reported at cost less accumulated amortisation and accumulated impairment losses, on
the same basis as intangible assets that are acquired separately.
Alternatively, intangible assets with indefinite useful lives are carried at cost less subsequent
accumulated impairment losses (see accounting policy in respect of impairment losses on tangible and
intangible assets below).
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from
use or disposal. Gains or losses arising from derecognition of an intangible assets are measured at
the difference between the net disposal proceeds and the carrying amount of the asset and are
recognised in profit or loss in the period when the asset is derecognised.
Expressway operating rights under service concession arrangements
When the Group has a right to charge for usage of concession infrastructure, it recognises
concession intangible assets based on fair value of the consideration paid upon initial recognition.
Subsequent costs incurred on expressway widening projects and upgrading services are recognised as
additional costs of the expressway operating rights. The concession intangible assets representing
expressway operating rights are carried at cost less accumulated amortisation and any accumulated
impairment losses.
The concession intangible assets are amortised to write-off their cost over their expected useful
lives in the remaining concession period on a straight-line basis.
Costs in relation to the day-to-day servicing, repairs and maintenance of the expressway
infrastructures are recognised as expenses in the periods in which they are incurred.
Impairment losses on tangible and intangible assets other than goodwill (see the accounting policy in
respect of goodwill above)
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and
intangible assets with finite useful lives to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). When it is not
possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and
consistent basis of allocation can be identified, corporate assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units
for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are
tested for impairment at least annually, and whenever there is an indication that the asset may be
impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating
unit) is increased to the revised estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have been determined had no impairment
loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an
impairment loss is recognised immediately in profit or loss.
Inventories
Inventories include consumables and parts for toll road operation and maintenance and those
commodities held for sale arising from the securities business.
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are
calculated using the weighted average method. Net realisable value represents the estimated selling
price for inventories less all estimated costs of completion and costs necessary to make the sale.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all
the risks and rewards of ownership to the lessee. All other leases are classified as operating
leases.
The Group as lessor
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the
term of the relevant lease.
The Group as lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term,
except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rentals arising under operating leases are
recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are
recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental
expense on a straight-line basis, except where another systematic basis is more representative of the
time pattern in which economic benefits from the leased asset are consumed.
Leasehold land and building
When a lease includes both land and building elements, the Group assesses the classification of
each element as a finance or an operating lease separately based on the assessment as to whether
substantially all the risks and rewards incidental to ownership of each element have been transferred
to the Group, unless it is clear that both elements are operating leases in which case the entire
lease is classified as an operating lease. Specifically, the minimum lease payments (including any
lumpsum upfront payments) are allocated between the land and the building elements in proportion to
the relative fair values of the leasehold interests in the land element and building element of the
lease at the inception of the lease.
To the extent the allocation of the lease payments can be made reliably, interest in leasehold land
that is accounted for as an operating lease is presented as 'prepaid lease payments' in the
consolidated statement of financial position and is amortised over the lease term on a straight-line
basis. When the lease payments cannot be allocated reliably between the land and building elements,
the entire lease is generally classified as a finance lease and accounted for as property,
plant and equipment.
Foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies
other than the entity's functional currency (foreign currencies) are recognised at the rates of
exchange prevailing at the dates of the transactions. At the end of the reporting period, monetary
items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-
monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary
items, are recognised in profit or loss in the period in they arise.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their
intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are
incurred.
Retirement benefit costs
Payments to defined contribution retirement benefit plans are recognised as an expense when employees
have rendered services entitling them to the contributions.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from
'profit before tax' as reported in the consolidated statement of profit or loss and other
comprehensive income because of items of income or expense that are taxable or deductible in other
years and items that are never taxable or deductible. The Group's liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting
period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which
those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are
not recognised if the temporary difference arises from goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments
in subsidiaries and interests in associates and a joint venture, except where the Group is able to
control the reversal of the temporary difference and it is probable that the temporary difference will
not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only recognised to the extent that it
is probable that there will be sufficient taxable profits against which to utilise the benefits of the
temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of the reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset is realised, based on tax rate (and tax laws)
that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of the reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case, the current and
deferred tax are also recognised in other comprehensive income or directly in equity respectively.
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to
the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs
that are directly attributable to the acquisition or issue of financial assets and financial
liabilities (other than financial assets or financial liabilities at fair value through profit or
loss) are added to or deducted from the fair value of the financial assets or financial liabilities,
as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at fair value through profit or loss are recognised
immediately in profit or loss.
Financial assets
Financial assets are classified into the following specified categories: financial assets at fair
value through profit or loss ("FVTPL"), available-for-sale ("AFS") financial assets and loans and
receivables. The classification depends on the nature and purpose of the financial assets and is
determined at the time of initial recognition. All regular way purchases or sales of financial assets
are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or
sales of financial assets that require delivery of assets within the time frame established by
regulation or convention in the market place.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and
of allocating interest income over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts (including all fees and points paid or received that
form an integral part of the effective interest rate, transaction costs and other premiums or
discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period,
to the net carrying amount on initial recognition.
Interest income is recognised on an effective interest basis for debt instruments other than those
financial assets classified as at FVTPL, of which interest income is included in net gains or losses.
Financial assets at FVTPL
Financial assets are classified as at FVTPL include financial asset held for trading.
A financial asset is classified as held for trading if:
- it has been acquired principally for the purpose of selling it in the near term; or
- on initial recognition it is part of a portfolio of identified financial instruments that the
Group manages together and has a recent actual pattern of short-term profit-taking; or
- it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement
recognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend
or interest earned on the financial asset and is included in the 'securities investment gains' line
item. Fair value is determined in the manner described in Note 6(c).
AFS financial assets
AFS financial assets are non-derivatives that are not either designated or classified as (a) loans and
receivables, (b) held-to-maturity investments or (c) financial assets at FVTPL.
Equity and debt securities held by the Group that are classified as AFS financial assets and are
traded in an active market are measured at fair value at the end of each reporting period. Changes in
the carrying amount of AFS monetary financial assets relating to interest income calculated using the
effective interest method and dividends on AFS equity investments are recognised in profit or loss.
Other changes in the carrying amount of AFS financial assets are recognised in other comprehensive
income and accumulated under the heading of investments revaluation reserve. When the investment is
disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the
investments revaluation reserve is reclassified to profit or loss (see the accounting policy in
respect of impairment loss on financial assets below).
Dividends on AFS equity instruments are recognised in profit or loss when the Group's right to
receive the dividends is established.
AFS equity investments that do not have a quoted market price in an active market and whose fair
value cannot be reliably measured and derivatives that are linked to and must be settled by delivery
of such unquoted equity investments are measured at cost less any identified impairment losses at the
end of each reporting period (see the accounting policy in respect of impairment loss on financial
assets below).
Loan and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. Loans and receivables (including trade receivables, loans to
customers arising from margin financing business, other receivables, financial assets held under
resale agreements, bank balances held on behalf of customers and bank balances and cash) are measured
at amortised cost using the effective interest method, less any identified impairment losses (see
accounting policy on impairment losses on financial assets below).
Impairment loss on financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end
of each reporting period. Financial assets are considered to be impaired when there is objective
evidence that, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the financial assets have been affected.
For an AFS equity investment, a significant or prolonged decline in the fair value of the security
below its cost is considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
- significant financial difficulty of the issuer or counterparty; or
- breach of contract, such as default or delinquency in interest or principal payments; or
- it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
- the disappearance of an active market for that financial asset because of financial difficulties.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the
difference between the asset's carrying amount and the present value of the estimated future cash
flows, discounted at the financial asset's original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is measured as the
difference between the asset's carrying amount and the present value of the estimated future cash
flows discounted at the current market rate of return for a similar financial asset. Such impairment
loss will not be reversed in subsequent periods (see the accounting policy below).
The carrying amount of the financial asset is reduced by the impairment loss directly for all
financial assets with the exception of trade receivables and loans to customers arising from margin
financing business, where the carrying amount is reduced through the use of an allowance account.
When trade receivables are considered uncollectible, they are written off against the allowance
account. Subsequent recoveries of amounts previously written off are credited against the allowance
account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
For the loans to customers arising from margin financing business, the Group reviews its advances to
customers to assess impairment on a periodic basis. In determining whether an impairment loss should
be recognised in profit or loss, the Group reviews the value of the securities collateral received
from the customers firstly on individual basis, then on collective basis in determining the
impairment. The methodology and assumptions used for estimating both the amount and timing of future
cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss
experience.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously
recognised in other comprehensive income are reclassified to profit or loss in the period.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of
impairment loss decreases and the decrease can be related objectively to an event occurring after the
impairment losses was recognised, the previously recognised impairment loss is reversed through profit
or loss to the extent that the carrying amount of the investment at the date the impairment is
reversed does not exceed what the amortised cost would have been had the impairment not been
recognised.
In respect of AFS equity investments, impairment losses previously recognised in profit or loss are
not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is
recognised in other comprehensive income and accumulated under the heading of investments revaluation
reserve. In respect of AFS debt investments, impairment losses are subsequently reversed through
profit or loss if an increase in the fair value of the investment can be objectively related to an
event occurring after the recognition of the impairment loss.
Financial liabilities and equity instruments
Financial liabilities and equity
Financial liabilities and equity instruments issued by a group entity are classified according to the
substance of the contractual arrangements entered into and the definitions of a financial liability
and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the
proceeds received, net of direct issue costs.
Other financial liabilities
Other financial liabilities (including accounts payable to customers arising from securities business,
trade payables, other payables, dividends payable, bank and other borrowings, placements from other
financial institutions, short-term financing note payable, financial assets sold under repurchase
agreements and bonds payable) are subsequently measured at amortised cost using the effective interest
method.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial
liability and of allocating interest expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments (including all fee and points paid or
received that form an integral part of the effective interest rate, transaction costs and other
premium or discounts) through the expected life of the financial liability, or, where appropriate, a
shorter period, to the net carrying amount on initial recognition.
Interest expense is recognised on an effective interest basis other than financial liabilities
classified as at FVTPL.
Financial assets held under resale agreements
Financial assets held under resale agreements where the Group acquires financial assets which will be
resold at a predetermined price at a future date under resale agreements, the cash advanced by the
Group is recognised as secured loans and receivables and presented as amounts held under resale
agreements in the consolidated statement of financial position. The difference between the purchase
and resale consideration is amortised over the period of the respective agreements using the effective
interest method and is included in interest income.
Financial assets sold under repurchase agreements
Financial assets sold subject to agreements with a commitment to repurchase at a specific future date
and price are not derecognised in the consolidated statement of financial position. The proceeds from
selling such assets are presented under "financial assets sold under repurchase agreements" in the
consolidated statement of financial position. The difference between the selling price and
repurchasing price is recognised as interest expense during the term of the agreement using the
effective interest method.
Securities lending arrangement
The Group lends investment securities to clients and requires cash and/or equity securities from
customers held as collaterals under such securities lending agreements. The cash collaterals arisen
from these are included in "accounts payable to customers arising from securities business". For
those securities held by the Group and lent to client that do not result in the derecognition of
financial assets, they are included in AFS investments.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in
accordance with the terms of a debt instrument. Financial guarantee contracts issued by the Group are
initially measured at their fair values and are subsequently measured at the higher of:
(i) the amount of obligation under the contract, as determined in accordance with HKAS 37
Provisions, Contingent Liabilities and Contingent Assets; and
(ii) the amount initially recognised less, where appropriate, cumulative amortisation
recognised in accordance with the revenue recognition policies.
Derecognition
The Group derecognises a financial asset only when the contractual rights to the cash flows from
the asset expire, or when it transfers the financial asset and substantially all the risks and rewards
of ownership of the asset to another entity. If the Group neither transfers nor retains substantially
all the risks and rewards of ownership and continues to control the transferred asset, the Group
continues to recognise the asset to the extent of its continuing involvement and recognises an
associated liability. If the Group retains substantially all the risks and rewards of ownership of a
transferred financial asset, the Group continues to recognise the financial asset and also recognises
a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset's carrying
amount and the sum of the consideration received and receivable and the cumulative gain or loss that
had been recognised in other comprehensive income and accumulated in equity is recognised in profit or
loss.
The Group derecognises financial liabilities when, and only when, the Group's obligations are
discharged, cancelled or expire. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable is recognised in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result
of a past event, it is probable that the Group will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the
present obligation at the end of the reporting period, taking into account the risks and uncertainties
surrounding the obligation. When a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash flows (where the effect of
the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered
from a third party, a receivable is recognised as an asset if it is virtually certain that
reimbursement will be received and the amount of the receivable can be measured reliably.
4. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Critical judgements in applying accounting policies
The following is the critical judgement, apart from those involving estimations (see below), that
management has made in the process of applying the Group's accounting policies and that have the most
significant effect on the amounts recognised in the consolidated financial statements.
Note 52 describes that Dongfang Jujin Jiahua is a subsidiary of the Group although it is 31.39% owned
by Zheshang Securities Co., Ltd. ("Zheshang Securities")..
The directors of the Company assessed whether or not the Group has control over Dongfang Jujin Jiahua
based on whether the Group has the practical ability to direct its relevant activities unilaterally.
In making their judgement, the directors considered the Dongfang Jujin Jiahua is a limited
partnership, while Ningbo Dongfang Jujin Investment Management Advisory Co., Ltd. ("Dongfang Jujin"),
a 100% owned subsidiary of Zheshang Securities, is a general partner of Dongfang Jujin Jiahua.
After assessment, the directors concluded that the Group has sufficiently dominant voting interest to
direct the relevant activities of Dongfang Jujin Jiahua and therefore the Group has control over
Dongfang Jujin Jiahua.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period, that have a significant risk of causing a material
adjustment to the carrying amounts of assets within the next financial year.
Estimated impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-
generating units to which goodwill has been allocated. The value in use calculation requires the
Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable
discount rate in order to calculate the present value. Where the actual future cash flows are less
than expected, a material impairment loss may arise. As at December 31, 2014, the carrying amount of
goodwill is Rmb86,867,000 (without accumulated impairment loss) (2013: Rmb86,867,000 (without
accumulated impairment loss)). Details of the impairment testing are disclosed in Note 23.
Estimated impairment of intangible assets with indefinite useful lives
Determining whether intangible assets with indefinite useful lives are impaired requires an
estimation of the value in use of themselves or the cash-generating unit to which they belong. The
value in use calculation requires the Group to estimate the future cash flows expected to arise from
themselves or the cash-generating unit to which they belong and a suitable discount rate in order to
calculate the present value. Where the actual future cash flows are less than expected, a material
impairment loss may arise. As at December 31, 2014, the carrying amounts of intangible assets with
indefinite useful lives were Rmb66,563,000 (without accumulated impairment loss) (2013: Rmb66,563,000
(without accumulated impairment loss)). Details of the impairment testing are disclosed in Note 23.
Estimated impairment of interest in a joint venture and associates
The Group regularly reviews whether there are any indications of impairment and recognises an
impairment loss if the carrying amount of the Group's interest in a joint venture or associates are
lower than their respective recoverable amount. The Group tests for impairment for the interest in a
joint venture and associate whenever there is an indication that the asset may be impaired. The
recoverable amounts have been determined based on the higher of the fair value less costs of disposal
and value in use calculations. These calculations require the use of estimates, such as discount
rates, future profitability and growth rates. Where the actual future cash flows are less than
expected, a material impairment loss may arise. As at December 31, 2014, the carrying amount of
interest in a joint venture was Rmb300,667,000 (without accumulated impairment loss) (2013:
Rmb333,944,000 (without accumulated impairment loss)), and the carrying amount of interest in
associates was Rmb627,866,000 (with accumulated impairment loss of Rmb11,979,000) (2013:
Rmb574,733,000 (with accumulated impairment loss of Rmb11,979,000)).
Provision for financial guarantee contract
The directors of the Company based on its best estimate of the financial position and credit rating of
the guarantee to determine the probability of incurring a claim by the counterparty to the Company to
estimate fair value or the respective obligation under the financial guarantee contract. Based on
expectations at the end of the reporting period, the Group considers that it is more likely than not
that no amount will be payable under the arrangement. However, this estimate is subject to change
depending on the probability of the counterparty claiming under the guarantee which is a function of
the likelihood that the financial receivables held by the counterparty which are guaranteed suffer
credit losses. As at December 31, 2014 and 2013, in respect of the financial guarantee contract
provided to a joint venture of the Group in the amount of Rmb1,076,910,000 and Rmb1,100,000,000,
respectively, the directors of the Company considered that the fair value of the financial guarantee
obligation was insignificant in both years.
Fair value measurements and valuation processes
Some of the Group's assets and liabilities are measured at fair value for financial reporting
purposes. The board of directors of the Group has set up a valuation team, which is headed up by the
Chief Financial Officer (''CFO'') of the Group, to determine the appropriate valuation techniques and
inputs for fair value measurements.
In estimating the fair value of an asset or a liability, the Group uses market-observable data to the
extent it is available, Where Level 1 inputs are not available, the Group engages third party
qualified valuers to perform the valuation.
The CFO works closely with the qualified external valuers to establish the appropriate valuation
techniques and inputs to the model. The CFO reports the valuation committee's findings to the board of
directors of the Group at the end of each reporting period to explain the cause of fluctuations in the
fair value of the assets and liabilities.
As at 31 December 2014, the fair value of the held-for-trading investment and available-for-sale
investments (excluding those unlisted equity securities investments measured at cost) was estimated at
an asset of Rmb2,124,740,000 (2013: Rmb1,181,025,000) and Rmb752,753,000 (2013: Rmb414,438,000),
respectively.
5. FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
Financial assets
12/31/2014 12/31/2013
Rmb'000 Rmb'000
AFS investments
- at cost 38,500 11,000
- at fair value 752,753 414,438
Fair value through profit or loss
Held for trading investments 2,124,740 1,181,025
Loans and receivables
(including cash and cash equivalents) 32,842,737 15,485,366
__________ __________
Financial liabilities
Amortised cost 28,119,793 10,908,402
__________ __________
(b) Financial risk management objectives and policies
The Group's major financial instruments include AFS investments, held for trading investments,
trade and other receivables, loans to customers arising from margin financing business, financial
assets held under resale agreements, bank balances and cash, bank balances held on behalf of
customers, trade and other payables, placements from other financial institutions, accounts payable to
customers arising from securities business, bank and other borrowings, dividends payable, short-term
financing note payable, financial assets sold under repurchase agreements, bonds payable and financial
guarantee. Details of the financial instruments are disclosed in respective notes. The risks
associated with these financial instruments include market risk (interest rate risk, currency risk and
other price risk), credit risk and liquidity risk. The policies on how to mitigate these risks are
set out below. The management manages and monitors these exposures to ensure appropriate measures are
implemented on a timely and effective manner.
Market risk
(i) Interest rate risk
The Group is exposed to fair value interest rate risk in relation to loans to customers arising
from margin financing business, fixed-rate entrusted loans, financial assets held under resale
agreements, fixed-rate time deposits, fixed-rate bank and other borrowings, short-term financing
note payable, financial assets sold under repurchase agreements and bonds payable (see Notes 28,
29, 31, 33, 38, 39, 40 and 41 for details).
The Group is also exposed to cash flow interest rate risk in relation to variable-rate bank
balances held on behalf of customers, bank balances and bank and other borrowings (see Notes 32,
33 and 38 for details).
The Group currently does not have an interest rate risk hedging policy as the management considers
the Group is not exposed to significant interest rate risk. The management will continue to
monitor interest rate risk exposure and consider hedging against it should the need arise.
The Group's exposures to interest rates on financial liabilities are detailed in the liquidity
risk management section of this note.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for
non-derivative instruments, comprising variable-rate bank balances, bank balances held on behalf
of customers and bank borrowings at the end of the reporting period.
The analysis is prepared assuming the balances outstanding at the end of the reporting period were
outstanding for the whole year. A 30 basis points (2013: 30 basis points) increase or decrease
represents management's assessment of the reasonably possible change in interest rates.
If interest rates had been 30 basis points (2013: 30 basis points) higher/lower and all other
variables were held constant, the Group's post-tax profit for the year ended December 31, 2014
would have increased/decreased by Rmb44,277,000 (2013: Rmb21,679,000). This was mainly
attributable to the Group's exposure to interest rates on its variable-rate bank balances.
(ii) Currency risk
Several subsidiaries of the Company have foreign currency denominated monetary assets and
liabilities, which expose the Group to foreign currency risk. The Group is mainly exposed to
HKD and USD relative to Rmb.
The carrying amounts of the Group's foreign currency denominated monetary assets and liabilities
at the end of the reporting date are as follows:
Assets Liabilities
12/31/2014 12/31/2013 12/31/2014 12/31/2013
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Hong Kong dollar ("HKD") 18,352 19,395 12,490 13,933
United States dollar ("USD") 71,693 65,157 42,862 36,948
_______ _______ _______ _______
Sensitivity analysis
The Group did not maintain significant assets and liabilities denominated in the currency other
than the Group's functional currencies, the impact of the change in foreign exchange rate would
not have significant impact to the Group and the sensitivity analysis on the increase and decease
of the foreign exchange rate is not presented, accordingly.
(iii) Other price risk
The Group is exposed to equity and debt security price risk in relation to its held for trading
and AFS listed investments.
The Group currently does not have a price risk hedging policy and the management will continue
to monitor price risk exposure and consider hedging against it should the need arise.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to equity and debt
security price risks at the reporting date.
If the prices of the respective equity and debt instruments had been 5% (2013: 5%) higher/lower,
- post-tax profit for the year ended December 31, 2014 would have increased/decreased by
Rmb79,678,000 (2013: Rmb44,288,000) as a result of the changes in fair value of held for
trading investments; and
- investment valuation reserve would have increased by Rmb28,228,000 (2013: Rmb15,541,000)
for the Group as a result of the changes in fair value of AFS listed investments, or the
investment revaluation reserve would decrease by the same amount and the Group would
consider any potential impairment effect, if necessary.
Credit risk
As at December 31, 2014, the Group's maximum exposure to credit risk which will cause a financial
loss to the Group due to failure to discharge an obligation by the counterparties provided by the
Group is arising from the carrying amount of the respective recognised financial assets as stated in
the consolidated statement of financial position and the amount of contingent liability in relation to
financial guarantee issued by the Group as disclosed in Note 50.
The Group reviews the recoverable amount of each individual trade debt and entrusted loan
receivables at the end of the reporting period to ensure that adequate impairment losses are made for
irrecoverable amounts. In this regard, the directors of the Company consider that the Group's credit
risk is significantly reduced.
The Group has no credit period granted to its trade customers of toll operation businesses. All the
Group's trade receivable balance for toll operation business are toll receivables from the
government-operated organisation.
The Group also provides clients with margin financing business, and have financial assets held
under resale agreements which are secured by clients' securities or deposits held as collateral.
In respect of the margin financing and securities lending business of the Group's securities
operation, which was carried out by Zheshang Securities, Zheshang Securities has appointed a group of
authorised persons who are charged with the responsibility of determination of credit limits, credit
approvals and other monitoring procedures to ensure that follow-up action is taken to recover
overdue debts. Each client has a maximum credit limit based on the quality of collateral held and the
financial background of the client. In addition, Zheshang Securities reviews the recoverable amount
of each individual at the end of the reporting period to ensure that adequate impairment losses are
made for irrecoverable amounts. Margin calls are made when the trades of margin clients exceed their
respective limits. Any such excess is required to be made good within the next trading day. Failure
to meet margin calls will result in the liquidation of the customers' position. Zheshang Securities
seeks to maintain strict control over its outstanding receivables. It will also adhere to the Group's
policies and procedures to conduct periodic credit assessment and manage any concentration in the
following exposures and perform regular reporting to the management:
(i) exposures to a particular client/counterparty or group of related clients/counterparties; and
(ii) exposures to a particular investment product.
The Investment Committee of Zheshang Securities is also responsible to the credit risk arising from
its proprietary trading operation, including the investments in available-for-sale investments and
held for trading investments. The Investment Committee assesses the financial performance of the
issuers to ensure that the issuers can satisfy the repayment of the principal and interest as they
fall due. It has set portfolio size limits and single issuer limits to limit Zheshang Securities'
exposure to the credit risk. Zheshang Securities also monitors the credit rating and market news of
the issuers for any indication of potential credit deterioration.
The credit risk on liquid funds is limited because the counterparties are state-owned banks or
banks with high credit ratings assigned by international credit-rating agencies.
As at December 31, 2014, other than the concentration of credit risk on trade receivables,
entrusted loan receivables, financial investment products and financial guarantee contract amounting
to Rmb135,609,000 (2013: Rmb101,428,000), Rmb542,739,000 (2013: Rmb455,400,000), Rmb17,000,000 (2013:
Rmb168,000,000) and Rmb1,076,910,000 (2013: Rmb1,100,000,000) as disclosed in Notes 27, 29 and 50,
respectively, of which these balances were only limited and concentrated to a few counterparties, the
Group does not have any other significant concentration of credit risk.
There are also no concentration risks on its margin financing business and financial assets held under
resale agreements as at December 31, 2014 and December 31 2013 respectively as the Group has a large
number of clients who are dispersed.
The Group's concentration of credit risk by geographical location is mainly in the PRC.
Liquidity risk
Most of the bank balances and cash at December 31, 2014 and 2013 were denominated in Rmb which is
not a freely convertible currency in the international market. The exchange rate of Rmb is regulated
by the PRC government and the remittance of these Rmb funds out of the PRC is subject to foreign
exchange controls imposed by the PRC government.
The Group closely monitors its cash position resulting from its operations and maintains a level of
cash and cash equivalents deemed adequate by the management to enable the Group to meet in full its
financial obligations as they fall due for the foreseeable future.
Except for the bonds payable which is presented according to the Group's estimate after taking into
account the exercise of the early redemption right attached to the bonds payable, the following table
details the Group's remaining contractual maturity for its non-derivative financial liabilities and
has been drawn up based on the undiscounted cash flows of financial liabilities according to the
earliest date on which the Group can be required to pay. The table includes both interest and
principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is
derived from interest rate curve at the end of the reporting period.
Liquidity tables
On demand
Weighted or
average Less than 3 months- 1 - 3
interest rate 3 months 1 year years
% Rmb'000 Rmb'000 Rmb'000
2014
Non-derivative financial
Liabilities
Placements from other
financial institutions 6.40 1,830,181 154,423 -
Accounts payable to customers
arising from securities business - 16,545,146 - -
Trade payables - 693,604 - -
Other payables - 132,277 - -
Dividends payable - 76,139 - -
Bank and other borrowings
-variable rate 6.03 104,598 60,893 201,415
Short-term financing note payable 6.14 891,566 - -
Financial assets sold under
repurchase agreements 6.27 6,331,969 - -
Bonds payable 6.13 18,400 55,200 1,287,704
Financial guarantee 1,076,910 - -
__________ _______ _________
27,700,790 270,516 1,489,119
__________ _______ _________
2013
Non-derivative financial
Liabilities
Placements from other
financial institutions 7.02 316,456 - -
Accounts payable to customers
arising from securities business - 8,167,103 - -
Trade payables - 421,994 - -
Other payables - 74,329 - -
Dividends payable - 94,976 - -
Bank and other borrowings
-fixed rate 5.04 442,618 - -
-variable rate 6.42 105,653 14,404 315,329
Short-term financing note payable 5.50 1,013,712 - -
Financial guarantee - 1,100,000 - -
__________ _______ _________
11,736,841 14,404 315,329
__________ _______ _________
Total Carrying
undiscounted amount
cash at
3 - 5 years +5 years flows 31/12/2014
Rmb'000 Rmb'000 Rmb'000 Rmb'000
2014
Non-derivative financial
Liabilities
Placements from other
financial institutions - - 1,984,604 1,940,000
Accounts payable to customers
arising from securities business - - 16,545,146 16,545,146
Trade payables - - 693,604 693,604
Other payables - - 132,277 132,277
Dividends payable - - 76,139 76,139
Bank and other borrowings
-variable rate - - 366,906 350,000
Short-term financing note payable - - 891,566 883,570
Financial assets sold under
repurchase agreements - - 6,331,969 6,299,057
Bonds payable - - 1,361,304 1,200,000
Financial guarantee - - 1,076,910 -
_______ _______ __________ __________
- - 29,460,425 28,119,793
_______ _______ __________ __________
2013
Non-derivative financial
Liabilities
Placements from other
financial institutions - - 316,456 310,000
Accounts payable to customers
arising from securities business - - 8,167,103 8,167,103
Trade payables - - 421,994 421,994
Other payables - - 74,329 74,329
Dividends payable - - 94,976 94,976
Bank and other borrowings
-fixed rate - - 442,618 440,000
-variable rate - - 435,386 400,000
Short-term financing note payable - - 1,013,712 1,000,000
Financial guarantee - - 1,100,000 -
_______ _______ _________ __________
- - 12,066,574 10,908,402
_______ _______ _________ __________
The amounts included above for financial guarantee contracts are the maximum amounts the Group
could be required to settle under the arrangement for the full guaranteed amount if that amount
is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting
period, the Group considers that it is more likely than not that no amount will be payable under
the arrangement. However, this estimate is subject to change depending on the probability of the
counterparty claiming under the guarantee which is a function of the likelihood that the financial
receivables held by the counterparty which are guaranteed suffer credit losses.
The amounts included above for variable interest rate instruments for non-derivative financial
liabilities are subject to change if changes in variable interest rates differ to those estimates
of the interest rates determined at the end of the reporting period.
As at December 31, 2014 and 2013, the Group received collaterals in respect of its financial assets,
such as financial assets held under resale agreement, held-for-trading investments, loans to customers
arising from margin financing business, placements from other financial institutions and financial
assets sold under repurchase agreements, etc., which are disclosed in the corresponding notes. The
risk exposure associated with these financial assets is significantly reduced by the collaterals
received, which enable the Group to recover to the extent of the outstanding receivable balances from
the counterparty if a default occurs.
(c) Fair value measurements of financial instruments
This note provides information about how the Group determines fair values of various financial assets
and financial liabilities.
Fair value measurements recognised in the statement of financial position that are measured at fair
value on a recurring basis
Some of the Group's financial assets and financial liabilities are measured at fair value at the
end of each reporting period. The following table gives information about how the fair values of these
financial assets and financial liabilities are determined (in particular, the valuation technique(s)
and inputs used).
Fair value as at Fair value as at Fair
Financial 31/12/2014 31/12/2013 value
Assets Classified as Rmb'000 Rmb'000 hierarchy
1) Equity investments Held for
listed in exchange trading
investments Assets - 89,877 Assets - 78,658 Level 1
2) Equity securities
listed on National
Equities Exchange
and Quotations
(inactive due to
low transaction Available-for-sale
volume) investments Assets - 8,761 N/A Level 2
3) Listed open-ended Held for
equity funds trading
investments Assets - 97,718 N/A Level 1
4) Unlisted Held for
Open-ended trading
equity funds investments N/A Assets - 5,242 Level 2
5) Fund listed Available-for-sale
in exchange investments Assets - 35,233 Assets - 44,574 Level 1
6) Debt investments Held for
listed in exchange trading
investments Assets - 621,813 Assets - 443,810 Level 1
Available-for-sale
investments Assets - 122,000 Assets - 127,000
7) Debt investment Held for
in interbank trading
market investments Assets - 1,315,332 Assets - 653,315 Level 2
8) Investments in Available-for-sale
structured products investments Assets - 246,053 Assets - 126,948 Level 2
Assets - 251,191 Assets - 74,402 Level 3
9) Investments in Available-for-sale
trust products investments Assets - 89,515 Assets - 41,514 Level 3
Basis of fair value measurement / Significant Relationship of
Financial valuation technique(s) and unobservable unobservable
Assets key input(s) input(s) inputs to fair value
1) Equity investments
listed in exchange Quoted bid prices in an active market. N/A N/A
2) Equity securities
listed on National
Equities Exchange
and Quotations
(inactive due to
low transaction
volume) Derived from recent transaction price N/A N/A
3) Listed open-ended
equity funds Quoted bid prices in an active market. N/A N/A
4) Unlisted Shares of the net assets of the products,
Open-ended determined with reference to the
equity funds net asset value of the products,
calculated by observable (quoted) prices
of underlying investment portfolio
and adjustments of related expenses. N/A N/A
5) Fund listed
in exchange Quoted bid prices in an active market. N/A N/A
6) Debt investments
listed in exchange Quoted bid prices in an active market. N/A N/A
7) Debt investment Discounted cash flow. Future cash flows
in interbank are estimated based on applying the interest
market yield curves of different types of bonds
as the key parameter. N/A N/A
8) Investments in Shares of the net assets of the products,
structured products determined with reference to the net asset
value of the products, calculated by
observable (quoted) prices of underlying
investment portfolio and adjustments of
related expenses. N/A N/A
Discounted cash flow. Future cash flows are Actual yield of The higher
estimated based on expected applicable yield the underlying the actual
of the underlying investment portfolio investment portfolio yield,
and adjustments of related expenses, and the discount the higher
discounted at a rate that reflects the rate the fair value
credit risk of various counterparties
9) Investments in Discounted cash flow. Future cash flows Actual yield of The higher
trust products are estimated based on expected applicable the underlying the actual
yield of the underlying investment investment portfolio yield,
portfolio and adjustments of related and the discount the higher
expenses, discounted at a rate that rate the fair value
reflects the credit risk of
various counterparties
As at December 31, 2014
Level 1 Level 2 Level 3 Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Held for trading investments
- Equity securities
a. Manufacturing 14,915 - - 14,915
b. Financial services 73,395 - - 73,395
c. Energy and water services 1,543 - - 1,543
d. Mining 24 - - 24
________ ________ ________ ________
89,877 - - 89,877
________ ________ ________ ________
- Open-ended fund 97,718 - - 97,718
________ ________ ________ ________
- Bonds 621,813 1,315,332 - 1,937,145
________ _________ ________ _________
Sub-total 809,408 1,315,332 - 2,124,740
________ _________ ________ _________
Available-for-sale investments
- Equity
a. Manufacturing - 1,763 - 1,763
b. Information technology service - 6,998 - 6,998
________ ________ ________ ________
- 8,761 - 8,761
________ ________ ________ ________
- Fund 35,233 - - 35,233
- Corporate bonds 122,000 - - 122,000
- Structured products - 246,053 251,191 497,244
- Trust products - - 89,515 89,515
________ ________ ________ ________
Sub-total 157,233 254,814 340,706 752,753
________ ________ ________ ________
As at December 31, 2013
Level 1 Level 2 Level 3 Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Held for trading investments
- Equity securities
a. Manufacturing 43,720 - - 43,720
b. Financial services 15,482 - - 15,482
c. Information technology service 6,396 - - 6,396
d. Energy and water services 3,057 - - 3,057
e. Transportation, storage
and postal services 1,218 - - 1,218
f. Real Estate 2,002 - - 2,002
g. Construction 1,539 - - 1,539
h. Mining 2,937 - - 2,937
i. Wholesaling 1,170 - - 1,170
j. Agriculture, forestry, fishing
and animal husbandry 366 - - 366
k. Others 771 - - 771
________ ________ ________ ________
78,658 - - 78,658
________ ________ ________ ________
- Open-ended fund - 5,242 - 5,242
________ ________ ________ ________
- Bonds 443,810 653,315 - 1,097,125
________ ________ ________ _________
Sub-total 522,468 658,557 - 1,181,025
________ ________ ________ _________
Available-for-sale investments
- Fund 44,574 - - 44,574
- Corporate bonds 127,000 - - 127,000
- Structured products - 126,948 74,402 201,350
- Trust products - - 41,514 41,514
________ ________ ________ ________
Sub-total 171,574 126,948 115,916 414,438
________ ________ ________ ________
There were no transfers between instruments in Level 1 and Level 2 in the current and
prior years.
The following table represents the changes in Level 3 available-for-sale investments during the year
ended December 31, 2014 and 2013.
For the year ended December 31, 2014
Structured Trust
products products Total
Rmb'000 Rmb'000 Rmb'000
At beginning of the year 74,402 41,514 115,916
Addition 154,870 42,000 196,870
Total gain recognised in
other comprehensive income 21,919 6,001 27,920
_________ _________ ________
At end of the year 251,191 89,515 340,706
_________ _________ ________
For the year ended December 31, 2013
Structured Trust
products products Total
Rmb'000 Rmb'000 Rmb'000
At beginning of the year - - -
Addition 74,810 41,000 115,810
Total (loss) gain recognised in
other comprehensive income (408) 514 106
_________ _________ ________
At end of the year 74,402 41,514 115,916
_________ _________ ________
6. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as a
going concern while maximising the return to shareholders through the optimisation of the debt and
equity balance. The Group's overall strategy remains unchanged from prior year.
The capital structure of the Group consists of net debt, which includes the borrowings disclosed in
Notes 38, 39, 40 and 41, net of cash and cash equivalents and equity attributable to owners of the
Company, comprising issued share capital, reserves and retained profits.
The directors of the Company review the capital structure on a regular basis. As part of this
review, the directors consider the cost of capital and the risks associated with each class of
capital. Based on recommendations of the directors, the Group will balance its overall capital
structure through the payment of dividends and new share issues as well as the issue of new debt or
the redemption of existing debt.
7. SEGMENT INFORMATION
Information reported to the Chief Executive Officer of the Company, being the chief operating
decision maker, for the purposes of resource allocation and assessment of segment performance focuses
on types of goods or services delivered or provided.
Specifically, the Group's reportable and operating segments under HKFRS 8 are as follows:
(i) Toll operation - the operation and management of high grade roads and the collection of the
expressway tolls.
(ii) Service area and advertising businesses - the sale of food, restaurant operation, automobile
servicing, operation of petrol stations and design and rental of advertising billboards along
the expressways.
(iii) Other toll road-related service - the toll road maintenance service and others.
(iv) Securities operation - the securities broking, margin financing and securities lending
services and proprietary trading.
Segment revenue and results
The following is an analysis of the Group's revenue and results by reportable and operating
segment.
For the year ended December 31, 2014
Toll related operation
Service area Other toll
Toll and advertising road-related Securities Total
operation businesses service operation Segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Revenue
External sales 4,259,247 2,291,532 81,984 2,418,360 9,051,123 - 9,051,123
Inter-segment sales - 4,631 - - 4,631 (4,631) -
_________ _________ _______ _________ _________ _______ _________
Total 4,259,247 2,296,163 81,984 2,418,360 9,055,754 (4,631) 9,051,123
_________ _________ _______ _________ _________ _______ _________
Segment profit 1,937,232 93,447 66,537 753,028 2,850,244 2,850,244
_________ _________ _______ _________ _________ _________
For the year ended December 31, 2013
Toll related operation
Service area other toll
Toll and advertising road-related Securities Total
operation businesses service operation Segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Revenue
External sales 4,019,867 2,158,469 21,447 1,651,332 7,851,115 - 7,851,115
Inter-segment sales - 4,755 - - 4,755 (4,755) -
_________ _________ ________ _________ _________ _______ _________
Total 4,019,867 2,163,224 21,447 1,651,332 7,855,870 (4,755) 7,851,115
_________ _________ ________ _________ _________ _______ _________
Segment profit 1,721,848 59,789 30,787 402,553 2,214,977 2,214,977
_________ _________ ________ _________ _________ _________
The accounting policies of the operating segments are the same as the Group's accounting policies
described in Note 4. Segment profit represents the profit after tax of each operating segment. This
is the measure reported to the chief operating decision maker for the purposes of resource allocation
and performance assessment.
Inter-segment sales are charged at prevailing market rates.
Segment assets and liabilities
The following is an analysis of the Group's assets and liabilities by reportable and operating
segment:
Segment assets Segment liabilities
12/31/2014 12/31/2013 12/31/2014 12/31/2013
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Toll operation 14,733,018 14,784,868 (1,783,759) (2,082,988)
Service area and
advertising business 915,371 926,171 (197,059) (234,708)
Other toll road- related service 455,725 310,818 (56,933) -
Securities operation 35,163,763 15,980,470 (28,187,371) (10,102,539)
__________ __________ ____________ ____________
Total segment assets (liabilities) 51,267,877 32,002,327 (30,225,122) (12,420,235)
Goodwill 86,867 86,867 - -
__________ __________ ____________ ____________
Consolidated assets (liabilities) 51,354,744 32,089,194 (30,225,122) (12,420,235)
__________ __________ ____________ ____________
Segment assets and segment liabilities represent the assets and liabilities of the subsidiaries
operating in the respective reportable and operating segment.
Other segment information
Amounts included in the measure of segment profit or segment assets:
For the year ended December 31, 2014
Toll related operation
Service area Other toll
Toll and advertising road-related Securities
operation businesses service operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Income tax expense 636,111 19,223 4,306 258,308 917,948
Interest income 48,558 7,759 243 2,547 59,107
Interest expense 18,037 - - 60,194 78,231
Interests in associates - 231,609 364,439 31,818 627,866
Interest in a joint venture 300,667 - - - 300,667
Share of profit (loss) of associates - 19,462 53,621 (8,063) 65,020
Share of loss of a joint venture (33,277) - - - (33,277)
Gain on fair value changes on held for
trading investments 15,864 - - 262,388 278,252
Additions to non-current assets (Note) 707,664 12,592 12,749 746,439 1,479,444
Depreciation and amortisation 895,733 45,752 - 77,404 1,018,889
Loss on disposal of property, plant
and equipment 3,522 9,459 - 458 13,439
_______ _______ _______ _______ _________
For the year ended December 31, 2013
Toll related operation
Service area Other toll
Toll and advertising road-related Securities
operation businesses service operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Income tax expense (credit) 585,570 18,252 (10) 152,949 756,761
Interest income 82,114 7,457 - 6,351 95,922
Interest expense 84,764 - - 10,397 95,161
Interests in associates - 224,035 310,818 39,880 574,733
Interest in a joint venture 333,944 - - - 333,944
Share of profit (loss) of associates - 40 27,669 (6,172) 21,537
Share of loss of a joint venture (36,010) - - - (36,010)
Gain on fair value changes on held for
trading investments 14,242 - - 84,040 98,282
Additions to non-current assets (Note) 236,487 62,072 280,000 43,697 622,256
Depreciation and amortisation 900,966 31,500 - 90,057 1,022,523
Loss (gain) on disposal of property,
plant and equipment 2,798 (783) - 134 2,149
_______ _______ _______ _______ _________
Note: Non-current assets excluded financial instruments.
Revenue from major services
An analysis of the Group's revenue, net of discounts and taxes, for the year is as follows:
Year ended Year ended
12/31/2014 12/31/2013
__________ __________
Rmb'000 Rmb'000
Toll operation revenue 4,259,247 4,019,867
Service area businesses revenue (mainly sales of goods) 2,208,235 2,054,543
Advertising business revenue 83,297 103,926
Commission income from securities operation 1,679,244 1,197,315
Interest income from securities operation 739,116 454,017
Others 81,984 21,447
_________ _________
9,051,123 7,851,115
_________ _________
Geographical information
The Group's operations are located in the PRC (country of domicile). All non-current assets of the
Group are located in the PRC.
All of the Group's revenue from external customers is attributed to the group entities' country of
domicile (i.e., the PRC).
Information about major customers
During the years ended December 31, 2014 and 2013, there are no individual customer with sales over
10% of the total sales of the Group.
8. SECURITIES INVESTMENT GAINS
Year ended Year ended
12/31/2014 12/31/2013
__________ __________
Rmb'000 Rmb'000
Gain on fair value changes on held for trading investments 278,252 98,282
Cumulative gain reclassified from equity on disposal of
AFS investments - 1,381
_______ _______
278,252 99,663
_______ _______
The above securities investment gains are wholly contributed from listed investments in both years.
9. OTHER INCOME
Year ended Year ended
12/31/2014 12/31/2013
_______ _______
Rmb'000 Rmb'000
Interest income on bank balances, entrusted loan receivables
and financial products investment 59,107 95,922
Rental income (Note) 120,265 88,739
Handling fee income 2,142 2,781
Towing income 9,372 10,155
Gain on disposal of an associate 29,890 -
Gain on deregistration of an associate - 16
Exchange gain (loss), net 1,173 (957)
Loss on commodity trading, net (20,785) (1,351)
Others 49,328 45,751
_______ _______
250,492 241,056
_______ _______
Note: Rental income included contingent rent of approximately Rmb44,552,000 (2013: Rmb39,102,000)
during the year.
10. FINANCE COSTS
Year ended Year ended
12/31/2014 12/31/2013
__________ __________
Rmb'000 Rmb'000
Interest expenses wholly repayable within 5 years:
Bank and other borrowings 26,631 87,288
Short-term loan note 41,638 10,397
Beneficial certificates 1,905 -
Long-term bonds payable 15,425 2,700
Total borrowing costs 85,599 100,385
Less: Amount capitalised in the cost of qualifying assets (Note) (7,368) (5,224)
_______ _______
78,231 95,161
_______ _______
Note: Borrowing costs capitalised during the year ended 31 December 2014 includes all the
interest income and interest expenses arising from the specific borrowings to the
expenditure on qualifying assets.
11. PROFIT BEFORE TAX
The Group's profit before tax has been arrived at after charging (crediting):
Year ended Year ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Depreciation of property, plant and equipment 197,815 190,690
Release of prepaid lease payments 2,155 2,164
Amortisation of expressway operating rights (included in
operating costs) 798,626 811,025
Amortisation of other intangible assets (included in
operating costs) 20,293 18,644
Total depreciation and amortisation 1,018,889 1,022,523
Staff costs (including directors and supervisors):
- Wages, salaries and bonuses 1,014,256 761,109
- Pension scheme contributions 79,246 70,657
_________ _________
1,093,502 831,766
_________ _________
Auditors' remuneration 6,843 8,125
Allowance for loans to customers arising
from margin financing business 10,911 8,477
Allowance for trade receivables 280 7
Reversal of allowance for trade receivables - (291)
Reversal of allowance for other receivables (6) -
Loss on disposal of property, plant and equipment 13,439 2,149
Cost of inventories recognised as an expense 2,037,575 1,889,783
Impairment loss on available-for-sale investments 6,554 -
Allowance for write-down of inventories 830 -
_________ _________
12. INCOME TAX EXPENSE
Year ended Year ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Current tax:
PRC Enterprise Income Tax 995,619 821,118
Deferred tax (Note 42) (77,671) (64,357)
_______ _______
917,948 756,761
_______ _______
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of
the EIT Law, the tax rate of the Group is 25%.
No Hong Kong Profits Tax has been provided as the Group's income neither arises in, nor is derived
from Hong Kong during the year.
The tax charge for the year can be reconciled to the profit before tax per the consolidated
statement of profit or loss and other comprehensive income as follows:
Year ended Year ended
12/31/2014 12/31/2013
__________ __________
Rmb'000 Rmb'000
Profit before tax 3,768,192 2,971,738
_________ _________
Tax at the PRC enterprise income tax rate of 25% (2013:25%) 942,048 742,935
Tax effect of share of profit of associates (16,255) (5,384)
Tax effect of share of loss of a joint venture 8,319 9,003
Utilisation of unused tax loss previously not recognised (22,201) (9,441)
Tax effect of expenses not deductible for tax purposes 6,037 19,648
_________ _________
Tax charge for the year 917,948 756,761
_________ _________
13. OTHER COMPREHENSIVE INCOME
Tax effect relating to other comprehensive income as follows:
Year ended 12/31/2014 Year ended 12/31/2013 Net-of- Net-of-
Before-tax Tax income-tax Before-tax Tax income-tax
amount benefit amount amount benefit amount
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Fair value gain on
AFS financial
assets arising during the year 68,301 (17,075) 51,226 4,865 (1,216) 3,649
Reclassification adjustments
for the cumulative gain
included in profit or loss
upon disposal of
AFS financial assets - - - (1,381) 345 (1,036)
_______ _______ _______ _______ _______ _______
Total 68,301 (17,075) 51,226 3,484 (871) 2,613
_______ _______ _______ _______ _______ _______
14. DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENTS' EMOLUMENTS
The emoluments paid or payable to each of the 12 (2013: 9) directors and 5 (2013: 5) supervisors are as follows:
Zhan Luo Ding Li Wang Wang Dai
Xiaozhang @ Jianhu @ HuiKang @ Zongsheng ^ Weili ^ Dongjie ^ Benmeng ^
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(note iv) (note i) (note i) (note iii)
2014
Salaries, allowances and
benefits in kind 293 460 460 5 4 2 --
Bonuses paid and payable 480 296 182 -- -- -- --
Pension scheme contributions 19 19 19 -- -- -- --
Total emoluments 792 775 661 5 4 2 --
2013
Salaries, allowances and
benefits in kind 233 230 230 4 2 2 --
Bonuses paid and payable 377 339 339 -- -- -- --
Pension scheme contributions 17 17 17 -- -- -- --
Total emoluments 627 586 586 4 2 2 --
- Cont'd -
Li Wai
Zhou Zhang Zhou Pei Tsang, Fu Zhang
Jianping ^ Junsheng * Jun * Ker-wei * Rosa * Zhexiang # Xiuhua #
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(note iii) (note i) (note iii)
2014
Salaries, allowances and
benefits in kind -- 54 197 200 -- 6 6
Bonuses paid and payable -- -- -- -- -- -- --
Pension scheme contributions -- -- -- -- -- -- --
Total emoluments -- 54 197 200 -- 6 6
2013
Salaries, allowances and
benefits in kind -- 54 198 200 -- 5 5
Bonuses paid and payable -- -- -- -- -- -- --
Pension scheme contributions -- -- -- -- -- -- --
Total emoluments -- 54 198 200 -- 5 5
- Cont'd -
Wu Liu Zhang
Yongmin # Haisheng # Guohua # Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
(note ii)
2014
Salaries, allowances and
benefits in kind 4 1 3 1,695
Bonuses paid and payable -- -- -- 958
Pension scheme contributions -- -- -- 57
Total emoluments 4 1 3 2,710
2013
Salaries, allowances and
benefits in kind 2 1 3 1,169
Bonuses paid and payable -- -- -- 1,055
Pension scheme contributions -- -- -- 51
Total emoluments 2 1 3 2,275
@ Executive directors
^ Non-executive directors
* Independent non-executive directors
# Supervisors
Notes:
(i) Resigned on December 29, 2014.
(ii) Resigned on April 8, 2014.
(iii) Appointed on December 29, 2014.
(iv) Ms. Luo Jianhu is also the Chief Executive of the Company and her emoluments disclosed above include those
services rendered by her as the Chief Executive.
Bonuses paid to directors and supervisors are performance-rated and are determined by the Remuneration Committee of
the Company, which comprises four independent non-executive directors.
No directors or supervisors waived any emoluments and no incentive was paid to any directors or supervisors as an
inducement to join the Company and no compensation for loss of office was paid to any directors, supervisors, past
directors or past supervisors during both years. Bonuses are determined by reference to the individual performance of
the directors.
The emoluments paid or payable to each of the 8 (2013: 6) senior managements are as follows:
Cheng Zhang Fang Wu Wang Zhan Zheng Zhang
Tao Jingzhong Zhexing Junyi Dehua Huagang Hui Xiuhua Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Note i) (Note ii) (Note iii)
2014
Salaries, allowances and
benefits in kind 78 456 456 -- 345 456 439 439 2,669
Bonuses paid and payable -- 182 182 230 -- 182 54 54 884
Pension scheme
contributions 3 19 19 -- 14 19 19 19 112
Total emoluments 81 657 657 230 359 657 512 512 3,665
2013
Salaries, allowances and
benefits in kind -- 226 218 226 -- 218 161 153 1,202
Bonuses paid and payable -- 339 328 339 -- 328 241 229 1,804
Pension scheme
contributions -- 17 17 17 -- 17 17 17 102
Total emoluments -- 582 563 582 -- 563 419 399 3,108
Notes:
(i) Appointed on October 28, 2014.
(ii) Resigned on March 17, 2014.
(iii) Appointed on March 17, 2014.
The emoluments of each of the senior managements were below HK$1,000,000 (equivalent to Rmb788,900 (2013:
Rmb786,200)) in both years. Bonuses paid to senior managements are performance-rated and are determined by the board
of directors of the Company.
No senior management waived any emoluments and no incentive was paid to any senior management as an inducement to
join the Company and no compensation for loss of office was paid to any senior management, past senior management
during both years. Bonuses are determined by reference to the individual performance of the senior managements.
15. EMPLOYEES' EMOLUMENTS
The emoluments of the five highest paid individuals in the Group are as follows:
Year ended Year ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Salaries, allowances and benefits in kind 5,539 8,432
Bonuses paid and payable (Note) 10,875 9,287
Pension scheme contributions 101 137
16,515 17,856
Note: The bonuses paid and payable are determined by reference to the performance of the relevant business of the
Group for the years ended December 31, 2014 and 2013.
No emoluments nor incentive was waived as an inducement to join the Company and no compensation for loss of office
was paid to any five highest paid individuals in the Group during both years. Bonuses are determined by reference to
the individual performance of the five highest paid individuals in the Group.
The five individuals with the highest emoluments in the Group during the year included five (2013: five) non-director
employees.
Their emoluments are within the following bands:
No. of individuals
Year ended Year ended
12/31/2014 12/31/2013
HK$3,500,001 to HK$4,000,000 (equivalent to Rmb2,761,001
(2013: Rmb2,752,001) to Rmb3,156,000 (2013: Rmb3,145,000)) 4 1
HK$4,000,001 to HK$4,500,000 (equivalent to Rmb3,156,001
(2013: Rmb3,145,001) to Rmb3,550,000 (2013: Rmb3,538,000)) -- 1
HK$4,500,001 to HK$5,000,000 (equivalent to Rmb3,550,001
(2013: Rmb3,538,001) to Rmb3,945,000 (2013: Rmb3,931,000)) -- 3
HK$5,500,001 to HK$6,000,000 (equivalent to Rmb4,339,001
(2013: Rmb4,324,001) to Rmb4,733,000 (2013: Rmb4,717,000)) 1 --
16. DIVIDENDS
Year ended Year ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Dividends recognised as distribution during the year:
2014 Interim -- Rmb6 cents (2013: 2013 interim Rmb6 cents)
per share 260,587 260,587
2013 Final -- Rmb25 cents (2013: 2012 Final Rmb24 cents)
per share 1,085,779 1,042,347
1,346,366 1,302,934
The final dividend of Rmb26.5 cents per share in respect of the year ended December 31, 2014 (2013: final dividend of
Rmb25 cents per share in respect of the year ended December 31, 2013) in the total amount of Rmb1,150,925,000 (2013:
Rmb1,085,779,000) has been proposed by the directors and is subject to approval by the shareholders in the annual
general meeting.
17. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on profit for the year attributable to owners of the Company
of Rmb2,349,052,000 (2013: Rmb1,907,470,000) and the 4,343,114,500 (2013: 4,343,114,500) ordinary shares in issue
during the year.
Diluted earnings per share presented is the same as basic earnings per share as there were no potential ordinary
shares outstanding for the years ended December 31, 2014 and 2013.
18. PROPERTY, PLANT AND EQUIPMENT
Leasehold Communication Machinery
land and Ancillary and signaling Motor and Construction
buildings facilities equipment vehicles equipment in progress Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
COST
At January 1, 2013 604,352 740,381 454,972 220,058 536,706 259,991 2,816,460
Additions 10,009 30,638 12,439 24,535 28,258 218,802 324,681
Transfer 23,878 56,317 9,298 184 3,326 (93,003) --
Disposals -- (8,025) (6,507) (24,775) (21,864) -- (61,171)
At December 31, 2013 638,239 819,311 470,202 220,002 546,426 385,790 3,079,970
Additions 244,574 14,823 15,703 19,194 51,856 1,111,975 1,458,125
Transfer 3,845 14,617 3,025 -- 1,295 (22,782) --
Disposals -- (9,005) (95,980) (22,123) (46,768) -- (173,876)
At December 31, 2014 886,658 839,746 392,950 217,073 552,809 1,474,983 4,364,219
DEPRECIATION
At January 1, 2013 161,414 215,931 291,210 152,037 361,569 -- 1,182,161
Provided for the year 42,367 36,410 37,965 18,183 55,765 -- 190,690
Disposals -- (4,374) (6,051) (23,430) (21,068) -- (54,923)
At December 31, 2013 203,781 247,967 323,124 146,790 396,266 -- 1,317,928
Provided for the year 40,660 46,087 46,680 16,119 48,269 -- 197,815
Disposals -- (4,618) (84,587) (13,570) (36,214) -- (138,989)
At December 31, 2014 244,441 289,436 285,217 149,339 408,321 -- 1,376,754
CARRYING VALUES
At December 31, 2014 642,217 550,310 107,733 67,734 144,488 1,474,983 2,987,465
At December 31, 2013 434,458 571,344 147,078 73,212 150,160 385,790 1,762,042
The property, plant and equipment are located in the PRC.
The carrying value of properties shown above comprises:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Leasehold land and buildings in the PRC:
Long lease 23,991 24,322
Medium-term lease 618,226 410,136
642,217 434,458
As at December 31, 2014, certain property, plant and equipment have been pledged as collaterals to secure general
banking facilities granted to the Group. Details of which were set out in Note 49.
During the year, the Group acquired several units of a building, a whole block of building under renovation and a
number of car parking spaces located in Hangzhou from a related party, Hangzhou Jinji Real Estate Co., Ltd. ("Jinji
Co", a subsidiary of Communications Group, for a cash consideration totalling Rmb899,334,000 (2013: nil), of which
was fully paid during the year. As at December 31, 2014, the whole block of building amounting to Rmb696,358,000 was
included in construction in progress since the building was under renovation and has not reached the usable
condition.
19. PREPAID LEASE PAYMENTS
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Analysed for reporting purposes as:
Current assets 2,155 2,155
Non-current assets 66,001 68,156
68,156 70,311
The Group's prepaid lease payments comprise leasehold land in the PRC under medium-term leases. The amount represents
prepayment of rentals under operating leases for "land use rights" of land situated in the PRC.
As at December 31, 2014, certain prepaid lease payments have been pledged as collaterals to secure general banking
facilities granted to the Group. Details of which were set out in Note 49.
20. EXPRESSWAY OPERATING RIGHTS
Rmb'000
COST
At January 1, 2013, December 31, 2013 and at December 31, 2014 19,508,332
AMORTISATION
At January 1, 2013 6,786,174
Charge for the year 811,025
At December 31, 2013 7,597,199
Charge for the year 798,626
At December 31, 2014 8,395,825
CARRYING VALUES
At December 31, 2014 11,112,507
At December 31, 2013 11,911,133
The above expressway operating rights were granted by the Zhejiang Provincial Government
for a period ranging from 25 to 30 years. During the expressway concessionary period, the
Group has the rights of operations and management of Shanghai- Hangzhou-Ningbo Expressway,
Shangsan Expressway and Jinhua Section of the Ningbo-Jinhua Expressway and the toll-collection
rights thereof. The Group is required to manage and operate the expressways in accordance
with the regulations promulgated by the Ministry of Communication and relevant government
authorities. Upon the end of the respective concession service periods, the toll expressways
and their toll station facilities without residual value, will be returned to the grantors
at nil consideration.
As at December 31, 2014 and 2013, the expressway operating rights in respect of Jinhua Section
of the Ningbo-Jinhua Expressway has been pledged as collaterals to secure general banking
facilities granted to the Group. Details of which were set out in Note 49.
21. GOODWILL
Rmb'000
COST AND CARRYING VALUES
At December 31, 2013 and December 31, 2014 86,867
Particulars regarding impairment testing on goodwill are disclosed in Note 23.
22. OTHER INTANGIBLE ASSETS
Securities/
Customer futures firm Trading
bases licenses seats Software Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
COST
At January 1, 2013 101,147 63,083 3,480 63,536 231,246
Additions -- -- -- 17,575 17,575
At December 31, 2013 101,147 63,083 3,480 81,111 248,821
Additions -- -- -- 21,319 21,319
At December 31, 2014 101,147 63,083 3,480 102,430 270,140
AMORTISATION
At January 1, 2013 47,881 -- -- 27,732 75,613
Additions 6,266 -- -- 12,378 18,644
At December 31, 2013 54,147 -- -- 40,110 94,257
Charge for the year 6,266 -- -- 14,027 20,293
At December 31, 2014 60,413 -- -- 54,137 114,550
CARRYING VALUES
At December 31, 2014 40,734 63,083 3,480 48,293 155,590
At December 31, 2013 47,000 63,083 3,480 41,001 154,564
The customer bases of Zheshang Securities and Zheshang Futures Broker Co., Ltd. ("Zheshang Futures") are
amortised on a straight-line basis over 15 years and 3 years, respectively.
The securities/futures firm licenses of the securities operation are considered by the management of
the Group to have indefinite useful lives because they can be renewed at minimal cost even though the
current licenses are effective for three years.
The trading seats of the securities operation is considered by the management of the Group to have an
indefinite useful life because there is no economic or regulatory limit to their useful life.
Software are amortised on a straight-line basis over three to five years.
Particulars of the impairment testing on intangible assets with indefinite useful lives are disclosed in Note 23.
23. IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES
For the purposes of impairment testing, goodwill and other intangible assets with indefinite useful
lives set out in Notes 21 and 22 have been allocated to four individual cash generating units ("CGUs"),
comprising two subsidiaries in toll operation segment and two subsidiaries in securities operation segment.
The carrying amounts of goodwill and other intangible assets (net of accumulated impairment losses) as at
December 31, 2014 and 2013 allocated to these units are as follows:
Goodwill Securities/futures firm licenses Trading seats
12/31/2014 12/31/2013 12/31/2014 12/31/2013 12/31/2014 12/31/2013
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
Toll operation
-- Zhejiang Jiaxing
Expressway Co., Ltd.
("Jiaxing Co") 75,137 75,137 -- -- -- --
-- Zhejiang Shangsan
Expressway Co., Ltd.
("Shangsan Co") 10,335 10,335 -- -- -- --
Securities operation
-- Zheshang Securities -- -- 51,783 51,783 2,080 2,080
-- Zheshang Futures 1,395 1,395 11,300 11,300 1,400 1,400
86,867 86,867 63,083 63,083 3,480 3,480
During the years ended December 31, 2014 and 2013, management of the Group determines that there are no impairment
of any of its CGUs containing goodwill and other intangible assets with indefinite useful lives.
The basis of the recoverable amounts of the above CGUs and their major underlying assumptions are summarised below:
Jiaxing Co and Shangsan Co
The recoverable amounts of Jiaxing Co and Shangsan Co are determined based on value in use calculations. The key
assumptions for the value in use calculations relate to discount rates, growth rates, and expected changes in toll
revenue and direct costs during the forecast period. Those calculations use cash flow projections based on financial
budgets approved by management covering a five-year period and a discount rate the management considered appropriate.
No growth rate has been assumed beyond the five-year period up to the remaining toll road operating rights which
are 14 years (2013: 15 years) and 16 years (2013: 17 years) for Jiaxing Co. and Shangsan Co., respectively.
Management believes that any reasonably possible change in any of these assumptions would not cause the aggregate
carrying amount of Jiaxing Co's and Shangsan Co's goodwill to exceed their aggregate recoverable amounts.
Zheshang Securities & Zheshang Futures
The recoverable amounts of Zheshang Securities & Zheshang Futures are determined based on value in use
calculations. The key assumptions for the value in use calculations relate to the discount rate, growth
rates and profit margin during the forecast period. Those calculations use cash flow projections based
on financial budgets approved by management covering a five-year period with discount rates management
believe appropriate. Growth rate beyond the five-year period is assumed to be zero. Management
believes that any reasonably possible change in any of these assumptions would not cause the carrying
amount of Zheshang Securities & Zheshang Futures' other intangible assets to exceed its aggregate
recoverable amounts.
24. INTERESTS IN ASSOCIATES
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Unlisted investments in associates,at cost less impairment 488,542 492,534
Share of post-acquisition profit, net of dividends received 139,324 82,199
627,866 574,733
At December 31, 2014 and 2013, the Group had interests in the following associates:
Place of
Form of registration Percentage of equity interest
Name of entity business structure and operation attributable to the Group Principal activities
12/31/2014 12/31/2013
% %
Zhejiang Expressway Corporate The PRC 50 50 Operation of petrol
Petroleum Development stations and sale of
Co., Ltd. ("Petroleum petroleum products
Co") (Note i)
JoinHands Technology Corporate The PRC -- 27.58 Provision of printing
Co., Ltd. ("JoinHands services and property
Co") (Note ii) leasing
Zhejiang Concord
Property Investment Corporate The PRC 45 45 Investment and real
Co., Ltd. ("Zhejiang estate development
Concord Property")
Zhejiang Communications Corporate The PRC 35 35 Finance and Investment
Finance Co., Ltd.
("Zhejiang
Communications
Finance") (Note iii)
Zheshang Fund Corporate The PRC 25 25 Asset fund management
Management Co., Ltd.
("Zheshang Fund")
(Note iv)
All of the above associates are accounted for using the equity method in these consolidated financial statements.
Notes:
(i) According to the Articles of Association of Petroleum Co, 66.67% voting power is required to govern the
significant financial and operating policies, and the Company can only exercise significant influence over
the entity since the Company only has one board seat out of 9 in the entity's board of directors.
(ii) In July 2011, the Company agreed to transfer all of its 27.582% equity interest in JoinHands Co to Guangzhou
Kaixin Consulting Co., Ltd. ("Kaixin Co"), an independent third party, at a consideration of Rmb31,430,000.
However, as Kaixin Co failed to pay the consideration for the equity transfer according to the terms of the
equity interest transfer agreement, such transfer had not been completed and the Company lodged a lawsuit
against it in August 2011 at the People's Court of Xihu District, Hangzhou City ("Hangzhou People Court").
The court ruled in favour of the Company, except for the execution of the priority right for claim against
the mortgaged commercial property and land use right in Hangzhou held by JoinHands Co ("the Property") to the
Company and the liquidated damages, in March 2012. Both the Company and Kaixin Co filed appeals respectively
because of their respective objections against the court's decision. During the year ended December 31, 2011,
an impairment loss of Rmb11,979,000 in relation to interest in the associate, JoinHands Co, was recognised.
On April 28, 2013, a final judgement from Hangzhou People's Court had ruled in favour of the Company. The
Property had been put in an open auction and was completed during the year ended December 31, 2013. However,
the transfer of the Property interest was still in progress and had not been completed as at December 31,
2013.
During this year, a settlement agreement was also entered into among the Company, Kaixin Co, JoinsHand Co
and the guarantor of Kaixin Co, pursuant to which Kaixin Co will compensate Rmb5,400,000 to the Company in
respect of such transfer. On May 16, 2014, the transfer of Property interest was completed and since then,
the Company did not participate in the financial and operating policy decisions of JoinHands Co and it was
no longer an associate of the Group. During the year ended December 31, 2014, the Company received proceed
arising from the open auction of RMB23,834,000 and the compensation of Rmb5,400,000 as stipulated in the
settlement agreement, together with the deposit previously received from Kaixin Co of Rmb2,842,000, being
considered as the total consideration for the disposal of the Company's interest in JoinHands Co to Kaixin
Co totalling Rmb32,076,000. On the date of disposal, the carrying amount of the Company's interest in
JoinHands Co was amounted to Rmb2,186,000, and the disposal of which had therefore resulted in a gain of
RMB29,890,000 (included in Note 9).
(iii) In March 2013, the Group entered into a capital contribution agreement with Zhejiang Communications Finance
and the other shareholders of Zhejiang Communications Finance, pursuant to which the Company and the other
shareholders agreed to make corresponding capital contribution of Rmb280,000,000 and Rmb20,000,000, by way
of cash, into the equity capital of Zhejiang Communications Finance. Zhejiang Communications Finance then
became a 35% owned associate of the Group.
(iv) The Group is able to exercise significant influence over Zheshang Fund because it has the power to appoint
one out of four directors of that company under the provisions stated in the Articles of Association of that
company.
On August 14, 2014, Zheshang Securities, together with one of the shareholders of Zheshang Fund, Yangshengtang
Co., Ltd., auctioned off their respective 25% equity interest (totalling 50%) in Zheshang Fund. The hammer
price reached at Rmb414,000,000 offered by Tonglian Capital Management Co., Ltd. ("Tonglian Capital"), another
shareholder of Zheshang Fund which is independent to the Group, and Zheshang Securities will receive a
consideration of Rmb207,000,000 accordingly.
As at December 2014, the disposal transaction has not been completed and Zheshang Securities received a
refundable deposit of RMB103,500,000 in respect of such transfer, of which was included in other payables in
Note 37.
The directors of the Company consider the disposal required approval by China Securities Regulatory Commission
and equity transfer registration was a lengthy process and they are neither not certain if the approval
would be obtained nor the timing when such approval would be granted. The amount of deposit received would
be refundable to Tonglian Capital if the transfer eventually cannot be completed.
The summarised financial information in respect of the Group's material associates at the end of the
reporting period is set out below. This represents amounts shown in the associate's financial statements
prepared in accordance with HKFRSs:
Petroleum Co and its subsidiaries
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Current assets 186,208 180,869
Non-current assets 246,018 257,516
Current liabilities 31,912 46,735
Non-current liabilities -- 1,481
Equity attributable to owners of the Petroleum Co 340,907 333,482
Non-controlling interests of Petroleum Co 59,407 56,687
For the year ended For the year ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Revenue 6,365,626 6,472,584
Profit for the year 91,441 31,890
Profit attributable to owners of Petroleum Co 26,828 21,631
Profit attributable to non-controlling interests of Petroleum Co 64,613 10,259
91,441 31,890
Dividends received from the associate during the year 9,701 8,987
Reconciliation of the above summarised financial information to the carrying amount of the interest in
Petroleum Co recognised in the consolidated financial statements:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Net asset of the associate 340,907 333,482
Proportion of the Group's ownership interest in Petroleum Co 50% 50%
Carrying amount of the Group's interest in Petroleum Co 170,454 166,741
Zhejiang Communications Finance
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Current assets 2,849,318 4,504,856
Non-current assets 3,331,312 2,184,472
Current liabilities 5,139,374 5,801,276
For the For the date of
year ended acquisition to
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Revenue 293,370 155,239
Profit for the year/period 153,204 79,054
Dividends received from the associate during the year/period -- --
Capital contribution placed during last period -- 300,000
Reconciliation of the above summarised financial information to the carrying amount of the interest in Zhejiang
Communications Finance recognised in the consolidated financial statements:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Net asset of the associate 1,041,256 888,052
Proportion of the Group's ownership interest in Zhejiang
Communications Finance 35% 35%
Carrying amount of the Group's interest in Zhejiang
Communications Finance 364,440 310,818
Aggregate information of associates that are not individually material
12/31/2014 12/31/2013
Rmb'000 Rmb'000
The Group's share of loss (2,015) (16,948)
Aggregate carrying amount of the Group's interests in
these associates 92,972 97,174
25. INTEREST IN A JOINT VENTURE
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Unlisted investment in a joint venture, at cost less impairment 373,470 373,470
Share of post-acquisition loss (72,803) (39,526)
300,667 333,944
At December 31, 2014 and 2013, the Group had interest in the following joint venture:
Form of Place of Percentage of equity
business registration interest attributable
Name of entity structure and operation to the Group Principal activities
12/31/2014 12/31/2013
% %
Shengxin Expressway Co., Ltd. Corporate The PRC 50 50 Management of the Shaoxing
("Shengxin Co") section of the
Ningbo-Jinhua Expressway
The summarised financial information in respect of the Group's interest in Shengxin Co which is accounted for
using the equity method at the end of the reporting period is set out below. This represents amounts shown
in the joint venture's financial statements prepared in accordance with HKFRSs:
Shengxin Co
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Current assets 41,410 34,629
Non-current assets 2,831,259 2,954,410
Current liabilities 49,912 43,557
Non-current liabilities 2,221,423 2,277,595
The above amounts of assets and liabilities include the following:--
Cash and cash equivalents 37,139 29,743
Non-current financial liabilities (excluding trade and other
payables and provisions) 2,150,000 2,200,000
For the From date
year ended of acquisition to
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Revenue 306,827 284,445
Loss for the year/period (66,553) (72,020)
Dividend received from the joint venture -- --
The above loss for the year/period includes the following:--
Depreciation and amortisation (172,559) (171,910)
Interest income 996 146
Interest expense (129,244) (137,699)
Income tax expense (4,464) (4,464)
Reconciliation of the above summarised financial information to the carrying amount of the interest in
Shengxin Co recognised in the consolidated financial statements:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Net asset of the joint venture 601,334 667,887
Proportion of the Group's ownership interest in the joint venture 50% 50%
Carrying amount of the Group's interest in Shengxin Co 300,667 333,944
26. AVAILABLE-FOR-SALE INVESTMENTS
AFS investments comprise:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Non-current assets:
Unlisted equity securities investments, at cost (Note i) 38,500 11,000
Corporate bonds listed in the PRC with fixed interest of 9.6% per
annum and maturity date on May 31, 2017 122,000 122,000
Trust products 32,131 10,514
Financial products (Note ii) 28,601 --
221,232 143,514
Current assets:
Equity securities 8,761 --
Funds 35,233 44,574
Trust products 57,384 31,000
Corporate bonds -- 5,000
Financial products (Note ii) 468,643 201,350
570,021 281,924
791,253 425,438
As at December 31, 2014, the Group has entered into securities lending arrangement with clients that resulted
in the transfer of listed AFS investments with total fair value of Rmb29,922,000 (2013: Rmb2,772,000) to
external clients, which did not result in derecognition of the financial assets. Details of the collaterals
were set out in Note 31.
Notes:
(i) Unlisted equity securities investments represent investments in unlisted equity securities issued by private
entities established in the PRC. They are measured at cost less impairment at the end of the reporting period
because the range of reasonable fair value estimated is so significant that the directors of the Company are
of the opinion that their fair values cannot be measured reliably.
(ii) The financial products comprise products offered by fund or asset management companies where funds are mainly
invested in listed securities,open-ended funds or asset management plan and the Group's return of investment
is tied to the result of such investments.
27. TRADE RECEIVABLES
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Trade receivables comprise:
A fellow subsidiary (Note 51(i)(a)) 3,212 3,077
Third parties 133,349 99,023
Total trade receivables 136,561 102,100
Less: Allowance for doubtful debts (952) (672)
135,609 101,428
The Group has no credit period granted to its trade customers of toll operation and service area businesses.
The Group's trade receivable balance for toll operation is toll receivables from the Expressway Fee Settlement
Centre of the Highway Administration Bureau of Zhejiang Province, which are normally settled within 3 months.
All of these trade receivables were neither past due nor impaired in both years.
In respect of the Group's asset management service, security commission and financial advisory service
operated by Zheshang Securities, trading limits are set for customers. The Group seeks to maintain
tight control over its outstanding accounts receivable in order to minimise credit risk. Overdue balances
are regularly monitored by management.
The following is an aged analysis of trade receivables net of allowance for doubtful debts presented based
on the invoice date at the end of the reporting period, which approximated the respective revenue
recognition dates:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Within 3 months 116,473 90,812
3 months to 1 year 18,111 10,453
1 to 2 years 971 --
Over 2 years 54 163
135,609 101,428
Movement of allowance for doubtful debts
12/31/2014 12/31/2013
Rmb'000 Rmb'000
At the beginning of the year 672 956
Impairment recognised for the year 280 7
Amount reversed during the year -- (291)
At the end of the year 952 672
The Group determines the allowance for impaired debts based on the evaluation of collectability and aged
analysis of accounts and on management's judgement including the assessment of change in credit quality
and the past collection history of each client. The directors consider the credit risk of the balance to be minimal.
28. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING BUSINESS
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Loans to margin clients 8,565,301 2,955,388
Less: Allowance for doubtful debts (19,388) (8,477)
8,545,913 2,946,911
The Group has provided customers with margin financing and security lending for securities transactions,
the credit facility limits to margin clients are determined by the discounted market value of the pledged
securities accepted by the Group or the market value of cash collateral.
All of the loans to margin clients which are secured by the underlying pledged securities are interest bearing.
The Group maintains a list of approved stocks for margin lending at a specified loan to collateral ratio.
Any excess in the lending ratio will trigger a margin call which the customers have to make good of the
shortfall. The Group has the right to process forced liquidation if the customer fails to make good of the
shortfall within a short period of time.
As at December 31, 2014, loans to customers under the margin financing and securities lending activities
carried out in the PRC were secured by the customers' stock securities and cash collaterals. The undiscounted
market value of the stock security collaterals was amounted to Rmb24,411,134,000 (2013:Rmb8,207,640,000).
Cash collateral of Rmb975,337,000 (2013: Rmb222,313,000) received from clients was included in accounts
payable to customers arising from securities business in Note 35.
No aged analysis is disclosed as in the opinion of the directors, the aged analysis does not give
additional value in view of the nature of business of securities margin financing.
Movement in the allowance for doubtful debts
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Allowance for doubtful debts at the beginning of the year 8,477 --
Impairment recognised for the year 10,911 8,477
At end of the year 19,388 8,477
The Group determines the allowance for impaired debts based on the evaluation of collectability and
aged analysis of accounts and on management's judgement including the assessment of change in credit
quality, collateral and the past collection history of each client. As at December 31, 2014, the
balance of allowance for doubtful debts include individual assessment of Rmb2,263,000 (2013: Rmb2,572,000)
and collective assessment of Rmb17,125,000 (2013: Rmb5,905,000) The concentration of credit risk is limited
due to the customer base being large and unrelated.
29. OTHER RECEIVABLES AND PREPAYMENTS
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Current
Entrusted loan and interest receivable from a related party
(Note 51(ii)) 491,911 54,000
Interest receivables 163,609 122,392
Financial products investment receivables (Note) 17,000 168,000
Prepayments 86,242 30,195
Others 73,476 77,381
832,238 451,968
Non-Current
Entrusted loans and interest receivables from a related party
(Note 51(ii)) 50,828 401,400
883,066 853,368
Note: Short-term fixed-yield and principal protected bank financial products.
30. HELD FOR TRADING INVESTMENTS
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Held for trading investments include:
Listed securities in the PRC, at fair value:
Equity securities 89,877 78,658
Open-end equity funds 97,718 5,242
Bonds
Listed in Shanghai/Shenzhen Stock Exchange with fixed
interest ranging from 4.36% to 8.5% (2013: nil)
per annum 621,813 --
Unlisted with fixed interest ranging from 4.33% to 8.70%
(2013: 4.27% to 8.6%) per annum 1,315,332 1,097,125
2,124,740 1,181,025
31. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Analysed by collateral type:
Bonds 1,316,942 20,500
Stock securities 1,407,656 853,754
2,724,598 874,254
Analysed by market:
Inter bank market 1,316,942 --
Shanghai/Shenzhen Stock Exchange 1,407,656 874,254
The collaterals include both equity and debt securities listed in the PRC. As at December 31, 2014, the fair
value of equity securities and debt securities held as collaterals was Rmb4,762,681,000 (2013: Rmb1,915,221,000)
and Rmb1,320,746,000 (2013: Rmb20,500,000), respectively.
32. BANK BALANCES HELD ON BEHALF OF CUSTOMERS
For the Group's securities operation carried out by Zheshang Securities, the Group receives and holds
money deposited by customers (including other institution). These customers' money is maintained in one
or more segregated bank accounts. The Group has recognised the corresponding accounts payable to respective
customers and other institution.
Bank balances held on behalf of customers carry interest at market rates which range from 1.62% to
1.98% (2013: 1.62% to 1.98%) per annum.
Bank balances held on behalf of customers that are denominated in currencies other than the functional
currency of the respective group entities are set out below:
HKD USD
Rmb'000 Rmb'000
As at December 31, 2014 12,490 42,862
As at December 31, 2013 13,933 36,948
33. BANK BALANCES AND CASH
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Time deposits with original maturity over three months 761,320 704,459
Unrestricted bank balances and cash 2,689,381 1,130,759
Time deposits with original maturity of less than three months 612,341 676,222
Cash and cash equivalents 3,301,722 1,806,981
4,063,042 2,511,440
Bank balances carry interest at the average market rate of 0.35% (2013: 0.35%) per annum. Time deposits
carry interest at fixed rates ranging from 1.35% to 3.30% (2013: 1.35% to 3.30%) per annum.
Bank balances and cash that are denominated in currencies other than the functional currency of the
respective group entities are set out below:
HKD USD
Rmb'000 Rmb'000
As at December 31, 2014 6,098 28,832
As at December 31, 2013 5,462 28,209
34. PLACEMENTS FROM OTHER FINANCIAL INSTITUTIONS
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Placements from
Industrial Bank Co., Ltd (unsecured) 500,000 --
China Securities Finance Corporation Limited ("CSF") (secured) 1,440,000 310,000
1,940,000 310,000
These placements with interest rate ranging from 5.8% to 7.5% (2013: 7.0% to 7.1%) per annum are repayable
within 1 year from the end of the reporting period.
The placements from CSF were secured by a cash deposit of Rmb168,161,000 (2013: Rmb10,785,000) and debt
and equity securities with total fair value of Rmb178,608,000 (2013: Rmb203,923,000) as at December 31, 2014.
35. ACCOUNTS PAYABLE TO CUSTOMERS ARISING FROM SECURITIES BUSINESS
The amounts mainly represent money held on behalf of clients at the banks and at the clearing houses
by the Group.
The amounts include payables for securities/futures business as well as cash collateral from customers
for securities lending and/ or margin financing arrangement.
The majority of the accounts payable balance is repayable on demand except where certain accounts payable
to brokerage clients represent margin deposits received from clients for their trading activities under
normal course of business. No aged analysis is disclosed as in the opinion of the directors an aged analysis
does not give any additional value in view of the nature of the business.
As at December 31, 2014, Rmb975,337,000 (2013: Rmb222,313,000) cash collateral have been received from clients
for securities lending or margin financing arrangement, of which under normal course of business. Only the
excess amounts over the required margin deposits stipulated are repayable on demand.
Accounts payable to customers arising from securities business that are denominated in currencies other than
the functional currency of the respective group entities are set out below:
HKD USD
Rmb'000 Rmb'000
As at December 31, 2014 12,490 42,862
As at December 31, 2013 13,933 36,948
36. TRADE PAYABLES
Trade payables mainly represent the construction payables for the improvement projects of toll expressways.
The following is an aged analysis of trade payables presented based on the invoice date:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Within 3 months 438,079 214,669
3 months to 1 year 119,156 82,048
1 to 2 years 67,732 29,518
2 to 3 years 10,897 8,496
Over 3 years 57,740 87,263
693,604 421,994
37. OTHER PAYABLES AND ACCRUALS
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Other liabilities:
Accrued payroll and welfare 841,314 544,469
Advance from rental and advertising customers 96,763 94,124
Toll collected on behalf of other toll roads 2,759 5,057
Retention payable 176,416 143,807
Deposit received for disposal of an associate (Note 24(iv)) 103,500 --
Others 263,169 192,382
1,483,921 979,839
Other accruals 77,353 15,657
1,561,274 995,496
38. BANK AND OTHER BORROWINGS
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Bank loans 350,000 500,000
Loan from a related party (See Note 51(ii)) -- 340,000
350,000 840,000
Secured (Note) 350,000 400,000
Unsecured -- 440,000
350,000 840,000
Carrying amount repayable:
Within one year 150,000 540,000
More than one year, but not exceeding two years 200,000 200,000
More than two years but not more than five years -- 100,000
350,000 840,000
Less: Amounts due within one year (150,000) (540,000)
Amounts shown under non-current liabilities 200,000 300,000
12/31/2014 12/31/2013
Rmb'000 Rmb'000
The bank and other borrowings comprise:
Fixed-rate borrowings -- 440,000
Variable-rate borrowings 350,000 400,000
350,000 840,000
The range of effective interest rates (which are also agreed to contracted interest rates) on the Group's
borrowings are as follows:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Effective interest rate:
Fixed-rate borrowings N/A 5.04%
Variable-rate borrowings 5.895% - 6.77% 6.22% - 6.77%
Note: Details of the securities pledged for the grant of borrowings to the Group were set out in Note 49.
The Group's borrowings were all dominated in the Group's functional currency as at December 31, 2014 and 2013.
39. SHORT-TERM FINANCING NOTE PAYABLE
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Unsecured
Short-term loan note (Note i) -- 1,000,000
Beneficial certificates (Note ii) 883,570 --
883,570 1,000,000
Notes:
(i) As at December 31, 2013, Zheshang Securities had issued short-term loan note at the principal amount of
Rmb1,000,000,000, which was interest bearing at of 5.5% per annum. The amount was matured on January 22,
2014 and had been repaid in full on the maturity date.
On January 17, 2014, April 16, 2014 and July 11, 2014, Zheshang Securities issued another three short-term
loan notes at principal amount of Rmb1,000,000,000, Rmb1,000,000,000 and Rmb950,000,000, which bear interest
at 6.28%, 4.87% and 4.55% per annum, respectively. These amounts were matured on the same year on April 16,
2014, July 15, 2014 and October 10, 2014, respectively and had been repaid in full on these maturity dates.
(ii) During the year ended December 31, 2014, there was Rmb1,083,570,000 principals received from investors for
subscription of beneficial certificates issued by Zheshang Securities, which bear fixed rate interest ranging
from 5.1% to 7.0% per annum, out of which Rmb200,000,000 was matured and repaid.
As at December 31, 2014, the remaining beneficial certificates of the remaining Rmb883,570,000 and its
interests are repayable upon maturity.
40. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Analysed as collateral type:
Bonds 2,400,257 --
Other rights and interests in debt instruments 3,898,800 --
6,299,057 --
Analysed by market:
Shanghai Stock Exchange 70,000 --
Inter-bank market 2,330,257 --
Other financial institutions 3,898,800 --
6,299,057 --
As of 31 December 2014, the above financial assets sold under repurchase agreements include those repurchase
agreements entered into with qualified investors, which amounted to Rmb6,299,057,000, with maturities within
1 year (31 December 2013: nil).
Sales and repurchase agreements are transactions in which the Group sells a security and simultaneously
agrees to repurchase it (or an asset that is substantially the same) at a fixed price on a future date.
Since the repurchase prices are fixed, the Group is still exposed to substantially all the credit risks
and market risks and rewards of those securities sold. These securities are not derecognised from the
financial statements but regarded as "collateral" for the liabilities because the Group retains
substantially all the risks and rewards of these securities. The cash proceed received is recognised as
financial liability.
As at 31 December 2014, the Group enters into repurchase agreements with certain counterparties. The
proceeds from selling such securities are presented as financial assets sold under repurchase agreements.
Because the Group sells the contractual rights to the cash flows of the securities, it does not have the
ability to use the transferred securities during the term of the arrangement.
The following tables provides a summary of carrying amounts and fair values related to transferred financial
assets that are not derecognised in their entirety and the associated liabilities as at December 31, 2014:
Loans to
customers
Held for Financial arising from
trading assets held margin
trading under resale financing
investments agreements business Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Carrying amount of transferred assets 1,253,581 1,834,693 3,987,504 7,075,778
Carrying amount of associated liabilities (1,116,868) (1,768,419) (3,413,770) (6,299,057)
Net position 136,713 66,274 573,734 776,721
41. BONDS PAYABLE
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Long term subordinated bonds 1,200,000 --
Detailed information for long term subordinated bonds as at 31 December 2014 repayable in full in two to
four years is as follows:
Carrying
Name Face value amount Issue date Maturity date Interest rate
Rmb'000 Rmb'000
14 Zheshang (Note i) 700,000 700,000 September 22, 2014 September 21, 2018 6.30%
14 Zheshang 02 (Note ii) 500,000 500,000 November 20, 2014 November 19, 2017 5.90%
1,200,000 1,200,000
Notes:
(i) On September 22, 2014, Zheshang Securities issued a 4-year subordinated bond in the principal amount of
Rmb1,000,000,000, with a redemption option exercisable at par value plus the unpaid interests at the second
anniversary since the date of issue, out of which a principal amount of Rmb300,000,000 was subscribed by the
Company. The annual interest rate in first two years is 6.30%, and which will be 9.30% for the remaining two
years if the issuer does not exercise the option of redemption.
(ii) On November 20, 2014, Zheshang Securities issued a 3-year subordinated bond to the public in principal amount
of Rmb500,000,000, at a fixed interest rate of 5.9% per annum.
42. DEFERRED TAXATION
The following are the major deferred tax liabilities and assets recognised and movements thereon during the
current and prior years:
Accelerated tax
Changes in depreciation
fair value of of property
held for trading plant and Fair value Temporary
and available- equipment and adjustment differences
for-sale expressway of long of accrued
investments operating rights term assets expenses Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At January 1, 2013 31,786 160,822 122,195 (45,679) 269,124
Credit to profit or loss (5,381) (13,286) (8,868) (36,822) (64,357)
Charge to other comprehensive
income 871 -- -- -- 871
At December 31, 2013 27,276 147,536 113,327 (82,501) 205,638
Charge (credit) to profit or loss 10,079 (11,643) (8,866) (67,241) (77,671)
Charge to other comprehensive
income 17,075 -- -- -- 17,075
At December 31, 2014 54,430 135,893 104,461 (149,742) 145,042
As at December 31, 2014, the Group had unused tax losses of approximately Rmb42,055,000 (2013: Rmb132,860,000)
No deferred taxation asset has been recognised due to the unpredictability of future profit streams.
The unrecognised tax losses will expire in the following years:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Year 2014 -- 66,614
Year 2015 2,704 24,895
Year 2016 23,751 23,751
Year 2017 15,600 15,600
42,055 130,860
43. SHARE CAPITAL
Number of shares Share capital
12/31/2014 12/31/2014
and 2013 and 2013
Rmb'000
Registered, issued and fully paid:
Domestic shares of Rmb1.00 each 2,909,260,000 2,909,260
H Shares of Rmb1.00 each 1,433,854,500 1,433,855
4,343,114,500 4,343,115
The domestic shares are not currently listed on any stock exchange.
The H Shares have been listed on the Stock Exchange since May 15, 1997. The H Shares were admitted to the
Official List on May 5, 2000 and their dealings on the London Stock Exchange commenced on the same day.
On February 14, 2002, the United States Securities and Exchange Commission, following the approval by the
Board of Directors and the China Securities Regulatory Commission, declared the registration statement in
respect of the ADSs evidenced by ADRs representing the deposited H Shares of the Company effective.
All the domestic shares and H Shares rank pari passu with each other as to dividends and voting rights.
44. NON-CONTROLLING INTERESTS
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Balance at beginning of year 3,696,421 3,577,221
Share of total comprehensive income 525,816 308,573
Deregistration of a subsidiary (Note i) (1,420) --
Arising from acquisition of additional interest in a subsidiary
(Note ii) -- (78,863)
Dividend paid to non-controlling interests during the year (93,021) (110,510)
4,127,796 3,696,421
Notes:
(i) As detailed in Note 52, during 2014, the Group has deregistered Roadtone Co (as defined in Note 52), a 51%
owned subsidiary, resulting in the reduction of non-controlling interest of RMB1,420,000.
(ii) As detailed in Note 46, during 2013, the Group acquired the remaining 76.55% equity interest in Jinhua Co,
of which 10.267% was acquired from the non-controlling shareholder for a consideration of RMB101,512,000.
This acquisition of additional interest in a subsidiary resulted in a reduction of non-controlling interest
of Rmb78,863,000.
The summarised financial information in respect of the Group's subsidiary that has material non-controlling
interests, namely Shangsan Co and its subsidiaries and Yuhang Co (as defined in Note 53) at the end of the
reporting period are set out below. The summarised financial information below represents amounts before
intragroup elimination.
Shangsan Co and its subsidiaries
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Current assets 34,149,648 15,434,356
Non-current assets 3,633,244 3,052,155
Current liabilities 27,550,416 10,692,614
Non-current liabilities 1,474,595 19,758
Equity attributable to owners of the Company 5,014,542 4,460,933
Non-controlling interests 3,743,339 3,313,206
For the year For the year
ended ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Revenue 3,392,626 2,404,228
Expenses (2,172,342) (1,710,102)
Profit for the year 1,220,284 694,126
Other comprehensive income 51,458 2,228
Total comprehensive income 1,271,742 696,354
Profit attributable to owner of the Company 738,815 425,610
Profit attributable to non-controlling interests 481,469 268,516
1,220,284 694,126
Total comprehensive income attributable to owner of the Company 765,649 426,772
Total comprehensive income attributable to non-controlling interests 506,093 269,582
1,271,742 696,354
Dividends paid to non-controlling shareholders (75,960) (94,950)
Net cash inflow (outflow) from operating activities 1,443,261 (1,236,398)
Net cash outflow from investing activities (1,113,220) (851,427)
Net cash inflow from financing activities 983,570 554,950
Net cash inflow (outflow) 1,313,611 (1,532,875)
Yuhang Co
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Current assets 70,876 198,150
Non-current assets 1,068,890 725,236
Current liabilities 311,917 104,544
Non-current liabilities 108,391 108,747
Equity attributable to owners of the Company 366,924 362,148
Non-controlling interests 352,534 347,947
For the year For the year
ended ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Revenue 92,944 114,089
Expenses (61,015) (52,145)
Profit for the year 31,929 61,944
Profit and total comprehensive income
-- attributable to owner of the Company 16,284 31,591
-- attributable to non-controlling interests 15,645 30,353
31,929 61,944
Dividends paid to non-controlling shareholders (11,058) (11,058)
Net cash inflow from operating activities 50,048 93,743
Net cash outflow from investing activities (119,571) (190,205)
Net cash inflow from financing activities 20,279 72,391
Net cash outflow (49,244) (24,071)
45. RETIREMENT BENEFITS SCHEMES
The employees of the Group are members of the state-managed retirement benefits scheme operated by
the PRC government. To supplement this existing retirement benefits scheme, the Group adopted a
corporate annuity scheme in accordance with relevant rules and regulations. The Group is required to
contribute a certain percentage of payroll costs to these retirement benefits schemes to fund the
benefits. The only obligation of the Group with respect to these retirement benefits schemes is
to make the specified contributions.
No forfeited contributions are available to reduce the contribution payable in future years.
46. ACQUISITION OF A SUBSIDIARY UNDER COMMON CONTROL IN THE PRIOR YEAR
On March 20, 2013, the Group entered into share transfer agreements with Communications Group and Yiwu
Communications Development Co., Ltd. ("Yiwu Development"), an independent third party, to acquire the 66.283%
and 10.267% equity interests in Zhejiang Jinhua Yongjin Expressway Co., Ltd. ("Jinhua Co"), from Communications
Group and Yiwu Development, respectively, for corresponding cash consideration of Rmb655,356,000 and Rmb101,512,000,
totalling Rmb756,868,000. Jinhua Co is principally engaged in the operation and management of the Jinhua Section
of the Ningbo-Jinhua Expressway. Before the above acquisitions, Jinhua Co was a 23.45% owned associate of the Group.
After the completion of the acquisition, Jinhua Co then became a 100% owned subsidiary of the Group. Since
Communications Group is the parent company of the Company, the Group's acquisition of the 66.283% equity interest
from Communications Group was regarded as a business combination involving entities under common control and was
accounted for using merger accounting method, in accordance with the guidance set out in Accounting Guideline 5
"Merger Accounting for Common Control Combinations" ("AG5") issued by the Hong Kong Institute of Certified Public
Accountants (the "HKICPA") and the acquisition of 10.267% equity interest in Jinhua Co from Yiwu Development was
accounted for as acquisition of additional interest in a subsidiary.
47. COMMITMENTS
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Authorised but not contracted for:
-- Purchase of machinery and equipment 431,405 344,933
-- Renovation of service areas 67,700 18,000
-- Acquisition and construction of properties 308,049 1,324,082
-- Equity investments 213,000 30,000
1,020,154 1,717,015
48. OPERATING LEASES
The Group as lessee
Year ended Year ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Minimum lease payments 71,186 80,244
Contingent rental expenses 1,721 3,085
72,907 83,329
At the end of the reporting period, the Group had commitments for future minimum lease payments under
non-cancellable operating leases which fall due as follows:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Within one year 50,789 60,087
In the second to fifth years inclusive 85,594 125,500
Over five years 725 1,797
137,108 187,384
Operating lease payments represent rentals payable by the Group for certain service areas along expressways
located in Zhejiang and Tianjin, and the operating branches of Zheshang Securities and Zheshang Futures.
They are negotiated for an average term of three to ten years and some of the rentals contain both a fixed
element and a contingent element linked to sales. The above commitment represented the minimum lease payments
payable to lessors only and do not include any contingent rent elements.
The Group as lessor
The Group leased their service areas and communication ducts under operating lease arrangements. Leases are
negotiated for terms ranging from 1 to 25 years and rentals are fixed annually.
At the end of the reporting period, the Group had contracted with tenants for the following future minimum
lease payments:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Within one year 94,793 60,090
In the second to fifth years inclusive 102,860 88,047
After five years 29,708 25,643
227,361 173,780
For certain of the Group's service areas, the rental income are variable and being calculated at the higher
of a pre-agreed percentage of revenue of the relevant service areas made by the lessees or the minimum lease
payments. The above commitment represented the minimum lease payments from lessees only and do not include
any contingent rent elements.
49. PLEDGE OF ASSETS
At the end of reporting period, the Group had pledged the following assets to banks as securities against
general banking facilities granted to the Group:
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Property, plant and equipment 747,456 381,797
Expressway operating rights 1,777,267 1,882,283
Prepaid lease payments 39,251 40,372
2,563,974 2,304,452
50. CONTINGENT LIABILITIES
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Guarantees given to bank, in respect of a joint venture (Note) 1,076,910 1,100,000
Note: The Group provided a financial guarantee to Shengxin Co, a 50% owned joint venture of the Group, in favour
of a bank for 50% of its outstanding bank borrowings and interest. As at December 31, 2014, the bank
borrowings of Shengxin Co and accrued interest amounted to Rmb2,150,000,000 (2013: Rmb2,200,000,000) and
Rmb3,820,000 (2013: nil), respectively. The directors of the Company consider that the fair value of the
guarantee is insignificant at initial recognition and default by the guaranteed party is not probable as at
December 31, 2014.
51. RELATED PARTY TRANSACTIONS AND BALANCES
Other than disclosed elsewhere in the consolidated financial statements, during the year, the Group also
entered into the following significant transactions with related parties:
(i) Transactions and balances with government related parties
The Group operates in an economic environment currently predominated by entities directly or indirectly
owned or controlled by the PRC government ("government-related entities"). In addition, the Group itself
is part of a larger group of companies under the Communications Group which is controlled by the PRC
government. However, due to the business nature, in respect of the Group's toll road and securities
business, the directors are of the opinion that it is impracticable to ascertain the identity of
counterparties and accordingly whether the transactions are with other government-related entities
in the PRC. Details of other significant transactions with government related parties are
summarised below:
(a) Communications Group
Short-term loan
For the year For the year
ended ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Interest expenses incurred -- 10,886
Pursuant to the entrusted loan contracts entered into between Jinhua Co and Communications Group on
January 21, 2013, Communications Group agreed to provide Jinhua Co with entrusted loans amounting to
Rmb140,000,000 at a variable interest rate of 6.00% per annum. Such loan with those entrust loans
provided by Communications Group before January 1, 2013, amounted to Rmb200,000,000 were replaced by
two new entrusted loan contracts subsequently in 2013, amounted to Rmb170,000,000 each at a variable
rate of 5.24% per annum, with maturity date of August 10, 2015. All of the loans were early repaid in
2013. No additional entrusted loans were advanced to the Group during the current year.
Other transactions
For the year For the year
ended ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Toll road service area leasing income earned (Note) 3,212 3,077
Toll road service area management fee paid (Note) 600 600
Property leasing income earned 1,552 1,035
Road maintenance service expenses incurred 15,403 43,272
Toll road related inspection services income earned 7,173 7,286
Note: Pursuant to the leasing and operation agreement entered into between Jinhua Co and Zhejiang
Communications Investment Group Industrial Development Co.,Ltd. ("Zhejiang Communications Investment"),
a fellow subsidiary of the Communications Group, Jinhua Co leased the toll road service area to Zhejiang
Communications Investment and Zhejiang Communications Investment managed the operation of the service area
and the advertising business in respect of the toll road service area. Such business began from January 1,
2011, and will be expired at the same time with the operating right for Jinhua Section in 2030.
(b) Transactions with other government related parties
Petroleum Co
For the year For the year
ended ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Purchase of petroleum products 1,931,466 1,781,179
Pursuant to the operation management agreement entered into between Zhejiang Expressway Investment
Development Co., Ltd. ("Development Co"), a wholly owned subsidiary of the Company, and Petroleum Co
in respect of the petrol stations in the service areas along the Shanghai-Hangzhou-Ningbo and Shangsan
Expressways, Petroleum Co assist Development Co in running their petrol stations along these roads.
Petroleum Co is a government related entity and also an associate of the Group.
Others
The Group has entered into various significant transactions, including deposit placements, borrowings
and other general banking facilities, with certain banks and financial institution which are
government-related entities in its ordinary course of business. In view of the nature of those banking
transactions, the directors are of the opinion that separate disclosure would not be meaningful.
(ii) Transactions and balances with associates and other non-government related parties
Loan advanced from Zhejiang Communications Finance
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Outstanding loan payable balances repayable within one year -- 340,000
For the year For the year
ended ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Interest expenses incurred 6,534 6,873
The amounts of loan advanced from Zhejiang Communications Finance in last year were unsecured and
repaid during the year in accordance with the terms of loan agreements.
During the year, the Group had further obtained advances of RMB400,000,000 and RMB58,500,000,
which carried interest at a fixed interest rate of 5.04% and 6.16% per annum, respectively.
Both of these two loans were fully repaid during the same year.
Short-term loan advanced to Zhejiang Concord Property
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Outstanding loan receivable balances 500,000 450,000
Interest receivables 42,739 5,400
542,739 455,400
Analysed for reporting purpose as:
Current assets (note 29) 491,911 54,000
Non-current assets (note 29) 50,828 401,400
542,739 455,400
For the year For the year
ended ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Interest income earned 43,024 44,476
During the year, the Group advanced additional entrusted loans to Zhejiang Concord Property totalling
Rmb100,000,000 (2013: Rmb450,000,000) and received settlement of loan principals and interests amounting
to Rmb50,000,000 (2013: Rmb610,000,000) and Rmb5,686,000 (2013: Rmb39,299,000), respectively.
The amounts were unsecured and repayable in accordance with the terms of entrusted loan agreements
entered into between the Group and Hangzhou Concord Group. The amounts carried interests at an effective
interest rate of 10% (2013: 12%) per annum. All entrusted loans in both years were guaranteed by World
Trade Ltd, an independent third party, in full.
Financial service provided by Zhejiang Communications Finance
The Group entered into a financial services agreement with Zhejiang Communications Finance. Pursuant to
the agreement, Zhejiang Communications Finance agreed to provide the Group with the deposit services, the
loan and financial leasing services, the clearing services and other financial services.
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Bank balances and cash
-- Time deposits with original maturity over three months 20,000 --
-- Cash and cash equivalents 536,751 60,443
556,751 60,443
For the year For the year
ended ended
12/31/2014 12/31/2013
Rmb'000 Rmb'000
Interest income earned 1,551 858
(ii) Key management emoluments
The remuneration of the directors, supervisors and key management personnel during the year was
Rmb5,637,000 (2013: Rmb4,820,000) including retirement benefit scheme contribution of Rmb147,000
(2013: Rmb136,000) which is determined by the performance of the individuals and the market trends.
52. PARTICULARS OF SUBSIDIARIES OF THE COMPANY
Date and Registered Percentage of equity
place of and paid-in interest attributable
Name of subsidiary registration capital to the Company
Principal
Rmb Direct Indirect activities
12/31/2014 12/31/2013 12/31/2014 12/31/2013
% % % %
Yuhang Co Note 1 75,223,000 51 51 -- -- Management of the
Yuhang Section of
the
Shanghai-Hangzhou
Expressway
Jiaxing Co Note 2 1,859,200,000 99.999454 99.999454 -- -- Management of the
Jiaxing Section of
the Shanghai-Hangzhou
Expressway
Shangsan Co Note 3 2,400,000,000 73.625 73.625 -- -- Management of the
Shangsan Expressway
Development Co Note 4 120,000,000 100 100 -- -- Operation of service
areas as well as
roadside advertising
along the expressways
operated by the Group
Zhejiang Note 5 16,000,000 -- -- *70 *70 Provision of
Expressway advertising services
Advertising Co.,
Ltd.
("Advertising
Co")
Zhejiang Expressway Note 6 8,000,000 100 100 -- -- Provision of
Vehicle Towing and vehicle towing,
Rescue Services repair and emergency
Co., Ltd. ("Towing rescue services
Co")
Hangzhou Roadtone Note 7 3,000,000 -- -- -- *51 Provision of
Advertising Co., advertising services
Ltd.
("Roadtone Co")
Zheshang Securities Note 8 3,000,000,000 -- -- **52.15 **52.15 Operation of
securities business
Zheshang Futures Note 9 500,000,000 -- -- ***52.15 ***52.15 Operation of
securities business
Zheshang Capital Note 10 100,000,000 -- -- ***52.15 ***52.15 Operation of
Management (2013: securities business
RMB3,000,000)
Zheshang Securities Note 11 500,000,000 -- -- ***52.15 ***52.15 Provision of asset
Asset Management management service
Co., Ltd.
("Asset
Management")
Ningbo Dongfang Note 12 1,000,000 -- -- ***52.15 ***52.15 Provision of
Jujin Investment investment management
Management Co., and advisory services
Ltd ("Dongfang
Jujin")
Ningbo Dongtang Note 13 29,150,000 -- -- ***16.37 ***16.37 Provision of
Jujin Jiahua investment management
Investment and advisory and
Management private equity
Center investments
("Dongtang
Jujin Jiahua")
Zhejiang Zheqi Note 14 200,000,000 -- -- ***52.15 ***52.15 Trading of future
Co., Ltd. (2013:
("Zhejiang Rmb100,000,000)
Zheqi")
Jinhua Co Note 15 900,000,000 100 100 -- -- Management of the
Jinhua Section of
the Ningbo-Jinhua
Expressway
Zhejiang Note 16 30,000,000 100 -- -- -- Management of
Expressway toll road
Road
Maintenance
Co., Ltd.
("Maintenance Co")
* These two companies are subsidiaries of Development Co, a wholly-owned subsidiary of the Company, and,
accordingly, are accounted for as subsidiaries by virtue of the Group's control over them.
** The company is a subsidiary of Shangsan Co, a non-wholly-owned subsidiary of the Company, and, accordingly,
is accounted for as a subsidiary by virtue of the Group's control over it.
*** The companies and partnership entity are subsidiaries of Zheshang Securities, a non-wholly-owned subsidiary
of Shangsan Co, and accordingly, are accounted for as subsidiaries by virtue of the Group's control over it.
Note 1: Yuhang Co was established on June 7, 1994 in the PRC as a joint stock limited company and was subsequently
restructured into a limited liability company under its current name on November 28, 1996. The Company is
able to control over Yuhang Co because it has the power to appoint five out of nine directors of that
company and under the provisions stated in the Articles of Association of that company, the passing of
ordinary resolutions at the board meetings required one-half of the directors attending the meetings.
Note 2: Jiaxing Co was established on June 30, 1994 in the PRC as a joint stock limited company and was
subsequently restructured into a limited liability company under its current name on November 29, 1996.
Note 3: Shangsan Co was established on January 1, 1998 in the PRC as a limited liability company.
Note 4: Development Co was established on May 28, 2003 in the PRC as a limited liability company.
Note 5: Advertising Co was established on June 1, 1998 in the PRC as a limited liability company.
Note 6: Towing Co was established on July 31, 2003 in the PRC as a limited liability company.
Note 7: Roadtone Co was established on July 27, 2004 in the PRC as a limited liability company and has been
de-registered during the year.
Note 8: Zheshang Securities was established on May 9, 2002 in the PRC as a limited liability company. On November
16, 2013, the board of directors of the Company announced that Zheshang Securities proposed to seek a
separate listing of its shares as A shares on the Shanghai Stock Exchange. This proposed spin-off for
separate listing has not yet been completed at the end of the reporting period.
Note 9: Zheshang Futures was established on September 7, 1995 in the PRC as a limited liability company.
Note 10: Zheshang Capital Management was established on February 9, 2012 in the PRC as a limited liability company.
The registered capital of Zheshang Capital Management has been reduced from Rmb300,000,000 to
Rmb100,000,000 during the year ended December 31, 2014.
Note 11: Asset Management was established on July 22, 2013 in the PRC as a limited liability Company.
Note 12: Dongfang Jujin was established on March 25, 2014 in the PRC as a limited liability company.
Note 13: Dongfang Jujin Jiahua was established on April 11, 2014 in the PRC as a limited partnership. Pursuant
to the partnership agreement, Dongfang Jujin is a general partner, while Zheshang Capital Management and
other two individuals are limited partners of the partnership.
The directors of the Company consider that the Group has the practical ability to direct the relevant
activities of Dongfang Jujin Jiahua unilaterally, and it is therefore classified as a subsidiary of the
Group.
Note 14: Zhejiang Zheqi was established on April 9, 2013 in in the PRC as a limited liability Company, and its
paid-in share capital was increased by Rmb100,000,000 to Rmb200,000,000 during the year ended December
31, 2014.
Note 15: Jinhua Co was established in February 2002 in the PRC as a limited liability Company. As at December 31,
2012, 23.45% equity interest of Jinhua Co was directly held by the Company. During the year ended
December 31, 2013, the Company acquired the remaining 66.283% and 10.267% equity interests in Jinhua Co
from Communications Group and non-controlling interests, respectively, and Jinhua Co then became a wholly
owned subsidiary and directly held by the Company as at December 31, 2013.
Note 16: Maintenance Co was established on January 28, 2014 in the PRC as a limited liability company.
All of the Company's subsidiaries are operating in the PRC. As at December 31, 2014, Zheshang Securities has
issued long- term subordinated bonds to the public and beneficial certificates at the total principal
amount of Rmb1,200,000,000 and Rmb883,570,000, respectively. As at December 31, 2013, Zheshang Securities
had issued a short-term loan note at principle value of Rmb1,000,000,000 which was fully repaid during
the year. Except for Zheshang Securities, none of the other subsidiaries had any debt securities in issue
at any time during the year.
53. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
12/31/2014 12/31/2013
Rmb'000 Rmb'000
NON-CURRENT ASSETS
Property, plant and equipment 478,498 266,358
Prepaid lease payments 1,594 1,688
Expressway operating rights 4,227,602 4,572,835
Other intangible assets 2,552 2,739
Investments in subsidiaries 6,640,021 6,610,021
Investments in associates 395,484 397,670
Investment in a joint venture 373,470 373,470
Available-for-sale investments 101,554 72,514
Bonds receivables 300,000 --
Other receivables 50,828 401,400
12,571,603 12,698,695
CURRENT ASSETS
Inventories 3,064 3,616
Trade receivables 17,867 28,046
Other receivables 481,536 45,959
Prepaid lease payments 95 95
Available-for-sale investments 10,650 30,000
Held for trading investment 80,000 80,000
Amount due from subsidiaries 230,619 328,324
Bank balances and cash
-- Time deposits with original maturity over three months 50,000 20,000
-- Cash and cash equivalents 581,014 349,576
1,454,845 885,616
CURRENT LIABILITIES
Trade payables 99,989 139,071
Tax liabilities 106,092 106,073
Other taxes payable 9,164 8,846
Other payables and accruals 267,028 225,984
Amount due to subsidiaries 891,630 305,337
Bank borrowings -- 440,000
1,373,903 1,225,311
NET CURRENT ASSETS (LIABILITIES) 80,942 (339,695)
TOTAL ASSETS LESS CURRENT LIABILITIES 12,652,545 12,359,000
NON-CURRENT LIABILITIES
Deferred tax liabilities 94,478 98,482
94,478 98,482
12,558,067 12,260,518
CAPITAL AND RESERVES
Share capital 4,343,115 4,343,115
Reserves 8,214,952 7,917,403
12,558,067 12,260,518
Investment
Share Share Statutory valuation Dividend Special Retained
capital premium reserves reserve reserves reserves profits Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At December 31, 2013 4,343,115 3,645,726 1,993,059 385 1,085,779 18,666 1,173,788 12,260,518
Total comprehensive
income for the year -- -- -- -- -- -- 1,644,147 1,644,147
Disposal of an
associate -- -- -- (232) -- -- -- (232)
Interim dividend -- -- -- -- -- -- (260,587) (260,587)
Final dividend -- -- -- -- (1,085,779) -- -- (1,085,779)
Proposed final dividend -- -- -- -- 1,150,925 -- (1,150,925) --
Transfer to reserve -- -- 167,011 -- -- -- (167,011) --
At December 31, 2014 4,343,115 3,645,726 2,160,070 153 1,150,925 18,666 1,239,412 12,558,067
54. EVENTS AFTER THE END OF THE REPORTING PERIOD
The following events have been carried out subsequent to the end of the reporting period:
(i) On January 21, 2015, Zheshang Securities has issued a three-year unsecured subordinated bond at the principal
amount of Rmb500,000,000, which bears interest at a fixed rate of 6.3% per annum.
(ii) On February 2, 2015, Zheshang Securities has issued a five-year unsecured corporate bond at the principal
amount of Rmb1,500,000,000, with the redemption option exercisable by the bondholders at the third
anniversary of the date of issue. The corporate bond bears fixed interest rate of 4.9% per annum with
interest to be paid annually in arrears for the first three years. At the third anniversary of the date of
issue, the bondholders has the right to require Zheshang Securities to redeem the outstanding corporate bond
at an amount equals to its principal amount. If the redemption option is not exercised, the interest rate
would be re-priced for the remaining period of two years till maturity at that time.
Independent Auditor's Report
(Issued by a Third Country Auditor registered with The UK Financial Reporting Council)
TO THE MEMBERS OF ZHEJIANG EXPRESSWAY CO., LTD.
(Incorporated in the People's Republic of China with limited liability)
We have audited the consolidated financial statements of Zhejiang Expressway Co., Ltd. (the "Company") and
its subsidiaries (collectively referred to as the "Group") set out in the later part of this report, which comprise the
consolidated statement of financial position as at December 31, 2014, and the consolidated statement of
profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated
statement of cash flows for the year then ended, and a summary of significant accounting policies and other
explanatory information.
Directors' Responsibility for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of consolidated financial statements that
give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong
Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance,
and for such internal control as the directors determine is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit and
to report our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no
other purpose. We do not assume responsibility towards or accept liability to any other person for the contents
of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong
Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor 's judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity's preparation of consolidated financial statements that give a true and fair view in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs
of the Group as at December 31, 2014, and of the Group's profit and cash flows for the year then ended in
accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with
the disclosure requirements of the Hong Kong Companies Ordinance.
Deloitte Touche Tohmatsu Certified Public Accountants LLP
Certified Public Accountants
(Registered as a Third Country Auditor with the UK Financial Reporting Council)
Shanghai, China
March 18, 2015
Corporate Information
EXECUTIVE DIRECTORS AUTHORIZED REPRESENTATIVES
ZHAN Xiaozhang (Chairman) ZHAN Xiaozhang
LUO Jianhu (General Manager) ZHANG Jingzhong
DING Huikang
STATUTORY ADDRESS
NON-EXECUTIVE DIRECTORS
12/F, Block A, Dragon Century Plaza
LI Zongsheng (Resigned on December 29, 2014) 1 Hangda Road
WANG Weili (Resigned on December 29, 2014) Hangzhou City, Zhejiang Province
WANG Dongjie PRC 310007
DAI Benmeng ZHOU Jianping Tel: 86-571-8798 5588
Fax: 86-571-8798 5599
INDEPENDENT LEGAL ADVISERS
NON-EXECUTIVE DIRECTORS
As to Hong Kong and US law:
ZHANG Junsheng (Resigned on December 29, 2014) Herbert Smith Freehills
ZHOU Jun 23rd Floor, Gloucester Tower
PEI Ker-Wei 15 Queen's Road Central
LEE Wai Tsang Rosa Hong Kong
SUPERVISORS As to English law:
Herbert Smith Freehills LLP
FU Zhexiang Exchange House
WU Yongmin Primrose Street
LIU Haisheng (Resigned on April 8, 2014) London EC2A 2HS
ZHANG Guohua United Kingdom
ZHANG Xiuhua
COMPANY SECRETARY As to PRC law:
T & C Law Firm
Tony ZHENG 11/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
PRC 310007
AUDITORS H SHARES LISTING INFORMATION
Deloitte Touche Tohmatsu The Stock Exchange of Hong Kong Limited
35/F, One Pacific Place Code: 0576
88 Queensway
Hong Kong LONDON STOCK EXCHANGE PLC
INVESTOR RELATIONS CONSULTANT Code: ZHEH
PR Concepts Asia Limited ADRS INFORMATION
16/F., Methodist House
36 Hennessy Road, Wanchai US Exchange: OTC
Hong Kong Symbol: ZHEXY
Tel: 852-2117 0861 CUSIP: 98951A100
Fax: 852-2117 0869 ADR: H Shares 1:10
PRINCIPAL BANKERS REPRESENTATIVE OFFICE IN
HONG KONG
Industrial and Commercial Bank of China,
Zhejiang Branch Suite 2910
Shanghai Pudong Development Bank, 29/F, Bank of America Tower
Hangzhou Branch 12 Harcourt Road
Hong Kong
H SHARE REGISTRAR AND TRANSFER OFFICE Tel: 852-2537 4295
Fax: 852-2537 4293
Hong Kong Registrars Limited
Room 1712-1716, 17/F, Hopewell Centre WEBSITE
183 Queen's Road East
Hong Kong www.zjec.com.cn
For the Location Map of Expressways in Zhejiang Province, please visit:
http://photos.prnasia.com/prnk/20150330/8521501909-d
NOTE: To view the full set of the company's 2014 Annual Report, please visit www.zjec.com.cn