2013 Annual Report / Financial Statements

ZHEJIANG EXPRESSWAY CO., LTD. 2013 Annual Report Focus on Transformational Development, Deepen Reform and Innovation During the year of 2013, under the leadership of the parent company, the Company strived to accelerate thetransformational development of its listing platform and achieved its annual target. The Company alsoactively looked to deepen reforms and innovation. As a result, the Group's operating performance improvedsignificantly. Content Definition of TermsCompany ProfileReview of Major Corporate EventsParticulars of Major Road ProjectsFinancial and Operating HighlightsChairman's StatementManagement Discussion and AnalysisPrincipal Risks and UncertaintiesCorporate Governance ReportDirectors, Supervisors and Senior Management ProfilesReport of the DirectorsReport of the Supervisory CommitteeConnected TransactionsIndependent Auditor 's ReportConsolidated Financial Statements & NotesIndependent Auditor 's Report(Issued by a third country auditor registered with the UK Financial Reporting Council)Corporate InformationLocation 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 JoinHands Technology JoinHands Technology Co., Ltd., a 27.582% owned associate of the Company Listing Rules the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited Maintenance Co Zhejiang Expressway Maintenance Co., Ltd., a 100% owned subsidiary of the Company Period the period from January 1, 2013 to December 31, 2013 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 operatingof high-grade roads. The Company and its subsidiaries also carry out certain ancillary businesses such asautomobile 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 kmShangsan Expressway, the 70 km Jinhua section of Ningbo-Jinhua Expressway, ancillary facilities along the threeexpressways, and Zheshang Securities. All of the three expressways are situated within ZhejiangProvince in the PRC. As at December 31, 2013, total assets of the Company and its subsidiaries amounted toRmb32,089.19 million. The Company was incorporated on March 1, 1997 as the main vehicle of the Zhejiang Provincial Government forinvesting 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 aprovincial-level communications company which is wholly-owned by the State and established by the ZhejiangProvincial Government. It mainly operates a diversity of businesses, such as investment, operations,maintenance, toll collection and ancillary services of expressways; construction and building of transportationproject, ocean and coastal transport; as well as real estates. As at December 31, 2013,consolidated assets of Communications Group totaled Rmb150,400.91 million. The H Shares of the Company, which represent approximately 33% of the issued share capital of the Company, werelisted on the Hong Kong Stock Exchange on May 15, 1997, and the Company subsequently obtained a secondary listingon 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 itsH 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 allopportunities of investment and acquisition of new projects, aiming to develop itself into a first-class expresswayoperator in China. In addition, the Company will also endeavor to enhance its corecompetitiveness in the securities business, increasing its profit contribution to the Group. For the corporate and business structure of the Group as at December 31, 2013, please visit:http://photos.prnasia.com/prnk/20140401/8521401858-a Review of Major Corporate Events 1. On January 16, 2013, the Company announced the final distribution notice for its ten-year 2003 corporate bonds. On January 21, 2013, the final interest together with principal were paid accordingly. 2. On March 21, 2013, the Company announced its 2012 annual results in Hong Kong and thereafter conducted its annual results presentations in Hong Kong and Britain. 3. On March 30, 2013, the Company entered into a capital increase agreement with Zhejiang Communications Investment Group Finance Co., Ltd. and its existing shareholders, pursuant to which the Company has conditionally agreed to make a capital contribution of Rmb280 million in cash to the equity capital of Zhejiang Communications Finance, thereby enabling the Company to own a 35% equity interest in Zhejiang Communications Finance. 4. On May 3, 2013, China Securities Regulatory Commission confirmed the acceptance of Zheshang Securities's application for the listing of its shares as A shares on the Shanghai Stock Exchange. 5. On May 7, 2013, the Company announced its 2013 first quarterly results. 6. On June 21, 2013, the Company held its 2012 Annual General Meeting to approve the distribution of a final dividend of Rmb0.24 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. The acquisition of the remaining 76.55% equity interest in Zhejiang Jinhua Yongjin Expressway Co., Ltd. and the proposal of issuing domestic corporate bonds with an aggregate principal amount of up to Rmb1 billion were also approved. 7. On June 30, 2013, the Company completed the acquisition of the remaining 76.55% equity interest in Zhejiang Jinhua Yongjin Expressway Co., Ltd., which then became a 100% owned subsidiary of the Company, and merger accounting method was adopted. 8. On August 29, 2013, the Company announced its 2013 interim results in Hong Kong and thereafter conducted its interim results presentations in Hong Kong. 9. On October 17, 2013, the Company held an Extraordinary General Meeting at which the distribution of an interim dividend of Rmb0.06 per share was approved. On the same day, the Development Co. was selected as one of the first "Top Ten Expressway Service Area Management Companies in China," and became the only service area management company selected in Zhejiang province. 10. On November 11, 2013, the Company announced its 2013 third quarterly results. 11. On January 28, 2014, Zhejiang Expressway Maintenance Co., Ltd., a 100% owned subsidiary of the Company, was founded with registered capital of Rmb30 million. Number Number Remaining Percentage of Length in Number of Toll of Service Start of Years ofExpressway Ownership Kilometers of Lanes Stations Areas Operation Operation Shanghai-Hangzhou Expressway - Jiaxing Section 99.9995% 88.1 8 7 2 1998 15 - Yuhang Section 51% 11.1 6 1 0 1995-1998 15 - Hangzhou Section 100% 3.4 4 2 0 1995 15Hangzhou-Ningbo Expressway - Hangzhou to Hongken section 100% 16.0 4 1 0 1992 14 - Hongken to Duantang section 100% 124.0 8 9 2 1995 14 - Duantang to Dazhujia section 100% 5.0 4 1 0 1996 14Shangsan Expressway 73.625% 142.0 4 11 3 2000 17Ningbo-Jinhua Expressway - Jinhua Section 100% 69.7 4 7 1 2005 17 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 Rmb0.09/ton per km x 1.5 is reduced in a linear manner to up to 15 tons Rmb0.09/ton per km Above 15 tons and Rmb0.09/ton per km is reduced in a linear manner to up to 30 tons 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 loaded vehicle Overloaded up to 30% The overloaded portion over 10% is calculated based on Rmb0.09/ton per km x 1.2; the remaining portion is calculated based on the fee standard of "Overloaded below 10%" Overloaded above 30% The legally loaded portion and the overloaded portion up to 30% is and up to 50% 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 The legally loaded portion and the overloaded portion up to 30% is 50% and up to 100% 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, 2009 2010 2011 2012 2013 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) (Restated) (Restated) Revenue 6,175,626 6,959,504 6,994,391 6,927,415 7,851,115Profit Before Tax 2,936,461 3,044,830 2,719,108 2,461,289 2,971,738Income Tax Expense (811,530) (784,714) (704,705) (634,669) (756,761)Profit for the year 2,124,931 2,260,116 2,014,403 1,826,620 2,214,977Attributable to: Owners of the Company 1,705,349 1,826,565 1,760,738 1,649,484 1,907,470 Non-controlling interests 419,582 433,551 253,665 177,136 307,507Earnings Per Share (EPS) 39.27 cents 42.06 cents 40.54 cents 37.98 cents 43.92 cents Return on Equity (ROE) 2009 2010 2011 2012 2013 (Restated) (Restated) (Restated) (Restated) ROE 11.56% 11.92% 11.19% 10.28% 11.94% For Segmental Revenue (Year 2013), Segmental Operating Cost (Year 2013) and other Financial andOperating Highlights graphs, please visit: http://photos.prnasia.com/prnk/20140401/8521401858-b Chairman's Statement Dear Shareholders, It is my honour to present the annual results of Zhejiang Expressway for the year 2013 on behalf of the Boardof Directors. Over the course of the year, the global economy continued to fluctuate. While the U.S. has been creating jobsand both its housing market and Wall Street have moved up sharply, the EU still remained in recession for muchof the year, and living standards in most of the developed world have yet to recover. In China,the economy remained stable amid external volatility and stable GDP growth eased worries about a "hard landing".Meanwhile, China's fixed-asset investment climbed 19.6%, which helped drive economic growthat a moderate and sustainable pace. Despite a number of natural disasters that struck our business' home province of Zhejiang, including thedevastating typhoon Fitow in October, which affected certain sections of our expressways for a short time,the region remained a hub for China's manufacturing industry and privately-owned small- to mid-sizeenterprises and achieved year-on-year GDP growth of 8.2%, a slight rise from 8.0% in the prior year. In 2013,the total import and export value for Zhejiang Province was more than RMB 2 trillion. Of this, the province'sexport value reached RMB1.5 trillion, representing double-digit year-on-year growth and ranking 3rd nationwide. Carry on the Three-year Strategic Program and Focus on the Transformational Development Steady growth in the provincial economy of Zhejiang as well as solid operating performance helped us recordour best financial results since 2008. We also achieved major progress in our three-year strategic programaimed at transforming our business model through sound capital management, cost controls, and brandimprovements. With overwhelming support from our independent shareholders, we were able to acquire 76.55%equity interest in the Jinhua section of the Ningbo-Jinhua Expressway, 66.28% of which were acquired fromour parent company, the Communications Group. The Jinhua acquisition illustrates two of our growth principles- our commitment to achieving portfolio growth in our expressway network and collaboration with our parentcompany for the benefit of all our shareholders. In 2013, our three-year strategic initiative had a positive impact on our core businesses as well as ourfuture development plan. Following a thorough analysis and inspection of a series of projects, we initiateda plan to identify potential new businesses that would be good candidates to fit into our transformationmodel. On the corporate side, we took steps to improve risk controls by refining our audit system coveringconstruction project management, contract management, and other internal risks. Despite the Chinese stock market being one of the world's worst performing in 2013, trading volumes remainedactive. Zheshang Securities, our financial brokerage subsidiary, recorded a substantial increase in netprofit. The brand awareness and branch network of Zheshang Securities continued to expand during 2013. Thebrokerage ranked top among its peers in terms of both bond issuance and number of deals, and margin tradingand securities lending became a new profit growth driver during the year. I am even more pleased to reportthat the China Securities Regulatory Commission has accepted Zheshang Securities' application for an initialpublic offering on the Shanghai Stock Exchange, and the Company has officially entered into the wait list.As of the end of 2013, Zheshang Securities had 108 securities and futures business outlets across China andRMB83.0 billion of assets under management. Looking ahead, we believe that China is enduring some short-term pain as it continues to revamp its growthmodel, but these moves will help the country over the long-term with innovation and structural reform. Onthe whole, China's economy is expected to remain stable through this adjustment phase. In addition, whilethere are clearly still a number of complex and lingering effects from the global financial crisis, the U.S.and European markets are expected to continue to recover, albeit at a relatively slow pace. This shouldcreate opportunities for manufacturers in Zhejiang Province, which in turn should continue to support amoderate growth in our traffic volumes. Moreover, the newly announced Free Trade Zone in Shanghai is setto ease and facilitate imports and exports, and attract foreign companies to establish headquarters there.We believe this zone will also help to boost traffic volume in and around the Yangtze River Delta region. Considering all of these factors, we will continue to push forward our transformational development planand seek to grasp potential investment opportunities, strengthen our talent base, form a sustainable corporateculture, enhance efficiency, increase the use of information technology, and strengthen our overallcapabilities to manage our businesses. We believe these actions will help us continue to deliver excellentresults and further improvements in operational efficiency. In conclusion, I would like to thank all of our stakeholders for their support and confidence as we worktowards making our company a better, stronger company. To our customers and clients, we owe you the highestquality of service, on our roads, in our service area operations, and in our securities and futures business.To our 6,238 employees, we adopt a performance-based incentive scheme and create a working environment secondto none. To our shareholders, we are committed to a stable long-term dividend payout policy. 2013 has been agood year - and we expect 2014 to be even better. Zhan XiaozhangChairmanMarch 17, 2014 Management Discussion and Analysis Director and General ManagerLUO Jianhu BUSINESS REVIEW In 2013, China's economy maintained a relatively fast pace of GDP growth of 7.7% compared with last year.Though Zhejiang's economy saw a slight decrease in its growth rate during the fourth quarter, the Province'seconomy and overall investment levels generally maintained solid momentum. During the Period, ZhejiangProvince's GDP increased 8.2% year-on-year. As Zhejiang Province's economy steadily improved and its foreign trade showed signs of recovery, trafficvolume on the Group's expressways continued to see steady organic growth. In addition, stock market tradingvolumes also resumed. As a result, income from the Group's overall operations increased 13.4% year-on-year.Total income reached Rmb8,092.98 million, of which Rmb4,158.34 million was attributable to the three majorexpressways operated by the Group, representing an increase of 6.6% year-on-year and 51.4% of the totalincome; Rmb2,192.48 million was attributable to the Group's toll road-related businesses, representing anincrease of 6.9% year-on-year and 27.1% of the total income; and Rmb1,742.17 million was attributable tothe securities business, representing an increase of 47.5% year-on-year and 21.5% of the total income. 19.6%Securities Business Income 52.7%Toll Income 27.7%Other Income A breakdown of the Group's income for the Period is set out below: 2013 2012 % Change Rmb'000 Rmb'000 (Restated) Toll income Shanghai-Hangzhou-Ningbo Expressway 3,122,022 2,968,396 5.2% Shangsan Expressway 769,723 702,489 9.6% Jinhua section, Ningbo-Jinhua Expressway 266,594 231,481 15.2%Other income Service areas (mainly sales of goods) 2,062,558 1,945,614 6.0% Advertising 107,692 104,276 3.3% Road maintenance 22,227 471 4619.1%Securities business income Commission 1,288,151 886,946 45.2% Bank interest 454,017 293,924 54.5%Subtotal 8,092,984 7,133,597 13.4%Less: Revenue taxes (241,869) (206,182) 17.3%Revenue 7,851,115 6,927,415 13.3% Toll Road Operations As the economy in Zhejiang Province stabilized with positive signs of progress and improvements were seenin foreign trade, the Group's expressways achieved a high level of organic growth in traffic volume. Trafficvolume on the Shangsan Expressway grew at an even higher rate, benefiting from a higher concentration ofsmall and medium sized enterprises along its route, while the Jinhua Section of the Ningbo-Jinhua Expresswaybenefited from a strong growth in trade at the nearby Yiwu small commodities market with the containertruck traffic growing at a fast pace. In the meantime, the toll free policy on small passenger vehicles during major holidays led to a loss ofapproximately Rmb140 million in toll income in 2013. In addition, the Group's toll income suffered a combinedloss of approximately Rmb100 million during the Period as a result of a gradual phasing out of the"Unified Toll Card" policy, adjustments made to the rounding off of the last figures for passenger vehicletolls, as well as the policy adjusting passenger vehicle classifications. Although the Jiaxing-Shaoxing Expressway (not operated by the Group), which first opened to passenger vehiclesin July, 2013, diverted some traffic away from the Group's Shanghai-Hangzhou-Ningbo Expressway, the loss intraffic was partly offset by a rise in traffic on the Group's Shangsan Expressway. However, the positive impacton Shangsan Expressway was not fully realized until the Jiaxing-Shaoxing Expressway opened to trucks at theend of November, 2013. Overall the Company's toll income was adversely affected by approximately Rmb8 millionin 2013. Additionally, bad weather caused by Typhoon "Fitow" and other short-term unfavorable factors had alsoaffected the Group's toll income, which led to a loss of approximately Rmb15 million. Although the Group's toll road operations were challenged by various negative factors in 2013, the managementwas still able to deliver solid results and increase toll income by taking more initiatives to plug loopholes,conducting marketing campaigns to attract traffic, and modifying weighing equipment for accurate measurements. By the end of June 2013, the Group completed the acquisition of a 76.55% equity interest in Jinhua Co (whichoperates the 69.7km Jinhua Section of the Ningbo-Jinhua Expressway). During the Period, as local roads thatrun parallel to the Jinhua Section of the Ningbo-Jinhua Expressway were under construction, a largenumber of vehicles on short-distance trips were redirected to the Ningbo-Jinhua Expressway as a result toeffective promotions and road signage. This led to a further increase in traffic volume and helped to drivean increase in toll income of Rmb10 million. Continued Progress Leads to Improved Results 2013 was the first year of the Company's three-year development plan. During the year, the Company achievedits best performance since 2008, leveraging its listing platform and steadily pushing forward itstransformational development. The average daily traffic volume in full-trip equivalents along the Group's Shanghai-Hangzhou-Ningbo Expresswaywas 44,013 during the Period, representing an increase of 4.9% year-on-year. In particular, average dailytraffic volume in full-trip equivalents along the Shanghai-Hangzhou Section of the Shanghai-Hangzhou-NingboExpressway was 44,182, representing an increase of 3.4% year-on-year, and that along the Hangzhou-NingboSection was 43,891, representing an increase of 5.9% year-on-year. Average daily traffic volume in full-tripequivalents along the Shangsan Expressway was 18,317 during the Period, representing an increase of 9.1%year-on-year. Average daily traffic volume in full-trip equivalents along the Jinhua Section of theNingbo-Jinhua Expressway was 13,533 during the Period, representing an increase of 12.0% year-on-year. Please visit: http://photos.prnasia.com/prnk/20140401/8521401858-c Total toll income from the 248km Shanghai-Hangzhou-Ningbo Expressway, the 142km Shangsan Expressway and the70km Jinhua Section of the Ningbo-Jinhua Expressway amounted to Rmb4,158.34 million during the Period,representing an increase of 6.6% year-on-year. Toll income from the Shanghai-Hangzhou-Ningbo Expresswayamounted to Rmb3,122.02 million, representing an increase of 5.2% year-on-year; toll income from the ShangsanExpressway amounted to Rmb769.72 million, representing an increase of 9.6% year-on-year; while toll incomefrom the Jinhua Section of the Ningbo-Jinhua Expressway amounted to Rmb266.59 million, representing anincrease of 15.2% year-on- year. Toll Road-Related Business Operations The Company operates certain toll road-related businesses along its expressways through its subsidiaries andassociated companies, including gas stations, restaurants and shops in service areas, as well as a roadsideadvertising business. During the Period, due to the renovation of the Jiaxing Service Area starting in July 2013, income fromservice areas was adversely affected. However, increasing sales of refined oil products and additionalincome from the external road maintenance projects ensured solid growth in the Group's toll road-relatedbusinesses. As a result, income from toll road-related operations during the Period was Rmb2,192.48 million,representing an increase of 6.9% year-on-year. Please visit: http://photos.prnasia.com/prnk/20140401/8521401858-d Securities Business on Fast Track Zheshang Securities achieved breakthroughs in terms of business scale, accomplishing its strategic goal ofopening more than 100 outlets nationwide. Its asset under management reached a historic high ofRMB83.0 billion. Zheshang Securities' IPO application was accepted by the China Securities RegulatoryCommission and it is officially on the wait list for an IPO. Meanwhile, Zheshang Securities was classifiedinto "A-Class Broker" once again. Securities Business During the Period, the total trading volume of the Shanghai and Shenzhen stock markets increased 49.60%compared with last year due to a revival of activity in the domestic securities market. Though thesecurities brokerage business of Zheshang Securities saw a slight decline in market share, there was asolid rise in income as a result of higher trading volumes. Zheshang Securities continued to increase the number of its branches to facilitate the further development of itssecurities brokerage business and to stabilize and increase its market share. Zheshang Securities had 108 businessoutlets during the Period. While accelerating the all-round development of each business segment, Zheshang Securities has been activelyworking to improve its income and profit structure, and accelerate the development of the margin financing andsecurities lending business to enhance its capabilities to expand new businesses. With continued businessinnovation, Zheshang Securities believes it can diversify its business and reduce the dominant role that itsbrokerage business had played in the past. Income from the securities brokerage, investment banking, assetmanagement, margin financing and securities lending businesses of Zheshang Securities all grew steadilyyear-on-year. In addition, in order to accelerate its listing process on the Shanghai Stock Exchange, Zheshang Securitiessubmitted an IPO application, which was accepted by the China Securities Regulatory Commission inMay, 2013. Zheshang Securities is now officially on the wait list for an IPO. During the Period, Zheshang Securities' total operating income was Rmb1,742.17 million, an increase of 47.5%year-on-year. Of such income, brokerage commission income amounted to Rmb1,288.15 million, up by 45.2%, andinterest income from the securities business amounted to Rmb454.02 million, up by 54.5%. Moreover, securitiesinvestment gains of Zheshang Securities included in the consolidated statement of profit or loss and othercomprehensive income of the Group was Rmb85.42 million during the Period. Long-Term Investments Petroleum Co. (a 50% owned associate company of the Company) recorded income of Rmb6,481.14 million, anincrease of 6.4% year-on-year. The rise was due to an increase in both the retail price and sales volume ofpetroleum products. During the period, net profit of Petroleum Co. was Rmb21.63 million (2012: net profit ofRmb15.02 million). Shengxin Co (a 50% owned joint venture of the Company) operates the 73.4km long Shaoxing Section of theNingbo-Jinhua Expressway. During the Period, the traffic volume of the Shaoxing Section of the Ningbo-JinhuaExpressway rose due to the improving provincial economy. The average daily traffic volume in full-tripequivalents was 12,692, an increase of 6.28% year-on-year. Toll income during the Period wasRmb294.46 million. However, due to its relatively heavy financial burden, the joint venture reported a lossof Rmb72.02 million. JoinHands Technology Co., Ltd. (a 27.58%-owned associate company of the Company) operates a property leasingbusiness. There was no substantial improvement in its operations during the Period. The Company institutedlegal proceedings with regards to the transfer of the equity interest in the associated company. The Companythen lodged an appeal against the subsequent judgment of the Company's priority of compensation for themortgaged properties. The appeal was ruled in favor of the Company by the Hangzhou Intermediate People'sCourt on April 28, 2013. These mortgaged properties in the associated company were auctioned off onDecember 24, 2013. In accordance with the judicial auction procedures, the court will transfer the fullpayment received from the auction to the Company after the buyer finishes all procedures for ownershiptransfer of the auctioned properties. On March 30, 2013, the Company entered into a capital increase agreement with Zhejiang Communications Financeand its existing shareholders. The Company conditionally agreed to carry out a capital injection ofRmb280 million in cash, and upon completion of the capital contribution, the Company beneficially owned a35% equity interest in Zhejiang Communications Finance. During the Period, income from the associatedcompany were mainly derived from fees and commissions for providing financial services, including arrangingloans and receiving deposits from subsidiaries of Communications Group, and were accounted for as a share ofgain of associates of the Company from May 1, 2013. Zhejiang Communications Finance realized a net profitof Rmb79.05 million from May 1, 2013 to the end of the Period. FINANCIAL ANALYSIS The Group adopts a prudent financial policy with an aim to provide shareholders of the Company with sound returnsover the long term. During the Period, profit attributable to owners of the Company was approximately Rmb1,907.47 million, representingan increase of 15.6% year-on-year, return on owners' equity was 11.9%, representing an increase of 16.1% year-on-year,while earnings per share for the Company was Rmb43.92 cents. Liquidity and financial resources As at December 31, 2013, current assets of the Group amounted to Rmb16,652.84 million in aggregate (December 31,2012 (restated): Rmb15,707.99 million), of which bank balances and cash accounted for 15.1% (December 31, 2012(restated): 31.0%), bank balances held on behalf of customers accounted for 49.4% (December 31, 2012 (restated):47.7%), and held for trading investments accounted for 7.1% (December 31, 2012 (restated): 9.5%). Current ratio(current assets over current liabilities) of the Group as at December 31, 2013 was 1.4 (December 31, 2012 (restated):1.4). Excluding the effect of the customer deposits arising from the securities business, the resultant current ratioof the Group (current assets less bank balances held on behalf of customers over current liabilities less balance ofaccounts payable to customers arising from securities business) was 2.2 (December 31, 2012 (restated): 2.4). The amount of held for trading investments of the Group as at December 31, 2013 was Rmb1,181.03 million (December31, 2012: Rmb1,486.77 million), of which 92.9% was invested in bonds, 6.7% was invested in stocks, and the rest wasinvested in open-end equity funds. During the Period, net cash inflow generated from the Group's operating activities amounted to Rmb979.98 million. The Directors do not expect the Company to experience any problems with liquidity and financial resources in theforeseeable future. Injected Asset to Strengthen Portfolio The Company completed the 76.55% equity interest transaction of the Jinhua Section of the Ningbo-Jinhua Expressway,the first injection of existing asset from the Group. With relatively low financing costs, we completed the debtswap with the Jinhua Co and successfully completed the process of integration and transition. As at December 31, 2013 2012 Rmb'000 Rmb'000 (Restated) Cash and cash equivalent Rmb 1,773,310 3,382,797 US$ in Rmb equivalent 28,209 4,024 HK$ in Rmb equivalent 5,462 5,232 Time deposits Rmb 704,459 1,459,433 US$ in Rmb equivalent - 23,975Held-for-trading investments - Rmb 1,181,025 1,486,772Available-for-sale investments - Rmb 281,924 134,899Total 3,974,389 6,497,132 Rmb 3,940,718 6,463,901 US$ in Rmb equivalent 28,209 27,999 HK$ in Rmb equivalent 5,462 5,232 Borrowings and solvency As at December 31, 2013, total liabilities of the Group amounted to Rmb12,420.24 million (December 31, 2012(restated): Rmb11,863.63 million), of which 6.8% was bank and other borrowings, and 65.8% was accounts payableto customers arising from securities business. Total interest-bearing borrowings of the Group as at December 31, 2013 amounted to Rmb1,840.00 million,representing a decrease of 21.4% compared to that as at December 31, 2012. The borrowings comprised outstandingbalances of domestic commercial bank loans of Rmb500.00 million, loans from a domestic non-bank financialinstitution of Rmb340.00 million, and short-term loan note amounting to Rmb1 billion that was issued byZheshang Securities in 2013 for a term of 3 months. Of the interest-bearing borrowings, 16.3% was not payablewithin one year. As at December 31, 2013, the Group's loans from domestic commercial banks include short-term loans andlong-term loans, with floating interest rate ranging from 6.22% to 6.77% per annum; loans from a domesticnon-bank financial institution were short-term loans, with the interest rate fixed at 5.04% per annum. Theannual coupon rate for short-term loan note was fixed at 5.50%, while the annual interest rate for accountspayable to customers arising from the securities business was fixed at 0.35%. Maturity Profiles 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 500,000 200,000 300,000 -Fixed rates Domestic commercial bank loans - - - - Loans from a non-bank financial institution 340,000 340,000 - - Short-term loan note 1,000,000 1,000,000 - -Total as at December 31, 2013 1,840,000 1,540,000 300,000 -Total as at December 31, 2012(Restated) 2,340,000 1,660,000 680,000 - Total interest expenses for the year amounted to Rmb95.16 million, while profit before interest and taxamounted to Rmb3,066.90 million. The interest cover ratio (profit before interest and tax over interestexpenses) stood at 32.2 (2012 (restated): 18.6) times. 2013 2012 Rmb'000 Rmb'000 (Restated)Profit before tax and interest 3,066,899 2,601,054Interest expenses 95,161 139,765Interest cover ratio 32.23 18.61 As at December 31, 2013, the asset-liability ratio (total liabilities over total assets) was 38.7% (December 31, 2012(restated): 37.7%). Excluding the effect of customer deposits arising from the securities business, the resultantasset-liability ratio (total liabilities less balance of accounts payable to customers arising from securities businessover total assets less bank balances held on behalf of customers) of the Group was 17.8% (December 31, 2012(restated): 18.3%). Capital structure As at December 31, 2013, the Group had Rmb19,668.96 million in total equity, Rmb9,817.10 million in fixed-rateliabilities, Rmb500.00 million in floating-rate liabilities, and Rmb2,103.13 million in interest-free liabilities,representing 61.3%, 30.6%, 1.6% and 6.5% of the Group's total capital, respectively. The gearing ratio, which iscomputed by dividing the total liabilities less accounts payable to customers arising from the securities business bytotal equity, was 21.6% as at December 31, 2013 (December 31, 2012 (restated): 22.3%). As at December 31, 2013 As at December 31,2012 Rmb'000 % Rmb'000 % (Restated) (Restated) Total equity 19,668,959 61.3% 19,621,681 62.3%Fixed rate liabilities 9,817,103 30.6% 8,481,819 26.9%floating rate liabilities 500,000 1.6% 1,340,000 4.3%interest-free liabilities 2,103,132 6.5% 2,041,812 6.5%Total 32,089,194 100.0% 31,485,312 100.0%Long-term interest-bearing liabilities 300,000 0.9% 680,000 2.2%Gearing ratio 1 (note) 21.6% 22.3%Gearing ratio 2 (note) 1.5% 3.5%Asset-liabilities 1 (note) 38.7% 37.7%Asset-liabilities 2 (note) 17.8% 18.3% Note: Gearing ratio 1 represents the total liabilities less balance of accounts payable to customers arising from securities business to the total equity; gearing ratio 2 represents the total amount of the long-term interest-bearing liabilities to the total equity; Asset-liability ratio 1 represents total liabilities to total assets; Asset-liability ratio 2 represents the total liabilities less balance of accounts payable to customers arising from securities business to the total assets less bank balances held on behalf of customers. Capital expenditure commitments and utilization During the Period, capital expenditure of the Group totaled Rmb2,379.31 million, while capital expenditure of theCompany totaled Rmb2,087.69 million. Amongst the total capital expenditure of the Group, Rmb756.87 million wasincurred for acquiring 76.55% equity interest in Jinhua Co, Rmb280.00 million was incurred for 35% equityinvestment in Zhejiang Communications Finance, Rmb1 billion was incurred for capital injection to Jinhua Co,Rmb184.33 million was incurred for acquisition and construction of properties, Rmb90.00 million was incurred forpurchase and construction of equipments and facilities, and Rmb68.12 million was incurred for service arearenovation and expansion. As at December 31, 2013, the capital expenditure committed by the Group and the Company totaledRmb1,717.02 million and Rmb311.06 million, respectively. Amongst the total capital expenditures committed bythe Group, Rmb1,324.08 million will be used for acquisition and construction of properties, Rmb344.94 millionfor acquisition and construction of equipments and facilities, Rmb18.00 million for service area renovation andexpansion and Rmb30.00 million for setting up a l00% owned subsidiary of the Company, Zhejiang ExpresswayMaintenance Co., Ltd. The Group will finance the above-mentioned capital expenditure commitments with internally generated cash flowfirst and then will consider using debt financing to meet any shortfalls in priority to using other methods.Pursuant to the resolution of shareholder's meeting dated June 21, 2013 of the Company, the shareholders ofthe Company have approved the proposed issue of domestic corporate bonds by the Company with an aggregateprincipal amount of up to Rmb1 billion. Contingent liabilities and pledge of assets Pursuant to the board resolution of the Company dated November 16, 2012, the Company and ShaoxingCommunications Investment Group Co., Ltd. (the other joint venture partner that holds 50% equity interest inShengxin Co) provided Shengxin Co with joint guarantee for its bank loans of Rmb2,200.00 million, inaccordance with their proportionate equity interest in Shengxin Co. Pursuant to the resolution of shareholders' meeting dated June 26, 2012 of Yuhang Co (a 51% equity interestowned subsidiary of the Company), Yuhang Co provided a property under construction as a mortgaged assetfor its domestic commercial bank loan of Rmb100.00 million. As at December 31, 2013, the carrying amount ofthe mortgaged asset was Rmb422.17 million. Pursuant to the board resolution dated June 24, 2008 of Jinhua Co, Jinhua Co provided the operatingright of the expressway operated by it as pledged asset for its domestic commercial bank loans ofRmb300.00 million. As at December 31, 2013, the carrying amount of the pledged asset was Rmb1,882.28 million. Except for the above, as at December 31, 2013, the Group did not have any other contingent liabilities, pledgeof 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 weretransacted and booked in Renminbi. Therefore, the Group's exposure to exchange fluctuation is limited. During thePeriod, 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 thatforeign exchange risks will not affect the operating results of the Group in the future. Human Resources As at December 31, 2013, there were 6,238 employees within the Group, amongst whom 1,324 worked in the managerial,administrative and technical positions, while 4,914 worked in fields such as toll collection, maintenance, serviceareas, securities and futures business outlets As a result of the reform of the remuneration and performance-based system implemented two years ago, the totalremuneration of the employees, unit results and workforce commitment were further improved, as well as thecorrelation between the appraisal results and the remuneration level was enhanced during the period, whichfully captalised on the benefits of the incentive appraisal system. The remuneration package comprises threeparts: basic salary, incentive pay and benefits. The basic salary is determined primarily based on theseniority and ability of the staff. The incentive pay is pegged with productivity. Benefits for employees comein the form of contributions made by the Group to local social security agencies covering pension, medical andaccommodation concerns that are calculated as a percentage of employees' income and in accordance with relevantPRC rules and regulations. The Company continued to implement the corporate annuity scheme during the Period,and total pension cost charged to the income statement during the Period amounted to Rmb70.66 million. OUTLOOK With the steady and rapid development of China's economy and an upturn in Zhejiang Province's domestic andforeign trade, it is anticipated that in 2014, the Group's toll road business, which is closely tied to macroand regional economic development, will see traffic volume on its expressways grow steadily, although organicgrowth rate is expected to be slower compared with 2013. In addition, the Jiaxing-Shaoxing Expressway, which opened to passenger vehicles in July last year and openedto trucks at the end of November 2013, is expected to have a sustainable positive impact on the Group'sShangsan Expressway. Meanwhile, the Group will reinforce its initiatives to plug loopholes and increase theefficiency of toll collection, and strengthen its promotion efforts in order to attract more vehicles to itsexpressways and ease the negative impact of traffic diversion. The establishment of the Shanghai Pilot Free Trade Zone is anticipated to facilitate the growth in trafficvolume of the surrounding areas of the Yangtze River Delta with the promotion of import and export trading.In the future, it is believed that with the growth of trade and increasing demand of transportation andlogistics, the Group's expressways will see higher traffic volumes. In response to the current uncertainties about the recovery of the securities market, Zheshang Securities isseeking new profit growth drivers by trying to actively develop innovative businesses, and enhance cost andrisk controls. Meanwhile, Zheshang Securities will further accelerate the process of its proposed listing onthe Shanghai Stock Exchange to facilitate its sustainable and sound development. Looking ahead to 2014, with the policies of China's new leadership to deepen reforms achieving early success,the Group's management believes that the new round of economic reforms will bring new opportunities andchallenges to the Group's reform and development. The Group will continue to focus on its core expresswaybusiness, raise service quality, further improve operational management ability, push forward with itsdevelopment of innovative securities businesses and improve its securities businesses. The Company willalso look for appropriate investment projects, cultivate diversified business management capabilities,leverage the strategic synergies with its parent company, and enhance the utilization of capital,in order to further increase its profitability and deliver satisfactory results. Principal Risks and Uncertainties TOLL ROAD BUSINESS RISKS Economic Environment As the global economy recovers gradually, it is expected to remain in a state of low rate of growth forsome time. The domestic economy, despite showing signs of picking up, was still trying to find a newbalance as a whole. Meanwhile, although the import and export trading conditions are showing signs ofrecovery, but many uncertain factors remain, which is having an impact on Zhejiang, a province withheavy reliance on export trading. Growth in the traffic volume and toll revenue of the Group'sexpressways is expected to remain uncertain, creating uncertainties for the operations, financialconditions and operating results of the Group. Roads Competition Despite the opening of Jiaxing-Shaoxing Expressway nearby, the impacts of traffic diversion on theGroup's expressways have largely stabilized. However, as Qianjiang Cross River Passage is scheduledto commence service soon in 2014, coupled with the opening of other new expressways nearby, it isexpected that new traffic will be diverted from certain sections of Shanghai-Hangzhou-NingboExpressway. Accordingly, we cannot be assured as to whether traffic volume to be generated on theGroup'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 holidaysby the PRC government on September 30, 2012, the expressway operators who charge for toll are negativelyaffected. In addition, due to the introduction of a special project by five ministries and commissions forthe rectification of the toll road policy in Zhejiang province, a number of new policies focusing onadjusting the toll policy of expressways within the province were successively issued. Despite that weexpect the possibility of further significant changes in the policies of the expressway industry in the nearterm is minimal, we cannot be assured that they will not have any adverse effects on the toll revenue of theGroup. SECURITIES BUSINESS RISKS Market Fluctuations The securities business is highly susceptible to market fluctuations and may experience periods of highvolatility accompanied by reduced liquidity. It may be materially affected by economic and other factorssuch as the global market conditions; the availability and cost of capital; the liquidity of the globalmarkets; the level and volatility of stock prices, commodity prices and interest rates; currency valuesand other market indices; inflation; natural disasters; acts of war or terrorism; as well as investorsentiment and confidence in the financial markets. There is no assurance as to whether our securitiesbusiness will be adversely affected by fluctuations in the market, or whether our securities businesswill 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 aresubject to risks of intervention by the PRC regulatory authorities. We could be fined, prohibited from engaging insome of our business activities or subject to limitations or conditions on our business activities, among otherthings. Significant regulatory actions against us could have material adverse impacts on our financialposition, cause us significant reputational harm, or harm our business prospects. New laws, regulations orchanges in the enforcement of existing laws or regulations applicable to our clients may also adverselyaffect our business. FINANCIAL RISKS For financial risks and uncertainties of the Group, please see notes 5, 6 and 7 to the Consolidated FinancialStatements. STATEMENT OF RESPONSIBILITY FROM THE DIRECTORS WITH RESPECT TO THE ANNUAL REPORT AND THE COMPANY'S ACCOUNTS The Directors of the Company duly confirm that to the best of their knowledge: - the consolidated financial statements prepared and subject to disclosure under the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants give a true and fair view of the assets, liabilities, financial position and profit of the Group, and cover the enterprises that have been consolidated into the Company; and - the "Management Discussion and Analysis" section included in this annual report includes a fair review of the development and performance of the business and the position of the Group, covers the enterprises that have been consolidated into the Company and describes the principal risks and uncertainties faced by the Group. From the beginning of year 2013 up to now, there has been no occurrence of significant events that would havea material impact on the normal operation of the Group. By Order of the BoardTony ZHENGCompany Secretary Hangzhou, Zhejiang Province, the PRCMarch 17, 2014 Corporate Governance Report CORPORATE GOVERNANCE PRACTICES To govern the daily functioning of the Board of Directors of the Company, the Company has adopted its ownGuidelines on Corporate Governance that closely followed the principles of good governance in Appendix 14 ofthe 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 recommendedbest 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 thanthe 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 withthe required standards for securities transactions by Directors as set out in the Model Code and the Rules onSecurities 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 ZongshengMr. WANG WeiliMr. WANG Dongjie The independent non-executive directors of the Company during the Period were:Mr. ZHANG JunshengMr. ZHOU JunMr. PEI Ker-Wei During the Period, the Board held a total of four meetings. Individual attendances by the directors (as indicatedby the numbers of meetings attended/numbers of relevant meetings held) are as follows: Attendance Attendance by in person proxyMr. ZHAN Xiaozhang (Chairman) 4/4Ms. LUO Jianhu (General Manager) 4/4Mr. DING Huikang 4/4Mr. LI Zongsheng 4/4Mr. WANG Weili 2/4 1/4Mr. WANG Dongjie 2/4 1/4Mr. ZHANG Junsheng 4/4Mr. ZHOU Jun 4/4Mr. PEI Ker-Wei 4/4 During the Period, the Company held two general meetings of the shareholders. The meetings were chaired byChairman, 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 ofassociation of the Company, the scope of which includes, amongst others: to determine the business plans andinvestment proposals of the Company; to prepare the financial budget and final accounts of the Company; todetermine the dividend policy of the Company; to appoint or dismiss senior managerial officers of the Companyas well as to determine their remuneration; and to draw up proposals for any material acquisition or sale bythe Company. To assist the Board to effectively discharge its duties, the Board has set up the Audit Committee, the NominationCommittee, 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, relevantpreparation 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 theappointment of independent non-executive directors, with three independent non-executive directors appointed,at least one of whom possessing the appropriate professional qualification or accounting or related financialmanagement expertise. Pursuant to Rule 3.13 of the Listing Rules, the Company had specifically inquired with all three independentnon-executive directors and received their respective confirmation of independence during the Period. The threeindependent non-executive directors have all confirmed their compliance with requirements regarding independenceunder Rule 3.13 of the Listing Rules. The Company still considers the independent non-executive directors to beindependent. There were no financial, business, family or other material or relevant relationships between members of theBoard, 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 ensurethat he or she has appropriate understanding of the business and operations of the Company and that he or she isfully aware of his or her responsibilities and obligations under the Listing Rules and relevant regulatoryrequirements. Directors are also regularly updated on the Group's business and industry environments whereappropriate in the management's monthly reports to the Board as well as briefings and materials circulated tothe Board before board meetings. In addition, during the Period, the Company has arranged for all its executive and non-executive directors toundergo continuous trainings designed to develop and refresh their knowledge and skills so as to ensure thattheir contribution to the Board remains informed and relevant. However, as the management considers that theindependent non-executive directors of the Company are very experienced, knowledgeable and resourceful, theCompany did not arrange any professional briefings or training programs for its independent non-executivedirectors and has decided to leave it to the independent non-executive directors to undergo appropriatetraining 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 theCompany, respectively. The roles of Chairman and General Manager are fully segregated as expressly set out inthe articles of association of the Company. NON-EXECUTIVE DIRECTORS Terms for the non-executive directors of current session of the Board started on June 11, 2012, and will expireon June 30, 2015. SPECIAL COMMITTEES UNDER THE BOARD The Board has set up the Audit Committee, the Nomination Committee, the Remuneration Committee, and the StrategicCommittee. Roles and responsibilities for each committee are specified in its terms of reference, details of whichcan be found under the "Corporate Governance" section in the Company's web site. The Audit Committee comprised of the three independent non-executive directors and two non-executive directors,namely Mr. ZHANG Junsheng, Mr. ZHOU Jun, Mr. PEI Ker-Wei, Mr. WANG Weili and Mr. WANG Dongjie, of whomMr. ZHOU Jun serves as the Chairman of the Audit Committee. The Nomination Committee comprised of three independent non-executive directors, one executive director and onenon-executive director, namely Mr. ZHANG Junsheng, Mr. ZHOU Jun, Mr. PEI Ker-Wei, Mr. ZHAN Xiaozhang andMr. LI Zongsheng, 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 competitiveadvantage, improve business performances, and promoting the Company's continued development. When setting up theboard member composition, the Company takes into consideration a number of aspects that determine board memberdiversification, including but not limited to gender, age, culture, education background, professionalexperience, work and living background, knowledge and skill, etc. The Company's Nomination Committee isresponsible 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 boardwhen needed. The assessment as well as recommendation or suggestion above would have fully taken intoconsideration any pros and cons to the diversification of board members. The Remuneration Committee comprised of three independent non-executive directors and two non-executivedirectors, namely, Mr. ZHANG Junsheng, Mr. ZHOU Jun, Mr. PEI Ker-Wei, Mr. LI Zongsheng and Mr. WANG Weili,of whom Mr. ZHANG Junsheng serves as Chairman of the Remuneration Committee. The Strategic Committee comprised of three executive directors, namely Mr. ZHAN Xiaozhang, Ms. LUO Jianhu andMr. DING Huikang as well as Mr. ZHANG Jingzhong, Mr. WU Junyi and several outside experts and advisors, of whomMr. 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 ofthe Audit Committee (as indicated by the numbers of meetings attended/numbers of meetings held) are as follows: Attendance Attendance in person by proxyMr. ZHANG Junsheng 4/4Mr. ZHOU Jun 4/4Mr. PEI Ker-Wei 4/4Mr. WANG Weili 2/4 1/4Mr. WANG Dongjie 2/4 1/4 In the meetings held during the Period, the Audit Committee conducted, amongst others, review of financialstatements for the quarterly, interim and annual results, the effectiveness of the system of internal controland the reporting thereof to the Board, as well as recommendation on the re-appointment of external auditors. During the Period, there were no changes to the members of the Board or senior management of the Company;hence the Nomination Committee and the Remuneration Committee had not held any meetings. During the Period, the Strategic Committee held three meetings, mainly discussed the Company's direction forstrategic development. Each and every member of the Strategic Committee attended the meetings. The Board is responsible for developing and reviewing the Company's corporate governance policies and practices,monitoring the Company's compliance with the Code and its disclosure within this report; the Board reviews andmonitors the training and continuous professional development of Directors and senior management through theworks of human resources department, and review and monitor the Company's policies and practices on compliancewith 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 thatthere were no events or conditions which would have a material impact on the Company's ability to continue tooperate as a going concern basis. AUDITORS' REMUNERATION During the Period, the Company had paid HK$4.10 million (approximately Rmb3.24 million equivalent) andRmb860,000 to Deloitte Touche Tohmatsu Certified Accountants (the Hong Kong auditors) and Pan-China CertifiedPublic Accountants Ltd. (the PRC auditors), respectively, for audit services conducted in 2012. The auditorsdid 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 regardingundergoing relevant professional trainings. DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE'S INTERESTS IN SHARES AND UNDERLYING SHARES OF THE COMPANY As at December 31, 2013, none of the Directors, Supervisors and General Manager had any interests or shortpositions 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 toSection 352 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant tothe Model Code. INTERESTS AND SHORT POSITIONS OF OTHER PERSONS IN SHARES AND UNDERLYING SHARES As at December 31, 2013, the interests and short positions of other persons in the shares and underlying sharesof 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 CompanySubstantial 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 CompanySubstantial shareholders Capacity of the Company (H Shares) JP Morgan Chase & Co Beneficial owner, investment 172,359,162(L) 12.02%(L) manager and custodian corporation/ 458,000(S) 0.03%(S) approved lending agent 118,560,942(P) 8.27%(P) BlackRock, Inc. Interest of controlled corporations 156,191,285(L) 10.89%(L) 232,000(S) 0.01%(S) Deutsche Bank Aktiengesellschaft Investment manager 87,120,436(L) 6.08%(L) 5,768,617(S) 0.40%(S) Invesco Hong Kong Limited Investment manager/advisor of various accounts 87,012,000(L) 6.07%(L) The letter "L" denotes a long position. The Letter "S" denotes a short position. The letter "P" denotes interestin a lending pool. Save as disclosed above, as at December 31, 2013, no other persons had any interests or short positions in theshares 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% ormore of the voting rights of all the shares of the Company having the right to vote may write to the Board torequest the convening of an extraordinary general meeting and specifying the agenda of the meeting. Upon receiptof 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 theright to vote are entitled to propose additional motions in annual general meeting, provided that such motionsare 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 in the sectionbelow. INVESTOR RELATIONS The Board is committed to ensuring that all shareholders and the investment community have equal and timelyaccess 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, statutoryannouncements, 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 pressconferences 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 aspart of the Company's bid to enhance its transparency and to promote the understanding of its business in theinvestment community. Any parties who wish to learn more about the Company may do so via the contact detailslisted below: Mr. Tony ZHENGCompany Secretary12/F, Block A, Dragon Century Plaza1 Hangda Road Hangzhou, Zhejiang 310007ChinaTel: 86-571-8798 7700Fax: 86-571-8795 0329E-mail: [email protected] During the Period, the last shareholders' meeting of the Company took place at 3:00 p.m. on Thursday, October17, 2013 at the headquarters of the Company. Details of this extraordinary general meeting of the shareholderswere set out in the announcement dated October 17, 2013 on resolutions passed at the extraordinary generalmeeting of the shareholders. The next Annual General Meeting of the Company is expected to be held on May 5, 2014 to consider the resolutionsin respect of, among others, the reports of the Directors and of the Supervisory Committee for 2013, the auditedfinancial statements of the Company for 2013, a final dividend for 2013, the final accounts for 2013 and thefinancial budget for 2014, as well as the re-appointment of external auditors. The Company has an issued share capital of 4,343,114,500 shares comprised of domestic shares and H shares. Thedomestic 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 sharesare H shares, representing approximately 33% of the total issued capital of the Company. As at the date ofthis report, and to the best of the Directors' knowledge, 100% of the H shares of the Company are held by thepublic. 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 andfinancial information, as well as to ensure the accuracy of financial statements, including the establishmentof departments and units, setting out responsibilities, execution of management systems and quality controlmechanisms. The system is capable of taking necessary steps to react to possible changes in our businesses aswell as external operating environments. Throughout the operating process, the Company's various internalcontrol 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 monitoringactivities. Aside from reviewing the annual reporting by external auditors, the committee also reviews theeffectiveness of internal control system and risk management mechanism through reviewing the internal specialaudit 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 toll revenue, as well ascompliance and risk control mechanism relating to innovative new business of the Company's securities business.The internal audit department carried out specific audit into these compliance issues and monitored relevantrectifications, ensuring the effectiveness of the Company's management systems. During the Period, the Directors of the Company had carried out a review on the effectiveness of the Company'sinternal 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 theinternal control system that may have had an impact to Shareholders' interests, and the internal control systemwas deemed to be effective and sufficient. MANAGEMENT FUNCTIONS The management functions of the Board and the management are expressly stipulated in the articles of associationof the Company. Pursuant to the articles of association of the Company, the management of the Company isassigned the functions to be in charge of the production and business operation of the Company and to organizethe implementation of the resolutions of the board of directors, to organize the implementation of the annualbusiness plan and investment program of the Company, to prepare plans for the establishment of the internalmanagement structure of the Company, to prepare the basic management systems of the Company, and to formulatebasic 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 furtherobtained 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 TransportAuthority of Zhejiang Provincial Bureau of Construction. From 1991 to 1998, he served as Deputy Secretary andSecretary 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 ofCommunications. From 2002 to 2003, he was Deputy Director of Human Resources Department at Zhejiang ProvincialBureau of Communications. From 2003 to 2006, Mr. Zhan was Chairman of Zhejiang Wenzhou YongtaiwenExpressway Co., Ltd. From 2006 to 2008, he became Chairman of Zhejiang Jinji Property Co., Ltd. Mr. Zhan hasbeen Assistant to General Manager and Manager of Research and Development Department at Zhejiang CommunicationsInvestment Group Co., Ltd from 2006 to 2009. He served as an Executive Director and the General Manager of the Company from March 2009 to June 2012.Mr. ZHAN currently serves as Deputy General Manager of Communications Group. Ms. LUO Jianhu, born in 1971, graduated from the Department of Law at Hangzhou University with a bachelor'sdegree in law, majoring in Economic Law. She is a lawyer and senior economist. Ms. Luo has been appointed as anExecutive 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 ZhejiangTransportation Engineering Construction Group Co., Ltd., the deputy director, director of the Legal AffairsDepartment, the deputy director, director of the Secretarial Office to the board, board secretary and themanager 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 GeneralManager of the Company and chairman of Maintenance Co. Mr. Ding graduated from Zhejiang Institute ofCommunications majoring in Road and Bridge Engineering and Changsha Institute of Communications, majoring inEconomic Law. From 1980 to 1997, Mr. Ding successively held the positions of technician, assistantengineer, 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 managementcommittee of Zhejiang Ningbo Yongtaiwen Expressway Second Phase Project. He has been Chairman of Zhejiang NingboYongtaiwen 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. LI Zongsheng, born in 1967, is a senior economist. Since Mr. Li graduated from the Department of ChineseLanguage at YanTai University in July 1991, he had served as the deputy director of the administrative office ofthe Commission for Economy and Trade of Zaozhuang in Shandong Province and the head of the First SecretarialDivision of Zaozhuang Municipal Government Office. Since he joined Zhejiang Communications Investment Group Co., Ltd. in July 2004, he had successively held thepositions of the head and deputy director of the Chinese Communist Party Working Department, deputy director ofthe Discipline Office and the board secretary and deputy director of the Secretarial Office to the Board. He iscurrently the manager of the Human Resources Department of Zhejiang Communications Investment Group Co. Ltd. Mr. WANG Weili, born in 1966, graduated from Fuzhou University majoring in Road and Bridge. He is a seniorengineer with professional certification. Since he started his career in September 1987, Mr. Wang had served as an engineer of Zhejiang TransportationDesign Institute, the vice director of Engineering Division of Executive Commission of Zhejiang JinliwenExpressway Co., Ltd. and the deputy general manager and chief engineer of Zhejiang-Jiashao ExpresswayCo., Ltd. Since he joined Zhejiang Communications Investment Group Co., Ltd. in May 2006, he had successivelyheld the positions of the deputy manager of Project Management Department, deputy manager of Security ManagementDepartment, manager of Expressway Management Department, deputy supervisor of the Expressway ConstructionManagement Office and managing director of Zhejiang Smart Expressway Services Co., Ltd. He is currently the chairman of Jinliwen Expressway Co., Ltd. Mr. WANG Dongjie, born in 1977, graduated from Southeast University majoring in Highway and Railway Engineeringwith 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 ofHangzhou Ring Road North Line Project, the deputy executive chief of the Executive Commission for the interflowrenovation of Hangzhou airport road, the Engineering Division Chief of Management Office of Chun'ansection of Hangqian Expressway and the director and deputy general manager of Hangzhou Transportation Road andBridge Construction Company. He joined Zhejiang Communications Investment Group Co., Ltd. in January 2007 and is currently the president ofthe Investment and Development Department. Independent Non-Executive Directors Mr. ZHANG Junsheng, born in 1936, is a professor, Independent Non- executive Director and a member of the AuditCommittee and the Nomination and Remuneration Committee of the Company. Mr. Zhang graduated from ZhejiangUniversity in 1958, and was Tutor, Lecturer, Associate Professor, and Advising Professor at ZhejiangUniversity. He was also Professor concurrently at, amongst other universities, Zhongshan University. In 1980, he became Deputy General Secretary of Zhejiang University. In 1983, Mr. Zhang served as Deputy GeneralSecretary and General Secretary in the Hangzhou City Communist Party Committee and Secretary in the MunicipalPolitical and Legislative Committee. In 1985, he began to work for the Xinhua News Agency, Hong Kong Branch,and had become its Deputy Director since July, 1987 and was Consultant to the Sichuan Provincial Government andSenior Consultant to the Shenzhen Municipal Government. Since September 1998, Mr. Zhang has taken up theposition of General Secretary of Zhejiang University. He is currently Special Advisor to the Zhejiang ProvincialGovernment. From 2003 to 2008, Mr. Zhang served as Director of the Zhejiang Province Economic DevelopmentConsultation Committee. From 2005 to 2013, he successively held the positions of team leader of the CentralSupervision Team and inspection commissioner of the Ministry of Education. Mr. Zhang is currently the specialconsultant (inspection) of the Ministry of Education, Chairman of Zhejiang University Development Committee,Honorary Doctor of Science of City University of Hong Kong, Honorary Academician of Asian KnowledgeManagement Association and Honorary Professor of Canadian Chartered Institute of Business Administration. Mr. Zhang has been Independent Non-executive Director of the Company since March 2000. 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 anda 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 ShanghaiIndustrial 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 inApril 1996, the management positions he had held within the SIIC group of companies were deputy general managerof 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 theStrategic Investment Department of SIIC. Mr. Zhou has about 20 years' professional experience in generalmanagement, 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. CareySchool of Business, Arizona State University. Mr. Pei received his Ph.D. degree in Accounting from University ofNorth Texas in 1986. He is currently the director of W.P. Carey EMBA programs in China. He served as the chairman of theGlobalization Committee of the American Accounting Association in 1997 and as the president of the ChineseAccounting 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 ChinaHoldings (00151.hk) and Zhong An Real Estate (00672. hk). SUPERVISORS Representing Shareholders Mr. FU Zhexiang, born in 1958, graduated from Correspondence College of the Party Central School majoring inEconomics 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 CollectionDivision of Highway Inspection and Collection Bureau of Zhejiang Province and the deputy chief accountant ofZhejiang Xin Gan Xian Express Passenger Transportation Co., Ltd. Since he joined Zhejiang CommunicationsInvestment Group Co., Ltd. in February2002, 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 InternalAudit Department. He is currently the deputy chief economist of Zhejiang Communications Investment Group Co., Ltd. and chairmanof 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 PoliticalScience and Law with a master's degree. He was the Deputy Dean of t he Department of Law at Hangzhou University, Deputy Dean of theDepartment of Law at Zhejiang University's Law School, and Director of Zheda Law Firm. Mr. Wu studied at theChristian-Albrechts-Universitat zu Kiel in 1996 as a visiting scholar. He is currently the Dean of theDepartment of Law at the Law School of Zhejiang University, a Supervisor for master's degree candidates inBusiness Law, a member of China Business Law Research Council, Deputy Director of Zhejiang Tax Law ResearchCouncil, an Arbitrator of Hangzhou Arbitration Committee, and a Lawyer at Zhejiang Zeda Law Firm. Mr. LIU Haisheng, born in 1969, obtained a doctorate degree in Economics from Fudan University,a postdoctoral fellow in Accounting at Xiamen Universit y . He is currently Professor in Accounting,a master student supervisor, a Certified Public Accountant (non-practicing) in the PRC, a member of theExpert Consultancy Committee of Accounting Standards in Zhejiang Province, an Assessment Experton Financial Expenditures Performance of Zhejiang Province and Independent Supervisor of the Company. He is currently a Vice Dean of the School of Finance and Accounting at Zhejiang Gongshang University. His mainresearch fields include accounting for intangible assets, strategic cost management and economictheories. Mr. Liu is also independent director of a number of listed companies including Zhejiang QianjiangMotorcycle Co., Ltd. Mr. ZHANG Guohua, born in 1963, obtained a doctorate degree in human resources management. He is a senioreconomist and the vice president of China Everbright Bank, Hangzhou Branch (official chairman-level). Mr. Zhanggraduated from Hangzhou University in 1985 with a bachelor's degree in education and then received amaster's degree in educational psychology in 1988. In 2000, he was granted the Graduate Certificate ofCompletion in finance by the School of Economics of Zhejiang University, and then obtained the doctorate degreein 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 EverbrightBank, Hangzhou Branch and Wuxi Branch, and Ping An Bank, Hangzhou Branch. He had held the positions of deputydirector 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'sdegree 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 ExpresswayExecutive Commission. She joined the Company since March 1997, and had served as assistant manager, deputymanager and manager of the Operation Department. Ms. Zhang currently serves as the Assistant to General Manager. She is also General Manager of Shengxin Co,the director of Yuhang Co, Jiaxing Co, and Petroleum Co. OTHER MEMBERS OF SENIOR MANAGEMENT Mr. ZHANG Jingzhong, born in 1963, is a Senior Lawyer, the Deputy General Manager of the Company. Mr. Zhanggraduated from Zhejiang University (previously known as Hangzhou University) in July 1984 with a bachelor'sdegree 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 thequalifications 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 wasappointed Deputy General Manager in March 2002. He has been re-appointed as Company Secretary since March2003 and Deputy General Manager since March 2006. Mr. Zhang also serves as Director at Shangsan Co, DevelopmentCo, and Vice Chairman at Zheshang Securities. FANG Zhexing, born in 1965, is a Senior Engineer, the Deputy General Manager of the Company. Mr. Fang graduatedfrom 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 WaterConservancy Bureau in Taizhou, Zhejiang Province. From 1991 until 1997, he was the Engineer in the ProjectManagement Office of Zhejiang Provincial Expressway Executive Commission, where he participated in the projectmanagement 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 ofInternal Audit Department of the Company, the Manager of the Human Resources Department and the Secretary ofDisciplinary Committee. Mr. Fang is currently the Chairman of Development Co, Jiaxing Co and Advertising Co. Mr. WU Junyi, born in 1969, a holder of master degree in accounting, and was the Chief Financial Officer of theCompany. Mr. Wu graduated from Xi'an Communications University in 1996. From 1996 to 1997, he was with the ChinaInvestment Bank, Hangzhou Branch. He joined the Company in May 1997, and has served as Manager of Securit iesInvest ment Department and Manager of Planning and Finance Department. Mr. Wu has been re-designated as theManager of the Financial Management Department of Zhejiang Communications Investment Group Co., Ltd., and nolonger served as the Chief Financial Officer of the Company with effect from March 17, 2014. Mr. Wang Dehua, who was born in 1974, graduated with an undergraduate degree in Accounting from HangzhouInstitute of Electronics Engineering in 1996. He worked in the Foreign Funds Utilization Audit Department ofZhejiang Provincial Audit Office from 1996 to 2003. Mr. Wang worked at the Corporation Division of theAdministrative and Finance Department of Liaison Office of the Central Government in the Hong Kong S.A.R. from2003 to 2011, serving as its Deputy Director upon departure. Mr. Wang studied at School of Economics and Financeof the Faculty of Business and Economics of the University of Hong Kong from 2005 to 2007, and graduated in 2007with a master 's degree in Economics. He worked at Zhejiang Communications Investment Group Co., Ltd. from 2011to 2014, serving as its Deputy General Manager upon departure. Mr. Wang Dehua has been appointed as the ChiefFinancial Officer of the Company with effect from March 17, 2014. Mr. Tony H. ZHENG, born in 1969, is the Company Secretary of the Company. Mr. Zheng graduated from University ofCalifornia at Berkeley in 1995 with a BS degree in Civil Engineering. He joined the Company in June 1997, andhas served as Deputy Director of the Secretarial Office to the Board and Assistant Company Secretary. Mr. Zhengcontinues to serve as Director of the Secretarial Office to the Board, and Director of Hong Kong RepresentativeOffice of the Company. Report of the Directors The Directors of the Company hereby present their report and the audited financial statements of the Group forthe year ended December 31, 2013. 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 asprovision 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 ofChina ("PRC"). Accordingly, a further analysis of the revenue and segment profit by geographical area is notpresented. An analysis of the Group's revenue and segment profit by principal activities for the year endedDecember 31, 2013 is set out in note 8 to the financial statements. RESULTS AND DIVIDENDS The Group's profit for the year ended December 31, 2013 and the state of financial position at that date are setout in the financial statements. An interim dividend of Rmb0.06 per share (approximately HK$0.08) was paid on November 20, 2013. The Directorsrecommend the payment of a final dividend of Rmb0.25 (approximately HK$0.32) in respect of the year, toshareholders whose names appeared on the register of members of the Company on May 14, 2014. This recommendationhas been incorporated in the financial statements as an allocation of retained earnings within the capital andreserves section in the consolidated statement of financial position. The dividend payout ratio reached70.6% during the Period. Further details of the dividends are set out in note 17 to the financial statements. FIVE YEAR SUMMARY FINANCIAL INFORMATION The following is a summary of the published consolidated results, and of the assets, liabilities andnon-controlling interests of the Group prepared on the basis set out in the notes below. Year ended December 31, 2013 2012 2011 2010 2009Results Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) (Restated) (Restated)Revenue 7,851,115 6,927,415 6,994,391 6,959,504 6,175,626Operating costs (4,955,609) (4,574,040) (4,277,222) (3,950,456) (3,325,756)Gross profit 2,895,506 2,353,375 2,717,169 3,009,048 2,849,870Security investment gains 99,663 99,783 7,925 126,532 35,967Other income 241,056 291,990 286,595 209,871 432,383Administrative expenses (84,792) (86,287) (90,618) (87,542) (73,886)Other expenses (70,061) (49,778) (39,457) (23,689) (180,908)Finance costs (95,161) (139,765) (171,440) (207,921) (151,220)Share of profit of associates 21,537 (4,513) 8,934 18,531 3,001Share of profit of a joint venture (36,010) (3,516) - - 21,254Profit before tax 2,971,738 2,461,289 2,719,108 3,044,830 2,936,461Income tax expense (756,761) (634,669) (704,705) (784,714) (811,530)Profit for the year 2,214,977 1,826,620 2,014,403 2,260,116 2,124,931Attributable to:Owners of the Company 1,907,470 1,649,484 1,760,738 1,826,565 1,705,349Non-controlling interests 307,507 177,136 253,665 433,551 419,582Earnings per share - Basic and diluted 43.92 cents 37.98 cents 40.54 cents 42.06 cents 39.27 cents As at December 31, Assets and liabilities 2013 2012 2011 2010 2009 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) (Restated) (Restated)Total assets 32,089,194 31,485,312 31,274,171 35,997,204 34,905,267Total liabilities (12,420,235) (11,863,631) (12,027,203) (17,602,682) (17,165,182)Net assets 19,668,959 19,621,681 19,246,968 18,394,522 17,740,085 Notes: 1. The consolidated results of the Group for the four years ended December 31, 2012 have been restated in accordance with Accounting Guideline 5 "Merger Accounting for Common Control Combinations" issued by Hong Kong Institute of Certified Public Accountants. While those of the year ended December 31, 2013 were prepared based on the consolidated statement of profit or loss and other comprehensive income as set out on the later part of the financial report. 2. The 2013 earnings per share is based on the profit attributable to owners of the Company for the year ended December 31, 2013 of Rmb1,907,470,000 (2012 (Restated): Rmb1,649,484,000) and the 4,343,114,500 (2012: 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, 2013 2012 2013 2012 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated)As reported in the statutory financial statements of the Group prepared in accordance with PRC GAAP 2,223,778 1,835,213 19,926,115 19,870,036 HK GAAP adjustments: (a) Goodwill - - (199,769) (199,769) (b) Amortization provided, net of deferred tax (1,952) (1,952) (163,156) (161,204) (c) Assessment on impact of appreciation, (3,659) (3,547) 60,105 63,764 net of deferred tax (d) Others - (7) 6,597 6,597 (e) Non-controlling interests (3,190) (3,087) 39,067 42,257 As restated in the financial statements 2,214,977 1,826,620 19,668,959 19,621,681 MAJOR CUSTOMERS AND SUPPLIERS In the year under review, the five largest customers and suppliers of the Group accounted for less than 30% ofthe total turnover and purchases, respectively. None of the directors of the Company or any of their associates or any shareholders (which, to the best knowledgeof the directors, own more than 5% of the Company's issued share capital) had any beneficial interest in theGroup's five largest customers. RELATED PARTY TRANSACTIONS During the year, details of the related party transactions that the Company has entered into with its subsidiaryand fellow subsidiary are set out in note 51 to the financial statements. Certain related party transactions inrespect of the purchase of a 66.283% equity interest in the Jinhua Co and the capital contribution in ZhejiangCommunications Finance constitute non-exempt connected transactions as defined in Chapter 14A of the ListingRules, whereas the deposit services provided by Zhejiang Communications Finance constitute non-exempt continuingconnected transactions as defined in Chapter 14A of the Listing Rules. Please refer to the section headed"Connected Transactions" below for further details about such connected transactions. The Company has compliedwith the disclosure requirements in respect of such connected transactions in accordance with Chapter 14A of theListing Rules. PROPERTY, PLANT AND EQUIPMENT Details of movements in property, plant and equipment of the Group during the year are set out in note 19 tothe financial statements. CAPITAL COMMITMENTS Details of the capital commitments of the Group as at December 31, 2013 are set out in note 47 to the financialstatements. RESERVES Details of movements in the reserves of the Group during the year are set out in the consolidated statement ofchanges in equity to the financial statements. DISTRIBUTABLE RESERVES As at December 31, 2013, before the proposed final dividend, the Company's reserves available for distributionby way of cash or in kind, as determined based on the lower of the amount determined under PRC accountingstandards and the amount determined under HK GAAP, amounted to Rmb2,146,650,000. In addition, in accordancewith the Company Law of the PRC, the amount of approximately Rmb3,645,726,000 standing to the credit of theCompany's share premium account as prepared in accordance with the PRC accounting standards was available fordistribution by way of capitalization issues. TRUST DEPOSITS As at December 31, 2013, other than the deposits placed with a non-bank financial institution ofRmb60,443,000, the Group's deposits have been placed with commercial banks in the PRC and the Group has notencountered 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 listedsecurities 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 DIRECTOR Mr. LI ZongshengMr. WANG WeiliMr. WANG Dongjie INDEPENDENT NON-EXECUTIVE DIRECTORS Mr. ZHANG JunshengMr. ZHOU JunMr. PEI Ker-Wei DIRECTORS' AND SENIOR MANAGEMENT'S BIOGRAPHIES Biographical details of the Directors of the Company and the senior management of the Group are set out onDirectors, Supervisors and Senior Management Profiles section in the Company's annual report. DIRECTORS' SERVICE CONTRACTS Each of the Directors of the Company has entered into a service agreement with the Company, with effect fromJune 11, 2012, to June 30, 2015. Save as disclosed above, none of the Directors and Supervisors has entered into any service contract with theCompany which is not terminable by the Company within one year without payment of compensation, other thanstatutory compensation. DIRECTORS' AND SUPERVISORS' INTERESTS IN CONTRACTS As at December 31, 2013 or during the year, none of the Directors or Supervisors had a material interest, eitherdirectly or indirectly, in any contract of significance to the business of the Group to which the Company, itsholding 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 ordebentures of the Company granted to any Director, Supervisor and chief executive or their respective spouse orminor children, or were any such rights exercised by them; or was the Company, its holding company, or any ofits subsidiaries or fellow subsidiaries a party to any arrangement to enable any such persons to acquire suchrights 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 PRCwhich 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 regardingindividual income tax policies (Caishuizi[1994]No.020), the dividend incomes received by foreign individualsfrom 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 andpayment of enterprise income tax by Chinese resident enterprises for payment of dividend to H shareholderswho are overseas non-resident enterprises (Guoshuihan[2008]No. 897), the Company as a Chinese residententerprises is required to withhold 10% enterprise income tax when it distributes dividends for the year 2008and thereafter to all non-resident enterprise holders of H shares of the Company (including HKSCC NomineesLimited, other nominees, trustees or other entities and organizations, who will be deemed as non-residententerprise holders of H shares) whose names appear on the H share register of members of the Company on therecord date. Under current practice of the Hong Kong Inland Revenue Department, no tax is payable in Hong Kong in respect ofdividends 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, asat the latest practicable date prior to the issue of this annual report, the Company has maintained sufficientamount 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 Kongauditors since 2005, will retire and a resolution for their re-appointment as Hong Kong auditors of the Companywill be proposed at the forthcoming Annual General Meeting of the shareholders. By Order of the BoardZHAN XiaozhangChairman Hangzhou, Zhejiang Province, the PRCMarch 17, 2014 Report of the Supervisory Committee During the Period, the Supervisory Committee duly performed its supervisory responsibilities, and safeguardedthe legitimate interests of the shareholders and the Company in accordance with relevant rules and regulationsunder the Company Law of the PRC, the Company's Articles of Association and the Rules of the SupervisoryCommittee. Main tasks undertaken by the Supervisory Committee during the Period were to assess and supervise lawfulnessand appropriateness of the activities of the Directors, General Manager and other senior management of theCompany in their business decision-making and daily management processes, through a combination of activitiesincluding holding meetings of the Supervisory Committee and attending general meetings of shareholders andmeetings of the Board. The Supervisory Committee has carefully examined the operating results and the financialstanding of the Company, discussed and reviewed the financial statements to be submitted by the Board to thegeneral meeting of shareholders. During the Period, the Supervisory Committee held two meetings of its own, and attended four meetings held bythe Board and two general meetings of shareholders. The Supervisory Committee observes that during the Periodand with the support of Communications Group, the Company was able to start its three-year development plan withsuccess, realizing the best business performance since 2008. A series of key areas of work achieved satisfactoryprogress, including improvement in roadway conditions, enhancement in safety and risk control management, theestablishment of comprehensive standardized management systems, elevating brand images at the service areas,first time asset injection by the Communications Group, as well as successful submission of IPO application onthe part of Zheshang Securities. The Supervisory Committee has reviewed the financial statements of the Company for 2013 prepared by the Boardfor submission to the general meeting of shareholders, and concluded that the financial statements accuratelyreflected the financial position of the Company in 2013, and complied with the relevant laws, regulations andthe Company's Articles of Association. The Company maintained a high dividend payout ratio in recent years,thereby maintaining a stable long term dividend payout policy and providing satisfactory return to itsshareholders. During the Period, the members of the Board, General Manager and other senior management of the Company havecomplied with their fiduciary duties and have acted in good faith and diligently while carrying out theirresponsibilities. There was no incident of abuse of power or infringement of the interests of shareholders oremployees. The Supervisory Committee is satisfied with the performances across various lines of business achieved by theBoard and the management of the Company. By the order of the Supervisory CommitteeFU ZhexiangChairman of the Supervisory Committee Hangzhou, Zhejiang Province, the PRCMarch 14, 2014 Connected Transactions During the year ended 31 December 2013, the Company had the following non-exempt connected transactions andnon-exempt continuing connected transactions. Connected Transactions Acquisition of 76.55% equity interests in Jinhua Co On 20 March 2013, the Company entered into an agreement with Communications Group pursuant to which the Companyconditionally agreed to purchase from Communications Group a 66.283% equity interest in Jinhua Co held byCommunications Group at a cash consideration of Rmb655,356,000 (the "Communications Group Acquisition"). On the same date, the Company entered into an agreement with Yiwu Communications Development Co., Ltd.("Yiwu Development"), pursuant to which the Company conditionally agreed to purchase from Yiwu Developmenta 10.267% equity interest in Jinhua Co held by Yiwu Development at a cash consideration of Rmb101,512,000(the "Yiwu Acquisition", together with the Communications Group Acquisition, the "Acquisitions"). On June 30, 2013, the Company completed the Acquisitions. As the Company already owned a 23.45% equity interestin Jinhua Co prior to the Acquisitions, the Company beneficially owns the entire equity interest in Jinhua Coupon the completion of the Acquisitions. As Communications Group is a substantial shareholder (as defined in the Listing Rules) of the Company andtherefore, a connected person of the Company, the Communications Group Acquisition constitutes a connectedtransaction for the Company under Chapter 14A of the Listing Rules. Under the terms of the Yiwu Acquisition,completion of the Yiwu Acquisition is conditional upon, among other things, the prior completion of theCommunications Group Acquisition (but not vice versa). Accordingly, although Yiwu Development is an independentthird party, Yiwu Development is also treated as a connected person of the Company and the Yiwu Acquisitionalso constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Capital increase in Zhejiang Communications Finance On March 30, 2013, the Company entered into a capital contribution agreement with Zhejiang CommunicationsFinance, Communications Group, Zhejiang Ningbo Yongtaiwen Expressway Co., Ltd. ("Ningbo Expressway Co") andZhejiang Taizhou Yongtaiwen Expressway Co., Ltd. ("Taizhou Expressway Co"), pursuant to which the Companyconditionally agreed to contribute an amount of RMB280,000,000, by way of cash, into the equity capital ofZhejiang Communications Finance (the "Capital Contribution"). On May 2, 2013, the Company completed the Capital Contribution, and upon such completion, the Companybeneficially owns a 35% equity interest in Zhejiang Communications Finance. The Communications Group is a substantial shareholder (as defined under the Listing Rules) of the Company, andCommunications Group also holds approximately 75% of the issued share capital of each of Ningbo Expressway Co.and Taizhou Expressway Co. and 60% of the issued share capital of Zhejiang Communications Finance. Therefore,each of Communications Group, Ningbo Expressway Co., Taizhou Expressway Co and Zhejiang Communications Financeis a connected person of the Company and as a result, the Capital Contribution constitutes a connectedtransaction for the Company under Chapter 14A of the Listing Rules. Continuing Connected Transactions Deposit services with Zhejiang Communications Finance Pursuant to a financial services agreement (the "Financial Services Agreement") dated July 18, 2013 entered intobetween the Company and Zhejiang Communications Finance, Zhejiang Communications Finance agreed to provide theCompany with a range of financial services including certain deposit services (the "Deposit Services") for aterm of three years from the date of the Financial Services Agreement subject to the terms and conditionsprovided therein. As the Company, Communications Group (a substantial shareholder of the Company), NingboExpressway Co. and Taizhou Expressway Co. beneficially own 35%, 40%, 15.625% and 9.375% of the issued sharecapital of Zhejiang Communications Finance, respectively, Zhejiang Communications Finance is a connected personof the Company and as a result, the Deposit Services constitute continuing connected transactions for theCompany under Chapter 14A of the Listing Rules. During the year 2013, besides the Company, Jinhua Co has also placed deposits with Zhejiang CommunicationsFinance. As the definition of "the Company" used in the Financial Services Agreement did not specifically referto the Company's subsidiaries as potential recipients of the Deposit Services, on March 28, 2014, the Companyand Zhejiang Communications Finance entered into a supplemental agreement (the "Supplemental Agreement") tosupplement the Financial Services Agreement with retrospective effect from July 18, 2013, so as to make clearthat the definition of "the Company" used in the Financial Services Agreement as the proposed recipient of thefinancial services under the agreement, was intended to refer to the Group. All other terms of the FinancialServices Agreement remain unchanged. Under the Financial Services Agreem ent (as supplemented by the Supplemental Agreement ), Zhejiang CommunicationsFinance may provide Deposit Services including current deposit, time deposit, call deposit or agreement depositservices to the Group. The Deposit Services will be provided under the Financial Services Agreement on anon-exclusive basis and the Group is entitled to determine whether to accept the Deposit Services provided byZhejiang 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 theFinancial Services Agreement. The interest rate to be paid by Zhejiang Communications Finance for the Group's deposits with ZhejiangCommunications Finance shall be determined based on the prevailing deposit interest rate promulgated by thePeople's Bank of China for the same period and should not be lower than the deposit interest rates offered bymajor 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'sdeposits with Zhejiang Communications Finance shall not be more than Rmb700,000,000 during the term of theFinancial Services Agreement. During the year under review, the maximum amount of the daily deposit balance (including any interest accruedthereon) for the Group's deposits with Zhejiang Communications Finance under the Financial Services Agreementwas Rmb345,453,000. The independent non-executive Directors have reviewed the continuing connected transactions described aboveand 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 withHong Kong Standard on Assurance Engagements HKSAE 3000 "Assurance Engagements Other Than Audits or Reviews ofHistorical Financial Information" and with reference to Practice Note 740 "Auditor's Letter on ContinuingConnected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong Institute of Certified PublicAccountants. The auditors have issued their unqualified letter containing their findings and conclusions inrespect of the continuing connected transactions in accordance with the Rule 14A.38 of the Listing Rules. A copyof 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 itssubsidiaries (collectively referred to as the "Group"), which comprise theconsolidated statement of financial position as at December 31, 2013, and the consolidated statement of profitor loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement ofcash flows for the year then ended, and a summary of significant accounting policies and other explanatoryinformation. Directors' Responsibility for the Consolidated Financial Statements The directors of the Company are responsible for the preparation of consolidated financial statements that givea true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Instituteof Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and forsuch internal control as the directors determine is necessary to enable the preparation of consolidatedfinancial 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 toreport our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no otherpurpose. We do not assume responsibility towards or accept liability to any other person for the contents ofthis report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong KongInstitute of Certified Public Accountants. Those standards require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether the consolidated financial statementsare free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in theconsolidated financial statements. The procedures selected depend on the auditor 's judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraudor error. In making those risk assessments, the auditor considers internal control relevant to the entity'spreparation of consolidated financial statements that give a true and fair view in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by the directors, as well asevaluating 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 ouraudit opinion. Opinion In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of theGroup as at December 31, 2013, and of the Group's profit and cash flows for the year then ended in accordancewith Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosurerequirements of the Hong Kong Companies Ordinance. Deloitte Touche TohmatsuCertified Public AccountantsHong KongMarch 17, 2014 Consolidated Statement of Profit or Loss and other Comprehensive IncomeFor the year ended December 31, 2013 Year ended Year ended NOTES 12/31/2013 12/31/2012 Rmb'000 Rmb'000 (Restated)Revenue 8 7,851,115 6,927,415Operating costs (4,955,609) (4,574,040)Gross profit 2,895,506 2,353,375Securities investment gains 9 99,663 99,783Other income 10 241,056 291,990Administrative expenses (84,792) (86,287)Other expenses (70,061) (49,778)Share of profit (loss) of associates 21,537 (4,513)Share of loss of a joint venture (36,010) (3,516)Finance costs 11 (95,161) (139,765)Profit before tax 12 2,971,738 2,461,289Income tax expense 13 (756,761) (634,669)Profit for the year 2,214,977 1,826,620Other comprehensive income 14Items that may be reclassified to profit or loss:Available-for-sale financial assets: - Fair value gain during the year 4,865 4,800 - Reclassification adjustments for cumulative gain included in profit or loss upon disposal (1,381) (175) Income tax relating to components of other comprehensive income (871) (1,156)Other comprehensive income for the year (net of tax) 2,613 3,469Total comprehensive income for the year 2,217,590 1,830,089Profit for the year attributable to: Owners of the Company 1,907,470 1,649,484 Non-controlling interests 307,507 177,136 2,214,977 1,826,620 Total comprehensive income attributable to:Owners of the Company 1,909,017 1,651,293Non-controlling interests 308,573 178,796 2,217,590 1,830,089EARNINGS PER SHARE - Basic and diluted 18 Rmb43.92 cents Rmb37.98 cents Consolidated Statement of Financial Position At December 31, 2013 NOTES 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated)NON-CURRENT ASSETSProperty, plant and equipment 19 1,762,042 1,634,299 1,582,832Prepaid lease payments 20 68,156 70,321 72,476Expressway operating rights 21 11,911,133 12,722,158 13,468,635Goodwill 22 86,867 86,867 86,867Other intangible assets 23 154,564 155,633 157,594Deposit paid for acquisition of a property 24 - - 323,800Interests in associates 26 574,733 280,057 248,395Interest in a joint venture 27 333,944 369,954 -Available-for-sale investments 28 143,514 133,000 1,000Other receivables 31 401,400 325,035 300,000 15,436,353 15,777,324 16,241,599CURRENT ASSETSInventories 73,576 27,418 26,400Trade receivables 29 101,428 64,447 52,475Loans to customers arising from margin financing business 30 2,946,911 724,123 -Other receivables and prepayments 31 451,968 621,023 846,127Prepaid lease payments 20 2,155 2,154 2,154Available-for-sale investments 28 281,924 134,899 60,274Held for trading investments 32 1,181,025 1,486,772 1,260,021Financial assets held under resale agreements 33 874,254 280,066 -Bank balances held on behalf of customers 34 8,228,160 7,491,625 7,177,508Bank balances and cash - Time deposits with original maturity over three months 35 704,459 1,483,408 2,467,793 - Cash and cash equivalents 35 1,806,981 3,392,053 3,139,820 16,652,841 15,707,988 15,032,572 NOTES 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated)CURRENT LIABILITIESPlacements from other financial institution 36 310,000 - -Accounts payable to customers arising from securities business 37 8,167,103 7,481,819 7,143,067Trade payables 38 421,994 408,612 345,453Tax liabilities 331,611 223,592 491,619Other taxes payable 53,417 54,226 62,918Other payables and accruals 39 995,496 991,260 741,031Dividends payable 94,976 94,998 94,971Bank and other borrowings 40 540,000 660,000 712,553Long-term bonds due in one-year 41 - 1,000,000 -Short-term loan note 42 1,000,000 - -Derivative financial instrument - - 6,426 11,914,597 10,914,507 9,598,038NET CURRENT ASSETS 4,738,244 4,793,481 5,434,534TOTAL ASSETS LESS CURRENT LIABILITIES 20,174,597 20,570,805 21,676,133NON-CURRENT LIABILITIESBank and other borrowings 40 300,000 680,000 1,140,000Long-term bonds 41 - - 1,000,000Deferred tax liabilities 43 205,638 269,124 289,165 505,638 949,124 2,429,165 19,668,959 19,621,681 19,246,968CAPITAL AND RESERVESShare capital 44 4,343,115 4,343,115 4,343,115Reserves 11,629,423 11,701,345 11,396,418Equity attributable to owners of the Company 15,972,538 16,044,460 15,739,533Non-controlling interests 45 3,696,421 3,577,221 3,507,435 19,668,959 19,621,681 19,246,968 The consolidated financial statements were approved and authorised for issue by theboard of directors on March 17, 2014 and are signed on its behalf by: ZHAN Xiaozhang LUO Jianhu DIRECTOR DIRECTOR Consolidated Statement of Changes in EquityFor the year ended December 31, 2013 Attributable to owners of the Company Investment Share Share Statutory Capital revaluation Dividend capital premium reserve reserve reserve reserve Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Note i)At January 1, 2012(Originally stated) 4,343,115 3,645,726 2,968,634 1,712 (1,555) 1,085,779Merger accounting restatement - - - - - -At January 1, 2012(Restated) 4,343,115 3,645,726 2,968,634 1,712 (1,555) 1,085,779Profit for the year - - - - - -Other comprehensive income for the year - - - - 1,809 -Total comprehensive income for the year - - - - 1,809 -Dividend paid to non-controlling interests - - - - - -Interim dividend - - - - - -Final dividend - - - - - (1,085,779)Proposed final dividend - - - - - 1,042,347Transfer to reserves - - 258,877 - - -At December 31, 2012(Restated) 4,343,115 3,645,726 3,227,511 1,712 254 1,042,347Profit for the year - - - - - -Other comprehensive income for the year - - - - 1,547 -Total comprehensive income for the year - - - - 1,547 -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 - - - - - (1,042,347)Proposed final dividend - - - - - 1,085,779Transfer to reserves - - 318,348 - - -At December 31, 2013 4,343,115 3,645,726 3,545,859 1,712 1,801 1,085,779 - Cont'd - Attributable to owners of the Company Non- controlling Special Retained interests Total reserves profits Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Note ii)At January 1, 2012(Originally stated) 18,666 3,116,462 15,178,539 3,420,561 18,599,100Merger accounting restatement 797,471 (236,477) 560,994 86,874 647,868At January 1, 2012(Restated) 816,137 2,879,985 15,739,533 3,507,435 19,246,968Profit for the year - 1,649,484 1,649,484 177,136 1,826,620Other comprehensive income for the year - - 1,809 1,660 3,469Total comprehensive income for the year - 1,649,484 1,651,293 178,796 1,830,089Dividend paid to non-controlling interests - - - (109,010) (109,010)Interim dividend - (260,587) (260,587) - (260,587)Final dividend - - (1,085,779) - (1,085,779)Proposed final dividend - (1,042,347) - - -Transfer to reserves - (258,877) - - -At December 31, 2012(Restated) 816,137 2,967,658 16,044,460 3,577,221 19,621,681Profit for the year - 1,907,470 1,907,470 307,507 2,214,977Other comprehensive income for the year - - 1,547 1,066 2,613Total comprehensive income for the year - 1,907,470 1,909,017 308,573 2,217,590Arising from acquisition of a subsidiary under common control and additional interest in a subsidiary (Note 2) (678,005) - (678,005) (78,863) (756,868)Dividend paid to non-controlling interests - - - (110,510) (110,510)Interim dividend - (260,587) (260,587) - (260,587)Final dividend - - (1,042,347) - (1,042,347)Proposed final dividend - (1,085,779) - - -Transfer to reserves - (318,348) - - -At December 31, 2013 138,132 3,210,414 15,972,538 3,696,421 19,668,959 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 of a combining entity; 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 cash payment for acquisition of additional interest of Rmb22,649,000 to the non-controlling interest during the year December 31, 2013. Details of the transaction are set out in Note 2. Consolidated Statement of Cash FlowsFor the year ended December 31, 2013 Year ended Year ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 (Restated)OPERATING ACTIVITIES Profit before tax 2,971,738 2,461,289Adjustments for: Finance costs 95,161 139,765 Interest income (95,922) (181,659) Share of (profit) loss of associates (21,537) 4,513 Gain on deregistration of an associate (16) - Gain on disposal of an associate (-) (12) Share of loss of a joint venture 36,010 3,516 Depreciation of property, plant and equipment 190,690 179,635 Amortisation of expressway operating rights 811,025 807,207 Amortisation of prepaid lease payments 2,164 2,155 Amortisation of other intangible assets 18,644 16,248 Fair value changes on derivative financial instrument - (2,841) Fair value changes on held for trading investments (98,282) (99,608) Gain on disposal of available-for-sale investments (1,381) (175) Loss on disposal of property, plant and equipment 2,149 6,882 Allowance for trade receivables 7 125 Reversal of allowance for trade receivables (291) - Allowance for advance to customers arising from margin financing business 8,477 -Operating cash flows before movements in working capital 3,918,636 3,337,040Increase in inventories (46,158) (1,018)Increase in trade receivables (36,988) (12,097)Increase in loans to customers arising from margin financing business (2,231,265) (724,123)Increase in other receivables and prepayments (26,687) (4,904)Decrease (increase) in held for trading investments 404,029 (127,143)Increase in financial assets held under resale agreements (594,188) (280,066)Increase in bank balances held on behalf of customers (736,535) (314,117)Increase in placements from other financial institution 310,000 -Increase in accounts payable to customers arising from securities business 685,284 338,752(Decrease) Increase in trade payables (45,035) 63,159Decrease in other taxes payable (809) (8,692)Increase in other payables and accruals 212,705 130,579Decrease in derivative financial instruments - (3,585)Cash generated from operations 1,812,989 2,393,785Income taxes paid (713,099) (923,893)Interest paid (119,915) (141,950)NET CASH FROM OPERATING ACTIVITIES 979,975 1,327,942 Year ended Year ended NOTES 12/31/2013 12/31/2012 Rmb'000 Rmb'000INVESTING ACTIVITIES (Restated) Interest received 138,492 158,650Acquisition of a joint venture - (184,140)Payment of consideration payable for the acquisition of a joint venture in the prior year (189,331) -Investment in an associate (280,000) -Additional contribution in an associate - (50,000)Proceed on deregistration of an associate 388 -Proceed on disposal of an associate - 4,906Dividends received from an associate 8,987 6,500Proceeds on disposal of property, plant and equipment 4,099 1,250Repayment of entrusted loans from related parties 592,047 337,482Repayment of entrusted loan from third parties - 300,000Entrusted loans to related parties (450,000) (310,000)Purchases of financial products investment (228,294) (1,069,500)Settlement of financial products investment 163,726 970,000Purchases of property, plant and equipment (252,408) (365,028)Purchases of intangible assets (17,575) (14,287)Refund of deposit paid for acquisition of a property - 323,800Purchase of available-for-sale investments (290,774) (204,388)Proceeds on disposal of available-for-sale investments 138,100 2,563Decrease in time deposits 778,949 984,385NET CASH FROM INVESTING ACTIVITIES 116,406 892,193FINANCING ACTIVITIESPayment for the acquisition of a subsidiary under common control and additional interest in a subsidiary 2 (756,868) -Dividends paid (1,302,934) (1,346,366)Dividends paid to non-controlling shareholders (110,532) (108,983)New bank borrowings raised 2,010,000 200,000Repayment of bank and other borrowings (2,510,000) (712,553)Repayment of long-term bonds (1,000,000) -Issue of short-term loan note 1,000,000 -Interest paid (11,119) -NET CASH USED IN FINANCING ACTIVITIES (2,681,453) (1,967,902)NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,585,072) 252,233CASH AND CASH EQUIVALENTS AT JANUARY 1 3,392,053 3,139,820CASH AND CASH EQUIVALENTS AT DECEMBER 31 35 1,806,981 3,392,053 Notes to the Consolidated Financial StatementsFor the year ended December 31, 2013 1. CORPORATE INFORMATION Zhejiang Expressway Co., Ltd. (the "Company") was established in the People's Republic of China (the "PRC") withlimited liability on March 1, 1997. The H shares of the Company ("H Shares") were subsequently listed on TheStock 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, theCompany 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 Boardof Directors and the China Securities Regulatory Commission, declared the registration statement in respect ofthe American Depositary Shares ("ADSs") evidenced by the American Depositary Receipts ("ADRs") representing thedeposited H Shares of the Company effective. In the opinion of the directors, the immediate and ultimate holding company of the Company is ZhejiangCommunications Investment Group Co., Ltd. (the "Communications Group"), a state-owned enterprise established inthe PRC. The addresses of the registered office and principal place of business of the Company are disclosed in thecorporate information section of the annual report. The consolidated financial statements are presented in Renminbi ("Rmb"), which is also the functional currencyof the Company. The Company is an investment holding company. The Company and its subsidiaries (collectively referred to asthe "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. MERGER ACCOUNTING RESTATEMENT On March 20, 2013, the Group entered into share transfer agreements with Communications Group and YiwuCommunications Development Co., Ltd. ("Yiwu Development"), an indepdendent third party, to acquire the 66.283%and 10.267% equity interests in Zhejiang Jinhua Yongjin Expressway Co., Ltd. ("Jinhua Co"), from CommunicationsGroup and Yiwu Development, respectively, for corresponding cash consideration of Rmb655,356,000 andRmb101,512,000, totalling Rmb756,868,000. Jinhua Co is principally engaged in the operation and management ofthe Jinhua Section of the Ningbo-Jinhua Expressway. Before the above acquisitions, Jinhua Co was a 23.45% ownedassociate of the Group. After the completion of the acquisition, Jinhua Co then became a 100% owned subsidiaryof the Group. Since Communications Group is the parent company of the Company, the Group's acquisition of the66.283% equity interest from Communications Group was regarded as a business combination involving entitiesunder common control and was accounted for using merger accounting method, in accordance with the guidance setout in Accounting Guideline 5 "Merger Accounting for Common Control Combinations" ("AG5") issued by the HongKong Institute of Certified Public Accountants (the "HKICPA") and the acquisition of 10.267% equity interest inJinhua Co from Yiwu Development was accounted for as acquisition of additional interest in a subsidiary. As a result, in the comparative consolidated statement of profit or loss and other comprehensive income andconsolidated statement of cash flows for the year ended December 31, 2012 and the consolidated statement offinancial position as at December 31, 2012 have therefore been restated, in order to include the losses, assetsand liabilities of the combining entities since the date on which they first come under common control. The adopting of merger accounting method in respect of the Group's acquisition of 66.283% equity interest inJinhua Co has resulted in a decrease in total comprehensive income attributable to owners of the Company and adecrease in profit attributable to owners of the Company for the year ended December 31, 2012 by Rmb36,786,000and Rmb36,786,000, respectively. The effect of the merger accounting restatement in respect of the Group's acquisition of 66.283% equity interestin Jinhua Co described above on the consolidated statement of profit or loss and other comprehensive income forthe year ended December 31, 2012 by line items is as follows: Merger Year ended accounting Year ended 12/31/2012 restatement 12/31/2012 Rmb'000 Rmb'000 Rmb'000 (Originally stated) (Restated)Revenue 6,700,258 227,157 6,927,415Operating costs (4,369,641) (204,399) (4,574,040)Gross profit 2,330,617 22,758 2,353,375Securities investment gains 99,783 - 99,783Other income 288,644 3,346 291,990Administrative expenses (82,092) (4,195) (86,287)Other expenses (46,154) (3,624) (49,778)Share of loss of associates (17,341) 12,828 (4,513)Share of loss of a joint venture (3,516) - (3,516)Finance costs (53,995) (85,770) (139,765)Profit before tax 2,515,946 (54,657) 2,461,289Income tax expense (646,864) 12,195 (634,669)Profit for the year 1,869,082 (42,462) 1,826,620Other comprehensive incomeItems that may be reclassified to profit or loss:Available-for-sale financial assets:- Fair value gain during the year 4,800 - 4,800- Reclassification adjustments for cumulative gainincluded in profit or loss upon disposal (175) - (175)Income tax relating to components of other comprehensive income (1,156) - (1,156)Other comprehensive income for the year (net of tax) 3,469 - 3,469Total comprehensive income for the yearProfit for the year attributable to: 1,872,551 (42,462) 1,830,089Owners of the Company 1,686,270 (36,786) 1,649,484Non-controlling interests 182,812 (5,676) 177,136 Total comprehensive income attributable to: 1,869,082 (42,462) 1,826,620Owners of the Company 1,688,079 (36,786) 1,651,293Non-controlling interests 184,472 (5,676) 178,796 1,872,551 (42,462) 1,830,089EARNINGS PER SHARE- Basic and diluted Rmb38.83 cents Rmb(0.85)cents Rmb37.98 cents The effects of the merger accounting restatement in respect of the Group's acquisition of 66.283% equity interestin Jinhua Co described above on the consolidated statements of financial position as at January 1, 2012 andDecember 31, 2012 by line items are as follows: Merger Merger January 1, accounting January 1, December 31, accounting December 31, 2012 restatement 2012 2012 restatement 2012 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Originally (Originally stated) (Restated) stated) (Restated) NON-CURRENT ASSETSProperty, plant and equipment 1,294,465 288,367 1,582,832 1,357,844 276,455 1,634,299Prepaid lease payments 68,983 3,493 72,476 66,931 3,390 70,321Expressway operating rights 11,364,938 2,103,697 13,468,635 10,732,058 1,990,100 12,722,158Goodwill 86,867 - 86,867 86,867 - 86,867Other intangible assets 157,594 - 157,594 155,633 - 155,633Deposit paid for acquisition of a property 323,800 - 323,800 - - -Interests in associates 446,679 (198,284) 248,395 465,513 (185,456) 280,057Interest in a joint venture - - - 369,954 - 369,954Available-for-sale investments 1,000 - 1,000 133,000 - 133,000Other receivables 382,000 (82,000) 300,000 325,035 - 325,035 14,126,326 2,115,273 16,241,599 13,692,835 2,084,489 15,777,324CURRENT ASSETSInventories 26,400 - 26,400 27,418 - 27,418Trade receivables 48,013 4,462 52,475 57,847 6,600 64,447Loans to customers arising frommargin financing business - - - 724,123 - 724,123Other receivables and prepayments 844,142 1,985 846,127 701,627 (80,604) 621,023Prepaid lease payments 2,052 102 2,154 2,052 102 2,154Available-for-sale investments 60,274 - 60,274 134,899 - 134,899Held for trading investments 1,260,021 - 1,260,021 1,486,772 - 1,486,772Financial assets held under resale agreements - - - 280,066 - 280,066Bank balances held on behalf of customers 7,177,508 - 7,177,508 7,491,625 - 7,491,625Bank balances and cash- Time deposits with original maturity over three months 2,467,793 - 2,467,793 1,483,408 - 1,483,408- Cash and cash equivalents 3,120,430 19,390 3,139,820 3,362,709 29,344 3,392,053 15,006,633 25,939 15,032,572 15,752,546 (44,558) 15,707,988 The effects of the merger accounting restatement in respect of the Group's acquisition of 66.283% equityinterest in Jinhua Co described above on the consolidated statements of financial position as at January 1, 2012and December 31, 2012 by line items are as follows: (Continued) Merger Merger January 1, accounting January 1, December 31, accounting December 31, 2012 restatement 2012 2012 restatement 2012 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Originally (Originally stated) (Restated) stated) (Restated) CURRENT LIABILITIESAccounts payable to customers arising from securities business 7,143,067 - 7,143,067 7,481,819 - 7,481,819Trade payables 317,188 28,265 345,453 378,364 30,248 408,612Tax liabilities 491,619 - 491,619 223,592 - 223,592Other taxes payable 61,753 1,165 62,918 53,082 1,144 54,226Other payables and accruals 724,216 16,815 741,031 973,031 18,229 991,260Dividends payable 94,971 - 94,971 94,998 - 94,998Bank and other borrowings 462,553 250,000 712,553 - 660,000 660,000Long-term bonds due in one-year - - - 1,000,000 - 1,000,000Derivative financial instrument 6,426 - 6,426 - - - 9,301,793 296,245 9,598,038 10,204,886 709,621 10,914,507NET CURRENT ASSETS 5,704,840 (270,306) 5,434,534 5,547,660 (754,179) 4,793,481 TOTAL ASSETS LESS CURRENT LIABILITIES 19,831,166 1,844,967 21,676,133 19,240,495 1,330,310 20,570,805NON-CURRENT LIABILITIESBank and other borrowings - 1,140,000 1,140,000 - 680,000 680,000Long-term bonds 1,000,000 - 1,000,000 - - -Deferred tax liabilities 232,066 57,099 289,165 224,220 44,904 269,124 1,232,066 1,197,099 2,429,165 224,220 724,904 949,124 18,599,100 647,868 19,246,968 19,016,275 605,406 19,621,681CAPITAL AND RESERVESShare capital 4,343,115 - 4,343,115 4,343,115 - 4,343,115Reserves 10,835,424 560,994 11,396,418 11,177,137 524,208 11,701,345Equity attributable to owners of the Company 15,178,539 560,994 15,739,533 15,520,252 524,208 16,044,460Non-controlling interests 3,420,561 86,874 3,507,435 3,496,023 81,198 3,577,221 18,599,100 647,868 19,246,968 19,016,275 605,406 19,621,681 The effects of merger accounting restatement in respect of the Group's acquisition of 66.283% equity interest inJinhua Co described above on the Group's equity as at January 1, 2012 and December 31, 2012 are as follows: Merger Merger January 1, accounting January 1, December 31, accounting December 31, 2012 restatement 2012 2012 restatement 2012 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Originally (Originally stated) (Restated) stated) (Restated)Share capital 4,343,115 - 4,343,115 4,343,115 - 4,343,115Share premium 3,645,726 - 3,645,726 3,645,726 - 3,645,726Statutory reserve 2,968,634 - 2,968,634 3,227,511 - 3,227,511Capital reserve 1,712 - 1,712 1,712 - 1,712Investment revaluation reserve (1,555) - (1,555) 254 - 254Dividend reserve 1,085,779 - 1,085,779 1,042,347 - 1,042,347Special reserve 18,666 797,471 816,137 18,666 797,471 816,137Retained profits 3,116,462 (236,477) 2,879,985 3,240,921 (273,263) 2,967,658Non-controlling interests 3,420,561 86,874 3,507,435 3,496,023 81,198 3,577,221 18,599,100 647,868 19,246,968 19,016,275 605,406 19,621,681 3. 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 CertifiedPublic Accountants (the "HKICPA") for the first time in the current year. Amendments to HKFRSs Annual Improvements to HKFRSs 2009-2011 CycleAmendments to HKFRS 7 Disclosures - Offsetting Financial Assets and Financial LiabilitiesAmendments to HKFRS 10, Consolidated Financial Statements, Joint Arrangements and Disclosure HKFRS 11 and HKFRS 12 of Interest in Other Entities: Transition GuidanceHKFRS 10 Consolidated Financial StatementsHKFRS 11 Joint ArrangementsHKFRS 12 Disclosure of Interests in Other EntitiesHKFRS 13 Fair Value MeasurementHKAS 19 (as revised in 2011) Employee BenefitsHKAS 27 (as revised in 2011) Separate Financial StatementsHKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures Amendmentsto HKAS 1 Presentation of Items of Other Comprehensive IncomeHK(IFRIC) - Int 20 Stripping Costs in the Production Phase of a Surface Mine Except as disclosed below, the application of the new and revised HKFRSs in the current year has had no materialimpact on the Group's financial performance and positions for the current and prior years and/or on thedisclosures set out in these consolidated financial statements. Impact of the application of HKFRS 11 HKFRS 11 replaces HKAS 31 Interests in Joint Ventures, and the guidance contained in a related interpretation,HK(SIC) - Int 13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers, has been incorporatedin HKAS 28 (as revised in 2011). HKFRS 11 deals with how a joint arrangement of which two or more parties havejoint control should be classified and accounted for. Under HKFRS 11, there are only two types of jointarrangements - joint operations and joint ventures. The classification of joint arrangements under HKFRS 11is determined based on the rights and obligations of parties to the joint arrangements by considering thestructure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement,and, when relevant, other facts and circumstances. A joint operation is a joint arrangement whereby the partiesthat have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations forthe liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties thathave joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement.Previously, HKAS 31 had three types of joint arrangements - jointly controlled entities, jointly controlledoperations and joint controlled assets. The classification of joint arrangement under HKAS 31 was primarilydetermined based on the legal form of the arrangement (e.g. a joint arrangement that was established through aseparate entity was classified as a jointly controlled entity). The directors of the Company reviewed and assessed the classification of the Group's investments in jointarrangements in accordance with the requirements of HKFRS 11. The directors concluded that the Group'sinvestments in Shengxin Expressway Co., Ltd., which was classified as a jointly controlled entity underHKAS 31 and was accounted for using the equity method, should be classified as a joint venture under HKFRS 11and accounted for using the equity method. Impact of the application of HKFRS 12 HKFRS 12 is a new disclosure and is applicable to entities that have interests in subsidiaries, joint venturesand associates. In general, the application of HKFRS 12 has resulted in more extensive disclosures in theconsolidated financial statements (please see notes 26, 27 and 45 for details). HKFRS 13 Fair Value Measurement The Group has applied HKFRS 13 for the first time in the current year. HKFRS 13 establishes a single source ofguidance for, and disclosures about, fair value measurements. The scope of HKFRS 13 is broad, and applies to both financial instrument items and non-financial instrument itemsfor which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements,subject to a few exceptions. HKFRS 13 contains a new definition for 'fair value' and defines fair value as theprice that would be received to sell an asset or paid to transfer a liability in an orderly transaction in theprincipal (or most advantageous) market at the measurement date under current market conditions. Fair valueunder HKFRS 13 is an exit price regardless of whether that price is directly observable or estimated usinganother valuation technique. Also, HKFRS 13 includes extensive disclosure requirements. In accordance with the transitional provisions of HKFRS 13, the Group has applied the new fair value measurementand disclosure requirements prospectively. Disclosures of fair value information are set out in note 6(c). Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income The Group has applied the amendments to HKAS 1 Presentation of Items of Other Comprehensive Income. Upon theadoption of the amendments to HKAS 1, the Group's 'statement of comprehensive income' is renamed as the'statement of profit or loss and other comprehensive income'. Furthermore, the amendments to HKAS 1 requireadditional disclosures to be made in the other comprehensive income section such that items of othercomprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently toprofit or loss and (b) items that may be reclassified subsequently to profit or loss when specific conditionsare met. Income tax on items of other comprehensive income is required to be allocated on the same basis - theamendments do not change the option to present items of other comprehensive income either before tax or net oftax. The amendments have been applied retrospectively, and hence the presentation of items of othercomprehensive income has been modified to reflect the changes. Other than the above mentioned presentationchanges, the application of the amendments to HKAS 1 does not result in any impact on profit or loss, othercomprehensive income and total comprehensive income. New and revised HKFRSs issued but not yet effective Amendments to HKFRS 10, Investment Entities(Note 1) HKFRS 12 and HKAS 27Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions(Note 2)Amendments to HKFRS 9 and Mandatory Effective Date of HKFRS 9 and Transition Disclosures(Note 3) HKFRS 7Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities(Note 1)Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets(Note 1)Amendments to HKAS 39 Novation of Derivatives and Continuation of Hedge Accounting(Note 1)Amendments to HKFRSs Annual Improvements to HKFRSs 2010-2012 Cycle(Note 4)Amendments to HKFRSs Annual Improvements to HKFRSs 2011-2013 Cycle(Note 2)HKFRS 9 Financial Instruments(Note 3)HKFRS 14 Regulatory Deferral Accounts(Note 5)HK(IFRIC)-Int 21 Levies(Note 1) 1 Effective for annual periods beginning on or after January 1, 2014 2 Effective for annual periods beginning on or after July 1, 2014 3 Available for application - the mandatory effective date will be determined when the outstanding phases of HKFRS 9 are finalised 4 Effective for annual periods beginning on or after July 1, 2014, with limited exceptions 5 Effective for first annual HKFRS financial statements beginning on or after January 1, 2016 Annual Improvements to HKFRSs 2010-2012 Cycle The Annual Improvements to HKFRSs 2010-2012 Cycle include a number of amendments to various HKFRSs, which aresummarised below. The amendments to HKFRS 3 clarify that contingent consideration that is classified as an asset or a liabilityshould be measured at fair value at each reporting date, irrespective of whether the contingent consideration isa financial instrument within the scope of HKFRS 9 or HKAS 39 or a non-financial asset or liability. Changes in fair value (other than measurement period adjustments) should be recognised in profit and loss. Theamendments to HKFRS 3 are effective for business combinations for which the acquisition date is on or afterJuly 1, 2014. The amendments to HKFRS 8 (i) require an entity to disclose the judgements made by management in applying theaggregation criteria to operating segments, including a description of the operating segments aggregated and theeconomic indicators assessed in determining whether the operating segments have 'similar economiccharacteristics'; and (ii) clarify that a reconciliation of the total of the reportable segments' assets to theentity's assets should only be provided if the segment assets are regularly provided to the chief operatingdecision-maker. The amendments to the basis for conclusions of HKFRS 13 clarify that the issue of HKFRS 13 and consequentialamendments to HKAS 39 and HKFRS 9 did not remove the ability to measure short- term receivables and payableswith no stated interest rate at their invoice amounts without discounting, if the effect of discounting isimmaterial. The amendments to HKAS 16 and HKAS 38 remove perceived inconsistencies in the accounting for accumulateddepreciation/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 therevaluation of the carrying amount of the asset and that accumulated depreciation/amortisation is the differencebetween the gross carrying amount and the carrying amount after taking into account accumulated impairmentlosses. The amendments to HAKS 24 clarify that a management entity providing key management personnel services to areporting entity is a related party of the reporting entity. Consequently, the reporting entity should discloseas related party transactions the amounts incurred for the service paid or payable to the management entity forthe provision of key management personnel services. However, disclosure of the components of such compensationis not required. The directors do not anticipate that the application of the amendments included in the Annual Improvements toHKFRSs 2010-2012 Cycle 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 aresummarised below. The amendments to HKFRS 3 clarify that the standard does not apply to the accounting for the formation of alltypes 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 agroup of financial assets and financial liabilities on a net basis includes all contracts that are within thescope of, and accounted for in accordance with, HKAS 39 or HKFRS 9, even if those contracts do not meet thedefinitions of financial assets or financial liabilities within HKAS 32. The directors do not anticipate that the application of the amendments included in the Annual Improvements toHKFRSs 2011-2013 Cycle will have a material effect on the Group's consolidated financial statements. HKFRS 9 Financial Instruments HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets.HKFRS 9 was subsequently amended in 2010 to include the requirements for the classification and measurement offinancial liabilities and for derecognition, and further amended in 2013 to include the new requirements forhedge accounting. Key requirements of HKFRS 9 are described as follows: - All recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement are subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. - With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities attributable to changes in the financial liabilities' credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss. The new general hedge accounting requirements retain the three types of hedge accounting. However, greaterflexibility has been introduced to the types of transactions eligible for hedge accounting, specificallybroadening the types of instruments that qualify for hedging instruments and the types of risk components ofnon-financial items that are eligible for hedge accounting. In addition, the effectiveness test has beenoverhauled and replaced with the principle of an 'economic relationship'. Retrospective assessment of hedgeeffectiveness is also no longer required. Enhanced disclosure requirements about an entity's risk managementactivities have also been introduced. The directors anticipate that the adoption of HKFRS 9 in the future may have a significant impact on the amountsreported in respect of the Group's financial assets and financial liabilities (e.g. the Group's investmentsin unlisted equity securities currently classified as available-for-sale investments may have to be measured atfair value at the end of subsequent reporting periods, with changes in the fair value being recognised in profitor loss). Regarding the Group's financial assets, it is not practicable to provide a reasonable estimate of thateffect until a detailed review has been completed. Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets 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 therehas been no impairment or reversal of impairment of the related CGU. Furthermore, the amendments introduceadditional disclosure requirements regarding the fair value hierarchy, key assumptions and valuation techniquesused when the recoverable amount of an asset or CGU was determined based on its fair value less costs ofdisposal. The directors of the Company do not anticipate that the application of these amendments to HKAS 36 will have asignificant impact on the Group's consolidated financial statements. 4. SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements have been prepared in accordance with Hong Kong Financial ReportingStandards issued by the HKICPA. In addition, the consolidated financial statements include applicabledisclosures required by the Rules Governing the Listing of Securities on the Stock Exchange of Hong KongLimited and by the Hong Kong Companies Ordinance. The consolidated financial statements have been prepared on the historical cost basis except for certainfinancial instruments that are measured at fair values at the end of each reporting period, as explained inthe accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods andservices. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date, regardless of whether that price is directlyobservable or estimated using another valuation technique. In estimating the fair value of an asset or aliability, the Group takes into account the characteristics of the asset or liability if market participantswould take those characteristics into account when pricing the asset or liability at the measurement date. Fairvalue for measurement and/or disclosure purposes in these consolidated financial statements is determined onsuch a basis, except leasing transactions that are within the scope of HKAS 17, and measurements that have somesimilarities to fair value but are not fair value, such as net realisable value in HKAS 2 or value in use inHKAS 36. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3based on the degree to which the inputs to the fair value measurements are observable and the significance ofthe 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 controlledby 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 arechanges 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 Grouploses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of duringthe year are included in the consolidated statement of profit or loss and other comprehensive income from thedate 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 tothe non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of theCompany and to the non-controlling interests even if this results in the non-controlling interests having adeficit balance. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accountingpolicies in line with the Group`s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions betweenmembers 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 thenon-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 orbusinesses in which the common control combination occurs as if they had been combined from the date when thecombining 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 thecontrolling party's perspective. No amount is recognised in respect of goodwill or excess of acquirer's interestin the net fair value of acquiree's identifiable assets, liabilities and contingent liabilities over cost at thetime 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 thecombining entities or businesses from the earliest date presented or since the date when the combining entitiesor businesses first came under the common control, where this is a shorter period, regardless of the date of thecommon control combination. The comparative amounts in the consolidated financial statements are presented as if the entities or businesseshad 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 acquisitionof 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 morefrequently when there is indication that the unit may be impaired. If the recoverable amount of thecash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce thecarrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro-ratabasis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recogniseddirectly 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 thedetermination 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 toparticipate in the financial and operating policy decisions of the investee but is not control or joint controlover those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement haverights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of controlof an arrangement, which exists only when decisions about the relevant activities require unanimous consent ofthe parties sharing control. The results and assets and liabilities of associates or a joint venture are incorporated in these consolidatedfinancial statements using the equity method of accounting. Under the equity method, an investment in anassociate or a joint venture is initially recognised in the consolidated statement of financial position at costand adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income ofthe associate or joint venture. When the Group's share of losses of an associate or a joint venture exceeds theGroup'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 recognisingits share of further losses. Additional losses are recognised only to the extent that the Group has incurredlegal 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 whichthe investee becomes an associate or a joint venture. On acquisition of the investment in an associate or ajoint venture, any excess of the cost of the investment over the Group's share of the net fair value of theidentifiable assets and liabilities of the investee is recognised as goodwill, which is included within thecarrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiableassets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profitor 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 losswith respect to the Group's investment in an associate or a joint venture. When necessary, the entire carryingamount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment ofAssets as a single asset by comparing its recoverable amount (higher of value in use and fair value less coststo sell) with its carrying amount, Any impairment loss recognised forms part of the carrying amount of theinvestment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent thatthe 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 associateor a joint venture, or when the investment (or a portion thereof) is classified as held for sale. When the Groupretains an interest in the former associate or joint venture and the retained interest is a financial asset, theGroup measures the retained interest at fair value at that date and the fair value is regarded as its fair valueon initial recognition in accordance with HKAS 39. The difference between the carrying amount of the associateor joint venture at the date the equity method was discontinued, and the fair value of any retained interest andany proceeds from disposing of a part interest in the associate or joint venture is included in the determinationof the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for allamounts previously recognised in other comprehensive income in relation to that associate or joint venture onthe same basis as would be required if that associate or joint venture had directly disposed of the relatedassets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by thatassociate or joint venture would be reclassified to profit or loss on the disposal of the related assets orliabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassificationadjustment) 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 jointventure or an investment in a joint venture becomes an investment in an associate. There is no remeasurementto 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 usethe equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that hadpreviously been recognised in other comprehensive income relating to that reduction in ownership interest ifthat 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 contributionof assets), profits and losses resulting from the transactions with the associate or joint venture is recognisedin the Group's consolidated financial statements only to the extent of interests in the associate or jointventure 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 forestimated 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 timeall 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 therelevant services have been rendered. Underwriting and sponsors fees are recognised as income in accordance with the terms of the underwritingagreement 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 managementcontracts. Dividend income from investments is recognised when the shareholders' rights to receive payment have beenestablished (provided that it is probable that the economic benefits will flow to the Group and the amount ofrevenue can be measured reliably). Interest income from a financial asset is recognised when it is probable that the economic benefits will flow tothe Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, byreference to the principal outstanding and at the effective interest rate applicable, which is the rate thatexactly discounts the estimated future cash receipts through the expected life of the financial asset to thatasset's net carrying amount on initial recognition. The Group's accounting policy for recognition of revenue from operating leases is described in the accountingpolicy for leasing below. Property, plant and equipment Property, plant and equipment including buildings and leasehold land (classified as finance leases) held foruse in the production or supply of goods or services, or for administrative purposes (other than propertiesunder 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 costscapitalised in accordance with the Group's accounting policy. Such properties are classified to the appropriatecategories of property, plant and equipment when completed and ready for intended use. Depreciation of theseassets, 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) lesstheir 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 anychanges in estimate accounted for on a prospective basis. Estimated Annual useful life depreciation rateLeasehold 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% Property, plant and equipment (Continued) An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits areexpected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement ofan item of property, plant and equipment is determined as the difference between the sales proceeds and thecarrying 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 accumulatedamortisation and accumulated impairment losses. Amortisation for intangible assets with finite useful lives isrecognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisationmethod are reviewed at the end of each reporting period, with the effect of any changes in estimate beingaccounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquiredseparately are carried at cost less accumulated impairment losses (see the accounting policy in respect ofimpairment 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 initiallyrecognised 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 livesare reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis asintangible assets that are acquired separately. Alternatively, intangible assets with indefinite useful lives are carried at cost less subsequent accumulatedimpairment losses (see accounting policy in respect of impairment losses on tangible and intangible assetsbelow). An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use ordisposal. Gains or losses arising from derecognition of an intangible assets are measured at the differencebetween the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss inthe 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 intangibleassets based on fair value of the consideration paid upon initial recognition. Subsequent costs incurred onexpressway widening projects and upgrading services are recognised as additional costs of the expresswayoperating rights. The concession intangible assets representing expressway operating rights are carried at costless accumulated amortisation and any accumulated impairment losses. The concession intangible assets are amortised to write-off their cost over their expected useful lives in theremaining concession period on a straight-line basis. Costs in relation to the day-to-day servicing, repairs and maintenance of the expressway infrastructures arerecognised 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 respectof goodwill above) At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangibleassets with finite useful lives to determine whether there is any indication that those assets have suffered animpairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order todetermine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amountof an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which theasset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are alsoallocated to individual cash-generating units, or otherwise they are allocated to the smallest group ofcash-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 forimpairment 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 inuse, the estimated future cash flows are discounted to their present value using a pre-tax discount rate thatreflects current market assessments of the time value of money and the risks specific to the asset for whichthe 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 carryingamount, 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) isincreased to the revised estimate of its recoverable amount, but so that the increased carrying amount does notexceed 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 profitor loss. Inventories Inventories include consumables and parts for toll road operation and maintenance and those commodities held forsale arising from the securities business. Inventories are stated at the lower of cost and net realisable value. Costs of inventories are calculated usingthe weighted average method. Net realisable value represents the estimated selling price for inventories lessall 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 andrewards 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 ofthe relevant lease. The Group as lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except whereanother systematic basis is more representative of the time pattern in which economic benefits from the leasedasset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the periodin which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognisedas a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on astraight-line basis, except where another systematic basis is more representative of the time pattern in whicheconomic 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 asa finance or an operating lease separately based on the assessment as to whether substantially all the risks andrewards incidental to ownership of each element have been transferred to the Group, unless it is clear that bothelements 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 thebuilding elements in proportion to the relative fair values of the leasehold interests in the land element andbuilding 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 isaccounted for as an operating lease is presented as 'prepaid lease payments' in the consolidated statement offinancial position and is amortised over the lease term on a straight-line basis. When the lease payments cannotbe allocated reliably between the land and building elements, the entire lease is generally classified as afinance 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 theentity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at thedates of the transactions. At the end of the reporting period, monetary items denominated in foreign currenciesare retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms ofhistorical 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, whichare 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 intendeduse or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure onqualifying 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 haverendered 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 beforetax' as reported in the consolidated statement of profit or loss and other comprehensive income because of itemsof income or expense that are taxable or deductible in other years and items that are never taxable ordeductible. The Group's liability for current tax is calculated using tax rates that have been enacted orsubstantively enacted by the end of the reporting period. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities inthe 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 aregenerally recognised for all deductible temporary differences to the extent that it is probable that taxableprofits will be available against which those deductible temporary differences can be utilised. Such deferredtax assets and liabilities are not recognised if the temporary difference arises from goodwill or from theinitial recognition (other than in a business combination) of other assets and liabilities in a transaction thataffects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences associated with investments insubsidiaries and interests in associates and a joint venture, except where the Group is able to control thereversal of the temporary difference and it is probable that the temporary difference will not reverse in theforeseeable future. Deferred tax assets arising from deductible temporary differences associated with suchinvestments and interests are only recognised to the extent that it is probable that there will be sufficienttaxable profits against which to utilise the benefits of the temporary differences and they are expected toreverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to theextent that it is no longer probable that sufficient taxable profits will be available to allow all or part ofthe asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period inwhich the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enactedor 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 themanner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amountof its assets and liabilities. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognisedin other comprehensive income or directly in equity, in which case, the current and deferred tax are alsorecognised 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 contractualprovisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that aredirectly attributable to the acquisition or issue of financial assets and financial liabilities (other thanfinancial assets or financial liabilities at fair value through profit or loss) are added to or deducted fromthe 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 atfair 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 throughprofit or loss ("FVTPL"), available-for-sale ("AFS") financial assets and loans and receivables. Theclassification depends on the nature and purpose of the financial assets and is determined at the time ofinitial recognition. All regular way purchases or sales of financial assets are recognised and derecognisedon a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that requiredelivery 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 ofallocating interest income over the relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash receipts (including all fees and points paid or received that form anintegral part of the effective interest rate, transaction costs and other premiums or discounts) throughthe expected life of the debt instrument, or, where appropriate, a shorter period, to the net carryingamount on initial recognition. Interest income is recognised on an effective interest basis for debt instruments other than thosefinancial 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 remeasurementrecognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend orinterest 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 andreceivables, (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 tradedin an active market are measured at fair value at the end of each reporting period. Changes in thecarrying amount of AFS monetary financial assets relating to interest income calculated using theeffective 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 comprehensiveincome and accumulated under the heading of investments revaluation reserve. When the investment isdisposed of or is determined to be impaired, the cumulative gain or loss previously accumulated inthe investments revaluation reserve is reclassified to profit or loss (see the accounting policy inrespect of impairment loss on financial assets below). Dividends on AFS equity instruments are recognised in profit or loss when the Group's right to receivethe dividends is established. AFS equity investments that do not have a quoted market price in an active market and whose fair valuecannot be reliably measured and derivatives that are linked to and must be settled by delivery of suchunquoted equity investments are measured at cost less any identified impairment losses at the end ofeach reporting period (see the accounting policy in respect of impairment loss on financial assetsbelow). Loan and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that arenot quoted in an active market. Loans and receivables (including trade receivables, loans tocustomers arising from margin financing business, other receivables, financial assets held underresale agreements, bank balances held on behalf of customers and bank balances and cash) are measuredat amortised cost using the effective interest method, less any identified impairment losses (seeaccounting policy on impairment losses on financial assets below). In particular, for financial assets held under resale agreements where the Group acquires financialassets which will be resold at a predetermined price at a future date under resale agreements, thecash advanced by the Group is recognised as secured loans and receivables and presented as amountsheld under resale agreements in the consolidated statement of financial position. The differencebetween the purchase and resale consideration is amortised over the period of the respectiveagreements using the effective interest method and is included in interest income. Impairment loss on financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the endof each reporting period. Financial assets are considered to be impaired when there is objectiveevidence that, as a result of one or more events that occurred after the initial recognition of thefinancial 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 securitybelow 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 thedifference between the asset's carrying amount and the present value of the estimated future cashflows, 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 differencebetween the asset's carrying amount and the present value of the estimated future cash flowsdiscounted at the current market rate of return for a similar financial asset. Such impairmentloss 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 allfinancial assets with the exception of trade receivables and loans to customers arising from marginfinancing 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 allowanceaccount. Subsequent recoveries of amounts previously written off are credited against the allowanceaccount. 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 tocustomers to assess impairment on a periodic basis. In determining whether an impairment loss should berecognised in profit or loss, the Group reviews the value of the securities collateral received from thecustomers firstly on individual basis, then on collective basis in determining the impairment. Themethodology and assumptions used for estimating both the amount and timing of future cash flows are reviewedregularly 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 inother 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 lossdecreases and the decrease can be related objectively to an event occurring after the impairment losses wasrecognised, the previously recognised impairment loss is reversed through profit or loss to the extent thatthe carrying amount of the investment at the date the impairment is reversed does not exceed what theamortised 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 notreversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised inother comprehensive income and accumulated under the heading of investments revaluation reserve. In respectof AFS debt investments, impairment losses are subsequently reversed through profit or loss if an increase inthe fair value of the investment can be objectively related to an event occurring after the recognition ofthe 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 thesubstance of the contractual arrangements entered into and the definitions of a financial liability and anequity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group afterdeducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceedsreceived, net of direct issue costs. Other financial liabilities Other financial liabilities (including accounts payable to customers arising from securities business, tradepayables, other payables, dividends payable, long term bonds, bank and other borrowings, placements fromother financial institution and loan note) are subsequently measured at amortised cost using the effectiveinterest method. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial liability and ofallocating interest expense over the relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash payments (including all fee and points paid or received that form an integralpart of the effective interest rate, transaction costs and other premium or discounts) through the expectedlife of the financial liability, or, where appropriate, a shorter period, to the net carrying amount oninitial recognition. Interest expense is recognised on an effective interest basis other than financial liabilities classified asat FVTPL. Financial assets held under resale agreements Financial assets held under agreements to resell are recorded as "financial assets held under resaleagreements". Financial assets held under resale agreements are initially measured at fair value and aresubsequently measured at amortised cost using the effective interest method. Financial assets that have been purchased under agreements with a commitment to resell at a specific futuredate are not recognised in the consolidated statement of financial position. The cost of purchasing suchassets is presented under "financial assets held under resale agreements" in the consolidated statement offinancial position. The difference between the purchasing price and reselling price is recognised as interestincome during the term of the agreement using the effective interest method. Derivative financial instrument Derivatives are initially recognised at fair value at the date when derivative contracts are entered into andare subsequently remeasured to their fair value at the end of the each reporting period. The resulting gainor loss is recognised in profit or loss immediately. Securities lending arrangement The Group lends investment securities to clients and requires cash and/or equity securities from customersheld as collaterals under such securities lending agreements. The cash collaterals arisen from these areincluded in "accounts payable to customers arising from securities business". For those securities held bythe Group and lent to client that do not result in the derecognition of financial assets, they are includedin AFS investments. Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimbursethe holder for a loss it incurs because a specified debtor fails to make payment when due in accordance withthe terms of a debt instrument. Financial guarantee contracts issued by the Group are initially measured attheir 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 assetexpire, or when it transfers the financial asset and substantially all the risks and rewards of ownership ofthe asset to another entity. If the Group neither transfers nor retains substantially all the risks andrewards of ownership and continues to control the transferred asset, the Group continues to recognise theasset to the extent of its continuing involvement and recognises an associated liability. If the Groupretains substantially all the risks and rewards of ownership of a transferred financial asset, the Groupcontinues to recognise the financial asset and also recognises a collateralised borrowing for the proceedsreceived. On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount andthe sum of the consideration received and receivable and the cumulative gain or loss that had been recognisedin 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 andthe 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 apast event, it is probable that the Group will be required to settle the obligation, and a reliable estimatecan 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 presentobligation at the end of the reporting period, taking into account the risks and uncertainties surroundingthe 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 ismaterial). When some or all of the economic benefits required to settle a provision are expected to be recovered from athird party, a receivable is recognised as an asset if it is virtually certain that reimbursement will bereceived and the amount of the receivable can be measured reliably. 5. KEY SOURCES OF ESTIMATION UNCERTAINTY The following are the key assumptions concerning the future, and other key sources of estimation uncertaintyat the end of the reporting period, that have a significant risk of causing a material adjustment to thecarrying 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-generatingunits to which goodwill has been allocated. The value in use calculation requires the Group to estimate thefuture cash flows expected to arise from the cash-generating unit and a suitable discount rate in order tocalculate the present value. Where the actual future cash flows are less than expected, a material impairmentloss may arise. As at December 31, 2013, the carrying amount of goodwill is Rmb86,867,000 (withoutaccumulated impairment loss) (2012: Rmb86,867,000 (without accumulated impairment loss)). Details of theimpairment testing are disclosed in Note 25. Estimated impairment of intangible assets with indefinite useful lives Determining whether intangible assets with indefinite useful lives are impaired requires an estimation of thevalue in use of themselves or the cash-generating unit to which they belong. The value in use calculationrequires the Group to estimate the future cash flows expected to arise from themselves or the cash-generatingunit to which they belong and a suitable discount rate in order to calculate the present value. Where theactual future cash flows are less than expected, a material impairment loss may arise. As at December 31,2013, the carrying amounts of intangible assets with indefinite useful lives were Rmb66,563,000 (withoutaccumulated impairment loss) (2012: Rmb66,563,000 (without accumulated impairment loss)). Details of theimpairment testing are disclosed in Note 25. 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 lossif the carrying amount of the Group's interest in a joint venture or associates are lower than theirrespective recoverable amount. The Group tests for impairment for the interest in a joint venture andassociate whenever there is an indication that the asset may be impaired. The recoverable amounts have beendetermined based on the higher of the fair value less costs of disposal and value in use calculations. Thesecalculations 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 atDecember 31, 2013, the carrying amount of interest in a joint venture was Rmb333,944,000 (without accumulatedimpairment loss) (2012: Rmb369,954,000 (without accumulated impairment loss)), and the carrying amount ofinterest in associates was Rmb574,733,000 (with accumulated impairment loss of Rmb11,979,000) (2012:Rmb280,057,000 (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 theguarantee to determine the probability of incurring a claim by the counterparty to the Company to estimatefair value or the respective obligation under the financial guarantee contract. Based on expectations at theend of the reporting period, the Group considers that it is more likely than not that no amount will bepayable under the arrangement. However, this estimate is subject to change depending on the probability ofthe counterparty claiming under the guarantee which is a function of the likelihood that the financialreceivables held by the counterparty which are guaranteed suffer credit losses. In respect of the financialguarantee contract in the amount of Rmb1,100,000,000 provided to a joint venture of the Group, the directorsof the Company considered that the fair value of the financial guarantee obligation was insignificant as atDecember 31, 2013. Fair value measurements and valuation processes Some of the Group's assets and liabilities are measured at fair value for financial reporting purposes. Theboard of directors of the Group has set up a valuation team, which is headed up by the Chief FinancialOfficer ("CFO") of the Group, to determine the appropriate valuation techniques and inputs for fair valuemeasurements. In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extentit is available, Where Level 1 inputs are not available, the Group engages third party qualified valuers toperform the valuation. The CFO works closely with the qualified external valuers to establish the appropriate valuation techniquesand inputs to the model. The CFO reports the valuation committee's findings to the board of directors of theGroup at the end of each reporting period to explain the cause of fluctuations in the fair value of theassets and liabilities. As at 31 December 2013, the fair value of the held-for-trading investment and available-for-sale investmentswas estimated at an asset of Rmb1,181,025,000 (2012: Rmb1,486,772,000) and Rmb414,438,000 (2012:Rmb256,899,000), respectively. 6. FINANCIAL INSTRUMENTS (a) Categories of financial instruments 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Financial assetsAFS investments -- at cost 11,000 11,000 1,000 -- at fair value 414,438 256,899 60,274Fair value through profit of loss Held for trading investments 1,181,025 1,486,772 1,260,021Loans and receivables (including cash and cash equivalents) 15,485,366 14,350,238 13,922,073Financial liabilitiesDerivative financial instrument -- -- 6,426Amortised cost 11,452,872 11,021,034 9,468,671 (b) Financial risk management objectives and policies The Group's major financial instruments include AFS investments, held for trading investments, trade andother receivables, loans to customers arising from margin financing business, financial assets held underresale agreements, bank balances and cash, bank balances held on behalf of customers, trade and otherpayables, placements from other financial institution, accounts payable to customers arising from securitiesbusiness, bank and other borrowings, dividends payable, long-term bonds, loan note and financial guarantee.Details of the financial instruments are disclosed in respective notes. The risks associated with thesefinancial instruments include market risk (interest rate risk, currency risk and other price risk), creditrisk and liquidity risk. The policies on how to mitigate these risks are set out below. The managementmanages and monitors these exposures to ensure appropriate measures are implemented on a timely and effectivemanner. Market risk (i) Interest rate risk The Group is exposed to fair value interest rate risk in relation to loans to customers arising from marginfinancing business, fixed-rate entrusted loans, financial assets held under resale agreements, fixed-ratetime deposits, fixed-rate bank and other borrowings, long-term bonds and short-term loan note (see notes 30,31, 33, 35, 40, 41 and 42 for details). The Group is also exposed to cash flow interest rate risk in relation to variable-rate bank balances held onbehalf of customers, bank balances and bank and other borrowings (see Notes 34, 35 and 40 for details). The Group currently does not have an interest rate risk hedging policy as the management considers the Groupis not exposed to significant interest rate risk. The management will continue to monitor interest rate riskexposure and consider hedging against it should the need arise. The Group's exposures to interest rates on financial liabilities are detailed in the liquidity riskmanagement section of this note. Sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates fornon-derivative instruments, comprising variable-rate bank balances, bank balances held on behalf of customersand bank borrowings at the end of the reporting period. The analysis is prepared assuming the balances outstanding at the end of the reporting period wereoutstanding for the whole year. A 30 basis points (2012: 30 basis points) increase or decrease is thesensitivity rate used when reporting interest rate risk internally to key management personnel and representsmanagement's assessment of the reasonably possible change in interest rates. If interest rates had been 30 basis points (2012: 30 basis points) higher/lower and all other variables wereheld constant, the Group's post-tax profit for the year ended December 31, 2013 would haveincreased/decreased by Rmb21,679,000 (2012 (restated): Rmb21,904,000). This was mainly attributable to theGroup'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, whichexpose 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 endof the reporting date are as follows: Assets Liabilities 12/31/2013 12/31/2012 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Hong Kong dollar ("HKD") 19,395 19,460 13,933 14,228United States dollar ("USD") 65,157 68,543 36,948 40,544 Sensitivity analysis This sensitivity analysis details the Group's sensitivity to a 5% (2012: 5%) increase and decrease in RMBagainst HKD and USD. 5% (2012: 5%) is the sensitivity rate used when reporting foreign currency riskinternally to key management personnel and represents management's assessment of the reasonably possiblechange in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currencydenominated monetary items and adjusts their translation at the end of the reporting period for a 5% (2012:5%) change in foreign currency rates. If RMB had strengthened/weakened 5% (2012: 5%) against HKD, the Group'spost-tax profit for the year ended December 31, 2013 would have decreased/increased by Rmb205,000 (2012:decreased/increased by Rmb196,000). If RMB had strengthened/weakened 5% (2012: 5%) against USD, the Group'spost-tax profit for the year ended December 31, 2013 would have decreased/increased by Rmb1,058,000 (2012(restated): Rmb1,050,000). (iii) Other price risk The Group is exposed to equity and debt security price risk in relation to its held for trading and AFSlisted investments. The Group currently does not have a price risk hedging policy and the management will continue to monitorprice 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 pricerisks at the reporting date. If the prices of the respective equity and debt instruments had been 5% (2012: 5%) higher/lower, -- post-tax profit for the year ended December 31, 2013 would have increased/decreased by Rmb44,288,000 (2012 (restated): Rmb55,754,000) as a result of the changes in fair value of held for trading investments; and -- investment valuation reserve would have increased by Rmb15,541,000 (2012 (restated): Rmb9,634,000) 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, 2013, the Group's maximum exposure to credit risk which will cause a financial loss to theGroup due to failure to discharge an obligation by the counterparties provided by the Group is arising fromthe carrying amount of the respective recognised financial assets as stated in the consolidated statement offinancial position and the amount of contingent liability in relation to financial guarantee issued by theGroup as disclosed in note 50. The Group reviews the recoverable amount of each individual trade debt and entrusted loan receivables at theend of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. Inthis 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'strade receivable balance for toll operation business are toll receivables from the government-operatedorganisation. The Group also provides clients with margin financing business, and have financial assets held under resaleagreements 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, whichwas carried out by Zheshang Securities., Ltd. ("Zheshang Securities"), Zheshang Securities has appointed agroup of authorised persons who are charged with the responsibility of determination of credit limits, creditapprovals 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 backgroundof the client. In addition, Zheshang Securities reviews the recoverable amount of each individual at the endof the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. Margincalls are made when the trades of margin clients exceed their respective limits. Any such excess is requiredto be made good within the next trading day. Failure to meet margin calls will result in the liquidation ofthe customers' position. Zheshang Securities seeks to maintain strict control over its outstandingreceivables. It will also adhere to the Group's policies and procedures to conduct periodic credit assessmentand 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 itsproprietary trading operation, including the investments in available-for-sale investments and held fortrading investments. The Investment Committee assesses the financial performance of the issuers to ensurethat the issuers can satisfy the repayment of the principal and interest as they fall due. It has setporfolio 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 ofpotential credit deterioration. The credit risk on liquid funds is limited because the counterparties are state-owned banks or banks withhigh credit ratings assigned by international credit-rating agencies. As at December 31, 2013, other than the concentration of credit risk on trade receivables, entrusted loanreceivables, financial investment products and financial guarantee contract amounting to Rmb101,428,000 (2012(restated): Rmb64,447,000), Rmb455,400,000 (2012: Rmb639,651,000), Rmb168,000,000 (2012 (restated):Rmb103,432,000) and Rmb1,100,000,000 (2012: nil) as disclosed in Notes 29, 31 and 50, respectively, of whichthese balances were only limited and concentrated to a few counterparties, the Group does not have any othersignificant concentration of credit risk. There are also no concentration risks on its margin financing business and financial assets held under resaleagreements as at December 31, 2013 and December 31 2012 respectively as the Group has a large number ofclients 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, 2013 were denominated in Rmb which is not a freelyconvertible currency in the international market. The exchange rate of Rmb is regulated by the PRC governmentand the remittance of these Rmb funds out of the PRC is subject to foreign exchange controls imposed by thePRC government. The Group closely monitors its cash position resulting from its operations and maintains a level of cash andcash equivalents deemed adequate by the management to enable the Group to meet in full its financialobligations as they fall due for the foreseeable future. The following table details the Group's remaining contractual maturity for its non-derivative financialliabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities basedon the earliest date on which the Group can be required to pay. The table includes both interest andprincipal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derivedfrom interest rate curve at the end of the reporting period. Liquidity tables Weighted On demand Total undis- Carrying average or Less than 3 months - 1 - 3 counted amount at interest rate 3 months 1 year year 3 - 5 years +5 years cash flows 31/12/2013 % Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 2013Non-derivative financial liabilitiesPlacements from other financial institution 7.02 316,456 -- -- -- -- 316,456 310,000Accounts payable to customers arising from securities business -- 8,167,103 -- -- -- -- 8,167,103 8,167,103Trade payables -- 421,994 -- -- -- -- 421,994 421,994Other payables -- 618,799 -- -- -- -- 618,799 618,799Dividends payable -- 94,976 -- -- -- -- 94,976 94,976Bank and other borrowings -- fixed rate 5.04 442,618 -- -- -- -- 442,618 440,000 -- variable rate 6.42 105,653 14,404 315,329 -- -- 435,386 400,000Short-term loan note 5.50 1,013,712 -- -- -- -- 1,013,712 1,000,000Financial guarantee -- 1,100,000 -- -- -- -- 1,100,000 -------------------------------------------------------------------------------------------------------------------- 12,281,311 14,404 315,329 -- -- 12,611,044 11,452,872------------------------------------------------------------------------------------------------------------------ 2012 (Restated)Non-derivative financial liabilitiesAccounts payable to customers arising from securities business 7,481,819 -- -- -- -- 7,481,819 7,481,819Trade payables -- 371,006 37,606 -- -- -- 408,612 408,612Other payables -- 695,605 -- -- -- -- 695,605 695,605Dividends payable -- 94,998 -- -- -- -- 94,998 94,998Bank and other borrowings -- fixed rate 5.18 2,331 6,993 182,387 -- -- 191,711 180,000 -- variable rate 6.16 326,473 384,353 442,382 101,006 -- 1,254,214 1,160,000Long-term bonds -- fixed rate 4.29 1,042,900 -- -- -- -- 1,042,900 1,000,000------------------------------------------------------------------------------------------------------------------ 10,015,132 428,952 624,769 101,006 -- 11,169,859 11,021,034------------------------------------------------------------------------------------------------------------------ The amounts included above for financial guarantee contracts are the maximum amounts the Group could be required tosettle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to theguarantee. Based on expectations at the end of the reporting period, the Group considers that it is more likely thannot that no amount will be payable under the arrangement. However, this estimate is subject to change depending onthe probability of the counterparty claiming under the guarantee which is a function of the likelihood that thefinancial 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 subjectto change if changes in variable interest rates differ to those estimates of the interest rates determined at the endof the reporting period. As at December 31 2013, the Group has not entered into any master netting arrangements with counterparties. Thecollaterals of which, such as financial assets held under resale agreement, loans to customers arising from marginfinancing business, placements from other financial institution and etc., are disclosed in the corresponding notes,which are generally not on the net basis in financial position. However, the risk exposure associated with favourablecontracts is reduced by a master netting arrangement to the extent that if a default occurs, all amounts with thecounterparty are terminated and settled on a net basis. (c) Fair value measurements of financial instruments This note provides information about how the Group determines fair values of various financial assets and financialliabilities. Fair value measurements recognised in the statement of financial position that are measured at fair value on arecurring basis Some of the Group's financial assets and financial liabilities are measured at fair value at the end of each reportingperiod. The following table gives information about how the fair values of these financial assets and financialliabilities are determined (in particular, the valuation technique(s) and inputs used). Basis of fair value Relationship of measurement/ Significant unobservable Fair value Fair value valuation technique(s) unobservable inputs to fairFinancial assets Classified as as at hierarchy and key input(s) input(s) value 31/12/2013 Rmb'000 1) Equity investments Held for Assets - Level 1 Quoted bid prices in N/A N/A listed in exchange trading 78,658 an active market. investments 2) Equity securities Held for Assets - Level 2 Shares of the net N/A N/A and Open-ended trading 5,242 assets of the equity funds investments 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. 3) Fund listed in Available-for- Assets - Level 1 Quoted bid prices in N/A N/A exchange sale 44,574 an active market. investments 4) Debt investments Held for Assets - Level 1 Quoted bid prices in N/A N/A listed in trading 443,810 an active market. exchange and investments debt investment in interbank Available-for- Assets - market sale 127,000 investments Held for Assets - Level 2 Discounted cash flow. N/A N/A trading 653,315 Future cash flows are investments estimated based on applying the interest yield curves of different types of bonds as the key parameter. 5) Investments in Available-for- Assets - Level 2 Shares of the net N/A N/A structured sale 126,948 assets of the products, products investments 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. Assets - Level 3 Discounted cash flow. Actual yield The higher 74,402 Future cash flows are of the the actual estimated based on underlying yield, the expected applicable investment higher the yield of the underlying portfolio fair investment portfolio and the value and adjustments of discount related expenses, rate discounted at a rate that reflects the credit risk of various counterparties 6) Investments in Available-for- Assets - Level 3 Discounted cash flow. Actual yield The higher trust products sale 41,514 flows are estimated of the the actual investments Future cash based on underlying yield, the expected applicable investment higher the yield of the underlying portfolio fair investment portfolio and the value and adjustments of discount related expenses, rate discounted at a rate that reflects the credit risk of various counterparties 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 securitiesa. Manufacturing 43,720 -- -- 43,720b. Financial services 15,482 -- -- 15,482c. Information technology service 6,396 -- -- 6,396d. Energy and water services 3,057 -- -- 3,057e. Transportation, storage and postal services 1,218 -- -- 1,218f. Real Estate 2,002 -- -- 2,002g. Construction 1,539 -- -- 1,539h. Mining 2,937 -- -- 2,937i. Wholesaling 1,170 -- -- 1,170j. Agriculture, forestry, fishing and animal husbandry 366 -- -- 366k. Others 771 -- -- 771-------------------------------------------------------------------------------------------- 78,658 -- -- 78,658---------------------------------------------------------------------------------------------- Open-ended fund -- 5,242 -- 5,242---------------------------------------------------------------------------------------------- Corporate 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-------------------------------------------------------------------------------------------- As at December 31, 2012 Level 1 Level 2 Level 3 Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 Financial assets at FVTPLHeld for trading investments 1,486,772 -- -- 1,486,772Available-for-sale financial assetsListed equity and debt securities 256,899 -- -- 256,899 There were no transfers between instruments in Level 1 and Level 2 in the current and prioryears. The following table represents the changes in Level 3 available-for-sale investments duringthe year ended December 31, 2013. Structured Trust products products Total Rmb'000 Rmb'000 Rmb'000 At beginning of the year -- -- --Addition 74,810 41,000 115,810Total (loss) gain recognised in other comprehensive income (408) 514 106At end of the year 74,402 41,514 115,916 7. CAPITAL RISK MANAGEMENT The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern whilemaximising the return to shareholders through the optimisation of the debt and equity balance. The Group's overallstrategy remains unchanged from prior year. The capital structure of the Group consists of net debt, which includes the borrowings disclosed in Notes 40, 41 and42, net of cash and cash equivalents and equity attributable to owners of the Company, comprising issued sharecapital, reserves and retained profits. The directors of the Company review the capital structure on a regular basis. As part of this review, the directorsconsider the cost of capital and the risks associated with each class of capital. Based on recommendations of thedirectors, the Group will balance its overall capital structure through the payment of dividends and new share issuesas well as the issue of new debt or the redemption of existing debt. 8. SEGMENT INFORMATION Information reported to the Chief Executive Officer of the Company, being the chief operating decision maker, for thepurposes of resource allocation and assessment of segment performance focuses on types of goods or services deliveredor 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, 2013 Toll related operation Service Other toll area and road Toll advertising 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-------------------------------------------------------------------------------------------------------------------- For the year ended December 31, 2012 (Restated) Toll related operation Service Other toll area and road Toll advertising 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 3,772,395 2,028,883 -- 1,126,137 6,927,415 -- 6,927,415 Inter-segment sales -- 7,919 -- -- 7,919 (7,919) ----------------------------------------------------------------------------------------------------------------------Total 3,772,395 2,036,802 -- 1,126,137 6,935,334 (7,919) 6,927,415--------------------------------------------------------------------------------------------------------------------Segment profit 1,598,710 62,241 -- 165,669 1,826,620 -- 1,826,620-------------------------------------------------------------------------------------------------------------------- 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 chiefoperating decision maker, the Group's Chief Executive Officer, for the purposes of resource allocation and performanceassessment. 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 12/31/2013 12/31/2012 01/01/2012 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) (Restated) (Restated)------------------------------------------------------------------------------------------------------- Toll operation 14,784,868 17,404,526 17,679,206 (2,082,988) (3,836,988) (4,299,866)Service area and advertising business 926,171 647,043 695,675 (234,708) (157,674) (231,303)Other toll road related service 310,818 -- -- -- -- --Securities operation 15,980,470 13,346,876 12,812,423 (10,102,539) (7,868,969) (7,496,034)-------------------------------------------------------------------------------------------------------Total segment assets (liabilities) 32,002,327 31,398,445 31,187,304 (12,420,235) (11,863,631) (12,027,203)Goodwill 86,867 86,867 86,867 -- -- ---------------------------------------------------------------------------------------------------------Consolidated assets (liabilities) 32,089,194 31,485,312 31,274,171 (12,420,235) (11,863,631) (12,027,203)------------------------------------------------------------------------------------------------------- Segment assets and segment liabilities represent the assets and liabilities of the subsidiaries operating in therespective reportable and operating segment. Other segment information Amounts included in the measure of segment profit or segment assets: 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 585,570 18,252 (10) 152,949 756,761Interest income 82,114 7,457 -- 6,351 95,922Interest expense 84,764 -- -- 10,397 95,161Interests in associates -- 224,035 310,818 39,880 574,733Interest in a joint venture 333,944 -- -- -- 333,944Share of profit (loss) of associates -- 40 27,669 (6,172) 21,537Share of loss of a joint venture (36,010) -- -- -- (36,010)Gain on fair value changes on held for trading investments 14,242 -- -- 84,040 98,282Additions to non-current assets (Note) 236,487 62,072 280,000 43,697 622,256Depreciation and amortisation 900,966 31,500 -- 90,057 1,022,523Loss (gain) on disposal of property, plant and equipment 2,798 (783) -- 134 2,149------------------------------------------------------------------------------------------------- For the year ended December 31, 2012 (Restated) 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 556,468 18,078 -- 60,123 634,669Interest income 141,684 10,693 -- 29,282 181,659Interest expense 139,519 246 -- -- 139,765Interests in associates -- 234,005 -- 46,052 280,057Interest in a joint venture 369,954 -- -- -- 369,954Share of profit (loss) of associates -- 7,367 -- (11,880) (4,513)Share of loss of a joint venture (3,516) -- -- -- (3,516)Gain on fair value changes on held for trading investments 10,290 -- -- 89,318 99,608Additions to non-current assets (Note) 617,984 14,333 -- 105,406 737,723Depreciation and amortisation 880,323 28,624 -- 96,298 1,005,245Loss on disposal of property, plant and equipment 5,409 1,223 -- 250 6,882------------------------------------------------------------------------------------------------- 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 12/31/2013 12/31/2012 Rmb'000 Rmb'000 (Restated)----------------------------------------------------------------------------------------------------Toll operation revenue 4,019,867 3,772,395Service area businesses revenue (mainly sales of goods) 2,054,543 1,937,955Advertising business revenue 103,926 90,473Commission income from securities operation 1,197,315 832,213Interest income from securities operation 454,017 293,924Others 21,447 455---------------------------------------------------------------------------------------------------- 7,851,115 6,927,415---------------------------------------------------------------------------------------------------- Geographical information The Group's operations are located in the PRC (country of domicile). All non-current assets of the Group are locatedin 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, 2013 and 2012, there are no individual customer with sales over 10% of the totalsales of the Group. Year ended Year ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000----------------------------------------------------------------------------------------------------Gain on fair value changes on held for trading investments 98,282 99,608Cumulative gain reclassified from equity on disposal of AFS investments 1,381 175---------------------------------------------------------------------------------------------------- 99,663 99,783---------------------------------------------------------------------------------------------------- The above securities investment gains wholly contributed from listed investments in both years. 10. OTHER INCOME Year ended Year ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 (Restated)----------------------------------------------------------------------------------------------------Interest income on bank balances, entrusted loan receivables and financial products investment 95,922 162,292Other interest income (Note 24) -- 19,367Rental income (Note) 88,739 72,796Handling fee income 2,781 5,685Towing income 10,155 9,303Gain on deregistration of an associate 16 --Gain on disposal of an associate -- 12Exchange loss, net (957) (2,155)Fair value gain on derivative financial instrument -- 2,841Loss on commodity trading, net (1,351) --Others 45,751 21,849---------------------------------------------------------------------------------------------------- 241,056 291,990---------------------------------------------------------------------------------------------------- Note: Rental income included contingent rent of approximately Rmb39,102,000(2012: Rmb33,697,000) during the year. 11. FINANCE COSTS Year ended Year ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 (Restated)----------------------------------------------------------------------------------------------------Interest expenses wholly repayable within 5 years:Bank and other borrowings 87,288 96,865Long-term bonds 2,700 42,900Short-term loan note 10,397 --Total borrowing costs 100,385 139,765Less: Amount capitalised in the cost of qualifying assets (Note) (5,224) ------------------------------------------------------------------------------------------------------ 95,161 139,765---------------------------------------------------------------------------------------------------- Note: Borrowing costs capitalised during the year ended 31 December 2013 includes all the interest income and interest expenses arising from the specific borrowing to the expenditure on qualifying assets. 12. PROFIT BEFORE TAX The Group's profit before tax has been arrived at after charging (crediting): Year ended Year ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 (Restated)----------------------------------------------------------------------------------------------------Depreciation of property, plant and equipment 190,690 179,635Amortisation of prepaid lease payments 2,164 2,155Amortisation of expressway operating rights (included in operating costs) 811,025 807,207Amortisation of other intangible assets (included in operating costs) 18,644 16,248----------------------------------------------------------------------------------------------------Total depreciation and amortisation 1,022,523 1,005,245----------------------------------------------------------------------------------------------------Staff costs (including directors and supervisors): -- Wages and salaries 761,109 639,842 -- Pension scheme contributions 70,657 64,377---------------------------------------------------------------------------------------------------- 831,766 704,219----------------------------------------------------------------------------------------------------Auditors' remuneration 8,125 5,971Allowance for loans to customers arising from margin financing business 8,477 --Allowance for trade receivables 7 125Reversal of allowance for trade receivables (291) --Loss on disposal of property, plant and equipment 2,149 6,882Cost of inventories recognised as an expense 1,889,783 1,786,678Fair value gain on derivative financial instrument -- (2,841)---------------------------------------------------------------------------------------------------- 13. INCOME TAX EXPENSE Year ended Year ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 (Restated)----------------------------------------------------------------------------------------------------Current tax: PRC Enterprise Income Tax 821,118 655,910 Deferred tax (Note 43) (64,357) (21,241)---------------------------------------------------------------------------------------------------- 756,761 634,669---------------------------------------------------------------------------------------------------- Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, thetax 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 Kongduring the year. The tax charge for the year can be reconciled to the profit before tax per the consolidated statement of profit orloss and other comprehensive income as follows: Year ended Year ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 (Restated)----------------------------------------------------------------------------------------------------Profit before tax 2,971,738 2,461,289Tax at the PRC enterprise income tax rate of 25% (2012:25%) 742,935 615,322Tax effect of share of (profit) loss of associates (5,384) 1,128Tax effect of share of loss of a joint venture 9,003 879Tax effect of income not taxable for tax purposes -- (17)Tax effect of expenses not deductible for tax purposes 10,207 17,357----------------------------------------------------------------------------------------------------Tax charge for the year 756,761 634,669---------------------------------------------------------------------------------------------------- 14. OTHER COMPREHENSIVE INCOME Tax effect relating to other comprehensive income as follows: Year ended 12/31/2013 Year ended 12/31/2012 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 4,865 (1,216) 3,649 4,800 (1,200) 3,600Reclassification adjustments for the cumulative gain included in profit or loss upon disposal of AFS financial assets (1,381) 345 (1,036) (175) 44 (131)-------------------------------------------------------------------------------------------------------Total 3,484 (871) 2,613 4,625 (1,156) 3,469------------------------------------------------------------------------------------------------------- 15. DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENTS' EMOLUMENTS The emoluments paid or payable to each of the 9 (2012: 15) directors and 5 (2012: 8) supervisors, please visit:http://photos.prnasia.com/prnk/20140401/8521401858-e Notes: (i) Resigned on June 11, 2012(ii) Appointed on June 11, 2012.(iii) Ms. Luo Jianhu is also the Chief Executive of the Company and her emoluments disclosed above include those services rendered by her as the Chief Executive.(iv) Resigned on June 11, 2012 and remained as the senior management of the Company The emoluments of each of the directors and supervisors were below HK$1,000,000 (equivalent to Rmb786,200 (2012:Rmb811,000)) in both years. Bonuses paid to directors and supervisors are performance-rated and are determined by theRemuneration Committee of the Company, which comprises three independent non-executive directors. No directors or supervisors waived any emoluments and no incentive was paid to any directors or supervisors as aninducement to join the Company and no compensation for loss of office was paid to any directors, supervisors, pastdirectors or past supervisors during both years. Bonuses are determined by reference to the individual performance ofthe directors. The emoluments paid or payable to each of the 5 (2012: 5) senior managements are as follows: Zhang Fang Wu Zheng Zhang Jingzhong Zhexing Junyi Hui Xiuhua Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Note i) (Note ii)-------------------------------------------------------------------------------------------------------2013Salaries, allowances and benefits in kind 226 218 226 161 153 984Bonuses paid and payable 339 328 339 241 229 1,476Pension scheme contributions 17 17 17 17 17 85-------------------------------------------------------------------------------------------------------Total emoluments 582 563 582 419 399 2,545-------------------------------------------------------------------------------------------------------2012Salaries, allowances and benefits in kind 214 420 420 321 251 1,626Bonuses paid and payable 82 135 135 98 103 553Pension scheme contributions 12 24 24 24 24 108-------------------------------------------------------------------------------------------------------Total emoluments 308 579 579 443 378 2,287------------------------------------------------------------------------------------------------------- Notes: (i) Resigned as director and remained as senior management on June 11, 2012.(ii) Resigned as supervisor and remainined as senior management on June 11, 2012. The emoluments of each of the senior managements were below HK$1,000,000 (equivalent to Rmb786,200 (2012: Rmb811,000))in both years. Bonuses paid to senior managements are performance-rated and are determined by the Board of Directorsof the Company. No senior management waived any emoluments and no incentive was paid to any senior management as an inducement to jointhe Company and no compensation for loss of office was paid to any senior management, past senior management duringboth years. Bonuses are determined by reference to the individual performance of the senior managements. 16. EMPLOYEES' EMOLUMENTS The emoluments of the five highest paid individuals in the Group are as follows: Year ended Year ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000----------------------------------------------------------------------------------------------------Salaries, allowances and benefits in kind 8,432 6,680Bonuses paid and payable (Note) 9,287 16,315Pension scheme contributions 137 126---------------------------------------------------------------------------------------------------- 17,856 23,121---------------------------------------------------------------------------------------------------- Note: The bonuses paid and payable are determined by reference to the performance of the relevant businessof the Group for the years ended December 31, 2013 and 2012. No any emoluments and no incentive was waived as an inducement to join the Company and nocompensation for loss of office was paid to any five highest paid individuals in the Group duringboth years. Bonuses are determined by reference to the individual performance of the five highestpaid individuals in the Group. The five individuals with the highest emoluments in the Group during the year included five (2012:five) non-director employees. Their emoluments are within the following bands: No. of individuals Year ended Year ended 12/31/2013 12/31/2012----------------------------------------------------------------------------------------------------HK$3,500,001 to HK$4,000,000 (equivalent to Rmb2,751,701 (2012: Rmb2,838,501) to Rmb3,144,800 (2012: Rmb3,244,000) 1 --HK$4,000,001 to HK$4,500,000 (equivalent to Rmb3,144,801 (2012: Rmb3,244,001) to Rmb3,537,900 (2012: Rmb3,649,500) 1 --HK$4,500,001 to HK$5,000,000 (equivalent to Rmb3,537,901 (2012: Rmb3,649,501) to Rmb3,931,000 (2012: Rmb4,055,000)) 3 1HK$5,000,001 to HK$5,500,000 (equivalent to Rmb3,931,001 (2012: Rmb4,055,001) to Rmb4,324,100 (2012: Rmb4,460,500)) -- 1HK$5,500,001 to HK$6,000,000 (equivalent to Rmb4,324,101 (2012: Rmb4,460,501) to Rmb4,717,200 (2012: Rmb4,866,000) -- 1HK$6,000,001 to HK$6,500,000 (equivalent to Rmb4,717,201 (2012: Rmb4,866,001) to Rmb5,110,300 (2012: Rmb5,271,500) -- 1HK$6,500,001 to HK$7,000,000 (equivalent to Rmb5,110,301 (2012: Rmb5,271,501) to Rmb5,503,400 (2012: Rmb5,677,000) -- 1---------------------------------------------------------------------------------------------------- 17. DIVIDENDS Year ended Year ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000----------------------------------------------------------------------------------------------------Dividends recognised as distribution during the year: 2013 Interim -- Rmb6 cents (2012: 2012 interim Rmb6 cents) per share 260,587 260,5872012 Final -- Rmb24 cents (2012: 2011 Final Rmb25 cents) per share 1,042,347 1,085,779---------------------------------------------------------------------------------------------------- 1,302,934 1,346,366---------------------------------------------------------------------------------------------------- The final dividend of Rmb25 cents per share in respect of the year ended December 31, 2013 (2012:final dividend of Rmb24 cents per share in respect of the year ended December 31, 2012) has beenproposed by the directors and is subject to approval by the shareholders in the annual generalmeeting. 18. EARNINGS PER SHARE The calculation of the basic earnings per share is based on profit for the yearattributable to owners of the Company of Rmb1,907,470,000 (2012 (Restated):Rmb1,649,484,000) and the 4,343,114,500 (2012: 4,343,114,500) ordinary sharesin issue during the year. Diluted earnings per share presented is the same as basic earnings per share asthere were no potential ordinary shares outstanding for the years endedDecember 31, 2013 and 2012. 19. 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 January1, 2012 (Originallystated) 523,284 509,936 356,146 196,404 401,083 243,425 2,230,278 Mergeraccountingrestatement 60,812 203,510 110,266 8,428 2,625 6,062 391,703 At January1, 2012(Restated) 584,096 713,446 466,412 204,832 403,708 249,487 2,621,981 Additions 21,100 19,469 79,603 22,066 42,160 54,836 239,234 Transfer - 33,482 10,306 - - (43,788) - Disposals (844) (11,869) (13,603) (6,840) (11,055) (544) (44,755) At December31, 2012(Restated) 604,352 754,528 542,718 220,058 434,813 259,991 2,816,460 Additions 10,009 30,638 12,814 24,535 27,883 218,802 324,681 Transfer 23,878 56,317 9,924 184 2,700 (93,003) - Disposals - (8,025) (6,507) (24,775) (21,864) - (61,171) At December31, 2013 638,239 833,458 558,949 220,002 443,532 385,790 3,079,970 DEPRECIATION At January1, 2012(Originallystated) 114,601 156,921 260,209 136,066 268,016 - 935,813 Mergeraccountingrestatement 5,816 36,544 53,904 5,290 1,782 - 103,336 At January1, 2012(Restated) 120,417 193,465 314,113 141,356 269,798 - 1,039,149 Provided forthe year 41,752 31,177 36,502 17,324 52,880 - 179,635 Disposals (755) (5,639) (12,851) (6,643) (10,735) - (36,623) At December31, 2012(Restated) 161,414 219,003 337,764 152,037 311,943 - 1,182,161 Provided forthe year 42,367 36,959 46,661 18,183 46,520 - 190,690 Disposals - (4,374) (6,051) (23,430) (21,068) - (54,923) At December31, 2013 203,781 251,588 378,374 146,790 337,395 - 1,317,928 CARRYINGVALUES At December31, 2013 434,458 581,870 180,575 73,212 106,137 385,790 1,762,042 At December31, 2012(Restated) 442,938 535,525 204,954 68,021 122,870 259,991 1,634,299 At January1, 2012(Restated) 463,679 519,981 152,299 63,476 133,910 249,487 1,582,832 The property, plant and equipment are located in the PRC. The carrying value of properties shown above comprises: 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Leasehold land and buildings in the PRC: Long lease 24,322 24,654 24,984 Medium-term lease 410,136 418,284 438,695 434,458 442,938 463,679 As at December 31, 2013, certain property, plant and equipment have beenpledged as collaterals to secure general banking facilities granted to theGroup. Details of which were set out in Note 49. 20. PREPAID LEASE PAYMENTS 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Analysed for reporting purposes as: Current assets 2,155 2,154 2,154 Non-current assets 68,156 70,321 72,476 70,311 72,475 74,630 The Group's prepaid lease payments comprise leasehold land in the PRC undermedium-term leases. The amount represents prepayment of rentals under operatingleases for "land use rights" of land situated in the PRC. As at December 31, 2013, certain prepaid lease payments have been pledged ascollaterals to secure general banking facilities granted to the Group. Detailsof which were set out in Note 49. 21. EXPRESSWAY OPERATING RIGHTS Rmb'000 Cost At January 1, 2012 (Originally stated) 16,756,557 Merger accounting restatement 2,691,045 At January 1, 2012 (Restated) 19,447,602 Additions 60,730 At December 31, 2012 (Restated) and at December31, 2013 19,508,332 Amortisation At January 1, 2012 (Originally stated) 5,391,619 Merger accounting restatement 587,348 At January 1, 2012 (Restated) 5,978,967 Charge for the year 807,207 At December 31, 2012 (Restated) 6,786,174 Charge for the year 811,025 At December 31, 2013 7,597,199 Carrying values At December 31, 2013 11,911,133 At December 31, 2012 (Restated) 12,722,158 At January 1, 2012 (Restated) 13,468,635 The above expressway operating rights were granted by the Zhejiang ProvincialGovernment for a period ranging from 25 to 30 years. During the expresswayconcessionary period, the Group has the rights of operations and management ofShanghai-Hangzhou-Ningbo Expressway, Shangsan Expressway and Jinhua Section ofthe Ningbo-Jinhua Expressway and the toll-collection rights thereof. The Groupis required to manage and operate the expressways in accordance with theregulations promulgated by the Ministry of Communication and relevantgovernment authorities. Upon the end of the respective concession serviceperiods, the toll expressways and their toll station facilities withoutresidual value, will be returned to the grantors at zero consideration. As at December 31, 2013 and 2012, the expressway operating rights in respect ofJinhua Section of the Ningbo- Jinhua Expressway has been pledged as collateralsto secure general banking facilities granted to the Group. Details of whichwere set out in Note 49. 22. GOODWILL Rmb'000 Cost and carrying VALUES At January 1, 2012, December 31, 2012 and December31, 2013 86,867 Particulars regarding impairment testing on goodwill are disclosed in Note 25. 23. OTHER INTANGIBLE ASSETS Securities/ Customer futures Trading bases firm seats Software Total licenses Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 COST At January 1, 2012 101,147 63,083 3,480 49,249 216,959 Additions - - - 14,287 14,287 At December 31, 2012 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 AMORTISATION At January 1, 2012 41,615 - - 17,750 59,365 Charge for the year 6,266 - - 9,982 16,248 At December 31, 2012 47,881 - - 27,732 75,613 Charge for the year 6,266 - - 12,378 18,644 At December 31, 2013 54,147 - - 40,110 94,257 CARRYING VALUES At December 31, 2013 47,000 63,083 3,480 41,001 154,564 At December 31, 2012 53,266 63,083 3,480 35,804 155,633 The customer bases of Zheshang Securities Co., Ltd. ("Zheshang Securities") andZheshang Futures Broker Co., Ltd. ("Zheshang Futures") are amortised on astraight-line basis over 15 years and 3 years, respectively. The securities/futures firm licenses of the securities operation are consideredby the management of the Group to have indefinite useful lives because they canbe renewed at minimal cost even though the current licenses are effective forthree years. The trading seats of the securities operation is considered by the managementof the Group to have an indefinite useful life because there is no economic orregulatory 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 indefiniteuseful lives are disclosed in Note 25. 24. DEPOSIT PAID FOR ACQUISITION OF A PROPERTY On December 26, 2011, Zheshang Securities entered into a provisional agreementwith a related party, Hangzhou Jinji Real Estate Co., Ltd. ("Jinji Co"), asubsidiary of the Communications Group, for the purchase of a property inHangzhou for a provisional consideration of Rmb809,500,000. As at December 31,2011, deposit of Rmb323,800,000 had been paid to the vendor. During the yearended December 31, 2012, this provisional agreement has been terminated asJinji Co fails to deliver the property to Zheshang Securities, deposit ofRmb323,800,000 together with interest, which is according to the prevailinglending rate promulgated by the People's Bank of China ("PBOC"), ofRmb19,367,000 had been repaid to Zheshang Securities. 25. IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE USEFULLIVES For the purposes of impairment testing, goodwill and other intangible assetswith indefinite useful lives set out in Notes 22 and 23 have been allocated tofour individual cash generating units ("CGUs"), comprising two subsidiaries intoll operation segment and two subsidiaries in securities operation segment.The carrying amounts of goodwill and other intangible assets (net ofaccumulated impairment losses) as at December 31, 2013 and 2012 allocated tothese units are as follows: Securities/futures Goodwill firm licenses Trading seats 12/31/ 12/31/ 12/31/ 12/31/ 12/31/ 12/31/ 2013 2012 2013 2012 2013 2012 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, 2013 and 2012, management of the Groupdetermines that there are no impairment of any of its CGUs containing goodwilland other intangible assets with indefinite useful lives. The basis of the recoverable amounts of the above CGUs and their majorunderlying assumptions are summarised below: Jiaxing Co and Shangsan Co The recoverable amounts of Jiaxing Co and Shangsan Co are determined based onvalue in use calculations. The key assumptions for the value in usecalculations relate to discount rates, growth rates, and expected changes intoll revenue and direct costs during the forecast period. Those calculationsuse cash flow projections based on financial budgets approved by managementcovering a five-year period and a discount rate the management consideredappropriate. No growth rate has been assumed beyond the five-year period up tothe remaining toll road operating rights which are 15 years (2012: 16 years)and 17 years (2012: 18 years) for Jiaxing Co. and Shangsan Co., respectively.Management believes that any reasonably possible change in any of theseassumptions would not cause the aggregate carrying amount of Jiaxing Co's andShangsan Co's goodwill to exceed their aggregate recoverable amounts. Zheshang Securities & Zheshang Futures The recoverable amounts of Zheshang Securities & Zheshang Futures aredetermined based on value in use calculations. The key assumptions for thevalue in use calculations relate to the discount rate, growth rates and profitmargin during the forecast period. Those calculations use cash flow projectionsbased on financial budgets approved by management covering a five-year periodwith discount rates management believe appropriate. Growth rate beyond thefive-year period is assumed to be zero. Management believes that any reasonablypossible change in any of these assumptions would not cause the carrying amountof Zheshang Securities & Zheshang Futures' other intangible assets to exceedits aggregate recoverable amounts. 26. INTERESTS IN ASSOCIATES 12/31/2013 12/31/2012 12/31/2011 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Unlisted investments in associates, at cost less impairment 492,534 209,910 167,159 Share of post-acquisition profit, net of dividends received 82,199 70,147 81,236 574,733 280,057 248,395 At December 31, 2013 and 2012, the Group had interests in the followingassociates: Place of Percentage of Form of registration equity interest business and attributable to PrincipalName of entity structure operation the Group activities 12/31/ 12/31/ 2013 2012 % % Zhejiang Expressway Petroleum Corporate The PRC 50 50 Operation ofDevelopment Co., Ltd. petrol("Petroleum Co") (Note i) stations and sale of petroleum products JoinHands Technology Co., Corporate The PRC 27.58 27.58 Provision ofLtd. ("JoinHands Co") (Note printingii) services and property leasing Zhejiang Concord Property Corporate The PRC 45 45 InvestmentInvestment Co., Ltd. and real estate development Zhejiang Communications Corporate The PRC 35 N/A Finance andFinance Co., Ltd. ("Zhejiang InvestmentCommunications Finance")(Note iii) Ningbo Expressway Advertising Corporate The PRC N/A 24.5 ManagementCo., Ltd. ("Ningbo ofAdvertising Co")(Note iv) advertising billboards along expressways Zheshang Fund Management Co., Corporate The PRC 13.04 13.04 Asset fundLtd. ("Zheshang Fund") (Note managementv) All of the above associates are accounted for using the equity method in theseconsolidated financial statements. Notes: (i) According to the Articles of Association of Petroleum Co, 66.67% votingpower is required to govern the significant financial and operating policies,and the Company can only exercise significant influence over it. (ii) In July 2011, the Company agreed to transfer all of its 27.582% equityinterest in JoinHands Co to Guangzhou Kaixin Consulting Co., Ltd. ("KaixinCo"), an independent third party, at a consideration of Rmb31,430,000. However,as Kaixin Co failed to pay the consideration for the equity transfer accordingto the terms of the Equity Interest Transfer Agreement, such transfer had notbeen completed and the Company lodged a lawsuit against it in August 2011 atthe People's Court of Xihu District, Hangzhou City ("Hangzhou People Court").The court ruled in favour of the Company, except for the execution of thepriority right for claim against the mortgaged commercial property and land useright in Hangzhou held by JoinHands Co ("the Property") to the Company and theliquidated damages, in March 2012. Both the Company and Kaixin Co filed appealsrespectively because of their respective objections against the court'sdecision. During the year ended December 31, 2011, an impairment loss ofRmb11,979,000 in relation to interest in the associate, JoinHands Co, wasrecognised. On April 28, 2013, a final judgement from Hangzhou People's Court has ruled infavour of the Company, and the Property has been put in an open auction andcompleted with a transaction price of Rmb24,120,000 during the year. Since thetransfer of the Property interest has not been completed for the year endedDecember 31, 2013, the disposal of the associate has not been completed in thisyear. The management expect the transaction would be completed in 2014. (iii) In March 2013, the Group entered into a capital contribution agreementwith Zhejiang Communications Finance and the existing shareholders of ZhejiangCommunications Finance, pursuant to which the Company and the existingshareholders agreed to make corresponding capital contribution ofRmb280,000,000 and Rmb20,000,000, by way of cash, into the equity capital ofZhejiang Communication Finance. Zhejiang Communication Finance then became a35% owned associate of the Group. (iv) This associate has been deregistered during the year ended December 31,2013 and the Group entitled to received appropriation from deregistrationamounting to Rmb1,040,000, resulting in a gain on deregistration of anassociate of Rmb16,000. As at December 31, 2013, Rmb388,000 out of the totalappropriation has been received by the Group and a payable of Rmb 652,000 dueto the associate by the Group has been waived upon the deregistration. (v) The Group is able to exercise significant influence over Zheshang Fundbecause it has the power to appoint one out of four directors of that companyunder the provisions stated in the Articles of Association of that company.During the year ended December 31, 2012, Zheshang Securities, in proportion toits equity interest, had made additional capital contribution of Rmb50,000,000to Zheshang Fund. The summarised financial information in respect of the Group's materialassociates at the end of the reporting period is set out below. This representsamounts shown in the associate's financial statements prepared in accordancewith HKFRSs: Petroleum Co and its subsidiaries 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Current assets 180,869 219,364 Non-current assets 257,516 235,483 Current liabilities 46,735 77,112 Non-current liabilities 1,481 1,481 Equity attributable to owners of the Petroleum Co 333,482 329,824 Non-controlling interests of Petroleum Co 56,687 46,430 For the For the Year ended Year ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Revenue 6,472,584 6,083,272 Profit for the year 31,890 20,509 Profit attributable to owners of Petroleum Co 21,631 15,016 Profit attributable to non-controlling interests ofPetroleum Co 10,259 5,493 31,890 20,509 Dividends received from the associate during the 8,987 6,500year Reconciliation of the above summarised financial information to the carryingamount of the interest in Petroleum Co recognised in the consolidated financialstatements: 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Net asset of the associate 333,482 329,824 Proportion of the Group's ownership interest inPetroleum Co 50% 50% Carrying amount of the Group's interest inPetroleum Co 166,741 164,912 Zhejiang Communications Finance 12/31/2013 Rmb'000 Current assets 4,504,856 Non-current assets 2,184,472 Current liabilities 5,801,276 From date of acquisition to 12/31/2013 Rmb'000 Revenue 155,239 Profit for the period 79,054 Dividends received from the associate during the period - Capital contribution received during the period 300,000 Reconciliation of the above summarised financial information to the carryingamount of the interest in Zhejiang Communications Finance recognised in theconsolidated financial statements: 12/31/2013 Rmb'000 Net asset of the associate 888,052 Proportion of the Group's ownership interest in ZhejiangCommunications Finance 35% Carrying amount of the Group's interest in Zhejiang CommunicationsFinance 310,818 Aggregate information of associates that are not individually material 12/31/2013 12/31/2012 Rmb'000 Rmb'000 The Group's share of loss (16,948) (12,021) Aggregate carrying amount of the Group's interests inthese associates 97,174 115,145 27. INTEREST IN A JOINT VENTURE 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Unlisted investment in a joint venture, at cost lessimpairment 373,470 373,470 Share of post-acquisition loss (39,526) (3,516) 333,944 369,954 At December 31, 2013 and 2012, the Group had interest in the following jointventure: Percentage Place of of equity Form of registration interest business and attributable PrincipalName of entity structure operation to the Group activities 12/31 12/31/ /2013 2012 % % Shengxin Expressway Corporate The PRC 50 50 Management of theCo., Ltd. ("Shengxin Shaoxing section of theCo") Ningbo-Jinhua Expressway On July 6, 2012, the Company entered into a sales and purchase agreement (the"S&P Agreement") with Shaoxing Communications Investment Group Co., Ltd.("Shaoxing Communications Group"), an independent third party, who owned 100%equity interest of Shengxin Co, pursuant to which the Company conditionallyagreed to purchase from Shaoxing Communications Group, a 50% equity interest inShengxin Co for cash consideration of Rmb355,033,000, plus interest accrued onthe consideration at the interest rate according to the PBOC. The acquisitionhas been completed on November 28, 2012. As at December 31, 2012, 50% of the consideration amounting to Rmb177,516,000and the relevant interest of Rmb6,622,000 were paid by the Company to ShaoxingCommunications Group, while the remaining 50% and unpaid interest was accountedfor as consideration payable and included in other payables and accruals in theconsolidated statement of financial position. The summarised financial information in respect of the Group's interest inShengxin Co which is accounted for using the equity method at the end of thereporting period is set out below. This represents amounts shown in the jointventure's financial statements prepared in accordance with HKFRSs: The consideration and accrued interest had been fully settled by the Companyduring year end 31 December 2013. Shengxin Co 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Current assets 34,629 18,202 Non-current assets 2,954,410 3,085,117 Current liabilities 43,557 30,371 Non-current liabilities 2,277,595 2,333,041 The above amounts of assets and liabilities include the following: Cash and cash equivalents 29,743 13,250 Current financial liabilities (excluding trade and other Payables and provisions) - - Non-current financial liabilities (excluding trade and other Payables and provisions) 2,200,000 2,250,000 From date of For the acquisition year ended to 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Revenue 284,445 93,027 Loss for the year/period (72,020) (7,032) Dividend received from the joint venture - - The above loss for the year includes the following: Depreciation and amortisation (171,910) (14,304) Interest income 146 83 Interest expense (137,699) (7,258) Income tax expense (4,464) (279) Reconciliation of the above summarised financial information to the carryingamount of the interest in Shengxin Co recognised in the consolidated financialstatements: 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Net asset of the joint venture 667,887 739,907 Proportion of the Group's ownership interest in thejoint venture 50% 50% Carrying amount of the Group's interest in Shengxin Co 333,944 369,954 28. AVAILABLE-FOR-SALE INVESTMENTS AFS investments comprise: 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Non-current assets: Unlisted equity securities investments, at cost (Note i) 11,000 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 10,514 - 143,514 133,000 Current assets: Listed equity securities investments in the PRC (Note ii) - 134,899 Funds 44,574 - Trust products 31,000 - Corporate bonds 5,000 - Financial products (Note iii) 201,350 - 281,924 134,899 425,438 267,899 As at December 31, 2013, the Group has entered into securities lendingarrangement with clients that resulted in the transfer of listed AFSinvestments with total fair value of Rmb2,772,000 (2012: Rmb5,897,000) toexternal clients, which did not result in derecognition of the financialassets. Details of the collaterals were set out in Note 30. Notes: (i) Unlisted equity securities investments represent investments in unlistedequity securities issued by private entities established in the PRC. They aremeasured at cost less impairment at the end of the reporting period because therange of reasonable fair value estimated is so significant that the directorsof the Company are of the opinion that their fair values cannot be measuredreliably. (ii) Listed equity investments represent equity securities subscribed throughplacement by listed issuers. They are measured at fair value. During the yearended December 31, 2013, the gain on change in fair value of the investments ofRmb4,865,000 (2012:Rmb4,800,000) has been recognised as other comprehensiveincome. (iii) The financial products comprise products offered by fund or assetmanagement companies where funds are mainly invested in listedsecurities,open-ended funds or asset management plan and the Group's return ofinvestment is tied to the result of such investments. 29. TRADE RECEIVABLES 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Trade receivables comprise: A fellow subsidiary (Note 51(i)(a)) 3,077 3,010 2,431 Third parties 99,023 62,393 50,875 Total trade receivables 102,100 65,403 53,306 Less: Allowance for doubtful debts (672) (956) (831) 101,428 64,447 52,475 The Group has no credit period granted to its trade customers of toll operationand service area businesses. The Group's trade receivable balance for tolloperation is toll receivables from the Expressway Fee Settlement Centre of theHighway Administration Bureau of Zhejiang Province, which are normally settledwithin 3 months. All of these trade receivables were neither past due norimpaired in both years. In respect of the Group's asset management service operated by ZheshangSecurities of which was newly commenced during the year ended December 31,2013, Trading limits are set for customers. The Group seeks to maintain tightcontrol over its outstanding accounts receivable in order to minimise creditrisk. Overdue balances are regularly monitored by management. The following is an aged analysis of trade receivables net of allowance fordoubtful debts presented based on the invoice date at the end of the reportingperiod, which approximated the respective revenue recognition dates: 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Within 3 months 90,812 64,138 49,773 3 months to 1 year 10,453 - 2,431 1 to 2 years - 146 - Over 2 years 163 163 271 101,428 64,447 52,475 Movement of allowance for doubtful debts 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) At the beginning of the year 956 831 - Impairment recognised for the year 7 125 831 Amount reversed during the year (291) - - At the end of the year 672 956 831 The Group determines the allowance for impaired debts based on the evaluationof collectability and ageing analysis of accounts and on management's judgementincluding the assessment of change in credit quality and the past collectionhistory of each client. The directors consider the credit risk of the balanceto be minimal. 30. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING BUSINESS 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Loans to margin clients 2,955,388 724,123 Less: Allowance for doubtful debts (8,477) - 2,946,911 724,123 The Group has provided customers with margin financing and security lending forsecurities transactions since June 2012, the credit facility limits to marginclients are determined by the discounted market value of the pledged securitiesaccepted by the Group or the market value of cash collateral. All of the loans to margin clients which are secured by the underlying pledgedsecurities are interest bearing. The Group maintains a list of approved stocksfor margin lending at a specified loan to collateral ratio. Any excess in thelending ratio will trigger a margin call which the customers have to make goodof the shortfall. The Group has the right to process forced liquidation if thecustomer fails to make good of the shortfall within a short period of time. As at December 31, 2013, loans to customers under the margin financing andsecurities lending activities carried out in the PRC were secured by thecustomers' stock securities and cash collaterals. The undiscounted market valueof the stock security collaterals was amounted to Rmb8,207,640,000 (2012:Rmb2,745,885,000). Cash collateral of Rmb222,313,000 (2012: Rmb75,976,000)received from clients was included in accounts payable to customers arisingfrom securities business in Note 37. No aged analysis is disclosed as in the opinion of the directors, the agedanalysis does not give additional value in view of the nature of business ofsecurities margin financing. Movement in the allowance for doubtful debts 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Allowance for doubtful debts at the beginning of the - -year Impairment recognised for the year 8,477 - At end of the year 8,477 - The Group determines the allowance for impaired debts based on the evaluationof collectability and ageing analysis of accounts and on management's judgementincluding the assessment of change in credit quality, collateral and the pastcollection history of each client. As at December 31, 2013, the allowance fordoubtful debts include individual assessment of Rmb2,572,000 and collectiveassessment of Rmb5,905,000 The concentration of credit risk is limited due tothe customer base being large and unrelated. 31. OTHER RECEIVABLES AND PREPAYMENTS 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Current Entrusted loans receivables from related parties (Note 51(ii)) 54,000 314,616 350,704 Entrusted loan receivable from a third party (Note a) - - 300,944 Interest receivables 122,392 73,440 72,932 Financial products investment receivables (Note b) 168,000 103,432 - Prepayments 30,195 31,543 40,623 Others 77,381 97,992 80,924 451,968 621,023 846,127 Non-Current Entrusted loans receivables from related parties (Note 51(ii)) 401,400 325,035 300,000 853,368 946,058 1,146,127 Notes: (a) Pursuant to the board resolutions of the Company on January 30, 2011, andthe entrusted loan contracts, the Company provided short-term entrusted loansduring 2011 totaling Rmb500,000,000 with maturity date of March 31, 2012 toZhejiang Jiahe Industrial Co., Ltd. at a fixed interest rate of 12% per annumand guaranteed by Greentown Real Estate Group Co., Ltd. in full. Part of theloan of Rmb200,000,000 was early settled during 2011. The remaining balance wassettled during the year ended December 31, 2012. (b) Short-term fixed-yield and principal protected bank financial products. 32. HELD FOR TRADING INVESTMENTS 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Held for trading investments include: Listed securities in the PRC, at fair value: Equity securities 78,658 8,953 Open-end equity funds 5,242 26,362 Corporate bonds with fixed interest ranging from 4.27% to 8.6% (2012: 5.20% to 9.60%) per annum 1,097,125 1,451,457 1,181,025 1,486,772 33. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Analysed by collateral type: Bonds 20,500 119,900 Stock securities (note) 853,754 160,166 874,254 280,066 Analysed by market: Shanghai/Shenzhen Stock Exchange 874,254 280,066 Note: The financial assets (pledged by stock) held under resale agreements arethose resale agreements which qualified investors entered into with the Groupto purchase the specified securities at a predetermined price and apredetermined day in the future. The collaterals include both equity and debt securities listed in the PRC. Asat December 31, 2013, the fair value of equity securities and debt securitiesheld as collaterals was Rmb1,915,221,000 (2012: Rmb299,918,000) andRmb20,500,000 (2012: Rmb119,900,000), respectively. 34. BANK BALANCES HELD ON BEHALF OF CUSTOMERS From the Group's securities operation, the Group receives and holds moneydeposited by customers (including other institution). These customers' money ismaintained in one or more segregated bank accounts. The Group has recognisedthe corresponding accounts payable to respective customers and otherinstitution. Bank balances held on behalf of customers carry interest at market rates whichrange from 1.62% to 1.98% (2012: 1.62% to 1.98%) per annum. Bank balances held on behalf of customers that are denominated in currenciesother than the functional currency of the respective group entities are set outbelow: HKD USD Rmb'000 Rmb'000 As at December 31, 2013 13,933 36,948 As at December 31, 2012 14,228 40,544 35. BANK BALANCES AND CASH 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Time deposits with original maturity over three months 704,459 1,483,408 2,467,793 Unrestricted bank balances and cash 1,130,759 2,643,133 2,311,747 Time deposits with original maturity of less than three months 676,222 748,920 828,073 Cash and cash equivalents 1,806,981 3,392,053 3,139,820 2,511,440 4,875,461 5,607,613 Bank balances carry interest at the average market rate of 0.35% (2012: 0.42%)per annum. Time deposits carry interest at fixed rates ranging from 1.35% to3.30% (2012: 2.38% to 3.36%) per annum. Bank balances and cash that are denominated in currencies other than thefunctional currency of the respective group entities are set out below: HKD USD Rmb'000 Rmb'000 As at December 31, 2013 5,462 28,209 As at December 31, 2012 5,232 27,999 36. PLACEMENTS FROM OTHER FINANCIAL INSTITUTION 2013/12/31 2012/12/31 Rmb'000 Rmb'000 Placements from China Securities Finance Corporation Limited ("CSF") 310,000 - The placements from CSF were secured by a cash deposit of Rmb10,785,000 (2012:nil) and debt and equity securities with total fair value of Rmb203,923,000(2012: nil) as at December 31, 2013. The placements with interest rate ranging from 7.0% to 7.1% (2012: nil) perannum are repayable within 3 months from the end of the reporting period. 37. ACCOUNTS PAYABLE TO CUSTOMERS ARISING FROM SECURITIES BUSINESS The amounts mainly represent money held on behalf of clients at the banks andat the clearing houses by the Group. The amounts include payables for securities/futures business as well as cashcollateral from customers for securities lending and/or margin financingarrangement. The majority of the accounts payable balance is repayable on demand exceptwhere certain accounts payable to brokerage clients represent margin depositsreceived from clients for their trading activities under normal course ofbusiness. No aged analysis is disclosed as in the opinion of the directors anaged analysis does not give any additional value in view of the nature of thebusiness. As at December 31, 2013, Rmb222,313,000 (2012: Rmb75,976,000) cash collateralhave been received from clients for securities lending or margin financingarrangement, of which under normal course of business. Only the excess amountsover the required margin deposits stipulated are repayable on demand. Accounts payable to customers arising from securities business that aredenominated in currencies other than the functional currency of the respectivegroup entities are set out below: HKD USD Rmb'000 Rmb'000 As at December 31, 2013 13,933 36,948 As at December 31, 2012 14,228 40,544 38. TRADE PAYABLES Trade payables mainly represent the construction payables for the improvementprojects of toll expressways. The following is an aged analysis of tradepayables presented based on the invoice date: 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Within 3 months 214,669 236,246 103,264 3 months to 1 year 82,048 37,328 32,552 1 to 2 years 29,518 29,117 116,641 2 to 3 years 8,496 49,122 58,618 Over 3 years 87,263 56,799 34,378 421,994 408,612 345,453 39. OTHER PAYABLES AND ACCRUALS 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated)Other liabilities: Accrued payroll and welfare 544,469 408,689 359,430 Consideration payable for acquisition of equity interest in Shengxin Co (Note 27) (Note) - 189,331 - Advance from rental and advertising customers 94,124 73,048 78,042 Toll collected on behalf of other toll roads 5,057 7,114 36,944 Retention payable 143,807 85,849 87,714 Others 192,382 184,888 134,376 979,839 948,919 696,506 Other accruals 15,657 42,341 44,525 995,496 991,260 741,031 Note: The amount was unsecured, repayable on demand and carried interest atinterest rate according to the PBOC. The amount was fully settled during theyear ended 31 December 2013. 40. BANK AND OTHER BORROWINGS 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Bank loans 500,000 1,140,000 1,752,553 Loans from related parties (See Note 51(i)) 340,000 200,000 100,000 840,000 1,340,000 1,852,553 Secured (Note) 400,000 1,140,000 1,290,000 Unsecured 440,000 200,000 562,553 840,000 1,340,000 1,852,553 Carrying amount repayable: Within one year 540,000 660,000 712,553 More than one year, but not exceeding two years 200,000 280,000 460,000 More than two years but not more than five years 100,000 400,000 680,000 840,000 1,340,000 1,852,553 Less: Amounts due within one year (540,000) (660,000) (712,553) Amounts shown under non-current liabilities 300,000 680,000 1,140,000 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) The bank and other borrowings comprise: Fixed-rate borrowings 440,000 180,000 542,553 Variable-rate borrowings 400,000 1,160,000 1,310,000 840,000 1,340,000 1,852,553 The range of effective interest rates (which are also agreed to contractedinterest rates) on the Group's borrowings are as follows: 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Effective interest rate: Fixed-rate borrowings 5.04% 5.18% 4.95% to 6.31% Variable-rate borrowings 6.22% - 5.90% to 5.76% to 6.77% 6.31% 6.65% Note: Details of the securities pledged for the grant of borrowings to theGroup were set out in Note 49. The Group's borrowings were all dominated in the Group's functional currenciesas at December 31, 2013 and 2012. 41. LONG-TERM BONDS 12/31/2013 12/31/2012Long-term bonds - listed in the PRC Rmb'000 Rmb'000 - 1,000,000 The long-term bonds are unsecured and carry interest payable annually at afixed rate of 4.29% (2012: 4.29%) per annum. As at December 31, 2012, thelong-term bonds were classified as current liabilities according to itsmaturity on January 24, 2013 and had been repaid in full on the maturity date. 42. SHORT-TERM LOAN NOTE 12/31/2013 12/31/2012 Rmb'000 Rmb'000Short-term Loan note 1,000,000 - As at December 31, 2013, the Group has short-term loan note issued at principalvalue of Rmb1,000,000,000, which was interest bearing at a rate of 5.5% perannum. The amount was matured on January 23, 2014 and had been repaid in fullon the maturity date. On January 17, 2014, the Group has issued anothershort-term loan notes at principal value of Rmb1,000,000,000, which wasinterest bearing at a rate of 6.28% per annum. The amount will be matured onApril 20, 2014. 43. DEFERRED TAXATION The following are the major deferred tax liabilities and assets recognised andmovements thereon during the current and prior years: Accelerated tax depreciation Changes in of property fair value plant and Fair of held for equipment value trading and and adjustment Temporary available- expressway of differences for-sale operating long term of accrued investments rights assets expenses Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 At January 1, 2012 (Originally stated) 23,953 218,557 31,899 (42,343) 232,066 Merger accounting restatement - (42,065) 99,164 - 57,099 At January 1, 2012 (Restated) 23,953 176,492 131,063 (42,343) 289,165 Charge (credit) to profit or loss 6,633 (15,670) (8,868) (3,336) (21,241) Charge to other comprehensive income 1,200 - - - 1,200 At December 31, 2012 (Restated) 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 44. SHARE CAPITAL Number of shares Share capital 12/31/ 12/31/ 12/31/ 12/31/ 2013 2012 2013 2012 Rmb'000 Rmb'000 Registered, issued and fully paid: Domestic shares of Rmb1.00 each 2,909,260,000 2,909,260,000 2,909,260 2,909,260 H Shares of Rmb1.00 each 1,433,854,500 1,433,854,500 1,433,855 1,433,855 4,343,114,500 4,343,114,500 4,343,115 4,343,115 The domestic shares are not currently listed on any stock exchange. The H Shares have been listed on the Stock Exchange since May 15, 1997. The Hshares were admitted to the Official List on May 5, 2000 and their dealings onthe 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 SecuritiesRegulatory Commission, declared the registration statement in respect of theADSs evidenced by ADRs representing the deposited H Shares of the Companyeffective. All the domestic shares and H Shares rank pari passu with each other as todividends and voting rights. 45. NON-CONTROLLING INTERESTS 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 (Restated) (Restated) Balance at beginning of year 3,577,221 3,507,435 3,065,669 Share of total comprehensive income 308,573 178,796 248,706 Capital injection - - 336,642 Arising from acquisition of additional interest in a subsidiary (Note) (78,863) - - Dividend paid to non-controlling interests during the year (110,510) (109,010) (143,582) 3,696,421 3,577,221 3,507,435 Note: As detailed in Note 2, during the year, the Group has acquired theremaining 76.55% equity interest in Jinhua Co, of which 10.267% was acquiredfrom the non-controlling shareholder for a consideration of RMB101,512,000.This acquisition of additional interest in a subsidiary has resulted in areduction of non-controlling interest of Rmb78,863,000. The summarised financial information in respect of the Group's subsidiary thathas material non-controlling interests, namely Shangsan Co and its subsidiariesand Yuhang Co (as defined in Note 52) at the end of the reporting period areset out below. The summarised financial information below represents amountsbefore intragroup elimination. Shangsan Co and its subsidiaries 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Current assets 15,434,356 12,767,702 Non-current assets 3,052,155 3,241,847 Current liabilities 10,692,614 8,505,389 Non-current liabilities 19,758 66,375 Equity attributable to owners of the Company 4,460,933 4,299,211 Non-controlling interests 3,313,206 3,138,574 For the year For the year ended ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Revenue 2,404,228 1,805,349 Expenses (1,710,102) (1,389,341) Profit for the year 694,126 416,008 Other comprehensive income 2,228 3,469 Total comprehensive income 696,354 419,477 Profit attributable to owner of the Company 425,610 272,340 Profit attributable to non-controlling interests 268,516 143,668 694,126 416,008 Total comprehensive income attributable to owner of the Company 426,772 274,149 Total comprehensive income attributable to non-controlling interests 269,582 145,328 696,354 419,477 The summarised financial information in respect of the Group's subsidiary thathas material non-controlling interests, namely Shangsan Co and its subsidiariesand Yuhang Co (as defined in Note 52) at the end of the reporting period areset out below. The summarised financial information below represents amountsbefore intragroup elimination. For the year For the year ended ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Dividends paid to non-controlling shareholders (94,950) (94,950) Net cash outflow from operating activities (1,236,398) (383,926) Net cash (outflow) inflow from investing activities (851,427) 2,064,162 Net cash inflow (outflow) from financing activities 554,950 (528,060) Net cash (outflow) inflow (1,532,875) 1,152,176 Yuhang Co 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Current assets 198,150 145,227 Non-current assets 725,236 586,619 Current liabilities 104,544 52,025 Non-current liabilities 108,747 9,103 Equity attributable to owners of the Company 362,148 342,066 Non-controlling interests 347,947 328,652 For the year For the year ended ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Revenue 114,089 110,832 Expenses (52,145) (51,050) Profit for the year 61,944 59,782 For the year For the year ended ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Profit and total comprehensive income - attributable to owner of the Company 31,591 30,489 - attributable to non-controlling interests 30,353 29,293 61,944 59,782 Dividends paid to non-controlling shareholders (11,058) (11,058) Net cash inflow from operating activities 93,743 29,760 Net cash outflow from investing activities (190,205) (20,841) Net cash inflow (outflow) from financing activities 72,391 (22,542) Net cash outflow (24,071) (13,623) 46. RETIREMENT BENEFITS SCHEMES The employees of the Group are members of the state-managed retirement benefitsscheme operated by the PRC government. To supplement this existing retirementbenefits scheme, the Group adopted a corporate annuity scheme in accordancewith relevant rules and regulations. The Group is required to contribute acertain percentage of payroll costs to these retirement benefits schemes tofund the benefits. The only obligation of the Group with respect to theseretirement benefits schemes is to make the specified contributions. No forfeited contributions are available to reduce the contribution payable infuture years. 47. COMMITMENTS 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Authorised but not contracted for: - Purchase of machinery and equipment 344,933 238,504 - Renovation of service areas 18,000 70,850 - Acquisition and construction of properties 1,324,082 497,050 - Investment in an associate 30,000 280,000 1,717,015 1,086,404 48. OPERATING LEASES The Group as lessee Year ended Year ended 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Minimum lease payments 80,244 58,199 Contingent rental expenses 3,085 4,525 83,329 62,724 At the end of the reporting period, the Group had commitments for futureminimum lease payments under non-cancellable operating leases which fall due asfollows: 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Within one year 60,087 49,985 In the second to fifth years inclusive 125,500 112,900 Over five years 1,797 4,490 187,384 167,375 Operating lease payments represent rentals payable by the Group for certainservice areas along expressways located in Zhejiang and Tianjin, and theoperating branches of Zheshang Securities and Zheshang Futures. They arenegotiated for an average term of three to ten years and some of the rentalscontain both a fixed element and a contingent element linked to sales. Theabove commitment represented the minimum lease payments payable tolessors only and do not include any contingent rent elements. The Group as lessor The Group leased their service areas and communication ducts under operatinglease arrangements. Leases are negotiated for terms ranging from 1 to 25 yearsand rentals are fixed annually. At the end of the reporting period, the Group had contracted with tenants forthe following future minimum lease payments: 12/31/2013 12/31/2012 Rmb'000 Rmb'000 (Restated) Within one year 60,090 25,539 In the second to fifth years inclusive 88,047 39,044 After five years 25,643 37,310 173,780 101,893 For certain of the Group's service areas, the rental income are variable andbeing calculated at the higher of a pre-agreed percentage of revenue of therelevant service areas made by the lessees or the minimum lease payments. Theabove commitment represented the minimum lease payments from lessees only anddo not include any contingent rent elements. 49. PLEDGE OF ASSETS At the end of reporting period, the Group had pledged the following assets tobanks as securities against general banking facilities granted to the Group: 12/31/2013 12/31/2012 Rmb'000 Rmb'000 (Restated) Property, plant and equipment 381,797 - Expressway operating rights 1,882,283 1,990,100 Prepaid lease payments 40,372 - 2,304,452 1,990,100 50. CONTINGENT LIABILITIES 12/31/2013 12/31/2012 Rmb'000 Rmb'000 Guarantees given to bank, in respect of a joint venture (Note) 1,100,000 - Note: During the year ended December 31, 2013, the Group provided a financialguarantee to Shengxin Co, a 50% owned joint venture of the Group, in favour ofa bank for 50% of its outstanding bank borrowings and interest. As at December31, 2013, total bank borrowings and accrued interest held by Shengxin Coamounted to Rmb2,200,000,000. The directors of the Company consider that thefair value of the guarantee is insignificant at initial recognition and defaultby the guaranteed party is not probable as at December 31, 2013. 51. RELATED PARTY TRANSACTIONS AND BALANCES The following is a summary of the related party during the year: (i) Transactions and balances with government related parties The Group operates in an economic environment currently predominated byentities directly or indirectly owned or controlled by the PRC government("government-related entities"). In addition, the Group itself is part of alarger group of companies under the Communications Group which is controlled bythe PRC government. However, due to the business nature, in respect of theGroup's toll road and securities business, the directors are of the opinionthat it is impracticable to ascertain the identity of counterparties andaccordingly whether the transactions are with other government-related entitiesin the PRC. Details of other significant transactions with government relatedparties are summarised below: (a) Transactions with Communications Group (1) As disclosed in Note 2, on March 20, 2013, the Company entered into anagreement with Communications Group pursuant to which the Company purchasedfrom Communications Group a 66.283% equity interest in the Jinhua Co held byCommunications Group at a cash consideration of Rmb655,356,000. (2) On March 30, 2013, the Company entered into the capital contributionagreement with Zhejiang Communications Finance and its existing shareholders(all of who are subsidiaries of Communications Group). Pursuant to theagreement, the Company contributed an amount of Rmb280,000,000 in the capitalof Zhejiang Communications Finance, by way of cash. Upon completion, theCompany owned 35% equity interest in Zhejiang Communications Finance andZhejiang Communications Finance then became an associate of the Company. (3) Pursuant to the entrusted loan contracts entered into between Jinhua Co andCommunications Group on January 21, 2013, Communications Group agreed toprovide Jinhua Co with entrusted loans amounted to Rmb140,000,000 at a variableinterest rate of 6.00% per annum. Such loan with those entrust loans providedby Communication Group before January 1, 2013 amounted to Rmb200,000,000 werereplaced by two new entrusted loan contracts on February 28, 2013 amounted toRmb170,000,000 each at a variable rate of 5.24% per annum, with maturity dateof August 10, 2015. All of the loans were early repaid in 2013. The totalinterest expense amounted to Rmb10,886,000 was charged for the year endedDecember 31, 2013. (4) Pursuant to the leasing and operation agreement entered into between JinhuaCo and Zhejiang Communications Investment Group Industrial Development Co. , Ltd. ("Zhejiang Communications Investment"), a fellow subsidiary ofCommunications Group, Jinhua Co leased the toll road service area to ZhejiangCommunications Investment and Zhejiang Communications Investment managed theoperation of the service area and the advertising business in respect of thetoll road service area. Such business began from January 1, 2011, and will beexpired at the same time with the operating right for Jinhua Section in 2030. For the year ended December 31, 2013, Jinhua Co earned the leasing profit ofRmb3,077,000 (2012 (restated): Rmb3,010,000) and the management fee ofRmb600,000 (2012 (restated): Rmb600,000) from Zhejiang CommunicationsInvestment. (5) During the year ended December 31, 2013, the Group entered into certainroad maintenance contract with fellow subsidiaries of Communications Group, andrecognised respective service expenses of Rmb43,272,000 (2012: Rmb22,089,000). (6) During the year ended December 31, 2013, the Group provided certain tollroad related inspection services to fellow subsidiaries of Communications Groupand recognised respective service income of Rmb7,286,000 (2012: nil). (b) Transactions with other government related parties (1) Pursuant to the operation management agreement entered into betweenZhejiang Expressway Investment Development Co., Ltd. ("Development Co"), awholly owned subsidiary of the Company, and Petroleum Co in respect of thepetrol stations in the service areas along the Shanghai-Hangzhou-Ningbo andShangsan Expressways, Petroleum Co assist Development Co in running theirpetrol stations along these roads. Purchases of petroleum products fromPetroleum Co during year ended December 31, 2013 amounted to Rmb1,781,179,000(2012: Rmb1,669,833,000). Petroleum Co is a government related entity and alsoan associate of the Group. (2) The Group has entered into various significant transactions, includingdeposit placements, borrowings and other general banking facilities, withcertain banks and financial institution which are government-related entitiesin its ordinary course of business. In view of the nature of those bankingtransactions, the directors are of the opinion that separate disclosure wouldnot be meaningful. (ii) Transactions and balances with associates and other non-government relatedparties (1) On March 8, 2013 and April 8, 2013, Zhejiang Communications Financeprovided Jinhua Co with loans amounted to Rmb70,000,000 and Rmb 20,000,000 at afixed interest rate of 5.4% per annum, with maturity date of March 7, 2014 andApril 7, 2014, respectively. All of the loans were early repaid in 2013.Interest expense amounted to Rmb2,575,000 was charged for the year endedDecember 31, 2013. (2) On July 25, 2013 and December 30, 2013, Zhejiang Communications Financeprovided the Company with short-term loans amounted to Rmb190,000,000 andRmb150,000,000, at a fixed interest rate of 5.04% per annum, with maturity dateof January 25, 2014 and March 31, 2014 respectively. These loans have beenearly repaid subsequent to the end of the reporting period. Interest expenseamounted to Rmb4,298,000 was charged for the year ended December 31, 2013. (3) On August 7, 2012, the Company provided short-term entrusted loans toZhejiang Canal Concord Property Co., Ltd. ("Zhejiang Canal Concord"), asubsidiary of Hangzhou Concord Co, who is a subsidiary of the Group'sassociate, in the amount of Rmb190,000,000 at a fixed interest rate of 12% perannum, with maturity date of February 7, 2014. Such amount was early repaid inDecember 2013. The Company also advanced a long-term entrusted loan of Rmb100,000,000 toZhejiang Canal Concord at a fixed interest rate of 12% per annum on November28, 2011, with maturity date on May 17, 2013. Such entrusted loans areguaranteed by World Trade Ltd, an independent third party, in full. Part of theentrusted loan of Rmb17,953,000 was early settled during 2012 and the remainingbalance of Rmb82,047,000 was early settled in January 2013. Pursuant to the board resolutions of the Company on June 11, 2012, the Companyadvanced Rmb120,000,000 to Zhejiang Canal Concord, at a fixed interest rate of12% per annum with maturity date on January 17, 2014. Such entrusted loans areguaranteed by World Trade Ltd, in full. The respective amount was early settledin December 2013. The Company provided long-term entrusted loan during 2013 totallingRmb400,000,000 for a period of 18 months to Zhejiang Canal Concord at a fixedinterest rate of 12% per annum. Such entrusted loan is guaranteed by WorldTrade Ltd in full. (4) The Company provided long-term entrusted loan during 2011 totallingRmb200,000,000 with maturity date of April 25, 2013 to Hangzhou Canal Concordat a fixed interest rate of 12% per annum. Such entrusted loan is guaranteed byWorld Trade Ltd in full and amount to Rmb88,132,000 were early settled onJanuary 28, 2013, remaining amount was settled in April. (5) The Group's subsidiary, Development Co provided short-term entrusted loansof Rmb50,000,000 at a fixed interest rate of 12% per annum, with maturity dateon April 27, 2014 to Zhejiang Canal Concord. Such entrusted loan is guaranteedby World Trade Ltd in full. Interest income recognised in 2013 on the above entrusted loan transactionswith associates and its subsidiaries were Rmb44,476,000 (2012: Rmb70,993,000). Interest receivables as at December 31, 2013 on the above entrusted loantransactions with associates were Rmb5,400,000 (2012: Rmb47,604,000). Theamounts will be repaid at maturity. (6) The Group entered into a financial services agreement with ZhejiangCommunications Finance. Pursuant to the agreement, Zhejiang CommunicationsFinance agreed to provide the Group with the Deposit Services, the Loan andFinancial Leasing Services, the Clearing Services and Other Financial Services.On December 31, 2013, the balance of the Group under account of ZhejiangCommunications Finance is Rmb60,443,000 (2012: Rmb nil). (iii) Key management emoluments The remuneration of the directors, supervisors and key management personnelduring the year was Rmb4,820,000(2012: Rmb4,962,000) including retirementbenefit scheme contribution of Rmb136,000 (2012: Rmb191,000) which isdetermined by the performance of the individuals and the market trends. 52. PARTICULARS OF SUBSIDIARIES OF THE COMPANY Registered Percentage Date and and of equity interest Name of place of paid-in attributablesubsidiary registration capital to the Company Principal Rmb Direct Indirect activities 12/31/ 12/31/ 12/31/ 12/31/ 2013 2012 2013 2012 % % % % (Restated) (Restated) 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 Note 4 120,000,000 100 100 - - Operation ofCo service areas as well as roadside advertising along the expressways operated by the Group Zhejiang Note 5 16,000,000 - - *70 *70 Provision ofExpressway advertisingAdvertising servicesCo., Ltd.("AdvertisingCo") Zhejiang Note 6 8,000,000 **100 **100 - - Provision ofExpressway vehicleVehicle towing,Towing and repair andRescue emergencyServices Co., rescueLtd. ("Towing servicesCo") Hangzhou Note 7 3,000,000 - - *51 *51 Provision ofRoadtone advertisingAdvertising servicesCo., Ltd.("RoadtoneCo") Zheshang Note 8 3,000,000,000 - - *** *** Operation ofSecurities 52.15 52.15 securities business Zheshang Note 9 500,000,000 - - **** **** Operation ofFutures 52.15 52.15 securities business Zheshang Note 10 300,000,000 - - **** **** Operation ofCapital 52.15 52.15 securitiesManagement business Zheshang Note 11 500,000,000 - - **** - Provision ofSecurities 52.15 AssetAsset managementManagement serviceCo., Ltd.("AssetManagement") Zhejiang Note 12 100,000,000 - - **** - Trading ofZheqi Co., 52.15 futureLtd("ZhejiangZheqi") Jinhua Co Note 13 900,000,000 100 23.45 - 66.28 Management of the Jinhua Section of the Ningbo-Jinhua Expressway * These two companies are subsidiaries of Development Co, a wholly-ownedsubsidiary of the Company, and, accordingly, are accounted for as subsidiariesby virtue of the Group's control over them. ** Pursuant to the resolution of directors' meeting on May 25, 2012 ofDevelopment Co and the share transfer agreement, 100% shares of Towing Co weretransferred to the Company on September 26, 2012. *** The company is a subsidiary of Shangsan Co, a non-wholly-owned subsidiaryof the Company, and, accordingly, is accounted for as a subsidiary by virtue ofthe Group's control over it. **** The companies are subsidiaries of Zheshang Securities, non-wholly-ownedsubsidiaries of Shangsan Co, and, accordingly, are accounted for assubsidiaries 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 stocklimited company and was subsequently restructured into a limited liabilitycompany under its current name on November 28, 1996. The Company is able tocontrol over Yuhang Co because it has the power to appoint five out of ninedirectors of that company and under the provisions stated in the Articles ofAssociation of that company, the passing of ordinary resolutions at the boardmeetings 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 stocklimited company and was subsequently restructured into a limited liabilitycompany under its current name on November 29, 1996. Note 3: Shangsan Co was established on January 1, 1998 in the PRC as a limitedliability company. Note 4: Development Co was established on May 28, 2003 in the PRC as a limitedliability company. Note 5: Advertising Co was established on June 1, 1998 in the PRC as a limitedliability company. Note 6: Towing Co was established on July 31, 2003 in the PRC as a limitedliability company. Note 7: Roadtone Co was established on July 27, 2004 in the PRC as a limitedliability company. Note 8: Zheshang Securities was established on May 9, 2002 in the PRC as alimited liability company. On November 16, 2013, the board of directors of theCompany announced that Zheshang Securities proposed to seek a separate listingof its shares as A shares on the Shanghai Stock Exchange. This proposedspin-off for separate listing has not yet been completed at the end of thereporting period. Note 9: Zheshang Futures was established on September 7, 1995 in the PRC as alimited liability Company. Note 10: Zheshang Capital Management was established on February 9, 2012 in thePRC as a limited liability Company. Note 11: Asset Management was established on July 22, 2013 in the PRC as alimited liability Company. Note 12: Zhejiang Zheqi was established on April 9, 2013 in in the PRC as alimited liability Company. Note 13: Jinhua Co was established in February, 2002 in the PRC as a limitedliability Company. As at December 31, 2012, 23.45% equity interest of Jinhua Cowas directly held by the Company. During the year ended December 31, 2013, theCompany acquired the remaining 66.283% and 10.267% equity interests in JinhuaCo from Communications Group and non-controlling interests, respectively, andJinhua Co then became a wholly owned subsidiary and directly held by theCompany as at December 31, 2013. Since the acquisition of the 66.283% from Communications Group were accountedfor using the merger accounting method as detailed in Note 2, the Group's prioryear's attributable interest in Jinhua Co was therefore 89.733% in total,including the 66.283% indirect equity interest which was under common controlof Communications Group. All of the Company's subsidiaries are operating in the PRC. As disclosed inNote 42, Zheshang Securities has issued short-term loan note at principle valueof Rmb1,000,000,000 during the year. Except for this, none of the othersubsidiaries had in issue any debt securities at any time during the year. 53. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 NON-CURRENT ASSETS Property, plant and equipment 266,358 257,178 200,810 Prepaid lease payments 1,688 1,783 1,878 Expressway operating rights 4,572,835 4,927,666 5,272,899 Other intangible assets 2,739 3,140 - - Investments in subsidiaries (Note) 6,610,021 4,557,600 4,557,600 Investments in associates (Note) 397,670 410,073 410,073 Investment in a joint venture 373,470 373,470 - Available-for-sale investments 72,514 62,000 - Other receivables 401,400 325,035 382,000 12,698,695 10,917,945 10,825,260 CURRENT ASSETS Inventories 3,616 4,209 9,745 Trade receivables 28,046 27,901 29,449 Other receivables 45,959 376,122 461,481 Prepaid lease payments 95 95 95 Available-for-sale investments 30,000 - - Held for trading investment 80,000 80,000 80,000 Amount due from subsidiaries 328,324 522,795 1,089,193 Bank balances and cash - Time deposits with original maturity over three months 20,000 544,000 279,000 - Cash and cash equivalents 349,576 1,356,884 1,501,945 885,616 2,912,006 3,450,908 CURRENT LIABILITIES Trade payables 139,071 184,262 195,641 Tax liabilities 106,073 169,301 238,285 Other taxes payable 8,846 16,164 16,939 Other payables and accruals 225,984 454,015 286,511 Amount due to subsidiaries 305,337 14,546 436,773 Bank borrowings 440,000 1,000,000 362,553 Derivative financial instrument - - 6,426 1,225,311 1,838,288 1,543,128 NET CURRENT (LIABILITIES) ASSETS (339,695) 1,073,718 1,907,780 TOTAL ASSETS LESS CURRENT LIABILITIES 12,359,000 11,991,663 12,733,040 12/31/2013 12/31/2012 01/01/2012 Rmb'000 Rmb'000 Rmb'000 NON-CURRENT LIABILITIES Long-term bonds - - 1,000,000 Deferred tax liabilities 98,482 102,280 106,206 98,482 102,280 1,106,206 12,260,518 11,889,383 11,626,834 CAPITAL AND RESERVES Share capital 4,343,115 4,343,115 4,343,115 Reserves 7,917,403 7,546,268 7,283,719 12,260,518 11,889,383 11,626,834 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 January1, 2012 4,343,115 3,645,726 1,669,981 - 1,085,779 18,666 863,567 11,626,834 Totalcomprehensiveincome forthe year - - - - - - 1,608,915 1,608,915 Interimdividend - - - - - - (260,587) (260,587) Finaldividend - - - - (1,085,779) - - (1,085,779) Proposedfinaldividend - - - - 1,042,347 - (1,042,347) - Transfer toreserves - - 156,762 - - - (156,762) - At December31, 2012 4,343,115 3,645,726 1,826,743 - 1,042,347 18,666 1,012,786 11,889,383 Totalcomprehensiveincome forthe year - - - 385 - - 1,673,684 1,674,069 Interimdividend - - - - - - (260,587) (260,587) Finaldividend - - - - (1,042,347) - - (1,042,347) Proposedfinaldividend - - - - 1,085,779 - (1,085,779) - Transfer toreserve - - 166,316 - - - (166,316) - At December31, 2013 4,343,115 3,645,726 1,993,059 385 1,085,779 18,666 1,173,788 12,260,518 Note: As detailed in Note 2, during the year, the Group acquired the remaining76.55% equity interest in Jinhua Co, which then became a wholly-ownedsubsidiary of the Group. Prior to this acquisition, the Group held 23.45%equity interest in Jinhua Co, and the respective investment cost amounting toRmb304,850,000 was recorded as investments in associates in the financialstatements of the Company. The consideration for this acquisition amounting to Rmb756,868,000, togetherwith the previous investment cost of Rmb304,850,000 (as recorded in investmentin the associate in the prior year's statement of financial position) and theadditional capital contribution of Rmb1,000,000,000 made during 2013, there wasRmb2,061,718,000 in total in respect of the investment cost in Jinhua Co hasbeen accounted for as investments in subsidiaries as at December 31, 2013. Independent Auditor's Report (ISSUED BY A THIRD COUNTRY AUDITOR REGISTERED WITH THE UK FINANCIAL REPORTINGCOUNCIL) 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 ExpresswayCo., Ltd. (the "Company") and its subsidiaries (collectively referred to as the"Group") set out on pages [�] to [�], which comprise the consolidated statementof financial position as at December 31, 2013, and the consolidated statementof profit or loss and other comprehensive income, consolidated statement ofchanges in equity and consolidated statement of cash flows for the year thenended, and a summary of significant accounting policies and other explanatoryinformation. Directors' Responsibility for the Consolidated Financial Statements The directors of the Company are responsible for the preparation ofconsolidated financial statements that give a true and fair view in accordancewith Hong Kong Financial Reporting Standards issued by the Hong Kong Instituteof Certified Public Accountants and the disclosure requirements of the HongKong Companies Ordinance, and for such internal control as the directorsdetermine is necessary to enable the preparation of consolidated financialstatements that are free from material misstatement, whether due to fraud orerror. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financialstatements based on our audit and to report our opinion solely to you, as abody, in accordance with our agreed terms of engagement, and for no otherpurpose. We do not assume responsibility towards or accept liability to anyother person for the contents of this report. We conducted our audit inaccordance with Hong Kong Standards on Auditing issued by the Hong KongInstitute of Certified Public Accountants. Those standards require that wecomply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements arefree from material misstatement. An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the consolidated financial statements. Theprocedures selected depend on the auditor 's judgment, including the assessmentof the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity's preparation of consolidatedfinancial statements that give a true and fair view in order to design auditprocedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the entity's internal control.An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by the directors, aswell as evaluating the overall presentation of the consolidated financialstatements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements give a true and fair viewof the state of affairs of the Group as at December 31, 2013, and of theGroup's profit and cash flows for the year then ended in accordance with HongKong Financial Reporting Standards and have been properly prepared inaccordance with the disclosure requirements of the Hong Kong CompaniesOrdinance. Deloitte Touche Tohmatsu Certified Public Accountants LLP Certified Public Accountants (Registered as a Third Country Auditor with the UK Financial Reporting Council)Shanghai, ChinaMarch 17, 2014 Corporate Information Executive Directors Statutory Address ZHAN Xiaozhang (Chairman) 12/F, Block A, Dragon Century PlazaLUO Jianhu (General Manager) 1 Hangda RoadDING Huikang Hangzhou City, Zhejiang Province PRC 310007Non-Executive Directors Tel: 86-571-8798 5588 Fax: 86-571-8798 5599LI ZongshengWANG WeiliWANG Dongjie Legal Advisers Independent As to Hong Kong and US law:Non-Executive Directors Herbert Smith Freehills 23rd Floor, Gloucester TowerZHANG Junsheng 15 Queen's Road CentralZHOU Jun Hong KongPEI Ker-Wei As to English law:Supervisors Herbert Smith Freehills LLP Exchange HouseFU Zhexiang Primrose StreetWU Yongmin London EC2A 2HSLIU Haisheng United KingdomZHANG GuohuaZHANG Xiuhua As to PRC law: T & C Law FirmCompany Secretary 11/F, Block A, Dragon Century Plaza 1 Hangda RoadTony Zheng Hangzhou City, Zhejiang Province PRC 310007Authorized Representatives H Shares Listing InformationZHAN XiaozhangZHANG Jingzhong The Stock Exchange of Hong Kong Limited Code: 0576Auditors London Stock Exchange PlcDeloitte Touche Tohmatsu35/F, One Pacific Place Code: ZHEH88 QueenswayHong Kong ADRs Information Investor Relations Consultant US Exchange: OTCPR Concepts Asia Limited Symbol: ZHEXY16/F., Methodist House CUSIP: 98951A10036 Hennessy Road, Wanchai ADR: H Shares 1:10Hong Kong Representative Office in Hong KongTel: 852-2117 0861Fax: 852-2117 0869 Suite 2910 29/F, Bank of America TowerPrincipal Bankers 12 Harcourt Road Hong KongIndustrial and Commercial Bank of Tel: 852-2537 4295China, Zhejiang Branch Fax: 852-2537 4293 Shanghai Pudong Development Bank, WebsiteHangzhou Branch www.zjec.com.cnH Share Registrar and Transfer Office Hong Kong Registrars LimitedRoom 1712-1716, 17/F, Hopewell Centre183 Queen's Road EastHong Kong Location Map of Expressways in Zhejiang Province For Location Map of Expressways in Zhejiang Province, please visit:http://photos.prnasia.com/prnk/20140402/8521401858-f

NOTE: To view the full set of the company's 2013 Annual Report, please vist www.zjec.com.cn